Q4 2021 Simmons First National Corp Earnings Call

January 27, 2022

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Good day, and thank you for standing by and welcome to the Simmons First National Corporation fourth quarter 2021 earnings call and webcast. 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 will need to press star one.

One on your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Ed Billick. Please go ahead.

Good morning, and thank you for joining our fourth quarter earnings call. My name is Ed <unk> director of Investor Relations at Simmons First National Corporation. Joining me today are George Makris, Chairman and Chief Executive Officer, Bob Fehlman, President and Chief.

Waiting officer, J, Brogdon, Chief Financial Officer, and Treasurer, Steve Math, Nally, Chief administrative officer, Matt Reddin, Chief Banking Officer, and David Garner Chief Accounting Officer.

Purpose of our call is to discuss the information and data provided by the company in its quarterly earnings release issued this morning and to discuss the company's outlook for 2022.

We will begin with prepared comments followed by a Q&A session. We have 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 on 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 Simmons bank Dot com under the Investor Relations page for at least 60 days.

During today's call, we will make forward looking statements about our future plans goals expectations estimates projections and outlook.

I'd remind you that you should not place undue reliance on any forward looking statement.

Results could differ materially from those projected in or implied by forward looking statements due to a variety of factors additional information concerning concerning some of these factors is contained in the companys SEC filings, including without limitation. The description of certain risk factors contained in the company's Form 10-K for the year ends.

December 31, 2020, and the forward looking information section of the company's earnings release issued this morning.

The company assumes no obligation to update or revise any forward looking statements or other information.

Finally in this presentation, we will discuss certain non-GAAP financial metrics, we believe provide useful information to investors additional disclosures regarding non-GAAP non-GAAP metrics, including the reconciliation of these non-GAAP metrics to GAAP are contained in the company's earnings release and fourth quarter Investor presentation, which.

Included as exhibit to the company's current report filed this morning with the SEC on form 8-K and available on the Investor Relations page of the company's website Simmons Bank Dot Com I will now turn the call over to George Makris.

Thanks, Ed and welcome once again to our fourth quarter 2021 earnings call I'd.

I'd like to begin my comments by can be associated to Simmons bank.

For pollution, a record earnings year in 2021, despite the operational challenges associated with the pandemic.

Artificial economy created over the past two years earlier earlier today, we announced earnings of $271 million for the full year 2021, 6% increase over 2020.

We also reported diluted earnings per share of $2 46.

The increase of 6% from the previous year.

Other important financial information for the fourth quarter and for the full years available in our press release and our Investor presentation published earlier today and are available on the Investor Relations page of <unk> Dot com.

We simultaneously acquired and integrated landmark community Bank and Trust Bank.

Our Memphis based.

<unk> of last year. So their activity is included in our fourth quarter results. The acquisition of <unk> has significantly enhanced our size and scale in Tennessee, where we are now right.

Florida Spike post all deposit market share.

Shortly after we completed these acquisitions, we announced a definitive agreement to acquire a spirit of Texas Bancshares.

Strengthening our Texas franchise has been a strategic priority and partner will spur not only enhances our current footprint, but also establishes a platform for growth in Houston, Austin, San Antonio and College station.

Net income for the fourth quarter was $48 2 million and diluted earnings per share were <unk> 42 soon.

Included in our results for the quarter was $11 $3 million after tax noncore items, primarily related to the acquisitions of landmark in trial.

Excluding these items core earnings were $59 5 million or 52, saying that's on a diluted per share basis.

It is remarkable that we closed and integrated two acquisitions repurchased approximately two 6 million shares of our stock contributed $2 $5 million to our foundation.

And grew our tangible book value per share by 2% during the fourth quarter alone.

The positive momentum we began to see in terms of loan growth during the third quarter of 2021 accelerated in the fourth quarter.

Newly funded loans in the quarter totaled $2 6 billion.

Our commercial loan pipeline rose for the fifth consecutive quarter.

$2 3 billion up 56% on a linked quarter basis.

Growth was broad based throughout our community and metro markets, as well and our new as well as in our new corporate banking.

We're also encouraged by our level of unfunded commitments considered a leading indicator of loan growth, which rose to $2 9 billion.

In the fourth quarter, a 31% increase on a linked quarter basis.

We believe this positive momentum combined with new loan producers we've added in 2021.

And continue to actively recruit.

Positions us well in terms of loan growth in the year here.

During the fourth quarter of 2021.

Purchased two 6 million shares of our stock in January 2020 to substantially exhausted the remaining capacity under our existing share repurchase program.

As a result board of directors authorized with mood $175 million share repurchase program.

<unk> quarterly cash dividend, 6% to 19 <unk> per share.

