BusinessJefferson County ArkPine Bluff Ark

SIMMONS REPORTS SECOND QUARTER 2021 EARNINGS

  • Net income of $74.9 million, up 27 percent from the year ago quarter and up 11 percent compared to the first quarter of 2021
  • Diluted EPS of $0.69, up 28 percent from the year ago quarter and up 11 percent compared to the first quarter of 2021
  • Adjusted pre-tax, pre-provision income of $74.6 million, up 2 percent from first quarter 2021 levels
  • Loan production totaled $1.8 billion during the first half of 2021, on pace to significantly exceed production volume for full-year of 2020
  • Total deposits of $18.3 billion, up $1.3 billion since year-end 2020 while deposits costs dropped 10 bps over the same period
  • Improved macroeconomic scenario models and sharp decline in nonperforming loans (down $34.6 million linked quarter) drive $13.0 million provision expense recapture in the quarter
  • Merger and acquisition activity resumes during the quarter with announced pending acquisitions of Tennessee-based Landmark Community Bank and Triumph Bancshares, Inc.

Pine Bluff, AR – Simmons First National Corporation (NASDAQ: SFNC) (the “Company” or “Simmons”) today reported net income of $74.9 million for the second quarter of 2021 compared to net income of $58.8 million for the second quarter of 2020, an increase of $16.1 million, or 27 percent. Diluted earnings per share for the second quarter of 2021 were $0.69, an increase of $0.15, or 28 percent, compared to the same period in the prior year. Included in second quarter 2021 results were $524,000 in net after-tax merger-related and net branch right-sizing costs. Excluding the impact of these items, core earnings were $75.4 million for the second quarter of 2021, compared to $60.1 million for the second quarter of 2020, an increase of $15.3 million, or 25 percent. Core diluted earnings per share were $0.69, an increase of $0.14, or 25 percent, from the comparable period in 2020.

On a year-to-date basis, net income for the first half of 2021 was $142.3 million, or $1.31 diluted earnings per share, compared to $136.0 million, or $1.22 diluted earnings per share, for the first half of 2020. Excluding $2.9 million in net after-tax merger-related and net branch right-sizing costs and the after-tax gain primarily associated with the sale of branches in Illinois, core earnings for the first half of 2021 were $139.4 million, an increase of $5.4 million compared to the first half of last year. Core diluted earnings per share for the first half of 2021 were $1.28, an increase of $0.07, or 6 percent, from the comparable period of 2020.

“Overall we were very pleased with our results for the quarter as we delivered solid performance in multiple areas while continuing to navigate the challenging environment,” said George A, Makris, Jr., Simmons’ chairman and CEO. “While loan growth throughout the financial services industry continues to be hampered by the significant amounts of government stimulus in the economy that has resulted in sluggish loan demand and historically high levels of paydowns, Simmons generated $1.8 billion in loan originations and advances during the first half of 2021, putting us on pace to significantly exceed loan production volume reported for the full-year of 2020. Our commercial loan pipeline has increased for three consecutive quarters and we are cautiously optimistic that this trend is a positive sign going forward.”

“At the same time, asset quality metrics continued to improve as certain initially anticipated impacts of the COVID-19 pandemic on asset quality have thus far failed to materialize. As such, we recorded the recapture of $13.0 million of provision expense during the quarter while maintaining our nonperforming loan coverage ratio and an appropriate allowance to loan ratio that is reflective of the uncertainty in the economy and associated risk in our loan portfolio. As a result of our solid results in the quarter and our strong asset quality and capital positions, Simmons’ board of directors extended and increased the authorization under our share repurchase program, thus increasing our remaining capacity under the program to approximately $150 million and extending the program’s scheduled expiration to October 2022.”

 

Selected Highlights:

2nd Qtr 2021

1st Qtr 2021

2nd Qtr 2020

Net income

$74.9 million

$67.4 million

$58.8 million

Diluted earnings per share

$0.69

$0.62

$0.54

Return on avg assets

1.29%

1.20%

1.08%

Return on avg common equity

10.08%

9.20%

8.21%

Return on tangible common equity (1)

17.25%

15.85%

14.55%

Core earnings (2)

$75.4 million

$64.0 million

$60.1 million

Core diluted earnings per share (2)

$0.69

$0.59

$0.55

Core return on avg assets (2)

1.30%

1.14%

1.11%

Core return on avg common equity (2)

10.15%

8.73%

8.40%

Core return on tangible common equity (1)(2)

17.36%

15.08%

14.87%

Efficiency ratio (3)

56.93%

57.43%

51.13%

Adjusted pre-tax, pre-provision earnings (2)

$74.6 million

$73.1 million

$97.7 million

 

 

 

  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 exclude 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.

