Q4 2019 Earnings Call
Ladies and gentlemen, today's conference.
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This morning salvage goal will be led by Phil Green, Chairman and CEO , Jerry Salinas Group Executive Vice President and CFO before I turn the call over to Phil and Jerry I need to take a moment to address the safe Harbor provisions.
So the remarks made today will constitute forward looking statements as defined in the private Securities Litigation Reform Act 1995 as amended.
We intend such statements can be covered by the safe Harbor provisions for forward looking statements contained in the private Securities Litigation Reform Act of 90 95 as amended.
Please see the last page of text in this morning's earnings release for additional information about the risk factors associated with these forward looking statements that needed a copy of the release is available on our website or by calling Investor Relations Department.
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This time, we'll turn the call over to Phil.
Actually good morning, everyone. Thanks for joining us.
Today, I'll review, the fourth quarter, and Florida, <unk> full year results for calling for Austin, Our CFO Jerry Salinas.
We'll also provide additional comments and then we're going to open it up to your question.
In the fourth quarter kernel, calling false turned $101.7 billion <unk> dollar 60 cents per share compared with earnings though.
Hundred 17.2 million.
And $1.82 a share.
Reported same quarter, a year ago for the full full year Cowen Frost earned 435 45 million.
We're $6.94 a share compared with earnings of.
446.9 million or $6 nicer to share.
Reported 2018.
Yeah, we're interest rate environment impacted our results as you would expect however, our team continues to execute our strategy.
Pursuing consistent above average organic growth across our enterprise.
And we're investing for the long term, while maintaining or quality standards.
Our return on average assets was 1.21% in the fourth quarter compared to 1.48% in the fourth quarter last year.
Average deposits in the fourth quarter 27.2 billion were up 2.6% compared to the fourth quarter last year, well average loans were up 5.4%.
Our provision for loan losses was $8.4 million in the fourth quarter.
Appeared $8 million into third quarter of this year and $3.8 million in the fourth quarter 28.
Net charge offs for the fourth quarter were 12.7 million compared with $6.4 billion in third quarter.
$9.2 million in the fourth quarter last year.
Fourth quarter annualized net charge offs were 34 basis points of average loans.
[music].
Nonperforming assets were 109.5 million into the fourth quarter compared with $105 million in the third quarter and 74.9 million in the fourth quarter last year.
Overall delinquencies for accruing loan to see him as he ended the fourth quarter was 58.2 million [noise].
And that was 39 basis points period end loans [laughter] those numbers remain well within our standards comparable to what we've experienced in the past several years.
And overall, our credit quality remains good.
Total problem loans, which we define as risk grade tenant higher were $511 million at the end the fourth quarter.
Appeared $487 million in third quarter of this year.
$477 million in the fourth quarter last year.
The increase in the fourth quarter related primarily to the energy portfolio.
[noise] energy related problem loans were 132.4 million ended the fourth quarter compared to $87.2 million for the third quarter.
And 115.4 million in the fourth quarter of last year, you energy related problem loan total is mostly attributable to three borrowers who we've been working for several quarters.
Energy loans in general represented 11.2% of our portfolio at the end of the fourth quarter up from the previous quarter, but well below our peak of more than 16% in 2015.
Our focus were commercial loans continues to be on consistent balanced growth.
Including both the core component, which we define as lending relationships under 10 million in size.
As well as larger relationships, while maintaining our quality standards.
The balance between these relationships went from 52% larger 48% core at the end of 2018% to 57% larger at 43% core at the 2019.
The movement towards larger loans in 2019 was mostly due to activity in the fourth quarter were some quality new energy relationships were added after exiting a number of credits during the year.
[noise], new relationships increased 4% versus the fourth quarter over a year ago.
The dollar amount a new loan commitments booked during the fourth quarter was up sharply.
Increasing 75% from a year ago.
And 44% from the prior quarter.
Even excluding the strong energy growth, we saw in the fourth quarter, new loan commitments grew 42% versus a year ago.
20% for the park were represented good increases in both see it a and C. Ari.
That said quality deals are hard to combine.
2019, we book just 3% more loan can that much compared to 2018.
Bard looking at 16% more deals.
Im sorry, we saw our percentage of deals lost structure increased from 63% in 2018% to 69% and 2019.
Our weighted current active loan pipeline in the fourth quarter was up by about 9% overall compared to the prior quarter and was driven by 20% growth and see opportunities.
