SFNC - Earnings call transcript Q1 2019 | Simmons First National Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Simmons First National Corporation First 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 follow at that time. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to introduce your host for today's conference, Mr. Massanelli. Steve begin. may you Sir,

Steve 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 first Officer Good Simmons Steve serve Massanelli,

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

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

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

remind could expectations, in we During future that goals, statements outlook. statements make due estimates, forward-looking the differ of results you I'll projections variety about will plans, actual factors. materially from and projected our forward-looking today's call, those a to

to these Form revise and most assumes risk contained information factors our in annual any other in The is SEC the statements recent of contained certain without or issued obligation factors our or section of forward-looking our information. report forward-looking concerning limitation earnings including description no on company some the Additional press update information filings release XX-K. of yesterday

to Investor certain Makris. the X-K report SEC I'll of in presentation, website our believe the this current financial Relations our contained available simmonsbank.com. information that metrics over to filed Lastly, the we we and discuss the now on yesterday investors. non-GAAP reconciliations Form to page in are note of George turn Please GAAP metrics will on provide call useful non-GAAP with

George Makris

welcome our and diluted yesterday, Steve $X.XX. merger in costs. for reported earnings $XX.X rightsizing first after-tax, per quarter our the and XXXX earnings share program quarter issued of branch retirement net release million of were call. income million In Thanks, Included of we earnings and the first in related to conference $X.X quarter early first press net

core $X.X and as Revenue three of result million a the these at Excluding rate impact the March operating $X.X was net earnings quarter share significant income, $XX.X XX, cap by $X.X on and decrease company's of $X.XX. had a card revenue Accretion results were was sale compared Total $X.X were from earnings diluted the securities down affected million items to debit of gain XXXX. return-on-average quarter. million, interchange previous core first year. X.X%. the the items, was million, was assets were primarily was Durbin solid of first We and per up in million down assets income of of million our $XX.X

XX.X%. was ratio efficiency Our

flat was XXXX year-end. versus balance loan Our

CRE appealing quarterly. $XX Our we where card and the balances $XXX We agricultural million advantage million our some very seasonal of were taking had be $XXX see certain higher of million lending year-end. dynamic. for during quarter credit, new continues yielding we down loans of originated this customers loans and permanent of in credit payoff market to from The particularly

we longer be to growth see on growth to X% believe non-bank XXXX. attractiveness closer will continue our the options, based for term but We ahead, opportunities of

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

During increased the quarter, deposits brokered and public fund deposits while million, decreased million. $XXX $XXX core

balance of the the and our continued interest margin. sheet net management We

was deposits. our We're cost as balance reduced continue pleased core eliminated we some as emphasize in cash relationship growth to Our higher with banking. deposits, we very

for Our X.XX% X.XX% net core interest for which X.XX% compared to was first at to interest margin accretion The from the previous X.XX%, quarter quarter. XX. the was margin net quarter, company's compared December the excludes

is by with cost, one deposit planned expanded our core increase similar income. net Our basis with increase which and balance consistent interest interest margin point, in

quarter $XX was Our million. non-interest the for income

due to $XXX.X subject in $XXX,XXX, by when which compared fewer a became fees sales XXXX, as XXXX. of first first premium the in $X.X Durbin when lending XXXX, the we Mortgage million debit compared XXXX. reduction cap of premium compared million million. Mortgage the an established expense quarter quarter $XXX,XXX to to the rate represented July the in Non-interest by quarter income for by for the XXXX. lower of was in first the XXXX SBA and Core was of quarter increase As the quarter was income to first $X.X compared non-interest million, to compared the interchange current lending resulting Xst XXXX. amendment, period quarter for first expense first to the loan of $X.X quarter decreased SBA XXXX. decreased of $XX.X the lending during million of when to same income card quarter

