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Wintrust Financial Corp (NASDAQ:WTFC)
Q4 2019 Earnings Call
Jan 22, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Wintrust Financial Corporation's Fourth Quarter and Year-to-Date 2019 Earnings Conference Call. [Operator Instructions]

Following a review of the results by Edward Wehmer, Chief Executive Officer and President; and David Dykstra, Senior Executive Vice President, Chief Operating Officer, there will be a formal question-and-answer session. During the course of today's call, Wintrust's management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements.

Actual results could differ materially from the results anticipated or projected in any forward-looking statements. The Company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the Company's most recent Form 10-K and any subsequent filings on file with the SEC.

Also our remarks may reference certain non-GAAP financial measures. Our earnings press release and slide presentation include a reconciliation of the non-GAAP financial measure to the nearest comparable GAAP financial measure. [Operator Instructions]

I will now turn the conference call over to Mr. Edward Wehmer.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thanks very much. Happy New Year, everybody, and welcome to our fourth quarter earnings call. With me as always are Dave Dykstra, our Chief Operating Officer; Kate Boege, our General Counsel; and Dave Stoehr, our -- what are you? Our CFO. We'll go through the same format as usual. I'm going to give some general comments regarding our results, turn over to Dave for a more detailed analysis of other income, other expenses and taxes, back to me for some summary comments and thoughts about the future, and then time for questions. I'd like to first go walk down memory lane. As we enter the roaring '20s, I'd like to thank, as we call them now, I think it's appropriate to take a second to look at our accomplishments over the last decade. As we have always been a company that manages for the long term, I find it refreshing analysts are concentrating on the last quarter, looking at entire body and work over that longer-term.

I can actually say with confidence that our franchise has really never ever been in a better position or more valuable. Over that 10-year period, net income grew from $73 million in 2009 to $356 million in 2019, a 17% compounded annual growth rate. Nine out of 10-years were record earnings with only 2010 not achieving record status. Earnings per share tripled during that period of time, from a little over $2 now, over $6 resulting in 11% CAGR. Tangible book value grew at 8% CAGR from $23 in 2009 to almost $50 in 2019. Assets and deposits have both grown at 12% compound annual growth rate as it tripled during that timeframe from $4.2 billion to $36.6 billion and the deposits from $10 billion to $30 billion.

Loans grew from $8.4 billion to $26.8 billion from year-end 2009 to 2019. Non-performing assets as a percent of assets have come down every year since 2009 and ended this year to a low of 13.36% [Phonetic] total assets. Given our $6 run rate in EPS and our track record, consistent growth and all fundamental financial results, I can't -- it just drives me nuts to look at the discount that we trade at relative to the market. Our goal for 2020 and beyond is to continue this history of good growth in all major statistics by material future decreases -- material decreases in rates, this $6 per share run rate, has been the line in the sand for us and the basis for growth -- our future growth aspirations.

Now onto the quarter. Fourth quarter net income, all in all some of it is a bit reasonable considering the interest rate environment, headwinds that we experienced. I actually think since 9/11, we've only had a period of what I considered a normal yield curve for maybe an aggregate of 10 months to 12 months. I don't really know that the new normal is anymore, but it makes it little bit hard to manage our balance sheet, but I think we've done a pretty good job over those 10 years. Net interest income and net interest margin, as you know, that then it fell 20 basis points to 3.19%, and as earning asset yields fell 28 basis points and interest expense to 11 basis points, and the net free funds ratio was down by three basis points. All these differences are direct result of LIBOR market and the yield curve by initial material changes, which should be a good basis for us going forward.

Loan yields fell 24 basis points. Loans held for sale fell 30 basis points, while liquidity management yields fell 23 basis points. Drop in liquidity management yield was due to $747 million increase in average liquidity management assets due to our good growth during the quarter. This increase is yet to be invested in the longer-term securities as evidenced by our liquidity management portfolio. Management -- our liquidity management duration staying really constant at little around four years. Investing in these assets on longer-term securities -- longer-term securities should assist as part of the margin contribution going forward. Our goal is to maintain an approximately six year duration of liquidity management -- liquidity management assets, we have some opportunity there.

Our loan-to-deposit ratio, I mean is the high end of our estimated 85% to 90% range in the quarter at 89% from 90% in the previous quarter end. At the interest expense front, deposit expense decreased 7 basis points in the quarter. General, it takes time to decrease deposit rates, and we are actively and aggressively working to decrease the cost of funds on our deposit base. So there's opportunity here also. Overall cost of funds and total interest-bearing liabilities was also down 11 basis points.

On the net interest income front, we recorded a decrease of about $3 million. The margin decrease was a primary result of this decrease and It was mitigated by overall asset growth. The full year basis, net interest income was approximately $100 million. Going forward, depending on the rate environment, further rate cuts are actually not going to be appreciated. We expect the margin to be under decreased pressure due to our ability to deploy liquid management assets in the higher yielding securities and the aggressive deposit cutting costs -- cost-cutting where we can. We know LIBOR is, again, down this quarter, we think we've an aggressive. And hopefully, are our plan is to have a decrease in -- any future decrease in assets offset by liabilities and the cost of liability is going down. So again, we think we're kind of at a good point, barring an overall shift down materially in -- a quick shift down materially in the market.

