Q4 2019 Earnings Call
Good morning, and welcome to the regions Financial Corporation quarterly earnings call. My name is Shelby and I'll be your operator for today's call.
I would like to remind everyone that all participants on mindset in placed on listen only.
At the end of the call there'll be a question and answer session. If you wish to ask questions. Please press star one on your telephone keypad and we'll now turn the call over to Dana Nolan to begin. Thank you shall we welcome to lead on fourth quarter 2019 earnings Conference call. John Turner will provide highlights <unk> financial performance.
Well, thank each and every year the core earnings related documents, including forward looking statements are available under the investor relation traction on our website Igs disclosures cover our presentation materials prepared comments as well as <unk> of tonight's call.
I'll now turn the call or <unk>.
Thank you Dan. Thank you all for joining our call today.
By saying that we're pleased with our fourth quarter and full year results.
Morning, We reported strong full year earnings from continuing operations, a $1.5 billion, resulting in a 10% year over year increase in diluted earnings per share.
This year, we also delivered the highest level on a pretax pre provision in common over decades.
Generating 4% paused to operating leverage on reported basis and 2% on adjusted basis.
Despite lower interest rates and significant market volatility 2019 was a solid year and I'm proud of all that we accomplished we continue to make progress on our goal generating consistent sustainable long term performance through all phases of the economic cycle.
Although market uncertainty continues the economy still growing.
Our customers are optimistic about their businesses and consumer confidence remains healthy.
We're also encouraged bump progress made on the trade fraud, however will contain a monitor geopolitical tensions any uncertainty they introduced.
As we begin to new year, we have solid momentum and feel good about how we're positioned.
We have a comprehensive hedging strategy in place to protect net interest income. So we don't have stretched for loan growth.
Our core businesses continue to produce good results generating growth in consumer checking accounts in household credit cards and wealth assets under management.
We're very pleased with the performance of our priority markets and investments in our businesses continue to pay it off.
We have a robust credit risk management framework and while asset quality continues to normalize overall it remains pretty benign.
And finally, although we've made significant progress to simplify and grow we're only one third complete with our current list of identified initiatives. There are lot of process improvements annual revenue generating opportunities left.
We continue to leverage digital across our omnichannel platform to better meet customer needs and improve efficiency and effectiveness.
A quick examples.
Full year checking account and credit card production increased 17% and 65% respectively.
Loan applications increased 54% and in mortgage approximately 60% of all applications are complete an online.
Mobile deposits increased 52% and now represent 13% of all the pause.
As we look forward, we're focused on the things we can control maybe the needs of our customers with best in class service, while leveraging technology, and making banking easier for our associates and customers.
Continue to focus on the fundamentals of our business.
Generating positive operating leverage through disciplined expense management and prudent investment decisions.
Our priorities centered on soundness profitability and growth in that order.
Thank you for your time and attention. This morning before I turn the call over to David I want to thank the 19000 plus associates your regions for their commitment and dedication throughout 2019.
Tells that this team.
Confident about 20, Twond and feel good about our plans, which support delivering consistent sustainable results through all phases, the economic cycle.
David Thank you, John let's start with balance sheet.
Adjusted average total loans decreased less than 1%.
And ending total loans increased modestly.
Adjusted average consumer loans increased 1% led by increases in indirect other credit card and mortgage partially offset by declines in home equity.
Average business loans decreased 1% and were impacted by our continued focus on client selectivity and overall relationship profitability as well as lower line utilization and elevated paydown activity during the quarter.
We continue to focus on risk adjusted returns and are not interested in pursuing nominal loan growth for short term benefit.
That said, we expect full year 2020 average loan balances to remain relatively stable on reported basis and to grow in the low single digits on an adjusted basis.
Similar to 2019, we expect 2020 loan growth to be led by business services lending, specifically cnine loans with modest growth in owner occupied commercial real estate and Investor Real estate.
Within consumer lending, we expect growth in residential mortgage indirect other card and direct lending.
Turning to average deposits, reflecting seasonal trends average corporate segment deposits increased 4%.
Average well segment deposits increased 1% all average consumer segment deposits remained relatively stable.
