Q2 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to the first Midwest Bank Corp. 2019 second quarter earnings Conference call.
Following the close of the market yesterday. The company released its earnings results for the second quarter of 2019, and also issued presentation materials that will be referred to during the call today.
These provide both historical financial information and the company's outlook for 2019.
During the course of the discussion today managements comments and the presentation materials may include forward looking statements. These statements are based upon the Companys current beliefs and are not historical facts or guarantees of future performance or outcomes actual results or outcomes may differ.
The risks uncertainties and safe Harbor information contained in the company's most recent 10-K and other filings with the FCC as well as the forward looking statements non-GAAP and other legends included in the company's earnings release and presentation materials should be considered for the call today.
Finally, the company will not be updating any forward looking statements. After this call.
This call is being recorded and all participants are in a listen only mode.
Following the presentation by Mike Scudder, Chairman and Chief Executive Officer, Mark Sander, President and Chief operating Officer, and Pat Barrett Executive Vice President and Chief Financial Officer, the call will be opened for questions and answers for analysts only.
I will now turn the call over to Mr., Scott or please go ahead.
Great. Thank you good morning, and thank you everyone for joining us today, it's great to be with you.
Oh, well as I opened up in the release and certainly with the my quote I. It was an active quarter for us on several business fronts, but most notably for our mid May closing on the bridge Bank acquisition.
As well as the completion of the related system conversion.
To help you as we've we've provided a supplemental presentation to follow along with as we move through our remarks.
As is typically our practice I will cover the highlights we did work and path to walk you through the components.
Certainly they can add the differentiation of the impact of Brinci on our numbers.
Let me start with some of the headlines we closed the quarter at 17 billion in assets, that's up about 10% from last quarter, 18% from a year ago Bridge you added about 1.2 billion to this total.
And importantly, a talented team to our overall metro Chicago market price.
Combined with our fourth quarter acquisition of Northern state.
This puts us in the top 10 or for overall market share in Chicago.
We're very pleased with our progress and execution overall in the bridge view integration or projections remain on track.
And with the systems conversion behind Us and a great team on board, we have some solid momentum going forward.
[noise] wave from acquisition costs, our underlying EPS increased to 50 cents up 9% and 25% from the first quarter of 2019 and second quarter of 2018, respectively.
At the same time, our return on tangible common equity.
Proved a 16% that's up 64 basis points and 114 basis points from the first quarter of 19 in second quarter of 2018, respectively.
From a business perspective, if you look away from bridge you for a minute loans were up annualized about 9% for both the linked quarter and from a year ago. We were very pleased with seeing eye growth, while consumer reflected both solid sales activity as well as our desire to add some duration and diversification to the balance sheet given the evolving rate outlook.
At the same time, we saw a theory pay downs and production timing weighing on growth here for the quarter.
Prospectively, we continue to build and strengthen our sales teams as we benefit directly and indirectly from overall market disruption, we move forward their commercial expansion in Milwaukee, adding two more lenders in the market further complementing our our acquisition of northern Oak in the first quarter. We also to continue to add lenders locally as we move forward. All of this is in addition to the expansion of our direct mortgage team.
Importantly, all of these that these additions pay future dividends down the road.
Our deposits held up nicely, increasing on average, 6% in 14% linked quarter and from a year ago.
Respectively, while our mix was relatively unchanged growth in earning assets an accretion saw net interest income grow to 150 million or 8% over the linked quarter, while margin improved to 4.06 as expected underlying margin was down about eight basis points, which was just a recap a little bit better than what we would have expected given the rate environment and some of the actions that we took to better position the balance sheet.
Operating efficiency was 55% for the quarter and the year to date.
Improved from last quarter, and five Percentish four points better than what it was a year ago.
Greater revenue has helped us along with higher net interest income as well as our fee based fees revenues, sorry bounced back nicely as well.
Finally, our capital and earnings remain very strong providing us with flexibility as we navigate today's environment.
