Huntington Bancshares Inc

NASDAQ:HBAN

Earnings Call Transcript 2019-Q4

[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, IR]

Thank you. Welcome. I'm Mark Muth, Director of Investor Relations for Huntington. Copies of the slides we will be reviewing can be found on the Investor Relations section of our Web site, 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.

[Steve Steinour, Chairman, President, and CEO]

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 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 remains strong with 2019 net charge-offs at the low-end of our average through the cycle target range. We remain 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 dividends, 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 in 17 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 has 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 of mid-corporate lending, technology, media and telecom, our practice finance area, which we announced as part of the 2018 strategic plan.

Looking out to 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 reposition $2 billion of securities picking up approximately 70 basis points of yield on those securities. The rebalance resulted in $22 million of security losses in the fourth quarter.

On the expense side, we completed the position reduction of employees and announced the consolidation of 30 in-store branches, and these actions along with the disposition of other properties and a 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 and delivering top quartile through the cycle shareholder returns.

Zach will now provide an overview of our financial performance. Zach?

[Zach Wasserman, CFO]

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 the 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 yields 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 pay downs and refinancing activity. Consumer loan growth remained focused in the residential mortgage portfolio, reflecting robust origination 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 retain 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 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 deposit increased 5% year-over-year on 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 a 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 3.12% for the quarter, down 29 basis points from the year ago quarter, down eight basis points link quarter. And in line with the guidance we provided 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 have contributed four basis points to the net interest margin in the current quarter, compared to seven basis points in the year ago quarter. Slide 28 in the appendix provides information regarding the actual and scheduled impact of first merit purchase accounting for 2019 and 2020. Please note that this quarter is the last quarter we intend to write core NIM and PAA breakouts, as the PAA is expected to have a relatively immaterial impact in 2020.

Turning to asset to earning asset yield, our commercial loan yields decreased 52 basis points year-over-year, consumer loan yields decreased eight basis points and security yields decreased 16 basis points. The decrease in our earning 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 costs continue to move lower. As CDs and money market promotional rates re-price lower, and we actively manage commercial deposit costs. Total interest bearing deposit costs of 87 basis points for the quarter were up 3% year-over-year. So down 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 reduced the downside risk for lower interest rates and have significantly narrowed the band of modeled outcomes for net interest income. Our current interest rate risk modeling suggests little changed in interest income from either a 25 basis point increase, or 25 basis points decrease in 2020. We continuously monitor and 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 re-pricing events in the first-half of 2020. These re-pricing events provide an opportunity for the bank to reduce the cost of deposit, as these higher price CDs and promotional money market accounts re-price lower. Through December, the consumer deposit re-pricing activity is on track with our expectations. The success of our consumer depository pricing 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 re-pricing 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 saleable 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 four 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 enhance products and services and distribution capabilities. This disciplined expense management allowed us to achieve positive operating leverage on an 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 year-ago and common equity Tier 1 ratio or CET-1 ended the quarter at 9.88% or 23 basis points year-over-year. We continue to manage CET-1 to the high-end of our 9% to 10% operating guidelines. During the fourth quarter of 2019, we repurchased 13.1 million common shares at an average cost of $14.96 per share or total of $196 million. We plan to use the share repurchased to manage our capital following the CECL implementation back to a CET-1 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 CET-1 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?

[Rich Pohle, 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 life time loss methodology results in a higher allowance than 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 loans for credit losses will be determined using various models and incorporate multiple scenarios historical loss 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 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 activity.

We have a relatively small oil and gas portfolio representing less than 2% of total loans and we believe we have 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 slide. 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 two 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 remains relatively stable at 1.04% down one basis point versus the linked quarter.

Let me turn it back over to Zach.

[Zach Wasserman, CFO]

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% of continued growth in both consumer and commercial portfolios we expect growth to be modestly stronger on the consumer side focused in 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 or checking accounts and deepening customer relationships. Specifically our expectation entails continued decline CDs more than offset by growth in checking and money markets. We expect full-year total revenue growth of 1.5% to 3.5% on a GAAP basis which grows 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 rationale 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 in 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 told you previously, and are demonstrating with our actions and 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 to 45 basis points.

As Rich just covered fundamentally our credit remains strong, we are 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 repressed 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.

[Mark Muth, Director, IR]

Operator, we will 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 them back into the queue. Thank you.

[Operator]

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Jon Arfstrom with RBC. Please proceed with your question.

[Steve Steinour, Chairman, President, and CEO]

Good morning, Jon.

[Jon Arfstrom, RBC Capital Markets]

Good morning. Lots to ask about, but I will just maybe start Steve with -- just you talked a little bit about headwinds in commercial, but we do have USMCA and Phase 1 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?

[Steve Steinour, Chairman, President, and CEO]

Jon, USMCA is just recently done, and obviously there are other issues, distractions going on at D.C. right now. So I don't think there is a meaningful change yet, but from what we have reported at the prior conference, and I do expect there is going to be a second-half optimistic - lift. I'm optimistic in that regard, but I think it is going to be a 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 were down a bit from where we expected them to be. That was particularly true in auto as customers kept more cash on sheet. So, I think that just reflects the conservatism and just sort of wait-and-see approach. Again, in the Midwest we are hampered by lack of labor, so that is an element in this planning process as well as these uncertainties.

[Jon Arfstrom, RBC Capital Markets]

Okay, that's helpful. And then just one more, Zach or Rich, maybe Rich for you, can you talk about the Day 2 CECL impact again, I think what you said is expect the provision to be roughly the same in 2020 compared to 2019, I wonder if I heard that right? And Zach, how you want us to think about provisioning in 2020? Thanks.

