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Simmons First National Corp (NASDAQ:SFNC)
Q2 2019 Earnings Call
Jul 23, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Simmons First National Corporation Second Quarter 2019 Earnings Conference Call. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded.

It is now my pleasure to introduce Mr. Steve Massanelli. Please go ahead, sir.

Stephen C. Massanelli -- Executive Vice President, Chief Administrative Officer and Investor Relations Officer

Good morning and thank you for joining our second quarter earnings call. My name is Steve Massanelli and I serve as Chief Administrative Officer and Investor Relations Officer at Simmons First National Corporation. Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, Chief Financial Officer; David Garner, Controller and Chief Accounting Officer; Marty Casteel, Chairman and CEO of Simmons Bank, our wholly owned bank subsidiary; Barry Ledbetter, President of our Southeast Division; and Matt Reddin, 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&A session. We have invited institutional investors and analysts from the equity firms that provide research on our Company to participate in the Q&A session. All other guests in this conference call are in a listen-only mode. A transcript of today's call, including our prepared remarks and the Q&A session will be posted on our website at simmonsbank.com, under the Investor Relations page.

During today's call, we 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 our SEC filings including without limitation, the description of our certain risk factors contained in our most recent Annual Report on Form 10-K and the forward-looking information section of our earnings press release issued this morning. The Company assumes no obligation to update or revise any forward-looking statements or other information.

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-GAAP metrics to GAAP are contained in our current report filed this morning with the SEC on Form 8-K and available on the Investor Relations page of our website at simmonsbank.com.

I'll now turn the call over to George Makris.

George A. Makris -- Chairman and Chief Executive Officer

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 for the second quarter of 2019, an increase of $2 million or 3.8% compared to the same quarter of last year. Diluted earnings per share were $0.58 for the quarter. Included in the second quarter earnings were $9.9 million in net after-tax non-core items. We had merger related costs of $5.6 million, early retirement program expenses of $2.2 million and branch right-sizing cost of $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 in the second quarter and diluted core earnings per share were $0.68, increases of $10.8 billion and $0.09 respectively over the same quarter last year.

Total assets were $17.9 billion at June 30. Our return on average assets for the second quarter was 1.28%, and our core return on average assets was $1.51%. Our efficiency ratio was 50%. Our loan balance at 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 large bank merger completed in April, while $387 million of the increase was organic loan growth, primarily in our real estate portfolio. Our loan pipeline, which we define as loans approved and ready to close, was $419 million at the end of the quarter compared to $474 million at the end of the first quarter.

On a consolidated basis, our concentration of construction and development loans was 105%, and our concentration of CRE loans was 333% at the end of the quarter. The increase is primarily result of the addition of the Reliance portfolio, which was heavily concentrated in CRE loans. Total deposits at June 30 were $13.5 million, an increase of $1.5 billion since last quarter. $1.2 billion of the increase was due to the addition of our Reliance customers and $322 million was from organic deposit growth. We continue to be very pleased with our growth in core 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 on loans acquired of $10.2 million. Of this amount, $4.9 million or 48% was equitable credit mark related and $5.3 million, or 52% was interest mark related. Our net interest margin for the quarter was 3.92% compared to 3.85% at March 31. The Company's core net 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 GAAP and core net interest margin includes 12 basis points of credit mark accretion and 14 basis points of interest mark accretion.

Our core net interest margin essentially remained flat, which is consistent with our planned balance increase in deposit costs with a similar increase in interest income. Our non-interest income for the second quarter was $39 million, an increase of approximately $1 million compared to the same period last year. As of July 1, 2018, we became subject to the interchange rate cap was established by the Durbin Amendment, resulting in a $3.1 million reduction in debit card fees for the second quarter in 2019, when compared to the same period in 2018. This decrease was mostly offset by an increase in the gain on the sale of securities of $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 $378,000, when compared with the second quarter of 2018. Consistent with last quarter's software and technology costs increased approximately $2.2 million over the same period in the prior year. Our next generation banking technology Initiative is progressing on schedule. Our incremental IT expenditures during the second quarter were primarily related to this initiative.

