Image source: The Motley Fool.
MidWestOne Financial Group Inc (MOFG 0.47%)
Q3Â 2019 Earnings Call
Oct 25, 2019, 12:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day and welcome to the MidWestOne Financial Group, Inc. Third Quarter 2019 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]
I would now like to turn the conference over to Charlie Funk, CEO. Please go ahead.
Charles N. Funk -- President & Chief Executive Officer
Thank you very much, Aileen. Good morning or good afternoon, as the case may be to everyone. Thank you for joining us this morning. And I'll begin, as always, with the forward-looking statements message that says, this presentation contains forward-looking statements relating to the financial condition, results of operations and business of MidWestOne Financial Group, Inc.
Forward-looking statements -- excuse me -- generally include words such as believes, expects, anticipates, and other similar expressions. Actual results could differ materially from those indicated among the important factors that could cause actual results to differ materially are interest rates, changes in the mix of the Company's business, competitive pressures, general economic conditions, and the risk factors detailed in the Company's periodic reports, and registration statements filed with the SEC. MOFG -- excuse me -- MOFG undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of the presentation.
And with that, a few opening comments, would just be that the overall report, we think the -- overall theme of this report is positive. We did have a lot of moving parts, due to the purchase accounting adjustments, but still we think a very, very positive report. I think as much as anything, we believe we've gained good operating leverage from the AT transaction. And as such, as we mentioned in the earnings report, we calculate that our earnings per share, if you exclude only merger-related expenses, to be about $0.88 per share.
So let's begin, first of all, with the balance sheet. We continue to be hampered by higher than normal paydowns in our loan portfolio, and there's really no underlying one -- there is no one underlying theme to these paydowns. We've had a number of liquidity events that have happened with our customers throughout our footprint. Certainly, the economy seems to be a little bit slower, that would account for a little bit of the paydown as well. We've also had some positive movement in terms of some watch credits that we've been able to manage out of the bank, and we've lost a little bit to competition. So really not any one theme that you can point to, in terms of why we've had these paydowns.
It's also fair to say that we have fewer strong loan producing areas in our footprint than we did a year ago. And if you look at our footprint, about half of our regions are positive from year-end 2018 to currently, in terms of loan growth. And about -- so about half positive and half negative. In the Twin Cities, we generally have positive loan growth, but two of the four regions, in our Twin Cities footprint showed negative loan growth year-to-date. Overall, the Twin Cities remains strong in terms of its economy. Our loan growth is a little bit less than it was a year ago.
Denver continues to move forward, and generating very, very positive C&I loan growth. Our Florida footprint, our two offices there have modest loan growth this year. We've seen a number of liquidity events in our Iowa City footprint. We do have a good pipeline, and Iowa City to close either in the fourth quarter or the first quarter of 2020. And I would also note that our Southern Iowa footprint has a good pipeline, much of which will fund in the first quarter of 2020.
So we do expect a few more pay downs, due to liquidity events in quarter four. We also have a few large deals that are in our pipeline, but certainly not a 100% certain to close. So I would say, we need to stay tuned on this. We do have a pipeline. The amount of the pipeline is currently unclear. Probably clear itself up over the next 45 days.
In terms of lending competition, very, very tough on price in most of our markets. I would say, that in most instances what we find in terms of credit terms tend to be reasonable throughout our footprint. It appears most of our competitors, as far as we can tell, are doing a good job of underwriting. And so we found credit terms to be generally reasonable.
On deposits, very, very good year on deposits. We had a statement in the earnings release that although are flat -- our deposits were flat on a quarterly basis. Some of that was managing high-cost deposits out of the former AT, and those got funded elsewhere in our footprint. Those deposits came at a lower cost to us, which really does help our net interest margin. Overall in 2019, I'm very happy with the deposit generation in our Company. I believe, I am correct in saying that every single region in our Company is positive in terms of deposit growth from year-end 2018. And so the legacy MidWestOne has done a terrific job and we feel very confident that over time, we'll find good loans funded by these strong core deposits. It would appear that quarter four, we've got some deposits -- some new deposits in the pipeline. We'll see if those materialize. But overall, again a good story.