We closed the quarter with tier one common at 10.11% to risk weighted assets. That's essentially stable. If you compare us to where we were a year ago and up 40 basis points or excuse me stable versus year end up about 40 basis points from a year ago and that's after having acquired bridge you repurchased repurchasing 20 million in shares under our newly authorized program and increasing our dividend to 14 cents and that's up almost 30% from year ago. So all in all another busy quarter and now I will turn it over to Mark in path for some additional color.
Thanks, Mike and good morning, all.
Loans is shown on page three of the presentation material increase nearly 1 billion in the second quarter right in line with our expectations.
Bridge view of course was the largest piece of that at about $700 million, 65% of which was in commercial real estate.
We also acquired over $200 million of wonder for mortgages to extend our overall portfolio duration as we signaled in last quarters call, while protecting and growing earnings.
Oh away from these acquired assets, we saw solid gains in Cnine consumer partially offset by continued pressure from Sherri payoff activity.
CNR growth was particularly strong and well diversified across middle market and specialty teams as our previous talent investments continue to incrementally build our business quarter by quarter.
Similarly, similarly, our consumer direct and mortgage teams had another solid quarter.
Our business banking and real estate teams had softer production this quarter, however, and in conjunction with continued refinancing sale activity resulted in a drop in net salary loans away from bridge for you.
We believe the modest Q2 production here was more timing than anything and that we can and will grow see already in the face of payoff pressures in the future.
We are thus maintaining our outlook for high single digit single to low double digit loan growth for the full year.
We think our commercial and consumer businesses in total will each post solid incremental organic growth from here based largely on disciplined prospecting efforts, but also helped by some of the staff additions Mike referenced in his opening comments.
Turning to asset quality on page four.
Results in Q2 were also right in line with expectations.
Charge offs of 31 basis points and NPS of 0.77 of loans were consistent with the prior quarter.
Our provision expense covered charge offs and loan growth as expected.
Yet our allowance fell slightly on a percentage basis as we reduced specific reserves in conjunction with a couple of losses this quarter.
We expect all of these asset quality metrics to stay in the same range for the remainder of the year.
While some of the payoff activity we've seen in recent quarters is an indication that the the competitive landscape remains aggressive.
We will not chase loan growth by sacrificing credit quality, and we believe our broad diversification and conservative underwriting will serve us well going forward.
Relative to two deposits as seen on page five.
Our average deposits are up 1.5 billion over the last year as we have a very high retention rate on acquired deposits due to our very strong customer satisfaction scores.
Bridge, you added consistently to our strong mix in Q2, and our core base remains stable.
While we remain competitive across all deposit products, a big strength of our overall franchises this stable low cost deposit base.
In Q2, our average cost of the of deposits was 60 basis points, which will again be amongst the best in our peer group.
Pat will now translate all that into margin and net interest income.
Thanks, Mark and good morning to everyone on the call are list again.
Turning to net interest income and margin on slide six.
Net interest income was up $11 million or 8% from the prior quarter and up $23 million or 18% compared to the same period in 2018.
Compared to both prior prior periods the acquisition of bridge view Securities purchases and loan growth were partly offset by higher funding costs.
In addition, the increase compared to the first quarter benefited from an extra day in the quarter, while the increase compared to the same period a year ago was impacted by the acquisition of nor states.
Acquired loan accretion contributed $10 million for the quarter higher than expected due to the favorable resolution of certain loans.
Moving to net interest margin tax equivalent NIM for the current quarter of 4.6% was up two basis points linked quarter and 15 basis points from the prior year.
Excluding accretion margin was 378 for the quarter down eight basis points linked and up one basis point to the same period, a year ago very much in line with our expectations.
Compared to both prior periods margin compression reflected the mix of interest earning assets acquired in the bridge view transaction.
Purchases of Securities and one to four family mortgages to mitigate the risk of falling rates and higher funding costs consistent with our previous guidance.
Turning to earning assets and funding sources average interest, earning assets were up 900 million linked quarter, and 1.8 billion compared to the prior year, reflecting earning assets from the bridge view acquisition loan growth and securities purchases.
