Q4 2019 Earnings Call
Welcome to the Sea Coast fourth quarter earnings Conference call. My name is called <unk> and I Hope you're operator for today's call. At this time all participants are in listen only mode. Later, we'll conduct a question and answer session. During the question answer session. If he had a question. Please press Star then one.
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He coast won't be discussing issues that constitute forward looking statements within the meaning that the securities and exchange.
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Please note that this conference is being quite that I will now turn the call over to Mr., Dennis has some chairman and CEO Oh, he called <unk>.
So you may begin.
Thank you operator, and good morning, and thank you everybody for joining us today for Seacoasts fourth quarter and year end 2019 conference call.
Our press release, which we released yesterday after the market close and our investor presentations can be found on the investor portion of our website under the title presentations.
With me today as Chuck Shaffer, our Chief Financial Officer, and Chief Operating Officer, who will discuss our financial and operating result.
Jeff Lee, our Chief Digital Officer.
Because wrapped up an exceptionally strong year with continued solid improvement in our financial performance.
Adjusted earnings for the year totaled 104.6 million.
From 79 million last year and earnings per share increased by 24% to $2 and once that for the year.
Our assets exceeded 7 billion as loan growth continue to accelerate during the year with particularly strong growth in the final quarter.
These improvements continue to track our goals as we have executed the balance growth strategy, we laid out at our first Investor day dropped three short years ago.
That's not time, our assets have grown from 4.7 billion to 7.1 billion or an increase of 51%.
Earnings of double from a dollar a fair and 2016.
$2.01 this year.
At our tangible capital ratio increased from 7.7%.
At year end, 2016% to 11.05% they fear.
Clearly our balanced growth strategy has and continues to deliver strong results for shareholders.
Full year adjusted revenue on a fully taxable basis grew by 14% for the year, while adjusted noninterest expense grew by almost 3%, creating tremendous operating leverage reflecting both our continued growth as well as the as well as the successful consolidation of off.
It says in late 2018.
At a lot of hard work by our team members to streamline processes renegotiate, probably a contract and take greater advantage of our digital capabilities.
As you saw yesterday, we're excited to announce the acquisition of freedom back operating in the important Saint Pete market market on the West Coast to Florida, and together with our Palm Beach deal announced last month will add almost 500 million of assets.
And additional operating leverage in 2020 and beyond.
Yesterday's announcement of freedom back also brings up a solid.
Knowledgeable leadership team.
Kathy Swanson will become our market President for Pinellas County, responsible for all aspects of our operation and that important market.
He'll be joined by her key leadership folks and when combined with our franchise and people.
Well make up the largest Florida based bank in Saint Petersburg, and the third largest Florida based community bank and the Tampa, Saint Pete and I say.
Turning back to the East Coast, we expect to close the Palm Beach transaction late in the first quarter and freedom late in the second quarter.
As we've said many times, we remain focused on building out an extremely valuable an irreplaceable franchise throughout the state of Florida.
And we believe our Florida acquisition program will continue to play an important role in our balanced growth strategy over the next couple of years.
We will remain focused on opportunities to strengthen our position in Florida higher growth metro markets, including Tampa Saint Pete.
Orlando South Florida.
And also helping us up continue to build operating leverage.
I also want to say the outlook for Florida, and particularly the markets in which we operate remains very strong today.
Truck will cover a more detailed I'm a in a minute, but the final quarter of the year continue to produce just excellent result.
Adjusted earnings per share.
For the quarter was 52 cents.
And our adjusted return on average tangible assets stood at 1.57%.
Earnings continue to accrete study peer leading growth and tangible book value per share and our overall capital position remained steady with a tangible capital ratio of over 11% ranking us among the strongest in the nation.
Our capital returns remain strong with an adjusted return on tangible capital of just under 15% pretty incredible when you consider.
Most of our capital base.
Looking ahead, we remain very confident and our ability to meet our vision 2020 objectives.
Hitting these objectives required us to drive a lot of change into the organization and a great deal of that changes now behind us.
As we continue to execute our balanced growth strategy, we will focus on delivering both strong growth.
Excellent returns.
Our seacoast team members have worked incredibly hard over the past couple of years together, where we are today.
I want to express my sincere appreciation to all of you and my confidence in your ability to continue to lead seacoast to build out this incredible franchise across Florida, as we continue to execute our balanced growth strategy.
