Simmons Reports Record Earnings for First Quarter 2018

Globe Newswire 23-Apr-2018 6:00 PM

PINE BLUFF, Ark., April 23, 2018 (GLOBE NEWSWIRE) -- Simmons First National Corporation (NASDAQ-GS:SFNC) today announced record net income of $51.3 million for the quarter ended March 31, 2018, compared to $22.1 million for the same period in 2017, an increase of $29.2 million, or 132.0%. Diluted earnings per share were $0.55, an increase of $0.20, or 57.1%, from the same period in 2017.  Included in first quarter 2018 results was $1.3 million in net after-tax merger-related and branch right-sizing costs.

Excluding the impact of these items, core earnings were $52.6 million for the quarter ended March 31, 2018, compared to $22.5 million for the quarter ended March 31, 2017, an increase of $30.1 million, or 133.5%. Diluted earnings per share were $0.57, an increase of $0.21, or 58.3%, from the same period in 2017.

During the quarter, the Company completed its conversion of Southwest Bank with and into its subsidiary, Simmons Bank, as well as completed its offering of $330 million aggregate principal amount of 5.00% Fixed-to-Floating Rate Subordinated Notes due 2028 (the "Notes").  The Notes will bear a fixed interest rate of 5.00% per year in years 1-5, payable semi-annually in arrears, and a floating rate equal to three-month LIBOR plus 215 basis points in years 6-10, payable quarterly in arrears.  The Notes were offered to the public at 100% of their face amount.  The Company expects to use approximately $222 million of the net proceeds from the sale of the Notes to repay outstanding indebtedness and the remainder for general corporate purposes.

"We are off to a productive start for 2018," said George A. Makris, Jr., chairman and CEO.

Makris continued, "The conversion of Southwest Bank is now complete and we look forward to continuing to serve our new customers in the Texas markets.  We remain focused on the Bank SNB conversion and anticipate it will also be a smooth transition for our customers.  We are excited about building a stronger and more diverse organization."

The Company completed a 2-for-1 stock split effective February 8, 2018.  Financial statements, including earnings per share as well as other share-related disclosures, have been adjusted to include the impact of the stock split on all periods presented.

Loans

Total loans, including those acquired, were $11.0 billion at March 31, 2018, an increase of $5.2 billion, or 90.2% from March 31, 2017. 

On a linked-quarter basis (March 31, 2018 compared to December 31, 2017), total loans increased $207.6 million, or 1.9%.  The increase was due to:

• $126 million net increase in loans at Simmons Bank which includes:
  
  • Southwest Bank loans that merged into Simmons Bank as of February 20, 2018
  • $25 million decrease in liquidating portfolio (indirect lending and consumer finance)
  • $24 million decrease from seasonal agricultural loan payoffs
• $82 million net increase in loans at Bank SNB

Deposits

At March 31, 2018, total deposits were $11.7 billion, an increase of 71.7%, compared to the same period in 2017 and a 5.1% increase from December 31, 2017. The increase is from the recent acquisitions and growth in core deposits.  Total non-time deposits increased 70.6% compared to the same period in 2017, and comprised 81.1% of total deposits.

"We continue to focus on core deposits as a funding source for growth. We believe we have an opportunity to capitalize on the successes of the first quarter, especially in our new markets," said Makris.

Net Interest Income

The Company's net interest income for the first quarter of 2018 was $135.0 million, an increase of $62.6 million, or 86.5%, from the same period of 2017. Included in interest income was the yield accretion recognized on loans acquired of $11.3 million and $4.4 million for the first quarters of 2018 and 2017, respectively. Yield accretion was $2.7 million higher than projected due to accelerated cash flows of acquired loans. Based on our cash flow projections, we expect total accretion for 2018 to be in the range of $25 million to $28 million with more accretion income during the first part of the year and declining during the latter part of 2018.

Net interest margin was 4.17% for the quarter ended March 31, 2018, a 13 basis point increase from the same quarter of 2017. The Company's core net interest margin, excluding the accretion, was 3.82% for the first quarter of 2018, a 2 basis point increase from March 31, 2017 and a 12 basis point increase from December 31, 2017.  Cost of interest bearing deposits was 0.74% for the first quarter of 2018, a 41 basis point increase from March 31, 2017 and an 11 basis point increase from December 31, 2017.

Non-Interest Income

Non-interest income for the first quarter 2018 was $37.5 million, an increase of $7.5 million compared to the first quarter of 2017. The increase was primarily due to additional mortgage income, trust income, service charge and fee income resulting from the acquisitions.

Non-Interest Expense

Non-interest expense for the first quarter of 2018 was $98.1 million, an increase of $31.8 million compared to the first quarter of 2017. Included in this quarter were $1.3 million of net after-tax merger-related expenses and branch rightsizing costs.  Excluding these expenses, core non-interest expense was $96.3 million.

The increases during the quarter were driven by incremental increases in operating expenses related to the additions of Bank SNB and Southwest Bank during the fourth quarter of 2017. The efficiency ratio for the first quarter 2018 was 53.24%.

Asset Quality

All loans acquired are recorded at their discounted net present value; therefore, they are excluded from the computations of the asset quality ratios for the legacy loan portfolio, except for their inclusion in total assets.

At March 31, 2018, the allowance for loan losses for legacy loans was $47.2 million. The allowance for loan losses for loans acquired was $407,000 and the acquired loan discount credit mark was $79.1 million. The allowances for loan losses and credit marks provide a total of $126.7 million of coverage, which equates to a total coverage ratio of 1.1% of gross loans. The ratio of credit mark and related allowance to loans acquired was 1.7%.

Provision for loan losses for the first quarter of 2018 was $9.2 million, an increase of $4.8 million compared to March 31, 2017. The provision increase was due to increased loan migration during the quarter from the fourth quarter of 2017 acquisitions, which is consistent with our previous guidance.

Foreclosed Assets and Other Real Estate Owned

At March 31, 2018, foreclosed assets and other real estate owned were $29.1 million, an increase of $2.7 million, or 10.3%, compared to the same period in 2017 and a decrease of $3.0 million, or 9.3% from December 31, 2017. The composition of these assets is divided into three types:

At March 31, 2018, common stockholders' equity was $2.1 billion, book value per share was $22.86 and tangible book value per share was $12.62.  Asset growth due to the subordinated debt offering caused Tangible Common Equity to temporarily dip below 8%.  With the anticipated pay off of approximately $104 million in parent company debt during the second and third quarters, along with earnings growth, this ratio will increase to a range of 8-9% which reflects a normal operating range for the Company.

Simmons First National Corporation

Simmons First National Corporation is a financial holding company, headquartered in Pine Bluff, Arkansas, with total assets of $15.6 billion as of March 31, 2018 conducting financial operations throughout Arkansas, Colorado, 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 Global Select 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 on Tuesday, April 24, 2018. 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 4198919. 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 typically adjust GAAP performance measures to include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant non-core activities or nonrecurring transactions. Since the presentation of these GAAP performance measures and their impact differ between companies, management 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

Statements in this news release that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date of this news release, and we undertake 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 involve inherent risk and uncertainties. Various factors, including, but not limited to, economic conditions, credit quality, interest rates, loan demand, changes in the assumptions used in making the forward-looking statements, and the Company's ability to manage and successfully integrate its mergers and acquisitions could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect Simmons First National Corporation's financial results is included in its Form 10-K filing with the Securities and Exchange Commission.

FOR MORE INFORMATION CONTACT:
DAVID W. GARNER
EVP and Investor Relations Officer
Simmons First National Corporation
(870) 541-1000