Q4 2019 Earnings Call
Good day and welcome to the FSC Earnings Conference call Today's conference is being recorded.
It's time I would like to turn the conference over to Jim loudly President and CEO . Please go ahead Sir.
Thank you Todd.
Good afternoon walking through our fourth quarter earnings call I. Appreciate all of you taking time to listening.
Joining me today on the call is Keene Turner, our company's Chief Financial Officer in Chief Operating Officer, and Scott Goodman, President of Enterprise Bank and Trust.
Before we begin I'd like to remind everyone on the call that a copy of the release and accompanying presentation can be found on our website presentation and earnings release for first on FCC form 8-K. This morning.
Please refer to slides two oh the presentation titled forward looking statements. Our most recent 10-K intense you for reasons why actual results may vary from any forward looking statements that we make today.
2019 was a pivotal year for enterprise appraisal services score, we expanded our geographic presence into new Mexico with the acquisition of integrate and integration for into capital.
We're gearing up you organically grew the balance sheet quality loan and deposit growth.
And strategically manage their capital.
To provide a high return for shareholders. The following or just some of the highlights.
During the year, we earned net income of 93 million.
There are $3.55 per diluted share.
We organically grew our loan portfolio by 7.5%.
As I stated previously we had a successful integration of true the capital our country's largest acquisition.
Okay. They need attention so net interest margin and expense control, which contributed to an ROI of 1.55% excluding merger costs.
The fourth quarter was equally spectacular that's we posted record earnings per diluted share of one dollar a nine cents.
Quarter was highlighted by solid growth in loans and deposits when annualized these results were 7% and 10% respectively.
We further scaled our investment in technology, and people, which drove an attractive or way of 1.58% and ROTC of 19%.
Gotten chemo provide much more details on these solid results.
Our financial scorecard can be found on slide three.
Compared to a year ago, we were able to grow our earnings per share by 70%.
Contributed to these strong results was our ability to grow net interest income dollars by 20% to 22%.
Despite the compression of our core net interest margin, which fell by 13 basis points.
Certainly the growth attributable to the Trinity merger helped our leadership team was assertive imprudent and price you loans and deposits during a very turbulent year.
Credit quality remains a hallmark of our company. Despite the modest uptick in npls compared to last year at 50 basis points, we still compare favorably to our peer group.
Additionally, we're not worried that this is a trend as much of this represents one credit we feel we resolved given the relative reserve provided in previous quarters.
As I've mentioned on previous calls we constantly strive to incrementally improve our business. This is evidenced by our strong operating leverage this has become a way of life. It enterprise and I'm positive that we will continue to improve in this area during 2020.
Finally, several years ago, we set out to improve the costing composition of our deposit base.
The trading merger has certainly enhance this and can be seen by the impressive increase of 26% in this space when compared to last year.
Slide four reminds you as to where we are focused.
As I stated previously the integration of Trinity to date has been successful.
We're well positioned in our market and our newest market to serve these communities well and could you just find ways to enhance our already strong business.
After a slow start in 2019, we finished the year with three strong growth quarters. This growth was achieved while not compromising credit or pricing disciplines.
Our efforts to improve our sales and operational processes are working well.
We will continue to further leverage our investment these areas to improve is already strong results in the coming years.
As it relates to our 2020 focus achieving organic loan and deposit goals is paramount because we've done through further refinements of our sales process and require all regions and business lines to contribute.
Finally, we will heighten our focus on continuous improvement and all the other facets of our business both on the front and the backend.
I would now like to turn the call over to Scott Goodman, President of Enterprise Bank and trust, who provide much more detail about our company and about our business.
Thank you Jim and good afternoon.
Turning your attention first to slide number five.
Loan growth for the year was 964 million or 22% inclusive of the loans attributable to the Trinity acquisition.
Net of Trinity at 12, 31 loan growth was inline with expectations as balances increased.
