Simmons First National Corporation · NASDAQ:SFNC
Simmons First National — Q2 2020 Earnings Presentation
66 slides from Simmons First National's earnings presentation, Jul 21, 2020
Slide 1: 2nd Quarter 2020 Investor Presentation
NASDAQ: SFNC 2 nd 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 contained in this presentation may not be based on historical facts and should be considered "forward - looking statements" within the meaning of the Private Securities Litigation Refor
Slide 3: COVID-19 Update
NASDAQ: SFNC COVID - 19 Update
Slide 4: COVID-19 Pandemic Response
January: ▪ Monitored information regarding COVID - 19 in China February: ▪ Held pandemic planning meetings ▪ Inventoried supplies, ordered additional laptops/IT equipment ▪ Communications to associates March: ▪ Announced temporary closure of 52 branches ▪ Closed lobbies, except by appointments ▪ Com
Slide 5: Consumer Digital Accounts and Transactions
Consumer Branch and Digital Trends (in thousands) Consumer Digital Banking 199 171 157 123 144 130 134 130 145 154 144 142 131 165 148 146 140 166 147 191 173 165 141 171 151 184 153 177 175 168 166 161 186 171 176 166 193 173 75 95 115 135 155 175 195 215 Weekly Number of Transactions Branch Digita
Slide 6: Liquidity and Investment Securities
▪ Over $2.5 billion in Cash and Cash Equivalents as of 6/30/20 – 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 7: Current Expected Credit Losses (CECL) Methodology
Methodology Current Expected Credit Losses (CECL) Methodology ▪ CECL replaced the incurred loss methodology with a life of loan concept effective January 1, 2020 ▪ Reserve factors are based on estimated probability of default and loss given default for each segment – The estimates are determined bas
Slide 8: 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 9: Loan Portfolio Summary, including PPP Loans
Loan Portfolio Summary, including PPP Loans $ in millions Balance $ % of Total Loans COVID - 19 Modification $ Past Due 30 days or more $ Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio Consumer - Credit Card 184 1% 2 1 - - 6.0% - Consumer
Slide 10: Loan Portfolio Summary – Excluding PPP Loans
Loan Portfolio Summary – Excluding PPP Loans $ in millions Balance $ % of Total Loans COVID - 19 Modification $ Past Due 30 days or more $ Classified $ Non - performing $ ACL % Unfunded Commitment $ Unfunded Commitment Reserve Total Loan Portfolio (1) Consumer - Credit Card 184 1% 2 1 - - 6.0% - Con
Slide 11: Loan Portfolio – Geographic Diversification
Outstanding Balance as of June 30, 2020 Total Loan Portfolio $14.6 Billion Loan Portfolio – Geographic Diversification 13.3% 9.3% 6.9% 6.2% 3.8% 3.6% 56.9% Dallas Fort Worth St. Louis Little Rock Oklahoma City Nashville All other markets 11
Slide 12: Select Loan Categories – Geographic Diversification
Outstanding Balance as of June 30, 2020 Real Estate - Construction Loans Commercial Real Estate - Commercial Real Estate – Single Family Select Loan Categories – Geographic Diversification 7.3% 7.3% 6.0% 5.6% 4.6% 4.4% 64.8% Columbia, MO Little Rock Fort Worth Dallas Nashville Jonesboro All other ma
Slide 13: Select Loan Types – Geographic Diversification
16.6% 15.2% 13.9% 7.3% 6.6% 2.9% 37.5% Dallas Springfield, MO Fort Worth Little Rock Nashville St. Louis All other markets 18.7% 10.8% 5.7% 4.6% 4.3% 4.0% 51.9% Dallas St. Louis Fort Worth Little Rock Wichita, KS Jackson, MS All other markets 15.5% 15.3% 12.7% 9.1% 4.9% 3.4% 39.1% Fort Worth St. Lou
Slide 14: Select Construction Loan Types – Geographic Diversification
25.0% 17.0% 16.1% 9.4% 9.4% 7.3% 6.5% 9.3% Little Rock Savannah, GA Houston Lafayette, LA Troy, MI Springfield, MO Dallas All other markets 24.6% 21.3% 6.3% 5.9% 4.5% 3.8% 33.6% Fort Worth Dallas Nashville Columbia, MO Denver Northwest AR All other markets Outstanding Balance as of June 30, 2020 Res
Slide 15: Energy Lending Update – Excluding PPP Loans
Principal Reductions: ▪ Q1 - 20 $78 million ▪ Q2 - 20 $83 million ▪ Anticipated for the balance of 2020: ▪ Q3 $77 million ▪ Q4 $124 million Outstanding Balance as of June 30, 2020 Energy Lending Update – Excluding PPP Loans (1) (1) Excludes $16.9 million of PPP loans to energy customers, as these lo
Slide 16: Agricultural Lending Update
▪ Most commodity prices are lower than 2019 and have been volatile – Soybean and corn prices are lower than last year – Cotton and rice prices have improved from this time last year ▪ Current crop conditions are good after a wet spring ▪ COVID - 19 resulted in lower exports and oversupply, putting m
Slide 17: Lending – SBA PPP Loans
Loan Balance Loan Balance ($ in millions) # of Loans Interest Rate SBA Fee Estimated SBA Fee $ Estimated Agent Fee $ Less than $350,000 $ 392 41% 7,286 93% 1.00% 5.00% $ 19.6 $ (1.5) $350,000 to Less than $2 million 355 37% 478 6% 1.00% 3.00% 10.7 (0.9) $2 to $10 Million 216 22% 62 1% 1.00% 1.00% 2.
