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BankUnited Inc  (NYSE:BKU)
Q4 2018 Earnings Conference Call
Jan. 23, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2018 BankUnited Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to turn the conference over to Susan Greenfield, Corporate Secretary. You may begin.

Susan Wright Greenfield -- Senior Vice President, Investor Relations and Corporate Secretary

Thank you, Nicole. Good morning and thank you for joining us today on our fourth quarter and fiscal year of 2018 earnings conference call. On the call this morning are Raj Singh, our Chairman, President, and CEO; Leslie Lunak, our Chief Financial Officer; and Tom Cornish, our Chief Operating Officer. Before we start, I'd like to remind everyone that this call contains forward-looking statements within the meaning of the US securities laws. Forward-looking statements are subject to risks, uncertainties, and assumptions and actual results may vary materially from those indicated in these statements. Additional information concerning factors that could cause actual results to differ materially from those indicated by the forward-looking statements can be found in our earnings release and our SEC filings. We do not undertake any obligation to update or revise any such forward-looking statements now or at any time in the future.

With that, I'd like to turn the call over to Raj.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thank you, Susan. Welcome everyone to our fourth quarter earnings call. We spoke to you 90 days ago when it was much nicer in New York. I was in New York two days ago, it was in the single digits. I'm in Miami for the last two days. Let me start by inviting all of you to come to Miami and spend some money and help our economy. The weather here is 72 degrees is the high and 57 degrees is the low. And actually, there are a couple of Floridans here who were complaining that it's too cold. We are very happy to talk to you at the end of 2019 (ph) with our final fourth quarter. This is a pivotal quarter for BankUnited for a number of reasons. I will walk through all of them. The final loan sale for loss share as you all know was executed and the loss share for all practical purposes is behind us.

We also sold substantially all of our taxi portfolio; I said substantially all, a few hundred thousand couple are still left with us, but everything else is gone. There was also a very big deal, something we've been working on for some time, and that deal also closed in the last few days of December. We also announced and completed the second share repurchase program, which we announced at the last earnings call, $150 million. It was all executed fairly quickly before the end of the quarter. That takes our share repurchase for the full-year 2018 to $300 million, the first $150 million was executed over the first three quarters and the last $150 million in the fourth quarter. Given the weakness in the stock price, it was a good time to be aggressive and buyback stock.

Also yesterday, the board met and authorized another $150 million buyback. It is subject to of course Fed non-objection, which we have -- we're putting in for -- have already put in for and we expect to get that in a few days and we'll commence that -- a few weeks and we will commence that as soon as we have that non-objection from the Fed. This Fed non-objection is something new, which started only three months or four months ago, all banks are required to get this now. And also in November the operating agreement that we've had with the OCC, which dates back to the time that we became an OCC bank back in 2012, was also terminated which talks to the maturity of the company as we close in on our 10 year anniversary of forming the company.

As far as the results are concerned, deposits grew by $1.2 billion for the quarter and $1.6 billion for the year. I think this probably was our biggest quarter. I'm looking at Leslie here. This was our biggest growth quarter in the history of the company. More importantly than the total number was the fact that non-interest DDA grew by $208 million for the quarter. That takes DDA growth for the year to $550 million, which is about 18% growth in the year. To draw a comparison to 2017, I think in 2017 we grew only about $110 million in non-interest DDA. In other words, the growth in 2018 versus 2017 was 5 times as high. We have made demand deposit growth the most important target for us and have been focused on it all year 2018 and will continue to focus on this in '19. We've had good success over there.

One point to really note is a great number, but I will always tell you never to look at any one order and annualize that. You should always look at trailing four quarters as a better measure of performance and we expect that kind of performance to continue and hopefully get better next year. Covered -- sorry, non-covered loans and leases grew by $257 million for the quarter. Despite the fact that we again had a record production quarter, net growth was lower because of a unprecedented level of payoff and drop off in the portfolio. For the year we grew $965 million the non-covered loan and lease portfolio. And these numbers are net of the $80 million or so that we sold in the taxi portfolio. So if you take that out, it will be roughly $80 million higher. Net income for the quarter came in at $52.4 million and there was a fair amount of noise in the number primarily coming from the fact that the final loan sale -- usually the loss share has contributed to our earnings, always been a positive contributor. This quarter because of the way the accounting works as you end loss share, it actually hurt our earnings to the tune of a few pennies.

So, non-loss share earnings would have come at -- come in at $0.59 compared to the $0.50, which is the GAAP number. The taxi portfolio, the final writedown on that at the time of sale was $14 million pre-tax, which I think falls(ph)to about $0.09 or $0.10. Those are the two big items that created noise in this quarter. But other -- peel that away, I think we had a pretty decent quarter compared to the fourth quarter of the previous year or even compared to the third quarter of this year. NIM increased to just a tad over 4%, 4.01%, up from 3.51% linked quarter and 3.52% from comparable quarter in 2017. Leslie will get more into the NIM and explain to you in a little more detail. Cost of deposits increased to 152 basis points from 135 basis points in the third quarter and 94 basis points fourth quarter of 2017.

More importantly, we are seeing some stability in our betas. The betas were relatively flat from third to fourth quarter. If you dig deeper into different categories of loans, commercial betas maybe just a tad went down and personal or consumer betas went up a tad. Overall, betas were relatively flat as we compare third quarter to fourth quarter. We are getting a sense that deposit competition might be rationalizing and as the Fed starts to get a little more dovish, we may be reaching an inflection point. I don't think we're there yet. I think the move in December will soon cause deposit cost to move up at least for the first quarter, probably even a little further. But there seems to be early signs that deposit competition might be getting a little more rational.

