Cullen/Frost Bankers - Earnings Call - Q4 2017
January 25, 2018
Transcript
Speaker 0
Good morning, and welcome to the CullenFrost Bank Fourth Quarter and Year End Earnings Conference Call. My name is Kirsten, I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise. For those of you listening on the stream, please take note of the options available in your event console. At this time, I would like to turn the call over to Mr.
Greg Parker, Executive Vice President and Director of Investor Relations. Mr. Parker, you may begin.
Speaker 1
Thank you, Kirsten. This morning's conference call will be led by Phil Green, Chairman and CEO and Jerry Salinas, Group Executive Vice President and CFO. Before I turn the call over to Phil and Jerry, I need to take a moment to address the safe harbor provisions. Some of the remarks made today will constitute forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend such statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended.
Please see the last page of the text in this morning's earnings release for additional information about the risk factors associated with these forward looking statements. If needed, a copy of the release is available at our website or by calling the Investor Relations department at (210) 220-5632. At this time, I'll turn the call over to Phil. Thank you, Greg. Good morning, and thanks for joining us.
Today, I'll review fourth quarter and full year twenty eighteen results for CullenFrost, and our Chief Financial Officer, Jerry Salinas, also provide additional comments before we open it up to your questions. In the fourth quarter, CullenFrost earned $1.53 per diluted common share compared with $1.28 in the same quarter last year and $1.41 in the third quarter of this year. For the full year 2017, CullenFrost earned $5.51 per diluted common share, which is up from $4.7 in 2016. Fourth quarter and full year 2017 results include the benefit on a net basis of $4,000,000 or $06 a share to adjust deferred taxes as a result of the Tax Cuts and Jobs Act. As you can see, a strong fourth quarter capped a very good year overall in 2017.
Besides the excellent earnings, return on average assets reached 117 for the full year and was 126 in the fourth quarter. One area of focus in 2017 was balanced quality quality loan growth, and we had good results. During the fourth quarter, average loans were $12,900,000,000 This represents an increase of more than $1,150,000,000 over the fourth quarter last year. Our provision for loan losses fell to €8,100,000 in the fourth quarter compared to €11,000,000 in the third quarter. Nonperforming assets totaled $157,300,000 in the fourth quarter, a slight increase from the total of $150,000,000 in the third quarter.
The increase was basically attributable to One Credit, a longtime customer that has ceased operations. Net charge offs in the fourth quarter were $7,000,000 compared with $6,200,000 in the previous quarter and $5,700,000 in the 2016. For the past six quarters, we've experienced near normal levels of charge offs and we expect this trend to continue. Fourth quarter annualized net charge offs represent just 22 basis points of average loans. Overall delinquencies for accruing loans at the end of the fourth quarter were only 82 basis points of period end loans, a number well within our standards and one of the lowest totals in more than two years.
Total problem loans, defined as risk grade 10 and higher, were flat compared to the third quarter. Finally, outstanding energy loans at the end of the fourth quarter totaled $1,500,000,000 or 11.4% of total loans. The increase is split between increased customer activity in the energy sector and some quality customer acquisitions. Our current level compares to our peak of 16% in 2015. As we've discussed in previous quarters, Frost is building on momentum in the markets that we serve, and we're seeing increased optimism among our customers.
In responding to this optimism, we are focused on steady and sustainable organic growth through a competitive product mix and a strong value proposition. Average total deposits in the fourth quarter rose to $26,400,000,000 That was up by 4% from $25,400,000,000 in the fourth quarter of last year. Throughout 2017, we saw broad based growth in our deposit portfolio. In consumer banking, we continue to gain momentum from the investments we've made in our value proposition, including things like 20 fourseven customer service, one of the largest ATM networks in Texas, an outstanding mobile app, an expanded branch footprint and competitive deposit rates. Net consumer customer growth for the year was 2.7% due to high customer acquisition and strong retention of existing customers.
