Business First Bancshares - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 GAAP diluted EPS was $0.51, down from $0.65 in Q3, as results absorbed a $4.8M CECL provision tied to Oakwood and higher conversion/merger costs; core diluted EPS was $0.66 (flat vs Q3).
• Net interest margin expanded 10 bps sequentially to 3.61% (core 3.56%), driven by reduced funding costs and disciplined loan pricing; net interest income rose to $65.7M from $56.1M.
• Balance sheet inflected positively: deposits +$870.4M (+15.4%) and loans +$761.3M (+14.6%), with organic deposit growth of $156.8M and organic loans +$62.8M; NPL ratio improved to 0.42%.
• Management reiterated margin expansion ambitions (low-to-mid single-digit bps per quarter), a 2025 core expense run-rate in the low-$50M/quarter, and noninterest income building toward $40–$50M in 2025; material Oakwood cost saves are not expected until post-conversion (2026).
• Board declared a $0.14 common dividend and $18.75 preferred dividend; TBVPS declined to $19.92 on AOCI pressure from securities fair value marks, serving as a watch point into 2025.

What Went Well and What Went Wrong

What Went Well

• Net interest margin expanded 10 bps q/q to 3.61% (core 3.56%) on lower deposit costs; core NIM ex-accretion improved to 3.56% from 3.46%.
• Strong balance sheet growth: deposits +$870.4M and loans +$761.3M q/q, with organic deposit growth +$156.8M and organic loan growth +$62.8M; C&I loans grew $54.3M q/q.
• Noninterest income initiatives gaining traction: customer swap revenue reached $1.3M in Q4; CFO highlighted diversified fee pipeline and upward trajectory into 2025.
• Credit metrics stable-to-better: NPLs/Loans fell to 0.42% (from 0.50%); ACL/Loans rose to 0.98% including Oakwood, bolstering reserve coverage.

Quote: “Solid fundamental performance led to productive growth, increasing diversification of revenue sources, healthy asset quality…point to an exciting 2025” — Jude Melville, CEO.
Quote: “Our plan is to continue to grind out low to mid single-digit margin expansion throughout the year” — CFO Gregory Robertson.

What Went Wrong

• GAAP EPS declined to $0.51 from $0.65, with a $4.8M CECL provision for Oakwood and higher other expenses (+$7.1M) weighing on results; core EPS held at $0.66.
• Securities portfolio experienced $21.4M in negative fair value adjustments; AOCI declined by $16.9M, reducing TBVPS to $19.92 (from $20.60).
• Expense pressure: Q4 GAAP other expenses were $49.6M (+16.8% q/q), and management does not expect material Oakwood cost savings until after late-2025 conversion (benefits 2026).
• Noninterest-bearing deposits share dipped modestly to 20.8% of total deposits; overall cost of funds still elevated at 2.93% despite improvement.

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to Business First Bancshares, fourth quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. I would now like to turn the conference over to Matt Sealy, Senior Vice President, Director of Corporate Strategy and FP&A. Matt, you may begin.

Matt Sealy (SVP, Director of Corporate Strategy and FP& A)

Thank you. Good morning, and thank you all for joining. Earlier today, we issued our fourth quarter 2024 earnings press release, a copy of which is available on our website, along with the slide presentation that we will reference during today's call. Please refer to slide three of our presentation, which includes our safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our safe harbor statements are available on page seven of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the safe harbor statements in our slide presentation and earnings release.

I'm joined this afternoon by Business First Bancshares CEO and President Jude Melville, Chief Financial Officer Greg Robertson, Chief Banking Officer Philip Jordan, and President of b1BANK, Jerry Vascocu. After the presentation, we'll be happy to address any questions you may have. With that, I'll turn the call over to you, Jude.

Jude Melville (CEO and President)

Thanks, Matt. Good afternoon, everybody. I'd like to begin by saying thank you to everyone listening in today or reading the transcripts at some future date. We know you have choices to make when it comes to allocating your attention, and we appreciate your prioritizing our company. 2024 was a significant year for us, one in which we not only made but numerically demonstrated material progress towards goals that we've articulated in this forum over past quarters, and the fourth quarter was a particularly nice capstone to our efforts over the course of the year.

Over 2024, we grew our client base while exercising disciplined loan and deposit pricing, generating another quarter of double-digit basis point expansion of our net interest margin, which topped off a nearly 30 basis point expansion since our trough in the first quarter, helping us to achieve a sustainable over 3.5% core NIM sooner than expected. We continued our focus on expense management, leading to greater structural profitability, even while continuing to invest in key technology platforms and adding seasoned employees as we prepare internally for a responsible approach towards $10 billion in assets over the next few years.