324 million or roughly seven and a half the sense in 2019.
Q4 was also salad with 800 or I'm, sorry, 86 million of loan growth for approximately 7% annualized.
The improvement from Q3 is mainly due to higher line usage from Cnine clients.
Seasonal upswings in specialty lending.
Lending on commercial real estate development loans and lower levels of payoffs.
As slide number six shows we continue to emphasize see an eye lending in our business model.
Solid growth posted for the year and for Q4.
And I loans are up 11% year over year in this category and 8% net of Trinity.
Breaking this down by category on slide number five I'm, sorry, slide number seven.
We experienced growth for the year 2019 in nearly all business units.
The large increase in Investor commercial real estate is primarily attributable to the integration of Trinity book.
As is the growth in residential real estate.
Net of Trinity growth was more equally balanced between general Cnine in theory.
We continue to play strategic emphasis on adding and grilling season, I relationships, which can be retained overtime and deepen through our proven model a best in class client satisfaction.
Commercial real estate and related construction and development loan growth remains focused on our core geographies and leverages our relationship philosophy of aligning ourselves with key investors or developers, where we can be significant strategic partner.
Within the specialized categories loan balances for enterprise value lending or email declined by 37 million in the year due mainly to higher levels of pay downs associated with the sale of platform companies by a private equity sponsor clients.
Originations were also modestly down early in 2019 compared to prior years.
We rebounded in Q4 with close in the sector aided by typical seasonal activity and lower pay offs.
We have seen more diverse competition in this segment from local community banks as well as Nonbanks, resulting in some credit terms, which fall outside of our risk profile.
We believe that is particularly important to maintain disciplined credit standards in this segment.
Including focus on from is using the FDIC based model and proven partners with solid track Records.
The tax credit business grew by nearly 12% or 31 million for the year bolstered by Q4 momentum in the light tech sector.
This reflects the ramp up of activity with long term key partners, who are experienced experts and you continue to expand affordable housing programs in states where demand for this product is strong.
[noise] life insurance premium finance posted strong year with 55 million of growth.
Seasonally we saw more activity a bit earlier in the year during Q3, reducing net growth in the fourth quarter.
Fundings for premiums on is actually existing policies came in as expected during Q4, but growth was also slightly offset by a large pay off.
Within our business units shown on slide number eight.
All loan portfolios outside of the legacy trying to see Trinity book in New Mexico posted growth for 2019.
For Q4.
Specialized lending post the majority of its growth in this quarter based on the aforementioned factors as well as elevated activity in aircraft finance and seasonal upswing.
The Saint Louis market grew by 151 million or roughly 6.5% for the year, including 43 million in the quarter.
Q4 origination activity was strong and included a good mix of Cnine ancillary opportunities with both new and existing clients.
Larger fundings relate to the new relationships and the AG space and commercial real estate investment as well as new borrowing requests from several clients in the packaging and power equipment distribution industries.
The elevated payoffs that we had experienced earlier during 2019 in Saint Louis also diminished this past quarter.
Kansas City closed out a record year for loan growth was with a solid quarter.
Loans grew by 97 million or 13.5% year over year, and 31 million or 15.7% annualized in Q4.
Originations were solid in Kansas City, as well, including a large new realist relationship with a retail and distribution company in the food industry.
As well as new CRT loans go acquisition and expansion in both the investor and owner OCC operator categories.
As I've mentioned previously we've been able to capitalize on competitive disruption and our growing brand and the Kansas City market to attract numerous experienced bankers to our team over the past few years.
Gross is a reflection of this investment talent and their ability to operate successfully on our platform.
Arizona, Arizona also had a good year and 29 team posting loan growth of 38 million or nearly 11%, including a small increase of 4 million in Q4, following a robust third quarter.
Most of the activity in this quarter was around commercial real estate investors and construction funding.
We will continue to leverage key client relationships in Arizona lending into expansion and construction opportunities, which support a higher growth economic environment in this market.
