Simmons First earnings down from a year ago, Pine Bluff bank enters St. Louis market

Simmons First National Corp. on Monday (April 22) posted first quarter profits of nearly $48 million only weeks after completing a strategic acquisition that expanded the Arkansas regional banking group’s footprint into the St. Louis metropolitan area.

For the period ended March 31, Simmons reported net income of $47.4 million, or 51 cents per share, down 7.1% compared to $51.3 million or 47 cents per share in the same period of 2018. The quarterly results included after-tax merger-related expenses connected to the Simmons’ “branch right-sizing” costs and early retirement program.

Excluding those items, the Pine Bluff-based bank reported earnings of $49.1 million, or 53 cents for the first quarter, a decline of 6.7% compared to $52.6 million, or 49 cents in the same period a year ago. Revenues for the three-month period were $212.9 million, compared to $172.5 million a year ago.

Wall Street had expected the bank to report first quarter earnings of 54 cents per share on revenue of $172 million, according to Thomson Reuters. Simmons Chairman and CEO George Makris said the company had “solid operating results” in the first quarter, but revenue growth was impacted by lower accretion income, higher debt card costs and Dodd-Frank Act’s interchange fee restrictions related to the Arkansas bank exceeding $10 billion in assets.

Makris also highlighted Simmons’ recent acquisition of Reliance Bancshares and more than 20 bank branches in the St. Louis area, pushing the Arkansas bank’s asset value to an all-time high of $17.1 billion with more than 200 branch locations in Arkansas, Colorado, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

“We would also like to welcome our newest customers and associates from the Reliance Bank merger into the Simmons family,” said Makris. “We closed the transaction Friday, April 12, 2019, and performed the systems conversion over that weekend. We are excited about our growth opportunities in the St. Louis market due to our increased presence.”

Entering 2019, Simmons has continued to see incremental growth following the completion of two of the biggest deals in the company’s history in late 2017, paying just over $1 billion for the acquisitions of Stillwater, Okla.-based Southwest Bancorp Inc. and parent company Bank SNB, and First Texas BHC Inc., or Southwest Bank of Fort Worth. A year ago, the out-of-state acquisitions doubled Simmons’ first quarter earnings to record $51.3 million.

In the first quarter, Simmons’ reported total loans of $11.9 billion, up from $11 billion in the same period of 2018. The bank’s legacy loan portfolio also grew by 40.3% to $8.7 billion, up from $6.2 billion in the same period of 2018.

Total assets for the first quarter rose slightly to $16.1 billion, compared to $15.6 billion a year ago. However, the bank’s asset value over the three-month period ended March 31, which did not include the Reliance acquisition, declined by 2.4% from the previous high of $16.5 billion at the end of fiscal 2018.

Total deposits for the quarter $12 billion, an increase of $332.6 million, or 2.9%, from a year ago. Banking officials said total deposits declined over the three-month period by $409.2 million as brokered and public funded deposits fell by $557.2 million, compared to core deposits of just $148 million.

“Our cash balance was reduced as we eliminated some high cost deposits,” said the Simmons CEO. “We are very pleased with our growth in core deposits as we continue to emphasize relationship banking.”

For the quarter, the allowance for loan losses for legacy loans was $59.2 million. The allowance for loan losses for loans acquired was $1.3 million and the acquired loan discount credit mark was $42.4 million. The allowances for loan losses and credit marks provide a total of $103 million of coverage, which equates to a total coverage ratio of 0.87% of gross loans. The ratio of credit mark and related allowance to loans acquired was 1.41%.

During the quarter, Simmons said it identified loans specific to the acquired portfolio of Bank SNB’s Dallas market that “were poorly structured or were poorly managed post-funding, and were primarily linked to an individual lender.” As a result, the bank made a provision for acquired loans of $2 million related to the Bank SNB acquired pool of loans, officials said.

Following are other items included in the first quarter earnings report.
Simmons’ net interest income for the first quarter of 2019 was $137 million, an increase of $2.1 million, or 1.5%, from the same period of 2018. Included in interest income was the yield accretion recognized on loans acquired of $6.7 million and $11.3 million for the first quarters of 2019 and 2018, respectively.

The bank’s net interest income for the first quarter of 2019 was $137 million, an increase of $2.1 million, or 1.5%, from the same period of 2018. Included in interest income was the yield accretion recognized on loans acquired of $6.7 million and $11.3 million for the first quarters of 2019 and 2018, respectively.

As of March 31, common stockholders’ equity was $2.3 billion, book value per share was $24.87 and tangible book value per share was $14.78.

In Monday’s trading session, Simmons shares (NASDAQ: SFNC) closed at $24.85, down 62 cents. The bank’s share price has ranged between $22.64 and $33.45 over the past 52 weeks.