With that I'd like to turn the call over to Chuck to review our results in a little more detail and also to talk a little more about our recent acquisition.
Then we'd be happy to take a few questions.
Thank you Denise and thank you all for joining US. This morning is that provide my comments I'll reference the fourth Street Freedom Bank deck.
And the fourth quarter 2019 earnings slide deck, which can be found cecos banking backhaul.
Let's start this morning with the with the fourth Street Freedom Bank debt.
Last night, we announced the acquisition of fourth Street Banking Corporation inclusive of it subsidiary banks Freedom back Freedom is a $300 million bank by assets headquartered in Saint Petersburg, Florida operating two highly profitable branches in the city of St. Petersburg. This acquisition builds upon our two prior and.
Missions, adding two branches and increasing distribution and scale to our position in Florida second largest MSA.
Cecos will be the third largest Florida based franchise and the Pampa Saint Pete Clearwater, MSC and the largest Florida based bank in the Saint Petersburg market. This acquisition fits our M&A strategy being an end market low risk trend transaction.
We had Barry with a very high quality customer franchise, and a strong and strong credit underwriting. We expect this transaction to come together easily with no disruption to our organic growth plan.
Freedom is led by Kathy Swanson, a lifelong Saint Petersburg banker and prior to being CEO of freedom. She was an executive with Synovus Bank.
Kathy will remain with seacoast as market President of Pinellas County.
Freedoms high quality loan book has an average loan yield of approximately 5.79% and the majority of the firm's funding is made up of checking savings now in money market accounts, representing 74% of deposit funding.
Non interest bearing checking represents 33% of the funding and the net interest margin as approximately 4.16%, which will be accretive to cecos NIM.
We expect a full conversion of four streets convertible subordinated debt to common equity prior to close.
The debt has a 4.5% rate and converts at $1.85 per share, which is dilutive to four streets tangible book value per share and increases the tangible common equity by 10 basis by 10 million.
The holders can convert the debt anytime after December 30, Onest 2019, the holders can choose to convert not convert or conditionally convert subject to the deal being approved by shareholders and regulatory authorities.
We fully expect all holders to convert given it isn't the best economic interest to do so.
And anyone who does not convert will have their some have will have their debentures redeemed for cash.
Turning to slide five under the terms of the merger agreement fourth Street shareholders will receive 0.1 to seven five shares of Cecos common stock based on seacoast closing price on January 22nd 2020 of $29.39 a share the transaction is valued at approximately 63.6 man our threed.
Dollars and 75 cents per share.
The deal pricing translates to 1.74 times for streets tangible book value inclusive of the subordinated debt conversion and 14.1 times 2020 earnings and 7.4 times 2020 earnings when adjusted for cost saves.
We expect the acquisition to close late in the second quarter of 2020 after receipt from approvals from regulatory authorities the approval of fourth street shareholders and the satisfaction of other customary closing conditions.
We expect cost outs of 50% plus and will phase. These then over the first 120 days after transaction close using the crossover method. We expect the we expect tangible book value dilution to be earn back and approximately one and a half years inclusive of a quarter your impact from Cecil and an IR, our north of 20%.
Similar to our other acquisitions this as an accretive value, creating transaction that strengthen strengthens our foothold and a key and growing MSC.
Given the timing of the close we expect the deal to be 1.5% accretive to earnings in 2020, and 3.3% accretive to earnings in 2021, and when combined with the recently announced first bank of the Palm Beach is transaction. The combined are in back of both deals is less than two years and the combination will be over five person.
An accretive to earnings in 2021.
The assumptions used for modeling or develop falling detailed due diligence, which included a robust review of freedoms banks credit portfolio.
Due diligence identified a loan mark up 3.12%, including a 50 basis point interest rate, Mark and 81 basis point credit discount mark related to the non PCD loans, and a 1.82% Cecil related a triple Mark.
Pre tax loan loss provision of 2.2 million was assumed to be recorded through the income statement to establish a day one mark on the non PCD loan portfolio.
We estimate a core deposit intangible 2.5%.
Taken together, our assumptions yield goodwill of a modest $26 million, maintaining cecos strong tangible common equity ratio.
