Q2 2019 Earnings Call
You, ladies and gentlemen, and welcome to the Simmons first National Corporation second quarter 2019 earnings Conference call.
At this time all participants are in a listen only mode.
Later, we'll conduct a question and answer session and instructions will be given at that time.
If anyone should require assistance during the call you May Press Star then zero on your touch tone telephone.
As a reminder, this call is being recorded.
It is now my pleasure to introduce Mr. Steve Messing Nelly. Please go ahead Sir.
Good morning, and thank you for joining our second quarter earnings call. My name is Steve mass Smelly, and I service, Chief administrative officer, and Investor Relations Officer, and Seven's First Night Corporation.
Joining me today, or George Macros, Chairman and Chief Executive Officer.
Bob Feldman Chief Financial Officer.
David Garner controller, and Chief Accounting Officer.
Marty Castillo Chairman and C.E.O. Simmons Bank are wholly owned bank subsidiary.
Barry led better President of our Southeast Division, and Matt Red and President of banking enterprise.
The purpose of this call is to discuss the information and data provided by the company in our quarterly earnings release issued this morning and to discuss the company's outlook for the future.
We will begin with prepared comments, followed by a q. and a session.
We have invited institutional investors and analysts from the equity firms that provide research on our company to participate in the Q. and a session. All other gassed in this conference call or in a listen only <unk>.
A transcript of today's call, including our prepared remarks, and the Q. and a session will be posted on our website at Simmons Bank Dot com under the Investor Relations page.
During today's call will make forward looking statements about our future plans goals expectations estimates projections and outlook.
I remind you that actual results could differ materially from those projected in the forward looking statements due to a variety of factors.
Additional information concerning some of these factors is contained in R.F.C.C. filings, including without limitation. The description of our certain risk factors contained in our most recent annual report on form 10, K. and forward looking information section of our earnings press release issued this morning.
The company assumes no obligation to update or about any forward looking statements or other information <unk>.
Lastly in this presentation, we will discuss certain non-GAAP financial metrics, we believe provide useful information to our investors.
Please note that the reconciliations of non gap metrics to gap are contained in our current report filed this morning with the S.C.C. on form eight k. and available on the Investor Relations page of our website, it's Semmens bank Dot com.
I will now turn the call over to George Makeovers.
Thank you, Steve and welcome to our second quarter earnings Conference call.
In our press release issued earlier this morning, we reported net income of $55.6 million.
In the second quarter of 2019, and increase it $2 million or 3.8% compared to the same quarter of last year.
Diluted earnings per share were 58 cents for the quarter.
Included in the second quarter earnings.
Point $9 billion in net after tax X. non core items, we have merger related costs of $5.6 million.
Early retirement program expenses of $2.2 million in a branch right sizing cost $2.1 million, mainly related to the relocation of our little rock corporate offices.
Excluding the impact of these items the company's core earnings were $65.5 million for the second quarter and diluted core earnings per share with 68 cents increases of $10.8 million and nine and seen its respectively.
Over the same quarter last year.
Total assets were $17.9 billion June 30th.
A return on average assets that's for the second quarter was 1.28% while core return on average assets was 1.51%.
Our efficiency ratio was 50%.
Or loan balance the end of the quarter was $13.1 billion, an increase of $1.4 billion from last quarter.
Approximately $1 billion of the increase was due to the reliance bank merger completed in April .
While $387 million of the increase was organic loan growth primarily in our real estate portfolio.
Are low pipeline, which we define as loans approved and ready to close.
Was $419 million at the end of the quarter compared $473 million or is at the end of the first quarter.
On a consolidated basis, our concentration of construction and development loans was 105%.
In our concentration of C already loans was 333%.
At the end of the quarter.
The increase is primarily the result of the addition of the reliance portfolio, which was heavily concentrated in c. or you know.
Total deposits at June 30th we're $13.5 billion.
An increase of $1.5 billion, which last quarter.
