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F.N.B. Corp (NYSE:FNB)
Q3 2019 Earnings Call
Oct 17, 2019, 8:15 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the F.N.B. Corporation Third Quarter 2019 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]

I'd now like to turn the conference over to Matt Lazzaro, Manager of Investor Relations. Mr. Lazzaro, please go ahead.

Matt Lazzaro -- Manager of Investor Relations

Thank you. Good morning everyone and welcome to our earnings call. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements and non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for our reported results prepared in accordance with GAAP.

Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in our presentation materials in our earnings release. Please refer to these non-GAAP financial measures and forward-looking statements disclosures contained in our earnings release, related presentation materials and our reports and registration statements filed with the Securities and Exchange Commission and available on our corporate website.

A replay of this call will be available until October 24, and the webcast link will be posted to the About Us, Investor Relations & Shareholder Services section of our corporate website.

I will now turn the call over to Vince Delie, Chairman, President and CEO.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Good morning and welcome to our earnings call. Joining me this morning are Vince Calabrese, our Chief Financial Officer; and Gary Guerrieri, our Chief Credit Officer.

Today I'll provide highlights of F.N.B.'s exceptional third quarter results, which reflect record earnings of over $100 million and earnings per share of $0.31. I'll then discuss some exciting developments related to our long-term strategies that will enhance the F.N.B. brand and support our future growth objectives. Gary will discuss asset quality and Vince will review the financial results and provide an update for the projected CECL adoption impact.

Third quarter EPS of $0.31 is another example of F.N.B.'s long standing ability to execute our organic growth strategy as we continue to have success across broad geographies. This quarter's performance represents EPS growth of 7% on a linked-quarter basis. Tangible book value per share increased 14% year-over-year to $7.33, as the pace we build capital continues and is consistent with our capital management strategy. Even with this higher capital position, return on tangible common equity was again a solid level of over 17% and the efficiency ratio equalled 54%.

Looking across the footprint [Phonetic] spot loan growth was 9% on an annualized linked-quarter basis, driven by continued commercial growth of 8% and consumer growth of 11%. This was led by very strong commercial production in F.N.B.'s Pittsburgh, Cleveland, Baltimore and Washington, D.C. markets.

In the Carolina region, Charlotte, Raleigh and Eastern North Carolina exceeded expectations this quarter and are generating meaningful commercial activity this year. On the deposit side, we had growth of over $1 billion in interest-bearing demand deposits and 9% annualized growth in non-interest-bearing deposits. As I mentioned earlier this year, growing low cost deposits through household acquisition and deepening commercial relationships has been a focus of not only the management team, but the entire organization, as the loan-to-deposit ratio further improved to 94% at September 30 with a more favorable funding mix.

We continue to be laser focused on generating non-interest bearing and transaction deposit growth, given the current interest rate environment and the impact of margin pressure. Even when these balances have declined for the industry, we have continued to grow organically. We attribute the successful execution of our strategy that focuses on expansion into higher growth markets along with infrastructure and technology investments.

Looking at the 2019 FDIC market share data, we saw market share gains across most of our major metro regions. F.N.B. is now ranked in the top 10 of retail deposit market share in seven MSAs across our footprint, and we've gained substantial share in Cleveland, Baltimore and the Piedmont Triad compared to 2018. Looking specifically at the Carolinas, we continue to drive organic growth with market share gains in Charleston, South Carolina, Charlotte, Greensboro and High Point and Winston-Salem.

On an operating basis, non-interest income increased 15% year-over-year with sizable contributions from mortgage banking capital markets and wealth management. Capital markets and mortgage banking provided meaningful contributions to non-interest income at $8.7 million and $9.8 million. This represents a year-over-year increase of over 70% for capital markets and over 60% for mortgage banking. We are pleased with the growing contributions these business units have had over the past few quarters with significant increases from our newer markets in the Mid-Atlantic and Southeast.

The efficiency ratio was again solid at 54%, as expense control remains a focal point, particularly given the current interest rate environment. We remain focused on our credit culture as evidenced by favorable performance in asset quality. For more details, I'll turn the call over to Gary to comment on our asset quality metrics. Gary?

Gary L. Guerrieri -- Chief Credit Officer

Thank you, Vince and good morning, everyone. We had another quarter of positive credit results with our loan portfolio continuing to perform in a stable and consistent manner, further improving our position on already solid levels. GAAP results were favorable for the quarter marked by improved levels of delinquency that ended September down 4 basis points to stand at 91 bps, while NPLs and OREO also trended favorably during the quarter down 3 bps to 52 basis points. Total net charge-offs remained flat at 11 basis points annualized with an ending reserve position of 84 basis points. We are very pleased with these solid levels and the overall positioning of the portfolio as we remain at multiyear lows.

I'll now walk you through the quarterly details for the originated and acquired portfolios. Turning first to the originated portfolio, delinquency ended the quarter flat at 66 basis points with a long-term trend continuing to move in a favorable direction. NPLs and OREO further improved during the quarter to stand at a solid 56 basis points, 5 bp reduction on a linked quarter basis, which was driven by healthy OREO sales activity. Originated net charge-off levels for the third quarter remained consistent with Q2, ending September at a solid $5.3 million or 11 basis points annualized. On a year-to-date basis, net charge-offs totaled $15.4 million, also standing at 11 bps annualized. Provision expense for the quarter totaled $10.5 million and adequately covered net charge-offs and organic [Phonetic] loan growth, bringing our ending reserve position to 95 basis points.

Let's now review some results for the acquired portfolio, which stands at $3.2 billion at quarter end. Our credit results remain consistent, as this book continues to perform in line with our expectations. Contractual delinquency levels continue to trend favorably, decreasing $9 million on a linked quarter basis to stand at $78 million at the end of September. On a year-over-year basis, past dues continue to reduce down by $51 million, representing a 40% reduction, since September of 2018. The acquired reserve ended the quarter at $4.7 million and was up only slightly over the prior quarter.

In closing, we had another solid quarter of positive credit results marked by consistent and stable performance in the portfolio, which remains favorably positioned entering the final quarter of 2019. We will continue to execute our disciplined credit and lending decisioning processes as our banking teams seek out the highest quality lending opportunities to support our growth objectives and that fit our targeted risk profile and asset mix. This complements our risk management philosophy of proactively and attentively managing risk, as we remain focused on strategically positioning the portfolio in this later stage economy. Looking back on the year, we are very pleased with our performance and we look forward to finishing out the year in a solid position. I will now turn the call over to Vince Calabrese, our Chief Financial Officer for his remarks.

Vincent J. Calabrese -- Chief Financial Officer

Thanks, Gary. Good morning, everyone. Today, I will discuss our financial results for the third quarter, comment on our 2019 remaining outlook and provide an update on CECL. As noted on Slide 3, third quarter operating EPS totaled $0.31. This represents a 7% increase to both the prior year quarter and second quarter results. Our results for the period reflect the continued execution of our strategies as demonstrated by building our capital position with the TCE ratio of nearly 7.5%, leveraging our geographic expansion by generating consistent organic growth in loans and deposits and increasing the contributions from our fee-based businesses and sustaining favorable asset quality throughout the cycle.

