Simmons First National Corporation · NASDAQ:SFNC
Simmons First National — Q1 2020 Earnings Presentation
62 slides from Simmons First National's earnings presentation, Apr 21, 2020
Slide 1: 1st Quarter 2020 Investor Presentation
NASDAQ: SFNC 1 st 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 Reform
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: ACTED ▪ Pandemic planning meetings ▪ Inventoried supplies, ordered additional laptops/IT equipment ▪ Communications to associates March: ESCALATED ▪ Announced temporary closure of 52 branches ▪ Closed lobbies, except by appoint
Slide 5: Liquidity
▪ Over $1.7 billion in Cash and Cash Equivalents as of 3/31/20 – Intentionally increased cash position – Sold investment securities when the 10YR TSY was near historic lows ▪ Over $5 billion available in secondary borrowing sources of liquidity as of quarter end ▪ Evaluating access to the Fed’s PPP
Slide 6: CECL Methodology
Methodology CECL – Adopted January 1, 2020 ▪ Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated into seg men ts ▪ Discounted Cash Flow utilized for majority of pool modeling ▪ Reserve factors are based on estimated probability of defa
Slide 7: 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 ( 1) 23.6 23.6 ACL as of 03/31/20 $ 243.2 $ 0 $ 243.2 Allowance for Loan Losses and Loan
Slide 8: Loan Portfolio Summary as of 3/31/20
(1) As of 4/16/20 Loan Portfolio Summary as of 3/31/20 Balance $ % of Total Loans COVID19 Modification $ (1) Past Due 30 days or more $ Classified $ Non - performing $ ACL under CECL % Unfunded Commitment Unfunded Commitment Reserve Total Loan Portfolio Consumer - Credit Card 189 1% 1 1 - - 4.2% Con
Slide 9: Loan Portfolio – Geographic Diversification
Outstanding Balance as of March 31, 2020 Construction Loans Commercial CRE Total Loans Loan Portfolio – Geographic Diversification 12.2% 9.1% 7.0% 5.0% 4.0% 3.3% 3.0% 56.4% Dallas Fort Worth St. Louis Little Rock Oklahoma City Nashville Columbia, MO All other markets $14.4 billion 9 24.8% 13.5% 5.7%
Slide 10: Select Loan Types – Geographic Diversification
16.6% 15.4% 13.9% 6.6% 6.1% 2.9% 2.0% 36.5% Dallas Springfield, MO Fort Worth Nashville Little Rock St. Louis Oakland, CA All other markets 17.1% 11.8% 7.4% 5.4% 3.9% 3.5% 3.1% 47.8% Dallas St. Louis Wichita Little Rock Fort Worth Columbia, MO Jackson, MS All other markets 15.6% 14.9% 12.9% 8.6% 4.9
Slide 11: Select Construction Loan Types – Geographic Diversification
22.5% 13.2% 12.1% 11.3% 8.5% 7.5% 5.8% 19.1% Dallas Jackson, MS Chattanooga, TN Kansas City Denver Midland, TX St. Louis All other markets 26.4% 18.9% 14.0% 10.3% 6.9% 6.0% 5.6% 11.8% Little Rock Savannah, GA Houston Troy, MI Dallas Lafayette, LA Springfield, MO All other markets 42.0% 16.4% 15.7% 1
Slide 12: Energy Lending Update
▪ Q1 - 20 payoffs: $78 million ▪ Payoffs anticipated for the balance of 2020: ▪ Q2 $33 million ▪ Q3 $163 million ▪ Q4 $18 million Outstanding Balance as of March 31, 2020 Energy Lending Update 12 79.0% 16.7% 4.1% Upstream Midstream Services By Industry Sector 8.8% 7.5% 7.4% 6.8% 6.6% 6.6% 6.4% 6.3%
Slide 13: Agricultural Lending Update
▪ Commodity prices are lower than 2019 and have been volatile ▪ COVID - 19 resulted in lower exports and oversupply, putting more pressure on commodity pricing ▪ Energy input cost is down considerably ▪ There has been a considerable amount of rainfall this year, resulting in delayed planting ▪ Many
Slide 14: Lending – COVID-19 Programs
Number of Loans Amount (In millions) Average Balance SBA approved 3,177 $ 749 $ 236k In - process (1) 1,992 349 175k Total 5,169 $ 1,098 $ 212k PPP Loans are assigned a risk weighting of zero percent SBA – PPP Loan Program as of April 16, 2020 COVID - 19 Loan Modifications as of April 16, 2020 Lendi
Slide 15: Loan Modifications & SBA PPP Loans by Geography and Loan Type
32.6% 22.1% 20.3% 10.8% 10.1% 4.1% Arkansas Texas Missouri Oklahoma Tennessee Colorado/Kansas 7.9% 6.2% 10.0% 13.0% 31.4% 31.1% 0.4% Arkansas Central AR Tennessee Western Missouri Texas Colorado-South TX COVID - 19 Loan Modifications By Geography COVID - 19 Loan Modifications By Loan Type Loan Modif
Slide 16: Capital, Including Impact of CECL
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% Regulatory Capital Ratios
Slide 17: Share Repurchase Program
Share Repurchase Program 17 Number of Shares Repurchased Total Authorized remaining Weighted Average Price per share 5,312,000 $19.47 $76,564,000 ▪ On October 17, 2019 , SFNC board of directors authorized a new stock repurchase program (“Program”) under which the Company may repurchase up to $60,000
Slide 18: Management's Outlook: Revenue
