SFNC - Earnings call transcript Q1 2020 | Simmons First National Corporation

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Simmons First National Corporation First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I will now like to hand the conference over to your speaker today, Mr. Steve Massanelli. you. Thank sir. ahead, go Please

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,

Makris, are and Officer. Chief Bob Accounting and and Chief Officer; and Finance Matt and David Banking Garner, Chief Joining Fehlman, George Executive Financial Officer; Chief Reddin, me Chief Chairman today of Accounting Officer Operating Officer; Executive Director

discuss to release the and The and purpose was of on for earnings call by provided quarterly to outlook company issued information the future. company's this data morning the discuss our the this

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

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

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

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

page to Investor disclosures our financial and that are current which simmonsbank.com. we believe presentation, SEC on we Form to useful non-GAAP the non-GAAP of filed an reconciliations including will Lastly, the additional metrics earnings investors. metrics our provide these X-K metrics on press is available with report to of Please in morning in certain our release Relations website, GAAP information as discuss non-GAAP exhibit included note regarding this the contained this

the will Makris. George turn now I call to over

George Makris

welcome and Steve, quarter conference call. Thanks, earnings our to first

bankers during minute of today's by associates for digital banking and work could gratitude of they and I I'm our every their very Many will our to staff credit Simmons to trying of their from customers. thanking customers call the associates they of our center, were times. and like our values. these of during needs as home customers needs who our to not demonstration special of the our I'd are A begin banking support the our team mention very community dedication Later, who serving here debt address our needed because branch, of call goes commitment help. our proud efforts fulfill X,XXX-plus crisis. the this

our branch branches In our first related reported of Diluted we for XXXX. of sale related earnings million in the earnings per income net in first on press rightsizing to of of the were the Texas $X.X $XX.X gain merger quarter. release, Included income quarter net expenses. a for million share was and $X.XX and South quarter the

return Our quarter. first and was for XX.X% our the average efficiency ratio on was assets X.X%

XXXX, billion. were total XX, March of assets As $XX.X

deposit billion balance billion. was loan Our balance $XX.X our and was $XX.X

on $XXX we branches deposits our of During quarter. to for Colorado close and second the which $XX agreement the held moved million our loans to quarter, expect of sell we in million based sale

program excluding Our payroll end of steady loan protection the at quarter at remains million $XXX loans. the pipeline

$X.X X,XXX of totaling the In in loans, response the with economic over or billion. associated to have process modifying coronavirus pandemic, through April hardships completed we XX over the

million. that SBA over totaling for the have X,XXX over from addition, PPP time, loans we In approval $XXX of as obtained

gains recorded we PPP loan quarter, first our the were and $XX million. fund more cash to totaling position demand. of $X securities which $X.X March the used was During billion than sold At XX, approximately billion

forgiven, As those are loans or securities portfolio. re-embezzled we payback expect funds our in

Our core interest accretion excludes which for our X.XX% net interest quarter X.XX%. was and was margin margin net the

to line and with loans during have re-price our the of in approximately March continue deposits substantial We cuts loan our totaling index rate portfolio re-priced. XX% our

and During remaining the been October of XX, XX. and of Simmons of repurchases. XXXX. termination balance the authorized approximately stock first shares average our program future the additional conditions March needs decisions regarding repurchase we X.X have will quarter drive repurchased million date $XX.X capital The since price No is an repurchased stock shares million Market and is current $XX.XX.

XXXX. on We X, adopted CECL January

As of December adjustments After or XX, our or the million on January loans. total $XXX total was XXXX of X.XX% XXXX X, of related million our allowance allowance was X.XX% loans. $XX CECL

quarter, on net million to the XX. $XX of we $XXX X.XX% During total loans March allowance the added of totaled charge-offs million or which

In addition, $XX our reserve at for commitments quarter-end. unfunded billion was

Our strong. capital remains very

XX%. was risk total capital Our ratio based

leverage Tier XX%, was X% the X our quarter. was while the ratio of equity X common ratio Tier Our end at

and at This information the associated quarterly income encourage Investor extenuating the press Relations to certain statement balance sheet I and presentation with published this the we our sec.gov. and have contemporaneously specifically under investor quarter, can found you release our be commentary. with tab. This statistics addressing because our to including access would of circumstances go also pandemic, supplement information simmonsbank.com section

federal, On we our customers, local officials all behalf the our I have professionals challenges quickly responded our and presented and with to who care care communities the health serve, would like state, great Simmons to by Bank, and along with thank of pandemic.

of a believe factor will be is more even interesting pandemic coronavirus normal but impact critical the remains new normal. a full I While of timing uncertain, the to return the

will this programs months. not to marketplace the the the effects we several fully today, Based suspect I available on for of understand longer-term crisis

I information website. during to you we a We again, as our and well-positioned our encourage Once these are the access are monitor of unprecedented times. that more time come customers believe communities progress and prepared company to help to we as out on

and the and turn analysts operator line our invite I to our from investors. questions will institutional over now

Operator

[Operator comes Instructions] Woody from first I our Please from show, KBW. go question Lay ahead.

