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Huntington Bancshares Incorporated (NASDAQ:HBAN)
Q4 2019 Earnings Call
Jan 23, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Huntington Bancshares Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode, a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mark Muth, Director of Investor Relations.

Mark Muth -- Director of Investor Relations

Thank you. Welcome, I'm Mark Muth, Director of Investor Relations for Huntington. Copies of the slides we'll be reviewing can be found on the Investor Relations section of our website www.huntington.com. This call is being recorded and will be available as a rebroadcast starting about one hour from the close of the call. Our presenters today are Steve Steinour, Chairman, President and CEO; Zach Wasserman, Chief Financial Officer; and Rich Pohle, Chief Credit Officer.

As noted on Slide two, today's discussion, including the Q&A period will contain forward-looking statements, such statements are based on information and assumptions available at this time and are subject to changes, risks and uncertainties which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of risks and uncertainties, please refer to this slide and the material filed with the SEC including our most recent Forms 10-K, 10-Q and 8-K filings.

Let me now turn it over to Steve, who will start on Slide three.

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

Thanks, Mark, and thank you to everyone for joining the call today. As always, we appreciate your interest and support. We're pleased with our full year 2019 results and the continued momentum across the bank, despite a challenging operating environment. For the full year, we've reported earnings per common share of $1.27, an increase of 6% over 2018. Return on average assets for 2019 was 1.3%, return on average common equity was 13%, and return on average tangible common equity was 17%.

The bank achieved record net income for the fifth consecutive year and positive operating leverage on an adjusted basis for the seventh consecutive year. Our balance sheet is very well positioned with robust capital and liquidity and our comprehensive hedging strategy has reduced interest rate risk. Credit quality remained strong with 2019 net charge-offs at the low end of our average through-the-cycle target range. We've remained prudent with our allocation of capital to ensure we are earning adequate returns and taking appropriate risks, consistent with our aggregate -- moderate to low risk profile.

2019 marked the ninth consecutive year of an increased cash dividend, coupling the dividend with $441 million of share repurchases during the year. We returned over $1 billion to our shareholders in 2019, which represented a total payout ratio of 79%. As we previously communicated on many instances, our capital priorities are; First to fund organic growth. Second to support the cash dividend, and finally, all other capital uses including the buyback and selective acquisitions, these capital priorities have not changed.

Now moving to the economy, we continue to see growth and our expectation for 2020 is for continued expansion. Consumers continue to perform well across our footprint with strong labor markets driving wage inflation. In the 12-months ending November 2019, unemployment rates declined or remain the same, of the 20 largest MSAs in Huntington's footprint states. Job openings continue to exceed unemployment levels in the Midwest.

Home prices continue to appreciate with especially solid increases in Michigan, Indiana and Ohio. Additionally, consumer confidence in our region is generally stayed at the highest levels since 2000. The positive consumer sentiment is evident in the success of our consumer lending businesses. Our home lending business achieved record mortgage originations for both full year 2019 and the 2019 fourth quarter.

Our auto finance business also achieved record originations in the fourth quarter and we expect another good year in 2020 for our consumer lending businesses, again driven primarily by residential mortgage and auto finance. Now we have seen a slowdown in commercial loan activity, consistent with the measured tone from some of our commercial customers, economic uncertainty, along with tight labor markets, remain headwinds for more robust economic growth in our footprint.

Overall Huntington is performing well with disciplined organic growth, our customers are generally confident about their performance for 2020 and we share that confidence in our performance. We continue to see good traction in our new specialty lending verticals, mid-corporate lending, technology, media and telecom, our practice finance area in which we announced as part of the 2018 strategic plan.

I'm looking now into 2020, we proactively took actions in the fourth quarter to drive organic revenue growth, reduce our future expense growth and increase our capacity for additional investment in our businesses and technology. We repositioned $2 billion of securities picking up approximately 70 basis points of yield on those securities. The rebalance resulted in $22 million of security losses on the -- in the fourth quarter.

