Simmons First National Corporation (SFNC) Q3 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Simmons First National Corporation Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to David Garner. You may begin.

Good afternoon. I am David Garner, Investor Relations Officer of Simmons First National Corporation. We want to welcome you to our third quarter earnings teleconference and webcast. Joining me today are Tommy May, Chief Executive Officer; David Bartlett, Chief Operating Officer; and Bob Fehlman, Chief Financial Officer. The purpose of this call is to discuss the information and data provided by the company in our quarterly earnings release issued this morning. We will begin our discussion with prepared comments, and then we will entertain questions. We have invited institutional investors and analysts from the investment firms that provide research on our company to participate in the question-and-answer session. All other guests in this conference call are in a listen-only mode. I would remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed in this presentation may constitute forward-looking statements and may involve certain known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from our current expectations, performance or achievements. Additional information concerning these factors can be found in the closing paragraphs of our press release and in our Form 10-K. With that said, I'll turn the call over to Tommy May.

Thank you, David, and welcome, everyone, to our third quarter conference call. In our press release issued earlier today, Simmons First reported third quarter earnings of $6.8 million or $0.41 diluted earnings per share, which represents a $0.01 decrease over the same quarter last year. On a year-to-date basis, net income was $19.7 million or $1.16 diluted EPS, which is an increase of $0.06 or 5.5% from last year's EPS. Needless to say, our team has been very busy since our last conference call with 2 acquisitions. During the third quarter, on September 14, we announced the FDIC-assisted acquisition of Truman Bank of St. Louis, Missouri. As a part of this acquisition, we acquired $270 million in total assets at a discount of $28 million, with $229 million in deposits and $177 million in loans. Additionally, of the assets acquired, $108 million were covered under a loss share agreement with the FDIC. As a part of the transaction, we recognized a bargain purchase gain of $1.1 million and merger-related expenses of $815,000. As mentioned in this press release, this acquisition was the third of several that we anticipate making over the next several years, which is the reason we raised $71 million in additional capital in November of 2009. Obviously, our expansion into the St. Louis market complements our existing presence in Springfield and Kansas City, Missouri. Then just last week, on October 19, we announced our fourth FDIC-assisted acquisition with the purchase of Excel Bank in Sedalia, Missouri. As part of this acquisition, we acquired approximately $200 million in total assets. The final valuation will be completed in the fourth quarter, and more details will be announced during our normal earnings conference call in Q4. Needless to say, our fourth acquisition was strategic in that it complements the footprint we have been building in the Kansas and Missouri market. And we fully expect to pursue other opportunities to expand our footprint in that geographic region through other FDIC and/or traditional acquisitions going forward. To recap our FDIC acquisitions with 9 locations in Kansas and 9 locations in Missouri. First, in May 2010, we purchased Southwest Community Bank in Springfield, Missouri, with assets of $100 million, which was a good first step for expanding beyond the borders of Arkansas. In October of 2010, we announced the second acquisition with the purchase of Security Savings Bank in Olathe, Kansas, with $480 million in assets and 4 locations in the Kansas City metropolitan area, 3 in Salina, Kansas, and 2 in Wichita, Kansas. On September 14, 2012, we announced the third acquisition that I just mentioned, with the purchase of the $270 million in assets of Truman Bank, with 4 locations in