Q4 2021 Veritex Holdings Inc Earnings Call
Okay.
Good day and welcome to the vertex Holdings fourth quarter 2021 earnings conference call and webcast.
All participants will be in a listen only mode.
Please note this event is being recorded.
I will now turn the conference over to MS. Susan Caudle, Investor Relations Officer, and Secretary to the board of vertex Holdings you may begin.
Thank you before we get started I would like to remind you that this presentation may include forward looking statements and those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ the company undertakes no obligation to publicly revise any forward looking statements at this time.
And if you are logged into our webcast. Please refer to our slide presentation, including our Safe Harbor statement beginning on slide two for those of you joining us by phone. Please note that the safe Harbor statement and presentation are available on our website <unk> Bank Dot Com all comments made during today's call are subject to that safe Harbor.
Statement.
Some of the financial metrics discussed will be on a non-GAAP basis with our management believes better reflects the underlying core operating performance of the business. Please see the reconciliation of all discussed non-GAAP measures in our filed 8-K earnings release.
Joining me today are Malcolm Holland, our chairman and CEO , Terry Earley, our Chief Financial Officer, and Clay Riebe, Our Chief Credit Officer, I will now turn the call over to Malcolm.
Thank you and good morning, everyone I'm excited to announce our fourth quarter and full year 2021 earnings highlights the fourth quarter was a very strong quarter that produced operating income of 84 per share our strongest quarter in the company's history that was up from 70 <unk> per share in the third quarter or 20 <unk>.
<unk> increase while producing a pretax pre provision operating return of just shy of 2%.
<unk> did have a reserve release of approximately $4 4 million or 710.
Terry will give you the financial details on our quarter in a moment.
Both growth and credit quality continue to trend in a very positive direction.
Loan growth, excluding mortgage warehouse, and Pvp was $150 million for the quarter and $918 million for the year or 9% and 16% respectively. This growth is despite elevated loan payoff levels in Q4 of 646 million.
Exceeding the payoffs in the first two quarters of the year.
I cannot be prouder of our frontline lenders to deliver continued loan growth results like to have in 2021.
Our focus on hiring and adding to our team during the pandemic. In addition to the continued market disruption shows me that we made the correct call to invest in people during the pandemic.
It should also be noted that the support teams have been incredibly consistent and efficient in this high volume credit delivery process, and we would not be where we are without them. As we look into 2022, we have strong conviction that we can continue to produce mid teens annual loan growth.
Much like our loan growth deposit increases look much the same way for the year total deposits grew $851 million or 13%. It should be noted that a majority of that growth 49% was in the noninterest bearing category, which now represents 2030 excuse me 34% of total.
Deposits.
From a credit standpoint positive credit metrics remain the trend. The most notable move with <unk>, reducing by $24 million, bringing NPA to total assets down from <unk> five one.
2551 from <unk> 77 should also be mentioned that the year over year reduction in Npa's was over 50%.
Charge offs were just shy of $13 million at several loans reached final conclusion, all charge offs were previously identified and provided for in previous periods as mentioned we reported our first.
Credit loss reserve release of $4 4 million, which brought down our ACL to one 5% our credit leaders and their respective teams had an outstanding year assisting our gross growth initiatives, while at the same time measurably, improving our credit metrics in all categories.
The fourth quarter also brought two of several new production officers, mainly in the community Bank space. Additionally, we are still active in hiring new and experienced talent and the risks and operational areas growth is great on the frontline, but you must keep up in the non client facing areas to deliver credit in a sound and <unk>.
Patient matter at all.
Also like to point out that we closed our North Avenue capital transaction in November and are very impressed with the pipeline that Ben and Joseph has created going into 2022, but more importantly impressed by the overall business and its culture fit with vertex with that I will turn it over to Terry.
Thank you Malcolm.
Page five you'll see multiple graphs.
I just want to comment on a couple of these first our operating return on average tangible common equity remained very strong in the fourth quarter at 25% and 17, 6% over all of 2021 as <unk> executed well in spite of the pandemic.
Tangible book value per share only declined four during Q4 to $17 49 despite.