Woody Lay

[indiscernible] great It see question the was on increase XX% Just the to app. side. technology banking a

wanted how on performed technology the all XXXX? in Just has investments update after the an

George Makris

Well, very performed that it’s well. would say I

In fact, has a apps rating app store. X.X mobile in the our

We're continue So about that. our to we’re going mobile enhance proud to pretty offerings.

transactions So from of our pronounced we're away going to I continue roll is to especially transactions new mobile you the And that the during into at optionality app. this shows be in time. pretty chart looking into trend think digital period which branch may

of to be they think a habit Now, services. access we expect the is consumer permanent result the down. that economies' them be banking going way one there as that locked changes of And will we

taking consumer our we're how that we a business our continue to not use So, transactions. only to good will they enhance our offerings anticipation deposit locations in customers but branch less hard typical at look for digital

would really going better are way the say, and we’re things come. with So things pleased I to

Woody Lay

then, XXXX great color. less [feel is XXXX looking you That’s or further] it branch you right-sizing the more at new And or so in customer to do habit, think a event?

George Makris

consolidation probably that we're throughout quarter. the first you know, second second already by could in our in our borne roll that other to is to of it's do going branch It XX at continuing utilization. in XXXX. some quarter out close would consolidation be footprint. branches other consolidation XXXX. probably and customers’ going as Well, say could other we We're I announced possible look believe But possible that we've happen to branch that

Woody Lay

acquisition? the then right, cost Landmark] with I impact me, All saves expect the with just [do and last you of COVID from mean impact the to this

George Makris

That up, was breaking I couldn’t.

Robert Fehlman

was Yes that call breaking your we’re and question savings time. COVID Landmark related was It to so up, a - the a hard is the cost COVID-XX. on having

Woody Lay

will I impacted? Yes be mean

Robert Fehlman

February everything's along well. at very not there No, XX that happened all, conversion moving and on

George Makris

Yes.

Woody Lay

guys. thanks, Good

George Makris

you. Thank

Operator

Thank you.

question next Stephens, from ahead. line Olney the go comes from Our Please Inc. Matt of

Matt Olney

the a we deck You jump talk ACL where noted expect on loans. XXX go ratio sit this big where now overall just is of today? in as Thanks. Can the percent to you the slide pretty you based about a that that

George Makris

a about obviously the gives long-term would little time you that energy Matt, a is a our that most lot the of quite spent I lot honestly us bit through area XXXX quite and mean, of honestly, a think it over coverage production through XXXX. be of of I we've would got So hedged we’ve one quite I tell portfolio. talking our energy that. pause well now. And

oil gas is in and concerning today. not prices volatility current us the that to So

if But it to in probably more exposure continues, have we're our going portfolio. energy

We have of at look portfolio. rest a taken our the

our sure more that work modified loan outstanding we already to one As we color game had customers with options. one And two make loans, a just our And noted, balances. give we we probably forward. plan going you XX% understand modified you on their of little on have those

only. interest One was six months

compliance six-month have them in with prior three for so payment defer another they're our projections with we're plan. We deferral interest for available they dealing When loan and out sure financial payment to of make the was then with other history, of the agreement. performance their plan a to along of their both we customers, months emergency consideration only in crisis. The currently months their when liquidity, business take crisis three had come our

allowable cash or adjustment. rate We dividends no the any distributions no modifications, in and out, of have loan

certainly business agreement. all good accepted modify like practice, understand be a So, good think loan I we we feel our our that's And before that. their should customers customers in generally and

comfortable where today. So, we would you I fairly are that we're tell

And sheets when loan few we today. going that's Not with the to tell PPP the our with liquidity a over board I it's can the we going start out all the is effect of to coming balance really modifications mean, the that into we're before long-term and lockdown. mention, to be customers’ injecting be. months what

that So good with in we've had curve. success you really know planting as Arkansas,

want it start going mid-May. into means, be that What sheet. has again. billion to mentioned more this $X yet. emphasize early customers’ that Arkansas to not than are It could But balance be PPP and inject sure the we program, the to our forgiven liquidity that exactly we out I to we're potential coming Through I of once in

looking as that's, in far March. a we scenario at So than concerned, as early we're better were

Matt Olney

great details giving commentary, And you anticipated the the Okay, deck in portfolio. there George. for was energy in payoff think appreciate your amount? slide that within industry curious of that some the you consideration the that. what one are And remainder has what about stress big I'm to that's great mentioned XXXX. the variables payoffs of I I

great. And behind you of much XXXX Thanks. production as percent that numbers and to that the healthy put a hedge - what the as fall of how you borrowers far level of Can mentioned hedged then some have that's in XXXX? in

George Makris

Matt do want? you

Matthew Reddin

Yes.