In addition assets acquired in the North states transaction impacted earning asset growth compared to the prior year.
Average funding sources were up over $900 million linked quarter, and 1.7 billion from the prior year, reflecting the impact of both acquisitions and organic growth.
Moving to our 2019 outlook, if you recall our guidance three months ago assumed no additional rate changes this year.
Rather than attempt to predict the timing or likelihood of future interest rate changes I want to quantify that each 25 basis point downward adjustment by the fed would likely result in a $2 million to $3 million decline and I per quarter.
On the positive side, we are updating our accretion guidance to be $30 million to $33 million in a range for the year up modestly from our previous outlook.
Overall, we did not expect either these potential rate cuts or the improved accretion to change our full year guidance range of low to mid double digit growth.
If we do get 75 basis points of fed rate cuts as many predicts.
We expect to see relatively flat.
Compared to the second quarter run rate adjusted for day Count.
If we do not get those rate cuts expect $6 million to $9 million of incremental growth.
From a NIM and earning asset outlook perspective, as we've said previously will likely institute further actions to protect against future rate cuts as well as any further declines in market rates.
These actions would likely continue to drive earning assets, both securities and mortgages higher as a percentage of total earning assets and at the same time should be expected to result in quarterly NIM compression similar to what we saw in second quarter for at least the next one or two quarters or as long as these actions and rate changes continue.
Once again I want to remind you that projections are subject to volatility due to movements in interest rates pace of loan growth and the impact of acquisitions.
Mark turn it back over to you to discuss noninterest income on slide seven.
Thanks, Pat noninterest income rebounded as expected in Q2 up 10% versus linked quarter, and 4.3% higher than a year ago.
At the core these comparisons reflect what we view as our normal organic growth trajectory of low single digits overall, plus the benefit of acquisitions.
We were pleased with our consistent performance year. Following Q1 results there was skewed lower by a couple of isolated items.
Our primary fee income growth streams wealth management Treasury management and card services, all posted solid organic growth results in Q2.
Capital markets and mortgage rebounded sharply from Q1 really just to levels, we consider normalized and thus we look to grow both of these from here.
We have updated our noninterest income guidance for the full year as shown on page seven to mid to high single digit growth as a result of the impact of market conditions on the first part of the year and overdraft fee pressures.
More simply stated we think each of the next two quarters, we can generate solid mid single digit growth over what we posted in Q2.
It back over to Pat to talk about expenses.
Moving on to expenses on slide eight. Please note. The current quarter includes $10 million of acquisition and integration related expenses associated with the bridge view acquisition.
And to a lesser extent, some lingering delivering excellence implementation costs, both of which we believe will remain at or better than original expectations for the full year.
Away from these items total expenses were up 6% inline with our guidance compared to both the prior quarter and the year.
The increased linked quarter reflects additional operating costs associated with bridge view.
Merit increases to salaries valuation adjustments on certain properties and other expenses related organizational growth, partly offset by lower occupancy costs.
The increase compared to prior year as reflective of increased operating cost associated with the bridge view, Northern Ohio, and Northern States acquisitions.
Merit increases and higher other expenses, partially offset by the full incremental benefit of delivering excellence expense initiatives, our efficiency ratio of 55% improved from 56% linked quarter and from 60% a year ago.
Our outlook for 2019 legacy expenses is unchanged.
Which was the fourth quarter of 2018 run rate of 98 million plus 3% inflation.
With 4 million in additional expense in second quarter, plus $6 million in each of the third and fourth quarters related to bridge for you said another way our second quarter run rate of 104 million plus an additional $2 million spread across staff cost and occupancy expense to reach bridge views full quarter run rate is a good quarterly estimate for the remainder of the year.
Last note on taxes before I leave this slide our effective tax rate for the quarter was approximately 25% in line with our guidance and it remains our expectation for the full year.
Moving to capital on slide nine as Mike highlighted we continue to maintain capital at strong levels and are pleased with our track record of rapidly earning back the capital we've deployed on acquisitions.
