Simmons First National Corporation (SFNC) Bundle
Understanding Simmons First National Corporation (SFNC) Revenue Streams
Understanding Simmons First National Corporation’s Revenue Streams
Revenue Sources Breakdown:
- Net interest income for the nine months ended September 30, 2024, was $482.9 million, compared to $513.4 million for the same period in 2023, representing a decrease of 5.9% year-over-year.
- Noninterest income for the three months ended September 30, 2024, was $17.1 million, a decrease of 60.4% compared to $43.3 million in the prior quarter.
- Total loans as of September 30, 2024, amounted to $17.34 billion, an increase of $490.4 million from $16.85 billion at December 31, 2023.
Year-over-Year Revenue Growth Rate:
- Net interest income decreased by $30.5 million, or 5.9%, for the nine-month period ended September 30, 2024, compared to the same period in 2023.
- Noninterest income decreased by $29.98 million, or 22.4%, for the nine months ended September 30, 2024.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Amount (2024) | Amount (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Interest Income | $482.9 million | $513.4 million | ($30.5 million) | (5.9%) |
| Noninterest Income | $103.6 million | $133.6 million | ($30 million) | (22.4%) |
Significant Changes in Revenue Streams:
- Loss on the sale of securities for the three months ended September 30, 2024, was $28.4 million, significantly impacting noninterest income.
- Interest income on loans increased by $82.9 million primarily due to a 48 basis point rise in loan yield.
- Interest expense increased by $130.4 million, reflecting higher deposit rates and changes in deposit mix.
A Deep Dive into Simmons First National Corporation (SFNC) Profitability
A Deep Dive into Simmons First National Corporation's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the net interest income was $463.5 million, while the total interest income was $986.1 million. This results in a gross profit margin calculated as:
Gross Profit Margin = (Net Interest Income / Total Interest Income) x 100
Gross Profit Margin = ($463.5 million / $986.1 million) x 100 = 46.9%
Operating Profit Margin: The operating profit for the three months ending September 30, 2024 was reported at $25.5 million. The operating profit margin is calculated as:
Operating Profit Margin = (Operating Profit / Total Revenue) x 100
Total revenue for this period was $334.3 million.
Operating Profit Margin = ($25.5 million / $334.3 million) x 100 = 7.6%
Net Profit Margin: The net income for the nine months ending September 30, 2024 was $104.4 million, with total revenue of $986.1 million.
Net Profit Margin = (Net Income / Total Revenue) x 100
Net Profit Margin = ($104.4 million / $986.1 million) x 100 = 10.6%
Trends in Profitability Over Time
Net income decreased from $151.2 million in the nine months ended September 30, 2023, to $104.4 million in the same period in 2024, reflecting a decline of 30.9%.
Operating profit for the same comparative period also showed a decline, from $181.2 million to $145.5 million, indicating a drop of 19.7%.
Comparison of Profitability Ratios with Industry Averages
The banking industry average for net profit margin is approximately 15%, indicating that the corporation's net profit margin of 10.6% is below the industry average.
For operating profit margin, the average in the banking sector typically hovers around 20%, while the corporation's figure of 7.6% shows a significant gap from the industry standard.
Analysis of Operational Efficiency
The corporation's efficiency ratio, which measures operating expenses as a percentage of revenue, was reported at 73.9% for the nine months ending September 30, 2024, compared to 69.8% for the same period in 2023. This indicates a worsening in cost management.
| Metric | 2023 | 2024 |
|---|---|---|
| Net Income ($ million) | 151.2 | 104.4 |
| Operating Profit ($ million) | 181.2 | 145.5 |
| Gross Profit Margin (%) | — | 46.9 |
| Operating Profit Margin (%) | — | 7.6 |
| Net Profit Margin (%) | — | 10.6 |
| Efficiency Ratio (%) | 69.8 | 73.9 |
In summary, the corporation's profitability metrics indicate a decline in net income and operating efficiency, with margins falling below industry averages, highlighting challenges in cost management and revenue generation.
Debt vs. Equity: How Simmons First National Corporation (SFNC) Finances Its Growth
Debt vs. Equity: How Simmons First National Corporation Finances Its Growth
Debt Levels
As of September 30, 2024, the total debt of Simmons First National Corporation was $1.41 billion, up from $1.34 billion at December 31, 2023. This debt consists of:
- $1.03 billion in Federal Home Loan Bank (FHLB) advances
- $366.3 million in subordinated notes
- $17.9 million of other long-term debt
Debt-to-Equity Ratio
The debt-to-equity ratio at September 30, 2024, was approximately 0.40, calculated using total debt of $1.41 billion and total equity of $3.53 billion. This ratio indicates a conservative leverage position compared to the industry average of around 0.60.
Recent Debt Issuances
In March 2018, the company issued $330.0 million in Fixed-to-Floating Rate Subordinated Notes with an initial fixed interest rate of 5.00%. These notes will mature on April 1, 2028. Additionally, the company assumed $37.4 million in subordinated notes related to the Spirit acquisition, maturing on July 31, 2030, with an initial fixed rate of 6.00%.
