Ladies and gentlemen, thank you for standing by, and welcome to the Frost fourth quarter and full year 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, A.B. Mendez, Senior Vice President and Director of Investor Relations. Thank you. Please go ahead.
Thanks, Chantelle. This morning's conference call will be led by Phil Green, Chairman and CEO, and 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. Some of the remarks made today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend such statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 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. If needed, a copy of the release is available on our website or by calling Investor Relations department at 210-220-5234. At this time, I'll turn the call over to Phil.
Thanks, A.B. Good morning, everyone, and thanks for joining us. Today, I'll review the fourth quarter and full year results for Cullen/Frost, and our CFO, Jerry Salinas, will also provide additional comments, and then we're going to open it up to your questions. In the fourth quarter, Cullen/Frost earned $101.7 million, or $1.60 / share, compared with earnings of $117.2 million and $1.82 a share reported in the same quarter a year ago. For the full year, Cullen/Frost earned $435.5 million or $6.84 a share compared with earnings of $446.9 million or $6.09 a share reported in 2018. The lower interest rate environment impacted our results, as you would expect. However, our team continues to execute our strategy of pursuing consistent above-average organic growth across our enterprise, and we're investing for the long term while maintaining our quality standards.
Our return on average assets was 1.21% in the fourth quarter, compared to 1.48% in the fourth quarter of last year. Average deposits in the fourth quarter of $27.2 billion were up 2.6% compared to the fourth quarter of last year, while average loans were up 5.4%. Our provision for loan losses was $8.4 million in the fourth quarter compared to $8 million in the third quarter of this year and $3.8 million in the fourth quarter of 2018. Net charge-offs for the fourth quarter were $12.7 million compared with $6.4 million in the third quarter and $9.2 million in the fourth quarter of last year. Fourth quarter annualized net charge-offs were 34 basis points of average loans. Non-performing assets were $109.5 million at the end of the fourth quarter compared with $105 million in the third quarter and $74.9 million in the fourth quarter of last year.
Overall delinquencies for accruing loans at the end of the fourth quarter were $58.2 million, that was 39 basis points period in loans. Those numbers remain well within our standards and 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 10 and higher, were $511 million at the end of the fourth quarter compared to $487 million in the third quarter of this year and $477 million in the fourth quarter of last year. The increase in the fourth quarter related primarily to the energy portfolio. Energy-related problem loans were $132.4 million at the end of the fourth quarter compared to $87.2 million for the third quarter and $115.4 million in the fourth quarter of last year.
The energy-related problem loan total is mostly attributable to three borrowers with whom 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 for 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 and 48% core at the end of 2018 to 57% larger and 43% core at the end of 2019. The movement towards larger loans in 2019 was mostly due to activity in the fourth quarter, where some quality new energy relationships were added after exiting a number of credits during the year.
New relationships increased 4% versus the fourth quarter of a year ago. The dollar amount of 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 and 20% from the prior quarter, and represented good increases in both C&I and CRE. That said, quality deals are hard to come by. In 2019, we booked just 3% more loan commitments compared to 2018, despite looking at 16% more deals. In CRE, we saw our percentage of deals lost to structure increase from 63% in 2018 to 69% in 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 a 20% growth in C&I opportunities. Of the 10 new financial centers that we've opened so far in the Houston region, four were opened in the fourth quarter. We expect to open one more Houston area financial center in the current quarter on our way to a total of 25 new financial centers, and we've already hired more than 150 of the approximately 200 employees we expect to staff this expansion. Those new financial center openings benefit both commercial and consumer banking. Let's look at our consumer business. We added almost 13,000 net new consumer customers in 2019, an increase of 48% from a year ago. That represented a 3.8% increase in the total number of consumer customers, all of it 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 of 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 present challenges to our industry, but we remain focused on the fundamentals and growing our lines of business in line with our quality standards. 2019 had its share of challenges, but also had its share of achievements.
Besides 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 in Victoria, Texas, and we completed our corporate headquarters move to the new Frost Tower in downtown San Antonio in the culmination of a process that began six years ago. Our commitment to customer service was confirmed when Frost received the highest ranking in customer satisfaction in Texas in J.D. Power's U.S. Retail Banking Satisfaction Study for the 10th consecutive year and received more Greenwich Excellence and Best Brand Awards for small business and middle-market banking than any bank in the nation for the third consecutive year.
That's a tribute to the dedication of everyone at Frost who works hard every day to take care of our customers and implement our strategies. That dedication is what sets Frost apart from other financial service companies. I'll turn the call over to our Chief Financial Officer, Jerry Salinas, for some additional comments.
