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Texas Capital Bancshares Inc (NASDAQ:TCBI)
Q3 2019 Earnings Call
Oct 16, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Texas Capital Bancshares Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Heather Worley, Director of Investor Relations. Please go ahead.

Heather Worley -- Senior Vice President and Director of Investor Relations

Good afternoon, and thank you for joining us for the TCBI third quarter 2019 earnings conference call. I'm Heather Worley, Director of Investor Relations. Before we begin, please be aware this call will include forward-looking statements that are based on our current expectations of future results or events. Forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements.

Our forward-looking statements are as of the date of this call and we do not assume any obligation to update or revise them. Statements made on in this call should be considered together with the cautionary statements and other information contained in today's earnings release, our recent annual report on Form 10-K and subsequent filings with the SEC. We will refer to slides during today's presentation, which can be found along with the press release in the Investor Relations section of our website at texascapitalbank.com. Our speakers for the call today are Keith Cargill, President and CEO and Julie Anderson, CFO. At the conclusion of our prepared remarks, our operator Andrea, will facilitate a Q&A session.

And now, I will turn the call over to Keith who will begin on slide 3 of the webcast.

Keith Cargill -- President and Chief Executive Officer

Thank you, Heather. I will open, then Julie will give her assessment for Q3. I'll close before opening the lines for Q&A.

Let's begin on slide 3. In summary, we delivered a strong quarter in multiple key areas. Deposit growth was excellent, credit improved, controllable core expenses were up only modestly. Mortgage finance was strong, core LHI grew on average despite the significant paydowns we accomplished in leverage loans. Net revenue grew linked quarter and year-over-year. Earnings per share grew 13% linked quarter and 3% year-over-year. Outstanding results from an extraordinary effort by our truly talented team across Texas Capital Bank. And these excellent financial results were accomplished through executing our strategic initiatives to drive continued improvement in deposits, fees, efficiency and an even more differentiated premier client experience.

I am a fortunate CEO indeed to work with amazing talent, who wake up each morning excited to build the premier business in private bank in America. It is an aspiration we all own and expect to achieve in time. Julie?

Julie Anderson -- Chief Financial Officer

Thanks, Keith. My comments will cover slides 6 through 13.

Net interest income increased $8.6 million or 3.5% from the second quarter and is up $20 million or 8.6% from the third quarter last year continuing to demonstrate the resiliency of our balance sheet in the existing rate environment. Mortgage finance has acted as a very effective hedge in an inverted or close to inverted yield curve scenario. Despite the fact that our NIM decreased on a linked quarter basis, it's important to understand that it was primarily related to the earning asset shift specifically mortgage finance and liquidity. Honestly, we don't believe NIM is the best metric to assess relative profitability, our future revenue generation in this rate environment.

Traditional LHI yields were down, which is reflective of the continued decline in LIBOR. These were slightly higher in the third quarter and are comparable to Q1 level, but remain at levels meaningfully lower than we experienced in most of 2018. Our mortgage warehouse yields were down on a linked quarter basis, and similar to last quarter, the decline is not related to any shift in competitive pressures, but rather resulted from volume pricing that was already in place. And when we refer to volumes, that means loan volumes as well as deposits, both of which are positive for net interest income.

Our MCA yields continue to be pressured, which was expected compared to actual mortgage rate. We continue to have growth in deposits with growth in interest-bearing, as well as non-interest bearing. Overall, deposit costs decreased by 8 basis points from 129 basis points in the second quarter to 121 basis points in the third quarter. The decrease resulted from continued growth in DDAs, as well as meaningful decreases in interest-bearing deposit cost.

Our total funding costs were down 15 basis points with decreased usage of FHLB borrowings. We continue to have solid deposit pipeline with some of the verticals getting traction. The launch of our escrow vertical went public during the quarter and more to come in the next few months about other top potential vertical. Recent sensitivity simulations indicate that net interest income would decline approximately 6% to 9%, assuming 75 basis points of additional rate cuts over the next 12 months. This assumes that certain floors would kick in, as well as assumptions related to continued elevated mortgage finance volumes over the forecast horizon.

We have a slight increase in average traditional LHI during the quarter, but balances were down as of period end. That's consistent with the continued run-off in our leveraged portfolio. Traditional LHI average balances were down 1% from second quarter and up 3% from this time last year. The level of overall payoff continued to be high primarily in CRE, where we're continuing to replace run-off with fundings on existing commitments and some new originations. In contrast, the C&I leverage run-off is not being backfilled. Payoff in C&I leverage are in line with what we expected and we would expect to see further reductions in the fourth quarter.

Again, we had a strong average total mortgage finance balances, including MCA, driven by the seasonally strong quarter, which similar to the second quarter was even stronger with lower mortgage rates. Average balances are up from this time last year by 54%. We would expect fourth quarter volumes to be strong with the continued loan rate.

We continue to experience good growth in the linked quarter average total deposits, with the mix of interest-bearing, as well as non-interest bearing. Our slower core loan growth is and will continue to be beneficial to our marginal cost of funding. We continue to see improvements in deposit mix with some contribution from verticals, as well as from existing clients, including mortgage finance escrow accounts. We would expect that to continue with meaningful improvement more evident in 2020 as verticals get more traction and we continue to deepen existing relationship. Overall, 8 basis points linked quarter improvement in our deposit cost, and 15 basis points improvement in total funding costs was less reliant on FHLB borrowings.

Our interest-bearing deposit costs were down 6 basis points, but excluding CDs, which are mostly brokered CDs, our interest-bearing deposits were down 9 basis points on a linked quarter basis. As we've mentioned, index deposits have an assumed 100% beta, while all other interest-bearing is assumed to be closer to 65%. Our playbook for stepping down rates was in place prior to the July move. We're being cautious, but very proactive in applying rate reductions across the board. We expect repricing to remain at a similar level or perhaps faster for the next one to two bad news [Phonetic].

As for broker deposits, they remain at $2.1 billion. With increasingly favorable pricing, the selective use of brokered CDs remains an option to supplement the funding stack as we gain traction in the new deposit-focused vertical.

