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Operator
Good day, ladies and gentlemen, and welcome to the Simmons First National Corporation Second Quarter Call and Webcast.
(Operator Instructions) As a reminder, today's conference call is being recorded.
I would now turn the conference over to David Garner.
Please go ahead.
David W. Garner - CAO, EVP and IR Officer
Good morning.
My name is David Garner, and I serve as Investor Relations Officer of Simmons First National Corporation.
We welcome you to our second quarter earnings and teleconference and webcast.
Joining me today are George Makris, Chairman and Chief Executive Officer; Bob Fehlman, Chief Financial Officer; Marty Casteel, Chairman and CEO of Simmons Bank, our wholly-owned bank subsidiary; and Barry Ledbetter, Chief Banking Officer.
The purpose of this call is to discuss the information and data provided by the company in our quarterly earnings release issued yesterday and to discuss our company's outlook for the future.
We will begin our discussion with prepared comments, followed by a question-and-answer session.
We have invited institutional investors and analysts from the equity firms that provide research on our company to participate in the Q&A session.
(Operator Instructions) A transcript of today's call, including our prepared remarks and the Q&A sessions will be posted on our website, simmonsbank.com under the Investor Relations tab.
During today's call and other disclosures and presentations made by the company, we may make certain forward-looking statements about our plans, goals, expectations, estimates and outlook.
I'll remind you of the special cautionary notice regarding forward-looking statements and that certain matters discussed during this call may constitute forward-looking statements, and may involve certain known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different than our current expectations, performance our estimates.
For a list of certain risks associated with our business, please refer to the forward-looking information section of our earnings press release and the description of certain risk factors contained in our most recent annual report on Form 10-K.
All is filed with the SEC.
Forward-looking statements made by the company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance.
The company undertakes no obligation to update or revise any forward-looking statements based on the occurrence of future events, to receive new information or otherwise.
Lastly, in this presentation, we will discuss certain GAAP and non-GAAP financial metrics.
Please note that the reconciliation of these metrics is contained in our current reports filed with the U.S. Securities and Exchange Commission yesterday on Form 8-K.
Any references to non-GAAP financial measures are intended to provide meaningful insight.
These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
With that said, I'll now turn the call over to George Makris.
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Thanks, David, and welcome to our Second Quarter Earnings Conference Call.
First, I would like to welcome our new associates from Hardeman County Investment Company and its subsidiary bank, First South Bank, to the Simmons team.
We closed that transaction on May 15, and we'll converge systems in September.
We look forward to our continued growth and success at Tennessee.
In our press release issued yesterday, we reported net income of $23.1 million for the second quarter of 2017.
Diluted earnings per share were $0.72.
Included in the second quarter earnings were $3.7 million in net after-tax merger-related and branch rightsizing costs.
Excluding the impact of these items, the company's core earnings were $26.8 million for the second quarter of 2017.
Diluted core earnings per share were $0.84.
Our loan balance at the end of the quarter was $6.2 billion.
Total loans increased by $448 million during the quarter, which included $253 million in loans from the Hardeman acquisition.
The legacy portfolio grew by $368 million, upwards approximately $63 million migrated from acquired legacy.
$35 million of the increase is related to loan participations with Southwest bank our pending acquisition in Texas, which is evidence of a very strong loan growth.
$110 million of acquired loans and loans in our liquidating portfolios paid off during the quarter.
We continue to be encouraged about the growth of trends in our loan portfolio.
Our loan pipeline, which we define as loans approved and ready to close, was $345 million at the end of the quarter.
In addition, we have $594 million in construction loans not yet funded.
Our concentration of construction and developed loans were 60%, and our concentration of CRE loans was 245% at the end of the quarter.
All of our regions are experiencing good loan growth.
The company's net interest income for the second quarter of 2017 was $76.8 million, a 15.4% increase from the same period last year.
Accretion income from acquired loans during the quarter was $4.8 million compared to $4.7 million in the same quarter last year.
Our net interest margin for the quarter was 4.04%, which was down from 4.14% in the same period last year.
The company's core net interest margin, which excludes the accretion, was 3.79% for the second quarter of 2017 compared to 3.86% in the same quarter of 2016.