In closing the significant investments we've made in technology, particularly in terms of expanding our digital capabilities are producing solid results and will allow us to continue to help meet the ever changing needs of our customers, while improving the speed and efficiency with which we.

We deliver products and services to our customers.

The investments we've made in M&A represent a meaningful geographic transformation.

With an emphasis on building scale in high growth markets.

Differently enhance our growth profile.

Given our successful track record, we're confident in our ability to seamlessly convert and integrate spirit later this year.

Capitalize on the tremendous growth opportunity this acquisition presents.

As a result, we entered the year with positive momentum and are confident in our ability to respond to the ever changing landscape challenging economic environment.

We believe we're well positioned throughout our footprint to capture growth opportunities that will lead to another successful year.

This concludes our prepared comments I'll now turn the line over to our operator and invite questions from our analysts and institutional investors.

As a reminder to ask a question you will need to breath star one on your telephone.

Withdraw your question Brett <unk>, please standby, while we compile the Q&A roster.

Our first question comes from the line of David Feaster from Raymond James Your line is now open.

Hey, good morning, everybody.

Good morning, David.

I just wanted to touch on the growth outlook I appreciate the commentary in your prepared remarks, I mean, it's clear originations are improving.

Made a bunch of new hires it sounds like the pipeline is still good.

And it sounds like just looking at the guidance, we're expecting kind of a growth rate to accelerate throughout the year I'm just curious kind of some of the puts and takes as you as you as you look at what's happening in payoffs and Paydowns and everything how do you think about the pace of growth and what gives you confidence there.

We're going to see acceleration going forward.

Hey, guys, Matt I'll take the first stab at that others can join in.

We've talked about this every quarter, we were looking for that inflection point.

Reduction really ramped up and we saw that absolutely in the fourth quarter and just kind of give you a key point even in December we closed $1 billion in new originations and so we really we saw an inflection point in December now January is always an interesting month, and where where that looks what happens in January .

But as an overall pipeline as George comments were earlier, it's our pipeline to $2 4 billion today and still growing so well.

What we see from a production standpoint that looks really good.

Our headwinds are less and less will there be some early payoffs, yes, but all indicators look too.

Drew net positive accelerated loan growth this year.

Im glad to answer any specifics around certain areas you can kind of let me know where you would like me to dive and I'm glad to.

I guess, maybe just just kind of just some details on where you see looking at the pipeline and the growth opportunities I guess, where do you see the most upside where do you how is the pipeline mix changed.

And just any commentary on new loan yields and how pricing has trended just are you seeing any pricing improvement just given the steepening of the curve.

Just reiterating that the new date.

Absolutely I would say only in the last couple of weeks as we're all very focused on where rates are moving and what long term rates are showing we're starting to try that we're starting to build that into our term sheets and we're starting to pick up a little bit, but as we finish the year a lot of that pipeline.

Also important to point out that from a asset quality standpoint, we were very conservative nature and those are great assets that are going on our books, but we're starting to see a sign of where rates are moving and we can put that into our new deals.

Where we're seeing the opportunities.

At the top of the last Texas really rebounded nicely for us in the fourth quarter and their pipeline is very strong. We're also seeing some real nice pickups in our production showed that in the fourth quarter with the acquisition of landmark and try up we had some nice production in Memphis and Nashville.

The city is still a great market for US northwest, Arkansas has been a real shining star for Us in 2021, I think that will happen in 2022 and all of our <unk>.

Comment, we're seeing now and you can see in our deck that corporate our corporate banking group and a lot of the pipeline increase there as new pipeline from our commercial financing we've talked about that team, but we said that it won't be.

Low growth because we wanted to get them fully integrated and doing it the right way so youre seeing a nice build there, but also within that group our institutional banking group.

Where we have opportunity in the public sector with municipal finance that as a group, we're trying to really grow our asset base lending group to try and we're seeing some pipeline growth. There. So that's been a nice addition, and we see that really accelerate in 2022.

Okay.

That's great color. Thank you and then just.

So we've taken the guidance youre looking at loan growth.

High single digit sounds like deposits relatively stable.

Should see an improving earning asset mix.

You can give us maybe a little bit color on color on the margin.

Kind of where you.

Whether you think we've hit the trough year and should see continued expansion and just could you maybe remind us of your asset sensitivity and how you on a pro forma basis and how you. How you think of a rate hike potentially impacting the margin.

Yeah, Hey, David This is Jay a couple of remarks, there to maybe unpack the question, but the first thing I would go to just on the guide or on the outlook.

That you're referring to from page 29, and our slides as I think about net interest income net interest margin the real inflection in the margin from our perspective is going to hinge on sort of the timing of that growth throughout the throughout the year. So the primary driver from a from a true margin net interest margin point.

The view is going to be driven by.

Asset mix as you indicated so as we are investing.

Quiddity.

