Simmons Reports First Quarter 2020 Earnings

PINE BLUFF, Ark., April 21, 2020 (GLOBE NEWSWIRE) -- Simmons First National Corporation (NASDAQ: SFNC) (the “Company” or “Simmons”) today announced net income of $77.2 million for the quarter ended March 31, 2020, compared to $47.7 million for the same period in 2019, an increase of $29.5 million, or 61.9%. Diluted earnings per share were $0.68, an increase of $0.17, or 33.3%, compared to the same period in the prior year. Included in first quarter 2020 results were $965,000 in net after-tax merger-related and branch right-sizing costs as well as a $4.4 million after-tax gain associated with the sale of branches in south Texas.

Excluding the impact of these items, core earnings were $73.8 million for the quarter ended March 31, 2020, compared to $49.1 million for the quarter ended March 31, 2019, an increase of $24.8 million, or 50.5%. Core diluted earnings per share were $0.65, an increase of $0.12, or 22.6%, from the same period in 2019.

“I am very proud of our team and their demonstration of our community banking values during these trying times,” said George A. Makris, Jr., chairman and CEO of Simmons First National Corporation. “Many of our associates could not work from home because they were serving our customers who needed our help.”

Makris continued, “On behalf of Simmons Bank, our customers, and the communities we serve, I would like to thank our healthcare professionals and other front-line workers, along with our federal, state and local officials, who have all responded quickly and with great care to the challenges presented by the pandemic. We believe we are well positioned to help our customers and communities as we come out of these unprecedented times. We have very strong liquidity and capital that we believe should assist Simmons once again in weathering critical economic times. The diversification in our risk profile along with a conservative risk appetite has helped to accommodate the needs of the communities we serve while providing value to our shareholders.”

1. Return on tangible common equity excludes goodwill and other intangible assets and is a non-GAAP measurement. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.
2. Core figures exclude non-core items and are non-GAAP measurements. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.
3. Efficiency ratio is noninterest expense before foreclosed property expense, amortization of intangibles as a percent of net interest income (fully taxable equivalent) and non-interest revenues, excluding gains and losses from securities transactions and non-core items, and is a non-GAAP measurement. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.

Loans

Total loans were $14.4 billion at March 31, 2020, an increase of $2.6 billion, or 22.4%, compared to March 31, 2019, primarily due to the Reliance Bancshares, Inc. and The Landrum Company mergers completed during 2019 (“2019 mergers”). On a linked-quarter basis (March 31, 2020 compared to December 31, 2019), total loans decreased $51.4 million, or 0.4%. During the first quarter 2020, $115 million in loan balances were reclassified associated with the four branches held for sale in Colorado.

Deposits

Total deposits were $15.6 billion at March 31, 2020, an increase of $3.6 billion, or 29.8%, since March 31, 2019, primarily due to the 2019 mergers, but partially offset by the reclassification of $58.4 million of deposits associated with the Colorado branches held for sale.

Net Interest Income

1. Fully tax equivalent using an effective tax rate of 26.135%.
2. Core loan yield and core net interest margin exclude accretion and are non-GAAP measurements. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.
3. Includes non-interest bearing deposits.

The Company’s net interest income for the first quarter of 2020 was $167.5 million, an increase of $31.5 million, or 23.2%, from the same period of 2019 as a result of the 2019 mergers. Included in interest income was the yield accretion recognized on loans acquired of $11.8 million and $6.7 million for the first quarters of 2020 and 2019, respectively.

Net interest margin (FTE) was 3.68% for the quarter ended March 31, 2020, while core net interest margin, which excludes the accretion, was 3.42% for the same period. The decrease in the net interest margin during the first quarter of 2020 was due to a timing difference between the Company’s ability to manage the rate decrease in its variable rate loan portfolio and its repricing of interest bearing deposits in response to the substantial interest rate cuts by the Federal Open Market Committee of the Federal Reserve in March.

Non-Interest Income

Non-interest income for the first quarter of 2020 was $82.4 million, an increase of $47.6 million compared to the same period in the previous year. During the first quarter 2020, the Company sold approximately $1.0 billion in securities resulting in a gain of $30.1 million. In addition, the Company recognized a $5.9 million gain associated with the sale of the branches in south Texas recorded in Other Income, which the Company considers a non-core item.

