SFNC - Earnings call 1 2023 | Simmons First National Corporation

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Operator

Good day, and welcome to the Simmons First National Corporation First Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ed Bilek. Please go ahead.

Edward Bilek

Good morning, and welcome to Simmons First National Corporation's First Quarter 2023 Earnings Call.

several Chairman, our Fehlman; George and Jay are including management and today CFO, Executive our Makris; Brogdon. me members executive of team, President Joining CEO, Bob

you I the including and tab. simmonsbank.com presentation on like Q&A, under earnings available release the are website begin first quarter we to Before remind our that deck the our materials, Relations would at Investor

in outlook including, goals, statements will future undue implied our statements forward-looking to During uncertainties, statements plans, net and reliance projections These actual forward-looking interest we conditions, by and credit a lending regarding place future make forward-looking due deposit factors. expectations, variety any today's therefore, expressed statements among as not materially and and rates, outlook, or risks on call, differ our about estimates, results interest activity, margin. others, the you involve liquidity economic might and of quality, should those from

and earnings contained some concerning as our to of statements that risk information speak Additional the assumes Form Form as X-K XX, including the XX-K with year These well our of investor today as XXXX, are for factors is presentation information. furnished the other December Simmons our or update obligation ended in made, release these forward-looking date in XX-K. no or only revise they forward-looking statements factors Form contained and any

financial provide presentation, metrics Finally, information believe discuss investors. non-GAAP we in this we certain will to useful

included Relations to Form also the this are contained our in the on and and Additional filed which simmonsbank.com. investor release of reconciliations morning these GAAP as the the available SEC non-GAAP to our disclosures of exhibits regarding Investor website, are we with metrics, page are non-GAAP X-K including earnings metrics presentation,

we are the to Q&A session. ready begin Operator,

Operator

comes question with first KBW. Our Gailey Brady from Instructions] [Operator

Brady Gailey

as related a start what the corporate more color of you was to us far give I as these the little and corporate exposure any provision that remaining wanted to just piece the within happened Could there expense with bonds. bonds?

Jay Brogdon

Yes. Brady, is this Jay.

portfolio, less a would to represents, we've of bond I type The bonds in. in with this the We I those that were of there. those of to think, left It We out, in that on a of corporate of little of how provision the overwhelming unique remainder, relates those nothing took in little don't it's a the think quarter bonds, but our think, carve is a for. sort blend that done say, that very I portfolio. those We've is review probably X% we XXX So place Fortune that as think isolated bonds it already issuers the aggressive exposure companies. trying bit total really first bond some of companies. majority we is portfolio. for to all than events very provided were, terms There in

Brady Gailey

base Okay. would saw came $XX talk like -- you components you is expense profitability? on continue more I to kind there. efficient time this often the All just save you that right. anticipate looked guys focus increasing I cost And mean, part I where over a of at plan. Can the have ongoing the of for? the and million of just about feel get And then

Jay Brogdon

are we initiatives initiatives. this Better quarters. tie initiative There Bank certainly is. the specific some have for It within bank the have been back, to few I We've I really a mean Brady, months telegraphing overall. that this long been

in the quarter every retirement successful into to do we've in execute years. through the able to We early -- very and first -- here, some cost periodically second As those, of been we've specific early that able the identify had saves. in program. We've been sort also couple late a of quarter

there. uptake good had we So

initiatives. of spoken credit an types about optimization the just before our of One are example, anecdotally process. those as that is sort we've So

number those our identify we've been to able redundancies of a we've in of activities. number that, processes. worked standardized We through As a and sort centralized of

are identified, allow sort footprint. be but standardization for things to across to process the a those us, much both lead that these also end-to-end for of processes efficiencies of So better entire better

And the to activities, types timelines, those that better the that associate But so examples a of related should as we to you kind better have experience, initiatives those experience leading the enhancing figure. part when of those are again, customer sort things save are of of $XX cost be well. of improved about things types revenue sort of of that That's not million think initiatives.