I think, for me, the highlight of the quarter was the core net interest margin that we calculate without any purchase accounting at 3.48% versus 3.45% in the second quarter. Certainly having a mix change, we had three months -- had a higher loan-to-deposit ratio that came from AT versus Two [Phonetic] in the second quarter. That helped us, we've been able to lower rates on many of our large rate sensitive deposits as the Fed has eased. And as noted, we do have competitive pricing on loans. We think that will continue. We have not lost a lot of deals to rate, but the rate competition is significant.
I would say, in terms of the outlook going forward for our margin, it's probably more dependent on what the shape of the yield curve looks like than it is on whether the Fed eases or not, because clearly the flatter or more inverted of the yield curve gets, it just gets tougher and tougher for our Company to hold in with a strong net interest margin.
In terms of non-interest income, clearly the biggest headwind for us has been the mortgage servicing right adjustments $657,000 in this quarter, after $507,000 in the second quarter. And I would remind our listeners that our mortgage servicing portfolio is now over $1 billion, roughly $1.1 billion. So that does affect our income statement whenever we have significant changes in interest rates. Clearly our mortgage unit and mortgage activity is strong, and that should continue into the fourth quarter.
Also contributing on our non-interest income is the wealth management unit. Our Trust Department, with the AT acquisition is now between $1.6 billion and $1.7 billion in assets under management, and I would say, the integration has been excellent between the two Trust departments. And we've lost very little business, because of the merger, and very, very happy with the work done by our Trust personnel. Also in wealth management, our investment services area is pointed toward a record year. And we did add two investment representatives in Dubuque, which will help going forward. So, again a good story for investment services.
In terms of non-interest expense, I think it's a bright spot. We're certainly on target to meet or exceed our stated goals in terms of cost saves with AT. And I think, we'll be in a position to give a better update on that next quarter, but we feel really good about where we stand right now.
A few cautionary notes on expenses. As we go forward, we'll probably have a little bit of extra expense in the fourth quarter because of the Windows 7 going out of business, so to speak, and we need to upgrade our remaining Windows 7 computers, and that is not a cheap operation in our -- in a Company of our size.
Also going forward, and we've talked about this before, FinTech is not cheap. FinTech is expensive. And we need to have a continued commitment not only in software, but also in people to rollout the products that our customers expect and deserve. But overall, with an efficiency ratio, we believe our core efficiency ratio is under 60% right now. That's been a goal since we had the Central Bank acquisition in 2015. So we're very pleased with the progress on the efficiency ratio, and expect more improvement going forward.
Turning to asset quality. Again, we put this in the earnings release, but would note that we had a $4.3 million provision, but would note that $3 million of that wasn't related -- was not related to a deterioration in the overall quality of our loan portfolio, but rather we transitioned from the initial measurement of the acquired loans to our standard allowance methodology. $1.3 million provision was taken in the legacy MidWestOne footprint and portfolio. So otherwise, it was a fairly normal quarter for us in terms of credit. We gave guidance of a provision in the legacy MidWestOne portfolio of $4 million to $6 million in the first quarter. We're currently at $3.6 million of provision in the legacy MidWestOne portfolio, and we think we should -- as we look at it right now, have what we would consider to be a normal fourth quarter and fall well within the guidance that we gave.
Before I talk about ag, I would say that we've seen little, if any deterioration in our commercial real estate portfolio, and much of that in our Company is in the Twin Cities, and the Twin Cities continues to be a very, very strong economy in the commercial real estate portfolio. There is -- continues to do very well for us. Any erosion that we've seen in our C&I portfolio is nothing that would give us heart burn, at this particular point in time. And so that points to me then toward the update on our ag portfolio.
Just in general, in our footprint, yields on soybeans and corn are above earlier forecasts, but we still have crops that are being harvested. And right now our estimate is that probably 35% to 50% of the harvest is in, which means that there is still a lot out in the field. It's not a record year for corn and soybean yields, but anecdotally Iowa seems to be in better condition than many of our surrounding states. In our footprint, we would expect yields to be 10% to 20% less than they were in 2018. So not a Ben Buster, as we say in the Midwest, but certainly not a disaster either.