Net interest income rate should grow as a result of the above and plus additional organic franchise growth. Shortly the current 3.19% should be baseline of which we can build and grow, especially we can maintain our historical growth -- asset growth rates in 2020. If we're able to -- another expense table. We'll review these in detail a bit later, but some high-level remarks. Net overhead ratio, sort of 1.53% for the quarter, 1.57% for the year. If one were to eliminate the MSR valuation adjustments and acquisition-related expenses, we would be a bit below 1.50% on average at goal as an organization. If we were to omit the negative MSR valuations for the year, we would achieve approximately 7% earnings growth for the year.

On to the balance sheet, where assets grew $5.4 billion over the year, $1.7 billion over September and average earning assets about $1.41 billion -- $1.541 billion for the quarter and $4.8 billion for the year and loans were up $1 billion for the quarter and $3 billion for the year. So good loan growth across the board. We started the year with a little bit of ahead -- a little bit of a head start with almost $800 million of average assets. The average assets being below quarter-end asset, so that's a good thing.

So the loans -- net of loans held for sale grew $1.1 billion or 16.8% for the quarter and approximately $3 billion or 12.5% for the year. Fourth quarter included approximately $582 million of acquired loans. Real estate loans, commercial and residential grew $707 million in total. Premium finance loans, life and P&C grew $271 million. The commercial loans increased by $90 million. Loan pipelines continued to remain strong across the board. We expect to continue growing loans in high-single digits as it -- consistent with prior periods.

Deposit front, another great deposit growth quarter for $0.4 billion. That's after returning $200 million [Technical Issues] acquisition to kind of approximately half of this net growth in deposits. Core deposits, non-brokered comprised 97% of total deposits. I think, we had the best core franchise in our market. Continued good growth at the heart of our plans for 2020 and beyond. The credit fund, as mentioned, credit metrics returned to historical norms. Non-performing loans stayed constant and totaled about 0.44% outstanding, which is low as they been in any recent time in the past. Same to be said for non-performing assets. As I said earlier, it's decreased into 3% to 6% of assets.

Net charge-offs were $12.7 million, included $5.3 million of charges to the previously reserved for. Despite our second quarter blip, net charge-offs for the year totaled just around 20 basis points, a good number in anyone's measure and more aligned with what you would expect from us at Wintrust. We continue to hold the portfolio for prime assets. High-leverage deals are not welcome here anymore, and we are moving them out as we can. But we want to find them before they become problems, moving them about and move then on an expeditious basis.

I'm going to turn it over to Dave, who will provide some additional details on other income expense. He will also give you detail on the long-awaited CECL. But he convoluted, I call it the convoluted. I'll tell you what we call. Yeah, Dave, go ahead.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

All right. Thanks, Ed. As normal, I'll briefly touch on the other non-interest income and non-interest expense sections, as well as the convoluted CECL standard that Ed referred to. In the non-interest income section, our wealth management revenue increased $1 million to a record $25 million in the fourth quarter, compared to $24 million in the third quarter of this year and up 10% from the $22.7 million recorded in the year-ago quarter. Overall, we believe the fourth quarter of 2019 was another quarter solid quarter for Wealth Management segment benefiting from good customer growth on a strong equity market.

Mortgage banking revenue declined by 6% or $3 million to $47.9 million in the fourth quarter from $50.9 million recorded in the prior quarter and was up a strong 98% from the $24.2 million recorded in the fourth quarter of last year. The decrease in this category's revenue from the prior quarter resulted primarily from seasonally lower levels of loans originated and sold during the quarter from basically lower purchased home activity offset somewhat by an MSR adjustment during the fourth quarter, which was positive versus a negative fair value adjustment recognized on MSRs in the prior quarter.

The Company originated approximately $1.2 billion of mortgage loans for sale in the fourth quarter. This compares to $1.4 billion of originations in the third quarter of this year and $928 million in the fourth quarter of last year. The mix of loan volumes originated for sale was related -- that was related to refinance activity was approximately 60% compared to 52% in the prior quarter. So the refinance volume increased during the quarter and acted to mitigate the seasonally lower purchase home activity.

Table 16 of our earnings release provides a detailed compilation of the components of origination volumes by delivery channel, and also the mortgage banking revenue, including production revenue, MSR capitalizations, MSR variance and servicing income. We currently expect originations in the first quarter of 2020 to be stronger than the first quarter of 2019 given the continuation of the refinance activity, but the originations are expected to be less than the fourth quarter. So somewhere between the first quarter of last year and fourth quarter of the last year is where we currently expect volumes to be.

