Simmons First National Corp
NASDAQ:SFNC
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Simmons First National Corp
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Ladies and gentlemen, thank you for standing by and welcome to the Simmons First National Corporation Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Mr. Steve Massanelli. Thank you. Please go ahead, sir.
Good morning and thank you for joining our fourth quarter earnings call. My name is Steve Massanelli and I serve as Chief Administrative Officer and Investor Relations Officer Simmons First National Corporation.
Joining me today are George Makris, Chairman and Chief Executive Officer, Bob Bellman, Chief Financial Officer and Chief Operating Officer David Garner, Executive Director of Finance and Accounting and Chief Accounting Officer, Marty Castillo Chairman and CEO of Simmons Bank or wholly owned bank subsidiary, and Matt Reddin, Chief Banking Officer of Simmons Bank.
The purpose of this call is to discuss the information and data provided by the company and our quarterly earnings release issued this morning and to discuss the company's outlook for the future. We'll begin with prepared comments followed by a Q&A session. We've invited institutional investors and analysts from the equity firm to provide research on a company to participate in the Q&A session. All other guests in this conference call are in listen-only mode.
Transcript of today's call including our prepared remarks and the Q&A session will be posted on our website simmonsbank.com under the investor relations page. During today's call, we’ll make forward looking statements about our future plans, goals, expectations, estimates, projections and outlook. A reminder 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 SEC 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 assumed 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 GAAP are contained in our current report filed this morning with the SEC on form 8-K and available on the investor relations page of our website, simmonsbank.com.
I will now turn the call over to George Makris.
Thanks, Steve. And welcome to our fourth quarter and 2019 annual earnings conference call. I would first like to welcome the associates from Landmark Bank, who became part of the Simmons team on October 31. Landmark Bank operations are included in our results for the month of November and December.
In our press release, we reported net income of $238 million for 2019, an increase of $22 million, or 10.3% compared to 2018. Diluted earnings per share were $2.41, an increase of $0.09 or 3.9% from the previous year. Included in 2019 earnings were $32 million in 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 for 2019, an increase of $49 million, or 22.4% compared to 2018. Core diluted earnings per share were $2.73, an increase of $0.36, or 15.2% from last year.
During 2019, total assets grew $4.7 billion to $21.3 billion at December 31, 2019. Our return-on-average assets was 1.3%, while our core return on average assets was 1.5% for 2019. Our efficiency ratio was 50.3% for the year.
Fourth quarter 2019 net income was $52.7 million, and diluted earnings per share were $0.49. Included in fourth quarter earnings were $18.4 million in net after tax non-core items. Excluding the impact of these items, the Company's core earnings were $71 million for the fourth quarter of 2019 and core diluted earnings per share were $0.66.
Our loan balance at the end of the quarter was $14.4 billion, an increase of $1.4 billion from last quarter, and $2.7 billion from year-end 2018. In December, we entered into a branch purchase and assumption agreement to sell five branches in Austin, San Antonio and Tilden, Texas.
In conjunction with this pending sale, approximately $260 million in loan balances were moved to loan sale 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 CRE 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 2018. And we also moved approximately $160 million in deposits to deposits held for sale in conjunction with the pending branch sale.
Net interest income for the fourth quarter of 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, we're projecting approximately $32 million of accretion income. Net interest margin for the fourth quarter of 2019 was 3.76%. The Company's 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. Non-interest income for the fourth quarter was $45 million, an increase of approximately $10.4 million compared to the same period last year. Increases mostly categories for the quarter-over-quarter comparison, are due to the 2019 acquisitions of The Landrum Company and Reliance Bank.
Non-interest expense for the year was $461 million. Core non-interest expense was $418 million, which represented an increase of $32 million when compared to 2018. Non-interest expense for the fourth quarter of 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 2018. Incremental increases in most operating areas are related to our 2019 acquisitions of The Landrum Company and Reliance Bank.
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 NGB investments.
During fourth quarter, we launched our new mobile banking app, as well as our new treasury management platform. These upgrades provide our customers a faster and more customizable experience. Our mobile banking users have increased 15% since the rollout and customer feedback remains very positive.
At the end of the year, non-performing assets were $92 million. This balance is primarily made up of $71 million in non-performing loans, and $21 million in other non-performing assets, which includes approximately $6 million in closed 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 stockholder’s 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 $15.89, 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 end.
Our total risk based capital ratio at December 31st was 13.6%, while our Tier 1 leverage ratio was 9.6%. At December 31st, the allowance for loan losses for legacy loans was $68 million with an additional $444,000 allowance for acquired loans. The loan discount mark was $87 million for a total of $155 million with coverage.
