Q2 2019 Earnings Call

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Of course call. It carpets are you looking for.

The home Bancshares.

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Listen Hormann HR a man.

Thank you, Jason and your company.

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Hey.

Thank you I'm joining you know.

Greetings, ladies and gentlemen, welcome to the home Bancshares incorporated second quarter 2019 earnings call.

The purpose of this call is to discuss the information and data provided in the quarterly earnings release issued this morning.

The company presenters will begin with prepared remarks, then entertain questions.

Please note that if you would like to ask a question during the question and answer session. Please press. The Star then one on a touchtone phone.

If you decide you want to withdraw your question. Please press Star then two to remove yourself from the worst.

The company has asked me to remind everyone to refer to their cautionary note regarding forward looking statements.

You will find this note on page three of their Form 10-K filed with the S. E C. In February 2019.

At this time all participants are in a listen only mode and this conference is being recorded.

If you need operator assistance during the conference. Please press Star then zero.

It is now my pleasure to turn the call over to Mr. Allison.

Thank you Gary good morning, everyone.

Kevin and then Chris and John or at other locations with me today, they'll be able to phone though.

Stephen Tipton swiftly Bryan, Jennifer Donna Tracy and Randy pretty much the same group.

So good morning, and welcome to home Bancshares second quarter, 29 thing earnings release and conference call.

This is quarter number 50 times since our initial public offering and once again produced another solid quarter.

For the most part the other 50 want to build the same except for a few quarters during the financial crisis time, we get we bumped a little bit.

And that Oh, the 51, 26, I'm a record quarter record profit quarters in a row. That's why home was named the best Spike in America by Forbes for the second time in a row.

Where do we not only pride ourselves on being the best Bank in America for my ROI and the patients. They return on tangible common equity net interest margin asset quality, where the best and the other important segments as well as helping our communities.

Our communities recognize the importance of excuse me, we recognize the importance of supporting our communities in which we serve.

We serve thousands of volunteer hours for our people.

Our commitment to community reinvestment fair lending and the bursty with both our money and time, we have presented three quarters as you can see it from the press release.

Today, you 50, and 51, Donna Townsell said, how do you want to present. This time do you want to do these boxes or how do you want to you want to use last quarter or the fourth quarter and they look so good after let's show three quarters.

These have not been easy times with right and certainly think about it 19, we had a rate increase evercore.

Then told by experts, we're going to have two more in that thing.

Then tell were going to power was temporarily and now we're being told to expect two or three right.

Who in the world or they listening to I think they are riding on a different financial roller coaster in rest bust variety. They missed this one about as far as they did want to kill you remember that or as right you're Mad Allen M.S. It embodies say did on election night and I quote there is no way truck and when that was amazing and certainly comical both the fed and met out Matt out.

I don't know how you find that Mad dog man or whatever it is did not listen to the right people. Obviously, they they've been taught they were talking when they should have been listening.

But don't shoot the messenger there just following the law.

It's Congress been enacted into law and sent them to enforce its another example of people.

Who have no experience writing locales in spite of the pads Yo Yo interest right. We have a responsibility to manage our assets in a manner that isn't the best interest of our shareholders and communities. We serve the key is not to panic hold of course.

They were obviously totally wrong again, these huge mysteries crude a major loss of credibility.

At the end of the day your management is trying to operate profitably in the middle of this chaos.

I say when you're piloting an airplane and there is a major problem I can enjoy going out don't panic just fly the airplane. So were what we are doing is just running the bike and doing our best to ignore all the static.

Not complaining that is our job, though it would be nice to have a little more stability.

Couple that with going over 10 billion the regulatory environment is like being on a different universe.

Other than the risk management hardly any of it has the new regulatory expectations are involved in safety and soundness. Prime example is B.S.I. an email it really would be interesting to have Congress do a cost effectiveness study a b S I and eight yeah mail.

I promise you the results will be breathtaking the waste of money, it's almost criminal.

There are much better usage, the money than waste it likely yes.

Bankers throughout the country should rallied together to get Congress to do a study Saar to be alone, let Wendy and we'll get back to trying to run a good bye.

We keep a sharp eye on the markets and listen to our guys and gals underground plus personally visiting our customers and shareholders. There are far too many models being created too many quants too many intellectuals without real life experience and not enough people to people on the ground interaction with regulators they need to get out of their offices and listen to real people instead of talking to each other and those that have no business experience. One can always make an argument for the negative weather rail or per se, but there is no substitute for experience there is no substitute for experience.

Reports from experience people on the ground that live in reality is amazingly powerful source the fed should look at the models.

Select the client data and the opinions of all inexperienced P. Eight the intellectual people who have never been there.

Never been in the box, so and then I ask those in the real world, what's going on in the economy weigh heavily on those in the field and gather the information from different parts of the country I get it the latest bank they know better and they must take care of the rest of us deplorable and Walmart shoppers, but most of the time, we are by far more honest more reliable.

And the most reliable form of information they can get.

We together are built a financially strong and solid banking organization is located with a huge presence in the second or third fastest growing state in the country.

Along with strong performance from our staff Battle, Alabama operation, coupled with a solid Arkansas market and tacked on our New York Profit Center. Your company remains best in class class and all performance metrics. We continue to remain in a conservative mode.

Oh loans in M&A, while volatility continues to swirl around both politically and economically we think not pushing the envelope focusing on internal operations and taking what the market gives us on both M&A and loans is a proper position.

To ensure that we'll be around when the opportunities come again.

Well, we appreciate your support and let's talk about the highlights of the quarter.

And our strong deposit montblanc. It was 250, we averaged about 240 for the month.

And we did about what do we do stay even where we have last month and.

Q1, we were up almost 170 million and we're a little over 720 million in the last three quarters linked quarters. That's good at 720 million last three quarters.

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Loan to deposit ratio, we were 106, Randy we're down to 97 41, we need to get some loans.

HM.

Way too low what [laughter] last stable interest margin in the face of this chaos I think you look at that and the fourth quarter were 430, the first quarter at 430 and were for 28 this quarter, but remember that the quarter had over 500000 I don't know that you know that argue maybe I'm telling for the first time had over 500000.

Dollars expense on premium amortization write down that was impacted by the margin because of the unexpected fall in interest rates, resulting in faster prepayment speeds on some of the securities I think brown will talk more about that well.

Uh huh.

Let's talk about the cost of funds and I want you to go back with me for quarters three quarters, two quarters in one quarter and I want you to listen these numbers four quarters ago, our cost of funds.

