SFNC - Earnings call 3 2023 | Simmons First National Corporation

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Operator

Good day, and welcome to the Simmons First National Corporation Third Quarter 2023 Earnings Conference 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

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

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

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

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

Additional contained and in information our with our factors X-K Form is these presentation furnished release investor earnings some of concerning today.

statements XX, XX-K. XX-Q obligation including contained only ended update for the December XXXX, other risk to no date and XX, our or the as forward-looking XX-K These information. or they Form forward-looking Form the for statements year in assumes of ended March that Form factors the revise made, Simmons Our and quarter XXXX, speak any are

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

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

Operator

[Operator Instructions].

with Our Gailey first question comes KBW. from Brady

Brady Gailey

quality. with we can credit start just if Maybe

a little bit but there was pretty still was of credit Your clean, noise.

extended new just net You little then loans? with color NPL $XX extra a [indiscernible]. X Maybe billion $X commercial happening and the nursing a those what's million had the from charge-off on

Jay Brogdon

in It's kind step moment credit, feelings just kind we of we've let and the done I'll and Jay. on back Yes, our and feel good of very our work for some I'd picture. describe then the that around But jump about. of overall in and home first, you've credits credit I'll continue to say a about asked me

identify results leading back in say And continue feel we any dive . We've at or our but X reasons QX not that the we through overall, huge a results our quality a for et major ramifications, bottom to It's for dive that dive Care portfolio look good $XXX our portfolio. earlier. in that time X level and any a zero But deep deep flowing inflationary a go can I'd some was sector quarter going the and about Extended portfolio. portfolio, particular dive deep go that on you Nursing own any talked we a to in us, project indicators micro It's other we line back that have nonperformers QX, the the portfolio. the borrower, the customers. end longer no of again get and have of at see changes million on The coming and confidence credit did to of to activity we out there portfolio, we type for to cetera. all of rate, of has not to macro in quarter, the stressing metrics stabilization, the portfolio, cash just reach of portfolios, the deep kind had that That's we to we I us. If a that in wanted difficulties about mentioned did or our with the lot continue portfolio. for of interest third COVID of when overall stressing office in periods pressures, level on on through a rotate

Nursing modifications with to through borrower flowing. as And so loan. the -- on we now And that cash work particular, give reserve that project about to dive, I'd portfolio. again, in some Extended to relates for the the borrower, X we about in on credit. million when Care We level on resulted very modifications of and the and that piece, good $XX got X.X% portfolio that deep get That conclusion us charge-off portfolio, is [indiscernible], or you at broader more we've a that worked the metric it made we've overall, a I guess that feel that

in good incredibly feel and like again, addressed which were there is how our So in portfolio conservative very we about feel got that conservative I form, to and we but it. true

out. nothing activity. than had we Outside that when working some credits out got I sort nonperformers, puts classifieds in significant a normal good of of there's in, look results would other migrations some that flowing and at stands There's We've call nothing course in takes within really out or credit, in but few just other there. really there. We've

Brady Gailey

I million know All $XX helpful. the expenses. to plan. have reduction you on cost achieved guys That's then right. And moving

expenses the million. So if quarter, were $XXX in you look around they at core

fourth and some of now as flattish forward we run So How into think be there will do creep? should XXXX? the quarter think Or we about the rate? into expenses expense

Jay Brogdon

as well, at shot another take I'll X Brady. Yes. that

outlined we here So quarter. accrual third I'd the in cleanups again say some

that do So got a for think run from to adjust rate you've I perspective.

is significantly that had year. . kind to earlier the quarter noninterest expense through outlined that range, think of we rate achieve initiative it's run think fourth that to I hoped Better we what fair goals in which Bank in mid-XXX had exceeds the

launching the that's I of think year next into point. kind as we look rate, run

incentive continue opportunities to continue to numbers. the to evaluate expense we of things, as we on going investment of won't have. we're opportunities very into or you focused say, have run of again, those adjustments remain some However, but also those side And we'll sort coming discipline any rate

So there, by date. that given what later today. stand I as continue them them we've the lay opportunities got there at -- out want we out, are our guide are other And we'll previously that is think evaluate or to we I'd that would announce or to we still a goals initiatives

Brady Gailey

flow Okay. core fourth basis. margin. And is should for benefit on have know me, in the still to the kind on But your interest a of quarter, the finally NIM net starting slipping I hedge through. of gains we the just

maybe a and NIM slippage. positive have a little coming more you So

how 'XX? think next So quarter about should NIM we the and into

Jay Brogdon

Yes.