And last theory as an important component of our strategy here. We also intentionally prioritized cnine balance in that portfolio, which has been a meaningful portion of our growth in Arizona.
For 2019, as well as the focus of our talent and new relationship development process going forward.
The 2020 work in new Mexico will be centered around retention of the high value deposit base, we acquired as well as development of a loan growth strategy that better aligns this region with our core competencies and Leverages the dynamics of the business community in this region.
In the short run this has resulted in modest and intentional run off of the loan portfolio here.
Mainly in transactional out of market commercial real estate and portfolio residential.
On the flip side, we're seeing opportunities to increase business with the majority of the other borrowers mainly in Albuquerque, and Santa Fe.
As they get comfortable with the enterprise story and understand our elevated capabilities around credit capacity.
Specialized lending expertise and Treasury management.
[noise] deposit growth.
Which is summarized on slide number nine was 26% year over year inclusive of the Trinity book.
And a more modest 3.5% organically net of Trinity at 12 31.
This lower than historical organic growth.
They are mainly reflects the addition of over 1 billion of low cost funding in Mexico, which provided a solid cushion to enable our teams and the other markets to more proactively manage our deposit costs and focus on high value deposit relationships, rather than just growth in dollar balances.
I will provide more detail on just how this manifested itself within our financial performance.
That said, we did grow core deposits by 140 million or 12% annualized in Q4.
Representing continued strong execution in core deposit inflows from the commercial and business banking lines.
The emphasis from our teams on new relationships and lower cost transaction type accounts is positively impacting mix as DTA remains at 23% of total deposits.
Positive inflows associated with new accounts continue to outpace knows of close accounts and the average rate of the new funds is coming in below that of the outgoing balances.
At this point now I'd like to handed off to our CFO Keene Turner for his comments.
Thanks, Scott a fourth quarter results were solid and represents a strong finish to 2019, well refer to slide 10, where we show the full year changes and S.
Net income was $93 million in 2019 or $3.55 per share compared to $3, an 83 cents in 2018.
Revenue was 288 million, an increase of 25% than the prior year.
The increase in the operating revenue reflects the combination of our organic growth and the Trinity acquisition that increase earnings per share by 81 fan.
Noninterest expense from reduced EPS by 43 cents with a net add of 38 cents per share approximately 10% since 2018 level.
In addition merger related cost of $18 million reduced EPS by 47th then that will not reoccur.
Our tax rate in 2019 was higher than 2018, primarily due to certain tax planning opportunities that were only available to us in the prior period.
The net result is that we continue to operate the business the efficient and effective manner and we utilize a strengthened diversity of our business model that continued to add to our earnings power in 2019 that was approximately 10%.
To summarize our return levers assets for 2019 was 1.35% and our return on average tangible common equity was 16%.
Excluding merger related items, our return on assets improved to 1.55% and.
And we delivered an 18.5% return on tangible common equity.
During the year, we demonstrated our capital flexibility, we leverage $37 million with a cash portion of Trinity returned $17 million or 62 cents per share in dividends to our shareholders and we repurchased over $15 million common stock.
Combined with the capital utilized to support our organic growth.
We leveraged our returned to shareholders by a total of approximately $115 million of capital and our tangible common equity ratio still increased from the prior year to 8.9%.
It's not only demonstrates the capital Optionality that we expect to continue to maintain but it also demonstrates the high quality return profile, we have built over an extended horizon.
[laughter].
Turning to slide 11 in the fourth quarter.
Reported net income of $29 million or one dollar in nine cents per diluted share.
Our results were reflective.
Were relatively stable with the linked quarter with a return on average assets of 1.6% and a return on average tangible common equity at 19%.
[noise] worth, noting our fourth quarter performance was largely from the core business lines, whereas the third quarter, including some gains from our noncore acquired assets that reduced the quarterly comparison by four cents per share.
