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Veritex Holdings Inc (NASDAQ:VBTX)
Q2 2019 Earnings Call
Jul 23, 2019, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Veritex Holdings Second Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Ms. Susan Caudle, Investor Relations Officer and Secretary of the Board of Veritex Holdings. Please go ahead.

Susan Caudle -- Investor Relations Officer

Thank you. Before we get started, I'd 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, if you're logged into our webcast, please refer to our slide presentation, including our safe harbor statement beginning on Slide 2. For those of you joining us by phone, please note that the safe harbor statement and presentation are available on our website, veritexbank.com. All comments made during today's call are subject to that safe harbor statement.

In addition, some of the financial metrics discussed will be on a non-GAAP basis, which 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. Malcolm?

Malcolm Holland -- Chairman and Chief Executive Officer

Thank you, Susan. Good morning, everyone. Obviously, it was a incredibly busy and productive quarter for our company. Our operating income for the quarter was $32.7 million or $0.59 per share. Expenses were lower than expected, credit costs were low and in line with expectations. However, revenue was lighter than expected.

Year-to-date return on average assets, 1.66%; year-to-date return on average tangible common equity, 18.5%; and year-to-date efficiency ratio, 43.6%. I do feel it's worth noting that these outstanding results were during consolidation, integration and merger of two multi-billion dollar banks and our respective cultures. I couldn't be prouder of our team.

Let me address our growth for the first quarter found on Slide 12. Growth in loans for investment was $154 million or 10.7% annualized. Growth less mortgage warehouse was $68 million or 4.8% annualized. We continue to see a little slow down in our markets, but are also beginning to see some looser loan structures by some of our competitors, mainly in equity and covenant softening.

We will continue our credit disciplines even if it means a lower growth profile. Additionally, we are perhaps overly optimistic on keeping our loan growth around 10% in the midst of our merger and conversion. Loan growth less mortgage warehouse for the second half of the year should exceed the first half and be in the 7% to 9% range.

Turning to Slide 14, credit quality continued to remain very steady, although NPAs increased from 0.29% of assets in Q1 to 0.54% in Q2. The majority of the increase was two loans totaling $19 million that were not renewed timely. Both are secured by commercial real estate with appropriate collateral margins and will be renewed in Q3.

Total net charge-offs for the quarter were virtually non-existent. Our loan loss reserve plus our remaining purchase discount mark gives us an effective reserve of 1.77% to total loans, keeping in mind, over 50% of our loan portfolio was credit marked over the last seven quarters. Deposit growth, cost of deposits and NIM pressures continue to be a challenge for our company.

I'll turn the call over to Terry, who'll dive further on these subject and other financial results.

Terry S. Earley -- Chief Financial Officer

Thank you, Malcolm, and good morning, everybody. I'd like to take a few minutes to provide you with more details on Veritex's financial results for the second quarter.

I think we have had an excellent start to 2019 following the closing of the Green merger on January 1st of this year. Malcolm mentioned our year-to-date profitability -- profitability metrics, which were very encouraging. As in the last couple of quarters, we do have some noise in the numbers. So please note that for the most part, my commentary will focus on Veritex's second quarter financial results on a non-GAAP operating basis, which excludes $5.4 million in merger expenses, $642,000 in loss on sale of securities, and $359,000 loss on disposal of the Austin branch assets.

Before turning to the deck, I want to also note that much of this was accomplished before -- I want to note that much was accomplished this quarter, even before focusing on the financial results. Some of these accomplishments included the core conversion, rebranding of the Green locations, several significant hires as we continue to upgrade the team at Veritex, and the Austin divestiture just to name a few.

Now on to Slide 6. Fully diluted operating earnings per share were $0.59 per share in Q2, up 28.3% from the same quarter in 2018 and above the expectations from the Green merger. The operating net income of $32.2 million translated into a return on average tangible common equity of 18.09%, and that's the second consecutive quarter with a return over 18%.

