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Simmons Reports Fourth Quarter 2017 Earnings

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PINE BLUFF, Ark., Jan. 22, 2018 (GLOBE NEWSWIRE) -- Simmons First National Corporation (NASDAQ:SFNC) today announced net income available to common shareholders of $18.9 million, or $0.43 per diluted share, for the quarter ended December 31, 2017, compared to $27.0 million, or $0.85 per diluted share, for the same period in 2016.  Included in fourth quarter 2017 results was $14.2 million in merger-related and branch right-sizing costs, a $5.0 million donation to Simmons Foundation and a one-time tax adjustment of $11.5 million.

As a result of the "Tax Cuts and Jobs Act" that was signed into law on December 22, 2017, the Company was required to revalue its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates on these deferred amounts. The analysis resulted in a one-time non-cash charge to the income statement of $11.5 million.

Excluding the net after-tax impact of these items, core earnings were $42.0 million, or $0.97 per diluted share, for the quarter ended December 31, 2017, compared to $28.8 million, or $0.91 per diluted share, for the quarter ended December 31, 2016.

Year-to-date net income was $92.9 million, or $2.66 diluted earnings per share. Excluding the net after-tax merger-related and branch right-sizing costs, tax adjustment and the gain on sale of insurance lines recorded in the prior quarter, year-to-date core earnings were $119.0 million, or $3.41 diluted core earnings per share.

On October 19, 2017, Simmons First National Corporation completed the acquisitions of Southwest Bancorp, Inc. (NASDAQ:OKSB), headquartered in Stillwater, OK., including its wholly-owned bank subsidiary, Bank SNB, and First Texas BHC, Inc., headquartered in Ft. Worth, TX, including its wholly-owned subsidiary, Southwest Bank. The systems conversions are planned during the first half of 2018, at which time the subsidiary banks will be merged into Simmons Bank.

"We welcome our newest associates from Bank SNB and Southwest Bank and are pleased with our integration efforts thus far. We look forward to continued growth and profitability in their legacy markets," said George A. Makris, Jr., chairman and CEO.

Makris continued, "The effect of the tax law changes has allowed us the opportunity to consider an increased investment in our associates which will include, among a variety of initiatives, an increase in the profit-sharing component of our 401(k) plan and increased consideration for our high-performing associates; an investment in technology of up to $100 million over 5 years to improve our delivery of products and services to our customers; an investment in our communities as evidenced by our $5 million contribution to our Foundation to support CRA qualified community development grants throughout our footprint; and finally a strategy to provide a return on the investment of our shareholders through retention and deployment of additional capital to grow our business while at the same time increasing the dividend we distribute to our shareholders.

"These investments reflect our optimism for Simmons and we believe will help us achieve the growth potential we envision for our company," said Makris.

"Late last week we announced a 2 for 1 stock split which we believe will create investment opportunities for a wide variety of investors. Our retail ownership is approximately 50% and we believe it is a valuable dynamic to have owners as customers and vice-versa. We also announced a 20% increase in our dividend over the previous quarter."

Financial statements, including earnings per share as well as other share-related disclosures, reported after the stock split record date of January 30, 2018, will include the impact of the stock split on all periods presented.

Selected Highlights:   4th Qtr 2017   3rd Qtr 2017   4th Qtr 2016
                 
Net income   $18.9 million   $28.9 million   $27.0 million
Diluted earnings per share   $0.43   $0.89   $0.85
Return on avg assets   0.54%   1.25%   1.29%
Return on avg common equity   3.88%   9.12%   9.27%
Return on tangible common equity   7.53%   14.47%   14.71%
Net interest margin(1)   4.21%   3.91%   4.12%
             
Core earnings(2)   $42.0 million   $27.7 million   $28.8 million
Diluted core earnings per share(2)   $0.97   $0.86   $0.91
Core return on avg assets(2)   1.20%   1.20%   1.38%
Core return on avg common equity(2)   8.63%   8.77%   9.89%
Core return on tangible common equity(2)   15.97%   13.93%   15.65%
Core net interest margin(1)(2)   3.70%   3.77%   3.76%
               
Efficiency ratio   51.36%   55.06%   55.47%
(1) Fully tax equivalent.  
(2) Core earnings excludes non-core items, which is a non-GAAP measurement.  
   