Into loans this year with that growth youre going to see some margin expansion now the natural headwind to that margin expansion is the roll off of PPP.

In addition to just the lower rate environment, where some of the loans have been paying off versus where rates are coming on but I think I think the asset mix is more than enough to offset that.

As we inflect on the loan growth side, So that's kind of part a to your question.

B as it relates to interest rate sensitivity and I'd, maybe point you to page 21 in our slides.

For some additional statistics there.

But.

Keep in mind, we've got about 315 billion in <unk>.

Cash at the fed and in floating rate securities. So that's all going to be sort of fully asset sensitive if you will.

On the loan side, we give you a lot of statistics on this page breaking down our variable rate loan portfolio.

So you can see those statistics, there, but the thing I would point you to is if we ramp this year or the way we're thinking from the fed just on the variable rate loan portfolio alone.

We show you here that ramp would be about $9 million of incremental interest income off the loan portfolio.

And that's kind of a 25 basis point hikes in March June October if you will so hopefully that gives some color to unpack the question's a bit there.

No. That's very helpful. And then just touching on expenses.

There's a lot of moving parts here, just curious kind of.

How much of the landmark and triumphs synergies have been realized or are already in the run rate.

And then just kind of how do you think about inflationary pressures and expense growth just given the investments that you guys are making and maybe just kind of what our pro forma run rate once we get.

The <unk> deal.

In the run rate as well.

So again I'll point, you to a page and give you some additional color, but on page 11 of the slide deck.

Give you the detail on the quarter up in the table at the top.

I'd point, you to the kind of bottom middle of that page. If you take what we show as core noninterest expense I'll call out specifically there the contribution to the foundation as well as the salary expense on non retained triumph and landmark employees.

Part of our integration.

We don't sort of realize all of that head count reduction day, one we retain those folks for.

45 days two months et cetera. So we're fully there by the first quarter, but we had about $1 million of expense in the fourth quarter before we before those folks left so that's I think a more normalized run rate down there in the fourth quarter that $122 9 million that's going to be.

Really close to about 2% of average assets, which is what sort.

Continued to focus on.

As we think about our noninterest expense run rate. So I think we're continuing to kind of hold the line in that 2% area.

Yes, there is wage inflation et cetera out there, but I think given some of our ability around M&A and the scale. We've had we've got some opportunities to continue to combat that inflation, yes.

I would just add as you said that we think that 123 is more of a baseline and as we get into 'twenty. Two here, we're going to have the normal.

Racism, and merit increases and other cost of inflation going up in addition to what we've been doing the last year or so is investing on the production side.

We'll be doing some of that so you will see an increase in those numbers, but you should see revenue on the other side related to the production.

Okay. That's helpful. Thank you.

Yeah.

Thank you. Our next question comes from the line of Brady Gailey from <unk>. Your line is now open.

Hey, Thanks, good morning, guys.

Good morning, good morning.

Maybe just ask one other thing on loan growth I know in some of your prior acquisitions you've had some loans are you kind of strategically run off.

When you look at the two that closed in the fourth quarter.

Spirit of Texas that will close here in a little bit are there anything out of those targets are there any buckets out of those targets that are going to be kind of put in runoff like you've done in prior deals.

Hey, Matt there is nothing within triumph, but within landmark there were some purchased portfolio mortgages that were not under just want to amortize off.

Account for that and as we think about 2022, but it was it was a $100 million.

Last but thats the only thing in that book that we just knew hey, we're not going to be purchasing anymore and it will amortize.

Alright, and then anything on the spirit of Texas side now.

No nothing that we see right now at all spirit looks a lot like us.

Anecdotally their pipeline right now is over $1 billion today, and really excited to get them integrated in April because a lot of what they do their average loan size Brady is a lot like ours, just 350000, and that's kind of right in our sweet spot.

We feel good about them coming on with no planned run off of certain sector.

Yes, I saw they put up some really good growth in their fourth quarter, which was good to see.

So it's great to see you all you are so active with the buyback.

Earlier this month, there should we think about the 100.

And $75 million, new buyback being done.

This year or do you think thats too aggressive I mean, the stock the stock is still.

Under 12 times earnings at $1 65 times tangible book value Thats, a pretty compelling.

So could we see the 175 all be done in 2022.

Greg This is Bob I would say, it's going to be timed over the year I don't know if we will have it all in by the end of the year. There's a lot of factors in there. One is price like you said the other is timing when we can be in the market and when we can't be and when we could file our <unk> all of that.

And we also have a systematic plan that we're in over a measured period of time so.

I mean I can't tell you, it's all going to be in by this year, but our goal would be to utilize them.

Our capital position as best we can.

Okay, and then finally for me.

I know yield accretion ticked up a little bit in the fourth quarter potentially from the two deals that were closed.

