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CrossFirst Bankshares Inc (NASDAQ:CFB)
Q4 2019 Earnings Call
Jan 23, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by and welcome to the CrossFirst Q4 2019 earnings call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I will now hand the conference over to your speaker today, Matt Needham, director of investor relations.

Matt Needham -- Director of Investor Relations

Welcome, and thank you for joining us today on the call. On the call are George Jones, president and CEO of CrossFirst Bankshares; Dave O'Toole, chief financial officer of CrossFirst Bankshares; Mike Maddox, president, and CEO of CrossFirst Bank. As a reminder, a telephonic replay of this call, our earnings release and presentation will be available on our investor relations website for an extended period of time. Before we begin, let me remind you that everyone on this call that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

We caution investors that actual results may vary or may differ from expectations indicated or implied in our forward-looking information. We'll provide a comprehensive list of risk factors in our SEC filings, which I highly encourage you to review. Any forward-looking statements speak only as of today, and we undertake no obligation to update them except as required by applicable securities laws. Reconciliations of non-GAAP financial measures to the nearest comparable GAAP measures have been included in the release, and all earnings materials discussed today are provided in a diluted per share basis.

I'd now like to turn the call over to George Jones.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Thank you, Matt. Good afternoon, everyone. We appreciate everyone taking time today to be with us as we discuss our fourth-quarter and full-year results. Before we start, I'd like to take a brief moment to thank the management team and all the employees for delivering on the initiatives that we've put in place.

Our teams have done a great job executing on our strategic plan for 2019, which shifted the company's focus to improving net income and driving earnings per share. As we discuss our results, you'll see that management and our entire team did a very good job of controlling expenses and creating positive operating leverage without hindering our growth initiatives for 2019. As you've seen in our earnings release, we continued to produce record results in operating revenue for the 23rd consecutive quarter. And overall, 2019 was the best year in the company's history.

For the fourth quarter, we delivered record net income of $11.4 million or $0.22 per diluted share, which brought the net income for 2019 to $40.6 million or $0.83 per diluted share. Management focused on earnings-per-share growth by lowering our efficiency ratio through management of back-office expenses and building our balance sheet responsibly. We continue to strengthen our quarter over quarter earnings despite declining interest rates because of our strong management team, dynamic markets, and proven operating model that we've built over time. Our teams continue to deliver strong annualized double-digit balance sheet growth as our assets are approaching the $5 billion mark.

Our year-over-year loan and deposit growth reached 26% and 22%, respectively, and our overall loan portfolio remains diversified with credit metrics that are similar to third-quarter 2019 results. We are continuing to work through our previously identified non-performing asset, which is the reason for the elevated charge-offs for the quarter. The management team was highly focused on the IPO in 2019. And as we move into 2020, we will consider new market expansions and assess possible acquisitions.

In addition, we're excited about opening a location in Frisco, Texas during the first quarter of 2020, and we have submitted an application for approval with our primary regulators. We also look forward to opening our new Kansas City, Missouri office location on the Plaza later in 2020. Our capital position remains strong and we expect our growth strategy will allow us to leverage our capital in an efficient manner to drive shareholder value. As with 2019, we will continue executing on a strategy of prudent cost management with a measured approach to hiring and managing expenses, but we will continue investing and adding resources in key areas that allow us to build an organization with great bankers.

The combination of responsible growth and creating additional efficiencies should translate into higher earnings per share in 2020. Well, with that, I'd like to turn the call over to our Chief Financial Officer Dave O'Toole, for a more detailed discussion of the financial results. Dave?

Dave O'Toole -- Chief Financial Officer

Thank you, George, and good afternoon to everyone. I am happy to report continued improvement in profitability despite the headwinds of declining interest rates. For the year, we reached 0.90% return on average assets and are focused on achieving 1% in the near-term after a reported fourth-quarter return on average assets of 0.94%. We achieved an efficiency ratio for the year of 58.4%, which is a substantial improvement from prior year's 73.6%.

