Columbia Banking System's (COLB) CEO Melanie Dressel on Q4 2015 Results - Earnings Call Transcript

| About: Columbia Banking (COLB)

Columbia Banking System, Inc. (NASDAQ:COLB)

Q4 2015 Earnings Conference Call

January 28, 2016 16:00 ET

Executives

Melanie Dressel - President and Chief Executive Officer

Clint Stein - Chief Financial Officer

Hadley Robbins - Chief Operating Officer

Andy McDonald - Chief Credit Officer

Analysts

Joe Morford - RBC Capital Markets

Jeff Rulis - D.A. Davidson

Matthew Clark - Piper Jaffray

Jacquie Chimera - KBW

Aaron Deer - Sandler O’Neill

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Columbia Banking System’s Fourth Quarter and Full Year 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Melanie Dressel, President and Chief Executive Officer of Columbia Banking System.

Melanie Dressel

Thank you, Nicole. Good afternoon, everyone and thank you for joining us on today’s call to discuss our fourth quarter and full year 2015 results, which we released this morning. The release is available on our website at columbiabank.com.

As we outlined in our earnings release, we achieved record earnings for the year with net income just under $99 million and diluted earnings per share of $1.71 and we had record new loan production for the year with just over $1.1 billion in originations. Deposit growth for the year was also a record at $514 million. In addition, we achieved record earnings for the quarter with net income of $26.7 million and diluted earnings per share of $0.46. This was the ninth consecutive quarter our bankers have achieved well over $200 million in new loan originations. And in fact, when we look at the top four quarters for new loans in our history, three of them were in 2015. We realize that our acquisition activities have created noise in our numbers, whether it’s a quarter-to-quarter or a year-over-year comparison. However, when we remove the noise, we are pleased with the growth momentum we have gained in non-interest income.

Service charges and fee income, payment systems income and trust and investment income have experienced double-digit year-over-year increases. The increase in non-interest income is a combination of organic growth and a well-executed integration of Intermountain. The same can be said for non-interest expense ratio, which Clint will touch on. It continues to improve through a combination of successfully implementing acquisition cost savings and an improvement in our legacy expense leverage.

Clint Stein, Columbia’s Chief Financial Officer, is on the call with me today. He will begin our call by providing details of our earnings performance. Hadley Robbins, our Chief Operating Officer, will be covering our production areas this afternoon. And Andy McDonald, our Chief Credit Officer, will review our credit quality information. I will conclude by giving you an update on the economy here in the Pacific Northwest and we will then be happy to answer your questions.

As always, I need to remind you that we will be making some forward-looking statements today, which are subject to economic and other factors. For a full discussion of risks and uncertainties associated with the forward-looking statements, please refer to our Securities filings and in particular our Form 10-K filed with the SEC for the year 2014.

At this point, I would like to turn the call over to Clint to talk about our financial performance.

Clint Stein

Good afternoon, everyone. As Melanie mentioned, our fourth quarter earnings were a record. This is the second consecutive quarter that we have reported record net income. However, we did have some noise in our numbers this quarter. So, I will take a few moments to highlight their influence on our reported results.

As mentioned in the earnings release, we reversed $3.1 million from a mortgage repurchase reserve. We recognized this liability at the closing of the West Coast Bancorp acquisition to reflect repurchase risk associated with residential mortgages West Coast had previously sold into the secondary market. The current period adjustment to this contingent liability reflects our updated estimate of probable losses. Net of tax, the impact of reported earnings per diluted common share was an increase of just over $0.03. In addition, we had acquisition expense during the quarter of $1.9 million, expense from FDIC acquired loan accounting of $924,000, and additional occupancy expense of $852,000 related to the disposal of closed French facilities. These expense items aggregated to $3.6 million or just over $0.04 per share. So, the combination of these four income and expense items resulted in a net reduction to reported earnings per share of roughly $0.01.