the St. Louis MSA. Finally, our fourth acquisition was announced on October 19, in which we acquired approximately $200 million in assets of Excel Bank in Sedalia, Missouri, with locations in Sedalia, Green Ridge, Lee's Summit, which is Kansas City MSA, and Kirkwood, Missouri, which is the St. Louis MSA. On September 30, total assets were $3.4 billion, and stockholders' equity was $404 million. Our equity-to-asset ratio was a strong 11.8%, and our tangible common equity ratio was 10.2%. The regulatory Tier 1 risk-based capital ratio was 19.3%, and the total risk-based capital ratio was 20.6%. Both of these regulatory ratios remained significantly above the well capitalized levels of 6% and 10%, respectively, and ranked in the 84th percentile of our peer group, based on June 30 peer versus our September 30th actual. As we have previously reported, we continue to allocate our earnings, less dividends, to our stock repurchase program. Year-to-date, we have repurchased $14.7 million or approximately 608,000 shares at an average price of $24.16. We believe our stock and its current price continues to be an excellent investment. Because our repurchase plan was substantially completed during the quarter, our Board of Directors approved a new stock repurchase program, authorizing the repurchase of up to 850,000 additional shares of stock, which is approximately 5% of the shares outstanding. Beginning with the first quarter of 2012, we increased our quarterly dividend from $0.19 to $0.20 per share. On an annual basis, the $0.80-per-share dividend results in a 3.2% return based on our recent stock price. Net interest income for Q3 2012 was $27.9 million, which is an increase of $662,000 or 2.4% compared to Q3 2011. As discussed in previous conference calls, interest income on covered loans includes additional yield accretion recognized as a result of updated estimates of the fair value of the loan pools acquired in our FDIC acquisitions. In Q3, the actual cash flows from our covered loan portfolio exceeded our prior estimates. As a result, we recorded a $2.9 million increase to interest income. The increases in the expected cash flows also reduces the amount of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets. The impact to the noninterest income from Q3 2012 was a $2.7 million reduction. Thus, the net pretax benefit of these adjustments was $186,000. Noninterest income for Q3 '12 was $11.8 million, a decrease of $1.9 million compared to the same period last year. As we just discussed, there was a $2.7 million decrease due to the reductions of the indemnification assets resulting from increased cash flows expected to be collected from the FDIC covered loan portfolios. Additionally, Q3 2012 noninterest income, including the $1.1 million bargain purchase gain on Truman Bank acquisition. So obviously, it was very noisy. And normalizing for these items, noninterest income decreased $267,000 or 2%. The primary driver of this decrease was a reduction in credit card fees of $199,000 or 4.6%, and losses on the sale of ORE property of $424,000. Partially offsetting the decline was mortgage lending income, which increased $456,000 or 36.5% compared to last year. This improvement in mortgage lending was primarily due to lower mortgage rates, leading to a significant increase in residential refinancing volume. Moving on to the expense category. Noninterest expense for Q3 2012 was $28.7 million, an increase of $1.1 million compared to the same period in 2011. Included in Q3 '12 were $815,000 in merger-related expenses associated with the Truman Bank acquisition. Excluding the non-core items, noninterest expense for the quarter increased to just $271,000 or 1%. Obviously, we continue to have very good expense controls, coupled with our ongoing efficiency initiatives. Concerning our combined loan portfolio, we reported total loans, including covered loans, of $1.9 billion, an increase of $56 million compared to the same period a year ago. On a quarter-over-quarter basis, loans acquired in the Truman acquisition were $130 million net of discounts. FDIC covered loans from previous acquisitions declined $66 million, as we expected. And then legacy loans declined $8 million on a quarter-over-quarter basis. Let me spend a minute talking about the progress we are making in our legacy loan portfolio. First, on a quarter-over-quarter basis, while it is down $8 million, the decrease is primarily driven by a $14 million decrease in our student loan portfolio and a $7 million reduction in our credit card portfolio. In contrast, our commercial real estate increased $13 million, and our ag portfolio increased $7 million, all a positive in looking at our traditional loan pipeline. Now, looking at it on a linked-quarter basis, we were up $8.5 million, primarily driven by our commercial real estate and some seasonality in our ag lending, somewhat mitigated by student loans and C&I. Overall, while we're not at the level of organic growth that we expect and hope for in normal times, it does represent a significant improvement over the last 3 years. We continue to have a very good asset quality. As a reminder, acquired assets are recorded at their discounted net present value. Additionally, acquired assets covered by FDIC loss share agreements are provided significant protection against possible losses by the FDIC loss share indemnification. Thus, all acquired assets are excluded from the computations of the asset quality ratios for our legacy loan portfolio. The allowance for loan losses equaled 1.73% of total loans and approximately 230% of nonperforming loans. Nonperforming loans, as a percent of total loans, decreased from 79 basis points to 73 basis points when compared to last quarter. Because of the Truman acquisition, we reflect an increase of $6.5 million in nonperforming assets. The increase in nonperforming assets is related to the Truman Bank non-covered OREO that we acquired with a very conservative mark. So normalizing for the acquired OREO, our legacy nonperforming assets actually decreased some $1.7 million. Our legacy nonperforming assets to total asset ratio of 1.02% continues to compare very favorably to the industry and our peer group. The annualized net charge-off ratio for Q3 was 38 basis points and 40 basis points year-to-date. Excluding the credit cards, the annualized net charge-off ratio was only 27 basis points for both the third quarter and year-to-date. Our credit card portfolio continues to compare very favorably to the industry. In fact, our Q3 annualized net credit card charge-offs to loans decreased 15 basis points to 1.27% compared to 1.42% for Q2. Our loss ratio continues to be more than 325 basis points, below the most recently published credit card charge-off industry average of 4.56%. We are very conscious of the potential problems associated with high levels of unemployment, and thus we continue to allocate reserves accordingly. Primarily due to our improving asset quality and low charge-off rates, the provision for loan losses, while higher on a linked-quarter basis, remained lower than historical levels. For Q3, the provision was $1.3 million compared to $775,000 for a linked-quarter Q2 2012 and compared to $2.8 million for a quarter-over-quarter Q3 2011. Bottom line, we continue to experience good asset quality compared to the industry, highlighted by our low credit card charge-offs, allowing for lower-than-normal provision expense, efficiency-driven improvement in noninterest expense and, most importantly, an extremely strong capital base, with a 10.2% tangible common equity ratio and risk-based regulatory ratios that rank in the 84th percentile of our peer group. Simmons First is well positioned based on the strength of our capital, asset quality and liquidity to capitalize on opportunities that will come with increased loan demand, rising interest rates and/or additional acquisition opportunities. In closing, we remind our listeners that Simmons First experiences seasonality in our quarterly earnings due to our agricultural lending and credit card portfolio. Quarterly estimates should always reflect this seasonality. Now this concludes our prepared comments, and we would like to now open the phone lines for questions from our analysts and institutional investors. Now let me ask the operator to come back on the line and, once again, explain how to queue in for questions.

