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Operator
Good afternoon.
My name is Simon and I will be your conference operator today.
At this time I would like to welcome everyone to the Simmons First -- fourth quarter earnings conference call.
(Operator instructions) Mr.
Garner, you may begin your conference.
David Garner - IR
Good afternoon.
I'm David Garner, Investor Relations Officer of Simmons First National Corporation.
We want to welcome you to our fourth quarter earnings teleconference and webcast.
Joining me today are Tommy May, Chief Executive Officer, David Bartlett, Chief Operating Officer, and Bob Fehlman, Chief Financial Officer.
The purpose of this call is to discuss the information and data provided by our Company in our quarterly earnings release issued this morning.
We will begin our discussion with prepared comments and then we will entertain questions.
We have invited institutional investors and analysts from the investment firms that provide research on our Company to participate in the question and answer session.
All other guests in this conference call are in a listen only mode.
I would remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed in this presentation may constitute forward-looking statements and may involve certain known and unknown risks, uncertainties, and other factors which may cause actual results to be materially different from our current expectations, performance, or achievements.
Additional information concerning these factors can be found in the closing paragraph of our press release and in our Form 10-K.
With that said, I'll turn the call over to Tommy May.
Tommy May - CEO
Thank you, David, and welcome everyone to our fourth quarter conference call.
In our press release issued earlier today, Simmons First reported fourth quarter earnings of $16.6 million, which was up $9.8 million or approximately 143% from the same quarter last year.
Diluted EPS for Q4 2010 was $0.96 compared to $0.44 in Q4 '09.
In October we entered into a purchase and assumption agreement with loss share arrangements with the FDIC to purchase substantially all of the assets and to assume substantially all of the deposits and other liabilities of Security Savings Bank on Olathe, Kansas.
We recognized a pre-tax bargain purchase gain of $18.3 million on this transaction and incurred pre-tax merger related costs of $2 million.
As part of our acquisition strategy, we liquidated the acquired investment portfolio, resulting in a pre-tax gain of $317,000.
Additionally, in order to utilize some of our excess liquidity, we prepaid $58 million in acquired FHLB advances, which resulted in prepayment expense of $594,000.
To summarize, after taxes the combined fourth quarter 2010 nonrecurring items contributed $9.7 million to net income or $0.56 per diluted earnings per share.
Excluding the nonrecurring items, fourth quarter core earnings were $6.9 million or $0.40 diluted core earnings per share.
While the impact of the November 2009 stock offering was dilutive to EPS by approximately $0.03 in Q4 2010, the excess capital positions us to continue to take advantage of unprecedented acquisition opportunities through FDIC assisted transactions of failed banks.
We continue to actively pursue the right opportunities that lead our strategic plan regarding mergers and acquisitions.
During 2010 we performed due diligence on six potential FDIC opportunities, bid on four, and were the successful bidder on two institutions.
Again, while the offering is dilutive to EPS in the short term, we fully expect for it to be accretive as we complete additional acquisitions over the next 12 to 18 months timeframe.
As with our history, we will be very deliberate and disciplined in these acquisition opportunities.
On December 31st, total assets were $3.3 million, in stockholders' equity, $397 million.
Our equity to asset ratio was a strong 12% and our tangible common ratio was 10.3%.
The regulatory tier one capital ratio was 11.3% and the total risk based capital ratio was 21.3%.
Both of these regulatory ratios remained significantly above the well-capitalized levels of 5% and 10% respectively and ranged in the 97th percentile of our peer group based on September 30th tier versus our December 31st actual.
Net interest income for Q4 '10 was $26.3 million, an increase of $1.1 million or 4.18% compared to Q4 2009.
While we expected a slight increase in net interest margin in Q4, it decreased 17 basis points to 3.6% when compared to the same period last year.
The decrease was the result of the impact from the prepayment of the Federal Home Loan Bank advances, related to the FDIC assisted transaction, the decrease in the loan portfolio, and a higher level of liquidity than planned.
