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First Horizon National Corp (NYSE:FHN)
Q3 2019 Earnings Call
Oct 16, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the First Horizon National Corp Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Aarti Bowman of Investor Relations. Please go ahead.

Aarti Bowman -- Head of Investor Relations

Thank you, Alley [Phonetic]. Please note that the earnings release, financial supplement and slide presentation we'll use in this call are posted on the Investor Relations section of our website at www.firsthorizon.com. In this call, we will mention forward-looking and non-GAAP information. Actual results may differ from the forward-looking information for a number of reasons outlined in our earnings materials and our most recent annual and quarterly reports.

Our forward-looking statements reflect our views today, and we are not obligated to update them. The non-GAAP information is identified as such in our earnings materials and in the slide presentation for this call and is reconciled to GAAP information in those materials. Also, please note that this webcast on our website is the only authorized record of this call. This morning's speakers include our CEO, Bryan Jordan; and our CFO, BJ Losch. Additionally, our Chief Credit Officer, Susan Springfield, will be available with Bryan and BJ for questions.

I'll now turn it over to Bryan.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Thank you, Aarti. Good morning, everyone. Thank you for joining our call. I'm pleased with our third quarter strong financial results. We showed good balance sheet trends, improved efficiency and remain disciplined with expenses. The third quarter demonstrated that our counter-cyclical business mix helps us produce good returns even in a challenging interest rate environment. Fixed income revenue was up 66% from last year helped by lower rates and greater market volatility. Average daily revenue increased to nearly $1 million in the third quarter of 2019. Our mortgage warehouse business was also helped by lower rates, where loans to mortgage companies were up 84% year-over-year.

Our results show that we are delivering on the key strategic priorities outlined at our Investor Day last year. We're strengthening our dominant position, while profitably growing our new markets and specialty businesses in Tennessee. In the third quarter, we saw good balance sheet momentum across our markets with average loans, up 10% year-over-year. We're also improving our funding mix growing customer deposits to replace wholesale funding. I'm particularly pleased with the customer deposit growth in our key markets.

In the third quarter, we showed solid revenue growth and controlled our costs resulting in an improved efficiency ratio on an adjusted basis. Our cost saves are enabling us to reinvest into the company with better products and better technology for our customers. The current operating environment has slowed somewhat, but our markets across the Southeast remain good economically. Overall, our customers are in good financial position and they remain reasonably positive about the economy and growth prospects.

Over the past 12 months to 18 months, since completing the integration of the capital bank merger, we focused on growing our businesses. We've executed on the opportunities that are attractive markets offer, at the same time, we've been implementing plans and making investments to better position us to provide products and services in an increasingly cost-effective and convenient way. Our actions have enabled us to deliver solid improvement in our earnings power this year and position us for the long-term.

I'll now turn the call over to BJ to go through the quarter, and then I'll be back with some closing comments. BJ?

William C. Losch -- Executive Vice President and Chief Financial Officer

Thanks, Bryan. Good morning, everybody. I'll start on Slide 6, with our financial results, which demonstrate continued execution on our key priorities laid out at our Investor Day last November and strong growth momentum from our newer markets we entered with our capital bank merger. We had another very good earnings quarter in 3Q19, $0.35 on a reported basis and $0.43 adjusted for notable items. We saw strong revenue growth of 2% linked quarter driven by fee income in both our fixed income and banking businesses. FTN in particular, continued its strong 2019 performance with just under $1 million of average daily revenues in the quarter. We saw very strong broad-based loan growth in both our markets and our specialty businesses with overall loans up 5% linked quarter.

We saw healthy core deposit growth with strength in key markets such as Middle Tennessee, South Florida and the Carolinas. These strong customer flows enable to continued positive mix shift in the deposit base. And this customer growth coupled with good pricing discipline allowed us to both grow customer deposits, and lower our deposit rate paid by 3 basis points quarter-over-quarter. Strong loan growth and deposit pricing discipline help to mitigate continued macro interest rate pressures as well as lower accretion resulting in only a modest $3 million decline in net interest income for the quarter.

Expense control remains a key focus and we delivered another good quarter-on-quarter expenses with efficiencies offsetting reinvestment in the business and higher variable compensation supporting the strong revenue growth in our fixed income business. Total expenses were up 2%, due to some notable items that we've listed out on the bottom right of the slide. The primary drivers were restructuring expenses related to our efficiency actions, resolutions of legal matters and some acquisition-related charges primarily related to legacy, legal and employment agreement matters along with fixed asset impairments. Other than rebranding, which will officially roll-out in late October, we would expect much lower impacts from notable items in the fourth quarter.

Turning the loan growth on Slide 7, you can see that after the Capital Bank systems conversion mid last year, we've seen materially improved balance sheet momentum. Total loan growth stands at 10% year-over-year, much higher than the 3% to 6% growth we discussed at Investor Day last November. And the growth has been in the key markets and specialty businesses that are most profitable segments and the ones that we are very focused on growing.

Looking at the loan growth in more detail on Slide 8, you can see that our strategic focus on growing those areas have clearly paid off. Linked quarter specialty loans grew 11% and were up 23% year-over-year. As expected loans to mortgage companies delivered more strong growth with linked quarter increases of 32% and year-over-year increase of 84%. Bryan mentioned earlier the business offers counter-cyclical benefit, since lower rates helped drive volume and while refinancings were higher in the third quarter, the purchase market remains very strong as well. In fact, purchase volume outpaced refi volume, with the purchase refi mix at 56%, 44% respectively. We continue to grow market share and maintain competitive pricing through our ability to provide balance sheet capacity, expert knowledge and flexibility to our customers.

As you can see in the bottom left of this slide, not only did loans to mortgage companies grow in the specialty businesses area, but all other lines of businesses also grew linked quarter as well. Specialty loan growth in aggregate excluding loans to mortgage companies was up 4% linked quarter and 7% year-over-year. And our key markets Middle Tennessee, South Florida, the Carolinas, and Texas delivered solid growth as well just under 2% linked quarter with a 7% increase year-over-year.