Excess earnings combined with the benefits of the change in accounting for our sale leaseback transaction. During the first half of the year essentially funded our acquisitions of northern Oak and bridge view plus the repurchase of approximately 1 million shares and a 17% dividend increase during the first half of 2019.
Note that on an annualized basis as Mike said dividends are up approximately 30% compared to a year ago.
We expect continued capital accretion from excess earnings providing further capital deployment flexibility to fund growth or continued share repurchases.
And finally, consistent with our usual practice, we've summarized both our outlook and current quarter's earnings on slides 10, and 11, respectively.
Now I'll turn it back over to Mike for final remarks.
Thanks, Pat So just to recap we continue to like where we're positioned even as we navigate what I call the realities of an evolving rate outlook.
Since 2015, we've grown core EPS by 14%.
Compounded and are well on that pace for 2019.
Our focus remains on building talent, expanding our business and leveraging our teams and technology to drive a better and more efficient client experience. We have a strong balance sheet gauge team solid underlying momentum we've got the flexibility to manage our capital to both invest in our business as well as pursue opportunities to expand both in existing and adjacent markets always we do so with an eye on maximizing long term shareholder returns.
So with that let's open it up for questions.
Thank you Sir the question and answer session will begin at this time, if you are using a speakerphone. Please pick up the handset before pressing any numbers.
If you have a question. Please press Star then one on your push button telephone.
If you wish to withdraw your question. Please press Star then too.
Your question will be taken in the order that is perceived.
Please standby for your first question.
The first question comes from Brad Milsaps of Sandler O'neill.
Please state your question.
Hey, good morning, guys.
Morning Wonderbra.
Mark in the release and in your prepared remarks, you touched on the purchase of some consumer and one to four family residential loans during the quarter I was curious if you could give us the amount and what your appetite would be.
You know for future purchases you know maybe in lieu of continued.
C are you pay downs or other softness in the book.
Sure.
The amount in Q2 was a little bit over $200 million to answer that question or appetite going forward, it's partially about earning assets Brad thats, partially about the duration of our book and what we want to do to position our balance sheet for the rate environment that we see so as we.
Both opportunistically, but also strategically kind of look at where we want that balance of fixed versus floating to be.
Against the backdrop of earning assets you know we might do some additional purchases. We've stayed on the higher credit quality side of the wonder for mortgages and so there's a certain element of just a good attractive risk return to what we purchased as well.
That's helpful. And then just to follow up on the whole extension of duration discussion.
Maybe switch to Pat.
Just curious.
Your appetite for additional securities purchases. It looks like you may have bought X bridge you a few hundred million during the quarter also the borrowings were up.
Quite a bit I don't think bridge you had a lot of borrowings can you talk about.
What you're doing there.
In terms of additional.
Securities purchases kind of funded with borrowings.
Sure.
The borrowings are a little bit independent of that because we've already locked in and committed to forward fundings in previous years and as those come in Theres, probably about 400 million of maturing FHLB is that does it replacing so there's a little bit of a timing lag on the FHLB side, but as we're able to find forward funding at attractive rates in this down curve environment. We're certainly looking for opportunities to lock in more future funding at pretty attractive long term rates.
On the security side.
We put on between this quarter and the first quarter, probably 600 million.
Net securities.
And we were able to get reasonably attractive rates. If you just kind of watch the intraday pricing.
On average we have been putting those on was about 3% and these do serve to extend out the duration modestly not hugely would it not taking super long term bets on it but but net net we are.
Able to improve our asset sensitivity that way.
And then just to follow up on that and I'll hop back in the queue, but it seems you are two to 3 million of.
Hi pressure for each 25 basis point rate cut that's been pretty consistent.
I think Thats, what you said last quarter as well in spite of these moves you've made I guess it hasn't changed the impact on YY.
In spite of some of the duration you've added to the balance sheet.
Yeah, well the big question is how fast can we lower our deposit and funding costs and without having had had our deposit costs rise further and faster than they have during the cycle.
We have very little on an index side. They will automatically go down maybe a half a billion in public funds and that's it. So the remainder is its things that we have to go after customers and try to to reduce rates as rates do fall LLC that we've also been been still actively promoting money market specials and have been pretty.
