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National Bank Holdings Corporation  (NYSE:NBHC)
Q4 2018 Earnings Conference Call
Jan. 25, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the National Bank Holdings Corporation 2018 Fourth Quarter Earnings Call. My name is Emily, and I will be your conference operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session following the presentation. As a reminder, this conference is being recorded for replay purposes.

I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the Company's loans and loan growth, deposits, strategic capital, potential income streams, gross margin, taxes and non-interest expense. Actual result could differ materially from those discussed today. These forward-looking statements are subject to risks, uncertainties and other factors, which are disclosed in more detail in the Company's most recent filings with the US Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes no obligation to update or revise these statements.

It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman, President and CEO, Mr. Tim Laney.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Thank you, Emily, and good morning, and thank you for joining National Bank Holdings earnings call covering fourth quarter and full year 2018 results. I have with me this morning our Chief Financial Officer, Aldis Birkans; and Rick Newfield, our Chief Risk Management Officer. My teammates leveraged our relationship banking model to deliver strong results in 2018. Our intense focus on building full relationships with our clients resulted in record organic loan growth for the fourth quarter and the full year, while also building an attractive book of deposits as evidenced by deposit beta of just 8% overall of 2018. We believe that our intense focus on knowing and understanding our clients is a key driver of our excellent credit quality.

I'm also pleased to share that our team continued to deliver additional operating efficiencies during 2018, resulting in a solid beat against our expected expenses for the year. Finally, I just can't say enough about the value of the Peoples acquisition during 2018. We added great people, great markets, and some great practices to our organization. In fact, I would suggest it was darn near perfect.

On that note, I'll turn the call over to Aldis to cover our results in more detail and to share our outlook for 2019. Aldis?

Aldis Birkans -- Chief Financial Officer and Treasurer

Thank you, Tim, and good morning. There's a lot to like about how we finished 2018. During my comments, I will cover the financial highlights for both the quarter and the year, as well as share our guidance for 2019. As I cover the 2019 guidance, keep in mind that our 2019 economic assumptions include continued outperformance of our local markets when compared to the national averages. Additionally and consistent with our past practices, our guidance does not include any future interest rate policy changes by the Fed. However, our outlook does take into account the relatively flat yield curve that exists today. As you saw in yesterday's release, we delivered $0.55 earnings per diluted share for the fourth quarter 2018. The quarter's return on tangible assets was 1.26%, and the return on tangible common equity was 12.29%. For the full year 2018, we reported the record earnings of $1.95 per diluted share. When adjusted for the pre-tax $8 million of one-time Peoples acquisition costs, our EPS for 2018 was a record $2.16.

As Tim already pointed out, we could not be more pleased with the continued performance of our teammates, as it relates to our relationship building strategy, with a focus on growing our loans and low-cost deposit balances. Our fourth quarter originated and acquired loan balances, which exclude 310-30 loans, grew at a strong 19.8% annualized base, as compared to the prior quarter. The full-year organic loan growth came in at 11.7%, and it was above our 10% full-year guidance.

The quarter's loan growth was driven by a record $364.4 million in new loan fundings, which puts our full-year 2018 loan originations at a record $1.2 billion. This quarter, the loan growth was once again driven by our commercial and industrial loans that grew outstanding balances by 33.5% annualized. As in the past total loan originations are granular and diversified by industry.

The fully taxable equivalent new loan yields for the quarter came in at a strong 5.5% and continue to be accretive to our originated loan book yield of 4.69%. This quarter 46% of the new loan fundings were variable rate loans.

Looking to 2019, we project our originated and acquired loan balances, which exclude the 310-30 loans to grow in the range of 8% to 10% with the first quarter being seasonally slower as usual.

Turning to deposits. Our total average transaction deposits grew 1.3% annualized over the third quarter -- of the third quarter of 2018. We had success adding a number of treasury management clients that contributed to our average non-interest checking deposit balance growth of 2.8% annualized. As we have discussed before, our deposit strategy is based on capturing full client relationships. As a result of this strategy, we continue to be very pleased with ability to manage our cost of deposits with an increase in the fourth quarter of just 5 basis points. The total fourth quarter's deposit cost was 52 basis points, which is just 8 basis points above the deposit cost in the fourth quarter 2017.