Other non-interest income totaled $14 million in the fourth quarter, down approximately $3.5 million from the $17.6 million recorded in the third quarter of this year. The primary reasons for the lower revenue in this category include $2.6 million dollars of lower swap fee revenue, and $2.6 million dollars less of income from investments in partnerships. These investment partnerships are primarily related to SBIC investments that support our CRA goals. This category revenue generally fluctuates as a result of the two revenue sources I just talked about and has averaged about $14.6 million over the past five quarters. So despite falling from a very good third quarter level, the current quarter is roughly on average with the last five quarters.

Turning to non-interest expense categories. Non-interest expense totaled $249.6 million in the fourth quarter, up approximately $15 million or 6% from the prior quarter, a number of factors contributed to the increase. The first, severance payments, professional fees and data processing and conversion charges related to the recent acquisitions, totaled approximately $2.4 million during the fourth quarter compared to $1.3 million in the third quarter. Approximately $2.8 million other normal operating expenses related to the STC and Countryside Bank acquisitions were incurred during the quarter, and we would expect that this amount would be reduced over time as we continue to integrate these acquisitions into our infrastructure.

Costs associated with terminating two small pension plans that we inherited with prior acquisitions totaled $487,000 and that should be the end of any cost associated with pension plans as we no longer have any. There was a $750,000 increase in legal settlement charges in the fourth quarter compared to the third quarter as management deemed it more cost-effective to settle certain litigation matters than to enter into potentially lengthy court proceedings. $1.7 million of additional expense was accrued as additional contingent purchase price payments related to prior mortgage operation acquisitions.

We have contingent consideration on our mortgage acquisitions, and we have to make our best guess upfront. And if the mortgage market is better, you may have to record additional expense. I think if it was worse, it could come in as income, given the stronger mortgage market we recorded, an accrual for $1.7 million for what we think would be additional contingent purchase price payments on those mortgage operations. And we also had $1.1 million of less rebates on FDIC insurance assessments this quarter compared to the prior quarter.

I'll talk more significant -- the more significant categories now. The salaries and employee benefit category increased approximately $4.9 million in the fourth quarter from the third quarter of this year. Salary expenses accounted for almost all the increase, was approximately $4.8 million resulting -- was up approximately $4.8 million, resulting from approximately $1.4 million of staffing costs related to the STC Capital Banking and Countryside Bank acquisitions completed during the fourth quarter, plus an additional $1.4 million of severance accruals. And then also, normal growth of the company accounted for the growth in that category.

Additionally, employee benefits expense was approximately $159,000 higher in the current quarter than the prior quarter, and this was really all due to the $487,000 [Phonetic] costs associated with terminating the two pension plans. Equipment expense totaled $14.5 million in the fourth quarter, an increase of $1.2 million as compared to the third quarter. The increase in the current quarter relates primarily to expenses associated with two acquisitions closed during the quarter and increased software depreciation and licensing as we continue to invest in information technology, information security and a newly implemented bank secrecy software, which is -- which enhances our ability to monitor for BSA-related activities as we continue to grow.

Occupancy expense totaled $17.1 million in the fourth quarter, increasing $2.1 million from the prior quarter. The increase was due to the costs associated with new locations of the acquired institutions, new branch locations, and increased real estate tax assessments. Data processing and expense increased approximately $1 million in the fourth quarter compared to the prior quarter, due primarily to approximately $558,000 of conversion charges related to the STC Capital Bank system conversion and additional operating cost of data processing related to the two acquisitions that we closed during the quarter and just general growth of the franchise during the quarter.

FDIC insurance expense was up $1.2 million in the fourth quarter compared to the prior quarter. As you know, the FDIC insurance assessment regulations provided that after the reserve ratio reached 1.38%, the FDIC would automatically apply small bank credits to reduce small banks regulatory -- regular deposit insurance assessments up to the full amount of their assessments or to the full amount of their credits whichever is less. The reserve ratio reached 1.40% on June 30 and stayed above the required threshold on September 30. And since each of our subsidiary banks are less than $10 billion in assets, each of them qualified for the credits.

Therefore Wintrust Banks received credits of approximately $2.8 million in the fourth quarter, which was approximately $1.1 million less than the $3.9 million of credits received in the prior quarter. And it accounts for basically all of the quarterly increase in the expense. We believe we have about $200,000 of additional assessment credits that could be applied in the future. We expect those to come in the first quarter generally, if the reserve ratio remains above the required threshold.

Miscellaneous expense category totaled $26.7 million in the fourth quarter compared to $21.1 million in the third quarter, an increase of approximately $5.6 million. The increase was impacted by the aforementioned legal settlement charge and $1.7 million of expense accrued as a contingent purchase price payments on the mortgage acquisitions that I discussed. And this category was also negatively impacted by approximately $1.4 million of temporarily increased telecommunication charges, as we're converting and upgrading our systemwide telecommunication infrastructure and data network infrastructure. So as we get off of one provider and go to another provider and invest in that system and we've kind of got the overlap on the two providers as we are converting.