Now turning the turning to the fourth quarter results and beginning with the highlights on slide four of the earnings deck. We finished the year with strong results in the fourth quarter with adjusted net income growing 12% year over year 26.8 man, resulting in earnings per diluted share of 52.
For the full year 2019, adjusted net income was 32% higher than 2018.
We reported adjusted return on tangible assets of 1.57% and adjusted return on tangible common equity of 14.2%.
And as we continue to grow our capital base, it's worth mentioning that if in the fourth quarter. It that if the fourth quarters tangible common equity tangible asset ratio was adjusted to an illustrative target of 8%. Our adjusted return on tangible common equity would be 20.8% increasing from 20.5% in the prior.
Our quarter.
Cecos management and board will continue to monitor our capital position and are committed to managing capital prudently to build shareholder value through the economic cycle.
And we're pleased to report the continued robust build of shareholder value with tangible book value per share growing 20% year over year to $14.76.
Our focus on growing revenue, while streamlining operations is evident in our efficiency ratio, which improved one and a half points sequentially to 47.5% year to date, we have generated 11% operating leverage with adjusted revenues, increasing 14% and adjusted noninterest expense increase.
During 3%.
And lastly, we generated substantial loan growth this quarter and brought deposit costs down by 12 basis points successfully defending our margin.
Turning now to slide five net interest income increased 0.8 million sequentially. Despite a 25 basis point drop in the federal funds rate.
That is margin contracted five basis points to 3.84%.
Excluding accretion on acquired loans, the net margin declined only one basis points sequentially. Despite the reduction in rates experienced over the second half of 2019.
Quarter over quarter, the yield on loans contracted 17 basis points yield on securities contract at 12 basis points and the cost of deposits decreased 12 basis points.
Declined quarter over quarter were the result of federal reserve rate cuts to into third quarter and another in the fourth quarter affecting the variable rate portion of our loan and securities portfolio and lower AD on rates and commercial mortgage loans.
We continue to proactively mitigate the impact of rate cuts by remaining disciplined and deposit pricing.
Our strategy is included meaningfully shorten time deposit offerings, the maturity of maturities of one year or less and moving rates lower on higher yielding savings and money market products other interest bearing liabilities such as our trust preferred and federal home loan Bank advances also benefited from falling short term rates.
While the curve at steepened slightly from the previous quarter, the persistent flat rate environment will remain challenging.
Looking ahead to the first quarter of 2020, assuming no changes and the federal funds rate, we expect the net interest margin to be in the low three eightys for the first quarter.
The guidance of a potential slight decline in margin as the anticipated results have been assumed persistent flat yield curve.
The impact of purchase loan accretion on the net interest margin, though variable was 21 basis points in the fourth quarter and we are modeling approximately 22 basis points in the first quarter of 2020.
Assuming economic conditions remain unchanged, we expect net interest income to expand throughout 2020, primarily the result of growth and the balance sheet.
Moving to slide six.
Adjusted noninterest income was $13.8 million flat to the previous quarter and grew 1 million or 8% from the prior year.
Mortgage banking fees totaled one and a half million dollars a bit more subdued from heightened refinance activity in the third quarter, but our continued focus on generating saleable volume produced six and a half million in revenue for 2019.
We expect continued improvements in this line item in 2020. The result of continued expansion of the mortgage banking team.
2019 was a great year for our wealth management teams with a UN growth of $140 million inline with our target and an increase in fees of 0.4 man or 7% year over year. We ended the year with 650 man and assets under management.
Service charges on deposits are in line with the previous quarter and interchange income increased 0.2 million sequentially and 2019 interchanging interchange income increased by $1.1 million are 9% compared to the prior year and Cecos debit card programs for brass surpassed 1 billion and retail.
Sales.
The company debit card program distantly performs in the top quartile of visa partner banks of similar size.
The GAAP presentation of non interest income includes 2.5 million and gains on sales of securities.
Decision, we made to capture significant price appreciation at the 10 year Treasury declined significantly early in the fourth quarter.
Moving to slide seven.
Adjusted noninterest expense totaled 36 million declining 0.9 man sequentially and 3.6 million less than the prior year.
Outperformed our previous guided range of 37 to 38 million for the fourth quarter.
Salaries and employee benefits decreased 1 million on a combined basis. The result of lower incentive accruals and our continued proven success at focusing our cost control across the franchise.
We saw higher claims and health insurance this quarter and increased legal and professional expenses expenses associated with the upcoming acquisitions.
