Simmons First National Corp
NASDAQ:SFNC
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Simmons First National Corp
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00:06 Good day and thank you for standing by. Welcome to the Simmons First National Corporation's Third Quarter twenty twenty one Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ed Bilek, Director of Investor of Relations. Please go ahead.
00:39 Good morning and thank you for joining our third quarter earnings call. My name is Ed Bilek, Director of Investor of Relations at Simmons First National Corporation. Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, President and Chief Operating Officer; Jay Brogdon, Chief Financial Officer and Treasurer; Steve Massanelli, Chief Administrative Officer; Matt Reddin, Chief Banking Officer; and David Garner, Chief Accounting Officer.
01:06 The purpose of our call is to discuss the information in data provided by the company in its quarterly earnings release issued this morning and to discuss the company's outlook for the remainder of twenty twenty one. We will begin with prepared comments followed by a Q and A session. We have invited institutional investors and analysts from the equity firms that provide research on the company to participate in the Q and A session. All other guests on this conference call are in listen only mode.
01:31 A recording of today's call, including our prepared remarks, and the Q and A session will be posted on our website simmonsbank.com under the Investor Relations page for at least sixty days.
01:44 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 as actual results could materially differ from those projected or implied by the forward-looking statements due to a variety of factors.
02:04 Additional information concerning some of these factors is contained in the company's SEC filings, including without limitation the description of certain risk factors contained in the company's Form ten K for the year ended December thirty one, twenty twenty 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.
02:29 Finally, in this presentation, we will discuss certain non-GAAP financial metrics, which we believe provide useful information to investors, additional disclosures regarding non-GAAP metrics, including the reconciliations of these non-GAAP metrics to GAAP are contained in the company's earnings press release and third quarter investor presentation, which are included as exhibits to the company's current report filed this morning with the SEC on Form eight K and available on the Investor Relations page of the company's website simmonsbank.com.
03:00 I will now turn the call over to George Makris.
03:04 Thanks, Ed and welcome once again to our third quarter twenty twenty one earnings call. Simmons First National Corporation once again delivered solid results during the quarter reflecting our ability to execute basic blocking and tackling fundamentals. Equally important they demonstrate our continued focus on strategically navigating the current economic environment without losing focus on our goal of creating long-term value for our shareholders.
03:33 It goes without saying, there are times like now when it's best to just take what the defense gives you rather than taking undue risks and stretching for short-term growth that ultimately creates future headwinds.
03:48 Before I get to the numbers in the quarter, I'd would like to spend a minute on our acquisitions of Landmark Community Bank and Triumph Bank. Shortly after the end of the quarter, we announced the closing and conversion of these banks, which means in approximately four months since the day we announced the signing of the definitive agreements.
04:08 We were able to obtain all necessary regulatory approvals, shareholder approvals, close the transactions and simultaneously complete systems conversion for both banks over Columbus Day weekend. So, when they open for business on October twelve, it was as Simmons Bank.
04:30 Closing and converting a single bank is no small task, let alone two banks at the same time. To effectively complete this task took a herculean effort and is truly a remarkable accomplishment by the Simmons associates who work to make this happen, further proof of the outstanding team we've assembled here at Simmons.
04:51 I'd also like to take this opportunity to welcome our new customers, associates, and shareholders to the Simmons family. We're very glad to have you as part of our group.
05:02 Now, to the numbers for the quarter. Net income for the quarter was eighty point six million dollars, up fourteen point seven million dollars or twenty two percent, compared to the third quarter a year ago.
05:16 Diluted earnings per share was zero point seven four dollars, up twenty thirty percent from the year ago quarter. Core earnings for the quarter, which excludes certain non-core items, were seventy nine point four million dollars or zero point seven three dollars on a diluted per share basis.
05:35 On a year to date basis, net income for the first nine months of twenty twenty one was two twenty three million dollars, up ten percent from the same period a year ago, and on a diluted per share basis totaled two point zero five dollars, representing a twelve percent increase compared to the same period a year ago.
05:56 In terms of key performance metrics during the quarter, return on average assets was one point three seven percent, return on average common equity was ten point four two percent, and return on average tangible common equity was seventeen point four three percent.
06:14 Net interest income for the quarter on a fully taxable equivalent basis totaled one hundred and fifty point two million dollars, compared to one hundred and fifty one point one million dollars for the second quarter of twenty twenty one. Net interest margin in the quarter was two point eight five percent, down four basis points on a linked quarter basis.