Robert Fehlman

this And Bob. Brady, is

to to of on comments. add Jay's kind Just

people, As optimization more than the a last the processes about the the been and or working so. some Better as on we've of X talking said, systems Jay now. this, credit for we've months on initiative, said, Bank We've been year

felt early comfortable would as we we received our market, done it and exceeded numbers, associates, So as doing pretty times some It with over our expectation, by that up quarters, within the firm retirement prior system is this kind multiple And in well. able years. program, absorb we'll is of what Jay said, share our that. just could we to and sharing we the of we've was be the well and when that's the we're indicated it today

Brady Gailey

the the did been quarter, seen first rest has year then whole. where margin last nicely the which the quite step on thoughts net And But in expanding a the right. for take margin the as a year? over the but industry All of interest so, back the or has trends it

Jay Brogdon

a take thing I'll loaded here. sort back-end important is remember Brady, Last quarter, we remind on most moves funding again, of to the to the think the first you, want I baseline I some side. this. shot at So

I that So the call. about last talked in

quarter. the quarter this full of sort expected of impact we So that

of the I sort margin the of the see loaded. again, portfolio with back-end don't level we compressing the within quarter. continued compression we factors itself, think that, to to kind the is because, of of continue that in I coupled where sort had migration expect that contributing main really

of so was expect shouldn't see migration some look be you continue a that portfolio, lot at QX there'll you to do loaded within seeing. that If we're QX. to like kind dynamic I QX to the of from But QX, what back-end QX

headwind expense be So ongoing side. the on that the will

But, asset side, a continue on repricing good dynamics we'll the to well. have as there lot of

flows the a the I and in when should flows in, interest you think, fundamentals in of half all then So toward as margins the look the next that we QX. fourth than the quarter portfolios out stable we cash reminder expect And the overall those swap quarter, and across think all at near of QX this of and continue or of back horizon two, repricing here. year, much place what term, be that look in quarter for year, rate be us in just all toward September, saw the cash look more those kind we of to of I fourth have our late in we'll then kicks that to the

Brady Gailey

that to you on then about you right. thinking days gave did the know All guidance a better one here from than loan a growth, you growth are loan you just but changed And last XX in now? lot guided mid-single-digit when from for ago, I has little all How QX. me.

Matthew Reddin

Matt. in it's Brady, would I say that's line. still

those it front-end you quarter XXXX to deck be And fundings. commercial come on loaded our loan said this to point we it's that deck, even in more point pipeline, has I at so. at our I'd and going really illustrates growth for based that. you the even then that our as a down investor construction at XX, $X at look But look was unfunded last think that of billion, and when same Page time, right since

trending right now loan on So I growth side. the think direction it's that

Operator

comes Our James. next Raymond from David question with Feaster

David Feaster

all Just following on that where just how us risk-adjusted segment where Maybe other today? a returns? loan into demand I'm And yields detail could just good nice still the new pipelines and maybe and geographic the improve. is growth last perspective, So that. pipeline it's at question, loan seeing -- curious see where just you the you from some any and detail on up are just give to yields trending?

Matthew Reddin

question. rates we're around is $XXX I'll [indiscernible] comment that it's seeing of give kind you of a loan today kind Great [ coming pipeline a million at That high-level Dave, now in. where are Matt. XXX of ].

curve So into yields over cresting how I yield think be. it is take it current so that gets still and can versus those now always we're more higher that quickly where will catch of kind quality and this our asset really of pushing right through moving where we of steep kind that, we're -- kind

we're still metro interest seeing relationship, we're being that to seeing in very selective hurdling demand. There's rates Demand but getting clearly, question this around is definitely environment. the sure need we're need each it in markets, moderating opportunities, now, but I widening credit right of where there's doubt a that and making environment. seeing our spreads still we there yields full and the we in no think where demand? you're really one to this where with we're -- we're And every We're market. Your

David Feaster

think of look at banking this relatively end maybe the Obviously, a if in happened you it you a market turmoil the as to and dig to period uncertainty quarter. balances, I -- may of impacts deposit That's into was helpful. average lot migrating side. in like looked be noninterest-bearing switching the the the March. accounts the and lot like deposit trends, in And turmoil? But clients flows deposit and normal the curious, that of early versus true really of much do banking I'm core how business activity more just higher-yielding

Or since And core just outflows seen you forward? stabilize? you have expect going end, or -- more would then migration quarter from deposits

Jay Brogdon

we're that we're you anything that dissecting of our opening We're of you a volume it's of trouble So sort we've about. just tremendous normal than I'd having course this a quarter is everything anything asked still footprint. seeing And across all David, spent that just activities. lot convincing other accounts tell time ourselves

look Even So seen into migration everything example, that those a as But accounts. at typical normal those also to we see within commercial absolutely, an to accounts we continue overwhelmingly, higher-rate with normal historically. of we're course. [NIVs] are we've larger course seeing and the accounts. moves, very feels Out activity when those payments, degree

the quarter. a right. so the you're all And early lot throughout including in of quarter, We but that saw really

getting [NIVs] picked trend But than that in it's that's here up, far, hard quarter. rather in flourish grew certainly sooner of or lot stabilize going a We're a even trends. a I fourth go more we're where like has that But amount the you color November. you're operating time, balances, to to migration -- picked point That portfolio base. is we [NIVs] quarter. normal within pretty quarter really up on and I'll first accounts the last quarter, not than around of level the in customer to account just a later. see I'd of type the early have type that's the continued October perfect in checking late the third on think throughout customer has think sort crystal year ball anything those to migration and of the which accounts normal of very what back those for really had stable some in when are very seeing that,

