SFNC - Earnings call transcript Q1 2018 | Simmons First National Corporation

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Operator

Good day, ladies and gentlemen. And welcome to the Simmons First National Corporation's First Quarter Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, today's conference is being recorded. introduce for to conference, like now your today's host Mr. I'd Garner. David go Sir, please ahead.

David Garner

My Garner Corporation. is as morning, earnings name Good everyone. webcast. David to first Officer Simmons teleconference and you Investor at and First welcome National We our quarter Relations serve I

Reddin, are Matt Chairman subsidiaries; Enterprise. information one call data Bank, and me issued in Southeast Chief wholly-owned Banking Executive bank discuss President Fehlman, Ledbetter, and to of provided is Officer; President Division; future. earnings Simmons today the Joining Officer; CEO Marty of Chief Bob to quarterly Barry Company of this of our of purpose The for Company's Financial Casteel, the discuss release George and Makris, the and our outlook Chairman and yesterday by our

discussion our prepared with by comments, session. a begin will We question-and-answer followed

analysts have in and of the participate the including remarks from the equity investors Relations firms our session. to our will posted website Investor today's this Q&A Q&A call on institutional All tab. in We under provide Company simmonsbank.com A be in prepared transcript on listen-only guests mode. the conference invited our and call, research session that a other are

expectations, and constitute and materially During cautionary uncertainties, notice expectations, regarding statements, we about today's be our cause may that our results and you the may special and call estimates remind of estimates. which may certain from certain presentations in factors, plans, actual known different or and matters certain during discussed unknown current forward-looking other forward-looking made disclosures forward-looking involve and and risks, this call performance to by Company, goals, make the other may statements outlook. I statements

Exchange associated with with recent all the of Forward-Looking certain and factors please of in Commission. list on US of our to contained risk Form our the Annual the business, is and earnings description a filed release Report our press XX-K, For most certain Securities Information section refer risk

Forward-looking on the and and it's management events, receipt Company future are Company based on management forward-looking statements at of of The made revise or of time statements, otherwise. of are obligation or beliefs and projections, future occurrence performance. based of the the statements no guarantees undertakes estimates, such by to new update information the any assumptions not

should Lastly, on this these non-GAAP non-GAAP of determined metrics certain will will presentation, not substitute metrics. core be note, yesterday to we our with as filed provide Form viewed operating non-GAAP nor other now call by insights. in Makris. are disclosures to the that measures turn companies. in to Mr. they references I Any for presented current George These discuss contained financial X-K. over may to intended reconciliations the results financial comparable GAAP a GAAP that non-GAAP meaningful SEC are performance be in necessarily report are with Please the and accordance measures

George Makris

or XXX% you, first David. our merger-related first increase of last earnings of quarter in $X.XX, quarter $X.X same XXXX, the XXXX. in $XX.X of earnings for compared in quarter were were income Thank yesterday press to reported of the earnings million quarter. period Included first XX.X% costs. share per net same or the branch an from Diluted after-tax rightsizing an our million million $XX.XX net In issued quarter release conference call. And the we increase to welcome $X.XX and

from period Diluted the XXXX. in in earnings were Company's million of $XX.X XXXX. Excluding period quarter the or impact the million share of were same compared same or of first of an increase these core $X.XX, items, core XXX.X% to earnings for the $X.XX per the an XXXX, $XX.X increase XX.X%

the was $XXX quarter. million of from the billion, end at the $XX Our last increase quarter loan balance of an

loans the which $XX million at following our loans XXXX; as from During increased includes XX, Southwest loan quarter, that February our decrease indirect merged of increase the to and in finance seasonal $XX and Bank agricultural the in due million Simmons of in $XXX Bank Simmons net decrease the portfolio liquidating consumer items; lending Bank of pay-offs. million portfolios

had $XX million increase an Bank at loans SMB. also We net in

subsidiary at of which defined our consolidated and ready was Our quarter. as and end CRE concentration and million was to loans development portfolio of of approved our banks close the XX.X% On combined loan quarter. construction was the a $XXX the end the loans loans at XXX.X% basis, we of concentration

million the Fort was loans. quarter Worth, and the period interest XXXX million the first the $XXX to estimates St. same first The Oklahoma approximately flows accretion for acquired with XXXX. net in income first total The XXXX our during during first the Arkansas, year. loan of range was quarter during more in part Accretion $XX income Louis during $X.X million declining and Company's expect latter the due Based for acquired $XX projections, had the Dallas we million, the Denver, cash City and to accretion year our cash of compared on the income income Our in quarter. growth quarter same of flow $XX.X National of markets more accretion to Northwest accelerated of the million be than original part to was year. million last XX.X% last quarter increase $X.X from loans from exceptional