Shifting to deposits on Slide 9, you can see our continued emphasis on growing customer deposits, resulted in solid deposit growth across key markets and specialty areas. If you look at the bottom of the slide, we've seen excellent deposit growth across all areas; 21% deposit growth year-over-year in specialty businesses, 10% growth in key markets, and a very healthy 6% year-over-year in Tennessee. In the key markets in particular, our focus on South Florida is paying off with 16% growth, Middle Tennessee growing double-digits, and our Mid-Atlantic market primarily in the Carolinas growing 8%. Non-interest bearing deposits were also up 4% linked quarter due to a consistent dedicated focus on building primary relationships across our consumer and commercial customer basis. By continuing to shift our deposit mix and manage our deposit rates appropriately, we saw another decline in our deposit costs, which were down another 3 basis points this quarter.

Turning to Slide 10, look at NII and the margin, we continue to proactively manage the balance sheet to optimize both NII and NIM drivers in various rate environments. And as you can see our core net interest income was up due to strong commercial loan growth, as well as the lower deposit costs. The overall NII and NIM decreases were largely due to a large step down in accretion as well as the impact of declining LIBOR rates. While the lower rate environment is affecting our NII and NIM like others across the industry, our unique business mix is providing the expected counter-cyclical offset that others in the industry do not possess, that help support our overall earnings. Within the net interest income line, our loans to mortgage companies business benefits from falling rates through higher volume. And in our fee income businesses, the benefit from lower rates, specifically our fixed income and derivatives businesses, we saw strong performance.

Moving to Slide 11, we see some of the key drivers of another great quarter for fixed income. Linked quarter again averaged daily revenues about $1 million [Phonetic] a day, up 15% from last quarter and up 83% year-over-year. The decline in interest rates, the sentiment toward continued lower rates and market volatility all favorably impacted activity in the quarter. Other product revenue increased as well with customers continuing to execute rate swaps, resulting a higher fees in our derivatives business. In addition, we are very pleased with the hard work that Mike Kisber and his team at FTN have done to reduce fixed cost over the last few years have improved our profit margins on incremental revenue growth from prior levels. Based on the key drivers to revenues in fixed income, we expect earnings in the business to continue its strength in the current market conditions.

Turning to expenses on Slide 12, you see that our strategic focus on optimizing our expense base to both improve efficiency and enable incremental investment is paying off. We've demonstrated disciplined expense management on a core basis year-to-date. And in addition to benefiting from capturing the full-year benefit of merger cost saves in 2019, we've taken additional actions across the franchise this year to achieve approximately $80 million of incremental efficiencies with about $15 million reinvestment. We've reduced structural cost meaningfully by rightsizing our spend across all areas of our business rethinking how we deliver services to our customers based on what they want and improving processes to take out unnecessary cost. With the $80 million of cost reduction and avoidance [Phonetic] will achieve this year, we will have saved about 7% of our gross expense base, while starting to invest a meaningful amount in growth markets such as South Florida, as well as needed areas such as technology, digital banking, customer experience and treasury management.

Turning to asset quality on the next slide, loan loss provision remained relatively stable linked quarter, regional bank provision was up due to strong commercial loan growth and modest grade migration offset by continued net reserve releases in the non-strategic portfolio. The linked quarter uptick in net charge-offs was related to two commercial credits and we're still seeing overall credit stability in our portfolios with charge-offs still at historical lows and credit quality remaining strong.

To sum up, we're controlling what we can control and delivering on the key priorities we laid out last November at our Investor Day. We have strong balance sheet momentum with good loan and deposit growth in key markets and specialty areas. We're implementing cost savings to reinvest into the company to further enhance our earnings power. Credit quality is stable. We're deploying capital smartly and our counter-cyclical businesses such as fixed income and loans to mortgage companies are providing the unique offsets that we expected in a declining rate environment.

Wrapping up with the outlook slide on Slide 15, you'll see that our outlook for the year for return on tangible common equity efficiency ratio and credit quality remain unchanged, however, we've increased our ROA outlook to reflect strong revenues on higher fee income coupled with the ongoing expense discipline. As have others in the industry, we've lowered our NIM outlook for the full year due to earlier Fed rate cuts than previously expected, as well as our updated expectation of two additional Fed rate cuts this year and subsequent further declines in LIBOR. Again, the impact to NIM will be somewhat offset with loan growth that is likely to exceed our prior outlook of 3% to 6% for the year, as well as the counter-cyclical offsets in our fixed income business. Due to our strong organic loan growth opportunities, we've been able to put more capital to work in an accretive fashion and we expect CET1 levels to be in the 9% and 9.5% range for the year.

So with that, I'll turn it back over to Bryan and he can make some closing comments.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Thank you, BJ. We feel very good about our outlook for the remainder of the year and we're very encouraged by the momentum we see in the fourth quarter and going into the turn of 2020. The economies across our footprint continue to be good. Our customers are generally optimistic. And we're well positioned to continue growing our balance sheet, improving profitability and controlling expenses. Thank you to all of our colleagues, for all their hard work in the quarter, building our business and serving our customers.

With that Alley, we'll take now some questions.

Questions and Answers:

Operator

Great. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Steven Alexopoulos with JP Morgan.

Steven Alexopoulos -- JPMorgan -- Analyst

Hey, good morning, everybody.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Good morning Steve.

William C. Losch -- Executive Vice President and Chief Financial Officer

Hi, Steve.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

I'd like to start on the NIM guidance. So, if I look at the 3.25%, the new estimate for full year '19, it implies a fairly sharp drop coming here in 4Q, maybe 7 basis point range or so. BJ, is there another large step down in accretion coming in 4Q, or is this margin pressure from the assumption that we get to, two rate cuts in the quarter?

William C. Losch -- Executive Vice President and Chief Financial Officer

Hey, Steve. Good question. So you can see from second quarter to third quarter, we had a fairly large step down in the loan accretion from about $12 million in second quarter, down to about $6 million in the third. I wouldn't expect that big of a step down in the fourth. It will probably continue to come down modestly, but this was quite a big step down. I think it's more related to our -- now current assumption for two additional Fed rate cuts in the fourth quarter. As you know Fed fund futures have been moving all over the place. But as of this morning, the future is actually imply only one rate cut, the rest of this year in October, and then had another one until August of next year. But to be more on a conservative side, we're assuming two rate cuts and so, we would continue to assume that there will be further pressure on the margin in the fourth quarter.