In general, our core operating return on average assets and efficiency ratios continue to trend in the right direction. You may recall that we had a boost in third-quarter earnings from a one-time credit that lowered our FDIC insurance expense and a one-time adjustment from a change in our back-to-back swap valuation methodology. As you can see in our supplemental earnings presentation, we had a strong GAAP return on average assets in Q4 2018 because of a one-time tax credit related to the relocation of our corporate headquarters in Leawood. As George mentioned, in general, we continue making progress toward enhancing our core income quarter over quarter.

Not surprisingly, we experienced some net interest margin compression during the quarter. But we continued to have strong growth in earning assets, which helped mitigate the impact of declining rates. Net interest income continues to grow, reaching $37.2 million for the quarter, representing an approximate 4% increase on a linked-quarter basis and a 15% increase from the same quarter in 2018. During the fourth quarter, our tax-equivalent net interest margin slightly declined from 3.24% to 3.23% on a linked-quarter basis.

However, our year-to-date net interest margin of 3.31% continues to remain within a 3.25% to 3.50% band that we have been able to maintain over the last five years. Margin compression is a result of short-term timing differences in our asset and liability rate movements. Loan yields declined 32 basis points and interest-bearing deposit costs decreased 29 basis points on a linked-quarter basis, mostly due to the timing of the adjustments. Loan yields moved downward from LIBOR adjusting with the market ahead of the September and October FOMC rate cuts, while our deposit adjustments were timed with the FOMC decisions.

At the end of the quarter, we had $1.2 billion in loans indexed to LIBOR and $1.3 billion indexed to prime rate. We also continued to shorten the duration of our interest-bearing liabilities to take advantage of lower interest rates and the majority of our deposit growth came from our variable rate money market accounts. Additionally, we anticipate a significant number of time deposits will reprice downward in the first quarter of 2020, led by the final maturity of a 2018 3% CD special. Overall, our deposits grew by 7% for the quarter and 20% from year-end 2018.

In anticipation of flat rates in 2020, we added some additional short-term brokered funding to the balance sheet, which reduced our loan-to-deposit ratio to 98%. During the fourth quarter, our available for sale securities portfolio increased $9 million on a linked-quarter basis and $78 million for the year. We continued to add marketable securities to optimize our liquidity position and mitigate downward pressure from interest rates. In addition to reinvesting our cash flows and call securities, we sold some mortgage-backed securities during the fourth quarter and replaced them with higher-yielding callable municipal bonds.

These transactions resulted in the realization of some gains during the quarter and minimized reinvestment risk and impact to yields from declining rates. Overall, bond portfolio gains for the quarter were $520,000 and the total unrealized gain in our marketable securities portfolio at year-end was $21.8 million. The modest investment portfolio yield declines for the year were a combination of lower reinvestment yields and yields affected by higher prepayment speeds on mortgage-backed securities. With the portfolio adjustments I just spoke of, the tax-equivalent portfolio yield increased by 3 basis points in the fourth quarter.

Now to move on to non-interest income and non-interest expense. Overall, our non-interest income increased $1 million in the fourth quarter of 2019 or an increase of 83%, compared to the same quarter of 2018 and jumped $2.6 million for the full-year 2019, compared to full-year 2018. This improvement is a result of the success of our interest rate swap program. The back-to-back swap program started in 2018 and has grown to become a material piece of our non-interest income.

It accounted for $2.8 million in fees for full-year 2019, with the exception of swap fee production, which increased from 5% of our non-interest income composition in 2018 to 32% at year-end 2019. Our other non-interest income growth remained fairly flat for the quarter and year. As we look forward, our team will continue to look for additional ways to enhance fee income so that it becomes a larger portion of our overall revenue production. Non-interest expense for the fourth quarter of 2019 increased $1.7 million or 9%, compared to the fourth quarter of 2018 and increased $700,000 or 3%, compared to the third quarter of 2019.

