Simmons First National Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Simmons First National Corporation Fourth Quarter Earnings Calling Podcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to do sales race conference call. Mr. Steve Massinelli, you may begin.

Good morning, and thank you for joining our Fourth Quarter Earnings Call. My name is Steve Massanelli, and I serve as Chief Administrative Officer and Investor Relations Officer at Simmons First National Corporation. Joining me today are George Macris, Chairman and Chief Executive Officer, Bob Fellman, Chief Financial Officer and Chief Operating Officer, David Garner, Executive Director of Finance and Accounting and Chief Accounting Officer, and Matt Redden, Chief Banking Officer. The purpose of this call is to discuss information and data provided by the company in its quarterly earnings release issued this morning and to discuss the company's outlook for the future. We will begin with prepared comments followed by a Q&A session. We've invited institutional investors and analysts from the equity firms that provide research on the company to participate in the Q&A session. All other guests in this conference call are in listen-only mode. A recording of today's call, including our prepared remarks and the Q&A session, will be posted on our website, SimmonsBank.com, under the Investor Relations page for at least 60 days. During today's call, we'll make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook. I remind you that actual results could differ materially from those projected in or implied in by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in the company's SEC filings, including, without limitation, the description of certain risk factors contained in the company's Form 10-K for the year ended December 31, 2019, the Form 10-Q for the quarter ended June 30, 2020, and the forward-looking information section of the company's earnings press release issued this morning. The company assumes no obligation to update or revise any forward-looking statements or other information. Lastly in this presentation, we'll discuss certain non-GAAP financial metrics we believe provide useful information to investors. Please note that additional disclosures regarding non-GAAP metrics including the reconciliation of these non-GAAP metrics to GAAP, are contained in the company's earnings press release and fourth quarter investor presentation, which are included as exhibits to the company's current report filed this morning with the SEC on Form 8K and available on the investor relations page of the company's website, SimmonsBank.com. I'll now turn the call over to George Makris.

Thanks, Steve, and welcome once again to our fourth quarter and year-end earnings call. I want to begin by thanking the 3,000 Simmons associates who persevered during an unprecedented time to produce excellent results for our company, but as importantly, sustained service for our customers. In our press release, we reported net income, $255 million for 2020. an increase of $17 million, or 7.2%, compared to 2019. 2020 diluted earnings per share were $2.31. Included in 2020 earnings were $9 million in net after-tax non-core items. Excluding the impact of these items, the company's core earnings were $264 million for 2020. Diluted earnings per share for the year were $2.40. Our return on average assets was 1.2%. Our return on average common equity was 8.7%. Our return on tangible common equity was 15.3%. And our efficiency ratio was 54.7% for 2020. Fourth quarter 2020 net income was $53 million, and diluted earnings per share for that period were 49 cents, essentially flat from 2019. Included in fourth quarter earnings were $9 million in net after-tax non-core items. Excluding the impact of these items for the fourth quarter of 2020, the company's core earnings were $62 million And core diluted earnings per share were 57 cents. As of December 31st, 2020, total assets were $22 billion. Our loan balance was $13 billion. And our deposit balance was $17 billion. Our capital remains very strong quarter end. Our total risk-based capital ratio was 17%. Our common equity tier one ratio was 13%. while our Tier 1 leverage ratio was 9%. At December 31, 2020, the ratio of stockholders' equity was 13%, and the ratio of tangible common equity was 8.5%. We have once again shared an extensive presentation on our website at www.simmonsbank.com, along with press release and financial data which gives much more detail regarding our quarterly results and other important information about our company. We clearly indicated that 2020 would be an adjustment period for Simmons. However, no one anticipated the pandemic and its effect on all of us. Despite the challenges associated with crisis, we're very proud of our accomplishments related to our objectives for 2020. Simmons is a diversified, core relationship financial institution. We have a great balance of small and large markets, the diversification of financial services, which meet a customer's needs for a lifetime and beyond, and a sense of commitment to the communities we serve. During 2020, in culminating with the anticipated sale of our four Illinois branches in early 2021, we exited markets in South Texas, Colorado, and Illinois in order to be able to focus even more on our core markets. We reduced our branch network by 20% through branch sales and consolidation of service locations, which has allowed us to decrease costs and more efficiently provide our products and services. During 2020, we also identified transactional relationships, including our energy portfolio and certain large CRE loans. that we chose to help move out of the bank, many of which were moved because we prefer to lead our credits under our underwriting guidelines, and to the extent we participate in the syndicated credit, we want to make sure we have a core banking relationship with the borrower. Our efforts created capacity in our commercial portfolio we did not have before. We continued the evolution of our digital bank, which allows our customers to bank with us when they want, where they want. Our customers, both consumer and commercial, continue to conduct more and more of their basic banking on our self-serve platforms. COVID threw us a curve, and I believe we hit it out of the park. During the year, we mobilized over 1,500 associates to work remotely. We provided over 8,000 PPP loans, totaling almost $1 billion, in support of 100,000 jobs for our customers, many of whom were new to Simmons. We proactively provided loan modifications to many of our customers, which prevented them from going deeper in debt during such uncertain economic conditions. We had a record year in our mortgage group, originating more than $1.3 billion in home loans. And we successfully completed our full exam cycle including our first CFPB exam. We integrated Landmark Bank and Simmons Bank during the beginning of the crisis and just as the economy was put on pause. That timing created unique challenges, but our folks sucked it up and made it through. We repurchased over 6 million shares of our stock, and we contributed $3 million to the Simmons First Foundation to establish a fund to provide grants for conservation projects throughout our service area. So where are we today? The short answer is we're right where we want to be. Our deposits and liquidity are at an all-time high, giving us capacity we have not seen since 2014. Our capital levels are at the top range for our industry. Our asset quality is stable and improving, even in these economic times. Our allowance for loan losses is at an unprecedented level. Our loan concentration levels are well below regulatory guidelines. Our regulatory compliance programs were validated during the year. Our profitability is excellent, and our loan pipeline is starting to rebuild. In March of last year, we could not have written a script that anticipated all that we've seen, but I believe today we're in a really good position. Our core loans and deposits will be the basis for our growth and success over time. Because of our diverse business model, we were able to manage all areas of the bank to produce outstanding results in 2020. We are certainly not a one-trick pony. I'm very proud of our team and look forward to a very promising 2021. I'll now turn the line over to our operator and invite questions. from our analysts in institutional investment.