As previously discussed, we expect more incremental expenses related to NGB throughout this year and 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 for legacy loans was $63 million, with an additional $1 million allowance for acquired loans. The loan discount mark was $73.5 million for a total of $138 million of coverage.

At the end of the second quarter, our non-performing assets were $87.6 million, an increase of $6.9 million from the first quarter. The increase was due to the real estate owned acquired from large bank. This balance is primarily made up of $62.2 million in non-performing loans and $25.4 million in other non-performing assets, which include $6.5 million in closed bank branches held for sale. Our annualized net charge-off's total loans were 14 basis points. The provision for loan loss was $7.1 million. Our capital position remains very strong. As of June 30, 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 of tangible common equity was $8.5 June 30.

Our total risk-based capital of June 30 was $12.7, while our Tier 1 leverage ratio was 8.9%. Recently, Simmons was recognized by Forbes as one of the top banks in Tennessee and Arkansas. And was once again recognized by Arkansas business as one of the Best Place 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 move to our new Little Rock corporate offices, where we're proud to be an anchor in vibrant Rivermarket 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. Our NGB technology initiative continues on track, as we prepare to introduce updated applications throughout the remainder of 2019 and into the first half of 2020. And we continue to explore strategic M&A relationships, which would enhance our coverage in our current footprint.

This concludes our prepared comments. We'll now take questions from our research analyst 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.

Questions and Answers:

Operator

Thank you. [Operator Instruction] And our first question comes from the line of Brady Gailey with KBW -- Brady Gailey with KBW. Your line is now open.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Hey, thanks. Good morning, guys.

George A. Makris -- Chairman and Chief Executive Officer

Good morning, Brady.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Good morning, Brady.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

So maybe we can start with the expense base, I know it's kind of noisy with the acquisition closed in this quarter and some other non-recurring charges. When you look at the conversion for Reliance has been done, you have the -- roughly $4.5 million of savings that's coming from the early retirement program. As you look toward the back half of this year, how do you think the quarterly expense base will trend?

George A. Makris -- Chairman and Chief Executive Officer

Okay. May I'll take that first. Yeah. As you mentioned, we did convert Reliance early in the quarter. We work because we closed the bank and merged at the same time. We were able to get it most all of those cost saves early on in the process. So we do get to change most of that this quarter. Our guidance going forward as we're moving through, there's several moving pieces as you said, you first have the Reliance piece coming in for the fourth quarter. You have an increase from NGB as we move forward in the process. Yeah, it's been offset by some of our early retirement savings. Our target level for the balance of the year would be to maintain that expanse of the $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.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

And then, last quarter, we talked about kind of reducing the expected amount of loan growth down to 5%. If you look at what you've done year-to-date, you're right around that kind of 6% level and this 5% still the right way to think about loan growth for the year or is there a possibility that you guys could do a little better than that?

George A. Makris -- Chairman and Chief Executive Officer

Brady, this is George. There is 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 CRE concentration. Also remind you that the Reliance portfolio was heavily concentrated in low yielding CRE credits. And we are working through the management of those credits now, several had really no relationship with the bank other than that particular loan. So we will continue to generate substantial new loan business. Whoever that translates into net loan growth at the bank, just depends on how we manage particularly the CRE portfolio. Matt Reddin is sitting here with us and he may have couple other comments.

Matt Reddin -- President of Banking Enterprise

Yeah, Brady. That's exactly right. I mean, we're seeing the same volume we saw, it's not an increase kind of volume and loan opportunities, but managing those CRE concentrations that we are selling down with our correspondent group where we're taking care of existing customers kind of where we talk about all your loans and our relationship strategy. So we're going to continue to make those loans with our core customers that we may be selling down from our -- for CRE concentration purposes.

But I'll also point you on this quarter's loan growth, we also had good growth in our mortgage warehouse because what's happened in the right environment on the mortgage side. So that contributed to that and also our ag portfolio started to fund up. So couple of things from a seasonality that also bolstered loan growth. Can't you say that 6% range right now.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay. And then finally from me just one on M&A. I know you guys had talked about potentially getting one more deal announced and closed before year end and before you have to mess around with CECL next year. We're getting kind of close to that point where you can announce a deal and close it this year. Any update on that effort on the M&A front?