We continue to show positive trends in our core operating expenses. Specifically, looking at the changes in salaries and employee benefits, which represents over 50% of our total non-interest expense, third quarter salaries and employee benefits were up less than 4% from the third quarter of last year. And year-to-date, the increase is a little over 5%, levels that are unprecedented in our history, and we're doing it at a time we are focused on transformational changes in how we think about efficiency and client experience.

We're being very deliberate with revenue-generating hires and are continuing to attract exceptional talent as our story continues to be extremely compelling. We've discussed marketing expenses and the variable portion tied to deposit. About a third of the increase in that category this quarter, was related to the variable portion. That expense peaked in Q3 as we're not focused on growth in that category of deposits. The remainder of the increase was normal business development, which can fluctuate from quarter-to-quarter, but is not a significant part of the total expense.

Third quarter included an MSR impairment of $2.6 million and that's compared to $2.8 million in the second quarter and $2.9 million in the first quarter. So a total of over $8 million of non-run rate expenses negatively affecting total non-interest expense for the year. We are in the process of putting instruments in place that will protect us from future downside risk with the MSR portfolio, assuming rates continue to fall.

Our efficiency ratio for the third quarter was elevated to 54.8% and was really related to a couple of MCA items all of which are rate-related and have been offset in net revenue, either this quarter or in prior quarters. The classifications of several of the MCA items, as well as the marketing costs related to deposits have been punitive to our efficiency ratio. if servicing costs were netted in non-interest income against servicing revenue and the related marketing fees were moved to interest expense, our efficiency would have been consistently in the 50% to 51% range. And we've shown improvement year-to-date 2019 compared to 2018. We believe a more representative measure to focus on in evaluating our non-interest expense trends is non-interest expense to average earning assets, which has improved from 2.15% in the third quarter of 2018 to 1.86% in this quarter.

We are pleased with our improvements in our credit in the third quarter, namely a lower provision level, as well as a decrease in total criticized net of the charge-off. Our non-accrual levels are still at a relatively low level of 0.49% of total LHI. Net charge-offs for the quarter are primarily related to energy and leverage, specifically $17 million in energy and $20 million in leveraged. Similarly year-to-date charge-off of $61 million are comprised of $32 million in energy and $24 million in leveraged. All of the quarter's charge-offs were related to existing problem credits that we've discussed in previous quarters.

Additionally, we experienced a meaningful decrease in total criticized levels in the third quarter and that's directly reflective of the actions taken over the past few quarters in actively managing each of these credit. Our total criticized as a percentage of total LHI remains low and dropped to 2.2% this quarter compared to 2.6% in the second quarter. For all criticized loan relationships, we continue to be engaged in forecasting additional paydowns in the fourth quarter. We had a meaningful drop in provision to $11 million from $27 million in the second quarter. Loans being charged off already had certain reserves allocated.

Earlier in the year, we expected a larger portion of provision in the first half of the year and our actions have translated into achieving that. There will still be revolutions to existing credits and there could be migration within the criticized book, but we do believe there are enough offsets in those forecasted recoveries of provisions for us to lower our full-year guidance. We continue to be focused on Curtis' [Phonetic] management of the problem credits primarily in leveraged and energy, to minimize downside impact. And we are actively monitoring all portfolios in light of macroeconomic factors.

Turning to the quarterly highlights. Our continued strength in linked quarter net revenue, despite the punishing rate environment that's resulting from our strong volumes in mortgage finance, which -- has continued to contribute in a meaningful way to the increase. First quarter and second quarter non-interest income had $8.5 million and $6.5 million related to a legal settlement, which was not recurring in the third quarter. And that was the main driver of the decrease on a linked quarter basis. We continue to have some noise in the loss on sale of loans line in non-interest income, which is primarily resulted from holding MCA loans longer, which increases the hedging cost and is offset in additional spread income.

This quarter, that line also included an additional increase reserve component related to a spike in early loan payoffs resulting from refinance activity. We are continuing to improve run rate on core operating expense items. Year-over-year, 8% increase in non-interest expense compared to prior year Q3, excluding ORE recoveries last year. Excluding the increases in marketing related to deposit cost and the increases in servicing related to impairment, the year-over-year as well as year-to-date comparisons are 4% to 5%, which again, is unprecedented in our history and represents a significant improvement in managing our core operating expenses.

ROE and ROA levels were improved in the third quarter as a result of the lower provision for loan losses. Our ROA levels will continue to be negatively impacted by the higher mortgage finance and liquidity balances. Loan loss provision levels will continue to be key to driving improved ROE.

Now I will turn to the outlook for the remainder of 2019. We're maintaining our guidance for average traditional LHI growth at mid-single digit percent growth. This is reflective of the growth we experienced earlier in the year and incorporates our current focus of positioning our balance sheet to be as strong as possible as we head into what could be a challenging point in this cycle. We're increasing our guidance for average mortgage finance growth to mid-to-high 30%s from low-to-mid 20%s. That takes into the consideration the additional growth so far this year and an expected strong Q4. Obviously, this is the lowest risk category for us, so we're happy to exploit the opportunities available with lower mortgage rates, even if it means temporary dilution to some of our performance metrics.

No changes to our MCA guidance of $2.5 billion for average outstandings. MCA will continue to benefit from the additional volumes with lower rate. We're increasing our guidance for average total deposits to high-teens percent growth from low-double digit percent growth, reflective of the DDA growth that we experienced in the second and third quarters. We're decreasing our guidance for NIM to 3.2% to 3.3%, that's down from 3.5% to 3.45%. The decrease is primarily -- the decrease was driven primarily by the earning asset shift we've experienced and we'll continue to have from the total mortgage-finance, which is relatively lower-yielding asset. While punitive to NIM, the added growth is very positive to net revenue and offset some of the impact from rate decreases.

Our guidance assumes no Fed changes in rates as the probabilities for those continue to move dramatically from week to week. However, it's important to understand how we believe rate cuts will affect us and we're focused on it in terms of net interest income, which will be negatively affected future rate decreases.

As I noted earlier, the decrease to net interest income could be 6% to 9% over the next 12 months assuming 75 basis points of additional rate cut. Our guidance for net revenue remains at high-single digit percent growth. Because of the lower level of provision in third quarter, coupled with continued relationship-specific strategies, our leveraged lending and energy portfolios were reducing our guidance for provision expense to high 60% to high 70% and that's down from mid to high 80%. Our guidance for non-interest expense remains at mid-to-single digit, mid-single digit to high-single digit percent growth.

