Earnings Call Transcript - FBK Q4 2024

Operator, Operator

Good morning, everyone, and welcome to the FB Financial Corporation's Fourth Quarter 2024 Earnings Conference Call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial Officer. Also joining the call for the question-and-answer session is Travis Edmondson, Chief Banking Officer. Please note FB Financial's earnings release, supplemental financial information and this morning's presentation are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of this call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation. During this presentation, FB Financial may make comments which constitute forward-looking statements under the Federal Securities Laws. Forward-looking statements are based on management's current expectations and assumptions and are subject to risks, uncertainties and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K. Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information and this morning's presentation, which are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov. I would now like to turn the floor over to Chris Holmes, FB Financial's President and CEO.

Christopher Holmes, CEO

All right. Thank you, Jamie, and thank you for joining the call this morning. We always appreciate your interest in FB Financial. For the quarter, we reported EPS of $0.81 and an adjusted EPS of $0.85 per share. We've grown our tangible book value per share excluding the impact of AOCI at a compound annual growth rate of 12.9% since our IPO in 2016. On a full-year basis, we reported EPS of $2.48 or adjusted EPS of $3.40, which represents a year-over-year increase of 13%. Full-year pre-tax pre-provision net revenue was $158.7 million or $217.1 million on an adjusted basis, which represents a 20% year-over-year increase. These results were driven by our team's focus on growing core banking relationships combined with our continued focus on balance sheet optimization and managing our expenses. For the full-year, we grew total assets by $553 million or approximately 4.4%, funded through the growth of our core deposit balances of $343.5 million or about 3.3%. The themes I've emphasized over the past several quarters have circled around the strength of our operating foundation, including our solid capital and liquidity positions, while maintaining our earnings momentum. And this quarter's results reflect a continuation of those efforts. This quarter's earnings resulted in a GAAP return on average assets of 1.14% and a return on average tangible common equity of 11.5%. Our capital position remains very strong as we reported tangible common equity to tangible assets of 10.2% and a preliminary CET1 ratio of 12.8% as well as a preliminary total risk-based capital ratio of 15.2%. Our fourth quarter and full-year 2024 results reflect the unique strengths of the company, which continue to distinguish us among our peer group. First, we have intensely built our company with a local market authority model, allowing us to bring a personalized community banking approach to our customers while still having the size and resources to provide product and technology depth and breadth and top-of-the-line services. While this model is not new in theory, it is unique to banks our size and larger. As a result, we've experienced growth in our customer base and continued interest from high-performing bankers in our region who seek to join our franchise. Second, we operate in a highly desirable geography. As the Southeastern United States continues to experience growth, our geography presents an advantageous opportunity for organic growth with a wealth of attractive places nearby for de novo expansion. Our capability to capitalize on both metro and community market opportunities throughout our footprint gives us a unique opportunity and allows us to consider a lot of growth options as the banking landscape evolves. Lastly, we have an experienced and ambitious leadership team. Our team has the right mix of experience and forward-thinking vision required to take our company into its next phase of growth. Our team, which is relatively younger compared to our peers, continues to produce results for our customers and shareholders. This history of success by this relatively young team gives us confidence in the staying power of our franchise and the opportunity to generate meaningful long-term value. Ultimately, the combination of our business model, geography, leadership, and performance track record sets the stage for an ambitious future. Looking into 2025, what can you expect from us? You can expect us to do more of the same. Our focus has been, and will continue to be, on deploying capital to grow earnings per share and create long-term shareholder value. That's not changing. Our first priority has always been organic growth. We remain focused on growing organically through both our retail and commercial businesses in metro and community markets that we serve today, and we expanded on that this quarter with the addition of nine new revenue-producing bankers, totaling 32 for the year. We're also continuing to pursue new markets as we aim to take our banking model into markets contiguous with our footprint. Last quarter, we announced our expansion into Tuscaloosa, Alabama. This quarter, I'm pleased to announce that we are expanding into Nashville, North Carolina. This is our first step into North Carolina, and we're pleased to move into this market at a unique time in its history as many there are rebuilding their lives and businesses. The impact of Hurricane Helene on the Nashville community has been devastating, and we are ready and eager to bring our expertise and capital resources to this market as it rebuilds. While much of the media coverage has moved on to other stories in the news cycle, our team views Asheville as a permanent part of our story, and we look forward to being part of the rebuilding efforts and helping provide the much-needed capital investment for this community. In both Asheville and Tuscaloosa, we brought on strong leadership, begun hiring production teams with local roots in those communities, and will soon be establishing a physical presence in both of those new markets. You can expect us to continue doubling down on our value proposition with additional investment in both existing and expansion markets. Our second priority for capital deployment is bank acquisitions. We remain interested in combination opportunities that align culturally, geographically, and financially. Like many, we believe we are headed into a more accommodative M&A environment, and we are prepared for the right opportunities that present themselves. We're routinely building relationships with banks that look like us, operate as community-focused organizations, serve both retail and commercial customers, have meaningful market share, and fit well with our existing branch footprint. Lastly, before I pass it over to Michael, I'd love to congratulate our team on another strong quarter and a successful year. When we assess our performance against the ambitious goals we set for ourselves for 2024, you all have been rockstars, and I appreciate every one of you. I look forward to what we can accomplish together in 2025. I'll now hand the call over to Michael to go further into our financial results.