up year last interest X.XX% X.XX% $XXX and XX March acquisitions which compared quarter XXXX. margin year points was deposits to billion prior last and basis costs Fed interest Total end. the rate expect billion funds was higher from the acquired do and This first growth was excludes pressure increases We to of related the deposit cost the by X.XX% end growth. from deposits driven and same $XX.X non-term XX on XXXX the at from the recent internal increase and at from the points X.XX% and deposit to quarter costs net banks which last of was We've the margin quarter Cost $X.X were net basis Our interest throughout for billion of the Company's increase the million The of the from prior accretion year the year. over year. hikes. experienced quarter. to $X.X continue bearing of year same XX for $XXX increased of from core million in year over period increase funding of

fees are Our income, core our non-interest acquisitions. income last trust acquisitions in $XX.X categories $X.X an increase to for of Non-interest charges in expense year. all the of was result million, million quarter over while mortgage expense for and Incremental the increases increases the in We quarter non-interest our same $XX.X was had over quarter income, the from in million. due service of expense the the non-interest same $XX.X period XXXX was million, quarter for the XXXX.

in million estate and primarily of branches end million quarter loans. [indiscernible]. of credit $XX.X bank first At of gross March quarter, for losses coverage; other $XX.X for The total was the for million X.XX% the loans. discount ratio real efficiency Our million non-performing $XXX,XXX loan owned is at million loans ratio $XX equates allowance XX, million, coverage This loans loan total of was legacy for additional allowance this non-performing an the XX.X%. XXXX, mark with balance At million $XX.X closed end. in acquired up assets down of $XX.X year for includes a $XX.X made million $X.X in which $XXX.X was of were from

loans charge-offs, our points. basis the annualized During net quarter, XX first total were

period previous loan Excluding annualized same compared for XX million the quarter loans the charge-offs with basis credit larger last was during $X.X from net due to during was the fourth migration the points. of which quarter million is card increased provision loss charge-offs, quarter XXXX consistent the acquisitions The provision our to total The guidance. to during were loan $X.X year.

sale February organization successful of quarter completed We're to managed we the advance. significant pleased of creating new planned weekend. completed first the strong forward continuing the addition and about in Also we are completed the In successfully the conversion ahead facilities deposits, to Bank certain related first over financial Bank have during announce on looking through Heartland to Southwest liabilities. our and to the and assets serve Memorial customers. be branch to we're and conversion Bank quarter very loans Day steam results a for other full excited SMB that we I'm in to

explore offering approximately of to our the X-for-X general few the for split in completed indebtedness assets. we amount options of outstanding repay aggregate to net million March, for We're use proceeds continue stock corporate the the liquidating We an announced remaining In $XXX and use principal XXXX. We purposes. effective $XXX remainder million notes to expecting February we'll due subordinated X. of

equity Our common strong. was quarter capital At remains position $X.X the end, stockholders' billion. very

share per from the period year, book $XX.XX, was Our an of book increase while last our an year. value same period the increase from tangible value per was XX.X% $XX.XX, same last share X.X% of

growth reflects the for anticipated common to approximately X% second debt to offering of with a caused equity range normal X% pay-off net Along subordinated the company ratio X% the with the range quarters. in and of due earnings during $XXX parent Asset million third this growth, will debt the increase tangible below temporarily operating to which Company.

will comments. prepared and now Durban a Amendment reminder, in back the card in XXXX to questions that review We'll analysts subject rate less have $X by and in come research debit please investors. from will to the $XX is This call the estimate the a we open our the XXXX billion, operator interchange take concludes like XXXX. instructions, million line we the institutional beginning and the receive pre-tax million X, $XX and questions. I'd now cap, surpassed be for total our approximately to ask on basis. there on As assets established We July less fees

Operator

comes Sandler Stephen Scouten [Operator the O'Neill. Instructions] of first Our question with line from

open. line Your now is

Stephen Scouten

is I'm quarter, a are think guidance is Day expected the all cost expense and $XX here, gave think that question $XX pretty saves that the still accurate million you in still First XQ you there? the that on Memorial I last 'XX; you after curious thinking range conversion just million, the

George Makris

million is Yes, that to I $XX million. range $XX would say probably

if fourth rest we of for quarters pretty in significant third growth to As the will be in million first and the $XX million organic have you $XX that the continues and can our range. year see quarter the

Stephen Scouten

kind core saw upside? there? that about as guys the a yields; mitigate or sub-deck or inclusion quarter of primarily core but unusual of the any alter NIM we'll had obviously there of know, or the to expect to you XQ your that loan NIM kind result, and just $X.XX nice -- is was briefly, low of bump jump here usually else thinking the is core do from it for deals nice kind a additional then in full the And core anything And of on that $X.XX going with the NIM the range a you

George Makris

on our that to and effect positive the a obviously NIM we Well, acquisitions had continue. expect

We Ag are expecting helps our which fund core lending often up the to NIM.