Increased $6.192 million three quarters ago, it dropped to 3.357 million.

And then last quarter quarter, four last I guess it is now 2.519 million and this quarter $283000. So I think the cost of funds might be something that that's not going to be as prevalent as it has been in the past.

Strong asset quality, almost the best ever strong capital ratios industry, leading ratios common equity to assets 15.84, and tangible comedy Act tangible comedy common equity excuse me.

The times tangible common tangible assets, 9.96% almost 10% return on tangible common equity 21%.

Strong loan production over a billion dollars, where the loan production a billion and 24000 at 6.14.

We had $512 million, where the payoffs during the quarter.

At 5.54.

So the production coming down with one off that 60 basis points higher great job by the team.

Overall loan yields I've been telling you we're going to push it we started always last year's hard to turn the ship.

But overall loan yields were up three basis points to 6.06.

And those three basis points added $897000 to income for the quarter at even though average loans were down 30 million I think we ended up up 70 million for the end of the quarter, but average loans were down.

But the interest income on.

On the three basis points was $897000.

Congratulations to our team you give them a mission and they seem to get it done.

We continue to maintain strong cost controls with the sub 40 efficiency ratio and a strong ROI of 1.92.

For our shareholders, we increased dividend one cent per quarter.

And we'll continue to repurchase stock.

In the last year and a half we have bought back $168.400 million when stock.

8.716 million shares at an average price of 1927.

So far this year we spent.

$64 million.

For a 3 million 416722 shares at 18 73.

Last year, we bought 5.3 million shares for $104 million 1962 average so we'll continue to be in the repurchase business.

You will see loan writing changed.

In the Q this quarter in the past all credits that were construction or AG ramp related automatically ready to forward.

Which leads to the conservative nature of our company.

Let me make this clear there is no missed that so there's no misunderstanding. This is the interim policy and not a regulatory requirement.

Actually this was a nice sign from the regulators. They are actually thought were being too hard on our sales after discussion with the regulators we agreed to take a look.

The approximate Chinese were $1.5 billion of the forest moved to three.

And two credits totaling about $70 million moved to a past credit fab.

The balance remained in the folder soundly our call. The two credits move into a five one wasn't apartment construction project on a University campus.

With one of our largest and oldest customers in the bank. The project was weather delayed and Miss the starting school semester.

Apartment is now 68% occupied expected to be in positive cash flow by the end the year, probably did not need to move because the temporary nature and the quality of the customer, but we moved.

Condo project, it's in one of our best market the owners' side to keep it as rental because he thinks it's in the best long term interest of his family as a result, the project does not flow as Ron just on cash flow as room. He has over $12 million liquidity as agreed to sell one of his billings as the condo and pay down the balance enough to cash flow the project.

Neither credit has ever been past due and management does not expect a loss on either credit.

As always this company is totally transparent and wanted to report the changes and allow time for discussions on the call if necessary.

We pride ourselves being known as a company that tells it like it is good or bad.

Sorry, you show works, but its kind of lack of Trump rushing. So right. There is no better there and I think Chris were stale is temporarily idle the manifesto basis. However, it appears that some of your pocket journalists are still around.

You appeared to enjoy the boxes in last quarter's presentation.

And reports directly from each person responsible for that line of business not sure. We'll continue that in the future every quarter, but certainly helped to get us a better understanding of how we looked at margin in operation.

Brian started first last time and he will also.

Maybe first to die and cover the margin in the pieces impacting performance.

And then we will be led by Chris Poulton, John Marshall, Tracy and Stephen and then our chairman Randy Sims will wrap it up and Kevin Hester will be on the phone for any questions. So at this point in time I will turn it over to Brian and see if you keep US clear you did a good job last time I think everybody got it Moran so okay, well. Thank you Mr. Allison.

The second quarter was a good quarter for our net interest income and net interest margin on a tax equivalent basis. We recorded net interest income of $142.3 million for Q2, 2019 compared to 140.8 million for Q1 2019.

Our net interest margin was 4.28% for the second quarter of 2019 compared to 4.30% for the first quarter of 2019.

As Mr. Allison mentioned during the second quarter of 2019, the interest rate environment decline. For example, the 10 year Treasury went from 2.50% on March 31st% to 2.01% on June Thirtyth.

This decline has increased the prepayment speeds on our investment securities. As a result, we saw an increased premium amortization of 515000 from Q1 to Q2.

At the premium amortization is had remained flat from Q1 to Q2, our Q2 margin would have been 4.30% or unchanged from Q1 2019.

Last year, our CSG Division had a few payoff advance which increased our margin.

For the first six months of 2019, they do not have any additional interest income for playoff events for them from the FDA.

Loan production was very strong during the second quarter of 2019 with our loan production of more than $1 billion at an average rate of 6.1%.

This breaks down into $494 million at an average rate of 6.3% for CSG and $538 million at an average rate of 6.0% for the community banking footprint.

We were pleased with these levels of production and rights, while maintaining our strict underwriting standards.

Another positive was the impact of the change in the yield on our loan portfolio, we were able to increase the yield on the loan portfolio by three basis points. This equates to an 823000 dollar improvement in loan interest income for Q2, when compared to Q1.

Accretion income for the fair value adjustments recorded in purchase accounting was $9.2 million during Q2 compared to 9.1 million during Q1 for an increase of $100000.

In conclusion, even though reported margin declined two basis points. Our daily net interest income of 1.5 million per day remained unchanged for Q2 compared to Q1.

However, if the investment premium amortization had remained flat from Q1 to Q2, we would have reported an improvement of approximately 5000 of additional net interest income per day for Q2 2019 with that said I will turn the call back over to Mr. Allison did you say 823000 that reported 897.

Yeah, I'll check my number while you were talking and I came up with a 23.

Yes, let Steven an hour cipher and on over here, what we offer Holden.

Well as I 23 is a something right. So.

There's nothing wrong with that Thats, good but it's over 800000, it's over 805 letter I don't want to mislead the public so.

I guess next would go Chris Poulton, Chris the Euro.

Yes, Sir Thank you and thank you Johnny.

Second quarter, if you see a view was highlighted primarily by a significant increase in new loan production.

Which Brian just discussed as you may recall during last quarter's earnings call I noted that our loan pipeline specifically the approved but not closed loans stood at an all time high.

I'm pleased to report that during the second quarter, we closed the majority of those loans and we originated just under $500 million in new loan commitments.

With that perspective, we generally originate between 800 million an ability in any given year.