Thank you, Phil. I'll make 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 of the Texas macroeconomic numbers I'll mention here are sourced from the Dallas office of the Federal Reserve. Texas job growth was a very strong 4% in November, and the Dallas Fed now estimates 1.9% Texas job growth for full year 2019. December statewide unemployment of 3.5% upticked slightly from the historically low 3.4% level seen in each of the six months 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 was the industry with the second fastest job growth at 3.5% year-to-date through November.
Energy was 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 markets, Houston economic growth remains above the 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 1.6% rate for the full year through November. Professional and business services and education and health services led Houston job growth over the three months through November, growing at 8.2% and 7.7%, respectively, over the same period a year earlier.
Regarding the DFW Metroplex, the Dallas Business-Cycle Index, maintained by the Dallas Fed, 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 of the year. For the DFW Metroplex, November job growth remained strong at a 4.8% annualized rate, and area unemployment remained near multi-year lows at 3.2% in Dallas and 3.3% in Fort Worth. The Austin economy has also remained healthy in November, and the Dallas Fed's Austin Business-Cycle Index has now been in expansion territory for more than 10 years, with index growth remaining at or above the region's 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, with 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 at 3.1%. Permian Basin payrolls remained flat through November, and the unemployment rate has ticked 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 increase in 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 of $13.4 billion. The taxable equivalent yield on the investment portfolio was 3.37% in the fourth quarter, down 6 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 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 2/3 of the municipal portfolio was PSF insured. During the fourth quarter, approximately $1.4 billion of our Treasury securities that were yielding about 1.51% matured.
As insurance against a potential backdrop of flat-to-down rates 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 in securities to replace the Treasuries that matured. During the quarter, we purchased $500 million in 30-year Treasuries yielding about 2.27%, approximately $700 million in agency mortgage-backed securities yielding about 2.37%, and about $300 million in municipal securities with a TE yield of 3.3%. As a result of the maturities and purchases I just mentioned, the duration of the investment portfolio at the end of 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 cost of combined Fed funds purchased and repurchase agreements, which consist 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, up about $126 million from the previous quarter. Moving to non-interest expense, total non-interest expense for the quarter increased approximately $21.1 million or 10.6% compared to 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 of 2020, the estimates for full-year 2020 earnings, we currently believe that those estimates for 2020 earnings, that FactSet mean of $6.13, is reasonable. Again, regarding the estimates for full-year 2020 earnings, we currently believe that the FactSet mean of $6.13 is reasonable. Our assumptions do not include any rate cuts in 2020. With that, I'll turn the call back over to Phil for questions.
Thank you, Jerry. Now we'll open up the call for questions.
As a reminder, to ask a question, you need to press star one on the telephone. To withdraw your question, press the pound or hash key. Please stand by, we'll compile the Q&A roster. Your first question comes from Peter Winter with Wedbush. Your line is open.
Good morning.
Good morning.
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 going forward.
I think it's fairly consistent with that. It may depend on your definition of high, but certainly over 5% is what we'd shoot for. I don't think it'll be double digits, so that's as close I think I'll get to it.
Okay. Then, one of your competitors the other day talked about this increased competition from the non-bank players, and it resulted in a very high level of pay downs and payoffs. I'm just wondering what you're seeing on a competition level in your markets.
Yeah, competition continues to be tough, and it's mainly around structure. I wouldn't relate it just to non-bank competition. I think I've said before, it's been big banks, small banks. It has been some non-bank competition as well. I think, from people I've talked to in the industry, that's sort of a national thing, because people are searching for yield. It's mainly around guarantees and advance rates and those type of things. As I said, we lost more deals to structure on particularly real estate, this year than last year. We're at 69% loss due to structure versus 63% a year ago. It's not a factor. It's not the only factor, the non-banks.
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 if there was anything unusual this quarter.
I think we had 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 $1 million 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 with SunTrust. Your line is open.
Thank you. Good morning.
Good morning.
Good morning.
My question's 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 2019, and what you think is likely over the next few quarters, given problem loans have gone up pretty significantly in that sector?
I think just in general, we're coming to the end of this process of moving through the snag. We've got two large energy credits and non-performers, both around, say, little over $30 million. We've been working those things out for a while. In one case, three years or so, and the other, a long period of time. I think we're getting close to the point where a final resolution for those is going to happen. I don't know when it will be exactly, but I think it's sooner rather than later. It could be the first quarter, could be after that. 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, probably not all of it, given what's been happening with the discount rates in the energy space that has been pretty well known by everybody over the last couple of quarters. I think we'll see higher energy charge-offs, but it's really related to the culmination of these deals that have been working for a long time, as opposed to anything happening with the new credits because there's been some weakness in the sector. Does it make sense?