Other than the expenses categories just discussed, all the other expense categories were down on an aggregate basis by just over $1 million from the third quarter of 2019. The net overhead ratio for the fourth quarter stood at 1.53% without the acquisition-related and other uncommon charges mentioned at the beginning of my comments. The net overhead ratio would have been below 1.5% and we expect it to be below 1.5% for the year of 2020.

And before I turn it back over to Ed, I'll briefly comment on the implementation of CECL. Our estimated increase in the allowance for credit losses as a result of the implementation of CECL is in the 30% to 50% range. This range reflects the uncertainty of economic forecasts that will be used to record the transition amount. Approximately, 80% of the estimated increase is related to additions to the existing reserves for unfunded lending commitments due to the consideration under CECL of expected utilization by the company's borrowers over the life of those commitments, as well as for acquired loans which previously considered credit discounts.

We expect relatively modest increases in reserves on the remaining legacy book. As to future provisioning, it will continue to be impacted by charge-offs, loan growth, the mix of loan growth, the macroeconomic environment and many other factors. If the macroeconomic environment stays stable with our current assumptions and if we have loan growth similar to prior quarters and charge-offs remain low then I expect our quarterly provision for credit losses to be in the $10 million to $15 million range. But I caution that CECL accounting standard may cause significant volatility in the future and that estimate may be high or low.

My thoughts are that investors should focus on trends in non-performing loans and net charge-offs rather than provision expense. Under CECL, the provision expense will be sensitive to economic forecast that may or may not ultimately have a significant impact on the performance of the company's loan portfolio. So, as you may imagine, I'm not a big fan of the new CECL accounting standard as a cost benefit aspect of it in my opinion is way out of WACC, and I believe it will create a fair amount of volatility going forward. But we've got a great team that's worked hard on implementing the new accounting standard and we are ready to go.

So with that I will conclude my comments and throw it back over to Ed.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thanks for the convoluted comments, Dave.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Welcome Ed.

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, you're always good at being convoluted and shifting. Talks about the future. Although the rate environment provides a plethora of challenges, we believe we'll be able to navigate through the storm, as we have in the past. Overall, organic growth and acquisitive growth will be important as we need to grow this period of challenging rate environment. Decreasing our cost of funds is obviously a priority, and we're all over it. Loan pipelines remain strong. Interesting to note that we've been able to hold rates on our commercial premium finance business and our leasing business. So it should hold in well.

Deploying our liquidity management assets into longer-term better earning assets is part of what we're doing, as I mentioned, taking our duration from four to six years will be helpful there. We have the expectation of continued strong mortgage market. We will be maintaining a positive gap. So as to knock in, we don't -- I want to do lock in this is 3.19% -- the 3.20% margin that we want to build-off of that, but we're going to manage the downside risk a little bit more actively than we have in the past.

Credit, though, always a good question. It looks pretty good right now, but you never know. We will never kick the can down the road when it comes to credit. So again, continued good core franchise growth will be the key. We have closed the STC transaction and the Countryside transaction in the fourth quarter. Together, these deals will add -- added close to $800 million in total assets. Significant cost-outs will happen, but they're going to take few quarters to achieve.

We have converted STC and we're starting to -- we will close three branches there, over a period of time possibly four that should start happening in the first and second quarter. We will be converting Countryside in the second quarter. There'll be some expenses associated with that conversion, but then we can start really taking the cost out of the two. So we should have elevated from them in the first two quarters, but that should be decreasing. We're not on a loss for future acquisition opportunities as the pipeline remains relatively full.

You may, -- I'd like to advise maybe some larger transactions then I'll give historically been involved with them are now more of a possibility. So we get bigger, I think we can look at bigger deals and I think the pricing on the bigger deals make more sense. We're seeing smaller deals being priced relatively high right now. I don't know whether it's credit unit has been involved, but we've walked away from two or three in the past three weeks in the quarter as a result of pricing being going up by then. Or, it could just be two drums [Phonetic] holding each other up. I don't know what's going on, but we'll find out on the long term. And God willing, we look forward to reporting record results in 2020. As always, you can be sure of our best efforts in that regard.

Now we can open up for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is now open.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thanks. Good morning.

Edward Joseph Wehmer -- President and Chief Executive Officer

Good morning.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Good. Ed, you had some tongue twisters in the script, so we're going to get you off script now. But the -- your favorite topic, the percentage margin. I guess I was surprised to see the $1.1 billion in loan growth and net interest income down a bit. I'm just curious if anything surprised you guys in that percentage margin print and can you talk a little bit more about your confidence in seeing that margin stabilize at the 3.19%, 3.20% number because things look good except for the fact that, just that net interest income number didn't grow during the quarter.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yes. I can understand that. But now we got about $700 million carryover into this quarter. So on average basis, we went up that much. So that's some of the issue there. So you'll see that -- I think the -- with capital, we can grow our net interest income next year, if we can -- in our steady growth rates. As to deposits, I think we got LIBOR down 10 basis points or 12 basis points -- maybe 13 basis points really this quarter, but we are actively cutting expenses.

