Simmons Profit Falls on FDIC Assessment, Securities Losses in Q4

Bob Fehlman, CEO of Simmons Bank (Photo provided by Simmons Bank)

Simmons First National Corp. (Nasdaq: SFNC) of Pine Bluff on Wednesday reported falling fourth-quarter profit on a $10.5 million FDIC special assessment and securities losses.

The assessment was imposed to help the Deposit Insurance Fund recover losses following bank failures in 2023. Another Arkansas lender, Home BancShares Inc. of Conway, was hit with a $13.5 million assessment in the quarter.

The holding company for Simmons Bank said it made a strategic decision in the fourth quarter to sell about $241 million of low yield available-for-sale investment securities, resulting in a pre-tax loss of approximately $20.2 million. The proceeds from the sale were used to pay off higher rate wholesale fundings, including brokered deposits and Federal Home Loan Banks advances. Simmons expects the earn-back period to be two-and-a-half years.

The immediate result was a sharp fall in fourth-quarter profits. Net income was $23.9 million, down 71.3% from $83.3 million in the same quarter the previous year. Earnings per share came to 19 cents. Adjusted earnings were 40 cents per share.

The results topped Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for earnings of 35 cents per share.

Simmons posted fourth-quarter revenue of $177.6 million, down 25.3% from $237.7 million a year ago and below Street forecasts.

Deposits increased slightly on a quarterly basis from $22.23 billion to $22.24 billion, but were down 1.3% on an annual basis. Meanwhile, the cost of deposits continued rising to 2.58%, up from to 2.37% in the third quarter and 1.02% in the fourth quarter of 2022.

Simmons ended 2023 with $16.85 billion in loans, up 4.1% on an annual basis from $16.14 billion. Unfunded commitments, an indicator of future loan growth, totaled $3.9 billion, down from $4 billion at the end of the third quarter and $5 billion at the end of the fourth quarter of 2022.

At the same time, Simmons’ commercial loan pipeline experienced measured growth for the second consecutive quarter. Commercial loans ready to close at the end of the fourth quarter were $416 million, and the rate on ready-to-close commercial loans was 8.44%

After two straight quarters of decline, the bank ended 2023 with total assets of $27.34 billion, down from $27.46 billion a year ago.

“As we enter 2024 against a backdrop of economic uncertainty, we believe certain strategic actions we have taken this past year position us well to take advantage of opportunities and meet the challenges ahead,” CEO Bob Fehlman said in a statement.

Simmons Bank operates 234 branches in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Shares of the company were up 6% on Wednesday morning to $20.42. Year to date, shares were up 3%.