George A. Makris -- Chairman and Chief Executive Officer

Well, we're still in active discussions with what we think would be great merger partners. In our strategy, as we mentioned before has changed little bit. We really like our current footprint. We'd like to increase our market share in some key geographies, increase our coverage in our current footprint. There are a lot of blank spaces when you look at the map. We'd like to have a partner that has relatively low loan to deposit ratio, but who has a proven deposit gatherer.

And then, we certainly would like to have a lower CRE concentrations 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 CECL one-time balance sheet adjustment, this year versus a provision to our income statement next year. So we're doing all we can to bring that to fruition. It's still our great desire to do that.

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

All right. Great. Thanks, guys.

George A. Makris -- Chairman and Chief Executive Officer

Thanks, Brady.

Operator

Thank you. And our next question comes from the line of Stephen Scouten with Sandler O'Neill. Your line is now open.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Hey. Good morning, everyone.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Good morning

George A. Makris -- Chairman and Chief Executive Officer

Good morning, Stephen. Good morning.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

I'm curious, just beyond going back to the expense base, maybe beyond the cost saves from Reliance. What else allowed you guys to kind of on a core basis take expenses down quarter-over-quarter even with that inclusion. Were there other meaningful cuts beyond Reliance and the early retirement, anything there to note that allowed for that improvement?

George A. Makris -- Chairman and Chief Executive Officer

Well, I'll start on that, and that is our NGB 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 internally. 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've put in place for our back office. So, 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 had a great deal to do with our expense control in the third quarter. I would expect it to be similar going forward. Bob, you might have some another thoughts.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Just one other item, just if you look back a year ago or so, we were just a new $15 billion plus company. We're starting to mature into more of a larger bank of the $15 billion plus company and trying to figure out our way through that. And I think this quarter showed some of that and I echo all the things George said.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Okay. Great. And then maybe thinking about the NIM, Core NIM, My guess is relatively flat $366 million, accretion was a bit higher. Can you give us some thoughts on what you think? I guess, the accretion will 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 guidance around that $370 million NIM, especially in light of expectations for potentially forward rate cuts moving forward?

George A. Makris -- Chairman and Chief Executive Officer

Well, I'll just say this, that if you recall, I think last quarter, we talked about the effect of the large portfolio on the NIM and that was estimated to be roughly 4 basis points. So subtracting that from the equation, we probably are right at $370 million NIM without Reliance, which is very good, that shows an increase in our margin. The Reliance portfolio will continue to weigh on that NIM until we manage some of those low yielding loans out of the bank and replace them with higher yielding loans. So we still think that $366 million, the $370 million guidance is good for the rest of this year. I'm going to let Bob talk about accretion. I'm anxious to hear what he has to say.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Yeah. We did an obviously a pretty high number this quarter. Some of it is related to Reliance 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 and how much is related to 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 this, some of this -- some of the accretion is related, obviously the credit mark, that's going to we're used to build our allowance to 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 yields at or better than we had the mark on those. So as we had this quarter about $10 million or so in our accretion, our projection these are based on scheduled pay outs it's about $10.5 billion or $11 billion [Phonetic] for the balance of the year. Million sorry, million for the balance of the year.

Now, we would expect that number to have pay-offs in there and migration in there. There's never been a scheduled quarter, but a schedule means it's going to be at the -- that's the minimum amount it would be. So our scheduled amount again, is about $10 billion or $11 billion, [Phonetic], a million for the balance of the year. Next year, second year in it always comes down, so we don't have those and wouldn't be comfortable giving those projections till we get to the end of the year, when we know what pay-offs has happened from now till then.

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

Okay. And don't expect any meaningful change to that number from CECL in particular I think other than the normal decline you're speaking to?