Let's start with the balance sheet for the quarter. Looking at the average quarterly balances on Slide 6. Total loans were relatively flat compared to the prior quarter, reflecting sales of residential mortgage loans in both the second and third quarters. Looking forward, I think it's important to focus on the spot growth compared to last year and where the balance sheet is positioned today. On a year-over-year basis, spot commercial loans and leases were up 7%, reflecting a 19% increase in C&I loans and 20% growth in commercial leases. In consumer lending, we saw an increase of 3% year-over-year, which is impacted by mortgage loan sales amounting to roughly $250 million.

Compared to the second quarter of 2019, average deposits increased 4% annualized, primarily due to 8% growth in interest-bearing deposits and 9% growth in non-interest-bearing deposits, partially offset by a planned decrease in time deposits. As Vince noted, our deposit growth remains a focus for us, building on our commercial and consumer relationships as well as benefiting from seasonal growth in business deposit balances.

Let's now look at non-interest income and expense on Slides 8 and 9. Non-interest income reached a record $80 million, increasing 7% linked quarter, primarily due to significant growth in mortgage banking and insurance and another near record level for capital markets. Mortgage banking income increased $2.1 million, driven by normal seasonal increases and downward movement in interest rates, as production volume increased 25% over last quarter.

Insurance revenues increased $1.7 million with continued organic commercial growth and benefit from new business in the Mid-Atlantic and Carolina regions. Capital markets was again at very good levels, experiencing year-over-year growth of 71% with solid contributions from elevated activity and interest rate swaps, international banking and syndications.

Turning to Slide 9. Non-interest expense increased $2.5 million compared to the second quarter, primarily due to a $3.2 million charge from a third quarter renewable investment tax credit transaction. Related renewable energy investment tax credits were recognized during the quarter as a benefit to income taxes. On an operating basis, salaries and employee benefits expense decreased $0.7 million or 0.7%, and occupancy and equipment expense was essentially flat. This reflects our efforts to manage expenses company wide, as well as benefits from our ready program.

Looking at revenue on Slide 7. Net interest income was flat compared to the second quarter, as solid loan and deposit growth was mostly offset with lower asset yields on loans tied to one-month LIBOR, which declined 38 basis points from 2.40% at the end of June compared to 2.02% at the end of September. The resulting net interest margin was 3.17% compared to 3.20% in the second quarter, primarily due to the downward move in benchmark interest rates. While we are never pleased with net interest margin compression, we feel good about the relative performance, given challenges presented by the volatile interest rate environment that existed throughout the quarter.

Now I'd like to turn to our guidance for the remainder of the year. Overall, our bottom line EPS expectations are unchanged from January as we expect to mitigate net interest income pressure with better-than-expected non-interest income and provision expense. As you may recall, last quarter we updated our guidance for net interest income to end up closer to flat on a year-over-year basis, which included a different rate forecast and what we experienced during the third quarter. The current Bloomberg Consensus Economics Forecast is calling for one additional fed move in 2019, which has an impact to net interest income next quarter relative to our expectations in July. We would expect the margin to remain under pressure if current forecasted cuts materialize in 2019. And for net interest income to decline in the low single digits for the full year of 2019.

We're very pleased with the performance of our fee-based businesses, and current pipelines indicate a healthy fourth quarter. We now expect full-year non-interest income to grow in the mid-to-high single digits as mortgage banking and capital markets continue to exceed expectations from earlier this year. Given our asset quality trends. We now expect provision to be $50 million to $55 million and our expense outlook is for expenses to be down year-over-year. The success in the key fee-based business segments highlight the importance of diversifying revenue sources beyond spread income.

Lastly, we expect the full-year effective tax rate to be around 18%. Overall, we are very pleased with the financial performance this quarter and believe we are on track to meet our bottom line guidance for the year even in a challenging interest rate environment.

Lastly, I'd like to provide an update on the expected impact of adopting CECL in 2020 as our cross-functional teams continue to make good progress on our implementation efforts.

Beginning on Slide 10, we show the estimated day 1 increase to our allowance for credit losses of 25% to 35% for the originated loan portfolio. The related capital impacts are expected to range from 11 basis points to 15 basis points of TCE and 14 basis points to 20 basis points of CET1 regulatory capital on a fully phased in basis. While originated and acquired loans are treated the same on day 2, we felt that it was important to bifurcate the originated and acquired portfolio day 1 impacts for this presentation, since day 1 capital is only impacted by the originated portfolio.

Turning to Slide 11. The day 1 CECL allowance on the acquired portfolio is estimated to be $65 million to $75 million. The CECL transition on the acquired portfolio result in a balance sheet gross-up of loans and allowance with no capital impact. Once the day 1 CECL allowance is established on the acquired portfolio, the remaining credit and non-credit marks of $115 million to $135 million on these loans is accreted into interest income prospectively over the remaining life of the portfolio. The recognition of this accretion is similar to our current process, except that the remaining marks or discounts are maintained at the loan level as opposed to loan pools.

The estimated increase to our allowance is driven by the fact that the allowances must cover expected credit losses over the estimated life of the loan portfolios, considering forecast of future economic conditions. These estimates are still subject to change based on continuing work on the models, macroeconomic conditions and interest rates at the time of adoption and the size composition and credit quality over the loan portfolio. We will continue to evaluate and refine the results of our loss estimates until implementation in 2020. As you can see on the slides, the estimated day 1 capital impact to our existing capital ratios is manageable and doesn't impact our capital management strategies.

Next, Vince will give an update on some of our strategic initiatives in 2019.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thanks, Vince. Now I'd like to focus on our progress regarding key strategic initiatives, since our last call. In our consumer bank, we continue to focus on optimizing delivery channels. F.N.B. will be deploying a new interactive website in 2020 to engage and better serve our customers. We are utilizing data analytics to improve our customers experience and better align products and services with their needs. We are keeping pace with enhanced technology and expect to be a top tier provider of these services.

Regarding our physical delivery channel, we continue to execute our established ready program to optimize our branch network, which includes consolidation and expansion opportunities in higher growth markets. We recently announced plans to develop additional de novo locations in the D.C. Metro area; Northern Virginia; Charlotte, North Carolina; and Charleston, South Carolina, which will further enhance our retail strategy and support our corporate banking efforts in these attractive markets.

Earlier this month, F.N.B. announced $150 million share repurchase program that runs through the end of 2020. The Board of Directors unanimously approved this program to provide incremental value to our shareholders. This share repurchase program demonstrates our confidence in F.N.B.'s business model, as well as our future expectations for continued increased capital generation. Our Board's philosophy is to prudently return capital to shareholders. This is evident in our commitment to our dividend program, which has returned over $1 billion over the past decade.