Same store sales growth for new account origination is up by 7.4% compared to the 2016 with strong growth in all regions. Twenty two point one percent of our account openings came from our online channel, which includes our Frost Bank mobile app. That maintains our pace of more than double the level of the same quarter a year ago. The consumer loan portfolio reached $1,600,000,000 by the 2017. To put this in perspective, this is larger than our energy portfolio.
Total period end consumer loans grew by 11% or $155,000,000 compared to the same time frame in 2016. About 56% of this growth came from consumer real estate, such as home equity lines of credit, home improvement loans, HELOC and home equity loans closed in, with the rest driven by general consumer and consumer lines of credit, particularly private banking. Our multifaceted, concentrated effort to effectively grow the consumer loan portfolio included streamlining processes to increase efficiencies in our loan center and hiring additional key lenders. We continue to make progress with our mobile and web based account openings, which have opened new channels for customers to build a relationship with Frost. These digital account openings have helped us grow while still applying the same Frost standards that we have in place for traditional account openings.
On the commercial side, new loan opportunities are up 28% compared with last year. Our strategy of building our core loan portfolio, which we define as loan relationships under $10,000,000 in size, continues to help provide steady, sustainable organic growth. For 2017, new commitments under $10,000,000 accounted for 47% of the total volume for the full year. The efforts that our bankers have been putting into this are paying off extremely well. For our larger customers, new commitments at above $10,000,000 accounted for 53% of commitment growth.
We continue to be successful developing larger relationships. Overall, new loan commitments are up by 17% from last year. In 2017, we had a 27% increase in opportunities from customers. That indicates that customers have an increased need for new financing to support their growth, which is a reflection of a stronger economy. This kind of sustainable organic growth is only possible by building long term relationships with our customers.
As you may have seen in the press release, Frost is celebrating the one hundred and fiftieth anniversary of its founding this year. Banks, especially Texas banks, don't get to be 150 years old unless they succeed in helping their customers succeed and by making people's lives better in the areas where they do business. Those positive customer experiences are reflected in the recognition we received from third parties like J. D. Power and the American Banker Reputation Institute survey, and we continue to build on that success.
During the fourth quarter, Frost was named to Money Magazine's list of the best banks in America, which included the designation as best bank in Texas. And Global Finance Magazine named Frost the best private bank in the Southwest. A bank also can't get to be 150 years old without great bankers. As we roll out our one hundred and fiftieth anniversary celebrations this year, we plan to do at least 150 volunteer projects and community improvement efforts throughout Texas. The spirit of Frost employees and their dedication to their communities, their customers, and each other is truly inspiring.
I'd like to thank everyone at Frost for all their hard work and dedication as we celebrate this milestone and look ahead to future accomplishments. Now I'll turn the call over to our Chief Financial Officer, Jerry Salinas, for some additional comments.
Speaker 2
Thank you, Phil. I'll make a few general comments about the Texas economy before I provide some additional information about our financial performance for the quarter and close with our guidance for 2018. Regarding the economy, the Texas economy continues to expand with steady growth and historically low unemployment. According to the Dallas Fed, Texas employment in 2017 grew 2.4%, twice the rate of 2016 and faster than The U. S.
Growth rate despite the impact of Hurricane Harvey. Energy sector employment grew 9% and manufacturing employment grew 2.8% after two previous years of contraction in both sectors. The Dallas Fed's Texas business outlook survey suggests continued growth in the state's manufacturing and service sector. The Texas unemployment rate in December was 3.9%, up slightly from November, but still one of the lowest levels on record. Tightening labor markets could make it more challenging for Texas businesses to find qualified workers in 2018.
Because of the labor tightness, the Dallas Fed reports that Texas wages began rising in 2017 for the first time in three years. Recent gains in the Texas leading index suggest that the positive momentum from the second half of the year should carry forward into 2018. The Dallas Fed projects 2.8% job growth in Texas in 2018. Based on that forecast, about 350,000 new jobs would be added in Texas this year. Looking at individual markets, the Interstate 35 corridor markets continue to lead the state.