And our spirit of Texas is coming on but how do you think about.

We're accretable yield could be in 2022.

Well I'll tell you the accretable yields a little different than it was in the last deals because youre at a point that you have.

Under Cecil you have portion of it is credit Mark and then you have a portion of it that has a negative interest rate Mark. So there is a lot less accretion on those deals than we had per per asset size in recent deals.

I don't know if we do we have any guidance there, but I mean, it's going to be.

It won't be as much as it was this last year agreed, yes, I agree with that.

Okay Alright.

Alright, great. Thank you guys.

Thanks, Brad.

Thank you. Our next question comes from the line of Matt Olney from Stephens. Your line is now open.

Hey, Thanks, good morning, guys.

Morning, Matt.

Want to go back to the discussion around interest rate sensitivity.

I think it was Jay that mentioned the variable rate securities that will also reprice around one 5 billion a little bit less familiar with.

The structure of these and how these are price what else can you tell us about.

These are price on what kind of what kind of index and how quickly did those reprice.

They'll reprice similar to similar to our cash position. So they are there.

The yield I think in the quarter on those was in the mid 30 basis points. So call. It 35, 36 area basis points, but they're going to they're going to move just like our cash at the fed right now mass at 15 basis points youre going to see that move.

In lock step with any kind of increase from the fed so I would think of those both the same way.

Got it okay. Thanks for that.

And then on slide 14 talking about the loan portfolio you gave us a nice.

Graphic there as far as the new producers added in 2021, I, just want to kind of dive into that pretty.

Pretty big numbers. There are those are those gross or net numbers for the year and does that include the acquired banks that close earlier last year.

That would not include that are acquired bankers, but that is going to be replacement bankers as well as net new bankers Matt.

Got it okay.

And then as far as the <unk>.

General outlook you guys gave I think it's on slide 20.

Nine.

Got the pending acquisition of spirit of Texas.

This outlook include or exclude.

The impact of spirit.

Great Great question.

Excludes that so the outlook is really stand alone Simmons if you will.

So kind of 12, 31% to 12 31.

The pending or future M&A would be incremental to that outlook Matt.

Okay.

And then the.

I see the spirit of Texas, It looks like the expected closing dates of 2022 any any more details you can give us as far as the <unk>.

Timeline, there I think I've got it in my model set for the second quarter I can't recall, if that was what that was guidance or not just any any color on that would be helpful.

Matt This is George.

We're still optimistic in the second quarter.

We filed all the necessary applications at this point.

We haven't received all the approvals, we just havent been through the requisite timeline yet.

Our diligence.

It is well underway.

We're in constant communication with the spirit of Texas folks in.

I think having really good conversations.

I think their performance in the fourth quarter.

As indicative of our optimism about the combination when that happens.

So we're still optimistic that in the second quarter, we're going to get this deal finalized close converted.

There are certain things that are out of our control.

There was quite a bit of disruption at the federal reserve. These days. So we don't know exactly how that might affect approval, but.

We don't see anything between our two companies that would cause us any pause for concern.

In fact, I think the deeper we get into it the more we realize this is going to be really good.

Okay. Thanks for that George and then I guess as we think about layering in spirit into our forecast.

In 2022.

Can you just talk generally about.

That goal you guys have a maintaining operating expenses at that 2% level of average assets is that a dynamic what we should assume maybe that ticks ticks higher than that level. Initially and then over time works down or any color you can give on that.

I think you've got to.

Now for Tom the same way in the fourth quarter with Trump and landmark we're not going to.

Realized all of the cost synergies, Matt on day, one we're going to be prudent about how we go to go.

Go into that and so it's going to take.

A quarter or two to get there.

In terms of realizing all of those cost saves so it doesn't really budge me off the overall kind of core <unk> run rate of our expense expectation.

But it won't happen on on day one.

Okay. Thanks, guys.

Thanks Matthew.

Thank you at this time I'm showing no further questions I would like to turn the call back over to George Makris for closing remarks.

Thank you there is one point that we'd like to make that we sort of anticipated questions.

Our net charge offs for the fourth quarter.

Little elevated and I'm going to ask Bob Fehlman to talk about the new accounting principles that sort of.

Cause that to happen, yes, we had about $9 5 million in charge offs in the quarter about six of that was related to the recent acquisitions and under the seasonal rules that is those charge offs happened after the acquisition under the old rules prior to see so that would have been adjusted to fair value on that date and it would flow through.

So no surprises for us at all it was identified with the banks, we acquired and during our due diligence. So it's just a little difference in how the accounting is on that so other than that it was negligible charge offs for the quarter.

Just to add a little to that.

Considering the landmark of charge offs and charge offs.

Previously recognized energy credit between those two things that exceeded our $9 3 million.