Michael Mettee, CFO

Thank you, Chris, and good morning, everyone. I'll first take a minute to walk through this quarter's earnings and touch on our outlook for 2025. We reported net interest income of $108.4 million for the quarter. Reported non-interest income was $22 million or $24.2 million on an adjusted basis after adjusting for approximately $2.2 million in non-recurring facilities-related charges during the quarter. Non-interest expense was $73.2 million, and provision expense came in at $7.1 million. All-in, reported net income was $37.9 million or $39.8 million on an adjusted basis. On a full-year basis, we reported net interest income of $416.5 million. Reported non-interest income was $39.1 million or $95.6 million on an adjusted basis. Full-year non-interest expense was $296.9 million or $294.9 million on an adjusted basis, and provision expense came in at $12 million. All-in, our full-year reported net income was $116 million or $159.3 million on an adjusted basis. Looking at the margin for the quarter, net interest margin was down a couple of basis points to 3.5%, which was within our previously guided range, impacted by a 4 basis point drag due to carrying excess interest-bearing cash during the quarter. We saw contractual interest rates on loans decrease by 22 basis points, and our yield on interest-earning assets decreased by 19 basis points to 6.01%, largely due to the decrease in overall benchmark interest rates. On a dollar basis, net interest income was $2.4 million on a higher net asset base in the quarter, largely due to growth in loans and interest-earning cash balances. An increase in securities income of $1 million also contributed to the overall increase due to the first full quarter of benefit from the recent securities repositioning from the third quarter. The securities yield was somewhat impacted by the change in benchmark rates but still resulted in an increased yield of 19 basis points. On the liability side, we executed on targeted deposit repricing in line with market interest rates as we aim to prudently manage our cost of funds in the shifting interest rate environment. The cost of interest-bearing deposits decreased by 21 basis points to 3.37% in the quarter, bringing down our cost of total deposits to 2.7%. As Chris mentioned previously, we continue to prioritize organic deposit balances as our means to grow our business, with core deposit balances up 10.8% on an annualized basis in the quarter. Brokered deposits remain a small percentage of our deposit balance, and that will continue. We anticipate that a portion of these higher-cost deposits will run off over the next year as market interest rates decline as reflected in the 9.7% decrease noted this quarter. In 2025, we'll continue to focus on growing both sides of the balance sheet, as Chris mentioned, and we expect our net interest margin to land between 3.54% and 3.61% in the first quarter. Moving to adjusted non-interest income, we reported core non-interest income of $24.2 million during the quarter, which reflects a slight increase over the previous quarter. Amidst a seasonal slowdown in mortgage, the company maintained strong fee income levels through our investment services and swap fees in the fourth quarter. Looking at expenses, over the past few years, we've made investments in our team and technology as we prepare for our next phase of growth as a company. As we move into 2025, we're prepared to capitalize on those investments. Our expense strategy in 2025 is to align capital investment directly with revenue opportunities to drive increased profitability for the organization, such as new banking teams, business units, or taking opportunities to enhance the customer experience. In the quarter, core non-interest expense decreased to $72.7 million compared to $76.2 million in the third quarter, resulting in a core efficiency ratio of 54.6% compared to 58.4% in the prior quarter. The decline in non-interest expense was concentrated within the banking segment, resulting in a banking segment core efficiency ratio of 50.2% compared to 54.1% in the prior quarter. The decrease was primarily attributable to adjustments in our short-term incentive expense as we right-sized our accrual to close the year and a one-time franchise tax benefit recognized in the fourth quarter. In 2025, we're expecting to grow banking expenses at about 4% to 5% as we continue to grow the business and execute on our near- and long-term vision. Specific to the first quarter of 2025, we anticipate banking non-interest expense to land in the range of $64 million to $66 million. On credit, our charge-off levels were elevated this quarter, driven by the full charge-off of a single previously reserved C&I relationship totaling $10.5 million. We discussed this relationship in our second quarter call when we established a specific reserve. It's a credit in the services industry that underwent a series of challenges specific to licensing and employee fraud, which ultimately led to bankruptcy. These circumstances were specific to the borrower and not an indication of anything deeper or systemic within the loan book. As we communicated in the second-quarter call and as expected, we did reach a resolution on this credit by year-end. The charge-off drove a decrease in our overall ACL and non-performing loans to total loans ratio during the quarter. Absent the impact of this relationship, our fourth quarter annualized net charge-off rate was approximately 3 basis points, which is more in line with our normal run rate. Our total ACL balance at year-end was $152 million or 1.58% of loans held for investment. Partially offsetting the decrease mentioned was a reserve build of $7 million, primarily due to new allowance on loan growth and updates on our reserve modeling. On capital, we continue to maintain very strong capital ratios, including an equity to total assets ratio of 11.9% and a preliminary CET1 ratio of 12.8%. As Chris mentioned, our team remains focused on the deployment of that capital to deliver consistent long-term growth and earnings in tangible book value. With that, I'll now turn the call back over to Chris.