On the expense side, we completed the position reduction of employees and announced the consolidation of 30 in-store branches. Now these actions along with the disposition of other properties and the technology system decommission resulted in unusual expense of approximately $25 million in the quarter. Our disciplined expense management allows for further investment in digital and mobile technology and enterprise growth initiatives going forward.

I'm confident in our positioning entering 2020 and our colleagues are focused and executing our plans, we are all aligned with our strategies of creating a high performing regional bank in delivering top quartile through the cycle shareholder returns. Zach will now provide an overview of our financial performance. Zach?

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Thanks, Steve and good morning everybody. It's a pleasure to be with you here on my first earnings call with Huntington. Slides four and five provide highlights of our full-year 2019 and fourth quarter 2019 results respectively, many of which Steve already touched on. Fourth quarter results include approximately $47 million of pre-tax impact or approximately $0.03 per share after tax from previously announced actions that were taken to better position the bank for 2020, including the securities repositioning, workforce actions and the pending in-store branch closures.

Let's turn to Slide six to discuss the key fundamental drivers behind that financial performance for the quarter. Average earning assets increased $2.3 billion or 2% compared to the year-ago quarter. Average loans and leases increased $1.3 billion or 2% year-over-year with balanced consumer and commercial loan growth. Average commercial and industrial loans increased 3% from the year-ago quarter and reflected the largest component of our year-over-year loan growth. C&I loan growth has been well diversified over the past year, with notable growth in specialty banking, asset finance and corporate banking.

Our fourth quarter commercial loan growth was below our expectations as a portion of deals we expected to close at the end of the year, were pushed into 2020 and seasonal declines in line utilization at year-end were larger than normal. Overall commercial activity continues to be restrained by economic uncertainty. We continue to actively manage our commercial real estate portfolio around current levels with average CRE loans reflecting a 2% year-over-year decrease driven by paydowns in refinancing activity.

Consumer loan growth remained focused in the residential mortgage portfolio, reflecting robust originations in the second half of 2019. Average residential mortgage loans increased 7% year-over-year. As we typically do we sold the agency qualified mortgage production in the quarter and retained jumbo mortgages and specialty mortgage products.

Now turning to Slide seven. Average total deposits decreased less than 1% year-over-year, while average core deposits increased 1% year-over-year. Note that both of these growth rates were negatively impacted by the June 2019 sale of the Wisconsin retail branch network, including approximately $725 million or almost 1% of core deposits. We continue to see a migration in deposit balances from CDs and savings into money market accounts, reflecting shifting customer preferences and we are focused -- and where we are focused on promotional pricing. Average money market deposits increased 9% year-over-year, while savings decreased 9% and core CDs decreased 16%. We expect this dynamic to continue in 2020. Average non-interest bearing and interest bearing DDA accounts each increased 1% year-over-year.

As shown on Slide 32 in the appendix, we're very pleased that our commercial non-interest bearing deposits increased 5% year-over-year in the quarter. This growth highlights our continued focus on growing our low cost deposit base through new customer acquisition and relationship deepening.

Moving now to Slide eight, FTE, net interest income decreased $55 million or 7% versus the year-ago quarter, primarily driven by the 29 basis point decline in net interest margin, partially offset by 2% increase in average earning assets. Net interest margin was 3.02% -- 3.12% -- excuse me 3.12% for the quarter, down 29 basis points from the year-ago quarter, down 8 basis points linked quarter and in line with the guidance we provided at the Goldman Sachs Conference in December.

Moving to Slide nine, our core net interest margin for the fourth quarter was 3.08% down 26 basis points from the year ago quarter. Purchase accounting accretion contributed 4 basis points to the net interest margin in the current quarter compared to 7 basis points in the year-ago quarter. Slide 28 in the appendix provides information regarding the actual and scheduled impact of FirstMerit purchase accounting for 2019 and 2020. Please note that this quarter is the last quarter, we intend to provide core NIM and PAA breakouts, as the PAA is expected to have a relatively immaterial impact in 2020.