Growth in our earning assets and focused approach on managing deposit cost neutralize the impact of the decline in LIBOR on earnings per share.
Tax credit income with seasonally strong driving a three cents per share improvement in noninterest income.
Non interest expense included a write down on already property in the fourth quarter, resulting in a penny decreased from me Tcf and noninterest expense.
And our share repurchase from the third and fourth quarter combined with a slightly lower tax rate improved eat yes by about one cents per share.
The other items provision for loan losses in merger related expenses combined to increase he asked by two cents as we did not recognize any merger related expenses in the fourth quarter.
Turning to net interest income on slide 11.
On a core basis net interest income was stable with the linked quarter at $61 million.
Core net interest margin was 3.64% a decline of five basis points in the linked quarter.
Lower yields from the 25 basis point decline in one month LIBOR were offset by lower customer at wholesale funding costs that typically lag rate moves on the loan side.
We actively manage our deposit rates to reduce the overall cost of funding, while being mindful of maintaining our customer relationship.
This resulted in a 12 basis points decline in the yield on transaction account at 32 basis point decline and money market yields from the third quarter.
Our total cost of deposits was 81 basis points down 13 basis points from the linked quarter.
We also benefited from a seasonal inflow of deposits in the fourth score quarter as Scott noted and reduced our wholesale borrowings in the associated higher costs funds accordingly.
I point out that we typically do see some deposit outflows in the first quarter as commercial clients make tax payments and year end distribution.
Nonetheless, we're encouraged by our ability to maintain our earnings power. Despite continued pressure on our loan yields.
As LIBOR rates have continued to decline since year end, there may be some slight compression to margin in the first quarter. However in general we expect margin to stabilize in 2020 absent additional material movement in interest rates.
Our focus is to continue to expand net interest income dollars.
By delivering quality loan and deposit growth.
With the momentum from the third and fourth quarter, we believe that we're well positioned to deliver high quality results for shareholders in the upcoming here.
Turning to slide 12 in our credit trends loan growth of $86 million and 19 basis points in that charge offs, resulting in a provision for loan losses of $1.3 million.
Well net charge offs increase and improvement in sub standard and classified loans were just the overall provision requirement.
Our nonperforming loan level did increase during the quarter due to 113 million dollar loan that was placed on nonaccrual.
This did not significantly impact the provision for loan losses, when it went to nonaccrual as the reserve. It Didnt primarily established in prior periods that reserve is approximately 10% of the balance noted.
This reflects our posture in the current credit environment to aggressively manage and push out credit such a weakness at management teams that are unable to resolve them.
On slide 13, noninterest income increased zero point $8 million from the linked quarter from another stop strong quarter and tax credit income.
A majority of the income in the fourth quarter was through the brokerage of on balance sheet, Missouri State tax credit.
Swap fees from transactions with our loan customers were 0.8 million the past quarter, we've had ever with this product.
It's worth noting the linked quarter had approximately $1.4 million from noncore acquired loan workout income and gains on investment sale at somewhat masked the current quarter growth and noninterest income.
We also realized approximately zero point $1 million of annual tax planning fees from our wealth division in the third quarter that contributed to the linked quarter decline.
2020 is expected to have similar fee income growth in the high single digits from 2000, as we experienced from 2017 2018.
Operating expenses on slide 14 were $38.4 million for the fourth quarter and inline with our forecast as I. Previously mentioned expenses included zero point $8 million from the revaluation of an already property and we did not incur any merger related expenses in the current quarter.
We did benefit from a reduced assessment due to the FDIC credit that will also have a small benefit moving forward into the next quarter.
Core efficiency resulted at around 51% down 1% from a linked quarter.
Well wrap up on the final slide.
2019 was a record year for us across a number of fronts, we strategically for the balance sheet by 30% for $7.3 billion to end the year.
We improved our liquidity position with a lower cost deposit base, while maintaining our already strong return profile.