The Austin economy is the fastest growing major metro area with extremely low unemployment. According to the Dallas Fed, Austin's 3.6% job growth in 2017 was the best among the state's major metro areas. Austin jobs grew 5.1% sectors in the fourth quarter were leisure and hospitality, professional and business services. Austin's December unemployment rate held steady at 2.8%, the lowest of all major Texas metro areas and a near seventeen year low. The San Antonio economy is accelerating rapidly.
For 2017, San Antonio employment grew 3.4%, the fastest among all the large state metro areas. The construction and leisure and hospitality sectors were the main drivers of job growth. According to the Dallas Fed, post Hurricane Harvey reconstruction drove both sectors as many displaced coastal residents stayed in San Antonio while their homes were rebuilt. San Antonio's December unemployment rate declined to 3.8%. Regarding Dallas Fort Worth, according to the Dallas Fed, Metroplex employment expanded 2.3% for all of 2017.
Job gains generally were broad based and strongest in the second half of the year. The Metroplex labor market remains tight. December unemployment was 3.5% in Dallas and 4.4% in Fort Worth. Houston's economic outlook continues to improve. Employment totals have surpassed pre Hurricane Harvey levels, while energy related jobs are increasing.
Financial activities and trade, transportation and utilities are the strongest sectors. For 2017, Houston employment grew 1.3% and Houston's unemployment rate was 4.9% in December. The 2018 outlook for Houston remains positive. For Texas as a whole, the Dallas Fed projects 2.8% job growth in 2018. Now moving to our financial performance.
Looking at our net interest margin. Our net interest margin for the fourth quarter was 3.7%, down three basis points from the 3.73% reported last quarter. But as a reminder, last quarter, we had an adjustment to our tax exempt loan balances, which had a three basis point positive improvement on our net interest margin percentage. If you adjust out the impact from the correction of the tax exempt income issue, the net interest margin is flat with last quarter's adjusted net interest margin percentage of 3.7%. We had some positive effects offsetting some negative effects, but I would summarize by saying the favorable effect of higher yields on earning assets and higher loan volumes were offset by higher deposit costs and higher balances at the Fed.
Our TE net interest margin percentage for the fourth quarter as I said was 3.7%. Had the 21% statutory tax rate been in effect, our net interest margin percentage for the quarter would have been 3.39%. The taxable equivalent loan yield for the quarter was flat at 4.46% with the prior quarter. However, excluding the third quarter tax exempt loan correction that I mentioned earlier, the yield would have been up four basis points. Looking at our investment portfolio.
The total investment portfolio averaged £11,700,000,000 during the fourth quarter, down about £600,000,000 from the third quarter average of 12,300,000,000 The decrease was impacted by the sale of £750,000,000 in treasury securities that occurred late in the third quarter. The taxable equivalent yield on the investment portfolio was 4.09%, up 15 basis points from 3.94% for the previous quarter and was impacted by the sale of the treasury securities last quarter that had a yield of 1.3%. Also during the quarter, we purchased about $300,000,000 in municipal securities with a TE yield of about 4.5% or 2.93 non TE yield with a twenty year average maturity. Our municipal portfolio averaged about $7,480,000,000 during the fourth quarter, up about $122,000,000 from the previous quarter. The municipal portfolio had a yield for the quarter of 5.3%, down four basis points from the previous quarter.
At the end of the fourth quarter, about 68% of the municipal portfolio was pre refunded or PSF insured. The duration of the investment portfolio at the end of the quarter was 4.7, down slightly from four point eight years for the previous quarter. Regarding the outlook for 2018, our projections include a rate hike in June and one in December, with of course the December hike having minimal impact on our projections. With respect to the impact of the Tax Cuts and Jobs Act on our forward looking effective tax rate, we currently project an effective tax rate in 2018 of about 10%. Regarding estimates for full year 2018 earnings, we currently believe that the current need of analyst estimates of $6.12 is too low.
