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F.N.B. Corp (FNB -0.69%)
Q4Â 2018 Earnings Conference Call
Jan. 22, 2019, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Welcome to the F.N.B. Corporation Fourth Quarter 2018 Quarterly Earnings Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note today's event is being recorded.
I will now turn the conference over to Matt Lazzaro, Manager of Investor Relations. Mr. Lazzaro.
Matthew Lazzaro -- Manager of Investor Relations
Thank you. Good morning everyone and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials and our earnings release. Please refer to the non-GAAP and forward-looking statement disclosures contained in our earnings release, related presentation materials and our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website.
A replay of this call will be available until January 29th, and the webcast link will be posted to the About Us, Investor Relations & Shareholder Services section of our corporate website.
I will now turn the call over to Vince Delie, Chairman, President and CEO.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning, and welcome to our earnings call. Joining me this morning are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer. Gary will discuss asset quality, and Vince will review the financials. Today, I'll touch on our 2018 financial highlights, review last year's accomplishments, and wrap up with the discussion about our strategic objectives for 2019. We'll then open the call up for questions.
First, I'd like to highlight some key 2018 performance metrics. We are very pleased with the record earnings and significant revenue milestones our team achieved this year, which included a strong finish as fourth quarter operating earnings per share increased 28% to $0.30. For the full year of 2018, operating earnings per share increased 22% to $1.13; and operating net income was a record $367 million. These profitability levels resulted in strong internal capital generation driving higher capital ratios and increasing tangible book value per share by 10%. For the full year, our dividend payout ratio decreased to 43%, and for the fourth quarter this ratio finished below 40%. I'll note, we reach these levels in 2018, while returning $165 million in capital directly to our shareholders via dividends.
FNB reported record total revenue, which grew 10% to $1.2 billion, driven by net interest income growth of 10% and non-interest income growth of 9%. Our portfolios continue to expand that average loan and deposit growth of 5% and 7% respectively, resulting in a year-end loan-to-deposit ratio of 94%. Non-interest income growth was attributable to increased capital market fees of 29%, growth in wealth management revenues of 13%, and increased mortgage banking income of 10%. Double-digit increases were largely driven by success in our North and South Carolina markets, as our increased product offering begins to penetrate the customer base in these new attractive markets.
Looking at expenses, we are critically focused on expense management and driving positive operating leverage. Our continued focus on expense reduction will be evident when Vince provides more detail in our guidance for 2019. As a result of our cost saving initiatives taken this year, the full year efficiency ratio was 54.8% and expenses were slightly lower on a linked quarter basis, which marks two consecutive quarters of declining run rate expenses.
I'll now ask Gary to comment on credit quality, and Vince Calabrese will provide commentary on 2019 expectations.
Gary L. Guerrieri -- Chief Credit Officer
Thank you, Vince, and good morning everyone. We had a solid fourth quarter, which was marked by key credit metrics continuing to trend favorably, any of which have reached new multi-year lows. This has positioned our portfolio well, as we move into 2019. On a GAAP basis, delinquency ended the year at 1.07%, representing a 16 basis point improvement over the prior quarter. NPLs and OREO showed a slight improvement as well down 2 bps linked quarter to 61 basis points. Total net charge-offs were 24 basis points annualized with the reserve position remaining flat at 81 basis points.
I will touch more on our 2018 full year results to provide additional color, but let's first walk through the quarterly results for our originated and acquired portfolios. Looking first at the originated portfolio, delinquency ended December at a very solid 64 basis points, representing a decrease of 15 basis points over the prior quarter. NPLs and OREO also moved favorably on a linked quarter basis with an improvement of 12 basis points to end December at 61 basis points. Originated net charge-offs came in at 27 basis points annualized or $12.1 million. The originated ending reserve position at 95 basis points remain directionally consistent with the performance of the portfolio reflecting provision of $11.1 million during the quarter following the successful resolution of numerous non-performing credits.
Turning next to the acquired portfolio which totaled $4.1 billion at quarter-end, credit quality results were in line for the fourth quarter. Contractual delinquency decreased $10 million linked quarter totaling $120 million at year-end and it continues to trend in a positive direction. The acquired reserve was up in the quarter to stand at $7.3 million. Inclusive of the credit mark, the total loan portfolio remains adequately covered, reflecting a combined ending coverage position of 1.43%.
Reflecting back on the full year of 2018, both our GAAP and originated metrics have trended favorably, as we ended the year with our credit portfolio well positioned. As it relates to the GAAP results, the level of delinquency improved by 37 basis points year-over-year, or NPLs and OREO improved 5 basis points for the same period. Our 2018 full year net charge-offs were 26 basis points. So if you recall we're impacted by the sale of Regency Finance during the third quarter. Absent the resulting one-time accounting impact, our net charge-offs would have ended 2018 at a solid 23 basis points versus 22 basis points for the prior year.
Looking ahead to 2019, we remain committed to managing the business through our core credit principles, which we continue to consistently drive throughout our organization to support the delivery of credit and management of risk. With our position in higher growth and diverse markets, we continue to be very selective in seeking out high quality credit opportunities, it will allow us to balance growth objectives with our desired risk profile. We have also taken aggressive action over the last couple of years to take risk off the table, which will help better position the portfolio as we move into a later-cycle economy. Despite these positive results, we are carefully monitoring the economy at large for signs of any softness, including sectors that could be adversely impacted by tariffs or the government shutdown.
Our credit results for the year are a product of the disciplined approach our banking teams take each and every day to focus on sound and consistent underwriting, these selectivity of credits, proactive risk management and portfolio diversification across our markets. We will remain steadfast in this approach and the strategies we have developed to manage the business as we move ahead. As we stand here today, we are pleased with the number and quality of large corporate C&I opportunities we are seeing, which we expect to drive growth in the first quarter and beyond.
I will now turn the call over to Vince Calabrese, our Chief Financial Officer for his remarks.
Vincent J. Calabrese -- Chief Financial Officer
Thanks, Gary, and good morning everyone. Today I will discuss our financial results and provide high-level guidance for 2019. As you can see on Slide 4, fourth quarter EPS totaled $0.30, as we finished out the year on a positive note. Our TCE ratio increased 16 basis points from 6.89% to 7.05%, which now at this level provides us with flexibility moving forward. With the payout ratio under 40% in the most recent quarter, we would expect to build on our earnings growth momentum and continue to meaningfully grow tangible book value per share and our TCE ratio.