$X.X million prior Software in same and the year. the approximately over period increased costs technology

schedule. Our expenditures on next-generation initiative. And is related quarter IT progressing the banking our incremental during first technology primarily were this initiative to

into throughout this expenses incremental related half the first We XXXX. of expect NGB and year more to

associates we advantage quarter, Most be option. the took an this early offer. of replaced. XX associates will positions retirement not qualifying offered of first the During

those $X.X the expenses of the second expect We during retire million quarter, based on in second quarter. who will

were $XX.X $XX annualized million nonperforming This $XX.X credit was mark million $XX.X net estate The an $XX loans $XXX $XX increased the up quarter end additional million, expect decreased during balance the million other beginning with At assets allowance quarter, this the of $X losses program in loan an a the sale. primarily for savings $XX million million third acquired discount owned, quarter, is million from and coverage. which includes of of We for made loans year. bank close of was $X in in increase for March the $X.X loan loans loans. total million non-performing $X million Non-accrual this of of At ongoing from legacy held real year-end. of million XXst the first for branches OREO for million. while million allowance

of Dallas market our or risk SNB's managed which loans quarter, an primarily identified the acquired poorly post structured specific to were practices credit lender. management During portfolio and poorly individual were to funding the Bank linked

related a acquired to Bank As pool result, of of loans. $X the loans for made million SNB acquired we provision

purchase review loans. carefully associated loans on Unfortunately related risk stand-alone based allowance acquired potential pool credit that with with is new overall rules, to will managed specific of We and SNB mark to losses be for and losses Simmons for pool these any Bank not associated loans. the the amount we the identified believe adequately accounting a must have declining loan

loans for loan were annualized charge-off provision XX was The points. loss million. $X.X Our for basis net total

strong. very remains capital Our position

As of XX equity $X.X March was common billion. stockholders'

an $XX.XX, March common was was from equity end of to XXXX. of value increase year, XX.X%. share X% tangible at our XX, per value tangible per ratio at while X.X% X.X% of of book was last increase an book $XX.XX, compared The Our the share

ratio was risk-based X.XX% new the associates on We'd April Tier year-end. customers. year, new quarter the make X.XX% at very our Bank of total ensure seamless weekend. We transition to the quarter All while our Reliance system end the to our for end worked at was hard at to Our the XX, last to XX.X% leverage one closed ratio capital over the end to Friday, XX.X%, at performed the the happen our welcome of like Simmons compared and of the conversion Reliance this associates and family. a transaction compared

Louis We merger in Bank due our St. we have Reliance our the now are increased opportunities market presence. that excited to and by in with

growth another I Louis mentioned, NGB commercial which upgrade and involve our of our on momentum. bank Banking year the of systems has most mentioned provided forward XXXX. in our significant or prosperous offerings. building for As our digital previously initiatives, expect IT some that we our looking will We're company, Generation time, and Next including to St. in for team we applications,

have associated to not also but product only expect a more with for We efficiencies our customer, achieve better opportunity systems. to integrated the

we We increase our to continue serve. Deposit presence all our on are potential. as a certainly to fuel communities deposits the will priority growth loan be market will growth critical in in focus

and We customers. will deepen diversify to we loan our work relationships our with have portfolio, continue to

will institutional we will collective analysts pursue continue the the now call and CRE banks prepared comments. mark and our will concludes marketplace. and regulatory and the back for of come investors. research take We I'll from with C&D We'll guidance. ask instructions, in the operator the we loans abide enhance ensure questions by give our line on And partnerships that to value open to questions. our our This concentration to

Operator

Instructions] first Stephen from our you. from Scouten And Thank [Operator comes Sandler question O'Neill.

Your line is open. now

Stephen Scouten

morning, everyone. Good Hey.

George Makris

Hey, Stephen.

Bob Fehlman

morning, Good Stephen.