So our interest expense, so if we can bring that down by the same level knowing that our premium finance loans on the commercial side and $1.3 leasing portfolio continues to maintain rates and putting the liquidity work, we hope that this is the base we could work off of. That's what our numbers show us. I could see gradual improvement. It keeps going down, I mean it's hard to catch up. Eventually, we will, but right now, it appears it just stays right where it is or drops 10 basis points or 12 basis points a quarter, we can handle that and uses as relatively speaking, as our benchmark to go forward.

Dave, you got a comment?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. No. I just -- the key is going, I think going to be the 30-day LIBOR rate and wonder that stabilizes or not. And in the Fed's rate, if they hold stable. If those two hold stable, then I think we can hold and we got a good baseline and the growth will create growth and net interest income. So let's hope the yield curve steepens and 30-day LIBOR anchors out here.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. All right. And then the other obviously big -- bigger line item, you talk about what is mortgage and you had a good mortgage quarter and those kind of 2 times what you did a year ago. It sounds like you're still reasonably optimistic, even though I think we all expect Q1 to be down a bit, but talk a little bit about what you're thinking about Q1 and then your ability, you've talked about the efficiency efforts in mortgage and your ability to get cost down. If we do see the seasonal slowdown -- also some slowdown in the refi?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. As I said in my comments that I think the mortgage production right now based on what we're seeing and then, you don't have full visibility for the quarter because the loan close sort of in that 30 to 40-day period. So I'm not sure what the end of the quarter is going to look like and where rates will go in the next few weeks, but based upon the application pipelines we have and the forecast that we have, we think the production will be somewhere between what we did in the first quarter of last year and what we did in the fourth quarter. So first quarter last year, we did $772 million or -- I'm sorry, $678 million worth of production and we did $1.2 billion this quarter. My guess is that somewhere in that $900 million plus or minus range, but that's our best estimate right now. It could change if the rates fall and that refinance activity picks up even more, but my guess is that somewhere in that range.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. And then the efficiency piece of it.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

We continue to work on that. We have, as we talked before, we have offshored some of the activities that are non-customer facing that are more unit priced and so we've turned that more into variable versus fixed rate and we continue to invest in the technology. So I look at this as just an evolving improvement and mix expense line items as we continue to get better. There is not going to be one big quarter where expenses dropped. We're just getting better and better and better each quarter. So we should see some continued improvement there.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Yeah. Okay. And then just one more and I'll step back. Just the comment about bigger deals Ed, what do you mean by that? Do you mean, you'd consider an MOE? Do you mean just bigger than these sub billion dollar transaction you start -- you've historically done? Just what do you mean by those comments? Thanks.

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, obviously, we've got through the banks under $1 billion. We'll continue to look at that. But looking at banks over $1 billion make some sense for us also right now. Given many of them are having kind of the same issues we are. On the MOE standpoint, there's lots of opportunity that we don't generally comment on adding anything particular going on the discussions that are going on or not going on, but you can imagine that in a year like this, everybody, kind of, going through this -- through the same sort of margin compression issues that, that some things might make some sense, but things we never looked at before. I'm just saying that, but who knows.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. Thanks.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah.

Operator

Our next question comes from Terry McEvoy with Stephens. Your line is now open.

Terry McEvoy -- Stephens -- Analyst

Hi. Thanks for taking my questions. Start off with a question on the expenses. Dave, you ran through a lot of the fourth quarter puts and takes to the expenses. Could you just provide some thoughts on the first quarter? Will some of those expenses kind of disappear and, but you also have some seasonality that typically shows up in the first quarter as well.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. Well, the FDIC credits of $2.8 million are going to go down to $200,000. So there'll be a little headwind on that. And certainly the legal settlements of roughly $1 million this quarter, we don't expect that happen again. Pension termination of $0.5 million, we don't expect to happen again. The contingent consideration on the mortgage purchase price estimate, we think we've accrued that up. So we wouldn't expect that to happen again. Acquisition-related charges of $2.4 million, as Ed said, we don't expect much in the first quarter, but we will convert the Countryside deal in the second quarter. So we'll have some additional charges then when that happens, but that should be mostly in the second quarter. And so, I mean those were the big items that I don't think should recur going forward.

We also know that on the non-interest income side, there is a $2.6 million swing between third quarter and fourth quarter on swap fees. That fluctuates quarter-to-quarter. We had an abnormally good third quarter and it dropped a little bit in the fourth quarter given the rate environment and the like, but that very well could get better. And then the partnership investments generally those are positive. We had a couple of these SBIC investment firms have wrote off some investments inside of their funds during the fourth quarter which negatively impacted us. So I don't expect that to happen again, but that was a $2.6 million swing. So there was -- between those two line items there was $5.2 million swing that we don't expect to happen again sort of in the non-interest income side of the equation, but those are volatile and we just have to see what the market value of those funds do and what the customer appetites are for sort of the capital markets swap issues.