We expected the increases in deposit cost will continue to offset short-term increases in rates on earning assets.
We have experienced onetime deposit growth of $970 million over last year.
Total deposits increased by $395 million related to the Hardeman acquisition.
Cost of interest-bearing deposits increased 4 basis points from the prior year.
We continue to project that our cost of funding will continue to increase as a result of increased competition for deposits and recent Fed rate hikes.
Our noninterest income for the quarter was $35.7 million, an increase of $5.7 million from last quarter.
Based on deposit accounts increased primarily due to the addition of Hardeman during the quarter.
Included in income for the quarter was $1.3 million gain related to the sale of the guaranteed portion of several SBA loans.
Our year-to-date gain on the sale of SBA loans is $1.7 million versus $1.8 million in the same period of 2016.
In addition, we recognized gain of $2.2 million on the sale of approximately $150 million of securities to provide liquidity for strong loan demand.
While we were able to take advantage of favorable market rates to realize a gain on the sale of securities, our gain this quarter was $1.5 million, less than the realized gain in the same quarter of 2016.
Noninterest expense for the quarter was $71.4 million, but our core noninterest expense for the quarter was $64.7 million.
Incremental increases in all noninterest expense categories over the same period of 2016 are the result of our acquisition of Hardeman during the quarter as well as our acquisition of Citizens Bank in the third quarter of 2016.
Professional services increased $1 million, primarily related to the enhancement of our risk management programs in anticipation of surpassing $10 billion in assets.
Our efficiency ratio for the quarter was 56%.
It's important to note that both revenue and expense numbers include First South Bank operation for 46 days.
At June 30, 2017, the allowance for loan losses for legacy loans was $41.4 million with an additional $391,000 allowance for acquired loans.
The company's allowance for loan losses on legacy loans was 0.83% of total loans.
The loan discount credit mark was $28.4 million for a total of $70.2 million of coverage.
This equates to a total coverage ratio of 1.12% of gross loans.
The ratio of credit mark and related allowance to acquired loans was 2.3%.
During the second quarter, our annualized net charge-offs including credit card charge-offs of total loans were 23 basis points.
Excluding credit card charge-offs, our annualized net charge-offs total loans were 19 basis points.
The provision for loss during the quarter was $7 million compared to $4.6 million during the same period last year.
The increase of provision expense is primarily due to the addition of $714,000 for acquired loans and the greater-than-expected legacy loan growth during the quarter.
Based on our projections, we expect total provision for 2017 to be approximately $21 million compared to $20.1 million in 2016.
In June, we executed a sale of 35 classified loans with a discounted principal balance of $13.8 million.
The acquired loan portion of the sales resulted in a benefit of $1.4 million of accretion income and a $714,000 increase in provision expense for acquired loans, resulting in a net benefit of approximately $700,000.
We will continue to explore options to manage problem assets remaining from the FDIC and that prop then portfolios as well as options deferred to reduce profit loans.
Our capital position remains a very strong.
The quarterly income and stockholder's equity was $1.2 billion.
Our book value per share was $38.31, an increase of 6.8% from the same period last year, while our tangible book value per share was $24.71, an increase of 5.5% from the same period last year.
As mentioned earlier, we closed the Hardeman County Investment Company transaction on May 15.
Our team, along with the Hardeman management team, worked very hard to complete the merger.
We continue to work through the regulatory application with shareholder approval processes for the previously announced Southwest Bancorp, Inc.
and First Texas Bank Holding Company, Inc.
acquisition.
We look forward to closing those transactions and welcoming those associates and customers to Simmons.
This concludes our prepared comments.
We'll now open the phone line for questions from our research analysts and institutional investors.
At this time, I'll ask the operator to come back on the line once again to explain how to queue in for questions.
Operator
(Operator Instructions) And our first question comes from Brady Gailey of KBW.
Brady Matthew Gailey - MD
If you look at your core margin, it's been coming on the upper end of the range.
I want to talk about the $370 million to $380 million.
Is that range for the core margin still appropriate for the back half of this year and into next year?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
We think it is for the balance of the year.
If you noted, we have almost $600 million of loan funded construction loans that we expect to fund throughout the rest of the year.
Those were booked at rates earlier this year so we're pretty much locked into that.