For those who used marketing of their crops, we have seen over the last couple of months an improvement in soybean and corn prices. I think, a few of our customers use those opportunities when the price was up to lock in. Some of their crop or more of their crop, as the case might be, that only bodes well when we finish the year and you look at financial results of our borrowers.
Our ag loans are up about 1% during the quarter from quarter two -- from the quarter two levels of the ag portfolio. Ag loans represent right now 9.7% of our total portfolio. If you look at the ag portfolio only, right now 7.6% of our ag portfolio is rated substandard, 11.5% is rated watch, if you add those two together 19.1% of our ag portfolio is rated watch or substandard as of quarter end. That compares to 19.2% last quarter, and a year ago, we had 21.8% of the ag portfolio classified, watch or substandard. So we have made some progress there.
We also have dairy loans now to talk about because roughly 16% of our portfolio is dairy. We inherited that from AT, most of those are in our Southwestern Wisconsin footprint. And I think, I've talked about this before, but I would remind everyone that the former AT did a very, very good job with FSA guarantees. And when you have FSA guarantees, the bank has much less exposure, and therefore, I think we're managing that portfolio pretty well.
We get a lot of questions about land values from time to time. The peak in Iowa, for land values, was in 2013, where 13% off the high of land values. And over the last year, we've probably seen a 2% on average deterioration. So, again, not a great story, but certainly not a catastrophe either.
So I think our next steps in terms of ag would be that, we're certainly awaiting results from the harvest. Starting in November, December, and January, we'll have discussions with our borrowers, and look at where they stand. It's inevitable that some producers will probably not be funded by MidWestOne in 2020. And I would note, this is an industrywide phenomenon, not a MidWestOne phenomenon. But I would say, that that's a sizable minority of our borrowers. That said, some of our borrowers that are struggling right now, we may not be able to satisfy their needs next year. So overall in ag, I would say, not much has changed and more to come later this year.
To wrap this up, I would say that we're accreting capital very well. 8.21% tangible common equity at the end of this past quarter. We did repurchase shares when we believed it was prudent to do so. And I would also note that our tangible book value per share is up 84 basis points, and we want to continue to see that build. So in general, we feel very good about where we stand today, but we are by no means complacent and we still have a lot to accomplish to achieve the goals that we expect and our shareholders expect.
And Aileen, with that, I will turn it back to you, and we'll be happy to answer any questions that you might have.
Questions and Answers:
Operator
We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Nathan Race with Piper Jaffray.
Nathan Race -- Piper Jaffray -- Analyst
Hi guys, good morning.
Charles N. Funk -- President & Chief Executive Officer
Good morning.
Barry S. Ray -- Chief Financial Officer
Good morning, Nate.
Nathan Race -- Piper Jaffray -- Analyst
Maybe just to start on expenses, Charlie, your comments around some investments that you're making on the technology side of things. That's pretty well managed this quarter, and it looks like you have the FDIC assessment credit as well. So just curious how we should kind of think about expenses into 4Q? And perhaps maybe just early expectations for expense growth in 2020 as well, would be helpful.
Charles N. Funk -- President & Chief Executive Officer
Well, I can talk generally, Barry may wish to talk specifically. We're still in the budgeting process for next year. I think we may have disclosed in a prior earnings call that in 2019 we budgeted roughly a 25% to 28% increase in our technology budget. I'm not sure we're going to use all of that this year, but that is what was budgeted. So I mean technology is a small part of our overall budget. But also it's something that we need to invest in. So I think that line item is going to have an above average rate of increase going forward. I don't know, if you want to add to that, Barry.
Barry S. Ray -- Chief Financial Officer
I don't have anything necessarily to add to that, Charlie, more specifically, because as you indicated, we're starting into the budget process.
Nathan Race -- Piper Jaffray -- Analyst
Understood. And I guess maybe just for 4Q in particular, is it fair to kind of expect flattish expenses of around $29 million [Phonetic] or so? Or do you expect it to be trend a little higher into the fourth quarter of this year, Barry?
Barry S. Ray -- Chief Financial Officer
Yes, I don't know, if it's going to turn a little bit, a little bit higher in the fourth quarter is probably the thing for expenses. This quarter was the FDIC insurance credit. So I think we're going to -- that's going to more normalize in the fourth quarter Nate. So I would increase it back to a more normal level for the FDIC insurance, and then have it fairly flat from there.
