James J. Herzog
Senior Executive Vice President, Chief Financial Officer at Comerica
Thanks, Curt, and good morning, everyone. Turning to loans on Slide 6. Average loans declined less than 1/2 of 1%, attributed largely to expected paydowns in commercial real-estate from a higher pace of refinancing or sale of projects. As a reminder, our commercial real-estate line-of-business strategy is geared towards originating construction loans and we do not generally expect to be a permanent lender in that space. Declines in corporate banking were partially attributed to senior housing exits and energy grew by winning new and expanding existing relationships.
Throughout the quarter, we saw increases across a number of businesses, but period-end loans were flat as that growth was offset by a $500 million reduction in commercial real-estate. Total commitments were relatively flat as declines in commercial real-estate and corporate banking were offset by production in middle-market general, energy and environmental services. Average loan yields increased 1 basis-point as the impact of business cessation and higher non-accrual interests offset the impact of a lower rate environment.
On Slide 7, we continue to be encouraged by customer deposit activity. Average deposits decreased $550 million or 0.9%. Excluding the impact of the $1.4 billion decline in brokered CDs, customer deposits grew over $800 million or over 1% in the quarter with the largest contribution coming from middle-market general. Growth continues to be centered in interest-bearing deposits and although cyclical pressures persisted, noninterest-bearing deposits as a percentage of total remained flat at 38%, continuing to reflect a compelling mix. Period-end deposits increased $700 million.
Adjusting for the timing-related increase in DirectExpress deposits and the decline in brokered CDs, period-end customer deposits grew $400 million on a net basis. Lower brokered CDs, coupled with a successful pricing strategy drove a 40 basis-points decline in deposit pricing quarter-over-quarter. Going-forward, we intend to continue our relationship pricing approach, monitoring the rate and competitive environment while balancing customers' objectives with their own funding needs and profitability.
Our securities portfolio on Slide 8 declined as the shift in the rate curve reduced the valuation and we saw continued paydowns and maturities. Late in the 4th-quarter, we executed a modest repositioning, selling approximately $800 million of our lower rate treasuries and reinvesting at a market yield. We expect to accrete the $19 million pre-tax loss in the net interest income within 2025. Beyond a modest level of purchases to replace treasury maturities, we do not currently project a more meaningful securities reinvestment cadence until late this year.
Turning to Slide 9. Net interest income increased $41 million to $575 million. Excluding the benefit of Cessation, net interest income would have grown $16 million quarter-over-quarter. The benefit of maturing swaps in securities, higher customer deposits, strong deposit betas and non-accrual interests all contributed to a strong net interest income quarter.
Moving to Slide 11, we continue to believe the successful execution of our interest-rate strategy allows us to better protect our profitability from rate volatility. Despite the slight benefit this slide shows in a lower rate environment, we generally consider ourselves to be asset neutral, though we remain cognizant of the impact the rate environment may have on non-interest-bearing deposits. By strategically managing our swap and securities portfolios while considering balance sheet dynamics, we intend to maintain our insulated position over-time.
We feel credit quality remains a competitive strength as shown on Slide 12. Net charge-offs remain low at 13 basis-points and only reflect a slight increase from the prior quarter with lower 4th-quarter recoveries. Persistent inflation and elevated rates continued to pressure customer profitability and drove expected normalization in both criticized and nonperforming loans, largely in our general middle-market businesses. Overall, the modest migration observed was expected and already factored into our reserves. And as a result, our allowance for credit losses remained relatively flat at 1.44% of total loans. We feel our proven conservative credit discipline continues to position us well to outperform our peers through-the-cycle.
On Slide 13, 4th-quarter non-interest income decreased $27 million, including the $19 million realized loss from the securities repositioning and a $4 million decline in deferred compensation, which was largely offset within non-interest expenses. Despite modest pressures observed in the quarter across select categories, we continue to prioritize non-interest income and expect to see customer-related income growth in 2025.
