SFNC - Earnings call transcript Q2 2018 | Simmons First National Corporation

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Operator

Good day, ladies and gentlemen and welcome to the Simmons First National Corporation's Second Quarter Earnings Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to you Mr. Massanelli. Steph begin. may you Sir,

Steph Massanelli

at morning, and earnings I our quarter Relations for as Corporation. thank My name you Officer Investor call. and and Administrative joining First is National Chief second Officer Good Simmons Steph serve Massanelli

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

We comments, with by session. Q&A prepared a will begin followed

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

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 than 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 U.S. 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 its 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

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

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

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

loans, commercial in our liquidating our real-estate included $XX in a increase quarter, $XX million decrease agricultural million million lending increases increase portfolios seasonal the increase indirect and other million $XXX in $XX $XXX in loans portfolio increase of During in and loans, loans, finance. million consumer

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

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

The at sub-debt a prepayment had five impact timing additional Our which accretion X.XX% interest basis X.XX% quarter of second the net on core compared end previous quarter the quarter. impact. of the our issuance basis X.XX% quarter to margin excludes The net for for The interest X.XX% the quarter was Company's had to of an quarter. margin existing five first points compared points second previous margin. the subject

We increases loan rate XX%. was quarter, $XXX.X year expect year long-term in increase increased June to driven Fed deposits is Reserve was prior of XX% continue basis the from on XXth Funds last the Total recent Federal last of the deposits increased XX and do quarter. of deposit points. focus to Company's $X.X beta and growth. deposit basis acquisitions $XX funding to from billion and last core related by last Board from were pressure of quarter billion bearing rate the billion interest the this increase cost deposit Costs XX $XXX the increase. have and million at points We Fed Since target over internal costs our quarter last from the hikes. by beta experienced growth an million $X.X over

rate XXXX, and has Fed period by basis loan March deposit target The increased Company's the was to of points. that during core time. back Looking XX% beta XX% was beta XXX

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

is quarterly Our expense non-interest run-rate target $XX million. approximately

sale. was is a million $XX.X the gross At tax quarter in Income largely Our for the efficiency June closed equity to credit the quarter for tax up related held loans benefit million for of legacy a for due million made mark This additional loans quarter million assets coverage million other loan $XX.X lower second was was the XX, allowance first in primarily non-performing second slightly ratio million, $XX.X million an $XX.X the losses $X.X from of $X.X decrease total coverage. At acquired balance for branches end total $XXX.X This non-performing accounting of XXXX, with and loan of ratio is the to the compensation. for for bank to loans. discrete $XX.X in allowance XX.X%. which real-estate X.X% million with expense quarter. were includes The tax of discount loans. of equates owned,

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

annualized offs, that legacy the pleased we efficient was in loan to totals during for the which Bank as migration turning offs with fourth our conversion loan are completed more growth our expand creating charge card and Excluding successfully XX and to of basis million, product an the previous increase markets. includes of May a we guidance. all net SMB to points. into stronger and new quarter consistent an strong loans about organization the is which quarter the were of I'm credit our XXXX, excited loss charge announced Provision due during increased $X lines we focus to

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

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

of offering of our value in book XXXX. amount $XX.XX, the share tangible per announced In principal of due million aggregate was increase from same X.X% of period an Our $XXX we last March, notes subordinated year.

million As the in outstanding we of $XX quarter. $XXX June third million off paid pay XXth we will another indebtedness of have and

six approximately to due related parent paying to common growth debt company tangible reduced quarter off end. $XXX basis million the time the points at Asset in debt, offering in equity subordinated

the determine before needs the close customers. of XX at including continuously plan the network During many We our locations meeting to and branch look making branch September, to of evaluate locations. that considerations economic branches. we our market gross to We our factors decisions are close

Our and locations mortar customer serve the need. important brick

our digital to advantage of provide. the that convenience customers our However, channels of take continue we

our channels We will innovative the continue needs and to ever invest to in meet forward new customers. changing to look of

comments. have [million] million July basis. will million in by cap, Amendment fees in to now pre-tax on less as and rate the $X prepared card the As our in reminder, a a established interchange Durbin we we surpassed concludes XXXX the receive X, total that We beginning estimate $XX XXXX. assets debit (Ph), This less subject retain approximately $XX XXXX

take open the We research and will I to from ask instructions will call review questions our for investors. the now operator institutional and analysts please the questions.