Our reported net interest income was essentially flat with the prior quarter, increasing a modest $125,000 to $81.8 million. Interest income on loans was down $884,000 from the prior quarter. Incremental accretion income accounted for $395,000 of the linked quarter decline, with the remaining $489,000 attributed mostly to higher net interest reversals in the current quarter than we experienced in the third quarter. The decline in loan income was offset by $994,000 in additional securities income as the average size of the investment portfolio increased $192 million to 26.9% of interest earning assets, up from 25.2% in the third quarter. The increase in the securities portfolio was the result of the robust deposit growth we experienced in the second half of the year.

Non-interest income before the change in the FDIC loss-sharing assets was $25.8 million in the current quarter, up from $24.1 million in the prior quarter. The increase was driven by the previously mentioned mortgage repurchase liability adjustment and record interest rate swap income tempered by declines in volume sensitive line items, such as service charges and other fees and gain on loan sales, which collectively were down $1.3 million from elevated levels in the prior quarter.

Reported non-interest expense was $66.9 million for the current quarter, an increase of $2.8 million from the third quarter. The increase was largely driven by acquisition expenses, which were $1.4 million higher in the fourth quarter and the previously mentioned $852,000 of additional occupancy expense associated with the disposal of closed branch facilities.

After removing the effect of acquisition-related expenses, OREO activity and FDIC claw-back liability expense, our non-interest expense run-rate for the quarter was $64.2 million. This is a $1 million increase from $63.2 million on the same basis during the third quarter and is primarily attributed to the additional occupancy expense. Excluding these three items, our non-interest expense to average assets ratio declined another 3 basis points to 2.89% during the fourth quarter.

The full year 2015 ratio of 2.96% is down 13 basis points from 2014. We are pleased to see this ratio trend downward even as we continue to make infrastructure investments in areas we believe will further enhance our long-term competitiveness and profitability. The uptick in occupancy expense this quarter is not the result of a growing expense base, but rather will produce a lower run-rate in future periods as shuttered facilities work their way off our balance sheet.

The $1.9 million of acquisition-related expense is broken out as follows: compensation and benefits, $522,000; occupancy, $897,000; advertising, $65,000; legal and professional, $158,000; data processing, $226,000; and other expense of $4,000. We believe the first quarter of 2016 is the last one that will be significantly impacted by expenses stemming from the Intermountain acquisition. We anticipate the total transaction cost will be $300,000 or $400,000 higher than our announced estimate of $18 million. However, our revised cost savings estimate of $9.7 million compares favorably to our merger model estimate of $8.6 million. So, while total transaction costs will be roughly 2% greater than our original estimate, the resulting ongoing cost savings exceeded our goal by $1.1 million or over 12%. The operating net interest margin compressed 9 basis points during the quarter declining to 4.09%. With the shift in asset mix during the quarter, the securities portfolio accounted for 6 basis points of the decline with the remaining 3 basis points attributed to the loan portfolio.

Now I will turn the call over to Hadley to discuss our production results.

Hadley Robbins

Thank you, Clint. Total deposits at December 31, were $7.44 billion, an increase of $124 million from $7.3 billion at September 30. About $121 million of this increase was in non-interest bearing DDA. On a full year basis, total deposits have increased $514 million or about 7.4%. At year end, core deposits were $7.13 billion, holding steady at 96% of total deposits. The average rate on interest bearing deposits was 7 basis points, down from 8 basis points in the previous quarter. The average rate on total deposits remained unchanged for the quarter at 4 basis points.

Loans were $5.82 billion at December 31, representing a net increase of about $68.5 million for the third quarter. For the year, loans are up $369.7 million or about 6.7%. The fourth quarter increase was largely driven by continued strong levels of new production in the amount of $272 million. Loan production for full year of 2016 was $1.118 billion representing the 7.4% increase over 2014. That was production for 2015, sorry. Line utilization declined slightly from 52.8% at September 30, 2015 to 52.5% at December 31, largely reflecting the decline in line balances of $20 million for the quarter. While line usage declined for the quarter, on a year-over-year basis, line usage increased about $115 million. Assuming historical patterns hold, we are likely to see line utilization drift down in the first quarter of 2016.