[Operator Instructions] We'll take our first question from Matt Olney with Stephens.

So it's pretty encouraging to see you deploy some of that excess capital into failed bank M&A. I guess you've got some pretty good market share now in St. Louis and Kansas City, 2 larger markets for you. What are your thoughts on how much scale you ultimately need in a market the size of Kansas City or St. Louis to ultimately succeed to kind of be where you want to be in those 2 markets?

Well, I think that if we look at the Kansas City and the St. Louis market, they both have about 4 -- about $300 million to -- total dollars.

Yes, there's probably about $200 million or so in Kansas City area and $250 million or so in the St. Louis area.

So I'll just say $300 million in each one of those 2 markets. Obviously, we think in those 2 markets that we would -- we'd like to see the number grow up as much as $1 billion in each one of the markets. Now that obviously means that we have further expansion that we would be interested in, in those markets. I don't think it takes that scale to make it a positive impact in our franchise on a go-forward basis, because we've always said that we like to see $300 million to $500 million in each one of our target areas; at least that in minimum. So I think that what we have, what we sort of anticipated as our -- just putting our toe in those markets, and now we'd like to expand that to a level between where we are, even up to a level of, say, $1 billion, ultimately, in each one of those markets.

And then...

David, if you'd like to add to that.

Matt, this is David Bartlett. Thanks for that question. I think Mr. May summarized it well. Needless to say, the way we get there is through expanding and growing our footprint as it exists, with bringing in new people. And Marty and our teams in both of those markets are doing that, and we're doing that opportunity. And then the second way is through acquisition, both FDIC and traditional. And we're working those routes as well.

I think that what David says is that current investments in each of those markets represent a long-term investment. As we've said before, when we do an FDIC acquisition, we do it on a go-forward piece. And so we expect to expand our presence in each one of those markets, and as David said, organically, as well as through acquisitions, and we expect to do that over a long period of time.

All right, that's helpful. And then secondly, I wanted to ask about -- just about the pipeline for bank failures in your target markets. It seems like it's improved in recent months. And I guess in your conversations with regulators or your observations, maybe, are they getting more aggressive dealing with problem banks or why do you think the number of bank failures in your target markets has increased in recent months?

David?

Matt, I think we're still seeing the same level of troubled banks in our market area that we have interest in acquiring. So I mean that's -- without a doubt, we're still seeing that same level. I think we've talked in here before about the potential that politics may be playing a little bit today with the number of closures -- that's strictly speculation, we really don't know, but that's a possibility. I think what we're hearing from the FDIC is that these failures were -- are going to continue to occur over the next 24 months, not only as we see these banks that are restricted with capital and hurting now their earnings with new regulatory requirements. But in some states, they've got to handle the TARP issues that are in these markets as well with banks that took TARP, and their dividends are quickly going from, what, 3% to 5% -- 5% to 9%. So with some states, they've got to start addressing those issues. The feedback we're getting from the FDIC is that they are centralizing their workforces into the Dallas market, but they continue to have to deal with these issues over the next 2 to 3 years.

And one of the things that I would point out is that while the FDIC may be centralizing some of their operations, that there's probably a 3-year lag from the time that they start downsizing this enormous body of people that they've had involved in liquidation. And so while we may start seeing some of that, I do not believe that the number of closures are going to change significantly in 2013, and probably not even in 2014, but -- and certainly, we are very optimistic about our chances of any of those closures that might be taking place in the market where we want to be. I think the last 2 acquisitions -- in fact, all 4 of the acquisitions showed that when we want to be aggressive and we need to be aggressive, we can be and we can win, and we can make it value added to the shareholders.

All right. And then just lastly, probably more of a modeling question, with the additional loss share assets now on the balance sheet, how should we think about the quarterly runoff of the covered loans from current levels?

Well, let me just kind of refresh everybody's memory of where we have been on assets acquired and maybe where we are now, and then from the standpoint of runoff, I don't think you can extrapolate those numbers. I think that early on, we were able to liquidate a large number of the assets, and that process has kind of slowed down some, some by design and some just by where we are in the -- at least with those portfolios. But as far as the total assets acquired from 2010 and 2012 -- David I think it's about $1 billion on those net assets acquired. And the level that we are right now is where?

About $0.5 billion.

$0.5 billion. And that $0.5 billion would include those outstanding loans in the OREO, and it would include the 2 new deals. The dollars that we have left in loss share out of Springfield and Kansas, I think, totaled about $100 million and...

$150 million.

$130 million to $150 million.

Yes.

A portion of that is what we call go forward and we think will stay with us. And then the assets that we have recently acquired is, in total dollars, around $300 million.

$350 million, almost $400 million, yes.

Almost $400 million. So again, over $550 million in assets that are still on the books, about 50% of what we have acquired. The quarterly runoff of that, I'll ask Bob to discuss on that.

Matt, based on our history, as Mr. May said, it's hard to tell from one market to another, but our modeling right now projects that by December of next year, we'll be about 33%, so about 1/3 will run off in that first year. That's when you work through the bulk of your non-performings and non-accruals and so forth. We would expect it to slow down in year 2, in 2014, maybe another 15%, 20% at that point, and then kind of levelizing off at that point.

And we'll go next to Dave Bishop with Stifel, Nicolaus.