[ph] susceptible to a fixed portfolio we our funding still census to we're couple have possibly which were conscious converting also maybe good. ago that it so floating However, XX more up as rate the those be as be we time, as very variable we of some little will which mentioned rates going points. a subject some to obligated X is pressure. over construction very you've fund of On be can, a been And negative so that over to already -- period of much loans will loan rate, is with be rates that, won't months

going and to our expect so as so similar quarter going core player And we growth, is would to the really what would significant rates first higher to year. just $X.XX to the we taken on those a real So $X.XX cost because pressure is ours range expected today, expect funding it much of effect don't results that in main deposits. continued source in solid of game. the the what in a to the know exactly rest we going We we're up, very be than that core that good here for see to We're focused is still we something wild to market new deposit card deposits be for continue. core for be long-term

Stephen Scouten

was customer core anything of you just and markets there some quarter, drove obviously end you're an Sure. particularly me, that higher of And good effects really from that seeing? there one just on you good one new the deposits core growth seasonal good or it levels the that mentioned basis last period for here large deposit had kind growth the is growth, deposit in

George Makris

it's new just growth and to We think markets. good that very new gave effective. the We new from use were markets the tools

customers, in we bank, out in in those of Our business, we our we're ratio, world to public have through go and work at able XX% to to quite entities really strategy we group treasury loan bringing into some of some done great and year. serve. leg have the of but of commercial the management of that us have getting successful to some Six We're there those of a Simmons deposit particularly we'll front good funds deposits very the back is now, relationship, has rest important of job back the the public that communities been continue those

Operator

Our next line the with Gailey question comes KBW. Brady from of

line is Your now open.

Brady Gailey

wondering mean you a I $XX have on you're of but So $X.XX I million the the top the -- recognized that top likely this I is guidance yield, number quarter fairly what conservative of you'll range accretive of is it still have $XX NIM that million? I'm to core $X.XX; of was gave end come of well on $XX $XX for million to just high you'll that of it million think XXXX,

George Makris

not likely accelerated that because accelerates significantly that on regular flows where we're in come the cash the first some sure quarter. renewals, current pay-offs in and trying forecast we'll I'm what what that happened decision It's that we on see generally based flow, below and not process cash pay-offs to

know So below in not it going what -- exceed today I but $XX goes we any and be to that's is we that based reasonable, direction to say would million $XX if that. million on that

that migration, that we accretion the will at had loan portfolios, experienced We've loan experienced Bank flipside our of [ph] lot cash from acquisitions in of time up quarter is, that more to marks. that the as Simmons much from FDIC are current excellent this than first increased in saw time as have in quality provision. additional excelled Metropolitan portfolios a you you've when our end we flows Now mentioned those the less

loans probably to legacy it's when our to migrate very acceptable portfolio. we today the be over if mark, it's So as close what those provision be going to a needs to

by while our may show accretion, to that a provision, speaking. revenue additional generally additional offset be So with spike regard will

Brady Gailey

That's reasonable a back to the side, When to work in you in remind to last the market? you just years. you couple you you helpful. over X deals looking be acquisitions, what as guys will period? us M&A price consider you've are can reengage M&A the you're And And then a the integrate know done point I of to continuing earn on do think

George Makris

believe clear go in some also -- discussions Southwest very think having our our healthy it's with I merger Bank that and we say still sure must in of we're the Bank less we I to X SMB earn other not level We're in any has that's partners, [indiscernible]. right the agenda not than we're now focused performance would integration third changed, Well as on deals quarters, as making appropriate, establishing year. period our potential focus be Okay. Simmons very close interested some to base accretive acquisition we've that XXXX a on for from sort acquisitions, any been financial on earnings real for in do and metrics of about of that years fourth very very planned. this and our rest back

financial to think X solid our are [ph] as don't for that's and you I So change. wouldn't metrics have past years, pretty the going disciplined installed still

Operator

Feaster David with of line the from comes question next Our Raymond James.

now is open. line Your

David Feaster

on beta calculations? the now. shift point inclusion just Could of assuming Given in basis in rate what us of the the next more the and XX that kind remind loans you the those you're expect towards you deals the variable impact NIM of and hike two