Given the Company's continued growth in earnings and higher capital levels, we have flexibility relative to our capital management plans with a dividend payout ratio under 40%. We have been able to lower our payout ratio by executing strategic acquisitions, enabling F.N.B. to take out cost, gain scale and grow revenue faster on an organic basis, all while maintaining an attractive dividend.

In the past, we have emphasized our capital management strategy, and we are very pleased with our progress and the opportunities this presents for our shareholders. Over the past three years, we have demonstrated our ability to drive organic growth and execute our proven business model, as we have diversified geographically and expanded products and services. This diversification will allow us to support our long-term growth objectives, while maintaining our underwriting standards through the entire risk cycle. Given our improved capital position, we will evaluate the optimal methods to deploy capital, that results in increased shareholder value, which may include dividends, buybacks, as well as other strategic investments, that provide attractive returns.

One key element necessary for F.N.B. to continue to deliver performance for our shareholders is our commitment to our employees. I am pleased to share that F.N.B. was also included for a ninth consecutive year on the 2019 Best Places to Work in Western Pennsylvania list, presented by the Pittsburgh Business Times. This accolade builds on the Company's recognition as a top workplace in Cleveland for the fifth consecutive year. The recognition from these publications is a testament to our culture and what we most, our people.

Before turning the call over to the operator, I want to reiterate how strong the results were this quarter. To summarize, net income to common shareholders surpassed $100 million for the first time in Company's history. Return on tangible common equity and the efficiency ratio were again peer leading as we continue to deliver these returns in a very challenging economic environment, something our team has proven time and again throughout past economic cycles.

Tangible book value per share grew 14% year-over-year to $7.33, which is the highest level in recent decades. We are pleased with our progress and remain focused on growing tangible book value. Our dividend payout ratio reached 39%, and our TCE ratio increased to 7.44%. And we've announced $150 million buyback on top of returning over $1 billion in capital to the shareholders over the past decade. Non-interest income reached record levels of $80 million and increased 15% from last year. Our Company continues to generate consistent organic growth in loans and deposits, as evidenced by spot growth this quarter of 9% and 15% respectively. All of these results benefit our shareholders, and we would like to recognize the hard work and dedication of our employees, who make these results possible.

With that, I'll turn the call over to the Operator.

Questions and Answers:

Operator

Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions] And this morning's first question comes from Frank Schiraldi with Sandler O'Neill.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Good morning.

Vincent J. Calabrese -- Chief Financial Officer

Good morning, Frank.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Just on the -- Vince, you talked about -- you gave the updated guidance on NII. I just wondered if you would hazard an estimate on NIM compression here in the fourth quarter? I think in the third quarter, if you exclude purchase accounting accretion, the core NIM -- recall that the core NIM was down 4 bps, is that a reasonable expectation for 4Q?

Vincent J. Calabrese -- Chief Financial Officer

Well, I would say Frank, there's a lot of moving parts to it, right. So I think as we look ahead to the fourth quarter, what's the fed going to do? That's the key driver. Right now, these -- the guidance has baked into it one move from the fed. Our job overall is to manage the balance sheet in this interest rate environment. So kind of core being down for -- feel pretty good about it. We still have a lot of levers, kind of, in our pocket as we look at, kind of, protecting the net interest income.

The mix of loan growth obviously is a big impact. During this quarter, commercial was 80% of the growth in the loans, that obviously helps on the positive side. The funding mix was also favorable. We had another quarter with strong TDA growth. Our success in doing that helps to protect the margin as you get into the fourth quarter too.

And then, going the other way, right, one month LIBOR continues to decrease methodically toward forecasted fed cut potentially later this month. The current level is already down 15 basis points from the 2.04%. It was right after the last rate cut. So that affects our LIBOR-based loans, which is about 33%, 34% of the total loan portfolio. So I think, our ability to manage all those pieces, and then when you look at interest-bearing deposits in total, while it was up 2 basis points this quarter, it's clearly slowing. I expect that to turn the corner in the fourth quarter. It was up 11 basis points in the first quarter, 6 basis points in the second and then only up 2 basis points in the third, and I expect that to come down a few -- 3 basis points to 5 basis points in the fourth quarter. So that's a positive going the other way.

And then CD rates, just another element -- I know this is a long answer, sorry. But fee rates, I expect across this quarter. So the new rate for the new CDs will be lower than kind of what's rolling off. So that's also a positive. And then we still continue to have a significant portion of our deposits that kind of hit priced up as rates were going up. And the betas on the way down had been slow, and it takes time to kind of manage through those, particularly on the business side of the deposits. So there is still a meaningful amount of deposits that we're actively working to, kind of, reprice those down, commensurate with declines in rates, and if the fed moves again that creates more cover. So there's a lot of pieces there. I mean there is still pressure on the margin, but I would expect it to be manageable in the fourth quarter, given all these pieces. And the better we do, repricing and growing DDAs, the [Indiscernible] in the fourth quarter.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, and I think just to add from a competitive perspective, I think that we're in a better position than we were in previous quarters in terms of managing our -- the rate that we paid down. Others have not performed as well in terms of maintaining margins. So there is more pressure on our competitors, some of our larger competitors to rethink pricing.

Vincent J. Calabrese -- Chief Financial Officer

The other thing, I'd like to just backup for a second. From a total guidance perspective though, I made the comment in my remarks that we're still tracking from a bottom line perspective right, where we guided in January. So while there's some pressure on the margin and net interest income, going the other way, we've revised our guidance up for fee income to mid-to-high single digits given the success we've had the last couple of quarters, reduced our provision guidance to $50 million to $55 million from $55 million to $65 million given the credit quality we've been experiencing. So that's a positive, and we're still managing the expenses to be down year-over-year. So, kind of, from a bottom line perspective, we're right on top of the guidance we had at the beginning of the year, which is important.

Frank Schiraldi -- Sandler O'Neill -- Analyst

I got that, and that's great. I appreciate all the color. And then just on the loan growth, you guys talked about the spot balances a couple of times. And the commercial spot balance growth does look very -- it looks quite normal. I'm just trying to get a sense of, if I look at resi mortgage quarter-over-quarter balances in the period up $300 million. What is the normalized expectation there? I mean, just trying to get a sense if there is any noise in there?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Well, it's -- the only item that needs to be considered when you look at, particularly, the average balance change. We sold about $260 million in mortgage loans. That -- a good piece of it was sold at the end of the second quarter, so -- right around the end. So that's going to impact the average balances. I think, it's kind of tough to say that the growth rate in the mortgage business is going to continue at the levels that it is. I mean, we're -- obviously we're in peak season in terms of origination. We're in an environment where we got some benefit from interest rates being lower. And that business unit, which has helped offset, we've generated more fee income and it's helped offset the margin compression. But I think it's difficult to call how we're going to perform moving forward, because it's so lumpy. But I will tell you that moving into the fourth quarter, our pipeline is significantly higher, significantly over the prior-period last year.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay. Great. And then just finally [Speech Overlap] Yeah...

