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Media Release: SIMMONS REPORTS FIRST QUARTER 2021 EARNINGS

Pine Bluff, AR – Simmons First National Corporation (NASDAQ: SFNC) (the “Company” or “Simmons”) today announced net income of $67.4 million for the quarter ended March 31, 2021, compared to $77.2 million for the same period in 2020, a decrease of $9.8 million, or 12.7%, due in significant part to the difference in the gains on sale of securities recognized during the periods. Diluted earnings per share were $0.62, a decrease of $0.06, or 8.8%, compared to the same period in the prior year. Included in first quarter 2021 results were $634,000 in net after-tax merger-related and net branch right-sizing costs as well as a $4.0 million after-tax gain primarily associated with the sale of branches in Illinois.
Excluding the impact of these items, core earnings were $64.0 million for the quarter ended March 31, 2021, compared to $73.8 million for the quarter ended March 31, 2020, a decrease of $9.8 million, or 13.3%. Core diluted earnings per share were $0.59, a decrease of $0.06, or 9.2%, from the same period in 2020.
“We are very pleased with our solid performance in the first quarter. It reflects the benefit of our diverse operating model,” said George A. Makris, Jr., chairman and CEO of Simmons First National Corporation. “We are still feeling the effects of COVID in the economy. Some industries are still struggling to return to pre-COVID levels of performance and the government’s economic stimulus packages have created a rapid rise in liquidity. Loan demand has been well below historical levels, but we are encouraged by the rebuilding of the pipeline during the first quarter. Asset quality has improved as compared to 2020 and we are optimistic that trend will continue. Based on our current levels of capital and liquidity, we have lending capacity that we have not seen in several years, so Simmons is poised to do our part as the economy continues to return to normal.”

(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. Adjusted pre-tax, pre-provision earnings excludes provision for income taxes, provisions for credit losses and unfunded commitments, gains on sales of securities, and other pre-tax, non-core items, and is also a non-GAAP measurement. Please see “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” below.
(3) Efficiency ratio is core non-interest expense before foreclosed property expense and 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.

Total loans were $12.2 billion at March 31, 2021, a decrease of $705.0 million on a linked-quarter basis. Of this decrease, $228.7 million was related to declines in seasonal credit card and agricultural portfolios ($33.4 million), Paycheck Protection Program (“PPP”) loans ($107.1 million) and mortgage warehouse line of credit ($88.2 million). The remaining decrease was related in significant part to planned loan payoffs, normal paydowns and weakened loan demand as a result of the economic uncertainty stemming from the COVID-19 pandemic. 

 

Loan demand appears to be recovering going into the second quarter of 2021. The Company’s total loan pipeline consisting of all loan opportunities was $1.2 billion at March 31, 2021 compared to $674 million at December 31, 2020. Loans approved and ready to close were $284 million as of March 31, 2021.

 

As of March 31, 2021, the Company had $797.6 million in loans outstanding under the PPP. The change in the total PPP loan balance during the first quarter of 2021 was as follows:

Total deposits were $18.2 billion at March 31, 2021, representing increases of $2.6 billion, or 16.9%, since March 31, 2020 and $1.2 billion, or 7.1% since last quarter. The increase in deposit balances was driven in significant part by multiple rounds of economic stimulus legislation and changes in customer spending as a result of the ongoing COVID-19 pandemic. Trends affected by the increasing customer cash balances are paydowns on loans, decreased loan demand, reduced credit card balances and fewer overdraft activities.


(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 2021 was $146.7 million, a decrease of $20.8 million, or 12.4%, from the same period in 2020. The decrease in net interest income was primarily due to the decline in the loan yield of 44 basis points and the lower average loan balance during the current period. This decrease was partially offset by the 50 basis point decline in the cost of deposits. Loan and deposits yields were impacted by the continuing low interest rate environment during the first quarter of 2021. Included in interest income was the yield accretion recognized on loans acquired of $6.6 million and $11.8 million for the first quarters of 2021 and 2020, respectively. 

 

The loan yield essentially remained flat for the quarter ended March 31, 2021, compared to the fourth quarter of 2020 at 4.75%. The core loan yield, which excludes accretion on acquired loans, was 4.53%, an increase of 6 basis points for the same period. The yield on PPP loans was approximately 5.26% during the first quarter of 2021 (including accretion of net fees), which increased the Company’s overall loan yield by approximately 4 basis points.

 

Net interest margin (FTE) was 2.99% for the quarter ended March 31, 2021, while core net interest margin, which excludes the accretion, was 2.86% for the same period. The decline in the net interest margin during the first quarter of 2021 was primarily due to an $804 million increase in average cash and cash equivalents. The Company added $1.1 billion to its average investment security portfolio balance during the quarter. The net interest margin during the first quarter of 2021 was affected by additional liquidity and the PPP loans, which decreased the net interest margin by approximately 35 basis points.