$1.2 billion or the increase was due to the addition of far reliance customers.
And $322 million was from organic deposit growth.
We continue to be very pleased with our growth in coal deposits as we continue to emphasize relationship banking.
Our net interest income for the second quarter was $150.4 million.
Included in interest income was the yield accretion recognized loans required of $10.2 million.
Of this amount $4.9 million or 48% was accretable credit Mark related.
And $5.3 million or 52%.
Was interest Mark related.
Her net interest margin for the quarter was 3.92% compared to 3.85% at March 31st.
Companies Cornet interest margin, which excludes all accretion was 3.66% for the second quarter compared to 3.67% for the previous quarter.
The 26 basis point difference between gap in court net interest margin includes 12 basis points of credit market creation.
And 14 basis points of interest <unk>.
Our core net interest margin essentially remained flat, which is consistent with our plan to balance increasing deposit costs.
With a similar increase in interest income.
Or non interesting come for the second quarter was $39 million.
An increase of approximately $1 million compared to the same period last year.
As of July 1st 2018, we became subject to the interchange right cap is established by <unk>.
Resulting in a 3.1 million dollar reduction debit card fees.
For the second quarter in 2019.
Compared to the same period and 28.
This decrease was mostly offset by an increase in the gain on the sale of securities $2.8 million.
Non interest expense for the second quarter was $110.7 million.
Core non interest expense for the quarter was $97.4 million, which represented an increase of only $378000.
When compared the second quarter 2018.
Consistent with last quarter software and technology costs increased approximately $2.2 million over the same period and the price per year.
Our next generation banking technology initiative is progressing on schedule.
Our incremental I.T. expenditures during the second quarter will primarily related to this initiative.
As previously discussed we expect more incremental expense.
This is related in G.B. throughout this year during into the first half of 2020.
The early retirement option offered to qualified associates in the first quarter contributed to the decline in salaries and employee benefit expense.
During that quarter.
We expect ongoing net annual savings of $4.4 million from this program.
At June 30th 2019, the allowance for loan losses legacy loans was $63 million with an additional 1 million dollar allowance required loans.
The low discount Mark was $73.5 million for a total of $138 million of coverage.
At the end of the second quarter, our nonperforming ask six or $87.6 million, an increase of $6.9 million from the first quarter.
The increase was due to other real estate owned required for Milan Spike.
Disbalances, primarily made up of $62.2 million and not nonperforming loans.
And $25.4 million and other non performing assets, which include $6.5 million enclosed bank branches Hill for soil.
Our manualize net charge offs total loans were 14 basis points.
The provision for loan loss was $7.1 million.
Our capital position remains very strong.
As of June 30th 2019, common stockholders equity was $2.5 billion.
Our book value per share was $25.57, an increase of 9.9% from last year.
While our tangible book value per share was $14.90 an increase of 14.2%.
The ratio tangible common equity was 8.5% of June 30th.
Our total risk based capital at June 30th was 12.7%, while our tier one leverage ratio was 8.9%.
Recently Simmons was recognized by Forbes is one of the top banks in Tennessee, and Arkansas and was once again recognized by Arkansas business as one of the best places to work in Arkansas.
We're extremely proud of this type of recognition as it validates our corporate objectives of making Simmons, a great place to work and providing excellent customer experience.
We also completed the moved to our new little rock corporate offices, where we're proud to be an anchor environment rubber market area of downtown.
In the near term, we will continue to manage concentrations in our construction and commercial real estate loan portfolios.
Our emphasis will be on developing deeper relationships with our customers.
R.N.G.B. Technology initiative continues on track.
As we prepare to introduce updated applications throughout the remainder of 2019 in into the first half of 2020.
And we continue to explore strategic eliminate relationships, which would enhance our coverage in our current footprints.
This concludes our prepared comments will now take questions from our research analysts and institutional investors.
I'll ask the operator to please come back on the line and review the instructions and open the call for questions.