George Makris

our what beta on the you; increase interest the is exceeds on increase rates the deposit in beta we hope the in could the rates. tell I Here

positioned fairly we've think well that I sure So to ourselves make happens.

has As deposits can last close same, our basis NIM in you been is exceeding see, beta XX%, the by it sort our quarter. to beta one on of our point the

later going to deposit our both sooner but of them it is the loan So up, keep that as trend keep to can exceeding as or balance out with same will long rates. objective rates we close that's

Bob Fehlman

variable of the variable in we've to is And almost portfolio portfolio or XX% rate the rate. term, more we've the repricing near David, security moved also got

we've XX% increases and -- last for have so offset going XX variable are have rate; increase. as we're We with this asset earning but that so our almost deposit been the the George said, now months XX% to over goal to is positioning that

David Feaster

you of your And the was notably then pipeline bit on like quarter. give but the loan pretty see additional terms was or growth, to and a whether reform it where growth it the at of Could us markets just you was what and SMB heading it's whether down is in good just And started in you pulse segment the actually maybe you're point? from translate strength region? looks the quarter. you've in first maybe and where Bank seeing just growth into loan still seeing are optimism think tax strong this

George Makris

tax tackle on going believe of loan cut. point. cuts having I'm effect this tax think the I that at don't much to an we demand

that think proved rest for the of out be year. still I to needs the

far which Matt? address As which strong as, are today, Matt to markets Reddin going issue. -- let that I'm segments really

Matt Reddin

to see the Northwest Yes. quarter. City, middle very do and strong over DSW can then I good strong St. last imagine also area then really very well. and say as done has good is Tampa now we to you the growth, [ph] Arkansas would also Louis, compete Tennessee Nashville, [ph] competes growth

we've on reflected and we're close loan Your March now attention reloading focus a closing that on but growth. question is very that the had also optimistic overall the being We this of conversion. you just production, Southwest big growth of rate Well, and pipeline down, a that's still pipeline, in about on done but lot so got shows in of Banks think I really approved things. our buildup two

David Feaster

Okay.

that to is So probably XX% XX% target? good still

George Makris

so. think I

David Feaster

me, dynamics a you're business income Okay. would It talk mortgage. -- what Could seeing income have a bit weak fee Last some fee surprisingly the you one that expected. for your I was forward? going strong about second your for quarter, on from of to of talk little just I was thoughts income and what's about in fee lines a off typically trust just want and

George Makris

let Yes, so I'm going to I want to you handle that accountant give question. comfort, the

to going to turn Bob. I'm So it over

Bob Fehlman

side difference Basically it's year income as XX accounting part the converted trust acquisition, converted -- little we favorable, in really to moving Southwest so with was the trust quarter. from of one-time was their there but them have we'll as in negative our of some you about then versus a things months this adjustment on of Southwest -- into difference trust a the had we trust was be and process, in a Bank system core; theirs. David, versus our first months as got acquisition so some have a we the we'll accounting the accounting accounting, XX there $XXX,XXX, there adjustment we negative just

a the side. do mandatory decent On the revenue in but program was for the reason business forward. $XXX,XXX the we and adjustment on mortgage delivery the into you We program it was there is you related mortgage our get side, place; fair to as that how a from front-end going of so quarter we've value had put it up opposite were or about

one-time benefit or a was So likewise, $XXX,XXX so. there

an of book. to but amount, trust two when on George offset we kind going or of way just be system an relatively as into conversion other, the another So said, line business just accounting to trust each change it's close one you're from those new happen

last their So quarter expectations this to lines to overall, normal business the both quarter. from close relatively were

Operator

from Curtis Instructions] Our [ph] Will with of the Piper line Jaffray. comes next [Operator question

open. now is line Your

Unidentified Analyst

what's bit to mentioned George, I maybe another also about question can just more response perspective just seeing know you a continuing of and and kind a guys and little you to pricing kind to how just your you your cost in increase; comment taking of in that you're deposit provide competition of color or on from markets what are reacting place? countering and

George Makris

on metro CDs. ask and it's know today's markets I then give about deposit about real principally and segments; metro not talking is and that. focusing and we're to aggressive really more that talking real deposit markets, sales market real about growth, I'll approach markets our touch the that's We're we're a Casteel Marty color issue. pricing in in probably We're seeing as might to in in little a a a money premium you on the all

we so real So that's seeing. want deposits dependent market markets having for outside benefit get our sources one granularly Marty what it talk that of about caught on little to have that we those is a up, our footprint we're that to only metro don't may deposit more

Marty Casteel

I the George, for that's we're from seeing deposit metro the just would acquisitions aggressive that now. and on markets exactly community you approaches right some banks tell similar anecdotally of