As we've noted, we continue to feel very good about the slowing of our core operating expenses, but the impact of MSR impairment charges as well as the variable marketing costs have driven upward pressure on the range. Our guidance for efficiency ratio remains at the -- in the low 50%s.

Lastly, we will turn to our longer-term outlook. These are the right goals and we're committed to achieving them, but the timeline will be more challenging in the existing rate environment. As you know, the initiatives we have in place are focused on repositioning our balance sheet to be more stable through rate cycle, but certainly there can be variability at different points in that cycle. We are confident that we have the right initiatives under way for the long term. Historically, we have been very successful at repositioning as needed and we expect similar success this time. Keith?

Keith Cargill -- President and Chief Executive Officer

Thank you, Julie. We are committed to delivering an even more premier-differentiated client experience to our current business and private clients, while developing new best-of-class specialized industry verticals. Elevating our client experience delivery and opening new specialized industry businesses, will create untapped opportunities to attract clients in a more favorable ROE and self-funding categories, helping us overcome with growth, some of the shrinkage we continue to experience deliberately in our leveraged lending. Mortgage finance continues to give our Company a high-performance growth engine with essentially US government credit risk. This business allows us to grow net interest income despite late cycle challenges in pricing and structure and other core LHI categories. It also provides significant self-funding through the mortgage finance treasury management deposits. And the fee income from the mortgage finance business covers our cost of operating the business.

Beyond the success of the mortgage finance deposit growth, we have seen strong growth in core C&I treasury management deposits, as well as early growth in some of our new deposit verticals. In combination, the core treasury deposits and new deposit vertical funding has grown by over $1 billion so far in 2019.

Our final two deposit verticals launching in the first quarter of 2020 are expected to be the most significant new deposit growth initiatives of all. We are bullish on our deposit growth prospects for the next few years, as these verticals mature and our bankers and treasury management partners drive increased core treasury growth as well as cross-sell new deposit vertical products. It was most encouraging to see not only loan loss provision declined meaningfully but also to see a significant decline in criticized classified loans. The credit team, loan review team, relationship managers and their group heads, have all worked as one team for the past year to understand the loan portfolio at a deep, granular level and derisk the portfolio before an eventual economic slowdown sometime in the future.

Their hard work continues and we expect to deliver an improving trend for several quarters ahead. We are seeing significant improvement in process efficiencies and the resulting improvement in more responsive client service and lower core operating expense growth. We are working diligently and with confidence to deliver a great long-term investment for our shareholders and premier service and products for our clients.

Operator, if you would, let's please open the lines for Q&A.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Ebrahim Poonawala of Bank of America Merrill Lynch. Please go ahead.

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

Good afternoon, guys. I think the first question, Keith, just based on feedback I have received over the last one hour, would love to get a little more color on credit and how we should read you lowering the provisioning guide. Would love to get in terms of your comfort on migration trends and the leverage lending, the energy book, and just the risk of like things again surprising to the downside three or six months of. Now, if you could talk to that that would be helpful.

Keith Cargill -- President and Chief Executive Officer

Well, we're encouraged. It's early to declare victory, but we really believe we have a much deeper understanding, Ebrahim, of our portfolio and not just leveraged lending and energy. Then certainly [Phonetic] we had a year ago and it's taken a tremendous amount of our work by all the Group's I mentioned, our loan review team, credit team, our banker's group heads, everyone is really pitched in and it is most encouraging to me that we're seeing this -- this trend that's tipping down that's meaningful linked quarter. But we need to put two or three of these together, and I believe we will. It's -- it's taken a while to be confident that we really have our arms around the portfolio, but I believe we are in that kind of situation and things can happen on a given credit in given 90 days. So again, I'm not here to declare victory, but I do believe we're on the right path and we're going to see hopefully multiple successive quarters with the right trends not just one.

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

Got it. And is it fair to assume that the quarter-end included -- other banks have talked about their SNC exam having an impact. Is all of that reflected?

Keith Cargill -- President and Chief Executive Officer

It did include that. In fact, we had no surprises on the SNC exam. Our team was on top of it and so that came out just fine for us.

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

Okay. And just moving on to in terms of capital, when we look at TCE in the high 7%s, just talk to us in terms of how you're thinking about how low can capital ratios go or just your strategy around participation of the mortgage warehouse loans and how CECL, if at all may impact capital ratios toward the end of the year?

Julie Anderson -- Chief Financial Officer

So we talked about -- Ebrahim, I think we talked about earlier in the quarter that we are comfortable taking advantage of what we're getting with the warehouse growth. And so we're comfortable with doing additional participation. We ended the quarter participation that can -- participation commitments were a little over $1 billion, so we're comfortable with that. We want to make sure that we can continue to take good care of our clients

So we're comfortable with that TCE ratio that's comfortable for us. We're very comfortable with that. So we're not saying too much about CECL. I guess what I would say is, what we have said in the past for commercial -- commercially focused institutions like ourselves, we don't expect a material change in our overall -- our overall provisioning. So I think that we're comfortable with that.

Keith Cargill -- President and Chief Executive Officer

By the way, Ebrahim, that move and what we had in actual funded participations at second quarter-end versus third quarter-end was close to $0.5 billion. So we could have taken that on balance sheet, but we're being very disciplined to take care of clients without putting it all on balance sheet. And I think that's the right move. Had we put it on balance sheet, it would have been about a 23% growth linked quarter, but I think we're doing the right thing to have a strong business, but also to manage it and not let it all grow on balance sheet.

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

Got it. And if I can sneak in one last question. Demand deposit growth was extremely strong. Is that sustainable? Like do you expect to hang on to these balances as we look into the fourth quarter? And have we seen any early results from the one or two big deposit verticals that are either online or in the process of coming online?

Keith Cargill -- President and Chief Executive Officer

We're very encouraged about what we're doing with our deposit verticals and our core treasury efforts. Our bankers have done just as we ask and really taken their partners -- their treasury partners are out far more on calls and we're filling in some of the gaps in relationships where we only had loan relationships and that's really contributing long with our new deposit verticals. As I mentioned, just this year and nine months, were up over $1 billion in those two categories.