Charge offs, so it's a little misleading but.

This is really the first time.

We're dealing with the new Cecil requirements and are reporting the other thing that.

Needs to be expressed is that.

And our provision reversal.

One $3 million that actually includes an addition of $22 million.

Two the provision based on the landmark controls acquisition so the reversal.

The $22 million charge would have been much more than that so.

A couple of accounting issues that were unusual this quarter.

We wanted to make sure that we.

I'll come back to that.

So with that.

Once again I want to thank the Simmons associates, who put up with a lot over the last two years, particularly last year.

In the economy with Covid.

I think our results are extraordinary.

It's all due to the team that we built here at Simmons, we're looking forward to 2022 looking forward welcoming our new partners in the spirit of Texas Bank.

We hope that we have really really good.

News to report in April .

So much for joining us. This morning, we will do this again in 90 days.

This.

Today's conference call. Thank you for participating you may now disconnect.

[music].

Hi.

Okay.

[music].

One on your telephone please be advised today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Ed Billick. Please go ahead.

Good morning, and thank you for joining our fourth quarter earnings call. My name is Ed Belak director of Investor Relations at Simmons First National Corporation. Joining me today are George Makris, Chairman and Chief Executive Officer, Bob Fehlman, President and Chief.

Officer, J, Brogdon, Chief Financial Officer, and Treasurer, Steve Matzo, Nally, Chief administrative officer, Matt Reddin, Chief Banking Officer, and David Garner Chief Accounting Officer.

Our call is to discuss the information and data provided by the company in its quarterly earnings release issued this morning and to discuss the company's outlook for 2022, we.

All other guests on this conference call are in listen only mode <unk>.

A recording of today's call, including our prepared remarks, and the Q&A session will be posted on our website Simmons bank Dot com under the Investor Relations page for at least 60 days.

During today's call, we will make forward looking statements about our future plans goals expectations estimates projections and outlook.

I'd remind you that you should not place undue reliance on any forward looking statements as actual results could differ materially from those projected in or implied by forward looking statements due to a variety of factors additional information concerning concerning some of these factors is contained in the companys 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, 2020, and the forward looking information section of the company's earnings release issued this morning.

The company assumes no obligation to update or revise any forward looking statements or other information.

Included as exhibit to the company's current report filed this morning with the SEC on form 8-K and available on the Investor Relations page of the Companys website Simmons Bank Dot Com I will now turn the call over to George Makris.

Thanks, Ed and welcome once again to our fourth quarter 2021 earnings call I'd like to begin my comments by banking the associates of Simmons Bank for producing a record earnings year in 2021, despite the operational challenges associated with the pandemic.

Artificial economy created over the past two years earlier earlier today, we announced earnings of $271 million for the full year of 2021, 6% increase over 2020.

We also reported diluted earnings per share of $2 46, an increase of 6% from the previous year.

Other important financial information for the fourth quarter and for the full year is available in our press release and our Investor presentation published earlier today and available on the Investor Relations page of <unk> Dot com.

We simultaneously acquired and integrated landmark community Bank and Trust Bank, both Memphis space in October of last year. So their activity is included in our fourth quarter results. The acquisition of <unk> has significantly enhanced our size and scale in Tennessee, where we are.

Now right.

Florida Science based all deposit market share.

Shortly after we completed these acquisitions, we announced a definitive agreement to acquire a spirit of Texas Bancshares'.

Strengthening our Texas franchise has been a strategic priority and partner with spirit not only enhances our current footprint, but also establishes a platform for growth in Houston, Austin, San Antonio and College station.

Net income for the fourth quarter was $48 2 million and diluted earnings per share were <unk> 42.

Included in our results for the quarter were $11 $3 million after tax noncore items, primarily related to the acquisitions of landmark trial.

Excluding these items core earnings were $59 5 million or.

50 to say, that's all a diluted per share basis.

It is remarkable that we closed and integrated two acquisitions repurchased approximately two 6 million shares of our stock contributed $2 $5 million to our foundation.

<unk> grew our tangible book value per share by 2% during the fourth quarter alone.

The positive momentum we began to see in terms of loan growth during the third quarter of 2021 accelerated in the fourth quarter.

Newly funded loans in the quarter totaled $2 6 billion.

Our commercial loan pipeline rose for the fifth consecutive quarter to $2 3 billion.

Up 56% on a linked quarter basis as growth was broad based throughout our community and metro markets as well and our new as well as in our new corporate banking unit.

We're also encouraged by our level of unfunded commitments considered a leading indicator of loan growth, which rose to $2 9 billion.

In the fourth quarter, a 31% increase on a linked quarter basis.

We believe this positive momentum combined with new loan producers, we have added in 2021.

And continue to actively recruit.