Note total non interest bearing deposits grew 1.5% during the quarter.
Deposit growth in the business segments was partially offset by a 51% decline and the other segment deposits due primarily to reductions within wholesale corporate treasury deposit categories reflective of a lower need for wholesale borrowings.
So let's look at how that's impacted net interest income and margin.
Net interest income declined 2% linked quarter and net interest margin declined five basis points to 3.39%.
Net interest margin and net interest income were negatively impacted by lower market interest rates. However, this was partially offset by declining deposit costs and a more favorable funding mix.
Lower loan balances reduced net interest income benefited net interest margin.
With respect to funding we completed the cash tender offer during the quarter for approximately two thirds of our outstanding 3.2% parent company senior notes incurring $16 million in extinguishment costs.
The estimated run rate benefit in 2020 is an increase to annual net interest income of approximately $15 million and a one to two basis point improvement in margin.
As expected total deposit costs declined eight basis points compared to the prior quarter to 41 basis points and interest bearing deposit costs declined 13 basis points and 64 basis points.
The associated deposit beta was 28% this quarter.
Regions continues to deliver industry, leading performance in this space exhibiting the strength of our deposit franchise.
Assuming a stable rate environment, we expect modest reductions in deposit costs moving forward.
Now that the majority of our forward starting hedges have begun our balance sheet is largely insulated from movement in short term rates.
And additional hedging and securities repositioning have reduced roughly half of our sensitivity to longer term rates.
Four and a half million dollars afford starting hedges were added during the quarter aimed at locking in a portion of 2026 straight originations.
Looking ahead during the first quarter, we expect the margins expand in the low fortys as the benefits of our hedging strategy began.
Now, let's take a look at fee revenue and expenses.
Adjusted noninterest income increased 1% compared to the third quarter led by growth in capital markets wealth management and service charges.
Capital markets experienced a record quarter driven by growth across most categories, notably M&A advisory loan syndications and fees generated from the placement of permanent financing for real estate customers.
Commercial swap income also benefited from favorable CBVA adjustments during the quarter.
Although mortgage income decreased compared to the prior quarter results remained strong despite seasonally lower production as well as less favorable hedging and valuation adjustments on mortgage servicing rights.
For the full year mortgage was a significant contributor to non interest income growth increasing 19%.
Other noninterest income declined this quarter, driven primarily by positive valuation adjustments to certain equity investments in the prior quarter that did not repeated the same level.
Let's move onto non interest expense.
Adjusted noninterest expenses remained well controlled increasing slightly compared to the prior quarter, driven primarily by higher salaries and benefits marketing and professional fees.
Salaries and benefits increased modestly driven by higher production base incentives.
The increase in marketing expense was driven primarily by additional campaigns targeting priority markets, while professional fees reflected the timing of legal and consulting costs.
The company's fourth quarter adjusted efficiency ratio was 58.1%.
And the effective tax rate was 20.3%.
As John mentioned, we continue to benefit from our continuous improvement process. As we are only one third complete with our current list of identified initiatives, several which are exceeding our initial expectations.
For example at Investor Day, we committed to reducing our total square footage by 2.1 million square feet and our third party spend by $60 million to $65 million by 2021.
We also disclose plans to consolidate 100 branches during that same period.
Based on the progress we made in 2019, we're on track to exceed our targets related to square footage and third party spend reductions as well as branch consolidations.
We're now targeting third party spin reductions and the $80 million to $85 million range and we will continue to look for opportunities to pull forward or expand on initiatives, where we can.
For 2020, we recognize revenue growth will be challenging however, we remain committed to achieving full year adjusted positive operating leverage.
While our hedging strategy helps mitigate the risks from lower rates full year growth a net interest income will be difficult.
We have good momentum and growing non interest revenue, which we expect to continue.
So while total revenue growth may be modest we will continue to lean into the expenses and the opportunities identified through simplifying growth.
All while continuing to make prudent investments to drive revenue growth.
Well again spend approximately $625 million on technology in 2020.
We expect to open approximately 20, new branches and we will continue to higher talented bankers across our businesses.
With respect to the effective tax rate, we expect the full year 2020 range to be 20% to 22%.