Line activity in our C&I portfolio typically pulls back at the beginning of the year, in part this was strength with the seasonal patterns of borrowing activity related to a few industries in the portfolio, notably agriculture. New production was predominantly centered in C&I and commercial real estate and construction loans. Term loans accounted for roughly $183 million of total new production, while new lines represented about $89 million. The mix of new production was fairly granular in terms of size. 20% of new production was over $5 million, 29% in the range of $1 million to $5 million and 51% was under $1 million. In terms of geography, 59% of new production was generated in Washington, 28% in Oregon and 13% in Idaho and a few other states.

Following the pattern of new production, net loan growth in the fourth quarter was concentrated in C&I and commercial real estate. C&I loans ended the third quarter at $2.36 billion, up about $8 billion from the previous quarter and $243 million for the year or 11.5%. Industry segments with the highest loan growth in the fourth quarter include transportation, public administration, finance and insurance. Commercial real estate and construction loans ended the fourth quarter at $2.97 billion, up $73 million and $173 million for the year or 6.5%. The mix of asset types was well diversified. For the quarter, the largest increases by asset type occurred in office and warehouse.

The ongoing low interest rate environment combined with competitive market conditions continued to put downward pressure on loan coupon rates. The average tax adjusted coupon rate for the quarterly new production declined from 4.02% in the third quarter to 3.96% in the fourth quarter, while the average tax adjusted coupon rate for the overall loan portfolio declined from 4.40% to 4.38%. In closing, the bank’s deal flow remains active, the pipeline volumes are comparable to levels seen in recent quarters.

That concludes my comments. I will now turn the call over to Andy.

Andy McDonald

Thanks, Hadley. For the quarter, the company had a provision of $2.3 million. The originated portfolio had a provision of $750,000, the discounted portfolio had a provision of $250,000 and the purchase credit impaired portfolio had a provision of $1.3 million. The provisions were driven by loan growth in the originated portfolio, net charge-offs in the discounted portfolio and cash flows not meeting expectations in the purchase credit impaired portfolio. We had net charge-offs of $3.2 million for the quarter, split between the originated portfolio, which had $1.3 million and the purchase credit impaired portfolio, which had $1.6 million. The discounted portfolios had mixed results, with the West Coast portfolio having $271,000 in recoveries, while the Intermountain portfolio had $532,000 in charge-offs. So when you put it all together for the quarter, net charge-offs amounted to about 22 basis points on an annualized basis.

As of December 31, our allowance to total loans was 1.17%, down from 1.2% at September 30 and 1.28% at year end 2014. Our allowance to non-performing loans as of December 31 was 317%, up from 221% this time last year. Key to the improvement in this ratio was the decline in non-performing loans during the year. For the quarter, non-performing assets declined 9%, primarily due to a reduction in OREO. We had a modest increase in non-accruals this past quarter of around $2.3 million. As a result, non-performing loans to period end loans increased from 33 basis points to 37 basis points. At quarter end, loans 30 days or more past due and not on non-accrual were about $10 million or 18 basis points. This is even with last quarter when past dues were around $11 million or 19 basis points.

With that, I will turn the call to Melanie.

Melanie Dressel

Thanks Andy. Economic expansion is continuing at separate trend here in the Pacific Northwest. We are closely watching market conditions and our leading economic indicators in light of concerns about international economic conditions, particularly in China though. Despite the weaker demand expected from China and Asia overall, the Kiplinger letter is forecasting that Washington will still rank number six in job growth, Oregon follows close behind at number eight and Idaho is at number 13. Seattle, Washington and Portland, Oregon also ranked high in readiness for the future. Dell commissioned Economist to ranked cities most prepared prosper and grow in such areas has ability to attract people engaged in and open to lifelong learning that drives innovation, businesses that drive in collaborative environments and infrastructure that provides platforms for innovation, among other factors. The results presented at Harvard’s Strategic Innovation Summit last fall placed the Northwest two largest cities in the top 10 out of 25, to write and ranking seventh and ninth, respectively.