For 2019's deposit guidance, we project to grow our transaction deposit at mid-single digits for the year, with time deposits -- with time deposit balances remaining relatively flat to the current levels, resulting in total deposit growth in the low-single digits. The cost of deposit is expected to continue to drift up slightly, even without further interest rate increases by the Fed, due to the competitive market pricing for savings products. However, we expect our asset yields to offset this increase.

During the quarter, our fully taxable equivalent net interest margin widened 3 basis points to 3.99%, as the balance sheet continued to benefit from being slightly asset sensitive. At this point in the rate cycle and without additional rate increases, we are guiding our 2019 fully taxable equivalent net interest margin to be slightly above 4% for the year and fairly consistent by quarter.

Total earning assets are projected to grow to $5.3 billion to $5.4 billion by the end of 2019. As in 2018, we forecast the investment portfolio to still be in a net run-off mode, thereby offsetting some of the loan growth.

Moving onto credit. Once again, we are proud to have reported a very strong quarter as it relates to our credit performance. The fourth quarter's net charge-offs were just 6 basis points annualized, and our 2018 full year net charge-offs were just 2 basis points. Additionally, as we previously guided, during the fourth quarter, we successfully exited one large $24.1 million OREO property that was originally acquired as part of an FDIC acquisition.

The total non-performing assets ratio ended the year at 0.85%, a decrease from 1.51% at September 30, 2018. This quarter's loan loss provision expense was $2.5 million, driven by the strong originated loan growth. For 2019, we forecast our loan loss provision expense to be in the range of $11 million to $12 million as we expect to cover both the net originated loan balance growth at 1.1% to 1.2% coverage in net charge-offs at about 15 basis points.

The fourth quarter's non-interest income of $15.3 million was $6.4 million higher than in the fourth quarter 2017, but decreased $2.7 million on a linked quarter basis. The fourth quarter's combined service charges and bank card income contributed a strong 5.3% annualized growth on the linked quarter basis, while the decrease in non-interest income was driven by seasonal slowdown of the residential bank -- mortgage banking business.

To quickly recap, the performance of our 2018 residential mortgage business. For the full year, our residential mortgage banking group generated $1.1 billion in mortgage loan production with purchase mortgages representing 80% of this volume. The majority of the production or 92.6% was sold into the secondary market. The purchase market volume grew 1.6% over 2017 originations. And the mortgage business positively contributed to NBH's earnings in each quarter during 2018.

For 2019, we are forecasting our total non-interest income in the range of $70 million to $72 million. We are projecting to have a similar level of mortgage loan production as in 2018. Service charges and bank card fees are expected to grow at mid-single digits. Regarding expenses, we ended the year on a good note coming in under guidance, with fourth quarter expense of $42.9 million. The quarter's expenses benefited from $1.1 million -- $1.1 million decrease in salaries and benefits due to lower mortgage commissions and payroll taxes, as well as $0.5 million decrease in occupancy and equipment expense.

For the full year, expenses totaled $189.3 million. Again, adjusting for the $8 million related to the Peoples one-time acquisition costs we incurred a full year expense of $181.4 million, which is better than the $189 million to $192 million guidance provided at the beginning of 2018. For 2019, we forecast our total expenses in the range of $182 million to $185 million. Embedded in this expense guidance is an investment of approximately $3 million in our Salt Lake City market expansion initiative.

We are off to a great start in the (inaudible) and project a positive contribution beginning in 2020. Once again, we plan for OREO gains to at least cover the full year 2019 problem loan and OREO workout expenses. As we discussed during the last quarter's call, we executed several contracts that had a potential to be pushed into 2019, which did occur. We believe these contracts will result in nice gains and are expected to close in the first half of 2019. When projecting the 2019 effective tax rate, we expect it to be in the range of 18.5% to 19.5%. As always this projected the rate excludes the FTE adjustment on interest income.

As it relates to capital, we finished the year with a strong 10.5% Tier 1 leverage capital ratio, tangible book value ended the year at $18.77. For 2019, we expect fully diluted shares to stay around 31.5 million shares.