Operator

now from And from Instructions]. Raymond Feaster comes of [Operator David question first you. is your the open. our James. Sir, Thank line line

David Feaster

may about the of from that and the you we out increase two much talked I build million the the kind much about rate? rate Could how drove before that appreciate expense Good how And talked $XX just deals XX that run million are us in guys. what run is remind guidance XX cost before? to we million morning of talk in updated guidance. from digital the be of maybe savings

George Makris

pipe little will will I attempt in to bit. Bob and David, them a I address let

that prepared deep we SMB. into I close two to is Bank to acquisitions think We October important is and the things September, the of last large Southwest realize on of just One process. Bank is budget that got

During both time, those banks. of today, converted next nine we that period until have the of months over

important XXXX to were came from today. Our we banks. organic is from at two grown during note is about XX.X billion assets that time large of to of billion billion that What the integrating of have that growth September X.X that the X.X end

asset growth to base be So base whole and expanded that our entire XXXX. that's number, impressive XX, expense And needed original is what think come pretty XX% out from growth. organic it that our points today of has September for I since

throughout production and our entire today serve producers will every really hiring problem to attracting in no we good in we and have that continue footprint. We invest market

before So acquisitions believe million year, million been from of early what was growth this what between $XX Today, reasonable. going were, we run-rate. actual potential saves those we achieved. thought $XX to a be and run we have was the Most cost the organic $XX the understood reasonable already a results is million rate and

that. few and million a new put number. is new track. and like we ready will we XXXX We will this that on quarter, invest of that in organic complete going significant but associates. a be the will year support our our evaluate and have what year that agreements accounting affect $XX would it's for be see system our IT I We spend of get the to and the believe we HR servants growth This third the that to like switch of all say things just to run-rate to system rest that not have on right manage need we

- that. a product it to put year day all on work We been going effort and given are that's

We in have in got will in other that IT XXXX. round transformational end sometime projects start

our So right and are original organic The is of today that's pure track. on expense we growth. on where we in believe difference all expectation

David Feaster

maybe your was Could help Okay, talk and many quarter your quarter that and growth. we you and you led helpful. much that's desire credits to drive maybe And you had success and mixed lead last that in the very the have about appreciate growth thoughts to syndicated how talked forward. I that. mix your of deposit use about have going more how

George Makris

the days. last in or result zero, the we that, is XX place put answer so that program in a of just as the back growth Yes,

a So corresponding talk here now, about expectations will group. with regard bit little Matt to our is with him Redd us our let I banking

Matthew Reddin

to Corresponding participation The be Banking there return partners. we George. for down corresponding strategy will have as Sure, deposits loan thanks Group, selling our which growth getting opportunities, those the we we be from in should

loans purchasing relating we are We effort any are that leading to syndication, deposits. not not generate

David Feaster

maybe Okay. quarter for the about NIM. you much And the of know just core on kind the quantify then drag on to waying Last the going that going like XXX timing me, and you negatively the be? of five that's still that of is for have the one it I of right Could that portfolio points five broadly. sub-debt more the basis but a how exclusive longer basis in impacted to it Is about kind range forward? are maybe we points, the talked construction NIM range that. in looks good XXX midpoint

George Makris

sort a new way each I portfolio. might that's today, or today, counter-balance other loans construction But factor minute looking think is. we it a construction in about I Yes, higher at so our other. Matt they one let talk are rates of at because major don't

a XXX NIM last little because about the were Let’s million. bit, quarter at we talk

we so at current was of to the very of debt. $XXX of you quarter. know debt sub March, end $XXX As end refinance million the the issued at that the

we so to price but million So that’s good think $XXX long-term of fixed did added us We that’s X% move. five have for than next years. a strategic the or more at we

of will will, financing that a drag be you So margin. if million interest on our additional $XXX permanent net

timing referred earlier. the that’s So five we - basis and points a to

pay five it to preferred points able the off some to the portion we of and a which not is to July. actually end had was occurred period going or interest of of at payment be The trust basis the other June immediately, it next in were of because we going all

So second if burden would of paid the that during full debt we quarter have. off extra have felt could that we we

that’s basis So the points. five other

we effect. debt margin So would believe that the considering normal permanent our X.XX been have

So X.XX to comfortable think we that a with. is feel still X.XX range we

David Feaster

guys. Great, Okay. thanks

George Makris

Sure.

