Simmons First National Corporation (NASDAQ:SFNC) Q4 2022 Earnings Call Transcript

Simmons First National Corporation (NASDAQ:SFNC) Q4 2022 Earnings Call Transcript January 24, 2023

Operator: Good morning, and welcome to the Simmons First National Corporation Fourth Quarter 2022 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Ed Bilek, Director of Investor Relations. Please go ahead.

Ed Bilek: Good morning, and welcome to Simmons First National Corporation’s fourth quarter 2022 earnings call. Joining me today are several members of our executive management team, including our Executive Chairman, George Makris; and our CEO, Bob Fehlman. Before we begin the Q&A, I would like to remind you that our fourth quarter earnings materials, including the release and presentation deck, are available on our website at simmonsbank.com under the Investor Relations tab. During today’s call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality and net interest margin.

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These statements involve risks and uncertainties, and you should, therefore, not place undue reliance on any forward-looking statement as actual results might differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors. Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8-K today, our most recent Form 10-Qs and our Form 10-K for the year ended December 31, 2021, including the risk factors contained in that Form 10-K. These forward-looking statements speak only as of the date they are made and Simmons 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 metrics, including the reconciliations of these non-GAAP metrics to GAAP are contained in our earnings release and investor presentation, which are included as exhibits to the Form 8-K we filed with the SEC and are also available on the Investor Relations page of our website, simmonsbank.com. Operator, we are ready to begin the Q&A session.

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Q&A Session

Operator: The first question is from Brady Gailey of KBW. Please go ahead.

Brady Gailey: Hey, thanks. Good morning, guys. I wanted to start with the tax rate. The tax rate has been a little volatile this year. And it was abnormally low in the fourth quarter. Where should we expect, kind of the forward tax rate to be? Any color on why it was lower in 4Q?

Jay Brogdon: Hi Brady, this is Jay. Let me jump in on that and give a couple of initial remarks. First of all, you’re exactly right. The effective tax rate came in low in the fourth quarter. I’ll speak to that latter question first. Couple of drivers there, but really the biggest one, we call it out on our materials is a tax credit that we were able to, sort of complete the project and recognize in the fourth quarter. As a result, we’re able to take a full-year of that credit. The way that works from an accounting perspective is, you get the tax benefit sort of grossed up down in the tax line item and then there’s an amortization of that tax credit up in the non-interest expense area. And we call both those out there. So, sort of that full-year benefit recorded in the fourth quarter was the biggest driver to the tax rate, sort of being below expectation in the quarter.

I think going forward to your initial question, I think I would think of 2023 tax rate, sort of ranging in that 18% to 19% area.

Brady Gailey: Okay. That’s helpful. And then I noticed you guys were pretty active in the share buyback for the first three quarters of the year, but no buyback in the fourth quarter. So, any color there and how we should think about you guys potentially repurchasing stock in 2023?

Bob Fehlman: Brady, this is Bob. I’ll go ahead and take that one. You’re right, early in the year, we did a lot of stock buyback. Our focus really right now is growing tangible book value per share through EPS and organic growth. Doesn’t mean we won’t do stock buyback if the timing is right, but right now we’re really focused on building our capital position going into 2023. So, as you saw, we really did very little, if to no purchases in Q3, and in Q4 we did none at all. We’re going to be very selective going forward in this environment we’re in, just uncertainty of just holding on to capital and building tangible book value per share. All right. And then another good quarter of double-digit loan growth, which I know you guys kind of messaged on the conference call last quarter, but I think I remember after that you guys expect loan growth to really slow down in 2023, is that still the right way to think about that?

And where do you expect loan growth to be this year?

Matt Reddin: Hey, Brady, this is Matt. I’ll jump into the first. Yes, you’re €“ we had a nice fourth quarter, good diversified loan growth, it’s about a footprint. As you can see in the material on the pipeline, there’s technology, where rates on the pipeline is slowing. We still see moderated loan growth. A lot of that improved our unfunded commitment. Still seeing demand, kind of at mid-single digits is what we’re seeing 2023 so far, but it is, kind of an economic environment.