So let's shift asset quality.
Overall credit results remained in line with our risk expectations during the quarter, we saw improvement in several categories bought experiencing some normalization and others.
Net charge offs were 46 basis points for the quarter and 43 basis points for the year inline with our expected range of 40 to 50 basis points for 2019.
Provision equal net charge offs, resulting in an allowance equal to 1.5% of total loans and 171% of total non accrual loans.
Non performing loans increased 10% primarily attributable to a single credit within the waste management industry, which we expect will be resolved over the next several quarters.
Delinquencies and troubled debt restructured loans remained stable quarter over quarter, while business services criticized loans decreased 3%.
For 2020, we expect full year net charge offs between 45 and 55 basis points.
Let me comment briefly on Cecil.
We continue to finalize our day, one impact assumptions and expect the impact to be in the 500 $530 million range.
So, let's take a look at capital liquidity.
During the quarter the company repurchased 7.8 million shares of common stock for $132 million and declared $149 million in common dividends.
Our common equity tier one ratio was estimated at 9.6% inline with our target level of 9.5%.
The loan deposit ratio within in the fourth quarter was 85%.
The next slide reflects 2019 performance against our targets and we also provide you with a summary of full year 2020 expectations.
Wrapping things up in light of the challenging and changing economic backdrop, we are pleased with our fourth quarter and full year financial results.
I have a solid strategic plan designed to deliver consistent and sustainable performance throughout any economic cycle.
With that we're happy to take your questions, but do asset each caller asked only one question to allow for more callers we will open line for your questions.
Thank you Sir the floor is now open for questions. If you had a question. Please press star T., followed by the number one on your telephone keypad.
At any point. Your question is answered you may remember so from the Q by pressing the bounty we'll pause for just a moment to compile the today roster.
Your first question comes from Erika Najarian of Bank of America.
Hi, good morning.
Sure.
So we hear your loud and clear and I think your investors appreciate.
Or continued discipline in loan underwriting.
Thank you alluded to in previous calls potential wholesale consumer strategies to offset some of the green Sky runoff and I know you listed the categories David during your prepared remarks it maybe.
Dive a little bit into detail about some of the consumer strategy and it could there be pretend potential wholesale strategy and again I'm not asking if you're buying a depository.
In terms of obtaining portfolios or.
Accelerating partnerships to deploy your.
Loan deposit ratio of 85%.
Yeah. Good morning so.
As we mentioned in the prepared comments the.
The growth will we should experience actual via more on the business services side on the consumer side, we are going to continue to have our run off of our indirect auto portfolio that will put pressure on total balances.
We have made some shift in terms of our indirect other consumer you saw that in the fourth quarter.
That will continue to somewhat in the first part of the year than we kind of get to our concentration limit.
After first quarter or so.
So you shouldn't see that continues to grow.
At the same pace that you saw it in the fourth quarter throughout the year, we are going to continue to grow.
Residential mortgage we are going to continue to grow our credit card book, some as well those would be the big drivers of consumer but net net.
Total consumer will be relatively stable if you carve out.
If you carve out the the run off portfolio so the growth that.
We were trying to send the message really is going to come in the CNN, primarily in the CNR area.
But Eric I would say we are actively.
Observing that's going on in the market looking for opportunities, we're evaluating different opportunities that may come along clearly.
Shifted our exposure from the green scar relationship to increasing our exposure through so five that is largely result in fact, so fies originating loans directly to consumers versus indirectly.
Which was screens car model, we like that better.
We're learning more about so five and the portfolio. We haven't I think you can expect us to continue explore ways other ways to grow consumer loans over the next year.
Got it I'll go back into queue. Thank you.
Your next question comes from Jennifer Demba interest.
Good morning.
Morning.
You raised your net charge off guidance slightly for 2000.
For 2020 versus 19, just wondering kind of what's driving that isn't more conservatism or are you seeing some underlying weakness in any certain portfolios. Thanks.
Jennifer This David.
So we had 40 to 50 basis points last year, we races slightly.
Got 45 to 55 acknowledging couple of different things. One if you look at last couple of quarters, where you're at 44 to 46.
We also see some normalization.