According to a recent ranking by Business Insider, Washington has the top ranked state economy in the country based on seven measures; unemployment rate, GDP per capita, average weekly wages, recent growth in jobs, house prices and wages. 78% of all new jobs created have been on the private sector. Washington ports are the closest mainland U.S. ports to Asia. Shifts can arrive up to two days sooner to keep ports, such as Tokyo; and airfreight can arrive in Beijing in less than 15 hours. Combined, the ports of Seattle and Tacoma are the third largest container gateway in North America. The Northwest Seaport Alliance that consolidated container operation of the Port of Tacoma and Port of the Seattle reported dramatically improved results for 2015 compared to the prior year. Despite the global slowdown in the early 2015’s West Coast labor trouble, year-over-year, international container volumes are up 8%.

Oregon State economists said last month that he expects the state’s economy will continue at full throttle for at least another couple of years and is optimistic about the prospects for the 2015 through 2017 biennium. Oregon State’s population cracked the $4 million mark in 2015, a strong indication that the economy continues to improve and that the state is a very attractive place to work and live. Their 3.1% growth rate in payroll employment was faster than the U.S. rate of 1.9%. Oregon’s unemployment rate dropped to 5.4% in December from 5.7% in November. This decrease moves the state’s rate closer to the national level of 5%. In December 2014, Oregon’s unemployment rate was significantly higher at 6.7%. Oregon is expected to report well over $20 billion worth of exported goods for 2015. Over 86,000 U.S. jobs are supported by exports from Oregon.

Idaho’s economy appears to be fully back in expansion mode as well. 2015 job growth was 3.3%, well above the national average of 1.9% and is expected to continue in 2016 with growth of over 2%. The state was named by Forbes’ 13th in the nation for states with the fastest job growth. While agriculture is strong in Idaho with the state supplying almost one-third of all potatoes on the U.S. market, other industries are growing rapidly as well. For example, the state is home to one of the largest producers of computer memory in the world. Their top manufacturing product is electrical equipment, specifically computers and computer components. Micron Technology is based in Boise.

Idaho’s healthcare industry has seen revenue increase by 46% over the past 10 years and the state is second in the nation for growth in this sector. Tourism brings in $3.4 billion each year and employs more than 26,000 people. Idaho’s agriculture sector is not just potatoes, it’s actually quite diverse. The state is one of the top producers of cattle and dairy products and the record-breaking farm cash receipts of $9.7 billion in 2014 was a 16% increase over the prior year and was largely driven by the livestock sector.

You may know that we regularly survey our business customers throughout our market area to better understand their challenges, their opportunities and their thoughts on their economic environment. Our fourth quarter survey revealed the vast majority of those responding, actually 92% are confident about the future of their business and they continue to be optimistic about the general business conditions. However, concerns about the economy have risen, particularly among customers in the transportation and services sectors. Government regulations and taxes continue to be at the top challenges for most of our customers.

To summarize, the economy in our area continues to perform better than the country as a whole in most economic indicators. And along with our business customers, we are very optimistic about the future of the Pacific Northwest. Our priorities going forward continue to be growing loans, improving our operating leverage and effective utilization of capital. We continue to feel very optimistic about our opportunities in the Pacific Northwest, which helps us support our decision to pay another special dividend of $0.20 in addition to a regular dividend of $0.18. Both will be paid on February 24 to shareholders of record as of February 10. We are pleased to pay a special cash dividend for the eighth consecutive quarter. Both dividends totaling $0.38 constitute a payout ratio of 83% for the quarter and a dividend yield of 5.3% based on our closing price yesterday.

With that, this concludes our prepared comments this afternoon. And as a reminder, Clint, Andy and Hadley are with me to answer your questions.

And now, Nicole, will you open the call for questions, please?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Joe Morford. Your line is open.

Joe Morford

Thank you. Good afternoon, everyone. Sorry if I missed some of this in your comments, but I was trying to reconcile the strong loan production with a little slower growth and outstandings in the fourth quarter. Was there any increase in pay-downs maybe in C&I or some of that seasonal? And then just looking forward, how are you feeling about the pipeline and what that may mean for loan growth in the year ahead? It sounds like borrower confidence isn’t really an issue at the moment.