A little over half of those new commitments were funded during the quarter, which resulted in approximately $143 million of net loan growth for the second quarter.

Notably just about half of the new production came out of the West Coast LPL as we continue to see good progress from Guerin Robinson and his team in L.A. will payoff continued and will continue to be a feature of our portfolio. We do continue to see good opportunities in their respective markets and I remain pleased with the potential loans in our pipeline.

Thank you for the time and I'll hand, it back over to you John .

Thanks, Chris.

Next up is John Marshall go ahead John .

Good afternoon. Thank you Mr. Allison for the opportunity to provide an update on shore Premier finance in the second quarter.

Profitability grew in the second quarter and we continue to run ahead of budget just may be attributed to asset growth of 5.1 million stable margins and good expense management, our efficiency ratio remained below 30% for the quarter.

Commercial and consumer loan originations totaled 34.2 million an increase of 5.7 million over the first quarter are up roughly 20%.

In addition to $11 million in commercial commitments were approved and our pipeline of retail assets grew due to an increase in applications of 38% by volume, 34% by dollar portfolio growth has been stifled somewhat year to date by unusually high prepayment rates as consumers take market gains and reduced their personal debt that trend appears to have abated in June and July month to date.

The total combined portfolio was 448.9 million at the end of the quarter compared to 443.8 million at the end of Q1 and $436 million at the end of year in 2018 since joining Centennial Bank in July 2018 interest, earning assets are up 62.6 million, while we're not a financial center or branch marine related deposits have grown to 1.3 million doubling in the second quarter.

Our growth strategy for both commercial and retail is to add new manufacturers, both domestic builders and international and their attendant distribution channels in North America, working with their dealer networks for commercial floor plans and to leverage these relationships for new retail referral sources.

In addition, we receive commercial and retail referrals from Centennial bankers, particularly low scattered around the Florida market.

And we had success in co branding events at boat shows and marine industry trade shows with our parents Centennial Bank.

As always we're also grateful for our broad base of Marine loan brokers for the majority of our retail referrals, we continue to deepen and increase those relationships. We also anticipate launching a super yacht retail Marine Finance program in the third quarter of this year.

Growth has not been achieved at the expense of asset quality, our delinquent loans were down substantially below 1 million at the end of two Q compared to 1.4 million at the end of the first quarter and $5.8 million at the end of 2018.

Commercial commitments have all been freshly underwritten and approved through continual banks loan approval process and average retail borrower FICO scores at origination have climbed from Sevenseventy at the year end of 2018 to 775 in the first quarter and it's been the breach 777 in the second quarter.

The commodity type nature of the retail side of our business continues to put pressure on our margins.

In addition pressure came from recent fed decisions in the market reactions to the fed as it relates to the 10 year Treasury an index that is Tom Assumingly pegged by us and our competitors for establishing retail rates.

We see that with an average origination reach in the fourth quarter of 18 of 5.1% coming to 552 in the first quarter of this year and then pulling back slightly to 5.37.

Last quarter I expect continued downward pressure in the third quarter.

The third quarter growth outlook is mixed while we've seen an uptick in application volume and retail originations dealers are beginning to express some pessimism and tapering back to purchase orders. Nonetheless, I remain confident in our ability to achieve growth profitability and asset quality objectives with that I'll conclude my remarks and I. Thank you.

Thank you John .

Tracy French to serve is good afternoon to you. Thanks Johnny.

As you May recall last quarter I mentioned, our focus was going to be on net interest margin and improving asset quality.

The numbers posted today for the second quarter or show just that.

We improved our loan yield we've watched our deposit cost.

And improved our nonperforming loans to give a little bit a shout out to our community banking our net interest margin remained at 4.2% as it was the first quarter, which is up from 4.18 at the end of last year also like to give a little tip of the hat to some of our regions on the deposit growth that they've had little rock market has been up about seven and little over 7% year to date in southeast, Florida is up over 11% year to date.

And the next little Shout out to the North Florida market as they are up in non interest bearing checking accounts, 16.5% year to date. So congratulations to some of those and really congratulations to all Stephen will give a little color on the deposits.

Little lighter.

For the quarter Centennial Bank at a return on assets of 2.1% and efficiency ratio of 36.45%.

With total revenue of $204 million.

That it has been mentioned I am pleased to see the strong loan production from the community Bank segment I want to complement our lending teams for their continued effort in this competitive landscape.

David I'll give a little color on the loans and deposits. Thank you Tracy.

June Brian mentioned, the community Bank loan production for Q2 was strong with the contribution split fairly evenly between Arkansas and Florida.

While payoff volume in the Florida portfolio continues to be elevated we did see end of period loan growth for Arkansas and Alabama.

On the deposit side has been mentioned, we saw another strong quarter of growth $280 million.

Led by Southeast, Florida region with over $120 million in end of period growth.

Johnny mentioned the interest rate environment today is quite different than where we were just three months ago.

And we will closely monitor the impact of declining interest or potentially declining interest rates on both sides of the balance sheet.

Our efforts are now focused on deposit pricing, while maintaining core relationships with that I will turn it back over to Mr. Ralph.

Thank you.

We'll go to Randy Sims, our chairman in lithium ramp it up.

Well, one way to wrap something up is to say congratulations to everyone for another good quarter as you've heard from everyone. The numbers are again some of the best.

We seem to always talk about the numbers. So I'd just like to take a minute to mention we are making improvements in many areas of the bank with the intent to strategically take our operational areas to a higher level than not only provides new capabilities for our customers, but also improves our infrastructure for future growth. Our IP division that we rarely talk about is busy concentrating on continuing to improve structure as well as implementing new fintech initiatives, along with operational and retail divisions, we've deployed zale person to person payments implemented new functions within the mobile app and completely updated our customer website, we continue to add interactive teller machines and appropriate locations and new project products such as since to win a prize link savings program all to enhance the customer experience with the best in capabilities and products. In addition, the bank has taken on a new and more.

Issued is strengthening our internal structure, including operational areas as well as taking our regulatory departments to new levels of experience and depth.

These efforts and improvements position us to continue our goal of being a high performing bank not just now, but well into the future and prepares us for whatever opportunity the market may provide.

And with these improvements comes expense, but as you heard our numbers have remained strong.

As John stated this quarter 52, and our high performance has been consistent.

So let me just recap some of those strong numbers and wrap this quarter up we finished with total assets of $15.287 billion.