1. Core figures exclude non-core items and are non-GAAP measurements. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.

Non-Interest Expense

Non-interest expense for the first quarter of 2020 was $125.8 million, an increase of $24.4 million compared to the first quarter of 2019. Included in this quarter were $1.3 million of pre-tax non-core items for merger-related expenses and branch right-sizing costs. Excluding these expenses, core non-interest expense was $124.5 million for the first quarter of 2020, an increase of $25.0 million compared to the same period in 2019, primarily the result of the 2019 mergers and additional software and technology costs related to the Next Generation Banking (“NGB”) initiative.

The efficiency ratio for the first quarter of 2020 was 56.38% compared to 56.76% for the same period in 2019.

1. Core figures exclude non-core items and are non-GAAP measurements. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.

Asset Quality

At March 31, 2020, the allowance for credit losses was $243.2 million. Provision for credit losses for the first quarter of 2020 was $26.1 million.

Foreclosed Assets and Other Real Estate Owned

At March 31, 2020, foreclosed assets and other real estate owned were $20.8 million, an increase of $1.9 million, or 9.8%, compared to the same period in 2019 and an increase of $1.7 million, or 8.8% from December 31, 2019. The increase from year end was primarily due the closure of six branches in conjunction with the February 2020 system conversion of Landmark Bank into Simmons Bank. The composition of these assets is divided into three types:

Capital

At March 31, 2020, common stockholders' equity was $2.8 billion. Book value per share was $26.11 and tangible book value per share was $15.22 at March 31, 2020, compared to $26.30 and $15.89, respectively, at December 31, 2019. The ratio of stockholders’ equity to total assets was 13.7% at March 31, 2020, compared to 14.1% at December 31, 2019 while the tangible common equity to tangible assets was 8.4% at March 31, 2020, compared to 9.0% from the previous year-end.

Effective March 4, 2020, the Company’s board of directors approved an amendment to the Company’s stock repurchase program originally approved on October 17, 2019 to increase the amount of common stock that may be repurchased under the program from a maximum of $60 million to $180 million.  During the first quarter of 2020, the Company repurchased approximately 4,900,000 shares of its commons stock at an average price of $18.94. No shares have been repurchased since March 31, 2020. Market conditions and our capital needs will drive the decisions regarding additional, future stock repurchases.

Current Expected Credit Losses (“CECL”)

In 2016, new accounting guidance was issued that introduced a new credit loss methodology, the CECL methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

The CECL methodology replaces the current incurred loss methodology with a lifetime “expected credit loss” measurement objective for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. This standard requires the consideration of historical loss experience and current conditions adjusted for reasonable and supportable economic forecasts. The Company has elected to utilize a blended macroeconomic scenario using a one-year forecast horizon with a subsequent reversion to historical loss experience. Within the life cycle of a loan or other financial asset, this new guidance will generally result in the earlier recognition of the provision for credit losses and the related allowance for credit losses than previous practice. The CECL guidance was effective for the Company as of January 1, 2020. Upon adoption, the Company recorded an additional allowance for credit losses of approximately $151 million and an adjustment to the reserve for unfunded commitments of $24 million with a related $128 million as an adjustment to retained earnings, net of income taxes. The adjustment was based upon the Company’s analysis of current conditions, assumptions and economic forecasts.

COVID-19 Impact

In March 2020, Congress passed the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, which is designed to provide comprehensive relief to individuals and businesses following the unprecedented impact of the COVID-19 pandemic. The CARES Act includes approximately $2 trillion in assistance and a key component is the Paycheck Protection Program (“PPP”), which provides 100% federally guaranteed loans for small businesses to cover up to eight weeks of payroll costs to retain their workforce and assist with mortgage interest, rent and utilities. Notably, these small business loans may be forgiven if borrowers maintain their payrolls and satisfy certain other conditions during the crisis.

In response to the economic hardships associated with the COVID-19 pandemic, as of April 16th, the Company has obtained approval from the SBA for over 3,100 PPP loans totaling over $745 million for existing and new customers. The Company is continually monitoring the PPP and making the necessary adjustments to its own operations.