Clint Stein

Yes. Well, I think that as I mentioned there was some seasonal pullback in the fourth quarter on our lines of credit with outstanding usage on those lines declining by $20 million, which creates a headwind that you have to make up, which influences really the net loan growth for the quarter. And we had some pay-downs that also were occurred, but I don’t consider those two four out of the pattern that has happened throughout 2015. I think the strength of the pipeline, as I mentioned, it’s very consistent with what we have seen in the third and fourth quarter. And that I expect that we will be able to develop activity very similar to what we experienced in the previous quarter as a consequence of that. And again, there is the continued seasonal pattern that will take place, I believe, in the fourth quarter if it holds true to the past pattern. In 2015, first quarter lines dropped about $30 million.

Joe Morford

Okay, that’s helpful. I guess the other question was just looking – if you talked a little bit about the drivers to the strong deposit growth the past couple of quarters and prospects that may continue. Just trying to get a sense of what we may see with the size of the investment portfolio in the year ahead whether it will continue to grow or be a source of funding for some of those loan growths?

Clint Stein

Deposit growth has been strong. And we have had really the strength of deposit growth primarily as a result of building the C&I totals throughout the year. We have also had in this most recent quarter some new relationships that brought significant new deposits to the bank. And that my expectation is that we will continue to see deposits increase as we booked C&I in particular.

Joe Morford

Okay. Alright, thanks so much.

Melanie Dressel

Thanks, Joe.

Operator

Your next question comes from the line of Jeff Rulis. Your line is open.

Melanie Dressel

Hi, Jeff. Happy New Year.

Jeff Rulis

Hi, Happy New Year to you. Yes, just a question on the, I guess, drilling down a little further on the payoff activity, do you have that sequentially what that was in Q3 and Q4?

Clint Stein

I will have to do a little digging through the information I brought with me. If you have other questions, let me dig in.

Jeff Rulis

Sure. I will fire another one. I guess, just sort of...

Andy McDonald

Jeff, this is Andy. Just real quick. To add a little more color to Hadley’s comments, we did have line utilization decline like you said. But in the term loan book, we did have a number of multifamily type loans moved to the secondary market. We were able to replace that production with new construction loan and new construction activity, but that was not funded in the quarter. So, it counts in our production numbers, but you don’t see it in outstanding numbers. So, our commitments for the non-revolving lines actually increased, while our utilization in the non-revolving commitments actually declined.

Jeff Rulis

Interesting. Okay, thank you. Yes. And then I guess a question on the margin, I wanted to kind of revisit the model in general. I think historically, you have mentioned the margin has stayed between 4% and 4.25% on a core basis. And I guess I had revisited that in a while and I just wanted to – as the platform changed the interest rate environment different or is that still a kind of the gutters, if you will, to guide us on margin of the core basis?

Clint Stein

I will take that one, Jeff. This is Clint. Actually, what we have said is historically our margin throughout the 20 plus year history of the company has been generally between 4.25% and 4.5%. The last couple of years, we have said we are going to test the bottom end of that range and I think that’s kind of where we have been. And when I look at the operating margin, I guess I don’t feel – while it would be nice to say that it was still 4.18% like it was in the third quarter or that it expanded, I guess I don’t feel bad about the 9 basis points of compression because of what led – what the drivers were, very strong deposit growth in the second half of the year. We worked really potently to put that money to work as quickly as we could, which was in the investment portfolio. So when we look at overnight funds, we kind of minimized the impact of having the money sits, earning 25 basis points. But it did impact the margin, but it helped the revenue, if all things being equal, the investment portfolio revenue was up nearly $1 million for the quarter. So I guess and we have talked about this in the past amongst ourselves is that while the margin is very important to us and we are very proud of the margin that we have and even today as we calculated it at 4.09, we think it’s still a good margin. It’s kind of secondary to growing revenue and things that will flow to the bottom line and increase our franchise value through things like deposit growth.