Despite 66 of dilution from the North Avenue capital acquisition, and our normal 20 per quarter common stock dividend.
Vertex grew tangible book value per share 16, 2% in 2021, after adding back the impact of quarterly dividends.
<unk> growth has been and remains an important priority of our management team. The operating efficiency ratio was 47, 6% for Q4, and 49% 49, 3% for 2021 as vertex maintained its efficient profile, even while making significant talent investments.
On slide six Malcolm has already mentioned our loan growth for the quarter, what growth was driven by C&I and ADC. These two portfolios. Both grew at 11, 9% and 13, 5% respectively. During the fourth quarter, improving C&I utilization rates continue their upward trend that started in the first quarter of 2020.
One the level of unfunded commitments in the ADC portfolio remained relatively steady average mortgage warehouse balances increased just under 4% in the third and the fourth quarter.
The third quarter to the fourth reflecting new customer acquisition. This portfolio sits at six 7% of average total loans, excluding PPP. It remains our intent to keep the average mortgage warehouse portfolio at 10% or less of average total loans.
Slide seven shows information on our loan production 2021 was an exceptional year as we achieved five $4 billion in loan production and 91% increase over 2020.
On slide eight net interest income increased $5 5 million from Q3 to $76 7 million in Q4. The most significant driver of the increase was loan growth with average loans, excluding PPP grew by $410 million or 24% annualized from the third to the fourth quarter.
The second most significant driver was prepayment income from a debt security was that instrument was the commercial mortgage backed security that was purchased in the second quarter of 2017 also note that Q4 loan production was at $3 73, 373% in Q4 interest bearing deposit production was at 20 basis points.
Next let's talk about the net interest margin, which increased 11 basis points from Q3 to 337% almost all of the NIM expansion is due to the prepayment income on the debt security.
For Q4, the PPP portfolio represented a two basis point drag on the NIM and average liquidity was approximately $217 million higher than our normal target up meaningfully from Q3. This increased liquidity is primarily a function of higher loan payoffs and had the effect of depressing the NIM by seven basis points as you look.
And model net interest income in future periods to keep the following in mind.
Yes.
<unk> prepayment income is unlikely to repeat second there was a $35 million in sub debt with a cost of approximately five 5% that was called in December of 2021.
Third the remixing of earning assets away from PPP and excess liquidity should continue over 2022.
<unk> previously disclosed hedging gains will start flowing through net interest income late in the first quarter of 2022. Finally vertex is asset sensitivity profile has grown from Q3 to Q4 as a result of greater liquidity and faster loan prepay speeds with market expectations of 3% to four fed rate hikes in 2000.
22, this will add significantly to net interest income.
On slide nine I will provide an update on North Avenue capital capital acquisition.
To close in the fourth quarter <unk> had a good couple of months within <unk> and contributed approximately $1 3 million and pre tax earnings their pipeline is building and they are actively recruiting to take advantage of the increased government funding and the rural Energy for America program, otherwise known as <unk>, and the just announced $1 billion food supply.
Chain guaranteed loan program.
<unk> reported another good quarter with loan production of $666 million and gain on sale margins down slightly to 360 basis points seasonality certainly affected production volume and the pipeline, but the fundamentals remained strong throughout 2021 production was $3 billion.
Up from $2 3 billion in 2020, representing a 30% increase this was an exceptional result, when the total production in the industry declined almost 5% during 2021.
On slide 10, another strong noninterest income quarter with $16 2 million. Please remember then in the third quarter, we exclude from operating results the benefit of $1 9 million in PPP forgiveness. It thrive opt.
Operating noninterest revenue represented 17, 4% of total revenue for the quarter and should continue to improve with a full quarterly contribution from North Avenue capital and a more favorable season seasonality for our mortgage business for the full year of 2021 reported operating noninterest income of 57 million.
Over 27% increase over 2020.
This increase was the result of vertex and strategic intent to invest in diversified revenue sources, namely thrive with Avenue capital, a new syndications group customer interest rate swaps et cetera operating.