With that, I'll turn the call back over to Phil for questions.
Speaker 1
Thank you, Sherry. And with that, we'll open up the call for questions.
Speaker 0
And our first question today comes from Ebrahim Poonawala from Bank of America. Please go ahead.
Speaker 3
Good morning, guys. Good morning. Good morning. I was wondering, first, if we could start with just the outlook on loan growth. It was a strong quarter.
And when we look at about 10% year over year, Phil, just based on some of the numbers you guys shared in the prepared remarks, do you expect loan growth to get stronger relative to what we saw this year and just in terms of the makeup of loan growth that you expect into 2018?
Speaker 1
Ibrahim, I I think we can sit we expect consistency with what we've been doing. You know? I I'm extremely pleased about how we've executed. I'm very optimistic about future execution, and and I don't wanna change what we're doing. And what we're doing is we've got balanced growth.
And as we talked about, we're growing larger deals, which we're gonna do, but we've we've shown over the last eighteen, twenty four months the continuing momentum and focus on growing what we call around here the core loans. These are relationships under $10,000,000. And and they're very valuable because they grow organically as the businesses grow, and they're very amenable to a lot of the services we're offering that we offer because they're they're smaller customers. It it doesn't sound very sexy to put it, frankly, but it's but it's really important. And so we've got our focus on balanced growth in that area.
We've got our focus on the consumer side, which really is just expanding relationships. Know, 45% of the relationships that we have of deposit base is consumer related. And, those are great relationships. And we, feel like we've left some money on the table and that we have the ability with the correct products to scale that business in a quality way, and we've been doing it. So I I love what we did in this year in terms of the growth and the level of growth, and I'm optimistic about being consistent with that and continuing that growth for this year.
Speaker 3
Understood. Is it fair to say that means you funded entire loan growth this year with deposits? Should we expect the same continue in 'eighteen?
Speaker 2
I think our projections would stay about the same, yes.
Speaker 3
Got it. And then switching to expenses, think if I back out some of the one off type items you called out, about $192,000,000 in expenses implies about 4% to 5% year over year expense growth. As we think about 2018, should we expect that 5% rate to remain consistent again? Or is there anything else going on from an investment standpoint that you guys are sort of thinking about?
Speaker 2
You know, excuse me. Phil talked about some of the things that we're doing to grow the business, the people that we're hiring. And we've talked about technology that we're gonna have to spend, that we have spent on infrastructure and on product development. We're good stewards of expenses, but, you know, to grow the business, it takes expenses. So I think your higher end year over year sort of growth based on the on the reported number, I would say, is probably closer to to kind of what our expectations are.
Speaker 3
Got it. So closer to 5% on the full sort of reported expense number. Understood. Perfect. Thank you very much and congrats on the one hundred and fiftieth anniversary.
Speaker 1
Thank you.
Speaker 0
Our next question comes from Brady Gailey from KBW. Please go ahead.
Speaker 4
Hey, good morning, guys.
Speaker 2
Good Good morning, Brady.
Speaker 4
I know last quarter, you you all had margin guidance of around the $3.70 level, which is exactly where you came in the fourth quarter. Do you think that will hold as we go into 2018? Realize with the tax adjustment, optically, the margin will look closer to three forty. But you think kind of a stable three forty margin is the right way to think about 2018?
Speaker 2
Brady, what I'd say is that it's a good starting point, but you know, our projections would show, you know, some some improvements some improving trend as we go through 02/2018.
Speaker 4
Okay. And then, you know, you guys did a good job of breaking out some of the asset yields and what happened linked quarter. Can you maybe give us an update on, you know, any fluctuations in your funding costs in the fourth quarter?