On Slide 7, these graphs demonstrate the significant earnings power of Veritex with an operating return on average assets for the quarter of 1.63% and a pre-tax pre-provision return on average assets of 2.22%. This level of pre-tax pre-provision operating earnings bodes well as we move later and later in the credit cycle.

Veritex was already efficient on an operating basis before the Green merger. But this key metric has only gotten better with the scale and cost savings opportunities from the transaction. We finished Q2 with an operating efficiency ratio of 43.7%, basically flat from Q1 and down 5% from the Q2 2018 level of 48.7%. Tangible book value per share has declined by just over 3% since December 31, 2018, and ended Q2 at $14.27. Please note that the $14.27 TBV per share is net of approximately $0.55 per share dilution from the dividend and stock buyback.

We're committed to managing our capital resources prudently as the deployment of capital for the enhancement of long-term shareholder value remains one of our highest priorities. We continue to believe that return on tangible common equity is a critical financial metric that deserves significant focus.

On Slide 8, the net -- the GAAP net interest margin decreased 17 basis points to 4% in Q2, while the adjusted NIM, which excludes all purchase accounting impacts, declined 9 basis points to 3.69%. The table in the bottom right of the slide shows the items that impacted both the GAAP NIM and the adjusted NIM. The most significant driver of the lower GAAP NIM was an 8 basis point impact from purchased accounting accretion in amortization. The next most significant item was the 6 basis point increase on both the GAAP NIM and the adjusted NIM from lagging deposit betas. Also, there was a 1 basis point impact in the call for the interest rate floors that were purchased in Q2. Finally, loan production rates were 5.51% for the quarter and in line with the contractual rate on the portfolio.

Turning to Slide 9. Given the volatility in the NIM, we have taken multiple steps to -- so far in Q2 and Q3 to mitigate the downside impact of falling rates. During the quarter, Veritex purchased $275 million of one-month LIBOR interest rate floors with a strike rate 2.43%, and restructured $255 million in the investment portfolio to extend duration, pick up yield and reduce our exposure to floating rates. These actions removed 20% of the impact from a down 100 rate move as shown in the graph on the bottom left.

Subsequent to quarter end, we restructured $400 million in our funding profile through floating and structured products with a blended interest rate of approximately 1.5%. This new funding is mainly used to replace higher cost funding, including part of our correspondent money market. Most importantly, we have developed a customer specific plan that decreases money market rates while working to retain important relationships and preserve franchise value.

The table to the right at the bottom is a snapshot of the floors in our portfolio. 31% of the floating rate loans have floors. It's management's intent to continue to transition the balance sheet to a more neutral position to reduce the risk to further falling interest rates. As we look out for the remainder of 2019, the company expects the adjusted net interest margin, excluding all purchase accounting impacts to be in the range of 3.55% to 3.65%. The GAAP NIM should be 20 basis points to 30 basis points higher due to the impact of purchase accounting. We are assuming two Fed fund rating decreases in Q3. If there is a third cut in December, it shouldn't have a very material impact on the quarter.

On slide 10, Veritex reported operating fee income of $6.7 million. The results of the quarter were negatively impacted by lower sales volume of SBA loans. I should add that we feel good about our year-to-date results and acknowledge the gain on sale revenue for the SBA business can be quite lumpy. We expect SBA revenue to rebound in Q3 to more normal levels. Also, our customer interest rate swap business had a weak second quarter and we've already been encouraged by the activity so far in Q3. Finally, included in the Q2 results, is a $434,000 write down in the value of an acquired investment in a CRA related fund. This loss was not excluded from operating earnings.

On Slide 11, Company continues to realize on the cost saving from the Green Bank merger as total operating expenses declined 4.7% over Q1. In general, these savings are coming in earlier than planned. As previously stated, we continue to believe the core conversion and branch closures that were completed toward the end of Q2 will yield additional savings. But it remains our intent to reinvest most of these savings and additional quality personnel to drive future growth.

On Slide 13, the loan to deposit ratio stood at 96.2% at the end of quarter. Our preference is to operate this ratio between 95% and 100%. So we're very comfortable with this funding profile -- funding profile being in this position. Also non-interest bearing DDA now stands at 24% of total deposits, and the average cost of total deposits increased during Q2 by 13 basis points to 1.38%; 5 basis points of this increase was driven by lower CD amortization of the purchase accounting mark.

