Simmons First National Corporation · NASDAQ:SFNC
Simmons First National — Q3 2020 Earnings Presentation
60 slides from Simmons First National's earnings presentation, Oct 19, 2020
Slide 1: 3rd Quarter 2020 Investor Presentation
NASDAQ: SFNC 3 rd Quarter 2020 Investor Presentation
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 $ in millions Balance $ % of Total Loans Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio Consumer - Credit Card 173 1% - - 4.8% - Consumer - Other 191 1% 2 1 3.6% 19 Real Estate - Construction 1,853 13% 5 4 2.0%
Slide 5: Loans – Excluding PPP Loans
Loans – Excluding PPP Loans $ in millions Balance $ % of Total Loans Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio (1) Consumer - Credit Card 173 1% - - 4.8% - Consumer - Other 191 1% 2 1 3.6% 19 Real Estate - Construction 1,853 14% 5 4
Slide 6: COVID-19 Loan Modifications Update
By Loan Type # of Loans Loan Balance ($ in millions) % of Loan Balance % of Total Loan Portfolio Hotels 47 $320 58.1% 2.3% Restaurants – Real Estate 13 7 1.3% 0.1% Restaurants – Non - Real Estate 7 2 0.4% 0.0% Retail 16 16 2.9% 0.1% Nursing/Extended Care 3 43 7.8% 0.3% Multifamily 5 62 11.3% 0.4% Al
Slide 7: Energy Lending Update – Excluding PPP Loans
Principal Reductions: ▪ Q1 - 20 $78 million ▪ Q2 - 20 $83 million ▪ Q3 - 20 $42 million ▪ Anticipated for the balance of 2020: ▪ Q4 $99 million Outstanding Balance as of September 30, 2020 Energy Lending Update – Excluding PPP Loans (1) (1) Excludes $17 million of PPP loans to energy customers, as t
Slide 8: PPP Loans
Loan Balance Loan Balance ($ in millions) # of Loans Interest Rate SBA Fee Estimated SBA Fee $ $50,000 or less $ 94 10% 5,216 63% 1.00% 5.00% $ 4.7 Over $50,000 to $350,000 304 31% 2,441 30% 1.00% 5.00% 15.3 Over $350,000 to Less than $2 million 358 37% 481 6% 1.00% 3.00% 10.7 $2 to $10 Million 213
Slide 9: Asset Quality Trends
ASSET QUALTY TRENDS Credit Quality $ in millions Source: S&P Global Market Intelligence for the metrics for 2013 - 2019 (which metrics are as of December 31 of the relevant year) (1) ALLL for 2013 – 2019 and ACL 9/30/20 Non - performing Loans / Loans 3.33% 2.50% 1.44% 1.68% 0.81% 0.67% 0.65% 1.20% 0
Slide 10: Allowance for Loan Losses and Loan Coverage
ALLL or ACL Loan Discount Total Loan Coverage ALLL as of 12/31/19 $ 68.2 $ 87.3 $ 155.5 CECL Day 1 Adoption Impact 151.4 (87.3) 64.1 ACL as of 01/01/20 $ 219.6 $ 0 $ 219.6 Q1 - 20 Provision, net of charge - offs 23.6 23.6 ACL as of 03/31/20 $ 243.2 $ 0 $ 243.2 Q2 - 20 Provision 26.7 26.7 Q2 - 20 Net
Slide 11: Credit Quality – Acquired Loans
Acquired Bank Year Acquired Loans Balance Acquired “Day 1” Loan Fair Value Discount $ “Day 1” Loan Fair Value Discount % Gross Charge - offs amount since acquired (1) (2) Gross Charge - offs % since acquired (1) Accretion Income since Acquired (1) Metropolitan 2013 $494 ($37) 7.6% $10 2.0% $37 Delta
Slide 12: Capital, Deposits, Liquidity and Investments
CAPITAL, DEPOSITS, LIQUDITY AND INVESTMENTS 12
Slide 13: Capital
$ in millions Total Common Equity Common Equity to Assets Tangible Common Equity (1) Tangible Common Equity to Tangible Assets (1) As of 12/31/19 $ 2,988 14.06% $ 1,805 8.99% As of 01/01/20, with CECL Day 1 adjustment 2,861 13.46% 1,678 8.36% As of 03/31/20 2,845 13.65% 1,658 8.44% As of 06/30/20 2,
Slide 14: Regulatory Capital Ratios
15.1% 11.4% 13.4% 13.7% 15.8% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 2016 2017 2018 2019 FY20 YTD 14.5% 9.8% 10.2% 10.9% 12.6% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 2016 2017 2018 2019 FY20 YTD 13.5% 9.8% 10.2% 10.9% 12.6% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.