Christopher Holmes, CEO

All right. Thanks, Michael, for the detail. To conclude, we're pleased with our quarterly and full-year results, and we're proud of the progress that we've made as a company over the past year. We believe we're poised for a strong year in 2025 and look forward to sharing that progress with all of you. Thank you again for your interest in FB Financial. And operator, at this time, we'd like to open the line for questions.

Operator, Operator

Ladies and gentlemen, we will now start the question-and-answer session. Our first question comes from Stephen Scouten from Piper Sandler. Please go ahead with your question.

Stephen Scouten, Analyst

Hey, good morning, guys. I guess if we could talk a little bit about the new hires, just a little more detail there. I know you said there were nine this quarter and that's 32 on the year. And I think you'd called out five mortgage producers maybe elsewhere in the presentation. So can you maybe just give us a feel for maybe the disciplines of those hires that you're bringing on in terms of where they're focused and kind of what you would think would be a viable target for next year as you continue to bring in new people?

Christopher Holmes, CEO

Yes. In general, what we're talking about are what I would call core C&I frontline bankers. We are not complicated as an organization, and so it's a pretty direct number in terms of what we call a relationship manager or a producer, and it's a sort of elite titling group in our organization. So I would say it’s primarily core C&I frontline bankers. What else is in there besides that, either Travis or Mike?

Travis Edmondson, CBO

No, I think that's the majority of it. Also, it's pretty diverse geographically. It's not where we've had, in this quarter, a lift out of nine in one location. It's just pretty diverse across geographies.

Michael Mettee, CFO

Yes, that's right. As we think about 2025, Stephen, we all set a target that we're going to go out and hire 42 revenue producers. It's more about opportunities, finding the right fit. These things take years to recruit the right people to fit what we do. And so, they kind of come to us as they come to us. And that's what happened in the mortgage area, and then some of the people we've added in the East, we've been recruiting for a while. Then we added a couple in Nashville as well as we build out that team.

Christopher Holmes, CEO

Looking ahead to 2025 and beyond, recruiting is an ongoing process that requires daily attention. We didn't emphasize this as much in the past, but we're now seeing a lot of inbound opportunities, and we expect this trend to continue and possibly accelerate due to market disruptions. I'm feeling quite optimistic based on the discussions we're having in our region.

Stephen Scouten, Analyst

Yes, that makes a lot of sense. Is that optimism around hiring what seems to give you more optimism around growth coming up into this year? Are there other signs that you're seeing that lead to this optimism? And as you guys talked about in the release, building deposits now for what you expect to be a ramp-up in growth here next year?

Christopher Holmes, CEO

Yes. So as we look forward into the fourth quarter, which is not traditionally the most robust quarter, we had a net loan growth of 5.2%. As we've talked about through this year, there's a little bit of what we anticipate next year from that hiring of folks. There's also the normal organic growth of our geography, which is an advantaged geography, as I talked about in the prepared remarks. That and it takes a bit of time for those folks as they come on to really begin to bring volume, especially if they have some type of a restriction on their calling. We abide very strictly by those when those are in place. But we do have some folks that have been here for now close to a year, and we really expect them to hit their stride. That's a portion of the growth, but it's not totally dependent on that. We expect our existing roster of relationship managers to be acquiring accounts as well.

