Yahoo Finance

Brian Richardson

Thank you, Jeff. I would also like to thank everyone for joining us today. I would like to start by touching on five items from the earnings release. First, during the quarter, we saw continued NIM stabilization. Reported NIM of 2.88% increased 6 basis points from 2.82% in the third quarter.
Additionally, core NIM, which excludes excess liquidity of 3.02% increased 11 basis points compared to the third quarter. Second, as it relates to our loan and deposit activity, loans grew by $95.8 million or 5.6% annualized in the fourth quarter and grew by $259.4 million or 3.9% for the full year of 2024.
During the quarter, deposits decreased by $94.9 million. But as Jeff mentioned, public funds decreased by $185.6 million and brokered deposits decreased by $13.4 million. Offsetting these decreases was a $104.1 million increase in commercial and consumer accounts.
During the fourth quarter, non-interest-bearing deposits increased by $90.7 million. As of December 31, non-interest-bearing deposits represented a 20.9% of total deposits compared to 19.3% at September 30. For the full year of 2024, total deposits grew by $383.5 million or 6%.
Third, during the quarter, we recorded a provision for credit losses of $2.4 million. Our coverage ratio was at 1.28% at December 31, which was consistent with September 30. Net charge-offs for the quarter totaled $767,000 or 5 basis points annualized.
Fourth, non-interest income increased by $2.7 million or 14.6% compared to the fourth quarter of 2023. This was primarily driven by increases in wealth management, mortgage banking and service fee income. Fifth, non-interest expense increased by $1.6 million or 3.3% compared to the fourth quarter of 2023. For the full year of 2024, expenses increased by $2.1 million or 1.1% and when excluding restructuring charges recorded in 2023.
I believe that the remainder of the earnings release was straightforward, and I would now like to focus on five items as it relates to 2025 guidance. First, for 2024, net interest income totaled $211.2 million. For 2025, we expect loan growth of approximately 3% to 5% with modest NIM expansion resulting in net interest income growth of approximately 5% to 7%.
This assumes a relatively stable rate environment with [1 or 225 basis] point rate decreases in 2025. We however, modest Fed actions are not expected to have a material impact on our NII due to our overall ALM neutrality.
Second, the provision for credit losses will continue to be driven by changes in economic forecast and credit performance of the portfolio. At this time, we expect the provision for 2025 to be approximately $12 million to $14 million.
Third, 2024, net non-interest income totaled $84.5 million when excluding the [$3.4 million] gain on sale of MSRs and $225,000 BOLI death benefits. For 2025, we expect non-interest income growth of approximately 4% to 6% off of the $84.5 million base. Fourth, we reported non-interest expense of $198 million for 2024.
For 2025, we expect growth of approximately 4% to 5%. Lastly, as it relates to income taxes, we expect our effective tax rate to be approximately 20% to 20.5% based on current statutory rates. That concludes my prepared remarks. We will be happy to answer any questions.
Karli, would you please begin the question-and-answer session?

Question and Answer Session

Operator

(Operator Instructions)
Emily Lee, KBW.

Emily Lee

Hi. I'm on for Tim Switzer today. Thank you for taking my question. I wanted to ask what are the factors driving your 2025 guide and what you think can drive it up or down in either direction.

Brian Richardson

This is Brian. I'll take that one. The guide really is based on everything we're seeing in the current environment and our strategic priorities and focus that's really where we think things will land. And any time guidance is provided, of course, there we pick the middle of the road of where we expect things to go. And that's why I provide ranges in accordance with that.
So I mean, you can pick any number of possible variables that could present potential upside or downside, both macro or micro related. But I think there's kind of that's an infinite number of answers in all honesty.

Emily Lee

Okay. Thank you. And another question is, it might be a little early for this, but with the changes in administration occurring, there's a lot of different puts and takes on the macro outlook and the impact of tariffs and more rates will go. Are you seeing that result in any caution from some of your C&I borrowers at all or where maybe the other direction, certain industries where they're a little bit more bullish as it's impacted like your loan pipeline in any way?

Jeffrey Schweitzer

Yeah, Emily, this is Jeff. I would say that overall, there's a lot of optimism heading into 2025 from our customer base. As we all know, based on history, a lot of this will be shaken out over the next few months as far as tariffs, what products, what countries, amount, et cetera. But given more regulatory, friendly environment that everybody is anticipating probably heated up environment as there's more appetite for that.
We are customer base overall is pretty exciting. We don't have a lot of customers that deal internationally necessarily. So it's a little muted with our customer base. But overall, I would say that the optimism is there for what could be a solid 2025.