We funded our portfolio of increasingly diversified loans with even stronger core deposit growth, improving the mix of both sides of the balance sheet, reducing CRE and C&D concentrations markedly, while also maintaining strong asset quality, increasing our loan loss reserve to 0.98%, not including our remaining loan discount from previous acquisitions. Even while we diversify by type of credit asset, we also continue to diversify geographically, with over 40% of our exposure now in the Dallas and Houston markets. We demonstrated traction in our various non-interest income revenue sources, including building out the infrastructure of our correspondent banking function to serving over 100 bank clients, growing income from SBA and interest rate swap provisioning.

In addition to normal organic operations, over the course of the year, we successfully took advantage of opportunities to complete two mergers: one whole bank acquisition of Oakwood Bank in Dallas and one non-bank transaction, an SBA loan service provider out of Houston. In both cases, we're either on track or ahead of forecasts on earnings impact, employee and client retention, earnback periods, and minimization of tangible book value dilution. We accomplished both these acquisitions without the need of additional capital and finished the year with a higher TCE ratio, higher TBV per share, higher Tier 1 leverage ratio, and a stable Total Risk-Based Capital Ratio. It was a solid, constructive quarter and a solid, constructive year, and I congratulate our team for all the work that went into it.

What I'd like to emphasize in closing is that while this was a solid year, it was not a unique year in terms of our priorities, which will continue to be our points of emphasis into 2025 and beyond: healthy diversified growth within our capacity for capital generation, a focus on liquidity and capital accretion, continued focus on developing a growing set of robustly served clients, and preparation through investments, prioritization of regulatory relationships, reputation, and balance sheet structuring so that we may continue seizing opportunities as they present themselves, as we're confident they will. With that, I'll turn it back over to you, Matt.

Matt Sealy (SVP, Director of Corporate Strategy and FP& A)

Greg, I'll give you the floor. I'll yield the floor to you to kind of go over financials in more detail.

Greg Robertson (CFO)

Thanks, Matt. Thanks, Jude. And good afternoon, everyone. As Jude mentioned in his remarks, the fourth quarter marked a strong end to a productive year. I'll spend a few minutes reviewing our results, and we'll discuss our updated outlook before we open up for Q&A. Fourth quarter GAAP net income and EPS available to common shareholders was $15.1 million, and included $4.8 million one-time CECL provision related to the Q4 closing in Oakwood, a $168,000 merger-related expense, $463,000 core conversion-related expense, and a $21,000 gain on sale of securities. Excluding these non-core items, non-GAAP core net income and EPS available to common holders was $19.5 million and $0.66. From our perspective, fourth quarter results were highlighted by solid core margin expansion, disciplined expense management, continued execution on non-interest revenue business segments, and disciplined balance sheet growth.

Total loans held for investment increased $761.3 million, or 58% annualized during the fourth quarter. Excluding acquired Oakwood loans during the quarter, organic growth was $62.8 million, or 4.8% annualized. Loan growth from the linked quarter was largely attributable to net growth in the C&I portfolio of $54.3 million and $20.8 million in the residential one-to-four family portfolio, while construction loans declined by $31.9 million linked quarter. Organic production was led by our Southwest Louisiana and Greater New Orleans regions, which accounted for all of the net loan growth for the linked quarter. Based on unpaid principal balances, Texas-based loans represent approximately 41% of the overall loan portfolio as of December 31st, 2024. Total deposits increased $870.4 million, or 61.4% annualized quarter over quarter. Excluding acquired deposits from Oakwood, organic deposit growth for the quarter was $156.8 million, or 11.1% annualized.

Organic deposit growth for the quarter was highlighted by increases in money market deposits of $51.8 million and $33.3 million net growth in non-interest-bearing deposits, with the remainder of the growth being attributed to the bank's seasonal inflow of municipality deposits. Fourth quarter funding costs benefited from a full quarter impact of the Federal Reserve's September rate cuts and partial quarter impact of the November and December rate cuts. We are pleased with our ability to manage down our deposit rates while still generating positive deposit growth and lowering our loan-to-deposit ratio. Total interest-bearing deposit costs declined by 29 basis points from the linked quarter, highlighted by a 44 basis point quarter-over-quarter reduction in overall cost of NOW accounts and a 41 basis point reduction in the overall cost of money market accounts.

Notably, the weighted average total cost of deposits for the fourth quarter was 2.81%, down 13 basis points from the linked quarter, while the December weighted average cost of total deposits was 2.68%. We are encouraged this trajectory will bode well for us as we enter the new year. Total non-interest-bearing deposits represent 20.8% of total deposits as of December 31st, 2024, slightly down from 21.1% in the linked quarter, but remain in line with our expectations at the end of 2024 and the low 20% range. We think the composition of non-interest-bearing deposits should hold relatively constant in the low 20% range for the foreseeable future. Our GAAP reported fourth quarter net interest margin expanded 10 basis points linked quarter from 3.51 to 3.61, while the non-GAAP core net interest margin, excluding purchase accounting accretion, also increased 10 basis points during the quarter from 3.46 to 3.56%.