We expect a slight margin improvement in Q1 2011 over Q1 2010.
Non-interest income for Q4 2010 was $33.7 million, an increase of $20.7 million or 160.3% compared to the same period last year.
This includes the $18.3 million bargain purchase gain and $317,000 in investment gain.
Excluding these nonrecurring items, non-interest income was $15.1 million, an increase of $2.1 million compared to Q4 2009.
This is Tommy May and I apologize for the technical difficulty that we're having.
And this was a prerecording.
So I'm just going take it from right here and go forward.
I'm going to ask if somebody can hear me to make sure that we're still connected.
Operator?
Operator
The line is still connected.
Tommy May - CEO
Okay, thank you.
Let me take a moment to discuss several other items that impacted non-interest income.
The first item, income from the sale of mortgage loans increased by $1.2 million compared to last year.
Approximately half of the increase resulted from our Kansas acquisition with the remainder primarily due to lower mortgage rates, producing an increase in residential refinancing volume.
Credit card fees, which is the second item, increased $551,000 or 14.4% on a quarter-over-quarter basis.
This increase was due to a higher volume of credit and debit card transactions.
The third item, other non-interest income, increased by $689,000 over the same period last year.
This increase was primarily due to accretion on the FDIC indemnification asset, rental income and gains, all related to the FDIC acquisitions.
Also included in Q4 2010 was a $197,000 gain from the sale of a branch closed earlier this year.
In contrast, non-interest income was negatively impacted by a $611,000 decrease in service charges on deposit accounts.
This decrease was primarily due to a lower NSF income as a result of recent regulatory changes related to overdrafts on point of sale.
Now moving on to the expense category.
Non-interest expense for Q4 2010 was $30.5 million, an increase of $4.7 million or 18.2% compared to the same period in 2009.
The $4.7 million increase includes the $2 million in merger related costs and $2.5 million in normal operating expense at our two new acquisitions.
Normalizing for these expenses, non-interest expense increased by 0.5% compared to Q4 2009.
Now this modest increase is a result of the implementation of our efficiency initiatives.
Our efficiency initiatives related to revenue enhancements, process improvement, and branch staffing levels are well into the implementation phase.
For 2011, we estimate a $1.5 million to $2 million improvement compared to 2010.
Concerning our loan portfolio, as of December 31st, 2010 we reported total loans of $1.7 billion, a decrease of $192 million or 10.2%, again compared to the same period a year ago.
As expected, we saw a $53 million decrease in our student loan portfolio as a result of, as I say, the irrational decision by the administration and Congress to eliminate the private sector from providing student loans.
The balance of our consumer loan portfolio decreased some $21 million with declines in both our direct and indirect lending areas.
The real estate loan portfolio decreased by $103 million, including a $27 million decrease in the construction and development portfolio.
Considering the challenges in the economy, I think it is important to continue to point out that we have no significant concentrations in our portfolio mix, our construction and development loans represent only 9.1% of the total portfolio, CRE loans, excluding C&D, represent 32.6% of our loan portfolio, both of which compare very favorably to our peers.
Simmons First affiliates, like the rest of the industry are experiencing weak loan demand as a result of the recession.
We believe loan demand is likely to remain soft throughout 2011, but we are committed and I think well positioned to meet the borrowing needs of our consumer and business customers.
Although the general state of the national economy remains somewhat unsettled, and despite the challenges in Northwest Arkansas region, we continue to have good asset quality compared to the rest of the industry.
As a reminder, covered assets acquired from the FDIC are recorded at their discounted net present value and the resulting FDIC loss share indemnification provides significant protection against possible losses.
Thus, FDIC covered assets are excluded from the computations of our asset quality ratios.
The allowance for loan losses equaled 1.57% of total loans and approximately 190% of non-performing loans as of December 31st.
Non-performing assets as a percent of total assets were 112 basis points, which was actually down 11 basis points from Q3 2010.