Thanks.
Ladies and gentlemen, if you have a question at this time.
Please press Star then one on your touch tone telephone.
And if your question has been answered or you wished remove yourself from the queue. Please press the pound key.
And our first question comes from the line of Brad Galey KBW Brady.
Okay.
Hey, Thanks, good morning, guys.
<unk>.
So maybe we can start with the expense based on it's kind of noisy with you know the acquisition could in this quarter and some other.
Graveyard is when you look at it you know the conversion for reliance has been done you have the you know roughly four and a half million dollars of savings is coming from the early retirement program as you look towards the back half of this year.
How do you think the quarterly.
Expense baseball trend.
Okay.
I'll take that first yeah. As you mentioned, we did convert reliance early in the quarter.
We were because we closed the bank emerged at the same time, we were able to get most all of those costs saves early on in the process. So we did get to G. Most of that is for our our guidance going forward as we're moving through there are several moving pieces. As you said you first have the reliance piece coming in for the fall quarter, you have an increase from N.G.B. as we move forward in the process, but yet as being offset by some of our early retirement savings.
Our target level for the balance of the year would be to maintain that expands at 100 million or less on a quarterly basis would be our target.
So we're going to be working below that but right now that's our target level, we would say.
And then I know last quarter, you know, we talked about kind of reducing the expected amount of lung growth down to 5%.
If you look at what you've done your today, you're right around that.
Kind of 6% level. It is 5% still on the right way to think about while breath for the year or is there a possibility that you guys can do a little better than that.
Brady this George there's always a possibility we can do better than that as you.
Notice our loan pipeline is still very healthy so we're still originating a lot of loans it really just depends.
On early pay offs and how many of those new loans, we keep on the books as we manage our C.R.E. concentration.
Also remind you that the reliance portfolio was heavily concentrated in low yielding see <unk>.
And we are working through the management of those credits now several had really no relationship with the bank other than that particular low.
So we will continue to generate substantial new loan business.
Whether that translates into net loan growth at the bank just depends on how we manage particularly the C.R.E. portfolio, Matt Red and sitting here with us and he might have a couple of the comments yeah <unk>. That's exactly right. I mean, we're we're seeing the same volume me Sol if not an increased amount of volume alone opportunities, but means knows C.R.E. concentrations.
Yeah that we're selling down with our correspondent group, where we're taking care of existing customers Cat, we'll talk about all your lungs and our relationship strategy. So we're going to continue to make those loans with our core customers, but we may be selling down from our <unk> for for C.R.E. concentration purposes, but also points points you on the on this quarter's loan growth. We also had good growth in our mortgage warehouse because with what's happening to the right environmental the mortgage side so that that.
Contributed to that and also our AG portfolio started to fund up so a couple of things from a seasonality that also bolstered loan growth a cat. He said that that should that 6% range right now.
Okay.
And then finally for me just one on M. and I. Yeah. I know you guys had talked about potentially getting one more deal announced in clothes before you're in and before you have to mess around with Cecil next year.
Yeah, we're getting kind of close to that point, where you can announce a deal and close it this year in any update on that effort on the M. and <unk>.
Well, we're we're still in active discussions with what we think would be great.
Merged with partners and.
You know our strategy as we mentioned before is changed a little bit we we really like our current footprint.
We'd like to increase our market share in some key geography.
Increase our coverage in our current footprint there are a lot of blank spaces. When you look at them out.
We'd like to have a partner that has relatively low loan to deposit ratio, but who is a proven.
<unk>.
And then we certainly would like to have a lower C.R.E. concentration. So that just the math helps us manage that a little better.
I'm still optimistic that we might be able to.
Have a transaction close this year certainly be beneficial based on the effect of the Cecil.
One time.
Balance sheet adjustment this year versus a provision through our income state next year. So we're doing all we can to bring that to fruition.
It's it's still are are great desire to do that.
Alright, great. Thanks, guys.