Speaker 2
Yeah. Sure. Excuse me. Let me get that for you.
Speaker 4
Like, what happened to noninterest bearing deposits? I'm sorry. Interest bearing deposits.
Speaker 2
Sure. Hold on. Let me grab my average balance sheet here. So if you looked at the third quarter to the fourth quarter, so our total interest bearing deposits went cost of total interest bearing deposits went from 15 basis points to 19, and our total deposit cost went from nine basis points to 11.
Speaker 4
Okay. So, I mean, despite y'all putting out, you know, some higher rates like you did earlier in 2017, I mean, there there wasn't a a ton of movement. Do you think that there will be more movement in funding costs as we progress through 2018?
Speaker 2
Brady, we did. So with the December rate hike, we did have additional increases in deposit costs. So we went ahead and and increased some of our rates given what we were seeing with alternative products that the customers could go into. So our deposit beta is probably on the high end like in our we've talked about before our high yield money market account, which was at 35 basis points for balances over $250,000 we had a 40% beta on that product, as an example.
Speaker 4
Okay, great. Thanks for the color.
Speaker 1
Thanks, Brady.
Speaker 0
And our next question comes from the line of Jennifer Demba from SunTrust. Your line is open.
Speaker 1
Hey, Jennifer.
Speaker 5
Good morning. Phil, it looks like you guys really hit a home run with focusing on the sub $10,000,000,000 $10,000,000 loans rather in 2017. Are there any new initiatives for 2018 or will you just continue to focus on on that particular goal as one of your top priorities?
Speaker 1
Jennifer, we're gonna continue to focus on the on the goals that we had in 2017 and and just continuing to execute. You know, I'd say, I think we didn't I I wouldn't say we hit a home run as much as we we hit a a bunch of singles and doubles, and we wanna continue to do that. And I think that's a way to to rack up runs in the long term.
Speaker 3
Thanks so much. Thank you.
Speaker 0
Our next question comes from the line of John Pancre from Evercore ISI. Your line is open.
Speaker 6
Good morning, guys.
Speaker 2
Good morning, John.
Speaker 6
On the tax reform benefits, can you just talk to us a little bit about how you're thinking about how much of that falls to the bottom line, how much of that stays there? And do you think there's going to be any intentional reinvestment into the business in terms of the infrastructure and personnel and everything, but also how do you think about the potential for it to be competed away by the industry and some of your competitors? Thanks.
Speaker 1
I think that the there's there's a couple of things here. First of all, with regard to, you know, reinvesting in the business, yes, we're doing that. I mean, we've been we've been increasing, you know, our our value proposition to our employees over the last few months, and, you know, we'll continue to do that. You know, it's a competitive business, but I think the, the change in the tax law makes it easier for us to to invest in the business, and we are and we will. I think that'll be manifested a lot in technology, you know, making sure that we're we're keeping up with competition and our value proposition.
Those are big dollar expenditures. And we get some air cover with that with the tax law change to do that and have some earnings capacity to reinvest. So yes, I think that we will do that. We've been, like I say, investing in our employees. We'll be investing and have been and will continue to invest in technology.
And we've been investing in our value proposition. And one of the things has been making sure our rates are competitive for the long term. So that will help in that area as well. So it was good to get to see that change in tax law. We're just running a business here.
And and just as business people, a change like that helps us and makes it easier to invest in that business. And and that's what I believe we're also seeing and hearing from a lot of our customers.
Speaker 6
And and the potential for that to the to get competed away, the the remainder of the benefit. I mean, how do you feel about that?
Speaker 1
Well, we compete every day. I mean, every day. And some people have you know? So I don't know. I expect competitors to be irrational every day, and they probably expect the same of me.
But I don't expect anything specifically about that. And if besides, I feel like we're in a really good spot. I mean, as as Jerry said, even with their increases in rates what's our deposit cost, Jerry?
Speaker 2
Our total deposit cost for the quarter were 11 basis points.
