Good day, and welcome to the Hilltop Holdings First Quarter 2019 Earnings Conference Call and Webcast. All participants will be in a listen only mode. Please note this event is being recorded. I would like to now turn the conference over to Isabel Novakov. Please go ahead.
Good morning. Joining me on the call this morning are Jeremy Ford, President and CEO and Will Furr, CFO. Before we get started, please note that certain statements during today's presentation that are not statements of historical fact, including statements concerning such items as our outlook, business strategy, acquisitions, future plans and financial condition are forward looking statements. These statements are based on management's current expectations concerning future events that by their nature are subject to risks and uncertainties. Our actual results, capital and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our most recent annual report and quarterly report filed with the SEC.
Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information. Additionally, this presentation includes certain non GAAP measures, including taxable equivalent net interest margin, prepurchase accounting taxable equivalent net interest margin, tangible common equity and tangible book value per share. A reconciliation of these measures to the nearest GAAP measure may be found in the appendix of this presentation, which is posted on our website at ir. Hilltop holdings.com. And now I would like to hand the presentation over to Jeremy Ford.
Thank you, Isabel, and good morning. For the Q1 Hilltop reported net income of $38,800,000 or 0 point 41 dollars per diluted share, which represents a 63 percent increase compared with the $0.25 reported during the same quarter last year. Additionally, Hilltop delivered a return on average assets of 1.2% and a return on average equity of 8%. This quarter's strong results are representative of both our commitment to diversified and prudent growth and the hard work by our teams to drive operational efficiencies throughout the organization. This quarter, average loans held for investment, excluding broker dealer loans, grew by 10% and average deposits grew by 5% versus prior year.
While Hilltop's consolidated net interest margin contracted modestly on a linked quarter basis due to lower purchase accounting and a reduction in non accrual interest recoveries, It expanded by 17 basis points from last year driven by the benefit of higher market rates coupled with disciplined deposit pricing in addition to higher yields on investment securities at the non bank subsidiaries. Also during the quarter, lower rates and recent alignment efforts between the Capital Markets and Structured Finance departments yielded a net revenue increase of $28,000,000 versus prior year at Hilltop Securities. We continue to remain focused on value creation with our book value per share increasing by 6% versus prior year to $21.23 and our capital structure with a Tier 1 leverage ratio of 13.2%. Our credit quality at the bank evidences our risk management efforts as net charge offs in Q1 2019 of only 1 point $6,000,000 equated to 10 basis points of average loans and our non performing loans decreased to $30,900,000 from $34,000,000 at year end 2018. During the quarter, we had 2 significant items to call out, including expenses associated with the previously announced leadership changes and costs related to efficiency initiatives across the organization.
Moving to Page 4. Pre tax income at PlainsCapital Bank increased by $2,600,000 or 7% driven by higher loan yields partially offset by lower purchase accounting accretion. Our lenders and credit team continued to do an outstanding job of managing the portfolio as non performing assets declined to $54,000,000 or 1.05 percent of bank loans, down from 1.58% at Q1 2018. Of note, income generated at the bank from the warehouse line to prime lending declined commensurate with the reduction in mortgage origination volumes. Mortgage pre tax income of $2,900,000 for the quarter improved from a pre tax loss of $2,700,000 in Q1 2018 was a result of relatively stable gain on sale margins of 3.30 basis points and a reduced fixed cost base.
Cost improvements were from lower headcount and other operational enhancements made during the second half of twenty eighteen. As we expect volumes to remain under pressure, we will continue to focus on efficiency and profitability. The broker dealer reported a very strong quarter with a pre tax margin of 15.8% on increased net revenues of 28% versus prior year. The decline in market interest rates combined with ongoing investments in the business yielded strong trading gains. Additionally, compensation ratio improved to 60.6 percent from 64.4 percent in Q1 2018.