Oh, the 10, new financial centers that we've opened so far in the Houston region for were opened in the fourth quarter.
We expect to open more Houston area Financial Center, and the current quarter on our way to a total of 25 new financial centres.
We've already heard more than 150 of the approximately 200 employees, we expect to staff this expansion.
Those new financial center openings benefit both commercial and consumer bank.
Let's look at our consumer business.
We added almost 13000 net new customers consumer customers 2019, and increased 48% from a year ago.
That represented a 3.8% increase in the total number of consumer customers all of that representing organic growth.
In the fourth quarter.
32% of our account openings came from our online channel, which includes our Frost Bank mobile App.
This channel continues to grow rapidly in fact online account openings were 30% higher compared to the fourth quarter 2018.
The consumer loan portfolio averaged 1.7 billion in the fourth quarter, increasing by 1.2% compared to the fourth quarter last year.
Frost bankers have done a great job expanding our presence in growing markets.
Our overall strategy of sustainable organic growth is serving us well.
The interest rate environment continues to rich at present challenges to our industry, but we remain focused on the fundamentals and growing our lines of business inline with our quality standards.
2019 had to cheer challenges, but also had a chair of achievement.
Sides, adding the new financial centers in Houston that I mentioned, we also expanded into a completely new market, where we opened our first financial center and Victoria in Texas, and we completed our corporate headquarters move to the new Frost tower in downtown San Antonio and the culmination of a process that began six years ago.
Our commitment to customer service was confirmed when frost received the highest ranking and customer satisfaction in Texas and JD powers U.S. retail banking satisfaction study for the 10th consecutive year and receive more Greenwich Excellence and best brand awards for small business and middle.
Market banking.
That any bank in the nation.
The third consecutive year.
That's a tribute to the dedication of everyone at Frost, who works hard every day take care of our customers and implement our strategies that dedications watch sets frost apart from other financial service companies.
Now I'll turn the call over to our Chief Financial Officer, Jerry Salinas for some additional comments.
Thank you Bill.
A few comments about the Texas economy before providing some additional information about our financial performance for the quarter and I'll close with our guidance for full year 2020.
All the Texas macroeconomic numbers all mentioned here are sourced from the Dallas office at the Federal Reserve.
Texas job growth with a very strong 4% in November and the Dallas Fed now estimates, 1.9%, Texas job growth for full year 2019.
December statewide unemployment at 3.5% uptick slightly from the historically low 3.4% level seen in each of the six month through November .
In terms of employment growth by industry as of November construction had the strongest employment growth in Texas with 11.5% growth for the month and growth of 5% for the year to date period through November .
Financial activities with the industry with the second fastest job growth at 3.5% year to date through November .
Energy with the only sector that showed meaningfully negative, Texas job growth down 2.7% year to date through November .
According to the Dallas fed surveys activity in the Texas services sector accelerated again in the fourth quarter and revenue growth. In this sector has remained in positive territory every month since December of 2009.
Looking at individual market Houston economic growth remains above historical average and the Dallas Fed stated that as of November data suggests continued moderate growth ahead job growth in the Houston region accelerated to a 2.8% rate in the three months through November compared to a more modest one point.
6% rate for the full year through November .
Professional and business services, and education and health services led Houston job growth over the three month through November growing at 8.2% and 7.7% respectively over the same period a year earlier.
Regarding that DFW Metroplex did the Dallas business cycle index maintained by the Dallas Bad expanded at a 5% annual rate in the fourth quarter compared to 4.8% in the third quarter, while the Fort worth business cycle index expanded at a consistent 4.1% rate in the second half a year for the.
DFW Metroplex November job growth remained strong at a 4.8% annualized rate and area unemployment relate remain near multiyear lows at 3.2% in Dallas and 3.3% in Fort worth.
You often economy has also remained healthy in November and the Dallas Fads Austin business cycle Index has now been an expansion territory for more than 10 years with index growth, Romania at or above the regions historical 6% average for the past nine years.
In the three months ending in November Austin area job growth moderated to 2.4%.
Austin's unemployment rate remained at 2.7% in November for the fourth consecutive month.
The San Antonio region posted strong economic growth in November the Dallas Fed San Antonio business cycle index, continuing to grow above its long term average the San Antonio business cycle Index grew at a 5.5% rate in November and San Antonio job growth was 4.7% for the three months through November with area unemployment remaining.