Thank you.
Next question comes from the line of Stephen Scout.
Sandler O'neill your line is now.
Hey come on an airline.
So even in the morning.
I'm curious just beyond going back to expand space, maybe beyond their cost base from reliance went out to allow you guys to you know kind of on a core basis take expenses.
Down quarter recorder, even with that inclusion or are there other.
Meaningful meaningful cuts beyond reliance on the and the early retirement anything there to note that that that allowed for that improvement.
Well I'll I'll start on that and that is our N.G.B. program is designed to gain efficiencies through technology and I think we mentioned before that that sort of lag as we've grown through acquisition.
We had a lot of internal back office conversions.
Year to date.
So things that are not customer facing but give us quite a bit of new capability in turtle.
And I think what's happened is that we have.
Not frozen new hiring, but we've recognized that technology is going to take up some of the slack as we continue to grow.
So in the past as we've grown we've added people.
This year as we've grown we've taken advantage of this new technology that we put in place for our back office.
So.
You know, we hesitate to say what that ultimate result will be.
Because we're just learning the capabilities.
Of those new applications internally, but I would say that that had a great deal to do.
With our expense control in the third quarter I would expect it to be similar going for.
Bob you may have some other faults just one other out and just you know if you look back a year ago or so we were just a new 15 billion dollar plus company, we're starting to mature into more of the larger bank of a 15 plus billion dollar company and trying to figure out a way through that and I think this quarter showed some of that.
And I Echo all the things George said.
Okay great.
And then maybe thinking about and then EM at Cornell M. I guess, you know relatively flat 366 accretion with a bit higher can you.
Can you give us some thoughts on what you think I guess, the accretional be especially as we get into 2020, if there'll be any material changes there and then if there's any kind of changes to the guidance around that 379, m., especially in light of expectations for potentially for rate cuts moving forward.
Well I'll just I'll just say this debt.
If you recall I think last quarter, we talked about the effect of the reliance portfolio.
On the neon and that was estimated to be roughly four basis points.
So.
Subtracting that from the equation, we probably are ride at a 370.
Niamh without reliance which is very good that that shows an increase in.
In our margin.
You know the reliance portfolio will continue to weigh on that Nam until we manage some of those low yielding loans out of the bank and replace them with higher yielding loans.
So we still think the 366 to 370.
Guidance is good for the rest of this year I'm Gonna, let Bob talk about creation I'm anxious to hear what he has.
We did have obviously, a pretty high number this quarter some of those related to reliance and and the other acquisitions as we mentioned in a lot of our calls and meetings that we did plan to break it out this quarter how much is related to interest rate how much is related to a credit.
Reliance as George said had excellent credit quality in their loan portfolio.
But some of those loans were lower rates and so there was a larger mark interest rate Mark on that so as you look at the some of this some of the accretion is related obviously to credit Mark that's going to we're used to build our allows the provision the balance of it is true just interest rate just like it was a bond and as we reinvest that we expect to get yield ad or better than we had the mark on those so as we had this quarter about 10 million or so in in in our creation. Our projection. These are based on scheduled payouts is about.
10, and a half 11 billion for the balance of the year millions sorry, a million for the balance of the year now we would expect that number to have payoffs in there and migration in there.
There's never been a scheduled quarter, but a schedule means is going to be at the.
The minimum amount it would be so our our schedule amount again is about 10 11 billion a million for the balance of the year next year, you know second ear in it always comes down so that we don't have those it wouldn't be comfortable given those projections till we get to the end of the year. When we know what pay off this happens from now till then.
Okay, and don't expect any meaningful change to that number from C. for one particular thing.
Other than the than normal decline you're speaking to.
Yeah for for <unk>.
The way our accretion has been book.
As as we've talked about several times there will technically be a double talk when you get to see so you'll build the allowance, but you will not remove the credit mark out there or the interest rate or credit are related to these zones only the loans that are.
The impaired or.