Non-interest expense to average assets continued to decline and currently stands at 1.81%. We improved the assets per employee ratio to $13.8 million during the fourth quarter of 2019. Non-interest expense for the quarter was well-managed and that performance metric improved for the third straight quarter and second consecutive year. We've continued to manage the pace of hiring, which accounts for 65% of our non-interest expense.

Consequently, the salary and benefits expense decreased $400,000 from the third quarter of 2019 and increased just $1 million year over year. Full-year 2019 operating revenue grew by 29% and operating expense growth was under 2% compared to 2018, resulting in positive operating leverage for 2019. Net income in 2019 was more than double our 2018 net income and nearly triple our pre-tax net income from the previous year. We intend to continue improving operating efficiency and harvesting the well-recognized benefits of a branch-light strategy.

For 2020, we will strive to keep our non-interest expense growth in single digits with double-digit operating revenue growth. We expect that our volume-based expenses will continue to rise as we grow, but we will continue to manage all costs with the objective of enhancing profitability and efficiency. I would now like to turn the call over to CEO and President of CrossFirst Bank Mike Maddox for a more detailed discussion regarding our loan portfolio and asset quality. Mike?

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Thank you, Dave. Good afternoon. I'm going to spend some time this afternoon to discuss our loan portfolio and asset quality metrics. To begin, I'd like to commend all of our employees on their hard work and let them know how proud we are of what they have accomplished in 2019.

We have established a strong operating model and a culture over the last 12 years. And I am honored to be a part of such a high-quality group of bankers, which is really best-in-class. Our employees have worked extremely hard to produce terrific year-over-year results. Our organic growth continues to be at an industry-leading pace.

This is driven by our strong relationship banking model and the dynamic markets in which we operate. We want to be a talent magnet in our industry. Our management team is very focused on retaining the outstanding talent we have and continuing to recruit more high-caliber employees to our organization. We continue to grow our loan portfolio and remain high asset quality in the fourth quarter.

During the quarter, we increased average loans by 6% from the third quarter of 2019 and 29% compared to year-end 2018. We funded $255 million of loans to new borrowers that attributed to the 6% growth, and help offset more payoffs and amortizations of our current customer base. Our loan portfolio growth continues to be balanced between C&I and CRE credits. We also continue to see customer demand for longer-term fixed-rate loans, which has contributed to the increase in back-to-back swap activity.

The industry is getting more aggressive on structure and pricing of credits. We will continue to be disciplined as we underwrite and pursue new business this late in the credit cycle. It is extremely important that we maintain the integrity of our underwriting standards. As George mentioned, our classifieds and non-performing assets remained flat for the quarter.

And we finished the quarter with non-performing assets below 1% of total assets. During the fourth quarter, we had $5.5 million of charge-offs, which included a partial charge-off of our previously identified and disclosed non-performing credit. Our total charge-offs to average assets for the year was 0.31%. Our classified assets to capital for the fourth quarter also remained mostly unchanged at 13.3%, compared to the third quarter of 2019 and trended down compared to 2018.

Without our large previously identified non-performing credit, our classified assets to capital will be below 10%. We increased our annual provision by $3.4 million to $13.9 million to support continued loan growth and increase of specific reserve on our non-performing credit. At the end of the quarter, the overall loan loss reserve was 1.06% of loans compared to 1.18% in the third quarter of 2019. This decline was a result of our lower classified assets and is commensurate with the overall risk in our portfolio.

In addition, we are not required to adopt CECL in January of 2020. We continue to run parallel analysis on the potential impact of our reserves and capital and are still assessing the timeline for adoption. Our capital position remains strong, and our growth in the second half of the year leveraged our newly raised capital. Overall, we've had a very successful year in growing the company, which closed an initial public offering and continued record performance.

As a part of our final remarks, we would like to wish our friends the Hunt family and the entire Kansas City Chiefs organization, good luck in the Super Bowl. Thank you again for joining our call today, and as we mentioned earlier, our full results and financial metrics are included in the earnings release and presentation. This wraps up our prepared remarks. And now I'll turn it back over to the operator to begin Q&A portion of the call.

