FHN
#Thank you.
Good morning, Steve.
Yes, generally speaking, yes.
If you recall last call that we had, that's what we had discussed.
And we had said, think about $8 million to $10 million of incremental costs from TrustAtlantic, and so that would be probably in the $860 million, $870 million range, something like that.
And so, that's what we're ---+ that's what we're shooting for.
It could fluctuate depending on what we just talked about, which is fixed income, variable comp, but we think that that's a good level for us to strive for.
Steve, this is <UNK>.
As we've demonstrated over the last six, seven years, expense control is clearly one of the most leveragable levers that the industry has, and that we have, and we maintain a strong focus on controlling costs.
And at the same time, we've continued to make significant investments in our technology.
And as <UNK> noted in his comments, in people, we're very focused on controlling costs.
We think that we can maintain cost in a flat sort of range in 2016.
And we think, in addition to the things that <UNK> has mentioned this morning, using our profitability tools, looking at what it costs to deliver products and services, and the disaggregation of the business, we think that gives us additional avenues or windows to help us keep those costs under control, as we move into 2016 and beyond.
We're continually looking at where we want to be in terms of asset sensitivity.
We don't have any specific plans right now, besides what we did in the fourth quarter, which was incrementally grow the securities portfolio.
We did some bond swaps to extend duration on certain parts of the portfolio, which we think will be helpful and moderate asset sensitivity.
But at this point, since we did get an initial move, we want to wait and see a little bit more about how quickly those moves come, and we'll adjust accordingly.
We had more opportunity to moderate it if we want to, but we're good with our position right now.
Steve, I'll just add to that.
You may remember from what we said in the third quarter, the context around us reducing that asset sensitivity.
Now we believe that it was entirely appropriate to raise rates in December, and we think it's entirely appropriate that the Fed continues to increase rates.
The context we tried to put around it is, is our view that interest rates would get above the 200 basis points of move, it was embedded in there, was fairly unlikely.
We see this cycle somewhere in the 1% to 2%, maybe at the high end 2.5%, at the high end before the next recession or whatever causes rates to trend down.
So we just don't think that in this cycle, rates are going to go significantly up more than the 2% or so.
So we try to take off some of the excess, or the high end of that.
We benefit most from the first few moves, as I'm sure most in the industry do.
So we don't have a view that rates aren't going to go up, and that rates ---+ or shouldn't go up.
We firmly believe that rates should go up, and we're optimistic that the Fed will continue to move.
We just have reduced that sensitivity to what we think is sort of the outlier rate [moves], which are beyond 2%, 2.5% in this cycle.
Sure.
Yes, it's <UNK>.
Certainly, some of it is, for sure.
But if you look back on ---+ I think it's slide ---+ slide 6, where we give you a view, adjusting out notable items to a pretax income walk forward, you'll see our net interest income was up $26 million over 2014, and that had no hikes in it.
That is net growth on our balance sheet, from strong growth in the regional bank, offsetting anything that's happened in non-strategic.
So our bankers have demonstrated the ability to net grow.
Now rates would certainly help, but we're not necessarily waiting for that.
And the reason that you've heard us using the term positive operating leverage is we think that aligns with our philosophy around the Bonefish, that we're going to pull levers that we can as the opportunity arises and control what we can control.
So if we do see a better rate environment for us, and that translates into higher revenues, we'll still remain disciplined on expenses, but we'll be able to invest and have expenses grow less than revenues, but still be able to net grow the business.
If those rate increases don't materialize, like what we talk about earlier on an earlier question around expenses.
Flattish expense levels to 2015, I believe is pretty good performance, given wage pressures that we've seen particularly through our front line talent, regulatory costs, et cetera.
So I feel pretty good about our ability to do that, and manage through that in the right way.
Good question.
I would assume a tax rate probably in the 30% to 34% range.
I won't get into all the mechanics, unless you want to call offline about how you calculate effective tax rates.
But clearly, when you've had large ---+ larger one-time items, it really kind of distorts that rate.
But 30% to 34% is really what you should be thinking for 2016.
Yes, <UNK>.
Part of the reason that we saw a little bit better net interest margin in the fourth quarter was actually that we did have strong ---+ continued strong commercial deposit inflows.
They actually weren't as strong seasonally, as what we had anticipated.
And so, the net result was, while we did add to the securities portfolio, knowing that we had excess cash balances that we were confident in, we actually didn't add to the securities portfolio as much as we would have thought.
So right now what we're looking at, is making sure that we understand the core deposit trends, particularly on the commercial side, which can go in and out a little bit more, before we extend ourselves any further from a securities perspective.
<UNK>, this is <UNK>.
I'll add to it.
We're very comfortable with our sensitivity position, as we've described it.
And I guess, structural speaking, we don't believe in the [carriage] rate It doesn't ---+ you can make some money at it, but it doesn't always end well.
And we think using that portfolio to manage our interest sensitivity, and to manage our liquidity and our collateral needs is our primary objective.
So it's unlikely that, given levels of deposits or otherwise, that we would look to put more duration on through the securities portfolio.
I'm very comfortable with our sensitivity position the way it's structured today.
