Simmons First National (US:SFNC)2024-02-27 21:40Financial Performance - Net income available to common shareholders for the year ended December 31, 2023, was $175.1 million, or $1.38 diluted earnings per share, compared to $256.4 million, or $2.06 diluted earnings per share for the same period in 2022[214]. - Adjusted earnings for the year ended December 31, 2023, were $207.7 million, or $1.64 adjusted diluted earnings per share, compared to $298.8 million, or $2.40 adjusted diluted earnings per share in 2022[214]. - Included in 2023 results were $32.7 million of certain items, net of tax, primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment, and branch right sizing initiatives[214]. - Included in 2022 results were $42.4 million of certain items, net of tax, primarily related to acquisitions, Day 2 accounting provision, gain on an insurance settlement, merger-related costs, and branch right sizing initiatives[214]. Assets and Liabilities - Total consolidated assets of Simmons First National Corporation reached $27.3 billion as of December 31, 2023[17]. - Total consolidated loans amounted to $16.8 billion, while total consolidated deposits were $22.2 billion[17]. - The company’s reserve balances were zero as of December 31, 2023, due to the Federal Reserve's reduction of reserve requirements during the COVID-19 pandemic[64]. - Simmons Bank's total investment in the Federal Home Loan Bank of Dallas was $58.2 million as of December 31, 2023[104]. Acquisitions and Growth Strategy - The company has completed 21 whole bank acquisitions since 1990, enhancing its market presence[25]. - The acquisition of Reliance Bancshares in April 2019 added approximately $1.5 billion in assets and 22 branches[35]. - The acquisition of Spirit of Texas Bancshares in April 2022 further strengthened the company's position in Texas with approximately $3.1 billion in assets[38]. - The company aims to capitalize on organic growth opportunities in addition to pursuing strategic mergers and acquisitions[39]. - The company's growth strategy includes acquisitions and de novo branching, which carry inherent risks that could affect market value and profitability[141]. Risk Management and Compliance - The company has a robust risk management framework, including an Asset Quality Review Committee that meets quarterly[44]. - The company is subject to federal and state regulations, requiring approval from the Federal Reserve Board for acquisitions and limiting certain non-banking activities[53][54]. - The company is subject to heightened requirements due to exceeding $10 billion in assets, impacting its operations and compliance obligations[107]. - Future regulatory actions and changes in legislation, such as the Dodd-Frank Act, could adversely affect the company's operations and profitability[159]. Employee and Culture - As of December 31, 2023, the company had approximately 3,007 full-time equivalent associates, with no union representation and no labor disputes reported[52]. - The company is committed to maintaining a strong culture with six Culture Cornerstones, including "Build Loyalty," which was added in 2022 to enhance customer experiences[51]. - The company has implemented various programs for professional development, including mentorship opportunities and tuition reimbursement for higher education[50]. - The company has experienced increasing fraud attempts, including deposit and loan fraud, which pose a material operational risk[147]. Financial Health and Capital Management - The company had approximately $54.4 million available for payment of dividends to the Company without prior regulatory approval as of December 31, 2023[60]. - As of December 31, 2023, Simmons Bank was classified as "well capitalized" with a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 8%, and a CET1 risk-based capital ratio of at least 6.5%[79]. - The Company accrued $10.5 million related to a special assessment by the FDIC in the fourth quarter of 2023, based on estimated uninsured deposits as of December 31, 2022[92]. - The ability to pay dividends on common stock is contingent on the subsidiary bank's financial health and regulatory restrictions[170]. Market and Economic Conditions - Changes in interest rates and monetary policy could adversely affect the company's profitability and cash flows[116]. - Continued inflationary pressures could increase operating costs and negatively impact borrowers' ability to repay loans, leading to higher default rates[134]. - Economic downturns could lead to increased credit default swap spreads and lower credit ratings, impacting liquidity and lending practices[131]. - The company is vulnerable to adverse conditions in local markets, particularly in Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, where most loans are secured[135]. Competition and Industry Challenges - The company faces strong competition from various financial institutions, which could lead to loss of market share and reduced profitability[138]. - Changes in service delivery channels and emerging technologies pose competitive risks, potentially leading to loss of fee income and customer deposits[139]. - The company is heavily reliant on third-party service providers for essential operations, exposing it to risks related to vendor performance and service disruptions[154]. Regulatory Environment - The Economic Growth, Regulatory Reform, and Consumer Protection Act (EGRRCPA) provides regulatory relief to bank holding companies with less than $100 billion in assets, such as the Company[86]. - The Dodd-Frank Act established the Bureau of Consumer Financial Protection (CFPB) to oversee consumer protection regulations applicable to financial institutions[85]. - The company and Simmons Bank are no longer required to conduct annual stress tests under the Dodd-Frank Act due to regulatory reforms[110]. - The CFPB proposed rules in January 2024 that would subject overdraft services provided by financial institutions with more than $10 billion in assets to the Truth in Lending Act[111]. Shareholder Information - The company had approximately $39.9 million of remaining funds available for share repurchases under the 2022 Program as of December 31, 2023[199]. - The 2024 stock repurchase program allows for the repurchase of up to $175.0 million of Class A Common Stock[197]. - The company made no purchases of its common stock during the three months ended December 31, 2023[199]. - The company’s common stock is listed on the Nasdaq Global Select Market under the symbol "SFNC" with approximately 2,379 shareholders of record as of February 23, 2024[194]. Recognition and Awards - Simmons Bank was named to Forbes magazine's 2023 list of "World's Best Banks" for the fourth consecutive year[216]. - The bank was recognized by Forbes as one of "America's Best Midsize Employers" for 2023[216]. - The Better Bank Initiative was completed in 2023, focusing on enhancing operational processes and increasing capacity for organic growth[216]. - The bank achieved $18 million of annualized cost savings, exceeding the original estimate of $15 million[216].