Simmons First National Corporation (SFNC) is a prominent financial holding company based in Pine Bluff, Arkansas, with a rich history spanning over a century. As a regional banking powerhouse, the company has strategically expanded its footprint across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, solidifying its position as a reliable financial services provider to diverse communities.

Business Overview and Chronology

Simmons First National Corporation was established in 1903 when Simmons Bank, the company's primary subsidiary, was founded in Pine Bluff, Arkansas. Over the decades, the company has undergone a remarkable transformation, evolving from a small community bank to a prominent regional financial institution. This growth has been primarily driven by a series of strategic acquisitions, which have enabled Simmons to extend its geographical reach and diversify its product offerings.

Since 1990, the company has pursued an aggressive acquisition strategy, completing 21 whole-bank acquisitions, one trust company acquisition, five bank branch acquisitions, one bankruptcy 363 acquisition, four FDIC failed bank acquisitions, and four Resolution Trust Corporation failed thrift acquisitions. This inorganic expansion allowed Simmons to strengthen its presence in key markets and bolster its capabilities to serve a wider range of customers.

In 2019, Simmons completed two significant acquisitions that further expanded its reach and assets. The acquisition of Reliance Bancshares, Inc. added approximately $1.5 billion in assets and 22 branches in the greater St. Louis metropolitan area. Later that year, the company acquired The Landrum Company, including its wholly-owned bank subsidiary Landmark Bank, which added approximately $3.4 billion in assets and strengthened Simmons' position in Missouri, Oklahoma, and Texas.

The company faced a significant challenge in 2023 when the sudden collapse of two U.S. banks, Silicon Valley Bank and Signature Bank, caused general uncertainty and concern regarding the adequacy of liquidity in the financial services industry. However, Simmons was able to maintain its strong capital and liquidity positions throughout this period of market disruption, demonstrating its resilience and prudent risk management practices.

Business Segments

Simmons First National Corporation operates through three main business segments:

Community and Commercial Banking

This is the company's core business, representing the majority of its operations. The segment focuses on providing a variety of banking products and services to both individual and business customers, including:

• Commercial Lending: Loans to businesses and commercial entities for purposes such as financing commercial real estate, construction projects, commercial and industrial uses, equipment financing, and other general corporate needs. This includes specialized lending for small businesses and agricultural operations.

• Consumer Lending: Credit cards, personal loans, home equity loans, and residential mortgages.

• Deposit Products: Checking, savings, and time deposit (CD) accounts for both individual and business customers.

• Treasury Management Services: Cash management, lockbox, and other treasury management solutions for commercial customers.

In 2024, this segment generated net interest income of $627.70 million and noninterest income of $109.70 million, with income before provision for credit losses and income taxes of $206.14 million.

Wealth

The Wealth segment provides trust, investment management, and insurance services to both individual and institutional clients. Key offerings include:

• Trust and Wealth Management: Managing investment accounts, administering estates and personal trusts, and providing other fiduciary services.

• Insurance Services: Various personal and commercial insurance products and coverages through the company's insurance subsidiaries.

In 2024, the Wealth segment contributed $37.47 million in noninterest income to the company's overall results.

Other

This segment includes the company's treasury functions, as well as certain corporate overhead and other miscellaneous activities not directly attributable to the other business segments. For the year ended December 31, 2024, this segment recorded $767,000 in net interest income and $767,000 in total net revenue.

Financial Performance and Ratios

Financials Simmons First National Corporation has consistently demonstrated strong financial performance, with a focus on maintaining a healthy balance sheet and prudent risk management. As of December 31, 2024, the company reported:

• Total assets: $26.88 billion

• Total loans: $17.01 billion
• Total deposits: $21.89 billion
• Annual revenue: $1.31 billion
• Net income: $152.69 million
• Operating cash flow: $425.92 million
• Free cash flow: $380.42 million

For the fourth quarter of 2024, the company reported:

• Revenue: $205.36 million

• Net income: $48.32 million

These financial metrics reflect the company's ability to generate consistent and sustainable earnings, as well as its effective management of resources and cash flows.

Simmons' financial ratios further showcase its strength and stability. As of December 31, 2024:

• Common equity to total assets ratio: 13.13%

• Tangible common equity to tangible assets ratio: 8.29%
• Tier 1 leverage ratio: 9.74%
• Debt-to-equity ratio: 0.31

These ratios demonstrate Simmons' well-capitalized position, which provides a solid foundation for future growth and operational resilience.