George Makris

[Start that]. with

Matthew Reddin

is on comments A Matt, there this the Matt. hedging. couple

true. about are it’s XXXX, as far As XX% through hedged of

$XXX really look that's million that's understand in see $XXX deck those for XXXX. you in at XX% Of average And hedging Now, there to when overall numbers is you have on the the would you place. is production, million. you through of that got where hedged that and that,

you remaining hedge because had And underneath have whole. is make what's of get production a - wherewithal made essentially is important them that XX% up production that XX%, behind remember like loans the of once guarantees to smaller those that personal they to also,

well for to Now, XXXX I X% a and that then in moves XX% have but you number those XXXX, get into of XXXX. lot

George Makris

a little for average more price $XX; for weighted just it's oil $X.XX. information, gas natural Matt swap is the

Matt Olney

to Okay cost. as down that's color you trying those quarters? some in spot recently? have sounds the any can great It switch where appreciate give land Is want there rates this the over far could that next appreciate guys I more Just Thanks. that. then you bringing deposit as you the costs gears few I momentum on next quarters. nice to see like color. And few

George Makris

hard first I'd pick And of the balance - worked continued pretty you deposits for tell expect see would a of the I rates expect up we in rates just early our had or that and to I’d starting nice year. into Matt, QX our on the March. in into we lowering quarter.

deposit volume expectations be - we're PPP seeing obviously in. our - seeing would loans So from loan in, end stimulus up We're that good nice second quarter. and with pick we'd coming quarter coming But end. in I on checks a the quarter also the coming of good the deposit from have mean, growth

Matthew Reddin

be disappointed in Matt, manage I'll deposit our pricing. with loan our cost you this, I'll don't just we if line tell

successful doing I neutral. the quarter pretty keeping first will were would that that, we So be expect second spread and we in quarter that in the pretty successful

George Makris

you, in about too, have give is Yes. And XX% one number other I'd the we in didn't that of the quarter. rate variable loans release first the repriced

loan in the in Now the variable first - but XX% granted March, loan that month, basically and of somewhere in repricing happened our in all rate deposit quarter. happened pricing - loan

the balance be to a couple pricing deposit of another the months over pick very the the will quickly. time. But have of obviously next the lagging transactions of up year. The over will we'll So lagging time XX% period

Matthew Reddin

just I factor other in our may deposit pricing. Matt, one mention

As in the they that we've we products we deposit the very all place have acquired past, and some had deposit of banks pricing had been cognizant across in board.

the this momentum in so time deposit going We point best that in a our to have pricing, ability downward a of to we're lot those markets. different at of see standardized

Matt Olney

Understood.

Okay. Thanks then few end higher sounds the next of will that that like it for quarter, the least like it liquidity the just quarters. the excess levels for the that. I Am correctly? lastly, or continue build And sounds interpreting the towards liquidity the at

George Makris

in loans. billion was We’ll in about fund billion PPP $X.X liquidity our Well, so cash. $X.X

reinvesting And invest into will loans back the portfolio. those in are securities securities portfolio. as off, pay We that we PPP now actively our also

finding available business out are I well. that's to we've there own we loans but to think our do, and going of know programs we're chosen that's care what other So, now. right PPP our just own work out take there

believe that going our now. current circumstances know because normal very, to very higher we on under is would than that started we lots is I would be building right important normal circumstances these but level didn't have run was ever liquidity aren't of say we a if there deposits. We liquidity and

to - was have that stimulus announced, we're knew the this Before issue. some we going is

to stay be that. prepared money the on If going the of stimulus tried for lockdown period a we for not even to tide. time, stem we is So,

liquidity going of to why needing So, be aware always that. and we've is our to got do with associated to the risk their we’re customers access deposits

Matt Olney

Okay. the Thanks helpful. That’s the was very and slide thanks deck. helpful. for That for very commentary

Operator

ahead. our show Tenner next from D.A. Davidson. [Operator from go I comes Instructions] Gary question Please

Gary Tenner

[indiscernible]?