Asset quality remained strong. Obviously, NPAs dropped for us from 61 basis points to 43 basis points just from the sale of the taxi portfolio. Net charge-offs for the year came in at 28 basis points. But 18 basis points of the 28 basis points is actually due to taxi, which is now behind us. Let me talk a little bit about 2019 and what we see in the future for the next 12 months. I'll start by just talking about the economy and capital markets. There seem to be two different indicators we're getting. When we look at the economy and metrics both in New York and Florida and even national metrics and we look at our own customers' balance sheets and their cash flows, we feel that the economy is doing very well. We don't see any cracks in any part of our business and -- or any of the economies -- the regions that we play in.

When we look at capital markets, we see some red signals pointing to a tougher economy as we go into 2019. Now those two things are diametrically opposite and what we -- our sense is that we have to be cautious and careful. But at the same time, we remain optimistic and the business continues with its momentum. We had a call last night to look at the pipelines of various businesses for the -- at least for the first quarter, pipelines are healthy. And from a credit perspective, we talked about that as recently as last week and we still don't see any signs of any cracks anywhere. So, optimistic but cautious is the tone that I would say that we have on the economy and that forms our view for how we want to grow this year.

I think growth our best guess for balance sheet both for loans and deposits is going to be in the mid to high single digits and expense growth will be in the low single digits. I'm sure -- we talked last week -- last quarter about a new initiative that we had taken on, almost a journey I would say, where we had hired McKinsey and another firm to help us think through areas of improvement. That project is a third of its way there in terms of at a high level figuring out where the opportunities might be and the opportunities of both expense and revenue opportunities. We have just entered into the second phase of that project, which we are calling the design phase, where we actually take each of those opportunities and build detailed plan around how and when we can achieve those and validate them.

And then the third stage should be implementation, which is a longer stage, will start in April. The way we have timed this is the second stage, the design phase, will be done a week or so before the earnings call in April. And at the earnings call we will give you detailed guidance around what are our targets, how are we going to get there, what are the initiatives that we're talking about, what are the timelines for achieving them, and how we will track (inaudible). So, I will leave you with that. The work is progressing well. There's a lot of enthusiasm for it. It really can be summarized as a journey toward operational excellence. And like I said, it is both revenue and expense benefits and -- but what I will say is it's not a major change in strategy, it is not about launching new products and new businesses in new geographies.

We obviously look at new opportunities as it is, but this is more about looking inwards as what we do and how can we do it better and where we -- where are we falling behind in terms of operational excellence and going after those areas. There is a fair amount of automation that will come out of it, a fair amount of changes of processes, some organizational design changes looking at our branch network and the like. While we're doing this, there's an important topic that we probably haven't talked about enough in the past, but I will start mentioning this and giving you updates at these earnings calls is that we continue to make investments in technology without which the business is moving so rapidly -- the technology is moving so rapidly that if you do not stay up with this, you will be irrelevant in two or three years.

So when we launched this project or this journey or program, whatever you want to call it, I asked that we not try and hit these numbers by delaying important technology investments and improvements to our platform like the digital platform or the cloud migration that we're doing or the new commercial payments platform that we are in the middle of implementing. That all that had to happen as originally planned, but we have to go find other areas where we could do better. So it is not about kicking the can down the road, it is actually finding true areas where we can improve while continuing our pace of investments that are needed in the business. There are a couple of small things. As we had mentioned to you over the years that there is a good chance that once loss share is over, we would look at our mortgage servicing operation and take a hard look at that whether it's warranted that would be a mortgage servicer in the post loss share environment.

We made a decision in November that we will exit the mortgage servicing space and we started taking steps to that effect. We expect to not be in mortgage servicing business by April of this year and there will be cost saves associated with doing that to the tune of about $7.5 million, $8 million, $8.5 million. These are direct expenses. These are not things such as space and other capacity that's freed up, but these are direct expenses that we will be able to take out. This is an annual number. This is not a 2019 number. You can imagine that '19, it'll probably be about half, maybe a little bit (inaudible). The technology that supports the mortgage servicing operation, those contracts run through November I believe. So by December, we will have fully reached this $7.5 million to $8 million, $8.5 million number and 2020, we will have it for the full year.

With that, I will turn it over to Tom, who will talk about just in a bit more detail how fourth quarter went and the year went. And then Leslie will talk to you more about the P&L and also a little more detail on the guidance.

Thomas M. Cornish -- Chief Operating Officer

Great. Thanks, Raj. So, little bit more detail on both the loan and deposit growth side. So for the quarter, first starting with loans and leases. As Raj mentioned, total non-covered loans actually grew by $336 million for the quarter when you set aside the $79 million sale of the taxi portfolio. If we look kind of within the business units. Residential loans grew by $185 million for the quarter, which included $103 million of growth in the Ginnie Mae buyout loan segment. C&I business, and I'll talk about C&I and then core commercial, which is kind of what we call our corporate banking and business banking teams. But the C&I book in total grew by $110 million for the quarter. That was net of $105 million in seasonal declines in mortgage warehouse outstandings and the reduction of $79 million in the taxi medallion portfolio due to the sale.

So in our core commercial businesses, the corporate banking business offset that by growing by $243 million for the quarter and $75 million in the business banking team. So, $318 million of total growth within the core commercial area and very strong results in both the New York and Florida corporate and business banking markets. As we switch to CRE, the CRE portfolio had an aggregate decline by $74 million for the quarter with $178 million decrease in the multifamily asset class. And as you've seen in previous quarters, this was primarily focused in the New York market on long-term refinancings. We had $146 million decline in the New York multifamily market and also an $18 million decline in construction and land loans, which was offset by growth in other segments, predominantly office and industrial.