Nathan Race -- Piper Jaffray -- Analyst
Okay. That's helpful. And then just on the core NIM going forward. Obviously, with the Fed cutting rates, it doesn't sound like it's as much of an issue per Charlie's comments versus what happens with the belly of the curve, so to speak. So just curious maybe how we should think about the margin in the fourth quarter? And within that context, how much of an opportunity further exist to bring down the deposit costs after pretty good progress here in 3Q?
James M. Cantrell -- Chief Investment Officer and Treasurer
Yes. Nate, this is Jim. I though about this going forward. I think we're guiding to a relatively flat margin going forward, whether or not we get a fed cut next week or in December. The last few fed cuts we've been pretty good about moving deposit rates down as Charlie mentioned. And I think there is a little bit of powder left to do that some more if we need to. So as Charlie said, I think we're real determinant on margin, and it's a slow moving item, is the shape of the yield curve. That's probably a bigger factor. So if we get some rate cuts, and as a result of curve steeping down a little bit that could be a good thing for us. But I would project basically flat going forward.
Nathan Race -- Piper Jaffray -- Analyst
Okay, that's great to hear. And if I could just ask one more kind of housekeeping question on the purchase accounting accretion outlook. Obviously, it was elevated this quarter. How should we think about the accretion levels for 4Q?
Charles N. Funk -- President & Chief Executive Officer
Yes. This quarter was skewed by a couple of things, Nate. Prepayments factored into that, and I think we indicated that was $2.3 million. I'm thinking about, in terms of, in the near-term at least probably $1 million to $1.3 million would be the monthly run rate of $3 million -- let's call it, $3 million to $3.5 million, or I'm sorry $3 million to $3.5 million per quarter, and then declining from there in 2020.
Nathan Race -- Piper Jaffray -- Analyst
All right. That's very helpful. I appreciate all the color. Thank you.
Charles N. Funk -- President & Chief Executive Officer
Thank you.
Operator
Our next question comes from Jeff Rulis with DA Davidson.
Jeff Rulis -- DA Davidson -- Analyst
Thanks, good morning.
Charles N. Funk -- President & Chief Executive Officer
Good morning, Jeff.
Barry S. Ray -- Chief Financial Officer
Good morning.
Jeff Rulis -- DA Davidson -- Analyst
Charlie, you kind of walked through the loan growth outlook, and visibility on paydowns is, I expect that's a challenging item to peg. I guess if we look at both kind of on a net basis and based on what you're seeing with customers, and look that's coming from economy, it's coming from some credit pruning, it's coming from competition as you lined out the paydowns. But you think about a net growth number in '20 all things being equal, would you think that the paydowns subside?
Charles N. Funk -- President & Chief Executive Officer
Yes, it's a good question. And before I answer that, I neglected to introduce who is in the room, and I should do that. You've already heard from Jim Cantrell, our Treasurer, Barry Ray, our Chief Financial Officer, and we also have Gary Sims, our Chief Credit Officer here. The fourth quarter is pretty -- is unclear, because we have a couple of larger deals that we're looking at, that by no means are in the barn, so to speak. That could change our outlook. We know we're going to get some paydowns in the fourth -- yet in the fourth quarter. I think for next year, we start every year with a goal of, I think 4% to 5% in terms of loan growth, and that's an expectation. I think one of the things that is in our favor is, that we do have some activity we know will fund in the first quarter of 2020 to get us off to a pretty good start. But so much depends on the economy, that this just really hard to say. But, I would say fourth quarter is unclear and we look at as we always do 4% to 5% when we set our goals next year.
Jeff Rulis -- DA Davidson -- Analyst
Got it. Okay, thanks. I wanted to clarify the expense discussion. Barry, I think ex-merger costs you at $29 million, and then you just suggest that add back normalized FDIC expense in the mid-29 ranges in the ballpark?
Barry Ray -- Chief Financial Officer
For the fourth quarter, yes.
Jeff Rulis -- DA Davidson -- Analyst
Right, OK. And did you -- I can't remember if you've talked about, if you've got all your expenses, cost saves behind you or on track for that. I guess have you talked about an expense growth rate for 2020?