Thank you.

Questions & Answers:


Operator

[Operator instructions] Our first question is from Brady Gailey with KBW. Please go ahead.

Brady Gailey -- KBW -- Analyst

Thank you. Good afternoon, guys.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Hi, Brady.

Brady Gailey -- KBW -- Analyst

So the margin held in relatively well and the fourth quarter is down 1 basis point. It's now 3.23%. Dave, you were talking about that band that you guys have been in 3.25% to 3.50%, you're kind of at the lower end of that band. Do you think the margin has some stability here? Or do you think that it could kind of dip below the bottom of that band in 2020?

Dave O'Toole -- Chief Financial Officer

You know, Brady, 2020 will be a challenge from a margin standpoint, probably for all of us in this industry a little bit in a flat rate environment. We do think it will stabilize a little bit, probably come back up a little bit in the first quarter because of the maturity of a large portion of our CD portfolio, which will be repriced significantly downwards. So, we're hopeful we can sneak back inside the band and hold it for next year, but it could be a little bit of a challenge.

Brady Gailey -- KBW -- Analyst

All right. And then, just to be clear on the net charge-offs in the fourth quarter, that's related to the liquor distributor that we've been talking about?

Dave O'Toole -- Chief Financial Officer

Primarily the fourth-quarter charge-off was related to that credit.

Brady Gailey -- KBW -- Analyst

OK. And where do we stand with that credit now? How big is the loan? And how big is the reserves/net charge-offs held against it?

Dave O'Toole -- Chief Financial Officer

The credit is about $27 million, but we're not going to talk specifically about the reserves we have on individual credits. We continue to monitor the credit and work with the borrower. We've continued to increase our specific reserve as it relates to that credit, and we'll continue to work through it.

Brady Gailey -- KBW -- Analyst

All right. That makes sense. Anyway, we've seen there was another nice quarter from a loan growth perspective, you guys keep printing these 20%-plus loan growth quarters, about $180 million of loan growth on average the last few quarters. Does that feel sustainable as we look toward 2020?

Dave O'Toole -- Chief Financial Officer

Well, we continue to see a strong pipeline. We are concerned about the point at which we are in the credit cycle. We're going to be prudent. But we're going to continue trying to execute, and all of our markets continue to see good opportunities.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Brady, we're going to be within 5%, plus or minus, probably of that number we gave you guys early -- we gave you guys earlier around 20%. So, you know, we feel good about the opportunity that's out there. But again, as Mike said, you've got to remember we've got to be very cautious about the credit cycle and where we are. We're in the eighth or ninth inning and let's be careful.

We don't need any surprises.

Brady Gailey -- KBW -- Analyst

Yeah. And then, George, about a month ago, we had some big news in Dallas with your previous employer. Is that an opportunity for CrossFirst in a significant way, just with -- and not just that deal, but we've seen Prosperity, LegacyTexas, and we've seen a lot of dislocation specifically in Dallas. So, is that dislocation a big opportunity for you guys in 2020?

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Yeah, I think it is an opportunity, and you're exactly right. We've seen as much activity movement merger that we've -- than we've seen in quite a while. You know, we have continued to pick away at the competition taking people and business all along. So, it's not like this is all of a sudden going to open up a plethora of tremendous opportunity.

It should, both in people and in customers. It always does. I mean, you look at every one of these things that happened for a while. There is definitely unrest.

There's definitely question marks and there'll be some fallout. But again, we have never stopped in the past doing that. It's unusual in today's environment that we've had one, as muni, and secondly, as large as you're talking about in this last merger. So, we plan to mine as much of the opportunity as we possibly can, and it will mean some positive things for us, for sure.

Brady Gailey -- KBW -- Analyst

Great. Thanks for the color, guys.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

You bet.

Operator

Thank you, and our next question is from Michael Rose with Raymond James. Please go ahead.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Hi, Michael.