Speaker 1
11 basis points. I'll compete with anybody with that. I'll compete with anybody.
Speaker 6
Yep. Yep. Got it. Got it. And then back to that first answer you gave in terms of yours have been reinvesting.
Or do you care to put a number around it? What percentage of that tax relief do you think gets put back to the business?
Speaker 2
No. We're not ready to say that.
Speaker 6
Okay. All right. Good. Thank you.
Speaker 1
Thank you, John.
Speaker 0
Our next question comes from the line of Peter Winter from Wedbush Securities. Your line is open.
Speaker 7
Good morning. Just curious, with tax reform, does that have any impact on your strategy, of holding such a high level of muni securities?
Speaker 2
Peter, certainly, it's a different outlook. But really right now, based on what we're seeing and what we're doing, until the long end of the curve moves up, we're going to continue to see value in the municipals as one of our more attractive at this point, don't really see any change in our strategy. But the guys in our investment area keep an eye on that every day. But as far as any sort of huge structural change for us in that investment portfolio, no, you shouldn't expect anything like that.
Speaker 7
Okay. And then one follow-up. Other fee income, it was elevated in the third quarter, and then the fourth quarter came in a little bit higher. I'm just wondering what drove the increase. And is it a more normal run rate what we saw in the first half of 'seventeen?
Speaker 2
I think in the fourth quarter, I guess, of this year, I'm looking at you know, included, I I guess, we had about a $2,000,000 gain on the sale of a property. And then if you recall taking that out. Yeah. And so you're taking that out, and you're still seeing the change you're saying?
Speaker 7
Yeah. So in other words, if I take that out, fourth quarter was about $10,000,000 $9,600,000 in the third on a core basis, which you said was somewhat elevated and it's around $7,000,000 in the first half.
Speaker 2
Yes. I'm not really seeing other than those gains from the sale of property. It's kind of lumpy anyway because anything that's unusual flows through there. But the businesses that make up that business, we're really not seeing any significant changes there. That's where we have our public finance underwriting.
That was a little bit softer, maybe if you did a third to fourth sort of view. But we certainly expect that business to pick up. That's really the only thing that I'm seeing that I would call as unusual in that business line.
Speaker 7
Okay. Thank you.
Speaker 0
Our next question comes from the line of Brent Rabatin from Piper Jaffray. Your line is open.
Speaker 8
Hey, good morning.
Speaker 2
Good morning.
Speaker 8
Wanted to ask, you've always had a pretty look at balance sheet in the past few years and a fairly low loan to deposit ratio. I'm curious, Phil, just thinking about this year, I know you're trying to execute on a lot of the things you were doing last year and growing relationships in commercial and consumer. Is there an underlying goal maybe to increase the loan proportion to assets on the balance sheet? Or are there things with the balance sheet that you're trying to accomplish this year?
Speaker 1
That's really not driving the efforts. I think there's an underlying realization that being successful in a broad based way, in a balanced way in the loan portfolio in great markets, you gotta remember that, is gonna result in other things equal some some increase in loan to deposit ratio. But but remember, we're focused on relationships overall. And so we're growing deposit relationships as well. So and as we do that, we create feedstock for future years.
And and the cost of holding that feedstock, it continues to go down as interest rates have gone up and you've seen, let's say, the Fed numbers increase. So just the spread you're getting on these relationships that we're bringing in now are much more valuable than they were almost zero interest rates. And so in a sense, continuing to focus on relationships creates what, you know, we've always called around here a high class problem where, you know, you you're growing deposits. But, when you do that and the relational aspect of it gives you the kind of deposit cost Jerry just mentioned at 11 basis points, which which is not because we're paying under market. As everyone knows, we're aggressive and and in the market with our with our rates.
It's really because we've got so many transactional accounts and court accounts in that way. So, you know, as all that moves forward, you know, that's what we're really doing. It's just focused on the relationship, the loan relationships, the deposit relationships, and just being true to what we are.