We utilize our capital flexibility to translate our return on assets to returns for our shareholders.
The acquisition the acquisition of Trinity will benefit for the benefit us for the full year 2020, and we are well positioned to execute on our strategic initiatives.
With that well now open the line for analysts.
[noise]. Thank you if he would like to asked a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again star one to ask a question.
We'll take our first question from Jeff Fruitless of D.A. Davidson.
Thanks, Good afternoon.
Hi, Jeff how are you.
Doing fine thanks, Jim.
The I guess, because a couple questions for Scott on the.
Could you might it's just a with the aircraft finance book that the size of that again.
Right now I believe it's.
Roughly in the.
90, 80 to 90 million range. It you know I'll remind you on that that sector.
Majority of the businesses with aircraft dealers.
And who take aircraft in on on grade and we for planet, It's really a fee driven business. We also will occasionally finance aircraft for owner operators, who use the aircraft in their business, that's a little less of the strategy, but a in the fourth quarter, we did get some growth out of the.
Doing some aircraft that remained on the books, so but overall, we really view that this as a as a fee business.
And.
Your comments on the new Mexico market, it sort of longer term overgrowth short term some expected run off I guess, the the trade over point of when did you expect some.
More near term.
Compression or that book or is that largely flushed out in the by year end.
You're talking deposits I assume right.
Well Oh really on the loan book I, that's what I thought you. When you were on that slide at that you're referring more to the loan side running some.
So not a market out of market CRB out of the Oh, I'm sorry right.
Right yeah. They they had to use the strategy for loan growth, which was doing some of that non or end market.
Single tenant see Ari and Ah and also you know more aggressive on the portfolio residential yeah. So yeah, I think what you're seeing is a little bit of a trade off of leveraging funding into more of our core strategies getting their clients.
More used to what we can do for them. So I think you know I think.
From here on out I would expect it's primarily going to be stabilized and growth.
A good number of their clients.
Can leverage our larger balance sheet and we've already got new transactions in the pipeline for good long term clients from that bank.
Okay.
Thanks, Katy you mentioned the the.
Income growth overall, I guess, if you were.
Look into that tax credit income line I think exceeded expectations in 19 any thoughts on that specific line items for 2020 [noise].
Yeah, I think we expect that similar trend yeah, I think we said it was gonna be 20% to 25% growth from.
18, and 19, I think certainly we're targeting a 20% growth on a on a larger base in 19 to 20. So we've got some good momentum there I think you know the only bought four is that's gonna be a little bit lumpy throughout next year. So you know first quarter Ob you know not as robust as the fourth quarter, but I think we've also made some stuff.
Rides and getting some fee income into the earlier quarters in 19 like third quarter in second quarter. So we're optimistic that overtime as we as we ladder that business and we'll be able to make it a little bit more repeatable, but overall for the year. I think you know we expect to similar you know kind of twentyish percent growth rate there.
Thanks, It last one for me a keen just stood on the I think on that provision or the Ses will update you mentioned on the Q3 calls that you might be able to provide a little more color I think you mentioned.
I think if we if we were just double the P.T.I. loan loss allowance currently and then.
I think the other comment that you made was that might be moderated by kind of a short term she and I book overall so.
Any thoughts on the on the provision relative to the Cecil day one.
Accounting, yeah, so there's a lot or there's a lot there let me try to give you. Some color and then we'll give it did you guys a chance to fall out so right now our estimate for Cecil adoption is that it would increase the allowance by 50% to 65% and that's reflective of you know pretty decent amount of loans that were purchase.
So what you reflected as the the P.T.I. in a day too.
Yeah, that's going to lever about 25 to 30 basis points of tangible capital.
And then obviously there'll be some loans that you know based on the way the standards written will likely take out of pool accounting, so you're going to get a little bit of an elevated number of classified and some more noise and a non accrual or nonperforming loans. So just you know be prepared for that and then I think moving forward.