Importantly, Brad Wingus joined us in the quarter to become the President and CEO of Hilltop Securities. Brad succeeds Hill Feinberg who remains with Hilltop Securities as Chairman. We are extremely grateful for the momentous contribution Hill has made to build the quality firm we have today, as well as for the contribution Hill will be making to support its continued growth. Likewise, we are very excited to have such a high caliber leader and with deep expertise in our core businesses and look forward to working with Brad and the Hilltop Securities team to advance the capabilities of our firm. Our insurance business reported pretax income of $6,800,000 for the quarter with a combined ratio of 86.4%.
The year over year improvement was aided by fair market value gains in the investment portfolio efficiency initiatives includes a broad set of projects to enhance our platform and streamline operations with the goal of lowering operating costs and building a foundation for future organic and acquisitive growth. These projects include enhanced business operations, strategic sourcing and shared services. While we expect 2019 to be a heavy investment year and the benefits to largely materialize into 2021, we are encouraged by the progress being made. For example, the work Todd, Steve and the rest of the PrimeLending team did last year to right size the middle and back office while enhancing brands performance has started to pay off better than expected and are reflected in this quarter's lower cost and improved profitability. Also, our IT organization has been working diligently to unify the newly formed shared services department And with that has identified contracts and services for consolidation.
We are seeing opportunity for us to leverage the size and scale of the Hilltop businesses by combining data centers and bundling core business software. Another example of our shared services effort is the recent realignment of our risk management into 2 cohesive units, operational and risk compliance and enterprise risk and regulatory. We have realized synergies by eliminating the duplication of roles and responsibilities and believe this new model will enhance our risk management and capabilities across the entire company. Overall, I am very grateful for the commitment of our business leadership and shared services teams as well as the response within the organization for what we are building. Finally, I would like to give a heartfelt thank you to our former Vice Chairman and Co CEO, Alan White for his outstanding leadership over the past 31 years.
Alan retired on April 1 and leaves behind a lasting legacy of building relationships and a commitment to culture. In 1988, Alan founded PlainsCapital Bank with 1 branch in Lubbock and $160,000,000 in assets. Because of his leadership, Hilltop today has $13,700,000,000 in assets with 4 complementary businesses and 5,100 dedicated employees. Alan has been a great partner, dear friend and mentor to me and so many others in our organization. We wish him well in his retirement.
I will now turn the presentation over to Will to walk through the financials.
Thank you, Jeremy. I'm starting on Page 6. As Jeremy discussed, for the Q1 of 2019 Hilltop reported $38,800,000 income attributable to common stockholders equating to $0.41 per diluted share representing growth from the prior year period of 63%. During the Q1, Hilltop's provision for loan losses was approximately $1,000,000 During the Q1 of 'nineteen, we released the remaining $2,000,000 loan loss reserve related to Hurricane Harvey as the clients that were previously identified as at risk have been have seen sufficient improvement in their business performance to remove this reserve. The bank did not incur any credit losses related to Hurricane Harvey.
The first quarter provision includes $1,600,000 of net charge offs or 10 basis points of average bank loans. Credit quality during the quarter remained solid and while we monitor our credit portfolio very closely, we do not currently see any industry or concentrated exposures that are experiencing material deterioration at this time. During the Q1, revenue related to purchase accounting accretion was $8,600,000 and expenses were $1,900,000 resulting in a net purchase accounting pretax impact of $6,700,000 for the quarter. It is notable that purchase accounting related expenses declined $3,900,000 from the prior year period, principally driven by the absence of any FDIC asset amortization. In the current period, the purchase accounting expenses largely represent amortization of deposit and other intangible assets related to prior acquisitions.
Related to the purchase loan accretion, as the purchase loan portfolio balances continue to decline, we expect scheduled interest income related to purchase loan accretion to average between $4,000,000 quarter during 2019. Hilltop's capital position remained strong with a period end common equity Tier 1 ratio of 16.75 percent and a Tier 1 leverage ratio of 13.22%. Moving to Page 7. Net interest income in the Q1 equated to $109,000,000 including $8,700,000 of purchase loan accretion. Net interest income increased $6,000,000 or 5% versus the same quarter in the prior year.