I'll close by saying that I'm very proud of what our team accomplished in 2018, which resulted in record loan growth, record earnings per share, and record return on equity. We have built a solid foundation for continued growth in 2019, and I am excited about our momentum going into this year.

Tim, that concludes my comments.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Thank you, Aldis, and thanks for doing all the heavy lifting this morning. Looking ahead, we feel very good about the momentum in our current markets, and we're excited about the prospects for our business model in Utah. In fact, I think results in Utah may very well exceed our expectations for 2019. And while we can't predict where the economy is headed, as I believe you know our markets continue to outperform the national averages. Having said this, should we see a downturn in the economy, we believe the diversity and granularity of our loan portfolio will serve us well. With respect to capital management, there are really no changes. We expect capital to support organic loan growth and a growing dividend program. We continue to view capital strength as a creator of optionality, something that we view as a key to delivering attractive returns over time.

I'll say thanks there and ask Emily to go ahead and open up the call for questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from the line of Jeff Rulis from D.A. Davidson. Your line is open.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Hi, Jeff. Good morning.

Jeff Pusich -- D.A. Davidson -- Analyst

Hi. Good morning, guys. This is actually Jeff's associate on for him today.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Who is this?

Jeff Pusich -- D.A. Davidson -- Analyst

My name is Jeff Pusich. Nice to meet you, guys.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Good morning.

Jeff Pusich -- D.A. Davidson -- Analyst

Good morning. So the first question, in regards to your guide as Utah expansion, I was just curious how the reception has been so far (inaudible) you've made and just if you have any more color on that -- on the progress you guys are making there in Utah?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Sure. Well. We're incredibly fortunate in that the person I've asked to lead that effort for us actually has run our middle market business here in Colorado for some time. He grew up in Wells Fargo. He has been a very strong leader for us here in Colorado. His family ties are strong in Utah. He's a Brigham Young graduate. We've hired our market leader for Utah. I promise -- to the rest of the listeners, I didn't plan this question. But I am so glad it was asked. I couldn't be happier with the response. We're not using any search firms, and just to give you one data point, just putting the word out in the marketplace for commercial bankers and business bankers, we've seen between 40 and 50 resumes, I believe we've passed 50 now, resumes coming out of that market and what we really like are resumes from frankly the larger institutions, the Wells Fargos, the JP Morgans, we do find those bankers to be better trained to be more focused on capturing the full relationship. And Rick and I've spent a fair amount of time over in the market as well. And I have to say we're fortunate to operate in markets like Denver and the front range of Colorado, Austin, Texas. I believe the Wasatch Ranch, which really is a ranch that is anchored by Salt Lake City, I believe when you look out the next five years, I'll stop at five years, I think it can be right up there with an Austin, Texas or Denver, Colorado. The demographics are right, the culture is right, the economy is strong and growing stronger. So, I'm going to try to temper my enthusiasm, but maybe it's too late, we feel good about it, to answer your question.

Jeff Pusich -- D.A. Davidson -- Analyst

Awesome. Great. Thanks for the color on that. And then just wanted to touch on some of the acquired loans you guys have had recently. Is there any trunky OREO or NPLs set to come out of any of those loans?

Richard U. Newfield -- Chief Risk Management Officer

Jeff. Good morning. This is Rick. If I understand the question it's just -- I would assume of recently acquired, do we have any particular concerns there, the answer would be no.

Aldis Birkans -- Chief Financial Officer and Treasurer

But I think, since you raise the question around acquired loans, really the bulk of what we deal with are dialing all the way back to the original FDIC acquisitions. And as you all have seen, we cleared a rather large piece of OREO in the fourth quarter. And Rick, I'd ask you to take a moment or two to maybe provide a little more color on just how we look at a piece of OREO acquired in an FDIC acquisition and the economic returns, because it is pretty darn powerful.