Liquidity

Simmons First National Corporation maintains a strong liquidity position, with a loan-to-deposit ratio of 78% as of December 31, 2024. The company's additional liquidity sources, including federal funds lines, FHLB borrowing availability, and unpledged securities, totaled $10.90 billion as of the same date, providing ample access to funding resources.

The company's debt structure is well-managed, with total debt of $1.11 billion as of December 31, 2024. Simmons' long-term debt primarily consists of subordinated notes and debentures, which are strategically utilized to support the company's capital position and financing needs.

Cash and cash equivalents stood at $687.48 million as of 2024, with approximately $4.72 billion in available advances from the Federal Home Loan Bank (FHLB).

Geographical and Revenue Breakdown

Simmons First National Corporation operates through its network of approximately 222 financial centers across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas. This geographic diversification allows the company to capitalize on growth opportunities in various regional markets and mitigate concentration risks.

The company's revenue is generated from a diverse array of banking products and services, including commercial and consumer lending, wealth management, insurance, and treasury management solutions. Simmons' revenue is primarily driven by net interest income, which accounted for 81% of total revenue in 2024, followed by noninterest income, which contributed the remaining 19%.

Challenges and Risks

While Simmons First National Corporation has demonstrated resilience and adaptability, the company faces several challenges and risks that warrant consideration. The highly competitive banking industry, with rapidly evolving technological advancements and changing customer preferences, requires Simmons to continuously invest in its digital capabilities and infrastructure to maintain its competitive edge.

Additionally, the company's extensive geographic footprint exposes it to regional economic fluctuations, which could impact loan quality and profitability. Simmons must vigilantly monitor its credit risk exposures and maintain robust risk management practices to mitigate potential asset quality deterioration.

Furthermore, the company's reliance on net interest income as a primary revenue driver makes it vulnerable to interest rate movements and margin compression. Simmons must navigate the interest rate environment skillfully, leveraging its liability-sensitive balance sheet and disciplined pricing strategies to preserve its net interest margin.

The banking industry has faced a challenging interest rate environment in recent years, with the Federal Reserve raising rates rapidly to combat inflation. This has pressured net interest margins across the industry, requiring banks like Simmons to adapt their strategies accordingly.

Recent Performance and Outlook

Simmons First National Corporation reported strong performance in the fourth quarter of 2024, outperforming initial forecasts for net interest margin (NIM). The company's Q4 2024 NIM came in at 2.87%, driven by lower-than-expected deposit costs (about 24 basis points lower than anticipated) and tailwinds from higher repricing of their fixed-rate loan portfolio. This strong performance provides a solid starting point for the company's 2025 outlook.

For 2025, Simmons has provided guidance for low-single digit loan growth, which is below their normal growth rate. This conservative approach reflects the company's focus on "soundness, profitability and growth in that order" - maintaining credit discipline and profitability over maximizing growth.

Regarding net interest income (NII) for 2025, Simmons has provided a range that depends on interest rate movements and the pace of deposit repricing. The low end of the range assumes a rate cut by the Federal Reserve by October 2025, while the high end assumes no rate cut.

The company expects to continue benefiting from the repricing of their fixed-rate loan portfolio in 2025, noting a roughly 200 basis point spread between new production and paydowns. However, they acknowledge that increased competition may pressure that spread over time.

In terms of net interest margin (NIM), Simmons believes they can reach a run-rate of over 3% in the back half of 2025, although they expect the pace of NIM expansion to moderate after the Q4 2024 outperformance. The company anticipates that their NIM could expand to a range of 3.30% to 3.50% by the end of 2025.

While specific numeric guidance for 2025 return on assets (ROA) was not provided, the company indicated that a 3.50% NIM and low 50s efficiency ratio could translate to an ROA around 1.25% in the current rate environment.

Conclusion

Simmons First National Corporation has carved out a strong position as a leading regional banking institution in the Midwest and South. The company's strategic acquisitions, prudent risk management, and focus on organic growth have enabled it to navigate the evolving banking landscape and deliver consistent financial performance.

As Simmons continues to leverage its geographic footprint, diversified revenue streams, and disciplined approach to capital allocation, the company appears well-positioned to navigate the challenges and capitalize on the growth opportunities that lie ahead. The company's strong performance in Q4 2024 and cautiously optimistic outlook for 2025 demonstrate its ability to adapt to changing market conditions while maintaining a focus on sound banking practices.

Investors should closely monitor Simmons' ability to execute on its strategic initiatives, manage interest rate risk, and maintain its strong credit quality, as these factors will be critical in determining the company's long-term success. With its well-diversified business model, strong liquidity position, and focused approach to growth and profitability, Simmons First National Corporation remains a noteworthy player in the regional banking sector.