Loans            
    4th Qtr 2017    3rd Qtr 2017   4th Qtr 2016
               
Total loans   $10.8 billion   $6.3 billion   $5.6 billion
Legacy loans (all loans excluding loans acquired)   $5.7 billion   $5.2 billion   $4.3 billion
Loans acquired   $5.1 billion   $1.1 billion   $1.3 billion
             

Total loans, including those acquired, were $10.8 billion at December 31, 2017, an increase of $5.2 billion, or 91.4% from December 31, 2016. 

On a linked-quarter basis (December 31, 2017 compared to September 30, 2017), total loans increased $4.5 billion, or 71.0%.  The increase was due to:

  • $4.2 billion increase in loans acquired on October 19th
  • $193 million net increase in loans at Southwest Bank since merger
  • $54 million net increase in loans at Bank SNB since merger
  • $118 million net increase in loans at Simmons Bank
  • $26 million decrease in liquidating portfolio (indirect lending and consumer finance)
  • $65 million decrease from seasonal agricultural loan payoffs
Deposits            
    4th Qtr 2017    3rd Qtr 2017   4th Qtr 2016
             
Total deposits   $11.1 billion   $7.3 billion   $6.7 billion
Non-time deposits   $9.2 billion   $6.0 billion   $5.4 billion
Time deposits   $1.9 billion   $1.3 billion   $1.3 billion
             

At December 31, 2017, total deposits were $11.1 billion, an increase of 64.7%, compared to the same period in 2016. The increase is from the recent acquisitions and growth in core deposits.  Total non-time deposits increased 68.1% compared to the same period in 2016, and comprised 82.6% of total deposits.

Net Interest Income

The Company's net interest income for the fourth quarter of 2017 was $126.9 million, an increase of $52.6 million, or 70.8%, from the same period of 2016. Included in interest income was the yield accretion recognized on loans acquired of $15.7 million and $6.6 million for the fourth quarters of 2017 and 2016, respectively. Net interest margin was 4.21% for the quarter ended December 31, 2017, a 9 basis point increase from the same quarter of 2016. The Company's core net interest margin, excluding the accretion, was 3.70% for the fourth quarter of 2017, a 6 basis point decline from December 31, 2016 and a 7 basis point decrease from September 30, 2017.  Cost of interest bearing deposits was 0.63% for the fourth quarter of 2017, a 32 basis point increase from December 31, 2016 and a 20 basis point increase from September 30, 2017.

Non-Interest Income

Non-interest income for the fourth quarter 2017 was $36.6 million, an increase of $514,000 compared to the fourth quarter of 2016. The increase was primarily due to additional trust income, service charge and fee income resulting from the acquisitions. These increases were partially offset by the following items included in non-interest income:

  • $315,000 decrease in insurance income, due to the sale of the property and casualty lines of business in the third quarter of 2017
  • $566,000 decrease in the gain on sale of SBA loans
  • $2.7 million decrease in gain on sale of securities

Non-Interest Expense

Non-interest expense for the fourth quarter of 2017 was $108.5 million, an increase of $41.8 million compared to the fourth quarter of 2016. Included in this quarter were $14.2 million of merger-related expenses and branch rightsizing costs. Also included was a $5 million donation to Simmons Foundation.  Excluding these expenses, core non-interest expense was $89.3 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 quarter and First South Bank which closed earlier in 2017. The efficiency ratio for the fourth quarter 2017 was 51.36%.

Asset Quality            
             
    4th Qtr 2017     3rd Qtr 2017     4th Qtr 2016
                   
Allowance for loan losses on loans to total loans   0.73 %   0.82 %   0.84 %
Allowance for loan losses on loans to non-performing loans   90 %   78 %   92 %
Non-performing loans to total loans   0.81 %   1.05 %   0.91 %
Net charge-off ratio (annualized)   0.53 %   0.32 %   0.20 %
Net charg
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