06:35 On a positive note, the yield on loans rose three basis points on a linked quarter basis, and we continue to have success in managing down our deposit costs with total costs of deposits dropping four basis points during the quarter to twenty basis points.
06:53 On a core basis, which excludes accretion, net interest income on a fully taxable equivalent basis totaled one hundred and forty six point one million dollars for the quarter, up from the one hundred and forty five point five million dollars reported in the second quarter of twenty twenty one.
07:13 Non-interest income totaled forty eight point six million dollars for the third quarter of twenty twenty one, up three percent linked-quarter. Core non-interest income was forty eight point eight million dollars, up five percent on a linked-quarter basis. Non-interest expense totaled one hundred and fourteen point three million dollars for the quarter, flat on a linked-quarter basis and down two percent compared to a year ago.
07:40 As previously announced, during the quarter, we closed thirteen branches across franchise as part of our ongoing branch rationalization initiative. With the closing of Landmark and Triumph Bank acquisitions, there will be additional opportunities to write size our branch structure in the Memphis and Nashville markets, which includes in certain cases, the addition of new branches to better position us geographically, while expanding our reach and allowing us to better serve our customers in terms of convenience.
08:14 We continue to be steadfast in maintaining a strong credit culture, a cornerstone of our bank. Non-performing loans totaled fifty nine point four million dollars, down twenty one point five million dollars on a linked-quarter basis. This was fourth consecutive quarter of marked improvement with non-performing loans now at the lowest levels since December of twenty eighteen.
08:41 Net charge offs as a percentage of average total loans were seventeen basis points in the quarter, heavily influenced by the partial charge off of a single commercial credit. These positive trends combined with improved economic modeling scenarios resulted in a recapture of provision expense in the quarter totaling nineteen point nine million dollars.
09:04 At the same time, all of our coverage ratios remain strong with our allowance to loan ratio of one point eight seven percent and our non-performing loan coverage ratio at three forty one percent. With respect to the balance sheet, total assets ended the quarter at twenty three point two billion dollars, total loans were ten point eight billion dollars, and total deposits were eighteen point one billion dollars.
09:33 Loan production during the quarter was one point five billion dollars, but was offset entirely by paydowns. On positive note, our commercial loan pipeline rose for the fourth consecutive quarter to one point five billion dollars, up fifteen percent on a linked-quarter basis.
09:51 We're encouraged by this trend and other anecdotal evidence in the market that will translate into an increase in total loans. For this reason, amongst others, we're continuing to actively recruit loan producers across all business units throughout our franchise.
10:07 Capital levels remain very strong and significantly above regulatory well-capitalized guidelines. Total risk-based capital was seventeen point four percent. CET1 was fourteen point three percent and the leverage ratio was nine point one percent. Importantly, these ratios also reflect increased activity under our share repurchase program authorized by our board of directors.
10:35 During the quarter, we repurchased one point eight million shares with remaining capacity under program totaling approximately ninety eight point five million dollars. As always continuing to return excess capital to our shareholders in the form of share repurchases will be dependent upon market conditions and as part of our overall disciplined capital management process.
11:00 On our website at simmonsbank.com, we've shared an extensive presentation along with a press release and financial data, which gives much more detail regarding our quarterly results and other important information about our company.
11:16 In closing, we continue to be encouraged by our performance in twenty twenty one, while adapting to an ever changing landscape and challenging economic environment. With closing and conversions of Landmark and Triumph Bank, behind this, we are working to ensure our new associates have tools and resources in place to meet our customer needs, provide exceptional service and capitalize on the growth opportunities afforded to us in these markets.
11:45 As we enter the final quarter of twenty twenty one, our focus remains on building on the positive momentum and finishing the year strong as we enter twenty twenty two. This concludes our prepared comments.
11:59 I will now turn the line over to our operator and invite questions from our analysts and institutional investors.
12:08 And thank you. [Operator Instructions] And our first question comes from Stephen Scouten from Piper Sandler. Your line is now open.
12:37 Hey, good morning, everyone. I guess, maybe if we can look a little bit on the loan growth front, I know in the comments in the release, it sounded like you feel a little bit more optimistic about returning to growth in twenty two. The approved in rate of close pipeline is up, [indiscernible] like maybe twenty six million a quarter. So, can you give us some color just what you're seeing in your markets with your customers and kind of how you're thinking about loan demand from here?