Fourth quarter net interest income and net interest margin reflect the first full quarter impact of Oakwood's balance sheet. Both GAAP and core margin for the quarter expanded more than we expected due to the improved funding costs previously mentioned of disciplined pricing on new loan production. I think it's worth noting that our overall deposit beta for the fourth quarter, reflecting just the September rate cut, was 51%. Considering full quarter impact of the late Q4 rate cuts, we would expect deposit costs to continue to decline in the near term and will be affected by our ability to retain and attract lower cost in-market deposits and non-interest-bearing deposits. I would like to make a note of a few takeaways to slide 21 in our investor presentation, including Oakwood. We continue to see 45%-55% overall deposit betas as achievable.

I would also like to point out overall core CD balance retention rates increased from 90% to 90% during December, up from 83% in September. This impressive statistic reflects our team's continued focus on maintaining and retaining core deposit relationships. As you'll also see on slide 22, we have approximately $2.5 billion floating rate loans at approximately 7.75% weighted average rate, but also have approximately $600 million in fixed rate loans maturing over the next 12 months at a weighted average rate of 6.43%, which we would expect to reprice in the mid-7% range. Last thing I would add in our expectations for loan discount accretions to average approximately $700,000-$800,000 per quarter moving forward. Moving on to the income statement, GAAP non-interest expense was $49.6 million and included $168,000 of acquisition-related expense and $463,000 conversion-related expense.

Core non-interest expense for the fourth quarter of $48.9 million increased approximately $7.3 million linked quarter due to the full impact of Oakwood's expense base and some seasonality around year-end. We would expect a continued increase in our core expenses in the first quarter due to further seasonality around year-end. We also think that the current consensus outlook for core expenses in the low-$50 million per quarter range is reasonable. I would, however, like to remind folks that given the late 2025 conversion of our Oakwood franchise, we do not expect material cost savings during the year. Fourth quarter GAAP and core non-interest income was $11.9 million and $11.8 million, respectively. GAAP results did include a $21,000 gain on sale of securities.

Non-interest income results for the third quarter did come in slightly better than we had expected and was driven by a contribution from our newly formed customer swap business line, which generated approximately $1.3 million in revenue during the quarter. The fourth quarter did benefit from a one-off BOLI death benefit of $300,000 as well. We do view Q3 core non-interest income as a good run rate going forward, as well as Q4. Expect our non-interest income to continue to trend with an upward trajectory that will be bumpy, as we've mentioned before. That concludes my prepared remarks, and I'll hand it back over to Jude.

Jude Melville (CEO and President)

We're prepared to take questions now. It's been a good solid year that we're proud of, and we're as excited about 2025 as we've ever been.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw that question, again, press star one. Your first question comes from the line of Matt Olney with Stephens. Please go ahead.

Matt Olney (Analyst)

Hey. Thanks. Good afternoon, guys.

Greg Robertson (CFO)

Hey, Matt.

Matt Olney (Analyst)

Thanks. I'll start on the margin. Really good momentum on that core margin in the fourth quarter results, both on reported and core. Based on that commentary that Greg provided around deposit costs, competition, and loan yield, it feels like this momentum can continue, at least the first few quarters of 2025. We'd love to hear any additional thoughts you have around the margin next few quarters.

Jude Melville (CEO and President)

Yeah. Matt, thanks for the question. I think you're right. I think our plan is to continue to grind out low to mid-single-digit margin expansion throughout the year, maybe a little more in the beginning of the year because we probably hadn't, as I mentioned, gotten the full impacts of the last rate cut. But that's the plan. The key, obviously, is to continue to attract and grow deposits organically. If we can do that like we've been and hold loan rates steady, we should see some continued expansion.

Matt Olney (Analyst)

Okay. And then I guess also looking for any kind of commentary you have around loan yields, loan pricing, just the competition out there. I would think at some point this year, we'll see some other banks get more aggressive on some of their loan pricing. Is that something you're seeing yet? Any signs of that thus far?

Jude Melville (CEO and President)

I'll talk about kind of what we've seen so far, and maybe I'll let Philip or Jerry make a comment about what they're seeing with the pipeline. Our weighted average for production new and renewed for the fourth quarter was about $758. So still holding in line nicely, where we think we should be. I would expect you're right. The challenge will be the competition. Some of our competition may decide to get more aggressive, and we'll have to deal with that on a one-off basis. And I don't think that changes our focus on growing relationships and making sure the whole relationship is priced the right way. But I'll let Jerry or Philip.