Matthew Reddin

David. Thanks

Operator

from And from of Gailey Brady question the our comes line next KBW.

Your now open. line is

Brady Gailey

morning Hey good guys.

starting locations September, quarter. see branch that fourth just branch that annualized will could expect from saves talk million we guessing be May cost XQ XX to expenses save I’m in in seven of on closed five the basis to So around be those would million the about closures? the that in

Robert Fehlman

$XXX,XXX bigger so Bob. these smaller running a at to is I are $XXX,XXX XXX,XXX run you tell would at. $XXX,XXX, expense running are These $XXX,XXX. at the rate this more not you Yes, are branches run branches, like to

that there. the mobile expenses, Two and branches have XX have of less So cleanup very they which kind we are they overhead low performing operating in just need. are of branches negligible a

So $X.X on related million I locations. would other close in they say We expense basis relatively the to much because be annualized to will more side. think $X the to million range attrition these there on are don’t

Brady Gailey

that’s know fee impact for income And you the decline Durbin. this alright. three at Durbin to about still about that we starting to about in then half have think the back became the ago, being million right year. past in $X all Is this Okay, weeks I the for subject million way $XX roughly talked year, quarter? of next

George Makris

and end it got got right actually right But estimate our to kind towards $X day that million the of in million all rather experience basis, is it on Xst it one on for July annualized of on the year. real. balance we that the best of made we June Yes, $XX now

together, from what on income the history We when rates and idea we to run these are a best all those. as work have from to the is our our banks we and end September based on what four better Those three performance. with estimate trying of actual debit MasterCard get banks, will get putting

see what in. comes So will we

But point. or bit see uncontrollable we conservative number We we it's just also this a hit hopeful are at that better. little that that is

Brady Gailey

the question done putting on M&A last a then very George, deals out. the you year active Year-to-date year guys good of And were you get front. Alright. savings together this these for have a job cost and

saw in in back talk again we year. this half kind Florida. see a I just and do another deal you now and front you a to If about the Maybe the the Texas your we active feels big it's into M&A deal morning, of be that appetite M&A time on year next in to big like this expect guys

George Makris

Brady. thanks Well

interested job We cards because with give a our organically, our evident retail have done that to think very Company fit are from and good people very commercial non-strategic rollout about I and of presence credit markets in we would products, our acquisitions expand in grow acquisitions right all like for don't acquisitions But standpoint. it's our lending, cultures have a the grow a active treasury our very ability profitably. lending still but ability order we and management to an have ours, organization. have have We have we still new that are to of interested talked consumer to the don't to from we we

have So in or the way very commercial expanding are lending, excellent we one where other. we interested in those markets

So some with yes, we know good really having some you partners. potentially good are conversations

and We earlier some doing or that benefits I those acquisitions even to year XX% this book financial are. survey some of the the further bigger trying I a we what banks day other attention the sort head, say no the exactly than out watched tangible saw figure our of tell value. scratching us, will pay to are day of of you have

but certainly of appears back in I'm really I but think that not matter acquisition that, does it agree people's the is not that with sure some in accounting, we mind. it

is approach, in would to in quite but business. disciplined truly is some invested the us and there honestly have the M&A in long-term understand they a don't our combined I landscape we XXXX to are going be and very folks things we expect back the that are changing, all that, proposition talking in company I understand ours on. and be because that So going M&A are

Brady Gailey

the for color Thanks it. guys. Got

George Makris

Thanks.

Operator

the next from of our question Scouten And Sandler comes O'Neill. from Stephen line

Your line open. now is

Stephen Scouten

Hey guys good morning.

some bit So further I a part down elevated would this about from your it to looks quarter more but quarter, increased of it talk this the I expected the quarter just and in it even balances little moving wanted was little last come or NIM. to cash liquidity such.

tell quarter can could that new a is mean standpoint that on down as what occurred see look then me a back late hold early level in to guess I you the is So liquidity move or going we that I from and that there. repayment subject you July?