Loans and leases in the commercial lending subsidiaries grew by $37 million in aggregate, $57 million of that was in Bridge which is Bridge Funding Group, our leasing and franchise company which has continued to have a good year all year long both in operating leases and in franchise financing. That was offset by a decline of $20 million in Pinnacle, our municipal leasing and finance subsidiary, which has kind of continued to be a bit under challenged due to the changes in tax rate structures and the competitive market that we see in that that's been sort of a continuation of their trend line through most of the year. As Raj mentioned earlier, commercial production exclusive of mortgage warehousing and residential was very strong for the quarter at $1.4 billion. It continues to be blended across a nice mix and in this particular quarter, over 70% of the new production was in floating rate.

So, our desire to continue to develop a very balanced book very well mixed across the portfolio of segments continues to be successful. On the deposit side, as Raj mentioned, Q4 was a record quarter for deposit growth and the trend in non-interest DDA continued. Non-interest DDA accounted for $208 million of deposit growth for the quarter while savings and money market grew by $674 million and time deposits by $104 million while interest bearing demand deposits were relatively flat. What was really nice to see is we had really great deposit growth across all parts of the franchise; in the national team, the Florida team, New York, Florida corporate banking. The $1.2 billion that Raj mentioned earlier was really broadly spread out across the entire company, which was really excellent to see.

So, that sums up the deposits for the quarter as well and turn it over to Leslie.

Leslie N. Lunak -- Chief Financial Officer

Okay. Good morning. give you guys a little bit more details on the numbers and a little bit more detail about some of the forward guidance. First, a little bit more detail on the covered loan sale. We sold loans with an unpaid principal balance of $260 million plus a little over $5 million worth of other real estate owned. The loans were sold at an average price of about 97. One pool of $150 million actually sold at 102, which speaks very positively about the loans that we retained on balance sheet and their quality because they're at even higher quality than the loans that we sold. The aggregate impact on the P&L for Q4 of all of its activity related to the covered loans was a negative $9 million that included -- that's pre-tax, included about $121 million of accretion, $129 million of indemnification asset amortization, and then about $1.6 million of just kind of true ups that was recorded in conjunction with the sale, particularly we had some gain sharing that we had to do on that pool that sold for 102.

So, that turned that into a negative number in addition to the fact that there were some expenses associated with the FD -- with the sale that are not eligible for FDIC indemnification. The numbers are a little bit different than what -- the estimates that we had previously disclosed and what's really driving that difference of a few million dollars is the higher sale price and while that's a little bit counterintuitive, in the short run, that higher sale price had a negative impact because it resulted in an even bigger amortization of the indemnification asset than we expected. The loans retained have a UPB of about $401 million, a little less than we originally projected due to some payoffs that occurred in the intervening period, and a carrying value of $201 million. The remaining estimated interest income to be recognized on the retained loans is -- our best estimate today is $287 million based on our most recent cash flow forecast. That's a yield of 32.9% right now in that portfolio.

And for 2019, we'll probably see about $60 million of that $287 million come in. The loans have a weighted average life of 4.3 years, but the tail is obviously much much longer than that because these were 30-year mortgages originated between 2001 and 2008. So, the tail is much longer. That estimate also differs a little bit from what we had previously put out and that difference is really driven by changes in estimated prepayment fees. Little bit of color on the net interest margin. Net interest income for the quarter was $295.1 million, a $56.2 million increase over the comparable quarter of the prior year. The NIM increased to 4.01% from 3.52% and that increase was really driven by the increase in the yield on covered loans for the quarter. The acceleration of the timing of the final loan sale and the higher than previously modeled selling price resulted in an acceleration of accretion on those covered loans.

The yields on both non-covered loans and securities increased. The yield on non-covered loans increased to 4.18% for the quarter from 4.05% linked quarter and from 3.80% for the comparable quarter of the prior year. The tax equivalent yield on investment securities was 3.59% for the quarter, up from 3.41% for the immediately preceding quarter and from 2.89% for the fourth quarter of 2017. These increases were driven by coupon rate increases on floaters as well as some change in portfolio composition. Duration of the portfolio actually declined slightly this quarter to 1.42%. The -- in comparison to the prior year, the yields on investment securities, non-covered loans, and the NIM were each impacted by about 9 basis points by the change in the tax rate from 35% to 21%. Raj has already spoken to deposit costs for the quarter.

The increase in the cost of FHLB advances was driven by two things. One, just general market rate increases and two, over the course of the last couple of quarters we've done some hedging and extended out the duration of those advances a little bit. A little bit of color around reserves and the provision. The total provision was $12.6 million for the quarter. That included $14 million related to the taxi medallion portfolio. The mark to adjust the carrying value of those loans to the sale price runs under GAAP related provision for loan losses so the mark is what you're seeing there even though part of that mark is rate related rather than purely credit related, but it all runs through the provision. The price per underlying medallion averaged out to be about 155. One of the things we discovered when we did the sale in part because of the rate mark I just mentioned is that loans are worth less than the value. But that was the average price for underlying medallion.

Excluding taxi, the provision for the quarter was actually a net credit of $1.4 million, mainly because of declines in historical net charge-off rates and lower provisioning for classified loans. We had some other classified loans resolved during the quarter. The ratio of the ALLL to total loans declined from the prior quarter-end largely due to the elimination of the reserves related to the taxi loans that came off when we sold the loans. We also did have some declines in loss factors and a reduction otherwise in criticized and classified loans for the quarter. However, I want to point out that the non-performing asset coverage ratio or the ratio of the ALLL to non-performing loans actually increased from about 60% on September 30th to about 85% at December 31st. I didn't change anything about our ALLL methodology.

A little bit more illumination on the forward guidance. Raj mentioned that we are currently expecting mid to high single-digit loan and deposit growth for 2019 and low single-digit expense growth, I want to be clear that none of this guidance includes any impact attributable to the journey that we are -- the transformation journey that we're undertaking with consultants that we're going to give you more clarity on in April. So, all of this guidance will be updated at that time because nothing is baked in. The expense guidance does include the expected consulting fees related to that engagement. So, that is already baked in. But any cost savings that would come out of it are not in any way baked into that guidance.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

But it includes the cost based on the mortgage services.