Barry Ray -- Chief Financial Officer
We have not talking about expense growth rate for 2020. As we alluded to earlier, we are still in the midst of our budget process and hashing out some of those 2020 expenses. And so we've not discussed that, Jeff.
Jeff Rulis -- DA Davidson -- Analyst
Okay, fair enough. But just lastly, I guess, Charlie, the investment services and trust, you did allude to some momentum there. That's been pretty strong growth, I know as you gets your arms around the acquisition and your folks. But maybe if you could speak to continued success there is, that we've seen a leg up and now, maybe it moderates once everybody's on the same team, and outlook would be great there. Thanks.
Charles N. Funk -- President & Chief Executive Officer
Yes, it's a good point. The positive thing as I said in my opening comments is that there has been very little customer attrition, and I would call it important customer attrition from the Trust transition, which is by far the bigger of the two areas. A lot, as you know, in trust and investment services depends on what the markets do. Because obviously when market values go up, it makes it easier, but they've been able to routinely over the past few years do 5% to 10% in terms of what I would call bottom line growth, because even though in our financial statements that we provide to you, we don't break them out separately, but internally, they've been able to show net income growth of 5% to 10%, and I would like to continue.
We have good leadership there. We have good people, and I think we have good products to sell, and we've brought good products to American Trust, the former American Trust in Dubuque. So we're very optimistic about that.
Jeff Rulis -- DA Davidson -- Analyst
Great. Thanks. That's it from me.
Charles N. Funk -- President & Chief Executive Officer
Thank you.
Barry Ray -- Chief Financial Officer
Thanks, Jeff.
Operator
Our next question comes from Andrew Liesch with Sandler O'Neill.
Andrew Liesch -- Sandler O'Neill -- Analyst
Good morning, everyone.
Charles N. Funk -- President & Chief Executive Officer
Good morning.
Barry S. Ray -- Chief Financial Officer
Good morning, Andrew.
Andrew Liesch -- Sandler O'Neill -- Analyst
Nice to see the deposit growth at legacy MidWestOne franchise. Is there anything specific driving that?
Charles N. Funk -- President & Chief Executive Officer
We've -- as I said, I think everyone, all the regions in our Company are positive. We've had a few retail promotions over the course of the year and have attracted retail money market accounts, and most of that has stock as we've adjusted pricing. Denver has been terrific, were up in the $55 million to $60 million range in Denver, which is far exceeded our earlier projections. Florida is up 8% to 10%, which is really nice even though they have maybe $100 million, they still are up 8% to 10%. And Iowa continues to do well. And the Twin Cities, overall the Twin Cities, has been a very, very good story for us in deposits. So it's really not any one thing, it's the whole Company, and we're very pleased with the performance.
Andrew Liesch -- Sandler O'Neill -- Analyst
Very good. And then just on the legacy ATBancorp franchise now, do you expect any more run-off of some of those higher cost funds? Or is that pretty much all played out?
Charles N. Funk -- President & Chief Executive Officer
It could be a little more. There could be a little more. They -- as many of you know, they operated with the net interest margin that was less than 3%. And there was a lot of high cost money in the bank. And we've lost a couple of bids, and to be honest, the bids were above the LIBOR, above the the Fed funds rate. And we were able to replace that money elsewhere in our footprint cheaper. So there might be a little bit more, but I think the bulk of that is passed. The other thing, I think, that's positive about Dubuque, in particular, is that the commercial bankers there are uniformly complementary of our treasury management process. And I think we've brought a lot of products and expertise and treasury management that they did not have before. So I would think over the next year that probably bodes pretty well for eventual deposit growth there.
Andrew Liesch -- Sandler O'Neill -- Analyst
Certainly. And then just on the CD rates, the cost of the CD is up about 3 basis points compared to last quarter, or maybe some of that was from the full quarter of ATB. But what like -- where are repricing rates coming on now versus the maturities? And any sort of repricing schedule that you guys can provide would be helpful.
