Dime Community Bancshares, Inc. (DCOM) Q4 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the fourth quarter and fiscal year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Kenneth Mahon, President and CEO. Please go ahead.

Thank you, Sean, and thanks, everyone, for joining us this evening. On the call with me today are our newly minted CFO, Avi Reddy, you may have seen the announcement the other day; and also Chief Accounting Officer, Leslie Veluswamy. So I'm really starting today at 4:30. So in our prepared remarks I'm going to pick up some of the broad themes that underline the earnings release and also our outlook for fiscal year 2019. I'll keep my opening remarks brief, and then we'll leave some time for questions at the end. As many of you who follow us know at the beginning of 2017, two years ago, this month, upon the retirement of our long-serving CEO, Vinny Palagiano, we undertook the strategy of transforming the company's monoline multifamily business model. We chose a company vision that of becoming a robust community commercial bank. Primary emphasis for the change was because we believe the community commercial bank model provides the possibility of better returns for shareholders in the future, given changes in the operating landscape over time in the form of better returns and equity and better trading multiples to book value and to earnings. Dime's business model transformation has been focused on producing a higher-quality balance sheet structure summarizing these four financial metrics. First, growing our checking account balances, growing relationship-based commercial loans that have good risk-adjusted returns, increasing low-cost business deposit sourced both from our commercial customer and from our branches and continuing to reduce our CRE concentration ratio. So let's first start with growing our checking account balances. On a year-over-year basis, the sum of non-interest-bearing and interest-bearing checking accounts increased by 18.5% to $502 million at the end of December. Every dollar of low cost deposits that we raise increase the franchise value of the company. One of my favorite Tom Brown expressions is fearless focus. So from the CEO to our entire customer-facing staff, our incentive plans are designed around incenting low-cost deposit growth. Second, our second objective, financial objective is growing relationship-based commercial loans. The Business Banking division's portfolio grew to $648 million at the end of the year compared to $236 million at year-end 2017. Portfolio now represents 12% of total loans. Our net portfolio growth target for our first year in business was $250 million, which we came close to achieving. We weren't really sure at that point what our capabilities are going to be. For 2018, however, we established a net portfolio growth target of approximately $315 million and actually achieved $412 million of net portfolio growth for the year, surpassing our own internal target by over $90 million, 30% of the - higher than the beginning portfolio objective. We doubled the number of teams in the year and now have six productive lending teams. Increasing low-cost business deposit sourced is the third objective. Total commercial banking deposits from our Business Banking division and our legacy multifamily division increased by almost 25% or $85 million on a year-over-year basis and now comprise 10% of total deposits as compared to 8% a year ago. And our fourth targeted balance sheet metric is the CRE concentration ratio. We reduced Dime's consolidated CRE concentration ratio from 775% at the beginning of the year to 703% at the end of 2018, just a couple of percentage points from being with the headline number of being under 700%. As described above, we've made good quantifiable progress on all four fronts, and we only plan to get better in the year ahead. The last two years were mainly occupied with building the foundation in both people and culture for successful execution of the business model. For me and our executives, 2019 will be a year of back to the basics. Just in the past two years alone, we've been busy. We've entered these three new business lines, that being Business Banking, residential and SBA. We opened three new branches this year. In 2018, we completed the conversion of our legacy core technology platform. We've installed a new commercial loan origination system. And we brought in a tremendous number of talented new hires with previous commercial bank experience. It's now incumbent on the team to fully leverage these investments in people and systems and to continue to drive EPS growth. Despite all these significant investments and the costs associated with hiring relationship bankers and support staff for our Business Banking division, we were able to keep total core non-interest expenses for the year at approximately $86 million, which was within the range we have provided at the start of the year. A continuing hallmark of Dime's culture over time has been managing expenses prudently, and we remain committed to keeping operating costs down while simultaneously reinvesting in our business and growing our relationship-based Business Banking division. Managing down operating costs is one of the profitability differentiators between high-performing commercial banks and the rest of the sector. That's what we would like to be. There is been another important ancillary benefit that this Business Banking division build-out has had on how we operate our legacy multifamily business. Historically, Dime