Leslie N. Lunak -- Chief Financial Officer

Yes, it does. It includes what we believe will realize in 2019 from the termination of mortgage servicing operation. It includes the reduction in the deposit insurance expense, it includes the additional expense that's going to flow through the P&L in 2019 from some of the technology investments that Raj alluded to. All of that is baked in, but no cost base from the project that we're undertaking are included in that low single-digit increased guidance. Currently, we expect the NIM for the full year and you'll be so happy to know that this is the core NIM, it's the only NIM that's left.

We expect to be between 2.50% and 2.60% for the year for 2019. Now that's predicated on the assumption no Fed action in 2019, no hikes, no reductions by the Fed in 2019, a very flat curve. And what we believe this beats the relatively conservative assumption about deposit behavior. So, that's the underlying that gets us to that NIM. Effective tax rate I would say 23.5% to 24% for the year. And around the provision, provision sufficient to maintain the allowance ratio at current levels or slightly higher so 50 basis points to 55 basis points and we have no reason to believe there will be an increase in net charge-offs from the amount we saw this year excluding taxi.

And at this point, I'll turn it over to Raj for any closing remarks before we go to questions.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thank you, Leslie. I'll close by saying we're very happy with how far we've come. It's been nine-and-a-half years since we started the company. 2018 was an important year for us, but not nearly as important as 2019 will be. We are now in the post loss share era as we stand here, three weeks into it. We closed out the quarter strong. Deposits, like we said, was a record growth. DDA was strong and that momentum continues into this quarter. So, we're excited. We keep our fingers crossed with economy and rates, things we don't control, but obviously they'll be monitored very closely.

And with that, I will open it up for Q&A.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Ken Zerbe of Morgan Stanley. Your line is now open.

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

Great. Thanks. Good morning.

Leslie N. Lunak -- Chief Financial Officer

Good morning, Ken.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

I guess maybe starting off and I don't know if we should call the former covered loan income or how you want to phrase that, but let me just say covered loans just for simplicity. I heard you, Leslie, on the $60 million in 2019. But just want to make sure I understood the path of that going forward. I mean it sounds like it's -- just given the total amount of accretion, it sounds like the $60 million probably goes into 2020 and maybe I'm going to say $50 million and then $40 million. I mean maybe -- is that a right -- is that sort of the right way to think about it? But also on there if any of these covered loans prepay, are we -- could we see that $60 million jump in any given quarter or for the year to, I don't know, $70 million or $80 million given accelerated prepayments?

Leslie N. Lunak -- Chief Financial Officer

So, short answer is yes to both your questions. I don't have the exact numbers for the future years in front of me. But the trend, the way you're thinking about it is the right way to think about it. And yes, there will be a profit income if any of these loans prepay early on.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

But that $60 million includes the coupon.

Leslie N. Lunak -- Chief Financial Officer

Includes our--

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

The coupon.

Leslie N. Lunak -- Chief Financial Officer

Yes, includes the coupon, it includes -- but he's right. If loans prepay, there is some acceleration. Now that includes our estimated -- our estimated CTR is already baked in there. So, it would have to be prepayments in excess of what we're estimating before the number would be higher.

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

Got you, understood.. Okay. That helps. And then in terms of the $150 million buyback that you just got approved for going forward, how quickly do you think you may want to execute on that $150 million? Could it actually be in first quarter?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

We will start, like I said, maybe in two or three weeks once we get the Fed approval. I will point to you the last two $150 million share repurchases. The first one when the stock was in the high $30s, it took us nine months to do. The second one where the stock was closer to $30, it took us three months to do or two-and-a-half months to do. So, it'll depend on the stock price. We don't try and follow exactly where the stock price should be. We think of more dollar-cost average is the best way to keep buying back stock. But we tend to do it faster if the stock is weaker and little slower if the stock is stronger. So, it all depends where the market is. In March Brexit is happening and the world is falling apart, we might be doing it faster and if not, we might be doing it a little slower. But it will start, like I said, in maybe two or three weeks.

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

Got it. Okay. And then because part of the reason I ask is just your CE Tier 1 ratio is obviously much higher than many of your peers. And Raj, do you -- when you think about like where you want to be from a capital perspective, I mean it seems that you have a lot of flexibility not just this $150 million currently, but going forward to execute several of these let's call them $150 million programs over the next year or two years. How aggressive would you want to be generally speaking, with bringing down your CE Tier 1 and where would you like to end up at some point?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

I don't want to talk about programs that have not been authorized. Having said that, I will tell you that once this $150 million is done, we will go back to our board and sit down with them just like we did yesterday and talk about the next $150 million because we do fully recognize that we have excess capital.

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

All right. Thank you very much.

Operator

Thank you. Our next question comes from the line of Ebrahim Poonawala of Bank of America Merrill Lynch. Your line is now open.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Good morning, guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Just first question. Leslie, in terms of your margin guidance 2.50% to 2.60%, could you give us a sense of where that comparable number was in the fourth quarter? And if we do end up getting a rate hike, like do you see the margin at this point relatively neutral or would you consider yourselves liability sensitive where there's maybe upside to the margin as the year progresses without any Fed rate hikes? Any color there would be helpful.