[Rich Pohle, Chief Credit Officer]

Yes. This is Rich. The testing that we've done -- and again, this is new, so we are kind of going through quarter-by-quarter, the testing that we did, CECL to BAU showed that there were some quarterly volatility with over the course of the year, it tended to level itself out, so we don't see a lot of volatility -- 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 had under the incurred loss methodology.

[Jon Arfstrom, RBC Capital Markets]

All right, that's helpful, thank you.

[Rich Pohle, 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]

Good morning, everyone.

[Rich Pohle, Chief Credit Officer]

Good morning.

[David Long, Raymond James]

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

[Zach Wasserman, CFO]

This is Zach. I will take that question, David. Good to talk with you. We are 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 cuts sort in the late summertime period, but I think as we have noted in the prepared remarks, based on our hedging program, our net interest income, NIM is essentially neutralized from one rate increase and one rate decrease from today. So, I would say taking a step back sort of roughly flat from where we are today.

[David Long, Raymond James]

Got it, and 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?

[Zach Wasserman, CFO]

Yes, we do. I think under most realistic rate scenarios, as I mentioned, the hedging program will keep our NIM pretty constant, so we are not expecting how 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 take 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 branch here in Michigan and Ohio, and so, looking at our branch network and the cost around that 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 at our disposal 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 positive operating leverage, we are managing and expecting to generate positive operating leverage in 2020.

[David Long, Raymond James]

Got it, I appreciate the color. Thanks.

[Steve Steinour, Chairman, President, and CEO]

You're welcome.

[Operator]

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

[Steve Steinour, Chairman, President, and CEO]

Good morning, John.

[Rahul Patil, Evercore ISI]

This is Rahul Patil on behalf 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 the space, are you seeing pressure on pricing or your ability to grow auto loans at the pace that you have 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, you know, what's your 2020 auto loan growth outlook following a flattish average balance in 2019?

[Steve Steinour, Chairman, President, and CEO]

Yes, John. It's Rich, I will take that. So, I'll take the second question first. So, as it relates to CECL, the auto business is really neutral, and 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 standpoint. 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 very high cycle band that tends to be more price sensitive than others. So, I don't see us having any real issues in meeting the origination goals that we've got from the indirect automatic business in 2020.

[Rahul Patil, Evercore ISI]

Okay. And then, last quarter, I believe you had indicated that the consensus 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 cards in that 2020 NIM guidance. Could you just discuss your update? I know you talked about rebound in first half and then stable, but are you still comfortable with that 3.20 level right now?

[Zach Wasserman, CFO]

Yes, 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 just reiterated today in the prepared remarks. We expect the trajectory of that to be kicking higher into the first quarter. So, stabilizing around that level by mid second quarter, and then oscillating around that level through the balance of the year. There is really a couple big drivers of that. So, the most substantial of which is the re-pricing of the deposit maturity that we've talked about in the prepared remarks, there's roughly $5 billion re-pricing in Q1 and other $4 billion re-pricing 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, it's 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 are what driving that and helping us to get the NIM to back to 320.

With that being said, there's a couple of factors we're watching. Asset yields on new production, 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 in 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 ISI]

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

[Zach Wasserman, CFO]

Yes, it's assuming that essentially the forward rate curve that exists in November as I mentioned, which if you look precisely at the Fed Funds expectation, and that had one cut over the late summertime period, but even if it's flat, we're going to be roughly [indiscernible].

[Rahul Patil, Evercore ISI]

Okay. Perfect. Thank you.

[Operator]

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

[Ken Usdin, Jefferies]

Hey, thanks, guys. Good morning.

[Steve Steinour, Chairman, President, and CEO]

Hi, Ken.

[Ken Usdin, Jefferies]

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 re-price, 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 you know, scheduled is going to re-price from the rollovers?

[Steve Steinour, Chairman, President, and CEO]

Yes, I think we're -- as I said, we're seeing the re-pricing activity be pretty much in line with our expectations taking down, but also being somewhat competitive. So we assumed and plan for the right environment we've got right now, and we're seeing a trend in that way.

[Ken Usdin, Jefferies]

Yes…

[Mark Muth, Director, IR]

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 re-pricing 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 Usdin, Jefferies]

Got it, okay. 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 your securities portfolio, and can you talk about the underlying dynamics of -- in a stable rates environment to your front book/back book?

[Zach Wasserman, CFO]

So, the expectation for the securities portfolio -- this is Zach, roughly constant from where we are today. No material change, we like where we're at, and that's the expectations at this point. The second part of the question was -- back book…

[Ken Usdin, Jefferies]

Rolling off securities and rolling on, how -- if your rates stay low, stay where they are from here what's the dynamic happening in there? Thanks.

[Zach Wasserman, CFO]

Let's take that offline. I don't have that detail right in front of me. Yes, Ken, I've got that downstairs. So, I'll follow-up with you on that.

[Ken Usdin, Jefferies]

Okay. Thank you, guys.

[Zach Wasserman, CFO]

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.

[Steve Steinour, Chairman, President, and CEO]

I'm pleased with our 2019 performance, particularly given the environmental challenges we faced, our active management position, the bank continues to execute on our strategies, and confident about our prospects for 2020. Our top priorities are executing our strategic plan and thoughtfully investing in our businesses for continued prudent 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, management, 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]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.