In our press release, we updated our projection for the expected allowance for credit losses upon completion of the CECL accounting standard. We currently estimate that the ACL [ph] will be approximately 1.35% to 1.45% of total loans upon adoption. We have set our methodology and assumptions for the initial implementation. However, we will continue to monitor and 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 financial performance and lose sight of the bigger picture results. In retrospect, our performance in 2019 was remarkable. We achieved an ROE of 1.33% and a core ROE of 1.51%, which exceeded our target of 1.50%.
We produced a 10% return-on-common equity with an 18% return-on-tangible common equity and a 20% core return on tangible common equity. We operated in 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 was lowered from 333% at the end of the second quarter to 293% at year-end, both ratios now below the regulatory guidelines.
And importantly, our book value per share was 8.1%, while our tangible book value per share rose 12.1% during the time when we completed two acquisitions, which added $4.9 billion in 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 am extremely optimistic about the future of Simmons Bank.
This concludes our prepared comments. We will now take questions from our research analysts, and institutional investors. Operator, please review the instructions and open the call for questions.
Thank you, sir. [Operator Instructions] Our first question comes from Brady Gailey from KBW. Please go ahead.
Hey, thanks. Good morning, guys.
Good morning, Brady.
So you utilize 10 million of the 60 from a buyback point of view. So you have 50 million left. Would you anticipate that 50 million to be repurchased fully in 2020?
Brady, it’s very likely that we will. We have a systematic program that we put into place and we expect to continue it throughout 2020. Obviously market circumstances could change and we could withdraw that systematic buyback. But right now, it's still in place, and we expect it to continue.
All right. And then from a loan growth perspective, it seems like this earnings season 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 still the right way to think about loan growth for Simmons next year, or this year?
Well, yes, it is. 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 the sale of the South Texas locations. We have also communicated our intention to roll down our exposure and our energy portfolio by about another $200 million during the year, hopefully during the first six months of the year.
So we've got that $460 million or 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 market place. We're still able to originate a lot of 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. Matt, you may have some more color.
Now, George, I think you hit that right on the head. Brady, I think you've, you've kind of heard us in the last couple of quarters and speak to kind of where we're taking our portfolio. I think we'll have -- continue to have really good relationship opportunities. But I think the fourth quarter speaks to us executing on everything we've talked about doing. We had some nice run off in our transactional CRE portfolio. We also had run off in our energy portfolio as we're trying to execute. But at the same time, we had healthy production that was equally weighted between CRE and C&I. So I think George captured it right. And I think we'll see that again continue in 2020.
Alright, and then as it relates to the margin, clearly accretable levels are going to be coming down next year, especially versus the elevated 4Q level. So I get that the report at NIM would see some downside, but stripping out accretable yield, you looked at the core net interest margin at 343. And do you expect that to be stable in 2020? Or could there be some additional downside to the core NIM?
Well, there were some unusual fourth quarter circumstances related to the Landrum acquisition. So a lot of the pressure on the core NIM in the fourth quarter was just a rebalancing of earning assets. And that will continue, but I'm going to let Bob give you a little more specifics about the core net interest margin.
Yes, and Brady 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. And 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 a little swing there that our interest bearing deposits went down a little more than our loans.
As George said, for the quarter though when you looked at reported core, NIM were down about 15 basis points about 10 of that is related to the Landrum acquisition, and part of it is -- is they had a lower loan to deposit ratio and they have a lower margin. The other side of it is also they had about a billion dollars in security portfolio. And with purchase accounting you mark those to 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 some 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 end of the quarter. And a lot of that was even in U.S. 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 George said, we think this was an unusual quarter. We would hope this is the low end and we'll start building. We do have seasonably low in the first quarter. We should have impact because of our size. But we would expect to have improvement and we have been working the deposit side pretty hard.
I'll mention one other thing that that affects our margin in the fourth quarter, and it'll affect it again in the first quarter. And that is our agra [ph] portfolio. So it paid 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 the margin.
Got it? And I guess this is Marty’s last earnings conference call. So Marty great working with you over the years and wish you all the best in retirement.
Right. Thank you very much. Transition time is appropriate and we got a great team of bankers. Just feel very good about where we are as a bank and 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.
Hi, David.
I’d like to echo Brady’s comments, congrats, Marty on the retirement. Hope you enjoy that.
Thanks, David.
But I just wanted to start on expenses. I know the conversion for Landrum is slated for Presidents Day weekend, have any of the synergies been realized to date? And I guess just looking forward; obviously, there's a lot of moving parts, but just inclusive of additional expenses from NGV and other moving parts. How do you think about it, your non-interest expense in 2020?
