Simmons bank 3Q profit sinks 19.5%
Profitability plummeted in the third quarter at Simmons First National Corp., which reported Monday that net income dropped 19.5% for the quarter ended Sept. 30. Earnings per share plunged 28.6%.
The Pine Bluff bank reported net income of $65.9 million for the quarter compared with $81.8 million for the same period in 2019, a decrease of $15.9 million. Analysts’ consensus on net income was $47 million. Last year’s third quarter included a $31.7 million one-time gain on the sale of Visa Inc. stock.
Earnings per share sank to 60 cents in the quarter compared with 84 cents a year ago. That was still above analysts’ consensus of 43 cents per share.
Chairman and Chief Executive Officer George Makris touted the performance amid the ongoing pandemic.
“We’re very proud of our results for the third quarter, especially under these trying conditions,” Makris told banking analysts on a conference call Monday morning.
Revenue was $225.5 million, down from $233.8 million a year ago, but beat analysts’ expectations of $208 million.
Total loans were $14 billion at the end of the quarter, boosted by nearly 8% from last year as Simmons took over the operations of the Landrum Co. in an acquisition.
However, loan growth is slowing and was down from the second quarter of this year, dropping by $589.5 million, or 4%.
“Loan demand remains
very weak in almost every aspect of our commercial economy,” Makris told the analysts Monday.
Loan activity should pick up from here, according to Makris. “We’re looking for opportunities as we continue to move forward,” he said. “Our expectation is this is the bottom end of it.”
Little Rock banking analyst Garland Binns said the results were disappointing.
“It was a bad third quarter for Simmons, being down in net income, return on assets, return on equity and pretty much all areas from the third quarter of 2019,” Binns said Monday. “Simmons also experienced an increase in overhead costs from the third quarter of 2019.”
That increase was evident in the bank’s efficiency ratio, which increased to 54.1% in the third quarter, up from 42.7% last year. Efficiency ratio measures what it costs a bank to make $1. In this case, Simmons’ costs to make a buck increased by 12 cents year over year.
To control expenses, the bank is continuing to close branches. In the second quarter it shuttered 11 branches and closed another 23 branches on Oct. 9, estimating the moves will save $9 million per year.
In other key metrics, Simmons reported total assets of $21.4 billion, up from $17.8 billion a year ago. Net interest margin in the quarter dropped to 3.21%
from 3.82% in 2019.
The bank set aside nearly $23 million during the quarter as a provision for credit losses.
Related to the pandemic, Simmons has granted more than $3 billion in payment deferrals on more than 4,000 loans. Makris said Monday that payments should pick up without any issues for the great majority of customers.
“We expect only 3.9% of our loans to be considered for loan modifications longer than six months,” Makris added. “Most of those we expect to return to regular payments with no credit downgrade or long-term restructuring.”
Through Sept. 30, Simmons reported making 8,200 Paycheck Protection Program loans. Many of those – 63% — are under the $50,000 threshold that the Small Business Administration has targeted for its simple forgiveness program. Makris said the bank would begin applying to the SBA for forgiveness this quarter.
Shares of Simmons, which released its earnings report before the market opened, closed at $16.69 on Monday, down 58 cents. The stock was trading for about $24 a share a year ago.