And also during the third quarter 2019, the FDIC announced the achievement of their target deposit insurance reserve ratio, resulting in a in our ability to apply previously awarded credits to our deposit insurance assessment.
Zero associated expense this quarter. The company has remaining credits of 0.7 man, which will be applied to future assessments, if the FDIC fees reserve ratio remains above the target threshold.
For the first quarter of 2020, we expect adjusted noninterest expense to be approximately 40.5 million to 41.5 million, excluding the amortization of intangible assets, which is approximately one and a half million per quarter.
This guidance includes the acquisition of the first bank of upon beaches, which is expected to close a mid mid March.
And is presented on an adjusted basis, which excludes one time merger related charges.
We will remain disciplined we were we will maintain our disciplined focus on efficiency and expense management and as a reminder, the first quarter is impacted by seasonal for on K payroll tax and the return of incentive compensation expenses.
The company recorded 8.1 million and income tax expense in the fourth quarter compared to 8.5 main in the prior quarter. The third quarter of 2019 was impacted by change in the Florida corporate income tax rate, which resulted in write downs of deferred tax assets and a slightly higher resulting rate in the third quarter.
For the full year 2019, our effective tax rate was 23.2% we model our rate for 2020 at 23%.
Moving to slide eight.
I'd like to highlight our continued improvements in generating operating leverage with the declining overhead and a focus on growing revenue the adjusted efficiency ratio declined 2.9% sequentially to 48%.
And the it and the adjusted noninterest expense the tangible asset ratio declined to 2.11%.
We expect our adjusted efficiency ratio to move modestly back above 50% in the first half 2020 before moving back below 50% during the second half 2020, the increase in the first half of the year is primarily the result of four on K payroll tax and other compensation expenses.
And is in line with prior year seasonality.
We remain confident that we're on track to achieve a below 50% efficiency ratio exiting 2020 and beyond and on target with our vision 2020 plan.
We continue to maintain strict and proactive cost control discipline, while ensuring we do not a pete on revenue growth.
Turning to slide nine total new loan production was a record 587 million compared to 488 million in the prior quarter, resulting net loan growth in the quarter with 17% on annualized basis, and 8% year over year, achieving our stated objective of mid to high single digit loan growth and 20.
19.
Commercial originations during the fourth quarter of 2019 were 247 million, reflecting strong execution by our teams across the footprint and the addition of key talent over the past year, and our and our fastest growing markets like Tampa and Broward County.
Our commercial pipeline was 256 million at the end of the quarter, an increase of 56% compared to the same quarter in the prior year.
Moving onto the residential category, we placed a 163 million in the portfolio, including the opportunistic purchase of a portfolio totaling 99 million.
Additional production of 62 main was sold in the secondary market. The saleable mortgage pipeline exiting the year was up 40% compared to the same quarter in the prior year.
Consumer small business produced $150 million up 12 million from the prior quarter.
We are well positioned the continued to drive attractive growth, while maintaining our credit discipline as the economic cycle continues to mature.
For the full year 2020, we expect loan growth mid to high single digits as we move forward.
Turning to slide 10.
Deposits outstanding decreased 88 million sequentially, and we ended the year with deposit growth of 8% public Bond fund balances were seasonally higher and throughout the year. We've continued the successful acquisition of commercial customers with business checking balances growing 9% in 2019.
Looking ahead to 2020, we maintain our target for deposit growth of approximately 4% to 6%.
Turning to slide 11 rates paid on deposits decreased 12 basis points, the 61 basis points.
We expect deposit cost in the first quarter to be in line with Q4 Suming no rate actions taken by the Federal reserve.
Noninterest bearing demand deposits represent 28% of the deposit franchise and transaction accounts represent 50% of our deposit book inline with the prior quarter.
Turning to slide 12.
Credit continues to benefit from rigorous credit selection that emphasizes through the cycle orientation and builds on customer relationships and well understood known markets and sectors as well as maintaining diversity of loan mix. The allowance to total loans was up one basis point, the 68 basis points at quarter end.
Net charge offs for the quarter were $3.2 million or 25 basis points average loans and for the full year 2019 averaged 16 basis points inline with prior guidance are forward looking expectation for annualized net charge offs as 20% to 25 basis points through the first half of 2020.
