Sign in
SF

SIMMONS FIRST NATIONAL CORP (SFNC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 printed $209.6M total revenue and $0.26 diluted EPS; NIM expanded 8 bps sequentially to 2.95% (fourth consecutive quarter), while cost of deposits fell 16 bps to 2.44% .
  • EPS missed the Wall Street consensus ($0.26 vs $0.36*) on elevated provision ($26.8M) and a $4.3M noninterest expense charge tied to a customer deposit fraud; revenue was roughly in line with consensus ($209.6M vs $209.1M*) .
  • Two specific credits migrated to nonaccrual ($49.8M combined) with specific reserves increased to ~60% each, driving $15.6M of incremental provision; management reiterated portfolio soundness and reserves at the high end of their range .
  • 2025 outlook maintained: 3%+ positive operating leverage with mid‑teens PPNR growth; management now expects NIM could cross 3% sooner than originally anticipated given deposit remix tailwinds and asset repricing .
  • Core deposit franchise momentum (customer deposits +$183M; consumer checking accounts +1.5% YoY) and brokered/time deposit reductions support margin trajectory and funding optimization .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin rose to 2.95% (up 8 bps QoQ; up 29 bps YoY), marking a fourth consecutive quarter of NIM expansion, aided by lower funding costs and reduced wholesale funding use .
  • Noninterest income increased 6% QoQ to $46.2M on strong swap fee income and SBIC fair value adjustments; wealth management and service charges also improved YoY .
  • Deposit remix progress: cost of deposits fell to 2.44% (‑16 bps QoQ) with customer deposits +$183M and improved checking account growth (+1.5% YoY); CFO highlighted CD renewals shifting into lower‑cost pricing and DDA .
    • “Our net interest margin could cross 3% sooner than originally anticipated, given positive trends in customer deposits and favorable asset repricing” — President Jay Brogdon .

What Went Wrong

  • Elevated provision ($26.8M) on two specific relationships (St. Louis hotel $26.9M; fast‑food operator $22.9M) migrated to nonperforming; specific reserves increased to ~63% and ~61% respectively, contributing $15.6M of incremental provision .
  • Noninterest expense rose to $144.6M, including a $4.3M charge tied to a customer deposit fraud; adjusted noninterest expense would have been $139.3M excluding the fraud .
  • Nonperforming loans increased to $152.3M (0.89% of loans) and nonperforming assets to 0.61% of total assets; coverage ratio stepped down to 165% from 212% QoQ .

Financial Results

Income and Per‑Share Metrics

MetricQ1 2024Q4 2024Q1 2025
Total revenue ($USD Millions)$195.1 $208.5 $209.6
Net interest income ($USD Millions)$151.9 $164.9 $163.4
Noninterest income ($USD Millions)$43.2 $43.6 $46.2
Provision for credit losses on loans ($USD Millions)$10.2 $13.3 $26.8
Diluted EPS ($USD)$0.31 $0.38 $0.26
Adjusted diluted EPS ($USD)$0.32 $0.39 $0.26

Margins & Efficiency

MetricQ1 2024Q4 2024Q1 2025
Net interest margin (FTE)2.66% 2.87% 2.95%
Net interest spread (FTE)1.89% 2.15% 2.30%
Loan yield (FTE)6.24% 6.32% 6.20%
Cost of deposits2.75% 2.60% 2.44%
Efficiency ratio69.41% 65.66% 66.94%
Adjusted efficiency ratio66.42% 62.89% 64.75%
ROA (QTD)0.57% 0.71% 0.49%
ROE (QTD)4.54% 5.43% 3.69%

Asset Quality KPIs

MetricQ1 2024Q4 2024Q1 2025
NCO ratio (annualized)0.19% 0.27% 0.23%
Nonperforming loans / total loans0.63% 0.65% 0.89%
ACL / loans1.34% 1.38% 1.48%
Total nonperforming loans ($USD Millions)$107.3 $110.7 $152.3
Coverage ratio (ACL/NPL)212% 212% 165%

Deposits & Funding Mix

Metric ($USD Millions)Q1 2024Q4 2024Q1 2025
Noninterest bearing deposits$4,698 $4,461 $4,455
Interest‑bearing transaction accounts$10,316 $10,331 $10,621
Time deposits$4,314 $3,796 $3,695
Brokered deposits$3,025 $3,298 $2,914
Total deposits$22,353 $21,886 $21,684
Loans / deposits76% 78% 79%

Noninterest Income Components

Component ($USD Millions)Q1 2024Q4 2024Q1 2025
Service charges on deposits$12.0 $13.0 $12.6
Wealth management fees$8.4 $8.8 $9.6
Debit & credit card fees$8.2 $8.3 $8.4
Mortgage lending income$2.3 $1.8 $2.0
BOLI income$3.8 $3.8 $4.1
Other income$7.2 $5.6 $8.0
Total noninterest income$43.2 $43.6 $46.2

Actual vs Consensus (S&P Global)