Michael Rose -- Raymond James -- Analyst

Hey, good after -- hi, good afternoon. I hope everyone is well and good luck in the Super Bowl. I just wanted to start on some of the lending verticals, if you can give us some updates on where you stand. And maybe we can start with energy.

You guys are about 10.5%. You guys have talked about 8%, kind of 11% is a comfort at this point. But you're one of the few banks that have actually grown balances this quarter. So, if you can give us an update there? And then maybe, thoughts on some of the other ones like enterprise value and travel nations, etc.? Thanks.

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Yeah, sure. Hey, Michael, this is Mike. We -- really, our energy business was fairly flat. I think we added less than $10 million in loans in the fourth quarter.

We will continue to keep that in that range. We don't anticipate a lot of growth in that area over the next 12 months. On the enterprise value lending space, we're at $121 million. That's fairly consistent with where we were in the third quarter.

Their travel nations lending is just under $70 million. And so, yeah, those are our big niches. Our homebuilding business is about $150 million today.

Michael Rose -- Raymond James -- Analyst

All right. Any update on any of the exposures that I saw in the slide deck? We've seen some migration in some of the leveraged loans and things like that. Are you guys seeing any of the issues that we're seeing at some of your peer banks out there?

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Knock on wood, our enterprise value portfolio is performing very well. Energy has remained stable. About two-thirds of that portfolio is oil versus gas, and fairly well hedged. So, we haven't seen that migration yet.

Michael Rose -- Raymond James -- Analyst

OK. Maybe last one for me, just on deposits. Obviously, some broker deposits were added this quarter. I would think the expectation is to maintain that loan-to-deposit ratio under 100%, but with 20%, plus or minus, growth expected for this year.

I mean, what are the strategies to continue to drive deposit growth? Thanks.

Dave O'Toole -- Chief Financial Officer

Michael, this is Dave. I don't see us changing our strategy a great deal on deposit growth. We've built the infrastructure and the people to go ahead and grow core deposits at a pretty rapid pace. We supplement that, obviously, with some brokered deposits as needed.

We're not trying to let that take over our deposit growth plan. We want to grow core deposits and we want to change mix a little bit this year with more DDA. So, we expect to be able to fund the growth that we are looking for next year and this year with a combination of core deposits, about the same ratio that we had in the past, and we'll supplement it a little bit with some brokered funds.

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

And Michael, last year, we started an institutional deposit group here in Kansas City. They had a lot of success in 2019 and they have a very strong pipeline for 2020. And so, we think they'll be able to also help us maintain that growth in our deposit base.

Michael Rose -- Raymond James -- Analyst

OK. Thanks for all the color, guys. I appreciate it.

Operator

Thank you, and our next question is from Matt Olney with Stephens. Please go ahead.

Matt Olney -- Stephens Inc. -- Analyst

Hey. Thanks, guys. Good evening.

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Hey, Matt.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Hi, Matt.

Matt Olney -- Stephens Inc. -- Analyst

Hey, I want to follow-up on Brady's question on the higher-priced CDs. Can you just remind us what the remaining amount is that will mature? And what levels are you seeing these being replaced at what cost?

Dave O'Toole -- Chief Financial Officer

Matt, as you know, they started maturing in the fourth quarter. We have right now just under $200 million of 3% CDs yet to reprice. And then in addition to that, we have about $170 million worth of brokered CDs that have been on the book some time that also repriced in the first quarter. Of the 3% CDs, they're all coming in at or below 2%.

The brokered CDs will go back on the books or get paid off, depending upon what our liquidity position is. But if they go back on the books, they're probably in the $165 million range or so, coming down from the low 2s.

Matt Olney -- Stephens Inc. -- Analyst

OK. And then on the yield side, I think overall loan yields around 5.21% right now. Can you give us an idea of what some of the new originations are coming on it? I'm just trying to understand how much pressures on the loan yield side right now?