Jerry Vascocu (President)

Yeah. I would say, Matt, obviously, it's always a very competitive environment, and now is no different. But I do think that we have been pretty consistent over the year. We have some new software as far as our pricing capabilities, where we're able to, as Greg said, take into consideration the entire relationship. So those with significant deposit relationships, etc., we're able to be very competitive and retain those relationships. So our bankers do a good job of pulling along.

Jude Melville (CEO and President)

Yeah. I would just add, I think this year was a good illustration of our willingness to exercise discipline when it comes to trade-offs between growth and margin. And we certainly will continue growing and plan to continue growing and want to grow. But we also recognize that over the long term, we'll create more value by maintaining pricing discipline even while we grow, even if it's at a more moderate pace. So it's not just, "Well, what will the market give us?" It's also, "How are we willing to allocate our capital?" And I think we are more prepared than ever, both in terms of our mindset and in terms of our data availability, given the technological advancements that we've made, to be able to think through those choices.

And so we certainly will continue to grow and plan on being a larger organization in the future, but we want to do it the right way. And I think this year has been a good transition for us, mindset-wise, and we'll look to continue to think through those trade-offs.

Matt Olney (Analyst)

Yeah. Okay. And then just lastly for me, I guess, on the fee income side, we just saw some really strong growth throughout the year from several different sources. I think you mentioned this past quarter, it was the customer swap group that contributed nicely. I guess I just kind of want to look forward to 2025. And Greg, in your commentary, I think you said that the third quarter run rate is the best quarter to kind of consider for our forecast. Did I hear that right? And then any general commentary about what drivers you expect, what different groups and teams you expect to drive that fee income growth in 2025?

Greg Robertson (CFO)

Matt, I think what we could expect is that I may have said Q3, but I think it's Q3 and the build to Q4. The $11.8 million in Q4 is what we produced, and I think that's a good run rate to think about how we're going to go forward. I think somewhere you're going to see from $40-$50 million per year into 2025. As we've mentioned, it may be bumpy getting there because there's going to be different contributors along the way as those businesses kind of build out and continue to round out. But I think ending the year between $40 and $50, maybe closer to $50, is probably what the non-interest income target would be. Yeah.

Jerry Vascocu (President)

The important thing for us here is what we're trying to do is build an infrastructure that provides multiple opportunities for that growth so that no one product set or no one function has to consistently outperform, but we can kind of work together on how we get to where we want to go, and I think the SBA platform and the swaps are a good example of maybe even different reactions to interest rate movements. As rates come down a little more and they're more stable, maybe the SBA has more of an opportunity to pick up, whereas in a higher rate environment, that begins to limit some of your SBA opportunities, but perhaps the swap opportunities aren't as great in a more comfortable interest rate environment for everybody, so hopefully, we're adding enough different components to our non-interest income that in any given quarter, we'll see continued increase.

But as Greg said, it's harder to predict than interest rate margins. And so I might see a little volatility, but we feel really bullish on our opportunity when it comes to non-interest income over the course of 2025.

Jude Melville (CEO and President)

Yeah. I would add one thing. I think our markets and our bankers out there have really gathered a really good command of the shifting rate environment. And a little more normalized yield curve creates new and different opportunities. So I think it's nice to have the tools we've got via SBA swaps kind of driving some opportunities for clients. So it's been nice to watch the strategy kind of take hold as we prepare for a normalized rate environment.

On a similar vein, when thinking about our bankers that are out there, I think this was a good year in terms of confidence building in the product set. These are new tools, and they're not too new to the industry, but a focus on them is new to us. That's really been a six-to-eight quarter journey. By the end of 2024, we begin to see bankers think about it more often and begin to recognize that there are incentive opportunities and there are ways that we can serve clients more robustly than they might have thought two or three years ago. Partly, it's the yield curve that does make a difference, as Jerry pointed out. Our institutional knowledge and our institutional confidence will lead to more business in 2025 regardless.

Matt Olney (Analyst)

Yeah. Okay, guys. Well, I appreciate the commentary and congrats on the year. I'll step back.

Jude Melville (CEO and President)

Thanks, Matt.

Jerry Vascocu (President)

Thanks, Matt.

Operator (participant)

Your next question comes from the line of Michael Rose with Raymond James. Please go ahead.

Michael Rose (Analyst)

Hey. Good afternoon, everyone. Thanks for taking my questions. Just wanted to get a little more color on this quarter's C&I growth. It was really strong on an organic basis. Just trying to understand if that was more kind of line-driven or just customer growth. And then if you can kind of shape up the pipelines for us. And maybe, Jude, if you can just discuss kind of competition within the different regions and if there's any hiring plans as we kind of contemplate a 2025 loan growth outlook. Thanks.

