Simmons First National (SFNC) - 2024 Q3 - Quarterly Results

Q3 2024 Performance Overview Simmons First National Corporation reported Q3 2024 results, showing improved net interest income and strategic balance sheet optimization CEO Commentary and Strategic Highlights CEO commentary highlights 10% annualized net interest income growth and strategic securities sales for balance sheet optimization - Net interest income increased 10% annualized linked-quarter, driven by rising loan yields and stable deposit costs[1] - Strategic sale of $252 million in lower-yielding AFS investment securities resulted in a $21.0 million after-tax loss, optimizing the balance sheet[2][5] - Adjusted total revenue, noninterest income, and pre-provision net revenue demonstrated solid linked-quarter growth, despite the securities sale loss[2] - Credit trends remained stable, with the allowance for credit losses on loans at 1.35%[2] Financial Highlights Q3 2024 reported net income was $24.7 million, adjusted earnings $46.0 million, and tangible book value per share grew 4% Q3 2024 Key Performance Metrics | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Net Income (Millions USD) | $24.7 | $40.8 | $47.2 | | Diluted EPS (USD) | $0.20 | $0.32 | $0.37 | | Adjusted Earnings (Millions USD) | $46.0 | $41.9 | $48.8 | | Adjusted Diluted EPS (USD) | $0.37 | $0.33 | $0.39 | | Total Revenue (Millions USD) | $174.8 | $197.2 | $196.2 | | Adjusted Total Revenue (Millions USD) | $203.2 | $197.2 | $196.2 | Q3 2024 Balance Sheet and Capital Highlights | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Total Loans (Millions USD) | $17,336 | $17,192 | $16,772 | | Total Deposits (Millions USD) | $21,935 | $21,841 | $22,231 | | ACL to Loans Ratio (%) | 1.35% | 1.34% | 1.30% | | Tangible Book Value Per Share (USD) | $16.78 | $16.20 | $14.77 | | CET1 Ratio (%) | 12.06% | 12.00% | 12.02% | Financial Performance Analysis Analysis of net interest income, noninterest income, and noninterest expense reveals key drivers of financial performance Net Interest Income Net interest income increased to $157.7 million, driven by loan yield expansion and stable deposit costs, expanding NIM to 2.74% Net Interest Income Performance | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Net Interest Income (Millions USD) | $157.7 | $153.9 | $153.4 | Key Yields and Rates (FTE) | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Loan Yield (%) | 6.44% | 6.39% | 6.08% | | Cost of Deposits (%) | 2.79% | 2.79% | 2.37% | | Net Interest Margin (%) | 2.74% | 2.69% | 2.61% | - The 5 basis point linked-quarter increase in net interest margin included an estimated 3 basis point benefit from the strategic sale of AFS investment securities[8] Noninterest Income Noninterest income decreased to $17.1 million due to a $28.4 million securities sale loss, but adjusted noninterest income increased Noninterest Income Breakdown (Millions USD) | Category | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Service Charges on Deposit Accounts (Millions USD) | $12.7 | $12.3 | $12.4 | | Gain (Loss) on Sale of Securities (Millions USD) | ($28.4) | $0.0 | $0.0 | | Total Noninterest Income (Millions USD) | $17.1 | $43.3 | $42.8 | | Adjusted Noninterest Income (Millions USD) | $45.5 | $43.3 | $42.8 | - The increase in adjusted noninterest income was primarily due to gains on the sale of other real estate owned[10] Noninterest Expense Noninterest expense decreased to $137.2 million due to lower salaries and benefits, improving the adjusted efficiency ratio to 63.38% Noninterest Expense Summary (Millions USD) | Category | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Salaries and Employee Benefits (Millions USD) | $69.2 | $70.7 | $67.4 | | Total Noninterest Expense (Millions USD) | $137.2 | $139.4 | $132.0 | | Adjusted Noninterest Expense (Millions USD) | $136.8 | $137.8 | $129.9 | - The decrease in noninterest expense was primarily due to a decline in salaries and employee benefits from incentive compensation accrual