We don't want to drill down a lot at this point, but I think you can tell it's -- there is always seasonality that comes from our mortgage warehouse deposits and we experienced it in the second quarter and again in the third. But I wanted you to also hear about the north of the $1 billion growth that came from verticals and also just core treasury growth, which is awesome. They have alongside those seasonal balances.

Julie Anderson -- Chief Financial Officer

Hey, Ebrahim. Typically we can see some seasonality in the -- some downward impact from seasonality in our deposits in the fourth quarter and the first quarter.

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

Got it. And thanks for taking my questions.

Julie Anderson -- Chief Financial Officer

[Speech Overlap] and DDA.

Operator

Our next question comes from Brady Gailey of KBW. Please go ahead.

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

Hey, good afternoon guys.

Keith Cargill -- President and Chief Executive Officer

Hello, Brady.

Julie Anderson -- Chief Financial Officer

Hey, Brady.

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

So, I mean the mortgage warehouse and MCA combined, continue to perform really nicely here. I mean, it's up again off a strong 2Q. It feels like we're getting close to the levels where you start hitting concentration limits. I forgot exactly how you all look at it, but I know you have a limit out there. I mean as MCA and the warehouse continues to be robust and potentially grow from here, will most of those balances move into the participation program you have through other banks or is there is still capacity to let the balances grow on Texas Capital's balance sheet?

Keith Cargill -- President and Chief Executive Officer

We moved into the fourth quarter, while the volumes will be very good compared to most seasonally softer fourth quarters, I don't anticipate it being higher. And so, I don't believe that's going to impact this, Brady, in the fourth or first quarters. And as we grow the overall balance sheet between now and the second quarter next year, I think we'll be fine and in good shape and not have to lay off all of the growth once we get a couple of quarters down the road.

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

All right. And then one more on credit. If you look at non-performing loans, they were up -- they were pretty much stable, up a little bit linked quarter. The net charge-offs, obviously, would naturally reduce that. So maybe just talk about any sort of inflows into the NPL bucket in the quarter.

Keith Cargill -- President and Chief Executive Officer

There was one energy deal. And that -- that's the -- that was the bogey, and it got us slightly over, I think it was like $2 million higher, as I recall from prior quarter, overall on NPA still quite modest NPAs though.

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

Great. Thank you guys.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Julie Anderson -- Chief Financial Officer

Thanks.

Operator

Our next question comes from Brett Rabatin of Piper Jaffray. Please go ahead.

Brett Rabatin -- Piper Jaffray -- Analyst

Hey, good afternoon, everyone.

Keith Cargill -- President and Chief Executive Officer

Hello, Brett.

Julie Anderson -- Chief Financial Officer

Hi, Brett.

Brett Rabatin -- Piper Jaffray -- Analyst

Wanted just to go back to, Julie, the NII guidance and the 6% to 9% of downside for 75 basis points. Can you just talk about how you are modeling that in terms of the verticals for growing deposits, how mortgage -- the mortgage warehouse factors into that as presumably that declines, it would -- it would seem like you have a net benefit to the margin. Can you just walk through the modeling for how you're doing downside for Fed cuts?

Julie Anderson -- Chief Financial Officer

Sure. So, we're focused on net interest income, because you're right, there can be some variability in NIM with mortgage finance balances. I said we're assuming a 100% beta on the index deposits and 65% on the other interest-bearing, but that also assumes that the mortgage finance growth still continues to be pretty strong, not elevated, but certainly still strong over that four-quarter horizon.

Brett Rabatin -- Piper Jaffray -- Analyst

Okay. And then wanted to talk about the LHI growth for a second. As you overcome the declines in leveraged lending, I'm just thinking about like the growth path for the next year or so. I mean does that improve notably or can you give us any additional color on like kind of how you see that trending once you've gotten past running down some of the leverage book and then obviously, it's not growing energy as well?

Keith Cargill -- President and Chief Executive Officer

We're encouraged about a couple of new corporate verticals that we're looking at that are full-blown lending and deposit verticals. So, these would be separate from the deposit vertical initiatives we launched a year-and-a-half ago and we have a team that's close to us announcing that we will launch the first of those verticals. So we'll be able to talk about that in January. And I'm very optimistic that with that new vertical, with our -- some new talent we've been able to bring to the Company and our overall C&I business both in Houston and Dallas, that we're going to be able to more than backfill. It's just too early to give you that guidance for next year, but I'm very encouraged there will be even more diversified certainly with lower risk growth than what we experienced the last few years when we were growing leveraged lending. So I will have more for you in January, but we have yet another two corporate verticals we're contemplating to launch at some point in 2020, and between those three, I believe that we're going to have some good, solid, diversified, appropriate risk growth in our book.

Brett Rabatin -- Piper Jaffray -- Analyst

Okay. Great. Appreciate all the color.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Steven Alexopoulos of J.P. Morgan. Please go ahead.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Hi, everybody.

Keith Cargill -- President and Chief Executive Officer

Hello, Steve.

Julie Anderson -- Chief Financial Officer

Hey, Steve.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Wanted to start on the new margin guidance. Is my math correct, because the midpoint of the new guidance seems to imply a NIM in the 2.70% range for the fourth...?

Julie Anderson -- Chief Financial Officer

No, no, but we do expect NIM, I mean -- that's why we try to focus on net interest income obviously, but we do expect NIM with the continued success in mortgage finance, it could tick down, it would tick down in the fourth quarter compared to the third quarter. I mean that would also still -- that will also factor in the full extent of the of the September move. So -- but no backlog.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

So what is -- just so we're clear, what is the range that you expect them to come down in the final quarter?

Julie Anderson -- Chief Financial Officer

The range that we updated was the -- was the 3.25% -- 3.20% to 3.30%. It's the full year. That's the update for the full-year, 3.20% to 3.30%.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Okay. Just looking at where you started 2019, it seems to imply a pretty dramatic reduction in NIM coming again in 4Q. Like do you expect the pressure to be pretty consistent with what you reported this quarter?