Turning to asset -- to earning asset yields. Our commercial loan yields decreased 52 basis points year-over-year, consumer loan yields decreased 8 basis points and security yields decreased 16 basis points. The decrease in our earnings asset yields can be primarily attributed to lower interest rates following the three federal reserve rate reductions that occurred during 2019.

On the funding side of the balance sheet, our deposit cost continue to move lower, as CDs and money market promotional rates repriced lower and we actively manage commercial deposit costs. Total interest bearing deposit cost of 87 basis points for the quarter were up 3% year-over-year though down a 11 basis points sequentially.

Slide 10 summarizes the actions we've taken to reduce the unfavorable impacts of interest rate volatility and the lower interest rate environment. Our hedging strategies reduce the downside risk from lower interest rates and have significantly narrowed the band of modeled outcomes for net interest income. Our current interest rate risk modeling suggests, a little change to net interest income from either a 25 basis point increase or 25 basis point decrease in 2020. We continuously monitor and we will continue to prudently refine our interest rate risk management as the interest rate environment, balance sheet mix and other factors necessitate.

The graphs on the bottom left of the slide detail the mix of our loan portfolio as well as the significant consumer deposit balances with repricing events in the first half of 2020. These repricing events provide an opportunity for the bank to reduce the cost of deposits. As these higher price CDs and promotional money market accounts repriced lower, through December the consumer deposit repricing activity is on track with our expectations. The success of our consumer deposit repricing and retention has provided us the ability to remain more disciplined in our commercial deposit pricing, particularly among the highest cost deposits.

The graph on the bottom right of the slide displays the impact of our actions. You can see the downward trajectory of our total interest-bearing deposit costs by month since July. We expect this trend to continue given the significant deposit repricing opportunities that remain in the first half of 2020.

Turning to Slide 11 you can see, it provides the detail on our non-interest income, which increased 13% from the year-ago quarter. The growth was highlighted by mortgage banking income which increased 152%, primarily reflecting higher salable origination volume and secondary market spreads, as well as a $12 million increase in the gain on net mortgage servicing rights risk management. We also continue to see steady growth in card and payment processing income, trust and investment management and insurance.

In the 2019 fourth quarter, we repositioned $2 billion of securities picking up approximately 70 basis points of yield on those securities prospectively at a cost of $22 million in Q4, while negatively impacting fourth quarter results, the prospective earnings pick-up and the earn back on the positioning losses are very attractive and consistent with our active management of the securities portfolio. The year-ago quarter in 2018 included $19 million of securities losses from similar repositioning.

Slide 12 provides the components of the 1% year-over-year decrease in non-interest expense. The 2019 fourth quarter included $25 million of expense related to the actions, which Steve discussed earlier while the year-ago quarter included $35 million of similar branch and facility consolidation related expense. Adjusting for these items, non-interest expenses were essentially flat. We continue to drive efficiency in our core expense base to ensure robust and growing investment capacity to fuel our investments in digital, mobile and cyber technology, enhanced products and services and distribution capabilities. This disciplined expense management allowed us to achieve positive operating leverage on adjusted basis for the seventh consecutive year.

Slide 13 illustrates the continued strength in our capital ratios, the tangible common equity ratio or TCE ended the quarter at 7.88%, up 67 basis points from a year ago and common equity Tier 1 ratio or CET1 ended the quarter at 9.88% or 23 basis points year-over-year. We continue to manage CET1 to the high end of our 9% to 10% operating guideline. During the fourth quarter of 2019, we repurchased 13.1 million common shares at an average cost of $14.96 per share, or an total of $196 million.

We plan to use the share repurchase to manage our capital following the CECL implementation back to a CET1 level near 10% by the end of 2020 excluding the benefit of the CECL transition provision provided by the Federal Reserve. We feel managing internally to a CET1 level excluding the three-year transition reinforces our commitment to maintaining strong capital ratios, which we see as a position of strength for the organization. As a result, we are currently planning to repurchase less than a third of the remaining $249 million of share repurchase capacity on our 2019 capital plan in the first half of 2020.