Stephen Scouten

the elevated some other decline give you've what an in talked if I on some there I certain quarter-over-quarter or play But basis? end reductions you led non-bank of about period if to lenders. see in versus color here wondering the further loans the what guidance wanted could segments dynamics downs? pay know lower from other -- going were any at are on intentional

George Makris

and to take crack is at Matt want I us, with Well, that. him first Reddin the

Matt Reddin

a that you. the gives it of that shown rate now margin, higher that high portfolio. interest what think part in to slow market the and also is, the that the will too, standpoint we're in Thank year Great from We've environment can us down. to had very a we're us back remember get and that year. we George. the related It's at as is -- up, this But good first rate what question. the cost kind has also funding for this short-term the ag, got I with looking of here management for you versus the wet a season we're seeing building of so than growth take also ag Sure, the level. first at for impact Really, really today

Stephen Scouten

rolled an cost idea deposits us what of will off of would kind and idea you to and overtime brokerage there parts? helpful. $XXX public just replace us tend deposit. higher little thinking That's that the think, bit give at? intentional cost more came with from million. of those those of you theoretical It -- mentioned, like cost be give Can reductions an meet the seems basis be that you from may about a what funds to moving what to the And most I Okay. And the a

Bob Fehlman

-- year of the at and million or had our range, the ended excess cost the end in the in we of million XXX, we had liquidity were off We most so deposits. XXX. at overnight deposits some quarter, of intentionally about the Steven, that first invested Yes. XXX range. XXX broker Those and $XXX other $XXX year higher in reduced rolling we

So in we spread have a very that liquidity. the small on

So a just sheet good really was million-$XXX first growth, core deposit this in in in saw balance the We managed quarter. we million that quarter. the the think, first $XXX I

So pleased that. we are with

we'll lower the talked our we the we we side. the we as year track $X have to it we've we right to in times the the when from have growth that deposits year. loan about growth. built-up to did last much And billion growth costing use on believe deposit the loans on need last core that the the in fund obviously several that we They're for deposits year. And did calls So are broker coming the side offset last only of

Stephen Scouten

know, clarity GAAP quarter. that would are have But or Sure. Thanks. further core, now whether just be quite on a that your be like guys what however, weren't Any about NIM sure you that guidance me lot you basis I is you there it? And closed looks any for it'd makes do on direction thinking would combined sense. helpful. a of impact last one how then last Reliance guys That maybe

Bob Fehlman

the the the give you just I'll to would no That impact going is for management say X piece. about NIM point X basis assumes Well, of point Reliance to core. I and there the to be there and basis negative lowest securities mind there's company first think so in so from quarter We the numbers. -- forth. in is the rebalancing year. -- those portfolio We'll again keep our in NIM opportunity

GAAP from basis, that's pretty bit in forward. much points, the we coming in accretion impact. a X Reliance the points a GAAP quarter accretive NIM here will more points expect it So We'll have to would related out On anyone's to it you the pickup second offset to by little is. guess the on is and much basis this X X going know, where basis what be accretion Reliance. basis But

those on the above estimates our at/or know the in the related interest was portion came were due You of all side. mark. And diligence what numbers from it rate

Stephen Scouten

Very Thanks guys color. else Okay. jump-up. let for helpful, I’ll Bob. the somebody

Bob Fehlman

Okay.

Operator

Thank you.

next Raymond James. Feaster from Our comes David question from

Your line is open.

David Feaster

Hey good morning guys.

George Makris

David. morning Good

David Feaster

to CRE and It and notably Just the loan on hearing by growth. reviews construction start the I we've what some mixed want market. construction was about and driven CRE been

your strength that Reliance be in an CRE might issues on and Just this concentration thoughts drove wanted the inclusive where hear what of quarter. construction to maybe

Matt Reddin

growth of construction in you quarter the or--? first our me Let the clarify said

David Feaster

your CRE Yes, yes. and construction portfolios,

Matt Reddin

overall in time the for went the actually construction first our commitments quarters. recent quarter portfolio our Well, first construction in down and

for we've $XXX a current that's funding saw that portfolio time we an first done, a quarter. had So, about out overall commitment the construction but were million

So, seeing went that's overall construction, down in why but increase we're our the the quarter. commitments first for

David Feaster

Okay. And construction? and ratios your where are in CRE concentration

Matt Reddin

Right it's and about C&D. XX% at think now corporation I level

Bob Fehlman

the right at Right XXX. and CREs

David Feaster

acquired anything your diligence did you hindsight other in Is in your there has see done could just catch on of approach these and to a us this? that you're arose think And give that any process? SNB. any at Bank this way And then to going maybe color you on due bit little risk have issues you you Could the more changed Or Okay. other M&A credit potentially portfolios? that? that