Julie Anderson -- Chief Financial Officer

I think -- I mean obviously expect the fourth quarter to still be in the low 3%.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Okay, got you. Okay. Can you remind me, for your mortgage finance loans, they carry a lower yield in peers which are just in the mortgage warehouse business rate. First Horizon reported 5.3% yield. Just wondering why your yield is so much lower with just the mortgage warehouse business.

Keith Cargill -- President and Chief Executive Officer

We really focus, Steve, on the QM business. Now we have a little non-QM, but other other competitors are more comfortable with non-QM than we are. And so that's the primary difference.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Okay. Got you. Okay. And then just finally, I'm trying to make sense of this very strong deposit growth. I know Ebrahim asked the question, but when we look at non-interest bearing and savings deposit growth, why were they both so strong this quarter? I mean it was really off the charts growth.

Julie Anderson -- Chief Financial Officer

It is primarily from existing client, some related to mortgage finance and then some related to [Technical Issue] our core clients. It was primarily -- there were some -- there is also some -- Keith mentioned there was some impact from some of the vertical, but most of it was from existing clients.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Got you. And you said...

Keith Cargill -- President and Chief Executive Officer

[Speech Overlap] We grew so fast the last five years, we had some gaps, but we did not gather up the treasury relationship and so we've really been focused on that and it's bearing fruit. And it's really helping us along with the new verticals.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

And now that you have this liquidity, do you plan to keep the loan to deposit ratio below 100%?

Julie Anderson -- Chief Financial Officer

Yeah, we'll assess the liquidity levels that we have. Obviously, we've had some -- some outside success in the last couple of quarters in deposit generation. We've reduced what we're borrowing. That's still leaves us with quite a bit of liquidity so we will assess that. There is -- there will also be some seasonality and some of our deposits primarily DDA will see some seasonality in the fourth quarter. So we'll take all of that forecasting into assessment on what we're going to do with liquidity levels.

And we're really looking any way we can replacing higher cost funding. So like the brokered deposits over time, we're going to be in a better position to take that out and improve our NIM.

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Okay. Terrific. Thanks for taking my questions.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Julie Anderson -- Chief Financial Officer

Sure. Thank you.

Operator

[Operator Instructions] And our next question will come from Matt Olney of Stephens. Please go ahead.

Matt Olney -- Stephens -- Analyst

Hey, thanks for taking my question. I want to stick with the deposit discussion. And Julie, you mentioned downward pressure on deposit balances due to seasonality in the fourth quarter. If I look at the full-year guidance, I think, implies that the balances in the fourth quarter will drop pretty considerably by 9% or 10%. Can you just confirm that I'm thinking about that right for the fourth quarter deposit balance?

Julie Anderson -- Chief Financial Officer

We try to -- as you know, we finally confirmed with our guidance. So we do expect some seasonality impact on deposits. We would -- we try to set that guidance so that it is, it is conservative. I guess that's how I would leave it.

Keith Cargill -- President and Chief Executive Officer

And Matt, with the continued strong volume and warehouse along with that, it does help offset the normal seasonality on the deposit side too because you -- they're building their mortgage servicing book and so that helps keep it a little -- a little higher and more stable. But we also look at historical seasonality and we try to take what we know today, along with historical and give you a more conservative guidance.

Matt Olney -- Stephens -- Analyst

Got it. Okay. I think going back to, I think it was Brady's question previously, on the migration of loans from criticized into non-accrual. I think I see the migration that you mentioned Keith on the energy portfolio, but it also looks like there were some negative migration in the leverage lending book. Non-accruals were flat there, but there were still some higher charge-offs in the third quarter. Any color you could tell us about that book?

Keith Cargill -- President and Chief Executive Officer

Yeah, we really have been able to address those charge-offs in prior quarters and built that provision, which we all know was pretty hard on us in the first half of the year, but we are seeing the overall criticized classified tip down. And then within that, I really think we are seeing improvement in the classified. So it's not simply a matter of the criticized which we got on the radar in the first quarter with these deep dives we've been taking on our loan portfolio over the last four quarters, it's also the actual classified component that's very encouraging at this point. So, yes, there were a couple right at -- toward quarter-end, but the overall trend of migration, we think is favorable going into the fourth.

Matt Olney -- Stephens -- Analyst

Got it. Thank you.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Michael Rose of Raymond James. Please go ahead.

Michael Rose -- Raymond James -- Analyst

Hey, thanks for taking my questions. I wanted to go back to something you said earlier in the call around expenses, Julia. I think you said the way you guys are looking at it now is expenses to average assets. Is that correct. And if so, do you have kind of thoughts, it's obviously come down, but you have thoughts kind of around how we should think about that moving forward?

Julie Anderson -- Chief Financial Officer

No, I'm not giving guidance on that. That is something that, that Michael -- that's a thoughtful question and we will certainly think about that. I guess we just -- you know as we struggle with trying to explain how we really are doing a much better job on our core operating expenses, which is non-interest expense to average earning assets. It just seems like a more representative metric of our progress. So -- and we haven't given any guidance on that. I mean I think we still -- we feel comfortable that that's going to continue to improve. But we haven't given any specific guidance on.

Keith Cargill -- President and Chief Executive Officer

Excuse me, Julie.

Julie Anderson -- Chief Financial Officer

Sure.

Keith Cargill -- President and Chief Executive Officer

I might add, Michael, over time this gap between efficiency ratio as Julie's described measuring it and the traditional way we measure it, they will -- those lines will cross or meet and that will be as we replace some of these marketing expense deposits. Those marketing expenses are what really throw us and make it hard to give you metrics that are comparable to other peers. But again, that's one of the key things we're working on, is lowering overall cost of funding, including those marketing expenses.

Michael Rose -- Raymond James -- Analyst

Okay, that's helpful. And then maybe just going back to the margin, not to beat a dead horse here, but I think the guidance you said doesn't include any future rate cuts this year. Looks like the futures are implying we get one -- one month LIBOR is already down 14 basis points this quarter. Is that kind of all -- at least the drop in LIBOR, is that contemplated in the outlook and why perhaps the range is so big? And then if we do get a rate cut in October-December, would the dynamics around the stats that you quoted before in terms of the impact on NII, would that shift at all? Thanks.