The growth in net interest income was driven by asset growth, principally loan growth, which includes the acquired assets in Houston and an improvement in net interest margin, which expanded by 17 basis points versus the same quarter in the prior year. Net interest margin equated to 3.69% in the Q1 including 32 basis points of purchase accounting accretion. The pre purchase accounting taxable equivalent net interest margin equated to 3.38%, an improvement of 21 basis points versus the same period in the prior year. While loan yields have increased as compared to the same period in the prior year, the benefits have been somewhat offset by higher deposit costs. We remain extremely focused on managing and growing deposits as well as managing closely the rates we pay our clients.
As expected, we have seen deposit betas continue to increase even as the Federal Reserve appears to have paused moving rates higher. Hilltop's cumulative beta for interest bearing deposits from December of 2015 has been approximately 43%. Since the Q1 of 2018 Hilltop's interest bearing deposit beta has been approximately 55%. Given the continued increase in the current period betas, we continue to expect that our overall through the cycle betas will move higher and therefore closer to our model through the cycle beta levels of 50% to 60%. Further, with the recent decline in the 10 year rates, which generally align to mortgage origination rates, we expect that loan held for sale yields will decline from the Q1 2019 levels.
While we do believe these factors will continue pressure the pre purchase accounting taxable equivalent net interest margin throughout the remainder of 2019, we are increasing our full year pre purchase accounting taxable equivalent NIM outlook to 3.25 percent plus or minus 3 basis points. We will continue to revisit our assumptions based on the outcome of future Federal Reserve rate movements, yield curve shifts, and asset and liability flows across the portfolios. Quarterly average net earning assets have remained relatively stable versus the same period in the prior year, increasing by approximately $52,000,000 While the change in average balances has been modest, a mix shift has occurred as HFI loan growth coupled with the growth in high quality taxable securities has been offset by lower loans held for sale, lower repo securities and lower securities borrowed balances. These shifts reflect both seasonal shifts and business activity for the securities borrowed as well as lower overall mortgage origination activity as it relates to loans held for sale. I'm moving to Page 8.
Total non interest income for the Q1 of 2019 equated to $252,000,000 1st quarter mortgage related income and fees declined by $8,000,000 versus the Q1 of 2018. During the Q1 of 2019, the competitive environment in mortgage banking remained intense as Hilltop's mortgage originations volume declined by 513,000,000 or 17% versus the same period in the prior year. While mortgage volumes were challenged, gain on sale margins remained relatively stable during the Q1 at 3 30 basis points. With the recent decline in the primary mortgage rate, we did see modest improvement in production translate in the quarter. We expect that origination volume for the remainder of 2019 will be in line with 2018 production levels.
Further, we also expect that gain on sale margins have stabilized and will remain within the current range over the coming quarters assuming consistent market conditions. Other income increased by $28,000,000 driven primarily by improvements in sales and trading activities in both capital markets and structured finance businesses at Hilltop Securities. Favorable market conditions resulted in a 26% increase in trading volume, improved secondary spreads and an 8% increase in structured finance mortgage backed securities volume. I'm turning to Page 9. Non interest expenses increased from the same period in the prior year by $1,000,000 to $309,000,000 As Jeremy mentioned, we did have a set of significant charges related to the previously announced leadership changes equating to $8,000,000 In addition, we recognized $700,000 of charges related to ongoing efficiency initiatives occurring across Hilltop.
Related to the leadership changes, we do not expect further charges related to these announcements. Over the past 12 months, we have continued to make progress in aligning our businesses to the current market conditions and driving efficiencies across the franchise. As a result of these efforts, total FTE have declined by 304, which reduced salaries by $3,000,000 versus the same period in the prior year. Variable compensation increased by $2,600,000 compared to the same period in the prior year, driven by growth in net revenues at the securities business, somewhat offset by decline in mortgage origination related commissions expense. Further, Hilltop incurred $2,500,000 in costs related to ongoing core systems enhancements, and we do expect that these related expenses will increase for the remainder of 2019.