conversations, perfectly. sure. of to you sort underlying some net think it pressure I meaning set will interest think moderating margin, swap. see be there, the that absent up NIM, that There in of past just the talked although we continue historically or I the it positive of about kind for impact I've pressure

the in just quarter. quarter think We've quarter. occur at be point, A the lag got that first place in are point the of hikes. and sort the I would example seems this innings will interest with effect natural experiencing rate Fed the into take we on fourth it that of CD great over some at maturities that will this maybe of lagging the late kind

in in and the fourth the quarter. so first And quarter

there. on band repricing move a of cost I and fourth through interest and the some result will have we'll down NIM quarter, through will side first we're in where of of the the quarter. our QX, in margin again, slow quarter saw kind to think . But think fourth I the is overall Bottom band. be. close is pressure I What all you quarter of net probably we think first that the line So as

Fed more I think whatever about margin and through going have we're or deposits year, that's fourth think I third here we lot in would repricing. the than inflected assets probably And with as then happens in the market how more to going repricing quarter. to And we've here. broadly, next a subject the forward move the

Operator

with question James. comes Our Feaster from next David Raymond

David Feaster

drive fourth quarter the and some seeing utilization the you most some seeing are of deposits excess you're But in How pricing the touch new your we maybe trends I'm just the growth. trends well the CDs? maybe to of deposit core maybe early seeing you're curious, how client just could obviously migration We're side. of where core that I opportunity and some deposit was underlying cash. as that are funding both on trending seeing on as balances core hoping the for deposit is in core of

Jay Brogdon

But that for side. seen. on tell And is well. jump as flat of an really, out Deposits of quarter loans basis the David, up that were X average kind there down were continuation Yes, end we point side. it's of I'll you the really period I'd the for a basis. thing in the X kind same both trends we've on a on were the were down We deposits quarter. and broker on that borrowing I'd on

to line. the good you the experience core an were average migration grow associated the -- with hold again, to the kind higher continue we in And to So in even that cost able has of see book see on basis, the piece ability quarter, deposit that the it's it.

up. quarter trends slow that in like we're October. would different the we points speed saw down to that continue it I'd see and seeing So think to even third and at into the that

of all. into and and a see lower migrating but buckets there's how still not kind really transaction migration in sputtering type accounts what activity. losing you and cost It's pressure portfolio, some more in promo on that lower-cost some at IB So of just observing about think dollars We're accounts. primarily CD we out of the those lot we're NIVs

to continue a that, degree to So going experience think I forward. although again we'll slower

X look market incredibly then look, drive lower-cost market in a by trying again, and of daily out flows. bigger be the own fund look next those And I the price repricing terms of it's core our growth, just on factor mature X to We competitive there, sensitivity at as will, months. CDs of we basis. environment an and at deposit kind over think just

out a book between just the deposits book continue well market back great our the that have through whether those flowed We on opportunities. there, balancing as you it's money evaluate in to front just and side good bringing or the and those you're CD done the promo and success as as have but job have back always targeting campaigns,

Robert Fehlman

And add that. David, on I'd to

And cash we're seeing to they lower addition per And The to the migration of noninterest-bearing continue Jay ago, In less also a you haven't a feel decline that. rates. number have account. account year consumers people in or interest still in from year due ago. some of migration because interest-bearing, have than we of said, cash as than all of a and it's seen in pocket their their balances inflation have did that seen accounts accounts, balances of did whether our we in less ago, balances X customers, their and to rate but they less higher months

David Feaster

on at you Maybe growth increase kind any about opportunities quarter-over-quarter? point. that points basis going good And that great of in Where the what that other . returns? drove loan is there And the are segments a in seeing to seeing I'm Are think higher curious, these geographies the you presenting bring side just pipeline the better XXX That's returns are that ready the or good are loans terrific. forward? uptick see just rates? how you coin, of rate risk-adjusted close. to the it's

Jay Brogdon

credits the really ratings a up I saw again, we credits throughout about the to focused either get mentioned loan on quarter. quarter. because candidly, sort bank, XX, successfully we were we're talk want those lower to slides say that look Page loans on Yes. an worked fact when of at we of that, you love the average of handful the the that and/or We where balance basis to our of opportunities able waterfall and end I'd quarter, that in risk of do had for the we that didn't efforts very the rates we mention at right out

to continuing with success a on that. indication returns So we're I seeing growing of good that. is a loans great are on our basis, and focus pipeline to emphasize want that And we risk-adjusted

are I'd of And as basis. a seeing quarter-over-quarter really I of ready-to-close any rates even you that's a I just on It's pipeline there other, off out, or attractive. There reasons, seeing that in inflecting mean and I As up sort geography nor incumbent we're whatever the the category. better environment to either having it across are, in The we're than all really some opportunities ball, and very point this for in the eye the broad-based bring we in have pipeline the something it's have actually where provider portion maybe most opportunistic. and say had portion do irrational banks think your where and about. attention situations their any some this pretty grow to with really being a up, footprint. call we've really just full really relationship good particularly David, secondary to been some are I'd addition we're more effort. quarter customers is the out that a wouldn't things that pipeline the excited significantly into draw to come

