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BOK Financial Corp (NASDAQ:BOKF)
Q4 2019 Earnings Call
Jan 22, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the BOK Financial Corporation Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to your host, Chief Financial Officer, Steven Nell. Mr. Nell, you may begin.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Good morning and thanks for joining us. Today, our CEO, Steve Bradshaw will provide opening comments, Stacy Kymes, Executive Vice President of Corporate Banking will cover our loan portfolio and credit metrics and then I'll provide some details regarding our income statement items for the fourth quarter and provide high-level guidance for 2020. At the end of the call, we'll have Scott Grauer, Executive Vice President of Wealth Management, as well as Marc Maun, Executive Vice President and Chief Credit Officer available for questions. PDF of the slide presentation and fourth quarter press release are available on our website at bokf.com. We refer you to the disclaimers on Slide 2 as it pertains to any forward-looking statements we make during the call. I'll now turn the call over to Steve Bradshaw.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning, thanks for joining us to discuss our fourth quarter and full year 2019 financial results. The fourth quarter concluded a second consecutive record year for BOK Financial, both from a net income and an earnings per share perspective. For the full year, net income was $501 million, up over 12% from 2018. Diluted earnings per share were $7.03 for 2019, that compares to $6.53 last year. 2019 was a broad-based year with significant expansion of our fee businesses and continued strength in our specialty lending channels, while we also had accelerated growth in our core deposit franchise. Additionally, 2019 saw us achieve our business integration and financial goals for our acquisition of CoBiz which will help drive momentum in two of our most critical high growth markets going forward.

Looking at the fourth quarter, specifically, net income was $110.4 million or a $1.56 per diluted share, down from our record third quarter, but up 2% from the same quarter a year ago. And as a reminder, we closed on CoBiz at the start of the fourth quarter of 2018, so the light quarter comparison is appropriate.

Fee and commission revenue was up 12% year-over-year though seasonal slowdowns in mortgage volumes along with slightly lower consumer service charges left our fee and commission revenue down 4% from the previous quarter.

Expense management remains prudent though expenses did increase 3% this quarter due to elevated severance expenses as we work to rightsize our business units heading into 2020, coupled with our annual charitable contribution to the BOKF Foundation, which provides support to many nonprofit partners in the communities that we serve. Our loan loss provision was $19 million this quarter due to some migration in our energy portfolio and Stacy will cover that in more detail here in a moment.

Turning to Slide 5, average loans were $22.2 billion, that's up 3% year-over-year though, down from last quarter due to general pay downs in energy and commercial real estate and two anticipated large year in paydowns in our C&I portfolio. Having said that, we feel good about our pipeline opportunity in the early start here in 2020.

Average deposits were up 8% from the previous year and up over 5% on a linked quarter basis. Even with the strong growth this quarter, we were able to bring overall interest bearing deposit costs down from 1.17% in the third quarter to 1.09% in the fourth quarter. Growing deposits to fund loan growth was a significant area of emphasis for BOKF in 2019 and you can see that in our results. This focus will continue into 2020 allowing us to fund future loan growth. Assets under management or in custody were up over 2% for the quarter, and more than 8% year-over-year. Strong sales activity, coupled with favorable equity markets are really the key drivers of that expansion. And we saw an opportunity to further invest in our company at a favorable price this quarter as we bought back 280,000 BOKF shares at $81.59 per share in the open market. I'll provide additional perspective on the results at the conclusion of our remarks. But now Stacy Kymes will review the loan portfolio and credit in more detail. I'll turn the call over now to Stacy.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Thanks, Steve. As you can see on Slide 7, period end loans were $21.8 billion, down more than 2% for the quarter. While paydowns impacted our quarter-end numbers, 2019 was a growth year for BOKF from a loan perspective, up 3% on average year-over-year. Total C&I expanded nearly 3% in 2019, though paydowns in our two largest growth engines, energy and healthcare left total C&I down 2.7% linked quarter.

Energy had a fantastic year in 2019 growing nearly 11%. While the segment was down $141 million for the quarter, the trends in the industry we've discussed remain true and pipelines remain full. I expect our energy growth to return to a positive level as we head into 2020.

Our healthcare channel also had an exceptional 2019, growing over 8%. Though the quarter was flat, steady growth in commitment levels and our expertise in the senior housing space, bodes well for another great year for healthcare in 2020.