 

Loans

 

($ in billions)

2nd Qtr 2021

1st Qtr 2021

2nd Qtr 2020

Total loans

$11.4

$12.2

$14.6

 

Total loans at the end of the second quarter of 2021 were $11.4 billion compared to $12.2 billion at the end of the first quarter of 2021 and $14.6 billion at the end of the second quarter of 2020. Total loan production (loan originations and advances) for the first half of 2021 totaled $1.8 billion. While loan originations and advances are outpacing prior year production, the decline in loan balances reflects the substantial government stimulus to support the economy during the COVID-19 pandemic which contributed to an increase in the level of loan paydowns, payoffs and corresponding sluggish loan demand throughout the financial services industry. The Company’s balance of Paycheck Protection Program (“PPP”) loans totaled $441.4 million at the end of the second quarter of 2021, down $463.3 million during the first half of 2021 as originations under PPP Round 2 have been offset by loan forgiveness.

 

Total loans at the end of the second quarter of 2021 were $11.4 billion compared to $12.2 billion at the end of the first quarter of 2021 and $14.6 billion at the end of the second quarter of 2020. Total loan production (loan originations and advances) for the first half of 2021 totaled $1.8 billion. While loan originations and advances are outpacing prior year production, the decline in loan balances reflects the substantial government stimulus to support the economy during the COVID-19 pandemic which contributed to an increase in the level of loan paydowns, payoffs and corresponding sluggish loan demand throughout the financial services industry. The Company’s balance of Paycheck Protection Program (“PPP”) loans totaled $441.4 million at the end of the second quarter of 2021, down $463.3 million during the first half of 2021 as originations under PPP Round 2 have been offset by loan forgiveness.

 

Despite these headwinds, loan demand appears to be returning to more normalized levels. For the third consecutive quarter, the Company experienced an increase in its commercial loan demand. The Company’s total commercial loan pipeline consisting of all loan opportunities was $1.3 billion compared to $674 million at December 31, 2020. Loans approved and ready to close at the end of the quarter totaled $467 million.

 

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Total deposits at the end of the second quarter of 2021 were $18.3 billion, an increase of $1.7 billion or 10 percent from $16.6 billion at the end of the second quarter of 2020. The increase in total deposits from a year ago was driven by a $1.6 billion increase in interest bearing deposits (checking, savings and money market accounts) which totaled $10.6 billion at the end of the second quarter of 2021. Noninterest bearing deposits also contributed to the year-over-year growth in total deposits, increasing $285.9 million or 6 percent while time deposits declined $188.9 million or 6 percent during the same period.

 

Simmons-Bank-SECOND-QUARTER-2021-Net-Interest-Income.png?resize=768%2C278&ssl=1

Net interest income for the second quarter of 2021 totaled $146.5 million, compared to $146.7 million in the first quarter of 2021 and $163.7 million in the second quarter of 2020. Included in net interest income is accretion recognized on loans acquired totaling $5.6 million in the second quarter of 2021, $6.6 million in the first quarter of 2021 and $11.7 million in the second quarter of 2020. Excluding the impact of accretion, core net interest income for the second quarter of 2021 increased 1 percent on a linked quarter basis.

The decrease in net interest income from the year ago quarter reflects a lower average loan balance combined with an 11 basis point decrease in loan yields. To offset the expected pressure on net interest income given the current low interest rate environment, the Company has been diligent in its efforts to reduce deposits costs. As a result, cost of deposits for the second quarter of 2021 was 24 basis points, down 6 basis points on a linked quarter basis and 20 basis points compared to the second quarter of 2020.

While loan yields declined from the year ago quarter, on a linked quarter basis loan yields declined only 2 basis points. The core loan yield, which excludes accretion, for the second quarter of 2021 was 4.54 percent, up 1 basis point compared to the first quarter of 2021 and up 2 basis points compared to the second quarter a year ago. The yield on PPP loans was approximately 5.08 percent during the second quarter of 2021 (including accretion of net fees), which increased the overall loan yield by approximately 2 basis points.

The net interest margin on a fully taxable equivalent basis was 2.89 percent for the second quarter of 2021 compared to 2.99 percent for the first quarter of 2021 and 3.42 percent for the second quarter of 2020. Core net interest margin (excluding accretion on acquired loans) was 2.78 percent compared to 2.86 percent for the first quarter of 2021 and 3.18 percent for the second quarter of 2020. During the second quarter of 2021, the Company purchased $2.5 billion of investment securities. This included the strategic redeployment of excess liquidity through the purchase of variable rate investment securities totaling approximately $1.1 billion. Consequently, the duration of the investment securities portfolio shortened from 6.5 years at March 31, 2021 to 4.9 years at June 30, 2021.