Robert Fehlman

full in on the addition bring to David, And the to in. risk pricing is push that the side relationship

what focus is relationship today in, are that That You deposits, we've brings unless when been there. that a total to and treasury what no time, pushing coming the the but are the loans long a bring concessions the out bring on there's of full really is relationships profitability that deposits for in, customer. management you

David Feaster

a last X me. And good point. That's really for maybe

Just capital touching on to grow. capital priorities. is continuing Regulatory

curious thoughts and monetizing on utilize been about any balance the You've that there swap? anything? repurchasing capital restructuring just appetite or how stock. do active any think just capital to priorities then of for you optimization that sheet and type any Is or I'm

Robert Fehlman

evaluate than cash or say we more to right not. course. stock each is committed less still the dividends. buy We have to thing buyback now, we whether going wouldn't I'd earnings we're David, One be shares staying back our we're quarter in

not quarter, it, it, out a in be measured this it of approach saying be if in we'll have it. . like not we'll would evaluate we be continue saying we'll So do but we

Our capital, we're now. right comfortable, especially the regulatory side

of think in the that, bit moved. expected up. TCE little with a have I was been would our where decline has Other think TCE I XX-year than

we are on we buyback. mean, to we I environment range doing we'll the where and Again, the given are in less stock this determine we comfortable -- think think and love to we're approach quarter is all in it much as we'd to the cash we can, and if trading, but like a evaluate in we're balanced So or in buy are, balance decide with, you're where really not stocks today bank say, if a do as again, earnings back your prudent you're amount we dividends. your

Jay Brogdon

given to that. is the quarter. all that David, the as than we if And do something analytics analysis swap, think the that's would I'll to relates But throughout day swap what that. thus that And just on advantageous market have described, we far, it. Bob jump Yes. day every we dynamics, and [indiscernible]. been advantage mean happy say, of We'll do particularly in I'd it that we've ongoing more around take we that I find then also similar to every continue to

Operator

Olney with next comes Our question Matt from Stephens.

Matt Olney

dive some On extended the review the in the of steep that followed XQ. office you credit deeper care that quarter third in front, mentioned nursing

forward specific look sounds any and performing XQ deeper a part you worked credits events future out you line of are bank? out as other portfolio X that, is what dive at of proactively that like bank, the any of kind work looked with where some I focused of out seeing kind the of there some you into guess year, within still potential process. your maybe we what the up recently, the similar it As then your of credits and you next thoughts of didn't in about result Curious

Jay Brogdon

of determine going due of into probably say -- coming the portfolios balance Matt, don't further. sector year prioritize dig stepping deep what, want the into and next portfolio to up I'd those through we stress et sit longer not the this year year, anything, sector-specific and and away that and around I'd the rates, within specific to all say if of right different results portfolios. just those of we've we'll terms of year. the from any We're and rates, continue year, that. the that's we'd at any this customers, flow of just feel that. loan continue buckets the in We'll again, at stress here borrowers now our maybe do year done good cetera. for from kind looking Yes, . And to our higher seeing are throughout we about continue or broadly, review the higher But our more X we kind we're that the broad-based where into have dive -- that

you we think believe There's that across loans all we're mean, rate that, the credits, the we the asked continue the working opportunistic portfolio. to maybe end, we have of that the opportunity out relates I doing around. I at it the we a X that to relationship relationship have again, that factors is as really think just there something that's be have. As is at, number we factor Again, or about. the biggest we'll

where, Bob relationship, renewal books, we're pipeline on those move The ago, scrutiny heavy. a have bringing Now to is dates. even we while But the is mentioned the we do relationship we're very are particularly it's lot very, of willing into at the relationships. that. if to we're if opportunities out, is light time that see full there a stuff getting on The stuff as focused

or analysis. and anything think any portfolio, looks of So like it granular but like relates more a necessarily to portfolio of kind of I don't really that that big more opportunistic sales the broadly as level