A slowdown in general C&I seems to point to increased cautiousness in the general middle-market business community. Tariffs, trade disputes and the questions that arise heading into a new election cycle seems to have caused pause for some of our clients. Future clarity around the regulatory trade in an economic environment should help reenergize the middle-market segment. Continued discipline around concentration limits and commercial real estate, coupled with late quarter paydowns left the segment down 4.2% for the quarter. Commitment volume is still solid in this space and we will continue to high grade through stringent customer selection as we manage the portfolio.

On Slide 8, you can see that credit quality overall remains good. Non-accruing loans increased $8.5 million this quarter, primarily due to $6.6 million increase in a non-accruing community development credit. Net charge-offs were $12.5 million or 22 basis points on an annualized basis, up from $10.6 million or 19 basis points in the previous quarter, all relatively consistent with what we've seen over the past 18 months. Potential problem loans, which are defined as performing loans that based on known information cause management concern as the borrower's ability to continue to perform totaled $160 million at December 31, up from $143 million at September 30. This increase largely come from the energy portfolio as the capital markets environment is requiring certain customers to work through their liquidity needs. The situation may lead to additional non-accruals and some impairment. However, as we've discussed previously, our senior secured collateral position should protect us from material loss content. Based on evaluation of all credit factors, including changes in non-accruing and potential problem loans as well as specific impairments of two shared national energy credits, which we are not the lead agent, the company determined that a $19 million provision for credit losses was appropriate for the fourth quarter of 2019. I'll turn the call over to Steven Nell to cover the income statement in more detail. Steven?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Thanks, Stacy. As noted on Slide 10, net interest income for the quarter was $270.2 million, down $8.8 million from the third quarter as the full realization of the last two federal reserve interest rate cuts were felt in the quarter. Net interest margin was 2.88%, down from 3.01% the previous quarter. I provided on the slide, a roll forward to highlight significant items impacting the NIM calculation. First, accretion levels for $5.1 million less this quarter due to the lower CoBiz loan payoffs which reduced NIM by 6 basis points. Second, higher loan fees in the fourth quarter improved NIM by 3 basis points. Third, there was a 9 basis point decline in our non-interest bearing funding profile with a decrease in demand deposits and an increase in receivables from our trading activity. In addition, our earning asset yield decline, excluding accretion and fees of 29 basis points, was effectively offset by 28 basis point decline in funding costs. While net interest income and margin have moved down over the past few quarters, the projected flat interest rate environment in 2020 should allow some stability going forward.

On Slide 11, fees and commissions were $179.4 million, an increase of 12% quarterly year-over-year, fueled largely by strength in our brokerage and trading business. Brokerage and trading increased over 56% from the same quarter a year ago. While overall brokerage and trading was relatively flat in the quarterly comparison, growth in trading revenue was up $5.6 million, but was offset by lower customer hedging revenue and loan syndication fees. Mortgage banking revenue was down 16% from an expected seasonal slowdown. However, 2019 was a great year for the mortgage channel as the favorable rate environment allowed us to grow the business 16% compared to 2018.

As we enter 2020, we remain confident in our origination capabilities even in an expected flat rate environment. Fiduciary and asset management revenue was up over 3% linked quarter and year-over-year as strong sales gathering activities and favorable equity markets have fueled steady growth. Other revenue was down due to the variable nature of repossessed asset revenues from certain oil and gas properties that are contained in that line item.

Turning to Slide 12, total operating expenses increased $9.5 million to $288.8 million. Personnel expense increased $5.8 million for the quarter. Incentive compensation increased $2.6 million linked quarter, due to an increase in cash-based incentive compensation, primarily from the sales activity in wealth management and commercial banking. Regular compensation increased $3 million largely due to the severance costs from a realignment of personnel for the operating environment headed into 2020. Non-personnel expense was up $3.7 million from the third quarter, largely due to our typical year-end charitable contribution to the BOKF Foundation of $2 million. The mentioned pressure on net interest revenues moved our efficiency ratio back over 60% this quarter. While a 60% or lower efficiency ratio is still our long term goal, it will be influenced by the mix of revenue going forward.