Vincent J. Calabrese -- Chief Financial Officer

Yes, Frank, if I could just follow up on that, just to give you -- just a couple of data points. So the $260 million that Vince mentioned $111 million of that we sold in June, $100 million in August, $15 million in September. Just -- so you kind of understand how it rolled through the numbers. And then we had $120 million. It was in-held for sale at the end of June. It was put back and held for investment at September 30th. So that's kind of making the number a little bit higher for the quarter. And then, it kind of gives you the go forward from there. But like Vince said, it seasonally kind of lumpy kind of from a core business perspective.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Got you. Okay, great. And then just finally, it seems like you guys again have some pretty good traction now in the Carolinas. I'm sure after -- right after the acquisition, you get some pay downs and that hurts in that growth. But I wonder at this point, if you could -- if you have what the net commercial growth you're seeing in the Carolinas region at this point?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, it's fairly consistent with the guidance that we've given for the whole Company. I mean we don't -- we've said before, we don't expect them to produce outsized production in total. I think when you look at, when you break down the pieces, we've had in excess of double-digit growth in Charlotte and we performed very well in Winston-Salem in the Piedmont region, and now Raleigh is starting to come on. As I mentioned on the last call, they had significant pipeline that's starting to pull through. So they've had some very nice fundings. Still they've had a lot of pressure from real estate transactions paying off because the Yadkin was more of a real estate lender, particularly in that market. But they're doing really well.

And I'll tell you the teams down there, the people that we have are excellent. They've done a tremendous job and I think, tremendous job transitioning from a smaller community bank to adopting the products and services and really driving a lot of that fee income growth that we speak about. We mentioned that early on, when we bought the bank down there we said, "Hey, we feel the biggest upside that's not modeled is the fee income and they're really delivering on many fronts".

And the mortgage businesses, our mortgage leader Dave Green has done a tremendous job rebuilding the teams down there, so the contributions coming out of the Carolinas has grown steadily. And I think again that's -- it's having some really good people that are committed and believe in the Company and have been performing very well. So we're very pleased with where we are.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Great. Thank you.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thanks.

Vincent J. Calabrese -- Chief Financial Officer

Thanks, Frank.

Operator

Thank you. And the next question comes from Jared Shaw with Wells Fargo Securities.

Jared Shaw -- Wells Fargo Securities -- Analyst

Hi, good morning.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Good morning, Jared.

Jared Shaw -- Wells Fargo Securities -- Analyst

And just following up a little bit on the margin, I -- like you were just saying going into the end of the year, as we look at going into 2020 -- but with an expectation that rates may continue to have downward pressure, should we expect to see any more significant, I guess, restructuring and how you're positioning the overall balance sheet or should we expect that you stay fairly consistent with how you run any additional rate pressure we see could continue to flow through the margin?

Vincent J. Calabrese -- Chief Financial Officer

Yes, we will just continue to actively manage the balance sheet, Jared for kind of where we are and kind of what we see in front of us. For example this quarter, for the first half of the year, we really had not been reinvesting cash flows out the securities portfolio. In the third quarter, we had some opportunities to put some money to work. So we actually grew securities on a spot basis about $100 million from June 30th to September 30th. So, I mean, we're talking every day, and every week we have pricing committee as far as -- are there any tax which we should do we. We funded a good portion of that securities with the overnight borrowings in the short run to give us some protection from lower interest rates. So that was some of the tactics that we did this quarter.

And then earlier in the year, we took advantage of very low rates and termed out some few [Phonetic] hundred million worth of term borrowings for -- in the mid-ones for -- by two year to five year money. So, we'll continue to be opportunistic when we see those opportunities to kind of tweak the balance sheet a little bit. As you know, we kind of manage conservatively and kind of neutral from a philosophy standpoint. So, and I mentioned all the different levers that we have. I'm talking about for the quarter and our teams are going after DDA.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

We're looking at both the asset and the liability side of the balance sheet to take advantage of whatever we can to preserve the margin. We've been here before. So it's the same management team, 10 years of this stuff. We've become experts at finding rabbits. I think the strategy that we've laid out is to continue to focus on non-interest income, grow interest income. It's to continue to focus everyone on the funding side, generating low cost deposits that means we're investing in technology to keep consumer depositors. We've been growing our consumer deposit base. We had good growth in the Southeast and in the Mid-Atlantic regions, which was very helpful for us. We're very fortunate that we expanded into those markets when we did. So that will help us as we move through this time.

And then we constantly look at the asset side of the balance sheet. We look at loan portfolios and contribution. We look at margin on origination. We look at the investment portfolio when we look for opportunities to enhance yield, and we'll continue to do that. On the expense side, we've been very diligent over the last two years, and I think it's showing we've been disciplined in managing expenses. We still have to make investments in our Company, so some of the expense saves from the branch consolidation went into repositioning and high-growth markets and investing in technology. But I think overall, we've done a good job of holding costs down, and we have other avenues. We're pursuing to continue that into 2020.

Jared Shaw -- Wells Fargo Securities -- Analyst

Yeah, actually that was going to be my second -- my second question was, when you look at the expense saves coming out of branch optimization, offset by the expansion into the DC markets and some of the other markets, is that going to be a net cost increase, when you look at sort of the branch footprint combined with some of those tech initiatives or should they generally be a little more neutral to expenses?

Vincent J. Calabrese -- Chief Financial Officer

Well, I think, Vince would be mad at me, if I start giving guidance for 2020. But I think that -- well, let me give expense guidance. But our goal there is to try to fund that with those reductions. So as we transition and move toward a more technology oriented delivery channel, we have to come up with ways to reduce expense. We can't do both. So, and I think we've proven, if you look back over the last 12 months, we've made significant investments in the Company in a number of areas and we've proven that we're able to do that fairly effectively. And we use relationships with vendors that we have -- who see the bigger picture and say we want to grow with you, who help us. And we're very diligent on adds to staff and having efficient FTE deployment across the Company and that's going to continue into 2020, and we're going to do everything we can to benefit the shareholders as we move through this difficult interest rate environment.

Jared Shaw -- Wells Fargo Securities -- Analyst

Yes, thanks. And then finally just for me, on the capital management conversation. Certainly here, you were saying that the dividend and the buyback -- should we think that you're leaving the door open to get back into sort of whole bank M&A with the growth in TCE and the time that's passed with the IKAN [Phonetic] or are you thinking more not necessarily whole bank M&A but opportunistic portfolio or non-bank acquisitions?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Well, I wouldn't say that we're shifting gears. I think we're still focused on driving organic growth. We have a great platform now and we're well positioned in a number of markets. Whole bank deals are not what we're focused on. In terms of other investments, speaking specifically to investment opportunities to grow particular businesses like we did with capital markets. For us, we grew that from that and that's $20 million a year in revenue for the shareholders that we didn't pay anything for other than investing in the personnel and some minor operating expenses. So I think that, that's really our focus, and we're going to continue to stay down that path.

