Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standby and welcome to the Simmons first National Corporation fourth quarter 2019 earnings Conference call.
At this time all participants are in listen only mode. After the speaker presentation, there will be a question answer session.
To ask a question during the recession, you would need to press star one on your telephone.
Please be advised that today's conference is being recorded.
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I'd like to hand, the conference over to Speaker today Mr., Steve Masonite Alley. Thank you. Please go ahead Sir.
Good morning, and thank you for joining our fourth quarter earnings call. My name is Steve mass Nobody in our service Chief administrative officer, and Investor Relations Officer Simmons first National Corporation.
Joining me today, or George Makris, Chairman and Chief Executive Officer.
Bob Fehlman, Chief Financial Officer in Chief operating Officer.
David Garner executive director of Finance, and accounting and Chief Accounting Officer, Marty Castillo Chairman and CEO Simmons Bank are wholly owned bank subsidiary and Matt Red and Chief Banking Officer of Simmons Bank.
The purpose of this call is to discuss the information and data provided by the company in our quarterly earnings release issued this morning and to discuss the company's outlook for the future.
Well begin were prepared comments, followed back here and I used session.
We've invited institutional investors and analysts from the equity from to provide research our company to participate in the queue and <unk> session.
All other guest in this conference call or in listen only mode.
Transcript of todays call, including our prepared remarks, and the cure nice session will be posted on our website Simmons bank Dot com under the Investor Relations page.
During today's call will 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 the forward looking statements due to a variety of factors.
Additional information concerning some of these factors is contained in our FCC filings, including without limitation. The description of certain risk factors contained in our most recent annual report on Form 10-K , and the forward looking information section of our 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 will discuss certain non-GAAP financial metrics, we believe provide useful information to investors.
Please note that the reconciliation of non-GAAP metrics to gap are contained in our current report filed this morning with the FCC on form 8-K and available on the Investor Relations page of our website Simmons Bank Dot com.
I'll now turn the call over to George Makris.
Thanks, Steve and welcome to our fourth quarter Am 29 team annual earnings Conference call I.
I would first like to welcome the associates from landmark bike it became part of the Simmons team on October 31st Landmark Bank operations are included in our results for the March November and December .
In our press release, we reported net income of $238 million for 29 team an increase of $22 million were 10.3% compared to 28 team.
Diluted earnings per share were $2 from 41 cents, an increase of nine cents or 3.9% from the previous year.
Included in 2019 earnings were $32 million a net after tax merger related early retirement program and branch right sizing costs.
Excluding the impact of these items the company's core earnings were $270 million.
29 chain, an increase of $49 million for 22.4% compared to 28 thing.
Core diluted earnings per share were $2.73, an increase of 36 cents or 15.2% from last year.
During 2019 total assets grew $4.7 billion to $21.3 billion at December 31st 29 team.
Our return on average assets was 1.3% while our core return on average assets was 1.5% for 29 thing.
Our efficiency ratio was 50.3% for the year.
Fourth quarter 2019, net income was $52.7 million and diluted earnings per share were 49 cents included in fourth quarter earnings were $18.4 million and net after tax non core items, excluding the impact these items the company.
Core earnings were $71 million for the fourth quarter of 2019 in core diluted earnings per share were 66 cents.
Our loan balance at the ended the quarter was $14.4 billion, an increase of $1.4 billion from last quarter and $2.7 billion from yearend 2018.
In December we entered into a branch purchase an assumption agreement to sell five branches in Austin, San Antonio entailed in Texas in conjunction with this pending sale approximately $260 million in loan balances were moved to loans held for sale.
Our loan pipeline, which we define as loans approved and ready to close was $394 million at the end of the quarter.
On a consolidated basis, our concentration of construction and development loans was 98%.
And our concentration of see our Eagle loans was 293% at the end of the quarter.
Total deposits at December 31st were $16.1 billion.
Increases of $2.6 billion from last quarter and $3.7 billion from year end 28 tank.
We also moved approximately $160 million in deposits to deposits held for sale in conjunction with the pending branch cycle.
Net interest income for the fourth quarter 2019 was $168 million, a 21.7% increase from the same period in 2018.
Accretion income from acquired loans during the quarter was $15 million of this amount, 52% was accretable credit Mark related and 48% was interest mark related.
Total accretion income for 2019 was $41 million.
For 2020 were projecting approximately $32 million of accretion income.