Steven Alexopoulos -- JPMorgan -- Analyst

Okay. That's helpful. And then on the fixed income business, if I look at the $1 million [Phonetic] ADR, nice to see it back to the low end of the historical range. Market volatility was really high in August. Is this where you saw the bigger pickup in volumes, or is short-term rates just moved lower. Are you just seeing a sustained increase overall at trading volumes?

William C. Losch -- Executive Vice President and Chief Financial Officer

I would actually say it was pretty consistent. If you look at month-to-month demand for the quarter, I think, July was just under $1 million, August was right around $1 million [Phonetic], and September was slightly above $1 million. And so it was fairly consistent. But the interesting thing to see was the number of days that we had above $1 million was about 42% of trading days in the quarter above $1 million, 75% of trading days were actually above 750,000. So we had very consistent volume throughout the quarter in terms of what we were seeing. So that gives us a lot of encouragement that going forward, at least in these current market conditions, this kind of performance can continue for FTN.

Steven Alexopoulos -- JPMorgan -- Analyst

Okay. That's helpful. And just finally, BJ, on CECL, what's the anticipated impact day one, and how do you think about ongoing provision impacts from CECL? Thanks.

William C. Losch -- Executive Vice President and Chief Financial Officer

Sure. So, we haven't yet disclosed our impacts for CECL, we'll probably do that with our -- with our fourth quarter earnings announcements. But we have done a significant amount of work, of course, as you can imagine. And so we expect much like the industry to see more of an impact on the longer dated assets, more on the consumer portfolios, less of an impact on the commercial portfolios. So we will generally, I believe, be in line with, with what we're seeing across the industry, but we'll disclose that upcoming in the fourth quarter.

Steven Alexopoulos -- JPMorgan -- Analyst

Okay. Terrific. Thanks for all the color.

William C. Losch -- Executive Vice President and Chief Financial Officer

Sure.

Operator

Next we have Ebrahim Poonawala with Bank of America.

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

Good morning, guys.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Good morning.

William C. Losch -- Executive Vice President and Chief Financial Officer

Good morning.

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

I guess, BJ, if you could help clarify around the efficiency plan. So you expect $65 million of net savings through the restructuring, rebranding, all of that, that's going on. When we look at the $276 million expense run rate for the third quarter, how much of that is baked in, how much of that comes through in the fourth quarter. I'm just trying to think through as we look into next year, where -- how we should think about just core expenses ex in the capital markets volatility?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, if you look across, if you look at Slide 12, that kind of gives you a pretty good view of the relative stability quarter-to-quarter of our -- of our expenses and that's with materially growing fixed income. So we've been taking cost out of the organization. Particularly during the first half of the year, some of it being offset by variable comp with FTN, but also toward the second half of the year as I mentioned, we are reinvesting in the business. It's not just all drop into the bottom line. And so more of our reinvestment is hitting in the latter part of the year. So, I expect expenses to be in this range give or take $5 million in the fourth quarter based on what we're seeing. We have very, very good expense discipline, which we're proud of, but we will be reinvesting in the business as well.

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

Understood. So the net $65 million of savings one way or the other are reflected in these numbers?

William C. Losch -- Executive Vice President and Chief Financial Officer

Right.

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

Just making sure we got that right? Understand.

William C. Losch -- Executive Vice President and Chief Financial Officer

It's coming across the year, that's a all-in number relative to what our -- what our run rate was at the beginning of the year.

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

And then just tied to that, when we think about the cap markets, I guess, the efficiency ratio, ex the legal was about 71%, 72%. Can you give us a sense of like how we should think about operating leverage, if ADRs continue to get better into next year like does it fall into the '60s, or is there a natural trough in that business, when you think about it?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. I think, it's a good question. If you do take out some of the legal matters and really look at both last quarter and this quarter, the business roughly has a 50% margin on the incremental revenue that we're generating right now. I alluded to in my opening comments that Mike Kisber and the team out there have done great work last few years on taking our fixed costs and other costs that, that weren't supportive of revenue. That 50% used to be a 60% margin a couple of years ago. And so now we're getting much more leverage. So incremental 50% margin will of course help, overall the 70% efficiency ratio that we see today. So as fixed income move higher, we would expect the efficiency ratio to continue to get better.

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

That's helpful. And if I can just one follow-up to Steve's question on the margin. I guess, to make -- to be clear you assume October and in December rate cut in the guidance and it's implied about a 3.15% [Phonetic] plus or minus margin for fourth quarter. Can you talk about the outlook going forward given the dynamic of what you're seeing in terms of deposit mix shift like, is there a point where you can defend the margin despite additional rate cuts, or do we need rate cuts to stop before the margin drops?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, the 3.15% [Phonetic] plus or minus, that probably be a little bit more on the plus side than the minus side for that in the fourth quarter, because I think, we are doing a good job defending the margin with our deposit pricing discipline. We are seeing good volume particularly in loans to mortgage companies based on the rate environment. So, we do have pretty good offsets, but LIBOR declining and the Fed outlook certainly is a headwind. Deposit pricing dynamics are still very competitive, no doubt, but you have seen with the Fed cutting rates more and more banks, whether it's online or the traditional banks being lot more thoughtful and a lot more disciplined around deposit pricing in general. And so, I think that's incrementally helpful and supportive of the margins. But overall, declining LIBOR is going to be more of a headwind that we have to deal with. I will again remind everybody of the unique counter-cyclical offsets that we have in our business, some of which are in net interest income and net interest margin loans to mortgage companies, but others like our fixed income business and our derivatives business are going to show up more in the fee income lines such that our EPS can be potentially more supported than maybe some others that are just levered to the margin.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Hey, Ebrahim, this is Bryan. I'll add to BJ's comment. I think, fundamentally when you step back from what's going on with interest rates, there seems to be a fundamental disconnect between the expectation of lower rates and what's going on in the underlying economy. And as I indicated lower, it clearly has slowed a little bit. And I think some of the impact is driven by tariffs or the expectation of tariffs. And -- and I think there is an awful lot of talk about lower rates and the impact. If you look at even the dialog at the Fed, they have a bit of a mix discussion about whether they need to cut, whether they don't. We don't fundamentally see that rates need to go a whole lot more -- go a whole lot lower based on economic activities, BJ said, we've built in an expectation for a couple of cuts. But fundamentally the business underlying our markets is still very good, consumers are good, borrowers are good, borrowers are confident. And generally speaking, we see a lot of momentum in our footprint. And so, while we think that like everybody else, we're going to see negative impact at the Fed cuts rates on our margin. We do think there's a lot of underlying momentum in the business, lending and customer activity. And then as BJ said, we have a bit of a counter-cyclical balance that, that helps us overcome some of that. So, we look at these rate cuts and see them as a headwind, but we're still very optimistic about our outlook.