575000 income was $72.2 million, resulting in diluted earnings per share of 43 cents as compared to 42 from the last quarter, which meet market expectations, our ROI with consistent and very strong with the last quarter at 1.92% more importantly, we were able to achieve a strong net interest margin at 4.28% down just a little from the last quarter and 4.30% as you heard from the others. We are working very hard on both sides of the balance sheet to maintain the margin. Once again, our profitability was helped by a very strong efficiency ratio of 39.93%. It was good to see it under that 40% again as we continue to control our costs, but also make enhancements within our bank infrastructure.

I am very proud of this number given the improvements we have been making and the negative effect of Durbin estimated at $3 million for each and every quarter.

It's been a very strong quarter for deposit growth as you heard ending at 11.35 billion within approximately $280 million in growth, resulting in a loan deposit ratio of 97.41 as compared to March 30, Onest at nine 9.20, and yes, Mr. Allison that's keeping that engine running really low like 30 miles per hour.

I'll ask you when it Ron pot, and you're making a lot of money on it.

Understand and of course as you have heard from others, we had over $1 billion in loan production at an average rate of 6.1%, which again is one of the reasons why we are able to maintain a strong net interest margin our asset quality has and continues to be solid, indicating a very optimistic and secured outlook for 2019 and of course strong capital ratios as always and you will always see that from home Bancshares.

We now have two quarters behind us.

And I think you'd agree that once again the results. We presented today are powerful numbers, we look forward to the third quarter and another opportunity to once again perform at a high level level for our shareholders and that pretty much wrap things up.

Randy Thank you.

It's interesting going over $10 billion and what we've been able to accomplish when you think about durbin, yet that to $3 million spread out of our pocket this quarter.

And usually accretion is going down so thats pulling out and then when you go through this next universe regulatory wise with the expense that were encouraged there.

And still be able to make the numbers are beginning to get a feel for why in the past the that the analyst have lowered expectations for banks lack the us and multiples. When you go over 10, because I think these guys will these people will be able to keep up with cannot keep up with the with the increased expenses can they keep up with Lucent darbonne can they keep up with that.

And I want to share we can do that we did at the first quarter and it was lack of breath of fresh air to me we did it.

Well, we did a little easier this quarter than we did it did the first quarter. So lastly that now and there are some understanding for that so I'm pretty pleased I tell some of the day is aware rtms were kind of treading water, but we were okay treading water, we'll get through the first quarter is kind of related ended the second quarter and it was better in the second quarter. So hopefully the third quarter will be better than that in the second quarter.

But these reports were really good and I want to congratulate this team of people.

So the one thing about our team as you give them a mission and they get after they try to make it work and I've told our people last August we started pushing rates.

Everybody didn't push right. If you want to know what the quality of a bike has asked them what their margins.

With the given step away is it.

Right can threefifteen are they giving stuff away. They say, we won't have good asset quality all they got bad loans, because they pushed data that's not correct at all and Thats totally and correct that we get best asset quality, we've ever had it's as good as good as it is in the country. We just asked for the additional right. We have we maintain that relationship we visit with that customer and I think all led is still important to building. The relationship you hear people talking about relationship with our relationship is that they give a cheap right. So we've never backed up on that and and our team had the mission was given to them last all this and you can see what they've done with that they've been able to continue to push rates now what's going to happen now is the wasteful drop 50 basis points. The strong we'll try to continue matter of fact, we just got out of executive loan Committee today, and where we're at.

575, six and six in the quarter so.

Some of the way, we'll drop those rights in a hurry, we don't do that we try to get the maximum we can get out of it and and our team does that and it against all odds. They continued to produce for the shareholder I guess Randy for his aging monkeys be doing it.

Yes, but it's my pleasure and I mean that to work with such a great dedicated group professionals and they get the job done.

Congrats to you guys.

Gary I think we're ready for you on that.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble our roster.

Our first question comes from Brady Gailey with KBW. Please go ahead.

Hey, good afternoon guys.

Hi, Brady.

When you look at your net interest margin you all done a good job of holding that pretty steady around the 430 Mark.

But as we look forward with the yield curve doing what it's doing and then I'm guessing we're going to see.

Lower levels of yield accretion for you guys in the back half of this year and into 2020 do you think that it's realistic that you could see some NIM slippage here or do you think that maybe deposit cost are coming down and you're able to hold it around this for 30 level.

I'll take that and Steve and my comment a little bit after that then we'll give you the answer.

I.

And I'll follow up from him.

And then I might add some comments.

I'll start off with the accretion.

We have been and Brown 9 million plus an accretion each quarter the last three quarters.

I've really predicted it go down into the 8 million range this quarter.

We did have an increase in payoff accretion the payoff accretion was up about 500000 this quarter from the previous quarter. So theres a good chance that that may not be re occurring.

So we would have that pressure 500000 would equate to about two basis points on the NIM.

If you look at the models that we have.

And Weve disclose these model numbers before for our shop analysis I mean, we're really for the most part neutrally gap, but we are technically slightly asset sensitive.

Your asset sensitive and models are correct, which we can do things to try to.

No change the outlook from those models.

It would show that we would have some margin compression.

This upcoming.

For if we were simply yeah. The one that's coming up here at the end of the month should cost to support the models about $2 million of net interest income, which could apply to six basis points.

But.

We're going to try to do things too.

Try to improve on that.

Hey, Brady this is Steve and that to tack on there that we spent a lot of time over the last.

Month or so.

Trying to identify on the deposit side what opportunities.

We.

We expect we'll have it it's a bit.

Lowers a quarter at the end of the month, we I think we.

Indicated before we have.

Decent sized bucket in the in the funding side that.

Is tied to.

Either live or reference rates are tied to T. Bill rates that have already started to come down a little bit we saw some good benefit from that July one on there on the quarterly reset.

So we feel like we're trying to identify what we can match up on the funding side to that to the to the loan side as to what to variable rate and then.

As the portfolio may be kind of a wildcard.

All right and then my second question is on the expense side. It sounds like you guys have some continued investments that needs to be made in the infrastructure of just from being a bank that's over 10 billion in assets.

Yes, I was just wondering how youre.

Quarterly expenses have actually been going down the last couple of quarters. So as you look to.

Invest more in the expense infrastructure.

Do you think that will that have a notable impact on expense growth going forward.

Well as you, saying it hasn't so far and.

We don't we continue to do things to try to as where we are improving and putting some money into infrastructure. Some of that infrastructure is software that become makes you more efficient some of that infrastructure is our people that that again make you more efficient so it's kind of looking into.

Well into the future and say well are your expenses going to go way up well the expenses May go up a little on the front end, but.