Credit deteriorated loans.
So and that number is very small for salmon. So our creation going forward will be lower just because the normal schedule payoffs be going into next year.
But we don't expect a big change like you might see some other banks that account for that differently because they accounted for it as impaired loans basically.
I think the thing to point out those Stephen is that we when that accretion comes in is revenue we will not be building a provision based on migrated loans because vision will already be there.
So we would expect to see a little more of that hit the bottom line.
Then you've been you seen in past beginning in 2020, that's right.
Alright, thank you.
And our next question comes from the line of David Feaster with Raymond James Your line is now open.
Hey, good morning, guys.
Oh, sorry.
Hey, the impressive quarter and congratulations there just wanted to follow up on the NIM question. So you're reiterating the core NIM guidance are you assuming any rate cuts in that and could you remind us.
What what are your expectations are for the impact of a 25 basis point cut on your your margin.
Well, we've been talking about that quite a bit over the last 30 to 45 days.
Our objective is still to manage our deposit costs, along with our ability to drive revenue.
We expect.
Deposits costs to go down.
Associated with that we expect a little bit of pressure.
On our loan yield, but quite honestly, we still have quite a bit of pricing opportunity in our loan portfolio during the balance of the year.
From rates that are substantially lower than current market right. So we think we're still going to be able to balance.
The pressure on loan and deposit costs equally and maintain our NIM in the current range. That's our objective and we've taken a look at several models and believe Thats an achievable goal.
Okay. So so are you assuming rate cuts in there and how many itself.
Well, we have we're assuming one right.
Right.
Okay.
And that would be here in June at the end of July yes, David if we plug it in our model if we were to plug it straight into our model with no management interventions just let it run through you would see probably a one to two three basis points decline in the NIM. We believe there's opportunities in either one offsetting some with deposits and two as George said the the loan portfolio has some repricing opportunities. So we feel comfortable we'll be able to maintain if not slightly improve just because of the position of our loan portfolio balance sheet right now.
Okay.
Okay. That's helpful.
And then you talked about some some non core loans that you got from reliance on the real estate side.
How quickly are you expecting to run those off or would you be even interested in a potential sale of a portfolio.
Well, we we consider always manage that portfolio. So.
Several.
We expect to pay off early this year.
But we're also approaching.
Potential loan side.
We will not take big haircut on the loan sale because these are excellent quality loans.
I just have no other relationship with the bank.
The increase RCR he concentration and they have a low yield so we take a look at inventory if you will and opportunities we have in the marketplace with other types of lending.
So that makes sense for us to consider maybe freeing up that inventory and deploying it some other place. So we're taking a look at every opportunity.
But we will do what we think is in the best interest.
Of our company.
We're certainly not willing to take huge losses to get out of any of those loans. So to the extent that we can sell some.
Even participations.
We're going to explore those options.
How and how big is that noncore book.
Well I would say that the loans that we would consider in that book from reliance should be between two and $300 million. Okay.
Okay. That's very helpful. And then last one for me you talked about the energy be initiative.
Focused on improving efficiency could you just.
In most you've got a lot of tech investment that's coming in the second half of the year could you just remind us.
Exactly what's your what's your investing in and potentially what kind of efficiency improvement, we could expect potentially in 2020, I mean, you're kind of at the low end of your 50% to 55% efficiency guidance.
And could we expect that to come in below 50% or stay at the low end, even in the face of revenue headwinds from challenging rate environment.
We intend to manage between 50 and 55% so the LNG b.
Investment is just one of the investments as we feel is going to be necessary to grow our business in all our markets and I'll just mention a couple of business lines. So our trust company does an extremely good job in certain geographies. There are other geographies, where we have very little trust presence that is a people business. So we are going to have to invest in building teams in certain geographies in order to produce revenue I would say that what we've experienced with in GB. So far will pay additional dividends from a back office efficiency standpoint.