James M. Cantrell -- Chief Investment Officer and Treasurer
Yes, Andrew, this is Jim. I'll take that one. We've -- I would say, I would characterize, as we've reached pretty much an inflection point, as we look at the CD book yields coming on. We've been able to lower our CD pricing a little bit over the last quarters. And we're tracking pretty close to FHLB rates, when we look at our pricing. And so we've now crossed over where current CDs coming on the book, probably just a little below 2% whereas in the second quarter, they were -- CDs coming on were above 2%.
So it's a slow -- it's kind of a slow boat to turn. The average life is little over a year on that CD book, and it's material. And that's one of the areas where if we got further Fed easing, and the short-term rates come down relative to longer rates that CD book repricing would be one area where we would see a little bit of a lift in net interest margin. But that's on yet to come. So that's one of the areas where the flat yield curve isn't helping us particularly.
Andrew Liesch -- Sandler O'Neill -- Analyst
Right. That's very helpful. Those are my questions. I'll step back.
Charles N. Funk -- President & Chief Executive Officer
Thank you, Andrew.
Operator
Our next question comes from Damon DelMonte with KBW.
Damon DelMonte -- KBW -- Analyst
Hey, good morning guys. First question, I was just wondering, Barry, could you just revisit the comment you made on the accretable yield, and what the expectations are, kind of on a quarterly basis?
Barry S. Ray -- Chief Financial Officer
Yes, sure, Damon. As I said, the comments were, the $7.2 million accretion this quarter was impacted by about $2.3 million of that was prepayments and renewals. And so it's -- obviously that's going to impact quarter in an unexpected manner each quarter. But I think it's probably around $1 million to -- $1 million to $1.3 million per month or so. I would say, at around $3 million to $3.5 million per quarter would be in the near-term and then it's going to drop off thereafter and 2020 forward.
Damon DelMonte -- KBW -- Analyst
Okay. Okay, great. That's helpful, thank you. And then, have you guys completed the review on the acquired loans for the reserving methodology?
Barry Ray -- Chief Financial Officer
Yes, yes. David, this is Barry. We -- I know we recorded a provision for the acquired loans as we transitioned to our standard allowance methodology this quarter. My past experience would indicate that that process has resulted in kind of this one-time provision in credit quality remaining equal. There is not a similar impact in the upcoming quarters. Now one difference is, in 2020, we're going to be estimating allowance under different methodology. But I would say that, we had -- to your question, we've completed our transition through our standard allowance methodology for the American Trust and American Bank & Trust loans.
Damon DelMonte -- KBW -- Analyst
Got it. Okay. And then I guess that's probably it. Everything else had been asked and answered. So I think I'm all set. Thank you very much.
Charles N. Funk -- President & Chief Executive Officer
Thank you, Damon.
Operator
Our next question comes from Brian Martin with Janney Montgomery.
Brian Martin -- Janney Montgomery -- Analyst
Hey, good morning.
Charles N. Funk -- President & Chief Executive Officer
Good morning, Brian.
Brian Martin -- Janney Montgomery -- Analyst
Just a couple from me, just maybe for Barry, on the fee side. When you look at this quarter and kind of adjust for that MSR, is this a pretty clean quarter reflective of AT and it's a normalized level?
Barry S. Ray -- Chief Financial Officer
Yes, I would say that's true, Brian. What I did was, I looked at it Q3 to Q1, just to kind of get an idea of what the increase of this fees into Q2, we only had two months of American Trust. And if I back out the mortgage servicing right, and the only other thing I adjusted for was, I also from the first quarter backed out insurance commissions because we don't have that going forward. I come up with about a $3.5 million increase quarter-over-quarter and I think that's probably a pretty reasonable expectation.
Brian Martin -- Janney Montgomery -- Analyst
Yes. Okay, all right. Just want to make sure that. And then just the -- maybe one for Charlie or whomever. Just with your comments Charlie about growth slowing a little bit, I mean does M&A become more important? Or is it -- can you just comment on how you're viewing M&A today with kind of AT, I guess, in the rear view mirror, if you will a little bit?