3.1%.
Permian Basin Payrolls remained flat through November and the unemployment rate has kicked up in recent months, while the rig count has generally declined in recent months oil production has continued to increase Permian region job declines in the mining manufacturing and government sectors were offset by job growth in the leisure and hospitality professional and.
Business services information and trade transportation and utility sectors for the year to date period through November resulting in overall flat performance for jobs in the region. Despite the lack of job growth in the Permian region November unemployment remained low at 2.4% for the second consecutive month.
Our net interest margin percentage for the fourth quarter was 3.62% down 14 basis points from the 3.76% reported last quarter. The decrease primarily resulted from lower yields on loans and balances at the fed as well as an increasing the proportion of balances at the fed as a percentage of earning assets.
Partially offset by lower funding costs.
The taxable equivalent loan yield for the fourth quarter was 4.88% down 28 basis points from the third quarter impacted by the lower rate environment with September and October fed rate cuts.
The total investment portfolio averaged 13.6 billion during the fourth quarter up about 197 million from the third quarter average at 13.4 billion.
The taxable equivalent yield on the investment portfolio with 3.37% in the fourth quarter down six basis points from the third quarter.
Our municipal portfolio averaged about 8.4 billion during the fourth quarter up about 193 million from the third quarter the.
The municipal portfolio had a taxable equivalent yield for the fourth quarter of 4.8% flat with the previous quarter.
At the end of the fourth quarter about two thirds of imminent the municipal portfolio with BSF insured.
During the fourth quarter, approximately 1.4 billion of our Treasury securities that we are yielding about 1.51% matured.
As insurance against the potential backdrop of flat to down rate for an extended period of time, we made the decision to add duration to our investment portfolio.
During the fourth quarter, we purchased about 1.5 billion insecurity to replace the treasuries that matured.
During the quarter, we purchased 500 million in 30 year treasury, yielding about 2.27%.
Approximately 700 million an agency mortgage backed securities, yielding about 2.37% and about 300 million in municipal securities with a t. yields at 3.3%.
As a result of the maturities and purchases I just mentioned the duration of the investment portfolio at the ended the quarter was 5.4 years compared to 4.3 years last quarter.
Looking at our funding sources the cost of total deposits for the fourth quarter was 29 basis points down 10 basis points from the third quarter.
The combined cost of munis, the cost of combined fed funds purchased and repurchase agreements, which consists primarily of customer repos decreased 32 basis points to 1.21% for the fourth quarter from 1.53% in the previous quarter those balances averaged about 1.42 billion during the fourth quarter.
We're up about 126 million from the previous quarter.
Moving to non interest expense total noninterest expense for the quarter increased approximately 21.1 million or 10.6% compared to the third quarter excuse me the fourth quarter last year, excluding the impact of the Houston expansion and the operating costs associated with our headquarters move in downtown San Antonio non interest.
Expense growth would have been approximately 6.3%.
Regarding the outlook for the full year 2020.
The estimates for full year 2020 earnings we currently.
We currently believe that those estimates for 2020 earnings that backs that mean of.
$6 in 13 cents.
Is reasonable.
So again regarding the estimates for full year 2020 earnings. We currently believe that the fact that mean of $6 in 13 cents is reasonable.
Our assumptions do not include any rate cuts in 2020 with that I'll turn the call back over to fill for questions.
Thanks, Jerry No open up the call for questions.
Our next question.
All right.
On the phone to withdraw your question press the pound for Husky, Please standby compiled acuity roster.
Your first question comes from Peter with Wedbush. Your line is open.
Hi, good morning.
Good morning.
I was just wondering.
Can you talk about what the loan outlook is.
For you guys for 2020, I think before you've targeted high single digits and I'm just wondering what the outlook is.
Forward.
No I think is fairly consistent with that it may be.
Depend on your your definition of high.
But.
You know certainly over 5% is what would shoot for Doug and I don't think it'll be double digits. So.
The Thats close I think I'll get to it.
Okay.
And then one of your competitors the other day talked about this increased competition from the nonbank.
Players and that resulted in a very high level paydowns.
Payoffs I'm, just wondering what you're seeing from.
On the competition level in your markets.
Yes competition continues to be tough when it's mainly around structure.
But it's.
I wouldn't related just to non bank competition. Thank we've said before it's been big banks small banks. It has been some nonbank uptick as well.
And I think from people I've talked to an industry. That's that's sort of a national thing.