Tommy, you touched upon the commercial pipeline and the growth on the commercial real estate side of the ledger, primarily on a legacy basis. I was curious if you could talk about the loan pipeline at the end of September relative to June 30 on the commercial real estate side?

I can't. On the commercial real estate, we were -- it was up about $12 million on a quarter-over-quarter basis, and that's about $7 million on a linked-quarter basis as of -- the bulk of that was in the area of -- that was all in the commercial real estate area. And then on just the commercial portfolio on a quarter-over-quarter, it's up $6.8 million. And then on a linked-quarter, it was up $6.3 million. So both of those were positive. Certainly, on the commercial, I would say the bulk of that would have been seasonal numbers [indiscernible] related. And then on the commercial real estate, we -- you'll remember back at the first of the year, we had a large commercial real estate borrower who took their loans to the secondary market as they then -- from time to time on a nonrecourse basis, they have started to build that back up. And so a large portion of that increase came from a set of that particular transaction. I will tell you that just from a pipeline standpoint that whether you're looking on a linked-quarter basis or whether you're just looking back last year, going back even through 2010, that what we have -- the peak of our total loan portfolio was at about $1.9 billion in September '08, and then growing slightly in '09, and then falling off significantly in September '10. And now, a year later, we've started to see that the -- finally, the pipeline has improved, but our overall legacy portfolio has started to see some improvement. And that's -- while it's a small amount quarter-over-quarter, linked quarter, it's still a big deal in our lives when you consider that we have seen some numbers as much as $100 million decrease on a quarter-over-quarter basis for the last 2 years. Dave, you there?

Got you. And then sort of circling back to the comment you made there in terms of the large share reborrow that -- went out for -- on a nonrecourse basis, the new market share -- and these are the St. Louis and KC markets are -- what are you seeing there from a competitive basis relative to maybe some of your legacy markets today? Is there a better opportunity to move market share? Or are terms and conditions, pricing a bit more attractive relative to something like the Arkansas market?

Yes. Let me ask Marty Casteel, who is our Executive Vice President, who will be the Chairman and CEO of Lee Bank, talk a little bit about the new markets opportunities there.

Dave, we've been in Kansas since October of 2010. And we have just recently been able to attract and hire a CRE specialist lender, someone who is very seasoned, experienced, has a great reputation in the market. And he is bringing us opportunities to look at loans that we have not previously had. I can tell you that as of today, we have approved, but not closed, just under $8.5 million in Kansas. We've got others on the table we're getting to look at. The structure, the credit quality, we're very happy with all of that. We'd also tell you that pricing is very competitive, but we are at least in the market, we're getting some opportunities, and some of those, we're going to be taking advantage of. And certainly, the opportunity -- opportunities do exceed what we've seen in most of our legacy markets, related to CRE primarily. This lender does understand our risk appetite and respects our conservative credit culture, but we're not finding that a very -- we're going to look at some good opportunities. In the St. Louis market, it's still too early to tell. We're still trying to get our arms around that market.

I think as far as Kansas and the ag area, did you mention that, Marty?

I didn't mention the Kansas ag area. We really haven't made much progress there, unfortunately. We're still working, but that's a slow process to move those borrowers that we're willing to finance to us. Most of them have good homes, and it's going to be a challenge to do that, but we're at least working on it. We've got a man in place, and we feel good about the future -- his future ability. I didn't mention Wichita, but I'll also say in Wichita, we're seeing some opportunities there also with some CRE lending, and we've got some things on the table in Wichita that are going to help us out. The Sedalia market that we've just acquired is a real good agri market, and it's a market that we are very confident that we'll be able to grow some business in. We got to get someone in place, a new team leader that will do that and there are some major opportunities in Sedalia for us.

Dave, the second part of that pipeline that we see in the -- our big banks here in Arkansas?