Successful in those throughout the course of the second quarter.
Because we think long term. These are the things that we're going to need to have to remain competitive, but we will remain competitive on deposit rates.
Regardless.
Thank you guys appreciate the color.
Thank you.
Our next question will be from Michael Young of Suntrust. Please state your question.
Hey, thanks.
One does start on just kind of the balance sheet mix on the asset side, you kind of mentioned, obviously that you guys are trying to extend duration, but can you just remind us of kind of where your fixed floating in variable rate book stand now and then what you're sort of desired I guess outcome would be down the road in terms of those books.
Sure I'll take that Michael it's Pat we typically just based on our natural origination would migrate to around a 60 40 floating fixed split we employ a balance sheet strategies to bring that.
Swaps to bring that back to a 50 50 mix, which is our general target.
Bridge view was ever so slightly more fixed than floating so it didn't really move the needle on that and so we you know.
Rather than taking big interest rate. That's our goal is to really just stayed fairly evenly balanced with a with the understanding that are floating rate book is going to reprice a lot of it probably over half of it on a 30 day LIBOR, whereas to fix but with its remaining life is going to reprice on average every three years.
A 30 year.
Okay. So are you, saying you're pretty close to the fixed floating mix that you want to be at currently.
We are I think we you shouldn't be surprised to see us continue to add a little more duration through a combination of the incremental securities and or one to four family purchases in the remainder of the year again in recognition of the fact that we don't expect rates to rise going forward, whether they fall and how long they stay depressed.
You tell us, but we still think for for our size and profile trying to stay balanced it generally balanced over time is the right posture.
Okay. Thanks, and then maybe just one more on capital returns you know the total capital ratio has got a little bit then or would there be an interest in issuing some sort of.
Yep.
Sub debt or preferred to continue to be able to buy back stock or do you feel like you'll get to the level you need to be to continue the share repurchases going forward.
Yeah, well, we you know we throw off about 25 million or 15 basis points of tier one capital every quarter in excess earnings. So we're fighting a rising tide with capital I mean, it's a good problem to have we generally like our capital levels, where they are and tend to fund acquisitions as they occur. So I think the main focus on raising incremental capital would be able to would be to take advantage of current market conditions for liquidity more than capital and we continue all we always evaluate that based on what our long term needs. We think are versus the opportunities in the market.
Okay, and maybe just quickly on M&A are you seeing many of those opportunities are of conversations going on just general equal.
On the M&A environment is.
The fact that the dialogue and the strategic dialogue that people have relative to what they.
Proceed.
They're going to do with their particular franchises stays tends to stay pretty constant.
So I haven't seen any of those things in terms of cooling on whether that means that will translate to activity I guess remains to be seen but I haven't seen any shift I mean that the activities that propel an increase and that generally fall either towards succession.
Issues or.
Just people's perception of where the operating environment is going to go so I don't think that necessarily shrink.
Okay. Thank you.
Our next question is from Chris Mcgratty of KBW. Please state your question.
Good morning.
Pat I want to come back to the margin perspective to make sure I understand that so on a core basis. Excluding accretion. It was 378. This quarter I think last quarter. You said bridge view is kind of mid to high single digit smoother than it was in for two thirds. So call. It a couple of basis points that need to come off next quarter and then obviously the rate environment. So you're you're kind of basically saying somewhere between five to eight quarter based on page 25.
If we get a couple of economics, if we get a couple cuts are you're suggesting that the NIM on the adjusted basis to be in that kind of 360 range.
Your next few quarters is that is that right. Okay. I think that's fair you can think of each rate cut as being or maybe three to five basis points of impact.
And then the balance of the compression would be through anticipated further duration, adding.
Through the Securities book.
Okay.
That's helpful.
This occurred as book is about 18% of earning assets.
Is there a targeted level I think you said you added 600 in the quarter you given your liquidity.
Is that a number of perk up kind of proportion that will continue to grow or kind of stay relatively in that 18% range.