Operator

Our next question comes from Ken Zerbe with Morgan Stanley.

Ken Zerbe -- Morgan Stanley -- Analyst

Thanks, good morning.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Good morning, Ken.

William C. Losch -- Executive Vice President and Chief Financial Officer

Good morning, Ken.

Ken Zerbe -- Morgan Stanley -- Analyst

Obviously, your loan growth just is awesome this quarter. And I was -- but I was hoping to get a little clarity. When you think about 2020, obviously loans to mortgage companies very strong. I mean, is that something that can continue into 2020? I mean, I guess, sort of two questions. So one on the loans to mortgage side. And then the other one just kind of given that economic uncertainty. I mean, I think, you just -- so very positively about some of the healthy borrowers and what they're seeing. So, I guess implies that you do see some of that strength continuing, but it just seems like it's a tough pace to continue?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah, I'll start, and then let Susan pick up. The -- again, I think that the loans to mortgage companies going to depend on for the next couple of quarters, what refi activity looks like and there's still a huge number of potential refi opportunities out there with the way the tenure [Phonetic] has dropped. And to the extent that mortgage originators lower rates as volumes start to subside a little bit, I think you can make it steady. We would acknowledge very readily that, that is a bit of a cyclical business, and that -- at some point those balances will trend down, but I do think fundamentally in our warehouse business our team has done a really an outstanding job of building market share and build in a very strong business. So, I think with improved share, I think we'll run at higher balances.

I'm still optimistic about the opportunity to grow loans in our existing footprint on a broader basis. You see, in the data, we had good growth in our specialty businesses, South Florida, our Florida region, what's going on in Middle Tennessee, Mid-Atlantic are still very, very good economies and we see good opportunities there. There is one point in there, that the sort of underscores my next point, which is, if you look at our commercial real estate business, it was down a little bit on a year-over-year basis. So, we look at the opportunity to grow the balance sheet in a very disciplined thing. We think it's important that we not stretch our credit standards. We do not take undue credit risk to grow the balance sheet. So we're going to continue to try to capitalize on opportunities in the marketplace, but at the same time, we're going to continue to be very disciplined in the way we use our balance sheet and make sure that we're keeping good credit structure and we're keeping a strong pricing discipline as we look at opportunity. Susan?

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

For the mortgage warehouse business, we've added 49 clients over the last two years to the client account mortgage warehouse. And so being able to continue to expand that market share has been important for us, since we think about growing that business. We've also had great opportunities over the last couple of quarters with rates do what they're doing to expand existing relationships too. In addition to that, the mortgage warehouse team has added some very talented relationship managers from other entities who have relationships from most recently on the call, and we were able to, bring in a client that we've actually been calling on for several years and because of the item that we hired may finally decided to come on over. So we feel like that business will continue to be good. As Bryan mentioned, rates do impact it, but I feel good about the fact that we've expanded market share with new clients as well as with existing clients.

And then to add on to what Bryan said more broadly outside of mortgage warehouse, we do believe there are opportunities to continue to grow. And then I am pleased with the discipline that I see, we have monthly calls with lines bandwidth credit leaders and we talk about business they're winning and business they're choosing not to compete on. And I think that's very important as we continue to build the balance sheet for the long-term.

Ken Zerbe -- Morgan Stanley -- Analyst

Okay. That's very helpful. And then just my second question, in terms of deposit cost, it looks like your cost core deposits was down by 3 basis points this quarter. When you think about your NIM guidance for fourth quarter, how much of that is dependent on, as there sort of a set assumption about what your deposit costs are? And I guess, what I'm asking is, like how much visibility do you have in those deposit costs currently in terms of what you know is rolling off, in terms of pricing, given the October rate cut versus how much more variability could there be, if the industries are less aggressive on deposit pricing?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, I think Ken, we have very good visibility into deposit costs. We know obviously, exactly, what we are offering from a base rate from a promo perspective what vintages are, what's rolling off, what are rate guarantees are etc. So we've seen two quarters now of step downs on deposit pricing, as the Fed has cut rates. We would expect to be similarly disciplined in the fourth quarter, if they continue to cut rates. We've seen -- we've done a very good job on the commercial side, moving those rates down, I would expect that to continue. And I think we can do a good job, maybe even a little better job on the consumer deposit side managing rate. So, I feel very, very good about our deposit discipline, in the face of continuing to grow deposits in a reasonable fashion particularly in those key markets.

Operator

Our next question comes from John Pancari with Evercore.

John Pancari -- Evercore -- Analyst

Good morning.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Hi, John.

John Pancari -- Evercore -- Analyst

Just -- so back to, to the loan growth question, and I appreciate the color around both the warehouse as well as the other businesses and how it's holding up. I know, more broadly you're looking at the loan growth coming in above your 3% to 6% level for '19. For 2020, factoring in the mortgage warehouse is it still fair to assume a mid-single digit range, and then, or is it something that could be closer to the low-single digits just given later cycle in some of the macro backdrop indicators that we're seeing? Thanks.

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, John, I think, like we talked about, we continue to see strength in the fourth quarter, continuing into next year. Right now, we are in the midst of our strategy planning which we do with the management team and the Board at this time every year. And so we actually pretty good visibility into what the execution plans are for next year across the businesses. And like Bryan and Susan said earlier, you know, sentiment is pretty good. We know where we want to focus, which is key markets and specialty businesses. We understand where the niche opportunities are. And so we, we expect to be able to continue to grow.

Now, can we give 10% year-over-year, every year, that's difficult, but I think that we can continue to sustain some of the momentum that we've seen in the last couple of quarters for quite some time. Clearly, the toggle is going to be loans to mortgage companies, which for the foreseeable future with rates doing what they're doing, with refi volumes, how they're acting. We think that, that can have continued strength at least for the next couple of quarters. So, we feel very good about our loan growth prospects.