George Makris

Well, address yes David, that. I'll

that think a we I here. have lesson learned

careful the it time very the time close merges bank. our and the had reflects We announced transaction into which and are we between on loan the we we the the portfolio actually diligence actually then time

periods two time have are of most we that risk. those So, the

decisions of those conscious limit of some that periods ability during to very our credit are requirements time. We somewhat regulatory influence

we However, that what risk risk the also this illustrates we is. and understand believe that

diligent credit into we more the it of problems in time the will and time We of periods credit the to announce we be of Most our occur metrics time. kick-in. between merge the the during actually manage those our transaction and bank efforts actually all

week, found really credit loan million these early have we good process. that that very I'll $X Fortunately process. have the for that last resulted us tell we problems of we also million pool in of review you recovery. We think at $X the end payoff in

the the Wichita Bank. to that market years we and not dissimilar couple that a issues. think So, an those We it is we're our well actually to opportunity we announced for very to aggressive a oversight Simmons in very manage in on of transaction you're think our lender we'll in between well. with through what time just the ago, the well. not falls we top really This more single experienced in their right, of was portfolio credit be the But out did little managed point time us decisions

standalone. happened too and for want that has we to portfolio. it SNB have credit pool of reserve the didn't required specifically Bank those in if enough credits, happened these loans I fortunately accounting. the don't purchase specific time from of So, cover details us to mark to acquired an pool that But funds we in and additional left get that of things of pool to to loans are about at cover time downgrades to And

portfolio irrelevant. books, remind this provision make have a or a a had with significant a taking credit not whether to is our the to loan on to really we've that's we got cover is separate about one standalone. shortfall. sufficient where point Unfortunately, acquired And each first one portfolios we separate in allowance us mark. overall all you I XX So, Those our

David Feaster

quarter? in And Reliance? FICA a -- I Last and Okay. you wanted million how on expenses. seasonal to in from the $XX layering to the good that first for expenses remind the one $XX.X payroll Could And from are in core baseline out impacts first follow-up come before taxes? were of actually of expenses the XQ going me. annual of much just us is of in this quarter million

George Makris

would NGB about $XX an would We rate. I program. of I early not million the million $X with we satisfied the expect expense in the that say run Well, had We in quarter. offered first be that $XX personally retirement million

who put Bank, place, early exit at mentioned an to that to spent going in program if folks right do We'll I've give think And all chose. opportunity I our like not they expect before felt for as set NGB the our their if an just is some Simmons most really thing we change is careers efficiencies. internally. skill had of to we

So we XX retail of we that the going those a where certain fact. that to to certain had eligible absolutely just are positions of matter Really out that as in in of only replaced advantage associates the markets have took XX have be of coverage branches.

over itself that by We save that the initiative quarter. a expect us $X a year in will third beginning million little

some second $X.X that we’ll we the quarter, about costs severance in have will with which associated be initiative So believe million.

will in expense that sure an technology capital provides our we're the to from We standpoint continue make to efficiency marketplace that investment expecting. in push

opportunities some organically. However, have we some grow do investment to markets

and to will continue that a period to XX% our So, XX-month investments operate can over flexibility believe and we give XX% in that efficiency some markets. us still between we certain with regard will ratio examine

in expect but that. So I is that mind. we million probably tell we than less we're be exactly to something my can't going still you $XX forward too think on high what track.

Bob Fehlman

in estimate that right what little you million going on numbers is I David quarter the to expenses $X per is the would still $X be now. those million through this is to Bob. One working Reliance thing but give just forward. guidance We're to going a ballpark

David Feaster

you. terrific. Okay, Thank

Operator

you. Thank

D.A. Davidson. Tenner next question from comes Our from Gary

Your open. line is

Gary Tenner

morning. Good Thanks.