We generally have a range that's 15 to 20 in that and then we monitor and plan accordingly.
Could it go a little lower could it go a little higher in certain conditions sure.
But it's important for us to keep for certainly for liquidity purposes.
Okay, and just just a follow a follow up to what you said earlier as we do add duration.
It'll add earning assets. So it does contribute to in a high growth. So there's there's a purpose other than just interest rate risk management to this.
It will just be at a lower margin than if we were adding commercial loans or consumer loans.
Got it yes, it's quick.
And maybe one more on the on the Accretable with becoming a I mean this quarter was a year and a little bit more on accretion given the kind of early stage of the deal closing how do we think about level of what's remaining going into next year I know the guy for this year is kind of 30 to 33, which assumes which basically says going to go down to like eight a quarter. How do we think about that going into next year.
But it'll it'll fall off about a third or something in the low twentys for the full year.
And that's all other things being equal, which they never are so this quarter's outperformance was really resolution of the loan that we acquired several two or three years ago.
Okay.
Okay.
Got it all right. Thank you.
Does that answer your question on Cecil did you have a question on seasonal.
Yeah, I think I think you answered it and there was there was previously a concern in the market for banks that had been acquisitive that there was going to be a fall off in accretion income, but I think.
You know the work we've done in in some of the conversations we've had it would suggest that it's not as precipitous as it declines that I think some of that fear, maybe six to 12 months ago.
Right and geographies, just move geographically out or deny and into a credit to your for you.
Yeah, so it'll change ratios.
Got it thanks.
Our next question comes from Kevin Reevey of D.A. Davidson. Please state your question.
Good morning.
We're hearing.
So I was just curious.
First of all the new loans, you're booking Oh, you added or are you waiting for the warrants to those those loan agreements and then kind of looking at your overall loan book what percent of your loan book has floors.
There's a way to protect you from floating rate.
I like the notion Kevin, but unfortunately market won't let us in the commercial space right now Ed floors. So the answer is no. We're monitoring it but we're just not seeing that competitively in the marketplace in our consumer book, we do have floors in our helocs are almost or standard across our entire portfolio. So that's not new that's always been there, but that's a.
Relatively modest part of our entire loan book.
And then if you will I know earlier in the quarter, you walk up and down so.
Branching initiative, you're opening a branch up in the Quad cities area, and then Youve been growing in Milwaukee can you kind of talk about.
Future branching strategy on a de novo basis in the light of your efficiency initiatives that you've undertaken.
Yeah, I think we will be very select in terms of de novo openings I will say that the opening in the quad cities. We're closing that's a relocation to a better location a better facility and brand new so there's there's you know we have the deposits already in that marketplace that will shift to make that branch.
Positive you know.
Earnings from day, one in Milwaukee, and we have not announced any branches, but we certainly will look to a third to grow our business in that marketplace. We like it we have a nice so wealth business now and we've added commercial and over time, we'd like to do more in southeast, Wisconsin, but we have no plans at this point.
To open a branch.
And then lastly year to date your your stock is going to prefer warm okay. All right, but it looks like you guys are doing all the right things in terms of.
Oh your efficiency initiative, you're buying back stock you're increasing the dividend in your <unk> you putting up great numbers, what do you think your stock is underperformed.
That's a interesting question I think I had a sharp analyst would write a report that would correct that calendar [laughter] to shape.
[laughter] appreciate the commentary [laughter] I think somebody's got a great opportunity. They can take advantage of it that's the way I look at it.
No.
But we're at our job is we're running the company for the long term, we are doing the right things and it's all about execution.
Okay fair enough. Thank you.
Our next question comes from Kerry Mickey <unk> of Stephens. Please state your question.
Good morning, guys.
Hi Tech.
Pat earlier, you mentioned that deposit rates will be important for the NIM, assuming the fed does cut rates. So I guess my question for you is what is what are your assumptions in that two to 3 million dollar drop in Eni and then just maybe as a follow up have you seen an opportunity at all either in the second quarter early in the third quarter to begin cutting rates.