Non-performing loans as a percent of total loans increased from 75 basis points to 83 basis points.
These ratios compare very favorably to the industry and our peer group.
In fact our non-performing asset ratio, excluding covered loans, puts us in the 80th percentile within our peer group, based on September 30th tier versus our December 31st actual.
During Q4 2010, the provision for loan losses was $3.7 million compared to $3.4 million for Q3 2010.
The annualized net charge off ratio for Q4 was 70 basis points, down 9 basis points when compared to the third quarter last year -- or third quarter this year.
Excluding credit cards, the annualized net charge off ratio was down to 52 basis points compared to 63 basis points for the third quarter.
We remain aggressive in the identification, quantification, and resolution of problem loans.
The credit card industry continues to see pressure relative to the past dues and charge offs.
However, our portfolio continues to compare very favorably to the industry as our Q4 2010 annualized net credit card charge offs to loans decreased 10 basis points to 2.14% compared to 2.24% for Q3 2010.
Even with the national credit card charge offs declining in recent months, our loss ratio is more than 600 basis points below the most recently published credit card charge off industry average of over 8.5%.
One of the real strengths that we have in our credit card portfolio is our geographic diversification with no concentrations over 7% in any state other than Arkansas, where we have approximately 40% of our portfolio.
We are very conscious of the potential problems associated with high levels of unemployment and we continue to reserve accordingly.
Despite our 2.14% loss ratio, we are currently reserving at a level of 3% for our overall credit card portfolio.
Bottom line.
While the acquisition created a lot of noise, quarter-over-quarter we continued to experience good asset quality compared to the industry, a continuation of low credit card charge offs, a modest non-interest expense increase, and most importantly an extremely strong capital base with a 10.3% tangible common equity ratio.
While we are pleased to book an $18.3 million bargain purchase gain, we are very excited about the future growth potential of our new markets in Missouri and Kansas.
Simmons First is well positioned, based on the strength of our capital, asset quality, and liquidity to deal with the challenges and opportunities that we may face in this new year.
Our conservative culture has enabled us to engage in banking for 107 years.
We consistently rank in the upper quartile of our national peer group relative to capital asset quality and liquidity.
We continue to reiterate that there has never been a greater time to have these strengths.
In closing, we remind our listeners that Simmons First experiences seasonality in our quarterly earnings due to our agricultural lending, student loan, and credit card portfolios, and quarterly estimates should always reflect this seasonality.
This concludes our prepared comments and we would like to now open the phone lines for questions from our analysts and institutional investors.
Let me ask Simon to come back on the line and once again explain how to queue in for questions.
Operator
(Operator instructions) Your first question comes from the line of Dave Bishop with Stifel Nicolaus.
Your line is open.
Tommy May - CEO
Hello, Dave.
Dave Bishop - Analyst
Hey, Tommy.
Hey, question.
You sort of enumerated some of the headwinds to the margin during the quarter there.
Could from a basis point perspective, sort of pencil that out and what you're expecting that potentially rebound to absent that?
Obviously there's some short-term liquidity, basing in on probably from acquisition there.
What do you -- I guess penciling out here over the near term as we head into 2011.
Tommy May - CEO
Dave, thank you for that and I'll try to do that.
Let me tell you what we said last time in the guidance that we gave.
We said that basically we saw that Q4 would be flat to Q4 2009 and that would have been right at 377 basis points.
And obviously the number is at 3.6 or 360 basis points.
So let me try to give you a flavor for where that might be.
First of all, we had in our Federal Home Loan Bank advance payoff related to our Kansas transaction.
That would impact margin by 7 basis points and that obviously is a one-time impact.
We also have, but we projected the seasonality, which would be 7 basis points, but I think that the rest of it is associated with the liquidity.
Our loans are off of our projections, but the bulk of the rest of it is associated with the excess liquidity that we have on the balance sheet.