had only multifamily business to achieve balance sheet growth. We basically took what the market gave us in terms of rates and deposits. Now we have the flexibility to look for deals that meet our return hurdles, while keeping in mind our goal to improve the quality of the balance sheet. For example, in the fourth quarter, our multifamily group originated approximately $100 million worth of loans at a weighted average rate of about four and three quarters, while also bringing along more deposits and still utilizing our historically sound credit quality box and parameters that we've always applied to the multifamily business. Typical rack rates in that portion of the market were closer to four to four in a quarter. So we've achieved substantially higher yields in the loans that we did bring on. Very proud of the group over - in the multifamily team because they've adopted to the new mission of focusing on important relationships, solid margins and returns, while we're chasing balance sheet growth. In addition to the multifamily group, our residential lending operation is now fully online. We expect this group to remain a small but important part of our overall balance sheet as it serves four purposes. First, it enables us to serve the personal loan needs of our Business Banking customers and deepen those relationships. We already had success on several large and important business relationships, but we now provide the home mortgage to the business owner and hopefully, have created stickier relationship. Second, it enhances the Dime brand in our branch markets and then is another sales group for our retail staff. Third, growth in the residential portfolio also reduces our CRE concentration and last and, importantly, it is another added asset class to help manage the balance sheet and modulate growth depending on risk-adjusted returns we see for each business. This team was a lift out from a former in-market bank. So once we got the technology, infrastructure in place, they became productive almost immediately. To summarize, the Dime Commercial Bank business model is today a three-legged stool. Relationship Business Banking, a more profitable multifamily model and residential lending. If you - for those of you who have seen our investor slide deck, one of my favorite pages in that deck is one where we present. We compare our loan yields and our deposit costs to peer group of about 13 banks in the local market. As of the quarter end at September 30, it's the latest period for which we have numbers, Dime logged the median loan yields of the peer group by about 55 basis points. So the median yield of those 13 banks in the loan portfolio was 4.28. Dime at September 30, was 3.73. So we still say today what we said a year ago, there's a lot of runway in our ability to pick up yield without growth in the balance sheet. Now we believe that a year ago and we're happy to say this, we're starting to see the results of that now. The weighted average rate on our total Business Banking originations, which would be the real estate and C&I combined, in the fourth quarter was 5.38%, which is already higher than the median. So I'm confident that we have the infrastructure in place to make up the remaining ground versus the peer group. So at least reach the median yield. The deposit side of the equation is similar. If you look back at the fourth quarter of 2016, just prior to when the Federal Reserve started to raise interest rates in earnest, Dime was almost dead last from a cost of deposit's perspective. When compared to the 13 peer banks. Now our cost of deposit is actually 20 to 30 basis points lower than some of those same competitors. That said, we know we can do better in terms of improving our non-interest bearing deposit percentages to that of high-performing commercial banks, which we typically see in the 20% to 30% range of total deposits. If we move on to - a few words about the quarterly earnings per share. The details are in the press release. I just want to point out a few things and then we'll end up. The core - we're very pleased that core EPS showed up at $0.34 this quarter. Pleased but not surprised. It's up 6.3% on a linked-quarter basis and that both have reported margin and the margin excluding prepayment fees expanded also in the quarter. This was a direct result of our relationship-based build-out and the weighted average rate on loans trending higher, as the Business Banking portfolio became a larger percentage of the overall balance sheet. Our deposit betas also slowed as the cost of deposits was up only 9 basis points in the quarter versus 12 basis points in the prior quarter. Non-interest-bearing deposits will continue to grow. As I said earlier, we are focused on keeping deposit betas as low as possible while managing the loan-to-deposit ratio within a range of 125%. We ended the year with a loan-to-deposit ratio of 124%. Dimes' reported tangible book value per share at the end of the quarter was $15.14. The credit quality continues to remain pristine with nonperforming loans to loans of 4 basis points, 0.04, 4 basis points and 30- to 90-day delinquencies of less than $500,000. It was $531,000 at the end of the prior quarter. It remains a phenomenal asset quality track record of which we are proud. Now let's move on to the outlook for fiscal year 2019. We expect net portfolio growth for the Business Banking division of at least $650 million to $700 million. That's a net portfolio of growth. As mentioned previously, we beat our internal ending