13:11 Hey Stephen, this is Matt. Glad to answer that. I’ll give you a little color. We are very hopeful that we're kind of seeing that inflection point on net positive loan growth that could happen as soon as even the fourth quarter, you know we can't, we have a really good shot in October being a month of net positive growth, all based on that pipeline growing and then our production growing. The third quarter, the one point five billion that we show in production compares to the first half of the year at one point eight billion.
13:44 So really, that trend is showing, we're getting real close to that inflection point of net positive, and when I tell you about the production, we saw in the third quarter that was really, really good was a lot of repeat borrowers are getting more and more active, across a lot of categories.
14:01 CRE, industrial, multifamily, mini-storage finance, credit tenant, even some select office, so really good diversified CRE opportunities plus good, you know what I consider [indiscernible] auto dealerships, new medical facilities, specialty hospitals. We have not seen that type of diverse production this pre-pandemic meaning our borrowers are back doing business again, and we're seeing new customer acquisitions through new talent acquisition.
14:35 New bankers, we're seeing moving business over good course C&I business. We're seeing businesses being purchased. We're getting to enhance some of that. So, the third quarter really showed a good diverse mix that was very encouraging kind of as we look forward to the fourth quarter and into twenty twenty two.
14:58 Got it. That's very helpful Matt. Thank you. And then maybe just my follow-up would be around new loan yields. I think maybe in previous calls, you've given the yield on that improvement in rate to close pipeline. I'm not sure if I missed it this quarter around, but any data there on new loan yields because it looked like, if I exclude PPP, if I'm getting this right than core loan yields were probably down seven or eight basis points quarter over quarter? Just wanted to get some color there.
15:25 That's right on the money there. If you look at our – on slide thirteen of a commercial pipe – that's just a commercial loan pipeline, but it's a low rate environment, very competitive environment and with our asset quality parameters that we’ve always stayed to, you want to see that drift downward in this environment with that new production coming on.
15:47 Okay. Like I think last quarter was it maybe like three seventy range, is that kind of there trending or…?
15:55 Yes, three seventy seven last quarter and three forty seven this quarter. Again, that is as Matt said, that's without the consumers said, that's just commercial, and it also does not have the loan fees that you'd see that hit the ledger.
16:07 Correct. Sure.
16:08 If you go back to slide, a few slides you can see in slide seven the actual yield and both the GAAP and the core yield was slightly up for the quarter. Some of that obviously is PPP.
16:22 Right. Okay. Yeah. Core, just excluding accretion, but including the PPP?
16:26 That's right. Correct.
16:27 Got it. Okay, perfect. Well, thanks guys. And congrats on getting those deals close and converted. That is a very impressive timeline. So, glad to see it.
16:36 Thanks, Stephen.
16:37 16:36 Thanks Stephen.
16:38 And thank you. And our next question comes from David Feaster from Raymond James. Your line is now open.
16:45 Hi, good morning everybody.
16:47 Good morning, David.
16:49 I just wanted to start on the commercial finance team and just get an update with those guys, that's a pretty exciting group to bring over in just whether they had begun contributing in the quarter and just what expectations you might have for that team?
17:05 Hey, David, it's Matt. Thanks for the question. Yeah, we're excited as well. If you remember we talked about the commercial finance team, that group came to multiple institutions, they all have some non-solicits that we're absolutely going to observe and do it right, but really that third quarter of this – what we just went through was process policy procedure platform getting them all onboard and ready to go, but we will see some production from them closing in the fourth quarter.
17:31 So that's encouraging, but it has to be a slow build with those not listed, but the team is doing well and really getting engaged and we're starting to see some pipeline coming through loan committee with them right now.
17:43 Okay. That bodes well for production going forward. That's great. And then just even outside that team, it seems like you guys have been pretty aggressive recruiting. Just curious how hiring pipelines are looking? Where you're seeing opportunities and maybe whether there's any new verticals like that team you picked up that you're looking to expand into?
18:03 I really appreciate that question as well. That's something that's really important to remember about us right now. We talked about even coming into the pre-pandemic that we in an adjustment period. And now is a twenty five billion dollar bank, we're really focused on building out a metro market bank and then our community market bank.