Leslie N. Lunak -- Chief Financial Officer

Okay. So, I would say the comparable number for this quarter is probably right around 2.48% to 2.50%. So, that gives you a sense of where that is. In terms of -- I think the thing that would make the most difference, Ebrahim, is if the curve were to steepen more than if the Fed does or doesn't hike once or twice. I think Raj expressed some level of optimism that if the Fed takes a pause, maybe some of the pressure will come off of deposit pricing, but that remains to be seen. We really have to wait and see if that does or does not materialize and we do expect that even given the December rate hike and some of the repricing that is likely to still happen in the back, regardless our deposit costs will continue to go up for the next quarter or two. So, we're just -- and in terms of depositor behavior and the level of success that we can have with managing that rate of increase, that's going to -- that remains to be seen.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. And just on the expense -- low single-digit expense guidance, could you tell us what -- just to make sure I'm looking at the right numbers, what your base is when you look at the low expense growth? Is it for full-year 2018 it is $478 million, $480 million?

Leslie N. Lunak -- Chief Financial Officer

For full-year 2018 excluding the amortization of the indemnification asset.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Okay. So relative to that, you expect low single-digit expense growth and it doesn't include any efficiencies coming out of this plan with McKinsey that you'll update us in April?

Leslie N. Lunak -- Chief Financial Officer

That's correct.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Understood. And Raj, just one last side to that. Give or take your earning and ROE of -- ROTCE of about 9% right now, when you think about the rate outlook you've laid out means obviously you've gone through the consultant and spent some time, like what's the reasonable level of ROTCE that shareholders or we should expect over the next year or 2020 without any big change up or down in the economy?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Ebrahim, I'll answer your question in April when I lay out in detail what those measures will be and what the numbers will be and add them to our ROE guidance.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for taking my questions.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from the line of Jared Shaw of Wells Fargo Securities. Your line is now open.

Jared Shaw -- Wells Fargo Securities -- Analyst

Hi, good morning.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning, Jared.

Leslie N. Lunak -- Chief Financial Officer

Good morning, Jared.

Jared Shaw -- Wells Fargo Securities -- Analyst

Just on the excess of the employee comp this quarter, did that reflect I guess some headcount reduction in anticipation of stepping away from the mortgage servicing business I'm guessing or is that a good base to grow from with the normal first quarter growth?

Leslie N. Lunak -- Chief Financial Officer

Really Jared, what you see in the comp number for this quarter is truing up our bonus and incentive accruals for 2018. I would expect that to go up in the first quarter for two reasons because there's always expense in the first quarter in comp because of payroll taxes and HSA seeding, 401-K contributions, et cetera, that are elevated in the first quarter. And we're not going to see most of that headcount reduction until sometime into the second quarter.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay. And then in terms of the initiatives that McKenzie is looking at, is there -- are there things around the loss share that could be potential cost savings beyond just the mortgage servicing side of the business?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

No. I think the mortgage servicing, we've been working on that for a while and McKinsey is not looking at that. That -- those plans are already done and they are in motion and will be realized, like I said, sometime in early second quarter.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay. And then just finally for me, for the loans that were retained at December 31st, was the loss share officially closed or is that still --

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes. Officially it's not closed yet. We're still working on the paperwork, but for all practical purposes, you should assume that it's done.

Jared Shaw -- Wells Fargo Securities -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Brady Gailey of KBW. Your line is now open.

Brady Matthew Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Hey, good morning guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Hey, Brady.

Leslie N. Lunak -- Chief Financial Officer

Hey, Brady.

Brady Matthew Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

So when you take a step back, Raj, I mean we're looking at a core NIM in the 2.50%, 2.60% range and honestly, that still benefited a little bit just by the remaining mortgages that you retained that are yielding 30% some. I mean that's -- 2.50% to 2.60% NIM is low relative to the industry. How over -- I mean not just in 2019, but over future years, how do you get that net interest margin up closer toward peer levels?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes. There are two ways to do it, Brady. You can either improve your interest income or you can reduce your interest expense. Interest income is improved by changing the business mix and taking more risk, which I don't think it's very wise this late in the cycle to go out on the risk spectrum. On the deposit side, that's something we're working on and it's not something that can be achieved in a quarter or two or even a year. Last year, we generated $550 million of DDA. If we can have similar type of growth, maybe even better this year, that starts to help. And ultimately the thing that is beyond us, which is sort of the shape of the curve, which will also determine where your margin falls and which is something you can only pray for and not really work on.

So, those are the three things that impact margin. I'm not interested in taking more risk and materially changing the portfolio and suddenly start to get into higher yielding and higher risk, name it; construction loans, subprime loans, or whatever it might be. I think the time for that was probably five years ago, but not today. But we are going to double up our efforts on the deposit site and keep working on that. That's what will change. It will not change to suddenly a 3% number tomorrow, but it will be a slow progression and we'll get there.

Brady Matthew Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

All right. And then as you'll put in the press release, the operating agreement with the OCC was terminated, which I think you'll have been under that since you took over BankUnited over a decade. And if I remember right, that agreement held you'll to maybe around a 9% Tier 1 leverage ratio. With that operating agreement now gone, what flexibility does that give you? Obviously you can may be a little more aggressive on the buyback and take capital a little thinner than you could otherwise. What are the -- what's the impact of not being under that agreement anymore?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

From a capital perspective, yes, it did have some constraints on capital. But we were still so far above those limits, that's not what was defining how much we can buyback. So after this $150 million that we've announced; if that operating agreement was in place today, I don't think that would have changed that $150 million. It would have been just the same.

Leslie N. Lunak -- Chief Financial Officer

What it really does is give us more flexibility at the bank and how we would structure the capital structure at the bank level because those constraints were at the bank not at the holding company level.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

So the sub-debt that we issued a couple of years ago, I think two or three years ago, we did at the holding company which we pushed down as capital into the bank. If the operating agreement was not in place at that time, we may have chosen to do it differently and maybe could have saved us a couple of bucks here or there. So, it gives us that kind of flexibility not in overall capital levels because we're not in that much disagreement with where capital levels need to be at the bank anyway. Also it takes away a lot of the quarterly reporting and there's a business plan we put out every year for the next three years and then we have to manage that business plan and that sort of administrative burden is lifted, which is helpful.