Now let's look at the balance sheet for the quarter, starting on Slide 6. On a linked quarter basis average loan growth totaled $165 million, or 3% annualized, including commercial loan growth of 2% and consumer loan growth of 4%. The consumer growth in the quarter was concentrated in residential mortgage up 18%, and indirect auto up 17%, partially offset by about $75 million of impact for direct installment loans from the Regency sale. For the commercial portfolio, C&I and leasing, were up 12% annualized, as we saw good origination activity across our footprint, it was partially offset by a decline in CRE balances.
Turning to deposits on a linked quarter basis, average total deposits increased $368 million, or 6% annualized during the quarter. We experienced growth in multiple categories, including 4% annualized growth in non-interest bearing deposits, 6% annualized growth in interest-bearing transaction deposits, and a 9% increase in average time deposits. Non-interest bearing deposits increased for the third consecutive quarter and we are highly focused on continuing to grow these balances. I'll note that the increased cost of funds on interest bearing liabilities in the quarter included repricing of longer-term customer funding and longer duration borrowings to help keep our margin and interest rate risk fairly neutral.
Looking at the income statement on Slide 7, net interest income decreased 1.1%, or $2.5 million, reflecting the third quarter having two months of net interest income from Regency. For the quarter, total purchase accounting accretion was $9.2 million, with $8.3 million from incremental purchase accounting accretion and $900,000 from cash recoveries, resulting in an adjusted net interest margin of 3.17% that compares to 3.20%, excluding these items. Looking at the adjusted net interest margin trend compared to the prior quarter, the impact of higher residential and indirect growth, as well as increased funding costs from the recent Fed moves and lengthening duration for time deposits and borrowings offset the benefit on loans tied to prime in one-month LIBOR.
Let's look now at non-interest income and expense on Slides 8 and 9. The decrease in reported non-interest income was largely driven by the $5.1 million gain from the Regency sale in the third quarter, excluding this gain, non-interest income decreased $1.3 million, or 1.8%. This decline was primarily due to $1.4 million of lower insurance fee income, most of which was normal seasonal impacts and $0.5 million attributable to the Regency sale. Mortgage banking income decreased $1.4 million reflecting lower gain on sale margins and seasonally lower sold volume during the quarter. Capital markets and wealth management continued to produce strong fee income contributions consistent with the prior quarter.
Turning to Slide 9, operating expenses declined $1 million compared to the third quarter marking two consecutive quarters of decreased expenses. The primary drivers of the fourth quarter decrease were $2.7 million decrease in FDIC insurance expense and a $0.4 million decrease in outside services, partially offset by $2.6 million increase in salaries and employee benefits, reflecting normal fourth quarter true-ups for incentive accruals and elevated medical insurance expense. The efficiency ratio was at a solid level of 54.1%, consistent with 53.7% last quarter.
Next, I will discuss our expectations for 2019 shown on Slide 10. Spot loans and spot deposits are expected to increase in the mid-to-high single digits. Net interest income is expected to grow in the low single digits compared to full year 2018, which includes a lower level of full year purchase accounting in the $20 million to $30 million range for 2019. I'll note that we managed the balance sheet to a neutral interest rate risk position and are focusing on driving net interest income growth through organic loan and deposit growth. Even though we have pluses and minuses with branch consolidations and the Regency sale, non-interest income is expected to increase in the low single digits compared to full year 2018.
Our core fee businesses of wealth management, capital markets, insurance and mortgage banking are planned to grow high single digits or low-double digits consistent with recent trends. Non-interest expense is expected to be flat to down 2% compared to full year 2018, as we continue to find opportunities to take cost out of our expense base. Provision expense is expected to be $65 million to $75 million with originated net charge-offs in the range of 2018 levels. Finally, our effective tax rate is expected to be in the 18% range.
In 2019, we expect commercial and consumer loan production to pickup through a combination of increased demand and driving market share gains across our footprint, which we believe will lead to achieving our total loan growth targets. On the deposit side, we've made solid progress with our deposit gathering strategy, so I'm also optimistic we can reach those targets.
Next. Vince will talk about some of our growth strategies and cover some 2019 initiatives.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thanks, Vince. On last January's earnings call, we laid out several major initiatives, and I want to provide an update on the progress toward those objectives. In commercial banking, our leasing group had another outstanding year with average commercial leases up 40% over last year. Combined with our C&I portfolio, the average portfolio growth totaled 16% compared 2017. This was led by the very strong commercial production activity in FNB's Mid-Atlantic region, which includes the Baltimore and Washington D.C. markets and the Cleveland region. We entered these markets during 2013 and 2014, we're really beginning to see significant contributions from these investments. We look to build on this success, as we capitalize on the opportunities within our newer Southeastern markets. For the Carolinas, two out of the four commercial regions met our expectations in terms of commercial origination activity this year. Given that we've had success in capturing deposits share with Carolina FDC -- FDIC deposit balances up 5% year-over-year, we believe the attractive demographics will fuel commercial lending opportunities and lead to accelerated portfolio growth moving forward.
During the year, we made great strides toward improving the customer experience, notably in the Consumer Bank. As a proof point, S&P Global Market Intelligence recognized FNB in 2017, and again in 2018, with the study revealing that features of FNBs mobile app are more robust than those offered by most national and regional competitors. This recognition is an example of the progress we are making with FNBs technology investments, both clicks to bricks. Our strategy is to continually adapt and improve our digital and physical locations, in response to our evolving customer preferences.
During 2018, we further upgraded our digital capabilities to include Zelle and other new mobile features, while also refining the overall experience for the consumer by optimizing our physical branch network and adding additional concept branches to our platform. We have also built out the infrastructure necessary to expand the uses of artificial intelligence and data analytics to support our marketing efforts.
Regarding our physical delivery channel, we continue to reposition our branch network with positive results. Deposits per branch increased to nearly $60 million at the end of December and FNB achieved $6 million on annual expense reductions. 2018 marks the second consecutive year, where average deposit growth exceeded our average loan growth. I'm particularly proud of the retail team and their accomplishments as we were able to achieve 7% deposit growth, while closing 20 locations to improve consumer banking profitability. Through our ongoing optimization program, we will consolidate additional branches, as well as repositioning FNB and higher growth markets through attractive de novo locations that can accelerate long-term growth. Our ongoing strategy to accelerate organic growth and improve consumer banking profitability includes investments in technology in response to changing consumer behavior. These investments will drive significant enhancements to our online platform in 2019, all of which are already reflected in our expense guidance. We look forward to providing these new features to better serve our customers' financial needs, and we will keep you updated on our progress.