And we expect to continue to have upward pressure on our deposit costs.
So we think any incremental benefit we get on new loan pricing will be offset by deposits.
So we think it's going to be static pretty much for the rest of the year.
Brady Matthew Gailey - MD
All right.
That's helpful.
And then I know in the past, you have given some color about forward-looking yield accretion.
I know that it should naturally run off but you also just closed a deal and you have 2 more coming in, hopefully by year end.
But how do you think about yield accretion going forward as well?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, Brady, I'll just give you the -- what our scheduled accretion is for the next 2 quarters.
And remember, this can be lumpy as payoffs or we work out loans.
But right now for Q3, we're projecting about $2.5 million, in Q4, about $2 million.
And again, that's scheduled payments.
So that puts us right at about the $14 million level for the year.
And that's pretty close in line with what we've been saying.
None of that includes the pending deals.
Those pending deals, that will kind of blow it out once those deals -- the accretion comes on in those deals.
Brady Matthew Gailey - MD
Okay.
And then lastly for me, as we near the closing of these 2 deals, I'm sure there comes a point where if it gets close enough to year end, you'll just push the close into 2018 just as you can have another year of Durban.
How do you think about the timing there?
And would you prefer these deals to not close in 2018?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Brady, we prefer that the Durbin Amendment be repealed.
We're not worried about that.
But since it's probably not going to be, I think it is certainly our preference to close these deals as soon as we can, combine our balance sheets because all 3 institutions are experiencing really good growth.
And we need to combine our organizations in order to keep that engine moving forward.
So we believe we're all tracking to close in -- close this quickly as early in October.
We try to be nice to the accountants in the groups so we don't close anything right at the end of the quarter.
So then I would tell you that if for some reason, closing or approval got delayed into December, that would be the trigger that would make us want to go to January because we'll have to combine for reporting purposes, not only Simmons, but Southwest bank and Bank SNB at the end of the year, and that would be a pretty risky prospect if we would close deals until mid-December.
So we're really pushing -- everything's on track right now.
We'll file our combined S4 with the SEC on Monday.
We'll have shareholder meetings established well before the October timeline.
So we're going to take care of everything on our end to make sure that we're prepared for an October closing.
Now you know as well as I do, things can happen outside of our control every now and then, but I will tell you that things that we control will happen on that timeline.
Operator
And the next question comes from David Feaster of Raymond James.
David Feaster
So I'd like to start off on credit quality.
Legacy nonaccruals and NPLs picked up again this quarter as did charge-offs, and that excludes the classified legacy loans that you guys sold.
Could you just talk about what drove the increase and maybe your general thoughts on credit, and if there's anything in your book that might cause you concern?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
David, yes, I'll take that, and I'm looking at Marty and Barry, and they can chime in up here in a minute, too.
I think we mentioned earlier this year that we had an isolated loan officer portfolio that had some significant issues that we discovered earlier this year.
Those, quite honestly, aren't getting any better.
They're not getting any worse either, but they're still hanging around.
So one of our objectives between now and the end of the year is to go ahead and figure out what to do about managing those problem credits.
And I wish I can tell you they're in the $100,000-range, but I think, cumulatively, they're probably a little north of $10 million.
So we've got to work cut out for us there.
We think we're adequately reserved for any potential losses we make having those credits.
But that will be at least through the end of the year while we're managing that.
Otherwise, our credit quality is pretty stable.
I'll just go ahead and touch on our provision for the quarter.
We had $368 million added to our legacy portfolio this quarter, and all of that requires a provision.
And I think what you'll see going forward is more of an equal balance between accretion, income and provision expense.
We have most of the FDIC accretion, most of the Metropolitan accretion, those big numbers that we have on the books behind us.
So if you look at our mark compared to our acquired loans, it stands at 2.3%.
It used to be much, much higher than that.
So the good loans that come over, will have some accretion income associated with the mark, and probably most of that is going to go right into provision.
So if our loans keep growing like they are, we'll keep adding to that provision.
I think it's important to note that we have a very disciplined process in determining appropriate range for our allowance.
And if you'll note that our allowance, the legacy loans, was flat from quarter-to-quarter.