Word you know from pass rated loan origination perspective, I don't think much changes in terms of the world for US I think you're looking at you know back of the envelope about 1% on you know new loans and then the rest would be how it migrate you know maybe a little bit better maybe a little bit more stringent depending on what the complexion of growth looks like but.
I think that's a pretty good starting point.
Okay all right. Thank you.
You're welcome.
As a reminder to ask the question you can press star one well take our next question from Michael Perito KBW.
Hey, good afternoon, guys happy new year [noise].
Same here, thanks, Mike [noise].
Thanks for taking the questions I want to start on the $30 million credit I realize you're probably somewhat limited in what you can say, but I was curious if you could maybe just give us some broader parameters about what that credit was what line of business. It was how soon where it was and maybe just a little bit more color about what kind of went negative to drive to downgrade in the.
Corridor.
Sure. This is Scott I couldn't help you with that I'd.
I think as Kevin said it was it was in the C and I portfolio, It's a long term Saint Louis based client.
In the manufacturing industry.
And they've been negatively impacted by kind of a few concurrent issues.
Mainly with stress related to revenue.
To the oil and gas industry, along with kinda simultaneously a management dispute.
And ownership transition. So I think you know bottom line as we.
We've had this a in our workout group now for probably 18 months or so feel still very well secured on the credit.
And then I think we just felt in a position at year end, where we were already reserved at proper levels and could go out and apply their payments to principal.
And as identified several viable options I think for collection that can happen in the short run.
And when you say you guys sure just collateral primarily real estate [noise].
It's a combination it's a combination of equipment real estate.
And receivables, but hard collateral makes up the majority of the base.
And then just it with regard to obviously some of the management succession stuff would be unique but it didn't sound like there were some broader environmental things that might have negatively impacting them too is there any other [noise].
Slivers of the loan portfolio that could have similar stresses and is that something that's being looked at or do you or or not quite so [noise].
As it yeah as it relates to this particular credit no I mean if.
If you look at you know the revenue stress was really related to what you saw happening in oil and gas over the last few years and that's not an area that we aggressively London two we don't have any material concentrations there.
Okay.
And then more broadly if we take a step back just to see credit outlook remain.
Pretty steady Jim Scott I mean, any just updated broader thoughts I know you made some comments in your prepared remarks, but just maybe get a little bit more specific crushing and areas of concern, where you where you're pulling back or does it generally still feel like a pretty safe environment to be kind of growing the loan book at the targeted rate. So you guys are putting out.
So Mike this is Jim I'd say, we feel very good about the Irrs that brand currently I think in past calls we've talked about certain sectors.
You know certain sectors, a multifamily or a certain certain sectors of senior living that.
If they're not already a key client of ours, we're not looking for new ones necessarily there, but as it relates to any particular industry or what have you will be a business as usual for us.
I would just data you know we feel good about the fundamentals of the book classifies were actually down.
We feel good about where charge off levels and past dues ended up so.
All in all I don't think there any systemic issues.
Great helpful. M. onto couple other items I want to head keen on expenses I think that they've gotten the near term guidance was 30 739, you guys are a little over the mid point the fourth quarter as we think about the first quarter.
My guess is there some seasonal items that that that could drive that number higher it is that a fair way to think about it and then as we move out beyond the first quarter.
Maybe just a broader question I mean, how should we think about expense growth for enterprise moving forward. I mean, you guys have obviously done a great job pulled me efficiency ratio study for almost two years now, but still very much much into growth mode. I mean is it the four or 5% numbers it up to 3% number how do you guys kind of think about it as you completed the budget for 2020.
Yeah, I think if you look at yeah from a run rate perspective, Mike I think it's a pretty modest you know low single digit number I think if you look at from a merger map number you know just like the revenue line items, it's gonna be a higher.