Bob Fehlman: Also, Brady, just like the rest of the industry, we have slower paydowns in this environment with rates going up. So, you have less cash flows going out on paydowns and refinancing. And so that helps all of us in the industry build there, but it really bodes well for the unfunded commitments pipeline we had earlier in the year too that we’re still funding those over a period of time.

Brady Gailey: All right. And then finally for me, the net interest margin was stable if not down a few basis points linked quarter. How are you thinking about the trajectory of the net interest margin into 2023?

Jay Brogdon: So, Brady, Jay again here, let me jump in with some initial remarks there as well. I think the thing to point to here for Q4, we had some deposit leakage, I’ll call it late in the quarter. We’ve had what I felt like was a good third quarter on the deposit side and candidly early in the fourth quarter as well. You may recall in Q3, NIVs actually grew. We gave some of that back in the fourth quarter, kind of fell more in-line with the industry in the fourth quarter. You couple that with some strong loan growth continued in the fourth quarter. And we increased the reliance on wholesale funding. I think that’s, sort of cash flow timing as much as anything. I sort of think that the thesis for us from a margin perspective, from an NII perspective remains fully intact candidly.

So, when I think about, sort of go forward expectation for margin, some of that wholesale funding reliance in fact came late in the fourth quarter. That will be a bit of a headwind early in 2023 for us from a margin perspective, but as we continue to expand our loan to deposit ratio, sort of reinvestment of investment and other cash flows back in the loans, which we think we’ve got plenty of loan demand in the foreseeable future to do. Some of that moderation in loan growth that Matt spoke to that we expect, that’ll help sort of reduce any reliance on wholesale funding going forward. And so, I think that all is, kind of sort of tailwinds for us in 2023 from, sort of a built-in margin perspective as time moves on. I’m going to mention one other item.

We call this out in our slides, but just one thing that is important as we move later into 2023, remind you all that we have about $1 billion of our bond portfolio fixed rate that is swapped. And that was on a two-year forward contract and that will come into play in September of this year, sort of late September. And so that basically goes from fixed to variable late in the year and current rates would certainly be a boost to margin at that point as well.

Brady Gailey: Okay. All right. Great. Thanks for the color, guys.

Operator: The next question is from David Feaster of Raymond James. Please go ahead.

David Feaster: Hi. Good morning, everybody. I was hoping that maybe we could touch on the deposits that we were just talking about, maybe talk about some of the competitive dynamics in some of drivers of the core outflows. I mean, how much do you think is surge deposits versus seasonal dynamics versus clients just using excess cash to pay down higher cost debt? And are you seeing any differences from a geographic or regional perspective where competition is more intense? And do you think most of the surge deposits, if you will, are out at this point?

Jay Brogdon: So, let me again jump in David on that and Bob or Matt may also or others may have some comments here, but I do think that there is likely some seasonal impact for us in Q4. I don’t think there’s any doubt about that. And again, we saw some of the outflows pretty late in the quarter, which would, kind of sync up with that outcome or that expectation. When I think about €“ and I’ve spoken about this in prior quarterly calls, when I think about excess funds, that surge deposits, funds that we’re laying around whether they’re consumer or commercial or otherwise, I think most of that moved out of the bank earlier in the year last year. What it feels to me like when I’m looking at our data, sort of daily, weekly, monthly right now, it feels more like just an overall competitive dynamic.

That’s why I used the word leakage earlier. I don’t see, sort of wholesale shifts out of deposits. Certainly don’t see, sort of customer loss. It’s really just more, kind of that retail leakage out there across the footprint from a competitive dynamic or alternative opportunity for funds. So, those are some perspectives I have, but Matt, if you’ve got anything or Bob that you’d like to layer in, you got to have some additional comments there?

Matt Reddin: No, Jay, you hit that right on. I think I’d add to that just on the retail linkages, what we’re seeing also alternative opportunities, money markets with a Smith Barney or somebody to that effect, Charles Schwab, but also we’re seeing in the small community markets, rural markets, that is getting very competitive and seeing some really irrational pricing and that’s where we’re also seeing small retail customers kind of leak out customer losses, Jay said, but just real competitive on the time deposits.

David Feaster: Okay. No, I guess, if we €“ how do we think about funding loan growth? And if there are additional pressures, I guess, how do you think about funding that? I mean, it looks like this quarter was primarily CDs, but how do you think about CDs versus borrowings and even potential securities sales? And if you could just remind us of the cash flows off the securities book, that’d be helpful as well?