Yes. I think that we're starting -- in Northwest Arkansas, obviously, we're waiting for that engine to get revved up again, Dave, but we're starting to see stability in that market. And in visiting with our leadership this morning, they started talking about being a little bit cautiously optimistic, and they're starting to see some new real estate -- commercial real estate developments coming into review. And they're starting to see some new construction as well. So we're hoping that market is going to continue to -- or has bottomed out, starting to come up. As you know, we've talked about that market in the past on a piece of property that we took in that is in the OREO, that -- this isn't a great gauge, but it's a way that we can measure what's going on in the market. It's a hotel property that we have on our books and we're seeing nice occupancy increases and positive cash flows on it now. So that market is seeing some return. Our South Arkansas guys are continuing to attract, to bring in new farm business, and Central Arkansas is seeing some loan growth as well.

And we'll go next to Kyle Oliver with Raymond James.

The FDIC acquisitions coming up, but has the dialogue changed at all on open bank deals, yes, I mean, anything out there?

Kyle, we had a break up. Would you ask the question again, please?

Sure, yes, you talked a little bit about your FDIC deals going forward, but has the dialogue changed any with open bank transactions, and have you guys been talking to anybody on that front?

I'm going to ask David to just talk a little bit about the traditional side.

Kyle, that's a great question, and honestly, the dialogue that we're having is what we referred to; just planting some seeds and working toward what we think is going to be the next 2 years where those higher expectations from the better community banks are probably going to become more realistic. I would tell you they're still a little too high right now, a little too optimistic on what their banks are worth. But we're looking at our growth market opportunities where we had existing footprint and looking to see how we can leverage that now with traditional. And I will promise you there's focus -- as much focus on that as there is on FDIC acquisitions. As we see FDIC may be at its peak, declining, we're quickly moving up our traditional side and making contacts on banks that we think would be good partners.

Kyle, I would add, I think it's obvious that there are 2 types of traditional opportunities: one, with those that we are really interested in because of their footprint, because of the strategic value added, that it might be a plus; and then there are those that are challenged, that had some asset quality challenges that are more interested in finding a partner. And certainly, some of those we hear from, from time to time, and we never say never, but I think our focus is more on the strategic opportunity for us. Again, not that we wouldn't look at another one, but we are most interested on the strategic side as far as the traditional acquisition. And I think that what David has certainly been doing a month ago, where he said that probably an equal amount of our time is spent in that area, is again laying those foundations, creating those opportunities, opening some of those doors that we'll really see the results when this consolidation really gets underway, which we really think is going to be maybe a little bit earlier than we thought, but certainly, probably in 2013 and beyond.

Okay, great. And you may have spoken to this in the past, but is there any interest in acquiring any auxiliary business lines, like insurance or wealth management?

I think, certainly, when we announced our succession plans, one of the things that we said that we felt like, that leadership would have a high level of interest in is looking for expansion opportunities and new strategic businesses. And so I think the answer to that is, yes, that we believe that there are some opportunities in the noninterest income area. Now some of those are within our own operational units, such as in wealth management, that we think we have an infrastructure in the wealth management area that would support a significantly higher level of managed assets. And obviously, you can do that organically or you can do that through an acquisitive process. We're interested in both of those. I mentioned also a strong strategic business unit that we currently have in the credit card area, and certainly, we're interested in not only increasing the portfolio piece of that but the opportunity in the noninterest income. That, too, can be an acquisitive area, as well as organic. And then thirdly, the area that you mentioned, insurance, or other areas that we do not have a current presence that others have done well in, I think we're going to be very active in looking for those opportunities.

We'll go next to Derek Hewett of KBW.

Could you guys talk about how we should think about the margin given that most of the impact of the Truman and Excel deals will kind of flow through earnings next quarter?