Operating expenses on slide 11 increased $2 9 million from Q3 salaries and employee benefits were the largest component of the increase is head count grew 7% during the quarter with almost half of the growth coming from North Avenue capital as we've been saying for many quarters, we knew headcount and salaries were headed up due to our investments for growth.
Additionally relating to the fourth quarter personnel cost level. These costs were also up due to lower deferred loan origination cost.
Moving to slide 12.
Another good quarter on the deposit front with growth of 10% for the quarter and 13% for 2021 deposit growth would have been even better but we intentionally worked with our customers to move deposits off balance sheet at year end to allow us to stay under the $10 billion threshold total deposits costs continue their downward trend and ended the year at 18.
Basis points.
On slide 13, all capital levels, except total capital contracted approximately $11 million over the quarter as earnings were offset by the North Avenue capped on acquisition acquisition and dividends total capital contracted more due to the sub debt repayment as I mentioned earlier and the decline in the allowance for credit losses or <unk>.
<unk> deployment priorities given the current valuation of our stock are organic growth dividends strategic growth and lastly share repurchases with that.
I'd like to turn the call over to clay for some comments on credit.
Thank you Terry and good morning, everyone.
Picture at vertex continues to improve as Malcolm described earlier.
Reductions continue their downward trend in large part due to the resolution of the bank's largest NPA loan by way of a note sale.
Another meaningful resolution over the quarter included the sale of a judgment on an acquired credit that resulted in an approximate release of $1 million in specific reserves. Additionally, $4 4 million of loans on non accrual paid off during the quarter at par.
Credit migration continues to improve with criticized assets down by 7% for the quarter and 23% year over year, while we saw some credit downgrades in the normal course of business upgrades outpaced downgrades meaningfully throughout 2021, and I see nothing that would change that trend.
<unk>.
During the fourth quarter, we charged off $12 6 million in credits that were all more than fully reserved against.
Acquired loans accounted for 77% of these charge offs.
These charge offs came in three primary buckets.
43% were PCI loans.
8% were SBA loans, and 11% were loans moved to held for sale.
ACD charged off loans were primarily the result of negotiated settlements.
In anticipation of the risk resolution of that.
The SBA charge offs were the result of loans that have completed liquidation and were awaiting payment for the guaranteed portion from the SBA.
The vertex originated loan charge offs were centered in a loan that was moved to held for sale was more than sufficient reserves taken in previous quarters.
This loan sale closed in January .
We continue to believe the challenged credits we have in the loan portfolio are properly reserved and I'm encouraged with the progress and resolutions our credit team has made to further the positive credit trends and metrics.
With that I'll turn it over to mountain for final remarks.
As I reflect on 2021, I couldnt be any prouder of our team even during a pandemic and economic uncertainty, we're able to deliver top tier results in 2021 loan.
Loan growth, 16% deposit growth, 13%, new production hires 55 operational hires 101 reduction in Npa's, 48% reduction in criticized assets, 23% focus on noninterest income investment and drive.
Purchase of NAC.
Notwithstanding these accomplishments were all excited about our prospects and fully expect to continue our positive results in 2022.
We continue to evaluate M&A opportunities in both the bank and non bank space. It has been a core value of ours to be ready and opportunistic for any builder business that solves for the strategic needs of our company, whether it's funding noninterest income scale or technology, we have not lifestyle for.
<unk> Apo.
Operator, I'd now like to open the line for any questions.
Thank you, ladies and gentlemen, as a reminder to ask a question you will need to press Star then one on your telephone.
Withdraw your question press the pound key.
Again, Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Brad Milsap with Piper Sandler Your line is open.
Okay.
Good morning, guys.
Good morning.
Malcolm wanted to start with loan growth 23, new producers in the court order is pretty much it.
Can you tell us type.
Types of.
Lender came from and then what that means.
<unk> growth outlook.
Okay.
Two and beyond.
Sure.
Yes, so we did and in our production numbers.
We do include some of the support folks and so and that number specifically, we've got 10, plus kind of frontline relationship manager type people. The majority I think I've mentioned it was in the community Bank.
Space, both in Dallas and.
And in Houston.
I talk about market disruption.
