Simmons Misses Q1 Expectations as Profit Falls 30%

Bob Fehlman, CEO of Simmons Bank

Simmons First National Corp. of Pine Bluff (Nasdaq: SFNC) on Tuesday morning reported a sharp decline in first-quarter profit as deposit costs increased and the company put more money aside to cover bad loans.

CEO Bob Fehlman said the parent company of Simmons Bank faced challenges from rising interest rates and heightened market volatility, but deposits were stable and the bank ended the period with solid liquidity. Uninsured deposits represented 23% of the bank’s $22.5 billion in total deposits, and the bank has $10.8 billion in additional liquidity sources available.

First-quarter net income was $45.6 million, down 29.9% from $65.1 million in the same period a year ago. On a per-share basis, earnings came to 36 cents. Earnings adjusted for non-recurring costs were 37 cents per share.

The results fell short of Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 49 cents per share.

The bank holding company posted revenue of $325 million in the period. Revenue net of interest expense was $223.7 million, also missing Street forecasts.

Simmons said consumer migration to higher-rate deposit products contributed to a quarterly decline in net interest income, which fell to $177.8 million from $193 million in the fourth quarter of 2022. The housing market downturn was also a factor, on an annual basis, as mortgage lending income fell to $1.6 million from $4.6 million in the first quarter of 2022.

The bank’s first-quarter results include a provision for credit losses of $24.2 million, compared to a negative provision of $19.9 million in the same period a year ago and no provision in the fourth quarter of 2022. Simmons said it set aside the money after flagging two nonperforming corporate bonds in its securities portfolio.

Another factor, the bank said, was “updated economic assumptions.” The bank reported lower activity in its commercial loan pipeline as a result of recession forecasts and higher interest rates. Unfunded committments totaled $4.7 billion, higher than the same period a year ago but down from $5 billion in the fourth quarter of 2022.

As the bank faces economic uncertainty, it has identified $15 million annual expense savings that it expects to be fully implemented by the end of the year.

Total assets grew on a quarterly basis from $27.5 billion to $27.6 billion, up from $24.5 billion in the first quarter of 2022.

Simmons Bank operates 231 branches in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Shares of the company were down about 3% Tuesday morning. For the year to date, shares were down 32%.

The Associated Press contributed information to this report.