Credit and especially on the consumer side.
Also as Erika just mentions some shift in terms of consumer lending into other higher.
Last categories, we feel good about that because we get paid for the risks that we take but if you just looking at the charge off number in isolation it'll be up.
Perhaps slightly so we didn't think thats really not signal signaling any broad deterioration in credit whatsoever.
Thank you.
Your next question is from Ken is one of Jefferies.
Good morning. Thanks.
Thanks, Good morning.
I was wondering if you can follow up the seasonal discussion and help us understand.
How you are starting to think about the day two impacts, especially given some of the moving parts of your ins and outs on the consumer portfolio siding, you're already high 1.7 ish looks like pro forma reserve to loans ratio.
Do you think you'll have to meaningfully build as we go forward and how do you start to help us understand that thank you.
Yes, thank the best way so.
When they see what everybody else comes up within Cecil clearly the type of lending.
That you have your portfolio mix makes a big difference consumer long dated assets.
Duration assets have a much higher Cecil reserve to that.
As you think about seasonal for day to the first thing you ought to think about as was the charge off expectations and Jennifer just brought that up.
From that then you look at.
Loan growth. We've told you it was on absolute basis, our loans would be flat on an adjusted basis, they would be up a bit.
So not a lot of change. There then you have to think through the mix what are you growing.
Versus what's running off and so we'll give you some.
Better clarity on that at later date.
So we don't see a big change in Cecil This particular year, because we don't currently forecast a change in the economic outlook and that's something that all of us need to be aware of is one that you forecast to change and economic outlook that can cause a little bit of volatility and provisioning. So those are really the.
Key pieces that I think you should consider as you try to model the provision for next year.
Alright, Thank you David.
Your next question is from Peter.
This securities.
Okay.
Good morning morning, Peter you guys had a good year on the core fee income growth.
That's about 6%.
Do you think mid single digit growth is going to be sustainable in 2020, and just if you could talk about some of the businesses.
We see some of the better growth.
Yes, so Peter we were very pleased with our growth.
As a year for non interest revenue in particular in the fourth quarter.
If you take a top.
Three categories. Those are really driven by continued growth in customers, so growing customer checking accounts growing operating accounts growing.
Customers from the wealth standpoint.
Those are all critically important to us and we feel good about that we've hired additional.
Personnel during 2019 that'll help us continuing to grow customer accounts.
As you look at.
Mortgage mortgage had a really good year this year.
Will be hard to repeat that for all of 2020, but mortgage will be a big contributor to noninterest revenue and we feel good about where we are there.
Capital markets had a really strong fourth quarter.
We've mentioned to you before that that business has been about a 45 to 55 million dollar revenue per quarter business.
We think that that number is really in the.
Kind of $50 million to $60 million business for US now so we think.
Relative to 2019 capital markets should have some nice growth you got off to a pretty slow start and 19, we think it's going to get off to a nice start in 20 based on the backlog of the business that we see so when you add all that out we have pretty good confidence that we're going to have nice growth in noninterest revenue.
Frankly that is one of the key drivers of why we're committed to and believe we will generate positive operating leverage in a challenging rate environment for 2020.
Great. Thanks, and just one quick follow up.
You guys have done to also good job controlling the deposit costs.
With higher rates, and we've seen deposit costs coming down already with that with the cutting rates I'm just wondering.
Total deposit costs of 41 basis points is there much room left to to lower deposit costs.
We.
Our beta for this past quarter was about 28% that's a little.
Lower than our cumulative beta and our cumulative betas about 27% this down cycle.
That's slightly below what we saw in it and the upgrade cycle.
And as a result of that we think there's if we stay flat here. There is no movement, which we don't expect much movement from the fed we would continue to have deposit costs.
Come down some more.
Probably not as a rate that you've seen but I think theres incremental continued benefit there and again thats part of our margin guidance that we've given you too that we think the margin can expand along with the hedging program that we have.
That margin would expand a bit in 2020.
That's great.
Thanks, David.
Your next question comes from Matt O'connor from Deutsche Bank.
Morning, guys.
So look I know, there's some kind of drags to loan growth and call. It the near term here and I think the de risking you guys are very consistent.