Robert Fehlman

all year on this first -- call. most on We go of talked or -- David, in said, it of migrate our early kind saw are this last you December quarter QX. Bob, begin when quarter the quarter. fourth banks I'd And saw in we in and turmoil other that We -- in related after at see And looking just mix deposit this the we the as like of The And if seen the we the add, side. every Most commercial March, relatively about not quarter. Jay this started of much bank period analyzing were We mostly that -- the chains beginning industry. has in really was did all we've stable change really side of been day. all our consumer time. to hit it's in

David Feaster

and what office. in deck slide -- appreciate front and we what sense. And And you watching NPAs. then did hyper any you're solid, then but loan the the on modest put color in guys I'm a focus on makes and color you're obviously just I drove portfolio a more seeing that there's That credit. remained curious Credit that? credit on uptick obviously the the see broadly what

going? in Just How And curious segment? portfolio seeing clients any that on the with what's are thoughts conversations office there? your your those overall just

Matthew Reddin

Dave, it's Matt.

that relationship. So There's that on part we of first, your our acquired kind acquisition of. it on one NPAs, the a question was that first was rising -- an syndication specific was really loan a

is isolated very from our that quality strongly. up. we're really up So it's today -- seeing asset really that number holding drove very, What

lot We have of a attention.

focused we're challenges before rates so the loan started only that's of our relationships, not at CRE, $X now category the and if challenged size loan amount. with seeing -- on ones day. and of every imagine, would to blocking you X% average can we're any those say relates XX%. in we're any at were really our in or seeing I major we're office our office, portfolio office your specific at would and $X type point of billion, that but if weighted things you to Page an They moving tackling of you you thing industry as up look or million, of all As to But that on harder systemic really deck, buckets I COVID. average portfolio the rate where on similar to it XX But are in look around that

parks insurance that story in We've So who any it's and it's It's Simmons We or markets. versus seeing. in of continued community the is. the our -- Coast what community the seeing CPAs, our sector office company that're kind large -- -- really, East of granular. West we are seeing office have which don't is and our in portfolio coast of is we're office very -- also stability office is while and where towers kind versus what we're the

Operator

Scouten Stephen Piper from Sandler. comes question next Our with

Stephen Scouten

currently? type construction I just could a give growth and around there, what projects quarter. me maybe kind you guys construction you this about feel saw the start exposure for you if you're Could how of guess of seeing feel I your

Matthew Reddin

proven the what Yes, seeing Steve, that's some specific you we growth in are all I'll the have we categories, reoccurring proven segments industrial. have are fund-ups portfolio we're where Those and two that that on time. it's business those operators multifamily developers, Matt. in is our and happening had give with in

We look monitoring a very today, we robust pretty carefully. have over system and that that at

those and funding But love. far, X construction, a overall, we segments we to just very, it really, into construction going to. two like Underneath you're X then doing so is that And expected owner-occupied to that, are which very up well. move category portfolio

Stephen Scouten

you of will the margin, And Very Okay. where million you would anything go of color quarter. us feel the on And the the have in any $XXX or marginal you can around guys it do presentation kind give you impact that note, coming like month sub for trends? the late of that? here then a within the cost then -- helpful. adjustable that potentially was or of this deposits in debt for Can that, also is March margin the margin quarter give

Jay Brogdon

the in on the rate I debt X.XX%. that at can there, you is the I Steve, that tell on for sub think quarter second

the from think, margin calculate I So you could impact pretty easily. there,

Robert Fehlman

X%. to X%

Jay Brogdon

to Yes, it's X.XX%. X% from going

Stephen Scouten

the kind where or an cost was the ended of deposits where on quarter just on coming deposits those are of of at anything of in Okay. marginal where today? And kind or That's margin maybe idea perfect. March,

Jay Brogdon

of trend, we that a there from you liabilities we commentary, QX I have the at Stephen. because some I QX. loaded available in don't than I going can't trend When readily of to full bit reminder to I be back for the QX, of the in it's spot Yes. here, what mean, extension extrapolate the a quarter's did earlier. back-end a some of comment look margin the margin. margin you go that. And of nature when little again, was you that But really made did to lower But

amount in if -- fair direction looks We're type direction. I that neutral of rate that right even look so sensitivity absorbed of what in much like. moves think terms deck, interest rate And than of we're either either kind the now, our in you with at anything that included we've more a we XX-basis-point

some you this sort think should marginal -- you at gives that time. think I point rates in of So how we give of sense about

