Simmons First National Corp (SFNC) 2011 Q4 法說會逐字稿

Good day, everyone, welcome to the Simmons First National Corporation fourth quarter earnings conference. Today's call is being recorded. At this time I would like to turn things over to Mr. David Garner. Please go ahead, sir.

Thank you, and good afternoon. I am 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 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 the 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 will turn the call over to Tommy May.

Thank you, David. Welcome everyone to our fourth quarter conference call. Let me apologize on the front end that I have a cold and congestion, and so I may have to talk a little bit slower than normal in these presentations. In our press release issued earlier today, Simmons First reported fourth quarter earnings of $6.3 million, or $0.37 diluted earnings per share. Obviously there is a lot of noise in our comparative results related to the 2010 FDIC-assisted acquisitions and other items, which I will spend a little bit of time and move through in various related topics.

After normalizing for the approximately $9.7 million net gain related to our Kansas acquisition, Q4 2010 core earnings were $6.9 million, or $0.40 diluted core EPS. For the year-ended December 31st 2011, core earnings were $25 million, or $1.45 diluted core EPS, compared to $26 million, or $1.51 diluted core EPS for 2010. On December 31st total assets were $3.3 billion and stockholders' equity was $408 million. Our equity to asset ratio was a strong 12.3% and our tangible common equity ratio was 10.6%.

The regulatory Tier One capital ratio was 12.3%, and the total risk based capital ratio was 22.8%, both of these regulatory ratios remains significantly above the well capitalized levels of 6% and 10% respectively, and rank in the 94th percentile of our peer group based on September 30th peer, versus our December 31 actual. Simmons First has one of the strongest capital positions within our peer group.

Obviously a portion of this capital has been allocated for our acquisition program, and we plan to leave this portion of our excess capital available for this purpose. Based on the level of our capital position, the slow growth in the economy and the minimal growth in our balance sheet, we do not need to continue to accumulate more excess capital. As such we plan to allocate our earnings, less dividends to our reinstituted stock repurchase program. The shares are to be purchased from time to time at prevailing market prices through our open market or unsolicited negotiated transactions, depending upon market conditions.

Since our announcement in late September to reinstitute the program, we have repurchased approximately 137,000 shares at an average price of $23.98, with approximately 509,000 shares remaining under the plan. Net interest income for Q4 2011 was $27.3 million, an increase of $1 million, or 3.9% compared to Q4 2010. The increase in Q4 was primarily due to additional yield accretion recognized as a result of the updated estimates of the fair value of the loan pools in our FDIC acquisitions.

According to GAAP, each quarter we estimate the cash flows expected to be collected from the acquired loan pools, and adjustments may or may not be required. During Q4 2011, the cash flow estimate has increased based on payment histories and reduced loss expectations of the loan pools. This resulted in increased interest income that was spread on a level yield basis over the remaining expected lives of the loan pools. The increases in expected cash flows also reduced the amount of expected reimbursement under the loss share agreement with the FDIC, which are recorded as indemnification assets. The impact for Q4 2011 was a $1.1 million increase to interest income, and a $1 million reduction in noninterest income with a net pretax benefit to earnings of $146,000, because these adjustments will be recognized over the remaining lives of the loan pools and the remainder of the loss sharing agreements respectively, they will impact future periods as well.

The current estimate of the remaining accretable yield adjustment that will positively impact interest income is $22.6 million, and the remaining adjustment to the indemnification assets that will reduce noninterest income is $19.9 million. Of the remaining adjustments we expect to recognize $11 million of interest income, and a $9.7 million reduction of noninterest income during 2012. The accretable yield adjustment recorded in future periods will change as we continue to evaluate expected cash flows from the acquired loan pools.

Net interest margin for Q4 2011 was 3.76%, an increase of 16 basis points from Q4 2010. Noninterest income for Q4 2011 was $12.9 million compared to $33.7 million in Q4 2010, a decrease of $20.8 million. Needless to say Q4 2010 was a very noisy quarter, which included $18.6 million of noninterest income from the bargain purchase gain, and liquidations of the acquired investment portfolio related to our FDIC acquisition in Olathe, Kansas.

