Simmons First National’s Earnings Call: Mixed Sentiment with Growth and Challenges

Simmons First National ((SFNC)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the latest earnings call, Simmons First National Corporation presented a mixed sentiment, showcasing both achievements and challenges. The company reported significant growth in its loan pipeline, customer deposits, revenue, and net interest margin. However, these positive aspects were tempered by issues such as credit deterioration in specific loans and a notable fraud expense. Despite these hurdles, the bank displayed a proactive stance in addressing credit issues and expressed confidence in navigating future uncertainties.

Commercial Loan Pipeline Growth

The commercial loan pipeline saw a remarkable increase of 43% from the previous quarter, reaching its highest level since the second quarter of 2022. This growth highlights the bank’s strong performance in expanding its lending capabilities and capturing new business opportunities.

Customer Deposits Growth

Simmons First National reported a $183 million growth in customer deposits, approximately 4% on a linked quarter annualized basis. This growth reflects a positive remixing into lower-cost transaction accounts, indicating a strategic focus on optimizing deposit costs.

Revenue and Net Interest Margin Expansion

The company achieved a $1.1 million increase in total revenue from the previous quarter, marking the fourth consecutive quarter of top-line adjusted revenue growth. Additionally, the net interest margin expanded to 2.95%, up 8 basis points from the previous quarter and 29 basis points year-over-year, demonstrating improved profitability.

Non-Interest Income Growth

Non-interest income grew by 6% from the previous quarter, driven by strong swap fee income and diversified growth from other fee-based businesses. This growth underscores the bank’s ability to enhance its income streams beyond traditional interest income.

Credit Deterioration in Specific Loans

The bank faced challenges with credit deterioration as two specific credit relationships were moved to nonperforming status. This resulted in an increased provision expense of $15.6 million for the quarter, involving a $27 million loan related to a hotel property in Downtown St. Louis and a $23 million loan to a fast-food franchise operator.

Fraudulent Activity Impact

A significant fraud event impacted the bank, leading to a $4.3 million charge in non-interest expense for the quarter. This incident underscores the importance of robust fraud prevention measures in maintaining financial integrity.

Forward-Looking Guidance

Looking ahead, Simmons First National provided detailed guidance for the first quarter of 2025. The company anticipates a 2% increase in total period-end loans on a linked quarter annualized basis, despite a decrease in average loans due to back-end loaded funded growth. Customer deposits are expected to continue growing, with consumer checking accounts up 1.5% year-over-year. The bank reaffirmed its 2025 outlook for 3%+ positive operating leverage and mid-teens growth in PPNR, with expectations of the net interest margin crossing 3% sooner than anticipated.

In conclusion, Simmons First National’s earnings call highlighted a blend of positive growth and challenges. The bank’s achievements in loan pipeline and deposit growth, alongside revenue and margin expansion, were offset by credit and fraud issues. Nevertheless, the proactive measures and confident outlook suggest a resilient approach to future growth and profitability.