Slide 13 has our current outlook for 2020. Average security balances remain comparable to current levels as we manage to a relatively neutral interest rate risk position. Average loan growth around 3% to 4% with lower growth in energy compared to 2019. Average deposits are expected to cover loan growth for the year. Net interest revenue is expected to remain relatively flat compared to 2019, given overall lower interest rates for the year, stable net interest margin from the current level with a bias toward slight improvement if the overall net interest rate environment remains flat. Fee revenues grew mid single-digits with continued growth in brokerage and trading and assets under management and wealth. Efficiency ratio was slightly above 60% as fee revenues grew faster than net interest revenue. Day two CECL provision levels will provide for loan growth and will be influenced by changing economic outlooks. We are not expecting any meaningful changes in the historic loss rates during 2020 that drive our models. Tax rate, approximately 21% of pre-tax income. We will continue to provide sufficient capital for loan and balance sheet growth, a competitive dividend payment and a modest level of opportunistic share repurchases. Capital ratios are expected to improve slightly over the course of 2020.

And lastly, I want to share the updated transition impact of CECL that we expect to book on day one. After many test runs, we expect the pre-tax transition adjustment to range between $60 million and $65 million, which is in the middle of the range we provided last quarter. We have elected to phase in the impact of CECL transition on regulatory capital over a three-year period. I'll now turn the call back over to Steve Bradshaw for closing commentary.

Steven G. Bradshaw -- President and Chief Executive Officer

Thanks, Steven. 2019 was an outstanding year for the organization and one that's really a testament to the diversity of our revenue model. 2019 proved more challenging for the industry as a whole compared to 2018, as we faced some pretty significant revenue headwinds when interest rates moved lower starting in mid-year. While this pressure typically contracts the earnings potential of regional financial institutions, we saw a strong surge of revenue from our fee-based business units that performed exceedingly well when rates declined. This was no accident. We are purposefully built to perform under any economic cycle. And though we remain optimistic in our ability to continue to grow our business in 2020, the headwinds of lower rates and the economic uncertainty that is always exaggerated in a national election year may well prove challenging. However, we have always taken a long term approach to building shareholder value and that focus will continue to guide our decisions on how and where we invest in the company going forward. With that, we're very pleased to take your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Ken Zerbe with Morgan Stanley. Please proceed with your questions.

Ken Zerbe -- Morgan Stanley -- Analyst

Okay, thanks. Good morning.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Good morning.

Steven G. Bradshaw -- President and Chief Executive Officer

Good Morning, Ken

Ken Zerbe -- Morgan Stanley -- Analyst

So I wanted to start off with expenses, hoping to get a little more clarity in terms of maybe a dollar amount of expenses because it looks like this quarter was certainly higher than expected even backing out the severance in the charitable contribution and I know your guidance is that it's going to be above 60% on the efficiency ratio, but can you just provide a little more guidance in terms of like what dollar amount is the right number to be thinking about here?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Well, I think when you look at 2020 and the kind of revenue that we think will create in the fee businesses, I think that's one of the reasons I feel like the efficiency ratio is going to be a little higher than 60%, is because our fee business revenue growth is going to be more than our net interest income growth. And when you have fee revenue growth, it comes with a little bit higher expense base, commissions and other activities there that just drive a little bit higher efficiency business in terms of the percentage. And so I think a level -- you want me to point to the exact dollar level, I think it's out into 2020 is going to be closer to where we are here at this $288.8 million somewhere plus or minus in that area, I think going forward for 2020 is probably a pretty good expense level to use.

Steven G. Bradshaw -- President and Chief Executive Officer

Yeah. Ken, this is Steve Bradshaw. One thing that's always a bit of an anomaly in the fourth quarter is that we have a number of people, not only just in the fee businesses, but also in a lot of our lending areas that have annual incentive targets and it becomes, while we accrue for those throughout the year as we track it, it becomes more certain when you get into the fourth quarter. So we always see a little bit of lumpiness on the incentive comp side as we're -- as we're accruing for the year-end bonuses. So I don't -- I don't disagree with the way Steven characterized that, but I do think Q4 always have a little bit of incremental incentive comp cost in it.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. Understood. And then two really quick questions for you. The first question is, when you see your capital ratios are going to improve, I guess, whose perspective is that? I mean, do they go up or they go down over the course of the year?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Well, I think what we're trying to do is just improve those ratios just modestly. Okay?

Ken Zerbe -- Morgan Stanley -- Analyst

You mean they go higher?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

They go higher.

Ken Zerbe -- Morgan Stanley -- Analyst

Okay.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

The percentages go just a little bit. We're not talking about a lot of capital accumulation here. I think we'll continue, as I mentioned, to pay a good strong competitive dividend, we'll take advantage of the market where we can opportunistically and stock buybacks. But I would like to see the ratio go up just, just slightly over [Speech Overlap]

Ken Zerbe -- Morgan Stanley -- Analyst

Okay, perfect. And then just the last quick question. How many energy credits, I mean, what percentage of your energy portfolio are you not the lead on in the -- particularly in the STACK'S [Phonetic]?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

It's about 65% of the portfolio -- on the STACK portfolio that we are not the agent on.

