Simmons Bank 2Q net dips 8.1%
Chairman attributes decreases to economic uncertainty
Simmons First National Corp. reported Tuesday that profitability dropped 8.1% with core earnings of $60.1 million in the second quarter. Earnings per share fell 19.1% to 55 cents.
Chairman George Makris attributed the decreases to the economic uncertainty driven by the coronavirus pandemic and “a major slowdown in new loan activity in the markets we serve.”
Economic conditions are putting pressure on the company’s branch operations, leading Simmons to conduct a “constant evaluation” of all branches and locations. “We’re not through evaluating our physical locations,” Makris told banking analysts on a call Thursday.
Simmons closed 11 branches in June, a move that will produce $2.4 million in annual savings. Three locations in Central Arkansas – Conway, Little Rock and North Little Rock – were included in the closings.
The company announced it plans to shutter another 23 branches along with a loanproduction facility during the fourth quarter of this year, producing net cost savings of about $6.8 million. There will be six closures in Arkansas: two in Little Rock along with branches in Strong, Parkdale, Russellville and Conway.
By the end of 2020, Makris said the bank would have about 200 branches; it operates 226 branches in seven states today. Even with the closures, Simmons said it will be in the 98th percentile of its peer group based on branch locations.
The company reported onetime costs of $3 million and a $1.6 million after-tax gain associated with the sale of three branches in Colorado in May.
Including those items, net income was $58.8 million for the quarter, compared with $55.6
million for the same period in 2019. Diluted earnings per share was 54 cents, down 4 cents on a comparable basis in 2019.
Little Rock banking analyst Garland Binns called it “a lackluster second quarter” for the Pine Bluff bank as it closes bank branches to generate cost savings.
Total loans at the end of the quarter reached $14.6 billion, up $1.5 billion primarily due to Simmons’ acquisition of The Landrum Co. of Missouri, a purchase that was announced in 2019.
Net interest income for the quarter was $163.7 million, producing a net interest margin of about 3.2%.
Covid-19 and the uncertainty around economic recovery remain problematic, Makris said. “We are operating under uncertain conditions,” he said on Thursday’s call. “The direction of the economy is unclear and, unfortunately, we don’t seem to be close to a [national] consensus as to the severity or direction of the effect.”
Simmons has 4,600 loans in modification or deferment, valued at $3.3 billion. The company has set up a process to evaluate future deferment needs and Makris said there is “a very small number” of loans currently under modification that may need further extensions.
However, he said that the bank is not altering loans. “We have not changed any of the original loan terms,” he said.
The bank’s digital and selfservice product offerings are showing a strong performance.
For the first time ever, the company reported more weekly transactions by customers using digital channels than branches in March.
“I expect the trend toward self service will continue and put even more pressure on our physical locations,” Makris said.
Simmons shares rose $1.38, or 8.7%, to close Tuesday at $17.27.