But those are the large items that I think you could sort of adjust for going forward. I do think then that commissions expense, if we're less in mortgage originations as I spoke about in the first quarter a little bit, that the commission expense line item will come down, so that should help on the salary side too.

Terry McEvoy -- Stephens -- Analyst

Thanks. And then just a follow-up on the M&A question. At 1.35 times tangible book, is M&A really an option at all given, call it, the currency, be it small banks or larger banks?

Edward Joseph Wehmer -- President and Chief Executive Officer

It's all relative.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. I just have to look at what the prices on their side and some of the small deals or even larger deals, if you can get enough cost up out of them. Then if you look at the relative price and the cost savings you can make some of them potentially makes sense.

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah. We're pretty good stewards of tangible book value. We don't give away the house and expect a 10-years earn-back or something. But hopefully, it will be a 1.35 of tangible book, when you guys do your job out there, just kidding, but you think at $6. I mean $6 is a run rate per share, the average $12 [Phonetic] -- which we trade at $75. I mean we get this quarterly knee-jerk reaction that everybody thinks the world is coming to an end, nobody likes banks, reality worms. But we think the market is pretty good. With this rate environment. I think we can hold pretty steady and continue to grow. As I said earlier, I think our franchise value has never been higher than it is right now. When you look at the 97% core deposits and a great customer base, our growth at some -- we feel pretty good about that aspect of it.

So, yeah, you never know, but you never know. Doesn't work it don't work, but everybody else is in the same boat in terms of book value. Book value numbers and earnings numbers is really -- really now we're -- it's plays [Phonetic] 11 won't have turns off the market, equity made up with lots of cost cuts too. So we can do acquisitions, we could do them well. We're not going do anything stupid. So it doesn't work, it doesn't work, but to saying that the adds I've been looking at larger deals might make more sense and some of the smaller deals for the reasons I discussed earlier.

Terry McEvoy -- Stephens -- Analyst

Thanks for your thoughts.

Operator

Our next question comes from Chris McGratty with KBW. Your line is now open.

Chris McGratty -- KBW -- Analyst

Great. Thanks. Ed, you've talked about this $6 number a couple of times on the call today. I'm trying to get a sense as $6 in 2019. Is your expectation that you will do better than that in 2020, barring any changes by the Fed, is that the message you're trying to send?

Edward Joseph Wehmer -- President and Chief Executive Officer

Yeah. I think it's the base we're going to build off, I think if we can continue to grow at the rate, we were growing at, we grew $4.5 billion organically and $1 billion through acquisition last year. We've just growing at $3 billion, be a good number for us and hopefully, we can beat that and the earnings on that, if we can hold our margins steady and keep the cost down that has a commensurate increase in expenses, which we would fully expect to happen, we get our net overhead ratio in the 1.40s consistently. I think we'll be, OK.

Chris McGratty -- KBW -- Analyst

Okay. And just -- maybe I missed it, I think you talked about your margin. Was the comment that the rate of compression will abate from this quarter or that 3.19% will hold, kind of from here?

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, both, it just depends on where LIBOR continues to tank, it will be hard hold it, but I think that rate of compression should slow down. It does go down more than we expect, like, 10 basis points to 13 basis points, which should hold back just through extending our maturities on our liquidity management portfolio and continuing to cut our cost of funds, but any, like a quarter sudden drop of 35 basis point, some drop would have a negative effect on us.

Chris McGratty -- KBW -- Analyst

But as it stands today with LIBOR down what 10 basis points to quarter, you think you'll be in that ballpark of 3.19% for the first quarter, if everything stayed the same?

Edward Joseph Wehmer -- President and Chief Executive Officer

Yes, sir. And build off of that going.

Chris McGratty -- KBW -- Analyst

Okay. Maybe the second question, we've seen a lot of banks, given the revenue pressures kind of go to the expense well. Obviously, you guys have a growth aspect of the story, but what are the thoughts of really ratcheting up the efforts to cut costs, while the revenue pressures are there?

Edward Joseph Wehmer -- President and Chief Executive Officer

Well, we do that all the time and the efficiencies we look for those all the time. We have a whole process here we go through in terms of looking at process efficiencies and number of those are in the works right now. We continue to go through that and work through it, but we also have to make investments in IT and technologies that we're doing and that's people. So we look at it all the time. I don't know exactly what we can do to really -- do a drastic cut in expenses, right now and continue to grow the organization. We have to take what the market gives us. The market has given us good organic growth right now. That good momentum in our markets, good growth in our markets, that can continue to grow the franchise and keeping that overhead ratio in the 1.40s. The margin will come around eventually, I mean it will steady and solidify at some point, can't get off river, maybe it'll go up someday. But I've given up on interest -- on interest rate side.