Jay Brogdon: Yes, on the cash flow piece, David, I think we’re guided to 160 million to 180 million per quarter of principal roll-off. I’ll tell you Q4 that statistic was 185, sort of toward the high-end, slightly above that guide. So, I think that guide, kind of rings through as we go forward in terms of quarterly cash flow, not a lot of appetite to, sort of do a broader balance sheet restructure in right now with the securities portfolio or otherwise. I think we’ve got adequate cash flow, particularly relative to what we expect is moderating again continued loan growth, but moderating loan growth throughout the year. And so, that’s sort of the expectation from funding perspective, you asked a bit about the, sort of alternative funding out there.

To us right now, the most advantageous funding from a cost perspective to the extent we’re relying on wholesale has been in the brokered CD market or brokered market, a little more advantageous rates there than FHLBs or otherwise. We’ve got plenty of capacity there, certainly not our first option. We can fund it off our own balance sheet. That’s what we’ll do. But those are, sort of the relative opportunities and costs that are out there right now.

David Feaster: Okay. And then maybe just circling back to, kind of the loan discussion. Just wanted to touch on the pipeline. It’s still healthy down a bit. Kind of fits with the dynamics that you’ve talked about. But just maybe could you talk to us a bit about the pulse of your markets from a demand perspective? What geographies and segments are you still seeing healthy demand? And what’s your appetite for credit here? Just kind of given the economic backdrop in funding challenges and where do you still see good risk adjusted returns at this point?

Matt Reddin: Hey, David, great question. I’ll start there. I’m sure may have comments, but first kind of top of the house on our pipeline. It is stable. And I think we’re very focused on pricing discipline in these conditions and also credit conditions and what €“ our resulting pipeline due to those disciplines is well-diversified across all of our segments is not concentrated in any specific product type. We want to see good middle market C&I. We want to see public sector banking. We want to see selective long-term CRE client. Across the board is very diversified right now. Your comment on this, we’re just staying to our knitting around credit fundamentals. And question is, is there a demand in the marketplace? Yes. Moderated for sure with these €“ especially with this yield curve, it can make it a challenge, but people are doing business, but we’re going to be taking care of relationships every day, bringing in new deposits with those relationships.

I think that’s indicated what the pipeline looks like for us moving forward. But there is demand, but it is moderating.

David Feaster: Are there any segments or geographies that you’re seeing more demand and conversely that the ones that have maybe pulled back the most? As always €“ not as always, but our usual suspects on where even in this climate, the DFW, the Texas market overall, we’ve had a lot of success with our integration of Spirit of Texas. They’ve done over a billion dollars, $1.3 billion in new originations since April. So, that Texas market community to metro is continuing to see demand, but still you have moderated. You’re seeing demand in Northwest Arkansas, you’re seeing demand in Nashville, but really honestly, David, all of our metros are still seeing demand just moderated. And there’s no one market that I’m saying, hey, their completely pulled out , I would say, the contraction that is, we’re experiencing due to the interest rates and inflation is similar throughout all of our markets.

David Feaster: Okay. All right. That’s helpful. Thanks, everybody.

Jay Brogdon: Thanks, David.

Operator: The next question is from Stephen Scouten of Piper Sandler. Please go ahead.

Stephen Scouten: Hi, good morning everyone. Thank you. I guess, if we could talk a little bit further about some of the inner workings behind like the funding duration extension strategy you guys have referenced. In your release and, kind of what you’re having to price CDs that on a lot of that was nearly a billion dollars in growth in the quarter. Just kind of what, sort of duration you’re taking, most importantly thinking about could that really relieve pressure over the next couple of quarters as a result of what you did this quarter?

Jay Brogdon: Yes. Thanks, Stephen. So, a couple of remarks on that. First thing I’d say is, don’t read it as, sort of going out multi-year and strategy or anything in terms of extending duration. I think we extended duration and, kind of laddered out in the fourth quarter over, sort of think of like 3, 6, 9, and 12-month type basis. And so, I think we disclosed this. The duration went from something like the end of the third quarter 6.8 months to 8.4 months. So again, still a ladder of cash flows on the wholesale side, but a bit of an extended ladder relative to where we were late in the year. We had done the same thing earlier in the year last year, just a lot of that kind of repriced in the fourth quarter, again, particularly later in the fourth quarter.