Net interest margin for the fourth quarter 2019 was 3.76% companies core net interest margin, which excludes all accretion was 3.43% for the quarter.
Non interest income for the year was $201.5 million, an increase of $57.6 million compared to last year.
Noninterest income for the fourth quarter was $45 million, an increase of approximately $10.4 million compared to the same period last year.
Increases in most categories for the quarter over quarter comparison, our due to the 2019 acquisitions of Landrum company and rely on spine.
Non interest expense for the year was $461 million core non interest expense was $418 billion, which represented an increase of $32 million when compared to 28 team.
Non interest expense for the fourth quarter 2019 was $142 million, an increase of $47 million over the same quarter last year.
Core non interest expense for the quarter was $117 million, which represented an increase of $23 million when compared to the fourth quarter of 28 tank.
The incremental increases in most operating areas are related to our 2019 acquisitions of Landrum company and reliance bye.
Software and technology costs increased approximately $11.4 million in 2019 over the prior year related to our next generation banking technology initiative.
We continue to see results from our energy being investments during fourth quarter, we launched our new mobile banking app as well as our new Treasury management platform.
These upgrades provide our customers are faster and more customized mobile experience our mobile banking users have increased 15% central rollout and the customer feedback remains very positive.
At the ended the year nonperforming assets were $92 million. This balances primarily made up of $71 million in nonperforming loans and $21 million and other non performing assets, which includes approximately $6 million enclose bank branches held for sale.
During 2019, our annualized year to date net charge offs total loans were 31 basis points.
The provision for loan loss was $43 million for the year and was $5 million for the fourth quarter.
Our capital position remained very strong throughout 2019.
At year end common stockholders equity was $3 billion.
Our book value per share was $26.30, an increase of 8.1% from last year, while our tangible book value per share was $15, an 89 cents an increase of 12.1% from the same period.
The ratio of tangible common equity to tangible assets was 9% at year end compared to 8.4% at the previous year.
Our total risk based capital ratio at December 31st was 13.6% our tier one leverage ratio was 9.6%.
At December 31st of the allowance for loan losses for legacy loans was $68 million with an additional 444000 dollar allowance for acquired loans.
The loan discount Mark was $87 million for a total of $155 million of coverage.
In our press release, we updated our projection for the expected allowance for credit losses upon completion of the seasonal accounting standard.
We currently estimate that Hcl will be approximately 1.35 to 1.4 or 5% of total loans upon adoption.
We have set our methodology and assumptions for the initial implementation.
However, we will continue to monitor in any adjustment to future reserve levels will be based upon the forecast of economic conditions at that time and the composition of our portfolio. Among other factors that will be subject to change.
From time to time, we tend to be focused more on specific metrics within our funnel financial performance and lose sight of the bigger picture results in retrospect, our performance in 2019 was remarkable.
We achieved an ROI of 1.33%.
And a core ROI of 1.51%, which exceeded our target of 1.50%.
We produced 10% return on common equity with an 18% return on tangible common equity and or 20%.
Core return on tangible common equity.
We operated at an efficiency ratio of 50.3%, which is within our target range of 50% to 55%.
Our construction and development concentration went from 105% at the end of the second quarter to 98% at year end, while our commercial real estate concentration will lowered from 333% at the end of the second quarter, 293% year end both.
The ratios now below the regulatory guidelines.
And importantly, our book value per share rose, 8.1%, our tangible book value per share rose, 12.1%. During the time, we completed two acquisitions, which added $4.9 billion and assets.
And we repurchased $10 million of our stock.
During 2020, we will continue to implement our technology initiatives, including the expansion of our digital offerings and adjust our business strategy to take advantage of our successful growth over the past few years.
I'm extremely optimistic about future Simmons bank.
This concludes our prepared comments, we'll now take questions from our research analysts and institutional investors operator, Please review the instructions and open the call for questions.
Thank you Sir as a reminder to ask a question you would need to press star one on your telephone.
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First the pound key please standby, while we compile documenting roster.
I sure first question comes from Brady Gailey from KBW. Please go ahead.
Hey, Thanks, good morning, guys.
Good.
You utilize 10 million of the 60 from a buyback point of view as you have $50 million.
Would you anticipate that 50 million to be repurchase fully in 2020.
Brady, it's very likely that we will.
We have us systematic program that we've put into place.
And we expect to continue it throughout 2020.
Obviously market circumstances can change and we could withdrawal.
Thats systematic buyback, but right now it's still in place we expect to continue.