Stephen Scouten

pretty feels me, ROA here I think long-term helpful. I how you which executive jump then XX just within out curious just on guess I can have aggressive a of is a tied then, guess And aggressive like target, in to thing achieving And get is Very you Okay. kind Slide from I guess, that, there? comp Again, I'm your lay ROA you XXX-plus guys' where pretty -- been. it way? returns last long-term for guys that phenomenal. any

Robert Fehlman

to ROA. long-term Yes, comp our tied Stephen, is I'll you, tell

Our to short tied and is efficiency pretax ratio term preprovision.

about we're talked some better on numbers. and bank do, What processes today focusing year is last to in we're So people, all end we've even initiative trying the on at of as systems. MSAs diversifying into this into our really XX building good We geography different some years six really states spent areas. and really good our the some America and rural last company Middle in and these

we footprint. good really So think we have a

last really diversify a focused in to also increase make franchise. have need to We size investments our we and good to XX able to But geography on growing to. able M&A be we and years the be the

What every we're the challenge. cost we XX, $XX ratio basis, bank, these the to set up as part building the numbers a working that's becoming ROA low going on project right year And this we're to and million in of it's gave to a through at our good funds on bank, what going deposits we're is in becoming initiatives first the want it. on a annual process on a [ better ] focused to focused middle that XX%. this on now, several of But through. up we're as get going environment see, be go be that's XXX working day we and trying can better where got is focused cost more year-over-year to is -- XX you and like We're in of on. all year-end this efficiency foundation. rate we're on up XX, Well, of with us of to to We've really saves, months one we're out

Jay Brogdon

throughout in thing place there, add balance mind I'd will of just only time. Stephen, The keep optimization sheet other period the the just is naturally of that take of in importance the that

lot about off of going repricing And so where coming when there's assets I a to profitability. in are and they're where the natural of books lift be the back into think books,

Our loan-to-deposit to think in XX% gone And time expand fundamentals, -- continue those about of we're where we that the level to sets level that from in we rate ratio X type happens that. to environment, quarters as I are points last XX% to as XX% has whatever profitability. this with it things and setting, as but think all moment all

Operator

Our next Stephens. comes with Matt from question Olney

Matt Olney

this I so, compared current to this? and discussion, funding long late the were are thoughts you of average keep most had your on of the overall go the want XX borrowings to at level back the to I'm like given surprising want not what levels, higher if March you the the borrowing? level we of quarter. curious And in how to turmoil still if high hold peers,

Jay Brogdon

I mean, a in there borrowings in pickup Matt, small there's mind. just my

in major I do margin. I sort CDs see to our look When other the thought sort in from types material prudent I as deposits. becomes of I We things there shift more don't relative a total think transpire at where the have But well, around it's to whether were of of of or Fed. thing We brokered that. right cash perspective But to any at amount it's driver advantageous rate opportunities, quarter we last to they're strategy really nothing saw was of that liabilities, as think do a there's increased overall, that's it like March. it my major mind they a something that's don't just unless borrowings other X% a

we that I but that, in think we'll nothing how be pretty capitalistic mindset. think about beyond

Matt Olney

it me let Well, ask way. this

for little like a sounds need mean, funding it's slow from incremental the from going I it been. to just as where here, loan far bit is growth As

funding Incremental you how need cash high. much You've some the incremental are got portfolio. growth just curious coming levels? off still pretty deposit from securities costs pretty good flows I'm current

Jay Brogdon

the we I it think I about and timing still last late couple Yes. every lot. a growth of where don't mean loan I quarters, We've quarter are. think, it's talked cash We of last year. for we experiencing saw flows, were that's

with our fund coming We continue ups to expect quarters. the over good activity

as in So than But be closer we degree at to were the in where moment at time it or some sort we've next is a in as pipeline, look a here the $X on at end, modern could that recent experienced more out, commented quarter quarters. while have million at exceed quarter cash self-generated two pipeline. look again, we Matt ago, $XXX fund of That what there today's we're ups you flows? we to billion

The what there. yield do continues wanted exactly we it to do

those And accurately. about so We speeds, the book, think happening of I existing about our are. fund-ups see pipeline. of kind And those I in then think all are commitments, we can prepayment measure unfunded what pretty they what's

need for that of the mentioned all leads to optimization two like much lower think incremental ago. question we sheet a balance and more or sort of growth I