Expenses on Slide 14 increased $25 million over the prior quarter, inclusive of seasonally higher costs, which impacted a number of line items, including salaries and benefits. In addition, we saw an increase in legal and litigation-related expenses, and we made the strategic decision to increase funding to increase the size of our charitable foundation. These increases more than offset lower operational losses and the gains of real-estate, which we -- which as we continue to optimize our real-estate and banking center footprint. Expense discipline remains a key priority as we continue to focus on driving efficiency.
As shown on Slide 15, we continue to favor a conservative approach to capital with our estimated CET1 at 11.89%. This remained well-above our 10% strategic target and even if the proposed Basel III removal of the AOCI opt-out is in effect, we would have exceeded regulatory minimums and buffers. Movement in the forward curve caused unrealized losses in AOCI to shift higher in the quarter, but we expect them to improve over-time with maturities and paydowns.
Even with volatility in the rate curve, we returned capital to shareholders through $100 million in share repurchases in the 4th-quarter and intend to repurchase approximately $50 million of common stock in the first-quarter. As we consider future capital decisions, we intend to be measured in our approach and calibrate the size and frequency of future repurchases with expected loan trends. We will also continue to closely watch the forward curve, our profitability, the economy and any regulatory updates as they may also influence our strategy.
Our outlook for 2025 is on Slide 16. We project full-year average loans to be flat-to-up 1% in 2025 with expected growth in most businesses, largely offset by anticipated paydowns in commercial real-estate. In fact, excluding the impact from commercial real-estate, we project 2% average loan growth year-over-year. And in the first-quarter, commercial real-estate paydowns are expected to fully offset production in most other businesses, resulting in a relatively flat average loans compared to 4th-quarter '24.
As we move throughout the year, we project sequential quarterly loan growth, resulting in an estimated 3% point-to-point increase in total loans by year-end 2025 compared to year-end 2024. We intend to continue our deliberate reduction in brokered time deposits, which is expected to drive a 2% to 3% decline in-full year average deposits in 2025. Excluding brokered CDs, we expect full-year average customer deposits to grow 1%. Following seasonal declines in the first-quarter, we project customer deposit growth throughout the rest of 2025. With the elevated rate environment, we expect most of that growth will continue to be concentrated in interest-bearing balances, but believe our non-interest-bearing deposit mix will remain relatively consistent in the upper 30s.
Also, as a point of clarity, we are not assuming deposit attrition in 2025 for Direct Express within this outlook based on our current understanding of the transition strategy. We expect full-year 2025 net interest income to increase 6% to 7% compared to 2024 with the benefit of business cessation, maturing and replaced securities and swaps, a more efficient funding mix and higher loans, more than offsetting lower noninterest-bearing balances.
In the first-quarter, we expect net interest income to take a slight step-down with a 1% to 2% decline from the 4th-quarter as the impact of day count, lower noninterest-bearing deposits and lower non-accrual interest income offsets the benefit of Cessation and our swap in securities portfolios. From there, we expect to see growth through the rest of the year and even without the benefit of Cessation, we expect net interest income to be significantly stronger in 2025 than 2024.
With the potential for ongoing inflationary pressures and elevated rates, we expect manageable migration towards more normal credit levels to continue in our portfolio. As a result, we project full-year net charge-offs to be at the lower-end of our normal 20 to 40 basis-points range in 2025. We expect 2025 non-interest income to increase 4% over reported 2024 levels, which includes a 2% expected growth in customer income. For the first-quarter of 2025, we expect seasonal declines in customer-related non-interest income and then generally expect to see growth in customer fees through the balance of the year.
Full-year non-interest expenses are expected to grow 3% with higher salaries and benefits, lower gains on-sale of real-estate and an increase in pension expense. First-quarter 2025 expenses are projected to increase 2% over the 4th-quarter of 2024 with normal seasonality and compensation expenses. Expense discipline remains a priority as we seek to self-fund strategic and risk management investments to support our future long-term inefficiency.
Moving to capital, we continue to appreciate the importance of a strong capital position and intend to consider a number of variables, including loan growth, the forward curve and the broader economic environment as we execute our plan for the year. We intend to maintain a CET1 ratio well-above our 10% strategic target in 2025. In all, we expect favorable sentiment and trends to drive responsible customer-related growth throughout 2025.
Now, I'll turn the call-back to Curt.