Well, that's a 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, we're going to look to hit these numbers or beat them. But 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 costs saves. And historically, the first quarter is 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 non-interest expense for Q1. For the balance of the year we’ll be, it'll be pushing to get it down to about 100 in the low 120s by Q4. So I would say 124 in the first quarter and migrating down to 120 by the end of the year. That's going to be a major focus for us next year as we're rebalancing some of the company here and some of it will be on the expense side. And so those are our target numbers going forward.
Okay, that's extremely helpful. And just staying on the NGB, I know you've got a lot going and NGB 2.0 I believe should be starting now. Could you just talk about what you're investing in, upcoming investments that you have and the expectations for potential improvements in efficiency from those?
David, sure, I'll be glad to. So our focus in 2020 from an NGBT standpoint is going to be next generation of our digital offerings. So we just rolled out our digital app. with great success and our new Chief Digital Officer Alex Carriles has done a fantastic job. Our customers basically self-selected their timing for conversion from our old app to our new app. That number, even since we took a look at our script for this call has grown even more. We are now up 19% in the number of users over where we were before conversion, which I think is excellent. I also mentioned that our users are 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 as 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 banking.
Now we’ll continue to integrate more products and services in our digital offering this year. We're very proud that our writing for our digital app is 4.8 stars. And I'll tell you 4.8 stars is hard to achieve for any app, especially a banking app. So we're extremely excited about the future of our, our digital banking and our focus for 2020 primarily will be on those new initiatives.
Now, we still have some hangover from NGB 1.0. And that is to realize the efficiencies and the revenue gains from our investment last year. And that includes the utilization of our data warehouse. We don't talk about that a whole heck of a lot. But we had a lot of disparate systems with a lot of information about our customers that we have now put together, and our ability to utilize that in marketing programs and the product development is going to be a great benefit to us going forward from a revenue generation perspective.
So a lot of times we 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 is our greatest opportunity associated with that. We're also continuing to build additional infrastructure within the bank. This year we went to OutLink, which means that all of our processing is done by Jack Henry, as a 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 that's 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 to recognize the benefits of our initial investment and to continue and invest in our digital offerings. So the long answer to a short question. Sorry about that.
No, it's terrific. That's that's great color. And last one from me. Just your thoughts on M&A. I know you just closed The Landrum deal. But, I know you. You just have a very good pulse on the market, how our conversation is going. And just what's your appetite for a deal here?
Well, we're still very interested. And we're having some good conversations. As we mentioned several times, our focus has really moved from focusing on new markets to expanding in current markets. So the conversations are a little bit different today. They're going to be a little more dicey because in market acquisitions require more cutting, if you will, over the expense side of the ledger. And that is a tough part of the M&A business. So we think we're having some very productive conversations. We're not in any rush. We want to see how CECL affects our cost of doing business going forward. And many of the banks that we're talking to, aren't subject to CECL today. So it is an educational process, also for us to let them know how a merger will affect the combined company from a CECL's pool point. So I think we're having really good discussions. We're still very interested in expanding our presence in the markets we serve today. So, we're optimistic about the possibilities.
Terrific. Thanks, guys.
Thank you. Thank you.
Thank you. Our next question comes from Matt Olney from Stephens. Please go ahead.
Hey, thanks, morning, guys.
Good morning, Matt.
I want to go back to the discussion around loan balances. And I know you've been working to remix the loan portfolio exiting certain loans that you acquired that are lower yielding. I'm curious how the progress was in the fourth quarter and what's remaining. And then related that I think you're also exiting some energy shared national credits. Same thing there. How was the progress in the fourth quarter? And then and then what's remaining?
Hey, Matt, this is Matt. I'll hit that one first. Yes, I think we've, as I said earlier, I think in the fourth quarter, we executed on that pretty well. The energy loans, we took those down 41 million and that was just 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 over the first two quarters of 2020. Also, we had really good planned payoffs in St. Louis and in Fort Worth, that were pretty sizable to the tune of about 300 million that were planned, non relationship that we knew with reliance or even with transactional loans in the Texas region that went off. And then you saw -- from that you can see now we're below $100, $300 at the corporate level. So hopefully that gives you a little color on kind of those planned declines in the loan portfolio.
Matt, let me let me say one other thing about that. Because we're now below the regulatory guidelines and we expect a little more run off to give us a little more capacity. We are now back in the game with regard to relationship, CRE lending in certain categories. So we still have some concentrations in certain business areas that we don't need to do any more of today. But, I guess, the way I look at this is like a general manager of a pro football team who has a fixed roster. We're always looking to improve that. And improvement for us is moving from transactional business to relationship business. So now, we've got capacity built in because of the results that Matt and his team have been able to attain. And I would expect us to be active in the marketplace again.