People are searching for yield so.
And it's mainly around no guarantees Vance rates. This type of thing so and as I said we.
We lost more deals to structure on particularly real estate.
This year than last year.
69% lost due to structure versus 63% a year ago, so sort of factor, it's not the only back.
Non banks.
And then just one more housekeeping Jerry in other income.
I know it can be volatile, but there was a big increase relative to the past two quarters I'm just wondering there was anything unusual.
I think we had a stronger capital markets underwriting fees during the quarter those were up 1.6 million compared to the fourth quarter last year, and we had about a million dollars on.
On an insurance claim that we got paid on I think those are the two things that stand out.
Okay. Thanks very much.
Next question comes from Jennifer Demba Suntrust.
Thank you good morning.
Good morning.
My question is on credit.
Can you just talk about.
The level of energy charge offs, you saw during the fourth quarter and for the entire year in 19, and what what you think is likely over the next.
Few quarters, given problem loans have gone up pretty significantly in that sector.
No I think just in general.
The.
Yes, we're coming to the end of.
This this process of moving through the snake.
Most.
We've got two large energy credits and non performers.
Both around.
Say 30 little over $30 million.
And.
They've been working those things working those things out for awhile.
Yes.
In one case three years or so.
And the other a long period of time I.
I think we're getting close to the point where.
Final resolution are those going happen I don't know when it will be exactly but I think it sooner rather than later it could be.
It could be the first quarter could be after that and so.
Mike My gut tells me that there'll be some charge offs related to those.
A good amount of it reserved for already but maybe not all and probably not all but given what's been happening.
The discount rates on in the energy space has been pretty well known by everybody over the last couple of quarters. So I think we'll see.
I think we'll see higher energy charge offs, but it's really related to the culmination of these.
These deals that have been working for a long time as opposed to.
Anything happening with the.
New credits because there's been some some weakness in the sector its makes sense.
We just ask a follow up so in terms of the new problem loans that came in during fourth quarter.
What kind of gives you confidence.
That you did that kind of credit migration trend. This is I guess inflecting.
Yes, well.
I mean.
The one that was what was rated a.
Problem in the fourth quarter I mean, we talked about last quarter. It was one that was on watch before and it's.
It's in the reason we put it there is because you know their plan calls for selling assets and.
We know that's a difficult environment.
The difficult environment do that now there.
They've got strategic properties and early results on what they saw initially was was pretty good so, but it's not a great environment to be sell sell assets and so we'll just we'll just be seeing how that works over time, but.
It's we decided sparkling and move it to a problem, but again like I said earlier results on that are pretty good right now.
Okay, Jennifer in the fourth quarter net charge offs on energy work 2.9 million.
Okay.
And for the year.
For the year I'm seeing.
It looks like a little north of six.
Okay.
And just one more question on it on noninterest expenses.
Just wondering Jerry if you think.
You will see a similar level of expense growth. This year, given you're trying to complete the Houston expansion I guess, you've got what 15 more offices.
We don't we don't give specific line item guidance, but Jennifer where I would what I would point to point you to is our fourth quarter to fourth quarter or as reported.
Growth percentage and expenses and I to me, that's really representative of our expectations going into 2020.
Obviously, we as a group are all focused on trying to manage its expect manage expenses in this environment of trying to grow the business and try and do a being faced with some technology debt. If you will.
It's really important for us to to focus on expenses, but right now I would take that fourth quarter to fourth quarter growth is as kind of in the ballpark of of our current expectations.
Okay. Thanks.
Your next question comes from Steven.
The list with JP Morgan Your line is open.
Hi, good morning, everybody.
Good morning.
To start of the margin.
Obviously done a lot given how much like born short term rates move down in the quarter.
For NIM from here.
You know as I'm looking out in that fourth quarter I think we're at a 362 in the fourth quarter and you know the way we're not projecting any rate cuts like I said, so to me kind of what I'm looking at is we'd be flattish to maybe up just slightly but it really really flat is what I'm thinking for 2020 come.
Fair to the fourth quarter of 90.
A percentage wise.
That's helpful.
And then thank you.
Houston branches I know, it's early but for the branches you have open can you talk about the growth trends you're seeing so far.
Roughly inline with expectations and then costs for the branches that are coming out where you thought it would be.
I think we're happy with what we've seen versus what we expected.
The cost number I think there's a little bit less than we.
I had thought it would be just because we were.