Overall, we are encouraged with the recent results across both the indirect and mortgage business, as average residential mortgage loan production exceeded $2 billion, and indirect experienced record production in 2018. Specifically as it relates to the mortgage business, mortgage banking fee income increased 10% over last year. We are optimistic that we can build on this growth by leveraging our newer markets. We expect the mortgage business to be a meaningful driver to support our growth objectives in 2019.
Turning to non-interest income, last year I discussed the expansion of our SBA and capital markets platform. While SBA did not perform up to the levels we expected at the beginning of the year, we recently hired a new leader for this business, who will better execute our desired lower risk strategy in 2019. As I mentioned earlier, capital markets increased nearly 30% compared to 2017, but the Carolinas contribution increasing more than $2 million in revenue. We also believe these businesses have meaningful growth potential and hope to build on our core fee business units in 2019. These are just a few of the major initiatives we've laid out as part of our long-term strategic plan designed to fully leverage what we've built to meet our growth objectives and maintain our risk profile.
I'd like to thank our employees who through tremendous effort make our success possible and who for the eighth consecutive year in Western Pennsylvania and fourth consecutive year in Northeast Ohio voted FNB a best place to work. In addition, FNB was listed as a finalist for the second consecutive year in Baltimore. Looking ahead, our capital position strengthened meaningfully during the year, as we surpassed our targeted 7% TCE ratio, reaching 7.05% to begin 2019 better position with greater capital management flexibility. We are highly focused to better serve our constituencies by listening to their future needs and creating incremental value for our customers, communities, fellow colleagues and ultimately delivering greater shareholder value.
With that, I'll turn the call over to the operator for questions.
Questions and Answers:
Operator
Yes, thank you. We will now begin the question-and-answer session. (Operator Instructions) And this morning's first question comes from Frank Schiraldi with Sandler O'Neill & Partners.
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
Good morning.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning, Frank.
Vincent J. Calabrese -- Chief Financial Officer
Good morning, Frank.
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
I wonder if you guys could just give little -- talk a little bit more about loan growth expectations, the mid-to-high single-digit growth in 2019 reflects kind of a step-up, others are -- I think getting a little seems like some are getting a little more cautious on growth expectations. So -- if you had -- the primary driver is that the Carolinas, and then is it demand picking up, or is it runoff slowing?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, first, but let me give you a little color around the range, I would use 4% to 8%, Frank.
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
Okay.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
In it -- we're giving you a range because there's a lot of uncertainty not with FNB in our ability to execute with the government shutdown, tariffs, the global economy. But having said that, I feel very, very good about the new markets we've entered. As we've said in the past, we -- it usually takes us a couple of years to shake out the undesirable credits to change personnel over to start to pursue opportunities that are more in line with our risk appetite. And I feel we're there -- we're fully staffed across the footprint. We had good performance from two of the four regions in North Carolina from a production standpoint. We're expecting the other two to pick up here, they have decent pipelines. We're getting good growth in Washington D.C., very selectively we have a great team there, that we've assembled in Bethesda that covers the DC market. Maryland and Cleveland are performing very well. We've gained market share in those two markets and we've achieved double-digit growth in those portfolios. Those are the reasons, I think we've built the company to withstand downturns in more stressful economic times, I've mentioned repeatedly a part of our strategy in moving into multiple MSAs with good solid deposit share and lower proportional loan share is to enable us to grow at these rates without changing the risk profile of the company.
So we -- having said all of that, I think putting 4% to 8% out there is reasonable. We do have some -- as Gary mentioned in his comments, we have some good solid, large commercial opportunities as we've grown the company we've started to focus up market and we have a number of really solid, high quality opportunities that will drive both fee income and loan growth for the company. So that's the thesis for our guidance, and I think it sound. I do -- I will caution everybody about the environment -- again, we're seeing good opportunities that could change given the global economic climate, but so far so good. Credit quality has been good, we've spent a lot of time de-risking our portfolio. We've mentioned that to everybody over time that's been a headwind for us from a growth perspective, but it's a reasonable thing to do given where we are in the economic cycle and the uncertainty that's out there. So I think our portfolio itself is in a very strong position as we move forward despite what faces us.
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
Great. And thanks for all that color. And then just lastly, just on the -- you talked about -- Vince Calabrese talked about the non-interest or interest bearing deposit cost increase in the quarter and just given some of the drivers there sounded like that increase or that beta is not indicative of what you think run rate is going forward here. So just wondering what you have -- what's a good expectation for beta in the near term. And I guess what you have modeled -- baked into your model?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I'll pass to Vince for some historical perspective on betas, but before we go there, our strategy has always been to grow non-interest-bearing deposit accounts to shift the mix at the company. So everything we do from a pricing perspective is geared toward driving higher levels of non-interest bearing deposits. And I think if you look back over three consecutive quarters including this quarter -- this past quarter we're reporting on which is typically a low period for us. We've shown average balance growth, double-digit in some of the quarter. So I think our strategies are working. We're going to continue to pursue growth in non-interest bearing, deposit balances and competitively price certain categories to be in the game, so that we can bring new households in. The competition is intense, but I think we have a great delivery channel, we have good products, we have good team and our bankers are very skilled using the tools that we've given them, artificial intelligence, analytics, the sales management systems we've talked about to manage that growth. So Vince, if you could touch on the betas?
Vincent J. Calabrese -- Chief Financial Officer
Sure. Yeah, I guess a couple of comments on that. If you looked at our results for the current quarter as I commented on, we did have the opportunity to lengthen the term of our CDs. So we did that CD blitz back in 2017. We generated about $650 million of 13-month CDs then. We were able to retain 87% of that and move people into 19-month and 25-month CDs. So there's some lengthening there that comes on at a higher cost in the short run, but it's good financial strategy to pursue. And then we also had some opportunity to term out some borrowings about $300 million of five-year and six-year money that we put on a very attractive rate. So that's kind of -- the cost of funds move during the quarter had those two items where we are lengthening our duration there which will serve us well as we go forward.
As far as the betas themselves, I mean for the quarter, our total deposit beta was 45% up from 40% in the third quarter, so it went up a little bit. Interest-bearing deposits went from 54% in the third quarter to 61%. If you look at the betas kind of on a spot basis, interest-bearing deposits was actually 53%. So the -- spot was lower than the average and it came down from that -- it was 67% at the end of September. So I think as we go into -- looking into the first quarter, we would expect the betas to slow somewhat from the level that it was at in the fourth quarter, could be by a decent amount depending on the mix of what we put on. But directionally, I would expect the betas not to continue to growing and to come down in the first quarter.
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
Okay. Great, thank you.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thanks, Frank.
Vincent J. Calabrese -- Chief Financial Officer
Thank, Frank.