 

Non-Interest Income

 

Non-interest income for the first quarter of 2021 was $51.9 million, a decrease of $30.5 million compared to the same period  in the previous year. The decline in non-interest income was primarily related to the incremental gains on the sale of securities recognized during the first quarter of last year. During the first quarter of 2020, the Company sold approximately $1.0 billion in securities resulting in a gain of $30.1 million, to begin creating additional liquidity in response to the unfolding COVID-19 pandemic. During the first quarter of 2021, the Company generated a gain of $5.5 million on sales of securities.

 

Debit and credit card fees for the first quarter of 2021 were $9.0 million, an increase of $1.1 million, or 13.3%, compared to the first quarter of 2020. Makris stated, “This increase appears to highlight new consumer habits and the effects of the government economic impact payments.”

Non-Interest Expense

 

Non-interest expense for the first quarter of 2021 was $115.4 million, a decrease of $13.5 million compared to the first quarter of 2020. Included in this quarter were $858,000 of pre-tax non-core items for merger-related expenses and branch right-sizing costs. Excluding these expenses, core non-interest expense was $114.5 million for the first quarter of 2021, a decrease of $13.0 million compared to the same period in 2020. The decrease in other operating expenses is related to the realization of expected synergies from the continuous evaluation of the Company’s branch network and the branch sales and closures that began in 2020 and have continued in 2021.

 

The efficiency ratio for the first quarter of 2021 was 57.77% compared to 57.79% for the same period in 2020.

At March 31, 2021, the allowance for credit losses was $235.1 million. Total non-performing assets at March 31, 2021 decreased $52.1 million from the first quarter of 2020 and decreased $16.0 million from year end. Provision for credit losses for the first quarter of 2021 was $1.4 million, a decrease of $5.5 million, or 79.2%, from the previous quarter. 

 

Foreclosed Assets and Other Real Estate Owned

 

At March 31, 2021, foreclosed assets and other real estate owned were $11.2 million, a decrease of $9.6 million, or 46.3%, compared to the same period in 2020 and a decrease of $7.2 million, or 39.3% from December 31, 2020. The composition of these assets is divided into three types:

At March 31, 2021, common stockholders’ equity was $2.9 billion. Book value per share was $27.04 and tangible book value per share was $16.13 at March 31, 2021, compared to $27.53 and $16.56, respectively, at December 31, 2020. The ratio of stockholders’ equity to total assets was 12.6% at March 31, 2021, compared to 13.3% at December 31, 2020, while tangible common equity to tangible assets was 7.9% at March 31, 2021, compared to 8.5% at the previous year-end.

 

During the first quarter of 2021, the Company repurchased approximately 131,000 shares of its common stock at an average price per share of $23.53. Market conditions and capital needs will drive the decisions regarding additional, future stock repurchases.

 

Simmons First National Corporation

 

Simmons First National Corporation is a financial holding company headquartered in Pine Bluff, Arkansas, with total consolidated assets of approximately $23.3 billion as of March 31, 2021. The Company, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas and offers comprehensive financial solutions delivered with a client-centric approach. The Company’s common stock is listed 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 today, Tuesday, April 20, 2021. 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 1443639.  In addition, the call will be available live or in recorded version on the Company’s website at www.simmonsbank.com for at least 60 days.

 

Non-GAAP Financial Measures

 

This press release contains financial information determined by methods other than in accordance with U.S. 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, non-interest income, and non-interest expense certain income and expenses related to significant non-core activities, including merger-related expenses, gain on sale of branches, early retirement program expenses and net branch right-sizing expenses. In addition, the Company also presents certain figures based on tangible common stockholders’ equity, tangible assets and tangible book value, which exclude goodwill and other intangible assets. The Company further presents certain figures that are exclusive of the impact of PPP loans. The Company’s management believes that these non-GAAP financial measures are useful to investors because they, among other things, 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 normalize 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, and management uses these non-GAAP financial measures to assess the performance of the Company’s core businesses as related to prior financial periods. 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, including, without limitation, statements made in Mr. Makris’s quotes, 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, lending capacity and lending activity, revenue, assets, asset quality, profitability, net interest margin, non-interest revenue, share repurchase program, acquisition strategy, digital banking initiatives, the Company’s ability to recruit and retain key employees, the benefits associated with the Company’s early retirement program, branch closures and branch sales, the adequacy of the allowance for credit losses, the ability of the Company to manage the impact of the COVID-19 pandemic, and the impacts of the Company’s and its customers participation in the PPP. 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 effect of steps the Company takes and has taken in response to the COVID-19 pandemic; the severity and duration of the pandemic, including the effectiveness of vaccination efforts; the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein; 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; 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 PPP loan program authorized by the Coronavirus Aid, Relief and Economic Security Act); changes in accounting principles relating to loan loss recognition (current expected credit losses, or 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; government legislation; 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 the Company’s Form 10-K for the year ended December 31, 2020, which has been filed with, and is available from, the U.S. Securities and Exchange Commission.

Wesley is the owner of South Ark Weather, LLC which owns and operates searkweather.com You may contact him at wesley@searkweather.com

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