Let me just ask a follow-up. In terms of the new problem loans that came in during fourth quarter, what kind of gives you confidence that that kind of credit migration trend is, I guess, inflecting?
Yeah. Well, the one that was rated a problem in the fourth quarter, I talked about it last quarter. It was one that was on watch before. The reason we put it there is because their plan calls for selling assets. We know that's a difficult environment to do that. Now, they've got strategic properties, and early results on what they saw initially was pretty good. It's not a great environment to be selling assets in. We'll just be seeing how that works over time. We decided it was the proper thing to move it to a problem. Again, like I said, early results on that are pretty good right now.
Okay.
Jennifer, in the fourth quarter, net charge-offs on energy were $2.9 million.
Okay. All right. For the year?
For the year, I'm seeing, looks like a little north of $6 million.
Okay. Just one more question on non-interest expenses. Just wondering, Jerry, if you think you'll 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.
Right. Well, we don't give specific line item guidance, Jennifer, what I would point you to is our fourth quarter to fourth quarter as-reported growth percentage and expenses. To me, that's really representative of our expectations going into 2020. Obviously, we as a group, are all focused on trying to manage expenses in this environment of trying to grow the business and being faced with some technology debt, if you will. It's really important for us to focus on expenses. Right now, I would take that fourth quarter to fourth quarter growth as kind of in the ballpark of our current expectations.
Okay. Thank you.
Your next question comes from Steven Alexopoulos with JPMorgan. Your line is open.
Hi, good morning, everybody.
Morning.
Morning.
Let's just start on the margins. The NIM was obviously down a lot given how much LIBOR and short-term rates moved down in the quarter. How are you thinking about the core NIM from here?
As I'm looking out in that fourth quarter, I think we're at a 3.62% in the fourth quarter. We're not projecting any rate cuts, like I said. To me, kind of what I'm looking at is we'd be flattish to maybe up just slightly, but really, really flat is what I'm thinking for 2020 compared to the fourth quarter of 2019, percentage wise.
Yep. That's helpful. Then, thank you. On the Houston branches, I know it's early, but for the branches you have opened, can you talk about the growth trends you're seeing so far? Is it roughly in line with expectations? Then cost 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, is a little bit less than we had thought it would be just because we had many of them that were pushed near the end of the year. That was really just more of a timing thing. We're seeing good growth in households. Probably seeing a little bit better growth in households than we expected, a little bit better loan growth than we expected, a little bit less deposit levels than we had expected. I'm not really worried about that. As we get these relationships in, I think we'll see that be in line with what we were expecting to see. The main thing I'm focused on is what's happening with relationships, and those are better than we anticipated. I'm not discouraged at all.
In fact, I'm encouraged by what we're doing and how our people are executing. Another good thing about it is that we've hired some great people, and we're getting people that are willing to buy into our culture and seasoned bankers. I think the average relationships managers, as I recall, was around 20 years. These are real solid people.
Thank you.
As Phil mentioned, we had kind of disclosed the $0.19, and we did a negative impact on 2019. 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. For 2020, we're projecting that expansion. It's going to be the worst in the second year, obviously. So we're expecting a hit of $0.35 related to the Houston expansion in 2020 with improvements after that.
Okay. That's very helpful. Finally, for Phil, we saw another MOE earlier this week. Is an MOE something that you would consider? I know the culture is so strong at the company and really differentiates you. How do you think about an MOE for Cullen/Frost? Thanks.
Yeah. Well, of course, no CEO would talk about that kind of thing, but I'll just tell you what I've said consistently, and I'll say it again. That is that you know that a roll-up's not something that we're interested in, that we're executing an organic strategy, and I think the risk and the payoff is lower on the organic strategy. The payoff is better. We're investing with their income statement as opposed to investing with their balance sheet. The best use of an acquisition for a company like ours is really one that's not a roll-up, that puts you in a position to do organic growth from that point forward.
As I said before, those things don't happen very often. They come along infrequently. The last time we did that was when we moved out to the Midland and Odessa market with WNB about six years ago. Acquisitions is 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're focused on.
Thanks for taking all my questions.
You bet.
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from Brady Gailey with KBW. Your line is open.
Hey, thanks. Good morning, guys.
Morning.
Hey, Brady.
The energy loan loss reserve last quarter was about $33.3 million, it's about 2.3%. I know you had some problem energy loans flow in this quarter, but did that change much on a linked quarter basis?