adjustments[12] Efficiency Ratios | Ratio | 3Q24 | 2Q24 | | :--- | :--- | :--- | | Efficiency Ratio (%) | 75.70% | 68.38% | | Adjusted Efficiency Ratio (%) | 63.38% | 65.68% | Balance Sheet and Asset Quality This section reviews the company's loan and deposit trends, asset quality metrics, and capital position Loans and Unfunded Loan Commitments Total loans grew to $17.3 billion, a 3% annualized increase, with the commercial loan pipeline expanding to $1.2 billion Loan Growth (Millions USD) | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Total Loans (Millions USD) | $17,336 | $17,192 | $16,772 | - The commercial loan pipeline reached $1.2 billion at Q3 2024, up from $1.0 billion in Q2 2024[15] Deposits Total deposits increased slightly to $21.9 billion, driven by public and brokered deposits, maintaining a stable 79% loan-to-deposit ratio Deposit Composition (Millions USD) | Category | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Noninterest Bearing Deposits (Millions USD) | $4,522 | $4,624 | $4,991 | | Interest Bearing Transaction Accounts (Millions USD) | $10,038 | $10,092 | $9,875 | | Time Deposits (Millions USD) | $4,014 | $4,185 | $4,103 | | Brokered Deposits (Millions USD) | $3,361 | $2,940 | $3,262 | | Total Deposits (Millions USD) | $21,935 | $21,841 | $22,231 | - The loan to deposit ratio remained stable at 79% at the end of Q3 2024[17] Asset Quality Asset quality remained stable with a $12.1 million provision for credit losses, ACL at 1.35%, and slightly decreased nonperforming loans Key Asset Quality Metrics | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses (Millions USD) | $12.1 | $11.1 | $7.7 | | ACL to Total Loans (%) | 1.35% | 1.34% | 1.30% | | Net Charge-off Ratio (Annualized %) | 0.22% | 0.19% | 0.28% | | Nonperforming Loans to Total Loans (%) | 0.59% | 0.60% | 0.49% | | Total Nonperforming Loans (Millions USD) | $101.7 | $103.4 | $81.9 | - Net charge-offs in Q3 2024 included $3.5 million from a run-off portfolio, accounting for 9 basis points of the total net charge-off ratio[20] Capital Capital strengthened with stockholders' equity increasing by $70.0 million to $3.5 billion, exceeding 'well-capitalized' guidelines Key Capital Metrics | Metric | 3Q24 | 2Q24 | 3Q23 | | :--- | :--- | :--- | :--- | | Book Value Per Share (USD) | $28.11 | $27.56 | $26.26 | | Tangible Book Value Per Share (USD) | $16.78 | $16.20 | $14.77 | | TCE to Tangible Assets Ratio (%) | 8.2% | 7.8% | 7.1% | | CET1 Ratio (%) | 12.1% | 12.0% | 12.0% | | Total Risk-Based Capital Ratio (%) | 14.3% | 14.2% | 14.4% | - The linked-quarter increase in stockholders' equity was primarily driven by a $69.6 million recapture of accumulated other comprehensive income from mark-to-market adjustments on AFS investment securities[23] Shareholder Information This section provides an update on the company's share repurchase program and remaining authorization Share Repurchase Program No shares were repurchased in Q3 2024, with approximately $175 million remaining under the share repurchase program - No shares were repurchased during Q3 2024[26] - Approximately $175 million remained available for repurchases under the 2024 Program as of September 30, 2024[26] Appendix: Financial Statements and Reconciliations This appendix provides detailed financial statements, schedules, and reconciliations of non-GAAP financial measures Company Information and Disclosures This section includes conference call details, corporate overview, non-GAAP financial measure explanations, and forward-looking statements Consolidated Financial Statements This section presents unaudited consolidated balance sheets and statements of income for Q3 2024 and four preceding quarters Detailed Financial Schedules This section offers detailed schedules for risk-based capital, investment securities, loan portfolio, asset quality, average balance sheet, and selected financial data Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjustments for various items to derive adjusted earnings