What we will roll out from now on our revenue enhancement applications. So we hope to get the best both worlds efficiencies in the back office revenue generation in the front office.
Those initiatives will start rolling out.
In 30 days or so with our new Treasury management platform. So we will continue through our new digital banking platform.
And then we'll continue to try to make sure that we realize all the efficiencies we can through the back office upgrades.
Okay. That's helpful. Thank you.
Before.
Thank you and our next question comes from the line of Gary Tenner with D.A. Davidson. Your line is now open.
Thanks, Good morning.
More than a couple of follow up questions I guess first.
You mentioned the petitions for accretion back half of the year, it's enough to $11 million is that.
That I assume that's a that's a quarterly number.
No five and a half million or so per quarter.
That's it for the balance of the year.
Okay, and that's just the run rate and Thats combined credit and rate the rate. So just.
Will there be any accelerated pay offs, that's exactly right that's the schedule amount per quarter.
Okay perfect. Thank you.
And then on the.
Early retirement savings that you talked about was any of that embedded in the run rate in the second quarter or that call million one per quarter should start showing up here in threeq.
Most of it was already in the second quarter numbers.
And that's why we broke out the non core cost of that early retirement, so the severance amount if you will.
But most of that's already baked into that 97 half million dollar run rate.
Okay.
Perfect and then last lastly, if I can just on the construction growth, which remain very strong this quarter.
Just kind of commentary about what you're seeing in that in that market, maybe where some of the loans came from geographically.
And then how the competition is in that space right now has it eased at all.
I will let Matt take that.
Yes, I'll give you some color around where it came from and then also kind of about that where that portfolio is so we continue to see good good growth in our existing construction loans through north Texas.
Kansas City Middle Tennessee.
Our our that's the primary drivers or other areas that we see growth in that portfolio, but also know that right now our construction construction portfolio on average is funded over 50%. So we're well and a lot of our projects as we continue to manage our CRD concentrations we project next.
That for the next 90 days will fund another $300 million in construction funding on existing projects and if you look at our construction commitments, they're going down slightly month over month.
As we manage those concentrations I hope that gives you a little color glad to answer any more questions as that relates to.
Got it that's helpful. Thank you.
Thank you.
And our next question comes from the line of Matt Olney Stephens. Your line is now.
Thanks, Good morning, guys.
Morning, Matt.
I want to go back to the core margin discussion and George I think you mentioned.
You still have some loans that are priced below market level and youre getting some benefits of repricing those higher.
I haven't heard you guys mentioned this before or perhaps I just missed it.
Can you give us some more context as far as kind of what those repricing benefits are and how much longer do you think you can benefit from some of those tailwinds.
Hey, Matt This is Matt I mean.
One noticeable opportunity for us is that relies portfolio.
Well, we can get those loans as they mature at a much higher margin, but we also have existing loans on the books just in the current rate environment. We're in right now were still able to.
Even despite where rates are heading if you look at our approved ready to close.
Rates, where they are where they're at we're holding them, we're maintaining more if not increasing them, so thats, where we see that opportunity.
And then I guess offsetting that would be some loans that are variable that if the fed were to cut would reprice down immediately can you give us some context as far as.
How much of a variable rate loans you have.
And then within that LIBOR prime.
Well I'll tell you in the variable and maturing in the next 12 months is about a 45% of the portfolio. So we'd have about 45% that reprices.
Pretty soon is.
But but you also have to look on those side theres some deposit portfolio that allowed as tied to raise that some of it will get the full 25, some will get less.
You know so it will be offset most of those numbers.
And we'll have more versus prime or versus Brent.
How much we have a level versus probably yes, we have a clear right now we have about a billion plus in lab or loans that are tied.
And then the remaining that again, what Bob said 40, 50% that will mature in the next 12 months.
Got it.
And then on the credit front it looks like the non accrual loans were relatively flat.
Can you talk about any movement within this balance where there any larger credits that migrated in and out of the balance.