Finally, on Slide 15, our capital ratios at the holding company for bank remain very strong and increased slightly even with our capital actions. Importantly, we returned $28.9 million to common shareholders during the quarter, including the share buyback of $22.1 million and a $6.8 million in common dividends.

On a year-to-date basis, we returned $43.4 million to shareholders through the buyback of almost 1.2 million shares and a dividend which we initiated in 2019. Given our activity in the buyback, we clearly believe that the stock is trading below its franchise value, and we'll continue to use the buyback when we perceive that there's weakness in the stock and it represents a good value.

With that, I'd like to turn the call back over to Malcolm.

Malcolm Holland -- Chairman and Chief Executive Officer

Thank you, Terry. Well done. As I stated earlier, our second quarter was incredibly busy and eventful. The core conversion of our systems was completed in late June and went remarkably well. All operating, financial, branch, phones and network systems were integrated and are up and running as expected. The last remaining piece, our Internet banking product conversion is scheduled for September.

I'd like to publicly thank our conversion team for a job very well done. We also completed the sale of our Austin branch during the quarter, which allows for us to focus all of our efforts in arguably the two best markets in the country, Dallas-Fort Worth and Houston. Our management team and I couldn't be more excited about the future prospects here in Texas. We're engaged in several discussions currently with seasoned lenders and business leaders that will only make us a better and more valuable company. Our vision to creating one of the best institutions in our state is well on its way.

Operator, at this time, we would like to open the line for any questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Brady Gailey with KBW. Your line is open. Please go ahead.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Hey. Good morning, guys.

Malcolm Holland -- Chairman and Chief Executive Officer

Good morning, Brady.

Terry S. Earley -- Chief Financial Officer

Hey, Brady.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

So, I mean, you've repurchased over 2% of the company year-to-date, so a nice amount. You still have TCE over 10%, the stock is still cheap. Is there any reason to think that the buybacks would slow at all versus the pace that we've seen in the first half of the year?

Malcolm Holland -- Chairman and Chief Executive Officer

No. I know it's short and sweet, but no.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

All right. That's great. That's great. And then another is, there's some expense noise in the numbers this quarter. You also had the conversion in June. You got rid of the Austin location. When we put all that together and look toward expenses in the back half of the year, what do you think would be an appropriate kind of quarterly expense run rate?

Terry S. Earley -- Chief Financial Officer

Brady, it's Terry. I believe that our expenses are going to kind of stay where they are. I'm pretty comfortable with the $34 million expense run rate, and on an operating basis, we're at $34.1 million. I believe, we need to invest in people and brand and things like that. And I believe we're going to drive the efficiency ratio down by driving the numerator. And so, for us, as we look out for the rest of this year and next year, investing for growth to me is more important than harvesting expense saves, when our efficiency ratio is already this good.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

All right. And then finally for me, I mean, you mentioned the two commercial real estate loans that were, I think, around $20 million, talking about how they were renewed on a timely basis, what -- any more color as far as why that happened?

Malcolm Holland -- Chairman and Chief Executive Officer

Sure. I'm going to let Clay to give you some details on those.

Clay Riebe -- Executive Vice President and Chief Credit Officer

Yes. Thanks, Brady. Yes, the first asset is a Houston CRE loan that was performing until 3/31. We've got an asset [Phonetic] value that more than covers our loan balance today. The borrower began negotiating with a large sizable tenant to add to the property, and that the addition of that tenant was going to require some additional capital. And so we have been negotiating with them, bringing new equity to the table, as well as potentially increasing our loan amount to accommodate that new tenant. That tenant is really a game changer for the project. And so that's kind of the background on that. We expect that to be finalized in August, and this loan will return to performing status this quarter.

The second asset is another Houston CRE property. We've got a 37% loan-to-value on that property. The borrower made some changes to the organization that had to be unwound. And because of that unwound, unwinding took some time, and that has now been done. We expect that loan to be renewed by this month end. So that's some background on those two larger credit assets.