Slide 18: Lending – COVID-19 Loan Modifications
Loan Balance (In millions) % Real Estate Rental and Leasing $ 1,404 45.0% Accommodation and Food Services 744 23.8% Health Care and Social Assistance 273 8.7% Construction 197 6.3% Retail Trade 141 4.5% Other Services (except Public Admin.) 63 2.0% All other categories 300 9.7% Total $ 3,122 100.0%
Slide 19: COVID-19 Commercial Loan Modifications by Division and Loan Type
7.2% 5.1% 10.6% 11.7% 33.8% 31.6% Arkansas Central AR Tennessee Western Missouri Texas COVID - 19 Commercial Loan Modifications By Division COVID - 19 Commercial Loan Modifications By Loan Type Commercial Loan COVID - 19 Modifications 74.4% 11.5% 9.0% 4.3% 0.8% CRE Commercial Construction Single Fam
Slide 20: 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 $
Slide 21: Management's Outlook
Category Q1 - 20 Linked Quarter Change Q2 - 20 Linked Quarter Change Management’s Outlook Interest Income Down $4.2 million or 2.0% Down $17.6 million or 8.4% (Decrease was driven by the Q2 Fed rate cut, excess liquidity, and lower security portfolio balance) Expect continued negative impact from: -
Slide 22: Deposit Interest Expense and Repricing
▪ 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 23: Management's Outlook
Category Q1 - 20 Linked Quarter Change Q2 - 20 Linked Quarter Change Management’s Outlook Provision Expense Up $21.2 million Up $781,000 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 reserved
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 4.84% 4.94% Core Loan Yield 4.52% 4.62% Allowance for credit losses to total loans 1.59% 1.70% Stockholders’ equity to total assets 13.3% 13.9% Tangible common equity to tangible assets 8.3% 8.7% Regulatory tier 1 leverage
Slide 26: Quarterly Review
NASDAQ: SFNC Quarterly Review
Slide 27: Company Profile
(1) Based on June 30, 2020 closing stock price of $17.11 and number of shares outstanding as of that date. (2) As of June 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 credit ca
Slide 28: Selected Business Units
As of and for the six months ended ended June 30, 2020 28 Selected Business Units ▪ $184 million nationwide credit card portfolio ▪ Loan yield (including fees): 13.2% ▪ History of excellent credit quality (1.98% YTD net charge - off ratio) TRUST ▪ Total Assets: $5.9 billion – Managed Assets: $3.6 bi
Slide 29: Financial Highlights – Quarterly Results
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 30: 2020 Financial Highlights
As of and for the quarter ended June 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 accre
Slide 31: 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 32: 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 33: Performance Trends: Diluted EPS and Net Income
(1) LTM (Last Twelve Months) as of June 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 costs,
Slide 34: Regulatory Capital Ratios
14.5% 9.8% 10.2% 10.9% 11.9% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 2016 2017 2018 2019 FY20 Q2 15.1% 11.4% 13.4% 13.7% 14.9% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 2016 2017 2018 2019 FY20 Q2 11.0% 9.2% 8.8% 9.6% 8.8% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 2016 2017 2018 2019
Slide 35: Book Value & Tangible Book Value
(1) As of December 31, except for FY20 Q2, 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. 35 Book Value & Tangible Book Value BOOK VALUE ($ IN MILLIO
Slide 36: Loan Portfolio
(1) As of June 30, 2020, unless otherwise noted. (2) Includes Illinois branches. (3) Includes credit card, indirect lending, and equipment finance (nationwide). (4) Source: S&P Global Market Intelligence SNL US Bank Index (data for FY20 Q2 currently unavailable), except for FY20 Q1 and “SF NC, exclu
Slide 37: 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. 37 Net Interest Income $112.0 $114.1
Slide 38: Next Generation Bank Program
38 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 39: 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. 39 Acquisitions Since 2013 2013 – 2014 Consolidated eight charters to one National to State Charter Conversion (Fed Member Bank) 2015 2016 2017 2019 $ I
Slide 40: 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 June 30, 2020 closing stock price of $17.11. (2) FY20 Q2 EPS of $0.54. (3) FY20 Q2 Core EPS of $0.