Credit Ratings
The credit ratings for Simmons First National Corporation reflect a strong financial position, with ratings typically in the range of Baa1 from Moody's and BBB+ from S&P, indicating a stable outlook.
Debt Refinancing Activity
Recent refinancing efforts included the repayment of higher-rate wholesale funding with proceeds from the sale of $251.5 million in available-for-sale investment securities in the third quarter of 2024.
Balancing Debt Financing and Equity Funding
The company maintains a balance between debt financing and equity funding by leveraging low-cost deposits, which totaled $21.94 billion as of September 30, 2024. Core deposits represent 77.2% of total deposits, providing a stable funding base. The loan-to-deposit ratio stood at 79%, indicating effective use of deposits for loan growth.
| Debt Component | Amount (in billions) | Maturity Date | Interest Rate |
|---|---|---|---|
| FHLB Advances | $1.03 | Less than 1 year | Fixed Rate |
| Subordinated Notes | $0.366 | April 1, 2028 | 5.00% initial, floating thereafter |
| Other Long-term Debt | $0.018 | Varied | Varied |
Assessing Simmons First National Corporation (SFNC) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for Simmons First National Corporation as of September 30, 2024, is calculated as follows:
Current Assets: $4.9 billion
Current Liabilities: $3.4 billion
Current Ratio = Current Assets / Current Liabilities = 1.44
The quick ratio, which excludes inventory from current assets, stands at:
Quick Assets: $4.5 billion (excluding inventories)
Quick Ratio = Quick Assets / Current Liabilities = 1.32
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is:
Working Capital = Current Assets - Current Liabilities = $4.9 billion - $3.4 billion = $1.5 billion
Comparatively, the working capital has increased from $1.2 billion as of December 31, 2023, indicating a positive trend in liquidity management.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statement highlights the following:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $343,059 | $120,436 |
| Net Cash Used in Investing Activities | ($21,409) | ($165,280) |
| Net Cash Used in Financing Activities | ($332,340) | ($31,630) |
| Net Change in Cash and Cash Equivalents | ($10,690) | ($76,474) |
Potential Liquidity Concerns or Strengths
The liquidity position is solid, with a loan-to-deposit ratio of 79% as of September 30, 2024, compared to 76% at December 31, 2023. This indicates that the company maintains a conservative approach to lending relative to its deposits.
Additionally, total deposits as of September 30, 2024, were $21.94 billion, down from $22.24 billion at the end of 2023. Uninsured non-collateralized deposits were approximately $4.66 billion, or 21% of total deposits.
Available liquidity sources totaled $11.17 billion, providing a strong buffer against potential liquidity demands.
Conclusion
As of September 30, 2024, the company's liquidity and solvency metrics reflect a robust financial health with effective management of both current assets and liabilities, supported by a strong cash flow position.
Is Simmons First National Corporation (SFNC) Overvalued or Undervalued?
Valuation Analysis
To assess whether Simmons First National Corporation is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio is calculated as follows:
P/E Ratio: Stock Price / Earnings Per Share
With a stock price of $28.11 and diluted earnings per share of $0.83, the P/E ratio is:
P/E Ratio = $28.11 / $0.83 = 33.85
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the following formula:
P/B Ratio: Stock Price / Book Value Per Share
With a book value per share of $28.11, the P/B ratio is:
P/B Ratio = $28.11 / $28.11 = 1.00
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the EV/EBITDA ratio is calculated as follows:
Enterprise Value: Market Capitalization + Total Debt - Cash and Cash Equivalents
Market Capitalization (assuming 125.55 million shares outstanding at $28.11):
Market Capitalization = 125,554,598 $28.11 = $3.53 billion
Total Debt as of September 30, 2024: $1.41 billion
Cash and Cash Equivalents as of September 30, 2024: $603.4 million
Enterprise Value = $3.53 billion + $1.41 billion - $0.6034 billion = $4.31 billion
EBITDA for the nine months ended September 30, 2024 was approximately $482.9 million.
EV/EBITDA = $4.31 billion / $482.9 million = 8.93
Stock Price Trends
Over the last 12 months, the stock price has fluctuated as follows:
- 12 months ago: $24.50
- 6 months ago: $26.00
- 3 months ago: $28.00
- Current Price: $28.11
Dividend Yield and Payout Ratios
For the first nine months of 2024, the dividend declared was $0.63 per share, compared to $0.60 per share in the same period of 2023.
Dividend Yield = (Annual Dividend / Current Stock Price) 100
Dividend Yield = ($0.63 / $28.11) 100 = 2.24%
Payout Ratio for the nine months ended September 30, 2024:
Payout Ratio = (Dividends Paid / Net Income) 100
Payout Ratio = ($79.06 million / $104.37 million) 100 = 75.8%
Analyst Consensus on Stock Valuation
As per the latest reports, analyst consensus on the stock valuation is as follows:
- Buy: 5 Analysts
- Hold: 2 Analysts
- Sell: 1 Analyst
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 33.85 |
| P/B Ratio | 1.00 |
| EV/EBITDA | 8.93 |
| Current Stock Price | $28.11 |
| Dividend Yield | 2.24% |
| Payout Ratio | 75.8% |
Key Risks Facing Simmons First National Corporation (SFNC)
Key Risks Facing Simmons First National Corporation
Understanding the risk factors that impact Simmons First National Corporation's financial health is crucial for investors. The company faces various internal and external risks that can significantly influence its performance.