So that's evidenced that as our loans grow, we're going to maintain that discipline to make sure that our allowance is propped up for that loan growth.
So it's just one of the detriments to loan growth.
I might also mention that at the end of the quarter, we had a quarter-end number of $368 million we had to provide for.
But that $368 million didn't grow on the first day of the quarter.
So our average loan growth was about $260 million during that quarter.
So our revenue during that quarter didn't keep up with the provision that we had to make at the end of the quarter, and that's just nature of the accounting behind that.
So if we continue to grow, we'll continue to look at that.
We don't have any concerns internally about our asset quality.
Our loan portfolio is so diversified when you take a look at credit card, consumer lending, commercial lending, bank lending, we're very comfortable with our credit quality and with our provisions associated with it.
Marty, do you have anything to add to that?
Marty D. Casteel - Senior EVP
Well, I'll just add -- this isn't much in addition to what you said, but we did have 2 credit relationships in a single market that we reported on before, very isolated.
Those relationships totaled about $10 million, and we didn't take a more aggressive approach as far as reserving for those credits and actually will not accrue in the quarter about a -- just under $5 million relationship, 1 of the 2. So that accounts for most change in that allowance.
David Feaster
All right.
That's great color.
And just following up on the legacy loan growth, it was really south this quarter and notably driven by CRE in construction.
I know you're well below the CRE concentration guidelines, but your concentration has grown significantly.
So I'm just curious, where are you comfortable would that grow into?
And then as a follow on, can you maybe highlight you're retail exposure both of the CRE and C&I side, and maybe your thoughts on that space?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, we're comfortable growing to 100 and 300.
We just don't know how quickly we're going to get there.
The nature of the beast is this, we've got substantial construction loans yet to be funded, but as we fund those, some of the construction loans will have more permanent financing, so that C&D number is pretty fluid.
We still got one heck of a lot of capacity in both of those ratios.
And as our balance sheet grows, we'll create more.
And as our profitability and capital grows, that helps shows ratios as well.
So we're pretty comfortable along the lines of continuing to grow in those 2 areas.
With regard to retail exposure, I'll just tell you that we're very aware of trends in retail industry, particularly big box.
I will tell you, we have very little big box retail exposure, and I will ask Marty and Barry if they'd like to add a little more color to that.
Barry K. Ledbetter - Chief Banking Officer of Simmons First National Bank and EVP of Simmons First National Bank
Again, I just think, what George has said, we just have very little exposure to big box.
Our retail, our small-strip centers with limited exposure, so we feel very good about our retail across our footprint.
And it's pretty diverse throughout our footprint as well.
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
David, I will add this, just for the retail, you know, the flip side of them with trends and big box retail and brick-and-mortar is the online business, and there are several pockets of intermodal facilities across the country that are really, really growing with distribution centers for Amazon and others, and quite honestly, we've been very successful in dipping our toe into some of those developments.
There are some end-market borrowers that are very, very experienced in that arena.
So we're, as opposed to having negative trends in our portfolio from a retail exposure, we think we're actually benefiting from the growth trends in the online shopping.
David Feaster
Terrific.
Last one for me, just on expenses.
You guys kind of had given the -- a $64 million run rate in the past.
But this quarter, you were able to actually decrease expenses on a core basis despite the inclusion of Hardeman, which is incredibly impressive.
Could you just talk about your expense expectations at the back half of the year and maybe some color on the incremental costs of DFAST and other investments relating to crossing $10 billion there.
How much is in your run rate and how much remains?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, we were pretty proud of our expense control.
And remember, the Hardeman was only on our books for half the quarter.
But also remember that we have converted systems, so we haven't realized full cost saves yet.
So we think that, that may be pretty close to a wash going forward.
We still think the target is $65 million a quarter in the run rate is good for us.
We don't anticipate any other real extraordinary expenses with regard to surpassing $10 billion until we get closer to the timeline for our first DFAST submission.
Now remember, regardless of when we close these deals and cross $10 billion, our first DFAST submission was going to be in 2020 based on 2019 data.
So we will do a trial run, probably in 2019 or 2018 data, but -- and that cost is probably going to be $3 million to get through that first submission but that -- that's going to be a little further down the road.