Operator
Thank you. And the next question comes from Casey Haire with Jefferies.
Casey Haire -- Jefferies -- Analyst
Good morning, guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Hi, Casey.
Casey Haire -- Jefferies -- Analyst
Just wanted to follow up on -- so the NII guide, I know you guys run the balance sheet pretty neutral, but what is it -- what does the guidance bake in -- in the way of Fed hikes in 2019?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, let me comment on the guidance that's in there. The overall guidance year-over-year, the low-single digits, important to point out using GAAP reported net interest income for 2018 is the base number. So Regency was in there for eight months. So if we kind of normalize for Regency, we have net interest income growing in kind of the mid-single digits on an apples-to-apples basis. We do have two Fed moves in the forecast for 2019, but as you know for 2018, the Fed moves, we're kind of a push and the ability to continue to bring down the short-term borrowings helps that as that was offsetting some of the earning asset pickup that we get from the 45% of loans that just based on LIBOR and prime. So there's two baked in there, but it doesn't have that significant of an impact, if they don't happen, I guess, is the point I would make there.
And then the other important thing to the guidance is the -- I mentioned the purchase accounting accretion. So, for 2018, that was $38 million, our range for 2019 is to $20 million to $30 million that I mentioned, which is $5 million lower than that $25 million to $35 million we had been guiding toward in '18. So just to kind of put some context around that. And as you mentioned, we do manage to fairly neutral, so our goal is not to make bets on rates, but just grow net interest income by growing loans and deposits, so.
Casey Haire -- Jefferies -- Analyst
Okay, great. So, I mean, if the Fed is on a positive here, there's not a lot of risk to the NII guide?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Right.
Casey Haire -- Jefferies -- Analyst
Great. Okay. Alright. And then just switching to expenses pretty good cost controls that you're calling for this year, I know Regency, eight months of Regency won't be in there. Vince, I think I heard you say, you're going to continue with the branch consolidations. Just what is going to be -- what magnitude of branch cuts or other efficiency initiatives are baked into that guide because we do -- we are calling for a step up and loan growth from this current pace, so just what's underlying that expense guide?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah. We will continue to evaluate branch locations, there is an initiative that we've had for years in play called Ready here at the company, Project Ready. So we're going to continue to focus on that some of the cost savings from branch consolidation reinvested in higher growth areas like Charleston and Charlotte and parts of Ohio that we've targeted to open new locations. And so I think that, you will find that net-net, there will be expense reductions. I'd say baked into Vince's guidance would be something to the effect of half of what we told you last year in expense saves. So last year we --
Casey Haire -- Jefferies -- Analyst
Okay, great.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
So last year we gave you a number. We may do better than that, that's not included in the guidance, it's not easy to rationalize the delivery channel, it takes time. So -- but as far as your modeling, I would assume that about 50% of what we disclosed last year will happen this year.
Casey Haire -- Jefferies -- Analyst
Okay. So you're -- so the branch cuts actually are less --
Vincent J. Delie -- Chairman, President and Chief Executive Officer
$3 million in expense reductions, yes.
Casey Haire -- Jefferies -- Analyst
Yeah. Okay. All right, great. And then just last one from me on capital management. I know you guys above your 7% TCE and you commented on increased flexibility. Are you contemplating any Capital Management moves this year by -- may be dividend hike or share buyback, or are you still in the capital build mode?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, I think as you look at where we are in our evolution, we mentioned a few years ago, our hope was to get below 40% in terms of the dividend payout ratio. We want to build tangible book value per share, so anything we do would be measured against -- anything that could possibly impact that we've had some nice growth there. So we're back up beyond where we were prior to the Yadkin deal and growing nicely with the increased earnings. So TBV per share based upon our trajectory should be above 7 box. And I think at that point, we started to look at it. TCE is one capital measure that we use, but there are others. It opens the door for us to be much more thoughtful about the deployment of capital. If we come in on the lower end of the growth range and we feel the market's dicey, we'll have an opportunity to do some things, provided that our valuation presents opportunities for buybacks or addressing a dividend increase.
We're not going to sit here and accumulate capital for the sake of accumulating capital. We operate a low risk model, which means we're not doing certain things and for us to sustain our investment thesis, it requires us to be extremely efficient in terms of the deployment of capital and we're in a place we haven't been, since I joined the company 12 years ago. So nice solid capital base, capital ratios growing, tangible book value per share, accelerating the dividend payout ratio, approaching sub 40% that's some pretty exciting times for us in terms of and for the shareholders in terms of capital management. As you know, over time we've had to face considerable amount of regulatory burden. There are numbers in excess of $30 million per year that we dealt with. And with that behind us and how we're positioned in the markets, we're very optimistic about our ability to do some things differently as we move forward.
Casey Haire -- Jefferies -- Analyst
Great. Thanks for taking the questions guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yep, thanks you.
Vincent J. Calabrese -- Chief Financial Officer
Thanks, Casey.
Operator
Thank you. And the next question comes from Jared Shaw with Wells Fargo.
Jared Shaw -- Wells Fargo -- Analyst
Hi, good morning.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Hey, Jared.
Vincent J. Calabrese -- Chief Financial Officer
Hi, Jared.
Jared Shaw -- Wells Fargo -- Analyst
Maybe just shifting a little bit to credit, when we look at the dollar level of net charge-offs, now that Regency has gone -- is this -- could you give a little breakdown on what we're seeing there and it's just like a stable level in terms of given the economic outlook where we are now this 24 basis points, 25 basis points a quarter given the loan portfolio breakdown at this point?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah. Generally speaking, Jared, and we've talked about this in the past a little. Regency was approximately 4 basis points of the charge-off levels of the company at full run rate basis. So you can look at that being removed from that performance. We're looking at charge-off levels as we have in the past, you see the consistency that we've shown over the last number of years, we would expect that to continue naturally, as long as the economy continues to hold in a fine fashion. So, I would tell you, it's more of the same as we go forward based on the consistency of how we underwrite, how we manage the book.
Jared Shaw -- Wells Fargo -- Analyst
Okay. Great, thanks. And then in the loan growth, there was pretty good C&I growth this quarter. On the CRE side, when do you expect to see maybe some of those competitive pressures start to abate? Are you seeing in the market, any of the other non-bank competition starting to step back, or is that still as significant as it's been in the past?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
We're still seeing some large payoffs. I'd say we had a higher quality book, so I'm not surprised that we saw an acceleration in prepayments in that portfolio. Our clients were able to achieve stabilized occupancy quickly, that makes for an attractive investment by a non-bank investor. So we've seen pay-offs at a pretty steady clip. I'll let Gary give you more color. I don't know where we are in the cycle. I would suspect that it should start to wane in here.