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Yeah. I mean, there is quite a bit of pressure on the loan yield side, not only with the flat rate environment, but competition continues to be pretty stiff. But we're seeing floating rate loans on the C&I side in the high 4s and trying to be prudent on what we do on fixed-rate loans. But you know, it's definitely going to continue to have some pressure on our loan yields.

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Matt, believe it or not, the high-quality real estate loans are really putting a lot of pressure on yields. That we were looking at some loans that we've made last year, it was like LIBOR plus 3.50%. Today, we're looking at LIBOR plus 2.25%. And so, these are high quality, high amount of equity in the transaction, pretty safe loans, great projects in good areas.

But that's the kind of real estate loans we do, and we're continuing to get more pressure from the competition and bringing these rates down somewhat. And we've slowed down a little bit in terms of what we're doing in that space.

Matt Olney -- Stephens Inc. -- Analyst

OK. That's a good data point, George. And just to be clear, that incremental pressure that you're talking about, are these from other regional banks or national banks or nonbanks? Or how would you characterize the increased competition over the last year?

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

You know, I'd characterize it, really both, but we're seeing a lot from the larger banks, too, because these are big developers with larger projects and -- but the regional folks are highly competitive, too, in this space because it's a pretty good loan today. And it's stayed in the good markets with the good developers, and I think, we're going to continue to see that pressure. I don't know how low it can go. But there is a point in time where we just don't play either.

Matt Olney -- Stephens Inc. -- Analyst

Sure. And just to be clear, as far as the margin outlook, David, I think you said that you expect the margin to stabilize and even increase in the first quarter. Did I hear that correctly?

Dave O'Toole -- Chief Financial Officer

I think the first quarter could have a modest increase. It's not going to be anything dramatic. But I believe that we should be able to settle in at about that level. I'm hopeful it's inside of that band.

Matt Olney -- Stephens Inc. -- Analyst

OK.

Dave O'Toole -- Chief Financial Officer

I don't know what the rest of the year looks like, but obviously, we're looking at it probably a pretty flat rate environment this year. So, probably not too much movement.

Matt Olney -- Stephens Inc. -- Analyst

Got it. And then -- and switching gears over to the operating expenses. It looked pretty good in the fourth quarter. I think in the prepared remarks, you mentioned a little bit of a slowdown in hiring.

Any more color on the 4Q expense levels? And as we look into 2020, what's the reasonable level of growth that we should expect considering the hires that you expect to make?

Dave O'Toole -- Chief Financial Officer

We had a very successful year in managing expenses this year. It may be a year that will be hard to repeat. I think we had a 2% growth year over year in operating expenses, which is almost unheard of. Part of it was, we made a conscious effort to slow down our hiring.

We wanted to work within the FTEs that we had as of last year. Replace people as necessary, try to focus our hiring on production-oriented people. You have some normal attrition in any business. And as it turns out, our FTE count was almost the same at the end of this year as it was when we started.

So, we did a good job of controlling that. But we're getting a lot of requests from the field to add a handful of people this year, and I do expect that we'll have to put some people on. That's 65% of our operating expenses comes from salary and benefits, so, that will probably grow somewhat again this year. Our goal is going to be to keep our overall operating expense targets or growth below 10% for the year because we're pretty comfortable we can grow operating revenues at a double-digit pace.

And if that's the case, we get the leverage that we need to go ahead and continue to grow profitability. But really, at the end of the day, our path to 1% is probably credit-dependent more than anything else. We have in the last year and a half, done a really good job of managing expenses in this organization and getting them positioned where they should be for the future. Our growth targets are a little more realistic today than they were in the past.

Our balance sheet has been manipulated somewhat to be more resilient as we go forward in this new rate environment. So at the end of the day, profitability kind of becomes about credit expense, and as you can tell from last year's numbers, once again, we put 30 basis points of our earnings into the reserve for bad debts. That's a number that we've had almost every year for the last four, five years. I don't think we expect that to change a great deal this coming year.

So, managing expenses, growing prudently, turning over rocks, looking for improved fee income, and then, doing our best to hold our margin is probably our story for the coming year.