Malcolm Holland -- Chairman and Chief Executive Officer

That's $19 million of the $26 million increase in loans over 90 days still accruing.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Got it. All right. Thanks for the color.

Malcolm Holland -- Chairman and Chief Executive Officer

Got it.

Terry S. Earley -- Chief Financial Officer

Thanks, Brady.

Malcolm Holland -- Chairman and Chief Executive Officer

Thank you, Brady.

Operator

Thank you. And our next question comes from the line of Brad Milsaps with Sandler O'Neill. Your line is open. Please go ahead.

Brad Milsaps -- Sandler O'Neill -- Analyst

Hey. Good morning, guys.

Malcolm Holland -- Chairman and Chief Executive Officer

Good morning.

Terry S. Earley -- Chief Financial Officer

Good morning.

Brad Milsaps -- Sandler O'Neill -- Analyst

Terry, I appreciate all the color on the NIM. I know lots of things have changed since the last call. I think the previous guidance was 4.05% to 4.20% on a GAAP basis, certainly lower than that. Now, if you had to sort of, look at the reasons for lower, is it principally because of your expectations? I think you said, you guys were using two rate cuts in the third quarter, and then potentially a third later in the year. How much is sort of related to that versus sort of other things you're seeing on a fundamental basis, loan to deposit pricing?

Terry S. Earley -- Chief Financial Officer

So, there's a lot in that question. You know, we certainly are adjusting the guidance now, and feel -- it feel like that that's -- I will say this, I probably never in my career seen the direction of change, the direction of rates changed so much from things that are moving up. You think you're going to have a period of flat rates, and all of a sudden, I mean it pivot so quickly.

But that -- you know, coming back to your question, I think rates -- two rate moves down, when two or three and we were expecting flat rates is by far the single biggest driver. Next, I would say that the continuing increase in, especially CD rates. I probably missed that one a little bit in terms of -- I think if rates had stayed flat, I think kind of been at the low end of the range for the year with the way CD rates had behaved. I mean, there is just -- I mean, the level of irrational competition, astounds me. In terms of how some people are pricing deposits. It's just -- but that's the choice that they make. And so the challenge for us is to figure out how to balance relationship and pricing pressure.

And I think we're doing OK. It feels like pricing pressure is easing, but there are still people out there doing things we won't do on the deposit pricing side. So I would say, rate, one; deposit pricing, two; and accretion not being as strong as I would have thought. And then lastly, a little bit -- the growth is coming in a little lighter than we would have thought. And so all of these things are playing in it. And so, let me stop there and see if [Speech Overlap].

Brad Milsaps -- Sandler O'Neill -- Analyst

Yes. No, that's great color, I mean. Based on your comments, it sounds like you don't feel like deposit costs are sort of kind of add up inflection point of stabilizing. Maybe you've got -- the bigger the competition maybe have a little bit of room to inch higher [Phonetic] than before you can start bringing them down?

Terry S. Earley -- Chief Financial Officer

Well, we're bringing them down. We're acutely focused on what the roll off right is in the CD book this quarter. And I think we're either at or close to the inflection point. Our new production rates are at or below the roll off rate. But the question is, can you put them on at our new desired sheet rate? Or there are going to be customer pressures because of the overall look and feel of that deposit relationship that causes you to make exceptions. So, I mean, we're really, really close.

Brad Milsaps -- Sandler O'Neill -- Analyst

All right. Helpful. And then just a follow up to Malcolm. I appreciate the color on the opportunities in the market to hire folks. You've been talking about that for a couple of quarters now. Just kind of curious, do you have any goals on how many people you'd like to bring in between maybe say now and year-end or maybe the next 12 months?

Malcolm Holland -- Chairman and Chief Executive Officer

We don't really figure it that way. There are a couple of groups, we would say, very large group in town that ended up going somewhere else. I will tell you, we're in conversations with several, right now, both here, and really, Houston has some real opportunity with Jon Heine just getting some traction now with people and what have you.

