Simmons First National Corporation (SFNC) Q4 2013 Earnings Report, Transcript and Summary

Good day everyone and welcome to the Simmons First National Corporation Fourth Quarter Earnings Conference. Today’s conference is being recorded. At this time for opening remarks, I would like to turn things over to Mr. David Garner. Please go ahead sir.

Good afternoon. I’m David Garner, Investor Relations Officer for Simmons First National Corporation. We want to welcome you to our fourth quarter earnings teleconference and webcast. Joining me today are George Makris, Chief Executive Officer; David Bartlett, Chief Banking 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 could be found in the closing paragraph of our press release and in our Form 10-K. With that said, I’ll turn the call over to George Makris.

Thank you, David, and welcome everyone to our fourth quarter conference call. In our press release issued earlier today, Simmons First reported fourth quarter core earnings of $7.7 million, an increase of 4.7% compared to the same quarter last year. Diluted core EPS was $0.48, a 9.1% increase quarter-over-quarter. For the year ended December 31, 2013, core earnings were $27.6 million, or $1.69 diluted core EPS, 6.3% increase from 2012. During the quarter, we had non-core after-tax non-interest expenses of $4 million in merger related and branch right sizing costs. In November, we announced a completion of Metropolitan National Bank purchase. As a result of this acquisition, we recognized $3.9 million in after-tax merger related expenses. Additionally, during the fourth quarter, we closed one underperforming branch and recorded $66,000 in after-tax nonrecurring expenses related to the closure. Including these non-core expenses, net income for the fourth quarter was $3.8 million, or $0.23 diluted EPS. On a year-to-date basis, net income was $23.2 million, or $1.42 diluted EPS. On December 31, total assets were $4.4 billion, the combined loan portfolio was $2.4 billion and stockholders’ equity was $404 million. During the first quarter of 2013, we increased our quarterly dividend from $0.20 to $0.21 per share. On an annual basis, the $0.84 per share of dividend results in return in excess of 3.2% even after the recent market increase in our stock value. Over the last two years, we’ve increased our annual dividend by a total of $0.08, or 10.5%. During 2013, we repurchased approximately 420,000 shares at an average price of $25.89. As a result of the Metropolitan acquisition, we suspended the stock repurchase program during the third quarter. Net interest income for Q4 of 2013 was $39.6 million, an increase of $9 million, or 29.5% compared to Q4 of…

Thank you. (Operator Instructions) We’ll move first today to Brian Zabora with KBW. Brian J. Zabora – Keefe, Bruyette & Woods, Inc.: Thanks. Good afternoon.

Hello, Brian.

Hi, Brian. Brian J. Zabora – Keefe, Bruyette & Woods, Inc.: Yes, I have a question maybe to start with the margin. We have a full quarter of Metropolitan. Any sense of what that margin could be compared to the fourth quarter?

Brian J. Zabora – Keefe, Bruyette & Woods, Inc.: Great, that’s very helpful. And then your question, maybe a follow on accretion income. Thank you for putting the 2014 estimates in the press release. When we look out to the 2015 and beyond, it looks like accretion is still pretty sizable above $11.6 million, and what’s left on the FDIC, the indemnification expectations, we’ve been running out, it’s only about $5 million or $5.5 million. And this going to be – your accretion can be over a couple of years or is it going to be, I guess you see a lot more benefit maybe in 2015 that we do in 2014?

Brian J. Zabora – Keefe, Bruyette & Woods, Inc.: Great. Well, thank you for taking my questions.

Sure. Thank you, Brian.

(Operator Instructions) We’ll go next to Matt Olney with Stephens. Matt Olney – Stephens, Inc.: Hey, guys. How are you doing?

Hi, Matt.

Hi, Matt. How are you? Matt Olney – Stephens, Inc.: Hey, I’m doing well. Hey, I wanted to ask about your overall capital levels. I heard you mentioned the shelf filing that you expect and you deployed a big chunk of the excess capital of Metropolitan. How are you thinking about capital today relative to your overall M&A expectations?

So we don’t anticipate any deals coming down the pike or might come down the pike, this would require additional capital that you’re familiar with our history, and we really don’t like to cut it close. So, we want to be prepared in case we find an opportunity that has a cash component that would require us to go to the market and raise a little additional capital. But nothing is required at this point. So we don’t anticipate any deals coming down the pike or might come down the pike, this would require additional capital that you’re familiar with our history, and we really don’t like to cut it close. So, we want to be prepared in case we find an opportunity that has a cash component that would require us to go to the market and raise a little additional capital. But nothing is required at this point. Matt Olney – Stephens, Inc.: Okay.

At this point, I am just going to point out also, as George said on the deals we’ve been able to price at this point anything looking forward, the capital has been either neutral or accretive. Matt Olney – Stephens, Inc.: Okay.

So it will still have capacity in there if you would look forward. Matt Olney – Stephens, Inc.: And how should we be thinking about the timing of adding potentially another acquisition. Is there anything that prevented an acquisition the first half of the year or how you’re thinking about timing going forward?

Well, obviously, we have to talk to the regulators and make sure that they feel the same way we feel. But I would tell you that the Metropolitan transition has gone better than expected. I would tell you that the production folks have done a great job and our leadership in Milwaukee and Northwest Arkansas is really taking the ball in the runway with regard to production. Now we’ve got the conversion which can happen on March 21, that will be the really the last piece of the Metropolitan acquisitions and merger. And I feel very good about how that process is going, and I feel like very shortly after that we would be in a position to tackle another opportunity. Matt Olney – Stephens, Inc.: Okay, that’s helpful. And then as far as one of your other priorities over last year had been bringing on new lenders. Is that still a big priority of yours today, or has that really slowed down recently with the integration Metropolitan Bank, and what’s the outlook for bringing on new lenders in the future?

Matt Olney – Stephens, Inc.: Sure, that makes sense. Thanks, guys.

Thank you.

(Operator Instructions) And at this time, we don’t have any further questions. Mr. Makris, I’ll turn the conference back to you for closing remarks.

Okay. Thanks to everyone that called in and thanks to Brian and Matt for your questions and we look forward to another good quarter, and we will talk to you in about three months. Have a great day.

And that will conclude today’s conference. Again, we thank you all for joining us.