portfolio target for fiscal year 2018 by over $90 million and see strong demand due to our responsive customer focus platform and known brand name in the marketplace. As Dime shows longevity and commitment to commercial bank model where we are being shown more opportunities to add lending teams. As for total assets, we'd like to see some modest level of balance sheet growth to leveraging investments we have made in infrastructure. We are ultimately the most focused on improving the quality of our balance sheet. We refer to that as sort of building the new balance sheet inside the old balance sheet. The year-end 2019 total asset number will be a function of future payoffs in the multifamily business, which is still a question in the next couple of years. That said, we have been aggressive purchasers of our own shares in the second half of 2018. We have an active share repurchase plan in place, and we'll take advantage of the volatility in the sector valuations by buying back our shares. We have the capital to do so. If we segue into capital management, we expect to run the company at approximately 8.5% tangible common ratio in 2019. We're above that ratio now by about a quarter over percent, tangible common ratio is eight three quarters. Repurchasing shares at our recent trading metrics produces a very, very short-term tangible book value earn-back period. We always try to take actions that produce superior long- and intermediate-term returns for our shareholders. Dime has always been a good steward of capital and has grown tangible book value per share by approximately 46% over the last 5 years and 123% over the last 10 years. When you include $0.56 annual dividends, cash dividends that we have maintained, this creates an economic value creation to our shareholders of over 73% over 5 years and 205% over the last 10 years, respectively. I'd also note that in the second half of 2018, Dime repurchased approximately $26 million of common stock. That represents 3.5% decrease in our common shares outstanding for the full year when compared to 2017. The annual cash dividend in 2018, that imputes - plus the repurchases imputes to an approximately 90% payout ratio for the year. In 2019, we remain committed to returning capital to our shareholders keeping in mind our 8.5% tangible common ratio target. Returning again to the outlook on the balance sheet liquidity, that was built up significantly over the past 18 months. It is now at a level we're comfortable with. It's more in line with our peers, and we don't expect any material increases from current levels. As for net interest margin, for all the usual reasons, we don't provide quantitative NIM guidance. It spans on a number of extraneous factors, including the Federal Reserve, the shape of the curve, future competitive pricing environment for deposits. What we'll say on the NIM is this, the weighted average rate on $648 million of Business Banking portfolio was 5.22% at year-end 2018 and was accompanied by $188 million of total self-funding deposits at a weighted average rate of 51 basis points. This leads to a Business Banking portfolio NIM in excess of 3.75, far above our NIM on earning assets today. While there are various factors that will affect the changes in NIM on a quarter-to-quarter basis, the medium to long-term trajectory of our NIM is clearly upward. I spoke about the fact that the Business Banking portfolio is expected to become a larger and larger percentage of the balance sheet over time. Additionally, as disclosed in our press release, we have almost $1.5 billion of repricing assets, which have a fairly low weighted average coupon of approximately 3.43% to $1.5 billion of repricing multifamily loans over the next 2 years. That should help with the upward trajectory of NIM. So what I'll comment here, too, when it comes to the repricing assets, many of you know historically in this business, a lot of those loans do not reach their repricing period, while tend to come in early. So it's $1.5 billion based on their contractual repricing date. The - it could be possible that we see repayment happen faster than what the contractual repricings would indicate. Non-interest expense for the fiscal year 2019 should be in the range of $88 million to $90 million. This estimate does include the cost of hiring new lending teams to meet our aforementioned portfolio growth estimates for the Business Banking division. Finally, in fee income, while 2018 was a slow year for us in the SBA business, we did receive PLP status and hope to grow the business line in 2019. Recognizing the SBA shutdown right now, that could put a crimp or at least slow progress down. Secondary market premiums have also been down in latter half of 2018. So the business is not quite as profitable as it was when we thought about to build that a year ago, but it's still a very good source of non-spread revenue. And we have a very low contribution in 2018 to the revenue line, probably in the range of $200,000 to $300,000. So it's not going to be a material change. It shouldn't be materially lower than that - materially lower than that in 2019. We also need to optimize our new core technology platform to help drive higher commercial banking fees. So we put the system in. There are a lot of new bells and whistles on the system that we have yet to bring online, but we expect to do that in the first half of the year. And lastly, the tax rate, we expect that to be approximately 25%. So with that I'll ask, Sean, if you please open up the line for questions.

