Simmons First National Corporation · NASDAQ:SFNC
Simmons First National — Q4 2020 Earnings Presentation
54 slides from Simmons First National's earnings presentation, Jan 26, 2021
Slide 1: Contents
Contents 3 Loan Portfolio & Asset Quality 11 Capital, Deposits, Liquidity & Investments 18 4 th Quarter Earnings Highlights 29 Corporate Profile and Company Highlights 42 Appendix 4 th Quarter 2020 Investor Presentation | NASDAQ: SFNC
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
2 Forward - Looking Statements and Non - GAAP Financial Measures Forward - Looking Statements . Certain statements by Simmons First National Corporation (the “Company”, which where appropriate includes the Company’s wholly - owned banking subsidiary, Simmons Bank) contained in this presentation may
Slide 3: Loan Portfolio and Asset Quality
LOAN PORTFOLIO AND ASSET QUALITY 3
Slide 4: Loans – Including PPP Loans
Loans – Including PPP Loans as of December 31, 2019 as of December 31, 2020 $ in millions Balance $ % of Total Loans Balance $ % of Total Loans Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio Consumer - Credit Card 205 1% 180 1% - - 4.1% -
Slide 5: Loans – Excluding PPP Loans
Loans – Excluding PPP Loans as of December 31, 2019 as of December 31, 2020 $ in millions Balance $ % of Total Loans Balance $ % of Total Loans Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio Consumer - Credit Card 205 1% 180 2% - - 4.1% -
Slide 6: Loan Pipeline Trend by Category
Loan Pipeline Trend by Category (1) 6 $ in millions (1) Quarterly amounts adjusted for branches sold in South Texas and Colorado during 2020. $1,009 $641 $219 $192 $247 $341 $220 $90 $112 $250 $347 $291 $72 $70 $177 5.10% 4.70% 4.10% 4.37% 4.12% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% $0 $200 $400
Slide 7: COVID Loan Modifications
COVID - 19 Loan Modifications 7 COVID - 19 Loan Modification Update ▪ The majority of COVID - 19 loan modifications are projected to return to regular payments prior to end of Q3 2021. ▪ All risk ratings reviewed and adjusted as needed on all COVID - 19 modified loans, and any impact is reflected wi
Slide 8: PPP Loans
Loan Balance Original Balance ($ in millions) # of Loans 12/31/20 Balance ($ in millions) $50,000 or less $ 95 5,220 64% $ 91 Over $50,000 to $350,000 305 2,445 30% 285 $350,000 to Less than $2 million 358 481 6% 315 $2 to $10 Million 218 62 1% 213 Total $ 976 8,208 100% $ 905 PPP Loans 8 PPP Round
Slide 9: Asset Quality Trends
ASSET QUALTY TRENDS Credit Quality $ in millions Source: S&P Global Market Intelligence 2013 - 2020 (which metrics are as of December 31 of the relevant year) (1) ALLL for 2013 – 2019 and ACL 12/31/20. (2) YTD annualized net charge - offs. Non - performing Loans / Loans 3.33% 2.50% 1.44% 1.68% 0.81%
Slide 10: Allowance for Loan Losses and Loan Coverage
ALLL or ACL Loan Discount Total Loan Coverage ACL (ALLL)/ Loans ACL (ALLL)/ Loans excluding PPP (1) ALLL as of 12/31/19 $ 68.2 $ 87.3 $ 155.5 0.47% 0.47% CECL Day 1 Adoption Impact 151.4 (87.3) 64.1 ACL as of 01/01/20 $ 219.6 $ 0 $ 219.6 1.52% 1.52% Q1 - 20 Provision, net of charge - offs 23.6 23.6
Slide 11: Capital, Deposits, Liquidity and Investments
CAPITAL, DEPOSITS, LIQUDITY AND INVESTMENTS 11
Slide 12: Regulatory Capital Ratios
13.5% 9.8% 10.2% 10.9% 13.4% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 2016 2017 2018 2019 2020 W ELL C APITALIZED 8.0% 15.1% 11.4% 13.4% 13.7% 16.8% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 2016 2017 2018 2019 2020 14.5% 9.8% 10.2% 10.9% 13.4% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
Slide 13: Stock Repurchase Program
Stock Repurchase Program 13 $10.1 $93.3 $20.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 $100.0 Q419 Q120 Q220 Q320 Q420 REPUCHASE BY QUARTER (1) ▪ Summary of stock repurchases since reinitiating program in Q4 2019: – $123 million – 6.3 million shares or about 5.5% of outstanding – A
Slide 14: Book Value & Tangible Book Value
(1) As of December 31. (2) Figures based on tangible book value (which excludes goodwill and other intangible assets) are non - GAAP measurements. See Append ix for non - GAAP reconciliations. 14 Book Value & Tangible Book Value BOOK VALUE ($ IN MILLIONS) (1) TANGIBLE BOOK VALUE PER SHARE (1)(2) BOO