MetricQ1 2024Q4 2024Q1 2025
Diluted EPS ($USD) — Actual$0.32 $0.39 $0.26
Diluted EPS ($USD) — Consensus*$0.326*$0.352*$0.358*
Total revenue ($USD Millions) — Actual$195.1 $208.5 $209.6
Total revenue ($USD Millions) — Consensus*$202.3*$208.7*$209.1*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating leverage (PPNR growth)FY 20253%+ positive op leverage; mid‑teens YoY PPNR growth Reaffirmed; outlook remains intact Maintained
Net interest margin trajectoryFY 2025Glide path to 3% in back half of 2025 (Q3 2024 commentary) Could cross 3% sooner than originally anticipated Raised timeline
Expense guidanceFY 2025Maintain original full‑year expense guide (not quantified on the call) Reaffirmed despite $4.3M fraud; recovery could offset Maintained
Credit/ACL stanceFY 2025Scenario baseline expected to worsen; reserves likely to build industry‑wide; SFNC at high end of reserve range Continued high‑end reserve positioning pending Q2 update Maintained
Share repurchasesOngoing$175M authorization remaining; opportunistic posture No repurchases in Q1; prioritizing organic growth, capital preservation Maintained program
DividendQ2 2025Prior year $0.21 quarterlyDeclared $0.2125 per share (+1% YoY) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
NIM trajectoryExpect notable NIM inflection in 2025; glide path toward 3% NIM at 2.95%; could cross 3% sooner Improving
Deposit remix & costsProactive price cuts; remix away from CDs; brokered funding tactical use Cost of deposits down to 2.44%; customer deposits +$183M; CD renewals into lower‑cost products/DDA Improving
Wholesale/brokered fundingUsing brokered vs FHLB opportunistically; remain short in liability duration Brokered deposits down to $2.914B; other borrowings up sequentially (FHLB) Optimizing mix
Securities repositioningOpportunistic restructurings as long end moves; earnings/capital balanced No specific Q1 trade; strategy unchanged Neutral
Credit quality & reservesNormalization; coverage strong; industry reserves may build Two NPL migrations (~$49.8M) with ~60% specific reserves; ACL/loans up to 1.48% Mixed (idiosyncratic pressure; higher reserves)
Expense disciplineBetter Bank initiative; renegotiated vendor contracts; guided core OpEx lower Expense guide reaffirmed despite fraud; headcount mix shifted to revenue roles Improving underlying run‑rate

Management Commentary

  • Strategic focus: “Our focus is on soundness, profitability and growth and in that order. This first quarter reflected our continued commitment to soundness… we tackled potential challenged credits early and aggressively.” — President Jay Brogdon .
  • Margin outlook: “Our net interest margin could cross 3% sooner than originally anticipated, given positive trends in customer deposits and favorable asset repricing.” — Jay Brogdon .
  • Credit actions: “We increased our specific reserves to approximately 60% for each relationship… resulting in additional provision expense of $15.6 million in the quarter.” — Jay Brogdon .
  • Deposit franchise momentum: “Customer deposits grew $183 million… growth in the number of consumer checking accounts… up 1.5% year‑over‑year.” — Jay Brogdon .
  • Tone and positioning: “We’re well positioned to wait for greater clarity.” — Chairman & CEO George Makris .

Q&A Highlights

  • Resolution timing for two NPL credits: Management aims to resolve both in 2025, balancing seasonality (St. Louis hotel) and fraud‑related analysis; specific reserves are designed to cover potential loss risk .
  • Loan pipeline breadth and drivers: 43% QoQ increase in commercial pipeline, broad‑based across C&I/CRE/agricultural; some demand pull‑forward as borrowers locked attractive economics .
  • Deposit strategy and competition: Competitive environment remains intense; deposit optimization continues (CD renewals at lower rates, transitions to DDA); NIB was roughly flat and best in a long time .
  • Reserve methodology and scenarios: Moody’s April baseline worsened; SFNC reserved at the high end of its range, implying resilience to baseline deterioration .
  • Buybacks and capital priorities: Capital prioritized for organic growth and optionality (including securities); buyback remains a tool for dislocations but not a near‑term priority .

Estimates Context

  • EPS: Q1 2025 diluted EPS of $0.26 missed consensus $0.358* by ~$0.10; Q4 2024 beat ($0.39 vs $0.352*); Q1 2024 was roughly in line ($0.32 vs $0.326*) .
  • Revenue: Q1 2025 total revenue of $209.6M was roughly in line with consensus $209.1M*; Q4 2024 $208.5M vs $208.7M*, Q1 2024 $195.1M vs $202.3M* .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core margin trajectory is favorable: NIM rose to 2.95% and could exceed 3% earlier than planned, supported by lower deposit costs, deposit remix, and asset repricing; this is a key upside driver for NII and PPNR in 2025 .
  • Credit actions were decisive and idiosyncratic: Two credits drove NPLs and provision higher, but specific reserves (~60%) were set conservatively; portfolio metrics excluding these credits are healthier (NPLs would have declined 5 bps QoQ) .
  • Expense discipline intact: Despite the $4.3M fraud charge, management reaffirmed the expense guide, with self‑funded headcount shifts toward revenue production and ongoing procurement savings — underpinning targeted positive operating leverage .
  • Funding optimization progressing: Brokered deposits down, time deposits lower, and customer deposits higher; continued deposit remix should sustain margin expansion alongside tactical use of FHLB/brokered funding .
  • Capital remains strong with optionality: CET1 at 12.2% and total risk‑based capital at 14.6%; buyback authorization outstanding ($175M) affords flexibility, while dividend increased to $0.2125 (+1% YoY) for Q2 .
  • Near‑term trading implication: EPS miss was driven by nonrecurring items and specific credit actions; watch for signs of NIM crossing 3% and normalization of provision levels — catalysts for re‑rating on improving profitability .
  • Medium‑term thesis: Management is executing on soundness/profitability/growth with deposit franchise momentum, margin expansion, and expense control; resolving the two credits cleanly and sustaining core deposit growth are key milestones .