Bob Fehlman

Gary. Hi,

Gary Tenner

just good But hoping more the guide late a to growth some morning. joined for color the on -- reduction in year. few I the get was loan moments

quarter digits be to I think the you more the last mid-single-digit looks had now. reduced high-single to

So I'm just by? wondering what the changes are driven

George Makris

Matt as this secondary in pretty is loan and opportunities to it in really we our CRE let going there about Well, clients large other that's today would on make necessary advise say our on our CRE some customers our loans put necessarily in place put our that has it is a and growing to for talk to the the specifically. And that as participating market are best well be opportunity I'll not them. to just and job banking the I But of us in marketplace group lending. ability correspondent for banks. that for to We've significant context concentration sell control our and construction as books,

where So categories. C&I speak the make year, both may depends have not on with we and the whether or in the our still It on those lines and existing that. the we to very of what's books, hopeful pickup sure to construction sheet. acknowledge that they concentration to we items whether in opportunities in and market line customer, a them during We're Agri CRE specifically to business our are. business but that balance secondary want more tremendous or are our access level our business you there other our Matt, opportunities our that mistake participations out stay big on not of interest there help base we best put or sell customer to it not whether our just to

Matt Reddin

basis increase rates. to our you rate No, $XXX over I average at there. the the net increase point of approved we've end Also, almost George. would in pipeline close a think in our year that's our I seen increase XX really million good, point

in be So approved of of you'll point rate – aware another close and C&I. XX% pipeline our of

kind growing the sheet you're on really the overall balance remaining and where our for stays of so that repositioning the bankers curves part of year. seeing So our

George Makris

XXst So, than XXst is of for remainder we December X% the more look for had Gary, first if year be X% going so at on the quarter, a the we so year-over-year year. December to flat growth

Gary Tenner

All right. much. very Thank you

Operator

question next from Thank W. And Robert our comes you. Holland [Operator Baird. Garrett Instructions] from

Garrett Holland

outlook the for the XXXX Thanks sorry, quality $XX for loan parts growth? wanted if million I light the this. guidance asset the of and taking moving of follow-up in missed credit and But provision still the to is just of on some questions. I the accurate

George Makris

hadn't is. special provision Yes. certainly We the think that quarter, been from this rate run for have if it million It budget. it $X the would been acquired

credit still overall very with we're see any in comfortable portfolio. our we yeah, that, So don't deterioration

progress In think substantial fact, I managing in making that we're down. portfolio

of quality the if you we asset look XXXX were than first were. what take end Now, quarter in are at where a better at numbers our they the

on consider signifies we portfolio market screen loans. one in nothing deterioration legacy and blip that a credit the any to Dallas this in our be So quality

Garrett Holland

record on have the good to the credit is track growth risk-adjusted hear been It's and focus the historically great.

if for the couple some lending? debt CRE changed those there So you And of service have enforce? all you do LTV what past curious And detail just or standards over could at coverage provide more years?

Matt Reddin

better be Yes. cycle Garrett, that's are especially in a definitely so Yes, program with certain we great but to real customers, a with lower commercial implemented in we're value had prolonged doing may types, now loan the concentrating we growth estate, product business good right our still capital portfolio question. higher where a to heavily as now, access we've is as rates the with need standpoint. DSC churn portfolio that anything on doing. markets be we earlier, well pretty are as the long-term to also seeing you overall an know aggressive below to our George from a mentioned And credit create customers metric

is and from getting better DSCs. portfolio much those metrics overall, better we a in are CRE I think, credit standpoint, So, our LTVs a as position lower

Garrett Holland

Thanks helpful. for That's detail. the

Operator

remarks. from now over And you. lines. for our any further questions no Thank like phone George conference I'd the showing to turn Makris to closing back I'm

George Makris

you a opportunities welcome all now to market. what our and We in St. us associates to single-deposit is today have forward our we largest to Louis. in thanks big of for the look Reliance Well, joining Okay. really

again this do we'll months a and great congratulations, from So, three now. day. Have

Operator

today's in does participating the program. conference. for you thank gentlemen, and This Ladies conclude

a have You great day. all disconnect. may Everyone

Simmons First National (SFNC) 23 Apr 192019 Q1 Earnings call transcript