Noninterest Income

Noninterest income for the second quarter of 2021 was $47.9 million compared to $50.3 million in the first quarter of 2021 and $48.8 million in the second quarter of 2020. Gains on the sale of investment securities totaled $5.1 million in the second quarter of 2021, $5.5 million in the first quarter of 2021 and $390,000 in the second quarter of 2020. Core noninterest income totaled $47.5 million in the second quarter of 2021 compared to $44.9 million in the first quarter of 2021 and $46.6 million in the second quarter of 2020. Core noninterest income excludes gains on the sale of branches which totaled $445,000 in the second quarter of 2021, $5.5 million in the first quarter of 2021 and $2.2 million in the second quarter of 2020.

 

Simmons-Bank-SECOND-QUARTER-2021-Noninterest-Income.png?resize=768%2C242&ssl=1

 

Noninterest Expense

Noninterest expense for the second quarter of 2021 totaled $115.5 million compared to $113.8 million for the first quarter of 2021 and $116.2 million for the second quarter of 2020. Included in noninterest expense are pre-tax, non- core items for merger-related expenses and branch right sizing costs. Excluding these items, core noninterest expense was $114.3 million for the second quarter of 2021, $112.9 million for the first quarter of 2021 and $112.1 million for the second quarter of 2020. Overall expenses were well contained, increasing 1 percent from first quarter 2021 levels both on a reported basis and on a core basis. The efficiency ratio for the second quarter of 2021 was 56.93 percent compared to 57.43 percent for the first quarter of 2021 and 51.13 percent for the second quarter of 2020. As part of its ongoing branch right sizing initiative, the Company announced plans to close 12 branches during the third quarter of 2021.

 

Simmons-Bank-SECOND-QUARTER-2021-Noninterest-Expense.png?resize=768%2C233&ssl=1

 

 

Simmons-Bank-SECOND-QUARTER-2021-Asset-Quality.png?resize=768%2C225&ssl=1

 

Asset quality metrics continued to show marked improvement during the quarter. Total nonperforming loans at the end of the quarter totaled $80.9 million, down $34.6 million compared to $115.5 million at the end of the first quarter of 2021 and down $50.9 million from the second quarter of 2020. Net charge-offs as a percentage of average total loans for the quarter were negative 7 basis points, reflecting $2.2 million of loan charge-offs completely offset by $4.3 million of recoveries. Provision for credit losses in the quarter was a credit of $13 million, including $10 million associated with the loan portfolio. The recapture of provision for credit losses reflected continued positive trends in asset quality metrics, combined with improved economic modeling scenarios. As a result, the allowance for credit losses at the end of the second quarter of 2021 totaled $227.2 million compared to $235.1 million at the end of the first quarter of 2021 and $231.6 million at the end of the second quarter of 2020. At the same time, the allowance to loan ratio rose 7 basis points to 2.00 percent compared to 1.93 percent at the end of the first quarter of 2021 and 1.59 percent at the end of the second quarter of 2020. The nonperforming loan coverage ratio remains strong at 281 percent compared to 204 percent at the end of the first quarter of 2021 and 176 percent at the end of the second quarter of 2020.

Foreclosed Assets and Other Real Estate Owned

At June 30, 2021, foreclosed assets and other real estate owned (“OREO”) totaled $15.2 million compared to $11.2 million at the March 31, 2021 and $14.1 million at June 30, 2020. The increase on a linked quarter basis is primarily due to $4.4 million in closed bank branch facilities. A breakdown of the composition of foreclosed assets and OREO is provided in the table below:

Simmons-Bank-SECOND-QUARTER-2021-Foreclosed-Assets-and-Other-Real-Estate-Owned.png?resize=768%2C464&ssl=1

 

 

Total common stockholders’ equity at the end of the quarter totaled $3.0 billion compared to $2.9 billion at the end of the first quarter of 2021 and the second quarter of 2020. Book value per share at the end of the quarter was $28.03 compared to $27.04 at the end of the first quarter of 2021 and $26.64 at the end of the second quarter of 2020. Tangible book value per share was $17.16, up $1.03 from $16.13 reported at the end of the first quarter of 2021 and up $1.37 from $15.79 reported at the end of the second quarter of 2020. The ratio of stockholders’ equity to total assets at June 30, 2021 was 13.0 percent while tangible common equity to tangible total assets was 8.4 percent. All of the Company’s regulatory capital ratios continue to exceed the requirements under “well-capitalized” guidelines. The Company did not repurchase shares during the second quarter of 2021 primarily as a result of its merger and acquisition activity.