Robert Fehlman

$XXX payoff. end quarter. just happened bit a of million the Most that of And on the little expansion of that Yes. at right

margin little the So was to impact quarter. there during

of said, rate. lower loans we As were those some

looked spread it. was for concern elevated. in the and that had we're were the the where A glad some the it or pricing others wasn't you at was risk area. glad risk go those see them when them the worth rating wasn't moving the rating. had of and move kind we especially risk few . But The for So to change, to on off books nonperforming we their up, see

So to done them haven't work through that If areas opportunities. we we'll help look continue door. we that concern. them. I if out to deep the any other seen agree, and And for continue we can have several dives, not, we'll we've But those Jay,

Matt Olney

some give and a you kind of around those Okay. the And of on and reprice Any commentary or more for repricing loans you just there Bob's these us to as to some point come that Any up can renewal follow-up look of fixed any higher? asset as opportunity. on color that? color of kind

Jay Brogdon

I'll mention everyone market to sensitivity. I'd some think unexpected. QX in again, in moves that for the sort point to But my a the side few XX things QX, rate and mentioned around I Slide rate would already on and and remarks earlier of information that subject I funding interest be

that you I kind really in average a repricing asset fixed in on gave . But at biggest on here to side. of $X And think opportunities, have statistics weighted dollars terms there we of particular liability opportunity QX continue the XX rate in QX pipeline [indiscernible]. repricing that fixed out, some got rate basis, months, side. loans and period both in billion and we've go-forward XXX. terms rate a of in next left we be on One call I'd good billion will of to go of on lot of a see the the we

that quite come of portion that quarters few see do some I terms So portfolio. lot asset in terms of there'll to And to a more repricing portfolio risk than in our the side. in opportunities of significant again, we good repricing we or be the a over opportunity think liability have

Matt Olney

new the following you on loan more color of Any rate pricing on Jay, recently? renewed Okay. mentioned the and $X And loans. fixed that, up billion

Jay Brogdon

in pipeline It's you're statistic really similar seeing to what there. the

So just rates. our rates opportunity of are right top on pipeline renewal our

Matt Olney

Got it.

Okay. That's you . much. very Thank helpful, guys.

Operator

Our next question comes from Piper Graham Dick Sandler. with

Graham Dick

that back circle and make then sure to I wanted just I quickly to correctly. heard

sort that the of ex range Was be in inclusive balance it's like impact is here. that XQ? that to of here for swap Sounds swap Or impact? going

Jay Brogdon

quarter. It's in inclusive the fourth

level NIM, Graham, within swap. that is But first in we'll quarter think and particularly to I bit maturities of at with well on likely those NIM we'll portfolio. offset I think around, CD think and drive a is the slowing largely way and migration. probably the basically, see underlying as migration look again, repricing it, We pressure down that be the that the quarter of fourth the factors benefit the as underlying some

when So NIM, real the X I you QX inflection band think really, time saw at over that I the or us kind of in, in next that I point being kind see I the we'll QX, of be look QX, QX, think in so months. overall

Graham Dick

couple That's just Great. I of had just Okay. very a more. then And helpful.

$XX Or that On home that, said in I I credit, to loans of couple modified due you the just that that the about increase in increase? is million, loans nursing all you that there, drove was guess, guess, to a modified?

Jay Brogdon

sure have of sure XXX% I to would the of it not I'm I'm answer majority X Graham, to think that mentioned. but I've that, the been the -- related

Graham Dick

as guess, to I any right. $XXX million it across All schedule XXXX? maturity that portfolio, we it as is maturities saw I lastly, And means I into relates in to of the securities it difference that assume out Or look the Is quarter. $XXX the XXXX. year? per then same was there Okay. million, just

Jay Brogdon

to I got mind, answer a don't that. me to past Graham again, there. dramatically you my it'd I looked think it's make I'm those, me not that similar. probably -- too going But nothing have I hadn't be in comes XXXX would to far but great think be different.

Graham Dick

No I problem . appreciate it. Thank at all. you. perfect. That's Okay.

Operator

PA. Next Tenner from Gary with Davidson. question comes

Gary Tenner

runoff side mentioned, CDs. where of question With maturities that, cetera. as pressure from that you a some as the continues. repricing change on then and around the to the they utilize the following to thought flip few side, there's that that of bit up little -- are, rates process in a the Obviously, runoff in management. portfolio? obviously, the a the we Or is on runoff of just quarters there just And Just in of any funding portfolio, assume balance terms that row sheet how et should

CDs, In $X.X in that about mature addition well. that assume to you've as here brokered got the fourth roll CDs those ? the Should quarter we retail just billion of

Jay Brogdon

there talking the back about first to of in your Yes. you're portfolio. And go the understand. and to sure I portfolio, runoff make part want I the referring you're to When question securities

Gary Tenner

Correct.