In terms of capital, our goal is not to -- we've never been in this position before. Three years ago, when we rolled out our analysis, our model or discussed our model gave guidance relative to the acquisition, one of the things that we said was that we needed to grow from a scale perspective to cover investments and infrastructure. We successfully -- we did that by doing a large acquisition, taking the cost out from that acquisition and then growing revenue over time. And we've gotten a lot of benefit from that.

One of the things we called out was having our dividend payout ratio fall below 40%. We said, "Hey, if you look at this as a new model and we execute, we're going to be in a much better position for our shareholders from a capital perspective", because we're going to be able to grow TCE and organically without raising capital through a common equity raise and preventing dilution and grow organically. We're going to be able to do that and get that dividend payout ratio down. Once we do that, we'll have options. A buyback didn't make sense for us in the past because of the valuation that we had at certain points in time. It makes sense.

So I think given where we are in the cycle, the best part about all of this is we've delivered what we said we were going to deliver, we're below 40% dividend payout ratio this quarter. We have TCE ratio that's approaching the 7.5%, mark that we indicated now. We have flexibility. We can do different things to provide the best benefit for the shareholders. That's where we wanted to be. Very patience. I know the Street is not often patient. But I think we're in a very good position from a capital perspective, and that's what we wanted to emphasize.

Vincent J. Calabrese -- Chief Financial Officer

Yes, I could comment too, Jared, just on the buyback program that we announced. As we sit here today, we're going to look to be opportunistic, kind of, pre-CECL. We have the CECL estimates out there. But we'd like to get through the seasonal impact, kind of, at the beginning of the year, and then look at whether the buyback should be kind of opportunistic or kind of more programmatic as you go forward from there. But I think that's, to Vince's point, we haven't had that in our toolbox before and now we do and it's something we'll use in a smart way to benefit the shareholders.

Jared Shaw -- Wells Fargo Securities -- Analyst

Great. Thanks a lot.

Vincent J. Calabrese -- Chief Financial Officer

Thank you.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thanks, Jared.

Operator

Thank you. And the next question comes from Michael Young with SunTrust.

Michael Young -- SunTrust -- Analyst

Hey, good morning.

Vincent J. Calabrese -- Chief Financial Officer

Hey, Mike.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Good morning, Mike.

Michael Young -- SunTrust -- Analyst

I wanted to started on start just on the fee income side, the non-interest income, you talked about obviously [Technical Issues] you have had those businesses. But it's been kind of record quarters. Is that sustainable in the next year given the trajectory of interest rates? Will that continue to be a tailwind or do you think there has been some pull forward of some activity here in the past couple of quarters that it may remain a little bit as we move forward from here?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, it's a tough call I think. Would we have expected the mortgage company to produce what they're producing if we had the initial Bloomberg Economics Forecast from the beginning year? The answer would be no, because rates were supposed to go up, not down. So we got -- that was -- that's why we entered into that business and made the investments, because we said, "Hey, it's going to protect us in an environment where we have declining rates and it's paid dividends for us". If we -- if the economic environment is consistent, if the yield curve stays pretty much the way it is, the rates stay low. Let's say that -- let's hope we don't have an inversion forever, but let's say, rates stay low. Our prospects for delivering these types of results increases significantly. So that was the strategy. And it really is dependent on macroeconomic factors.

There is an element of core fee income built in here that we won't fall off of. So I think that, that will keep us in the game. And what we've done with our capital markets platform building it out were still in early stages relative to the build-out of that platform. So there is upside in international fee income. There is upside in our wealth platform. There is upside in insurance. You saw significant uptick in insurance fee income as we spread into those new geographies. So it's our goal to sustain these levels. It's lumpy. It tends to be stronger in the middle parts of the year, the second and third quarter. But I feel pretty good about where we sit.

Gary L. Guerrieri -- Chief Credit Officer

We have good pipeline going through fourth quarter too.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes -- this year in the fourth quarter, because of the rate environment should help us. I hope that's helpful.

Michael Young -- SunTrust -- Analyst

Okay. Yes, it is. I just wanted to make sure there wasn't anything large one time in there that we shouldn't carry forward.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

It's pretty granular. It's fairly diverse. It's pretty granular. The biggest chunk of the capital markets fee income is derivatives fee income, and that's a function of the rate environment and activity.

Vincent J. Calabrese -- Chief Financial Officer

And the new markets.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

And the new markets. I think given the markets we've expanded into, and we said this early on, there's a tremendous amount of opportunity in Charlotte and Raleigh and Charleston and the markets, the D.C. market that we're expanding into. There is a tremendous opportunity.

Michael Young -- SunTrust -- Analyst

Okay. Thanks for that color. And maybe just one other question on loan growth as we look forward into next year, I know you guys don't want to provide guidance, but just philosophically, as we think about, kind of, lower rate environment and the implementation of seesaw, will that impact either the structure of the loans that you make or the types of loans that you're pursuing, next year or pricing, any color you could provide around that would be helpful?

Gary L. Guerrieri -- Chief Credit Officer

Hey, Michael. This is Gary. In terms of our underwriting and the loans that we pursue, and we've -- I think we've talked about this in the past, we're going to be consistent in how we do business. We don't change our views. We don't change our underwriting, migrating up the curve in good times and down the curve in bad times. We're going to stay where we are. We're going to underwrite the way that we underwrite each and every day, and we stay the course. And we'll continue to do that as we move into 2020.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

And in terms of CECL, CECL should have an impact. Obviously, we're not a price setter. We've got some big competitors. There is hundreds, thousands of financial institutions and non-financial institutions lending. But I will tell you that the structures will change, because of the absolute return on capital. If the amount of reserve is doubling or more, term becomes important. And I think as we look forward in terms of how we underwrite, we're going to make sure we get. I hope the industry make sure we get paid for that, and I would expect us to pursue strategies to maximize returns on capital.

Gary L. Guerrieri -- Chief Credit Officer

And shorter is going to be better just generally speaking across the portfolios from a maturity standpoint.

Michael Young -- SunTrust -- Analyst

Okay. And just last one on the efficiency ratio. It's been good to see that, kind of, come down to below 55% here and hold, but there could be some revenue pressures, obviously, going forward. Do you think there is an ability to continue to defend kind of that efficiency ratio or bottom line number into 2020 with some of the expense belief that you discussed earlier?