Right now, what we're doing is building data warehouse that will allow us to combine all this data that has to be fitted into these DFAST models out of one data warehouse instead of disparate systems.
We've spent a lot of that money already.
I would tell you that the next level of expenditure for us is to be on the IT side as we build out this data warehouse.
So we think $65 million is a good run rate based on where we are today, and if we close this deal in October, I'm going to give you a different answer the next time you ask this question.
So you hang around Simmons enough and things change pretty rarely.
But we're pretty proud of where we are, and we think that we have already absorbed most of the expense, onetime expense, associated with gearing up for $10 billion.
Now we will continue to proportionally add our risk management programs as our balance sheet grows, but we're prepared today for that $10 billion mark.
Operator
The next question comes from Stephen's Scouten of Sandler O'Neill.
Stephen Kendall Scouten - MD, Equity Research
A question on your loan growth.
This quarter and it's is like that should continue, and you said it's continuing across the 2 other pending acquisitions as well.
But I mean, can you frame that out a little bit in terms of how we can think about that over -- through the 3-year end?
I know you had mentioned kind of some pipeline numbers last quarter, but are there any kind of targets you have or expectations for net growth through year end?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, you know, for the last couple of quarters, we talked about $500 million loan growth for 2017 and we missed that, we're already past that.
So we've talked internally and we believe that, at a minimum, we ought to be looking at an additional $100 million a quarter in loan growth.
And we've got our year-end adjustments, so we'll have our agri loans peak sometime in September, starts to pay down through the end of the year.
We'll have a credit cards start to peak in December.
It'll start paying down in January, but across the board, we feel pretty good about continued loan growth.
Now remember, we have 2 declining portfolios.
We have our indirect lending portfolio that declined about $26 million during this quarter and we think that, that rate will probably continue, and we also have our consumer finance portfolio, which declines about $4 million a quarter.
So we think $100 million a quarter in net growth is probably a very reasonable objective for us.
Stephen Kendall Scouten - MD, Equity Research
Okay.
And George, just to clarify, I know you said net growth, but just to be clear, that's what you expect on total loans.
I'm not saying about just legacy loans or worrying about migration from one portfolio to another, but that's on the total loans of, call it, with a $6.27 million today?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
That's correct.
That is correct.
Stephen Kendall Scouten - MD, Equity Research
Great.
And then thinking about the pending deals, I know you said you guys follow the application on the 14th.
And I believe in previous conversations, you had said you were going to wait until after year Safety and Soundness exam to file those applications.
So did you get back any findings from that Safety and Soundness exam?
Can you -- is there anything you tell us about your level of confidence about getting these deals done and kind of regulatory outlook to that end?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
I can tell you that, yes, we did get some results back from the Safety and Soundness, and that's about all I can tell you.
We've had examiners in here, as you probably know, since January.
I'll just put it like this.
If we felt there were any regulatory issues that would prevent the approval of the application, we wouldn't have filed one.
Stephen Kendall Scouten - MD, Equity Research
That's great.
Perfect, I appreciate that color.
And maybe lastly for me, is on -- going back to the expenses just briefly.
Is there any update that you guys have on the expected?
I know the timing of when Durbin comes could be '18 or could be '19 depending upon the timing of the close, but do you have any update on the actual dollar amount of what you expect to see there?
Or has that changed at all?
Unidentified Company Representative
Yes.
We're still along the same line at Durbin.
Now that's going to be an income item, but $12 million.
Again, if we cross $10 billion on December 31 of this year, then that would begin on July 1 of next year, so it'd be $6 million.
If we cross after July -- December 31, then it would begin July 1, '19.
Stephen Kendall Scouten - MD, Equity Research
Sure, okay.
And on the $1 million of professional fees that were incurred, that's going to stay within the run rate, is that correct?
Or is any of that kind of onetime consulting or preparation fees that might dwindle down?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
That will probably stay.
That's sort of the last piece of gearing up for $10 billion and to be able to absorb these 2 acquisitions.
So we think that, that's going to be a part of our run rate.
Unidentified Company Representative
At some point down the road, though, some of that professional fees could move over to salaries or other buckets, but we think the expense base is there regardless.
Stephen Kendall Scouten - MD, Equity Research
Okay.