[Operator Instructions] Our first question comes from Mark Fitzgibbon with Sandler O'Neill & Partners. Please go ahead, Mark.

Hey, guys. Good afternoon. I just - maybe let me start by saying congrats to Avi and Leslie.

Thank you.

Thank you, Mark.

You're welcome. Ken, just to clarify one of your comments. I think you said net portfolio growth of $650 million to $700 million. So that's exclusive of any runoff in the multifamily portfolio, and does that imply you're going to see balance sheet growth this quarter?

No, Mark, I just want to clarify. So Ken's comments said the Business Banking portfolio is $648 million at the end of the year. That particular portfolio, we're guiding towards $650 million to $700 million of net growth for that portfolio inclusive of payoffs in the Business Banking portfolio. So you should expect that portfolio at the end of 2019 to be between $1.3 billion and $1.35 billion. In terms of the multifamily portfolio, as Ken mentioned, it's a bit hard to predict payoffs over there. We'd like to see some overall growth in the overall balance sheet, but we're not going to be providing projections for that particular portfolio. One of the things that Ken did mention is we're very focused on making sure the risk-adjusted returns on that business are profitable to us. As Ken mentioned, we originated over $100 million of loans in the multifamily business at 4.75 in the quarter. So for that portfolio, if we're able to get good rates, there's a possibility that the portfolio doesn't go down as much as this last year, but it could really going to be a function of market rates and where we see the return over there.

But am I thinking about it the right way, Avi, that if you have roughly $613 million of multifamily loans repricing and let's just assume for argument's sake most of those go away, and you originate another $650 million of new loans. So the balance sheet isn't going to grow much this year? Is that what I should read into it?

No, Mark, the $615 million of repricing loans, the function of those loans that will stay with us, the function that will go away and refinance away, right. So when you think about our overall balance sheet, what we're really asking to do is to split our portfolio into two. On the Business Banking side, right, that portfolio is $645 million. That portfolio is going to grow somewhere between $650 million and $700 million. The multifamily portfolio, which is the remainder of the portfolio, that's going to be a function of payoffs. Payoffs are going to be determined by borrowers that do have repricing loans coming up or, as Ken said, loans that are 1.5 year out, they could also come in to refinance. That's really going to be subject to where we see rates in the market. And whether we think the risk-reward of doing those loans are advantageous to us. What we're really going to do is make sure that, as Ken said, we're going to manage our capital based at around 8.5%. So if we don't see much growth in that particular business, we'll be sure to use our capital to buy back shares and to drive earnings growth with that.

Mark, if I could add, the way that - that's the wildcard in projecting next year what's going to happen with the repricing multifamily loans. They reprice at 2.50 over the Federal Home Loan Bank 5-year rate. That would probably put those loans today at over 5%. I can - I wouldn't guarantee it, but I have a pretty good idea you're going to see rates lower than that in the multifamily business in 2019. In which case, we have two things we can do. We can either step up to the plate and give them a lower rate or we can let the loans walk and reinvest in our business. I mean a good deal for us would be will we keep enough of our existing portfolio with what the production we're getting out of Business Banking area enables us to grow assets a little bit. But we wouldn't even try to predict that. They're very volatile, and it's hard to predict what the consumer behavior is going to be in the multifamily market.

Okay. And then, secondly, what sort of goals have you set for SBA volumes and resi mortgage volumes this year?