Gary L. Guerrieri -- Chief Credit Officer
No, I would agree with that, Vince. I mean, as Vince mentioned it's been a steady flow at a normal pace with the activity in the life insurance company space. The multifamily projects that we have financed two years, two-and-a-half years, three years ago from a construction standpoint, they have stabilized. It's time for them to move to the permanent market. So that's really what we're seeing there.
Jared Shaw -- Wells Fargo -- Analyst
Okay. And then just finally from me on the indirect auto. Are you still expanding the dealer network, or you just taking more product per dealer?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, the dealer network, Jared has been a core group of dealers that we have banked from 25 years to 30 years in time frame, but occasionally we do add -- add one here and there. Keep in mind we're basically doing business in our Pennsylvania marketplace. We've not rolled it out to any of the growth markets other than the Pennsylvania marketplace. And as we've talked in the past, that book is run from a credit perspective, credit first, and it's a very good earning asset stream for us. We've been able to continue to do good volume there with our core group of dealers and we'll continue to do that as we move forward. Just as a touch point during 2018, the average FICO on new volume came in at $770 million (ph), so it's very good paper and it performs very consistently for us through time.
Jared Shaw -- Wells Fargo -- Analyst
And what's the spot rate on the indirect -- at the end of the year?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
The spot rate was above -- the spot growth was about $485 million, and the spot point right at $1.9 billion.
Jared Shaw -- Wells Fargo -- Analyst
I mean, the rate -- the yield on it? The yield.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
It's the yields all over the board depending upon the mix that comes in that particular month, I don't want to throw a number out at you. I don't have it at my fingertips right now, because we've got it by every category that you could imagine because of different types of automobiles being financed. We'll follow up with you after the call on that.
Jared Shaw -- Wells Fargo -- Analyst
Okay, thanks.
Operator
Okay, thank you. And the next question comes from Michael Young with SunTrust.
Michael Young -- SunTrust -- Analyst
Hey, good morning.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Hey, Mike.
Vincent J. Calabrese -- Chief Financial Officer
Hey, Mike.
Michael Young -- SunTrust -- Analyst
Wanted to circle back, just on the deposit and deposit pricing question kind of areas growth and -- if we go forward this year, we don't have any Fed hikes. How much kind of remaining pressure do you think we see on deposit pricing throughout the year? And is it more focused kind of on the front end here in the first half of the year, or is there some latency in repricing some of the CDs, et cetera, in the back half?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, I think if you don't see Fed rate hikes, it's going to depend on how the industry reacts and non-industry competitors, you've got some crazy rates out there from new entrants. I would say it depends on how that plays out, because there's going to be a lot of pressure to maintain margin, particularly if the Fed's not increasing rates because there will be less growth on the asset side. So hopefully you'll see pricing rationalization come into play, hopefully. For us -- we tend to price certain categories up and then we pursue a strategy of growing the household. So with the higher priced interest-bearing deposits that we gather, there is an element of non-interest bearing that comes, as well which makes the rate all in more attractive, the rate that we're paying.
So I think that, it's all going to be a function of how the industry response to the lack of Fed hikes and what's the root cause of the lack of those hikes, I mean, what's happening in the overall economy that's driving that. In any event, we have to be prepared and I think the best way to be prepared, as we move into a cycle like this is to do what we've done in the past and really focus our people on non-interest-bearing deposit gathering, which means banks that have invested in technology and have a product that offers features that consumers want like we have been doing will be more appealing and we'll make it easier for our bankers to gather those non-interest bearing deposits. That's true in small business, commercial and consumer banking.
Michael Young -- SunTrust -- Analyst
Okay. And if we see greater repricing pressure even though the Fed's not moving rates, would you guys start to slow the asset growth side, if you're just not getting the right risk adjusted returns and any kind of things that you focus on or watch for in terms of managing or monitoring that?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I mean, we've been pretty successful over time. If you look back over multiple periods, we've been able to grow deposits commensurate with loan growth or better, actually, more than.
Vincent J. Calabrese -- Chief Financial Officer
Last couple of years.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
So I would say there are number of things we could do. I think that would be addressed by the environment that you're operating in, more so than us taking a particular action because if the Fed's not doing anything, that means the economy is not moving at the pace that they expect, right, or there some other factors applying pressure. And that reverberates back through the customer base and impacts loan demand. So there are things we could obviously do ourselves, but I think we'll be dealt that hand without control. So -- and we have to be able to react to it as a management team and take the appropriate actions necessary to protect the margin, which is what we would do like we have in the past.
Vincent J. Calabrese -- Chief Financial Officer
The only thing I would add too, is we have opportunities to create shelf space on the asset side, if we wanted to. If there is growth in certain categories that meet our hurdles, we could sell more mortgage loans, we could securitize indirect loan. So there's things we could do on the asset side that creates shelf space so that you could bring in the growth that you want to bring in.
Michael Young -- SunTrust -- Analyst
Okay, perfect. And if I could sneak one last one in, just on capital, you mentioned buyback and dividend increases you specifically didn't mentioned M&A, is that still kind of on the back burner for a period of time and any update there?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I think given where the industry stands the sector has gone through some tremendous valuation changes in a short time frame. I think it makes it more difficult. As I said our focus is on tangible book value per share accretion. I think where we stand today given what we've accomplished, we had to do M&A, because of what we were facing from a regulatory standpoint. I think many people forget that this company emerged over $10 billion in 2014. I mean really got hit with the full impact of going over. Full year impact was 2014 (ph). That wasn't that long ago. So M&A was a necessary evil. We had to grow quickly. We had to take cost out to cope with the regulatory burden and the expense burden associated with building out the risk infrastructure. So I think that we're through that and we've built a nice franchise that has a tremendous amount of intrinsic value and we're in some fairly dynamic markets. So we have an opportunity to drive growth in those markets and continue to take market share like we have in Pittsburgh and Cleveland and Baltimore and the new market. So I think that we're going to focus on that and continuing to stay -- squarely focused on managing capital efficiently and driving tangible book value per share growth.
Operator
Okay, thank you. And the next question comes from Russell Gunther with D.A. Davidson.
Russell Gunther -- D.A. Davidson -- Analyst
Hey, good morning guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning, Russell.
Vincent J. Calabrese -- Chief Financial Officer
Hey, how are you?