Jude Melville (CEO and President)

Yeah. I would say Greg mentioned that we had some success in our Southwest and New Orleans markets, and actually, volume was a little low. If I heard your first part of your question correctly, I would say that it was a little bit of both. We had some deepening of some existing relationships on C&I, but I picked up some new customers, but definitely a focus on that as we transitioned and downshifted more on the C&D. Certainly, a bit of a larger focus on that C&I, but some really good wins in the fourth quarter. Yeah. I would just say that I don't know that our C&I has increased as much as it appears, so on a relative basis, right?

So what we talked about, let's say, six quarters ago was downshifting growth a little bit, but we felt like most of the downshifting would come through less of a focus on construction and CRE. And we felt like the C&I core business that we have would continue to perform. And that's really kind of what we've seen is that that's been the case. So not necessarily an outlier quarter. I think the whole year has been pretty representative of the fact that C&I has been relatively stable in terms of its production, but because of the shift in focus, it's taken on up. Really, the pole position that we've always wanted it to.

When you think about being a business bank, I think it's important that you have a robust set of offerings and not just do the real estate, although we, of course, feel very comfortable doing the real estate as well, but so excited about that and see that as a continued opportunity for us. Always, we have tried to focus on C&I so that we could get the benefits of a more robust deposit relationship, and so part of our success in the deposit generation this year, and in particular in the fourth quarter, has been focused on C&I relationships, not for the types of loans, but for the holistic banking relationship, and we still see we think we are a little bit differentiated from other community banks in our ability to conduct that type of business, and not just to do it, but to do it right.

We have internal auditing capabilities that we've invested in over the years, and we recognize that it has a different risk profile. And I just want to be sure that we're not doing it just for the sake of doing it, but doing it because we're good at it. And I think that's a little bit of a mood again because most community banks aren't making those same investments. I can remember, it seems like every three or four years, we all talk about doing C&I lending, but it doesn't really change in general. But we have chosen to make some investments as some of the banks haven't made. And I think that's paying off.

Michael, I will say that one other detail that kind of highlights your question is at the end of Q1 of 2023, we were about 120% concentrated in C&D as a percentage of capital. And in real time, we finished the fourth quarter at about 78%. So that decline in the C&D book and the total CRE number from $275 to $254 over that same timeframe actually kind of highlights what Jude was saying, is that I don't know that our focus is any different. It's just that when you're unwinding the C&D book specifically, as we noted in the quarter as well, that this is not the first quarter that that's happened. And that's my design as well.

I would say also, Michael, the second part of your question about hiring, we don't have ambitious hiring goals this year. We feel like we have capacity internally.

We'll continue to add bankers when we think they're a good cultural fit, and we'll continue to have those conversations. But we believe that our growth opportunities exist within our current set of bankers and with some incremental additions over the course of the year. But there was a point maybe three years ago where we were growing 25, 30 bankers a year. And we feel like we've achieved a certain level of platform from which we're able to grow more by adding support staff and making sure that our processes and procedures are adapting as we grow. And so we think we have more institutional capability to grow without necessarily going on a hiring spree in order to do so. But with that said, we're always looking for good partners.

Certainly, we'll continue to add, but we'll do so when it's right and not just because we need to grow.

Michael Rose (Analyst)

I appreciate all that, Color. Sorry I asked a couple of questions in one there. I think last quarter, you'd kind of talked about a mid-single-digit loan growth forecast. Any reason that that would change, just given some of the momentum that you mentioned? And yeah, I'll just stop there.

Jude Melville (CEO and President)

Yeah. No, no. I think you can still count on that. Again, it's one thing to be able to produce the loans, but it's another thing to think about how that relates to your capital structure and how it relates to your organic core deposit growth. And we want to make sure that we maintain balance between all three components. So that's still our intention for the year.

Michael Rose (Analyst)

Okay. Great. And then maybe just one quick final one for me, just on the cost savings related to the deal. Any changes in expectations there, or is it all kind of status quo?

Greg Robertson (CFO)

It's all status quo. We're doing our core conversion in May, and then we won't convert them till September. So we're not modeling in any material cost saves for 2025 from the Oakwood acquisition. That should set us up for 2026 to pull through what we had advertised at announcement.

Michael Rose (Analyst)

Great. I'll step back. Thanks for taking my questions.

Jude Melville (CEO and President)

Thanks, Mike.

Operator (participant)

Your next question comes from the line of Feddie Strickland with Hovde Group. Please go ahead.

Feddie Strickland (Analyst)

Hey. Good afternoon. Just wanted to start on the borrowings. I saw you reduce borrowings by about $10.3 billion this quarter. Can you just talk about how you think about those going forward and whether there's any major upcoming maturities that you could potentially pay down or kind of how you want to use borrowings and wholesale funding in general over the course of the next year or so?