Yeah, we moved it up. It's about $37.4 million. Yeah. We were at $33.3 million, you're right, and we moved that up to about $37.4 million.
All right. That's helpful. Then, when you take a step back and look at Houston, it was a little under $0.19 dilutive to last year. It's $0.35 dilutive to this year, 2020. When will that hit breakeven? How many years until you will recoup all those losses?
Well, the breakeven, as we said before, on average for these locations has been about 27 months.
Right. Mm-hmm.
I think 27 months. Anyone can do the math on that, lay that out, and sort of see when those tipping points occur. I think one thing to keep in mind is, this really in 2020 should be the highest hit. To the extent that you're seeing a lower burn rate, if you will, even for the branches that are still maturing, you can add some momentum from where we would've been, say, in 2020. I see the momentum in terms of its contribution towards earnings increases should begin in 2021. That said, they all have to break even and get to the point where they're growing earnings. That happens in 27 months on average. Just look at when we're opening them and make your assumption there and see when you think those turn around.
All right. Then lastly-
Yeah, go ahead.
Lastly for me, you've hired, I think you said you've hired 150 employees out of the 200 that are planned. Out of the 150 that you've hired, how many of those are commercial lenders, roughly?
About, I would say 20 of them or so, in round numbers.
All right, great. Thanks, guys.
You bet.
Next question comes from Jon Arfstrom with RBC Capital Markets. Your line is open.
Hey, thanks. Good morning.
Hey, Jon.
Morning.
Just a couple follow-ups, one on Brady's question on kind of 2020 versus 2021. Do you expect to have all the hiring done and essentially the compensation and some of the facilities expenses in the run rate exiting 2020 expense run rate?
Yes. You're saying do we expect to have most of that in?
Yeah.
Yeah.
Okay.
Our current plan is, and one may fall out into 2021, but our current plan is to have those all open by the end of this year.
Yep.
As far as the bankers are concerned, we typically try to hire a lot of the staff there six months before.
The locations, we're kind of moving along this year with the expectation. I think Phil mentioned that we're projecting one this quarter. I think we're projecting five in the second quarter. Yeah, you won't be at 100% run rate, but you'll get the bulk of it in 2020.
Yep. Okay. Okay, good. That helps. Jerry, as long as you're there. Last quarter, you talked about extending duration a bit. You did so this quarter. 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 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. We're thinking about potentially if the market makes sense for us, we'll do another $500 million there. Our focus really for the year is probably less on municipal securities than it has been historically. We've bought, I think I said $700 million in mortgage backs during the quarter, that's probably kind of where we're headed as far as percentage-wise.
We're probably moving more towards mortgage-backed right now as the current plan. Really, I think you talked about a flatter yield curve. Really, what we did this was really kind of a proactive move kind of as insurance. I mean, we're kind of looking at where our exposure is and our exposure was to flat rates. 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. Right now, yeah, I think that's our plan.
Okay. Good. Thank you for that. Phil, just the commercial pipeline you talked about up 9% sequentially with C&I as a driver.
Yeah.
Earlier you were talking about larger versus smaller. Go ahead.
No, go ahead.
Yeah. You talked about larger versus smaller. That pipeline increase, can you talk about, would you characterize that as deep and broad commercial strength, or would you say it's energy driven or help us understand that?
Yeah. I think the increase in energy in the quarter as much as it was just an anomaly.
Okay.
We had the opportunity to put on some really great relationships, and we've been moving out of relationships, ones which we didn't think were right for us or deep enough for us throughout the year. We just had a number of those hit. I don't have the energy pipeline percentage of that 20% growth at C&I in front of me, but I don't expect a change in our focus on core, over time.
You'll have dislocations like you saw in the fourth quarter in a particular segment. Sometimes it might be commercial real estate. I don't expect it to be much different. We were looking, again, we're not getting out of large deals. We're good at them. 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 deals. I expect this to continue to be in balance there. We're focused on it, I'll tell you.
Okay. All right. The basic message is it's broad. It's not just energy in terms of what you're-
Yeah. No. We haven't changed our focus there.
Yeah. Absolutely. Okay. All right. Thank you.
You bet.
Your next question comes from Rahul Patil with Evercore ISI. Your line is open.
Thanks. I just want to drill down in the expenses a little bit. I know you talked about fourth quarter reported expense growth year-over-year. That was around 10.5%. That is kind of good run rate going into 2020. You're basically guiding to a 10%-11% year-over-year growth in 2020 expenses. Last quarter you talked about expenses, on a reported basis will be north of 8% growth. What has changed? Why that incremental growth in 2020?