I don't think of ever seen a period of time where full employment and 2.5%, 3% GDP growth and absolutely no inflationary pressures, -- it's how can -- I just maybe you could explain to me someday, Chris. But, I do know that I do not want to -- I do want to maintain a positive gap instead, I want to stay interest rate sensitive, maybe not as much as we were. We've been [Indecipherable] that back a little. But because I don't want to lock in 3.20% margin for the next five years. That doesn't make sense to me. So see where it goes. Dave, you got anything?

Chris McGratty -- KBW -- Analyst

Thanks.

Operator

Our next question comes Brock Vandervliet with UBS. Your line is now open.

Brock Vandervliet -- UBS -- Analyst

Great. Thanks for taking my question. So as I look at your loan growth in the past acquisitions have always played a part of that. As you look at organic loan growth in 2020, what does that look like? Is that mid single-digits, higher than that?

Edward Joseph Wehmer -- President and Chief Executive Officer

I believe that the mid-single digit be a good number 7% -- 6% to 9% somewhere in that number right around there.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

I'm sorry, mid to high-single digits is sort of the phrase I would use, which would be 6% to 9%. Yeah.

Brock Vandervliet -- UBS -- Analyst

Okay. And separately, on expenses, everyone's kind of taking shots at this question, is a -- and we're still going through the adjustments, that is a low 2.40s per quarter base reasonable for expenses? How should we think about that?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

There are so many variables out there depending on the mortgage market, and the like. I think what we've tried to do Brock in the past, sort of focus on the net overhead ratio, so you can take the non-interest income components and non-interest expense components that are related to those. So our goal in 2019 was sort of 1.55-ish range for the full year. As Ed has mentioned previously, we expect to get that down into the 1.40. So I would, it certainly should -- will be below 1.50 based on what we're looking at now. So we're going to get expense leverage out of the system as we grow and that's how we look at it.

It's probably a little higher than the 1.40. If you take out some of the expenses we had this time but add back in the FDIC credits. It's higher, but you're going to come down on commissions in the first quarter, so maybe you get below -- 240s, but it really sort of depends on the mortgage market and what that does. And so it's hard, I hesitate to give a number because of fluctuates based upon what we're doing in the revenue section on some of these commission-based businesses that we have. So I would focus more on, are you come in with net overhead ratios for the year of less than 1.50 in the 1.40s.

Brock Vandervliet -- UBS -- Analyst

Got you. And appreciate the guide on provisioning going forward 10 to 15 a quarter. How does that post-CECL guide square with the $7.7 million -- $7.8 million, call it, $8 million in Q4?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Q4 you have to remember, we had a charge-off that took away of specific reserve of $5 million. So that was a big part of the drop, as we just didn't have that reserved for that one, that one loan. So...

Brock Vandervliet -- UBS -- Analyst

Got it. Okay.

Edward Joseph Wehmer -- President and Chief Executive Officer

So going forward, we think as Dave said earlier looking at, I mean, CECL is going to be all over the board on this, and if the guy at Moody's has a bad day or hangover or his hemorrhoids jacked up, he could think the banking business down, because everybody's using basically Moody's baseline as their basis for this. So I think you got to concentrate on net charge-offs and changes in specific reserves. That's what we're doing here in our -- when we evaluate people, because I mean this thing could go up and go down based on their win, so.

Brock Vandervliet -- UBS -- Analyst

Got it. Thank you.

Operator

Our next question comes from David Chiaverini with Wedbush Securities. Your line is now open.

David Chiaverini -- Wedbush Securities -- Analyst

Hi. Thanks. I wanted to follow up on the NIM discussion. You mentioned about how you may be able to defend the net interest margin at the 3.19% level by extending the duration from four years to six years. I was curious, how much in yield pickup do you expect with extending the duration?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Well, I think you just have to look whatever the overnight rate is and compare that to what a Ginnie and Fannie rate is out as in the marketplace. So Ginnie's and Fannie's are in the mid-2s right and the overnight rates are 1 -- mid-1, so maybe you pickup 100 or so basis points. If you get some agency, if you could get closer to 3%, if you have callable agencies, so you do some mix there. But certainly you pick up over 100 basis points, but it wasn't just that. And so that plus the lowering of the deposit costs is what depends the margin.

David Chiaverini -- Wedbush Securities -- Analyst

Great. Thanks for that. And you plan on extending that for the entire portfolio like roughly $6 billion on the securities.

Edward Joseph Wehmer -- President and Chief Executive Officer

The liquidity management includes the overnight funds.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. You have to look at -- if you look at our balance sheet, we've got interest-bearing deposits with banks of $2 million -- the $3.1 billion -- the $3.1 billion of available for sales and the $1.1 billion of held to maturity, I mean that's already invested. So we've got, -- it's got a little over $2 billion of overnight money that's available to be invested plus whatever you could get out of growth of the balance sheet on the deposit side.