And then maybe one other clarifying line item here on the intangible amortization.
That nearly doubled, if I'm looking at that right quarter-over-quarter, unless I was looking at annualized number.
I might need to check that, but is there any changes there that I'm missing?
David W. Garner - CAO, EVP and IR Officer
Stephen, it's David.
Yes, that's $1.5 million a quarter roughly, and that's what it is the last several quarters.
Stephen Kendall Scouten - MD, Equity Research
Okay, I must have grabbed an annual number.
Operator
(Operator Instructions) And the next question comes from Matt Olney of Stephens.
Matthew Covington Olney - MD
I wanted to go back to the loan sales that you guys did this past quarter end.
I'm curious, how did you determine which loans to sell in this process?
And what's the remaining amount of loans that you would consider selling from here going forward?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
I'll just touch on this.
Marty can talk about how we determined which loans.
We don't have any other active loan sales underway right now.
We went through our portfolio and identified ones that we felt like were salable.
And Marty, you might want to talk a little bit about that.
Marty D. Casteel - Senior EVP
That's exactly right.
We also looked at loans that, well, we felt very much sure that they were collectible.
We just felt like they were also going to be a lot of chronic classified loans.
So that really was the criteria we used.
If it was a chronic classified loan, we considered it to be a part of that pool of loans we're willing to sell.
Unidentified Company Representative
You know, and Matt, we were looking at both of these pulls.
We saw the pull in the first quarter, and one in the second quarter.
We were looking at both of these at the same time.
One closed in the first one, and the second.
I think we had about a $600,000 loss on the first one and a $700,000 gain here.
So to us, we were looking at close to $30 million almost at basically getting out a bit at breakeven cost to us.
Marty D. Casteel - Senior EVP
Loans that were causing us distractions and taking away from our future growth, we were trying to move out of the bank.
Matthew Covington Olney - MD
And just to clarify, I think you're saying that you're not looking to do additional sales from here?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
We don't have any active pursuit of a loan sale right now.
And that's not to say that at some point in time, we wouldn't consider that.
But currently, we're through with our loan sales.
Matthew Covington Olney - MD
Okay, understood.
And then going back to the provision expense in the second quarter, the $7 million, I think Marty may have mentioned that a portion of that may have been from moving the loan to nonaccrual status, the $5 million.
Do you have the breakout of how much of the provision was from that move?
Kind of reconcile that whole -- that entire $7 million amount from that versus good loan growth?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Matt, I would say that -- and I don't have that number right offhand, and I apologize, and I'm looking around here and I'm getting this deer in the headlights look around the table, too.
So I don't know that we've got that specifically.
I would say that probably half of the incrementals, so half of the $2.3 million increase was probably related to specific reserves that we set aside for those credits.
But I could be off a little bit, one way or the other.
Operator
The next question comes from Peyton Green of Piper Jaffray.
Peyton Nicholson Green - MD and Senior Research Analyst
I was wondering if you can tell me how much of the NPA Plus 90 movement in the second quarter was related to Hardeman balances?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Do you know, [Ronald]?
Unidentified Company Representative
No, it was a very small amount that was moved from the Hardeman.
I will tell you in the foreclosed asset bucket, there is about $3 million that was assets held for sale that was branches that we had sold that had moved to OREO that passed the 1-year period under GAAP that you move them from assets held for sale to OREO.
So in the NPA bucket, when you're looking at the foreclosed assets, about $3 million to $3.5 million was branches effectively that were moved over.
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Yes.
And Peyton, I might just add to that, that since we have changed regulators, the rules have changed little bit.
In the past, when we closed a branch, certainly what we did with Metropolitan, we had -- we closed 27 branches and all 27 branches went in the assets held for sale.
In the future, any branches we close will go immediately into other real estate.
So we will try the point that out as we go forward because that's good to be a huge difference in the way we account for those assets based on what you've been used to seeing with our prior regulators.
Peyton Nicholson Green - MD and Senior Research Analyst
Okay, so then a separate question.
Of the $368 million in loan growth in the quarter, how much of that was loans that you might have participated from your pending acquisitions?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Yes, only $35 million that we identified from Southwest bank.