Alright, and then from a loan growth perspective, it seems like.
This earnings season here, we're seeing a lot of weakness in loan growth from all the banks I know for you guys. We've talked about a low single digit level of loan growth. In 2020 is that's still the right way to think about loan growth for seven sector for this year.
Well.
Yesterday as it but we have to qualify that.
So as we take a look at each one of our divisions.
We see low to mid single digit growth numbers in their budgets.
However.
We have to remember that we have about $260 million, that's going to come off the books. When we complete this sale of the South Texas locations. We have also communicated our intention roll down our exposure in our energy portfolio by about another 200 million.
Dollars during the year hopefully during the first six months of the year. So we've got that $460 million are so to overcome.
Before we ever show any net growth.
I think the important thing here is that we're still very active in the marketplace, we're still able to originate lot loans.
We just need to understand that they're going to be other circumstances. When we take a look at the net results of our loan growth. It Matt you might have some more color.
George I think you hit that around the head.
Right.
Thank you.
Harder so the last couple quarters and speak to kind of where we're taking our portfolio. I think we'll have continued have really good relationship opportunities.
I think that fourth quarter speaks to us executing on everything we've talked about doing.
We had some nice runoff in our change that transactional CRD portfolio. We also had runoff in our energy portfolio as we're trying to execute but the same time, we had healthy production that was equally weighted between CRT and seeing that so I think George casualty right and I think we'll see that continuing.
Okay.
All right and then as it relates to the margin.
Clearly accretable yield levels are going to be coming down next year, especially versus the elevated for Q level. So I get that the reported.
See some downside, but stripping now accretable yield you look at the core net interest margin at 343.
Do you expect that to be stable and 2020 or could there be some additional downside to the Cornell.
Well there were some unusual fourth quarter circumstances related to delay in Rome acquisition. So a lot of the pressure on the core NIM in the fourth quarter was just a rebalancing of our earning assets.
And that will continue but I'm, let Bob give you a little more specifics about the core net interest margin yes.
As you know the fed dropped the rates at the end of October . So we did have some loan repricing in the quarter.
It was down probably on the legacy Simmons about 15 basis points on the other side of it we really work the deposits on the legacy side pretty hard this quarter.
We didn't really get the repricing done till the end of November , but we picked up about 18 19 basis points on cost of interest bearing deposits.
So we this is the first time, we saw little swing there that are interest bearing deposits went down a little more than our loans.
As George said for the quarter, though when you look at reported core NIM, we're down about 15 basis points about 10 of that is related to the landrum acquisition part of it is they have a lower loan deposit ratio and they have a lower.
Margin the other side of it is also they had about $1 billion in security portfolio and with purchase accounting you you Mark those market on day, one and we historically have liquidated the majority of that portfolio and reinvested at rates that are at that time, you get the same effect from purchase accounting it takes.
It's a period of time to reinvest a billion dollars and with all the pledging that you have to move in and out so for the quarter, we really didn't get reinvested till mostly towards the ended the quarter and a lot of that was even in us treasuries, which are obviously the lower yielding so it will take US a period of time to find the right investments to get.
Into our portfolio to build that back up but I would agree with what Georgia. We think this was an unusual quarter.
We would hope this is the low end of it will start building, we do have seasonably low into first quarter, we should have less impact because of our size.
But we would expect to have improvement and we have been working the deposit side pretty hard.
I mentioned one of the thing that that.
Affects our margin in the fourth quarter and it'll affect it again first quarter and that is our aggregate portfolio sit pay down over $50 million in the fourth quarter.
And it'll stay at a low level until we start.
Funding next year's crop production toward the end of the first quarter.
Those are usually good yielding loans and we take 50 million out at those higher yields that has a negative effect on margins.
Got it and I guess this is Marty his last earnings conference call Us MRT grades working with you over the years and wish you all the best in retirement.
Great. Thank you very much transition time is appropriate and we got a great team of bankers.
Yes.
I feel very good about where we ours banking our leadership, but thank you very much.
Thank you.
Our next question comes from David Feaster from Raymond James. Please go ahead.
Hey, good morning, guys.
I'd like to Echo Brady's comments, congrats Marty on on the retirement.
Enjoy that.
Okay.
But just wanted to start on.
Expenses I know the conversion for Landrum is slated for Presidents' day weekend.
I have any of the synergies been realized to date and I guess just looking forward.
Theres a lot of moving parts, but just inclusive of additional expenses from in GB and other.