No and I'll, just remind you of some of those include reliance portfolios.
That came in so we're pretty pleased with where we ended up.
We've done a pretty good job of managing our.
Problem loans, our special asset group and field have done a great job.
So we think our credit quality is very stable at this point.
George I recall from last quarter that you expected some paydowns as some of those past due loans your nonaccrual loans.
You got to subsequent to the quarter end back in back in the March April timeframe did those loans actually pay down.
We did the one that we mentioned actually did pay off.
We had a billion dollar recovering it still sitting in our allowance for acquired loans.
So it was not taken into income.
And what was the balance of that loan.
I won't say it was $3 million by recall zero, that's all for me.
Okay.
And then.
Also on the tax rate was a little bit.
Different this quarter and what's your expectations for the full year tax rate or even the back half the year.
Well you know as tax rate went up because we made a lot more money. So if I would say about 21.8 I think is our go forward estimates so.
Between 25 to 22.
And thats for the back half of the year for the full year.
It'll be the full year so.
Basically what it gets recast every quarter for a year to date numbers. So I'd say your year to date number right now is where it is going to end up pretty close okay.
And part of this incremental of adding reliance on that issue.
Okay, and which all of it is taxable and if you remember some of our bases nontaxable, if its beauties or other foley and so forth.
Got it.
Okay, Great. That's all for me. Thank you.
Thank you.
Thank you and as a reminder, ladies and gentlemen, if you have a question. Please press Star then one on your Touchtone telephone.
Our next question comes from the line of Garrett Holland with Baird. Your line is now.
Good morning, and thanks for taking the question just wanted to get your thoughts on the deposit pricing.
Competition.
Can you sounded pretty optimistic and your ability to reduce funding costs going forward just so what's a resale the deposit repricing beta if the fed does cut 25 basis points next week.
Yes, I think you first got anything thats with tied to money market type funds that you're going to get a higher percent of that so if theres any public funds broker deposits, you're going to get 100% of that the core.
I think generally you're probably talking about 40% or so that 30% of that beta we might get.
At one move and it may be over a period of two moves before you get it.
So make.
Sub accounts in some markets keep in mind, we priced by market and so some markets will have a little less opportunity in some will have more.
No I appreciate the detail that's helpful.
And then on capital can you just remind us where you want to operate across various metrics over the intermediate term just to preserve flexibility for growth and optionality for deals.
Gary we believe that.
TC ratio between 9% and as our operating range, so as we get closer to 9%.
We have an opportunity maybe.
Use little bit of that capital in our acquisitions, we have.
Avoided stock repurchase plans at this point.
If we choose to do stock repurchase we will probably build that capital level in order to be able to do that so we're very comfortable and I can think I think you can see from our historical numbers that to operate between.
Shim from PTC perspective between half and 9% from leverage ratio perspective and in total.
Our risk based capital between 12 and half of 13.5%.
Is very adequate for our risk profile I think we've been able to operate very effectively in those ranges over at least last four or five quarters.
And just as a reminder, you see the TC ratio did go down from March to June and that was related to the acquisition of reliance would said over 30% in cash in that deal and right in line with what our expectations were.
That's helpful. Thanks for taking the question.
You bet.
Thank you and I'm showing no further questions at this time, so with that I will turn the call back over to chairman and CEO , George Makris for closing remarks.
Well, thanks to all of you for joining us on our second quarter earnings call I, just want to say that I'm awfully proud of our associates I think we're already not seen page and I think that.
Shows in our ability to manage our net interest margin in a volatile environment.
Also our ability to.
Achieve efficiencies through our LNG B program, we're very optimistic about the new applications that we're going to roll out and our ability to provide even better service to our customers in the market and last but not least we're awfully excited about the recognition that we seem to be getting in most of our markets for our excellent customer service and certainly for best placed work in Arkansas.
So thanks again for joining us and we'll do this again next quarter have a great. Good.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a wonderful day.