John Pancari -- Evercore -- Analyst

Okay. And then on that same topic, the outside of the warehouse, are you seeing any impact to borrower sentiment just, if we look at the ISM data, we're seeing some softness there and some capex pull back? Any indication you're seeing that yet?

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

We really -- we does had a couple of customers that were impacted by tariffs. And so obviously, their settlements not really good due to the impact on their business. That's just between a couple of clients that we talk to you. Sentiment -- I think, Bryan said this earlier, sentiment is still good and people are cautiously optimistic at this point. So I don't say necessarily exuberant, but optimistic and they're talking with our bankers about opportunities to acquire companies, build new facilities, investment in equipment. So there's still opportunities for our clients to grow.

John Pancari -- Evercore -- Analyst

Okay.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

John, this is Bryan, I would add to what Susan said. There are very few customer meetings that don't some way come up -- tariffs don't some come up. And whether that impact their business or not, it does come up. So it is affecting sentiment to some extent because people are talking about it. If you look at borrower financial statements balance sheets, they continue to be very good. And as Susan said, while that they're competing for labor at higher rates or higher costs, they still are fairly optimistic. And so, I'd say on the whole, look, it's not without some headwinds and tariffs do come up and hire our costs particularly around labor affect people, but generally speaking, people are still pretty positive right now.

John Pancari -- Evercore -- Analyst

Okay, great. And if I could just ask one more follow-up. On the credit front, can you just give us a little bit more color on those two commercial credits that drove the higher charge offs. And then, I know that your non-accruals came down, but can you give us little more color around what happened in criticized assets for the quarter and maybe delinquencies more broadly? Thanks.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Sure. So on the two credits where we had a charge-off, one was an energy credit and they did not, really the drivers of that were two things; they had inadequate production and they were not able to successfully complete an equity raise, so we did take a charge this quarter on that credit. The other was a healthcare credit that owns and operates specialty, a surgical hospitals ambulatory surgery centers. And their real issue had to do with, they were bringing their accounts receivable collection and house and we're very delayed and getting building out and you may know it's medical receivables become difficult to collect those longer they go out. And they also had some acquisition. So we took a charge on that credit as well.

As it relates to -- just general outlook. Again if we've had a couple of downgrades with two companies related lumber companies that have some tariff issues, we've had a restaurant that had some reputational risk franchise issue. So all of these are specific to those credits and let me not seeing anything broadly. As it relates to criticized balances, they were up about $70 million [Phonetic] quarter-over-quarter, but they're at the same level at this point that they were at fourth quarter of 2018. So, it's really not elevated, if you know, there's going to be some lumpiness from time-to-time.

And then nonperforming loans did come down, that was specifically related to the mortgage warehouse client that we identified last quarter. We were actually able to successfully, I'll move that into held for sale. We also took a charge reversal on that mortgage warehouse client this quarter, last quarter, we charge-off $4 million [Phonetic] and we booked a recovery this quarter of $2.5 million [Phonetic] on that mortgage warehouse clients. So feel good about that.

And then lastly you mentioned delinquencies. Delinquencies were really stable across the book with exception of -- you probably saw little elevation in C&I. I think $22 million for the quarter, $6 million of that has already been resolved and we're also expecting -- and we're actually expecting roughly $9 million payoff to come in this way. So those, that $9 million was really that the driver of the elevation in the delinquencies in C&I. So overall, I feel, so very good about where we are as it relates to our asset quality.

Operator

Our next question comes from Brady Gailey with KBW.

Brady Gailey -- KBW -- Analyst

Hey, good morning guys.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Good morning.

William C. Losch -- Executive Vice President and Chief Financial Officer

Good morning, Brady.

Brady Gailey -- KBW -- Analyst

So, another great quarter in the mortgage warehouse. So I was wondering, the yield of the mortgage warehouse. I think, it was around 5.5% last quarter. With the pick up in volumes, I was wondering, if there was any large change in that mortgage warehouse yield quarter-over-quarter?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So it is based on one-month LIBOR. So with one-month LIBOR coming down the yields came down, so that the yields are roughly around 5.30% [Phonetic] now versus the 5.50% [Phonetic] last quarter. What I would tell you as it's very interesting is, as we've got more volume this quarter we've actually gained a bit more pricing power as well particularly toward the end of the quarter. What we saw across the industry and some of the market participants were actually backing away from some volumes and having some capacity constraints we were able to step in and serve those clients very well. And so, we saw a significant increase obviously in our volumes as well as our pricing hold up -- holding up pretty well. So, again as Bryan and Susan have said, this business is incredibly well managed. We have very loyal customers. We're gaining them every day. And so we're very bullish on the prospects of this over time.

Brady Gailey -- KBW -- Analyst

All right.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

We've also had -- the yield was also slightly impacted by average dwell time went up two days quarter-over-quarter and because of the way we do book fees on those with a slight impact on yield due to just the massive volume in the whole system, that really is what led to a slightly increased dwell time.

Brady Gailey -- KBW -- Analyst

All right. That's helpful. And then one more on expenses. I mean, you talk about kind of the net $65 million [Phonetic] taken out. I mean, I think, if I look at that slide last quarter, it was a net $30 million. So you all -- that number continues to go up, but longer term, as you look out the next couple of years, is there more opportunity to continue to get efficiencies or are you close to the level where operating leverage just won't be as great as it has been the last couple of years for you guys.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Brady, this is Bryan. As we look out, we think there are two compelling things on the expense side that we've got to keep both focused on. And one is, is making the right investments in our business on products and services, and the other is paying for it by driving efficiency in our existing operations. And so as BJ said earlier, we have demonstrated over many years that we have the ability to continue to think about our business and drive efficiency in the way we operate it. You may or may not have noted in the last couple of weeks, we closed another 20 [Phonetic] or so, 22 branches. So we're constantly trying to make sure that, that we're providing high levels of service and customer experience and doing it with the most efficient infrastructure we can. And so, while I don't know what the demand for investment will be. We think that we've got the opportunity to pay for a substantial, if not all of that substantial portion, if not all of that by continuing to think about how we reposition our infrastructure and use technology to get more efficient for the long-term.