And as well received I guess my question is like if we look more medium term and think about the type of loan growth that you should have the type of deposit growth that you should have.
Considering your markets like what's reasonable levels again beyond 2020, and just thinking.
There's been asking as I, just I feel like the balance sheet growth has been less than.
Most of US, we'll expect given the economy's given your markets.
But I'm also appreciative of the de risking and call. It the focus on the profitability, which is helping them for the capital.
But maybe talk about the medium term outlook for those two areas. Thank you.
So Matt we have been extremely deliberate in allocating capital to those relationships and give us the appropriate risk adjusted return because at the end of the day. That's what we think really is what our investors want us to do with the capital not just to grow but to grow appropriately to grow with right return and just as an example of this.
Last year.
We recycled 2 billion dollars' worth of credit out of our corporate banking group that we could ahead, we could add an additional $2 billion or the loan growth and I've been a sub optimal return these are customers that we.
Seek to sell and offer.
More of our banking services. So we have a full relationship with great returns and when we can't get that when it comes up for renewal, we led again and so we're going to stick to that now that being said as you think about loan growth for us in the short and long term is we should be GDP, plus a little bit our expectations for GDP.
This coming year is slightly under 2%.
Manufactured 1.8 in our in our estimate so.
We have low single digits loan growth expectations for on an adjusted basis for for 2020 and it's because.
If we try to push too hard past GDP. We thank you make a bad credit decision. So we're going to be incredibly disciplined we realize we need to growth. We're all about that growing earnings growing revenue and return and so it's all off the delicate balance and how we do that appropriately.
Got it just any guess online relative to kind of industry growth or kind of GDP growth.
As you think about medium term kind of loan to deposit.
Growth rates.
Well I'd say that we said consistently that we and David reiterated. This if you want to grow with the economy, plus a little recognizing that while the markets were in our good growth markets. There also mark has historically have demonstrated a fair amount of volatility and so it's important to us.
And we stay disciplined as David said focused on appropriate allocation of capital and we think growing with the economy plus a plus a little is right place for us medium term longer term.
Okay. Thank you.
Your next question is from Gerard Cassidy of RBC.
Good morning Gerard.
George you might be on mute.
Yes.
Sure our north draw your line is open.
Okay. When we go to the next question we lost Gerard.
Your next question is from style Martinez.
Yes.
Hey, good.
Good morning, guys for our install.
Good morning.
I guess a follow up question on on Cecil.
As Ken mentioned here Hcl ratio moves up with your with your day, one impact to over one seven.
It seems pretty high given the risk profile of your loan book in the composition of your loan book.
The only banks, who are very few banks, who have given day when impacts or above that level unless they have much more consumer oriented exposure and I know a lot of things go into it.
I know you have more term loans and you're seeing eye book for example.
I guess, how conservative do you think that estimate is in is a if I look forward it to the day to impact.
And do you think about what you said David on mix.
It would seem.
How do I think about the loss content of whats coming on your books versus whats getting paid off because it would seem given your de risking that you know that one seven reserve ratio could trend lower going forward or is that.
Too aggressive comment or or an expectation.
Well, yes few questions with that let me see if I can break it down so the one seven day relative to others you really the mix is hugely important.
I suspect when we get to.
Providing more.
Granular disclosures by loan type and and and breaking that down. So that you have a better gauge as to what new production would cost in what benefit you might get four run off of a loan portfolio. So we don't we tried to get this right.
We've tightened up the range quite a bit between 500 530.
That's a that's again to our 1.1%.
Reserve today, which includes of reserve for unfunded commitments.
To 170 so.
I think that.
What you're going to need some incremental disclosures to help you.
On a go forward basis will be providing that to you at a later point.
But.
We think.
We think the reserve that we have for Cecil as as pretty appropriate and we didn't do anything to be overly conservative or otherwise. We just did what we saw the standard called for and we're moving forward wall learn a little bit from each other as we go through the year.
And and we'll be making decisions on how that might affect our business and production and pricing going forward.
Got it and I guess, just following up like in terms of.
Oh can be thinking about provisions going forward should we be thinking that one seven lifetime ratio is sort of appropriate we should be provisioning to maintain that level of.