Slide 15: Book Value & Tangible Book Value
(1) As of December 31, except for FY20 Q3, which is as of quarter end. (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. 15 Book Value & Tangible Book Value BOOK VALUE ($ IN MILLIO
Slide 16: Deposits
▪ Interest Rates – In March, 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 maturities,
Slide 17: Liquidity and Investment Securities
▪ Over $2.5 billion in Cash and Cash Equivalents as of 9/30/20 – Intentionally increased cash position in Q1 – In Q1, sold investment securities when the 10YR TSY was near historic lows – Increase in deposits ▪ Over $5 billion available in secondary borrowing sources of liquidity as of quarter end ▪
Slide 18: 3rd Quarter 2020 Earnings Highlights
3 rd 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 quarter ended September 30, 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
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 2020 SCHEDULED
Slide 22: Management's Outlook
Category Q2 - 20 Linked Quarter Change Q3 - 20 Linked Quarter Change Management’s Outlook Interest Income Down $17.6 million or 8.4% (Decrease was driven by the Q2 Fed rate cut, excess liquidity, and lower security portfolio balance) Down $11.9 million (Decrease was driven by the Q2 Fed rate cut, ex
Slide 23: Management's Outlook (continued)
Category Q2 - 20 Linked Quarter Change Q3 - 20 Linked Quarter Change Management’s Outlook Provision Expense Down $1.2 million Up $1.1 million Provision expense expected to be impacted by changes of the following: 1. Loan Growth – expect flat to decreasing 2. Charge - off’s – if not specifically rese
Slide 24: Branch Rightsizing Initiative
Branch Rightsizing Initiative 24 South Texas Branch Sale ▪ Announced on December 20, 2019 ▪ Closed on February 28, 2020 ▪ 5 Branches ▪ Deposits: $140 million ▪ Loans: $261 million ▪ Gain on sale: $5.9 million June 2020 Branch Closures ▪ 11 Branches closed on June 26, 2020 ▪ Estimated one - time char
Slide 25: Key Ratios Adjusted for PPP Loans & Additional Liquidity
Adjusted for PPP Loans Including PPP Loans Excluding PPP Loans (1) Loan yield 4.54% 4.70% Core Loan Yield 4.29% 4.43% Allowance for credit losses to total loans 1.77% 1.90% Stockholders’ equity to total assets 13.72% 14.38% Tangible common equity to tangible assets 8.65% 9.09% Regulatory tier 1 leve
Slide 26: Performance Trends
(1) As of December 31, unless otherwise noted. (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
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: Diluted EPS and Net Income
(1) LTM (Last Twelve Months) as of September 30, 2020 (2) 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 c
Slide 29: Corporate Profile and Company Highlights
CORPORATE PROFILE AND COMPANY HIGHLIGHTS 29
Slide 30: Company Profile
(1) Based on September 30, 2020 closing stock price of $15.86 and number of shares outstanding as of that date. (2) As of September 30, 2020. (3) Loan and deposit figures in billions. The balances include only those assigned to the division (The balances do not include o the r business units such as
Slide 31: 2020 Strategy
2020 Strategy Great Place to Work Exceptional Associate Experience Powerful Culture Inclusive Workplace Strong Leadership 2020 Strategy Operational Excellence Modern/Digital Systems Top-Tier Efficiency Sustainable Growth Ses Lines of Business ‘Across Geographies Increase Deposit Market Share Excepti
Slide 32: Selected Business Units
As of and for the nine months ended September 30, 2020 32 Selected Business Units ▪ $173 million nationwide credit card portfolio ▪ Loan yield (including fees): 13.1% ▪ History of excellent credit quality (1.75% YTD net charge - off ratio) TRUST ▪ Total Assets: $5.9 billion – Managed Assets: $3.6 bi