18:22 And within those metro markets, you know, I think we'll continue to segment. We'll see those offerings to do that. We're bringing, we're upgrading our talent. We will bring home true commercial bankers in our metro markets to go alongside what we already have and we're seeing the fruits of that recruitment.
18:40 We're seeing some pipeline come on, but also when we talk about investing in talent, I think it's important to remember we brought on a new head of consumer and business, Joe DiNicolantonio, he was over business banking at region back, you know, years ago and now he's building out infrastructure technologies, platform, most importantly build them out bankers.
19:04 Also, we've hired a new head of consumer lending, consumer credit card, where we can give much more proactive in the consumer lending space. And also, we're focused on where we can do portfolio mortgages, that’s a nice complement with Landmark and Triumph. They were big in the medical professional space, sports and entertainment and Jumbo really from a mortgage perspective, we want to invest in that. More bankers, more talent there to take advantage of the [news] [ph] that they had.
19:33 So, hopefully that gives you a feel for where we're taking Simmons overall from our producers, but we are seeing pipeline add from our current bankers that we've added recently, but more to come is what I would tell you.
19:47 That's great. And then just last one, it's great to see the strength in some of the fee income lines. I know improving cross selling across the bank into the fee income business has been a major priority for you, George. But just curious whether you guys can walk through some of the puts and takes with your top fee business lines and what you're seeing on some of those businesses?
20:12 Well, I'll start and Matt and Jay and Bob can certainly hope in. I'm going to start with our wealth management group because as you know, about eighteen months ago, it might be two years ago, we hired a new head of our Wealth group, Jimmy Crocker, and Jimmy came on and Jason Waters, Head of our Investment Strategy came on at the same time. Those guys have done a great job, but as I've mentioned before, we have six billion dollars of assets under management, but we are very concentrated in Central Arkansas, Southern Missouri.
20:49 And we need that service across our entire foot footprint and Jimmy and Jason have been very diligent in going out and building teams in those markets now. That is one where the revenue comes absolutely after you get the talent in place. So, we're going to expect that that revenue will continue to grow.
21:09 I will say now that that group has already exceeded their budget for the year. So, I’ll call them our sand bagging group, they're definitely going have a little higher expectation next year, but they've done a fantastic job. And I think that's the one area where we have a substantial opportunity to improve.
21:33 Matt also mentioned that credit card is an opportunity for us. We're building out a portfolio with products. We've been very limited in that in the past. We'll have a new delivery channel through our digital offering sometime in twenty twenty two. So, we believe that credit card fee income is also going to be a really good opportunity for us going forward.
22:03 Matt, you might want to talk about mortgage a little bit, [indiscernible] because of the volatility based on rates, but glad to still grow a job and build that team out too and even though mortgage revenues down compared to last year, it is certainly up compared to our history. So, visit it a little there.
22:25 Yes, George, thank you. David, appreciate those comments on wealth. We are seeing good quarter over quarter revenue pipeline growth on the well side and you can see that the wealth advantage that we brought on, but just as important with that is on the mortgage side, if you look – if you have time on our Investor deck and look at slide fourteen, it really paints the picture of what twenty twenty was from a refinanced housing boom on the mortgage market, but now kind of stabilizing this high inventory still our production is exceeding our nineteen levels meaning, we're recruiting new MLOs.
23:03 We're having success both with purchase and refi now and we're excited we will bring them new MLOs every day. And we think we have a platform that attracts really good producers that can come alongside of bank and offer a complete financial services to their customer base. Obviously, you'll see continued build out of mortgage and also treasury management. We've continued to hire into that space. We brought on new treasury management associates and we had a nice little uptick there, the service charge income from treasury management this quarter. So, I think you'll see more going forward there.
23:40 David, I'll mention one other thing too with regard to deposit fee income. As we acquired banks we were very sensitive to the shock that we give to the customers that we acquire both from a product standpoint, rate standpoint, fee standpoint. So, we're a little slow to bring that new group into the fold if you will. So, last year we went through pretty significant consolidation of deposit products, deposit pricing, deposit service charges. So, now that group is all singing from the same hymnal if you know.