Vincent J. Calabrese -- Chief Financial Officer

If I would just -- I guess, we have a comment on that. As you know, expense management has been a focus here for as long as we've all been here. So being able to achieve an efficiency ratio in the 54s with the investments in the businesses that Vince discussed, it takes a lot of work, and something we focus on a lot. Every year, next year will be no different than this year. We'll have a long list of opportunities to create more efficiency. The items where we've talked about in the past are kind of ready program and then the renegotiations that's just constant, that's kind of -- as far as evaluating part of it as far as evaluating kind of your footprint as well as your relationships with all your partners and we've -- putting in a new phone system to save money, working on how we manage borrowed cash, we're optimizing facilities next year, that's going to be a focus. We have a lot of buildings and located throughout our footprint and there's opportunities to optimize facilities.

We're looking at bringing in third-party contractors if we can bring stuff in house and save some money and I could go on and on. There is probably 50, 60 items on the list of things that we'll continue to focus on. So our focus is to manage the overall profitability to continue to drive the profitability forward and manage the expenses and the efficiency ratio and the return. So --

Vincent J. Delie -- Chairman, President and Chief Executive Officer

I think it's a metric in our incentive compensation plans. It's focused on by the Board of Directors. I don't think management focuses on it. I -- trust me there is a lot of oversight over expense control here and we're very aware of the environment that we're in, but we also can't stop investing in the Company. I think that we have to balance this as business leaders, as managers of this enterprise. We have the balance what's good for the long term and good for the short term. So we try to manage that efficiency ratio at those levels or better and we look to make investments that will position the Company either from a technology perspective or facilities perspective to drive better revenue and have better revenue growth results and better penetration in the markets that we're in. Anyway, that's it.

Michael Young -- SunTrust -- Analyst

Very helpful, thank you.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. And the next question comes from Casey Haire with Jefferies.

Casey Haire -- Jefferies -- Analyst

Yeah, thanks. Good morning, guys.

Gary L. Guerrieri -- Chief Credit Officer

Good morning, Casey.

Casey Haire -- Jefferies -- Analyst

Wanted to follow up -- one more follow-up on the NIM. I was hoping to get the new money yields on loan originations versus the 4.78% existing yield in the third quarter here.

Gary L. Guerrieri -- Chief Credit Officer

I mean, with rates having come down, obviously, the rates on the loans are lower, the reflective of the market, kind of the rate on the new major 4.50% to 5% -- 4.45% to 4.50% as far as the rate overall. Now, as you know that, the mix has a lot to do with that. So this quarter, I mentioned earlier, we had a vast majority in the commercial space, driving the growth, I think, as 80% of the growth was in the commercial arena. So that kind of helps that rate, but the mix will affect it every quarter, but that's kind of the rate for the, as I call it, the [Indiscernible] to new loans that we put on the books.

Casey Haire -- Jefferies -- Analyst

Okay, very good. And just a question on the purchase accounting adjustments. On slide 11, you guys talk about $125 million to be recognized post CECL day one, so if I assume, just want to make sure my math is right here, but I assume that's a four-year life, that's about $31 million of accretion per annum over four years. And then, which would be about $8 million a quarter, which is obviously in line with what we saw here in the third quarter. Is that a decent way to think about it?

Vincent J. Calabrese -- Chief Financial Officer

Well, the way it will work going forward is it's kind of loan-by-loan, so we have loans that are -- will be kind of accretion will be coming in over a year, you have loans that will be coming in over 25, 30 years. So it's truly a function with this kind of what are the prepayments doing, so the pace of it, I mean, the $115 million to $135 million will be over the remaining life of the loan. That life can flex up or down.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, I think, Casey, what Vince is saying is, you can apply four years, but that's an air grab.

Vincent J. Calabrese -- Chief Financial Officer

Yes, your math is accurate, if you use four, but, yes.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes. It works mathematically, but there's a lot of analysis that has to go into, where we end up and it really depends on changes in interest rates, the overall health of the economy.

Vincent J. Calabrese -- Chief Financial Officer

Pay offs --

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, there are so many factors that go into it. But your math works.

Casey Haire -- Jefferies -- Analyst

Okay, great, great. All right. And just lastly on the capital management. I think everyone was excited to see the buyback. And it sounds like you guys are going to hold off until you digest CECL if we roll forward TCE going forward, March 31, you'd probably be right around where you are on 7.5% TCE, which obviously is a little bit light versus peers. So I'm just trying to get a sense, everyone's excited about the buyback, but also a little bit -- a little bit nervous given where you are.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, we're not -- we don't --

Casey Haire -- Jefferies -- Analyst

So, where do you [Speech Overlap].

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, I guess what I -- I didn't mean to interrupt you Casey.

Casey Haire -- Jefferies -- Analyst

No, no, no. It's all right.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, I think, relative to the peers, we've said this repeatedly, we don't have the same portfolio as the peers. They have elevated capital, because they do some things that have an elevated level of risk, higher yields, more risk, more capital, right? We're managing a lot differently. So as we move through this credit cycle, which I believe we're in later -- we still are not -- have not lost focus, as Gary said, on where we are in the cycle. We've been in a sustained economic expansion. We're very conservative. We feel that the capital ratios that we operate with and have operated with significantly lower by the way for a number of -- almost a decade since I've been here. We feel pretty good about that, about those levels. So 7.5% for us is, given the makeup of our portfolio and the quality of the portfolio, is equivalent to somebody that might have a much higher TCE ratio with a lot more risk, lot more maybe multifamily housing risk or some other risk in the portfolio that is outsized. Doesn't necessarily mean that's a bad thing for them. It just means that we shouldn't be managing our capital relative to peers, if that's how we're going to operate. Gary, I don't know if you want to mention anything else about --

Gary L. Guerrieri -- Chief Credit Officer

No, I think it's a very valid point. I mean, it's how we run the Company. It's how we do business and one of those areas that we are not heavily involved in at all, we don't have a private equity book. We've got a couple of clients there that we do some business with, but the book is consistently underwritten as we've touched on earlier, and we feel it will perform well through the cycle.

Vincent J. Calabrese -- Chief Financial Officer

Plus the actions we've taken over the last three years just to take risk off the table that we've done positions us very well as we sit here today.

Gary L. Guerrieri -- Chief Credit Officer

And that action was a late cycle action to position the balance sheet the way we wanted it going into our later stage economy.

Vincent J. Calabrese -- Chief Financial Officer

In case you -- just to clarify two, we will look to be opportunistic as far as the buyback this quarter and then once, kind of CECL is in place and we take a look at the environment going forward, then we'll kind of evaluate whether it becomes kind of more programmatic over the course of the year versus opportunistic, but for now we will be opportunistic where it makes sense to do it and the returns makes sense. So, and if we get north of the 7.5% or when we get north of the 7.5%, we're going to look at the loan growth and the loan growth prospects going forward and if we can deploy the capital and mid-to-high single-digit loan growth, we'll put it into that. If we're -- looks like we're going to build capital beyond the 7.5%, the level that we're very comfortable with, as Vince and Gary described, then we'll look to either do something with the dividend or maybe do more of the buyback at that point, but again over the course of the year, it's a kind of the game plan for that amount.