Okay. Got it. Let me just make sure 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 want to runoff and you got rid of 40 so call it 140 remaining in that book. Is that right? And then on the more the lower yielding real estate loans, I think you said previously about $200 million remaining runoff from that. Did I get those numbers right?
You're pretty close. real close on the energy and I think we see another 160 coming off next year over the next two -- we'll see. You hope two quarters maybe three quarters, but that is the plan there on the energy book. On the Reliance, that St. Louis, that's a little different number. I mean, we ran off 128 million in the third -- in the fourth quarter for St. Louis specifically. Yes, there's more plan runoff there. But I don't want to say that specific number. I think he said another 200 million. Is that what you said, Matt?
Yes.
It's around that number. It can come in below that or above that, as George said too, we're also trying to sell some these customers to make a relationship as well. So that could change and bring those yields high -- put those lower yielding loans higher.
Okay. Got it.
Hey, Matt. Just to clarify to, you do know, we pulled -- the South Texas loans are out of the loan balance as of the end of 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 make sense. She had a small presence in a very large metro market. So it seems like you need to add scale or exit. I'm curious beyond Texas, it seems like there could be some more opportunities for some strategic exits where Simmons also has a smaller presence in a larger market. Any commentary if we could see some more strategic exits in the future from Simmons?
Well, I will say that everything is on the table. As I mentioned, I think last quarter, maybe quarter before that, we're taking a look at our entire location strategy. And it's not just from a profit and 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 are top notch deserve the opportunity elsewhere. So I would tell you, it is a constant evaluation for us. You're right. On paper, there are other markets that 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 for the next few quarters. Just to clarify, on the deposit insurance, it looked like you had a credit there again in the fourth quarter. Are there any more credits remain that could offset that? Or are we going to return to a more normalized run rate there? And what is kind of a normalized run rate now on deposit insurance expense?
Yes. Matt, fourth quarter we used up those credits, so I would not expect any more in next year. So you obviously see a higher expense going forward. That's in the $2.5 million range on a quarterly basis that includes landmark. So ballpark of about $2.5 million on a go forward.
Got it. Okay. And then last question for me is just on the fees, fee income pretty impressive in the fourth quarter. Looks like part of that jump made them from the acquisition, but it's tough for me to parse out. So in any commentary on the run rate for fees as we go into 2020?
Well, of course, our mortgage group had a really good year last year too. We're not anticipating that same kind of revenue from that group in 2020, but of course, interest rate movements can change that overnight. We weren't anticipating this year either. So goes to tell you how well we forecast right here. But anyway with Landmark Bank, we picked up a lot of consumer business, I mean, they were a true community bank. So the fees that go along with those consumer accounts will be a real benefit to our organization. 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 continue to roll out our products and services across our footprint.
Yes, Matt, just to give you a little color on Landrum. The non interest income for Q4 was about 3.5 million and that's for two months. So that should help you in some of your modeling.
Okay. If I guess outside of that in the fourth quarter there must have been some legacy Simmons growth in the fees, because I think the jump was for that from 3Q to 4Q was stronger than that.
Yes. And as George said, a big chunk of that came in the mortgage area and some -- also our trust group had a nice little kick in the fourth quarter on closing some. And you never know when those timing of those states might close out. We've been playing on a lot of that to happen. And we were fortunate to have some of that in the fourth quarter. I think that also helped that number.
Okay. Got it. It's all for me. Thank you.
Thanks, Matt.
Thank you. Our next question comes from Gary Tenner from D.A. Davidson. Please go ahead.
Thanks. Good morning.
Good morning, Gary.
Hey. A couple follow ups on energy portfolio. Could you remind us what the amount of energy loans are that are currently on non-accrual?
Yes. So, I can do that for you. Right now on non-accrual there's 19 million. And that 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 be -- 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'll be a small book, but a 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 a possibility. We're in the market every day. There is a possibility for sure that we'll attract a new client to the bank that fits our high quality credit standards and full relationship standards. But I think any type of incremental growth I wouldn't see that coming for quite some time.
Gary, I might also mentioned that in our relationship business, while we have some energy exposure to some of our customers, several of those customers are well diversified and energy is only a portion of what they do well.
Okay. And just one other question for me. In terms of the projected $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 prepayments in that number?