Well I think if we got three rate cuts throughout the year, then we would be able at a minimum to keep our funding cost flat.
Overall, you know the growth in our CD book over the last one to two years to a certain extent means that you're you're locked into those rates rolling off we've already reduced rates and no longer have any promotional rates on two year or one year I think the only one we have is a seven month and we've already reduced the rate on that by 25 basis points from when we launched it a quarter earlier, so on that pricing, we've been able to do that I mentioned briefly earlier about half a billion of our public book public funds book is index linked so that will naturally move with whatever the rates are.
But we're actually trying to grow organic deposit production and money market isn't as a product where we havent really competed on money market products or head to for the last decade, and we think long term that is more important than a short term.
Save a few very small bases points on our overall funding cost. So as Mike said, we're really looking to stake stayed very competitive and run it for the long term and while we will be aggressive to take every opportunity. We can find to lower our deposit costs were not going to do it at the risk of not being at or better than market average you know rates.
Thanks, Pat and then just a follow up for me for Mike in the release, you mentioned navigate and evolving landscape as I look at just the headlines in the last Kinda 90 days you recently acquired international lending team on the Sop side and then you also obviously integrated.
Bridge you during the quarter. So were your comments there are more reflective out you know on a national basis, where we should expect to see.
The company continued to grow on a national basis or was it evolving.
Landscape within Chicago, given M&A and the opportunities in market to take advantage of.
Thank you, we scantily weren't a national landscape I've frankly, when I was crafting that or at least what I was thinking a lot of the evolving landscape was going to win rate environment like and well beyond.
It's.
Certainly you're seeing shift locally in the market.
And Ah I, you know I think we have well positioned to take advantage of those opportunities as we go through to see that.
Great.
Thank you.
Our next question comes from Nathan race of Piper Jaffray. Please state your question.
Hey, guys good morning.
Ordinate.
Question on capital I was just curious if you guys have any updated thoughts on maybe what the targeted Tc range or kind of what governor as you guys are seeing around capital levels at this point and along those lines that we can you know expect this magnitude of buybacks to persist at least in the back half of this year, just given where the stock is today.
Yeah, I'll try to answer that without answering that exactly but but as we've said before the levels that we have right now we're very comfortable with.
These carry as well through our periodic stress testing exercise is for the portfolio that we have and leave us comfortably positioned to continue to grow as we have been growing both organically and through M&A. So we're not looking to really reduce our overall capital levels at this point.
And.
With the stock buyback in place that gives us a tool when we don't have opportunities to deploy our excess earnings which again is around 20 to 25 million per quarter that gives us a lever to pull if we don't have other growth offer higher priority growth opportunities.
To fund with.
And we also have in the near term horizon, we still have to be able to accommodate the impact of seasonal which will be a one time hit to capital. We don't think its going to be.
Material, but it probably will consume a quarter or two quarters worth of excess earnings. So we'll make decisions on that as we go through the second half of the year.
And get into next year.
Understood. Okay. That's helpful. And then if I could just ask one I'm kind of a housekeeping question card based fees. They typically you know we tend to see some strength in the back half of the year within that line. In particular, you guys doing anything within that business to suggest that that may not occur to the same magnitude that we've seen in years past.
No I would say that.
Ladies and gentlemen, as a reminder, please press star then one if you have a question.
<unk>.
If there are no further questions I will now turn the call back over to Mr. Scudder for closing comments.
Great. Thank you.
Before I close it out here I want to take the opportunity to thank all of our economy colleagues.
For their many contributions to an investment in our performance they really make it happen.
As we go through and perform as a company I also want to particularly welcome our newest colleagues from bridge you I know a number will be listening to the call and certainly think them as well as others on our team worked so hard to make our systems conversions.
A success and seamless most importantly to our clients. So I appreciate all the hard work that goes into that.
With that I also want to thank all of you.
Listening for your interest in an investment in first Midwest have a great day everybody.
Ladies and gentlemen, this concludes the conference for today. Thank you all for participating and have a nice day all parties may now disconnect.