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Yeah. For same as the way our accretion has been booked as we've talked about several times, there will technically be a double growth, when you get to CECL, you'll build the allowance. But you will not remove the credit mark out there or the interest rate or credit mark related to these loans. Only the loans that are the impaired or credit deteriorated loans. So that number is very small for Simmons. So our accretion going forward will be lower just because of normal schedule pay-offs 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 can afford as impaired loans basically.

George A. Makris -- Chairman and Chief Executive Officer

I think to point out though Stephen here is that we -- when that accretion comes in as revenue, we will not be building a provision based on migrated loans because the provision will already be there. So we would expect to see a little more of that hit the bottom line than you've been used to seeing in the past.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Beginning in 2020.

George A. Makris -- Chairman and Chief Executive Officer

That's right.

Operator

All right. Thank you. And our next question comes from the line of David Feaster with Raymond James. Your line is now open.

David Feaster -- Raymond James Financial Inc. -- Analyst

Hey. Good morning, guys.

George A. Makris -- Chairman and Chief Executive Officer

Good morning, David.

David Feaster -- Raymond James Financial Inc. -- Analyst

Hey, impressive quarter, 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 your expectations are for the impact of a 25 basis point cut on your margin?

George A. Makris -- Chairman and Chief Executive Officer

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 cost along with our ability to raise revenue. We expect deposit 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 rate. 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 rate. And that's our objective and we've taken a look at several models and believe that's an achievable goal.

David Feaster -- Raymond James Financial Inc. -- Analyst

Okay. So still are you assuming rate cuts in there and how many if so?

George A. Makris -- Chairman and Chief Executive Officer

Well, we have -- we're assuming one rate cut right now. And that would be here in June -- at the end of July.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

David, when we will plug it in our model, if we were to plug it straight into our model with no management intervention, just let it run through, you would see probably 1 basis points to 2 basis points , 3 basis points declined in the NIM. We believe there's opportunities and either one, offsetting some with deposits; and two, as George said, 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.

David Feaster -- Raymond James Financial Inc. -- Analyst

Okay. That's helpful. And then you talked about 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?

George A. Makris -- Chairman and Chief Executive Officer

Well, we consider always to manage that portfolio. So several -- we expect to pay-off early this year, but we're also approaching the potential loan savings. We will not take a big haircut on the loan sale, because these are excellent quality loans. They just have no other relationship with the bank. They increase our CRE concentration and they have a low yield. So we take a look at inventory, if you will, and opportunities we have in the marketplace from other types of lending. So to make sense for us to consider maybe freeing up that inventory and deploying at 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 participation's, we're going to explore those options.

David Feaster -- Raymond James Financial Inc. -- Analyst

And how big is that non-core book?

George A. Makris -- Chairman and Chief Executive Officer

Well, I would say that the loans that we would consider in that book from Reliance should be between $200 million and $300 million.

David Feaster -- Raymond James Financial Inc. -- Analyst

Okay. That's very helpful. And then last one for me, you talked about the NGB initiative. We focused on improving efficiency. Could you just, in most of -- you've got a lot of tech investments that's coming in the second half of the year. Could you just remind us exactly what you're 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. I mean, could we expect that to come in below 50% or stay at the low end, even in the face of revenue headwinds from a challenging rate environment?

George A. Makris -- Chairman and Chief Executive Officer

Well, we intend to manage between 50% and 55%. So the NGB investment is just one of the investments that 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 that revenue.

I would say that what we've experience with NGB so far, we'll pay additional dividends from the back office efficiency standpoint. What we will roll out from now on our revenue enhancement applications. So we hope to get the best of 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. It 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 back office upgrades.

David Feaster -- Raymond James Financial Inc. -- Analyst

Okay. That's helpful. Thank you,

Operator

Thank you. And our next question comes from the line of Gary Tenner with D.A. Davidson. Your line is now open.

Gary Tenner -- D.A. Davidson -- Analyst

Thanks. Good morning.

George A. Makris -- Chairman and Chief Executive Officer

Good morning.

Gary Tenner -- D.A. Davidson -- Analyst

Just a couple of follow up questions, I guess, first, you mentioned the expectations for accretion back half of the year $10.5 million to $11 million, is that -- I assume that's a quarterly number?