All of the majority of those came from one of the major market disruption places.
In our state.
So that group, specifically is probably youre not going to see massive loan production numbers.
But it continues to be our most profitable.
Best funded.
Group and the Bank will also had a a corporate bank higher and also somebody on the sponsored finance area that we brought on from that same disruption that I just talked about.
So yes, and the thing is it takes a while for those folks to get ramped up.
Third quarter was also a really big higher quarter and so we're starting to see some of some of what they are putting together and the pipelines are.
We're pretty encouraged by where the pipelines are today.
Also includes some some production folks from Mac.
Yes, Yes, that's correct and then we had all the people I think there were 19 total.
And the <unk>.
Acquisition.
Okay.
Still comfortable with kind of that low double digit type growth guidance in 'twenty two.
Brad and I think I've mentioned it.
I'm probably.
I'm, probably thinking a little bit higher than that so.
Thinking we can do kind of mid teens.
We did 16 this last year.
Thinking we're going to be in the 14 to 16 range in 'twenty two.
Especially assuming payoffs don't stay at Q4 levels. Yeah, I mean that was I wanted everybody to get that payoff number that was the monster payoff level of $640 million, we still grew $150 million.
We didn't have $640 million in payoffs in the first half of the year.
I think theyre going to be higher than the first half of the year, but I don't think theyre going to be $650 million.
That coupled with R.
Our unfunded commitments that we have on the real estate side.
We feel pretty good about mid teens.
Okay, Great and then as a follow up for me Terry just on the expense side of the equation you guys have historically done a good job keeping a pretty tight lid on expenses, obviously, a lot of discussion about wage inflation, you've got sort of growth do you feel like the fourth quarter is a pretty decent run rate.
I know you'll get another month in.
In there, but just kind of curious how youre thinking about the expense build.
To kind of get that.
This kind of deflationary backdrop.
Well.
I need the perfect crystal ball to be able to forecast inflation and how its going to inflect wage costs.
I'll confess I don't have one of those but having said that.
Just in general on expenses, and we will take a wider range than a normal normally would I would.
I would say 190.
$180 million to $200 million right now and.
<unk>.
It's just it's so hard its so hard to know.
You can rest assured anytime someone departure organization.
It is.
It's painful to re hire on the comp front and.
I think thats, the case everywhere and I think we're being more successful.
Yes.
Recruiting and hiring and hanging on to people than most but it's a hard one this year, Brad and so it won't be it.
It won't be 45 to 200 and.
A couple of <unk>, we're planning to continue to hire some too.
Yes.
We had 45 for the quarter 45 annualized is 180, but with inflation and hiring expectations and a full year of that I think I've got a I think I've got to widen it out to about 200.
Yeah.
That's helpful and maybe one more follow up on.
Terry I know cautious we need to think about kind of an annual run rate can be volatile from quarter to quarter, but based on what you've seen from a couple of months you kind of still feel good about the initial kind of revenue guidance you laid out when you announced the deal late last year.
Yes, I would I would candidly probably tell you we feel a little better.
<unk>.
We feel a little better than what we initially laid out.
And just by the way <unk> has made three new hires this month.
And that was part of the plan. It was in the guidance. We gave it was and so they completed that and they are on the production side.
Great.
Got it.
Thanks for thanks, Brad.
Thank you. Our next question comes from the line of Michael Rose with Raymond James Your line is open.
Hey, good morning, everyone hope you're doing well.
Yes, Sir.
Yes.
Good morning, just wanted to start on the on slide eight on the core margin at $3 31, Terry you rattled off a bunch of.
Yes considerations.
If you could help us fell a little bit with.
What the what the impacts of all of those.
Considerations might be and how we should think at least about the core margin ex accretion.
On PAA stuff like that.
As we think about the year, obviously with the backdrop of.
Higher rates, but just looking for a core core expectations ex any rates. Thanks.
Alright, I'll be glad to.
If we ended Q4 at $3 31, what I would take it take 10 bps off that for that prepayment to $3 21, we've got.
<unk>.
Expansion opportunity between PPP and ex liquidity. So that takes you back up to $3 30.