We make investments in infrastructure to become more efficient and therefore try to keep our expenses down in even lower them, but.

Yeah, you could see some increase but I would hope that it would be followed by a decrease in as we improve things and we don't we don't.

Make those investments without some realistic outcome of improvement.

And lower costs.

That makes sense I mean.

So what you're looking for.

Yeah. Thanks for the color Thats, great, Okay, I'm going to wrap this up for you.

We're not going to let the expenses go up and margins go remained flat.

Well the tendency is for it to go down right I mean margins should in this environment go down we have about $2.8 million, where the loans are going to reprice.

We're about 75% fixed that's good for us are adjustable.

We've got about $1.4 billion for the funds it'll adjust to digest prime if they're going to take prime downtime.

They need to do that that will help us.

The games this leaves us a gap of about a billion dollars in there and.

This team works very hard we've got a call from one of our top flat.

Regional President said, you can Mark me down 15 basis points already have already taken the cost of deposits down so as we work like hail Malaya will workflow caylloma way down so.

May be a little blip temporarily but I don't think its I don't think it will be a long term blip for us because his team has a way of affection and fixing that as you well know so as we battled hard on the way up we'll badly harder on the way down.

Given kind of say one more thing you're only expenses.

You know we are we are challenged by taking our regulatory group to another level and we are meeting that challenge and we are investing in that but at the same time, we have a strategic initiative on the other side of people that are doing nothing but looking for ways to automate things. So as as we invest in taking regulatory to another level. So that team is looking to see where we can automate that to keep those costs down and that team is also looking at other areas of the bank and I give you examples, but I'm not I will take the time to do that but they also look and analyze where can we automate something that that actually reduces our cost and the number of people that we have to have so we got Wow. One thing is maybe makena. Our expenses go up over here, we had another another group over here that is trying to drive.

Have expenses Dana So I, just I want to know that we're working on both sides of that and.

And it has always been our goal to keep that efficiency ratio.

Where everyone is proud of it.

Your next question comes from Stephen Scouten with Sandler O'neill and partners. Please go ahead.

Hey, guys. Good afternoon, how are you doing.

Hi, good Steven.

I can't use only all recent freight.

Thank you Sir Thank you, we'll see how it all plays out but it should be it should be a good good direction for us. So thank you Mike there don't keep me.

[laughter] I don't know what do you kind of guy.

I hope so [laughter] I appreciate the time will tell my friend, Tom with Oh, Hey, I'm curious you know if you guys are seeing any sort of inflection point on the on the payoff levels in Florida in particular sounds like that's where you're seeing a lot of the pay downs and.

Production has been phenomenal. So I'm just wondering if you think we might.

See sometime here in the near future. We're more that comes to the bottom line and grows the bank a little bit quicker.

This is Kevin I can take that.

Okay orders thing you want to go ahead.

Probably to.

It's Dave we were the next two quarters at least I don't think you're going to see that we've got.

As we're looking at in the pipeline in the next two quarters look like they are pretty heavy on them on the pay off side as much as I'd like to report that they are not that we didn't see pretty handy.

But in the next couple of quarters at least.

See anything no I mean, not to say that like if you look at the last three quarters. It's been it's been around it's been a little north of 500 million and I think what Kevin mentioned, we're seeing.

We're seeing that plus a little bit.

Forecasted so things change.

It can move around from quarter to quarter, but it's.

We're still seeing the volume there.

Thank you heard me refer to it as agrees pick one day, it's hard to get your arms around that and even though it went I think it's not going to be as good it's better and when I think it's going to be better it's not and so it is somewhat difficult to get your arms around that but according to what the projection. The is it that they are going to be would be down the next two quarters, but.

I've seen that.

Many quarters before and it didn't turn out to be that way so [laughter].

That's a difficult one to forecast because you never know if you know whats coming and you never know what would you go to fund I think our funding we grew a $160 million 150 million 145, what was it.

Well on the unfunded commitments were up about 145 million from quarter to quarter to 2.6 or 2.35 billion to 2.35 base. So it gives you an idea of what's coming.

Okay appreciate that and John it sounds like you've been watching a lot of MSNBC lately. So when the rates looking like they're going to go down here. So what are you guys doing to prevent again some of these rate cuts I mean are you doing any hedging or otherwise to kind of put in protection is just in case. Those guys are right. We haven't done that I watched some are friends only upside spend millions of dollars on the hedging process and gift or had handed to them.

You know that the Fad says, they're going down it might be 90 days and they go up a high you know so it's a nice night, so I got a dartboard and it doesn't mean, it's up or down or a quarter or half. Unlike they just throw a dart boards, what they've been doing it looks like lightly so.

And I don't watch too much MSNBC and I did I did watch comedy hour on the night of the presidential election I Didnt.

We haven't really got sports implies and.

Significant floors in place and 75% fixed our adjustable so I think we're really on a down downright math like we're in pretty good position I actually think we're in a better position on the way down and we were on the way up and we Paul to keep it to hold our margin one way up so I can assure you will see that keep it on the way down I think I said that earlier, so I would be disappointed and I will be deformed Howard I push I think we've got a shot.

Might go down a few tanks, but I like we got a shot and how that within range.

You know one thing to remember is that we are a bank made up of a lot of different.

Communities and those communities drive the market those communities or is the market that we look at and that we serve.

And then this up and down that goes up and down and whatever the fed decides to do or is it you know disrupts that you know I wish that the fed would leave things alone and let the market do what it always does but we're a have a little bit of advantage I believe because we serve small community markets and.

Those changes are not as drastic as what we see on a national level.

Makes sense makes sense, maybe one last question from me I'm curious what the what you expect on the pace of the buybacks or kind of how you think about that moving forward. If if there's a capital level you might manage to or if you think they might pick back up to the levels. We saw in the previous two quarters versus a little bit a little bit less active this quarter.

Well we have a.

We kind of overall the first quarter.

We spent more than I mean, we had about a 180 million I think somewhere in that range approved by the regulators.

And we spent 50 something million in the first quarter, which was a little.

We spent 52 million in the first quarter and we spent 13 million in the second quarter and you're right. We had 188 million approved from the regulators. We up we were really evaluate and what's in the best interest with all that kept the world went in right now what's in the best interest of the company to slow down the Mad Max too.

Maybe look its a sinking fund to pay off some debt at some point in time, it's coming in the future. So we're we're really in the process of evaluating that at this point in time, we will continue to be in the buy back business.