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

No $5.5 million or so per quarter and that's for the balance of the year.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. And that's just the run rate and that's combined credit and rate though, right. So will there be any accelerated pay-offs?

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

That's exactly right. That is the scheduled amount for quarter.

Gary Tenner -- D.A. Davidson -- Analyst

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 it $1.1 million per quarter should start showing up here in 3Q?

George A. Makris -- Chairman and Chief Executive Officer

Most of it was already in the second quarter numbers, 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 $97.5 million run rate.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. Perfect. And then lastly, if I can, just on the construction growth, which remained very strong this quarter. Just kind of commentary about what you're seeing in that market maybe where some of the loans came from geographically and how the competition is in that space right now, has it eased at all?

George A. Makris -- Chairman and Chief Executive Officer

I going to let Matt take that.

Matt Reddin -- President of Banking Enterprise

Yeah. I'll give you some color around where it came from and then also, kind of how about that -- where that portfolio is? So we continue to see good growth in our existing construction loans through North Texas, Kansas city, Middle Tennessee. That's the primary drivers or other areas that we see growth in that portfolio. But I also know that right now, our constructional portfolio on average is funded over 50%. So we're well into a lot of our projects, as we continue to manage our CRE concentrations. And we project next nine 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 it.

Gary Tenner -- D.A. Davidson -- Analyst

No. That's helpful. Thank you.

Operator

Thank you. And our next question comes from the line of Matt Olney with Stephens. Your line is now open.

Matt Olney -- Stephens Inc. -- Analyst

Thanks. Good morning, guys,

George A. Makris -- Chairman and Chief Executive Officer

Good morning, Matt.

Matt Olney -- Stephens Inc. -- Analyst

I want to go back to the core margin discussion, and George, I think you mentioned, you still have some loans that are price below market levels and you're getting some benefits of repricing those higher. I haven't heard you guys mention 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 long or do you think you can benefit from some those tailwind?

Matt Reddin -- President of Banking Enterprise

Hey, Matt. This is Matt. I mean, one noticeable opportunity for us is that Reliance portfolio, where 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. We're still able to even despite where rates are heading. If you look at our approved rate at close -- rates, where they're where they're at, we're holding them or maintaining them or if not increasing them, so that's where we see that opportunity.

Matt Olney -- Stephens Inc. -- Analyst

And then, I guess offsetting that would be 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 variable rate loans you have and then within that LIBOR verse prime?

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Well, I'd say on the variable and maturing in the next 12 months is about 45% of the portfolio. So we have about 45% that reprice is pretty soon. But you also -- if you have to look on the other side. There's some deposit portfolio that allowed us to raise that. Some of it will get the full 25, some will get less. So it'll be offset on most of those numbers.

George A. Makris -- Chairman and Chief Executive Officer

LIBOR versus prime?

Matt Reddin -- President of Banking Enterprise

How much we have in LIBOR versus prime?

George A. Makris -- Chairman and Chief Executive Officer

Yeah.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Yeah. We have a -- right now, we have about $1 billion in LIBOR loans that are tied. And then remaining of that, again, what Bob said, 40%, 50% that will ensure the next 12 months.

Matt Olney -- Stephens Inc. -- Analyst

Got it. And then on the credit front, it looks like the non-accruals were relatively flat. Can you talk about any movements within this balance or there are any larger credits that migrated in and out of the balance?

George A. Makris -- Chairman and Chief Executive Officer

No. I'll just remind you some of those include the large portfolios that came in. And so we're pretty pleased before we ended up. We've done a pretty good job of managing our problem loans, our special assets group and field have done a great job. So we think our credit quality is very stable at this time.

Matt Olney -- Stephens Inc. -- Analyst

George, I recall from last quarter that you expected some pay down to some of those past due loans in non-accrual loans that you got to subsequent to the quarter and back in the March to April timeframe. Did those loans actually paid down?

George A. Makris -- Chairman and Chief Executive Officer

We did -- the one that we mentioned actually did pay off. We had $1 billion recovery and it's still sitting in our n our allowance for acquired loans. So it was not taken into income.