And you’re seeing handles €“ four handles on that in a lot of instances in terms of your questions around cost. On the wholesale side right now. And that’s kind of all across that ladder is where we’re seeing costs.

Stephen Scouten: Okay. That’s helpful Jay. And is the €“ are the costs on the wholesale based on what you guys are seeing €“ are the cost on the wholesale better than what you’re seeing in your markets and in your branches on the CD side or is it just that in terms of filling the gap in terms of the volume that you need that brokered CDs are better than the FHLB?

Jay Brogdon : Yes. It’s really €“ certainly, anything we’re doing on the CD side, whether it’s what I’ll call core versus brokered is more advantageous than anything we could do FHLB or otherwise right now. And so, our first preference and priority is always on the core side and that’s where we’re focused again to Matt’s earlier comments, but the competition across all of our geographies is pretty fierce there. And so, to the extent we need to fill the bucket further that’s where we go wholesale.

Stephen Scouten: Yes. And Matt’s comment was really interesting and I think something we’ve been seeing a lot maybe to my surprise this quarter especially is in the more rural market. Where are you seeing that? Is that like a lot of credit union competition that’s popping up or what’s driving maybe more competition in rural markets than I feel like we’ve seen in the past the upgrade cycle?

Matt Reddin : What we’re seeing and I can’t speak to other competitors seeing, but really throughout our community markets, not any specific state, what we’re seeing is a result of the Bank’s balance sheet. And there’s somewhat maybe potentially not with, but from their bond or investment portfolio and so they’re trying to fund in a new way that they’re not used to and it’s laser focused on funding right now and resulting in what we’re seeing on the special deposit side what we’re seeing the most interesting rates are offering.

Jay Brogdon: Yes. And I’d say something we’ve talked about too on that. It’s certainly been other community banks. Stephen, I think you called out one we’re seeing. I mean, we were looking at a flyer, I think late last week that we saw from a credit union and footprint in one of our footprints with really aggressive CD rates. So, it’s across the board from a competitive point of view in that area.

Stephen Scouten: Yes, that’s interesting. And maybe brings up another point too there is stress on some smaller community banks, I think, in particular, on their balance sheet, on TCE, on the funding side of things, when you guys have been a little less aggressive in terms of your commentary around potential M&A, but is that something you guys have a greater appetite for in 2023 if there’s some, I don’t know, weakness in potential targets?

Bob Fehlman: George, do you want to?

George Makris: Sure, Bob. I’ll take that. Stephen, we would always consider a strategic opportunity with regard to M&A, but we are not actively pursuing that at this point in time. You’ll hear a lot more going forward about our Better Bank Initiative. And I think maybe an appropriate time just to talk about where we are in that regard. In the fourth quarter, we announced some management changes and that is very specific to our next three to five year plan. Bob Fehlman is now our CEO. Congratulations, Bob. And Jay is our President and CFO. Congratulations to Jay. We’re in a period of time where we’ve together over the last 10 years, 14 acquisitions. And I would say those have been very, very successful and our financial metrics sort of bear that out.

We’re at a point in time now where we need to step back, further integrate processes, systems and take a look at our people across our entire footprint to make sure that we position ourselves for success over the next three to five years on what we can control and that is organic growth. So, that’s our primary focus today. As we go forward, you’ll hear a lot more about technology plans, our process plans, and so forth, but we would never say that we would never consider another acquisition. We’re just not aggressively pursuing that today. When you take a look at our footprint and our potential for growth within that footprint from an organic perspective, I think it is just tremendous. So, we’ve spent the last 10 years positioning this company for today.

And I’m very confident that under Bob and Jay’s leadership and their expertise in the areas that we need focus, we’re going to be very, very successful.