Sure, Mark. On the SBA side, we just recently made it higher. We have PLP status, so that helps us walk with the borrowers more expeditiously. Last year, we were a little headstrong because every loan that we do, we need to send it to the SBA and get it approved over there. I think we'd like to see the fee revenue from that business somewhere in the $1 million to $1.5-ish million annual run rate by the end of the year. It's a fairly small number. That said, still believe he run the group for us. He runs our Business Banking group. He's running a fairly successful SBA group in one of his previous banks. So think about in the $1 million to $1.5-ish million but this particular Mark, we only have around $200,000 to $300,000 of fees from that business. So it's fairly slow for us, but I think once we have the PLP status, we're hopeful that it produces more over time.

Thank you.

Our next question comes from Collyn Gilbert with KBW. Please go ahead.

Thanks. Good evening, guys. If we could just start on the deposit side, just a couple of questions, Ken, you'd indicated on your comments, one of the goals is to continue to grow non-interest-bearing deposits. Is the objective to try to have growth in '19 be comparable to what you guys put up in '18? Or should we kind of think that maybe that growth rate would start to slow a little bit?

No, Collyn, in '18, we grew our non-interest-bearing deposit ratio by approximately 200 basis points, right? So if you think about the growth we've outlined in the - in our Business Banking division, those loans come with associated deposits. So there is $188 million of total deposits in that particular business and the big chunk of that - that's non-interest-bearing. So as that portfolio grows and as that portfolio grows an even greater amount than it did the previous - because the previous year, our growth was only $400 million for the whole portfolio. You should expect at least that 200 basis points growth in non-interest-bearing deposits. The other thing that we have going on at our branches is we're really focused on business deposits at the branches, and we've made a lot of cultural changes at the branches and really focused on the business customer and that's really starting to bear fruit at this point. So I said, a minimum, our expectation would be to continue growing that in the 200-ish basis points and upwards area over time on an annual basis.

As the year went along in 2018, we were bringing in more branch managers from commercial banks who are used to getting out from behind the desk and going out and knocking on doors. That wasn't the typical first mentality when it came to deposit raising. You'll see more traction in that area in 2019.

Okay. Okay, that's helpful. And can you just remind us what the online or the Internet balance is or was at year-end? And what the blended rate was on that?

Sure. So at the end of the year, Collyn, the Internet was around $290 million and the blended rate on that was around 1.45.

Okay. And do you have - I know, there was runoff in that this quarter. Do you have it sort of a targeted balance or size that you want that segment of the deposits to be?

Great. So more - a lot of the remaining customers calling on that base, a lot of them are from the tristate area, the people who recognize the Dime brand. They've stayed with us at a rate that's not market leading at this point. So we'd hope that the attrition slows over there. At the end of the day, we're trying to move people towards the branch channel and really have more of a relationship with them than just an online relationship. So we'll use the channel as we see fit in terms of managing our net interest margin position, our liquidity position. And so we want to be flexible there. I think one of the things Ken always says is we're experienced with the business. We know how it works. We can turn it on if we want to, but right now the focus is really improving the quality of our balance sheet and by growing on non-interest-bearing deposits.

Okay. Okay, that's helpful. And then just curious, Ken, you said that the multifamily - I think, if I heard you correctly that the multifamily rate that you guys are offering now, is it 4.75 [ph] And do we assume by your comments that that's above the market rate then?

Yes.

Right now being offered?

Yes.

Okay. And what is it - what's happening? Why are you able to get those better than market rates on some of that production?

A lot of it - the people we've been able to keep - keep customers have been customers of ours for a long time and there's a certain amount of - it's the idea do I want to go through and have to go through this process with the new bank or is it just easier for me to accept the rate that's higher, but not so higher - not so much higher that it's painful and just roll it over into the rate, the rate that we give them. So it's lower than what it would be on the repricing and, as I said here, with a 250 point margin. But it's not as low as they could get if they went back to their broker, for example, and try to shop the loan around. So there's always a portion of your customers that's going to stay with you, and that's kind of sort of what we're seeing here. Not to mention the fact - and I know that it sounds trite but when it comes to service quality, that part of the business was always a machine for us. And that hasn't gone away. The people are still running our business, the service providers we use, the appraisers we use, the attorneys we use, they know that business pretty well. So what I found that the big difference for me between the business we're doing now under Stu and Conrad in Business Banking and the multifamily business is the multifamily business - from month-to-month, you can modulate what you want to do in that business. The lead time on the business loans, it could be months and months.