24:20 With our new acquisitions in Memphis, we'll transform, we’ll slow in bring that customer base on, we want them to get comfortable with Simmons Bank, there'll some give and take. There’ll be some fees that we lower some that will rise, but we will be consistent in the marketplace sooner rather than later in acquisitions going forward. So, that's another opportunity for us to standardize our product offering, our pricing across footprint, and we think that ultimately that'll will pay dividends with regard fee income.
24:57 Okay. That's a great color. Thanks, everybody.
25:00 Thanks, David.
25:02 Thank you. And our next question comes from Gary Tenner from D.A. Davidson. Your line is now open.
25:10 Thanks. Good morning. I have a question about just kind of balance management, obviously the last couple of quarters you put a lot of excess funds to work in the investment portfolio up over eight billion dollars now. Still almost two billion of cash, and I think you get some more excess liquidity from the two deals that closed in October. So, just kind of curious how you're thinking about the liquidity deployment if you're thinking about additional kind of leaning into some higher interest rates in the bond portfolio and balancing that against maybe a pending inflection point on the loan side?
25:47 Yeah. Gary, this is Jay. I think everything you said is kind of true to form with how we're looking at it. I'd say first and foremost, we look at the balance sheet overall. So, we're looking at everything from the liquidity position, which for us we think of as we sort of break apart the securities portfolio there.
26:05 We've got about one point five billion in floaters. And so, we of we think those variable rate securities more like short-term liquidity just like we have in the cash and cash equivalents bucket. So, we show that number at three point three billion at nine thirty. And then we've got a very laddered approach in the, you know call it the fixed income securities portfolio.
26:26 So, a lot of cash flow coming off from that portfolio over the next several quarters, but laddered out into some longer term maturities as well. And again, all of that’s overlaid against where we're at in the loan book, the percentage of that portfolio that's exploding the maturities in that portfolio. So, we pay a lot of attention to where we're at from an overall balance sheet, liquidity, and interest rate risk point of view.
26:56 Okay. And then follow-up to that, I just wonder if you could provide a, kind of update on the rate sensitivity within a loan portfolio. I know you do provide some detail in terms of overall rates sensitivity, but just maybe talk about the size of portfolio there’s variable rate and then update us on floors. Thank you.
27:16 Gary, I'll start on that question. Our mix fixed and variable and it has just been around fifty-fifty variable and fixed, but we've seen that the fixed go up slightly into the mid-fifties now, but really that just result in some construction, mini [indiscernible] CRA coming off our book, showing a little more fixed, but still like that equal waiting there today.
27:49 And in terms of floors, I don’t know if you could update any information in terms of the variable rate portfolio in floors.
27:55 Yeah. I would say a good portion. I don’t have that number right in front of me today that what our variable portfolio is, the majority of them do have floors.
28:08 Thank you.
28:11 And thank you. And our next question comes from Matt Olney from Stephens Inc. Your line is now open.
28:21 Yeah, thanks guys. Good morning. I was going to circle back on loan growth and definitely appreciate the improving commercial loan pipeline on Slide thirteen. You also mentioned some of your newer verticals are getting some traction and hopefully we'll be seeing some normalizing loan demand, but on the other side is the runoff and some of the paydowns. There seem to be pretty aggressive still, even more so than some of your peers. Any color on how close we are to seeing an inflection on core loan balances? Thanks.
28:54 Hey, Matt. Great question. And I look at that every day and what we see is our runoff is nothing that gives me concern that business is being taken from us, but it really is to continue rightsizing from a heavy CRE book that the big chunks are continuing to come off, that need to come off, that were planning to come off not so much even now with planned runoff, but even projects that are at completion that are moving to the secondary market are being sold out right, but as an inflection point, I'm very hopeful that that could happen even as soon as the fourth quarter, and we have a really good chance in the third quarter seeing our first month of net positive growth.
29:35 And so with that strong pipeline build, and I think we have a nice fourth quarter production coming. I think we're getting really, really close Matt to that inflection point and then positive loan growth moving forward.
29:48 Thanks to that Matt and I may miss heard you. When did you say the first positive month of net growth was? Did you see in the third quarter, I missed it, or do you expect that in the fourth quarter?
29:59 I was very hopeful in October we had that much, but as the quarter end, a lot of things move around the main borrowers do, pay all things that happen right at the very end, but we look at that on a daily basis and it looks very encouraging in the third quarter in September of that month. But again, it’s getting really, really close where you see that net positive on a monthly basis.
