Simmons First 4Q and yearly profits well ahead of 2017, one penny below Wall Street views

by Wesley Brown (wesbrocomm@gmail.com) 123 views 

Simmons First National Corp. Tuesday (Jan. 22) posted record fourth quarter profits that easily outpaced year ago results and closed out the year with another strategic acquisition that expanded the Arkansas bank’s six-state footprint to the north.

For the period ended Dec. 31, Simmons reported net income of $55.6 million, or 60 cents per share, up 194% compared to $18.9 million, or 22 cents per share for the same period in 2017. Excluding $805,000 in net after-tax merger-related and the bank’s so-called “branch right sizing” costs, fourth quarter earnings were $56.5 million on revenue of $212.9 million.

On a yearly basis, Simmons reported net income of $215.7 million, or $2.32 per share, compared to $92.9 million for 2017, up 132%, or $1.33 per share, in the same period a year ago. Revenue for the fast-growing Arkansas regional bank was reported as $696.4 million.

Wall Street analysts had expected Simmons to report fourth quarter earnings of 61 cents on revenue of $178.7 million, according to Thomson Reuters.

Despite falling one penny short of analysts’ expectations, Simmons First Chairman and CEO George Makris said the regional banking group produced record results, completed the successful conversion of two major acquisitions in late 2017, and completed a 2-to-1 stock split for investors.

“We had a remarkable year,” said Makris. “Throughout 2018, we experienced excellent organic growth in all our markets and balanced year-to-date loan yields with deposit costs in a rising-rate environment, all the while sustaining our reputable asset quality.

“This past year, we focused on improving our delivery of products and services to our customers throughout our existing footprint. We will carry this momentum into 2019 as we continue to focus on improving our business processes, expanding our customer relationships and closing our acquisition of Reliance Bancshares.”

As noted, Simmons announced in early November a deal to acquire Reliance Bancshares in a cash and stock deal valued at around $214 million. Reliance has assets of $1.5 billion and operates 22 branches in the St. Louis metro. By comparison, Simmons reported $16.5 billion in assets.

The deal continues a trend of growth through acquisition for the Pine Bluff-based bank. More than a year ago, Simmons completed two of the biggest acquisitions in the company’s history, paying just over $1 billion. In September 2017, Simmons completed its previously announced acquisitions of Stillwater, Okla.-based Southwest Bancorp Inc. and parent company Bank SNB, and First Texas BHC Inc., or Southwest Bank of Fort Worth. The out-of-state acquisitions helped to double Simmons’ first quarter earnings to $51.3 million, up from $22.1 million in the previous year.

Simmons officials expect the Reliance deal to close in the second quarter of 2019. Reliance will then merge into Simmons, expanding the Arkansas bank’s operations to Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Following are other selected financial highlights from the fourth quarter earnings report:

• Simmons’ net interest income for the fourth quarter of 2018 was $137.8 million, an increase of $10.9 million, or 8.6%, from the same period of 2017. Included in interest income was the yield accretion recognized on loans acquired of $3.9 million and $15.7 million for the fourth quarter of 2018 and 2017, respectively.

• Net interest margin was 3.76% for the quarter ended December 31, 2018, a 22 basis point decrease from the third quarter. The company’s core net interest margin, excluding the accretion, was 3.66% for the fourth quarter of 2018, a 5 basis point decrease from September 30, 2018. Cost of interest-bearing deposits was 1.20% for the fourth quarter of 2018, a 15 basis point increase from September 30, 2018.

“Since December 2017, the Federal Reserve Board has increased the Fed Funds target rate by 100 basis points,” said Makris. “During this same period, loan yield has remained even and core loan yield has increased 50 basis points while cost of deposits has risen 45 basis points. In addition, the cost of borrowed funds increased 86 basis points during this period.”

• On Dec. 31, 2017, total deposits were $12.4 billion, an increase of $1.3 billion or 11.8% compared to the same period a year ago.

• Total loans, including those acquired, were $11.7 billion at December 31, 2018, an increase of $946 million, or 8.8%, compared to $10.8 billion in the same period of 2017. The seasonal decrease in our agricultural portfolios and mortgage warehouse lines of credit was $85.9 million and the continuing decrease in our liquidating portfolios was $18.6 million. The remaining decline was due to loan payoffs greater than new loan fundings during the quarter.

“Based on our current loan pipeline, we estimate loan growth in the 7% to 7.5% range for 2019,” said Makris.

• As of Dec. 31, common stockholders’ equity was $2.3 billion, book value per share was $24.33 and tangible book value per share was $14.18.

At the close of business Monday, Simmons’ shares were down 31 cents at $26.17. The Pine Bluff bank’s share price has ranged between $22.64 as a low and $33.45 as a high over the past 52 weeks.

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