We continue to position our businesses for long term success and may take additional efficiency related charges in the future. I'm moving to Page 10. Total average HFI loans grew by 8% versus the Q1 of 2018. Growth versus the same period prior year was driven by loans acquired in our Houston market during the Q3 of 2018, an increase in real estate lending and growth in our mortgage warehouse lending business. Based on the current production trends, competitive environment, our outlook for pay downs throughout the year and our focus on high quality conservative underwriting, we expect full year average HFI loans to grow 4% to 6% in 2019.
Turning to Page 11. We have added this new asset quality slide to our presentation to highlight recent credit trends and coverage ratios. As previously noted and is shown on the chart on the top right of the slide, the businesses have maintained solid credit quality as non performing assets have declined approximately $30,000,000 from the same period in the prior year. In reference to the chart on the bottom right of the slide, we highlighted our allowance for loan loss to loans held for investment ratio equates to 90 basis points at the end of the Q1 2019. It is important to note that we maintain approximately 95,000,000 of remaining discounts across the purchase loan pools.
These discounts provide additional coverage against future losses. Moving to page 12. Average total deposits are approximately $8,300,000,000 and have increased by $432,000,000 versus the Q1 of 2018, including the acquired deposits in the Houston market. Interest bearing deposit costs have continued to increase as competitive pressures remain and clients are actively seeking higher rates of return on their deposits by migrating monies from non interest bearing and savings products in the higher yielding money market CD and investment products. I'm moving to Page 13.
During the Q1 of 2019, Plains Capital Bank continued to demonstrate solid improvement in profitability generating $42,000,000 of pre tax income during the quarter. The quarter's results reflect the benefits of the growth in the Houston market, the aforementioned release of the Hurricane Harvey reserves, which equated to $2,000,000 and the improvement in the efficiency ratio versus the prior year period, which was driven by revenue growth. The focus at PlainsCapital remains consistent, provide great service to our clients, drive profitable growth while maintaining a moderate risk profile and delivering positive operating leverage by balancing revenue growth and expense efficiency. Turning to Page 14, PrimeLending generated a solid pre tax profit of $3,000,000 for the Q1 driven by the efficiency efforts that the leadership team at PrimeLending executed during the 3rd and 4th quarters of 2018. While origination volumes declined by 17% versus the same period in the prior year, The combination of back office efficiencies and branch performance management has yielded significant reductions in operating expenses, which declined by approximately $8,000,000 versus the same period in the prior year.
Further supporting the improved results is our focus on pricing and fees. Mortgage origination fees have increased from the same period in the prior year by 29 basis points which yielded a small increase in fees versus the prior year even as origination volumes decline. The focus for PrimeLending is to generate profitable mortgage volume, continue to focus on operational efficiencies and successfully launch the new mortgage loan operating system in 20 19. Turning to Page 15. Hilltop Securities had a solid start to 2019 as market conditions improved from the Q4 of 2018 and the investments that have been made in structuring, sales and distribution are beginning to yield returns.
The securities business earned $16,000,000 of pretax income driven by strong trading gains in the Capital Markets and Structured Finance businesses. While activity was strong in the quarter, results from both of these businesses can be volatile as market rates, spreads and volumes can change significantly from period to period. Related to public finance, while revenues did improve modestly versus the same period in the prior year, we are seeing improved business activity and expect 2019 results to continue to improve. I'm moving to Page 16. National Lloyds recorded a $7,000,000 pre tax profit for the quarter as the fair market equity marks in the quarter yielded a $1,200,000 gain versus a $1,400,000 loss in the same period in the prior year.