Casey Haire -- Jefferies -- Analyst

Understood. Thank you.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thank you, Casey.

Gary L. Guerrieri -- Chief Credit Officer

Thank you, Casey.

Operator

Thank you and the next question comes from Collyn Gilbert with KBW.

Collyn Gilbert -- KBW -- Analyst

Thanks, good morning, guys.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Good morning, Collyn.

Gary L. Guerrieri -- Chief Credit Officer

Good morning, Collyn.

Collyn Gilbert -- KBW -- Analyst

Just back to the loan growth. So -- and if you guys answered this, I apologize for missing. I think your original guidance for the year was I think 4% to 8% in the loan growth. Should we -- just based on kind of the commentary that you're offering, I mean, I would assume that it's likely that you'll come in closer to the low end of that range for the year. Number 1, is that -- just clarity on that. And then Number 2, just back into the -- in terms of the loan yield discussion, as you said, Vince, obviously, it varies on the -- within the segments, but just was curious to get a little bit more detail as to what the yields are that you're putting or the structures that you're putting on the resi book and then what maybe some of the yields were on the CRE versus C&I.

Vincent J. Calabrese -- Chief Financial Officer

You want to comment on the commercial side?

Gary L. Guerrieri -- Chief Credit Officer

Yes, I mean in terms of the commercial book, the rates continue to be under pressure, Collyn. We've talked about 0.25 point [Phonetic] step downs over time. I think you're seeing that again. You're in the high-1s to 2% range on good solid paper. On extremely strong paper, you're 125 basis points to 150 basis points [Phonetic]. And we've seen a few of those very solid investment grade type companies that we do some good business with, as well as the ancillary business and deposit business. You look at the whole relationship and it all gets priced into together. So that's kind of where -- what we're seeing today from a commercial standpoint as far as pricing is concerned.

On CRE, you're still at 2%, 2.25%, some where higher. Some, you're going to get down the 175 basis points as well on the stronger transaction. So it's just continued to be pressured slightly downward as the economy has continued to perform.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Were you -- Collyn, were you asking relative to implementation of CECL going forward or were you just asking about?

Collyn Gilbert -- KBW -- Analyst

No, no, no. Just -- yes. What Gary answered, just the loan origination that you're seeing in the market, yes. And the competitive pressures and the impact, yes. Yes, perfect.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, OK, because I was going to so, I don't think anybody's pricing term differently today. That's all.

Collyn Gilbert -- KBW -- Analyst

Okay.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Relative to the implementation of CECL.

Vincent J. Calabrese -- Chief Financial Officer

Collyn, On the mortgage side, I mean, if I look at it for the last couple of months of the quarter, we were in the 3.65% to 3.70% [Phonetic] kind of area for the fall in for the mortgage loans that we originated.

Collyn Gilbert -- KBW -- Analyst

Okay, OK. Are you retaining -- is it a blend of what you're retaining there in terms of duration?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes.

Vincent J. Calabrese -- Chief Financial Officer

Yes.

Collyn Gilbert -- KBW -- Analyst

Okay, OK. Okay, that's helpful and then just on the muni deposit side, you guys have seen some strength there and continue to build that, but how are you seeing the pricing within that segment? Are you able to lower the rates there as rates have come down, or is that also somewhat competitive that's --

Vincent J. Delie -- Chairman, President and Chief Executive Officer

It's very -- everything is competitive when you're -- when you start talking about big dollars. So I would say that they manage -- they're managing, because they are on budgets and we're in a declining rate environment. There -- the treasures at these large municipal entities are trying to drive as much income as they can. So I would say it is competitive. I think the differentiator for us is that we don't just participate in the high yielding pieces of that relationship. We go after the whole relationship, we provide them with a whole bunch of treasury management services and they use free balances to pay for those services typically. The municipalities typically like to use their balances that way. I would say, as we move forward and as I mentioned earlier, typically we're competing against large, large banks in that space. They start to feel pressure, margin pressure. The pricing starts to become more favorable. So I think in certain respects, as we move through this point in the cycle with the year the way it is and pressure on margins, I think you'll see us benefit from that, because we're in the driver seat with the relationship basically.

Collyn Gilbert -- KBW -- Analyst

Okay. Okay, that's helpful. And then just broadly, you guys had indicated that you will continue to look for offsets to the business in general right to continue to drive performance next year if this rate environment holds. But I guess my question is a little bit more specifically to the balance sheet. So are there, Vince, as you look at it, with the goal and the objective be to -- try to keep core NIM flat in 2020 or if this, let's say, we see another cut in the beginning of 2020, will you continue to see core NIM compression? Just trying to get a sense of that.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, I assume you were asking for Vince. C, so let him answer.

Collyn Gilbert -- KBW -- Analyst

You're welcome, Vince. D, to answer it if you'd like, but, yes.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, thank you. Yes, well, go ahead, Vince.

Vincent J. Calabrese -- Chief Financial Officer

I guess what I would say, Collyn, is as we talked about earlier, I mean, our job is to protect the net interest margin. And the net interest income dollars are key, right, so the better we do, having loans and funding it with deposits, the better we're going to do in the -- we've had DDA growth now, every quarter for how many quarters, so the success we've had there obviously protects the margin too, so, I mean, we're all very focused on whatever is in front of us and growing the loans and deposits, growing the fee revenue sources like Vince talked about, and there is still upside, particularly in the new markets, in the capital markets. So, I mean we're going to be working hard at the whole -- all pieces of the profitability to grow the earnings and protect the margin and net interest income.

Collyn Gilbert -- KBW -- Analyst

Okay. Okay, I will leave it there. Thanks, guys.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thank you, Collyn.

Gary L. Guerrieri -- Chief Credit Officer

Thanks, Collyn.

Operator

Thank you. And the next question comes from Brian Martin with Jenny Montgomery.

Brian Martin -- Janney Montgomery -- Analyst

Hey, good morning, guys.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Good morning, Brian.

Gary L. Guerrieri -- Chief Credit Officer

Hey, Brian.

Brian Martin -- Janney Montgomery -- Analyst

Hey, most of mine were answered. Just -- I guess just a couple of things. I mean, Vince, could you talk about the -- or give any color kind of on the forward loan pipeline today. Just kind of where it stands relative to last quarter, just with the performance.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, we haven't done that. We weren't planning on giving pipeline information, but I will tell you it remains strong. Commercially, it's strong mortgage. I already mentioned, it's strong on a relative basis, on a quarter-over-quarter basis.

Vincent J. Calabrese -- Chief Financial Officer

And Carolinas are strong too.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Carolinas are strong. Raleigh still has a big pipeline and they are still one of our top performers on an FTE basis. So, I think, yes, we're pretty optimistic about that, but we're cautious about where we are in the cycle. So we're trying to balance that with a little bit of discipline.