Jude Melville (CEO and President)

Yeah. I think there's some opportunities with, I'll start with borrowings and kind of transition from there to other wholesale funding. I think we think there's an opportunity, and a caveat to this, Feddie, with as long as we continue to have success growing deposits organically like we have over the last year, I think that's going to present itself an opportunity to pay down about $50 million of FHLB maturities this coming year, which would be a fairly significant improvement to margin if we execute on that. I think with broker deposits, we see the same opportunity over the course of 2024, maybe not with as much pickup on it from the expense side of those deposits. We structure those a little bit differently where there's maturities come and go every quarter. Opportunity in both FHLB and broker deposits to reprice.

I think that that's all caveated on what the current rate environment, if it continues to stay like it is, and if we continue to be successful. I think if we are, then you'll see us do what we did in the fourth quarter is pay down those as the opportunity presents itself.

Feddie Strickland (Analyst)

Got it. Thanks for that. And just curious, I appreciate all the detail on the deck on the loans coming up for renewal. But as these come up for renewal, do you have a sense, kind of broadly speaking, for how much you've been keeping of the loans coming up for renewal versus kind of what's either rolled off, gone elsewhere? Just trying to get a sense for how much repricing opportunity there is and how much stays with the bank.

Jude Melville (CEO and President)

Yeah. I think it's a good question. We experienced about $200 million in loan maturities or renewals in the fourth quarter. I think that was higher than the other three quarters in the year. So I would say what we've done is done a good job of the relationships that we want to keep within the quarter. We've done a good job of doing that. I think in reality, to pin down an exact number of the $600 million that we would expect to renew, it'd be kind of tough because the market changes day-to-day almost. But we think we have a good shot at it. And with the weighted average, even from where we are, the pickup would be nice. I know that's not a real direct answer, but that's a tough one to answer.

Feddie Strickland (Analyst)

No.

Jude Melville (CEO and President)

Even if we're.

Feddie Strickland (Analyst)

I guess I'll just. Sorry. Go ahead.

Jude Melville (CEO and President)

I was going to say part of the point of the repricing opportunity is not just repricing loans that stay. It's also the opportunity to reprice with new loans. And it's really, where is that funding going? Is the funding going to maintain older relationships at a new price, or is the funding going to new relationships at a new price? And the new price is the important part. And certainly, it's better to keep a relationship than not. But what we want to be sure we try to do is continue to have that discipline on the margin.

Greg Robertson (CFO)

Yeah. And Feddie, when I think about it from my seat, to bring Jude's point home, I'm thinking about it. If we say we're going to grow 5% or 6% or whatever the number is in loans next year, I'm thinking about the net and the repricing of new and renewed. So the challenge for our bankers is just to make sure that we get to the number. Sometimes that's many different ways of how we get to the number.

Jude Melville (CEO and President)

Another way to think about that repricing opportunity, and the reason we originally started looking at it was thinking through repricing cliff. Were we facing, in a particular quarter, so much repricing and then with tension with rates being higher than they were when the loans were originally booked, would there be asset quality problems, and it's been interesting to see that that has not been the case. Any bumps that we've had over the course of the year were really due to just normal banking credit risk as opposed to interest rate risk, and so that's the real good news there is that we've been working our way through that portfolio, whether it's maintaining the relationship and repricing it or encouraging those clients to find a home somewhere else. I think from a credit perspective and a health of the portfolio, it's been a big positive.

And then secondarily, almost, you have the opportunity to reprice at a higher level for income. But really, the reason we began tracking it was more just to think about the credit exposure.

Greg Robertson (CFO)

Yeah. Feddie, the way we also think about we're not just thinking about repricing loans. We're thinking about the other side of the balance sheet as well on the liability side. So looking at time deposit maturities coming in the next 90 days or 120 days, I mean, that's a material number that almost matches the fixed-rate loans that reprice as well. So there's opportunity on that side. So it's the net of the two is kind of the way we think about it. And do we come out with a better relationship at a better price with an existing one? Sometimes we do, and sometimes we go to try to maybe use that capital for a new relationship as well.

Philip Jordan (Chief Banking Officer)

Feddie, one thing that I'd add is just to put in context of betas in this new down-rate environment relative to the rising rate environment beta on our new loan yields. So rising rate environment, when rates were moving up, we were at around an 85% beta on new and renewed loan yields. That's holding true roughly on new and renewed loan yields in kind of this declining rate environment. And then to put that a little bit more into context, we're getting closer to 100% betas on new offering rates on our interest-bearing deposit account. So there's still that little spread baked into just the asset liability side of this. But in terms of the actual dollars of loans that are repricing, we can quantify it much easier on the yield side from the beta perspective.