Slide 15: Deposits
▪ Interest Rates – In March 2020, the Fed reduced the Fed Funds target rate by 150 basis points. ▪ Interest Bearing Transaction Deposits – Rates were lowered during the latter part of the first quarter. ▪ Time Deposits – Rates were lowered during the latter part of the first quarter. Based on maturi
Slide 16: Liquidity
▪ Approximately $3.5 billion in Cash and Cash Equivalents as of 12/31/20 – Intentionally increased cash position in Q1 – In Q1, sold investment securities when the 10YR TSY was near historic lows – Approximately $900 million increase in deposits since 12/31/19 ▪ Over $5 billion available in secondar
Slide 17: Investment Security Portfolio
$ in millions Investment Security Portfolio ▪ In Q120, sold ~$1 billion of investment securities to: – De - risk the balance sheet – Create liquidity – Recognize gains of over $30 million – Increase capital ▪ In Q320, sold ~$500 million of investment securities – Projected calls for the next 12 - 18
Slide 18: 4th Quarter 2020 Earnings Highlights
4 th Quarter 2020 Earnings Highlights 18
Slide 19: Financial Highlights
Note: Core figures (excluding Core NIM) exclude non - core income and expense items (e.g., early retirement program costs, gain on sale of banking operations, merger related costs and branch right - sizing costs). Core NIM excludes purchase accounting interest accretion. Core figures, as well as fig
Slide 20: 2020 Financial Highlights
As of and for the year ended December 31, 2020 (1) Core figures (excluding Core NIM) exclude non - core income and expense items (e.g., early retirement program costs, gain on sale of branches, merger related costs and branch right - sizing costs). Core NIM excludes purchase accounting interest accr
Slide 21: Net Interest Income
HISTORICAL LOAN DISCOUNT BALANCE & ACCRETION INCOME (1) Fully tax equivalent using an effective tax rate of 26.135%. (2) Core loan yield and core net interest margin exclude accretion and are non - GAAP measurements. See Appendix for non - GAAP reconcil iations. 21 Net Interest Income 2021 SCHEDULED
Slide 22: Management's Outlook – Interest Income and Expense
Category Q4 - 20 Linked Quarter Change Management’s Outlook Interest Income Down $0.6 million Primarily driven by lower loan volume, which was mostly offset by a $900 million increase in the security portfolio. Management anticipates the following for 2021: 1) Organic loan growth in the mid single d
Slide 23: Management's Outlook – Provision and Expenses
Category Q4 - 20 Linked Quarter Change Management’s Outlook Provision Expense Down $16.0 million Provision expense was lower in Q420 due to an improvement in Moody’s Economic Scenario Forecast, decline in loan portfolio and a decline in non - performing loans. We expect lower provisioning in 2021, s
Slide 24: Branch Rightsizing Initiative
Branch Rightsizing Initiative 24 Branch Sales Branch Closings Will continue to review other branch rightsizing opportunities Location Date Sold Number of Branches Deposits in millions Loans in millions Gain on Sale in millions South TX Feb. 2020 5 $140 $261 $5.9 Colorado May 2020 4 $63 $121 $2.2 Ill
Slide 25: Key Ratios Adjusted for PPP Loans
As of and for the quarter ended December 31, 2020 Including PPP Loans Excluding PPP Loans (1) Loan yield 4.74% 4.89% Core Loan Yield 4.47% 4.60% Allowance for credit losses to total loans 1.85% 1.98% Stockholders’ equity to total assets 13.31% 13.87% Tangible common equity to tangible assets 8.45% 8
Slide 26: Performance Trends
(1) As of December 31. (2) Efficiency ratio is core non - interest expense before foreclosed property expense and amortization of intangibles as a percent of net interest income (fully taxable equivalent) and non - interest revenues, excluding gains and losses from securities transactions and non -
Slide 27: Performance Trends – ROA, ROTCE, ROACE
Note: Core figures exclude non - core income and expense items (e.g., early retirement program costs, gain on early retirement of trust preferred securities, gain on sale of branches, gain on sale of insurance lines of business, donation to the Simmons Foundation, one - time tax adjustment, merger r
Slide 28: Performance Trends – EPS and Net Income