Let me take a moment to remind you that under purchase accounting loans acquired through an acquisition were placed in the acquired loan portfolio and a purchase market, including both characteristics for credit and rate is applied and accreted back through net interest income as these loans pay down or mature.
At the end of the fourth quarter. This discount represents 3.83% of purchase loans outstanding.
And the non acquired loan portfolio. They triple ended the quarter at 80 basis points alone Outstand loads outstanding down four basis points from the prior quarter classified and criticized at criticized assets continue to trend favorably.
We continue to prudently manage our commercial real estate exposure, what construction and land development as a percentage the bank level capital at 40% and commercial real estate loans as a percentage of bank level capital at 204%.
Down from 42% and 204% respectively in the prior quarter and well below regulatory guidance.
On a consolidated basis, construction and land development and commercial real estate loans represent 38% and 191% respectively.
Concentrations continued to be consistently managed with the funded balance of our top 10, and top 20 reference relationships, representing 21% and 39% of total consolidated risk based capital, respectively down from 34% and 54% respectively for years.
There are.
Our average commercial loan sizes approximately 365000.
Nonperforming assets decreased $4.3 million to 39.3 man in the fourth quarter 2019, due to the sale of an art Oreo property.
Classified and criticized assets declined from 3% and 10% of total risk based capital, respectively to 3% and 9% of risk based capital period end.
The provision quarter over quarter reflect strong loan growth in the fourth quarter and a small increase in net charge offs for the quarter looking back over the last four quarters net charge offs for 16 basis points of loans outstanding inline with our expectation, reflecting strong asset quality trends.
Turning to Cecil.
We are finalizing our model validation review and while we do not have final day, one impact to share. We do continue to expect the that the adoption of C.. So we'll increase our loan loss reserves.
One reason for the increases the impact on our purchase loan portfolio. We acquired these loans of discount in the purchase discount, which currently stands at 3.83% accretes into interest income over time.
The vast majority of our acquired loans were not considered credit impaired time of acquisition.
Under Cecil that purchase discount no longer shields. These loans from getting an allowance. So the day one impact of Cecil will include recording reserve on these loans.
That's essentially double counting the credit Mark on these loans, but thats, what the new accounting standard will require us and other banks to do.
Keep in mind that Theres no change to the purchase discount and that will have can continue to be accretive to interest income for purchased on impaired loans.
The portfolio of purchase credit impaired loans is only $12.7 million. These loans will be treated and newly defined category of PCD purchase credit deteriorated upon the adoption.
There will be an incremental reserve for these loans that also increases the allowance on adoption and the impact on PCI accretion going forward will be nominal.
Turning to slide 13.
We continue our commitment to maintaining a fortress balance sheet through the cycle built around strong capital and strict credit underwriting. This has served to generate strong capital levels and book value per share growth because it positioning us well for additional disciplined acquisition and organic growth opportunities in htwo.
120.
The tier one capital ratio was 15% the total risk based capital ratio and the total risk based capital ratio was 15.7% at December 30, Onest 2019.
The tangible common equity to tangible asset ratio was 11.1% at quarter end, providing ample capital for additional prudent growth.
Using an 8% Tc ratio Illustratively would imply over 210 million and capital available for deployment.
And as mentioned earlier implies a 20.8% return on tangible common equity for the quarter Cecos Board and management are committed to prudent capital management to drive shareholder value.
And to wrap up on slide 14, and 15, we are well positioned to sustain and advanced momentum and growth into 2020.
Since announcing our vision 2020 targets in February 2017, we have achieved a compounded annual growth rate and tangible book value per share of 13%.
Steadily building shareholder value.
Our fundamentals remain very strong with a well capitalized low risk balance sheet and attractive funding.
And we see continued robust opportunities to enhance our balanced growth strategy and some of Florida fastest growing markets. We are on track to meet our vision 2020 targets remain focused on continuing to create meaningful value for shareholders will afford your questions I'll turn the call back to them.
Thank you Chuck and operator, we'd be pleased to take a few questions.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the Q. Please.
Hash key there will be labor for the first question is the now.
You are using a speaker phone you may need to take up the handset first before question. The numbers. Once again, if you have a question. Please press Star then one touch Tom.
And our first question comes from David Feaster from Raymond James. Please go ahead.