Now let me turn it over to Rich to cover credit including CECL. Rich?

Richard Pohle -- Executive Vice President, Chief Credit Officer

Thanks, Zach. Slide 14 provides an update on our CECL adoption. We estimate our allowance for credit losses or ACL will increase 44% from the year-end 2019 ACL to $1.28 billion or 1.70% of total loans and leases on an adjusted basis. As we stated on the third quarter call, given our 50% mix of relatively longer-dated consumer loans, the CECL lifetime loss methodology results in a higher allowance then the prior methodology. The increase in reserves is largely related to the consumer loan portfolio.

As we move forward into CECL, it is a new accounting standard with many variables. Our day to allowance for credit losses will be determined using various models and incorporate multiple scenarios, historical loss in recovery rates, borrower characteristics and other factors. As a result, we expect more volatility in our quarterly provisioning expense. Our parallel testing however indicates that key factors being held constant, the aggregate annual level of provision expense is not expected to materially change from the current incurred loss methodology despite that higher quarterly variability.

Slide 15 provides a snapshot of key credit quality metrics for the quarter, despite challenges in our oil and gas portfolio our credit metrics remain strong. As we have noted previously, some quarterly volatility is expected given the absolute low level of problem loans. Consistent prudent credit underwriting is one of Huntington's core principles and our financial results continue to reflect our disciplined approach to risk management and our aggregate moderate to low risk appetite.

Net charge-offs remain near the low end of our average through-the-cycle target range of 35 basis points to 55 basis points. Net charge-offs represented an annualized 39 basis points of average loans and leases in the current quarter, flat to the prior quarter and up from 27 basis points in the year-ago quarter. The increase was centered on the oil and gas portfolio, which made up approximately half of the total commercial net charge-offs. This portfolio was primarily impacted by geological issues compounded by low commodity prices and limited capital markets activity. We have a relatively small oil and gas portfolio representing less than 2% of total loans and we believe we have it appropriately reserved for.

Consumer charge-offs have remained fairly consistent over the past year, there is additional granularity on charge-offs by portfolio in the analyst package on the slides. Annual net charge-offs excluding the $67 million of oil and gas-related losses were 26 basis points, and just 15 basis points for the commercial portfolio. The non-performing asset ratio increased 2 basis points linked quarter and 14 basis points year-over-year to 0.66%, again primarily as a result of the stress in our oil and gas book. The allowance for loan and lease losses as a percentage of loans remained relatively stable at 1.04%, down 1 basis point versus the linked quarter.

Let me turn it back over to Zach.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Thanks, Rich. Slide 16 illustrates our expectations for full-year 2020. We expect 2020 to be another year of sustained organic growth as we continue to execute and invest in our core growth strategies. We expect full-year average loan growth in the range of 3% to 4% with continued growth in both consumer and commercial portfolios. We expect growth to be modestly stronger on the consumer side, focused on home lending and auto finance. We expect slightly more measured commercial loan growth consistent with recent economic data.

Full-year average deposit growth is expected to be approximately 3% to 4% as we remain focused on acquiring core checking accounts and deepening customer relationships. Specifically our expectation entails continued decline in CDs more than offset by growth in checking and money market. We expect full-year total revenue growth of 1.5% to 3.5% on a GAAP basis, with growth in both net interest income and non-interest income.

We are projecting the NIM to rebound in the first half of 2020 from the 2019 fourth quarter before stabilizing in the second half of the year. Given our relatively neutralized interest rate risk positioning, we remain confident in our outlook for net interest income growth, while deposit pricing remains rational in our markets we are closely watching the competitive environment around rate and volume of deposits as this represents the primary risk and opportunity for variance to our NIM forecast.