Julie Anderson -- Chief Financial Officer

So what would already be factored into the guidance is where we ended the quarter, right. The loans how they had repriced this level at the end of the quarter that largely included in the guidance. And then what we've assumed in that, the sensitivities that I gave you what we've assumed is that there is another 75 basis points we've assumed that could be [Indecipherable] in October, move at December and then again in June for that 12 months -- that 12 months of [Indecipherable].

Michael Rose -- Raymond James -- Analyst

Okay. that's -- yeah, that's...

Keith Cargill -- President and Chief Executive Officer

And then as we mentioned, of course, you have 100% beta on the institutional funding and then we are projecting a 65% beta on our other interest bearing.

Michael Rose -- Raymond James -- Analyst

Okay. Maybe just one more separate question on energy. I know it's been a topic of a lot of calls. So far, you guys spoke last year, last summer that you guys had seen some issues back then and the thought process was you were getting ahead of it and we're going to be perhaps first out of the chute. Do you still kind of feel that way? And maybe just as it relates to energy, why do you think we're seeing the issues that we're seeing now when oil prices are still pretty healthy? Thanks.

Keith Cargill -- President and Chief Executive Officer

I do think we're ahead of it as anyone. And I say that because the market -- the capital market is just kind of locked up right now and that is causing some of the stress on some of the energy companies that were not geared to be full blown operating energy companies. So it was more of a acquisition play when they thought prices were low and new capital came into that space with the intention of proving up some of the unproven property that they acquired with drilling programs. And now they realize they're going to have to be generating drilling programs that are cash flow positive, because the capital markets are an active and so they don't have access to the capital. They have robust drilling programs. So I think it's just in that state where it's difficult to call, how long we might be in this mode of them working their way through it. But I do think we are more on top of the portfolio certainly in many banks and we had to be, because it's something we've done in Texas Capital our entire history. But most of us are involved in the credit process at the company have done this 35 years, 40 years. These cycles, every single one, is unique and you learn from each one.

But you have to be so aggressive in looking at each deal and each operator. We're much more thoughtful now about looking more carefully at drilling plans, Michael, because some of the again, operating know-how with all that capital flowing in, was getting pushed to do some outlying drilling to try and elevate price of the overall property. and by doing that, they took some more risks than they should have. I think we've identified who those are and it's more a matter with the rest of the portfolio just grinding through this period where they have challenging access to capital. And I mean challenging access to any capital because as banks, we're looking so carefully at our borrowing bases, that we are taking a lot of the cash flow that they had hoped they'd be able to deploy in new drilling activity. But in order to be sure we keep our borrowing bases in line, we're having to capture more of that cash flow on debt paydowns. So it's not simply a matter of equity capital that's kind of in a wait-and-see mode, but also debt capital that they're having a challenging time to fund.

Michael Rose -- Raymond James -- Analyst

Very helpful. Thanks for all the color, Keith.

Keith Cargill -- President and Chief Executive Officer

You are welcome.

Operator

Our next question comes from Jon Arfstrom of RBC Capital Markets. Please go ahead.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thanks, good afternoon.

Keith Cargill -- President and Chief Executive Officer

Hello, John.

Julie Anderson -- Chief Financial Officer

Hi, John.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Hi. A couple of near-term and then longer-term question, but earning assets are a bit up quite nicely in Q2 and Q3, and I'm just curious if you feel like Q4 earning assets can be up again?

Julie Anderson -- Chief Financial Officer

It depends on warehouse volumes. And so we think they will be good. I don't know that they're going to be up, because fourth quarter is seasonally a little slower. So,I don't -- Keith I wouldn't say that would be up.

Keith Cargill -- President and Chief Executive Officer

We are still overcoming on the net growth side, Jon. The bleeding down is shrinking and derisking of our balance sheet was to leverage lending portfolio. And so actually, we're really quite optimistic that we will have an even bigger paydown in leveraged lending than we had on average in the last three quarters. So if that occurs then you just have to make up that $100 million plus roughly in order to get back to zero. And so I think it will be a modest growth if any growth in the fourth quarter. But I don't think that's -- you have to drill down to see if that's good. I think it may be good because we are derisking our balance sheet.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Yeah, OK, OK. That makes sense. It's just another way to think about the margin and NII equation. And my assumption would be flat to down and I just want to make sure I'm thinking about that correctly.

Julie Anderson -- Chief Financial Officer

I think that...

Keith Cargill -- President and Chief Executive Officer

Think you are.

Julie Anderson -- Chief Financial Officer

Yeah.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. On the provision, appreciate the fact that, that came down, but it's still -- there is still about a $10 million swing factor in terms of the high and low level of range. Just curious if you're leaning one way or the other? I know that's -- a lot of this kind of depends on what happens at year-end, but how are you feeling about it right now?

Keith Cargill -- President and Chief Executive Officer

Well, I can tell you I'm leaning more to the low and some of my cohorts, a little more to being safe on the high. But I'm -- I think collectively we agree on this range and I'm still hopeful it'll come in the high 60%s or low 70%s. But I think our team feels like we certainly can come in within the range.

Julie Anderson -- Chief Financial Officer

There is a small group in the room and it is probably 50-50. So we all agree. Again, we all agree that we feel comfortable with the rate.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay, all right. And then I hate to go back to this, but the 6% to 9% decline in NII on the 75 basis points, the first part of the question is what are you assuming in terms of growth? Is this just a static balance sheet or you are assuming like a normal course of business to get to that number?

Julie Anderson -- Chief Financial Officer

Our normal forecasted 12-month balance sheet. So it would assume that warehouse is still pretty strong, because we wouldn't see any reason why it wouldn't stay strong. Again the leverage, some of the continued paydown in leveraged, but as Keith said in a couple of quarters from some of these new areas, we would expect some growth. So it's our normal 12-month forecast.

Keith Cargill -- President and Chief Executive Officer

And again even -- even if the market and we anticipate the market next year, Jon, being somewhat softer than this year, we won't be doing linked quarter laying off of $0.5 billion of the warehouse volume. And so that gives us such shock absorber capability as we manage, how much we take on balance sheet, so that if we do see some -- some backing off slightly next year on mortgage warehouse volumes, we still feel good about being able to take market share and grow it slightly.