Peyton Nicholson Green - MD and Senior Research Analyst
Okay.
And then maybe just some color on, George, what you're saying in terms of how they're underwriting credit, and what gives you comfort about sustaining loan growth rates for them going forward under the Simmons umbrella?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, as you probably know, Peyton, as you look around the country and markets that are doing extremely well, the Dallas Fort Worth market is just really, really doing well today.
And the economy is very diversified there.
There's not a lot of concentration in one industry segment.
Southwest Bank, because of their reputation, has been able to take advantage of that.
I will tell you this, when we talk about the underwriting at Southwest bank, almost all of the loans that we participated in this last quarter were loans that were already on their books, that we had a chance to look at during our due diligence phase, earlier this year or even at the end of 2016.
As we took a look at these participations, we went back to look at our notes in our due diligence.
And based on what we said then and the progression between then and the time we actually participated in the loans, those borrowers had done exactly what they said they were going to do.
So I will tell you that we're very comfortable with Southwest Bank and Bank SNB's underwriting standards that we've had a lot of time to visit back and forth, that we've had a lot of time to talk about our credit approval processes going forward and who's going to participate.
There will be a lot of cross population between legacy Simmons, Bank SNB, Southwest Banks so we're going to get a lot of good viewpoints in our credit approval process going forward.
It is really the fundamental benchmark for legacy Simmons Bank, and it's not going to change going forward.
So I'd tell you, we're just extremely impressed with what's going on at Southwest bank since that's the one you mentioned.
Peyton Nicholson Green - MD and Senior Research Analyst
Okay.
And then maybe related but unrelated question to the pending acquisitions.
The cost-savings that you all are assuming in the acquisitions are certainly on the high end for footprint extension transactions.
And also given their importance to you as franchises that will improve your overall growth rate, do you get a sense that there's more importance to keeping the growth rate in place or getting the cost saves?
Any second thoughts about the cost savings and the firmness around them?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, what's most important is keeping the growth rate going.
It didn't do us any good going in, slash and cut into the muscle.
So we've had discussions about actually expanding production and production support groups to keep up their current growth rate, and we're all for that.
We'll have some natural cost saves just because we won't do the same thing twice in all of these markets.
And remember that Bank SNB is publicly traded and just inherently in that kind of organizations, their cost that we won't have to duplicate.
So we think that the 32% and 35% range is probably achievable over time, and if you look back to the basis for those cost saves and the growth that they have, while the cost save percentage when we closed may not be 32%, it's going to be 32% based on the base when we announced that deal early, if that makes any sense.
It's just a math issue.
So...
Peyton Nicholson Green - MD and Senior Research Analyst
After you, please.
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, so cost-savings is important, but most importantly is to make sure that we keep the infrastructure to keep the growth going.
Peyton Nicholson Green - MD and Senior Research Analyst
Okay.
So just to make sure I understood that clearly, the cost saves are pegged based on the date when you announced the acquisition, the natural growth in their franchises and increase in their expense base to accommodate growth will stay, and so you feel better about getting expense saves once you close them.
And any update on the timing of the conversions?
Do you have the dates firmly locked down?
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Well, we have 2 dates scheduled in 2018.
The first one will be in February, the second one will be in May, both of them would be over the holiday weekends in those months.
We like to have 3-day weekends to do our conversions.
So those are already scheduled with our third-party providers and we don't see any reason we won't hit both of those conversion dates.
Unidentified Company Representative
And Peyton, First South is scheduled on Labor Day weekend in September.
Operator
(Operator Instructions) And I'm showing no further phone questions.
At this time, I'd like to turn the conference back to Mr. Makris for any closing remarks.
George A. Makris - Chairman of the Board, CEO and Chairman of Simmons First National Bank
Thank you very much, and I'd like to thank everyone for joining us today.
We're really looking forward to closing and converting First South Bank over Labor Day, bringing them totally into the Simmons system.
We're looking forward to moving through the application process and the approval process for Southwest Bank and Bank SNB, and we're awfully excited about our combined organizations after all that coursed.
Thanks again, and I hope you all have a great day.
Operator
Ladies and gentlemen, thank you for participating in today's conference.
This does conclude the program, and you may now disconnect.
Everyone, have a great day.