We expect non-interest income on a GAAP basis to grow at a slightly higher pace than total revenue in 2020 driven by the continued focus on deepening customer relationships. Full year non-interest expense is expected to increase 1% to 3% based on our active management 2019, we are comfortable with our current expense base and the run rate trajectory. Our focus is on driving continued investment in opportunities to further differentiate Huntington and drive revenue growth.

As we've told you previously and are demonstrating with our actions in our 2020 guidance, we remain committed to targeting annual positive operating leverage. We anticipate that the full year 2020 net charge-offs will be within a range of 35 basis points to 45 basis points. As Rich just covered fundamentally our credit remained strong. We're taking decisive action to mitigate the risk in our oil and gas portfolio.

As a result we have expectations for oil and gas charge-offs remaining slightly elevated in the first half of 2020. These charges are fully represented in our 2020 guidance. We believe we are adequately reserved at year-end and with the life of loan CECL adoption. Our expectation for the effective tax rate for the remainder of the year is in the 15.5% to 16.5% range.

Operator, we'll now take questions. We ask that as a courtesy to your peers, each person ask only one question and one related follow-up, and then if that person has any additional questions he or she can add themselves back into the queue. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Thank you. Our first question comes from the line of Jon Arfstrom with RBC. Please proceed with your question.

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

Good morning, Jon.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Thank you, good morning. Well, a lot to ask about, but I'll just maybe start, Steve with just -- you talked a little bit about headwinds in commercial, but we do have USMCA when China seemingly done. Just curious if you could give us a little bit more color on that and if you're seeing any changes in optimism at all from the commercial customers.

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

Jon, it USMCA just recently done and obviously there are other issues, distractions going on in DC, right now, so I don't think there is a meaningful change yet but I -- from what we reported at the prior conference and I do -- I do expect there is going to be a second half -- I'm optimistic lift -- I'm optimistic in that regard, but I think it's going to be a little -- little hesitant, little reluctant in talking with different customers about the start of this year.

We did see more cash on balance sheets at the end of the year, so spot balances we're down a bit from where we expected them to be, that was particularly true in auto as customers kept more cash flow on sheet. So I think that just reflects conservativism and just sort of, a wait and see approach, again in the Midwest we're hampered by lack of labor. So that is an element in this planning process as well as these uncertainties.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay, that's helpful. And then just one more Zach or Rich, maybe Rich for you, just can you talk about the day to CECL impact, again, I think what you said is, you expect that provision to be roughly same in 2020 compared to 2019, I wonder -- I wonder if I, you heard that right, and Zach, how you want us to think about provisioning in 2020. Thanks.

Richard Pohle -- Executive Vice President, Chief Credit Officer

Yeah, this is Rich. The testing that we've done and again this is new, so we're kind of going through quarter-by-quarter. The testing that we did CECL to BAU showed that there were some quarterly volatility, but over the course of the year. It tended to level itself out. So we don't see a lot of -- we see more volatility on a quarterly basis going forward, but we don't expect a material change in the overall provision under CECL than we have under the incurred loss methodology.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay, all right, that's helpful. Thank you.

Richard Pohle -- Executive Vice President, Chief Credit Officer

Thanks.

Operator

Our next question comes from the line of David Long with Raymond James. Please proceed with your question.

David Long -- Raymond James -- Analyst

Good morning, everyone.

Richard Pohle -- Executive Vice President, Chief Credit Officer

Good morning.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Good morning.

David Long -- Raymond James -- Analyst

With your revenue outlook for the year, what is the rate backdrop that you are assuming right now?

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

This is Zach. I'll take that question, David. I'm good to talking to you. We're essentially assuming the forward yield curve as it existed in November although it's relatively consistent with where it looks right now. The fed funds expectation is relatively neutral, I think the actual forward rate, look at it precisely included -- forecasted one rate cut sort of in the late summer time period, but I think as we noted in the prepared remarks, based on our hedging program, our net interest income and NIM is essentially neutralized from one rate increase or one rate decrease from today. So I would say sort of taking a step back sort of roughly flat from where we are today.