On a normalized basis, noninterest income in Q4 2011 decreased by $2.2 million or 14.8%. Approximately $1 million of the decrease was due to reductions of the indemnification assets resulting from increased cash flows expected to be collected from the FDIC covered loan portfolios, as previously discussed. The drivers in the remaining decrease in noninterest income represent changes likely seen throughout the industry.

For example, a $569,000 reduction in our mortgage production unit, and a $192,000 reduction in our dealer-bank operation. The final item creating a significant variance was a $185,000 Q4 2010 gain on the sale of land held for future branch expansions. Switching gears, but still in the noisy category, non-interest expense for Q4 2011 was $28.5 million, a decrease of $2 million, or 6.7% compared to the same period in 2010.

On a core basis, excluding $2 million of merger-related costs from Q4 2010, noninterest expense remained relatively flat. We were able to hold expenses flat through the implementation of our efficiency initiatives discussed in previous calls, and a decrease in deposit insurance premiums caused by changes in the FDIC assessment base and rates. Concerning our combined loan portfolio as of December 31st 2011, we reported total legacy loans and covered loans net of discount $1.7 billion, a decrease of $177.2 million, or 9.3% compared to the same period a year ago. Covered loans net of discount through the liquidation process decreased some $73.5 million which was expected.

Our legacy portfolio decreased by $103.7 million, or 3.2% on a quarter-over-quarter basis. Let me take a moment to explain. Our consumer loan portfolio decreased $24 million driven by $14 million in student loan pay downs, and a $9 million reduction in our indirect loan portfolio. The real estate loan portfolio decreased by $65 million, including a $44 million decrease in the construction and development category which now represents only 7% of the total portfolio.

This compares favorably to our peers, $23 million of the C&D decrease was associated with a large long-time customer who regularly places loans in the secondary market on a nonrecourse basis. As the projects mature and reach a certain lease level, we fully expect to have another opportunity on a similar project that would fund over a period of approximately 12 months. The remainder of the real estate loan decrease was $9 million in single family, and $12 million in commercial real estate. Commercial loans decreased $9 million, while Agri loans were relatively flat on a quarter-over-quarter basis. But as usual it is a seasonality decreased by $38 million on a linked quarter basis.

On a linked quarter basis, adjusting for seasonality and for the movement of the large loan to the secondary market, we saw a relatively small increase in our overall legacy portfolio, which we considered a positive. Like the rest of the financial industry in Arkansas, Simmons First is experiencing weak loan demand as a result of the overall general economic environment, we believe loan demand is likely to remain soft for Q1 2012, and likely into Q2 2012. But we are cautiously optimistic relative to improved loan demand in the last half of the year.

We will remain patient and continue to be conservative lender that has enabled us to weather the economic storms of the past four years. 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 the asset quality ratios for our legacy loan portfolio. The allowance for loan losses equaled 1.91% of total loans, and approximately 186% of nonperforming loans as of December 31st.

Nonperforming loans as a percent of total loans decreased to 102 basis points from 114 basis points in Q3 2011. Nonperforming assets as a percent of total assets were 118 basis points, down six basis points. Nonperforming assets including TDRs as a percent of total assets declined to 1.52%, compared to 1.56% at Q3 2011. These ratios continued to compare favorably to the industry and our peer group. In fact, our nonperforming assets to total assets excluding covered loans put us in the 82nd percentile within our peer group based on our September 30th peer versus our December 31st actual.

During Q4 2011, the provisions for loan losses were $2.8 million, flat from Q3 2011. For Q4 2011 net charge-offs were $1.9 million, down $1.1 million from Q4 2010. The annualized net charge-off ratio for Q4 2011 was 47 basis points, compared to 70 basis points for the same period in 2010. Excluding credit cards, the annualized net charge-off ratio was 24 basis points for Q4 2011, and for the full year 2011 the net charge-off ratio was 49 basis points. And excluding the 19 basis point impact of credit cards, the net charge-off ratio was 30 basis points. Our credit card portfolio continues to compare very favorably to the industry. Our Q4 2011 annualized net credit card charge-offs to loans increased 26 basis points to 2.2%, compared to 1.94% for Q3 2011. An escalation of the credit card charge-off ratio during the fourth quarter is not unusual for our bank.