A higher number but you know I think our current range for 2020, I think we'd move that range a million Bucks. So I think we'd be at you know more like 30 840, you know certainly in the first quarter, you get a little bit of seasonality with typically the way employer payroll taxes work and and.
Some other items, but then I I think it you would expect the expense line item to behave like it has been in prior years. So I think we've had a lot of success in.
Kind of having a flat first and second quarter and then to the extent that we're able to you know get and get out and execute our plans I think you see a little bit of an up tick in you'll probably you know start to move up toward the you know that $40 million part of the ranges. The as you ramp throughout 2020. So that's how we think about.
Got it now with the overlay that we're going to really work hard and try to be thoughtful and we're positioned in 2020 to try to really get some growth or early on here hopefully we've stabilized NIM and we can yet revenue expansion, what I'll say isn't the first half of the year and that will allow us to maintain.
You know generally the efficiency ratio.
Moving forward. So I think if you can you know grow the loan book managing them effectively and you don't hold marginal efficiency at 50% I think will will be set up for a pretty decent 2020, So that's where we've got our.
Our sites that.
Got a very helpful. Thank you and then just last one from me I'll step back just Jim on capital.
You know you guys have been pretty balanced and your approach. There you know I expect that kind of the short answer, but just any updated thoughts with 2020 on a you know kind of up at the beginning on slide here of how you're planning to deploy capital, which you know obviously can accumulate quite quickly given where your returns are.
Yeah, I think we said in the past might you know, we're obviously grosses are number one objective and certainly a if there's an opportunity to improve our company's your M&A. We would look at seriously and then we've been.
Yes, we've done very well in terms of some buybacks and then recently, we improved our dividend, but I think it's a combination of the four levers like weve used in the past and be opportunistic as those come about.
Got it helpful. Thank you guys for taking my questions I appreciate it.
Thank you.
Thank you we'll take our next question from Andrew Liesch of Piper Sandler.
Good afternoon guys.
Hi, Andrew.
Hi.
Third most of my questions already but just want to focus on a on the loan growth guidance for next year I mean, how do you. If you can see like where the pipeline is right now and do it sounded like maybe payoffs for a little bit lighter and is in this fourth quarter compared to previous quarters.
It sounds like you're trying to get some growth here in the first quarter like if it [laughter] first quarter, sometimes are tend to be little bit tougher for you guys are varied and for for the industry. So how do you feel about growth like playing out throughout a throughout 2020 when would be a heavier in the first part of the year compared to previous years.
Well I'll try to.
Jump in there so I would say this we feel good about the momentum that was carried over from 19 into 20.
As you know our portfolio something that as it relates to fundings really we have great visibility, maybe 60 570 days out Oh, So I can't really comment about second half of of 20, but certainly feel very good about the guidance, we provided and where we stand today relative to the first quarter.
Okay.
That's helpful and you know you've covered all my other question, so I will step back.
Thank you I think that are.
I can to ask a question press star one well take our next question from Brian Martin of Janney Montgomery.
Hey, guys good afternoon.
Hi, Brian how are you.
Good. Thanks, Hey, can you guys give any any thought on just kind of in new Mexico <unk> as far as kind of what your outlook is in a you gave have started to give a little bit of color on that but just how you're thinking about that and the growth in <unk> or maybe or a in 2020, you know I guess relative to what you know that the.
Pay downs, you seen or any kind of the in the <unk> you know the intentional a decline thus far.
So Brian this is Kent I think just stepping back certainly you know we had a bit of a transitional here as you convert systems and things like that and I think we ended the year to good spot I think.
Yeah from an overall perspective, I think what you heard from Scott is yeah, first and foremost offend what we've got you know on the deposit front there and then I think that yeah. We've we've spent enough time planning and and looking at what the opportunities are to have some modest growth in that region in 2020 I think.
You had modest net modest net growth with the complexity that portfolio I think we would overall being good shape, but I would just step back and reflect that the way we've built our company its diversified by region. Its diversified by specialties and you know how we set out the year in the plan usually doesn't wrap up the way.