Category Q1 - 20 Linked Quarter Change Management’s Outlook Interest Income Down $4.2 million or 2.0% Expect continued negative impact from: - Additional variable rate loans repricing - Lower yields on investment securities and interest bearing cash accounts - Loan growth tempered (flat to down 5%)
Slide 19: Interest Bearing Deposit 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 quarter. ▪ Time Deposits – Rates were lowered during the latter part of the quarter. Based on maturities, we expect t
Slide 20: Management's Outlook: Expenses
Category Q1 - 20 Linked Quarter Change Management’s Outlook Provision Expense Up $21.2 million Increase was driven by impact of adopting CECL and the potential impact of COVID - 19 on the economy. Salaries and Employee Benefits Up $4.7 million or 7.4% The increase was impacted by a full quarter effe
Slide 21: Quarterly Review
NASDAQ: SFNC Quarterly Review
Slide 22: Company Profile
(1) As of January 17, 2020. (2) Based on April 9, 2020 closing stock price of $19.75 and number of shares outstanding as of that date. (3) As of March 31, 2020. (4) Expected. (5) As of closed date. (6) As of December 31, 2020. Company Profile BRANCHES BY STATE (1) TICKER: SFNC Founded Footprint Tota
Slide 23: Selected Business Units
As of and for the quarter ended March 31, 2020 23 Selected Business Units ▪ $188 million nationwide credit card portfolio ▪ Loan yield (including fees): 13.3% ▪ History of excellent credit quality (2.26% YTD net charge - off ratio) TRUST ▪ Total Assets: $5.8 billion – Managed Assets: $3.5 billion –
Slide 24: Financial Highlights Q1 2020
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 25: 2020 Financial Highlights
As of and for the quarter ended March 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 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 and ROTCE
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, loss on FDIC loss - share termination, donation to the Simmons Foundati
Slide 28: Performance Trends: Diluted EPS and Net Income
(1) LTM (Last Twelve Months) as of March 31, 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 29: Regulatory Capital Ratios
15.1% 11.4% 13.3% 13.6% 14.1% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 2016 2017 2018 2019 FY20 Q1 14.5% 9.8% 10.2% 10.8% 11.1% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 2016 2017 2018 2019 FY20 Q1 13.5% 9.8% 10.2% 10.8% 11.1% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 2016
Slide 30: Book Value & Tangible Book Value
(1) As of December 31, except for FY20 Q1, 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. 30 Book Value & Tangible Book Value BOOK VALUE($ IN MILLION
Slide 31: Loan Portfolio
(1) As of March 31, 2020. (2) Includes Illinois branches. (3) Includes credit card, indirect lending, and equipment finance (nationwide). 31 Loan Portfolio (1) TOTAL LOAN PORTFOLIO $14.4 billion Agriculture 1.3% Credit Card 1.3% Consumer 1.9% Construction 14.1% Single Family Residential 16.3% Commer
Slide 32: Credit Quality: Loan Portfolio
(1) Source: S&P Global Market Intelligence SNL US Bank Index (data for FY20 currently unavailable), except for FY20 Q1 and “SFNC, ex cluding credit card net - charge offs” figures obtained from internal sources. (2) For the period ended or as of December 31, unless otherwise noted. 32 Credit Quality
Slide 33: Net Interest Income
(1) Fully tax equivalent using an effective tax rate of 26.135%. (2) Core loan yield and core net interest margin exclude accretion and are non - GAAP measurements. See Appendix for non - GAAP reconcil iations. 33 Net Interest Income 2019 2020 Q1 Q2 Q3 Q4 Q1 Loan Yield (1) 5.53% 5.58% 5.47% 5.43% 5.
Slide 34: Purchase Accounting Accretion & Loan Discount
($ in Millions) 34 Purchase Accounting Accretion & Loan Discount HISTORICAL LOAN DISCOUNT BALANCE & ACCRETION INCOME 2020 SCHEDULED ACCRETION $7.2 $11.8 $5.7 $8.6 Q1 (Actual) Q2 (Estimated) Q4 (Estimated) Q3 (Estimated) FY20 (Estimated) $33.3 $112.0 $114.1 $77.2 $55.7 $35.5 $89.3 $49.3 $87.3 $69.2 $
Slide 35: 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. 35 Acquisitions Since 2013 2013 – 2014 Consolidated eight charters to one National to State Charter Conversion (Fed Member Bank) 2015 2016 2017 2019 $ I
Slide 36: Subordinated Debt Offering & Kroll Rating
(1) The ratings provided by KBRA are subject to revision or withdrawal by KBRA at any time and are not recommendations to buy, se ll or hold these securities. Each rating should be evaluated independently of any other rating. 36 Subordinated Debt Offering & Kroll Rating SENIOR UNSECURED DEBT SHORT -
Slide 37: 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 April 9, 2020 closing stock price of $19.75. (2) FY20 Q1 EPS of $0.68. (3) FY20 Q1 Core EPS of $0.