Positions us well in terms of loan growth in the year ahead.

During the fourth quarter of 2021, we repurchased two 6 million shares of our stock in January 2020 to substantially exhausted the remaining capacity under our existing share repurchase program.

As a result board of directors authorized a new $175 million share repurchase program and raised the quarterly cash dividend, 6% to <unk> 19 per share.

In closing the significant investments we have made in technology, particularly in terms of expanding our digital capabilities are producing solid results and will allow us to continue to help meet the ever changing needs of our customers, while improving the speed and efficiency.

With which we deliver products and services to our customers the.

The investments we've made in M&A represent a meaningful geographic transformation.

With an emphasis on building scale in high growth markets with significantly enhance our growth profile.

Given our successful track record, we're confident in our ability to seamlessly convert and integrate spirit later this year and capitalize on the tremendous growth opportunity. This acquisition presents.

As a result, we entered the year with positive momentum and are confident in our ability to respond to the ever changing landscape and challenging economic environment.

We believe we're well positioned throughout our footprint to capture growth opportunities that will lead to another successful year.

This concludes our prepared comments I will now turn the line over to our operator and invite questions from our analysts and institutional investors.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question Brett the banking please standby, while we compile the Q&A roster.

Our first question comes from the line of David Feaster from Raymond James Your line is now open.

Hey, good morning, everybody.

Good morning, David.

I just wanted to touch on the growth outlook I appreciate the commentary.

Fair remarks, I mean, it's clear originations are improving.

You made a bunch of new hires it sounds like the pipeline is still good.

It sounds like just looking at the guidance, we're expecting kind of a growth rate to accelerate throughout the year I'm just curious kind of some of the puts and takes as you as you as you look at what's happening in payoffs and Paydowns and everything how do you think about the pace of growth and what gives you confidence that we're going to see acceleration going forward.

Yes.

David Matt I'll take the first stab at that others can join in.

We've talked about this every quarter, we were looking for that inflection point.

Production really ramped up and we saw that absolutely in the fourth quarter and just kind of give you a key point even in December we closed $1 billion in new originations and so we really shock we saw an inflection point in December now January is always an interesting month, and where where that looks what happens in January .

But as an overall pipeline as George comments were earlier, it's our pipeline is at $2 4 billion today and still growing so from what we see from a production standpoint that looks really good.

Our headwinds are less and less will there be some early payoffs, yes, but all indicators look too.

Drew net positive accelerated loan growth this year.

And I'm glad to answer any specifics around certain areas you kind of let me know where you would like me to dive in Atlanta.

And just any commentary on new loan yields and how pricing has trended just are you seeing any pricing improvement just given the steepening of the curve.

Just reiterating that the new date.

Where we're seeing the opportunities.

At the top of the last Texas really rebounded nicely for us in the fourth quarter and our pipeline is very strong. We're also seeing some real nice pickups in our production showed that in the fourth quarter with the acquisition of landmark and try up we had some nice production in Memphis and Nashville Tampa.

Kansas City is still a great market for US northwest, Arkansas has been a real shining star for Us in 2021, I think that will happen in 2022 and all the other comment we're seeing now and you can see in our deck that corporate our corporate banking group and a lot of the pipeline increase there as new pipeline from our commercial financing and we've talked about that.

Team, but we said that it will be.

Slow growth because we wanted to get them fully integrated and doing it the right way so youre seeing a nice build there but also within that group our institutional banking group, that's where we have opportunity in the public sector with municipal finance that as a group we're trying to really grow our asset base lending group to try and we're seeing some pipeline growth.

There. So that's been a nice addition, and we see that really accelerate in 2022.

Okay. That's great color. Thank you and then just.

So we've taken the guidance Youre looking at loan growth in the high single digit sounds like deposits relatively stable.

You'd see an improving earning asset mix just was hoping you could give us maybe a little bit color on color on the margin.

Kind of where you whether you think we've hit the trough year and should see continued expansion and just could you maybe remind us of your asset sensitivity and how you on a pro forma basis and how you how you think of <unk>.

Hi.

It really impacted the margin.

Yeah, Hey, David This is Jay a couple of remarks, there to maybe unpack the question, but the first thing I would go to just on the guide or on the outlook.

That you're referring to from page 29 in our slides.

Think about net interest income net interest margin the real inflection in the margin from our perspective is going to hinge on sort of the timing of that growth throughout the throughout the year. So the primary driver from a from a true margin net interest margin point of view is going to be driven by.

Asset mix as you indicated so as we are investing.

Quiddity.

Into loans this year with that growth youre going to see some margin expansion now the natural headwind to that margin expansion is the roll off of PPP.

In addition to just the lower rate environment, where some of the loans have been paying off versus where rates are coming online, but I think I think the asset mix is more than enough to offset that.