Julie Anderson -- Chief Financial Officer

And on the deposit side, it does include some more deposits from some of the new vertical. More meaningful -- more meaningful than we've seen in the last couple of quarters.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. And then the last thing, maybe this is an obvious question, but I'm assuming that the last cut would take the biggest bite. So for example, if we get only 25% and the Fed has done, that's not a terrible outcome for you, but when we get to 50% or 75% that's where the biggest bite comes in terms of the NII guide?

Keith Cargill -- President and Chief Executive Officer

I don't necessarily think so. I'm very optimistic about our deposit trends and our new verticals, but also just our core treasury trends, it won't be easy. And we're going to have to be better than we've ever been, even though we've been really good this year on core expenses. I really feel good about what we can do overall, on our expense and efficiency next year. So, yes, on the spread, it won't be easy, but I don't think it will be as challenging as certainly if we hadn't done these initiatives two years ago and be into the process now with launching these biggest deposit initiatives in the next quarter or so.

Julie Anderson -- Chief Financial Officer

Hey, Jon. Something else that's important to remember is what happened with our deposit on the way up. We moved up really fast with a really high beta, which means we have a lot more to come down. So the index deposits alone will continue to come down and then in addition, as we continue to replace some of the higher cost deposits with some of these new verticals. So we feel like we have a lot more runway on the deposits coming down.

Keith Cargill -- President and Chief Executive Officer

But we're not naive. I mean it's a meaningful headwind and we're certainly doing our planning around expenses and all accordingly.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. All right, thank you.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Brad Milsaps of Sandler O'Neill. Please go ahead.

Brad Milsaps -- Sandler O'Neill & Partners -- Analyst

Hey, good evening.

Keith Cargill -- President and Chief Executive Officer

Hello, Brad.

Julie Anderson -- Chief Financial Officer

Hey, Brad.

Brad Milsaps -- Sandler O'Neill & Partners -- Analyst

Hey, Julie. Just to follow up on the warehouse. Just curious of the 26 basis point decline yield on the warehouse this quarter, how much of that relates to volume discount versus just to move in LIBOR? I just want to get a sense, you know as volumes may weaken as you move into 2020 a little bit versus the high this quarter, kind of can you recover any of that lost yield on the warehouse?

Julie Anderson -- Chief Financial Officer

I can't answer that. I mean...

Keith Cargill -- President and Chief Executive Officer

Some of it's driven by volume discounts with these top clients and so they've been coming in with such robust volumes, that certainly has contributed, but it's mostly LIBOR.

Julie Anderson -- Chief Financial Officer

Yeah.

Brad Milsaps -- Sandler O'Neill & Partners -- Analyst

Okay, that's helpful. And then I'm sorry if I missed this relatively small numbers, but there was also an uptick in the loans 90 days past due kind of ex the impact of premium finance customers. Just kind of curious to me, any additional color there on kind of what the driver was?

Julie Anderson -- Chief Financial Officer

No, just a couple of bigger deals, but not ones that we feel uncomfortable with. There's some documentation things, things that didn't happen, that didn't get done. So nothing that's a big consequence that we're concerned about migrating to a category.

Keith Cargill -- President and Chief Executive Officer

But we're not happy it didn't done...

Julie Anderson -- Chief Financial Officer

That's correct.

Keith Cargill -- President and Chief Executive Officer

On the documentation.

Julie Anderson -- Chief Financial Officer

That's correct.

Keith Cargill -- President and Chief Executive Officer

We don't have concern about the credits.

Brad Milsaps -- Sandler O'Neill & Partners -- Analyst

Got it. All right, thank you guys.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Peter Winter of Wedbush Securities. Please go ahead.

Peter Winter -- Wedbush Securities -- Analyst

Hi, I just want to follow up on the expense question. I know you're not going to give specific guidance, but can you just talk about big picture, maybe some opportunities to maybe lower the expense growth rate next year?

Keith Cargill -- President and Chief Executive Officer

We're looking at all things that we can leverage, including the technology investing we've been doing here for the last three years. And that is beginning to show some opportunity where we can, in fact, hire fewer new people, that's been the case this year. I think it will continue to give us opportunity to leverage that technology as we go into the new year. We're doing some really incredible work around process reengineering and finding again that we can list the value of our people that have been doing work not as value payable as they are capable of doing, but automating some of the things that are more rudimentary. And we're looking at deploying bots to give us 24/7 capabilities to do some of that rudimentary work and looking at a number of different opportunities. So thankfully, we have worked hard to get our technology grid in good shape up-to-date over the last three years, and now we're able to begin to do things that are more of a contributor to really giving tools to our people that will substantially help their productivity. And I'm encouraged we'll be able to take yet another really good step this next year being able to hire fewer and continue to hire even higher quality people each year and we've hired the finest quality people we've ever hired this year.

So the Company is still just an amazing place on the ability to attract great talent and I think as we give our people more technology tools to use, that's going to improve productivity.

Peter Winter -- Wedbush Securities -- Analyst

Okay. And then just on this long-term outlook, I was just wondering what type of time frame are you thinking about reaching these goals? And secondly, with the net charge-offs of 20 basis points to 25 basis points, is that kind of the average through a range -- through a cycle?

Julie Anderson -- Chief Financial Officer

Yeah, absolutely. That's the recycle. So obviously year-to-date this year and last year, that were higher. But if you look at some of our previous years, we hit 7 basis points, 8 basis points, but they were seemingly low. So that's through a cycle. You know, Peter when we put these on in January, we were talking about a three-year. It was under our three-year planning horizon. I think what has happened with rates was not what -- was not what we saw in January. So that's why I said, I think it's going to take a little bit longer and I don't know exactly what that looks like. We're in the midst of our -- of updating our three-year, our three-year planning cycle, and so we will try and give a little bit more -- a little bit more color on that in January when we update our moving due 2020 guidance and kind of update for the three years.

Keith Cargill -- President and Chief Executive Officer

And obviously we'll have some better visibility on this rate situation.

Julie Anderson -- Chief Financial Officer

Right, exactly.