Okay. Okay, that's helpful. And then just, Avi, can you just remind us how we should be thinking about - I know you said it before, but since we only get these calls once a year, how to be thinking about the provision in your reserving and just as you guys are adding the Business Banking kind of what you're thinking about in terms of what historical loss rates have been within some of those portfolio? I'm just trying to get a sense on some of the credit costs tied to what you're adding.

Yes. So I think, in general, Collyn, any net growth in the real estate portfolio, the multifamily and the Business Banking, it's around 40 basis points in terms of net growth in the portfolio. And then on the C&I side, any C&I loan is around 150 basis points. So any time we grow loans, it would be 150 basis points.

Okay. All right. That's helpful. Okay, I'll leave there. Thank you, guys.

Our next question comes from Matthew Breese with Piper Jaffray. Please go ahead.

Hi, everybody.

Hi, Matt.

I was hoping to go back to the margin guidance. I know you didn't want to get too far into it. You said the medium, long term, you could see some upside. But do you think we could at least see stability in the near to medium term? And have we hit an inflection point? That's the real question.

Matt, I think you're asking the same question a different way. So we'll just leave the modeling up to you. I think what we would point out is when we had the call in the first half of 2018, I think what Ken mentioned then is, look, I mean, it's hard to predict the margin quarter-to-quarter. But if you take a view that we have two different balance sheets, one that has a NIM of 3.75 [ph] and one that has a lower margin, you can obviously see some of our peers in the regular multifamily business that have only one way of generating growth, obviously, we have multiple ways at this point. And you make a certain assumption of how quickly that's going to grow the Business Banking piece. You're going to end up with a higher medium-term margin, right. And so - yes, I mean, look, quarter-to-quarter, it's tough to say on the first quarter of the year, there's the day count issue. We have some escrow deposits at the end of Q4 that we usually pay out that helps the margin slightly in Q4. But I would say, a year from now, the margin should be definitely higher than what it was now. And we're very pleased that in this quarter, the core margin expanded. In terms of the modeling, we'll leave that up to you.

Okay. And if you had to describe the interest rate position of the balance sheet, liability sensitive neutral asset-sensitive, how would you do there right now?

Great. I mean, I think every bank, they have disclosures in the 10-K and 10-Q and every bank uses different assumptions. The word asset-sensitive, liability-sensitive, it's - you can make different conclusion from what different people say. What I think we would say is that over the next couple of years, we have $1.5 billion of repricing loans. It's really going to give us an opportunity to reprice several balance sheet at higher yield. We're also changing the composition of our deposit base. So what we really want you to take away is regardless of the interest rate environment, we've created a couple of different business lanes and not to downplay the residential side as well, which if yields pick up in that. That could help us as well. That's going to help us grow our margin over time.

Okay. And then turning to the Business Banking division and the funding there, I think you said it was $180 million funding $648 million, so roughly 30% self-funded. But I know it's usually easier to get the loan before the deposits. And so as we think about the next incremental $650 million in Business Banking loans, should we expect the similar fund rate or better or worse? Or what are your expectations there?

Well, I mean, we, of course, like it to be the same. I mean, that said, it's a competitive market. It's just going to depend on where rates are at when - when the Fed was raising rates, a lot of people who wanted to - who would have otherwise put money on a non-interest-bearing deposit, they wanted the money market. If the Fed doesn't raise and if the Fed does drop it at some point, maybe people will keep money in a non-interest-bearing deposit. So it's really, again, when you look at good commercial bank like Ken pointed out, 20% to 30% in that, the mix between non-interest-bearing and interest-bearing, it depends on a customer-by-customer basis. At this point, the 16 we have are fully online. We'd be happy to replicate what we had right now, but regardless of that, the non-interest-bearing percentage should continue to grow - go up over time.