Richard U. Newfield -- Chief Risk Management Officer

Sure. And I'll cover that and then maybe a little more perspective on as Aldis mentioned the OREO gains that are under contract for maybe some color there, Jeff. So, the asset that Tim referring to, we cleared a $24.1 million was the book value, but going back to when we originally acquired this as part of an FDIC failed bank acquisition, we have collected more than $12 million above our original day one value, just to put in perspective the kind of mark or discount we took on that asset. And that's really part of the reason we see this continued opportunity on some existing OREO that's under contract for some nice gains that will offset our ongoing problem loan in OREO expense.

Aldis Birkans -- Chief Financial Officer and Treasurer

And Rick, I might add, just one small example of where our team demonstrates discipline with these type of loans or in this case OREO, the team sold that asset themselves without the involvement of a broker. And just eliminating the broker in that process saved roughly a $1.4 million (ph) in brokerage fees, which I just love the discipline and commitment around avoiding unnecessary expense and optimizing the return on those assets, but Rick you were going to talk about the rest of the (multiple speakers).

Richard U. Newfield -- Chief Risk Management Officer

No, I actually touched on it. No. I think. So hopefully, Jeff, that helps.

Jeff Pusich -- D.A. Davidson -- Analyst

Yes. That does. That's all the questions I have. Thanks a lot you guys. I'll step back.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

All right. Thank you.

Operator

And our next question comes from the line of Matt Olney from Stephens. Your line is open.

Matt Olney -- Stephens -- Analyst

Thanks. Good morning, guys.

Richard U. Newfield -- Chief Risk Management Officer

Hey, Matt. Good morning.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Good morning.

Matt Olney -- Stephens -- Analyst

Want to start on the margin, and if I understand the margin guidance it sounds like that margin, you expect that to drift a little bit higher the next few quarters, if the Fed kind of stays where it's at. So, did I appreciate that correctly? And then secondly, if the Fed does tight at some point during the year, do you still expect to have a positive reaction to the core margin if that were the case?

Aldis Birkans -- Chief Financial Officer and Treasurer

Yes. Matt, this is Aldis. Yeah, so you got it right. We do expect it to drift above the 4% mark now. Really still the lag effect of December rate hike, and our new -- as I mentioned our new originated loan yields are coming on to be accretive to the originated book that we have today. So that is helping the margin. So, we'll be at 4% plus. To your second...

Richard U. Newfield -- Chief Risk Management Officer

The second question just about if the Fed does tighten?

Aldis Birkans -- Chief Financial Officer and Treasurer

Yeah if the Fed does tighten, we continue to be slightly asset sensitive, we've been reducing that sensitivity, but we would benefit similar manner as we did this year.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

This last year.

Aldis Birkans -- Chief Financial Officer and Treasurer

Yeah, the last year I should say.

Matt Olney -- Stephens -- Analyst

Okay. That's helpful. And then in the mortgage business, looks like there is some seasonality there in the fourth quarter and a little bit more pressure. And you're surely not alone. I think all banks are talking about that in the fourth quarter. Any more details you can give to us on the margin?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Hi, Matt. Just on the mortgage business, one thing, we're going to attempt to do over time is try to provide more color around the seasonality of that business. But Aldis touched on something that I'm very proud of. Aldis and the mortgage banking team really challenged themselves to create a model where even in the slow quarters, and if you think slow quarters, no surprise, we're talking about the fourth and first quarters, we were determined to make money even in those slow quarters with the idea that it's the second and third where you make hay. But we don't want to be in a position where we're ever losing money. And our leader of the mortgage business has shown great discipline around moving quickly to adjust expenses where appropriate and remaining or maintaining the ability to flex capacity for the two strong quarters. I just can't say enough about the team and their focus there. But we're also, again, back to my first point, I want to be working to try to provide a little more information around what we expect that business to deliver quarter-to-quarter, so that for example, in the fourth quarter, the Street is not expecting a certain mortgage banking fee income number that we're not expecting internally. Does that make sense?

Matt Olney -- Stephens -- Analyst

That does make sense and that kind of leads me into the question on the first quarter margin. I mean should we expect another seasonal dip in 1Q, or we'll kind of flatten out from here compared to the fourth quarter?

Aldis Birkans -- Chief Financial Officer and Treasurer

I think compared to the fourth quarter, you can expect to be flattened out the similar mortgage banking gains in the first quarter as it was in fourth and then it's going to step up and ramp-up in second and third as Tim mentioned.