During the Q1 of 2019, National Lloyds did distribute $21,500,000 of dividends to Hilltop, bringing the total dividend since 2017 to $68,000,000 Finally, I'm moving to Page 17. For 2019, we're maintaining the full year outlook for our key balance sheet and income statement items consistent. As previously noted, we are increasing our pre purchase accounting taxable equivalent NIM outlook by 5 basis points, but that does not change our full year outlook range for net interest income growth. The outlook represents our current expectations with respect to the markets, rates and overall economic activity. These, however, may change throughout the year, and we will provide updates as necessary on our quarterly calls going forward.
Operator, that concludes our prepared comments, and we'll turn the call over to you for Q and A.
Thank you. We will now begin the question and answer session. The first question today comes from Michael Young with SunTrust. Please go ahead.
Good morning, everyone.
Good morning. Hi, Michael.
I wanted to start off just on the broker dealer. Obviously, good performance this quarter, kind of snapping back from a tough year last year. Can you maybe just give us an update on kind of your total revenue outlook for the year and the pre tax margin that you provided in the past. Is that a higher rate now you think for the full year?
We don't so my view is I gave the $360,000,000 to $370,000,000 last quarter. I'd probably just look to the higher range of that just to be conservative. So kind of 370 maybe 380 and pretax margin for the year 11% to 11% plus maybe up to 14%. But it's I'd say that it's early. We had a real pop in the structured finance business late in Q3.
And so I'd be a little tempered that this is not a trend.
Okay. And could you maybe just talk about at least from the structured finance business or anywhere else kind of within the company as a whole where just the drop in 10 year rates really drove some additional revenue or margin that we should not necessarily run rate or expect going forward of the same magnitude?
Yes. I mean, that's what we're talking about. And so in that business, we're basically net long on this TBA mortgages. And so when the 10 year dropped that gave us a pop, I think it was about $12,000,000 And so it's a lot of what we suffered through in the Q1 last year went the other way. So that's how I would talk about it.
And then on just the other things on the business, I think that the first quarter of 2018 was a real depressed quarter for municipal issuance. We're starting the year stronger and nationwide issuance is up. And if you exclude momentum that's being built there. And really good about Brad's coming on board and getting his arms around the company and as well as all the employees working with him and getting to know him and Hill Feinberg's continued leadership there as well.
Okay. And maybe just switching to expenses really quickly. You mentioned that this year was going to be a heavy investment year. Obviously, we started off the year pretty strong with good expense control in a number of business units. But can you just help us understand where some of those incremental investments are going to be and any sort of timing you can provide on when they might be within the year just so we can get that modeled correctly?
As far as Prime, I think we've articulated it on a fixed cost basis. We think that we've kind of illustrated the current run rate. As far as the other broader platform from growth and efficiency initiatives, it's early. We rolled out the details of the numbers of last quarter of going from 89% to 83% efficiency ratio and generating $80,000,000 of revenue and earnings and expense saves out of it. And it's going to be more in the later half or more into 2021 where it will be materialized.
So I don't have I wouldn't really I don't have anything to tell you right now about just how to phase it in through this quarter. We've kind of felt like on those things the level of investment is going to offset a lot of the savings.
Go ahead, Will. Yes. So
what I would add there, Michael, is we reported kind of on Page 9 of our slide deck, core systems improvements of about $2,500,000 this quarter and in my comments noted that we do expect those to go higher. So I would say as we start the deployment process which we are across a few of those platforms this year, we're going to see those expenses, that $2,500,000 number trend higher really through the end of this year.
Okay. And you will continue to kind of call that out and point that out to us in terms of where that's going to occur and
how much? Yes, we'll continue to be very transparent about what we're spending in that regard.
Okay, thanks.
Thanks. Thank you.
The next question comes from Brady Gailey with KBW. Please go ahead.
Hey, good morning guys.
Hey, Brady.
Good morning.