As we inflect on the loan growth side. So that's kind of part of your question part B as it relates to interest rate sensitivity and I'd, maybe point you to page 21 in our slides.

For some additional statistics there.

But.

Keep in mind, we've got about 315 billion in <unk>.

Cash at the fed and in floating rate securities. So that's all going to be sort of fully asset sensitive if you will.

On the loan side, we give you a lot of statistics on this page breaking down our variable rate loan portfolio.

So you can see those statistics, there, but the thing I'd point you to is if we ramp this year or the way we're thinking from the fed just on the variable rate loan portfolio alone.

We show you here that ramp would be about $9 million of incremental interest income off the loan portfolio.

And that's kind of a 25 basis point hikes in March June October if you will so hopefully that gives some color to unpack the question's a bit there no. That's very helpful. And then just touching on expenses.

There's a lot of moving parts here, just curious kind of.

How much of the.

Landmark and triumphs synergies have been realized or are already in the run rate.

Then just kind of how do you think about inflationary pressures and expense growth just given the investments that you guys are making and maybe just kind of what our pro forma run rate once we get.

The <unk> deal.

In the run rate as well.

So again I'll point, you to a page and give you some additional color, but on page 11 of the slide deck.

Give you the detail on the quarter up in the table at the top.

Point, you to the kind of bottom middle of that page. If you take what we show as core noninterest expense I'll call out specifically there the contribution to the foundation as well as the.

Salary expense on non retained triumph and landmark employees as part of our integration. We don't we don't sort of realize all of that head count reduction day, one we retain those folks for a.

45 days two months et cetera. So we're fully there by the first quarter, but we had about $1 million of expense in the fourth quarter.

Four we before those folks left so that's I think a more normalized run rate down there in the fourth quarter of that $122 9 million, that's going to be really close to about 2% of average assets, which is what I've.

<unk> continued to focus on.

As we think about our noninterest expense run rate. So I think we're continuing to kind of hold the line in that 2% area.

Yes, there is wage inflation et cetera out there, but I think given some of our ability around M&A and the scale. We've had we've got some opportunities to continue to combat that inflation.

And Jay I would just add as you said that we think that 123 is more of a baseline and as we get into 'twenty. Two here, we're going to have the normal.

Racism, and merit increases and other cost of inflation going up in addition to what we've been doing the last year or so is investing on the production side.

We'll be doing some of that so you will see an increase in those numbers, but you should see revenue on the other side related to the production.

Okay. That's helpful. Thank you.

Thank you. Our next question comes from the line of Brady Gailey from <unk>. Your line is now open.

Hey, Thanks, good morning, guys.

Good morning.

Just ask one other thing on loan growth I know in some of your prior acquisitions, you've had some loans that you cannot strategically run off.

When you look at the two that closed in the fourth quarter and spirit of Texas that will close here in a little bit are there anything.

Out of those targets are there any buckets out of those targets that are going to be kind of put in runoff.

You've done in prior deals.

Yes, Hey, <unk>, Matt there is nothing within triumph, but within landmark there were some purchased portfolio mortgages that were not better just want to amortize off.

Account for that and as we think about 2022, but it was it was a $100 million.

Our last but thats the only thing in that book that we just knew hey, we're not going to be purchasing anymore and it will amortize.

Alright, and then anything on the spirit of Texas side.

No nothing that we see right now at all spirit looks a lot like us.

Feel good about them coming on with no planned run off of a certain sector.

Yes.

Yes, I saw they put up some really good growth in their fourth quarter, which was good to see.

So it's great to see all your so active with the buyback.

Earlier this month.

Should we think about the 100.

And $75 million, new buyback being done.

This year or do you think thats too aggressive I mean, the stock the stock is still.

Under 12 times earnings at $1 65 times tangible book value Thats, a pretty compelling.

So could we see the 175 all be done in 2022.

And we also have a systematic plan that we're in over a measured period of time so.

I mean I can't tell you, it's all going to be in by this year, but our goal would be to utilize them.

Our capital position as best we can.

Okay, and then finally for me.

I know yield accretion ticked up a little bit in the fourth quarter potentially from the two deals.

All right.

And I know its spirit and practices coming on but how do you think about.

We're accretable yield could be in 2022.

Well I'll tell you the accretable yields a little different than it was in the last deals because youre at a point that you have.

Under sea. So you have a portion of it is credit Mark and then you have a portion of it that has a negative interest rate Mark. So there is a lot less accretion on those deals than we had per per asset size in recent deals.

I don't know if we do we have any guidance there, but I mean, it's going to be.

It won't be as much as it was this last year agreed, yes, I agree with that.

Okay Alright.

Alright, great. Thank you guys.

Thanks, Brad.