Matt Olney -- Stephens Inc. -- Analyst

And what was the balance of that loan?

George A. Makris -- Chairman and Chief Executive Officer

I would say it was $3 million, if I recall, is that right?

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Okay. And then also on the tax rate was little bit different this quarter. What's your expectations for the full year tax rate or even the back half the year?

George A. Makris -- Chairman and Chief Executive Officer

Well, tax rate went up because we made a lot more money. So I would say about $21.8 million I think is about go-forward estimate. So between $21.5 million and $22 million.

Matt Olney -- Stephens Inc. -- Analyst

And that's for the back half of the year, or for the full year?

George A. Makris -- Chairman and Chief Executive Officer

It'll be the full year. So basically, when 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's going to end up pretty close.

Matt Olney -- Stephens Inc. -- Analyst

Okay.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

And part of that's incremental of adding Reliance on that's additional free income and which all of that is taxable. And if you remember some of our base is non-taxable if it's in munis [Phonetic] or other [Indecipherable] income and so forth.

Matt Olney -- Stephens Inc. -- Analyst

Got it. Okay. Great. That's all for me. Thank you.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Thank you.

George A. Makris -- Chairman and Chief Executive Officer

Thanks, Matt.

Operator

Thank you. [Operator Instruction] Our next question comes from the line of Garrett Holland with Baird. Your line is now open.

Garrett Holland -- Robert W. Baird & Co. -- Analyst

Good morning and thanks for taking the questions. Just wanted to get your thoughts on the deposit pricing competition. You sounded pretty optimistic in your ability to reduce funding costs going forward. Just so what's the reasonable deposit or pricing bid if the Fed does cut 25 basis points next week?

George A. Makris -- Chairman and Chief Executive Officer

I think you first got anything that's with tied to money market type funds that you're going to get a higher percent of that. So if there's any public funds, broker deposits, you're going to get a 100% of that. The core, I think generally you're probably talking about 40% or so, if that 30% of that beta we might get at one move and then maybe over a period of two moves before you get it. So some accounts in some markets -- I don't know, keep in mind, we price by market and so some markets will have a little less opportunity and some will have more.

Garrett Holland -- Robert W. Baird & Co. -- Analyst

No. 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?

George A. Makris -- Chairman and Chief Executive Officer

Yeah. We believe that TCE ratio between 8% and 9% is our operating range. So as we get closer to 9%, we have an opportunity to maybe use a 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 operate between 8% and 9% from a TCE perspective, between 8.5% and 9% from a leverage ratio perspective and a total risk-based capital between 12.5% to 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 the last four to five quarters.

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

And just as a reminder, you see the TCE ratio did go down from March to June, and that was related to the acquisition of Reliance, we said over 30% in cash in that deal, and right in line with what our expectations were.

Garrett Holland -- Robert W. Baird & Co. -- Analyst

That's helpful. Thanks for taking the questions.

George A. Makris -- Chairman and Chief Executive Officer

You bet.

Operator

Thank you. And I'm showing no further questions at this time. So with that, I'll turn the call back over to Chairman and CEO, George Makris for closing remarks.

George A. Makris -- Chairman and Chief Executive Officer

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 all reading on the same 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 NGB 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 getting in most of our markets for our excellent customer service and certainly for Best Place to Work in Arkansas. So thanks again for joining us and we'll do this again next quarter. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Stephen C. Massanelli -- Executive Vice President, Chief Administrative Officer and Investor Relations Officer

George A. Makris -- Chairman and Chief Executive Officer

Robert A. Fehlman -- Senior Executive Vice President, Chief Financial Officer

Matt Reddin -- President of Banking Enterprise

Brady Gailey -- Keefe, Bruyette & Woods, Inc. -- Analyst

Stephen Scouten -- Sandler O'Neill & Partners LP -- Analyst

David Feaster -- Raymond James Financial Inc. -- Analyst

Gary Tenner -- D.A. Davidson -- Analyst

Matt Olney -- Stephens Inc. -- Analyst

Garrett Holland -- Robert W. Baird & Co. -- Analyst

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