Had many of network push near the end of the years that was really just more of a timing thing and we're seeing good growth in households.
Probably seen a little bit better growth in households than we expected a little bit better loan growth than we expected a little bit less the positive.
Oh levels then we.
Had had expected but.
I'm not really worried about that as we get these relationships and I think we'll see that.
The inline with what we were expecting to see the main thing I'm focused on us.
What's happening with relationships and and those are better than we anticipated. So I'm not discouraged at all effect I'm encouraged by what we're doing.
No and how are people who are executed.
The good thing about it is.
We've heard some great people and.
We are getting people that are.
I want to buy into our culture and.
And seasoned bankers I think the average.
Relationships managers as I recall was around 20 years so.
Yes, these are real real solid.
Okay.
Thank you again as Phil mentioned, we've gone to disclose a 19 cents and we did a negative impact on 19. It was just a little bit better than what we expected and as he mentioned a lot of that was driven by the timing of the openings and for 2020, we're projecting that expansion you it's going to be the worst in the second year, obviously until we're expecting.
Got hit a 35 cents.
Related to the Houston expansion in 2020.
Improvements after that.
That's very helpful and then finally.
Phil So we saw another.
Earlier this week.
Something that you would consider I know the culture, so strong that the company really differentiates you.
You bet and I'm only for calling for us. Thanks.
Yes.
Well of course.
No C O talk [laughter] talking about that kind of thing, but I'll just tell you what I've said.
Consistently out I'll say it again.
And that is that.
You know that a roll ups not something that we're interested in.
That.
We're executing on an organic strategy, thank the risk in the payoff.
It's lower on the organic strategy to pay off is better we're investing with their income statement as opposed to investing with our balance sheet.
The.
The best use if an acquisition for a company like ours is really one that's not a roll up puts you in position to do an acquisition puts you in a position to do organic growth from that point forward and so.
But as I've said before those things don't happen very often become more come along and frequently the last time. We did that was we moved up to the.
Midland and Odessa market with Wi Fi about six years ago, So acquisitions, there's not.
On our radar screen.
What's on our radar screen is how we're growing the company and growing relationships.
Every day.
And that's the thing we are focused on.
Thanks.
Thanks for taking all my questions.
Yes.
Again, we would like to ask a question. Please press star one telephone keypad.
Next question comes from Brady Gailey with KBW. Your line is open.
Hey, Thanks, good morning, guys.
Good morning, everybody.
The energy loan loss reserve last quarter was about 33.3 million.
So 2.2% did that you had some problem energy loans flow this quarter, but did that change much on a linked quarter basis.
[noise], we were yeah, we moved it up its about 37.4 million.
The percentage of yeah. So we were at 33, three you're right and we moved to that up to about 37 four.
All right. That's helpful. And then when you take a step back and look at Houston. It was a little under 19 cents diluted the last year, it's 35 cents dilutive to.
This year 2020, when will that hit breakeven and how many years into until you will read to all those losses.
Well the.
Breakeven as we said before on average for these locations spent about 20.
Seven months right I think 27 months so.
Anyone can do the math on that lay that out and sort of see when does this tipping points occur.
I think one thing to keep in mind is.
This really in 2020 should be the the highest hit so to the extent that you're seeing a lower burn rate. If you will even for the branches that are still maturing you're you can add some momentum from where we would have been say in 2020, So I see the momentum in terms of.
You should towards earnings increases should begin in 2021 that said they all have to breakeven.
And.
And get to the point, where their grow earnings. So you know that.
That happens in 27 months on average so just look at when we're opening them and make your assumption there and see see when do you think those turnarounds.
All right and then lastly, yes, but.
Lastly from me you've hired I think said you've hired a 150 employees out of the 200 that are plan.
I'm the 150 that you've hired out how many of those are commercial lenders.
Roughly.
But I would say 20 of them are so round numbers.
Alright, great. Thanks, guys.
Right.
Next question comes from John .
With RBC capital markets. Your line is open.
Thanks, Good morning.
Hey, John one.
Just a couple of follow ups one on bradys question on.
2020 versus 21.
Do you expect to have all the hiring dumb and essentially like the compensation and some of the facilities expenses in the run rate actually in 2020 expense run rate.
Yes, you are saying do we expect to have most of that in.
Yeah.
Yeah.
Okay, because our current plan is and you know one may fall, but our current fall out into 2021, but our current plan is to have those.