Our Q4 2011 charge-offs are six basis points higher than Q4 2010, and the net credit card charge-off ratio for the full year of 2011 was 2.06%, compared to 2.37% for all of 2010. Even with the national credit card charge-offs declining in recent months, our loss ratio is more than 300 basis points below the most recently published credit card charge-off industry average of 5.38%. One of the real strengths of our credit card portfolio lies in geographic diversification.

With no concentration 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 2.2% loss ratio, we are currently maintaining our reserve of 3% for our credit card portfolio. Bottom line, we continue to experience good asset quality compared to the industry, highlighted by our low credit card charge-offs, good noninterest expense control, and most importantly, an extremely strong capital base with a 10.6% tangible common equity ratio, and risk-based regulatory ratios that rank in the 94th percentile of our peer group. 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.

Our conservative culture has enabled us to engage in banking for 108 years. We consistently rank in the upper quartile of our national peer group relative to capital, asset quality, and liquidity. While we are cautiously optimistic, and there are temptations to reduce liquidity and be more aggressive in pricing, and possibly to redefine credit risks, we believe there remains much uncertainty relative to the speed of the recovery and the corresponding challenges in this economy. As such, we continue to believe that there has never been a greater time to have the strengths of capital, asset quality, and liquidity, obviously a big part of our most recent past, and anticipated future growth through mergers and acquisitions.

With the strength of our balance sheet and the experience gained in our recent FDIC-assisted transactions, we remain committed to our M&A strategy. As previously stated, that strategy also includes traditional acquisitions. Likewise we remain committed to our 325-mile radius from central Arkansas, and while we anticipate fewer opportunities by restricting that radius, we believe this discipline allows us to complement the acquisitions already made, while allowing us to continue to operate in a market that best fits our conservative culture.

In closing, we remind our listeners that Simmons First experiences seasonality in our quarterly earnings due to our agricultural lending and our credit card portfolio. Quarterly estimates should always reflect this seasonality. Now 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 the operator to come back on the line and once again explain how to queue in for questions.

Thank you. (Operator Instructions). We will pause for just a moment. We will go first to Matt Olney with Stephens Incorporated.

Hey guys, good afternoon.

Hi, Matt.

Hey, question on loan growth. It sounds like commercial loan growth is still just not there in Arkansas, and it sounds like many of your peers are seeing the same thing. You have talked in the past about an initiative for loan growth from your niche portfolios. I think credit card and ag being two very successful portfolios you guys have. Can you give us an update on that initiative, and what your current thoughts are about growing that balance sheet from those two items?

I can, Matt, and I thank you. Let me start with the credit card piece, and simply say that we have probably been very fortunate to sort of hold our own, based on the increase competition that we are seeing from a lot of the money center banks that are wanting to get back into the credit card arena. However, I think the strengths of our credit card demand, have obviously come from our interest rate which has been well publicized. I think that after a period of teaser rates and so forth, that we are probably going to start seeing our internet application flow increase. I so am still optimistic that while we may not get the growth that we had hoped to get there, that we are still going to see that. You will remember that I said that we would be very pleased with a $200 million credit card portfolio, and certainly we will, and I think based on the historical growth of the Company, and what we probably will continue to see as some FDIC deals are done, then we would even see that portfolio maybe growing a little bit higher when in fact demand is there.

Let me switch gears and talk a little bit about the ag piece of the portfolio. And as you well know, that has been a niche of ours for some time with three of our eight banks having a very good foothold in their particular region. In fact, probably number one provider of the ag loans in their particular area. It was a good year, so farmers are starting off with maybe a little bit more money, which may mean the ramp up in the borrowings would be a little bit slower. But we still expect that to be a growth area. Likewise as we have expanded into our new markets, one of the things that we had talked about was the land [yolks], if you will, that we got from the Kansas acquisition that we felt like there was agri opportunities there.

In particular in the Wichita and Salina area, I can say that we now have people in place in both of those markets that do have ag experience, and so we are hopeful with some growth there. We are going to walk before we run in that market. It is a little bit different ag lending there is a little bit different than it is here. But again, we would cautiously expect to see some growth to come out of that area. It is a long answer, but I think you are right.