The hedging gains youre going to add about five and a half so thats $3 35, and the sub debt payoff is two five to the NIM. So I would say about 338.
Core.
And Thats net of taking out the 10 bps for the security.
Payment.
Okay. So that's a good starting point I appreciate it.
And then.
You mentioned on the health for investment side.
Mid mid teens growth, that's really really good to see obviously.
Take a little bit better than expectations, but as we think about the warehouse you had a larger competitor of yours.
<unk> got a guide down warehouse balances almost 20%.
Should we think about your guys' warehouse.
As we think about the year. Thanks.
Yeah. So I mean listen we are not guiding it down we think it's going to grow theres opportunity.
Amy running that group has done an outstanding job. There is there is new business that we're looking at all the time.
And so we think there is a little bit of growth in there and we will never grow it.
Over the 10% that we've always talked about since day, one but running at six 7% last month or so in the last quarter on average there is some room, there and we think theres. Some additional room, there and she does too. So we're not guiding that piece down at all but we got some specific clients that are coming on in Q1.
Yes, we've already got some identified approved and.
So we feel pretty good about that number growing.
Alright, so maybe.
Not to pin you to it but maybe.
High fours low fives for a for an average is maybe the way to think about it just given I'm sure yes.
Yes, I think so.
Yes.
Okay Fair enough and then.
Maybe just one final one for me.
The loan to deposit ratio ex warehouse right.
Right around 93% I know you've talked about funding in the past any sort of expectations for deposit growth.
How should we think I think you'd mentioned that you have enough liquidity I think you said last call or in previous calls through the end of I want to say 2024.
But just wanted to get any updated thoughts on.
On that.
Our relatively higher loan to deposit ratio. Thanks.
Yes.
Certainly I understand the question and we quote Malcolm we tender our whole hot there.
But keep in mind one of my comments was we intentionally moved off deposits.
No.
At the end of the year to stay under 10 days have come back.
And there is some interesting and meaningful sizable MSR deposits coming with the.
The new mortgage warehouse customer zone in Q1.
And we're continuing to see.
Good deposit activity, especially from the major disruption that Malcolm referenced and we've hired some new folks and our treasury sales effort. So I think look we're pretty focused on that.
I would be an understatement.
And.
Stay tuned, but we feel we feel good about.
Deposit growth trends for for 'twenty, two given all of those things I just mentioned.
We'll continue to talk about this as we go as we go forward.
Alright, thanks for taking my questions Alright.
Alright, Thanks, Mike.
Thank you.
Our next question comes from the line of threat with Eitan with Hovde Group. Your line is open.
Hey, good morning, guys. This is actually growing.
Okay.
I was curious I know that you guys have done a pretty phenomenal job of picking up talent from the market disruption.
And with.
So within Texas itself, the first half of 'twenty one.
Pretty quiet, especially relative to the second half.
In terms of deals and with your guidance of kind of that mid teens growth.
With the recent deals announced.
It will take a little time for them to close but do you think that you could potentially see growth higher than that through.
More opportunities for adding talent or does that kind of tried to kind of prime the pump for FY 'twenty three.
Yes.
Again, it's some sort of guidance that were given I cant foresee that future I think with the team that we have assembled today, we feel pretty comfortable in the mid teens range.
We are talking to people other groups teams opportunities.
It always takes a ramp up time and so we don't have those hired a lot of these folks are awaiting.
Awaiting their payouts from 'twenty, one so those don't happen until February or March they don't get onboard until second quarter, probably don't see much in their health until you get to 'twenty three so.
Good payoffs slow sure.
Don't see that but they were to materially slow down I think you'd see the mid teens number growth. So I think the mid.
Mid teens grow number as a function of probably more payoffs than it is on hiring new talent.
Got you Okay. That's helpful color.
And then my follow up would be more on kind of.
Your valuation is.
Improving so obviously when you listed out the capital actions share purchases towards the low end I'm pretty sure that organic growth was at the high end, but do you think M&A.
Your perspective is there anything.
A wishlist so to speak that you would want to check in terms of the boxes that additional either bank or you see income source would need to explain to the text of the whole.