Culminate, but you know, we we typically get there because something stronger than we anticipated and something maybe not as strong. So I think we have a lot optimism there, particularly in Albuquerque, and I think it's you know relatively stable in Los Alamos and Santa Fe, and I think that it you know if we're able to sit here you know a year from now and say.
With that had low single digit growth I think we'd be pretty pretty pleased with that and I think that wouldn't you know fee our expectations and we have great momentum moving into 21.
Okay and it sounds like the pipeline is in pretty good shape if youre.
Sounds like you're a little bit more optimistic that growth is.
Earlier on or at least that you know better quarter to start the year versus me, but she had a year ago is that fair to say by your comments.
Yeah, I think if you're talking overall portfolio I think that's that's a fair comment.
Okay, Alright, and then just some housekeeping on that on the buyback what what remains in a buyback and I guess, what do you think about increasing the authorization or I guess where is that stand today.
Yeah. So I think we've got Brian about 300000 shares last certainly we're getting kind of down to the end on that but you know that's just something that we'll look at you know in the upcoming cycle here as we you know transition from our budget to our capital plan. So yeah. There's there's ample shares there for us to execute here and the need to near term.
And Ah you know moving forward from there then you know we're hopeful that we'll find some balances of M&A and and buyback to demands our capital in the upcoming here.
Okay, and any any any changes on M&A just kind of you know the pipeline. There is just the discussions how that's very these days.
You know there isn't any significant change there no I think its of similar we talked about before that there. There are certainly a lot of companies out there that.
You know or looking at their long term plan and I think they see.
Teaming up with a company as likely is going independent and so we've had conversations like we've had in the past was several businesses and all of our regions.
Okay.
And Brian .
I apologize I I misread that number we've got about 550000 shares there on the repurchase I just want to make sure that Brexit.
Yeah No problem, Okay, and then can you said just the just as it relates to the.
Two things he accretion and then the NIM outlook. The accretion any you know what remains on that as far as how to think about modeling that.
Yeah, I would think of so you've got a 364 and 368 core and reported margin I think we're at a point, where you know we're gonna have to look at when we adopt fees all whether we want to continue to break those out or just describe what's happening in the reported NIM, but yeah somewhere in the middle of that you know I.
Good.
Corn N plus a penny.
Or somewhere in as a midpoint of those two numbers, where you can feel pretty good but just know that the our outlook is to try to stabilize essentially both of those and grow net interest income dollars from there. So we're probably going to be at a point, where you know out a penny a quarter or you know noncore.
Wired you know it it may move the needle at any given point in time during the year. If there's an acceleration at a pay off based on you know how people got it gets applied but it is.
Probably not.
Much of a magnitude as it was in 2019 even.
Yeah Gotcha, Okay, and then last one was just a swap income I think he said it was had a pretty high level. This quarter I guess is that given the rate environment, maybe as you know stabilizing here I guess is that something continue to expect to grow or is that oh.
Yeah, I think well continue to emphasize use of swaps or in this environment and I think you nuts.
And that'd be a little lumpy quarter to quarter, just based upon the type of transactions that were doing but I think you know art, our salesforce understands swaps and I think it'll be a valuable tool for us going forward.
Okay, and then that FDIC bank that comes back in second quarter is that what we should think about there.
Yeah, I think for first corneal thinking a little bit of the current level, where we're at and yeah. You'll have your seasonal payroll and then I think that will help.
The transition from one Q2 Q when you was named the normal premium.
Got it okay. Thanks, guys.
Thank you Brian .
Thank you and we have no further questions in queue.
[noise] [noise], okay, well. Thank you all for joining us this afternoon.
I look forward to speaking to you all gets in the first quarter I have a great day.
Thank you ladies and gentlemen. This concludes today's conference you may now disconnect.
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