All open by the end up this year.
And as far as the bankers are concerned we typically try to hire a lot of the staff there.
Six months before.
And so the locations we are kind of moving along this year with the expectation I think Phil mentioned that we are projecting one this quarter I think we're projecting five in the second quarter. So yes, there will be up you know they help you won't be at 100% run rate, but you will you'll get the bulk of it in 2020 yep. Okay. Okay. Good.
That helps and then a jury as long as your you're there I'm just last quarter, you talked about extending duration to you you did so this quarter I'm curious if there's more to come for you.
In that area and then maybe talk about the impact and how you think about a little flatter curve that we're facing right now.
I think there is a we're continuing to have conversations I think the plan is to continue to add duration I think I said, we bought 500 million in treasuries there so.
We're thinking about potentially at the market makes sense for us It will do another 500 million there.
Our focus really for the year is probably less on municipal securities than it has been historically.
We bought I think I said 700 million in mortgage backs during the during the quarter and that's probably kind of where we're headed as far as a percentage wise, we're probably moving more towards mortgage back right now is the current plan.
And really you know I think you talked about a flatter yield curve really the inch what we did this was really kind of a proactive move it kind of an insurance I mean, we're kind of looking at where our exposure is in our exposure was to flat rates and so from our end it made sense for us to extend duration through our investment portfolio.
If we get the opportunity on the loan portfolio side, we may decide to do something there.
But right now yeah, I think that.
That's our plan.
Okay.
Good thank you for that.
And then Phil just the commercial pipeline you talked about up 9% sequentially, we'll see an eye as a driver.
Earlier, you were talking about larger versus smaller. Please go ahead.
No go ahead.
You talked about larger versus small I'm just that the pipeline increase can you talk about is that would you characterize that as deep and broad commercial strengths or would you say its energy driven or help us understand that.
Yeah, I think it's.
I think the increase in energy in the quarter was was as much as it was just an anomaly I mean, we had.
Some of the opportunity to put on some really.
Great relationships and we've been moving out of relationships.
Ones, which we Didnt think we're right for us or deep enough for us throughout the year and so we just had a number of those yet.
I would expect that I don't have the energy pipeline percentage of that 20% growth Sienna in front of me, but I.
I don't I don't expect a change in our focus on core.
You know over time.
And.
You'll have dislocations like you saw in the fourth quarter in a particular segments, sometimes it might be.
In commercial real estate and sometimes so.
So I don't expect it to be much different.
And when we were looking.
No again, we're not getting out a large deals were good and we want to do them. It's really this core thing is about balancing the portfolio. It's working on the core and on the large large deals. So I expect us to continue to be in balance there.
We're focused on it okay.
Okay, Alright basic messages its broad it's not it's not just energy in terms of yeah, Yeah, Yeah, Oh no no no no no. We're not we have changed our focus there.
Okay alright, thank you.
Yes.
Your next question comes from Rahul.
<unk>.
Your line is open.
Thanks, I just want to drill down in the expenses a little bit I know you talked about fourth quarter.
Got it expense growth year over year that was around 10.5%.
That is kind of good run rate going into 2020.
And so you'll basically guiding to attend 11% growth.
Growth in 2020 expenses last quarter, you talked about expenses reported basis will be north of 8%. Good. So what has changed wide that incremental growth in 2020.
You know I said it somebody throughout the number 8% than I, just said, it's gonna be north of that so we didnt really give any specific guidance.
What I'll say is really our outlook for expenses.
Really hasn't changed significantly for 2020.
The Houston expansion of course has been part of it.
You saw on a big increase in our technology expenses between the third quarter in the fourth quarter, we had really been projecting that.
Sure happened earlier in 2019, those projects actually Didnt get closed out until the fourth quarter and so they had a big impact on the fourth quarter.
But no I mean with our outlook for expenses between last quarter and this quarter as it relates to 2020 hasn't changed significant.
Okay. That's fair then the other thing is that you talked about 2020.
S. The reason you're comfortable with the consensus GPS six toadying.
Consensus right now is not modeling 10, 11% expense growth right.
On growth.
5% range that is essentially where everybody's talking about look good for you guys.
NIM outlook appeared to be slightly better last time, you said you know you probably noticed the downward trajectory through 2020, now you're saying flattish I'm just trying to get a sense for their exactly the consensus number six to 18 are you comfortable what's driving that comfort level right now given that expenses are probably.