Not sure how much will be and will continue to be in that market and sometimes we'll buy heavy sometimes we won't if they put it on sale will jump in there.

Very good. Thank you guys appreciate the time congrats on the quarter.

The next question comes from Michael Rose with Raymond James. Please go ahead.

Hey, good afternoon guys.

Just had a accounting question, so just sort of the comment around the unfunded commitments.

And you know.

Well, obviously with shore Premier finance coming on those two things is my understanding is they are treated pretty.

Putatively under Cecil So as we think about.

Going into 2020 does this curtail your desire to continue to grow short for me or finance or Chris is Ah versus group up in New York.

I mean, we won't get to seasonal I mean were.

I will say that whatever it is we need to staff for the for the day one.

Accounting, Mark, but I would not envision that it's going to change how we how we look at that at all and that's just way of doing business. Michael It's David I think maybe the comment there just because I think contractually some of the short.

Finance.

Longer term.

Yeah, I think I don't think we would change.

Our desire to be in that business, particularly with what John mentioned in underwriting standards and what we're seeing today just because of the accounting change I think it's a business we want to.

The n. be exposed to continue to.

To be a part of.

But it wouldn't limit your necessarily limit your growth plans and neither of those businesses.

I don't think is that what I'm hearing.

Yes, okay.

And I don't think the sorry, if I missed it but I don't think the M&A questions been asked and I don't think Jonny mentioned in the prepared remarks.

So just wanted to get an update on your thoughts on the M&A landscape at this point what you guys are seeing.

I did mentioned in the remarks that we will remain conservative M&A, we'll take what they give us aluminite and and on the loan side. So I don't think this is time to be pressing the humble I think with what I said.

We're we're continually looking we're continually running models here with other banks.

The M. away thing is.

As I said last quarter is kind of off the table for us because it doesn't.

We're having difficulty finding somebody that has the quality.

It's not a similarly I mean, there's not very few people have run a bank like we were on a bike and it's difficult to to do at emo way, particularly in light of who's going to ultimately run it at the end of the day. So I mean, we've seen a cup level when they want to run it.

But quite honestly they they they don't run near the performance that home Bancshares wrong. So.

Some of that is they go you know who is going to run it and it's going to it's going to be the boss.

I don't mind, if somebody was running at 220 ROI they want to be the ball such time, but they're running a once in a general way would be the balls, they probably not going to get hooked up with whole banks here. So.

Okay were still up.

Good luck.

I was going to say, sorry, I missed that in the prepared comments.

That's clear one final question for me.

We've heard a couple of banks talk about the lag effect on the downside if we do get a couple of rate cuts on deposit rates and I guess my question is do you think your interest bearing deposit costs have peaked.

Should we get a rate cut.

I do.

I think close I think were ratified.

You know if you heard my comments, maybe didn't maybe you weren't on my comments, but.

I went back four quarters. It was 6.3 million cost upon increase in calling from memory, then three and $3.2 million increase in cost of funds to 2.5 to 293000 this quarter.

Which is a pretty good indication of what's happening there so.

I looked at it yesterday and or excuse me I looked at it today and it was flat so what I'm seeing I like I'm seeing interest income up slightly im seeing interest expense down slightly so that's a that's a good indicator for the company.

Okay, sorry, I missed some of the commentary in the beginning thanks for taking my questions.

You have a bunch of them have a bunch of calls rally list.

The next question comes from Matt Olney with Stephens. Please go ahead.

Hey, guys good afternoon.

Hi, Matt.

Yeah, I think Randy mentioned that the loan to deposit ratio is now at 97%, but the low as its been for a while.

Is this a strategic change in our you can operate here or well Randy get his way and we will see this move back up.

I am getting why if you let him.

[laughter] the regulators like it.

I don't particularly like it.

You know and we will be it's somewhere in between.

That's probably good answer that's probably a good answer somewhere in between.

But the positive been awfully strong 700, and plus 700 plus may in the last three quarters then.

It's I have to give pricing for its credit for because he established that new policy. If you all remember several years ago, we started asking for it so.

We're not stopping so I will stop yet we're not going to.

Well I'll start so.

And then John you mentioned you felt like you have some protection with some floors can you give us an idea of what point do those floors coming into play how many tests we have to see.

Yes, Matt This is Steve I take that we've got a.

On the CCSG portfolio Theres Theres, a couple of hundred million today that are that are protected with the floors.

Functionally all of the production I think your Christmas comments on how good is production was.

For the quarter all of his production so far this year.

Should be protected as it begins to fund, which as you know a good portion of his production has yet to fund.

We've got a about a 150 million or so on the community bank side Thats protected today in a in a 25 basis point down rate scenario and then.

Yeah those numbers.

Increase a little bit as if rates were to continue to go down so.

We've got 350 or so that's protected today, if they do lower rates into this month.

And Steve I would assume that if rates were to go down beyond 25 bits that 350 would would increase is that a is that fair.

Yes, yes, that's fair I don't have those numbers in front of me here, but yes, that's fair okay.

Okay, guys Thats all from me Thanks for your help.

No don't bet the farm on that Matt.

I wouldn't do that.

[laughter].

The next question comes from Jon Arfstrom with RBC capital markets. Please go ahead.

Thanks, Good afternoon.

Hi, Don.

Hey, Kevin what can you go back over that I was a little confused by the pay off information you were talking about I received its elevated the next couple of quarters are not elevated for the next couple of quarters I Miss that.

Yeah, Steven Steven made and he mentioned the number of 500 last quarter and I think what we have.

You know and and John you made the comment it is early it's early in the third quarter and certainly you know for the fourth quarter things can change and the things can move in and out of quarters and up and down you know as you go through but.

As we got it as we're seeing it right now the the payoff numbers around even a little higher than what we saw last last quarter and production has been strong between you know maybe doing out produce it.

And then that'd be a good thing, but but unfortunately, we're just seeing.

We're seeing people take take things off the table and sell sell projects and.

Move them move them Department and.

Let's just worried that.

Okay. So the message would be.

Yes.

Hoping for modest loan growth working hard to get there, but probably seeing some repricing higher and yields.

There's an offset is that fair.

I think Thats fair.

Okay. Okay.

John Marshall store.

Hi, Good afternoon Jones, you, Hey, John you made a comment about consumer health.

And maybe picking up a little bit in June in July , but then you also talked about dealers pulling back.

Can you expand on that a little bit and just let us know what you're seeing in terms of the consumer on why you think the dealers might be pulling back.