Reserve ratio going forward.
Yeah, I think for the time be and as I was trying to get to that point earlier is if you think about provisioning for 2020. The first thing you ought to think about is what's your charge off expectation for US next year. Then what is a loan growth net loan growth expectation for US next year, we've given you guide.
Yes, It says our net loans will be flat.
Grow on an adjusted basis, but we have a run off of our vehicle portfolio that will be working against balances. There and then you third and so.
The third component would be what are you growing.
The mix makes a difference and we'll give you some more granular data later to help you there and then what's your expectation of economic outlook from quarter to quarter.
And that could be that could change that we think the economy is going to be fairly stable. This year. That's are going in thought but that can change and so those are the those are the roughly four pieces that you need to have in terms of projecting Cecil provisioning.
All right Thats helpful. Thanks, a lot.
As a reminder, if he would like to ask a question. Please press star one on your telephone keypad again to ask a question press Star one.
Your next question is from Jeff Johnson Corey of Evercore ISI.
Good morning, Good morning, John .
Regarding your expectation for a positive operating leverage in 2020 can you.
You help size up the magnitude or maybe give us a little bit more color rounded regarding the components and then also.
Why not provide more detailed outlook around 20, you previously have given for your expense growth and and for your revenue targets, what's different about this year that you're not giving that.
Well.
Let's see if I can't help you there.
So, let's take that big component so eni.
Which is two thirds of our revenue will be very hard to grow that this year with the low single digit loan growth on an adjusted basis that we have given you.
And that's just Amir rate play the first half of 19 rates being up off the December 18 rate increase would be hard to replicate.
And then for the other third of our revenue in IR. We've we've given you a little bit of guidance in terms of what you can model.
We feel good about that growth.
From an expense standpoint, we said we'd be relatively stable from an expense standpoint, and if you add all three of those up we will generate positive operating leverage. So I think we've been reasonably explicit in terms of how we get there.
Seeing play with the numbers from that standpoint.
Okay. Thanks, David and then took to confirm what you just said that relatively stable expectation.
For 2020 expenses.
Did that already factors in your IP investments in what you're doing on the core systems front.
Absolutely.
I would underscore the point John that includes our.
Continued investments in talent in markets and in technology, we've not adjusting our budgets at all in we believe we can contain deliver.
Stable.
Fences year over year.
Okay got it alright, thank you.
Your final question this from Betsy Graseck of Morgan Stanley .
More invest behind them hi, good morning.
I'm going to ask the capital question I know I always do on this call.
But I did want to understand how you're thinking about capital utilization.
Not only in your base case assumption, where you've got net loan growth flat.
In total.
But you know in an environment, where things actually loan growth accelerates a little bit more.
Maybe you should give us a sense as to do we just hold with this what I would consider a little bit of excess capital or.
Is the pipeline of.
You know bolt ons.
Robust enough to use some of this or where do we anticipate a little bit more buyback this year. Thanks.
Yes. So it's always good question on capital on just reiterate how we think about utilization of the capital we generated.
So first off we're getting close to our target we laid out 9.6% common equity tier one today.
Estimated on on our current targeted at night and half percent.
As we've mentioned before that has 50 basis points of management buffer our quantitative calculation set would lead us to believe we need about 9% common equity tier one.
Yes, we think about first and foremost our capital there for us to grow appropriately organically in particular, and so we have low single digit loan growth expectations and you can do some quick math and see will use a little bit of capital from that standpoint.
We've targeted that 35% to 45% of our earnings to go and be paid to our shareholders in the form of the dividend. So you have that piece, we have from time to time done some bolt on acquisitions those use capital hadn't been today ton, but it's certainly something if we see opportunities John just talked about we'd look at different.
Things from time to time, and if we can deploy that capital at a meaningful manner that helps our grew our long term business will do so.
Then frankly the last thing we do is share repurchases. We are crazy about doing share repurchases, but we also don't want to continue to have excess capital. So as we can't deploy it in a meaningful manner through organic loan growth bolt on acquisitions, then we'll give that back to the shareholder and former share re.
Purchases like we've done this past several years. So I think those are the pieces that you need to have.