Moving parts, how do you think about it you are non interest expense in 2020.
Well David Good question I'm, just going to go ahead and give you what we expect for this next year kind of on budgeting and we're going to look to hit these numbers are beat them.
But you know like you said a lot of noise in this quarter, we had two months of the landmark and Landrum company.
Our expectation in the first quarter it will be higher because of we haven't realized all the cost saves in historically, the first quarters higher with payroll taxes and other items that hit in that first quarter. So we would expect somewhere in the high the 124 to 125 million for noninterest expense for.
Q1.
For the balance of the year will be it will be pushing to get it down to about one in the low one twenties by the end by Q4.
So I would say 120 forward and first quarter and migrating down to 120 by the ended the year, that's going to be a major focus for US next year is where rebalancing some of the company here and some of it will be on the expense side and so those are target numbers going forward.
Okay, that's extremely helpful.
And just staying on the in GB I know, you've got a lot going and GBP 2.0.
I believe should be starting now could you talk about what's you're investing in.
Upcoming investments that you have in the expectations for potential improvements in efficiency from those.
David sure be glad to so our focus in 2020 from an end GB to standpoint is going to be next generation of our digital offerings. So we just rolled out our.
Digital IOP.
Great success in our new Chief Digital Officer, Alex Gorillas has done a fantastic job.
Our customers by simply self selected.
Their timing for conversion from our old apt, our new App.
That number even since we took a look at our.
Script for this call has grown even more we're now up 19%.
The number of users over where we were before conversion, which I think is excellent also mentioned that our users or logging in.
1.4 times a day.
And when you think about our ability to communicate with our customers now through our digital channels.
The opportunities we have here is a bank and that our customers have to hear from us on regular basis with opportunities.
Has grown exponentially over traditional methods of walking into a branch or even logging into online.
Thank you.
I will continue to integrate more products and services in our digital offering this year.
We're very proud that.
Our writing for our digital lap is 4.8 stars.
I will tell you 4.8 stars as hard to achieve for any.
App, especially a banking so we're extremely excited about future of our our digital banking and our focus 2020, primarily will be.
All those new initiatives now we still have some hangover from in GB 1.0, and that is to realize the efficiencies in revenue gains from our investment last year and that includes the utilization of our data warehouse.
We don't talk about that whole heck of a lot we had a lot of disparate systems with a lot information about our customers that we have now put together and our ability to utilize added marketing programs and product development is going to be.
Great benefit to us going forward from a revenue generation perspective, so a lot of times, we've talked about efficiencies associated with these investments we start thinking about expense cuts well that's part of it but the other side of the efficiency ratio is revenue generation, we believe that.
As our greatest opportunity associated with that.
We're also continuing to build additional infrastructure.
Within the by this year, we went to Outlink, which means that all of our processing is done by Jack Henry as third party and all that has been moved out of.
The Simmons organization.
It's faster more reliable and safer in that environment, We think thats a real benefit going forward. It's also very scalable. So we don't have to worry about as we grow whether or not we have the internal capacity to operate so all those things are beneficial to us 2020 will be.
We recognize the benefits of our initial investment and continuing to invest in our digital off.
As long answer to short question, sorry about that no terrific Thats, that's that's great color.
And last one from me just your thoughts on M&A I know you just closed landrum deal but.
Oh, you just have a very good pull from the market our conversation going and just what's your appetite for deal here.
Well, we're still very interested.
And we're having some good conversations as we've mentioned several times our focus is really move from.
Focusing on new markets to expanding in current markets. So the conversations are a little bit different today.
You know, they're going to be a little more dicey because end market.
Acquisitions require.
More.
Cutting if you will have the expense side ledger and that is a.
Part of the M&A business. So we think we're having some very productive conversations.
No we're not in any rush.
We want to see how seasonal effects, our cost of doing business going forward.
And many of the banks were talking to.
Aren't subject to see sold today. So it is an educational process also for us to let them know how merger will affect the combined company from a seasonal point so.
We are having really good discussions.
We're still very interested in expanding.
Our presence in the markets we serve today.
So we're optimistic about possibilities.
Terrific. Thanks, guys.
Thank you.
Thank you next question comes from Matt Olney from Stephens. Please go ahead.
Hi, Thanks, Good morning, guys.
Matt.
I want to go back to the discussion around loan balances and I know you've been working to remix and loan portfolio.
Exiting certain loans that you acquired that are lower yielding.