Yeah, we'll get a little bit of a conflicting message coming out we've seen volume increase from an amputation endpoint and from a funding standpoint, and the quality of those applications as measured by gross wars is also improving.

But in our conversations with our dealers, they're looking forward to and they're pushing back on their manufacture it just a little bit in the amount of inventory that they're interested in holding as we move forward into probably now the third quarter.

Because the fourth quarter of this year, perhaps the first quarter of next year and I don't know.

I have to what is it that they are seeing are there any.

Technical indicators that would suggest that they want to hold less inventory and that that it's more of a gut feeling right now we've got sort of mixed signals, we've got retail buyers towards buying a lot more votes.

We've got dealers.

Very helpful back just a little bit.

Okay.

Okay. Good that helps.

I'm, hoping those dual offset each other and so it will be neutral for us and will continue to meet our growth goals.

Okay. Good I I was just most interested in the narrative on why but that helps me.

Chris maybe for you pipelines and commitments. Obviously, we're we're very high do you see that continuing coming into Q3 and the rest of the year.

Yeah. Good afternoon, we do we like the pipeline still it's a we moved to a lot of our waiting to close stuff. This this past quarter, so that was nice but.

We continue to like to see what were seeing through their we review it once a week I generally like to see about a billion dollars in the pipeline not all that will make its way through but as long as we have a billion plus in the pipeline I, usually feel pretty good about where we're headed.

We have a little over billion in the pipeline today, So I would say, where we continue to think they're interesting there's interesting opportunities and transactions out there I don't think that's changed we certainly take Oh, I would say a shift towards a more defensive nature as it relates to both the pipeline in the in the portfolio. So I. Let go the the pay off sentiment you know in our business. That's a good thing loans aren't supposed to be out there forever and ER.

Oh, well money's cheap and plentiful there some of the credits we'd like them to go ahead and move on out.

Yeah, Okay fair enough.

And then maybe just a bigger picture question for I don't know if it's.

Randy your Tracy or someone but it sounds like you all don't feel like a rate cut as needed.

At all based on what you're saying, but I'm just curious if you're seeing anything that you know bothers you were that's incrementally a little bit more troubling from an economic point of view or not.

Thanks.

No I haven't seen you know our portfolio still shows.

All businesses doing just fine so.

The that the rate cut or rate cut or not for the company was.

As I mentioned, how we go out and asked for deposits and it seem to be working pretty well.

Yes, the speaker job with call. It all our variable rate customer last two days are all covenants on a new fixed rate loans next week I'm just curious.

[laughter], so were going to ask them to come in and fix them up.

For that for that process, but you know it's a we worked on the interest rates here every day and that's something that we've done for several years now and when it goes up it goes up when it goes down it goes down. So we're we feel like our company's position pretty well to work through whatever the.

Challenges with a thrown at an interest rate so we'll go up or down.

Okay, you know from a personal nature I'll, just tell you that especially where I am at home.

In the beach areas and on the coastline.

It is so dad gum crowded they need to put some fences that and keep people out there people that need to go home.

It I have never in my life seen it that crowded.

Four and five umbrellas deep all the way down as far as you can see it.

And there's no slowdown of the economy or any indicators of what's going on around where I am and.

Everything that we hear.

In Conway and and and our markets is things are pretty good.

Oh, Okay, I need to put up so we have a clear burberry dancing signs on the Panhandle.

Yeah, [laughter] no oh that that [laughter] I was a little slow Matt was [laughter], we spoke I wish my really close to our markets and what's going on our people are on the ground live in it. So I mean, when you were not planning any disruption in the markets anywhere.

As a threat I think we could sign.

Okay. Good thanks for all the help.

Thanks.

The next question comes from Brett Brett Robertson with Piper Jaffray. Please go ahead.

Hi, guys good afternoon.

But.

Wanted just to go back to the margin for a second and I you know from a filing perspective about 60% of your book is variable can you give us.

How much might be live or and then the securities book is pretty small relative to earning assets but.

Just thinking about what you're doing in that book presently and then to yield to pop back up going forward on that portfolio as well.

I'll, let Steve and Brian to talk about that do you get that upside down it's about <unk>.

70, 75% fixed or adjustable balance is variable. So we don't have much variable even yeah. Brad This is Steve and I think what what what gets picked up in the filings are some of the we'll call it more adjustable type deals where we're.

Fixing the rate for a period of time, then it will adjust two years from now three years from now those sometimes get picked up as a.

As a variable rate.

I think what we've identified that.

Is subject to potentially move say in the next quarter or so.

As a truly variable type node is about 2.8 billion.

Half of that.

More so is on the CCFG side that is subject to move above the floor. The other half would be on the community bank side.

The majority of that is tied to lob, where we've got about eight or 900 million. That's tied to Wall Street Journal Prime and then the balance of of that would be tied to LIBOR. So we've seen a little bit of movement there or.

Over the last couple of months in lot more but.

That's where the portfolio stands as we see it.

Okay.

And then the Securities book any color there.

I mean, it's it is what it is I mean, we've got.

361 million of it that.

Variable and reprice within the next 30 days and then after that it gets pretty small amounts.

Oh, okay.

And then the other question I wanted to ask is you know this is the first quarter and while we've seen a provision from you guys and your credit. It's obviously stellar and I think that's one of the pitches for owning.

Oh Your company you know in the next few years as credit should be better than peers.

Could you give us maybe some thoughts on provisioning from here you know should we expect the standard 1% of new loan production or maybe give us some color. If you can on how you think about the provision going forward.

Well, we had a exceptional quarter this time.

Much better than it than the quarter actually look and we thought it was a good work.

We've always been reserved builders, we've always liked to handle about 1% was or just kind of how the company is run.

Actually Matt.

My past life around a 150 I just think Thats done I guess, just a solid number I understand we got always complicated measures of how we have to calculate reserves today, but those were.

150 workforce and the worst financial chronic I've ever seen in my life. So we're running at about one now I mean, we got.

Marks of about another 120 right.

So I'm not supposed to add those together I guess you can't.

I would tell you were before I think we are and I think we're well reserved.

See lots of people out here with 0.3 important six import seven reserves. If we have if we have a crunch that's not will be enough.

Here, what the asset quality says I won't be enough. So we're just a believer it we had a good quarter. It looked like what kind of match charge off close to charge offs for the quarter and we just kind of looked at it every quarter to see how that see how its going but asset quality rat I mean, I've, probably we probably could just 5.5 overs are but.

We'll keep as much in there as we can.

Okay.