George Makris

you Yes liquidity. come we leave liquidity at deposits It out quarter of and in various in coming They they have end our invested were quarter that's large levels both say to at We just the quarter are the during the during going not to those intent the end. times. have did month towards short-term. of quarter. the the so some actually

So we on better that we we or left one as that a we'll shorter that growth portfolio have reinvest loan have the portfolio. get handle security with our two with either the seen obviously in term

is at portfolio XX% assets. security about of down Our

XX% would target XX%. to Our be in that

So up of end did the that cash over length high could quarter right in the excess build was time but quarter, the there portfolio bit we I liquidity security of the see at a little the at have not invested the would say little level. also, I for a but

Stephen Scouten

betas, some loan your negative obviously presumably put deposit just thinking And beta this Okay. deposit core current NIM slightly of pressure loan moving forward. about on and which that would the beta, quarter ahead was the in

the is and we think going that keep to goal rate and grow strong continued loan are NIM saying the to see I with you about think hikes, getting keep the as how or may is of the those growth, on that? can expect what incremental they consistent rate would through just NIM if your try flattish to [indiscernible] to kind believe be pressure So fed hikes, about incremental we

George Makris

obviously objective betas for outpace betas. our our to deposit Well, is loan

year those to I been close the think in very till the first we satisfied relatively and half both each of of have other. fact are

a credit of interest the built in before benefit card has loans delay somewhat portfolio of building are actually rate we Some right can our like increases. realize

intend but our grow into That we where costs a But lag again today with and have while once to costs need core maybe have period can will loan sort of pretty bring yields that ahead at in and of risen we do quietly catch with where deposit And do that fund point are to if are level we looking pleased that believe where what there today, for are to those we deposits our at deposits. like a up. we deposit continue we is we sustain bank. time is So we we a little I’m we those to the portfolio.

that is period betas loan equal to objective our for good as strategy. we during a but outpace growth long-term as long-term deposit So is long they think our betas are

Robert Fehlman

The almost type bearing transaction that equal also it’s timed, to George think that interest I CDs. accounts, bulk in XX% reprice said, important repriced of some full the as you fast, up those moved to pretty that during the the kept we don’t of because XX% The note very get not is instantly, quarter deposits only them is for impact. loans, quarter quarter. and

costs. in believe we especially with environment up the a low have the the pick are loan from pleased we we yield been matched, but will deposit have pretty comparatively, rate So a better in short-term that low been coming what’s in long-term

Stephen Scouten

on helpful. benefits anything changes you And any thoughts, it would just speak are could in terms thing, environment, a or people terms one frame that guess [indiscernible] of to that? just That’s be is how slightly I how last regulatory or regulatory you starting any then you Okay. kind oversight, expenditures the you guys of real about is see may in of additions, are incremental to tangible thinking general better, bill

George Makris

size savings, economic far expect our is have some formal That bank we through the cost that. and still publish regulators be I so to really process tangible we Well our all I that but DFAST think testing conditions. would the say required benefit only go the to won’t substantial have have will stress

net a with run-rate construction know in on expect counting can quality our don't deep changes a going will going reduction and So forward. new build regulatory from lot are same cost we we assets regulatory and oversight. and I think what significant to don't forward. perspective I be we do of any

We bank. we are before have did there today it And is clear will that a are things those say risk ramp expected more $XX to billion standpoint. reverse of I expected we we $XX above experienced were differential our between do billion than monitor since banks $XX we and it size to the that below of and was the billion

all think management today will I have regulatory the I [indiscernible] associated the built environment programs, costs for also calls expect in with the it, we you most if don't costs but part risk forward. don't going with our in incremental any already any all incurred expect

Stephen Scouten

the Got George. so much really nice a on and for it Thanks growth. color congrats

George Makris

Thanks.

Operator

Instructions] from of line Piper And next Curtis comes Will the our question from Jaffray. [Operator

now Your is line open.