And let me just simply say that a lot of that liquidity has been by design, but a lot of it has also come from the fact that we've not had the run off in our Kansas and Missouri region that we expected.
Now I think we fully expect that we're going to have that run off and we look forward to it because we can replenish that with the liquidity that we have in the legacy bank.
Going forward to when you think from the standpoint of Q1 2011 over Q1 2010, I think we would be talking in terms of flat to slightly up.
And obviously you can go back and look at the numbers and Q1 '10 was at a level of about 3.7 or 3 --
Unidentified Company Representative
3.71.
Tommy May - CEO
3.71 and our belief at this point will be that number one, no more FHLB payoff, that's a 7-basis points pick up.
Number two, is some liquidity improvement and we believe is a combination of both of those that we will move slightly above that Q1 margin number.
Dave Bishop - Analyst
Helpful.
And then in terms of the loan demand there, I mean any sense there from your customers there of any early signs of green shoots emerging there?
Any sort of early cyclical SIC codes or might be a harbinger of things to come there?
What sort of commentary are you hearing from your line staff in terms of loan demand?
Tommy May - CEO
Well, Dave I wish I had something positive to say about loan demand.
I think that right now that the overall national economy and part of the negativity that is still out there, I think that we still see consumer and small business staying on the sideline.
I think that where we have the opportunity to put in play some special programs, which we are in fact doing at this point in time, in our agra area, and in our credit card area, and possibly in the small business through the SBA programs, we certainly might get some pick up there.
But we think generally speaking that we're going to continue to see a relatively weak pipeline.
I would tell you that one (inaudible) that will hopefully come from the Kansas acquisition be the agra potential.
We are certainly going to (technical difficulty) on that opportunity and I think it's too early to be able to quantify what we might be able to pick up there.
So I think with that noise of the discussion that I just gave you that we still see a relatively weak loan demand, certainly through the first half of 2011 and if we get some pick up it's going to be in special programs and/or possibly coming from some of our new markets.
Dave Bishop - Analyst
Great, thanks, Tom.
Operator
Your next question comes from the line of Ben Harvey with Stephens Inc.
Your line is open.
Tommy May - CEO
Hello, Ben.
Ben Harvey - Analyst
Good afternoon, Mr.
May.
My first question goes back to margin a little bit.
I was trying to get an idea on the decline in the loan yield on a linked quarter basis.
I would have assumed with the full quarter effect of the new covered loans that yield may have picked up a little bit.
Could you give a little color around that?
Bob Fehlman - CFO
Yes.
Hey, Ben, this is Bob.
Big -- when you're looking on a linked quarter basis, for as you know the third quarter is going to be the highest because of our seasonality.
We have probably $40 million, $50 million in agriculture loans that paid off on a linked quarter basis.
That's going to drop our margin going in.
As you know, Kansas only came in in the middle of October so all of the entries, the impact of it was not very much for the quarter.
Springfield's a small acquisition at about net loans on the books right now are about $40 million.
So the acquisition in the third -- in the fourth quarter was minimal.
We had seasonality impact from the third quarter to the fourth quarter.
That's what caused the rate.
Just on the -- I can just give you a little color on the covered loans we see the yield on those loans are roughly about 6.5% is what we're averaging on those.
So we'll see some pickup in the first quarter but we'll have a little bit more seasonality, so I would say we'd be closer to the 6% level for the whole portfolio going into the first quarter.
Ben Harvey - Analyst
Okay.
And then on kind of big picture M&A going forward, we've seen a lot of banks kind of talk about losing some interest in the FDIC and going back towards the live M&A.
What is your outlook going forward in terms of maybe a more favorable bidding structure on FDIC with a lower level of competition?
Tommy May - CEO
Well, let me just big picture and then I'll let David Bartlett jump in and add some on the FDIC flavor of it.
I think we've said all along that our M&A outlook is positive.
That we really believe over the next three years, because of all the things that you know about and we've talked about not only the recession but the changes in all the regulations and all the fatigue that goes with this changing industry that we're going to see more and more of these traditional opportunities come along.
