Simmons First National (US:SFNC)2023-11-06 21:09Part I: Financial Information Financial Statements (Unaudited) The unaudited consolidated financial statements for the period ended September 30, 2023, show a slight increase in total assets to $27.56 billion, with net income for the third quarter decreasing to $47.2 million from $80.6 million in the prior year, primarily due to increased interest expense Consolidated Balance Sheets As of September 30, 2023, total assets were $27.56 billion, a slight increase from $27.46 billion at year-end 2022, driven by a $608 million increase in net loans, while total deposits decreased slightly to $22.23 billion from $22.55 billion Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $605,648 | $682,122 | ($76,474) | | Total investments | $7,100,713 | $7,612,560 | ($511,847) | | Net loans | $16,553,341 | $15,945,169 | $608,172 | | Goodwill | $1,320,799 | $1,319,598 | $1,201 | | Total assets | $27,564,325 | $27,461,061 | $103,264 | | Liabilities & Equity | | | | | Total deposits | $22,231,211 | $22,548,094 | ($316,883) | | Other borrowings | $1,347,855 | $859,296 | $488,559) | | Total liabilities | $24,278,770 | $24,191,699 | $87,071 | | Total stockholders' equity | $3,285,555 | $3,269,362 | $16,193 | Consolidated Statements of Income For the third quarter of 2023, net income was $47.2 million ($0.37 per diluted share), down from $80.6 million ($0.63 per diluted share) in Q3 2022, primarily due to a significant rise in interest expense that compressed net interest income Income Statement Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $153,433 | $193,585 | $494,498 | $524,290 | | Provision for credit losses | $7,722 | $103 | $31,999 | $14,048 | | Noninterest Income | $42,777 | $43,023 | $133,592 | $125,419 | | Noninterest Expense | $131,998 | $138,943 | $414,922 | $424,173 | | Net Income | $47,247 | $80,603 | $151,150 | $173,152 | | Diluted EPS | $0.37 | $0.63 | $1.19 | $1.40 | Consolidated Statements of Comprehensive Income (Loss) The company reported a comprehensive loss of $27.1 million for Q3 2023, primarily due to unrealized holding losses on available-for-sale securities, but achieved comprehensive income of $124.3 million for the nine-month period, a significant improvement from a $384.0 million loss in the prior year Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $47,247 | $80,603 | $151,150 | $173,152 | | Other Comprehensive Income (Loss) | ($74,392) | ($117,302) | ($26,820) | ($557,185) | | Comprehensive Income (Loss) | ($27,145) | ($36,699) | $124,330 | ($384,033) | Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, net cash provided by operating activities decreased to $120.4 million from $226.2 million in the prior year, while net cash used in investing and financing activities also saw significant changes, resulting in a $76.5 million decrease in cash and cash equivalents Cash Flow Summary (Nine Months Ended, in thousands) | Activity | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120,436 | $226,208 | | Net cash used in investing activities | ($165,280) | ($592,200) | | Net cash used in financing activities | ($31,630) | ($605,251) | | Decrease in Cash and Cash Equivalents | ($76,474) | ($971,243) | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $3.27 billion at December 31, 2022, to $3.29 billion at September 30, 2023, primarily driven by net income, partially offset by other comprehensive loss, common stock dividends, and stock repurchases - For the nine months ended September 30, 2023, the company paid dividends of $0.60 per share, totaling $75.9 million21 - The company repurchased 2,257,049 shares for a total cost of $40.0 million during the first nine months of 202321 Condensed Notes to Consolidated Financial Statements The notes provide detailed information on accounting policies, acquisitions, financial instruments, and other key aspects of the company's operations, including the 2022 acquisition of Spirit of Texas Bancshares, investment securities portfolio analysis, loan portfolio details, and capital adequacy Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial turmoil in the banking industry during early 2023 and highlights the company's solid liquidity, strong capital, and stable deposit base, noting a decline in net income due to net interest margin compression and the early achievement of the 'Better Bank Initiative' cost savings goal - Net income for Q3 2023 was $47.2 million ($0.37 diluted EPS), compared to $58.3 million ($0.46 diluted EPS) for Q2 2023234 - The company's 'Better Bank Initiative' successfully achieved its original $15 million annual cost savings target by the end of Q3 2023, one quarter ahead of schedule237 - As of September 30, 2023, uninsured deposits (excluding collateralized and intercompany deposits) were approximately $4.63 billion, representing 21% of total deposits236 Key Metrics as of September 30, 2023 | Metric | Value | | :--- | :--- | | Total Assets | ~$27.6 billion | | Loan to Deposit Ratio | 75% | | Nonperforming Assets to Total Assets | 0.32% | | Tangible Book Value per Share | $14.77 | | Uninsured, non-collateralized deposit coverage ratio | 2.5x | Quantitative and Qualitative Disclosures About Market Risk The company manages market risk, primarily interest rate risk, through asset and liability management policies, with simulations indicating a liability-sensitive balance sheet where a 100 basis point increase in rates is projected to decrease net interest income by 0.87% over the next 12 months Net Interest Income Sensitivity (as of Sep 30, 2023) | Interest Rate Scenario | % Change from Base | | :--- | :--- | | Up 200 basis points | (1.76)% | | Up 100 basis points | (0.87)% | | Down 100 basis points | 0.80% | | Down 200 basis points | 1.28% | - The company has seven primary and secondary sources of liquidity, including approximately $510 million in federal funds lines and $5.37 billion in available FHLB lines of credit as of September 30, 2023374375376 Controls and Procedures Based on management's evaluation, including the CEO, CFO, and Chief Accounting Officer, the company's disclosure controls and procedures were deemed effective as of September 30, 2023, with no material changes to internal controls over financial reporting during the quarter - The CEO, CFO, and Chief Accounting Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period387 - No material changes were made to the company's internal control over financial reporting during the third quarter of 2023388 Part II: Other Information Legal Proceedings The company is involved in various legal proceedings incidental to its business, including a putative class action complaint regarding insufficient funds/overdraft fees that was resolved in the company's favor in July 2023, with management believing the ultimate outcome of all proceedings will not have a material adverse effect on financial condition - A putative class action lawsuit alleging improper overdraft fees, filed in June 2020, was resolved in the bank's favor on July 14, 2023, when the district court ruled in favor of Simmons Bank on the outstanding issues157 Risk Factors There have been no material changes to the risk factors faced by the company from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 - No material changes in risk factors were reported since the company's 2022 Form 10-K and Q1 2023 Form 10-Q390 Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities Under its 2022 stock repurchase program, the company purchased 1,128,962 shares of its common stock during the third quarter of 2023 for an average price of $17.69 per share, with approximately $39.9 million remaining available for repurchase as of September 30, 2023 Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | July 2023 | 0 | $— | $59,899,000 | | August 2023 | 567,100 | $18.26 | $49,541,000 | | September 2023 | 561,862 | $17.12 | $39,922,000 | | Total Q3 | 1,128,962 | $17.69 | $39,922,000 | Other Information During the third quarter of 2023, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q3 2023394 Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, articles of incorporation, bylaws, certifications from executive officers (CEO, CFO, Chief Accounting Officer), and XBRL data files