Brady Gailey -- KBW -- Analyst

Got it. Thanks guys.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Marty Mosby with Vining Sparks.

Marty Mosby -- Vining Sparks -- Analyst

Good morning.

William C. Losch -- Executive Vice President and Chief Financial Officer

Hey, Marty.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Hi, Marty.

Marty Mosby -- Vining Sparks -- Analyst

As always do, I have more of a layered question, and then I want to kind of walk through. Going into the year, first one, as we're really well positioned, you kind of at the seasonal low with mortgage companies, fixed income was at it's, kind of cyclical low. So those are kind of deltas that can kind of kick in, which we've seen over the last two quarters which should have been expected given what you saw with the interest rates and then the seasonality and mortgage company. That's generated about $0.08 of growth from the first quarter to where rent now in the third quarter out of about the $0.09. Now, some of that's been offset by loan loss allowance have been ticking up as well. So, if you net that out, let's say that it's about $0.05, or $0.06, out the $0.09. So my thing now is, as we kind of go through this inflection point and we look at the seasonality of Mortgage, now you still have the refis that could take a couple of quarters to burn out. But if you kind of go through that next dip you kind of see that seasonality.

If you look at, what's happening in fixed income as much as you had rates down, we still have on the back-end of your little table there, the yield curve is going to be flat to inverted, the economy is still relatively positive given all the loan growth that you talked about. So those things are really negative. In the positives, I think are more related to cash flow, in other words rates came down, mortgage prepayments have kicked up and so cash flow is creating some of this temporary uptick in the fixed income side. So, if the allowance, my three questions are really, if you look at the mortgage company seasonality, that's kind of a headwind, if we think about sustainability of fixed income that looks like an incremental headwind as we go forward. And then lastly, when we look at the allowance have we kind of gotten to a new level, or is this just elevated because of what we had with the two credits that we charged off this particular quarter. So, just trying to get the level of those three things because that really was the dynamic that we went through in the last two quarters.

William C. Losch -- Executive Vice President and Chief Financial Officer

So there is a lot there, Marty.

Marty Mosby -- Vining Sparks -- Analyst

I know it, I know it, sorry.

William C. Losch -- Executive Vice President and Chief Financial Officer

So, again I'll start on the mortgage company and FTN, and maybe Susan can give her views on loan loss provision. But, I think on, on the two counter-cyclical offsets, which we've said before, yes, they are up because sentiment and the rate environment are down, if the reverse had happened maybe they wouldn't have been a strong, but our margins would have been better and we would have gotten more incremental income from some of the great loan growth that we've seen. So, I kind of see them as counterbalances to continue to help us over time in any rate environment, or any economic environment continue to improve our earnings. So, I don't necessarily sit here and say, well, gosh, yeah, this has been great, but it's going to be a headwind. We kind of look at the totality of our business mix, which is why we like it working together to allow us to figure out ways to continue to grow the business. And as Bryan just articulated, we are constantly trying to think ahead about how we continue to do that, particularly around let's say expenses knowing that we have to take out more cost to be able to reinvest, or any of those types of things. So, we are constantly tweaking and managing to continue to grow and we'll continue to do that, the best we can.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

And then as it relates to the allowance, we believe, we're adequately reserved. And we just -- as each quarter comes we, we take a look at what's going on in the book. At this point, I feel very good about our asset quality Marty. And so, if we didn't have the two larger charge-offs this quarter, I'm not -- I feel very good about the fourth quarter. And the outlook for 2020 assuming that economic conditions remain stable.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Hey, Marty, this is Bryan. The other thing that when you went through and you start doing your reconciliation, I didn't hear you pick up was, yield on loans were down about $0.03 in the quarter, just due to lower rates. And generally [Phonetic], the old adage that every dark cloud has a silver line. And I'm not sure that every silver lining has a dark cloud. And I wouldn't work too hard to work out all of the cyclical stuff. I mean, the end of the day, we have a balanced business model. We understand that the mortgage business will ebb and flow. We understand that fixed income business will ebb and flow. Our outlook for those today continues to be positive, simply because of what we see in customer activity, and what we believe about the rate environment. And so, I don't think there as you described, and I don't think there are headwinds for 2020 as we sit here today.

Marty Mosby -- Vining Sparks -- Analyst

Yeah. My worry was just that some of these positives are kind of more temporary where some of the negatives are could be more permanent. That's what I was trying to size up, but appreciate your willingness to go through that. Thanks.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

So -- are you fairly bearish on long-term rates in that they're going to be this low and go down from here?

Marty Mosby -- Vining Sparks -- Analyst

No, what we generally think is, that rates are going to tick down, but they're going to kind of stabilize on a range, that was not going to be as much volatility. So, when you look at your market volatility, where you're talking moderate, I think it's going to flip back once we kind of get into a level and this is going to kind of be stock in that level. So that kind of goes low. The yield curve still going to be flat. If you look at the economy is still relatively positive and the direction of rates kind of stabilize. And so it's not going down anymore, it's not going up, it's not going down. So, if you have that, then you really don't have the prepayments that you got on the mortgage back side. And then the refi is eventually kind of burn out, so that mortgage piece, while it's positive right now, it doesn't have any lasting duration to it.

And then Susan, on the credit side, the only thing that we were at last year was we still had leases of loan loss reserves, our reprovisioning was in the -- let's call it $3 million to $6 million range. Now we're kind of stepping up to a $10 million to $15 million range. So you just kind of looking at those things happening that the drop-down in rates, the net interest margin doesn't get any better, the allowance and provisioning stays higher, and then some of these things that we've got have been helping us over the last couple of quarters. Just kind of burn out over the next, let's call it two quarters or three quarters. So, that's the balancing act, I'm trying to do, as I was looking at it. Coming into the year, well, we were positioned perfectly, I'm not sure now with a teeter-totter, those things, how that all works out. So that's what I was trying to size up.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

You must be fairly bearish on the industry as a whole, because we've got these counter cyclical things and as we've acknowledged a couple of times, clearly there is a cyclical nature. But if the consumer remains strong, right stay strong, purchase activity and then housing finance all to be good, I think there is a -- I wouldn't be as negative as you sound like you are this morning.

