Simmons First National Corp. of Pine Bluff on Tuesday reported third-quarter profit of $47.2 million, down 41% from the same quarter last year, as customers moved into higher interest rate deposit accounts and interest expense increased.
The publicly traded bank holding company (Nasdaq: SFNC) reported earnings of 37 cents per share, down from 63 cents in the same quarter last year. Earnings, 39 cents per share when adjusted for non-recurring costs, still surpassed Wall Street expectations of 34 cents per share, according to the Associated Press.
Quarterly revenue net of interest expense was $196.2 million, down 17% from the same quarter last year and short of Wall Street forecasts.
“While the current economic and interest rate environment continues to pose challenges to the financial services industry, we remain resolute on serving our customers’ financial needs while diligently focusing on maintaining strong asset quality, capital and liquidity positions,” CEO Bob Fehlman said in a news release accompanying the results.
Fehlman added that, year-over-year, average loans were up 9% and average deposits were up 3% as the company reinvested cash from its securities portfolio to fund loan growth and reduce wholesale borrowings. He also said the bank was able to save $15 million in annual costs one quarter sooner than expected under its “Better Bank Initiative.”
Total interest income for the quarter was $310.3 million, up $13.1 million from the second quarter of the year and $79.7 million from the same quarter last year, fueled in part by higher interest rates.
But higher interest rates also affected total interest expense, which hit $156.9 million in the third quarter, up from $134.0 million in the second quarter and just $37.0 million in the third quarter last year.
“While the higher interest rate environment positively impacted interest income, the corresponding increase in interest expense was driven by an increase in deposit costs, continued customer migration to higher rate deposit products and pricing measures instituted to defend market share, offset in part by a decrease in other wholesale borrowings costs, primarily Federal Home Loan Bank advances,” the company said in a news release.
The company said total deposits have been “relatively stable,” at $22.2 billion in the third quarter compared with $22.5 billion in the second quarter and $22.1 billion in the third quarter last year.
But “the change in mix of deposits, both on a linked quarter and year-over-year basis, reflected continued customer migration into higher rate deposits, principally certificates of deposit, given the rapid rise in interest rates, as well as increased market competition,” the company said.
The company reported that time deposits, which include CDs, hit $6.7 billion in the third quarter, up 76% from the $3.8 billion it reported in the same quarter last year.
The company said total assets hit $27.6 billion at the end of the third quarter, up from $27.1 billion in the same quarter last year.
During the third quarter, the company repurchased about 1.1 million shares of its Class A common stock at an average price of $17.69 under a 2022 stock repurchase program.
The Associated Press contributed to this report.
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