But the answer to the question is, I don't have numbers. I'm kind of an old Tom Landry [Phonetic] guy. You hire the best athlete and find a place for him. And so we need to be available for when those athletes are coming out. Obviously, there's some pretty good disruption in our Texas markets. You know which banks are being disrupted, and so there's going to be opportunities. Candidly, Brad, we've had people call in us, which isn't always a good thing, but we've had some real quality people that we're working through now. So we just want to make the right hires. But I don't have any specific numbers. But we do want to add, we are adding.

Brad Milsaps -- Sandler O'Neill -- Analyst

Great. Great. Thanks a lot. Appreciate the color.

Malcolm Holland -- Chairman and Chief Executive Officer

You bet. Thanks.

Operator

Thank you. And our next question comes from the line of Matt Olney with Stephens. Your line is open. Please go ahead.

Matt Olney -- Stephens -- Analyst

Hi, thanks. Good morning, guys.

Malcolm Holland -- Chairman and Chief Executive Officer

Good morning, Matt.

Matt Olney -- Stephens -- Analyst

I want to start with fees, a little soft in 2Q on the fee side. I think you've mentioned SBA and swap fees in the prepared remarks were lower than expected, but it sounds like you expect to get a rebound in the back half of the year. Are there any numbers you can put behind this? Is the $9 million fee income in 1Q a reasonable goal or will be something less than that?

Malcolm Holland -- Chairman and Chief Executive Officer

That's a good question and...

Terry S. Earley -- Chief Financial Officer

You know, look, as I've said, I think if you go back and look at the script for Q1, $9.25 million operating fee income in Q1 exceeded our expectations. We thought we could get there, but we thought it would be later in the year. I think when SBA quarter at $1.1 million, no meaningful swap income, I think, you're going to see -- I hate to give numbers, but I believe that this will increase in a significant way from Q2 to the rest of the year.

Malcolm Holland -- Chairman and Chief Executive Officer

They are going to be between Q2 and Q1. And the other thing is, we hired a new mortgage guy. He's got four new mortgage lenders that we're putting on and so in the down interest rate environment. We're going to -- I think we're going to see some more mortgage activity. It's never going to be a big part of what we do. But so far, the first half year has been virtually non-existent. And now I think we're going to see some of that. So it's hard to exactly predict because it's lumpy, but it's going to be somewhere between Q1 and Q2.

Terry S. Earley -- Chief Financial Officer

Yes, I mean, there were some SBA stuff that just got pushed. It's not -- they just got pushed into Q3 that was targeted for a Q2 close, got in sale and it just got pushed into Q3. And so I believe, when you add back the write-off of -- we don't expect a write-off on the CRA fund again. So you're really looking like more like $7.1 million, so between $7.1 million and $9.2 million, $9.3 million.

Malcolm Holland -- Chairman and Chief Executive Officer

$8 million comes in the middle.

Terry S. Earley -- Chief Financial Officer

Yeah.

Matt Olney -- Stephens -- Analyst

Okay.

Terry S. Earley -- Chief Financial Officer

And I really believe that with what I see going on in SBA and swap world, that's a number I'm comfortable with.

Matt Olney -- Stephens -- Analyst

Well, I understood. Those can be some lumpy items, so tough to predict. And I guess, Terry, going back to the guidance around the adjusted margin, the 3.55% to 3.65%, I think you gave some good parameters to help us out as far as what you're assuming. Was that range -- just to clarify, was that for the back half of the year on average, or is that for those full year 2019?

Malcolm Holland -- Chairman and Chief Executive Officer

Back half of the year.

Matt Olney -- Stephens -- Analyst

Got it.

Malcolm Holland -- Chairman and Chief Executive Officer

The full year would be -- you know, if I gave you the full year, we were 4.05% to 4.20%. Full year is going to be way above any of those numbers because we did 4.08% in the first half, if you will. So I just wanted to rather make you do the math. I thought it was just best to say here's the guidance for the back half of the year.