Share Repurchase Program

The Company’s board of directors approved an amendment to the Company’s stock repurchase program (“Program”) that increases the amount of the Company’s common stock that may be repurchased under the Program from a maximum of $180 million to a maximum of $276.5 million and extends the term of the Program from October 31, 2021, to October 31, 2022 (unless terminated sooner). The Program was originally approved on October 17, 2019 and amended in March 2020, and to date, the Company has repurchased approximately $126.5 million of its common stock under the Program.

The Program permits the Company to repurchase shares of its common stock through open market and privately negotiated transactions or otherwise. The timing, pricing, and amount of any repurchases under the Program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of the common stock, corporate considerations, the Company’s working capital and investment requirements, general market and economic conditions, and legal requirements. The Program does not obligate the Company to repurchase any common stock and may be modified, discontinued, or suspended at any time without prior notice.

Simmons First National Corporation

Simmons First National Corporation (NASDAQ: SFNC) is an approximately $23.4 billion asset Mid-South based financial holding company whose principal subsidiary, Simmons Bank, operates 198 financial centers, including 68 in Arkansas, 48 in Missouri, 33 in Tennessee, 23 in Texas, 20 in Oklahoma and 6 in Kansas. Founded in 1903, Simmons Bank offers comprehensive financial solutions delivered with a client-centric approach. Simmons Bank was recently named to Forbes’ list of “World’s Best Banks” for the second consecutive year and ranked among the top 30 banks in Forbes’ list of “America’s Best Banks” for 2021. Additional information about Simmons and Simmons Bank can be found on our website at simmonsbank.com, by following @Simmons_Bank on Twitter or by visiting our newsroom.

Conference Call

Management will conduct a live conference call to review this information beginning at 9:00 a.m. CDT today, Tuesday, July 27, 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 8482416. In addition, the call will be available live or in recorded version on the Company’s website at 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, loan demand, 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 and developments with respect to COVID-19 variants; 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.

Important Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed transactions (“Proposed Transactions”) with Landmark Community Bank (“Landmark”) and Triumph Bancshares, Inc. (“Triumph”). No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended, and no offer to sell or solicitation of an offer to buy shall be made in any jurisdiction in which such offer, solicitation or sale would be unlawful.

In connection with the Proposed Transactions, the Company has filed with the SEC a registration statement on Form S-4 (the “Registration Statement”) that includes proxy statements of each of Landmark and Triumph and a prospectus of the Company (the “Joint Proxy Statement/Prospectus”), and the Company may file with the SEC other relevant documents concerning the Proposed Transactions. The definitive Joint Proxy Statement/Prospectus will be mailed to shareholders of Landmark and Triumph. SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTIONS CAREFULLY AND IN ITS ENTIRETY AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BY THE COMPANY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS.

Free copies of the Joint Proxy Statement/Prospectus, as well as other filings containing information about the Company, may be obtained at the SEC’s Internet site (http://www.sec.gov), when they are filed by the Company. You will also be able to obtain these documents, when they are filed, free of charge, from the Company at simmonsbank.com under the heading “Investor Relations.” Copies of the Joint Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to Simmons First National Corporation, 501 Main Street, Pine Bluff, Arkansas 71601, Attention: Ed Bilek, Director of Investor Relations, Email: [email protected] or [email protected], Telephone: (870) 541-1000, to Triumph Bancshares, Inc., 5699 Poplar Avenue, Memphis, TN 38119, Attention: Will Chase, President, Telephone: (901) 333-8800, or to Landmark Community Bank, 1015 West Poplar Avenue, Collierville, TN 38017, Attention: Jake Farrell, Chairman, Telephone: (901) 850-0555.

Participants in the Solicitation

The Company, Landmark, Triumph and certain of their directors, executive officers and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Landmark or Triumph in connection with the Proposed Transactions. Information about the Company’s directors and executive officers is available in its proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on April 15, 2021. Information regarding all of the persons who may, under the rules of the SEC, be deemed participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the Joint Proxy Statement/Prospectus regarding the Proposed Transactions and other relevant materials to be filed with the SEC when they become available. Free copies of these documents may be obtained as described in the preceding paragraph.

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Wesley is the owner of South Ark Weather, LLC which owns and operates searkweather.com You may contact him at [email protected]

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