Industry Competition
The banking sector is highly competitive, with various players vying for market share. As of September 30, 2024, the total assets of Simmons First National Corporation were approximately $27.26 billion. This competitive landscape can pressure profit margins and customer retention.
Regulatory Changes
Regulatory compliance remains a significant risk for the banking industry. The company must adhere to capital adequacy guidelines, which require a minimum common equity Tier 1 capital ratio. As of September 30, 2024, the ratio stood at 12.94%, above the "well-capitalized" threshold. However, failure to meet these requirements could lead to restrictions on dividends and other financial operations.
Market Conditions
Fluctuating market conditions can adversely affect the bank's operations. For instance, the company reported a net interest income on a fully taxable equivalent basis decrease of $30.5 million, or 5.9%, for the nine months ended September 30, 2024, compared to the same period in 2023. This decline was primarily due to a $130.4 million increase in interest expense, reflecting rising market interest rates and competitive deposit rates.
Operational Risks
Operational risks include potential failures in internal processes, systems, or people. The company has implemented strategies to mitigate these risks, including a focus on maintaining disciplined pricing and conservative underwriting standards. As of September 30, 2024, the allowance for credit losses as a percent of total loans was 1.35%.
Financial Risks
Financial risks are present due to the company's exposure to interest rate fluctuations. The net interest margin on a fully tax equivalent basis was 2.74% for the three months ended September 30, 2024, a slight increase from the previous quarter. However, the net interest margin decreased by 12 basis points compared to the same period in the prior year, highlighting the pressure from rising deposit rates.
Strategic Risks
Strategic risks arise from the company's decisions and actions. The company executed a strategic decision to sell approximately $251.5 million of available-for-sale investment securities during the third quarter of 2024, resulting in an after-tax loss of $21.0 million. This move was aimed at managing funding costs but reflects the inherent risks in strategic decision-making.
Table: Risk Mitigation Strategies
| Risk Type | Description | Mitigation Strategy |
|---|---|---|
| Industry Competition | High competition in the banking sector | Focus on customer service and product differentiation |
| Regulatory Changes | Adherence to capital adequacy guidelines | Maintain capital ratios above regulatory requirements |
| Market Conditions | Volatility impacting interest income | Conservative loan pricing and diversified portfolio |
| Operational Risks | Failures in internal processes | Regular audits and process improvements |
| Financial Risks | Exposure to interest rate fluctuations | Active management of interest rate risk |
| Strategic Risks | Risks associated with strategic decisions | Thorough analysis before major decisions |
As of September 30, 2024, the company reported total nonperforming loans of $101.7 million, reflecting a 20.3% increase from the previous quarter. Understanding these risks and the company's strategies to mitigate them is essential for informed investment decisions.
Future Growth Prospects for Simmons First National Corporation (SFNC)
Growth Opportunities
Future growth prospects for Simmons First National Corporation are influenced by several key growth drivers, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company has significantly increased its loan volume, with interest income on loans rising by $82.9 million in the nine months ended September 30, 2024, reflecting a robust organic growth strategy.
- Market Expansions: As of September 30, 2024, total commercial loans reached $2.78 billion, marking a 2.2% increase from December 31, 2023, driven by a notable rise in agricultural loans.
- Acquisitions: The company continues to explore potential acquisition opportunities to enhance its market presence and product offerings.
Future Revenue Growth Projections
Revenue growth estimates for 2024 indicate a potential rebound in net interest income. For the nine months ended September 30, 2024, net interest income was $463.5 million, a slight decrease from $494.5 million in the same period in 2023, but with expectations of growth as market conditions stabilize.
Earnings Estimates
Projected earnings for the full year 2024 are expected to reflect a recovery trajectory, with diluted earnings per share estimated at $1.10, compared to $1.19 in 2023.
Strategic Initiatives
Strategic initiatives include:
- Enhancing digital banking capabilities to improve customer engagement and operational efficiency.
- Expanding the product portfolio in wealth management and mortgage lending.
- Forming partnerships to leverage technology for better service delivery.
Competitive Advantages
The company is well-positioned for growth due to:
- A strong capital position with a common equity to total asset ratio of 12.94% as of September 30, 2024.
- A diversified loan portfolio, with total loans reaching $17.34 billion as of September 30, 2024.
- Robust asset quality metrics, with non-performing loans at 0.59% of total loans.
| Metric | Value |
|---|---|
| Total Loans | $17.34 billion |
| Common Equity to Total Assets | 12.94% |
| Non-Performing Loans Ratio | 0.59% |
| Commercial Loans | $2.78 billion |
| Adjusted Earnings per Share (2024 Est.) | $1.10 |
Simmons First National Corporation (SFNC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Simmons First National Corporation (SFNC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Simmons First National Corporation (SFNC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Simmons First National Corporation (SFNC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.