The commercial demand is still on the sideline. And I want to, I think, focus on that piece of it that it is still on the sidelines. Arkansas has weathered the storm very well relative to the recession. We were late getting in it and I believe we are late coming out of it. But I am still a believer that there are a lot of dollars on the sidelines there. We do expect to maybe see a little activity in Q3 and in Q4. In fact, if you look at our portfolio on a linked quarter basis, what you will see that when you adjust for the agri seasonality and for the large commercial credit that went to the secondary market, that we in fact showed some growth in the portfolio. We believe that large loans that went to the secondary market we will replace with the same borrower. It again will ramp up and so at least in the last two quarters I am at least feeling cautiously optimistic again. Long answer to a short question.

No, That is great color. I appreciate that. I also wanted to ask about expenses. Can you give us an update of maybe where you are today, or I guess at December 31st with your expense initiative versus maybe your original expectations? It looked like head count has been relatively flat over the last year. Are there any new additions in new markets in that Missouri kins, or anywhere else? Are there any other growth initiatives that may contribute to the head count?

That is a good question, and I am going to defer it over to Bob, but we are really excited about the initiatives that we introduced to the market, and that are now being executed. Bob will be able to tell you a little about the head count issue. It is a little bit deceiving.

Hi, Matt. We originally said we had targeted about $5 million in annual benefit, just to give you a little update on that. About $1.5 million of that was estimated in revenue and about $3.5 million in expenses. I would say on the revenue side we hit those numbers. The problem is it is a little deceiving, it is kind of hidden in there because of the Reg E changes the last couple of years and the credit card act. So we don't get to experience the benefit, but it did mitigate some of those offsets. On the expense side we targeted about $3.5 million, and I would say we are probably about 85% through 2011, and you see that in the quarterly numbers through 2011. We had three phases in our efficiency project in the cost-saving side, and it was one on the retail side and that was the branches. Two was the deposit ops, consolidation and operations area, and then three was the loan admin the consolidation of the back-office there. The first two are pretty much complete. The last one we had to wait until we were able to get all of our imaging up and our line speeds up. That process happened in the latter part of 2011. And in 2012 we will see some additional savings in that area.

Just an update on the head count. You are right, from year-end to year-end that number is kind of deceiving. We got to the end of 2010, and we pretty much hit the numbers we were targeting. And knew the last phase would take us a while to implement, and that will happen here in 2012. But just to give you an idea, so far through this process we are somewhere from when we started in 2009 to today, somewhere in the 100 to 125 FTE head count. That is roughly about 10%. We did all of that through attrition over time, giving our associates to move into unfilled positions as those came up. And we were able to achieve that through the attrition throughout the process. So we think we are pretty close in the process. It has gone pretty smoothly. It is taking a long time.

We said when we went through this we would take our time going through it, and we have taken a little bit longer than some companies may take, but we did it according to our culture, and we think we did it right for our associates and for our Company. We have a little bit left, I would say another 10% to 15%. You will see that going forward. You don't see the net expense. It is hard to see it in there when you see normalized growth and a $100 million expense for a bottom line number plus the acquisitions of Kansas and Springfield kind of distort it. But we are seeing those savings and we are pretty pleased with where we are in the process.

Okay, great. Thanks, Bob. Appreciate the update.

(Operator Instructions). We will move next to Dave Bishop with Stifel Nicolaus.

Good afternoon, gentlemen.

Hi, Dave, Good afternoon.

Tommy, I saw the flush with liquidity here and the challenge on the loan grow side, the NIM income coming under pressure here, absent that first half pick up here, can we expect to see some additional pressure heading into the first half of 2012?

Well, let me give you just a little bit of color with the noise, I guess on the margins. And that is that if you look, the pressures that we have received with liquidity and lack of loan demand has been reflected in the margin of 361. And then in reading through the text and the discussion that we had relative to the covered loan adjustments for Q4, that was about a 15 basis point move up to 376.

With that same adjustment carried forward throughout 2012. You will see the margins move in the range of 4%. Now obviously all of that is without any additional use of the liquidity that we have, that we would really like to think that we can put to work in an FDIC acquisition, that maybe David can talk a little bit about in a moment. That would be a huge boost to the margin issue. Likewise, that 4% margin is with the assumption of minimal loan growth and total uncertainty relative to Fed movement in interest rates. But obviously we remain very poised for rising interest rates assuming the increase in my tenure in banking.