The incentive plans are written in a way that the business development officers can return back to the customers they made loans to last year. And still got credit for the deposits they bring in this year on those customers. So they're really incenting on our balance sheet. So if they didn't get a single deposit for many loans they made this year but doubled the amount of deposit they got last year, they get credit for it.

I mean, the other thing I'd point out, Matt, is obviously the loan growth target for this year, it's $650 million to $700 million. That's obviously higher than the $400 million. So at times, if we're trying to manage the balance sheet, you've got mix the reality of growing loans versus getting deposit. So the loan target is very high. If we're able to accomplish the same percentage, we would be extremely happy. If it's a little bit lower, it's still - it would help us push up the non-interest-bearing percentage over that 200 basis points bogey that we talked about full year.

Understood. Okay. And then I just wanted to get a sense for the appetite on the stock repurchase. Is that something at these levels, you're looking to execute on?

Yes. Matt, I mean, again, we won't share our secret sauce. But where the stocks trading at, the en banc [ph] is fairly shot. Ken said, we're committed to managing the capital base at around 8.5%. We won't to rule out anything. We were aggressive purchasers when the shares went to 17. We'll look at the stock price. There could be events in Q1 with Brexit and with other things that could cause market volatility. And if I stock out the funds, look, there are other ways to use our capital. And so we won't to rule out anything, but we look at it all the time.

Understood. Okay. That's all I had. Thanks for taking my questions.

Our next question is follow-up from Collyn Gilbert. [Operator Instructions] Please go ahead.

Actually, that was - I did want to follow-up on the share repurchase topic as well following up on Matt's question. So I appreciate may be an unwillingness to sort of give your secret sauces to the strategy going forward, but I'm just trying to understand what have prompted you all to buy fewer shares back in the fourth quarter as you did in the third quarter? And I guess, if I'm thinking about growth opportunities, you've already highlighted your tangible common equity goal, just so - because as we're trying to model what your appetite might be going forward, I'm just trying to understand why was the fourth quarter repurchase activity so much less than the third quarter?

Sure. Collyn, this is Avi. I mean, we're obviously a regulated bank. So when we set our capital plans at the start of the year, we have to go back to our regulators do our internal plans, things like that. So there's just other considerations than just looking at the stock price. In addition to that, when we do repurchases the cash of the holding company and there's cash at the bank level. So it takes time to move cash up and down. So those are the things that apart from just looking at the share price in terms of when we can do our buybacks.

Okay. But should we assume that you're kind of - like the pathway ahead is pretty clear? And there shouldn't be any additional hurdles that would keep you from being as aggressive as possible going forward? Again, with the mindfulness to that TCE ratio target?

Yes, no - we'll just reiterate what we said. The target is 8.5%. If there are opportunities to buy back at a price that we feel attractive, we will. It's hard to do it all overnight. We also want to do it in pieces. It's also managing the actual capital ratio, right. So at June 30, the capital is at 9%, we moved that down to 8.8%, then we moved that down to 8.7%, now we're moving it down gradually over time. So I mean, there's no restriction that we have. We started the deal. We've done our capital planning. We feel comfortable at 8.5% after doing our stress testing. So we'll leave it at that.

Okay. All right, very good. Thank you.

At this time, there are no more questions in the question queue. And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Kenneth Mahon for any closing remarks.

Thanks, Sean. Thank you. Thanks again for joining us everybody. I'm actually - I feel like I see the light at the end of the tunnel here, and it's not the oncoming train. We have the - we have all the building blocks in place here. We're executing the strategy that we had outlined for ourselves. We think we put ourselves in a good position over the next couple of years and compare this to the multifamily model, the monoline model that we're running for so long. So I'm proud of where we are, and I'm looking forward to talking to you in the future. Collyn, I will tell you, we didn't do 1 - we're not doing 1 a year. We did 1 in July. Our expectation is that we'll do another conference call in July of this year, but as we said earlier, every quarter. We'll have a chance to make, of course, correction in the middle year if you need some more information from us. But thank you, again, everybody for joining us, and we'll look forward to the next call.

This conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.