Bob Fehlman : Yes. Stephen, this is Bob. Just to kind of add on to that. If you look at our slide deck on Page 3, it really tells the story of what we’ve done over the last 10 years and you go back to 2012 when George came on as CEO, we were really focused on Arkansas was our footprint primarily. In fact, we had $2.6 billion and 94% of our deposits were in Arkansas. And we really had a focus on growing the bank so we can make additional investments whether it’s in the IT area, whether it’s in people, whether it’s in our market outside and branding. And over that period of time, as George said, we’ve had 14 bank acquisition and today at the end of the year in 2022, we have $22.2 billion and the geographic diversification over that period of time is significant.

And now in Arkansas, 35% deposits are here and 22% are in Missouri, Tennessee and so forth. We have a really good diversification in some really good growth markets in Middle America. So, we’re very pleased with where we’re going. And as George said, again we’ll not turn away from an acquisition if it is the right one, but our focus today is what we have called is a Better Bank Initiative and it’s really focusing on people, processes and systems. And that is what we’re focused on. And our end result is really focused on growing earnings per share and tangible book value per share.

Stephen Scouten: Great. That’s a lot of helpful color and thanks for the call out on that pie chart. That’s a pretty aggressive transformation. It’s nice to see it there visually. Thanks a lot.

Operator: The next question is from Gary Tenner of D. A. Davidson. Please go ahead.

Gary Tenner: Thanks. Good morning.

Bob Fehlman: Good morning, Gary.

Gary Tenner: Hey, I wanted to just ask one more question on the funding side. It looks like a good bit of the wholesale time deposits that came on were later in quarter unless I missed it, had you provided or could you provide the, kind of spot rate on deposits?

Jay Brogdon: I don’t have that number off the €“ right off the here for you, Gary, but I think you can suffice it to say, I think to maybe get to the point of your question, if you unpacked the quarter, certainly as we layered in on the wholesale side and made a decision to extend maturities, margin or cost of deposits, cost of deposits was higher, margin was lower late in the quarter, compared to early in the quarter. I think that as I tried to say earlier, as I did say earlier, is a headwind early in the year and a tailwind as we continue to move through the year next year?

Gary Tenner: Okay. And then just to be clear again, make sure I understand it. The decision to, kind of layer on some of that is more of an issue with timing of funding in that, you didn’t really have a lot of excess liquidity that was, even though you have a low loan deposit ratio you were pretty well invested in the securities portfolio. So, there loan growth that stayed strong in the quarter. Is that kind of the thought for the fourth quarter?

Jay Brogdon: I’d say it’s two-fold. That’s a part of it. And the other part, again, if we’d have the same sort of third same, sort of fourth quarter as we had third quarter in terms of some on the core deposit trend side, we wouldn’t have had near the reliance. I think that’s part of it as well, but it is timing of cash flows. We knew we were going to have at least a decent loan growth fourth quarter, it came in better than expected, maybe some seasonality and other headwinds that impacted us on the core deposit side. That’s all a moment in time for me. The cash flow off the securities portfolio is what it is day-in and day-out, quarter-in and quarter-out. And so, I think as time moves on, again, all things being equal with the deposit portfolio on the core side, our reliance on wholesale funding should diminish over time as well.

Gary Tenner: Great. Appreciate that. And then just to go on the credit side for a second, it looks like you’re waiting is in terms of the Moody’s scenarios, the S2 was about 30%. And I think even later in the year, S2 hadn’t become €“ has not become, kind of the Moody’s baseline forecast, could you give us a sense of the sensitivity of your ACL as that kind of maybe if the S2 waiting were to increase?

Jay Brogdon: I’ll just say a couple of comments. This is just our management input. Keep in mind, we’re putting the scenarios in for the markets we serve. This is not on a national basis. So, we really look at the markets we serve. And over time Moody’s changes there. The baseline changes. At one point, the baseline was more positive. Now, it’s turned a little more negative. So, I would say, I feel very comfortable, wasn’t a lot of change in what we did from Q3 to Q4. We all feel really good about where we are today, but we all have a little bit of concern on the economy just because the rates have continued to go up and we just don’t know where it’s going to go, but you know asset quality continues to be at its best level historically.

It’s just €“ we just continue to look at the market, the macro environment we’re in, and our markets more specifically. Yes. And therefore, yes, we also have a pretty large reserve in unfunded commitments that didn’t change this quarter. Our unfunded commitment level was relatively close to Q3. So, there’s a pretty significant reserve in there that when those loans fund over we’ll move over to the ACL.

