Simmons Reports Record Earnings for Second Quarter 2018

Globe Newswire 23-Jul-2018 5:00 PM

PINE BLUFF, Ark., July 23, 2018 (GLOBE NEWSWIRE) -- Simmons First National Corporation (NASDAQ:SFNC) today announced record net income of $53.6 million for the quarter ended June 30, 2018, compared to $23.1 million for the same period in 2017, an increase of $30.5 million, or 132.2%. Diluted earnings per share were $0.58, an increase of $0.22, or 61.1%, from the same period in 2017.  Included in second quarter 2018 results were $1.1 million in net after-tax merger-related and branch right-sizing costs. Excluding the impact of these items, core earnings were $54.7 million for the quarter ended June 30, 2018, compared to $26.8 million for the quarter ended June 30, 2017, an increase of $27.9 million, or 104.3%. Core diluted earnings per share were $0.59, an increase of $0.17, or 40.5%, from the same period in 2017.

Year-to-date net income for the first half of 2018 was $104.9 million, or $1.13 diluted earnings per share, compared to $45.2 million, or $0.71 diluted earnings per share, for the same period in 2017. Excluding $2.4 million in net after-tax merger-related and branch right sizing costs, year-to-date core earnings for 2018 were $107.3 million, an increase of $58.0 million compared to the same period last year.

"We are pleased to again report record earnings for this quarter building off the strong results in the first quarter," said George A. Makris, Jr., chairman and CEO.

Makris continued, "The system conversions and integration for our most recent acquisitions are now complete and we are excited to turn our focus on expanding our products and services throughout our larger footprint."

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.

Total loans, including those acquired, were $11.4 billion at June 30, 2018, an increase of $5.1 billion, or 82.6% from June 30, 2017. 

On a linked-quarter basis (June 30, 2018 compared to March 31, 2018), total loans increased $378.6 million, or 3.4%.  The increase includes:

• $201 million increase in real estate loans
• $131 million increase in commercial loans
• $58 million increase in seasonal agricultural loan growth
• $12 million increase in other loans
• $23 million decrease in liquidating portfolio (indirect lending and consumer finance)

At June 30, 2018, total deposits were $12.0 billion, an increase of 68.3%, compared to the same period in 2017 and a 2.5% increase from March 31, 2018. The increase is from continued focus on core deposits as a funding source for asset growth and the recent acquisitions.  Total non-time deposits increased 65.7% compared to the same period in 2017, and comprised 80.3% of total deposits.

Since last quarter, the Federal Reserve Board increased the Fed Funds target rate by 25 basis points. The Company's deposit beta was 40% and the core loan beta was 36%. Looking back to March 2017, the Federal Reserve has increased the target rate by 100 basis points. The Company's deposit beta was 51% and the core loan beta was 45% during the same period.

The Company's net interest income for the second quarter of 2018 was $136.8 million, an increase of $60.0 million, or 78.2%, from the same period of 2017. Included in interest income was the yield accretion recognized on loans acquired of $10.1 million and $4.8 million for the second quarters of 2018 and 2017, respectively. Yield accretion was $3.7 million higher than projected during the quarter due to accelerated cash flows of acquired loans. Based on its cash flow projections, the Company expects total accretion for 2018 of approximately $30 million.

Net interest margin was 3.99% for the quarter ended June 30, 2018, an 18 basis point decrease from the first quarter. The Company's core net interest margin, excluding the accretion, was 3.70% for the second quarter of 2018, a 12 basis point decrease from March 31, 2018.  Cost of interest bearing deposits was 0.84% for the second quarter of 2018, a 48 basis point increase from June 30, 2017 and a 10 basis point increase from March 31, 2018.

The subordinated debt issuance at the end of the first quarter had a 5 basis point impact on the Company's second quarter net interest margin. The timing of existing subordinated debt prepayment had an additional 5 basis point impact.

Non-Interest Income

Non-interest income for the second quarter 2018 was $38.0 million, an increase of $2.3 million compared to the second quarter of 2017. The increase was primarily due to additional trust income, service charge and fee income resulting from the acquisitions. This increase was partially offset by a $2.2 million decrease in gain on sale of securities compared to the same quarter last year.

Non-Interest Expense

Non-interest expense for the second quarter of 2018 was $98.5 million, an increase of $27.1 million compared to the second quarter of 2017. Included in this quarter were $1.5 million of pre-tax merger-related expenses and branch rightsizing costs.  Excluding these expenses, core non-interest expense was $97.0 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 second quarter 2018 was 52.70%.

Income tax expense in the second quarter included a $2.0 million discrete tax benefit related to tax accounting for equity compensation.

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 June 30, 2018, the allowance for loan losses for legacy loans was $51.7 million. The allowance for loan losses for loans acquired was $2.1 million and the acquired loan discount credit mark was $68.3 million. The allowances for loan losses and credit marks provide a total of $122.1 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 1.6%.

Provision for loan losses for the second quarter of 2018 was $9.0 million which includes an increase due to strong legacy loan growth as well as increased loan migration during the quarter from the fourth quarter of 2017 acquisitions, which is consistent with the Company's previous guidance.

Foreclosed Assets and Other Real Estate Owned

At June 30, 2018, foreclosed assets and other real estate owned were $30.5 million, an increase of $4.5 million, or 17.3%, compared to the same period in 2017 and an increase of $1.4 million, or 4.7% from March 31, 2018. The composition of these assets is divided into three types:

At June 30, 2018, common stockholders' equity was $2.1 billion, book value per share was $23.26 and tangible book value per share was $13.05.  Asset growth due to the subordinated debt offering and the timing related to paying off approximately $104 million in parent company debt reduced Tangible Common Equity 6 basis points.

Simmons First National Corporation

Simmons First National Corporation is a financial holding company, headquartered in Pine Bluff, Arkansas, with total assets of $16.2 billion as of June 30, 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, July 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 4496437. 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:
STEPHEN C. MASSANELLI
EVP, Chief Administrative Officer and Investor Relations Officer
Simmons First National Corporation
(870) 541-1000