Simmons’ 3Q profits up nearly 50% from a year ago

by Wesley Brown (wesbrocomm@gmail.com) 209 views 

Simmons First National Corp. reported Tuesday (Oct. 22) that third-quarter profits grew by nearly $27 million from a year ago as the fast-growing, Pine Bluff-based regional banking group continues to see strong loan growth despite unpredictable interest rates.

For the period ended Sept. 30, Simmons reported net income of $81.8 million, or 84 cents per share, up 48.2% compared to $55.2 million, or 59 cents per share, for the same period in 2018. Included in quarterly results were $2.1 million in net after-tax merger-related, early retirement program and branch right-sizing costs, bank officials said.

Notwithstanding those items, Simmons reported core earnings of $84 million, or 87 cents per share, for the three-month period, compared to $56.5 million, or 61 cents per share, in the third quarter of 2018. A survey of Wall Street analysts had expected the Arkansas financial holding company to report third quarter earnings of 64 cents, according to Thomson Reuters.

“We are very pleased with our operating results this quarter,” said Simmons First Chairman and CEO George Makris, Jr. “We continue to have very strong loan demand opportunities although our customers are displaying cautious optimism regarding the uncertainty in the world economy today and interest rate adjustments that may not appear to be related precisely to economic data.”

Makris also mentioned Simmons’ ongoing multi-million-dollar upgrade of the Arkansas bank’s technology system following a string of strategic acquisitions. Those improvements include a new mobile banking app that customers began using only a week ago.

“We are beginning to see significant results from our Next Generation Banking technology investment. We have successfully converted our system processing to a hosted environment increasing the security and reliability of our systems,” said the Simmons chief executive. “Also, on Oct. 16, we launched our new mobile banking app. The customer response has been phenomenal. We will continue to expand our digital offerings over the coming months.”

The Simmons CEO also noted that the bank posted a $15 million pre-tax loss related to the Chapter 11 bankruptcy filing by White Star Petroleum LLC, the Oklahoma City-based independent oil and gas firm founded by former Chesapeake Energy CEO and billionaire Aubrey McClendon.

The Oklahoma oilman, who was one of the first developers in Arkansas’ Fayetteville Shale, died in a one-car accident just before White Star was formed in April 2016. According to bankruptcy filings, White Star had assets of between $500 million to $1 billion and liabilities of between $100,000 and $500 million. White Star’s debts included a $274 million secured revolving credit line, a $58 million secured term loan, and $10 million in unsecured bonds.

A month ago, Houston-based Contango Oil and Gas Company agreed to acquire the assets of White Star Petroleum for $132.5 million, if the deal is approved by the bankruptcy court. Makris said Simmons participated in a shared credit arrangement with White Star that exposed the Arkansas bank to $19.2 million. Based on the anticipated net proceeds from the pending bankruptcy sale, Simmons’ recognized a $14.7 million third-quarter loss, he said.

“I have mentioned for some time now that asset quality is one of our top priorities, and the loss we experienced as a result of the White Star bankruptcy is certainly disappointing,” Makris said of the bankruptcy write-off. “In response to it, we have, among other things, made changes to our credit underwriting and approval processes that are consistent with the conservative credit culture at Simmons.”

Makris also touted the bank’s announced acquisition of The Landrum Co., a Columbia, Mo.-based community bank that company officials said would allow the Arkansas regional bank to bolster its recently expanded operations in Missouri, Texas and Oklahoma. Under terms of the deal first announced on July 31, Simmons will acquire all of the outstanding capital stock of the parent company of the privately-held Landmark Bank of Columbia for $435 million.

Following the expected close of the deal in late 2019 or early 2020, Simmons will have assets nearing $21 billion, along with total loans and deposits surpassing $15 billion and $17 billion, respectively.

The surprise deal with Landrum will be Simmons’ second major acquisition Missouri in 2019 and will expand its footprint from the thriving urban market in St. Louis to the state’s fastest-growing city in Columbia, the college town of nearly 125,000 people and home to flagship University of Missouri.

During the second quarter, Simmons First completed its acquisition of St. Louis-based Reliance Bancshares Inc. in a $214 million cash-and-stock deal first announced in November.

Simmons also announced that its board of directors has authorized a new $60 million stock buyback program, which will terminate on Oct. 31, 2021 or sooner. The new program replaces the Pine Bluff bank’s existing stock repurchase program, which was announced on July 23, 2012.

Following are other items included in the third-quarter earnings report.

  • Total loans, including those acquired, were $13 billion in the third quarter, an increase of $1.1 billion, or 9.7%, compared to $11.9 billion a year ago.
  • During the third quarter of 2019, Simmons said it reduced its real estate portfolio by $165 million as part of an effort to manage its commercial real estate concentration.
  • Total deposits were $13.5 billion through the third quarter, an increase of $1.4 billion, or 11.4% from the same period of 2018.
  • Simmons’ net interest income for the third 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.

In Tuesday’s midday trading session, Simmons shares were trading up 2.4%, or 66 cents, at $24.71 on the Nasdaq stock exchange. The bank’s share price has ranged between $22.08 and $29.60 over the past 52 weeks.

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