Russell Gunther -- D.A. Davidson -- Analyst
Hey, wanted to circle back to your comments on the C&I growth you're seeing and the large corporate opportunities there. What's driving the pickup in opportunity and is that growth kind of all in your core footprints?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah. It's in the core footprints, I'd say, part of it is the growth we've experienced. Our balance sheet, the size of the balance sheet today enables us to move up market. We have a number of people that came from much larger institutions that have experience in corporate banking and we are seeing a lot of transactions. Some are M&A related, some are just big capital investment that's starting to happen. So we're seeing it, and there are other factors that come into play. I mean, when you start to see credit spreads broaden in the bond market, there is a shifting when spreads became thin, larger corporate borrowers shifted out of their pro rata facilities into the bond market. When those credit spreads start to broaden and the bank market is still fairly competitive they shift back and we are getting a tailwind from bond economics changing and the larger companies moving back into the bank -- back to the banks for capital. So you got a little bit of that, you've got some M&A activity. We've got opportunities with larger companies across a six state area, we compete in seven, very large MSAs with a number of large corporate borrowers that we can call on and we've been focused on that. So all of that comes into play. And for us that's all new. So those are new markets that we can capitalize on in a reasonable way without changing the risk profile of the company.
Russell Gunther -- D.A. Davidson -- Analyst
Thanks for that. And then last one from me. Gary, you talked about closely monitoring portfolio that could be impacted by tariffs and if the government shutdown really continues to track on here. So could you just give us some color on what you're watching in particular and where you would find yourself perhaps most exposed if the government shutdown extends meaningfully?
Gary L. Guerrieri -- Chief Credit Officer
Yeah. I mean, in terms of the industries, specifically metals, exposure, anything steel related we're keeping a very close eye on that. That's a core business for us. So it's something that we're very close to.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
That's on the tariff side.
Gary L. Guerrieri -- Chief Credit Officer
Right, on the tariff side, talking to our clients. We've got some scrap dealers, so they are potentially impacted as well. Overall, it's concentrated in that space. I mean, do you have some one-off borrowers that do business in China that are impacted on a one-off basis as well. But overall, we have not seen any major issues at this point. We continue to talk to our clients, and it remain vigilant in talking to them to stay ahead of it. The good news is, at this point, we haven't seen any major concerns to date.
As far as the government shutdown is concerned, we've got -- in our Washington DC market, we've got a small government contracting book of business, it's about $100 million at this point. We have not seen any impact at all to those clients. They've got very large balance sheets and continue to operate as normal. We did have some smaller clients in that space as well, and our bankers were talking with them on a regular basis. Nothing that has shown us any concern at this point, but that's something we'll continue to monitor in the short run here until it hopefully resolves itself sometimes.
Vincent J. Calabrese -- Chief Financial Officer
But the entities that we finance aren't impacted by that portion of the government, that's closed. So there's people forget that three quarters of the government is still functioning. So I think the impact to us over time might be in the Maryland area portions of Pennsylvania, where you might have some employees, that -- employees in the major cities that work for TSA, for example, who may need relief. We haven't seen a lot of it, recently --
Gary L. Guerrieri -- Chief Credit Officer
At this point, it's been less than a handful of clients that have called in, and we've reached out to.
Vincent J. Calabrese -- Chief Financial Officer
But we've encouraged -- if you look on our website, there is a number for those people to call. We put that out right away. We have a program to deal with any distress that a small business would be experiencing that's relying on the federal government and can't get paid. We are looking to help the employees of the federal government need relief that was part of the reason we advertised that number, so that we could provide some sort of relief to those that are struggling financially, because of it. So we put all the stuff into play early on, very early on, leading up to the shutdown and it's been in place since we've not seen a lot of activity to date.
Russell Gunther -- D.A. Davidson -- Analyst
Got it. Okay, that's it for me. Thanks for taking my questions guys.
Vincent J. Calabrese -- Chief Financial Officer
Thank you.
Gary L. Guerrieri -- Chief Credit Officer
Good thing (ph), Russell.
Operator
Thank you. And the next question comes from Matt Schultheis with Boenning.
Matt Schultheis -- Boenning -- Analyst
Good morning.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning, Matt.
Matt Schultheis -- Boenning -- Analyst
So a couple of quick questions. With regard to the Yadkin loan book, what percentage of those loans has matured been reunderwritten and moved into the originated book at this point?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I'll have to let somebody else to answer that question. I don't have that much detail at my fingertips relative to that portfolio. I don't know if anybody, we might have to circle back with you, I don't think we have that.
Vincent J. Calabrese -- Chief Financial Officer
It's not a big deal --
Matt Schultheis -- Boenning -- Analyst
Okay.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
It would be a smaller number.
Vincent J. Calabrese -- Chief Financial Officer
It's not a big number.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah.
Matt Schultheis -- Boenning -- Analyst
Okay. And so it's different question, but sort of related. Where are you with regard to CECL? Are you running parallel? How are your conversations with your auditors and regulators gone? And can you give us any detail there.
Vincent J. Calabrese -- Chief Financial Officer
Sure. I can give you an update on that. I mean, our models have been developed or in development making good progress on it. We've started the kind of model validation process which is a key step in the process. Our plan is to do parallel runs throughout this year beginning in April with Q1 numbers. We have a very active management steering committee, Gary and I both are part of that. And as you would imagine that the full team has been meeting for months and months, working on that. We also continuing to monitor the FASB developments and there are some proposals out there, that they're going to assess and may or may not result in delaying it to do an impact study. So we're also keeping an eye on that. But I would say we're right on track with the couple-year project plan we put together and just moving along that path.
Matt Schultheis -- Boenning -- Analyst
Any update on potential impact for what you might have to do for your allowance or outlook for provision going forward?
Vincent J. Calabrese -- Chief Financial Officer
Yeah. We'll have that in the second quarter. We're still -- like as I said, developing the models, validating the models and then in the second quarter, we would expect to start to get some kind of early works at the impacts.
Matt Schultheis -- Boenning -- Analyst
Okay. Thank you very much.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Okay. Thank you, Matt.
Vincent J. Calabrese -- Chief Financial Officer
Thanks, Matt.
Operator
Thank you, And the next question comes from Collyn Gilbert with KBW.
Collyn Gilbert -- KBW -- Analyst
Thanks. Good morning guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning.