Ken Zerbe -- Morgan Stanley -- Analyst

And STACK's as a percentage of total?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

As a percent of total energy?

Ken Zerbe -- Morgan Stanley -- Analyst

Yes.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

It's going to be...

Stacy C. Kymes -- Executive Vice President, Corporate Banking

It's going to be a relatively high percentage...

Steven E. Nell -- Executive Vice President and Chief Financial Officer

49%.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Yeah, half.

Ken Zerbe -- Morgan Stanley -- Analyst

Perfect, OK. Thank you very much.

Operator

Our next question comes from the line of Brady Gailey of KBW. Please proceed with your question.

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

Hey, good morning, guys.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Good morning, Brady.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning.

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

When you look at the guidance for 2020, you say stable NIM from current level. I'm assuming that means a stable NIM from the fourth quarter level of 288. Is that the way to read that?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

That's correct. That's what we think.

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

Okay. And then how -- and then how -- I mean, when you look at accretable yield levels, you had the $5.8 million in the fourth quarter was the lowest level you had in all of '19. I know that is a shrinking bucket, but how -- how do you think yield accretion will trend in 2020?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

You know, I think that $5.8 million was a little bit lower than I honestly expected and I really think 2020 will fall somewhere in the kind of $25 million to $30 million range of accretable yield. I don't know how it's going to fall by quarter. But I think that's the level that you should probably expect.

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

Okay. And then finally just on deposit costs. I know when we spoke 90 days ago, you guys were saying deposit costs could be -- could be flat if not up a little bit, you saw deposit costs down in the fourth quarter. Maybe talk about the option of continuing to reduce deposit costs from here or do you think that kind of bottomed at this 4Q level?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

This is Stacy. I mean, I think if you look at what we did in the fourth quarter, where we increased deposits about $1.5 billion but yet reduced overall deposit costs, as you mentioned, I think that was a huge win for us in terms of continuing to move deposit costs down as we looked forward. I still think you're going to find opportunity to continue to lower deposit costs. If LIBOR moved immediately as the Fed move deposit cost lag, they lag going up, they're going to lag going down. So that gives us some opportunity as we move into 2020 to continue to improve our deposit costs as part of our funding and hopefully that translate into improvement in the NIM as we move into 2020 as well.

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

Got it. Thanks guys.

Operator

Our next question comes from the line of Michael Rose with Raymond James. Please proceed with your questions.

Michael Rose -- Raymond James -- Analyst

Hey, guys. Just wanted to touch on the loan growth outlook. It looks like 3% to 4% full year average to full-year average. I guess I'm trying to reconcile that with the difference between the period end balance and the average balance for the quarter. It looks like there might have been some paydowns or some charge-offs, obviously at the end of the -- at the end of the year and trying to reconcile that with some of the comments around some softness around the middle-market and energy not growing as much as we move forward. So if you can just -- something to square that, I'd appreciate it. Thanks.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Absolutely. Well, we had really a pretty good loan growth throughout the quarter. It was really in the last couple of weeks of the quarter that we saw paydowns in both energy and commercial real estate. We've seen a nice rebound in outstanding balances early in January so we're hopeful that some of those paydowns that you saw are revolving in nature and will come back. If you look at where we grew last year, energy grew 11%. We're clearly not forecasting energy to grow at that level as we move forward. We don't think you'll have -- you will have some lumpiness as we've had in previous periods around quarter-over-quarter growth but if you look at long term growth, being in that 3% to 4% range is something that we feel very good about. We don't think that the fourth quarter was a trend in any respect as we looked at the nature of some of those declines, there was seasonality in some of the businesses that we have on the C&I side, they tend to fund up in the middle of the year and then pay down at the end of the year. Energy had paydowns. We had paydown in the commercial real estate. We don't think that's really representative of what we're going to see as we move forward and certainly that has held to be true here, very early, admittedly, in this new year. So I feel very good about the guidance that we provided in that 3% to 4% range and certainly don't see anything today that would make me think that that's not achievable.