To be quite honest with you. We don't we don't spend our time analyzing where consensus is that we look at the bottom line number and.
Thats the number that we're seeing in fact, setting and based on that number we're comfortable with the overall projection.
Honest with you I've, given you a little bit more color than we typically do trying to help there, but we don't give specific line item guidance.
Okay and just one last question how are you guys thinking about state to provisioning under Cecil.
Yeah, I think that that at the end of the day from a from a seasonal standpoint, you know we would expect that future provisions, they're going to continue to be impacted by charge off or the mix of loan growth of course, the forecasted economic environment and other factors and at this point you know, there's obviously a lot to be determined to what happens by the time that.
First quarter, a provision is concerned but no we're not to not too worried about it at this point, but a lot of it will be dependent on what the what the environment looks like at that point.
Alright, thank you.
Your next question comes from Matt.
Devens Your line is open.
Yeah. Thanks for taking my question just want to follow up on the consumer loan portfolio I know, it's a pretty small part of the overall portfolio, but if we go back a few years ago. The consumer portfolio had some pretty strong growth and since slowed down quite a bit. So can you just talked more about that portfolio what.
Drove the growth a few years ago, and what's driven the slow down more recently and we have seen some higher charge offs in that book more recently in anything to note there. Thanks.
Yeah. It's.
The main component of the portfolio that slowing in fact is declining so year over year is been in the personal lines of credit unsecured lines of credit.
The the losses that you're seeing there really related to some.
Loans to some individuals whose companies had some issues and now we've tightened up in that area on plc, and then the underwriting there and so you've seen that drop and so we don't expect to.
That to be a systemic or recurring issue, we've actually had really good growth this relates to.
The.
Consumer real estate part of that portfolio, which includes home equity loans.
Home improvement loans et cetera, and that continues to grow and we were happy with that so really what you're seeing is really an offset on one side of the portfolio being a personal lines of credit.
Offsetting what is good growth and the consumer real estate and which has extremely.
Great credit metrics and great performance.
Okay. That's all from me thank you.
Thank you.
Next question comes from Steven Alexopoulos with JP Morgan Your line is open.
Hi, everyone. Just two quick follow ups. So first on the deposit side, what do you guys have such strong growth in average deposits.
Any color there.
Well, we really have had good growth in the second quarter or excuse me. The second part of the year, It's something we've obviously been focused on.
Let me go here and just pull it I think that.
Although I wanted to see specifically what categories are growing here [noise].
You know linked quarter basis, some of it was driven by a good increases obviously in the see an eye categories. So if you're looking you're looking at a linked quarter basis, a fourth quarter for US is always stronger now I think the fourth quarter. This year was stronger than normal like I said some of that started in the third quarter.
And so it's been on that in the see an eye.
The commercial deposits I think some of it has to do with rates.
Some of that has to do with volatility, but I think that we continue to we continue to make the calls that we need to make we continue see growth and new customers. We continue to be focused on the things that we need to do to grow the business.
We had during the.
18, starting in 18, you know as rates started to go up over 150 basis points. We were seven has started to have challenges on the commercial de eight were sick. We were seeing some of those balances leave as I think the opportunity costs of the keeping balances in da accounts I got to it.
Expensive I think we're starting to we're proactively doing some things to get some of that back on the balance sheet, but in addition to that I think just the lower rate environments, probably helping us air and like I said were continued to focus on building those new relationships. We've had great you know from the time it from the interest bearing side, we've had good growth in the jumbo deposit.
Jumbo Cds.
We've got a pretty competitive right there and those continue to go up but I've really been Empress also with the growth that we've seen an interest on checking really to be honest with you. So really just a we've had some good augmentation barred from our existing customers, but we've also had a.
The addition of new customer so.
Knock on where we're pretty excited about the growth that we see.
Okay.
That's helpful and then separately.
Your Texas peers have called out pressure on restaurant finance loans, a restaurant franchise loans, you guys have a material exposure to restaurants.
No.
I don't think we do it's not something that.
Big component to us and that's not I've not heard that.
Restaurant business is always you know.
Historically.
For riskier part.
But.
No it's not really something that's raised raised dark.
Okay.
Perfect. Thanks for taking my follow ups.
There are no further questions at this time.
Call back over to Phil Green for closing remarks.
Okay, everyone. Thanks for your participation will be a journey.
This conference call you may now disconnect.
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