Brady Matthew Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

All right, great. Thanks for the color, guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from the line of Stephen Scouten of Sandler O'Neill. Your line is now open.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Hey, good morning guys.

Leslie N. Lunak -- Chief Financial Officer

Good morning Stephen.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

So you guys have seen really impressive non-interest bearing deposit growth year-to-date which you noted, but that's also been a tension point for a lot of your peers and I think the industry as a whole. So can you talk a little bit about what you guys might be doing differently or what you're capitalizing on that's made that such a -- such a nice outperformance for the year and do you see that continuing?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

It is a very impressive number, but the answer is going to be very boring and there is nothing that special. At the beginning of last year, every year actually at the beginning of the year, we set out goals for the year for the Company, we create a rallying cry all over the bank about what is important. And we started in January last year and said priority number one, two, and three is demand deposit growth and then we followed it up with action by changing incentive plans to incent that growth in DDA as the Number 1 criteria to get paid. So when you change the subject, you change messaging, and you repeat it over and over again for a whole year; you see results. So, there is no magic to it. It really was just those two things.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Okay, good. And maybe on the loan growth side and I'm not sure -- I missed a little bit of Tom's comments so I apologize. But on the growth expectations, I'm curious about what's embedded there within New York City multifamily? Is that still expected to run down from here or are we reaching a saturation point where that can kind of stabilize and/or maybe even grow?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

We're not solving for any particular number. We'll be happy to grow it from here. What we are solving for is a spread and structure that is acceptable to us and fits in what we have defined as the risk box that we want to play in. So, we often -- we get asked this question very often that is this some magical number of threshold that once we breach that, then we can start growing. It's actually not the case at all. We could have been growing anytime over the last year or could grow today if we find the right kind of spreads and structure. Now the spreads did widen in the fourth quarter and we were getting very excited about it, but in December we saw those spreads go back. And more importantly than spreads, it has been structure, longer dated IOs are becoming more and more common and those are hard to do.

Thomas M. Cornish -- Chief Operating Officer

And you still see I would add a lot of equity recapture available in the market, as Raj mentioned, a lot of duration. So, we are making new multifamily loans. We have been making new multifamily loans every quarter for the last four or five quarters. It's just the overall environment today when you look at still what's available in the CMBS market and the lifeco market just doesn't offer us for the most part an attractive thought process around why these are great assets for us right now.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

I would like to make another point here that our portfolio is not completely floating or completely fixed. I'm talking about the total portfolio of the bank. So as rates stop going up and as our fixed rate portfolio continues to reset or get refied and we put in new product without balance sheet growth, there is a lift in earnings that happens from that. So, we will benefit from that, which if we were completely floating rate balance sheet, we would not. That benefit would have been captured already. So other banks that are more fixed than us, they will benefit even more obviously. But I'm kind of stating the obvious, but I just don't want people to forget that as these -- talking about multi-family loans, as these multi-family loans come up on their five-year anniversary, they go from being in the low 3% coupons to low 4% coupons and that's not growth, but that's growth in earnings.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Yes. No, that's helpful. And then maybe one last question. You mentioned, Raj, obviously record production this quarter. Can you give a little color in regards to production in the quarter relative to previous quarters as well as paydown numbers? And then if you think there was any impact there of loans coming into the bank with capital markets kind of being shut down in the fourth quarter if that was impactful? Thanks.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes. It is -- we generally don't get into production because it gets very complicated quickly between commitments and outstandings and changes in commitment levels. At a high level, I will tell you the production environment was very strong in the fourth quarter and the only place where we felt weakness was municipal finance. That has been -- 2018 has been a painful year for that business line mostly because the spread in that business has really, really come down and is not meeting our hurdles and we're losing a lot of business. So, that business had a weak quarter and a weak year. But other than that, mortgage warehouse has been a good growth business for us. Commitments have been growing very nicely, but utilization levels in 2018 were meaningfully lower than '17 and '16 and that's probably also because of the environment, mortgage production overall in the system has been much lower which makes for lower utilization for warehouse lines.

And the only other thing that you talked -- we've talked in the past is compared to 2015 and '16, our CRE or multi-family business in New York has not been at the same level of production that historically it has been. So you take those three things out, everything else is hitting on all cylinders and production is very strong. Unfortunately so is the runoff and that's why the net number ends up being just pennies on the dollar compared to the gross number. Even before you ask me the question do I see that trend changing and what will it take to change that trend? I don't know what it will take to change the trend. But that trend has been very much with us for a good part of the year if not longer and continues into the first quarter.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Great. Really helpful color, guys. Thanks and congrats on all the progress here this year into '19.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thank you.

Leslie N. Lunak -- Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from the line of Steven Alexopoulos from JP Morgan Chase. Your line is now open.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Hey, good morning, everybody.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

Leslie N. Lunak -- Chief Financial Officer

Good morning, Steven..

Steven Alexopoulos -- JP Morgan Chase -- Analyst

To start on the NIM. So if our starting point is 2.48% to 2,50% and full year is 2.50% to 2,60%, this implies a lift in NIM right through the year and a $60 million benefit from the accretion will help. What's the underlying assumption for deposit cost within the guidance?

Leslie N. Lunak -- Chief Financial Officer

I think and, Steven, this is from talking from memory here. But I think it's about a 50 basis point increase in interest-bearing deposit cost.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Okay. So, moderation from what we saw in 2018. Okay.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes..

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Okay. And then, Leslie, on the loan yield...

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes. Moderation of increase in deposit cost, but part of that moderation comes from the fact that we will expect the Fed to keep moving the way they have moved in 2018.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Yes.