Im curious how the progress was in the fourth quarter and whats remaining and then related that I think you're also exiting some energy shared national credits.
Same thing there how would the progress in the fourth quarter and then what's remaining.
Hey, Matt This is Matt I'll I'll hit that one first I think we as I said earlier I think in the fourth quarter, we executed on that pretty well in the energy loans. We took those down 41 million and that was as is one quarter of.
Really good effort and I think you'll continue to see that as George said.
Really the bulk of that will happen.
Our two quarters of 2020 also we had really good plan payoffs in Saint Louis and in Fort worth.
We're pretty sizeable to the tune about 300 million.
That were planned non relationship that we knew with reliance are even with transactional.
Loans.
In the Texas region that went off and then you saw what from that you can see now were below the 100 300 at the corporate level. So hopefully that gives you a little color on kind of those planned.
Declines in the in the loan portfolio.
Let me, let me start I want to think about that because we're now below the regulatory guidelines and we expect expect a little more run off to give us a little more capacity, we are now back into game.
With regard to relationship CRT lending in certain categories. So we still have some concentrations in certain business areas that we.
I don't need to do any more of today.
But.
I guess way I'll look at DS is like a.
General manager Pro football team, who has a fixed roster, we're always looking to improve that and improvement for us is moving from transactional business relationship business.
So now we've got the capacity built down because of the results that Matt and his team has been able to a tiny tiny.
And and I would expect us be active in the marketplace.
Okay got it let me just actually I got these numbers right as far as the remaining loan run off I think on the energy Snick side. There was $180 million you on runoff and you got rid of 40, so call. It 140.
The remaining in that bucket is that right and then on the.
The more the lower yielding real estate loans.
I think you said previously about $200 million remaining runoff from that and I get those numbers right.
You are pretty close real close on the energy and I think we see another 160 coming off next year.
Over the next to it we will see you hope to quarters, maybe three quarters, but that is the plan there on the on the energy book on the reliance.
At St. Louis that's a little different.
Number I mean, we ran off 128 million in the third.
In the fourth quarter for for St. Louis specifically, yes, there is more planned runoff there, but I don't want to say that specific number that I think you said another 200 million right Matt Yes.
Yes, yes, it's around that number it did come in below that are above that.
As George said too we're also trying to sales in these customers.
To make a relationship as well so that could change in green as you will have the but does lower yielding loans higher.
Okay got it.
Hey, Matt just just to clarify too.
You do know we pulled this the south Texas loans are out of the loan balance as of the ended the year and they're in a classification as assets held for sale.
Yes, I did see that I wanted to drill down more on that I think the strategic move makes it makes sense you had a small presence in a very large metro market.
So it seemed like even need to add scale or exit I am curious beyond Texas.
It seems like there could be some more opportunities for some strategic exits where we're sitting and also had a smaller president and a larger market any commentary if we could see some some more.
Strategic exits in the future from Simmons.
Well, Matt I will say that everything's on the tight.
As I mentioned I think.
Last quarter may be recorded for that.
We're taking a look at our entire location strategy.
And it's not just from a profit loss standpoint, it's from a.
Priority of investment.
Fairness to the teams in certain markets.
If we're not going to invest in a marketplace.
Our teams, which we feel our top notch deserve the opportunity.
Elsewhere so.
I would tell you it is a constant evaluation for us.
You're right on pipe or are there other markets look like they should be considered in the same way that south Texas was considered I will tell you that we are doing that evaluation now but have not made any decisions at this point.
Okay. Thanks for that George and then going back to the operating expense discussion.
Bob I got the guidance next few quarters just to clarify.
On the deposit insurance looked like you had a credit there again in the fourth quarter are there any more credit remained they could offset that are all we can return to.
Our normalized run rate there and what is kind of normalized run rate now on deposit insurance expense.
Yes, Matt <unk> fourth quarter, we used up those credit so would not expect anymore. In next year. So you, obviously see a higher expense going forward. That's in the two and a half million dollar range on a quarterly basis that Dave that includes landmark genetics numbers, yes, so ballpark of about two and half million go on a go forward.
Got it.
Okay and then last question for me just on the thief fee income pretty impressive in the fourth quarter looks like part of that jump may have been from the acquisition, but it's definitely to parsed out so in any commentary on the run rate for fee as they go into 2020.
Well.
Of course, our mortgage group had a really good year last year, two we're not anticipating that same kind of revenue from that group.