Collyn Gilbert -- KBW -- Analyst
Just a question on the NIM, Vince. So adjusted NIM this quarter was 3.16%, excluding all the modifications, whatever. If we just think about the trajectory of that, given kind of the natural repricing and maturation that's occurring within the portfolio. Are you expecting kind of that core NIM to gradually migrate higher as we move throughout 2019, again not assuming any rate hikes. Just kind of neutral impact on rates, but just trying to get an understanding for the direction at NIM?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I mean -- as you know, it depends on the mix of the earning asset that we put on, right. The last couple of quarters have been kind of -- the heavier pieces have been kind of indirect and mortgage, which are on the lower side of things. So the more commercial growth that we get this year mix wise will obviously help move the margin up. I think that the -- if we don't get a fed move or where we sit today expecting the betas to come down, obviously kind of helps the margin. The challenge is, we all know, with rates is they've been so volatile in the last three, four months as far as how much rates have moved. So it's hard to have a really good crystal ball as you get deep into the year. But if you kind of look ahead to the first quarter, I mean, we would expect a stable core NIM compared to the fourth quarter level, which you kind of get down to 3.16%, if you take out all the purchase accounting and then add the purchase accounting on top of that, you get to 3.28%. So that's kind of the perspective I would share this point, Collyn.
Collyn Gilbert -- KBW -- Analyst
Okay. That's helpful. And then did I hear you say when the question came up about operating expense guide that you're looking for $3 million of OpEx reduction in 2019. I know you guided to the percentages, but that --
Vincent J. Delie -- Chairman, President and Chief Executive Officer
That was -- you're speaking specifically to the branches, just the branches.
Collyn Gilbert -- KBW -- Analyst
Got it. Okay. Got it.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
That -- what was included for that.
Collyn Gilbert -- KBW -- Analyst
Okay, OK.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
So first get our guidance, Collyn, there's other initiatives, too. Cell phone -- there's a whole variety of initiatives. Renegotiating contracts or processing contract is up this year. So there is a variety of initiatives we're going after, and the $3 million was just for the branch consolidation benefit.
Collyn Gilbert -- KBW -- Analyst
Got it. Okay. That's helpful. And then just finally, Gary, on the provision guide, that's coming in higher in 2019, then certainly what you delivered in 2018. I'm just trying to understand, I guess without Regency, I would have thought maybe net charge-offs would be coming down in 2019, relative to 2018 levels, but -- and I apologize if this is part of Damon's question -- I'm sorry, Jared's question, but I just wanted to get the clarity on that.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah, I guess, I'll make a quick comment on the provision guidance and then Gary on charge-offs, if you want to add anything else. But if you look at the 2018, the provision range from $14.5 million to $16 million a quarter. So the full year was $61.2 million. I mean, our guidance for 2019 of $65 million to $75 million is based on the current credit outlook to Gary described which are in a very good position as we enter 2019, and then reserving for the planned growth in the loan portfolio. So really the combination of the two is just kind of how you get to that range, which is pretty close to kind of what we had for the full year of 2018, but that's how we're thinking about the provision.
Gary L. Guerrieri -- Chief Credit Officer
And Collyn, as mentioned earlier, the Regency thing, if you remove 4 basis points, that's going to right size things for you on a go-forward basis. So from that standpoint, we expect the charge-offs to be in a consistent range, absent Regency, subject to the economy holding. We are -- what everyone feels as a later-cycle economy. So once you get later in the year does that cause any impact? No one can tell at this point. We feel very comfortable with our consistent underwriting and we feel good about the portfolios as to where it sits today.
Collyn Gilbert -- KBW -- Analyst
Okay, that's helpful. I'll leave it there. Thanks, gentlemen.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thanks very much, Collyn.
Operator
Thank you. And the next question comes from William Wallace with Raymond James.
William Wallace -- Raymond James -- Analyst
Thanks. I'll try to be brief. On the fee income guidance, Vince, in your prepared commentary you spoke about the new hire for a lead in the SBA business. And then you also spoke about it sounded like an expectation of continued growth in the mortgage banking segment. On the mortgage side, if I look at the second year, the second half of 2018 versus 2017, it looks like mortgage was down slightly. I'm just curious, what are you anticipating from kind of gain on sale margin perspective at a volume perspective in 2019 to get that growth back?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Yeah. Well, there are number of initiatives that we put into effect, this year that should benefit us next year. There were some mark key hires in Maryland and in the Carolinas big producers that should start producing. Some of the -- I'd say earnings or margin pressure came from great volatility in the interest rate space. So we -- some of it is purely related to our hedging activity. So, I would say as we move forward, as things begin to normalize particularly in an environment where we don't have an elevation in rates, we should see some steady growth or expansion in that margin and we should see production gains coming out of the Carolinas and in Maryland that are fairly substantial. So that's why we gave the guidance we gave.
Vincent J. Calabrese -- Chief Financial Officer
(Multiple Speakers) in the fourth quarter there's about $0.5 million reduction from mortgage servicing rights impairment in that numbers. So the underlying number was higher by about $0.5 million.
William Wallace -- Raymond James -- Analyst
Okay. Great. And then on the SBA side with the new hire is it -- I don't know when that might have occurred is it -- do we have enough visibility to get a sense as to how much of an overhaul there might be to the business, or is it really just having somebody else who can drive.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, as you know, the business has been dramatically overhauled. So we're in a risk-off mode, relative to SBA we've said that for some time. So we've been shrinking the volume by focusing more on -- in market opportunities as a product area versus a national calling effort to slap a guarantee on anything that moves and hope that we live through a cycle. I think that the focus is changed and this person in particular hails from -- I think region. So he's had some experience utilizing the product, the way we want to utilize it. And I think it's a great business, when it's used for small businesses to provide capital where they might have a slight collateral deficiency. But it's not a product we're going to use to provide venture capital for companies or to engage companies that have had operating issues or deficit cash flow. So it's a different model. It's going to take discipline -- it's incredibly difficult to watch revenue decline in a particular area. But I think it speaks volumes about the company's ability to manage risk. And we're very optimistic about the team, we have 100% of the sales people in place, under this new leader and his mindset as I said is in direct alignment with ours. And he's doing some good things to get the production out of the bankers that we have in the seats here.
William Wallace -- Raymond James -- Analyst
Okay. And one follow-on to that. Have you guys -- has there been any decision process around whether or not you might want to start to balance sheet some of the production given -- some pressure on the premiums paid in the market?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
The good news about doing better quality deals is that we can make those choices and we look and we have put some of the production on our balance sheet, because the gain on sales not high enough to give it up. So, when you're willing to put something on your balance sheet and not just sell it under the previous model, it also speaks volumes about the risk profile of those credits. I don't know, if you want to say any more Gary.
Gary L. Guerrieri -- Chief Credit Officer
No, we've been doing all along, Wally, in the further less six plus months, we've been making decisions on a credit by credit basis and we have put more on the balance sheet in recent periods there.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
And that's because their credits they're originated out of our footprint, where as I've said, if somebody, smaller business is growing and they need capital and you know that bridges a collateral shortfall, slight collateral shortfall. That's how we're using the product.