So no buybacks this quarter. I mean the stock trades at 1.1 times tangible. You're nearing 13% TCE. Just wanted to get updated thoughts on how you guys think about the buyback and why no buyback this quarter?
To start with the latter part, why no buyback this quarter is clearly we had some corporate actions that we felt that we were not legally in a position to be doing share repurchases. So we that's why we were inactive in the Q1 with the leadership changes. As we look towards the future and obviously the stocks come back a little bit, we have a $50,000,000 share authorization and we do plan to be active in the market and open windows. And so we'll continue to do that as we have. And as we did last year, we had about $60,000,000 of share repurchases.
Okay. All right. And then, I hear you, Will, on the core NIM guidance going up 5 basis points. But if you look at the last couple of quarters, your core NIM has been running closer to like in the mid-three thirty level. I think it was 338 this quarter.
So what gets the core margin down to the level that you're talking about relative to the recent past?
Yes. So I think I tried to highlight it in the comments, but the view of ours is that betas are going to continue to increase on deposits even with the Fed, even if presuming the Fed pauses here and kind of rates stabilize, we are continuing to see a competitive environment on the deposit side from a couple of different competitive sets. Further, as I mentioned, the loan sale for sale yield, which was higher this period, we do expect to be under some pressure given this direct linkage to where the to where the tenure is and so that while it takes about a quarter for that to pull its way through given funding levels and pace, We do expect those 2 things in particular to be under pressure. And then loan yields on the core book, if you will, are also remaining under pressure in an intensely competitive commercial lending market. And so as we look at it, loan yields both HFI and HFS under pressure and deposit yields also under pressure from a beta perspective.
So that's what would take us there. And again as we think about the 3.25% to 3.28% range, that's kind of how we see it right now assuming market conditions stay reasonably consistent with current levels. Obviously, any changes we would evaluate. Okay.
All right. And then finally, probably my most important question. With Alan being retired, I was wondering if you guys were going to continue with the Halloween video.
Absolutely. We've committed to that.
That's great. Hey, it's weird not to hear Alan's voice on the call. I wish him the best in retirement.
Well, thank you very much. And we agree, but we appreciate that.
The next question comes from Chris Gamaitoni with Compass Point. Please go ahead.
Good morning, guys.
Hey, Chris. How's it going?
Going well. I wanted to touch on the structured looking like in April now that the 10 years at least even down and we're not having as much volatility?
I think spreads, and again, I don't want to give kind of quarterly guidance here around Q2, but what I'd say is the market rates have reasonably stabilized at current levels. And so by virtue of that, we expect our assumptions going forward and our outlook expectations going forward are the rates remain reasonably stable with the new reset levels after March of this year.
All right. Then getting to the expense, if I remember correctly, did you give us a total number of kind of integration or core systems expense for the year?
We have not. And again part of that is, as we pace through and we work through the final implementation, it's
difficult to put an absolute
dollar level on it. But what we're I think expect that to travel higher through the year quarter by quarter as we work into our implementation and deployment windows.
All
right. And another one following up on expenses is, if I remember correctly, in the Q4, you attributed, I think, higher variable comp for mortgage for the year. It looks like you've done a great job at fixing the operations of the mortgage business. You need to be congratulated on that. But it seems like you've really curtailed, call it, the money loser loans.
So with that would make me think that volume, at least was down a lot in the Q1 and stable throughout the year is variable comp should be down year over year, volume is down.
That's correct.
Okay. And then my last one is just on the loan growth guidance. If I just take loan growth guidance, if I take the Q1 rate and just assume that you don't grow period end balances at all for the rest of the year, I get to 6%. It would seem your number has upward bias with just seasonality in warehouse lines and I know there's still $1,100,000,000 of unfunded construction commitments. Can you kind of bridge that gap of why your average loan growth won't be at least mildly higher than your guidance?