Gary Tenner: Great. Thank you.

George Makris: Gary, this is George. One other thing. In our presentation on Slide 13, we specifically deal with our portfolios and office, retail, and constructions. And I think when you take a look at that, you’ll find that our portfolio is well diversified, smaller loans, more rural in nature and those three categories seem to be the ones that are top of mind with regard to credit risk. Our portfolios are a little bit different and very reflective of the conservative underwriting and the community bank nature of our bank. So, if you wouldn’t mind, just take a look at Slide 13 to understand a little better the three highest areas of credit risk with regard to investors perception across the country.

Gary Tenner: All right. Thank you for that. And just last question on the expense side. The comp line has kind of bounced around a little bit the last couple of quarters dipped in the third quarter back up here again in the fourth quarter. I think you called out some incentive comp accruals that were recorded in the third quarter, but that comp line moved up higher this quarter. So, had there been reversals in the third quarter that now, kind of reset in the fourth quarter? Just want to make sure I understand that clearly.

Jay Brogdon: You got it. That’s exactly what it was, Gary. So, you had reversals in Q3. We called that out in the third quarter. And that sort of more normalizing back in the fourth quarter.

George Makris: And keep in mind, Gary, one other point is, we always like to remind people Q1 is going to be a little higher as we get all the to payroll taxes and 401(K)s and all of that is the first quarter is always higher. One other comment we should have said earlier on just on our logistics here, we apologize for the loud banging noise. There’s a lot of construction going on in downtown Little Rock, which is good, but they happen to start the banging just as our call started today, so we apologize for that. Additionally, not sure if you’ve noticed, but we have two of our staff that is working remotely trying to isolate and keep everybody else safe. They’re all doing good, but we’re having to logistically handle that today. So, hopefully none of that interfered with the call today, but just wanted to call that out logistically.

Operator: The next question is from Matt Olney of Stephens. Please go ahead.

Matt Olney: Hey, thanks. Good morning, everybody.

Jay Brogdon: Good morning.

Matt Olney: I want to drill down on the construction portfolio and the funded piece continues to increase and obviously it’s moving from unfunded to funded. It looks like the unfunded portion moved down slightly. I’m curious if you think that unfunded piece has now peaked, it will move lower. And then if so, you expect the funded portion to peak here shortly as well? Thanks.

Matt Reddin: That’s a really good question. Yes, you’re correct. And I would say, we have peaked on construction unfunded commitments, not our overall unfunded, but the construction unfunded commitments, I’d say we saw that peak this quarter. Now, your question the peak coming on the construction funding near? No, it’s not. It’s actually due to the equity that is in the average equity within most of our CLD loans at around 40% if not more on occasion. So, really that ramp up peaks much further out. I would say that’s something that we’re very focused on analytically of where those peaks arise and where do we need to start originating more CLDs, always thoughtful on credit for us, but you’re right €“ we believe it did in the fourth quarter, but the outside where it funds up, I think is far into the future.

Matt Olney: Okay. Appreciate that, Matt. And then I guess, Matt sticking with, kind of the loan growth theme, I think you talked about that mid-single-digit growth, any more thoughts about, kind of how we could see that play out during the year, if that’s more front half loaded or back half loaded?

Matt Reddin : I would say, it’s going to be even best guess at this point, Matt. There’s no €“ as I said, the unfunded construction that is layered month-over-month. We project those calls to come to fruition, but then also we’ll also do a new business every day. And I’d say, it’s more of an even number than versus one front-end or back-end.

Matt Olney: Okay.

Jay Brogdon: Yes. And I think Matt €“ hey Matt, Jay here, just maybe one footnote there as well that I think is important, Bob or Matt, one probably stressed this earlier in the call, but just to remind you, durations on the asset side or loan side are certainly extending here. And so, payoffs are a lot slower in this environment. And I think that’s one thing to keep in mind as you think about sort of loan growth throughout the year. We’re not in the environment. We were a year ago where it was just, sort of pay down, pay down, pay down all the time. We’ve sort of moved beyond that, their stickiness that, sort of builds in that sort of loan growth. I think we couple that with sort of the timing of the projects that are underway on the C&D side. And it’s never going to be even throughout the year, but we don’t really see it loaded front or back. We see it more, kind of coming in systematically throughout the year.