Leslie N. Lunak -- Chief Financial Officer

As I said, we are assuming no hikes, no reductions if the Fed will just -- that's what's baked into that forecast and we'll update it as need be.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Yes, OK. And then on the loan yields, obviously quite a few moving parts of the loan yield story in the quarter, you'll now have the benefit of the retained loans. Leslie, what should we be thinking of as a good starting point for loan yields of 1Q which should be a pretty clean number?

Leslie N. Lunak -- Chief Financial Officer

Steven, unfortunately I don't have that in front of me. I mean my best expectation is it will go up from 4Q, but I don't actually have the detail that we're projecting in front of me at that granular level.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Okay. And then finally, Raj, you said the deposit environment is becoming more rational. I don't know if you heard Signature's call, but Joe said this is the worst deposit environment he's seen in his career, competitors offering 3%. What are you seeing that's leading you to believe that it's becoming more rational?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

I'll -- my treasurer, who is at the frontline of fighting the battle on deposits, when he calls me and says to me; this is probably six or eight weeks ago; that Raj, this month the calls that I got for exception pricing were for the first time less than what I got the previous month. That's an inflection point that I'm referring to and that has happened now two months in a row. That will change tomorrow, but I'm referring more to my treasurer's mood at the end of the year versus the last three years that he's been in crisis mode and he looks a little bit happier and he's smiling a little more than he used to.

Leslie N. Lunak -- Chief Financial Officer

In other words, purely anecdotal evidence.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes.

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Okay. Got it. That's helpful. Thanks for the color.

Operator

Thank you. And our next question comes from the line in Lana Chan of BMO Capital Markets. Your line is now open.

Lana Chan -- BMO Capital Markets -- Analyst

Thank you. Good morning.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

Leslie N. Lunak -- Chief Financial Officer

Good morning, Lana.

Lana Chan -- BMO Capital Markets -- Analyst

Could you guys mention how much mortgage servicing income you're getting and expected to decline in 2019 with the exit?

Leslie N. Lunak -- Chief Financial Officer

Frankly, Lana, it's been completely insignificant. From quarter-to-quarter, it runs at about breakeven on the revenue side not revenue net of cost, but it's just -- it's small, Lana, and we just haven't had that much of it. In some quarters, the fair value mark is positive, some quarters it's negative; but over time it just haven't really contributed anything meaningful on the revenue side. It's never been material, that's why we don't disclose it.

Lana Chan -- BMO Capital Markets -- Analyst

And just curious with the sort of McKinsey review, have you thought about or looked into the cost of or the benefit of potentially deleveraging your balance sheet with your securities and borrowings and using some of the freed up capital to buyback stock? Would that theoretically make more sense from -- given where the valuation is trading today?

Leslie N. Lunak -- Chief Financial Officer

Lana, it's not really part of the McKinsey project, but those are numbers that we run all the time. So, we're constantly running those numbers and making decisions about buybacks accordingly and we'll do that. To this point to continue to do the repurchase program we've done, we haven't had to do that. But we will continue to include that in the analysis going forward.

Lana Chan -- BMO Capital Markets -- Analyst

Okay. Great. Thank you.

Operator

Thank you. Our next question comes from the line of Dave Bishop of FIG Partners. Your line is now open.

David Jason Bishop -- FIG Partners -- Analyst

Hey, good morning, guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Good morning.

David Jason Bishop -- FIG Partners -- Analyst

Hey, Raj, just in terms of the business environment, you said pretty strong across the board you've been hearing good things coming out of the Florida region. Just curious how you could know what you're seeing just in terms of the health -- the general health of the Florida economy versus maybe some of the other parts of the country you operate in?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

So we obviously have a deeper view into Florida and also New York not just because of economic data we collect, but more importantly from the balance sheet and P&Ls of our clients that we review on an ongoing basis, right. At least once annually we look at every loan and see how our clients are faring and that's what I'm referring to. So as these annual reviews come in, we look at that and we look at the cash flow, we look at coverage ratios, and we see things are stable-to-better. And yes, that is a little bit of a backward looking view because by definition we're looking at what happened to them yesterday not what will happen to them tomorrow, but it's an important view and it's a very detailed view. When we look at capital markets, you could argue that's a forward-looking view and that's how we think about it. And we try and marry those two things to form an opinion about where the economy is headed, which is why I said at the beginning of my remarks that we're optimistic but cautious.

Thomas M. Cornish -- Chief Operating Officer

I might add when you move around the state of Florida and you basically look at all the major markets that we're doing -- that we do business in and all the major industry segments, most things are doing pretty well. I mean each market is a little bit different from Miami to Orlando to Tampa to Jacksonville, Fort Lauderdale in terms of what are the main drivers of each of those economies. But as you go from city to city and we do client meetings and whatnot and meet with economists in the area and capital markets people, the view across each of these major markets is optimistic for 2019.

David Jason Bishop -- FIG Partners -- Analyst

Got it. And then from a modeling standpoint, you mentioned the impact from the exit of the servicing group there. Any sort of impact from the revenue side we should think about as we head into 2019 as well?

Leslie N. Lunak -- Chief Financial Officer

No, not beyond what we -- the information we've given you around the yield on those retained loans. As I said, a lot on the revenue side from the servicing operation has never been significant.

David Jason Bishop -- FIG Partners -- Analyst

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of the Dave Rochester of Deutsche Bank. Your line is now open.

David Patrick Rochester -- Deutsche Bank -- Analyst

Hey, good morning, guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Hey, Dave.

David Patrick Rochester -- Deutsche Bank -- Analyst

Just on the deposit growth, what are the chances you could actually continue to see more elevated growth from here? It just seems like you're having a lot of success right now. You're talking about deposit compensation rationalizing, is that mid to high single-digit growth maybe a little bit conservative at least as deposits go?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Listen, from your lips to God's ears, that's what they say. It is the hardest thing to predict. Deposit growth is very hard to predict unlike loans which are far easier. There can be surprises in loans too, but on the deposit side there is surprise every day. And that's why I said don't take the $1.2 billion for this quarter and annualize that and say we're somehow going to do $5 billion, that's not going to happen. I think taking a longer-term view is better -- a better predictor of our performance than any one quarter. I can give you color for the first few days of this quarter. Nothing that I've said contradicts what we're seeing in the first few days of this quarter, it's coming along fine. But deposit numbers can move around a lot on a week to week basis.