Jeff Rulis

Okay. Thank you.

Operator

Your next question comes from the line of Matthew Clark. Your line is open.

Matthew Clark

Hi, good afternoon. Hi how are you.

Melanie Dressel

Good. How are you?

Matthew Clark

Good, hanging in there. First one, I guess on in terms of the securities purchase in the quarter, just curious what you guys were buying?

Melanie Dressel

Clint?

Clint Stein

Well, we are sticking with kind of what we have always done. And during the quarter, aired better rated munis. We are looking at some mortgage-backed CMOs as long as the structure for the cash flows is – meets our criteria. We are getting just a little over 2% with the mortgage backs. On a tax equivalent basis, we are in the low-3s on the munis. I think the important thing to note is that the duration of the investment portfolio stayed pretty stable. It’s still sub-4, it’s actually 3.7 at year end, but we do an instantaneous 300 basis point rate shock. Duration only extends to 4.1 years and that’s something that’s been really important to us. And I think it gets back to maybe what Joe was getting at, which is redeploying investment cash flows into the loan portfolio and certainly something that we would welcome to have happen. And when the time comes, we don’t want to have a bunch of unanticipated extension in our cash flows. So does that help with what you are looking at?

Matthew Clark

Yes, that’s great. And then on analysis expense run rate, the $65 million in the quarter, obviously, that was the right on the land for sale, which is thinking about that run rate going into the first quarter whether or not there is any other moving parts we need to think about?

Clint Stein

So that’s – it’s a great question and so I will take a minute to just clarify the way that we calculate that is we try to have comparability for all of you when we are talking about this ratio because we are really looking at it over a trend of quarters and years. So we take out acquisition-related expense. We remove any OREO activity, whether it’s a net benefit or a net cost because we figured that those are things that occur over a longer period of time and aren’t necessarily reflective of that quarter’s individual run rate. And then the FDIC claw back liability is the other piece that we take out of that and that’s really kind of a mass exercise and there is nothing we can do. We calculated each quarter and it is what it is. So when we take those things out, I come up with $64.2 million for the run rate. On the same basis, we were $63.2 million in the prior quarter, so that it’s up $1 million. We had $852,000 related to what I would say are non-recurring occupancy expenses related to branches we have closed over the last 3 years. And so I guess, looking forward we were 2.89 on that ratio for the fourth quarter. A year ago we stated our goalpost Intermountain for the fourth quarter this year was to be in the low-2.90s. Now that we are 2.89, we certainly would hope that we are not going to go back above 2.90. So there is always things from one quarter to the next as we continue to look at rationalizing our branch network and just the things that we want to do that improve our run rate long-term. So I think that’s why we focus really on the ratio more than the absolute dollar amount because it kind of gives us – it gives us an indication of the leverage we are able to achieve if we make an investment, whether it’s the technology investment or investment teams or anything along those lines.

Matthew Clark

Okay, great. And then you are going to be crossing $9 billion here shortly, obviously still a ways off from $10 billion, but just any update on the M&A front in terms of the opportunities out there and whether or not that’s something feel any pressure to deal or not?

Melanie Dressel

We never feel any pressure to do an acquisition just for any other reason other than it makes us better company on a combined basis. So I don’t really see M&A is being driven by going over the $10 billion mark. Certainly, it would be a lot better if we did go over $10 billion to go over it in a meaningful way. But we are going to go over $10 billion, whether we do it organically or not. So we were always open to look at potential partners for M&A activity, but we are also very focused on organic growth.

Matthew Clark

Okay. And then last one just on the tax rate in terms of the expectations for this year, on an operating basis, I have got 30.5 in the last couple of years, I am just not sure if that’s – do you think that’s right or not?

Clint Stein

I hesitate and the only reason I hesitate is because of the uncertainty of legislation around taxes. Oregon has a very onerous proposal going on around right now that for us would be a few million dollars if that thing ever got off the ground. But I think that as it relates to what we know today for 2016, I think we are going to be right in that same range that we have been in the last couple of years. I don’t see anything that materially shifts our effective tax rate.