Well, I think with the Q1, we're tracking pretty close to where we would have otherwise expected. So by virtue of that, we did see, as I mentioned in my comments, an improvement or growth in our mortgage warehouse lending business, which we know is seasonal and will trail toward the end of the year and also again contingent upon mortgage volumes in the market. So that's kind of driver the first driver of maintaining the guidance where we are relative to the Q1 performance. And then we are seeing an intense pressure around structures and underwriting in our commercial lending businesses. And by virtue of that, while we expect to continue to grow, it will be at a pace that we think is prudent given where the market currently is.
All right. I mean, you don't have an estimate of how much I'll take that offline. Thanks so much for the answers. I appreciate it.
Thank you. The next question comes from Brett Rabatin with Piper Jaffray. Please go ahead.
Hey, good morning.
Hey, Brad.
I wanted to first ask, just following up on mortgage, I guess I'm surprised, I guess there's been mixed results from some various banks this quarter on mortgage, but you guys are a strong player in that market and I kind of get the guidance around gain on sale not improving. But I guess I expected you to talk about higher fee income level this year. And I guess I'm just still struggling a little bit with the guidance around fee income and mortgage and just like why you're not expecting higher volumes than you had last year?
So as it relates to just both the fees, so volume first quarter origination volume first quarter was down 17% year on year, which is a little over $500,000,000 So as you think about kind of the rest of the year and our what we expect, we expect that to look like it's going to travel in line with 2018 levels of production which is obviously an improvement versus what has been down year on year to this point. That's Part A. In terms of our overall non interest income guidance of 1% to 3%, As Jeremy mentioned, we did see strong activity in our capital markets and structured finance businesses at Hilltop Securities, but we do recognize that a portion of that was driven by the rate the late rate movement in March. And without a significant additional rate movement you wouldn't expect that to be recurring. And then the next portion of that is the mortgage business generally both TBA as well as our mortgage origination business generates a large portion of its fees in the second and third quarters.
And so as a result of that we need to we're still cautiously optimistic that production volumes will be stronger through the second, third quarters of this year. But given the preponderance of that fee income generation in those quarters, we think it's prudent to maintain guidance at the current level.
Yes. And just to follow-up on that, I think maybe a little bit more specific to mortgage and prime lending is the gain on sale margins relative is a little bit off from last year, 4 basis points. But they've done a great job of increasing their mortgage loan origination fees on a per unit basis. That's up 19 basis points year over year.
Okay. And then I guess the other question I wanted to ask is you're going through an expense initiative and I think you guys are doing a pretty good job at working that fairly early. Can you maybe give us some color on just how you might expect the efficiency ratio to trend over the next year? And as we think about 2020, like what's a realistic goal, whether it's in 4Q 2019 or 2020, like where do you think the efficiency ratio can get to?
You're talking about on a consolidated basis?
Correct.
Yes. I mean, we just don't have that to give right now. I think what we're we've tried to articulate is where we're trying to go. And as we get closer, we're just 1 quarter in, we'll be able to articulate the shape of that curve more.
Okay. And then maybe just one last one for me. Just on Houston, I just wanted to hear, I know you've been spending money on Houston and trying to grow Houston. Can you talk about Houston visavis the rest of profile of the company and just how much of the growth that you're either in 1Q or this year, how much of that's going to be Houston focused?
As far as
okay. Commercial bank, not other stuff.
Yes. I think that we had well, first of all, we're really pleased with the integration and the leadership there and Andy Lane and Jerry Brewer, Mark Troth, and they've really come together and we've got one cohesive unit in Houston that's doing a great job. And I think that they're building a business and it's not a hockey stick and at the same time. So in the Q1 particularly, I think the loan growth there wasn't maybe as significant, but we do see some opportunities and some things that are actually getting through credit process right now and got to be funding that are really pointing towards the level of growth that we articulated and want there.
Okay. Great. Thanks for the color.
Thank you.
This concludes our question and answer session. The conference has also concluded. Thank you for attending today's presentation. You may now disconnect.