Third-quarter profit climbed 22% at Simmons First National Corp. as the bank reported Tuesday that net income reached $80.6 million and earnings per share soared to 74 cents, up 23% in the period ending Sept. 30.
The Pine Bluff bank, which operates as Simmons Bank in local markets, leaped above Wall Street projections of earnings per share of 58 cents, the consensus reported by Zacks Investment Research.
"Simmons First National Corp. once again delivered solid results during the quarter, reflecting our ability to execute basic blocking and tackling fundamentals," Chairman and Chief Executive Officer George Makris Jr. told analysts on a conference call Tuesday.
"Equally important, they demonstrate our continued focus on strategically navigating the current economic environment without losing focus on our goal of creating long-term value for our shareholders."
Results in the quarter included a $1.2 million net after-tax credit related to merger and integration expenses and branch closings. Excluding the one-time items, core earnings were $79.4 million compared to $68.3 in the third quarter last year. Earnings per share, excluding the items, increased to 73 cents from 63 cents, up 16% year-over-year.
Simmons reported total assets were $23.2 billion, up from $21.4 billion a year ago. Total deposits were up 12% to $18.1 billion from $16.2 billion a year ago though the cost of deposits decreased to 0.20% from 0.39% over the same period.
Loans dropped for the fourth consecutive month, plummeting to $10.8 billion from $14 billion in the third quarter of 2020. Net interest income was down to $145.2 million in the quarter compared with $153.6 million in 2020. Net interest margin also continues to fall, dropping to 2.85% from 3.21% last year.
Nevertheless, Simmons officials said Tuesday they are heartened by recent activity and noted the bank is close to turning around the loan declines, which have plagued the entire U.S. banking sector throughout the pandemic.
Simmons said it had "strong loan originations" coupled with four consecutive quarters of increases in its commercial loan pipeline. Loan production was $1.5 billion in the third quarter and the bank's commercial loan pipeline was up 15% since the end of June.
"We are encouraged by this trend and other anecdotal evidence in the market that will translate into an increase in total loans," Makris said, noting that Simmons is boosting its production teams to push through more loans.
Along those lines, in August Simmons established an 11-member commercial finance team to spark commercial and industrial lending efforts, especially in specialty areas such as business aviation and marine financing.
Chief Lending Officer Matt Reddin told the banking analysts on Tuesday's call that Simmons is close to reaching a turning point in lending activity. The third quarter "saw a lot of repeat borrowers getting more and more active" across multiple economic sectors, he said.
Loan interest has picked up in the commercial real estate, industrial and multifamily sectors as well as from borrowers interested in financing medical facilities and specialty hospitals, according to Reddin. "We have not seen that type of production since pre-pandemic," he said.
The new commercial finance team is ready to generate more loans, Reddin said. "We will see some production from them closing in the fourth quarter," he said.
Increased growth also could come through more acquisitions, Makris said, even though Simmons purchased two Tennessee community banks in June and converted those operations earlier this month to the Simmons brand and systems. Financials for the Tennessee banks were not included in Simmons' third-quarter report but will be in the fourth-quarter results.
Simmons may not be finished in the mergers and acquisition field, according to the chairman, who said the bank is having "productive conversations" with potential partners.
"It's still a very important part of our strategy to continue to build out our scale in the markets that we serve and maybe some ancillary markets that we would pick up in acquisitions," Makris said. "We're still very much interested in continuing our M&A strategy."
Simmons repurchased 1.8 million shares of its common stock in the quarter at an average price of $28.48, which would translate into an investment of nearly $51.3 million. The repurchase program has a remaining capacity of $98.5 million and bank officials said Tuesday buybacks likely will continue.
Simmons became the 8th-largest bank in Tennessee during the quarter when it completed the acquisitions of Landmark Community Bank of Collierville and Triumph Bancshares Inc. of Memphis. The transactions were valued at about $278 million.
Overall, Makris said Simmons is optimistic heading into the final stretch of the year. "We continue to be encouraged by our performance in 2021 while adapting to an ever-changing landscape and challenging economic environment," he said.
Simmons shares fell 30 cents, or less than 1%, to close Tuesday at $30.88.