Matt Olney -- Stephens -- Analyst

Yes. Very helpful. And then I guess kind of related, you took on some borrowings at the end of the quarter, maybe at the beginning this quarter $400 million. I think the rate I was around 1.5% were replacing some higher cost deposits. Can you give us an idea kind of what that would be replacing -- well, what deposit cost?

Terry S. Earley -- Chief Financial Officer

About a 100 bps higher.

Matt Olney -- Stephens -- Analyst

Got it. Okay. Thank you, guys.

Malcolm Holland -- Chairman and Chief Executive Officer

Thanks, Matt.

Terry S. Earley -- Chief Financial Officer

Thanks, Matt.

Operator

Thank you. And our next question comes from the line of Daniel Mannix with Raymond James. Your line is open. Please go ahead.

Daniel Mannix -- Raymond James -- Analyst

Yeah. Hey, guys. Good morning.

Malcolm Holland -- Chairman and Chief Executive Officer

Hey, Daniel.

Terry S. Earley -- Chief Financial Officer

Daniel.

Daniel Mannix -- Raymond James -- Analyst

Hey. Thanks for taking the questions. Just wanted to start by going back to Brady's question on the buybacks. So it sounded like you're going to still be pretty aggressive there. By my math, you got about $20 million left under the current authorization, which is less than what you did in the second quarter. How do we think about a replacement authorization as far as size and timing is concerned?

Malcolm Holland -- Chairman and Chief Executive Officer

So we got a little less than $20 million left, but let me -- I will just say that that will be a topic in a soon to be at board meeting about what next steps are -- how the current buyback run through December. I think, Terry, does it?

Terry S. Earley -- Chief Financial Officer

Yes, it does.

Malcolm Holland -- Chairman and Chief Executive Officer

So we're going to start talking about adding to that. We just haven't had that discussion at the board meeting, but we will in August.

Daniel Mannix -- Raymond James -- Analyst

Okay. Got it. Want to move over to loans? Seeing if I could get some more information here as far as maybe like a breakdown between Dallas and Houston as far as demand is concerned, competition. What are you seeing on pay downs quarter-to-date, and how do you expect that trending over the rest of the area, either?

Terry S. Earley -- Chief Financial Officer

So competition just between Dallas and Fort Worth, so Dallas is certainly led the charge in new loan generation. And there's two reasons for that. One is we're bigger. We're about two-thirds in Dallas and about a third in Houston, maybe 60-40, something like that. And then the other thing is just, you know, we hired Jon Heine in April, April-May time frame. So Jon is there on the ground 90 days. So there obviously has been some movement there and just change in leadership. And I can tell you, I am super, super excited about what he's doing down there, and the prospects for the future, but that stuff doesn't happen overnight.

Houston is still a very, very strong viable market. So we're super encouraged with that. But -- and Jon still in the honeymoon stage, although I guess it's coming to an end here shortly. But pay downs, there haven't been any -- greater than any, and we haven't seen a spike in pay downs. Let me just say it that way. Pay downs have been pretty consistent. We actually, as we forecast in the future, Daniel, the pay down number is a little bit smaller in Dallas than it is in Houston. I don't really know why, but that's what the future looks like for us. So, I think, I'm still really encouraged that 7% and 9% net loan growth outside of mortgage warehouse that I think is going to be -- is achievable. We're going have to hit on most cylinders, but we still feel confident we can get there.

Daniel Mannix -- Raymond James -- Analyst

That's great color. Thanks. If I could just sneak in one more here. You guys had mentioned previously that you might have something for us as far as the seasonal impact. Is there anything that you guys can provide on that front?

Terry S. Earley -- Chief Financial Officer

Malcolm's looking at me.

Malcolm Holland -- Chairman and Chief Executive Officer

I'm looking at Terry.

Terry S. Earley -- Chief Financial Officer

Daniel, we have done a ton of work, and we're not comfortable enough really yet to say we're ready to go out there. We're just finalizing the models. We've got the model validation scheduled for later this year. An external firm, audit firm to come in, do the model validation. And we'll be ready to talk at the end of the next quarter. And we're in the last stages in my mind of finalizing the models and getting that range firmed up. But, given -- yes, I would say this, if you've guys -- if you left rates alone for the past 90 days, we might be there. But there's nothing taken more of my time than managing for interest rate risk of late. So the team's working hard. We'll be ready to talk about that in 90 days.