Michael Rose -- Raymond James -- Analyst

Okay, thanks for the color and then maybe just switching gears to energy,maybe for Mark. Where -- can you just give some greater color on maybe what caused some of these issues for these two energy STACK's, I assume it probably has to do with the company has run out of -- run out of cash. If you can just give some color there and then whether they were gas-related or oil-related. And then, has anything changed as it relates to your thoughts around energy lending as we move forward as an asset class? Thanks.

Marc Maun -- Executive Vice President, Chief Credit Officer

Well, firstly on the taking energy as a class, what's -- nothing's really changed on how we're approaching it. What we're seeing in the market is really, there is an impact from the capital markets and the A&D market being a bit closed in certain circumstances and natural gas prices and then yield prices are lower right now. So that is causing some issues for certain credits. But again, we're continuing to be 78% E&P, first lien secured deals from a gas price perspective, 95% of our customers have some form of hedging. But we don't really look at it on a portfolio basis, but we are pleased that we've seen our customer base pursue hedging as a way of protecting their downside risk. As it relates to specific credits, we kind of monitor those on an individual basis and don't really get too detailed about what's going on, on particular deals and well, I can tell you that we feel very strongly that our workout team is in certain circumstances is taking all steps necessary to minimize whatever exposure we have and minimize the amount of loss such that we really feel like going forward in 2020, we will continue to have our 12-month loss in the 25 base -- 20 basis points to 25 basis points, which is consistent with what we've had in the past, maybe a little lumpy in the first quarter, but, going forward, we don't see it getting out of whack as what we've had historically.

Michael Rose -- Raymond James -- Analyst

Okay. Thanks for taking my questions.

Operator

Our next question comes from the line of Peter Winter of Wedbush Securities. Please proceed with your questions.

Peter J. Winter -- Wedbush Securities -- Analyst

Good morning.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning, Peter.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Good morning.

Peter J. Winter -- Wedbush Securities -- Analyst

Can you talk about some of the drivers to the 3% to 4% average loan growth? Because -- especially with energy, which was the main driver for 2019 is going to slow and just general middle-market, a little bit of cautious -- caution there.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

This is Stacy, Peter. Certainly, energy will continue to be a driver for us. I certainly don't want to indicate that it's going to not grow next year. We think there's going to be opportunity there. We grew 11%. I don't think we'll grow 11% but I think we can grow mid-to-high single-digits inside of energy, which is obviously a large portfolio for us. We have ample room under our commercial real estate limits to continue to grow there. Our teams there are continuing to see opportunities that we think are positive and reasonable from a credit risk to take at this point in the cycle. So we think we'll see growth there. Healthcare has been an area that we continue to grow and invest in, and you'll see that good growth for the year in healthcare. We have high expectations for that team in 2020 and we think we'll continue to grow there. Where some of the softness is, is maybe on the lower end of C&I where you may have a sole proprietor or single business owner who is kind of a little bit more cautious about the macro environment, but we think that clearly, if you think about what we've done on the wealth side, we grew our lending side in the wealth space in strong double-digits last year, and we think that will be a growth driver for us in 2020 as well. So as you kind of add the pieces together and roll that forward into 2020, we certainly feel very confident that something in the 3% to 4% range is very achievable for us.

Peter J. Winter -- Wedbush Securities -- Analyst

Okay. And on the fee income side, you talked about brokerage and trading and wealth. So I'm just wondering, can you talk a little bit, Steven, about the outlook for mortgage banking in 2020?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Yeah. So I think we had good origination capability across our footprint. We feel very confident with the purchase market there and our ability to serve that market and so I do think it will be a little lower in total for the year of 2020. But I think we've got a great approach and a good process and we're pricing pretty well. We've got good discipline there. And so I feel confident that we can achieve some pretty good results in mortgage. It may not be at the same revenue level that we achieved in 2019, given the different rate environment, but I do feel pretty good about the continued growth in that -- in that sector.

Peter J. Winter -- Wedbush Securities -- Analyst

Okay. And then just my last question. I know you guys have done a lot of work on reducing expenses at the bank. I'm just wondering, with a tougher revenue environment, are there still opportunities to cut expenses at the bank?

Steven G. Bradshaw -- President and Chief Executive Officer

Yeah. Peter, this is Steve. We actually really worked in earnest on -- on that initiative, really going back into the fall when it became apparent that we were going to see further rate cuts and have more pressure on the net interest revenue side in '20. You saw us take a little over $2 million in severance costs in the fourth quarter and that was really just to identify where we thought we had some opportunities across the board. We're also curtailing some of the expansion of new positions across the bank as well. So there is always opportunities and we're always seeking an opportunity to improve efficiency. We're being careful not to do that on the backs of reducing our investment commitment from a technology perspective. That's important to us competitively. And we continue to make strides there. But no question, we'll have a hyper focus on expenses really throughout 2020.