2020, but of course interest rate movements could change that overnight, we weren't anticipating that this year either so.
Goes tell you how well we forecast here, but anyway.
With landmark bank, we picked up a lot of consumer.
Business I mean, they were a true community bank. So the phase that go along with those consumer accounts.
We'll be a real benefit to our organization.
Our our biggest opportunity is to increase our fee revenue business units across our entire footprint. So I would be personally disappointed if we saw fee income even be flat going forward in any category.
Our objective is to grow that fee income as we continued rollout our products and services across our footprint.
Matt just to give you a little color on landrum. The Ned the noninterest income for Q4 was about three and half million and that is for two months.
Should help you in some of your modeling.
Okay. So I guess outside of that in the fourth quarter. They would it must Benson some legacy Simmons growth and the fees because I think the jump was.
For the from Threeq to Fourq, he was with stronger than that.
Yeah, and then as George said, a big chunk of that came in in the mortgage area and some.
Health of our Trust group had a nice little kick in in the fourth quarter on closings and you never know when there's timing does the state might close out we've been plan on a lot of that to happen and we.
We're fortunate to have some of that in the fourth quarter I think that also help that number.
Okay got it and thought from me. Thank you.
Thanks, Matt.
Thank you next question comes from Gary Tenner from D.A. Davidson. Please go ahead.
Thanks, Good morning.
I guess.
Hey.
A couple of follow up some energy portfolio could you remind us what the amount of energy loans are that are currently on nonaccrual.
Yes, I can do that for you right now on non accrual is 19 million.
And that's just three specific borrowers.
Okay, and I know you're running off obviously, the shared national credit piece of that portfolio, but beyond that in terms of your kind of regular single relationships or your own relationships.
What's your interest level in that space today.
It's going to have to me we know we're in the markets.
Where we'll have some.
Really nice energy clients, but they have to be true relationship of the highest quality. So I think that will be at a small book, but a very.
Very good book.
Okay, and that's in terms of putting incremental new loans on the books.
Well I think you won't see incremental yes, there is that possibility. We're in the market every day, there's a possibility for sure that will attract a new client to the bank that fits our high quality credit standards in full relationship standards.
I think you any type of incremental growth I wouldn't see that come in for quite some time.
Gary I might also mentioned that in our relationship business, while we have some energy exposure for our customers.
Several of those customers are well diversified energy is only a portion.
What they do well.
Okay and just one other question for me.
As of the.
$32 million of accretion for 2020 is that purely scheduled maturities based on contractual.
Maturities of loans or is there any assumptions and visibility on on prepayments and that number.
The bulk of it is scheduled there are some prepayments that we did expect and as Matt said and some of our markets like Missouri that we do have in there, but generally speaking that's scheduled or known pay offs.
All right good thank you.
Thank you. Our next question comes from Darren Thompson from Baird. Please go ahead.
Good morning, Thanks for taking the questions.
Good morning, and wanted to follow up one follow up on asset quality and the provision if what do you expect robot quoted quarterly provision run rate as we move through 2020 based on your expectations for for core performance and then the Cecil day to impact.
Well the theory behind the seasonal impact is that our provision should cover two things one is charge offs during the quarter and the second is that loan growth during the quarter.
So.
Based on our ability to control charge offs, which we think is going to be.
Consistent with our history.
And net loan growth.
No.
I would say that our provision is going to be less than it was this year.
Rejected.
But it's going to be driven by those two factors charge offs and.
New loans.
Understood. That's helpful. And then maybe just a bigger picture question you touched on this a little bit but as you've expanded the footprint in the bank with deals in recent years.
Can you talk a bit more about the pace of progress you've made improving productivity for these acquired bag attraction moving beyond let me just broader banking relationships generally pleased with that process progress in.
How large this opportunity as you move in 2020 and beyond.
Well, we think the opportunities huge and let me just sort of.
Explain.
What's happened over the last three to four years.
We have ball several banks with different profiles products and services. So.
If we buy bank Thats, primarily a commercial real estate lender. What we'll find is I don't have a real wide spread consumer base. They don't have burst into agro lending and seeing eye lending and our objective has been to help diversify those kinds of loan portfolios.
We have recently established the business development group, whose primary responsibility is to help our geographic leaders.
Diversify and all for all of our products and services in a coordinated fashion in all our geographies and we think that potential is still.
Tremendous in our current footprint.