Stephen Scouten, Analyst

Yes, I understand. That makes sense. Just one last thing from me.

Christopher Holmes, CEO

I would say one other thing because you mentioned the deposit side. We have bulked up on deposits and I say bulked up, that's probably the wrong term. We've continued to grow at a measured pace on the deposit side. If you'll notice, our loan-to-deposit ratio has shrunk. As we look into next quarter, anticipating loan growth, we have potentially maturing deposits at some higher costs that we may or may not retain depending on the relationship. They are not core relationship deposits, but their relationship, but maybe not core relationship deposits. We are also managing through that in the first quarter.

Stephen Scouten, Analyst

Makes sense. Nice to have that flexibility. Just the last thing for me may be your comments around M&A, Chris. I know in the past, you've talked about needing to have some patience around deals because you don't know if you could get more than one deal approved a year or what that timeline might look like. But we just saw one deal get approved in less than three months of some decent size. Does what you're seeing and hearing lend you to be slightly more aggressive and think about going after it in this kind of environment? Does it change your mindset?

Christopher Holmes, CEO

Yes, it does. It shapes our view and changes it somewhat from where it was, in the same way you alluded to. I think under the previous regulatory leadership that was in place, you were looking at one deal in an 18-month period. You had to be quite judicious about what you got into, because the opportunity cost could be great. As long as you don't get yourself over your skis, and I think that's an important point, acquisitions can be pursued constructively. That all remains to be seen, but as you said, we just saw a deal get approved relatively quickly. I think that was a Federal Reserve transaction that was regulated there, but we saw it get approved relatively quickly. Hopefully, that's a sign of things to come because that timing, as you know, poses additional risks for the transaction.

Stephen Scouten, Analyst

Yes, it all makes a lot of sense. Thanks for the time, and congrats on a great 2024.

Christopher Holmes, CEO

All right. Thanks, Stephen.

Operator, Operator

And our next question comes from Brett Rabatin from Hovde Group. Please go ahead with your question.

Brett Rabatin, Analyst

Hey guys, good morning.

Christopher Holmes, CEO

Good morning, Brett.

Brett Rabatin, Analyst

I wanted to start on credit, and I'm sure you guys saw locally that Wheellock sold the LBAC Tower, Phillips Plaza, and Parkway Towers at pretty significant discounts. The common theme there seems to be age of building. I know office is only about 4% of the portfolio, but just wanted to see if you guys had any thoughts on office in Nashville, any aged properties, and if you guys had any kind of median or average age for the portfolio for you guys and just how you see the commercial real estate market here?

Christopher Holmes, CEO

Yes, Brett. Good question. We did see that, and we couldn't miss it. We had two transactions that took place, specifically office transactions that sold at a loss. Both of them were purchased some time ago, I think even pre-COVID. One of them saw a substantial loss. Fundamentally, my answer is no; we don't need to question the economic state of Nashville or Middle Tennessee at this time. A lot of the factors that have caused Nashville's growth momentum; those elements are still in place. In-migration still occurs, corporate relocation pipelines are solid, and the inquiries remain robust with the chamber and ECD. That said, regarding the two specific properties, the downtown ones sold at a loss, and I don't know if you mentioned the suburban one but that one sold at auction also at a slight loss. All those properties were older buildings that had some occupancy issues. They were out of town acquisitions by a fund that may not have had the best knowledge of the local market. I see those scenarios as unique. Keep in mind, our office portfolio is not heavily centered in urban settings, meaning we don’t engage in significant financing of those types of properties. We focus on opportunities that don’t reach unfavorable regulatory limits.

Brett Rabatin, Analyst

Okay. But to the question, I saw that on Broadway, it was an interesting price. But the question I had was, those to me seem to be outliers, but they also seem to indicate that properties that are 35 to 40 years old might have issues. So the question is, you mentioned you don't really see any commercial real estate issues, but just was curious if you guys had an average or median age for your office portfolio for the buildings?

Christopher Holmes, CEO

Yes. We don't have that information at our fingertips. Remember, we don't take on a lot of center-city type office financing in our markets. So we do not have much for comparable properties that were sold at a discount.