Peter J. Winter -- Wedbush Securities -- Analyst

Okay. Thanks for taking my questions.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Thanks, Peter.

Operator

Our next question comes from the line of Gary Tenner of D.A. Davidson. Please proceed with your question.

Gary Tenner -- D.A. Davidson & Co -- Analyst

Thanks, good morning, guys.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Good morning.

Gary Tenner -- D.A. Davidson & Co -- Analyst

Hey. So two questions, one on the deposit side. You gave, obviously, Steven, the sequential quarter change in deposit costs. Could you give us any inter-quarter color in terms of deposit costs, maybe where they were in December?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

No, I mean I don't have that in front of me exactly what they are in December. I just know the composite deposit costs for the quarter, as Stacy mentioned earlier, we were happy to see that go down from 1.17% to 1.09%. As he mentioned, I think there is opportunity there to continue to drive that down a bit and -- but beyond that, I probably wouldn't comment further.

Gary Tenner -- D.A. Davidson & Co -- Analyst

Okay and then broader perspective on the Oklahoma economy. We're hearing that maybe there is a bit of a slowdown there, lower tax receipts. There's been some job cuts, I think, at some of the larger energy companies in the state. Can you talk about kind of the perspective for the broader Oklahoma economy?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Oklahoma is doing well. I think the decline in tax receipts is largely driven by declining growth production taxes as there has been less drilling in the SCOOP and the STACK here in Oklahoma, but kind of corporate taxes and personal income taxes have held in very well and are actually slightly up a little bit. So I think the Oklahoma economy is doing well and we don't see any weakness, really the job kept seem to be being able to be absorbed by the economy in a reasonable period of time. So we're not seeing kind of inherent weakness there understanding that there is some dislocation from time to time with certain companies, but there is job growth here too that's able to absorb that and state's doing well.

Gary Tenner -- D.A. Davidson & Co -- Analyst

All right. Thank you.

Steven G. Bradshaw -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Matt Olney of Stephens Inc. Please proceed with your questions.

Matt Olney -- Stephens Inc -- Analyst

Hey, thanks. Good morning, guys.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Good morning, Matt.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning, Matt.

Matt Olney -- Stephens Inc -- Analyst

I want to go back to -- I think it was Peter's first question on loan growth drivers in 2020. And, Stacy, it sounds like energy will be a decent part of the driver and I think energy is now around 18% of loans outstanding. Can you just remind us what your internal limits are on this asset class? And with the higher charge-offs that we saw this quarter from energy, is there any pause or concern about growing this book in the future.? Thanks.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Sure. We have ample room inside of our concentration limits. We don't see anything that would be a constraint on our ability to grow it other than the opportunity to find good deals. If you look at actual net charge-offs, we've been in this $10 million to $12 million per quarter now for a while. I don't see the fourth quarter as an anomaly from that perspective. I think it's very consistent, and actually if you go back and look at the fourth quarter last year, I think net charge-offs fourth quarter over fourth quarter almost identical. So we're -- as Marc alluded to, we're kind of providing some guidance that we think net charge-offs will be in that 20 basis points to 25 basis point range next year for the full calendar year. There could be some of that that's front-loaded earlier in the year as some of these near-term issues work themselves through the process, but we still feel very good about this space. You talk about net charge-offs in energy this year, they were higher than last year. They were at about 91 basis points or so in the E&P space, but if you think about the sector overall, we're getting 100 basis points to 125 basis points additional spread on those loans. We think we'll continue to see some opportunity to improve that in 2020 as others think about their exposure here. But we like this business through the cycle. We understand that this has been a longer-term ebb and flow in this industry than we've seen in a while, but we have a great team. The credit teams in the line are working great together. We have a great engineering staff. We think that we're well-positioned to be able to manage through this and do it in a way that is good for the shareholders and good for us. I think we've talked about there will be some lumpiness in criticized and classified and non-accruals, and you see that a little bit, but even -- even with all that, our non-accrual loans are less at the end of the fourth quarter than they were at the end of the second quarter. So there is a little bit where we're going to go up, there's a little bit where we're going to go down. But it will ebb and flow and it's at a level that we believe is very manageable and for the full year, we are going to have 21 basis points in net charge-offs. For the company, we think that's going to compare very favorably to our peer group. And so it's an asset class that clearly is in the media a lot, there is issues with around liquidity in the space to a large extent, but we're working through that and I think we're very well-positioned to manage that. We're still as energized, if you will, around energy as we ever have been, because we think that it's an important part of our DNA of the company and we continue to want to emphasize that as a core product offering for BOK Financial.