But the dollar perspective, I'd say we're close to 100% kind of pull-through and renewal on the dollars.

Feddie Strickland (Analyst)

Got it. Thanks for the color, guys. Just one last quick one. Just curious. I saw a greater share of the loans came from Louisiana portion of the footprint rather than Texas this quarter ex Oakwood. What should we expect sort of going forward in terms of where loans are coming from the footprint? I guess is the pipeline maybe a little heavier in Louisiana than it was before? Just kind of curious on that.

Jude Melville (CEO and President)

I think each quarter you're going to see a little different mix, and we have a history of that. It's one of the reasons to have a diversified geography is that not only from a credit perspective, but also from a source of production perspective, and we're still at a size where regions having different outcomes affects our overall in different ways, and I do think the downshifting of the focus on construction over the past few quarters logically impacts Dallas more because they had more construction than Louisiana for obvious reasons in terms of growth and development, and so it's not a surprise that there might be some rebalancing there in terms of our bookings. I think as we kind of stabilize where we want to be on construction exposure as a concentration, then we shouldn't see as much negative impact to the downshifting away from construction.

But we're always going to rotate it. I hope we do and we're continuing to invest in Louisiana even as we invest in Texas and want robust shifting areas of growth. We want to add anything.

Matt Sealy (SVP, Director of Corporate Strategy and FP& A)

Yeah. I was just going to say that the volume that we talk about is a net growth rate. So to Jude's point, those large C&D loans are paying off. We're making new loans in Dallas. It's just replaced by greater rate. And then the second part is the Oakwood acquisition. They have a great book that we'll build on as well, so.

Jude Melville (CEO and President)

Yeah. Yeah. When you think about it, the amount of production that it takes to offset natural amortization that occurs in that book because of that significant growth over the years, there remains a lot of activity and a lot of production in Dallas just to keep a little more moderate growth going. Yeah. And I think one thing we want to be sure that we do, and maybe we can provide more information on this in the future, but I think we want to remain focused on the granularity of the relationship. And even as we get bigger in terms of our aggregate asset size, we don't want our individual credit perspective to be in linear relationship with that overall balance sheet growth. We want to try to continue to serve in our sweet spot.

And that means slightly smaller loans, which hopefully will be more profitable and long-term healthier from a credit perspective. But it does mean that you got to do more of them to replace the same dollar amount, right? But one advantage of C&I is that they tend to be more profitable over time than construction given the totality of the relationship. And we're excited about that. But we'll continue to try to de-risk even as we grow.

Matt Olney (Analyst)

Got it. Thanks for the call, guys. I'll step back.

Jude Melville (CEO and President)

Thanks, Feddie. Thanks, Feddie.

Operator (participant)

Again, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Manuel Navas with D.A. Davidson. Please go ahead.

Manuel Navas (Analyst)

Good afternoon.

Jude Melville (CEO and President)

Hey. Good afternoon. Thanks for calling in.

Manuel Navas (Analyst)

I appreciate the quarterly NIM guidance of low single digits to mid-single digits per quarter growth. What type of rate environment is behind that assumption?

Jude Melville (CEO and President)

I'm sorry. I didn't hear the last part of that. Could you repeat?

Manuel Navas (Analyst)

What rate assumptions have you made in terms of further decreases in the Fed funds rate?

Jude Melville (CEO and President)

Yeah. So we're forecasting a flat rate environment. We think the work we've done on our balance sheet and becoming more neutral, that's the most conservative way to approach it.

Manuel Navas (Analyst)

And what would be the impact if there were more cuts? How would that shift that kind of trajectory?

Jude Melville (CEO and President)

We should improve a basis point or two if there were ever a cut going forward.

Manuel Navas (Analyst)

Okay. If I take your if we stay flat, maybe you got, let's say, three basis points per quarter. Could you get to 375 NIM and fourth quarter 2025?

Jude Melville (CEO and President)

I think that would be optimistic. I think anywhere from the 365-375 range would probably be somewhere where we'd be pleased with that. I think back to my earlier statement, I think in this environment, it's going to depend on how successful we are in attracting deposits as well as pricing loans the right way. I think the yield curve movement that we've had lately, especially on the longer end, is going to make it challenging.

Philip Jordan (Chief Banking Officer)

Yeah. I'll give you a little bit more color. I think a 370 core by the end of the year isn't completely out of the realm of possibility. One thing that I would remind you about is our Business Manager factory-like business that we have where those fees, they run through the margin, but they don't come with an actual balance that weighs against the earning asset base. So those, I think we mentioned last quarter, were a little elevated. Depending on how some of those clients kind of progress over the course of the year, that could influence that core margin more so than you might think simply because of the fact that there's no actual earning assets that weigh down on the actual margin calculation. But a 370 is not completely out of the realm of possibility.