Brett Rabatin, Analyst

Okay. The other question I wanted to ask was around the margin, maybe Michael. Just talking about the improvement in the first quarter; my suspicion is that a large part of it could be driven by a reduction in liquidity, that is to say, using some cash to fund loans. Just wanted to hear, Michael, if that's the case, and any other thoughts on what would drive the margin in the first quarter? As you guys see it for the full-year, assume the Fed is not changing interest rates; just to keep it static, can you kind of outrun the local deposit market that is still pretty robust?

Michael Mettee, CFO

Yes. Brett, you are correct. It's about the loan-to-deposit ratio. As mentioned earlier, we've dipped down 85%. So as we deploy some of the excess liquidity or if we have higher-cost deposits that we don't renew or they run off at their non-core relationships, that would impact the margin positively. We thrive in a stable interest rate environment, and we've performed well while navigating recent changes. Our loan portfolio has about half of its loans floating. Hence, any decline in interest rates typically reflects on our yields as well. The team has done great work as we’ve seen rates decline on the deposit side. If the yield curve stabilizes, we anticipate margin expansion.

Brett Rabatin, Analyst

Okay, fair enough. I appreciate the color. Congrats guys on a solid 2024.

Michael Mettee, CFO

Thanks, Brett.

Christopher Holmes, CEO

Thank you, Brett.

Operator, Operator

Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

Russell Gunther, Analyst

Hey, good morning, guys.

Christopher Holmes, CEO

Good morning, Russell.

Russell Gunther, Analyst

I just wanted to follow up on the loan growth discussion earlier. You guys have many good proof points for an optimistic 2025. I think in the past, you've talked about being able to accelerate the growth rate into the double digits. I'm just wondering if that's still the case or if the backup in rates puts caution on that. How are you seeing that transpire over the course of the year?

Christopher Holmes, CEO

Yes. As we look into 2025, we see continued good things and momentum. We're targeting low double-digit to high single-digit loan growth rates. Thus far, that feels good and while never easy, we believe it is achievable.

Russell Gunther, Analyst

Understood. Okay, great. And then switching gears a bit, you guys are in a very comfortable excess capital, excess reserve position. You touched on the pickup in organic growth, as well as the potential to deploy that via M&A in 2025. You've also been opportunistic in 2024 around securities repositioning and buyback. How are you thinking about those levers? Is it capital build mode for M&A?

Michael Mettee, CFO

Yes. You noticed we didn't emphasize restructuring and buybacks, but those options remain. We prefer the first two options Chris mentioned as better capital deployments, which is no change from what you've heard us say before. We believe those will materialize in 2025. We're certainly open to restructuring or share buybacks if needed, but at this point, our focus is on organic opportunities and then M&A as a secondary priority.

Russell Gunther, Analyst

Got it. Okay, great. And the last one for me. I appreciate the commentary on core expense growth rate within the commercial bank. How are you thinking about expenses within the mortgage vertical and any improved efficiencies there?

Michael Mettee, CFO

Yes. First, we've achieved four straight quarters of positive mortgage contributions. Thus far, 2024 was a challenging year for mortgages, but I'm proud of that turnaround. We expect to continue improving and want to be better than the market. With regards to mortgage, we anticipate continuing to enhance our operations. Overarching housing and interest rate markets won't allow blowout years in mortgage, but we've taken the peaks and valleys out and expect to operate more efficiently in 2025 than in 2024, which was already an improvement over 2023.

Russell Gunther, Analyst

All right, very good. Guys, that's it for me. Thanks for taking my questions.

Christopher Holmes, CEO

Thanks, Russell.

Operator, Operator

And our next question comes from Catherine Mealor from KBW. Please go ahead with your question.

Catherine Mealor, Analyst

Thanks. Good morning.

Christopher Holmes, CEO

Good morning, Catherine.

Catherine Mealor, Analyst

Just one follow-up on the margin. I want to see if you could talk a little bit about deposit cost. One key point we're trying to figure out as an industry is what happens to deposit cost as we start to see growth improve in 2025. So we're curious about how you're thinking about that with any new deposits coming on board.

Michael Mettee, CFO

Yes, good morning, Catherine. As you noted, it's still competitive. Particularly in higher-growth markets, it is costly to move deposits. We actually observed a shift into some interest-bearing deposits from non-interest-bearing ones late in the quarter, where customers sought out advantages in rates. It's still pretty aggressive; in some markets, we've seen CDs above 4.5%. We won't be offering CDs at that rate but will need to be in the 80%, 90% of Fed funds to attract new deposits, which will result in a competitive year as we seek to grow relationships and deposits.