Charles N. Funk -- President & Chief Executive Officer
It's a good question. I would say, AT is probably not in the rear view mirror for some in our Company, because it took a lot of effort by a lot of our support people. And so right now, I think we're digesting that. We're digesting it internally. We certainly are aware, and will be aware of any opportunities that come forward. I think right now though, I wouldn't rule out anything that's -- that is relatively small, but I think what we need to do is digest what we have and make sure that the machine that we're currently operating becomes more efficient, continues to grow, and then we'll see where it takes us. But certainly not in the next three months, we'll be looking at anything of any size.
Brian Martin -- Janney Montgomery -- Analyst
Okay. And then just on the buyback, I know you commented about that just -- is your expectation to use the full authorization on the buyback? I know you said you, I guess or is it more price sensitive, and we shouldn't expect a lot more of that.
Charles N. Funk -- President & Chief Executive Officer
I would say, it's price sensitive. And when we think it represents excellent value we step in, but probably the best word is, and you used, more price sensitive.
Brian Martin -- Janney Montgomery -- Analyst
Yes, OK. All right. And then maybe just one for Jim, on the margin. I appreciate the color. Yes, I guess if you get to a scenario Jim, where you get three more rate decreases here in the next three meetings, would you be surprised if the margin wasn't flat? I mean, I guess it sounds as though you're -- I guess assuming -- I guess though with the caveat if we don't get a flattening, as you mentioned, would be hurtful. But if you don't -- if you get a little bit maybe more steepening, or just staying with that, and you have three cuts your thought would be you can hold the margin on a core basis where it's at today?
James M. Cantrell -- Chief Investment Officer and Treasurer
Yes, Brian, I do think, just to answer very directly. I think we could probably hold the margin, if we get three cuts. And part of the reason I say that is, when we look at, I kind of took an inventory of our prime and our LIBOR-based assets, and that's about $820 million on the asset side. So those will [Phonetic] reprice down relatively quickly. I will say, of that $820 million, roughly $220 million is either at or sitting on floor. So really it's only $600 million moving down going forward.
If I look at the liability side of the balance sheet, we've got about $250 million of liabilities that are contractually tied to short-term rates like [Indecipherable] and LIBOR. So that's $250 million there. And then we've got another roughly, I'll say $650 million that are in deposits and liabilities, that I would call high beta, meaning we have some discretion there. Price is probably a little more higher than the market. The [Indecipherable] move down, we would move down basis points for basis point, but that's $650 million of them -- $650 million that we could move down in pretty good fashion, if we were to go down $75 million [Phonetic]. So that balances out the repricing on the asset side, relatively well in my opinion.
Brian Martin -- Janney Montgomery -- Analyst
Okay.
James M. Cantrell -- Chief Investment Officer and Treasurer
[Indecipherable] question.
Brian Martin -- Janney Montgomery -- Analyst
Yes. That's helpful. And just -- maybe just the tax rate. Any -- it looked like it was little bit lower this quarter, anything, yes, I guess we should be thinking about kind of the go-forward rate on that?
Barry S. Ray -- Chief Financial Officer
This is Barry, Brian. Yes, I think that we probably use it around, where we use like around 21% would be -- tax rate that I would utilize.
Brian Martin -- Janney Montgomery -- Analyst
Okay, all right. I think that takes everything. Thanks guys.
Charles N. Funk -- President & Chief Executive Officer
Thank you, Brian.
James M. Cantrell -- Chief Investment Officer and Treasurer
Thanks, Brian.
Operator
[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Charlie Funk for any closing remarks.
Charles N. Funk -- President & Chief Executive Officer
Well, we would just say thank you for joining us this morning. And if we need to provide further clarification on anything, we'd be happy to do it as time allows. So we wish everyone a good rest of your day, and a great weekend. And back to you, Aileen.
Operator
[Operator Closing Remarks]
Duration: 38 minutes
Call participants:
Charles N. Funk -- President & Chief Executive Officer
Barry S. Ray -- Chief Financial Officer
James M. Cantrell -- Chief Investment Officer and Treasurer
Barry Ray -- Chief Financial Officer
Nathan Race -- Piper Jaffray -- Analyst
Jeff Rulis -- DA Davidson -- Analyst
Andrew Liesch -- Sandler O'Neill -- Analyst
Damon DelMonte -- KBW -- Analyst
Brian Martin -- Janney Montgomery -- Analyst