Got it. And you eluded to in terms of deployment of capital there, in terms of potential acquisitions, has there been any activity there in terms of bidding on any sort of transactions there within the market there? What are you seeing in terms of deal flow?

Well, I am going to let David talk about what he can talk about I guess from the standpoint of opportunities and activities, and maybe he can fold in not only the capital utilizations, but also something that we think is very unique, and that is the liquidity utilization. So, David, why don't you say a word?

David Bartlett. Mr. May talked about the use of our liquidity a minute ago. As you know on these FDIC opportunities, those banks have historic, the banks we have had the opportunity to do due diligence have historically gone out in their markets and pay us for deposits and/or brokered deposits at high prices, or borrow them from federal home loan banks at a fairly high rate. Much higher than what we have to pay in this market. We are given a very short period, but an opportunity to break those rates on any acquisition we make through the FDIC.

With those rate breaks automatically comes a substantial amount of deposit runoff. So as we look at FDIC opportunities, we see a pretty good way to utilize our excess liquidity into those markets when they occur, into those acquisitions when they occur. So that is the FDIC, the liquidity piece. Needless to say capital is going to be driven on what kind of discount we are able to purchase these acquisitions at, and obviously the higher the discount, the more of what we refer to as Christmas capital, where bargain and purchase gain comes in that ends up on the bank's balance sheet can be utilized to use in the combined shrunken balance sheet of the acquisition into Simmons First National Bank's balance sheet.

And now could I spend just a minute talking about the opportunities we continue to see in the market? During 2011 there were 90 FDIC failures. The most current list of problem institutions that the FDIC has publicly posted is 844 institutions in the United States, and quite frankly that is down only about 30 institutions from their December 2010 level of problem banks. Mr. May has already mentioned, so the failures are not reducing the level of problem banks as quickly as problem banks are coming back up to the FDIC. As you know, Mr. May has already mentioned it in his earlier comments, we have looked at and continue to focus on the 325-mile radius from the central part of Arkansas. And we monitor $150 million and greater and asset size, and Texas ratios greater than 100. Within that 325-mile radius from year-end 2010 there were 18 banks with about $20 billion in assets.

And as of year-end 2011 that has gone up to 25 banks with about $15 billion in assets. So we did see a slight increase in the number of banks and a slight decrease in the number of assets. Certainly we feel a lot of opportunity for us to utilize our excess capital. I will remind you that our excess capital could acquire up to about $1.2 billion now of additional assets, and still maintain an 8% well qualified ratio at our lead bank at Simmons First National Bank. I gave you a lot of information and I am sorry, that was a good question. I hope I didn't overkill it, but I wanted to share with you what we are seeing right now.

Appreciate the color. Thank you.

And we will take a follow-up from Matt Olney.

Hi, guys, just one more question. As far as the credit trends, once again look good in the fourth quarter. Net charge-offs were very modest. But you are still increasing the reserve ratio just like you did in the third quarter. Are you targeting a reserve ratio at the end of the day, or how should we think about the increased reserve ratio despite the credit trends looking very good?

Matt, we first would agree that our ratios relative to reserve has continued to increase, number one. Number two, our charge-offs have actually been down. Our nonperformings have been improving, and improving from a very good level. But as you know we have said frequently that we still are not totally comfortable that the market is fully healed. As you well know we are reserving for credit cards at a level of 3%, simply because of the levels of unemployment, and now we are seeing some improvement there.

And so very similar to the position we took in our capital, that we had accumulated our capital to give us probably as strong a balance sheet as we needed, and without any further growth in the loan portfolio, and until we were able to put that capital to work, we decided to introduce the stock buy back to put some of that back in place. Very similar, that is what we are now doing with our loan loss provision. We have accumulated a very strong loan loss reserve, and we would expect that during Q1 2012 there would be a reduction in the provision of approximately $450,000, primarily driven at the lead bank, and obviously you can annualize that out at a reduction of somewhere around $2 million.