David Patrick Rochester -- Deutsche Bank -- Analyst

Yes, appreciate that. And how is the large deposit team progressing the national team at this point? Are you guys happy with the results so far? How large is the book? Just curious on that front.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

We have not disclosed how large the book is. But I have said when we had brought the team on that success would not be measured by hundreds of millions, but by billions and I will tell you that they have been successful.

David Patrick Rochester -- Deutsche Bank -- Analyst

Great. And then I guess as all-in costs go, where are you seeing new deposits coming in today post a hike and where are you seeing pricing in the market just on money markets and CDs?

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Yes. If you want to grow money market, you have to have a 2 handle on the consumer side. Business is difficult to say because it all depends on the full relationship that you have. But on the consumer advertised price, the number starts with a 2 and if you are at the 1.75 range, you're basically treading water not growing, not shrinking and if you're below that, you will shrink. In terms of one year CD or 13 months, 14 months CD; if you are at the 2.50 range you are flat and if you want to grow, you have to be in the 2.60, 2.70 range.

David Patrick Rochester -- Deutsche Bank -- Analyst

Got you, great . And then I know you plot a lot of that deposit growth into securities this quarter, but you also pay down some borrowings as well which helps reduce that interest cost you were talking about earlier. Is there any opportunity to pay down more borrowings? Do you have any more lumpy borrowings rolling off at higher rates? Is that going to be a focus this year at all?

Leslie N. Lunak -- Chief Financial Officer

It's something potentially, yes. We had a lot of cash this quarter. A few things, we sold the cover -- we had a lot of deposit growth, we sold the covered loans, we got the $300 million check from the Internal Revenue Service. So, we had a lot of cash this quarter so some of that we deployed into the securities portfolio and some of it we used to pay down some borrowings. And we'll continue to weigh those two opportunities and decide which makes the most sense. And yes, there are more borrowings we could pay down. If that gives us more juice than buying bonds, we will.

David Patrick Rochester -- Deutsche Bank -- Analyst

And sorry if I missed this, but what was the overall -- the average purchase rate on the securities you bought in 4Q and then where are you seeing reinvestment rates today?

Leslie N. Lunak -- Chief Financial Officer

I don't have the numbers in front of me for the average yield on what we bought for the quarter. I just don't have that right here. But you did see the yields on the book go up appreciably during the quarter and a lot of that was attributable to what we put on.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

December was a good month to buy.

Leslie N. Lunak -- Chief Financial Officer

Yes.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

As probably everybody knows. (multiple speakers) December which we were happy that the cash that we got from the various avenues that Leslie mentioned, all of that happened really in December. So, we were lucky from a timing perspective that the cash came in at just the time and spread (inaudible).

David Patrick Rochester -- Deutsche Bank -- Analyst

Yes. And what part of that book is variable rate at this point? I know It was a decent chunk previously.

Leslie N. Lunak -- Chief Financial Officer

Yes, it's still a decent amount, I mean the duration is 1.42% so that tells you right there that a pretty significant portion of it is floating. I don't have the number in front of me. It will be in our 10-K.

David Patrick Rochester -- Deutsche Bank -- Analyst

Okay. Great. Thanks, guys.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes the line of Brock Vandervliet of UBS. Your line is now open.

Brock Vandervliet -- UBS -- Analyst

Hey, good morning. Thanks for the question. Tail-end Charlie here, everything's been answered I would say other than with respect to CECL. Any sort of early read on that and if not, when do you think you would be likely to release some sort of a guide on CECL implications?

Leslie N. Lunak -- Chief Financial Officer

Yes. So let me say first of all, I don't have a number that -- I've seen a number, but it's not a number that I have enough confidence in to disclose it publicly at this point. A lot of work is still going on and a lot of analysis is still going on. I'm very comfortable with where we are with respect to our implementation timeline. We will start running the two methodologies parallel this quarter, the first quarter of 2019. In doing that, we will figure out what we don't know. We'll learn what we missed, but we're going to start that this quarter. So, I'm highly confident that we're in a good position to implement the standard on a timely basis. I doubt that we will disclose the number before the third quarter. So much of this is dependent on what your economic forecast is at the time you implement the standard. That has the potential to have a very material impact on the number. It's going to swing pretty materially if you are staring recession in the face as opposed to if you're staring a period of economic growth in the face. So, I doubt we'll put a number out there before the end of the third quarter.

Brock Vandervliet -- UBS -- Analyst

Okay, great. Thank you.

Operator

Thank you. And that is all the questions we have today. I'd like to hand the call back over to Raj Singh for any closing remarks.

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thank you, everyone, for joining. We'll speak to you in three months.

Operator

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Everyone, have a great day.

Duration: 62 minutes

Call participants:

Susan Wright Greenfield -- Senior Vice President, Investor Relations and Corporate Secretary

Rajinder P. Singh -- Chairman, President, and Chief Executive Officer

Thomas M. Cornish -- Chief Operating Officer

Leslie N. Lunak -- Chief Financial Officer

Kenneth Allen Zerbe -- Morgan Stanley -- Analyst

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Brady Matthew Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Steven Alexopoulos -- JP Morgan Chase -- Analyst

Lana Chan -- BMO Capital Markets -- Analyst

David Jason Bishop -- FIG Partners -- Analyst

David Patrick Rochester -- Deutsche Bank -- Analyst

Brock Vandervliet -- UBS -- Analyst

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