Yes, I mean, we're always active in the M&A side, and then as our currency becomes stronger we get.
A little bit more active from time to time, but yes. There is a few.
Few holes if you will in the state of Texas, we are fairly committed to the state of Texas at this point in time.
Obviously, we don't have anything in central Texas.
We'd like to fill that hole at some point in time, but and then we also would be theirs.
What we call Unicorn banks around the state that arent for sale nobody's willing to sell them, but if and when that happens are there is an event that happens at that institution, we want to be in that conversation.
So we want we want to be active, but we're going to be extremely disciplined.
On the on the M&A side, because we do have such an organic growth story on that.
On the non bank side, we continue to look at different opportunities. Obviously last year was quite successful in that regard with our investment and thrive in the acquisition of Mac. So.
Continuing.
Continuing to look at those things and Fintech is a big buzzword. So we continue to look at there's all sorts of stuff flying around there.
So we will continue to evaluate it in.
Again, it's got to meet one of those strategic priorities that I said at the end of the.
My remarks, really we need to meet those.
Got it that's helpful color congrats on the solid.
Thank you.
Our next question comes from the line of Matt Olney with Stephens. Your line is open.
Hi, Thanks, Good morning, guys.
Good morning, Matt, Matt, but well.
I wanted to ask more about fees and start with thrive.
It sounds like you think that the fourth quarter was the trough and expect some improved seasonal trends in the first quarter.
Did I hear that right and I think you mentioned.
A few months ago that you thought the thrive impact of <unk> could be between $2 million to $3 million per quarter based off the seasonality is that still.
Or do we need a downshifting in any of that given the market headwinds.
Well I mean I think if.
Clearly seasonality and I expect Q1.
It is a mean.
Things start to ramp up when you start coming out of out of winter.
So whether it hits the production side of things in Q1, I think it will hit the pipeline side.
And.
Look as we all know there has been tremendous.
Gain on sale margin compression. In addition to just volumes were down gain on sell margins.
Come down.
Thrive.
<unk> is focused on bringing on more teams.
Growing production capacity.
But I think it's.
<unk>.
If I had to.
I had two.
Let me give you a crystal ball.
Im getting my Crystal ball out.
No.
I would say.
It's going to be it's not as lumpy as <unk>, but it isn't going to be a linear straight line either if I had to.
Les out of range for thrive.
Probably go in the seven and a half to $9 million.
Seven $5 million to $9 million annual impact.
And it's obviously going to be stronger in Q2 and three.
Yeah.
That's the best insight I have now.
I'd say I'd say Q1 is going to be a little stronger than Q4 of 'twenty two.
Look I mean I'm looking at <unk>.
<unk> got perfect vision into the fourth quarter, which I clearly.
Who does it.
In this volatile.
Right Crazy time, we're in here so.
And it's such a rate driven business, but I think they did prove in 2021, even when the industry is down they can grow and one of the key parts of that is what's going on in the Texas economy. I mean, we brought on between three and 400000 people last year moved into Texas, and 67% of their business that thrive roughly two.
<unk> comes out of the state of Texas, So it's huge I mean.
Nice.
<unk> to half when this is going on.
Okay. Yeah. That's helpful. Terry Thanks for the commentary there and I appreciate that it's tough to make a call on the mortgage trends at this point.
I guess, taking a step back I think you talked about one of the strategic priorities is to get the fee.
Speeds up to 25% of revenues.
I assume this is a longer term goal and maybe not quite within within sight in 2022.
What about that right.
Yes, yes, no I think we've gone from I believe a year ago, 10, 11, and we're up to almost 18, but if you loaded a full year of Mac.
We're going to get to the <unk> low <unk>. So we're going to get to 25, no I don't I don't think so but yes that continues to be a long term goal, which means that we'll continue to look at.
Other businesses.
Both inside and outside that might add to that number the other thing making it hard Brad is when you got where given our asset sensitivity and given with the fed on the launching pad with rates that drives up the revenue just from just from just from net interest income and rates and if you're growing mid teens and the fed.