David Long -- Raymond James -- Analyst

Got it. And if the -- if the rate backdrop goes against you, do you have additional levers that you can pull on the expense side, so you can still produce positive operating leverage.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Yes, we do, I think under most realistic rate scenarios, as I mentioned that the hedging program will keep our NIM pretty constant. So we're not expecting to have to pull those expense levers but as always, we do have a number of expense levers that we've got at our disposal. I'll tick down a few of them. We can always look at the pacing and phasing of our strategic growth initiatives. We've got the number one brand share in Michigan and Ohio and so looking at our branch network and the costs around few levers is an opportunity and -- I think generally as we see revenue soften, we typically see, just the linked variable expense reduction from compensation tend to mitigate and offset that.

So those are the levers we've got as well as we look at all the time, there are other levers like staffing contingency plans, which you saw us pull-in the fourth quarter of 2019, which are at our disposal, but again it's not our expectation that we'll have to do that in 2020. The last thing I'll just say is, you commented a positive operating leverage. We are managing and expecting to generate positive operating leverage in 2020.

David Long -- Raymond James -- Analyst

Got it. Appreciate the color. Thanks.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

You're welcome.

Operator

Our next question comes from the line of John Pancari with Evercore. Please proceed with your question.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Good morning, John.

Rahul Patil -- Evercore -- Analyst

This is Rahul Patil on behalf of John. Just have a two-part question on your auto lending business. Considering that one of the biggest players in auto lending is now becoming more active in this space. Are you seeing pressure on pricing or your ability to grow auto loans at the pace that you had previously expected.

And then the second part is tied to CECL, the CECL implementation impact your appetite for auto loans going forward. Just trying to gauge, what's your 2020 auto loan growth outlook, following a flattish average balance in 2019?

Richard Pohle -- Executive Vice President, Chief Credit Officer

Yeah, John, it's, Rich, I'll take that. So I'll take the second question first. So as it relates to CECL, the auto business is really neutral. The weighted average life of our typical auto loan is not that much different than what we had under the incurred loss methodology. So it's a fairly benign impact from a CECL. As it relates to the overall business strategy, I think we have just a tremendous franchise across multiple states with thousands of dealers that we've got the ability to drive volume. I think we are in a, a very high FICO band that tends to be more price sensitive than others. So I don't see us having any real issues and meeting the origination goals that we've got from the indirect auto business in 2020.

Rahul Patil -- Evercore -- Analyst

Okay. And then last quarter, I believe you'd indicated that the consensus NIM estimate around that time of 3.20% for full year '20 was reasonable, but I believe that you had assumed earlier a couple of rate cuts in that 2020 NIM guidance. Could you just discuss your updated thoughts. I know you talked about, rebound in first half and then stable, but are you still comfortable with that 3.20% level right now.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Yeah, thanks for the question. This is Zach. I'll answer that one. So the answer is yes, we are still comfortable with the approximately 3.20% guidance that we talked about in December at the Goldman Sachs Conference and then just reiterated today in the prepared remarks. So we expect the trajectory of that to be ticking higher into the first quarter, sort of stabilizing around that level by mid-second quarter and then oscillating around that level through the balance of the year. There's really a couple of big drivers of that. So the most substantial of which is the repricing of the deposit maturities that we talked about in the prepared remarks, there is roughly $5 billion repricing in Q1 and another $4 billion repricing in Q2 and so far, we're really pleased with both the retention and the pricing on that which is proceeding according to our plans.

The other factor with a little smaller but still helpful is the 70 basis points of pick up we got on the securities repositioning that we discussed earlier. So, those two factors what's driving that and helping us to get the NIM to back to 3.20%, with that being said, there's a couple of factors we're watching. Asset yields on new production all of your previous question around auto and residential, we continue to see them where we want them, but that's something we look at very carefully.

The other one is, as I mentioned in my prepared remarks, the volume and rate for the deposit costs, again, we're seeing the trend on our expectation, but it's something that we'll continue to watch. Those are the biggest factors that could cause the NIM to be higher or lower than that 3.20%.