Brian Martin -- Janney Montgomery -- Analyst

All right. Certainly, I have understood and how about just your ability to hire folks. I mean, some of your competitors have talked about a lot of the disruption in the markets and the success they're having, I guess. And I know it's an ongoing process for you guys as well, but just any comments you guys can share on your ability to hire this year based on kind of what you've done in years past. I mean, have you seen more momentum on the hiring side, or anything on that?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

We've -- yes, I think we're probably out there pretty early if you go back, I think, if you pulled transcripts from eight years ago, we talked about our ability to hire people from larger institutions that can cross-sell effectively -- if we're allowed to say cross-sell, sophisticated products and services. I think that we've always done a great job of bringing in the best talent we can bring in and we've had no issue at all attracting people to this company, zero.

And just because we don't brag about it every quarter, doesn't mean it's not happening. So we tend to be a little more quiet about it. We respect the other financial institutions that we compete against. And when we're able to secure a good person, we bring them in, and we have had no issue doing that. So -- and we will opportunistically bring people in, if we feel somebody is interested and we feel there's a potential upside. So we just don't talk a lot about it, that's not our culture. We think that it's best to just continue to focus on running the business and not talk about those things. Anyway, that's --

Brian Martin -- Janney Montgomery -- Analyst

Yes, I guess, I just kind of wanted to get the sense if you saw any momentum or the disruption in the market giving you more opportunity than you've seen in the past.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Absolutely. It absolutely does, it has, for us, over a decade and a half. So, Pittsburgh's a great example. I mean, look what happened 12 years ago, 10 years ago. I mean there was an incredible amount of disruption, and we were able to benefit, and many of the people that we hired from larger institutions, they are still here. So I -- and I mentioned we keep winning these awards in all the markets we go into, those are our employees commenting on the culture. I think that that's important and that helps us attract people and retain them.

Brian Martin -- Janney Montgomery -- Analyst

Got you. Okay. And then maybe one for Vince. C. Just, Vince, when you look at -- just kind of going back to the margin for a minute, but just -- if you look at the repricing of the earning assets in the lag, in the deposit side, I mean, is it fair to think about it that if we do get more increases, if we get several more rate decreases here that the moderation -- I guess that the decline in the margin could moderate some, the more rate cuts you get. I guess, the deposit beta could get higher, the more rate cuts we get. Is that fair way to think about it? I guess, I'm just not sure the pricing dynamics on the loans versus deposits. I know there's a lag initially, but as that catches up, seems like it would allow it to the degregation in the margin to moderate some, but is that the wrong way to think about it?

Vincent J. Calabrese -- Chief Financial Officer

No, I think it's the right way to think about it. I think, like Vince talked about, it's very competitive on the deposit side. So, there's opportunities to do it, but you're balancing -- keeping the account and the balance and repricing it down. So there is, I mean, the more the Fed moves, the more cover you have right, so that you kind of have to keep pace. I mean, on the way up, I can assure you those customers were calling us every time the Fed moved to try to get the rate to go up.

So it's -- there is definitely opportunity there to kind of continue to reprice those and rightsize them for kind of where rates are and that's part of the yield curve, right, the longer end of the yield curve actually just gone up a few basis points of rates cut?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, I think -- I think in your scenario, the slope of the curve matters. So, if they continue to cut and we don't see significant deterioration in the middle part of the curve, we -- obviously, it would moderate, the margin pressure moderate. So it really matters, the slope matters and we'll see what happens. I'm not smart enough to forecast what happens when the rates are cut by the Fed given all the other elements in the analysis, but if you talk to a bunch of economists, they'd probably tell you that it's likely that the yield curve starts to resemble a more normal curve as those cuts occur. So in that case, you would be right. There would be moderation and the pressure.

Brian Martin -- Janney Montgomery -- Analyst

Got you. Okay. I got you. That's helpful. And just remind me, if you guys talked about the floors you have in the loan portfolio, what percent of the loans have floors and just kind of where they're at today?

Vincent J. Delie -- Chairman, President and Chief Executive Officer

We don't have a substantial amount of floors in the portfolio, we have found that for higher quality borrowers, particularly in the commercial space. They don't accept them. So we try to utilize derivatives to the best of our ability to fix rates for our borrowers and to create collars and that really protects us, because we're receiving -- they're receiving a fixed rate. We're getting the variable rate revenue stream or income and I think that's how we go after it. The floors are very challenging to put into effect, probably a little easier, maybe, on the consumer side, but I'm not sure that we have many even in the consumer book.

Brian Martin -- Janney Montgomery -- Analyst

Okay.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes. Anyway, yes.

Brian Martin -- Janney Montgomery -- Analyst

Okay. And then you answered my question on efficiency, but just the last one for Gary. Just anything you're seeing on the credit front, Gary. It doesn't sound like it from a systemic standpoint that there is any worries out there. Just any areas you'd point to that are, I guess, maybe a more cautious on today as you get later in the cycle?

Gary L. Guerrieri -- Chief Credit Officer

Brian, as we've discussed, I mean, we continue to see solid performance across the portfolio. I mean, that said and Vince mentioned it earlier, we're managing the book from a late-stage economy perspective and we have been for a while now. So, we're really focused on the economically sensitive, commodity, tariff-related segments as well as transportation.

So, those economically sensitive areas, we're continuing to watch very closely. We've not seen softness at this point and based on the diversification across our book and the concentration management techniques that we have in place and industries and also geographical diversification, we feel very good about where we are at this point. So, we'll continue to watch those as the economy moves forward.

Brian Martin -- Janney Montgomery -- Analyst

Okay. I appreciate it. Thanks guys.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Thanks, Brian.

Gary L. Guerrieri -- Chief Credit Officer

Thanks, Brian.

Operator

Thank you. And at this time, I would like to return the floor to management for any closing comments.

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Yes, thank you very much and we're very pleased with our accomplishments, through the first three quarters of this year. We're looking to finish strong. Our focus is and will continue to be focusing on sustaining earnings-per-share growth and delivering on all of the areas that we mentioned, expense control, loan and deposit growth, managing the margin through a difficult climate, that will continue to be our focus.

So I'd like to thank all of our employees again for their tremendous contribution. I think we've had a great year so far this year. We're looking to close it out strong, and thank you for participating in the call. We appreciate your interest and we would like to thank the shareholders for supporting us along the way. Thank you.

Operator

[Operator Closing Remarks]

Duration: 73 minutes

Call participants:

Matt Lazzaro -- Manager of Investor Relations

Vincent J. Delie -- Chairman, President and Chief Executive Officer

Gary L. Guerrieri -- Chief Credit Officer

Vincent J. Calabrese -- Chief Financial Officer

Frank Schiraldi -- Sandler O'Neill -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Michael Young -- SunTrust -- Analyst

Casey Haire -- Jefferies -- Analyst

Collyn Gilbert -- KBW -- Analyst

Brian Martin -- Janney Montgomery -- Analyst

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