And we welcome those.
We're good acquirers, we're good consolidators, and we look forward to that opportunity.
We obviously haven't seen that since 2005, at what we would call prices that we felt were acceptable to us and rewarded our shareholder.
We think we are going to see that.
And I would tell you from a big picture standpoint that we still are very positive and proactive relative to the FDIC transactions.
If you look at our footprint, we have expanded beyond the borders of Arkansas.
It obviously has been with the FDIC assisted.
It's been into the Missouri region and the Kansas region.
Good footprint for us.
But the fact is the best way to expand that reach in those markets is possibly if other opportunities present themselves, either FDIC or traditional is to seek it through the M&A side.
So I would just simply say we have not backed off one iota on the FDIC piece and let me just stop and, David, see if you have anything you want to say.
David Garner - IR
Ben, I'd be glad to ask any -- or answer any specific question, but I think you've summarized it well.
We still monitor that same 325-mile radius around central Arkansas looking for the FDIC opportunities.
Quite frankly, historically speaking in the first quarter it gets a little quiet from FDIC and things normally pick up starting later in the year.
Right now in that 325-mile radius we still have identified 100 -- Texas ratios of 100 and above, roughly 38 banks with over $32 billion in assets.
So is it done?
I don't really think so.
Is it quiet?
Yes.
Do we expect to see more opportunity?
Yes.
Tommy May - CEO
David, on the issue of less competition, that would be a positive and certainly we still feel that our sweet spot is in what range?
David Garner - IR
Yes, the $200 million range, $200 million to $250 million and up would be our sweet spot.
And obviously less competition could certainly help on the bid process.
The last few deals we had the chance to look at, obviously we're under confidentiality agreements with the FDIC, but I'm not sure where the less competition's coming from.
We haven't noticed it ourselves.
Ben Harvey - Analyst
Okay.
And then one last question, I'll jump back into the queue.
In terms of the non-interest expense from the salaries line item, is the fourth quarter number kind of a good starting point for '11 or are there some -- anything unusual in there?
Bob Fehlman - CFO
I think you're going to have in the fourth quarter some -- I mean we're just -- Kansas is not in there for a full quarter, so you have the little bit in there.
Obviously you have to pull out the merger related cost.
But you're getting close to a baseline there going forward into the first quarter and on down into next year.
Let me give you a real quick update on the expanse and related to our efficiency.
It's hard to tell the numbers because it's so noisy, but if you look at our non-interest expense, I believe we're up some 10% on a quarter-over-quarter basis, and about 4% on a year-over-year basis.
When you back out the noise of Kansas, Missouri, the gains, and the merger related costs, and all of that, for the quarter our non-interest expense was up less than 0.5 of a percentage point or $133,000.
And on an annual basis, we're up 58 basis points or less than 0.5 of -- right at 0.5 of a percentage point or $600,000.
It's pretty minor increase and it shows the impact of the efficiency ratios hitting when you've got $100 million base and you're growing at less than a half when salaries on our group of population is going up at about 3.5%, 4%.
So we're seeing a lot of those cost savings hit in 2010, we'll see them in 2011.
But Ben, what you're saying on the expense base, I'd say the best starting place is fourth quarter and kind of growing that number slightly going forward.
Ben Harvey - Analyst
Thank you, gentlemen.
Great quarter.
David Garner - IR
Thanks, Ben.
Operator
Your next question comes from the line of Michael Rose with Raymond James.
Your line is open.
Tommy May - CEO
Hello, Michael.
David Garner - IR
Hey, Michael.
Michael Rose - Analyst
Hey, good afternoon.
How are you guys doing?
Tommy May - CEO
Great.
Michael Rose - Analyst
Hey, just wanted to switch back to credit here for a second.
Just looking for some numbers here.
Obviously the trends were pretty good, but do you have a sense for what flowed into non-performing this quarter and maybe what happened earlier in the pipeline?