Matt Olney: Okay, appreciate that Jay. And then I guess, kind of similar discussion on just the loan repricing of the fixed rate loans that you call out in the slide deck. I think you mentioned just over a billion dollars weighted average rate of 4.86, any color on, kind of those reprice dynamics where we stand today?

Matt Reddin : Well, Matt, from a standpoint of, kind of that of what we see kind of nearly definitely much better rate environment to reprice those loans and we are doing that and we’re opening a in our pipeline now and that has included . So, we’re very moving, very disciplined to where rates are overall, but I will also take the yield curve, it creates a challenging environment with where treasuries are. So, we’ve got to fight for every basis point, and it’s all about bringing new deposits to the bank as we do new originations with four clients. Hopefully, that makes sense to you. Matt?

Matt Olney: Yes. Thanks for that. I guess just lastly on €“ George made the comment about the last few years, as far as acquisitions and where the bank is today and it seems like you successfully completed a number of expense initiatives over the last several years. As you step back, I’m curious where the bank is today on the expense side and are there more opportunities that we could hear about in during the year?

Bob Fehlman: Jay, you want to take that?

Jay Brogdon: Sorry, guys. I was trying to come off mute there, Bob. So yes, I think absolutely, Matt, at one of the €“ when George spoke earlier and Bob about our focus going forward, never say never on acquisitions, but our focus is on this Better Bank Initiative and it’s very internally focused. We think we’ve got a lot of opportunities. Matt, I don’t want to overpromise and under deliver on, sort of timing of when we might come out, what some of those initiatives mean, but I’d tell you we’ve got everybody rallied around, sort of those initiatives internally. Everyone’s excited about where our focus is. Focus on organic growth, making sure we’ve got the scalability in our business to, sort of capture that. And that’s absolutely going to lead to a number of efficiencies across the board for us.

These are harder to get efficiencies than, sort of that first phase coming out of an acquisition, but they’re still very meaningful in my mind. And I think we’ve got a lot of work to do and I think they’ll be promising efforts ahead in that regard.

Matt Olney: Okay. Thanks for that Jay. I guess just following up on that on the Better Bank Initiative. What are the primary metrics the bank is focused on within the initiative that we should appreciate maybe from our end?

Jay Brogdon: Well, my answer to that would be, there’s probably a lot of internal metrics we’re most focused on right now in that regard that will lead to what you’re focused on Matt, but it’s not going to be anything you haven’t seen before. I mean, to me at the end of the day, as we optimize our balance sheet, which is sort of priority number one in my mind as we just kind of continue to do that over time, remix the balance sheet to where we want it to be, that’s going to be obviously advantageous to revenue. We’re doing a number of things that I think are going to gain us some additional economies of scale as we execute on that and grow. And so, the number one metric I point you to, if you think about both the revenue and the expense side is going to be the efficiency ratio.

And I think we’ve got a lot of opportunity to continue to drive that down into €“ over time to drive that down into the lower 50s. I would love to see us and this is a more intermediate timeframe comment, but optimistically I’d like to see us put a along our efficiency ratio and that’s going to take us to execute on both sides of that equation.

Matt Olney: Okay. Thanks for the commentary guys. Appreciate it. This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

George Makris: Well, thanks again for joining us on our quarterly conference call. Once again, I’d like to congratulate Bob, Jay, and their teams for recognition that they have a great say in the future of Simmons Bank going forward. I think we’re in a great position today as we’ve talked about with our Better Bank Initiative. One of the things that I’d like to point out is that as we go through this people processing systems evaluation, our staff has been very busy over the last 10 years with their day jobs and integration of 14 acquisitions. We are currently evaluating what our capacity is without those acquisitions. And I think what you’re going to see is a very pleasing result. So, more to come on that. I think Jay hit some high level metrics that we’re taking a look at.

I can’t remember if it was Bob or Jay that said, we’re absolutely focused on increasing earnings per share, tangible book value per share, we believe that’s really what’s going to drive shareholder value going forward. And why we spent the last 10 years developing the bank that we are today. So, thank you very much for joining us today and I hope you have a great day.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.