Edward Joseph Wehmer -- President and Chief Executive Officer

And through industry environment is going above little over 1% after tax and then the spread we picked up. I mean, that's what we're looking at. I would hesitate a little in the past, but 1% after -tax would be good than 1.25, 1.33 tax should, but my goal is anyhow, that's a goal.

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Yeah. And that's why you haven't seen us put a ton of money into it yet, because the long and just hasn't provided that type of return and we're hesitant to put $2 billion to work at spreads less than that all at once, and I have always said that, the day we do that is the day that long and all shoot to the moment. So we'll leg into this thing, unless the long end really pops up dramatically.

David Chiaverini -- Wedbush Securities -- Analyst

Okay. Thanks for that. And then shifting to the loan growth and you mentioned about the mid to high-single digit 6% to 9%. I was curious, just how are your borrower -- your commercial borrowers feeling nowadays? Do they feel in your discussions with them, to feel better about the economy with the trade deal, the Phase 1 trade deal getting done. I'm just curious as to what they're saying?

Edward Joseph Wehmer -- President and Chief Executive Officer

They're all feeling good. I mean, there's not a day that goes by, they're reasonably privately owned middle market company those who could offer to a hell of a lot of money. Basically, our C&I portfolio was stagnant for the year and that didn't mean -- we booked over billion dollars worth of loans but they're much in pay-offs through some de-risking. But the portfolio, we got rid of highly leveraged deals. We're getting out of that business, but they're all feeling pretty good about what they're doing and they may not be running that $40 million backlog that they have, but they're all doing pretty well right now, and they feel pretty good. But they're all, with the money that's flying around out there right now from PE firms and Fintech companies, we're seeing lot of pay downs. So we have to work really hard just to stay steady in that business. Fortunately, if the Fintech takes it over, we do maintain the deposit accounts. So that's a good thing. So I'd say the Fintech it's over the long. So we got to be careful though because I had a company that's kind of legs up against the wall in terms of leverage. So it's a tough market from a lender standpoint, from the borrower standpoint, they're all feeling pretty good, I would say.

David Chiaverini -- Wedbush Securities -- Analyst

Great. Thanks very much.

Operator

Our next question comes from Michael Young with SunTrust. Your line is now open.

Michael Young -- SunTrust -- Analyst

Hey. Thanks for the question. I wanted to follow up on the share buyback that you announced and just kind of get your thoughts on how you are looking to deploy that. Obviously, a lot of discussion of M&A as well. But just kind of how you're comparing and contrasting buying back your own stock versus looking at acquisitions?

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Well, we haven't bought any stock back today. We have the tool available to us. And we just -- we really compare and contrast the deal flow and what sort of returns we think we can get off of those versus the buyback. We're not big fans of dilute -- as I said diluting tangible book value. So given the pipeline of deals we're looking at, we're going to see how some of those flow through and then we'll watch the stock price movement and compare them. So haven't done anything to-date, but we will continue to evaluate it versus the acquisitions. But we just compare the two and maybe that's why we're losing some of the deals out there. As I've said, some of them are recently have had very high price expectations, and we're very judicious on what we do. We don't need to do $200 million, $300 million, $400 million, $500 million or $1 billion bank if they cost too much, there's just no reason to overpay. We're looking at it for the long-term value of the shareholder. So if those don't pan out then you would probably see us look a little harder at the stock buyback.

Edward Joseph Wehmer -- President and Chief Executive Officer

It's just the matter, it's just numbers as David said it. The deals we're looking vis-a-vis capital and where my multiples are, I said we're at $66 a share, which is 11 times -- 12.5 times multiples situation. So we were always good stewards of capital, and we use it accordingly. But it comes a time where buying it back is obviously better than buy the bank. So all just comes out of the [Indecipherable] basic finance book.

Michael Young -- SunTrust -- Analyst

And just as a follow-up, Dave, with the limiting capital ratio at this point would be the total capital ratio? Is that what we should watch?

Edward Joseph Wehmer -- President and Chief Executive Officer

Yes, sir. That's always been our limiting ratio.

Michael Young -- SunTrust -- Analyst

Okay. Thank you.

Operator

I'm showing no further questions in queue at this time. I'd like to turn the call back to Mr. Wehmer for closing remarks.

Edward Joseph Wehmer -- President and Chief Executive Officer

Thanks everybody for listening in. Have a great first quarter and look forward to pitchers and catchers reporting. Have a good month. Bye.

Operator

[Operator Closing Remarks]

Duration: 54 minutes

Call participants:

Edward Joseph Wehmer -- President and Chief Executive Officer

David L. Stoehr -- Executive Vice President and Chief Financial Officer

Jon Arfstrom -- RBC Capital Markets -- Analyst

Terry McEvoy -- Stephens -- Analyst

Chris McGratty -- KBW -- Analyst

Brock Vandervliet -- UBS -- Analyst

David Chiaverini -- Wedbush Securities -- Analyst

Michael Young -- SunTrust -- Analyst

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