30:25 Got it. Okay. Thanks for clarifying. And then also want to ask about operating expenses, little bit noise in the third quarter, where would you point us to for a good starting point for the fourth quarter for the legacy Simmons Bank and then of course layering on the two acquisitions?
30:44 Yeah, Matt, this is Jay. So, couple of comments on that. Fair to point out, we had some non-core noise in the quarter. First of all, I would just reiterate kind of the guide we've had historically for what I'll call Simmons legacy for this purpose. Again, we've closed early in the fourth quarter on Landmark and Triumph. So, we'll talk about that separately in a moment, but when you think about the one hundred twelve to one hundred and fifteen range, we've been pretty consistent in that range this year.
31:12 We had a couple of one-timers in the third quarter that impact those numbers, a balance of some true ups on accruals in the third quarter. We had a non-core item related to branch rightsizing. So, if you go back in time to prior quarters, non-core M and A expense on the mark to market of some of those branches when we bring them in is held for sale as we've worked through those branches, we've been able to reverse out some of that mark to market in the third quarter.
31:42 So, what actually shows up is kind of a non-core positive, if you will, and the expenses in the quarter, but when you clear out all that noise, we still feel really good in our guidance range and that one twelve to one hundred and fifteen range, for what I'll call Simmons legacy. And then I would fully kind of reiterate the guide that we had at an announcement on Landmark and Triumph, but we had blended cost save expectations of forty percent on those transactions.
32:12 We might not fully hit forty percent in the fourth quarter. We're going to get the integration piece right, which will carry some of that expense burden here on the balance of October, a portion in November, but I think by December and certainly all of next year we'll meet if not exceed that guide with expectation to some of Matt’s earlier comments, Matt Reddin’s earlier comments that we'll invest some of that back into production talent and we're already having success there.
32:43 Okay. That's all from me. Thanks guys.
32:47 Thank Matt.
32:47 And thank you. [Operator Instructions] And our next question comes from Brady Gailey from KBW. Your line is now open.
33:02 Thanks. Good morning, guys.
33:03 Good morning, Brady.
33:05 So, I wanted to start with the buyback, it was great to see all reengage and size there, repurchasing almost two percent of the company. I know the stock is a little higher today than it was when you were doing these buybacks in the third quarter. How should we think about the buyback from here? I know you have about one hundred million left. Would it be safe to assume that you could do another fifty million in the next couple of quarters?
33:33 Yeah, Brady, I think you hit. It's all about management of our capital position and it's the dividend payout, it’s the stock buyback, all of that as a whole and acquisitions when we do acquisitions putting cash in the deal. You look at the share buyback, we did have a pretty quarter and we bought it back at about twenty eight fifty. As the price goes down, we would price lower down a little bit, as the price goes up, I mean.
33:57 So, I don't know if we have a timeline when we hit that fifty million to ninety eight million, but we’ll still be active. Our plan would be active in the buyback in the foreseeable future.
34:08 All right. Then congrats on those the two pending deals and such a tight turnaround. I know you guys always kind of remain active in M and A, looking at downstream targets. With these two now close, maybe just an update on how things are progressing on the M and A front for Simmons?
34:32 Well, Brady, we have a lot of good friends that we've built relationships worth over the years across our footprint and we continue to have some very productive conversations at least in our opinion they're productive. It's still very important part of our strategy to continue to build out our scale and markets that we serve and maybe even some ancillary markets that we would pick it up through acquisitions.
35:02 So, we're still very active, still having very productive discussions. Nothing's come to the point of announcement yet, but we're very hopeful that one or more of these conversations might in the near term anyone. So, we're very much interested in continuing our M and A strategy.
35:32 Alright, great. Thanks guys.
35:35 Thanks, Brady.
35:37 And thank you. And we have a follow-up question from Matt Olney from Stephens Inc. Your line is now open.
35:48 Yeah, just following up on the last question around M and A, George how would you characterize the M and A chatter currently in the market? And then secondly, as far as Simmons preference, I think the last two deals Landmark in Triumph were two smaller banks that were in the current footprint at a density. How should we be thinking about the Simmons M and A strategy from here? Should we anticipate similar deals that would increase density or market expansion, just any color? Thanks.
36:23 Well, Matt, our first priority is to increase our density in the markets that we serve. So, to the extent that we're successful there, that would be our priority. Now, we've been very fortunate with two deals in Memphis. All of that was end-markets where we currently were. Prior to that Landmark, a bank out of Columbia was in our footprint, but in no markets that we currently serve.