Hey, good morning, guys. Congrats on corneal. Thank you. We're excited about though you got to you got a pretty full flight here.
Two deals.
I believe you've had as much as three on going at the same time are we on pause here near term or would you still be interested in M&A at this point and I guess historically, you've converted and closed the same day is that the plant here.
Yes that is the plan here, David and generally conversation to remain robust.
We plan to close the first bank of the Palm Beach is deal in mid March So that's right around the quarter and.
One of the benefits of doing small loader its transactions as we can close and convert them at the same time, which will do with both these transactions and keep moving down the road. So we're still a out talking to various opportunities the conversations remain robust and there's still plenty of opportunity to continue our M&A strategy as we move.
Forward.
Okay terrific I guess, just what the deal really expand your Saint Pete presence here, how do you think about this market and the opportunities for growth for both loans and deposits as well as new hires.
Yes, that's.
Great Great question, David and I'd say too is we talked in the past to both research and investors that we'd love the Tampa Saint Pete market, it's a tremendous market.
It's twice the size of Orlando and it's the second largest MSA and.
And the state of Florida. It is full of opportunities for us both in terms of customers and bankers and as we've done over the past year. We've continued to expand our bank for pool in the market and just here in the fourth quarter added across the franchise. Another another seven commercial bankers and another nine m.
Oh lows. So we continue to expand distribution, we think the markets are serving us well we continue see strong.
Population growth in the markets and great opportunities for growth. So this gives us some more scale there. The team that operates in the same be market is operated there for many years as well regarded well thought of and is.
Staying on with us and as excited about the opportunity to work with us so.
Thank you. This acquisition is more than just acquiring a bank theres a great market behind.
David our position in.
Ellis County was quite small previously we had.
Very very small amount of exposure, there and so as Kathy and her team.
Get together and assimilate with our position there just build an even stronger presence for her and for her bank in that market and we're really excited about.
The talent that is coming.
With that acquisition, so very very excited about that also a good support the part of shareholders there.
GAAP grown to really appreciate some of the deep connections they have in the market and so we're really really excited about being.
Much stronger position and develop coming.
Terrific.
Great Bank and great team.
Now that were there now that were there we hope we can convince Raymond James to open up an account with us.
There you go.
I appreciate all the color on the guidance, but just had a quick one on the loan growth guidance does that assume any additional loan purchases and I guess, how do you how do you think about loan purchases.
Supplementing organic growth do you expect.
And if you do any more purchases do you think it's going to be more on the commercial or the resi mortgage side. The wed described the the purchased.
Strategy is it purely opportunistic we don't count on it if we come across something that makes sense, we'll do it.
This case the portfolio, we purchased in the fourth quarter was something we had been working on with a fairly large regional banks that had a higher loan to deposit ratio that wanted to.
Exited that or reduce that loan deposit ratio, we actually went into that portfolio enhance selected the loans that we took is an agreement we put together with them. So we got a great portfolio. So it's it's purely an opportunistic strategy David.
Yes go ahead.
That's good that's all from me go ahead.
Okay. Thank you very much David Thanks, David.
Our next question comes from Steve Moss from B. Riley FBR. Please go ahead.
Good morning, guys.
Yes.
Just one follow up on loan growth.
Questions here, perhaps.
For the quarter here in particular, the pipeline ending last quarter was really strong 360 million and I guess the pull through didnt seem quite as strong as what I was thinking just curious slate.
What drove that are maybe with some stuff pushed out into next quarter.
It's purely some things pushed into Q1, so we had.
A handful of deals maybe about 10 deals that moved into Q1 that would make up the difference there and where we closed about half those and expect to close the rest over the coming week. So it is just purely a timing on closings.
Okay. That's helpful and then just in terms of.
Prepayment activity in Paydowns.
How much is that influencing your loan growth for 21 with expectations for 2020.
Yeah, we've modeled in.
Similar trend the what we experienced in the current year and what we've seen when you go back and look at payoffs is it's really been rate dependent on rates have come down, particularly in long into the curve. We see via payoffs go up payoffs were actually the highest they've been all year in Q4, So we had to overcome that.
So we we we model in a conservative guide around that and.
Expected to remain just about a same as it's been over the last 12 months.
Okay. That's helpful and then perhaps.
Question on capital return I mean, obviously, you've been doing acquisitions and and that's been a source of capital deployment, but just wondering any thoughts around.