Slide 38: 5 Year Total Shareholder Return
(35.0%) (30.0%) (25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 65.0% 70.0% 75.0% Dividend + Stock Appreciation (3/31/15 – 3/31/20) Note: Based on March 31, 2020 closing stock price of $18.40. Source: S&P Global Market Intelligence 3
Slide 39: Long-term Shareholder Return
(95.0%) (75.0%) (55.0%) (35.0%) (15.0%) 5.0% 25.0% 45.0% 65.0% 85.0% 105.0% 125.0% 145.0% 165.0% 185.0% 205.0% 225.0% 245.0% Dividend + Stock Appreciation (12/31/07 – 3/31/20) Note: Based on March 31, 2020 closing stock price of $18.40. Source: S&P Global Market Intelligence 39 Long - term Sharehold
Slide 40: Investment Profile
(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 $2.03 for 2020 and $2.04 for 2021. (3) Tangible book value (which excludes goodwill and other
Slide 41: Next Generation Bank Program
41 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 42: Branding Partnerships
BRANDING PARTNERSHIPS 42
Slide 43: Simmons Bank Open, Team Simmons & PGA Activation
Simmons Bank Open, Team Simmons & Additional PGA Activation 43 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 44: St. Louis Blues
44 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 45: 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 46: Discovery Park: Exhibit & Simmons Bank Ag Center
46 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 47: Simmons Bank Field
47 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 48: Simmons Bank Arena
48 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 49: Simmons Tower
49 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 50: River Market Building
50 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 51: 2020 Strategy
2020 Strategy 2020 Strategy e- Great Place to Work Operational Excellence Sustainable Growth Exceptional Associate Modern/Digital Systems Expand Profitable Experience Top-Tier Efficiency Pisa creat, Powerful Culture Increase Deposit Inclusive Workplace Market Share Strong Leadership Exceptional Cust
Slide 52: Appendix
APPENDIX 52
Slide 53: Non-GAAP Reconciliations
53 Non - GAAP Reconciliations Q1 Q1 $ in thousands 2016 2017 2018 2019 2019 2020 Calculation of Core Return on Average Assets Net income available to common stockholders 96,790$ 92,940$ 215,713$ 237,828$ 47,695$ 77,223$ Net non-core items, net of taxes, adjustment 4,619 26,109 4,520 31,738 1,381 (3,
Slide 54: 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 55: 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 56: 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. 56 Non - GAAP
Slide 57: Non-GAAP Reconciliations: Core Net Interest Margin
57 Non - GAAP Reconciliations Q1 Q1 $ in thousands 2016 2017 2018 2019 2019 2020 Calculation of Core Net Interest Margin Net interest income 279,206$ 354,930$ 552,552$ 601,753$ 135,995$ 167,483$ Fully tax-equivalent adjustment 7,722 7,723 5,297 7,322 1,601 2,305 Fully tax-equivalent net interest inc
Slide 58: Non-GAAP Reconciliations: Book Value per Share
58 Non - GAAP Reconciliations $ in thousands, except per share and share count 2016 2017 2018 2019 FY20 Q1 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$ 2,844,633$ Intangible assets: Goodwill (348,505) (842,6
Slide 59: Non-GAAP Reconciliations: Non-interest Income to Revenue
59 Non - GAAP Reconciliations Q1 Q1 $ in thousands 2016 2017 2018 2019 2019 2020 Calculation of Non-interest Income to Revenue Net Interest Income 279,206 354,930 552,552 601,753 135,995 167,483 Non-interest income 139,382 138,765 143,896 205,031 34,792 82,394 Total Revenue (GAAP) 418,588 493,695 69
Slide 60: Non-GAAP Reconciliations: Core Loan Yield
60 Non - GAAP Reconciliations Q1 Q2 Q3 Q4 Q1 $ in thousands 2019 2019 2019 2019 2020 Calculation of Core Loan Yield Loan Interest Income 159,440$ 178,122$ 179,971$ 193,402$ 187,566$ Total Accretable Yield (6,660) (10,162) (9,322) (15,100) (11,837) Core Loan Interest Income 152,780 167,960 170,649 17
Slide 61: Non-GAAP Reconciliations: Tangible Common Equity to Tangible Assets
Non - GAAP Reconciliations 61 YTD Q1 $ in thousands 2019 2020 Calculation of Tangible Common Equity to Tangible Assets Total common stockholders' equity 2,988,157$ 2,844,633$ Intangible assets: Goodwill (1,055,520) (1,064,978) Other intangible assets (127,340) (121,673) Total intangibles (1,182,860)
Slide 62: Simmons First National Corporation
Simmons First National Cor
Simmons First National — Q1 2020 Earnings Presentation on 6ix