Matthew Reddin

Gary. Yes,

the when own liquidity we decided idea any to out come if to that we going we As We have early early what to on really out did care didn't lot into government got we our George know of there, come take unknowns. be was what March, by mentioned, were plans of didn't stimulus going a were issues up. going and they

big de-risk basis our So when had we the the points price, and putting sheet security portfolio couple in into take CMOs, by to taking it $X XX-year XX it's billion munis. of and balance of that of XX, it, of securities advantage was and hit portion a backs gains below basically the in in decided we a of cash, the time small that mortgage and chunk was a hundred and million

So, we up dollars built $X were able of ourselves. we XX-sub in billion there, selectively up gain, pulled so some care in take that million picked out liquidity a to

lot Well, plans. since has a government the stimulus that in, time, put came in of

over yields end first, to the going know, rates the those So, came we're But liquidity you be fund back those are it on put towards the are to depending calculate up. X% of we life And, fee accreted or you and that anywhere going and these loans, of when gets said, the cash X% use those quarter, yields to off. - forgiven well, when PPP loans from this we paid those X%. as they as and to loan X%, were,

be to you is Those the I - what rates and would - also very effective going is yield would tell call those I lumpy.

is forgiven to that's or have second income that substantially third You're X%. those rates going you're some paid during to higher the as quarter, X%, and If period. recognized periods X%, have in they're off fee going

somebody it the the more of markets portfolio choose was instead us back controlled in the road. stabilized a the own of of this, good lot gave into that back go But it when then very side on timing. destiny optionality us, for hopefully, down to So, securities can We back our we else. relying

Gary Tenner

[indiscernible]?

Matthew Reddin

our all Well, of exit is $XX to intention that. million

we $XXX of quite I As come exit can around, exit. expect QX. QX. for deck quarter, to QX we or not to last going will in and And that seen million tell determine the what that’s in most be us redeterminations on you, our time you’ve was whether logical honestly, slide to

So, national out we’re portfolio. to of about some intention those is realistic we but of every credit in we’re loans, think our get opportunity energy the exit our very to

Gary Tenner

[indiscernible]?

Matthew Reddin

Yes.

bet. You

nonaccruals. you the aware in bankruptcy including that So, to loans Landmark we probably had converted first increase Southwind there. $XX in of. million Way energy Bank. quarter, which royalty And during early the what were for million us is exactly Bank something too is into Simmons consumer exposure $X tell then We

So, loan the loan fell our portfolio. their into in of all appropriate categories portfolio

now acquired So, in non-accruals loan our our bucket are portfolio. were all in previously of their that regular

So of three those in were increase the the bulk, categories. the vast majority

Robert Fehlman

and know there under acquired longer Yes CECL, loan no as an bucket. you is

it nonperforming and reported was only So of how our not - acquired were part loan loans bucket. before the

in So, and the ACL of now they're now there instead field, same loans. it’s playing because the legacy covers all loans all in just of all it's reported

Operator

And David from comes Please Feaster go James. Raymond ahead. next from so our question

David Feaster

get to I capital. on thoughts just your wanted

the about repurchase on the but got think You’ve I any just program that you grow you're the would What [indiscernible] how do do to buyback a to before to topic capital, and commentary guess capital and hold coming thoughts want you have think lot comfortable, to appreciate about would you putting helpful? on I be preserving what capital.

Robert Fehlman

is your two and those so on what and I capital appreciate equity your and I different always your - ways. look capital Yes regulatory. there’s What is at TCE it then

was X%, XX%. and Tier On our was X XX% the regulatory leverage base our side, ratio risk total

comfortable that especially $XXX this and GAAP quarter was that CECL given ratios So drag with million those we adopted we're implemented capital. very on

which of phase-in five-year we regulators that. took the us obviously the Fortunately, gave advantage

$XXX us quarter. the purposes. And we as during of worth of give into noted stock some regulatory to period for will grow time we also repurchased it million a So that

a have maintain they and and capital like capital period we today. our were levels very pleased very happy So with to those were that levels

mentioned, as March haven't pricing it repurchase and That's at looked since you look the if And back XX. said, earn at We bit did buying those you than basically, buy can first there. due - we a quarter this - a have a repricing, plan on buyback as back that The stock at year about when in stock the period repurchased shares. to that on as we we we quite plan. less do right good

our stopped the not We or decide don't it. we capital we our there. it we'll look balance just continue sheet see have have ceased buyback, right any we'll where looking But and economic are just just keep at and keep and basically but have in any we the not and stock monitoring not bought have monitor at but structure, We’ll at look now, any plans structure we'll term, to near it. purchased times,