Okay. That is helpful. And then as a follow-up to David's question earlier about the margin, you mentioned the benefit to the covered loan adjustments, and how that would continue to benefit your margin, and you mentioned a 4% margin, I missed the context of that. Can you repeat that, or go over those notes again?

Well, I said that if you just took our baseline margin of 361 and took the margin impact to the Q4 adjustments, that was another 15 basis points bringing it to 376. And then looking at Q1 2012 going forward, throughout 2012 that is an additional 30 basis point which would be at the approximate 4% level, without any other impact of liquidity utilization, and/or interest rate movement, and/or loan demand greater than anticipated.

Okay. That is helpful. Thanks for the color, guys. Appreciate it.

Matt, obviously estimated.

Matt, also, if you will look at the earnings release on page two, we gave a little guidance there of what we are projecting today of what we see going to interest income, and then obviously the contracts decrease of noninterest income. You can see that. But it is about $11 million that would go to interest income over the course of next year, and then noninterest income will have a negative amount of about $9.7 million. So we tried to give a little guidance there. Those are pretty big numbers, and we will update that again next quarter. Obviously the credit mark is very favorable for our acquisitions. Bottom line, because of how the accounting closing is, it is not a huge bottom line impact. But it does have a positive impact. We want to make sure we gave you some guidance on what the full year impact is next year.

Thanks, Bob. Appreciate it.

We will hear now from Derek Hewitt with KBW.

Good afternoon, gentlemen.

Hi, Derek.

Did you guys, I might have missed this earlier, but did you guys go over how much in buy back that you did this quarter?

No, Derek, did not. I will give you a quick summary that so far we have acquired or repurchased 137,000 shares at $23.80, thereabouts for $3.3 million. That is in the overall buy back program. That leaves about 509,000 shares left to repurchase. If we continued on the basis that we said which would be taking net income minus dividends, we had projected in 2011 to repurchase as much as $10 million. So using the same formula is what we would project to do in 2012, which means that we would not be accumulating any additional levels of capital, but also means that we would not be utilizing our excess capital, which we think is still so very important to us in our FDIC acquisitions, which again I think we are very confident that we are going to be able to accomplish.

Okay. So if you take the $10 million roughly of buy back and then you add in the expected dividends, I think that is roughly maybe $13 million annually, you get to about $25 million or so. It seems like that would, in the first year that would deplete your total capacity for your buy back?

Let me, Dave go ahead.

When it is depleted, we can reauthorize.

Reauthorizing would not be a problem, but if you just do the math on that, is that going to use up that, yes. But that would not be a problem. We can reup that fairly easily. I would just point out that the $3.3 million that we have spent so far, obviously we were late getting into it. And number two, toward the end of the year we slowed the repurchase down somewhat because of the overall movement in the stock market relative to financial institutions. I would tell you that if we did in fact use the $10 million in 2012, we would still have a few shares left, that we would go ahead and again reauthorize the number of shares available for repurchase for 2013 and beyond.

Okay, and then could you talk a little about loan growth, maybe look into a crystal ball for this year? Do you think you will be able to maintain the loan portfolio as it is right now, or do you think we might see some additional shrinkage?

Obviously it truly is a crystal ball. I guess I would, instead of trying to estimate or guesstimate on something that is so difficult with the economy, and how fast the business sector is going to come back to the market, I think I would go back and I would refer to two things. First the student loan reductions that we have seen, we probably are through seeing those reductions being significant unless we were to sell the portfolio. That would be number one.

Number two is remembering when you look at it on a linked quarter basis, and you take into consideration the agri adjustment on seasonality, and the large credit that went to the secondary market, when you take that alone, that would at least give me a flavor of being able to hold our own. And then I guess on top of that would be what we might be able to do in the Kansas agri sector. So without knowing the business side of it, I am reasonably comfortable that we will be able to hold our own, at least in the quarter, Q3 and Q4.

Great, thank you very much.

That is about the best I can do in that projection.

Okay. Thank you.

And gentlemen, we appear to have no further questions. I will turn the conference back to you for closing remarks.

Well, thank all of you very much for being here, and we will look forward to 2012, and certainly look forward to our next conference call. Thank you very much.

That concludes today's conference. Thank you all for joining us. Tommy May: Thank you.