Matt Olney -- Stephens -- Analyst

And for the full-year guidance, I think you mentioned it, but I missed it on the mortgage front, what are your expectations for mortgage in 2019?

Aldis Birkans -- Chief Financial Officer and Treasurer

Yeah. Obviously the two key components being the volume that you are able to originate and the margins that the market is allowing you to get. For the margins, we are expecting the same margins, no margin improvement. If you recall, margins came in sort of second quarter of last year, quite a bit and then continued to stay compressed throughout the rest of that year. We expect that margin to be there, the same flat as it was third and fourth quarters of 2018. And for volume, we expect to originate the same amount of volume in '19 as we did in '18.

Matt Olney -- Stephens -- Analyst

So, if I just combine those two -- since the margin did kind of get hit the back half year and you're assuming those margins kind of maintained throughout the year, is that implied that the full year mortgage income could be a little bit below in '19 compared to '18?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

That's correct.

Matt Olney -- Stephens -- Analyst

Got it. And then just lastly, Tim, I just want to throw a challenge to you on this Utah expansion. It sounds like you feel good about the expansion, the people you identified. I'm just curious about why now. It feels like your loan growth has done very well over the last few quarters, and it doesn't feel like this is something you need from a growth perspective, but what else am I missing that you see that I just don't appreciate as far as the timing of the Utah expansion?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Thank you, Matt. That's a very good question, and I love the strategic nature of the question. When we started this Company I think one of the things we did reasonably well was identify markets that we're going to grow faster than the national average coupled with identifying markets that we believe would maintain rational competition through a cycle. We have been very focused on staying within our core markets since day one, and developing the capabilities, the talents in order to serve those markets and be successful. We're now at a point in our maturation where we feel comfortable looking at market extensions you might say and attempting to answer the questions we asked when we started the Company. No market -- no market came close to Salt Lake City in meeting those criteria. And coupled with the fact that we have the right connections in that market, and the fact that we have frankly the capital to invest, just made the timing in our mind perfect. And by the way speaking of capital to invest, the idea that we're going in de novo and looking at the potential return on that investment as a meaningful investor it makes me very excited.

Matt Olney -- Stephens -- Analyst

Got it. Thank you for that.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

You bet, Matt.

Operator

(Operator Instructions) And our next question comes from the line of Tim O'Brien from Sandler O'Neill. Your line is open.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Good morning, Tim.

Tim O'Brien -- Sandler O'Neill -- Analyst

Morning, Tim. Morning, guys. Could I get it first of all a little -- frankly that $270 million in commercial loan originations that's an eye-popping number. Could you give a little color on that because so many -- especially in the context of a lot of banks that I follow and other folks follow that are commercially oriented have really struggled in 2018 to generate meaningful commercial lending business, and draws haven't been strong. So what do you -- what are you guys doing differently and what kind of loans -- are those loans distinct in certain ways, are they granular, was it all produced in-house through internal bankers? Give a little color on it?

Richard U. Newfield -- Chief Risk Management Officer

Sure. Tim, this is Rick. I'll take that. So, I've mentioned this in the past, I'll start with just a real simple metric and that is the granularity, and we're still just below $1 million per average funded loan. So, really no change. I think one of the key drivers in the fourth quarter is hitting on all cylinders. It's across geographies, it's varied by industry. I will mention a bit more momentum out of Texas, which is nice, but not unique to Texas. We really saw, again, that highly diversified approach. I'll also mention that we're delivering this loan origination activity, while managing commercial real estate or non-owner-occupied commercial real estate very effectively. Actually that percentage of loans ticked down under 50% and is now under a 100% of risk-based capital. I'll finally say that we're absolutely adhering to our underwriting standards and you've heard us say this before, we're staying well within our self-imposed concentration limits. We continue to be committed to that diversification.