Thats one of the reasons that we have taken on the strategy will have and why we've grown into certain markets.
Wealth management being today.
A great example, where we have wealth management professionals.
We are very very success.
We are the largest trust operator in the state Arkansas almost by two times, we need to replicate that in markets outside of Arkansas. So that's going to be our real focus going forward is getting the people in place with the expertise to offer our products and services out.
Side traditional lending.
In these marketplaces, we think that potential square.
Appreciate the detail thanks for taking the question.
Sure.
Thank you.
As a reminder.
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Question press the pound key.
Our next question comes from Stephen Scouten from Piper Sandler. Please go ahead.
Hi, guys good morning.
Morning.
Hey, I'm curious a little bit just if you all have seen any attrition from your relationship managers lenders revenue producers and so forth just kind of given that there.
Seemingly some constraints.
On growth and portfolios, you're working down Im just wondering if you've had any issues with retaining people you want to retain.
Yes, Steve is Matt yet that's a good question we've seen some of that isn't that we expected we saw some of that in the Dallas Fort worth area, we've seen a little do that in Missouri, but not that much with our reliance conversion, but honestly had we look at data as an opportunity to the bank.
That now with our balance sheet in horsepower. It does bankers relationship managers like to do that we choose as opting to upgrade to be more well rounded complete commercial banker that selling all of our products and services to Georges point.
But we have seen some of that.
Okay.
And then.
Maybe falling back lower around M&A I know.
In years in quarters past, you've talked about Nashville as the market.
Target overtime and there was a fairly sizable transaction I was just announced there is that still a market. That's on your radar in our.
Or is it more kind of density within your existing markets from this point.
Well, certainly Nashville is a priority market for us.
Today, we have not found a successful merger partner.
We also have plan B, which is de novo growth in Nashville market.
We've had some good conversations with the some potential leaders in that market with some potential lenders in that market.
And to increase our physical presence.
We are well underway in evaluating that opportunity. So I think you'll see us take a proactive approach in growth in Nashville, whether it's through M&A or de Novo.
Okay.
Okay, Great and maybe just lastly from me and I don't know if I missed this in response to Brady's earlier question, but are you guys putting out an expectation for what you think accretion could be in 2020.
Yes, we announced that it was $32 million and that's scheduled mostly scheduled there are couple expected payoffs that are included in that.
Okay, great. Okay, guys. Thanks, so much for the color appreciate.
Okay. Thanks.
Thank you. This concludes our county session at this time I would like to turn the call over to George markets, Chairman and CEO for closing remarks.
Thanks, very much not just a wind this up.
Those of you own the call May have noticed in our press release day, we announced retirement plans for.
Marty Castillo prison, Simmons Bank, and Pat Berard General Counsel.
We'll take this opportunity personally think both of them for their outstanding leadership, and very unselfish commitment to the future Simmons Bank.
Been very instrumental in the success Weve sheet achieved since I've had the pleasure to work with both of them and actually for many years for that.
We've been playing in this day for sometime now unreasonably, we've announced other changes, which aligned with our strategic objectives.
Bob Fehlman has assumed the duties of Chief operating Officer. In addition to his responsibilities as our CFO . David Garner is assumed responsibility for all accounting and finance as well as containing tidal chief accounting officer, Pat newly has assumed responsibility for all operations groups continue to grow.
It's been named Chief risk Officer.
All three of these individuals from port to Bob.
Redness expanded his role as Chief Banking Officer. Currently manages most of all of our revenue producing business units, including our divisions, which were aligned this year to better distribute our portfolio of products and services throughout our footprint.
During the Captain has assumed the role of Chief strategy Officer. In addition to role as Chief people Officer I believe this great fit as our success certainly depends on our people.
Freddie Black and Sabrina Mcdonald together make up the leadership for our business development group.
Their knowledge and experience will help us develop a coordinated approach to growth in all markets and across all business units.
Pat Burrow has built our legal group from scratch and I'm proud to one of his first cars George Makris third we will assume the ROE of General counsel.
Steve mass nobody will manage a newly formed real estate division, which worked rationalized our location strategy and help ensure we take advantage of our size and scale you.
And certainly the addition of Alex Gorillas, our Chief Digital Officer has and will provide great opportunity not only for Simmons bank.
For our customers as we continue our commitment to expand our digital offerings and give our customers choices on how they access our products and services.
As I've said before I'm very optimistic about our future.
Thanks to all view for joining us today and this concludes our conference.
Ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.