Dividends at this point capital still remain peers remain strong here.
Yes, certainly does remain strong and.
All I can say as we regularly take a look at our capital position in light of.
Of our current and forecasted.
Forecast that we see out there.
And including opportunities, we see for balance sheet growth and the overall operating environment, we're comfortable today with the capital levels, we maintain.
We went to great lengths kind of talk about that earlier in our prepared remarks, and we just view it as a as a tremendous asset tremendous benefit that we carry along.
When you look at our credit discipline.
And our commitment to maintaining really at fortress balance sheet not just in terms of credit, but also in terms of capital really puts us on us and extremely strong position and we intend to leverage that strong position as we go forward.
With that large and very robust capital level.
Having said that capital does continue to build and we'll regularly reevaluate that and as we continue to have discussions with our board.
We will look at alternatives and make sure we deployed capital prudently circumstances warrant so.
Stay tuned and and we have something to say, we'll certainly be talking about it.
Alright, Thank you very much guys. Thanks.
Our next question comes from Michael Young from Suntrust. Please go ahead.
Hey, good morning.
Michael.
Wanted to ask just qualitatively on any investments that are going on this year I think last year. There was the full digital.
Processes of origination that you're working on hiring et cetera.
Some departures here at the end of the year. So can you just talk about maybe some strategic initiatives and where some ongoing investment needs are for this year.
Well I'll, just start and say that many of the investments we've talked about last year, particularly around the digital investments and the like much of that is behind US we have more to continue to kind of complete as we look into 2020 that was always our plan to have that in.
Pretty solid shape as we got into 2020. So we think our investments going forward will be more heavily weighted into some of the growth.
Investments that we see out there and probably.
You know as Chuck mentioned earlier, we continue to higher very aggressively and in the in the market. So we're in and we'll continue to see investments I would say in that area around growth. So that's kind of high level, what I would say Chuck you have any other thoughts no I think that well so the well last year, we made a fair amount.
Of investment and a full digital lend in commercial origination platform a full.
Pricing model that we acquired as well is the investments in our own internally developed platform. So we we put a lot of more money in work into that over the last year to set ourselves up for growth. We're now investing in putting bankers and to what we think is a robust platform.
And looking to expand the markets that's kind of they objective for 2020.
Okay.
So fair to characterize the it'll be more of investment in people and in originators this year versus.
Bakken indoor or technology initiatives from last year.
Yeah, and the only other thing I'd say is we.
As part of our negotiation with our outsourced data provider last year, which provided a fair, but about a benefit to our personnel. We negotiated a fold rework of our digital mobile and online platforms and so late this year, we'll work to really enhance the customer experience around.
Our mobile and online platforms and Thats all worked into our forward expectations and worked into the cost structure. So was just a matter of implementing that and I think thats going to provide a a much better user experience for our our customers and so we're pretty excited about that.
Okay, and maybe just a couple ways of asking questions about the them, but first you guys had very significant drop in deposit cost this quarter.
It is pretty impressive given that you already have a pretty low cost of deposits overall, our their incremental opportunities to continue to do that or have you kind of pulled a lot of the levers there already.
I think.
It's all depends on interest rates in the steepness of the curve, but assuming the curve remains flat I'd expect deposit costs to remain about where they are for the foreseeable future unless the outlook changes and NIM, we guided to low three eightys in Q1, assuming the rate curve would remain where it is it's probably would that would.
Also flatline out as we move forward. So it's all going to depend on where rates go but I think.
I think we can hold the deposit cost about where they are.
Okay, and there is no leighton pressure on on loan yields from here I know you guys are a little less livewatch. So I didn't know if there'd be some incremental roll through throughout the year or do you believe you can can offset that.
No I think I think we can offset that and I think that remains relatively flat as well, we're pretty well positioned for where we are.
And.
The thing that would be most beneficial is some steepness and the curve as you know.
But.
We are pretty good shape, I think from up from a margin and loan and deposit cost perspective, we worked pretty hard to manage that position to be is effective as possible and position ourselves to be.
Right, where we are and feel good about where we are going into 2020 and when you look forward as I mentioned in my prepared comments I think net interest income continues to grow because we position that well as well as we expect growth into the coming year. So ill life. We are forward outlook remains pretty positive.
Alright, congrats on a good year goal.