Vincent J. Calabrese -- Chief Financial Officer
What I would add too, Wally, which is one other point, it's important to keep in mind that we've changed the business model a lot in the last two years, as we mentioned, I mean, the total contribution is a little over $0.01 a share. So just to kind of put that in context. So I think we feel good about the activity picking up, but in total it's about little over $0.01.
William Wallace -- Raymond James -- Analyst
Yeah. Thank you. Shifting gears real quick on to the tax rate. Would you -- it looks like your guidance includes some expectation of tax credits. I'm wondering, if you'd give -- what the dollar amount of credits were in the fourth quarter and how you're anticipating additional credits in 2019, if I'm correct in my assumption?
Vincent J. Calabrese -- Chief Financial Officer
Yeah, I mean, you can do the math for the fourth quarter, it's little over $6 million, if you do the math to our guided tax rate and the effective tax rate that we booked for the quarter. And I think that as we've said, this is part of the business, it's been part of the business for at least a couple of years and our leasing operation on the wholesale bank side and we'll continue to go after this we have a pipeline that we have teed up for 2019. So there's some level of that in the 2019 guidance and depending on how we do, we could do a little better. So it's a function of bringing the business into the bank. So it's going to be part of the business. We have people that are focused on this and looking for these opportunities and we have more with the broader markets we're in, there is more opportunities to go after it. So we will continue to do that. Then we also have other tax credits, historic tax credit, R&D tax credits, we're pursuing; as well as low-income housing that we've always been pursuing. So we're definitely more active on that the tax credit side to lower effective tax rate for the company.
William Wallace -- Raymond James -- Analyst
Okay. Thanks guys, that's all.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thank you.
Vincent J. Calabrese -- Chief Financial Officer
Thank you.
Operator
Thank you. And the next question comes from Brian Martin with FIG Partners.
Brian Martin -- FIG Partners -- Analyst
Hey, guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Good morning, Brian.
Vincent J. Calabrese -- Chief Financial Officer
Hey, Brian.
Brian Martin -- FIG Partners -- Analyst
I'll keep it short since a lot has been covered. But just maybe for Gary, just to run-off in the acquired portfolio, Gary, I mean, is that -- I guess did you guys talk about that being lower. I mean, it sounds like it's been trending lower, but your outlook for 2019, I guess, less impact. I guess can you give some guidance on how you're thinking about that run-off?
Vincent J. Calabrese -- Chief Financial Officer
Yeah. Actually Brain, I can comment on that. This is Vince. I mean, the acquired run off for the quarter was $377 million, it was $320 million last quarter. This quarter is the second lowest of the year. So, it's still lower than it had been running prior to the third quarter. And it's really just a function of additional CRE payoffs it happened, both in the metro footprint, as well as in the Carolina footprint, which really why that the number kind of went up little bit from where it was last quarter. I mean, looking ahead you have a shrinking book. So I would expect that, that number to definitely be lower for full year of 2019, than what it was in 2018. But -- even with the pickup like I mentioned, it's still the second lowest of the year.
Brian Martin -- FIG Partners -- Analyst
Okay. All right. And just you guys talked about the two regions in the Carolinas doing well and the other two maybe just not meeting, what you guys expected. I mean, when you look at maybe why those regions didn't perform as well as the other two. I mean, I guess -- and why you're optimistic they give better. I guess, I'm just trying to understand a little bit better just that outlook to get them going back up. I mean, I hear you guys talk about having some concerns on the economic climate and maybe growth being a little bit slower, but then you're talking about the loan growth being up and just trying to reconcile those two and why the optimism on those other two regions picking up as you go into 2019 here?
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, because we have good people in the seats, we have the portfolios, if you backed out the CRE that's been taken out, there's good production there, that should lead to growth. So we're not giving up on them. The two regions that performed better actually had more C&I concentration in the base. So they expanded nicely. The other two -- I'm optimistic about moving forward because we've shaken the CRE. So there's a lot of the stuff that we didn't want to go on. We've got good people in the seats that can move them up market, they have decent pipeline. So we're feeling good about the Carolinas in total. So there's been a little bit of investment in personnel there as well that should pay off, that's why.
Brian Martin -- FIG Partners -- Analyst
Okay. All right. That's helpful. And just the other one. just going back to the SBA comment for a minute, and I realize it's a small piece of the puzzle. But the government shutdown does that impact to that? I mean, it's just so small right now. I'm not -- don't really worry about that, or I guess it seems like some of that business is not occurring. So I guess, is that affecting you guys, or did it sound like it is based on your comment that you're not really being impacted by it, but did I misunderstand that or --?
Gary L. Guerrieri -- Chief Credit Officer
It kind of just delays things a little bit, Brian. In terms of like new applications, it would slightly delay them.
Brian Martin -- FIG Partners -- Analyst
Okay. All right. I think you guys answered all the other questions I have. So I appreciate it. Thanks guys.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thank you. Take care.
Vincent J. Calabrese -- Chief Financial Officer
Thanks, Brian.
Operator
Thank you. And as that was the last question this morning, I would like to return the call forward to Matt Lazzaro for any closing comments.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Well, actually, it's Vince Delie. And you know, I'd like to thank everybody for participating in the call. We had a lot of great questions. The company performed very well last year. I'm very pleased with the performance of the company, and we stay keenly focused on the areas that we spoke about, driving the dividend payout ratio down, creating tangible book value and continuing to focus on growing and a way that doesn't present risk for us or take us outside of our risk appetite. So, again very strong year. Looking forward to this year, I think, we've got a good game plan. We've got our arms around expenses and we have a good plan there. So we're looking for some good solid positive operating leverage and performance. So thank you, everybody for calling and look forward to the next quarterly call.
Operator
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Thanks. Bye.
Duration: 72 minutes
Call participants:
Matthew Lazzaro -- Manager of Investor Relations
Vincent J. Delie -- Chairman, President and Chief Executive Officer
Gary L. Guerrieri -- Chief Credit Officer
Vincent J. Calabrese -- Chief Financial Officer
Frank Schiraldi -- Sandler O'Neill & Partners -- Analyst
Casey Haire -- Jefferies -- Analyst
Jared Shaw -- Wells Fargo -- Analyst
Michael Young -- SunTrust -- Analyst
Russell Gunther -- D.A. Davidson -- Analyst
Matt Schultheis -- Boenning -- Analyst
Collyn Gilbert -- KBW -- Analyst
William Wallace -- Raymond James -- Analyst
Brian Martin -- FIG Partners -- Analyst
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