Matt Olney -- Stephens Inc. -- Analyst

OK. And then just circling back on credit quality. I think you mentioned the charge-off from the previous-identified credit what about the provision expense, the $3.4 million? Was that all from growth in the fourth quarter? Or is part of that from impairment or writedown?

Dave O'Toole -- Chief Financial Officer

Part of that was our normal planned provisioning of growth, but there is a portion of it also that was for specific reserves on our problem asset portfolio.

Matt Olney -- Stephens Inc. -- Analyst

OK. So I guess, thinking about the provision expense for 2020. Would you think that something -- even if you were to attain 20%-plus. Do you think that a $3 million quarterly provision expense is at a more reasonable level? Or what would you kind of point us toward for the quarterly provision expense for 2020?

Dave O'Toole -- Chief Financial Officer

I wish we could say 3%. I think it probably will be a little bit more than that. We provisioned about 1.5% on our new business last year, and then had to supplement that somewhat for the specific reserves that required. Our provisioning for growth this coming year will probably exceed 1.5%.

Matt Olney -- Stephens Inc. -- Analyst

OK. That's all for me. Thank you, guys.

Dave O'Toole -- Chief Financial Officer

Thank you.

Operator

Thank you. [Operator instructions] And we have a question from the line of Andrew Liesch with Piper Sandler. Please go ahead.

Andrew Liesch -- Piper Sandler -- Analyst

Good afternoon, everyone.

Dave O'Toole -- Chief Financial Officer

Hello.

Andrew Liesch -- Piper Sandler -- Analyst

Hi, I just wanted to follow-up on the expense line here, and largely on the salaries and benefits. Was there like any sort of true-up on the annual bonus here that hit the expense line?

Dave O'Toole -- Chief Financial Officer

There was a true-up on our AIP program at the end of the year. We've been watching it throughout the year. That's a calculated number, and there was a fourth-quarter true-up on the AIP. So, that had some impact of lowering salary and benefit costs in the fourth quarter.

Andrew Liesch -- Piper Sandler -- Analyst

OK. And then, as we look here now into the first quarter with FICA and payroll taxes in their normal seasonal aspects, we should expect to see that line item jump up and maybe flatten out throughout the year or maybe grow a little bit depending on hiring?

Dave O'Toole -- Chief Financial Officer

Well, for FICA and 401(k) contributions, things like that, we fully accrue that in our AIP accrual analysis at year-end. So, the jump that you would see going into the New Year would be increases in base salaries that are somewhat customary and measured.

Andrew Liesch -- Piper Sandler -- Analyst

OK. That's very helpful. And then, just a housekeeping question. What tax rates should we be using for forecasting going forward?

Dave O'Toole -- Chief Financial Officer

You know, I think you can stay at 21%, 21.5% effective tax rate. You know, we're continuing to keep the municipal portfolio at the level it's at. We have the BOLI credit that impacts that as well. So, our budgeting around here is in the 21.5% effective rate.

Andrew Liesch -- Piper Sandler -- Analyst

OK. You've covered all my questions. Thanks so much.

Dave O'Toole -- Chief Financial Officer

Thank you.

Operator

Thank you, and this concludes our Q&A portion of the call. I will turn the call back to Matt Needham for any final remarks.

Matt Needham -- Director of Investor Relations

Thank you, again, for joining us today on the call. This call can be accessed via replay at our website. And as always, you can contact me if you have any follow-up questions. Again, we appreciate your interest or investment in the company and the time that you've taken to spend with us this afternoon.

Go, Chiefs.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Matt Needham -- Director of Investor Relations

George Jones -- President and Chief Executive Officer of CrossFirst Bankshares

Dave O'Toole -- Chief Financial Officer

Mike Maddox -- President and Chief Executive Officer of CrossFirst Bank

Brady Gailey -- KBW -- Analyst

Michael Rose -- Raymond James -- Analyst

Matt Olney -- Stephens Inc. -- Analyst

Andrew Liesch -- Piper Sandler -- Analyst

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