Speaker 8
Okay. Fair enough. And then the other thing I was curious about was prior to the last cycle, you guys did the the brilliant move of putting on the swaps that received fixed pay floating. Are you considering doing anything like that as the Fed moves rates higher?
Speaker 1
Well, if I was, I wouldn't say it here. You know, I I think that we're always looking at all kinds of alternatives. You know? So, you know, the the people that do that for us regularly propose a lot of different things, and and our team regularly vets it. You got the same people basically sitting on the alco committee that have been there for years.
We understand this balance sheet and how it works. You know? Who knows? But, you know, the thing is I mean, those those things are great. And sometimes it's better to be lucky than good on that swap.
You know? It's it's fantastic. But the thing I'm most excited about is is is not hitting home runs because we make a great decision on interest rate swap directionally. It's that it's that we got great people. I'm not just saying that.
I mean, we have great people. I thought about why we have such great people. It's because we have a great culture. And when you have a great culture like that, over time, it draws people to you and you end up with great people. And so when you add to that a great value proposition and you add to that, we're in tremendous markets.
I dare someone to find a better place to do business than Texas today. And you add to that that our bankers understand what they're supposed to be doing. And then you add to that that they're doing it. You know, that's what I'm most excited about. It's it's that simple in one sense, but in another sense, it's that hard because you can't put that together without a focus and commitment over a long period of time.
We couldn't sit here and come up with a plan for next year that says, let's do all this. Okay? Let's put this in place. You couldn't do it, but we've got it in place. People are doing it.
We're in great markets doing it. That's the thing I'm most excited about. I mean, I am very, very positive
Speaker 2
about it.
Speaker 8
Okay. Great. Appreciate all the color, Phil.
Speaker 1
All right. Thank you.
Speaker 0
And our next question comes from the line of Dave Rochester from Deutsche Bank. Your line is open.
Speaker 2
Hey, sorry guys. This is actually Meng on for Dave. Most of my questions all my questions actually have been answered. Thank you.
Speaker 1
Thank you. Thank you.
Speaker 0
And our next question now comes from the line of Steve Alexopoulos from JPMorgan. Your line is open.
Speaker 2
Hi. This is actually Jason Onning on for Steve today. I'm just curious. How do guys think about potential capital deployment from here with the you know, with 2018 effective tax rate being lower and the possibility for regulatory relief coming up? Any Any color on the topic of capital deployment would be appreciated.
Speaker 1
I think we've been doing a nice job with it, it really relates to all three key areas. I mean, we've got great dividend, right? We've increased it for twenty four, twenty whatever, however many years. It's an important thing to us. We want to continue to maintain that in place and increase it as our prospects increase.
And so we'll focus on that. Secondly, we've utilized stock buybacks in the third quarter. We had a dislocation in price after the rate increase that we did, bought back a 100,000,000 shares there in that program, and then added right after that a $150,000,000 program for a couple of years. So we've got that in place to use, and we will use it if we feel like it's in the company's best interest. We have we occasionally, but I would say rarely, do an acquisition.
That's not the the key focus of what we're we're doing right now. The key focus on what we're doing is in organic growth. And as you're growing loans in high single digits, you know, and and our deposit growth has been, say, mid single digits, you're gonna end up spending your regulatory risk based capital faster than you're spending your leverage ratio, if you will. So we're using it to grow the business. And that's what I love to do.
I mean I love for us to take capital, plow it back in the business and continue to see it grow. So we've really got the, I think, the three legs of the stool that we have utilized, and we'll continue to be utilizing those.
Speaker 2
Okay. That's helpful. Thank you.
Speaker 0
And we have no further phone questions at this time.
Speaker 1
Great. Well, we appreciate your interest in our company, and we will be adjourned. Thank you.
Speaker 0
Thank you for your participation. This does conclude today's call. You may now