Slide 33: Next Generation Bank Program
33 Next Generation Bank Program WHY WHAT ▪ Allows better identification of opportunities for our customers and the ability to offer them proactively vs. waiting for our customer to ask for help ▪ Enhanced customer engagement and interaction across all channels, including digital ▪ Data will be more
Slide 34: 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. 34 Acquisitions Since 2013 2013 – 2014 Consolidated eight charters to one National to State Charter Conversion (Fed Member Bank) 2015 2016 2017 2019 $ I
Slide 35: 111 Years of Consistent Dividend History
$0.14 $0.16 $0.18 $0.20 $0.22 $0.24 $0.27 $0.29 $0.31 $0.34 $0.37 $0.38 $0.38 $0.38 $0.38 $0.40 $0.42 $0.44 $0.46 $0.48 $0.50 $0.60 $0.64 $0.68 $- $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 (1) Based on September 30, 2020 closing stock price of $15.86. (2) FY20 Q3 EPS of $0.60. (3) FY20 Q3 Core EPS o
Slide 36: 1 Year Total Shareholder Return
(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 (10/1/19 – 9/30/20) Note: Based on September 30, 2020 closing stock price of $15.86. Source: S&P Global Market Intelligence 36 1 Year Total Shareholder Return
Slide 37: 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 – 9/30/20) Note: Based on September 30, 2020 closing stock price of $15.86. Source: S&P Global Market Intelligence 37 Long - term Shareholder R
Slide 38: Investment Profile
Source: S&P Global Market Intelligence (1) LTM 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 $1.93 for 2020 and $1.73 for 2021. (3) Tangible book v
Slide 39: Branding Partnerships
BRANDING PARTNERSHIPS 39
Slide 40: Simmons Bank Open, Team Simmons & Additional PGA Activation
Simmons Bank Open, Team Simmons & Additional PGA Activation 40 A marquee showcase event, Simmons Bank Open, in Nashville, Tennessee. Tournament week includes substantial branding, Pro - Am outings and hospitality. Team Simmons Bank is comprised of four Korn Ferry tour golfers. Braden Thornberry of M
Slide 41: St. Louis Blues
41 St. Louis Blues |St. Louis, Missouri Our St. Louis market is excited to be a sponsor of the 2019 Stanley Cup champions, the St. Louis Blues hockey team, during th e 2 019 - 2020 season. As a part of the sponsorship, Simmons Bank signage is featured throughout Enterprise Center during hockey games
Slide 42: Dickies Arena: Simmons Bank Plaza & Pavilion
Dickies Arena: Simmons Bank Plaza & Pavilion | Fort Worth, Texas In October 2019, Simmons Bank became the naming rights holder to the Simmons Bank Plaza and Simmons Bank Pavilion at the newl y constructed Dickies Arena, a 14,000 - seat, multi - purpose venue in Fort Worth, Texas. The Simmons Bank Pl
Slide 43: Discovery Park: Exhibit & Simmons Bank Ag Center
43 Discovery Park: Exhibit & Simmons Bank Ag Center | Union City, Tennessee In December 2019, Simmons Bank was announced as a major sponsor and partner for Discovery Park of America’s permanent exhibit , “ AgriCulture : Innovating for Our Survival.” The exhibit is scheduled to open in fall 2020 in a
Slide 44: Simmons Bank Field
44 Simmons Bank Field | Pine Bluff, Arkansas In 2018, Simmons announced a $2.5 million gift to the University of Arkansas at Pine Bluff (UAPB) to fund athletics upgrades. Ad ding to our legacy of investing in our hometown and headquarters in Pine Bluff, Arkansas, the gift is the largest in UAPB hist
Slide 45: Simmons Bank Arena
45 Simmons Bank Arena | North Little Rock, Arkansas In October 2019, Simmons acquired naming rights to Simmons Bank Arena in North Little Rock, Arkansas. The arena is a beacon f or economic vitality and culture in our home state, all while being a destination for nearly 500,000 annual visitors. Simm