Matt Olney

goal $XX merit of, And going call increases, discussion quarters. back I If expenses some next the of it, expense X% of assume the the and over just Okay. expense right kind Is the keep annual increase normal around at million of this a way that this? levels savings then year relatively incremental where over per targeting forecasted kind think to few on. to from now next then layer standpoint? the Is just the flat from they're about and to the quarters few

Jay Brogdon

that XXX% be specific that emphasize to the Again, off expenses to achieve -- slide. of of adjusted quarter. be No, our of -- going saying say in at we're to at kind rate I and our we're million in $XX Matt, second -- million want run expense the number. would the you look we're noninterest current level then I QX, expenses were ought of $XX of the actually run QX, of in here, look would we rate annualized not sort sort that

some a achieve and that second doubt, We in more in achieve the quarter, of little we'll the third. no will

We by the of have fully expect we year. should in the end that

Robert Fehlman

a just on we million, $X.X-some your April Matt, in million X. Merit is, $X.X that's pretty $X push QX, increases first payouts for difference the quarter. in little timing about for -- much more our each thereafter. XXX(k), million. tax to And payroll in the a had modeling That's for the went color quarter

So I the in QX increase. the the have think you numbers baseline for in merit

Jay Brogdon

Yes. Agreed.

Operator

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

Gary Tenner

my or A have were an asked answer tangible unfortunately, lot of stock, been your But already. book. answered questions is in closer terms capital, to of ever getting

your You have of guys using recently. held kind on off buyback

Just thoughts about [indiscernible]? on might be kind how the thinking the with stock you of over term that near

Robert Fehlman

first that's value Gary, to shareholder off, committed and we're tell I'd tangible book EPS building time. value our over through you, and

While the for X us. so, always months or we in back the it's table last stock haven't bought on

it love at at going to able is do in, day. you those we're tell capital we're to we're it's But do really banking I starting we going with this can't in to environment really it maintaining it. it March But good to time. in You'd And I not be it. tell levels. to do had today you a we're it environment. or can't look the environment We going this look every

best at be is shareholders. tell our what you, table it's our for the would I for So to of looking investment dollars for the us use on

Gary Tenner

apologize but rates? otherwise? had in I mentioned the available it margin asked mentioned it, it catch Okay. And then question and and was I had know a the didn't I I you did earlier, missed of I Jay, don't for at kind all, I spot spot know, if a deposit you don't deck you I if think

Jay Brogdon

moment. are deposit widely by our I varied pretty mean, rates honestly, at product the spot

blended rate. the in Again, margin deposit don't best in likely quarter. think a QX you will think slower continue way the QX is I about a pace So to there saw I sort just from trend what the have equation much than at spot of overall

Gary Tenner

to And number number, just by item to up I held went that? it's the few of [indiscernible] is All Okay. million quarter. did then add small just know Or sort but the last anything the question. a other [maturity] noticed accounting you it securities in -- impacted that some a quarter? right. in that help maturity I

Jay Brogdon

Yes. It's of to just that held some into portfolio that marks sort amortization the really adds it's -- portfolio. of of in maturity quarter. There's in natural no the

Robert Fehlman

maturing a really -- we're CRA investment, not unless negligible type it's Gary, securities at We're amount. And any a buying point. Yes. this

Jay Brogdon

Correct.

Gary Tenner

thought why to Okay. I Yes, just I wouldn't wanted so that's clarify.

Operator

concludes question-and-answer our would over Makris George This I closing turn the session. any to for like to remarks. conference

George Makris

Thank joining much, you and for very us today. thanks

as industry asset you are hope banking three I some basis the organization. are that quality, I peers. these banking of company who our out would you that uncertain of in would we the to community capital think our well. liquidity, industry, the diversification in a recognize all you played a compared our of really see those can our outstanding, at times When especially has take look

balance very portfolio, of our this in that based company times. you heard in rebalancing forward. years repricing point would based loan the said go our over to our are sheet, exactly that that's Jane what our and will have expect to uncertain Bob the last what some X diversifying optimistic last on income we And expense about kick I of we company year, I we and XX So months you way established from us this the get hope talk have on the later initiatives. have additional the swaps we on spent fact about think

primarily believe not that's did result net the our of expectations, conservative that a our provision we quite income meet our while for uncertain nature and So times come. to

marketplace happens today positioned care to I react in regardless the our of of customers. still And and what we're think well take

in on those for portion excellent significant job months communities I available dependent are communities over and still grow. care last to particularly taking are the we We of and where capital think smaller we an we've the a of communities thrive the done the X serve,

So and today, thanks great again for joining us you a have I hope day.

Operator

for now conference has concluded. presentation. attending today's Thank The you

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Simmons First National (SFNC) 25 Apr 232023 Q1 Earnings call transcript