You're people money and back range, which in the to to to X.XX% seeing we're from trying think right to a pressed is right ads running accounts Sunday X.XX% range. aggressively CDs, longer we're are newspapers aggressively in seeing X% term the that in X.XX% rates, good CDs also seeing but ads I market the indication deposits newspaper short-term acquire anywhere

aggressive So seeing of signs competition. we pricing are by more

Unidentified Analyst

from the from hard core the NIM? the last mentioned full then impact quarter but sub-debt just And I had one I a on time know you hearing; and me, guys the

George Makris

X or days X it last all This the the of basis the impact year the to for quarter bucket on quarter, on [ph] no winning no point at impact will to wasn't X be really at sub-debt full We'd a all, impact the so expect X NIM NIM. impact.

Operator

comes of from Matt Olney with the line Stevens. question next Our

is line Your open. now

Matt Olney

like looks changed that we falling at is debt just that that's rate? impact over from of fixed back rate you that positioning to in rate overall the all move forward? your discussed, you Going interest as guys some sub-debt It

George Makris

for it on years. a I $XXX Matt, moved fixed, floating, to in X% -- about then was five-year after it remaining million that as the LIBOR five-year you know, think X.XX% we sub-debt, five issued over

off and about When look the million $XXX roughly line did $XXX With most had the credit $XXX the downstream. pay-off million, or some that first of we had in debt, we overall, million that million open the of quarter, -- it notes almost you breakeven also the is looks negative heading up, then we'll like $XXX well at think we pay-off are troops and of positioned long-term. in that a there move a we'll be arbitrage today but as we'll we're bit we rates little where be [ph] of rates for paying

bit over So be little a us overall this impact it the will protection most couple debt. interest of will that it on negative next rate a of give but of years on of some

Matt Olney

to And to operating quarter -- like XQ then million or third in the going elevate I are towards appreciate to million back that guidance again first the the in for down operating calls expenses. that with the trend $XX -- we you're that of me, the that $XX and remind expenses, Remind in range making of $XX off the me half make year? just investments going number -- million

George Makris

net of that quarter have the the first quarter first as that taxes in pretty period into hit expenses, all their of payroll payroll away get the we we time; course expenses quarter. second well elevate Well, go will

the say, expect just quarter expenses year. several will reoccur first that second quarter; would run our So would year the during early won't below be there we were I rate that our yes, expense in

Matt Olney

that's do going how And million then of be on much know [ph] [ph]? versus the accretion, you non-accredible of to accredible discount $XX

George Makris

most is so have but majority and [ph], few had loans don't I -- the very the non-accredible it's acquisitions that a think piece that small. the very you of on of the is trying impaired accredible amount yes, it but Of portion two I'm know, of question to small dollar it. that of back

Matt Olney

that that's you're the about that I where trying million see be the as expense. and closure we on to question know or come figure I'm I to down last down is throughout write-off trend there out to consequently year? think if would expense overtime branches guess you of my and beginning full And OREO Thanks. well? $X OREO that you have closed going

George Makris

expect as liquidate that closed we -- would to say breakeven those. will we be branches our I

The some other marked we've pieces, OREO, on all write-downs. we've value and you but raw to the above code we at surprises the examples, they went to some regard And both We let particularly book million. land then therefore land guess. pieces the liquidate take that's had piece a but some of and to are them to sides, able we good have believe under cooperate appropriately have another additional their been me had we've had mark that away would city we OREO we severances and contract give so to contract not down with had $X.X OREO by of city

things, We there. OREO be is we're just appropriately we get standpoint, any believe work our as those So don't portfolio through think additional we particularly to losses. we that that marked branch a taking today, from going

Operator

showing for questions not any Instructions] I'm Makris I to Mr. any [Operator closing remarks. turn this at further time. would like to the call back

George Makris

stock responsible the and of take for this Bank and the gone elements we that's work now. look regular the and a efforts for It's in all I day their what we that and have their a again great today. that day. we'll this from doing to months Thanks three into We all at during And successful lot known want and us the non-banking and very opportunity folks of Have you. to of thank forward quarter. they've Bank planning monumental on all joining first conversion of this today and the wanted of just all for of hard look Southwest conversion just to quarter. split, business associates thank appreciate task a Simmons I to several sub-debt Okay, of quarter for offering jobs of make went through for SMB and just a that to about you call [ph] doing accomplished

Operator

concludes for program you thank you gentlemen, disconnect. participating may and a now and Everyone, in have the conference. day. great This Ladies today's

Simmons First National (SFNC) 25 Apr 182018 Q1 Earnings call transcript