Okay is there anything on the bolt on front I mean, you've had a nice piece over the past year or so and I know you mentioned that the outlook several times.
Though is if the outlook with the current.
Footprint that you have or does the fee outlook could be out let's be enhanced by incremental acquisitions, they could speak a little bit to that.
We continue to look at opportunities.
Whether it be investments in.
Capital markets capabilities wealth management buying more and servicing rise not great time to do that today, but we're still looking there are other capabilities potentially that we have some interest and we look at loan portfolios from time to time and those are things that will continue to do as we.
Think about how we.
Invest in excess capital we have in other parts of our business that will help us grow over time.
Okay. Thank you.
Your next question is from Gerard Cassidy of RBC.
Thanks for Georgia is about that hi, guys I apologize.
Can you guys see where they see it you have done a really good job over the last three years or so on being very conservative in your underwriting standards and of course. This resulted in more modest loan growth and some of your peers and I'm not asking the comment on your peers underwriting standards, but can you just give us some color in commercial.
See NIE that is in commercial real estate or kind of underwriting or you guys seeing that you've just not comfortable with that maybe some of your peers are.
Asked Ronni Smith, who has a corporate banking group to respond Gerard Hey, Gerard good morning.
You know and you may have heard his earlier, but we are really focus back in on.
The relationship side of things Gerard simply because we believe that when you have a broad and deep relationship.
You become more meaningful to that client and it gives you the ability to to whether through whatever storms might be out there. When you are meaningful to them have the opportunity to get in early and really clients full activity on the front side is so important but.
Understanding the complete.
Flow of business that they have to complete demand that you have the banking services.
It's really where we try to be focused on.
I would also say that.
We look historically it how well company sales have gone through the cycles.
Really strongly lean into the management their capability.
Performed through the last cycle and then of course used to standard underwritings that I won't go into the details around out today, but those are the or the high level pieces of how we try to look at risk that we take on.
When we go through clients look too.
The only thing I would add to that is it.
Specifically to your question I think to what our most consistently hear from our bankers is.
Loan to value so our willingness to provide as much capital as a customer may want to tends to be the differentiator.
As an example, we may want to one of the 6% loan to value on a project and the customer can get 65 or 70 from some someone else. So that's a function of.
Roger you factor.
Got it tends to be the most significant differentiator in today's marketplace Gerardus forgotten I would also adds at least a very very close to our customers are people in the steel do an excellent job that we are touching basis with them, sometimes on a weekly basis, but often monthly certainly quarterly and making sure that if theres any early warning signs or any risks that are out.
There were on top of that early because as you know if you can get on top of a problem early you've got a lot more solutions you can give.
When you have to wait until especially the left to do but to exit the relationship.
Great and then just as a follow up question.
Obviously, you're one of the so called extended cycle banks, so you'll be going through a full see car this year.
Are you expecting any differences between this year and what you did last year last year. Obviously, you didn't go through its being an extended cycle bank should we expect anything kind of differences.
Yeah, Gerard we kind of could we go through stress test all the time internally issues. This is one that we have to fill out form and go through the review process with our crude Tory Supervisors, we are waiting the instructions for that.
We're looking to see if there are any changes there was an article I think this morning are.
Yes, I can't remember in the banker regarding.
Expectations were some changes.
In and see car for this year.
Good things like if you're in stressed do you have to continue with.
Anticipated share repurchases at the same pace in a stress environment I mean, that's something we would not do so we're hoping that that gets changed in the rules.
Or would we continue to grow the portfolio at the same pace we.
Our now for in a stressed environment. So those are two pretty big important things that we're hoping might get changed in the and the rules, but other that understanding with losses are I mean is this is a good exercise for the industry for us individually and for regulatory Supervisors and so we're ready to go and we will be submitting that plan.
First part of April .
Great. Thank you as always.
Welcome.
There are no further questions. It at this time I will turn the call back over to John Turner for closing remarks.
We will all close by again thanking our 19th plus thousand associates for all their efforts in 2019 on behalf of our customers. Thank you all to spend in the call today for your interest in our company.
Good day.
This concludes today's conference call you may now disconnect.