Aldis Birkans -- Chief Financial Officer and Treasurer

Yeah. Rick the only maybe exception I would add is, I'm not convinced that we're running on all cylinders. I still think we're probably six or seven out of eight cylinders, and can continue to get better. You mentioned Texas, just to provide a little more color, I felt like we started to see competition in Texas, demonstrate more rational pricing and credit structure in the second half of last year, which is very encouraging. Colorado continues to be strong. Folks ask about the disruption given a couple of competitors, that's going to yield some benefit, no doubt about it. But I think the point that Rick made that's most important is that our teams are growing more experienced in operating in our business model, our relationship-centric model, and over time we're earning market share by executing with discipline against our model.

Tim O'Brien -- Sandler O'Neill -- Analyst

That's great color. Thank you very much for that. And then kind of shifting gears slightly with the disruption in the Denver marketplace, have you guys added bankers or did you add bankers in the quarter or have you since quarter end?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

We have started that process. I'm not going to cover it in detail, I'll just say, yes.

Tim O'Brien -- Sandler O'Neill -- Analyst

Have added. Okay. Good for you. And then just to piggyback on the Utah discussion, so you dropped that number $3 million in budget for that. Can you talk a little bit about what you envision? Is that going to be -- are you going to ultimately domicile deposits in that state? Is that something you can share with us now? How is this going to work out, Tim? Is it going to be a commercial hub with domicile deposits or -- and what would you like to see accomplished or hope to see accomplished in 2019 up there?

G. Timothy Laney -- Chairman, President and Chief Executive Officer

The answer to your question is, yes. I mean, we'll be -- we'll have full banking capabilities for both business banking or I think (ph) small business, as well as middle market commercial. We're not going to go anywhere where we can't deliver our treasury management services. Again, you'll never hear us use the term lender. That's just not what we do. If you dial back to I think another important decision and an investment we made when we started the Company, it was an investment in a robust set of treasury management capabilities. Those capabilities are now aged. And the beauty of what we're seeing is we can compete with the BofAs and the Wells Fargos as it relates to capabilities, but deliver them through a very personal relationship where services is put at a premium and that's critical for our model. We're not going to let up there. So -- again, sorry if I'm on a soapbox there. But you better believe we're going to be focused on full depository and treasury management capabilities in the state. And we're conservative in our expectations for everything we do, we build a business case. Aldis talked about -- I think touched on just very briefly the expectations for generating returns there. I actually believe we're going to exceed our expectations just given the early momentum I've seen from the team on the ground. And it's in its infancy and we're already seeing relationships come our way. So that frankly bodes well.

The other dynamic and I probably should have mentioned this earlier is when we look at that market, we look at Zions, which we view as a very solid admirable financial institution, but then you drop down. Really if you look at publicly traded banks, you drop down to really that $2 billion, $3 billion range before another bank shows up. And we believe there's just room in that market for a real business banking, commercial banking focused institution like ours.

Tim O'Brien -- Sandler O'Neill -- Analyst

Great. And then I'm going to ask one last question. Shifting gears back to mortgage. So the Mortgage Bankers Association, their outlook is for a kind of negative growth and production and revenue in 2019 is my understanding. So, does that suggest you guys are going to take market share or what guided that outlook for kind of equal production in '19 for you guys? How did you get to that?

Aldis Birkans -- Chief Financial Officer and Treasurer

Yeah. Tim, good question. Yeah, actually if you break it down that mortgage banking association guidance, the down is driven by refinancing market and a continued slowdown in that component. As I mentioned in my remarks, we are 80% and in some quarters we are above 80% in purchase mortgages. And if you look at the purchase mortgage outlook, it's actually growing by banker -- by MBA by 4% next year. So we feel confident -- this year -- 2019. So, we feel confident that we can deliver. Coupled that with putting us in good markets, we should be able to get the volume that we're talking about.

Operator

And our next question comes from the line of Chris McGratty from KBW. Your line is open.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Good morning, Chris.

Chris McGratty -- KBW -- Analyst

Hey. Good morning, guys. Maybe Aldis, a question for you. You've got the remixing that's been really a support of your margin, but your loan to deposit is now 90%. Interested in kind of thresholds that you're comfortable with given the remix that you talked about in your prepared remarks?