Thank you. Our next question comes from the line of Matt Olney from Stephens. Your line is now open.

Hey, Thanks, good morning, guys.

Good morning, Matt.

Want to go back to the discussion around interest rate sensitivity.

I think it was Jay that mentioned the variable rate securities that will also reprice around one 5 billion a little bit.

Less familiar with.

The structure of these and how these are price what else can you tell us about what these reprice on what kind of what kind of index and how quickly did those reprice.

They'll reprice similar to similar to our cash position. So they are there.

Lockstep with any kind of increase from the fed so I would think of those both the same way.

Got it okay. Thanks for that Kevin.

Yes.

And then on slide 14 talking about the loan portfolio you gave us a nice.

Graphic there as far as the new producers added in 2021, I, just want to kind of dive into that pretty.

Pretty big numbers. There are those are those gross or net numbers for the year and does that include the acquired banks that closed earlier last year.

That would not include that are acquired bankers, but that is going to be replacement bankers as well as net new bankers Matt.

Got it okay.

And then as far as the.

The general outlook you guys gave I think it's on slide 29.

You've got the pending acquisition of Spirit of Texas does this outlook include or exclude the.

The impact of spirit.

Great Great question. It excludes that so the outlook is really stand alone.

Simmons if you will.

So kind of 12% to 31% to 12 31.

Any pending or future M&A would be incremental to that outlook Matt.

Okay.

And then the.

I see the spirit of Texas, It looks like the expected closing date is 2022 any any more details you can give us as far as the <unk>.

Timeline, there I think I've got it in my model is that for the second quarter I can't recall, if that was what that was guidance or not just any any color on that would be helpful.

Well, Matt this is George.

We're still optimistic in the second quarter.

We filed all the necessary applications at this point.

We haven't received all the approvals, we just havent been through the requisite timeline yet.

Our diligence.

It is well underway.

We're in constant communication.

With the spirit of Texas folks in.

I think having really good conversations.

I think their performance in the fourth quarter.

As indicative of our optimism about the combination when that happens.

So we're still optimistic that in the second quarter, we're going to get this deal finalized close converted.

There are certain things that are out of our control.

There was quite a bit of disruption at the federal reserve. These days. So we don't know exactly how that might affect approval, but.

We don't see anything between our two companies that would cause us any pause for concern.

In fact, I think the deeper we get into it the more we realize this is going to be a really good fit.

Yeah.

Okay. Thanks for that George and then I guess as we think about layering in spirit into our forecast.

In 2022.

Can you just talk generally about that.

That goal you guys have a maintaining operating expenses at that 2% level of average assets is that a dynamic what we should assume maybe that.

Ticks higher than that level initially and then over time works down or any color you can give on that.

I think you've got to.

Now for Tom the same way in the fourth quarter with Trump and landmark we're not going to.

Realized all of the cost synergies, Matt on day, one we're going to be prudent about how we go to go.

Go into that and so it's going to take.

A quarter or two to get there.

In terms of realizing all of those cost saves so it doesn't really budge me off the overall kind of core <unk> run rate of our expense expectation.

But it won't happen on on day one.

Okay. Thanks, guys.

Thanks Matthew.

Thank you at this time I'm showing no further questions I would like to turn the call back over to George Makris for closing remarks.

Thank you as there is one point that we'd like to move that we sort of anticipated questions.

Our net charge offs for the fourth quarter.

Little elevated and I'm going to ask Bob Fehlman to talk about the new accounting principles that sort of.

Cause that to happen, yes, we had about $95 million in charge offs in the quarter about six of that was related to the recent acquisitions and under the Cecil rules that is those charge offs happened after the acquisition under the old rules prior to see so that would have been adjusted to fair value on that day and it would flow through.

Considering landmark trial charge offs and charge offs.

Previously recognized energy credit between those two things that exceeded our $9 3 million.

Charge offs, so it's a little misleading but.

This is really the first time.

We're dealing with the new Cecil requirements in our reporting.

Other thing that.

Needs to be expressed is that.

And our provision reversal.

One $3 million that actually includes an addition of $22 million.

Two the provision based on the landmark controls acquisition so.

Reversal without that $22 million charge would have been much more than that so.

Just a couple of accounting issues that were unusual this quarter.

We wanted to make sure that we.

<unk> talked about today.

So with that.

Once again I want to thank assemblage associates, who put up with a lot over the last two years, particularly last year.

In the economy.

Covid.

And I think our results are extraordinary.

It's all due to the team that we built here at Simmons. We're looking forward to 2022, we're looking forward to welcoming our new partners in the spirit of Texas Bank.

We hope that we have really really good.

News to report in April Thanks.

Very much for joining us. This morning, we will do this again.

In 90 days.

This concludes today's conference call. Thank you for participating you may now disconnect.

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