Yes. We were at about 3, maybe 4, at quarter end, if I'm not mistaken. And I think that the basis-point impact next quarter, probably at 7 basis points -- I'd say, a 5- to 7-basis-point decrease based on seasonality. And then about a 12- to 14-basis-point -- maybe I should -- 12- to 14-basis-point increase relative to the 2 FDIC acquisitions. So a 5-basis-point net improvement. So rounding north of -- well, right in the 4% is where we would expect to be. So I would guess that would mean sort of on a go-forward basis that our expectations would be that, that 4% would sort of be the baseline, obviously, unless our loan pipeline goes south instead of going north. And then it will be adjusted north of that, based on seasonality, that occurs primarily in Q2 and Q3.

And most of the seasonality happened in Q3 when we come up, and Q1 will be our lowest, and Q2 will be a little low also.

Okay, great. And also, do you have the pro forma TCE, which incorporates the Excel deal?

Bob's going to pull that up right now.

Yes, when you put and take in -- right now, we're projecting it to probably be north of about 9.80%, a little right under 10%. And with those sale banks, you'll have some runoffs, so I'd say it won't be long before we're back over 10% with that. But I'd say, fourth quarter will probably be in the 9.70% to 10% range.

We'll go next Brian Hagler with Kennedy Capital.

We talked about the outlook for more FDIC acquisitions and live bank deals. One thing I don't think I've ever asked you guys is, would you look in maybe Kansas City and St. Louis to add groups of lenders that are maybe at some of these undercapitalized banks, that they're going to be sitting on their hands for the next couple years?

Brian, I think that's a great question. I think Marty mentioned that we have made one of those hires in the Kansas City area. And I think strategically, Marty believes that that's an integral part of the co-borrowing. You like to speak?

That's exactly right, Brian. If we can find the right lenders or the right piece of lenders, we certainly have an interest and we are looking. But like in Kansas City, they have to be people that we can integrate into our lending culture and that they understand that we're looking for long-term relationships and credit opportunities that are going to be within our expected asset quality culture. So we are looking, and I think there are some opportunities there. We're already running some traps along those lines.

And how hard is that to integrate them into your culture? I just don't know how much of a history you have of doing this, if there's any.

Well, in the Kansas City market, we've had -- we're seeing some success. We've actually seen a similar success in Wichita from the standpoint of getting people acclimated to what we're looking for and the types of structures we're looking for with credits. So it is very doable. I think, as a matter of fact, it's not that difficult. We just have to open dialogues initially and get all the cards on the table, and everybody knows the expectations going in.

I think that's a great point. We don't think you can just go out and hire somebody and then, because they're good at the interview, bring him in and think that we can necessarily put them through some type of training program and all of a sudden they're going to be indoctrinated and be able to execute that. I think that the hardest part is on the front end, and that's finding somebody that -- we're interested in their capacity as a lender matching up with our culture versus trying to take their portfolio, bring it to us. We want them to be somebody that knows the market, that has a good reputation in the market, that has been able to do good in good times, and those kind of people, they're already in tune with our culture because our culture is really not that different. It is conservative. And certainly, in the types of loans that we might make, but we would be looking at those in making the hire on the front end. So I think it's fairly easy to do once you find that person who has again that kind of history and that kind of reputation.

But in the end, it sounds like that opportunity -- there's an opportunity out there. And until you do, maybe get to see a few more failed bank opportunities in those markets. I'm sure there'll be more in St. Louis.

Well, I think the observation, Brian, is really good, and that is that we don't think we could go into Kansas City and St. Louis and bring some of our seasoned senior lenders and put them in that market and say, "okay, go get them." We can, but we don't think that's a part of being successful. So I think that finding the right person is, like I say, a big part of Marty's strategy of going forward and I think it will be successful.

[Operator Instructions] And at this time, we have no other questions. I'd like to turn the conference over to Mr. May for any additional or closing remarks.

As always, we thank all of you for being here, and we look forward to the opportunity to visit again at our next meeting. And we will -- at our next meeting, we will have the pleasure of having Mr. Makris here with us, and we'll probably give him the opportunity to make a few comments. We're excited about the -- our go forward. Thank you, and have a great day.

That does conclude today's conference. We thank you for your participation.