In addition, the Company has completed or is in the process of modifying more than 3,600 loans totaling over $2.8 billion. The Company is dedicated to supporting its customers and communities throughout this period of uncertainty.

In March and in response to the pandemic, the Company announced temporary closure of 52 branches and has been focusing on the enhanced digital banking experience.

The Company has implemented business continuity plans to help ensure that customers have adequate access to banking services while at the same time working to protect associates through heightened safety procedures. As of March 31, 2020, the Company has approximately $4.7 billion in liquidity sources available and is well capitalized, which management believes should allow the Company to approach the crisis from a position of strength.

Simmons First National Corporation

Simmons First National Corporation is a financial holding company headquartered in Pine Bluff, Arkansas, with total consolidated assets of approximately $20.8 billion as of March 31, 2020, conducting financial operations in Arkansas, Colorado, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas. The Company, through its subsidiaries, offers comprehensive financial solutions delivered with a client-centric approach. The Company’s common stock trades on the NASDAQ Market under the symbol “SFNC.”

Conference Call

Management will conduct a live conference call to review this information beginning at 9:00 a.m. CDT today, Tuesday, April 21, 2020. Interested persons can listen to this call by dialing toll-free 1-866-298-7926 (United States and Canada only) and asking for the Simmons First National Corporation conference call, conference ID 5979394. In addition, the call will be available live or in recorded version on the Company’s website at www.simmonsbank.com.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. These measures adjust GAAP performance measures to, among other things, include the tax benefit associated with revenue items that are tax-exempt, as well as exclude from income available to common shareholders certain expenses related to significant non-core activities, including merger-related expenses, gain on sale of branches and branch right-sizing expenses. In addition, the Company also presents certain figures based on tangible common stockholders’ equity and tangible book value, which exclude goodwill and other intangible assets. The Company’s management believes that these non-GAAP financial measures are useful to investors because they present the results of the Company’s ongoing operations without the effect of mergers or other items not central to the Company’s ongoing business, as well as normalizing for tax effects. Management, therefore, believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses. 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. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the tables of this release.

Forward-Looking Statements

Some of the statements in this news release may not be based on historical facts and should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by reference to future periods or by the use of forward-looking terminology, such as “believe,” “budget,” “expect,” “foresee,” “anticipate,” “intend,” “indicate,” “target,” “estimate,” “plan,” “project,” “continue,” “contemplate,” “positions,” “prospects,” “predict,” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could,” “might” or “may,” or by variations of such words or by similar expressions. These forward-looking statements include, without limitation, statements relating to Simmons’ future growth, revenue, assets, asset quality, profitability, net interest margin, non-interest revenue, share repurchase program, acquisition strategy, NGB initiative, the Company’s ability to recruit and retain key employees, the adequacy of the allowance for credit losses, and the ability of the Company to manage the impact of the COVID-19 pandemic. Any forward-looking statement speaks only as of the date of this news release, and Simmons undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this news release. By nature, forward-looking statements are based on various assumptions and involve inherent risk and uncertainties. Various factors, including, but not limited to, changes in economic conditions, credit quality, interest rates, loan demand, deposit flows, real estate values, the assumptions used in making the forward-looking statements, the securities markets generally or the price of Simmons common stock specifically, and information technology affecting the financial industry; the effects of the COVID-19 pandemic on, among other things, the Company’s operations, liquidity, and credit quality; general economic and market conditions; unemployment; potential claims, damages, and fines related to litigation or government actions, including litigation or actions arising from the Company’s participation in and administration of programs related to the COVID-19 pandemic (including, among other things, the CARES Act); changes in accounting principles relating to loan loss recognition (CECL); the Company’s ability to manage and successfully integrate its mergers and acquisitions; cyber threats, attacks or events; reliance on third parties for key services; and other factors, many of which are beyond the control of the Company, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect the Company’s financial results is included in its Form 10-K for the year ended December 31, 2019, which has been filed with, and is available from, the U.S. Securities and Exchange Commission.

FOR MORE INFORMATION CONTACT:Stephen C. MassanelliEVP, Chief Administrative Officer and Investor Relations OfficerSimmons First National Corporation[email protected]