Rahul Patil -- Evercore -- Analyst

Okay. And then, I just want to clarify one thing and that is assuming a cut -- rate cut in the summer of this year?

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Yeah, it's -- assuming -- essentially, the forward rate curve that exists in November as I mentioned, which if you look precisely at the fed funds expectation in that had one cut over the late summer time period, but even if it's flat, we're going to be roughly [Technical Issues]

Rahul Patil -- Evercore -- Analyst

Okay, perfect. Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Ken Huston with Jefferies. Please proceed with your question.

Ken Huston -- Jefferies -- Analyst

Hey, thanks guys, good morning. One more question on the deposit -- good morning. One more question on the deposit side of things, see what you're expecting for total growth, I'm assuming that's still coming from core customer growth. You mentioned the $5 billion that's going to reprice, underneath that, can you just talk about what's happening in your markets as far as just underlying core deposit pricing and if that's still also coming down aside from what you're just scheduled is going to reprice from the rollovers?

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

Yeah, I mean, I think we're, as I said, we're seeing the repricing activity be pretty much in line with our expectations, ticking down but also being somewhat competitive, so we've assumed and planned for the rate environment we've got right now and we're seeing it trend in that way.

Mark Muth -- Director of Investor Relations

Yeah. Ken, this is Mark. I would say that generally, what we're seeing on the consumer side is very rational and as we would have expected and the repricing coming in both with better pricing and better retention has allowed us to then be a little more aggressive on the commercial side, which we do see is more competitive. If you were to point to some of the competitive issues out there, it definitely is on the commercial side in particular with your large dollar deposit on the commercial side and we've just allowed some of those to leave the bank as a result of the success we're having on consumer side.

Ken Huston -- Jefferies -- Analyst

Got it, OK. And then one more question just on the mix of the balance sheet with pretty good loan growth and pretty good deposit growth, what do you see happening in terms of both the size of the securities portfolio, and can you talk about the underlying dynamics of, in a stable rate environment, your front book, back book?

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

So the expectation for the securities portfolio, this is Zach. Roughly cost of where we are today, no material change. We like where we're at that and that's the expected point. The second part of the question was -- back book?

Ken Huston -- Jefferies -- Analyst

Rolling off securities and rolling on how -- if you're free to stay low -- say where they are from here, what's the dynamic happening in there. Thanks.

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Let's take that offline. I don't have that detail right in front of me.

Richard Pohle -- Executive Vice President, Chief Credit Officer

Yeah, Ken. I've got that downstairs, so I will follow-up with you on that.

Ken Huston -- Jefferies -- Analyst

Okay, thank you guys.

Richard Pohle -- Executive Vice President, Chief Credit Officer

Thank you.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Steve Steinour for closing remarks.

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

I'm pleased with our 2019 performance particularly given the environmental challenges we faced. Our active management position, the bank continue to execute on our strategies. I'm confident about our prospects for 2020. Our top priorities are executing in our strategic plan and thoughtfully investing in our businesses for continued through organic growth while delivering annual positive operating leverage. We are clearly building long-term shareholder value through a diligent focus on top quartile financial performance and consistently disciplined risk management.

And finally, we always like to end with a reminder to our shareholders, there's a high level of alignment between the Board, managements, colleagues and our shareholders. The Board and our colleagues are collectively a top 10 shareholder of Huntington and all of us are appropriately focused on driving sustained long-term performance. So thank you for your interest in Huntington, have a great day.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Mark Muth -- Director of Investor Relations

Stephen D. Steinour -- Chairman, President and Chief Executive Officer

Zachary Wasserman -- Senior Executive Vice President, Chief Financial Officer

Richard Pohle -- Executive Vice President, Chief Credit Officer

Jon Arfstrom -- RBC Capital Markets -- Analyst

David Long -- Raymond James -- Analyst

Rahul Patil -- Evercore -- Analyst

Ken Huston -- Jefferies -- Analyst

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