David J. Turner, Jr.
Senior Executive Vice President, Chief Financial Officer at Regions Financial
Thank you, John. Let's start with the balance sheet. Average and ending loans declined modestly on a sequential-quarter and full-year basis. Within the business portfolio, average loans decreased modestly quarter-over-quarter as our customers continue to carry excess liquidity and utilization rates remain below historic levels. However, client optimism is improving and further clarity surrounding tax reform and tariffs is expected to be a catalyst for business activity and lending.
As a result, it will probably be the second-half of the year before we see the impact filter through to the economy. As John noted, our footprint provides us meaningful advantages. For example, within our footprint, there is $77 billion of federal infrastructure spending already-approved and allocated at the state-level, which will benefit customers in infrastructure and infrastructure adjacent industries. We're also encouraged that pipelines and commitments are trending up.
As a result, we expect a notable pickup in C&I lending in 2025, but this will be partially offset by continued softness in commercial real-estate origination. Average consumer loans remained stable in the 4th-quarter as modest growth in credit card was offset by declines in other categories. For full-year 2025, we currently expect average loan growth of approximately 1% as we continue our focus on risk-adjusted returns. From a deposit standpoint, both ending and average deposit balances grew modestly quarter-over-quarter, consistent with normal year-end seasonality.
Noteworthy growth occurred in commercial due largely to year-end tax inflows to state, county and municipal customers. Despite modest growth in interest-bearing commercial deposits during the quarter, we remain at our expected mix in the low 30% of non-interest-bearing to total deposits. We continue to believe this profile will be relatively stable in the coming quarters. In the first-quarter, we typically see a moderate reversion of the year-end commercial balance increase, offset by some growth in consumer deposits driven by tax refunds.
After the first-quarter, overall balances normally grow modestly through the year, which aligns with our baseline expectation. For the full-year of 2025, we expect average deposits to remain relatively stable with 2024 as modest growth in consumer deposits is expected to be offset by declines in commercial deposits as customers draw-down their excess liquidity.
Let's shift to net interest income. Net interest income grew 1% in the 4th-quarter, demonstrating a well-positioned balance sheet profile amid Fed policy easing. The benefits from lower deposit cost and hedging fully offset the pressure on asset yields from lower interest rates. Linked-quarter, interest-bearing deposit costs fell by 21 basis-points, representing a falling interest-rate bearing deposit beta of 34%. We believe our ability to manage funding costs lower even after exhibiting industry-leading performance during the rising rate cycle further highlights the strength of our deposit advantage.
Growth in interest-bearing deposits added cash balances and negatively impacted the reported deposit beta, but had little impact to net interest income. The net interest margin increased 1 basis-point to 3.55%, overcoming the pressure from elevated average cash balances, which negatively impacted net interest margin by 3 basis-points. Finally, we took advantage of a steepening yield curve in the 4th-quarter, executing the repositioning of $700 million of securities at a $30 million pretax loss and resulting in a 220 basis-point yield benefit.
Today, we have few bonds that can be replaced and meet our interest-rate risk and capital management objectives. However, we will continue to reassess going-forward. In terms of full-year 2025, net interest income is expected to increase between 2% and 5%, building on the growth momentum established in 2024. In the near-term, net interest income will decline modestly in the first-quarter due mostly to two fewer days. After this, growth is expected to come from fixed-rate loan and securities yield turnover in the prevailing higher-rate environment, an improving loan and deposit growth backdrop and the ability to protect net interest income from uncertainty as the path of the Fed rate evolves. Now let's take a look at fee revenue performance during the quarter. Adjusted non-interest income declined 5% from a strong 3rd-quarter, while full-year adjusted non-interest income increased 9%, driven by record capital markets, treasury management and wealth management income.
Over-time and in a more favorable interest-rate environment, we expect our Capital markets business can consistently generate quarterly revenue of approximately $100 million, benefiting from investments we have already made in capabilities and talent, but we expect it will run around $80 million to $90 million in the near-term. Within mortgage, due in-part to our experience and cost advantage, we will continue to look for opportunities to acquire additional mortgage servicing rights, building on the $56 billion we've acquired since 2019.
We expect full-year 2025 adjusted non-interest income to grow between 2% and 4% versus 2024. Let's move on to non-interest expense. Adjusted non-interest expense declined 4% compared to the prior quarter, driven primarily by declines in salaries and benefits and lower Visa Class B shares expense, reflecting the 3rd-quarter litigation escrow funding that did not repeat. Full-year 2024 non-interest expenses decreased 4% on a reported basis and 1% on an adjusted basis.
We have a demonstrated track-record of managing our expense base over-time and remain committed to prudently managing expenses to fund investments in our business. We will continue focusing on our largest expense categories, which include salaries and benefits, occupancy and vendor spend. We expect full-year 2025 adjusted non-interest expense to be up approximately 1% to 3% and we expect to generate positive operating leverage. Regarding asset quality, provision expense was approximately equal to net charge-offs at $120 million and the resulting allowance for credit-loss ratio remained unchanged at 1.79%.
Annualized net charge-offs as a percentage of average loans increased 1 basis-point to 49 basis-points, driven primarily by previously identified portfolios of interest. Full-year net charge-offs were $458 million or 47 basis-points. Non-performing loans as a percent of total loans increased 11 basis-points to 96 basis-points, modestly below our historical range, while Business Services criticized loans remained relatively stable.
Our through-the-cycle net charge-off expectations are unchanged and remain between 40 and 50 basis-points. As it relates to 2025, we currently expect full-year net charge-offs to be towards the higher-end of the range attributable primarily to loans within our previously identified portfolios of interest. We do expect losses to be more elevated in the first-half of the year, but importantly, losses associated with these portfolios are already reserved for. Let's turn to capital and liquidity. We ended the quarter with an estimated common equity Tier-1 ratio of 10.8%, while executing $58 million in share repurchases and paying $226 million in common dividends during the quarter. When adjusted to include AOCI, common equity Tier-1 decreased from 9.1% to an estimated 8.8% from the third to 4th-quarter attributable to the impact from higher long-term interest rates on the securities portfolio.
We continue to execute transactions to better manage this volatility. Near the end-of-the 4th-quarter, we transferred an additional $2 billion of available-for-sale securities to held-to-maturity as we prepare for new regulatory expectations. In the near-term, we expect to manage common equity Tier-1, inclusive of AOCI, closer to our 9.25% to 9.75% operating range. This will provide meaningful capital flexibility going-forward to meet proposed and evolving regulatory changes, while supporting strategic growth objectives and allowing us to continue to increase the dividend and repurchase shares commensurate with earnings.
With that, we'll move to the Q&A portion of the call.