Is raising rates getting to 25% in fee income even with the full year and that is a pretty herculean effort.
Yeah no understood.
Good problem to have given your rates into the profile.
Just lastly on credit.
Think quite gave us some great details as far as the cleanup in the quarter.
Is it fair to say that additional credit clean up from here is going to be less material.
And what we saw in the fourth quarter and then with the allowance ratio now I think at 115 extra warehouse in PPP do you see more room for this to drift down or should we anticipate this to more or less flattened out from here. Thanks.
Well I mean, I think yes, I think the material cleanup that we did in the fourth quarter was.
Don't anticipate that going forward.
You can see what our historical numbers have been for the last couple of years I would think those are going to moderate down.
<unk> just.
Primarily because we've reduced the PCB book by 78% over the last three years, and that's where a majority of this has come from so.
Thank you, it's going to moderate down significantly.
I think you can anticipate the reserve stand hopefully staying right where it is.
That would be without <unk>.
Might be challenging might be challenges, but with the.
A way to go with Hawaii seasonal works and the economic inputs to go into the model.
Those are pretty important drivers and so we would have thought that $1 15 was kind of the bottom I think it's got the potential I'm not talking about major moves, but I think it is.
Again, when you come back to the strength of the Texas economy, and you look at the Moody's forecast for GDP and unemployment it could push it a little lower not NGO and sub one or anything like that no misunderstanding, but.
Again, it's a good problem to have when you've got this economy.
Especially with a growth profile.
Okay. That's all from me congrats on a great year guys. Thanks.
Hey, Thanks, Brad Matt Matt.
Thank you. Our next question comes from the line of Gary Tenner with D. A Davidson your line is open.
Thanks, Good morning.
I'm, sorry, I missed.
In your prepared remarks, the gain on sale margin on track can you just give us that again.
That was three.
$3 60 down slightly.
Thank you.
And then you had mentioned kind of the Lumpiness on Mac and I think you've kind of telegraphed that pretty well when you did the deal based on kind of the fourth quarter production and kind of what things look like in the first quarter any any sense to.
So it could be from that particular business here at <unk>.
It's going to be higher.
We've got a pretty decent range and the reason I mean.
Just a little slow to answer because those are big deals.
And so that.
It's lumpy and so I think last year. They sold a total of 20 something loans.
Low twenty's and so if you get five or six in a quarter youre going to get a pretty good.
So but their pipeline is very very strong and it will undoubtedly first quarter will.
It seemed in the fourth quarter could be by measurable route.
Okay.
As I recall the gain on sale premiums, there well above sharepoint SBA level any change to that or.
Or are they still kind of high teens or 20.
20% range.
We've sold so far since the acquisition.
Ben in the 17% to 20% range.
Okay. Thank you.
And then.
Okay.
Gary.
On this basis at 15%.
FY <unk>.
Yes.
Okay.
And then just wanted to ask on capital on Slide 13.
<unk> been running in the half.
What kind of.
Your expectations for mid teens loan growth.
How do you think about kind of building that back up from here or what's your kind of level that you'd like to operate at maybe whether it's <unk> or other capital ratios.
Well.
<unk> is the one we focus on the most in.
We.
The thing this quarter was the big thing.
The goodwill from the Mac acquisition intangibles, there. So look we want to see this migrate back up to the.
Not in a quarter level.
Over the over the course, maybe.
We needed to be starting with a $9 between nine quarter not in the half as we move through and we'd really like to as we think about 2020 to see it migrate up to that level.
Obviously, if thats the goal and given our when you think about growth and dividends.
That doesn't leave any room for buybacks so.
And given the valuation and the earn back.
Probably wouldnt be there anyway, but capital growth capital accumulation right now is a pretty pretty high priority for us given given where we are and the growth. We think we're going to have.
Okay, and if things lay out right now you think you could get back towards that range organically over the course of the year.
I think a lot of it depends on how it's going to be it's going to be somewhat I don't think we can get near the top end of that range. This year I do think we can get to I think we can make meaningful progress in building it back.
Okay. Thank you.
Thank you.
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Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a wonderful day.
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