Matthew Clark

Okay, thank you.

Melanie Dressel

Thanks Matt.

Operator

Your next question comes from the line of Jacquie Chimera. Your line is open.

Melanie Dressel

Hi, good afternoon.

Jacquie Chimera

Melanie good afternoon, I just wanted to see what drove the up tick in merger charges in the quarter. And then a little bit of clarity, I think it was one of the prepared remarks that current quarter charges would cause future benefits, I am guessing it has to deal with branch closures that you had mentioned, but I know those have been prior as well, so just some color on all of that?

Melanie Dressel

Clint?

Clint Stein

Sure. No, you are exactly right, Jacquie. It’s related to, well for the quarter the largest line item that was impacted by acquisition expense was occupancy at $897,000. That has to do with additional branch consolidations and that’s really what’s left when we look into the first quarter. And the expectation that we are going to just not ride over the top of $18 million estimate, the vast majority of that’s going to hit the occupancy line item.

Jacquie Chimera

Okay. So there is all else equal, if I remove the merger charges and then I remove the mark on the other branches during the quarter, occupancy could potentially tick down in 1Q?

Clint Stein

I think that’s a fair way to look at it. If you – yes, if you kind of normalize the noise that we had from both through acquisition expense and then just through our regular expense.

Jacquie Chimera

Okay. And then my next question if you could just quantify, I am assuming there is limited, if any, impact from the rate increase on the deposit book, but just what it means for the loan portfolio?

Clint Stein

Yes. We haven’t moved our deposit rates at all. In fact, we rounded up to 4 basis points. I think that as we have had various conversations the last quarter or so, we have talked about that our total cost was round down to 4. We were 3.9%. So, we round up to 4%. So, we haven’t really had the competitive pressure to look at a rate increase. On the loan side, we saw in December, our coupons on originations in December were up 2 to 3 basis points, but that’s a little bit of I guess that’s looking at the portfolio as a whole, but the thing that heavily will remind me of were originating loans, whether it’s fixed or prime or LIBOR and that mix from quarter-to-quarter in this last quarter we had probably I think the highest amount of LIBOR-based originations that we have had for any quarter in the last several quarters and those rates tend to be lower anyway. So, I would say it’s nominal. There is a little bit of a benefit, but it’s nominal at this point. And I am not optimistic based off of the FOMC’s comments yesterday.

Jacquie Chimera

That’s fair. Okay, that was all I have. Thank you.

Melanie Dressel

Thanks, Jacquie.

Operator

[Operator Instructions] Your next question comes from the line of Aaron Deer. Your line is open.

Melanie Dressel

Hi, Aaron.

Aaron Deer

Hi, guys. I think, Jacquie, actually just asked from my last question. There was one other I have here. I am wondering if given the pullback in the market when the Board was discussing the special dividend if there was any discussion given to possibly doing any share repurchases here if that’s still just not really part of the equation?

Melanie Dressel

It’s always a conversation in the boardroom. So, I have – it’s just one of the many options that they consider.

Aaron Deer

Is it – is there a pricing consideration or there is just general position by some members or are there – I am just curious what the considerations are behind it?

Melanie Dressel

Well, we are still trading at 2x book, tangible book, so.

Aaron Deer

And that’s kind of the fee...

Melanie Dressel

Yes. Yes, and I haven’t had the nerve to look and see what the market did today.

Aaron Deer

You are up.

Melanie Dressel

Good. And hopefully, everybody else was too.

Aaron Deer

There was a fair bit. I agree with you.

Melanie Dressel

About the high size.

Aaron Deer

Alright, that was it for me. So, everyone have a good afternoon.

Melanie Dressel

Okay, thanks Aaron.

Operator

There are no further questions at this time. I will turn the call back over to the presenters.

Melanie Dressel

Thanks everyone for joining us and we will talk to you next quarter.

Operator

This concludes today’s conference call. You may now disconnect.

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