(1) Per share information has been adjusted to reflect the effects of the Company’s two - for - one stock split, which occurred on Febr uary 8, 2018. Note: Core figures exclude non - core income and expense items (e.g., early retirement program costs, gain on early retirement of trust preferred secu
Slide 29: Corporate Profile and Company Highlights
CORPORATE PROFILE AND COMPANY HIGHLIGHTS 29
Slide 30: Company Profile
(1) As of December 31, 2020, unless otherwise noted. (2) Based on January 15, 2021 closing stock price of $26.18 and number of shares outstanding as of that date. (3) Loan and deposit figures in billions. The balances include only those assigned to the division (the balances do not include o the r b
Slide 31: Selected Business Units
As of and for the year ended December 31, 2020 31 Selected Business Units ▪ $188 million nationwide credit card portfolio ▪ Loan yield (including fees): 13.1% ▪ History of excellent credit quality (1.62% YTD net charge - off ratio) INVESTMENTS ▪ Retail investments services provided through networkin
Slide 32: Primary Regulators
32 Primary Regulators 2020 Annual Examination • Safety and Soundness • Trust • IT 2020 Consumer Compliance Examination First exam by CFPB during 2020
Slide 33: Digital Banking Accomplishments 2020
33 Single Digital Platform Consolidated three legacy platforms into a single consistent digital experience for all Simmons Bank consumer customers Customer Experience Center New innovation space for testing our ideas with real users to deliver superior digital experiences for our customers Credit Ca
Slide 34: Digital Banking Year in Numbers 2020
34 Digital Banking Year in Numbers 2020 30% Increase in Digital Banking users Online Account Origination Pilot launched in Q4. Online Account Origination expected to roll out in 2021. 2.72x Mobile deposit $ volume increase 4.8 Star Rating on iOS App Store 2.02x Mobile deposit item volume increase 84
Slide 35: Simmons Foundation
35 Simmons Foundation SFNC’s contributions to the Foundation In 2020, $3 million was contributed, specifically reserved for environmental or conservation grants. In 2019, $5 million was contributed, with half specifically reserved for community enhancement grants within the Company’s footprint. Life
Slide 36: Acquisitions Since 2013
(1) Purchase price and ratios as of closed date. Source: S&P Global Market Intelligence. (2) Metropolitan was acquired from Section 363 Bankruptcy. 36 Acquisitions Since 2013 2013 – 2014 Consolidated eight charters to one National to State Charter Conversion (Fed Member Bank) 2015 2016 2017 2019 $ I
Slide 37: 112 Years of Consistent Dividend History
(1) Based on January 15, 2021 closing stock price of $26.18. (2) 2020 EPS of $2.31. (3) 2020 Core EPS of $2.40, excludes non - core income and expense items and is a non - GAAP measurement. See Appendix for non - GAAP reco nciliations. Note: The future payment of dividends is not guaranteed and is s
Slide 38: 1 Year Total Shareholder Return
(55.0%) (50.0%) (45.0%) (40.0%) (35.0%) (30.0%) (25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% Dividend + Stock Appreciation (1/15/20 – 1/15/21) Note: Based on January 15, 2021 closing stock price of $26.18. Source: S&P Global Market Intelligence 38 1 Year Total Shareholder Retur
Slide 39: 3 Year Total Shareholder Return
(55.0%) (50.0%) (45.0%) (40.0%) (35.0%) (30.0%) (25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% Dividend + Stock Appreciation (1/15/18 – 1/15/21) Note: Based on January 15, 2021 closing stock price of $26.18. Source: S&P Global Market Intelligence 39 3 Year Total Shareholder Retur
Slide 40: Long-term Shareholder Return
(80.0%) (60.0%) (40.0%) (20.0%) 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% 180.0% 200.0% 220.0% 240.0% Dividend + Stock Appreciation (12/31/07 – 1/15/21) Note: Based on January 15, 2021 closing stock price of $26.18. Source: S&P Global Market Intelligence 40 Long - term Shareholder Ret
Slide 41: Investment Profile
Source: S&P Global Market Intelligence (1) Core EPS excludes non - core income and expense items and is a non - GAAP measurement. See Appendix for non - GAAP reconciliations. (2) Based upon the Company’s average six analyst consensus EPS of $1.69 for 2021 and $1.88 for 2022 (analyst’s published esti