William C. Losch -- Executive Vice President and Chief Financial Officer

Well, not negative, trying just to balance out the things that are particular to you. So that was really the issue just in First Horizon. So, generally positive because I think credit costs stay low for the duration here. So the cycle stays positive, loan growth still stays and what you're doing in the core bank with deposit growth and loan growth, that's generating a couple of pennies every quarter. So you're getting that kind of progression underneath that. First Horizon, we've always had this volatility to have to deal with. I'm just trying to size up what I've experienced over the last three decades in this process. So that's what I was trying to get out.

Marty Mosby -- Vining Sparks -- Analyst

Got you.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Yeah. I think, Marty just, just to add one more thing, if I could. As I look at our business, we've got excellent customer activity loan growth. We've got positive deposit growth and positive mix shift into key markets. We've got really good revenue growth from fixed income and fee income in the business. We've got excellent expense discipline. So, yeah, it's hard for me to see what we're not doing right and how we're not taking advantages of the opportunities we have with our counter-cyclical offset today, while also making sure we're looking to the future and making sure that we can continue to put up solid earnings numbers in returns.

Marty Mosby -- Vining Sparks -- Analyst

Yeah. The two things that I heard, that I think are helpful in the sense of what I was trying to be more constructive on, is the fact that when Susan said you've added more mortgage lenders, so that's a part of the core business growth. If you look at the expense we are coming through the restructurings, so you should get some more expense savings. So there's probably some levers that you've got on the backside to help compensate for maybe some of this burn out that I was kind of anticipating.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

We're optimistic about it. Good discussion. Thank you.

Operator

Our next question comes from Casey Haire with Jefferies.

Casey Haire -- Jefferies -- Analyst

Yeah. Thanks, good morning, guys.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Hi.

William C. Losch -- Executive Vice President and Chief Financial Officer

Hi.

Casey Haire -- Jefferies -- Analyst

Wanted to touch on capital. I saw you guys taking down the, the CET1 ratio. You're at the floor now. Can you just give us some updated thoughts on buyback appetite here, because it does sound like you have decent loan growth on the comp still. And then, if we layer in sort of an industry average CECL hit, you could go below that 9% level. Just, just trying to get your updated thoughts on what the buyback appetite is?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. Hey, Casey. So, as you obviously know CET1 denominator is period end assets and we saw a significant run-up in the last week of the month in our loans to mortgage companies business. So, I would have expected a week before the end of the quarter that our CET1 would have been probably 30 basis points higher and the period end assets ran up so much and brought it down just to 9 basis points and that's exactly what we have. The capital levels that we do to allow us to take advantage of, of organic growth opportunities like that.

So we did repurchased about $30 million of shares in the quarter, which we felt really good about will continue to try to be opportunistic with share purchase -- repurchases, if we can, but always our first priority is to support customer growth and loan growth. And so based on what we've talked about today, we still feel good about our loan prospects going into the fourth quarter, so that will be our primary way will put capital to work. And if there is any, any excess that, that we feel is there, we'll put into work in a different fashion, but right now, we probably are in the 9% to 9.5% range in the fourth quarter and feel really good about that.

Casey Haire -- Jefferies -- Analyst

Okay, great. And just one follow-up on the mortgage warehouse yield. It sounds like it's still accretive to your loan yields. So, if it's dilutive to your NIM, as you guys point out on Slide 12, is that, that has to deal with more I guess the funding side of that growth?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. I mean, just the easiest way to think about it is, the loan yield that we talked about a 5.30% [Phonetic] funded, let's call it one-month LIBOR, since it has such short duration. And so, if you do that math, it's just, yes, right on, or slightly below our margin. And that's how we calculate it for the last quarter.

Operator

Our next question comes from Jennifer Demba with SunTrust Bank.

Steve -- SunTrust Bank -- Analyst

Hey guys, it's actually Steve on for Jennifer.

William C. Losch -- Executive Vice President and Chief Financial Officer

Hey, good morning.

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Hi, Steve.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Hi, Steve.

Steve -- SunTrust Bank -- Analyst

Hi. So, I just wanted to kind of check up on your Nashville progress. How our loans and deposits growing there? Do you guys have any goals for growing it further?

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Yeah. This is Bryan. We have very good growth and at Middle Tennessee, it's one of those, the handful of markets that we continue to emphasize. I mentioned the couple of others earlier our Florida region, Mid-Atlantic. I'd also add into that our Houston market. We still see good growth opportunities in all of those. The Middle Tennessee has -- it's been a tremendous growth engine for the economy and our state of Tennessee as a whole. And we have been very successful in seeing good strong customer acquisition and customer growth there. And the team that, that we have in place led by [Indecipherable] is doing a fantastic job. It's commercial, it's business banking. We're doing a really good job in the product client space. Our music industry business continues to be good. So we're very optimistic about the ability to continue our Middle Tennessee growth as well as some of these other markets and we think that's going to be a bright spot for quite a while.

Steve -- SunTrust Bank -- Analyst

Perfect. And just a little bit on kind of merger interest. I mean, you guys talking at all. I know you probably may not have the multiple to do something big, but just kind of wondering what your thinking there?

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Well, look we can ever comment on specifics, and as BJ pointed out earlier, we have a capital base, we have capital generation, and we look at it in three buckets and those three buckets are very simply supporting customer growth and customer activity, which is continued to be very strong, putting it to work in an M&A context or repatriating it with the shareholders. And over the last several quarters, we've seen strong balance sheet growth that we've seen the ability to buy back some stock. So, we'll continue to evaluate all of those opportunities and try to be smart about how we manage capital.

Operator

Our next question comes from Christopher Marinac with Janney Montgomery Scott.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Hey, good morning. I wanted to get back to the margin discussion on Slide 10. If the world gets a little more bearish than the 50 basis points, down that you have here. With the beta be better necessarily, and then with the momentum that you have in the other businesses continue, do you think in the next year?