Early space delinquencies, watch list trends.
Anything surprising you at this point or has there been a shift in kind of what you're seeing in terms of category?
Or any color you have there would be helpful.
Tommy May - CEO
Okay, again I'm going to touch on the big picture piece and I'll ask David maybe to talk a little bit about Northwest Arkansas as a conclusion of it.
If you look at -- I don't think there are any surprises.
I think that when you look at the level of our non-performing loans or our non-accrual loans on a quarter-over-quarter basis, they're down some $10 million.
And then our OREO is up some $14 million.
So the total non-performing assets is up $2.6 million.
I think that first of all the net increase has to basically do with two loans, one in Central Arkansas, one in Northwest.
Both of them we have -- I think we have handled very well.
And so I don't think there are any major surprises there.
And so while your non-performing assets on a quarter-over-quarter basis is up $2.6 million or $2.7 million, the link quarter is up $153,000.
So I think on a link quarter basis we again see it very positive.
When you look at the progress that we're making in this, we'll define it first progress relative to performance level where we are in overall non-performing assets is obviously low.
We're not seeing a significant increase in the migrations and the past due migrations.
We're not seeing a significant increase in the non-performing migrations.
So I think all of that is positive.
I think Northwest Arkansas obviously has been our biggest challenge, especially when you consider that our credit card portfolio continues to perform at outstanding levels.
And so David, why don't you say a word if you would about progress there?
David Garner - IR
Michael, hi, David.
I think Mr.
May summarized it well.
The transfer from the non-performing loan category into our other non-performing asset of OREO is naturally progressing.
Our OREO position right now in Northwest Arkansas is staying around $13 million.
We disclosed that in call reports in the past.
Are we identifying and seeing new credits that give us heartburn?
I mean obviously the market is still soft but what we're not seeing is a lot of surprises, as Mr.
May said.
We've identified some credits that continue to show a little weakness and that process is still proving to be positive for us and now we're working through those issues.
Michael Rose - Analyst
Okay, that's helpful.
And if I can ask a follow-up question, I apologize if I missed this in the beginning.
It was rather difficult to hear.
But can you kind of address Reg E and the Durbin Amendment and how that's impacted you?
And if -- what the potential hit could be if you've analyzed that at this point?
Thanks.
Tommy May - CEO
Well, I appreciate the opportunity to address the Durbin Amendment.
We -- obviously we are concerned about where it is and where it's going.
We -- I guess what I would say is some of the rhetoric that we are now hearing I guess both from the administration and from Congress says hey Fed, we want you to take a little bit different look relative to the impact of the community banks on the interchange fee.
We consider that a positive, but I can tell you we're not going to let our full weight down on that issue.
The potential impact of the Durbin amendment, it would be about I think the $1 million range on the average.
Somewhere between $500,000 and $1.5 million.
And a lot of that depends on exactly what happens in the -- with the overall fee adjustments.
Now, in Reg E overall I think relative to the debit card NSL, the impact that we had projected was somewhere around $2.5 million on a pre-tax basis.
And is that right, Marty?
And I think we're cautiously optimistic about what we're seeing in that trending of opting in.
Marty, say a word about that if you would.
Marty Casteel's the Executive Vice President.
Say a word about it.
Marty Casteel - EVP
Our opt-in rate's probably been about the same experience as others.
We're in the high 40s as far as opt-in.
We are, as Mr.
May said, cautiously optimistic that our income is not going to be affected as much as we had first been concerned.
We see customers continue to opt-in as they use those debit cards and are denied point of sale.
We see people continue to contact us and so that still has to be determined -- the exact impact.
But right now we are optimistic that it will not be in the $2.5 million pre-tax range.
David Garner - IR
Yes, we saw some improvement, as Marty said, in the November/December as we moved in and we hope to see that even improve more as we implement more of these strategies.
Michael Rose - Analyst
Thanks, guys.
David Garner - IR
Thanks, Michael.