Matt Olney -- Stephens Inc -- Analyst

Okay, thanks for that color, Stacy. And then sticking on the credit discussion. The press release mentioned that non-accrual loans did tick up and I think it was pointing to a $7 million increase from a multifamily community development credit. Can you tell us more about this credit and is that -- is that part of the senior housing portfolio?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

It is not a part of the senior housing portfolio. This is a low-income housing tax credit deal that we made as part of our investment in the communities that we serve. It has demonstrated some weakness and sensitive and slower to lease up. But leasing is commencing, it's just moving at a slower pace. We don't foresee any real significant loss. I won't say zero loss. But certainly not any that significant related to that new non-accrual loan in the fourth quarter.

Matt Olney -- Stephens Inc -- Analyst

Okay, guys. Thank you.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Thank you.

Steven G. Bradshaw -- President and Chief Executive Officer

Thank you.

Operator

Our next set of questions comes from the line of Jon Arfstrom of RBC Capital Markets. Please proceed with your questions.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Thanks, good morning all.

Steven G. Bradshaw -- President and Chief Executive Officer

Good morning.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

A few follow-ups. Steven maybe for you, early on, when you talked about the NIM, you said it was the full realization of the last two cuts. We've talked a little bit about deposit pricing, but I'm just curious, are you saying that you feel like the earning asset yield pressure that we saw last quarter has essentially run its course? Is that the message that you're sending?

Steven E. Nell -- Executive Vice President and Chief Financial Officer

I think, a good portion of it is, yeah. When you think about the number of the percentage of LIBOR-based loans that we have, they've repriced effectively and so I think the majority of that is in the numbers.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Okay, good. And then, Stacy or Steve maybe for you, this general slowdown in C&I that you talked about, I think you used the term "pause" and maybe it's a confidence issue, obviously three months ago, it was maybe a little bit more pessimistic and things are a little more optimistic today. Have you seen any of that pause or confidence improve a bit in the last three months or is it just more of the same?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

I think the environment on the middle-market and lower end middle-market C&I side has been relatively consistent over the last few months. I think as we begin to get more certainty around some of these things, I think you'll see continued opportunities for people to invest in their business, buy a new piece of equipment, add a line, grow and expand the business. But today, that's not been an area that we've seen a lot of growth in. It's certainly outpacing GDP growth. We've talked for many years about kind of being able to outpace GDP growth, you can do it a little bit, but not much and not consistently, and if you do, then be careful. And so I think that's kind of what we're seeing is just kind of slow steady growth, not high single-digit kind of growth in that space.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Okay, good. Talked about two large year-end expected paydowns. Can you give us an idea of the size of those commentary at all?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

No, we didn't have -- we had paydowns broadly in both -- in really three areas in energy and commercial real estate and in our wholesale-retail sector, just portfolio pay downs, they weren't large credits. They -- some of that cyclicality, one of those in the wholesale retail sector tends to fund up in the summer as they go through the kind of Christmas selling season. Then they buy inventory and they tend to sell down as cash flow comes in during that period of time. Energy and commercial real estate were just kind of the nature of the business. Nothing unusual there particularly, but as I look at the early part of 2020, I see a nice rebound there. And so I'm certainly optimistic as we move into 2020 that, that was not a trend, but just kind of a late fourth quarter anomaly. Sometimes you see those kinds of things, Jon. I don't know if it's balance sheet dressing at the -- for some of those companies they're not window dressing, but we'll see that and tend not to react to that real strongly based on what we see late in the fourth quarter as we move forward.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Okay, all right. I may have misheard you on that, but that helps. And then last one, it sounds like you still -- you have quite a bit of room in commercial real estate, but you mentioned concentration limits a couple of times. Can you just remind us of the themes and kind of the guard rails on that?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

So, commercial real estate, it's based on both of our limits in energy and commercial real estate are based on committed, not outstanding. They are 135% of Tier 1 capital and reserves for commercial real estate, I think it's 225% of Tier 1 capital and reserves for energy that we've got ample room to grow, consistent with the guidance that we provided in both those spaces. So we're not -- we don't have any overriding concerns that our internal concentration guidelines will be a constraint for growth in those areas in a meaningful way in 2020.