Emily Lee

Great. Thank you. I have one more question. This quarter deposits decreased 6% quarter-over-quarter in Q4, although non-interest-bearing deposits increased 27%. Can you expand a little bit on the drivers of what we saw in deposit trends in Q4?

Brian Richardson

Sure. This is Brian. I'll take that one. Again, we saw a decrease between brokered deposits and public funds are approximately $200 million in the quarter, that's the seasonal outflow and just our intentional management of the broker deposit book was a combination of those two items there. We did see growth commercial and consumer deposits across a wide population there, it wasn't one or two specific deposits that drove it.
But we did see growth of $104 million during the quarter. So that's kind of what we saw occurring there. And I guess the next question logically would be what we would expect to occur going forward. There is continued seasonal outflow to be expected on the public funds book anywhere from $50 million to $100 million per month. So we would expect that continues to kind of wind down throughout the first quarter.
And as we've said in the past, you hit your annual trough occurs at the end of the second quarter every year, then tax collections in the third quarter brings you back up to the high point.

Emily Lee

Great. Thank you. That's all for me.

Brian Richardson

Thank you very much.

Operator

(Operator Instructions)
Frank Schiraldi, Piper Sandler.

Frank Schiraldi

Morning. The loan growth assumptions, the 3% to 5% growth in 2025, it seems like most people have talked to in the industry are expecting or maybe hopeful that loan growth will pick up more in the second half of the year as maybe we get a better sense of where the new administration's policy sort of shake out. So just curious if that 3% to 5% is that -- does that also assume some pickup in the back half of the year? Is that more, I guess, back loaded for 2025?

Jeffrey Schweitzer

Yeah, Frank, to some degree, I mean, there's the second and the fourth quarters historically, all these are stronger quarters from a loan growth perspective. It's given the 3% to 5%, it's not that dramatically different quarter-to-quarter, and we are getting off to a decent start in the first quarter here.
I wouldn't necessarily say that there could be the macro impact of that due to what the administration may or may not do. For us, and from our perspective, we've always been able to source it. It is us managing the growth of the loan book now with our deposit growth to maintain our loan-to-deposit ratio and ultimately start to push down our loan to deposit ratio.

Frank Schiraldi

Yeah, and then just on the an interest income guidance -- Brian, you mentioned the pretty neutral, I guess at this point. So rate cuts don't matter too much for expectations, I would assume a steeper yield curve is better. I'm just curious if the yield curve, there's been a lot of movement in the longer end.
Are you -- would you say if we get rates staying at the longer end where they are currently there could be some upside to that? Or is that sort of the higher end of your guidance 7%? Just trying to get a little more color on the potential drivers to maybe outperform there.

Brian Richardson

Sure. Frank, this is Brian. So of course, the steepening of a continued steepening of the curve would benefit us as well as a majority of the financial institutions. So I think that would be a fair assessment, and that is not in any way kind of baked into the 5% to 7% guide, the 5% to 7% guide is simply just modest expansion.
And really, if you think about what happened to nimble on a quarterly reported basis throughout '24 where we ended if that just even helped steady you have inherent expansion year-over-year just because of the low points that we started with in 2024.
So you have couple of basis points of NIM expansion that gives you a couple of spend on potential NII lift. And then when you think about the 3% to 5% loan growth that provides the other component of what's been into our guide currently. But of course, again, steepening yield curve could have further implications.

Frank Schiraldi

Okay. So just lastly on the buyback. You got any color there in terms of should we anticipate maybe more consistent buybacks at sort of these levels? Would you say you continue to be or would you say continue to be more opportunistic on that front?

Brian Richardson

Yeah. No, I would think -- what we've said previously, again, this is Brian. What we said previously and we continue to operate with is our goal really is to excess capital that is generated on the buybacks. So we're not looking to grow regulatory capital just for the sake of growth. So therefore, we that's kind of the guardrails that we're managing with.
But we will, from certain times when valuations that may be dislocated, we are a little bit more opportunistic with an all in goal of, on a quarterly basis, kind of buying at a level that, that doesn't result in significant growth of our regulatory capital.

Frank Schiraldi

Got it. Okay, I appreciate the color. Thank you.

Brian Richardson

Thanks Frank.

Jeffrey Schweitzer

Thanks Frank.

Operator

Thank you very much. We currently have no further questions. So I'd like to hand back to Jeff Schweitzer for any closing remarks.

Jeffrey Schweitzer

Thank you, Karli, and I'd like to thank everybody for listening in today. As I said earlier, we're excited about the year we had in 2024 and the momentum we have heading into 2025, and we look forward to talking to everybody at the end of the first quarter. Have a great day.

Operator

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.