Operator
Your next question comes from the line of Dave Bishop with Stifel Nicolaus.
Your line is open.
Tommy May - CEO
Hey, Dave.
Dave Bishop - Analyst
Hey, actually Mike just took my question about the Durbin Amendment.
Thanks.
Tommy May - CEO
Okay, thanks, Dave.
Operator
(Operator instructions) And your next question comes from the line of Derek Hewett with KBW.
Your line is open.
Tommy May - CEO
Hello, Derek.
Derek Hewett - Analyst
Good afternoon, gentlemen.
Hey, a quick -- two questions on the loan portfolio.
I am looking at -- if you look at credit card fees relative to average balances, it looks like it increased from about 2.2% last quarter to about 2.4% this quarter.
Was there anything unusual in credit cards this quarter?
Bob Fehlman - CFO
Derek, this is Bob.
I will tell you what.
In 2009 and in I think 2008 we had a significant increase in the number of balances out -- or number of accounts outstanding as we put new programs in.
When we got to the -- a lot of those balances have increased and started using their cards over the last -- over 2010.
So we've seen in the fee area about a 10% increase, 12% increase in the credit card fees.
Most of that is based on usage and a lot of it's based on the new cards that were -- came online.
Also we had in the fourth quarter we had some annual fees.
We still have some cards that we have annual fees on and that was a little more than projected in the fourth quarter.
Tommy May - CEO
Let me just say a word about the annual fees.
Years ago the annual fees were as much as $10 million.
I mean I'm not exactly sure of the amount, but competitively we realized that we were going to have to either eliminate or waive.
The fact is that over a period of time we have waived some of those fees.
Today those numbers are about $1.8 million.
Obviously with the credit card act and a lot of the income that are being taken away from there you're starting to see a shift in a lot of banks relative to reactivating those annual fees.
So ours are still out there.
They've been waived down to a level of about $1.8 million and as Bob said this last quarter they were up, which means we weren't waiving and I think that we -- we'll continue to monitor the market there going forward.
Derek Hewett - Analyst
Okay, great.
Thank you.
And in terms of student -- the student loan portfolio, any updated thoughts in terms of either selling it at this point or are you guys going to continue to just let it slowly amortize out naturally?
Tommy May - CEO
Derek, we are continuously monitoring the process.
We are -- we have basically taken the student loan operations piece of it, consolidated it into our overall loan administration and so we have the capacity to be able to administer that effectively going forward.
The truth of the matter is also that we continue to look for opportunities to sell that portfolio.
And we would sell that portfolio if we had a -- if we could match a rational buyer with a rational seller.
And right now we haven't found that on either side.
So we're just going to continue right now doing it just like we have.
We have about $60 million in that portfolio.
If we had to sell it at a discount today, that could be in a 3%, even a little bit higher range and the impact obviously could then be somewhere around $2 million and we're not interested at that level.
Bob Fehlman - CFO
And Derek, we're also -- we're not interested in taking the hit.
We're also not interested with our liquidity level of moving that off the balance sheet at 150 and overnight money unless we had alternative investment.
We did see an improvement in that discount.
We have had buyers that are interested.
It was at about 10%, 12%, moved down to that 3% to 5% range over the last quarter.
So there are others out there that are becoming more interested in acquiring.
Tommy May - CEO
As poor as that yield is, it's still a whole lot better than 25 basis points, so we'll leave it where it is for the time being.
Derek Hewett - Analyst
Okay, seems to make sense.
Thank you very much for taking my questions.
Tommy May - CEO
Thanks, Derek.
Operator
And there are no further questions at this time.
I turn the call back over to our presenters.
Tommy May - CEO
Okay, well we thank all of you very much for being here.
And I again want to apologize for the interference that we had on the beginning.
We'll try to make sure that doesn't happen again.
Hope you all have a great day.
Thanks.
Operator
Ladies and gentlemen, this concludes today's conference call.
You may now disconnect.