And we may change that over time, but today, we're very comfortable with it.
Good morning, <UNK>.
Yes, sure.
So let's call it 1 to 2 basis points on the move in LIBOR, for this quarter is probably the best guess.
And then deposit competition, I'd say it's still rather benign.
We hear across our markets ---+ some community banks, some credit unions that are doing certain things, they were doing them even before the Fed raised rates.
So we haven't seen a lot of movement at all in our markets, particularly from the larger competitors that could really move some balances around.
So that's been a positive for us.
And so hopefully that will continue, but we've got ---+ we've got ample plans to be able to react to competition as appropriate.
Good morning, <UNK>.
Correct.
Sure.
So as we've talked about in the past, probably the number one driver, if you boil it down is market volatility.
We can represent buyers or sellers.
And so, whenever there's increased volume and volatility, we can do well, whether it's good volatility or bad volatility, so to speak in the market.
So that's probably the main driver.
The second is, clarity around rates, and we alluded to it in our opening comments.
But since people felt more and more confident as we got to mid December that the Fed was actually going to raise rates, that actually helped people understand where they wanted to be invested and how long.
And so, we saw a little bit of a pickup in activity from people feeling a little bit more certain, at least in the short term, about how they wanted to position their portfolios.
What's happened this year so far, with the flattening of the longer end of the curve is certainly not helpful, so that's probably a headwind to any activity.
But again, that's offset by whatever volatility we'll see.
And with the markets doing what they have done, you can imagine that there's been more volatility.
So I go back to what <UNK> said is, we were at [$850,000] for the quarter, a good increase year-over-year, probably not back to the $1 million to $1.5 million range yet.
But the range that we saw in the fourth quarter plus or minus a little bit is our operating assumption at this point.
Good morning, <UNK>.
Hey, it's <UNK>.
I'll start.
If you actually look at the regional bank dollar amount of reserves, it's gone up.
And so, our coverage has stayed relatively steady in the regional bank.
And so, while we've continued to see positive grade migration in the bank, while we've continued to see loan growth, we've tried to realistically look at our reserve levels there and maintain those, accounting for the incremental loan growth, but also seeing opportunities to moderate that reserve as well.
But we feel comfortable about where we are there.
If you look under the covers of where the reserve coverage has been coming down, it's in the non-strategic portfolio that's had less than $5 million of charge-offs, and even a quarter or two of recoveries, in a portfolio that's running off.
And so, that's where we're ---+ that's where we're getting the net benefit of a reduction in reserves.
But we have active dialogue about maintaining healthy reserves, particularly as we're growing loans in the regional bank, and we feel comfortable where we stand today.
Not that great, in meaning.
It means that ---+ (multiple speakers)
Low numbers are great, and it means [insignificant] (laughter).
Chris, this is <UNK>.
The accounting around loan loss reserves has become very mechanical over the last several years, in my view to a fault.
And so, it's almost an implied degree of precision that doesn't exist in reality.
And I think ---+ now we try to balance that out with, what is a practical view, where credit trends are headed.
And then the second point, we've talked in a number of different ways about the economy continuing to move forward.
And as we look at emerging problems and credit portfolios, we just really don't see that many.
We think that that the economy continues to move forward, that credit quality is strong.
And clearly, at 4 basis points of losses with ---+ a lot of that driven by one net recovery, that is pretty great.
But we really do think that credit trends continue to be strong into 2016, that the economy continues to move forward.
And that coupled with what we're hearing from our customers that, that they're optimistic, and they're borrowing money and they're still looking to invest.
That although, we've seen a dislocation in the oil markets, commodity markets, and we're seeing some dislocation in China and internationally, we think the economy can continue to be pretty steady.
And as a result, credit quality will be as well.
Hey, <UNK>, it's <UNK>.
I want to make sure I understood.
Were you asking about first quarter margin.
Okay.
Yes.
I think ---+ what I expect sitting here today is, our first quarter margin to be relatively steady to where we were in the fourth, maybe modestly up.
That's what we currently have forecasted for the quarter.
First quarter ---+ first quarter net interest income and margin, <UNK>, is always impacted by day counts, and the contract of billings on loans, and et cetera.
And so, first quarter is always a little squirrelly, but you ought to see some continued benefit of the Fed increase that we had in the fourth quarter.
<UNK> highlighted 1 basis point or 2 that we saw, because of LIBOR ramping up.
With the resets on LIBOR being 30 and 90, it takes a while to work through the balance sheet.
So all of that, it sort of fits into what <UNK> just described
Yes.
And the other thing I would mention is first quarter, if you look back and see the big changes ---+ <UNK> mentioned day count, the other is excess balances at the Fed.
And so, it'll be dependent on what kind of deposit flows that we get, But again, I think, hopefully we can keep it relatively steady [the fourth].
Okay.
Thank you, Kate.
Thank you all for joining the call this morning.
We're very excited about our 2015 results, and encouraged about our opportunities in 2016.
Thanks again, to our colleagues.
If you have any questions or need additional follow up, please reach out to any of us.
<UNK> will be available throughout the day as well.
Thank you all again, and I hope you have a great day.