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Okay, all right. Thank you.

Operator

Our final question comes from the line of Jared Shaw of Wells Fargo Securities. Please proceed with your questions.

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

Hey, good morning. This is actually Gilmore Brasiliero [Phonetic] filling in for Jared. First question, I just want to circle back to some of the commentary on energy. I'm wondering if some of the weakness in the energy market is manifesting itself in other industries and -- and if so, how much of that is driving the commentary around the sluggishness in middle-market C&I?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

You're talking just a broader spillover effect in the broader kind of Colorado, Texas and Oklahoma economy.

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

Correct.

Stacy C. Kymes -- Executive Vice President, Corporate Banking

It's a natural conclusion to see that and wonder about that. It's not obvious to me at this stage that, that's what we're seeing. If you think about really from my perspective, this is the kind of the tail of this original downturn that happened in 2015, '16. I don't -- I think it was more pronounced in that period of time. I think where we are today, it's not nearly as pronounced and it's a little bit more steady state from that perspective. I'm not necessarily -- and it's a good question, but I'm not necessarily seeing a direct tie at this point to the slowdown in general C&I to the weakness -- some weakness that's being demonstrated in E&P [Phonetic]. I think that was more obvious and pronounced several years ago, but as we've stabilized in this kind of $55 to $60 price for oil, particularly in our footprint markets, I think that that's less of an issue.

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

Okay. And then maybe switching gears to the deposit growth this quarter, pretty impressive. Was that just the culmination of the work that's been going on that kind of all hit in the fourth quarter? And I guess looking at some of the initiatives that have been taking place, what's still remaining and how should we think about deposit growth heading into 2020?

Stacy C. Kymes -- Executive Vice President, Corporate Banking

So deposit growth is something that Steve laid out for us as an important initiative to kind of try to grow deposits to fund the loan growth in 2019. And as you go through that process, it's a hard -- it's a ship that doesn't turn immediately. It takes a lot of time and effort to begin to cultivate and identify the opportunities. If you look in the fourth quarter, Scott Grauer and our Wealth team really did an exceptional job of bringing in great deposits priced at reasonable levels. They were a big driver for the deposit growth in the fourth quarter, but the commercial businesses did a great job with that as well. Really, just as a result of our long-term effort, kind of the culmination of an effort that's been going on for a while in terms of moving the deposit needle, as we think about 2020, I think our, really, desire is kind of growth at a reasonable price. We want to grow, to continue to fund the loan growth, but we are very mindful of ensuring that we're paying attention to the cost of those deposits and doing everything we can to minimize the impact to our net interest margin as we think about growing deposits in 2020.

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

Okay, and then just last one from me. Looking at mortgage banking revenue versus expense and the disconnect there this quarter. Is that a timing issue, or was that a true up on incentive for the strong year and if...

Steven G. Bradshaw -- President and Chief Executive Officer

Yeah, you know, the biggest -- the biggest driver of the revenue side is commitment levels and then the expense side is really tied more to loan fundings. And so if you look at loan fundings, they're pretty level. And so the work that had to take place to get loan fundings completed in the mortgage banking cost line item is there, but the revenue side is more influenced by the commitment levels at the end of the year, which did drop off. So that's kind of the disconnect, just timing.

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

Great, thank you.

Operator

We have reached the end of the question and answer session. I will now turn the call back over to Steven Nell for any closing remarks.

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Okay. Well, thanks everyone for joining us today. We appreciate all your questions and interest in BOK Financial. And if you have any further questions, give me a call at 918-595-3030 or you can email us at ir@bokf.com. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Steven E. Nell -- Executive Vice President and Chief Financial Officer

Steven G. Bradshaw -- President and Chief Executive Officer

Stacy C. Kymes -- Executive Vice President, Corporate Banking

Marc Maun -- Executive Vice President, Chief Credit Officer

Ken Zerbe -- Morgan Stanley -- Analyst

Brady Gailey -- Keefe, Bruyette & Woods -- Analyst

Michael Rose -- Raymond James -- Analyst

Peter J. Winter -- Wedbush Securities -- Analyst

Gary Tenner -- D.A. Davidson & Co -- Analyst

Matt Olney -- Stephens Inc -- Analyst

Jon Arfstrom -- RBC Capital Markets Corp -- Analyst

Gilmore Brasiliero -- Wells Fargo Securities -- Analyst

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