Somebody threw out the number 8% and I just said it's going to be north of that. We didn't 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 a big increase in our technology expenses between the third quarter and the fourth quarter. We had really been projecting that to happen earlier in 2019. Those projects actually didn't get closed out until the fourth quarter, they had a big impact on the fourth quarter. No, our outlook for expenses between last quarter and this quarter as it relates to 2020 hasn't changed significantly.
Okay. That's fair. The other thing is that you talked about 2020 EPS. You're comfortable with the consensus EPS of $6.13. Consensus right now is not modeling 10%, 11% expense growth, right? Loan growth, in that 5% range. That is essentially where everybody is thinking about loan growth for you guys. NIM outlook appears to be slightly better. Last time you said, you probably notice a downward trajectory through 2020. Now you're saying flattish. I'm just trying to get a sense for where exactly in the consensus number $6.13, are you comfortable? What's driving that comfort level right now, given that expenses are probably edging higher?
To be quite honest with you, we don't spend our time analyzing where consensus is at. We look at the bottom line number, and that's the number that we're seeing in FactSet, and based on that number, we're comfortable with the overall projection. To be 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. Just one last question. How are you guys thinking about Day 2 provisioning under CECL?
I think that at the end of the day, from a CECL standpoint, we would expect that the future provisions are going to continue to be impacted by charge-offs, the mix of loan growth, of course, the forecasted economic environment and other factors. At this point, there's obviously a lot to be determined to what happens by the time that first quarter provision is concerned. We're not too worried about it at this point, but a lot of it will be dependent on what the environment looks like at that point.
All right. Thank you.
Your next question comes from Matt Olney with Stephens. 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 it's since slowed down quite a bit. Can you just talk more about that portfolio? What drove the growth a few years ago, and what's driven the slowdown more recently? We have seen some higher charge-offs in that book more recently. Anything to note there? Thanks.
Yeah. The main component of the portfolio that is slowing, in fact, it's declined some year-over-year, has been in the personal lines of credit, unsecured lines of credit. 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 PLCs and in the underwriting there. You've seen that drop. We don't expect that to be a systemic or recurring issue.
We've actually had really good growth as it 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're happy with that. Really what you're seeing is really an offset on one side of the portfolio, being in personal lines of credit, offsetting what is good growth in the consumer real estate, which has extremely great credit metrics and great performance.
Okay, that's all from me. Thank you.
All right. Thank you.
Next question comes from Steven Alexopoulos with JPMorgan. Your line is open.
Hi, everyone. I just had two quick follow-ups. First on the deposit side, why do you guys have such strong growth in average deposits? Do you have any color there?
Well, we really have had good growth in the second part of the year. It's something we've obviously been focused on. Let me go here and just pull it. Hold on, let me see specifically what categories are growing here. On a linked-quarter basis, some of it was driven by good increases, obviously, in the C&I category. If you're looking at a linked-quarter basis, the fourth quarter for us is always stronger. I think the fourth quarter this year was stronger than normal. Like I said, some of that started in the third quarter. It's been on that in the C&I, the commercial deposits. I think some of it has to do with rates. Some of it has to do with volatility. I think that we continue to make the calls that we need to make.
We continue to see growth in new customers. We continue to be focused on the things that we need to do to grow the business. We had during the 2018, starting in 2018, as rates started to go up over 150 basis points, we were starting to have challenges on the commercial DDA. We were seeing some of those balances leave as I think the opportunity cost of keeping balances in DDA accounts got too expensive. I think we're proactively doing some things to get some of that back on the balance sheet. In addition to that, I think just the lower rate environment is probably helping us there. Like I said, we're continuing to focus on building those new relationships. From the interest-bearing side, we've had good growth in the jumbo deposits, jumbo CDs. We've got a pretty competitive rate there, and those continue to go up.
I've really been impressed also with the growth that we've seen in interest on checking, really, to be honest with you. Really just, we've had some good augmentation from our existing customers, but we've also had addition of new customers. Knock on wood, we're pretty excited about the growth that we've seen.
That's helpful. Separately, some of your Texas peers have called out pressure on restaurant franchise loans. Do you guys have a material exposure to restaurants?
No, I don't think we do. It's not something that is a big component to us, and I've not heard that.
Yeah.
The restaurant business is always historically a riskier part. No, it's not really something that's raised to my regard.
Perfect. Thanks for taking my follow-ups.
Okay.
There are no further questions at this time. I will now turn the call back over to Phil Green for closing remarks.
Okay, everyone. Thanks for your participation. We'll be adjourned.
This concludes today's conference call. You may now disconnect.