Keith Cargill -- President and Chief Executive Officer

Because that's what's primarily is driving that.

Julie Anderson -- Chief Financial Officer

Absolutely.

Peter Winter -- Wedbush Securities -- Analyst

Okay. And then my -- just my last question. Just -- you had mentioned [Indecipherable] there shouldn't be much of a change given the commercial short-term nature of the portfolio. I'm just assume -- I'm just wondering does that include, I guess, a fairly positive economic outlook as well?

Julie Anderson -- Chief Financial Officer

Yeah. You know, one of the things that I've said is that I think that, well, I think, commercial -- commercially focused things are not going to have dramatically different reserve level. I think that the introduction forecasting into that is going to drive more volatility. So I don't know that it's going to be overall higher level, but certainly it could drive more volatility on a quarter-to-quarter and year-to-year basis.

Peter Winter -- Wedbush Securities -- Analyst

But right now, you guys still have a fairly positive economic outlook?

Keith Cargill -- President and Chief Executive Officer

We do. Texas is doing quite well.

Julie Anderson -- Chief Financial Officer

[Speech Overlap].

Keith Cargill -- President and Chief Executive Officer

And there are lots of mixed signals, but overall, we're positive on the economy.

Peter Winter -- Wedbush Securities -- Analyst

Great. Thanks for taking my questions.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question is from Jennifer Demba of SunTrust. Please go ahead.

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Thank you. Keith, do these results include -- sorry, back to credit for just a second. Do the results you reported include a redetermination period for the E&P lines?

Keith Cargill -- President and Chief Executive Officer

That is under way and so it is something that takes 60 days or so, Jennifer. So some of that has been incorporated, but it's not been completed. We don't anticipate any significant change, but that is not put to bed.

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Okay. Okay. And what is -- you're still contracting your leverage loan book through the end of this year, what does leveraged lending look like for TCBI going forward? What will you be doing differently than previously?

Keith Cargill -- President and Chief Executive Officer

Well, we really, before we started this process, talked and had many meetings to talk about the business we want for the long run, and the business we want in this space for the long term are what we call our trophy-sponsored clients, and of course, high-quality single-run enterprises that happened to also fall into that leveraged lending bucket.

So we're not inclined to take on new sponsors at the pace we did over the last five years. We like the sponsors that we've had a history of 10 or 15 deals with over the years, understand how they behave when portfolio companies don't go exactly as due diligence and plans suggest, and so we do like the business. We just believe we were too successful and brought them and took too much market share with some sponsors that we just didn't have the history with. And some of the hiccups we had on deals were with these newer sponsors we've not had the history with. So that is the approach we're taking. We certainly want to take great care of our longtime quality clients here in the PE space and have a great track record, think like operators, not just financial engineers. And we have a wonderful core client base. Over the course of the next year or so, we likely will still tip it down some. It won't be at the same pace, we're not [Indecipherable] for a 30% top run-off in 2020, it might be something closer to 10%. But just fine-tuning it, we are not ready to give all that detail until January, but that's directionally where we're headed at this point.

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Last question. Keith, did the escrow team have any impact on third quarter results?

Keith Cargill -- President and Chief Executive Officer

I'm sorry, Jennifer. I was reading a note someone gave me.

Julie Anderson -- Chief Financial Officer

The escrow team.

Keith Cargill -- President and Chief Executive Officer

The escrow team, will they have any -- do they have any major impact? No.

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Impact on third quarter results?

Keith Cargill -- President and Chief Executive Officer

No, they haven't. And they won't have their special black box that they've been working with our IT team on for the larger, more complex clients they will be bringing on board until the first quarter. So they have several clients that we can take on and handle very capably, but those that are in more complex businesses where we need to have the best piece of technology, much like we understood 13 years ago we needed to build in mortgage finance, mortgage warehouse. We're doing the same type of thing where we're really listening to the clients and building something that will be a great tool for us and the client in those cases where we have larger, more complex clients in escrow. So they will have some impact in the fourth quarter, but it should be significantly accelerating as we get into next year.

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Thank you.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Brock Vandervliet of UBS. Please go ahead.

Brock Vandervliet -- UBS -- Analyst

Thanks. I was just wondering if you could kind of clarify the math on the energy credit flows. So energy NPA is $61 million in Q2, energy net charge-off $16.5 million for Q3. I would think that would get to therefore, NPAs say $46 million. Your NPAs at the end of Q3 were $63 million. And does that imply a new energy NPA of $17 million or $18 million or no?

Keith Cargill -- President and Chief Executive Officer

That's exactly what it was, Brock.

Julie Anderson -- Chief Financial Officer

Yeah, we mentioned earlier on the call that the upticking total non-accruals was one energy deal.

Brock Vandervliet -- UBS -- Analyst

OK, got it. All right. And has that been reserved or is that a new credit?

Julie Anderson -- Chief Financial Officer

Any time it goes to -- any time a loan goes to non-accrual there no impairment analysis done, and the appropriate reserves would have been put on it.

Brock Vandervliet -- UBS -- Analyst

Okay. All right. Got it. Understand the math now. Thank you.

Keith Cargill -- President and Chief Executive Officer

You're welcome.

Operator

This concludes our question-and-answer session. I will turn the call back over to President and CEO, Keith Cargill for closing remarks.

Keith Cargill -- President and Chief Executive Officer

I'd like to thank all the call participants for tuning in and we appreciate your interest and your support. Have a good evening.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Heather Worley -- Senior Vice President and Director of Investor Relations

Keith Cargill -- President and Chief Executive Officer

Julie Anderson -- Chief Financial Officer

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

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

Brett Rabatin -- Piper Jaffray -- Analyst

Steven Alexopoulos -- J.P. Morgan Securities -- Analyst

Matt Olney -- Stephens -- Analyst

Michael Rose -- Raymond James -- Analyst

Jon Arfstrom -- RBC Capital Markets -- Analyst

Brad Milsaps -- Sandler O'Neill & Partners -- Analyst

Peter Winter -- Wedbush Securities -- Analyst

Jennifer Demba -- SunTrust Robinson Humphrey -- Analyst

Brock Vandervliet -- UBS -- Analyst

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