Manuel Navas (Analyst)

And then the brokered deposit and FHLB borrowing opportunity, is that assumed to happen, or is that if you get the excess deposit growth, you'd pay those?

Matt Olney (Analyst)

I would say wholesale.

Jude Melville (CEO and President)

If you get the excess deposit growth, it would look a lot like what we did in the third and fourth quarter where we were able to pay those down, and if not, then they would reprice, but you wouldn't get the full benefit of the difference in the repricing from an organic deposit standpoint.

Manuel Navas (Analyst)

Okay, so that's not necessarily a core NIM guidance, but it is a potential positive.

Jude Melville (CEO and President)

Correct. Yeah. It's an opportunity. Yeah.

Manuel Navas (Analyst)

Got it. Got it. Just was trying to see what's in and what isn't. And I like that opportunity. It's a very nice one. Stepping over to net charge-offs, they stepped up a bit just this quarter. Any thoughts on how net charge-offs or provision should extend across the next year? Is it just kind of a modest blip and will normalize back down? What are your kind of thoughts of progression across the next year?

Jude Melville (CEO and President)

Yeah. I would say the fourth quarter for us was a little higher. I think it's a cleanup quarter for a few credits that we had outstanding, a settlement of one. I would call those kind of outliers. I think what we're expecting is to just continue to plot along like we have been in the past quarters. No material decline in the book at all.

We are big enough, though, that we will have an occasional one-off, and I always try to caveat this conversation with that, that these things are going to happen. But we're not seeing any systemic issues, and we're not seeing any blanket degradation. But certainly, our special assets team is on the case and active and working through situations and did over the course of 2024 successfully and anticipate continuing that. But we need to stay vigilant because there will be one-off events. But I would absolutely agree with Greg that from a whole portfolio point of view, we'll be as confident in 2025 as we did in 2024.

Philip Jordan (Chief Banking Officer)

And Manuel, one thing circling back to the margin, I realize that we had failed to mention the accretion outlook. And so in 2025, it's going to be we see around $800,000 a quarter, a little over $3 million for the full year, which compares to a little over $4 million for 2024. What was it in 2024? I'm sorry. I didn't hear that.

It was a little over $4 million, not quite $4.5 million.

In 2024.

Manuel Navas (Analyst)

Okay. I appreciate this. Appreciate all the commentary. Just the last thing on the credit, these are really low levels, but the reserve did step up a bit. Are we likely to kind of stay at that level for now?

Jude Melville (CEO and President)

We're going to reserve at a 120 of every new loan produced. So we think that that will at least stay at that level and maybe slightly improve. To move it 1% point at our size, it takes $800,000 more dollars to enter the model, so almost $1 million more. So I think it's a pretty big needle mover to get it to move. But I think we're going to try.

We were really pleased, though, with the return to normality, essentially, of our overall loan loss provision being almost one there. It's been a while. Because of our acquisitive history, it's been a while since we've been kind of at one or a hair because, as y'all know, we had the loan loss provision, and then we had credit marks associated with the acquired assets that don't show up in the provision for off-balance sheet. So we've always tried to make the math clear for everybody and show what the effective loan loss reserve was, which is about 20 basis points today more than the loan loss provision is. But we finally found something positive in the CECL accounting rules, and that meant that with the Oakwood transaction, we were able to actually move the reserve over to the reserve.

And so we'll benefit from a little normalization there, which we're excited about. But definitely want to kind of stay in that range, if not slightly above, over the coming year.

Manuel Navas (Analyst)

I appreciate the commentary.

Jude Melville (CEO and President)

Thank you.

Operator (participant)

We have no further questions at this time. I will now turn the call back over to Jude Melville for closing remarks.

Jude Melville (CEO and President)

Okay. Good. Well, thanks, everybody, again, for participating. And thanks to our team for a great year. I think just in closing, we spend so much time, particularly on this call, thinking about the metrics and the numbers, and they are certainly in the models, and they're certainly very important. But I do like, when I can, to point out that first and foremost, we're still a relationship business. And if I think about the work that we did in 2024 and the good things that we accomplished, a lot of it really has to do with the building of relationships, whether that be a core set of investors that we didn't know before or our analyst relationships that we've enjoyed growing over time or our repertoire relationships or our employees.

We have over 800 now, which is a lot compared to the 200 or so that we had four or five years ago. And to be able to manage through that and feel really good about the culture that's developing here, that's all about the relationships. And all those relationships lead to relationships with clients, and we have more than we've ever had. And so if I'm thinking about things we're proud of in 2024 and things that we're excited about in 2025, it really comes down to deepening and expanding those relationships. And we appreciate y'all being a key component of that. So thank you for your time.

Operator (participant)

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.