The bulk of it is scheduled. There are some pre payments that we did expect. And, as Matt had said, in some of our markets like Missouri, that we do have in there, but generally speaking that's scheduled or known payoffs.
All right. Very good. Thank you.
Thank you. Our next question comes from Garrett Holland from Baird. Please go ahead.
Good morning. Thanks for taking the questions.
Good morning, Garrett.
I want to follow up on asset quality and the provision. What do you expect from a quarterly provision run rate as we move through 2020 based on your expectations for core performance and then the CECL Day 2 impact?
Well, the theory behind the CECL 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 low growth, I would say that our provisions are going to be less than it was this year projected, but it's going to be driven by those two factors; charge-offs and net new loans.
Understood. That's helpful. And then maybe just the bigger picture question and 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 banks? The traction moving beyond lending and just the broader banking relationships. Generally you pleased with that progress? And how large is this opportunity to move in 2020 and beyond?
Well, we think the opportunities are huge. And let me just sort of explain what's happened over the last three to four years. We have bought several banks with different profiles of products and services. So, if we buy bank that's primarily a commercial real estate lender. What we'll find is, they don't have a real widespread consumer base. They don't have verst into Agra lending and C&I 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 offer 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. That's one of the reasons that we have taken on the strategy that we have and why we've grown into certain markets. Wealth Management being a great example, where we have wealth management professionals, we are very, very successful. We are the largest trust operator in the state of 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 outside traditional lending in these marketplaces, we think that potential is growing there.
Appreciate the detail. Thanks for taking the question.
Sure.
Thank you. [Operator Instructions] Our next question comes from Stephen Scouten from Piper Sandler. Please go ahead.
Hey, guys. Good morning.
Good 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 are seemingly some constraints on growth and portfolios you're working down. I'm just wondering if you've had any issues with retaining the people you want to retain?
Yes. Stephen, its Matt. That's a good question. We've seen some of that. Some of that we expected. We saw some of that in the Dallas Fort Worth area. We've seen a little bit of that in Missouri, but not that much with our reliance conversion. But honestly, we look at that as an opportunity to the bank that now with our balance sheet in horsepower, if those bankers or relationship managers like to do that, we choose that opportunity to upgrade to be more well rounded, complete commercial banker that selling all of our products and services to George's Point, but we have seen some of that.
Okay. Helpful. And then, maybe following back a little bit around M&A. I know, in years and quarters past you've talked about Nashville as a market. You all might want to target over time. And there was a fairly sizable transaction that was just announced there. Is that still a market that's on your radar? And are you know -- or is it more kind of density within your existing markets from this point?
Well, certainly Nashville is a priority market for us. To-date, we have not found a successful merger partner. But we also have Plan B, which is de novo growth and national market. We've had some good conversations with some potential leaders in that market with some potential lenders in that market and increase our physical presence. We're 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 nova.
Okay, great. And maybe just last thing for 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 mostly scheduled. There are a couple expected payoffs that are included in that.
Okay, great. All right guys. Thanks so much for the color. I appreciate.
Okay. Thanks Stephen.
Thank you. This concludes our Q&A session. At this time, I'd like to turn the call over to George Makris, Chairman and CEO for closing remarks.
Thanks very much. Just to wind this up. Those of you on the call may have noticed in our press release today, we announced the retirement plans for Marty Casteel, President of Simmons Bank and Pat Burrow, our General Counsel. I will take this opportunity to personally thank both of them for their outstanding leadership and very unselfish commitment to the future of Simmons Bank. They've been very instrumental in the success we've achieved since I've had the pleasure to work with both of them and actually for many years before that.
We've been planning in this day for some time now and recently we've announced other changes which align with our strategic objectives. Bob Fehlman has assumed the duties of Chief Operating Officer in addition to his responsibilities as our CFO. David Garner has the same responsibility for all accounting and finance as well as retaining title of Chief Accounting Officer. Pat Neeley has assumed the responsibility for all operations groups. Tina Groves has been named Chief Risk Officer. All three of these individuals report to Bob.
Matt Reddin has expanded his role as Chief Banking Officer. Currently, Matt 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 a footprint. Jena Compton is the same the role of Chief Strategy Officer in addition to her role as Chief People Officer. Now I believe this is 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 that one of his first hires George Makris III will assume the role of General Counsel. Steve Massanelli will manage the newly formed real estate division which work to rationalize our location strategy and help ensure we take advantage of our size and scale. And certainly the addition of Alex Carriles as our Chief Digital Officer has and will provide great opportunity not only for Simmons Bank, but 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 said before, I'm very optimistic about our future. Thanks to all of you for joining us today. And this concludes our conference.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.