David Feaster

pipeline Okay, you PPP Do to and look an that’s curious your to flat opportunity as does growth just obviously just how to and some come be loan then growth, most see halt. exclusive the some you do your this But growth helpful. today loan loan all share to think people I’m just activity gain of you about or would is going [indiscernible] program, a And that balance customers? on what to down? actually expect drive of talking to

George Makris

risk our like consideration. recently customer. the that to So talking strictly our a - put bit think it we on adhere times David, in appropriately it’s in about it's policy we've up some policy. is credit It’s little time restrictions by And set reason going And loan in that this, place I'm is shares with new reason. to for a Matt to

is very thing second shortening are in The interested maturities. we

and and then, marketplace, except make we're year restricting out loans like on With more far would than the perfectly cash not of we’re the to go And I say like out which good in willing things a types certain that loans uncertainty too equipment sense. loans.

We these uncertain in want where action think out for bank of during that's appropriate customers to their an business, So who money participate don't account. we have take times. their us in to put

then what's So let turn knowing actually currently I'm how our happening going on philosophy that’s over street. him that to talk that's translating about the into Matt, of it sort to

Matthew Reddin

George. pipeline having at we time point if close Really $XXX at in bucket, since even the million about our $XXX to that million. most I we thanks, before feel bankers and David, at really of a rate and close Yes look you conversations customers, bucket had started tell out like close approved it that with taking you our will approved that our while out. just that $XXX Of fall rate we over - says million.

However, specifically it out on there and not higher well. are opportunities, pause very new it’s estate projects know to going on be our values. we customer We're we putting complete commercial guidelines far real new sense unless adhering underwriting pushing on around too any neck button the to and a makes

looks So have clarity growth I forward. see loan any wouldn't what expectations don't big until moving way on on - we some like economy in we the

in question But your on preferred And say, customer. would regarding been SBA existing say, a vast PPP our have lender loans is XX% marketplace. some we I majority known the I would

there to stood so, we program our quantifying quality existing believe new will through would absolutely a I a flight But and more XX% not that. there customers. or was when PPP big acquisition some be were that And customer number, because I up to

David Feaster

a - one. through fee you you loans just Do expect NII? program, quick income? PPP to the hold going on those through Or flow flow sale I and one have fees And for Okay. are to those

Robert Fehlman

life flow, over of the loans. the David, and be accretive they’ll Yes - through over the NII they’ll

income. come or And June, the pro a to August, get of like so in, get that paid the in rata balances accounting And accretive two-year let's say, July they’ll or up - taken paid, under a there’ll be amount how loan. is whatever timeframe when forgiven is then that balance will be set fee July, they rules it's this they

say yield to those That's that going - that loans they’re the in is were paid, why I months be very on lumpy.

we one we're of much yield may that higher you on at So in X%, we could X%, that this and month, bucket. that see X% be get the time yield period a X%,

David Feaster

this from you from a me know portfolio? guys. opportunity you thoughts customers your an to that one is are any comments book? for you Ag all. share Thanks, I just Last on on for gain hearing competency any core What the this just Okay. is

Matthew Reddin

are which defined I is so customers. our being Ag Good our question book. say the very would on on for still focused far, Ag what Ag package the stimulus customers

So that's our Ag over to look see severe our going quarter, $XX onto that's customers their we're, - same you million, years, due right if prices. book at now, holding crops same time, last you'll - but and from significant on about to the price decrease

So in stimulus of We've We XX conscious - what they're had were that in package farmers PPP will them PPP for to had them. Ag they also very participate the able loans. participate the over do loans.

So, anxious what package new very perspective, where the are see we but acquisition. to at be for from feel good they’re stimulus customer that they would

gain say that capital. some ability they would where to there, are know everyone’s I have of there they but a to quality the also flight

this climate. on think I Ag expectations have we current customers any in don't growth So, significant new from

David Feaster

Thanks guys.

Operator

over Thank show George this further Mr. Chairman back no ahead. remarks. I you. the Please and closing the At I’d go like time, turn CEO, Makris, for call queue. questions to to in

George Makris

this. Simmons been for unusual times certainly bank Well, times all are well positioned Bank thanks storm. we feel that joining It's as tradition community like the very These a preparation about conservative good during our us today. we weathering for of are the to and you normally

great make appreciate your again, happens. think and We place that day. putting that we we're support your sure policies think - time are today. in So, we Have we to a

Operator

Ladies for call. you gentlemen, today's this concludes and Thank participating. conference

You may now disconnect.

Simmons First National (SFNC) 21 Apr 202020 Q1 Earnings call transcript