Slide 41: 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 (7/1/19 – 6/30/20) Note: Based on June 30, 2020 closing stock price of $17.11. Source: S&P Global Market Intelligence 41 1 Year Total Shareholder Return SFNC (24.8
Slide 42: 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 – 6/30/20) Note: Based on June 30, 2020 closing stock price of $17.11. Source: S&P Global Market Intelligence 42 Long - term Shareholder Return
Slide 43: 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 $1.68 for 2020 and $1.60 for 2021. (3) Tangible book v
Slide 44: 2020 Strategy
2020 Strategy 2020 Strategy to Work Excellence Sustainable Growth Exceptional Associate Modern/Digital Systems Experience ‘Top-Tier Efficiency Powerful Culture Inclusive Workplace Strong Leadership Expand Profitable Lines of Business ‘Across Geographies Increase Deposit Market Share Exceptional Cust
Slide 45: Branding Partnerships
BRANDING PARTNERSHIPS 45
Slide 46: Simmons Bank Open, Team Simmons & Additional PGA Activation
Simmons Bank Open, Team Simmons & Additional PGA Activation 46 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 47: St. Louis Blues
47 St. Louis Blues |St. Louis, Missouri Our St. Louis market is excited to be a sponsor of the reigning 2019 Stanley Cup champions, the St. Louis Blues hockey team, dur ing the 2019 - 2020 season. As a part of the sponsorship, Simmons Bank signage is featured throughout Enterprise Center during hock
Slide 48: 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 49: Discovery Park: Exhibit & Simmons Bank Ag Center
49 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 50: Simmons Bank Field
50 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 51: Simmons Bank Arena
51 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 52: Simmons Tower
52 Simmons Tower | Little Rock, Arkansas We have a multi - year arrangement with the building’s owner for the tower signage and we continue to operate a branch bank in the lobby. Coupled with our River Market building and Simmons Bank Arena signage we effectively created a highly visible brand in do
Slide 53: River Market Building
53 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 54: Appendix
APPENDIX 54
Slide 55: 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 56: 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 57: Non-GAAP Reconciliations: Core ROA and ROTCE
57 Non - GAAP Reconciliations Q1 Q2 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$ 77,223$ 58,789$ 103,293$ 136,012$ Net non-core items, net of taxes, adjustment
Slide 58: Non-GAAP Reconciliations: Non-interest Income to Revenue
58 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$ 331,164$ Non-interest income 139,382 138,765 143,896 205,031 132,621 Total Revenue (GAAP) 418,588$ 493,695$ 696,448$ 806,784
Slide 59: Non-GAAP Reconciliations: Efficiency Ratio
(1) 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 and non - core items. 59 Non - GAAP
Slide 60: Non-GAAP Reconciliations: Core Net Interest Margin
60 Non - GAAP Reconciliations Q1 Q2 YTD YTD $ in thousands, except per share and share count 2016 2017 2018 2019 2020 2020 2019 2020 Calculation of Core Net Interest Margin Net interest income 279,206$ 354,930$ 552,552$ 601,753$ 167,483$ 163,681$ 285,423$ 331,164$ Fully tax-equivalent adjustment 7,7
Slide 61: Non-GAAP Reconciliations: Book Value and Tangible Book Value
61 Non - GAAP Reconciliations Q2 $ 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$ 2,903,936$ Intangible assets: Goodwill (348,505) (842,6
Slide 62: Non-GAAP Reconciliations: Core Loan Yield
62 Non - GAAP Reconciliations Q2 Q3 Q4 Q1 Q2 $ in thousands 2019 2019 2019 2020 2020 Calculation of Core Loan Yield Loan interest income (FTE) 178,122$ 179,971$ 193,402$ 187,566$ 177,168$ Total accretable yield (10,162) (9,322) (15,100) (11,837) (11,723) Core loan interest income (non-GAAP) 167,960
Slide 63: Non-GAAP Reconciliations: Tangible Common Equity to Tangible Assets
Non - GAAP Reconciliations 63 YTD Q2 $ in thousands 2019 2020 Calculation of Tangible Common Equity to Tangible Assets Total stockholders' equity 2,469,513$ 2,904,703$ Preferred stock - (767) Total common stockholders' equity 2,469,513 2,903,936 Intangible assets: Goodwill (926,450) (1,064,765) Othe
Slide 64: Non-GAAP Reconciliations: ACL / Loans
Non - GAAP Reconciliations 64 Q2 $ in thousands 2020 Calculation of ACL / Loans (exluding PPP Loans) Total loans 14,606,900$ Allowance for credit losses on loans 231,643 ACL / Loans 1.59% Total loans 14,606,900$ PPP Loans 963,700 Total loans, excluding PPP Loans (non-GAAP) 13,643,200 Allowance for c
Slide 65: Non-GAAP Reconciliations: Tier 1 Leverage Ratio
Non - GAAP Reconciliations 65 Q2 $ in thousands 2020 Calculation of Regulatory Tier 1 Leverage Ratio Less Average PPP Loans Total Tier 1 capital 1,820,488$ Adjusted average assets for leverage ratio 20,742,824$ Average PPP loans (645,172) Adjusted average assets less average PPP loans (non-GAAP) 20,
Slide 66: Simmons First National Corporation
7 Simmons First _ National Corporation
Simmons First National — Q2 2020 Earnings Presentation on 6ix