Thank you bye bye.
Mike.
Our next question comes from Jeff can well from Guggenheim Securities. Please go ahead.
Hi, good morning.
Morning.
Hey, congrats on the results and thanks for taking my questions I wanted to ask if you could drill down a little bit maybe give us a little bit of color on the new business that you're seeing.
It's both consumer and commercial over the past quarter, maybe to the past few much really can you just you just touched a little bit about.
Customers you've been adding.
Andrew My displacing for choosing seacoast, it's always good to get to refresh on why you're winning new business direct.
Yes, no we continue to be very competitive in the marketplace and we.
We benefit tremendously from the population growth that's going on in the in the economy. If you look at the markets, we purposely position in the franchise in.
Tampa Orlando for corridor in South, Florida, there's tremendous growth in those markets tremendous growth in the Florida GDP that is helping.
Businesses, our core business.
Prospects is.
Generally.
Companies that are in the professional practice space and small manufacturing and.
And the like and that those companies are doing incredibly well given what's happening in Florida, There's a lot of health care moving to Florida chasing the population and it just really is supporting growth. So now the markets are doing well, we're getting good inbound customer growth and work.
Using bankers and marketing and everything you can imagine to make sure that continues.
And it's Florida is doing incredibly well and we're catching the benefit of that.
No question about it and when you look at for example, unemployment rates and most of the markets were in some of them now they're below 3%.
Just incredibly strong environment.
And consumers are employed.
And we're just seeing really positive things here very competitive certainly in Florida, but I think we offer a really unique value proposition with the.
Level of service, so we deliver and the like in those markets were also as you well know very focused on continuing to grow and support our.
Production folks in the field and we a lot of tools that we used to help them.
To that and we're expanding that group.
Every every month as we continue to grow out in to the franchise. When you look ahead at our market share in a lot of these markets theres, nothing but upside for us as we as we continue to grow the franchise. So very very excited about the next few years and what that will bring in terms of growth.
Thanks very much.
My second question is related to that I was curious if you could talk a little bit about what you're seeing with your existing customer base in terms of cross sell and we saw your data analytics and things are by nature and obviously you guys are put a lot of working to making sure that years, you're staying on top of.
The trends with your customer base. So I guess my question is which products are you seeing the most success with from a cross selling perspective, right now and are there areas, where you would expect to be doing more cross selling over next call. It 12 to 18 months.
Thanks, Jeff Jeff Lee I'll I'll answer that question poised to continue to see really good progress in the cross selling of deposit accounts loan accounts and also some of our fee areas as well I think wealth in particular is done a really good job of tapping into the cross sell opportunities a lot of that banker driven we are.
We are getting referrals in.
I think when you look at the penetration of some of these products and services. There are still a lot of room to grow and take advantage of what's still existing in the platform that we already have so theres still value to be created but we've seen continued good momentum at the cross selling of.
Deposit activity load activity and the fee activity products as well.
Great and then if I could just squeeze one last one and it's just related to your earlier.
The earlier questions that we heard about the loan growth guidance for this year could you just help us out there little bit maybe at a high level explained we expect to that growth to come from.
Our geography, and particularly at it looks very strong for example, just maybe just give us a little more color there.
No problem.
The bulk of the growth comes out of the commercial banking franchises and it's primarily coming out of Broward County Palm Beach County.
Somewhat in our legacy market of the treasure coast, but.
Also Orlando and Tampa and in particular.
Around the more metropolitan markets is where we see the bulk of the growth.
I would just reiterate that.
The focus when you look at where our investments are in terms of handling that growth there clearly in the metro areas.
That's where we see the deep markets and the incredible growth happening in those markets, but I would also say that it's pretty evenly distributed across the entire franchise. We have had been working very hard to make investments and.
Across the franchise, we are particularly in markets, where we have more upside in terms of market size and Tampa being one of those and so we've seen.
Type lines grow generally across the board, but that become far more even I would say over the last year and due to a lot of hard work by a lot of folks in the field, who are done a great job.
Contacting customers and helping us grow so I think it's pretty much across the board.
Just a great environment, great market, great state being.
Okay, great. Thanks, very much thanks.
Thanks, Jeff.
And operator, I think that ends are.
Calls today, we appreciate everybody joining us today and we look forward to updating you in April for the first quarter. Thank you.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.