Slide 42: Appendix
APPENDIX 42
Slide 43: Non-GAAP Reconciliations – Core Earnings
(1) Effective tax rate of 26.135% for 2018 - 2020 and 39.225% for prior periods, adjusted for non - deductible merger - related costs a nd deferred tax items on P&C insurance sale. (2) Tax adjustment to revalue deferred tax assets and liabilities to account for the future impact of lower corporate t
Slide 44: Non-GAAP Reconciliations – Diluted EPS
(1) Effective tax rate of 26.135% for 2018 - 2020 and 39.225% for prior periods, adjusted for non - deductible merger - related costs a nd deferred tax items on P&C insurance sale. (2) Tax adjustment to revalue deferred tax assets and liabilities to account for the future impact of lower corporate t
Slide 45: Non-GAAP Reconciliations – Core ROA and ROTCE
45 Non - GAAP Reconciliations Q3 Q4 $ in thousands 2016 2017 2018 2019 2020 2020 2020 Calculation of Core Return on Average Assets Net income available to common stockholders $ 96,790 $ 92,940 $ 215,713 $ 237,828 $ 254,852 $ 65,885 $ 52,955 Net non - core items, net of taxes, adjustment (non - GAAP)
Slide 46: Non-GAAP Reconciliations – Non-interest Income to Revenue
46 Non - GAAP Reconciliations $ in thousands 2016 2017 2018 2019 2020 Calculation of Non - interest Income to Revenue Net Interest Income $ 279,206 $ 354,930 $ 552,552 $ 601,753 $ 639,734 Non - interest income 139,382 138,765 143,896 205,031 248,528 Total Revenue (GAAP) $ 418,588 $ 493,695 $ 696,448
Slide 47: Non-GAAP Reconciliations – Efficiency Ratio
(1) Effective tax rate of 26.135% (2) Efficiency ratio is core non - interest expense before foreclosed property expense and amortization of intangibles as a percent of net interest income (fully taxable equivalent) and noninterest revenues, excluding gains and losses from securities transactions an
Slide 48: Non-GAAP Reconciliations – Core Net Interest Margin
48 Non - GAAP Reconciliations Q4 Q1 Q2 Q3 Q4 $ in thousands, except per share and share count 2019 2020 2020 2020 2020 2019 2020 Calculation of Core Net Interest Margin Net interest income $ 167,066 $ 167,483 $ 163,681 $ 153,610 $ 154,960 $ 601,753 $ 639,734 Fully tax - equivalent adjustment 2,172 2
Slide 49: Non-GAAP Reconciliations – Book Value and Tangible Book Value
49 Non - GAAP Reconciliations $ in thousands, except per share and share count 2016 2017 2018 2019 2020 Calculation of Book Value and Tangible Book Value per Share Total common stockholders' equity $ 1,151,111 $ 2,084,564 $ 2,246,434 $ 2,988,157 $ 2,975,889 Intangible assets: Goodwill (348,505) (842
Slide 50: Non-GAAP Reconciliations – Core Loan Yield
50 Non - GAAP Reconciliations Q4 Q1 Q2 Q3 Q4 $ in thousands 2019 2020 2020 2020 2020 Calculation of Core Loan Yield Loan interest income (FTE) $ 193,402 $ 187,566 $ 177,168 $ 163,379 $ 160,306 Total accretable yield (15,100) (11,837) (11,723) (8,948) (8,999) Core loan interest income (non - GAAP) 17
Slide 51: Non-GAAP Reconciliations – Tangible Common Equity to Tangible Assets
Non - GAAP Reconciliations 51 Q4 $ in thousands 2020 Calculation of Tangible Common Equity to Tangible Assets Total stockholders' equity $ 2,976,656 Preferred stock (767) Total common stockholders' equity 2,975,889 Intangible assets: Goodwill (1,075,305) Other intangible assets ( 111,110) Total inta
Slide 52: Non-GAAP Reconciliations – ACL / Loans Excluding PPP
Non - GAAP Reconciliations 52 Q2 Q3 Q4 $ in thousands 2020 2020 2020 Calculation of ACL / Loans (exluding PPP Loans) Total loans $ 14,606,900 $ 14,017,442 $ 12,900,897 Allowance for credit losses on loans 231,643 248,251 238,050 ACL / Loans 1.59% 1.77% 1.85% Total loans $ 14,606,900 $ 14,017,442 $ 1
Slide 53: Non-GAAP Reconciliations – Tier 1 Leverage Ratio
Non - GAAP Reconciliations 53 Q4 $ in thousands 2020 Calculation of Regulatory Tier 1 Leverage Ratio Less Average PPP Loans Total Tier 1 capital $ 1,884,563 Adjusted average assets for leverage ratio $ 20,765,127 Average PPP loans (937,544) Adjusted average assets less average PPP loans (non - GAAP)
Slide 54: Simmons First National Corporation
Simmons First National Corporation | NASDAQ: SFNC . ——— », ~~ Simmons Bank jee
Simmons First National — Q4 2020 Earnings Presentation on 6ix