Jay Brogdon

Yes.

are So we from then, we there believe that, attractive I'd point continue view, say securities have good risk-adjusted returns in obviously, the but extent loan invest very investment portfolio and to our out rates cash on sufficient loan strategy flows are priority an would coming off in be of what investment to our the there some balance the our sheet of where That's side. that. will

our our what what far. that's And would into the be -- future. that's generally has think so experience here So I intermediate strategy our been

balance to extent to continued out kind of particularly third there balance we're that a lowest If of if reduce try -- opportunities the or out continues and take that to through securities is funding about sheet at on for or to sheet around borrowing, reinvestment advantage of we it's to a core be opportunities shortfalls -- are that with I into expensive. and So but we'll absolutely portfolio there opportunities side. your this or sources are are to bit those of just funding a funding way to is either again, happy the opportunities you that's question a long cost the cheaper that to do to that lot of that the CD optimization. market any could do talked brokers, That theme. side it, higher that's other try in how the some there runoff replace there rate saw, portfolio. play any are expect levels wholesale core if to it do But less the the really needs that money the we shrink quarter, and And we've borrowings that there. even purely are and If think saying loan there

there those CD repricing I we the see core the both brokered the months. as of and see over coming CD So on think book, the same more you'd book,

Gary Tenner

apologize tell going it, . as it's I your us you Okay. the And and spot I in through Appreciate deposit but think them I I that. missed rates? don't can was I if caught presentation,

Jay Brogdon

to the the promo that X And balance any for think published our campaigns. standard our our have don't promotional most in the across part book promo book portfolio. we with across well We Again, have and markets deposit side, I rates seeing front there. say CD we're But as all spot the I'd trying balance of in rates. top through very spot back don't working you're in delicate those on handles about rates, and promos how to our . the that's both those seeking that as are penetrate the all we opportunities. terms

Operator

Our next with question comes Stephens. [indiscernible] from

Unknown Analyst

reasonable? here, on the and the But the the with the to that lots mid-single-digit loan as this. still puts takes or you loan you growth growth paydowns mentioned loan improving over towards loan but mentioned pipeline. you way, Is respect quarters? from of as outlook us would point if apologize I far few Yes. next growth What from

Jay Brogdon

the kind we're this early I we of year and that above into this year, our year, part of balance year. it stepping the and for were year we the digits mid-single outlook in that the think as the with back in

on range, be here. but as -- perhaps optimistic that it'd the the coming quarters look over of more think I the would in the be range I

even lower lower or lower a mid-single-digit expectation our think than on number. credits kind working et that light single-digit relationship rating in to find either of much cost of on forward focus kind loan risk out we focus where of see going light our in cetera, in banking opportunities growth of I that you're going

Robert Fehlman

the agree. now, Yes. to macro we're we environment through all And environment, mid-single in comfortable digit given this feel going very Matt, with low I'd say, right

Unknown Analyst

Yes.

from just given thoughts the bit initially clarify, -- here? cycle some commentary you've any is we more than in betas then deposit around [indiscernible] thought. cycle. the And I a helpful. betas past, for But around the little to That's Okay. updated getting think deposit Any I know

Jay Brogdon

have mean I cumulative Is [indiscernible]. that I we mid-XXs. Yes. we're think what probably there

CDs mean, particular we're of level few in mid-XXs. the when look I that handful subject But as chance months, at good So everything Matt, all today. would the into of the my we from just look forward. is Fed next over very does I to I else, months, again, predict, over here I'd which I look X as handicap of the here, of but say to XXs next there's tougher is sort at maturing when migration like the sit be much that's, that best what that creeps it do a the

Operator

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

George Makris

the thanks pleased to think many be. of hard say, little, that going the needs so the banking is fundamental with I'm Better to on to me all initiative, there there to And to of This results patients, external joining really bank. industry of which or optimistic to of but us our very the Bank affecting come. really management that for you today next key have is Well, needs guess benefit I can't good what real our that we I'm focus be be more year for the I factors are today. for is so but still

rate You in securities our our repricing about. our opportunities, fixed can excited portfolio potential portfolio, we upside have and we're in see that some loan that

we're And business. in importantly, most still

customers to that left We see market the opportunity. our as have they lot a help in of grow capacity

holds appreciate participation a today. for support XXXX our Have what your your about optimistic and And very day. great bank. I'm So we

Operator

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

disconnect. now You may

Simmons First National (SFNC) 24 Oct 232023 Q3 Earnings call transcript