And then just lastly, I want to go back to capital for a second you mentioned buybacks <unk>, let's say you're not at all to M&A in the next few quarters and you're really profitable.

You know what do you do with capital, yes buybacks.

Or not [laughter] sort of enough in terms of what you're thinking about managing capital. What do you do is capital continues to accumulate.

Well, we have some trust preferred out there and we also have a $300 million worth of sub debt.

So I mean accounts as capital when its still that so I mean, we're we're down at burst at.

Home Bancshares, we don't like that.

We don't like that that counts as capital.

We don't think Thats.

The right way to treat that but we did raise $300 million and it would be our effort pay that off at some point in time are stark accumulate money to take in Denton bankers, how many months 33 months left but we've had at 27 months ago 33 months till that as to where we start losing part of the capital treatment. After five years is callable and then we will get 80% capital treatment.

Well, we'll continue brand for US is that me about dilution on buying back stock and I understand it is dilutive, but it has been up.

It has been one of the best uses of capital for our company for some time and as I said, when we bought back 8.7 million shares in the last 18 months and $168 million worth so.

Okay, particularly if they want to take us down the price down will be will be an active buyer.

Okay I appreciate all the color.

Thank you.

The next question comes from Brian Martin with Janney Montgomery Scott. Please go ahead.

Hey, guys.

Hi, how are you Brian James jobs.

James Gorman.

[laughter] like Steven as well so his comments.

Yeah.

Hey, you guys have covered a lot of this but just the and that maybe for Steven just on the you talked about the variable rate and fixed rate, helping on the funding side and the market sensitive deposits what what's the level. Those are currently they could adjust in the next quarter.

Steven versus like John mentioned.

Maybe.

The first part of the keep an eye, but we've got about a billion five.

Or so that are tied to some index either treasuries.

Live or or or.

Wall Street Journal Prime that functionally should flow, 100% beta with with that as that changes and then we've got.

You know another billion ish or so that we've identified.

Call it market top of the market type rates that we can effect over time so.

That's that's our task and I think so.

Tracy Johnny both mentioned will.

We'll work to work those rates down you know we see.

If we see the fed make a move on the 31st.

Okay, and it sounds as though just kind of hearing all the kind of trend margin that I guess, you'd probably think it's fair to say that the you know the core margin kind of ex accretion is probably.

I guess, maybe near a bottom if if you do get a rate decrease given kind of the initiatives maybe it to as Johnny said, a couple of ticks lower but shouldn't be materially lower in a in a lower in a down rate environment. I guess is that kind of and in summary kind of a fair statement.

I think that's a fair statement I like that.

Yes, Brian mentioned I mean other than models show that you know it could put a little bit of pressure on it but I think that's based on the assumptions that we have and we're evaluating all of that now to see if we can do better than that so.

Okay, all right and I think it was.

Brian said it was about six basis points. If you get a 25, that's what the model should be a I I 25.

Basis point decrease.

Yeah that is correct.

Okay and the last two for me was just the Johnny you talked about Neil.

The buyback versus debt repayment I mean, how quickly could you do something on the on the debt repayment or I guess is that you know more near term or is that a little bit longer term given you've got a couple of years on the capital treatment.

Yes, it's non callable this Steven Bryan its non callable totaled 22.

Okay. So you didn't see we got 33 months until it comes up Brown sand. So we started chemo. The problem is going to be with me I mean, we started accumulating that tell them I think you're you're sitting on 150 or $200 million in the deal comes up I said I will be your biggest problem is going to be maybe coast.

You know we may let it depends on what the next deal looks like compared to what paying down the debt looks like so.

Most sense is if we do a deal we've never done a dilutive deal they've always been accretive so.

And our stocks creep back up a little bit getting back at the 20 to 30 times tangible book, We just took a look at.

How many $296.

Mike.

I don't think we ranked sixth or seventh when you take out the non bank so to speak in margin in the country. So we're pretty proud of that.

But as again at that dose earlier in the call I said fuel a judge Mike ask what the margin is found at where there are real mines or whether given.

Hey, Brian Randy Sims, and I really believe in those models.

[laughter].

We're going to be proven wrong once again.

All right and then last.

And that's what the models [laughter] modestly I, assuming that the other guys around the table do nothing except just let it roll out well mine will actually right. We just have to go go on vacation and let the models do it and going by case versus actually led our community that they don't do any of those customers are coming in to pick what mom loved about that why on the way up to where we were pretty much flat.

We're pretty much flat I think where we might we couldn't be in better shape on the way down it looks like.

Yeah, Yeah in the last couple of just on the on the pipeline you talked about the payoffs shiny, but just as far as the production I mean, I guess your your sense I mean, there's a pretty wide swing from one Q2 Q into production volume I guess, one of them feel more realistic or do you think it's the production volumes, maybe somewhere in between and and then in the back half of the year.

Oh, you had the first quarter you had you had you had shock and all from the.

From the bad in December I mean, it it shipped the world what attain the S&P 500 total return phone had the worst month since 1929, I mean, there was just.

That was a major era and it just everything so I think it took a while to recover Max so I'm optimistic that that production will be up.

Production will be better I mean, New York funded started funding. Some this this quarter, but still have a lot to funding as time comes on and and were up 101, We've got about 2.3 billion and you'll see some of that fund in so I suspect we may be down a little bit and I must tell you that we might be down a little bit on loans. This quarter and the reason I'm telling you that is the last time I said, we'd be up we were down so I'm going to tell you we're down in may will be up.

Okay.

And just lastly, it wasn't the on the expenses I guess it sounds like they could move up a tick from here based on what Randy was saying, but just kind of looking thinking about the efficiency I guess worth add here around this 40% level I guess is that something you expect to be able to maintain it because that tick up a little bit and then as Randy said you get the benefits in it ratchet back down a little bit.

Oh, we've always had a good efficiency ratio. It's gone you know below 40 up a little 40 high a you know a little bit above 40 don't look for any major changes the man I'm just Ellen you were doing some really good things for the bike and for the future and and we're we're we're spending the money to take our regulatory areas not to the level that not only the regular I just won't but yeah that need to be done so.

Yeah, you know I don't take so much from what I said.

Yeah, I got you all right, thanks, guys nice quarter.

You bet. Thank you very much.

This concludes our question and answer session.

I would like to turn the conference back over to Mr. Allison for any closing remarks.

Thank you Gary and thank everyone for your participation in our call and we'll talk to you in three months.

Thank you.

The conference is now concluded. Thank you for attending today's presentation you may now disconnect.