Aldis Birkans -- Chief Financial Officer and Treasurer

Yes. well really the 90% loan deposit ratio is driven by the -- we had spot balances a little bit down at the end of the quarter. The core would be closer to 88% loan deposit as we look at it. And as we look through the rest of this year 2019, we think we will drift into kind of mid to lows 90% loan deposit, which we feel very comfortable being -- still being there and not having any funding pressures.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Chris, what's interesting is when I look back on 2018, we had a couple of larger competitors that really started pricing up some of their consumer deposit instruments in the summer of last year. We've since seen become more rational, but the fact to the matter is we weathered that challenge really quite well by sticking to our knitting, and that's what we're going to do here in '19. We're going to remain very focused on small business and commercial relationships. We still think we have value propositions for individuals for consumers that makes sense. But what we're not going to do is chase hot money. I see no value in it in terms of building a real franchise. I see no value in it at all. And I hope that additional color helps.

Chris McGratty -- KBW -- Analyst

It does. Thank you. One more on the OREO. Were there any P&L impacts from the resolution either a benefit or a contract expense? I may have missed that.

Aldis Birkans -- Chief Financial Officer and Treasurer

On this particular one at the close, as Rick mentioned, we, over the life of that property, collected north of $12 million in addition to what it was in the books. At the sale of this property, there was a small $100,000 gain, but that's it.

Chris McGratty -- KBW -- Analyst

Okay. Got it. And then maybe Tim, kind of a high level question for you. With the Utah expansion and what I'm hearing is still really not a lot of interest in buying your stock, it feels like you're taking kind of a multi-year view to maximize value for shareholders. And in the past, you've talked about kind of potentially considering accelerating it. So, I'm interested in your thoughts here given the scarcity value of the dislocation in the markets you're in. Any comments you have would be great. Thanks.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Yeah. It's another great question. Another challenge Aldis and I have given ourselves is to deliver to the board a new set of goals around financial performance. Really, we've started that with our strategic work late last year, but we want to in fairly short order be able to bring to the street a set of performance -- aspirational performance metrics. If you think about where we were historically as we built the company getting to that double-digit return on tangible common equity was important, getting to that 1% plus, and we would say really kind of baseline now 120, 125, ROA was very important. Getting past that $2 of earnings per share was important, but that was yesterday. And so, what we intend to bring to the street in the next couple of months will be really what that next set of aspirational goals might look like. With respect to M&A, nothing has really changed there. We view optionality as our friend. We're really looking for partnerships. If there are folks that are actually interested in becoming a part of our organization then they need to approach it the same way that Peoples folks did which is ask the question what kind of returns can we realize over a three to five year time frame. And then look, we're a public company. So we're going to keep all options open, optionality is our friend. The only thing I know how to do is focus on building the best company we can build. We know we can get better. We've got a lot of room frankly to get better. I'm very proud of what our teammates have done given where we started and where we're at today. But every one of us know that we can get a heck of a lot better.

Chris McGratty -- KBW -- Analyst

Okay. Thanks for the perspective, Tim. Appreciate it.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Chris, you bet.

Operator

Thank you. And I'm showing we have no further questions at this time. I will turn the call back to Mr. Laney for his closing remarks.

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Thank you, Emily. I'll simply say thanks to everyone for joining us this morning. We're excited about 2019. The momentum coming into '19 has exceeded my expectations. I just also want to, with all of my heart, thank my teammates for a heck of a year in '18, and commit to all of our investors that we're gearing up to do better this year. Thank you very much. Have a good day.

Operator

And this concludes today's call. If you would like to listen to the telephone replay of this call, it will be available beginning in approximately two hours and will run through February 8, 2019, by dialing (855) 859-2056 or (404) 537-3406, and referencing the conference ID of 1148965. The earnings release and online replay of this call will also be available on the Company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.

Duration: 42 minutes

Call participants:

G. Timothy Laney -- Chairman, President and Chief Executive Officer

Aldis Birkans -- Chief Financial Officer and Treasurer

Jeff Pusich -- D.A. Davidson -- Analyst

Richard U. Newfield -- Chief Risk Management Officer

Matt Olney -- Stephens -- Analyst

Tim O'Brien -- Sandler O'Neill -- Analyst

Chris McGratty -- KBW -- Analyst

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