Catherine Mealor, Analyst

Great. But then on the flip side with loan pricing, would you say that you still observe a consistent expansion in your new margin based on the loan pricing and the expectations for growth?

Michael Mettee, CFO

Yeah. The expansion is holding steady. On new loan origination, we're seeing rates around 720-ish. So if you think about that, it's around a 350 to 400 basis-point margin spread. Loans remain competitive, and moderately slowed rates make loan growth and loan pricing somewhat aggressive, which is why we need to work both sides of each relationship and ensure we obtain deposits in conjunction with loans. Thus far, loan yields have held fairly steady. The steepening yield curve can create challenges based on how competitors price their offerings; we must maintain discipline.

Catherine Mealor, Analyst

That's great. One other on the margin, holistically, if the Fed does not change rates, can you still see continued expansion throughout the next couple of years?

Michael Mettee, CFO

Yeah. I believe we should see a base point or two of expansion each quarter as we naturally reprice the balance sheet. It won't be significant, but we'll gradually increase over time.

Catherine Mealor, Analyst

Okay, great. As you think about hitting high-single digit to low double-digit growth in 2025, are you seeing more opportunities in C&I versus commercial real estate, or could you provide insights into where you're noticing pipeline opportunities today?

Travis Edmondson, CBO

Yes, good morning. We're seeing growth opportunities in both sectors. We've concentrated more on the C&I space over the last 12 months. Looking ahead, we have additional room in the CRE category, but we will not exceed regulatory thresholds. We will see some marginal growth in the CRE portfolio, and we're primarily focused on nurturing our existing relationships, but the net-new relationships are primarily stemming from the CRE field.

Catherine Mealor, Analyst

Great. Thanks so much.

Christopher Holmes, CEO

Catherine, this is Chris. It's worth mentioning that we see numerous CRE relationships that we don't pursue to maintain a balanced portfolio and not become overly concentrated in any particular sector. However, there is still ample CRE financing available that we are not fully leveraging. We aim to strike the right balance.

Catherine Mealor, Analyst

Makes sense. All right, great. Thank you. Great quarter and great year.

Operator, Operator

Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.

Steve Moss, Analyst

Good morning, guys.

Christopher Holmes, CEO

Good morning, Steve.

Steve Moss, Analyst

Most of my questions have been asked and answered here, but just want to clarify on credit. With the loan charge-off, you mentioned the specific reserve. Was that specifically reserved ahead of this quarter, or was that the driver of the provision this quarter?

Travis Edmondson, CBO

The specific reserve for the charge-off was established in prior quarters.

Christopher Holmes, CEO

Yes, most of that was set aside in the second quarter.

Steve Moss, Analyst

Okay. So then the provision for this quarter was a mix of growth in other credit-specific reserves?

Michael Mettee, CFO

No, it was primarily driven by loan growth, along with a modestly worse economic forecast. We generally rely on Moody's baseline, which experienced slight degradation, leading to the adjusted provision. There weren't other significant credits that drove it higher.

Christopher Holmes, CEO

The provision also entailed minor cleanup regarding that charge-off, which, while it was not a significant amount, did exceed that specific reserve.

Steve Moss, Analyst

Okay, great. Lastly, in terms of margin sensitivity, we'll see where the Fed goes for the upcoming year. Just curious how your balance sheet is positioned today for potential additional Fed rate cuts, whether you anticipate one, two, or more than that, and how you foresee that impacting the margin?

Michael Mettee, CFO

Yes, we are slightly asset sensitive. If the rates were held stable or reduced, we would be comfortable. We have a steepening yield curve, which could benefit the balance sheet while posing some challenges on the mortgage side. That said, we expect to manage operationally regardless of what the Fed does.

Christopher Holmes, CEO

We feel confident if the rates remain steady. If we were caught by surprise with significant rate reductions, our mortgage capability would likely ramp up considerably. That's part of our strategy.

Steve Moss, Analyst

Great. I really appreciate all the insights today and nice quarter, guys.

Christopher Holmes, CEO

Thank you, Steve.

Operator, Operator

And ladies and gentlemen, at this time, we will conclude today's question-and-answer session. I'd like to turn the floor back over to Chris for any closing comments.

Christopher Holmes, CEO

Thanks, Jamie. I would like to say thanks once again to everyone for joining us on the call. We always appreciate your interest and participation, and we look forward to connecting again next quarter. Thank you.

Operator, Operator

And ladies and gentlemen, with that, we'll be ending today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.