36:54 So, we even consider that to be in footprint as well. So, we're focused on the states where we're doing business today and primarily on markets that we're currently in, but if we happen to find a really good partner that had some presence in the market we were in, but had some new markets as well, we would see that as a very positive outcome.
37:22 And George just a general comment you can make on, just the overall level and activity of M and A chatter in your markets?
37:32 Well, you know it's probably picking up a little bit, but to me, it's sort of normal. We've been pretty active for the last several years. So, I would say that our activity has not increased or decreased. We sort of have a [quota Matt] [ph] as we've talked about before about how many transactions we can manage at one-time or within a certain period of time? And I think we've been very disciplined in that process. And we’ll continue to be disciplined. So, I wish I could tell you that we controlled the timeline on acquisitions, but I'll tell you that's just not the case. So, when we have a potential merger partner and their timeline is next six months, then it's going to be up to us to try to meet that expectation.
38:31 So, they are sure to get [slided] [ph] if you will, and timelines that we feel like we can manage successfully and knock on wood so far so do.
38:44 Okay, great. Makes sense. And just a few housekeeping items here at the end. PPP, I think you said eight point five million dollars of remaining fee that you expect, how much of those would you anticipate realizing in the fourth quarter versus into twenty twenty two?
39:03 You know, Matt, we're working at every day, and we've got a group out there, it's gone down pretty quick the last quarter. You're into PPP2 now, so it's a little different. There's not much of PPP1 left. It's going to be down by year end, but we'll still have some going into the first quarter.
39:24 Okay. Thanks, Bob. And then similar question on the discount accretion. I know that's good to be a de minimis amount at this point. I wish your expectations be the next few quarters on that?
39:38 Yes, I mean, I think you're right. It's kind of trailing off, but of course, you're going to have a pickup in that here in the fourth quarter with the closing of Landmark and Triumph early in the quarter. So, I would expect the trail off on, again, I'll use that term legacy to sort of continue, but to maybe be picked up a bit from the new acquisitions over the coming quarters.
39:58 Yes. Do keep in mind on the new accounting rules and CECL is, we will have the day one – first have day two at CECL adjustment that will hit in addition to the loan discount, so we'll have a double count. So, effectively, all of the accretion will be interest income going forward versus being related to the credit mark.
40:20 Yes. Okay. Thanks, guys.
40:23 Thanks you, Matt.
40:26 And thank you. And I am showing no further questions. I would now like to turn the call back to George Makris for closing remarks.
40:36 Thank you very much for joining us today. Just in summary, I want to thank the folks that you've heard on this call that [David calls] [ph], I think it illustrates our ability to manage in different kinds of economic scenarios and while our loan book is down we've been able to manage fairly successfully our investment portfolio. We did make eight million dollars this quarter which we're pretty proud of.
41:05 I think also the marked improvement in our asset quality illustrates two points. First of all, our conservative nature on the way that we recognize risk in our portfolio. So, when the pandemic started, we were the first banks to market with recognizing additional risk based on uncertainty in the marketplace and our provision and our allowance reflected that at that point time.
41:36 I think you can see that we are now starting to work with our customers and understand that they're past the point of that particular risk, and our portfolio is improving. We're able to recapture some of that earlier provision, which I think is a very positive reflection of our customer [banks] [ph]. And I'll leave you with this thought because Matt didn't mention it, while we're really proud of our loan pipeline build to the end of the third quarter, up fifteen percent from the previous quarter, as of Friday that loan pipe line was one point eight billion dollars with proved ready to close at five thirty million.
42:16 So just in this short three week since the end of the quarter, we said that pipeline continue to build and that's without the pipeline from Landmark and Triumph because I just quite honestly haven't had time to get their pipeline hit loan production system. So, we're very optimistic about our ability to meet the market's needs.
42:44 If we had been in this position eighteen months ago with a loan deposit ratio of ninety eight percent in CRE concentration of three hundred and forty percent, we would not be in the position we are today. So, I'm really proud of what these folks have done, the navigation that they’ve done during a very uncertain period of our economy.
43:07 So, I hope you'll take that as a positive note. Thanks again for joining us today and hope you have a great fourth quarter and happy holidays.
43:18 Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.