Willam Curtis

Hey good morning everyone.

that wanted understood. and quick to one go sure But I provided back make the to to run branch just $XX question savings I would September talked does on run-rate. that back run-rate. I color appreciate the here to that you include or to to wanted rate incremental That go closures Just you be XX and the that expenses the million

Robert Fehlman

said I on annual As an $X about it's basis. million

million would that number, on And think best is estimate. be run-rate say go-forward compliance. looking is of that million it get office putting you $XX addition of two at we regulatory our had don't So cost ballpark the that billion $XX at we XX.X $X.X material I in could but and that five XX.X. and where so addition then be are our our today to of you impact and a at George in I organic growth in and the I to say back said would out in the put acquisitions figure together and the all take banks of billion growth $X to will

I to right number a we believe in line think with. start that is XX we are good

We basis way we look for that's - to forward. in comfortable are will will a third that and think savings expense pretty we we believe non-interest on though going be our starting level we at continue quarter that go-forward

Willam Curtis

Okay been thank has it. I Everything else answered. appreciate you.

Robert Fehlman

Thanks Will.

George Makris

Thanks.

Operator

of Stephens. our from from And Matt line comes next question the Olney

is line Your open. now

Unidentified Analyst

guys. Hey is on good for morning actually [indiscernible] This Matt.

George Makris

morning. Good

Unidentified Analyst

discussion go the So core to pay on about the debt impact I wanted the sub back down, to margin. the

You to late mentioned at margin that XXX the within that pay in the down debt was until weren't able the you the core quarter.

I quarter. the of to will NIM $XX third remaining XQ, be XXXX? $XX million are million drag So core able impact have think to that on pay the down mentioned you you the in the quantify

George Makris

It's going to negligible it been the during because already weeks so we be two it's off. quarter. first off the paid of paid

Robert Fehlman

would we more permanent, say overall get we of points relative permanent terms the being XX Yes. I put basis just five it quarter. back should temporary, third if most the that in

X% We the have day be September. have off of paying that July we in of paid was of last of off XX couple million XX on XX weeks would million, then million, the rate that’s that remaining first and the XX million at high a

we quarter would won’t say see third it some But the receive the five that negative I be till then. of in benefit would two that So we points of impact. will basis

Unidentified Analyst

is then really me. just helpful. That Got you. it. one more from Thank And

XX% growth I’m you is wondering being number, loan your I XX% still to about that good still expectation a think quarter forward? last talked going

George Makris

in first six we the obviously, outpaced have months. Well, that

outpace So in pipeline we going our says that that forward. can

talk However, rate commensurate to is keep it sure keeping And we on want has to our organization pricing fixed is be Rising disciplined and year. comments? in very certainly echo and Matt, that me. of make environment very of to this want to loans Matt to are may think the the with any disciplined for rest we associated risk the the I encouraging approach our and do going to with you forward NIM, sort official been that’s fine that growth. loan rates and have to our growth XXX

Matthew Reddin

rate said that doing which No environment our month-over-month our teach on are George, successful in said, shorter we pricing get loans we are in and this very focused getting right. And need, rates, on have more that. current term that it variable you focused we can’t in that rate we guys we must that we fixed so

George Makris

Yes.

is required that opportunities, to to meet Matt current have just our requirements. So restructure got get will we the loan it’s we

Unidentified Analyst

Got it. my taking Really for lot guys. questions. Thanks a helpful

George Makris

You bet.

Operator

further currently closing And back for Makris questions. call Instructions]. turn I’m [Operator any I the George no remarks. will showing to

George Makris

I Okay. for joining of you balance over here able grow and to to Thanks been us nine and at our associates organically XX% accomplish able of to of last have this will quite Simmons morning. the during they very pleased. say proud months that to what period be this sheet just time, each of I’m our

a great performance are good We continue day. looking the and that, have with to forward

Operator

conference. and have Ladies disconnect. and in This a you gentlemen, great program thank today’s concludes you may day. Everyone, your today’s participation all for

Steph Massanelli	Chief Administrative Officer and Investor Relations Officer
George Makris	Chairman and Chief Executive Officer
Robert Fehlman	Chief Financial Officer
David Garner	Controller and Chief Accounting Officer
Marty Casteel	Chairman and CEO of Simmons Bank
Barry Ledbetter	President of Southeast Division
Matthew Reddin	President of Banking Enterprise
David Feaster	Raymond James
Brady Gailey	KBW
Stephen Scouten	Sandler O'Neill
Willam Curtis	Piper Jaffray

Simmons First National (SFNC) 24 Jul 182018 Q2 Earnings call transcript