William C. Losch -- Executive Vice President and Chief Financial Officer

Hey, Chris. So, I think, if there are multiple rate cuts beyond, let's say the 50 basis points. I do think in my opinion, that banks would get a bit more aggressive even more so than they have been on managing deposit pricing because of what the yield curve looks like in short-term and long-term rates. So, yes, I think there would be further opportunity beyond the 50 basis points. It's very interesting. I know you look at it as well. But Fed fund futures have been all over the math. And I've heard all kinds of sentiment about, what's going to be a 100 basis points of reduction from here over the next four quarters. Like I said earlier, futures as of today would only imply one cut in October and not another one until August next year. So it's hard to tell, we are trying to manage the balance sheet as well as we possibly can to mitigate those things. And the way we're doing it is strong healthy loan growth and managing pricing discipline and deposit mix as well as we possibly can. And using those counter-cyclical businesses to provide offsets that we can as well. So we'll see how it works, but we like how we're positioned.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great. That's helpful. And then just a quick follow-up. On the fixed income business, the -- are we best to look at operating leverage year-over-year and not look at just what happened this last quarter, just, you seem that had good operating leverage looking at it from a year ago?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, Chris, like I mentioned earlier, I think a pretty good rule of thumb generally speaking is probably a 50% margin on incremental revenue in the business right now. You know, again, the team out there has done a great job of eliminating as much cost that wasn't customer enabling as possible. So 50 basis point margin would probably be a good way to look at.

Operator

Our next question comes from Garrett Holland with Baird.

Garrett Holland -- Robert W. Baird -- Analyst

Good morning, and thanks for taking the questions.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Good morning.

Garrett Holland -- Robert W. Baird -- Analyst

First, maybe on the securities portfolio, it's trending a bit lower in recent quarters, which makes sense given the strong loan growth. But where do you expect that portfolio to stabilize and where the new money yields for securities as the yield is coming a bit too?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So, it was down, I don't know $100 million this quarter. It's base, as you said on what we're seeing in terms of loan demand, so we'd much rather put money to work on the loan side, we expect loan growth to continue. In the securities portfolio, we've generally just been reinvesting cash flows for the most part, mostly back into mortgage-backed securities, yields are lower, generally speaking, then what we're seeing in the aggregate portfolio right now modestly. So you can see, if you look at our financial supplement in the yields and rates section, you can see what the yields are doing and they've been modestly coming down as you might imagine with the yield curve. So, I don't see a material impact nor a change in our strategy to manage those securities portfolio. It will just be based on how much loan demand we have and what kind of reinvestments we have.

Garrett Holland -- Robert W. Baird -- Analyst

That's helpful. And I wanted to get your thoughts on deposit mix going forward, specifically market-indexed deposits in the relative attractiveness of those funds as rates do move lower?

William C. Losch -- Executive Vice President and Chief Financial Officer

Yeah. So interestingly there was clearly a headwind as rates were going up. They are a tailwind in terms of deposit costs as they come down. Long-term, we want customer deposits versus market indexed deposits, so we will continue to manage those down as we continue to build customer deposits. You saw in this quarter though they were actually up and that's because we saw excess cash coming from the brokerage firms that we do have contracts with, sending more money into our facilities. So that happens and has helped to fund our loan growth at lower cost. So that was helpful to us, the long-term, we'll continue to try to manage it down from these levels.

Operator

Our last question today comes from Jared Shaw with Wells Fargo Securities.

Timur Braziler -- Wells Fargo Securities -- Analyst

Hi, good morning. This is actually Timur Braziler filling in for Jared. Just one more for me, Bryan, in your prepared remarks, you mentioned that the operating environment has slowed somewhat. Can you just frame that comment. Are you seeing that on the commercial side kind of ex the mortgage warehouse business or utilization rates down, if you can provide any additional color on that comment that would be great?

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Yeah. I'll -- it's really just a sense of talking to customers and our bankers talking to customers, and so it's not a scientific measure. It's sort of is consistent with job growth, which is by historical standards good. It's not as great as it was, you see expectations around the economy and GDP growth following. And that's consistent with the dialog that we're having with our customers. As I said -- and I would acknowledge that some of it may be a geographic and where we do business. The Southeast is still relatively strong in my sense. And we don't see or hear anything from customers that, that is as negative as what you would read in the ISM either services or industrial and -- but we do think it has slowed a little bit. That said, against the backdrop, as we pointed out customer balance sheet continue to be strong and they continue to be forward-leaning. So all in all, we remain optimistic about our ability to continue to grow in a somewhat slower growth economy. And look at the end of the day, if we're down from three to two that still not a bad place relative to where we've been for the last 10 years or 12 years. So we're still fairly optimistic.

William C. Losch -- Executive Vice President and Chief Financial Officer

And I would just add, just look at our numbers and look at the broad-based growth that we're seeing. So, as Bryan said there might be a lot of discussion and sentiment out there, but the numbers are there and we still think that the growth prospects are very strong across all of our business lines, across the key markets that we're in, we have great people. And so we're optimistic about our ability to continue to grow the firm.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Look, I think, at the end of the day customers are -- our people to whether they're consumers or whether they're running big businesses and all day longer told that interest rates are down and where the yield curve remains a recession and the politicians talk about how bad everything is and the impact of tariffs. And so, that's going to weigh on sentiment to some extent, but at this point, we don't think it's out of balance, and we don't think we've talked ourselves into a recessionary track. Not to say that we don't do that over in the next several quarters, but at the end of the day, balance sheet trends and momentum continue to be fairly good.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Bryan Jordan for any closing remarks.

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

Thank you, Alley. Thanks everybody for joining our call this morning. We appreciate your interest in our company and our quarter. Please let us know, if you have any questions or anything that you want further follow-up on. Thank you again to all of our colleagues for the great work which you were doing building our business and building our customers and our communities. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

Aarti Bowman -- Head of Investor Relations

D. Bryan Jordan -- Chairman, President and Chief Executive Officer

William C. Losch -- Executive Vice President and Chief Financial Officer

Susan L. Springfield -- Executive Vice President and Chief Credit Officer

Steven Alexopoulos -- JPMorgan -- Analyst

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

Ken Zerbe -- Morgan Stanley -- Analyst

John Pancari -- Evercore -- Analyst

Brady Gailey -- KBW -- Analyst

Marty Mosby -- Vining Sparks -- Analyst

Casey Haire -- Jefferies -- Analyst

Steve -- SunTrust Bank -- Analyst

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Garrett Holland -- Robert W. Baird -- Analyst

Timur Braziler -- Wells Fargo Securities -- Analyst

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