Slide 46: Simmons Tower
46 Simmons Tower | Little Rock, Arkansas At 42 stories and the tallest building in Arkansas, we have a multi - year arrangement with the building’s owner for the tower sig nage and we continue to operate a branch bank in the lobby. Coupled with our River Market building and Simmons Bank Arena signag
Slide 47: River Market Building
47 River Market Building | Little Rock, Arkansas We were pleased to acquire this beautiful building in the heart of the vibrant city of Little Rock and make it a regional hub ju st an hour from our corporate headquarters in Pine Bluff. We continue to increase our banking operations in new areas of t
Slide 48: Appendix
APPENDIX 48
Slide 49: 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 50: 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 51: Non-GAAP Reconciliations: Core ROA and ROTCE
51 Non - GAAP Reconciliations Q2 Q3 YTD YTD $ in thousands 2016 2017 2018 2019 2020 2020 2019 2020 Calculation of Core Return on Average Assets Net income available to common stockholders 96,790$ 92,940$ 215,713$ 237,828$ 58,789$ 65,885$ 185,119$ 201,897$ Net non-core items, net of taxes, adjustment
Slide 52: Non-GAAP Reconciliations: Non-interest Income to Revenue
52 Non - GAAP Reconciliations YTD $ 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$ 484,774$ Non-interest income 139,382 138,765 143,896 205,031 204,472 Total Revenue (GAAP) 418,588$ 493,695$ 696,448$ 806,784
Slide 53: 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 54: Non-GAAP Reconciliations: Core Net Interest Margin
54 Non - GAAP Reconciliations Q3 Q4 Q1 Q2 Q3 YTD YTD $ in thousands, except per share and share count 2016 2017 2018 2019 2019 2019 2020 2020 2020 2019 2020 Calculation of Core Net Interest Margin Net interest income 279,206$ 354,930$ 552,552$ 601,753$ 149,264$ 167,066$ 167,483$ 163,681$ 153,610$ 43
Slide 55: Non-GAAP Reconciliations: Book Value and Tangible Book Value
55 Non - GAAP Reconciliations Q3 $ 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$ 2,941,474$ Intangible assets: Goodwill (348,505) (842,6
Slide 56: Non-GAAP Reconciliations: Core Loan Yield
56 Non - GAAP Reconciliations Q2 Q3 Q4 Q1 Q2 Q3 $ in thousands 2019 2019 2019 2020 2020 2020 Calculation of Core Loan Yield Loan interest income (FTE) 178,122$ 179,971$ 193,402$ 187,566$ 177,168$ 163,379$ Total accretable yield (10,162) (9,322) (15,100) (11,837) (11,723) (8,948) Core loan interest i
Slide 57: Non-GAAP Reconciliations: Tangible Common Equity to Tangible Assets
Non - GAAP Reconciliations 57 Q3 Q4 Q1 Q2 Q3 $ in thousands 2019 2019 2020 2020 2020 Calculation of Tangible Common Equity to Tangible Assets Total stockholders' equity 2,547,071$ 2,988,924$ 2,845,400$ 2,904,703$ 2,942,241$ Preferred stock - (767) (767) (767) (767) Total common stockholders' equity
Slide 58: Non-GAAP Reconciliations: ACL / Loans
Non - GAAP Reconciliations 58 Q3 $ in thousands 2020 Calculation of ACL / Loans (exluding PPP Loans) Total loans 14,017,442$ Allowance for credit losses on loans 248,251 ACL / Loans 1.77% Total loans 14,017,442$ PPP Loans 970,488 Total loans, excluding PPP Loans (non-GAAP) 13,046,954 Allowance for c
Slide 59: Non-GAAP Reconciliations: Regulatory Tier 1 Leverage Ratio
Non - GAAP Reconciliations 59 Q3 $ in thousands 2020 Calculation of Regulatory Tier 1 Leverage Ratio Less Average PPP Loans Total Tier 1 capital 1,868,173$ Adjusted average assets for leverage ratio 20,652,454$ Average PPP loans (967,152) Adjusted average assets less average PPP loans (non-GAAP) 19,
Slide 60: Simmons First National Corporation
7 Simmons First National Corporation
Simmons First National — Q3 2020 Earnings Presentation on 6ix