Malcolm Holland -- Chairman and Chief Executive Officer

Yes. And if we could -- if we were hard pressed, we have enough information discussed it, but it's just we've been focused on the NIM and interest rate risk, but we're well along in the process.

Daniel Mannix -- Raymond James -- Analyst

That's great. Thanks, gentlemen. I really appreciate the time.

Malcolm Holland -- Chairman and Chief Executive Officer

Thanks, Daniel.

Terry S. Earley -- Chief Financial Officer

Thanks, Daniel.

Operator

[Operator Instructions] Our next question comes from the line of Gary Tenner with D.A. Davidson. Your line is open. Please go ahead.

Gary Tenner -- D.A. Davidson -- Analyst

Thanks. Good morning, guys.

Malcolm Holland -- Chairman and Chief Executive Officer

Good morning.

Terry S. Earley -- Chief Financial Officer

Hi, Gary.

Gary Tenner -- D.A. Davidson -- Analyst

I got into call a couple minutes late, so I apologize if I'm going over something you covered. But in terms of the loan growth this quarter and the breakout you provide, the originating loans versus acquired loans, could you just talk about that originated growth and how much of that actually represents loans transferring from the acquired to the originating bucket?

Terry S. Earley -- Chief Financial Officer

Yes, Gary, it is probably about a $100 million that transferred from the acquired into the originated bucket. As Malcolm said, we had overall total loans held for investment grew by about 10.7% linked quarter annualized. When you back mortgage warehouse out, that is about 4.8%.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. And then I just hear a moment ago, your full year loan growth outlook is 7% to 9%?

Terry S. Earley -- Chief Financial Officer

That's the back half. We think we can do the 7% and 9% in the back half.

Malcolm Holland -- Chairman and Chief Executive Officer

Excluding mortgage.

Terry S. Earley -- Chief Financial Officer

Excluding mortgage warehouse. Correct.

Gary Tenner -- D.A. Davidson -- Analyst

Ex warehouse, OK. All right. Perfect. Thank you for that. And then just, I don't know, if you mentioned this in your remarks, but any kind of updated thoughts on M&A? I think you've talked in the past about, maybe toward the back half of this year, getting clear of the conversions and everything related to Green Bancorp that you would maybe start thinking about that again, just wondered what your updated thoughts over there?

Terry S. Earley -- Chief Financial Officer

You know, candidly, Gary, the M&A question and thoughts have not been occupied much of my time for a lot of reasons. As I said I think many times we had to make sure we've got this deal right, do this conversion right, make sure this culture conversion goes well. That's where our focus is. I haven't had any M&A discussions.

Secondarily, I really do like our scale at $8 billion. I feel like we have an opportunity to do some really good things. So -- and then the other thing is just currency value. The dilution that it would potentially create right now doesn't make sense. So M&A is -- it's not, and it's never off the table for me. But it's certainly not something we're focusing on.

Gary Tenner -- D.A. Davidson -- Analyst

Yes. Perfect. Thank you.

Terry S. Earley -- Chief Financial Officer

Thank you .

Operator

And I'm showing no further questions at this time, and I would like to turn the conference back over to the speakers for any further remarks.

Malcolm Holland -- Chairman and Chief Executive Officer

Thanks, everybody, for the call today, and we're available the next couple days for any specific questions you might have. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Susan Caudle -- Investor Relations Officer

Malcolm Holland -- Chairman and Chief Executive Officer

Terry S. Earley -- Chief Financial Officer

Clay Riebe -- Executive Vice President and Chief Credit Officer

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Brad Milsaps -- Sandler O'Neill -- Analyst

Matt Olney -- Stephens -- Analyst

Daniel Mannix -- Raymond James -- Analyst

Gary Tenner -- D.A. Davidson -- Analyst

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