SFNC Q1 Deep Dive: Revenue Growth Outpaces Expectations, Credit Costs Weigh on Profitability

June 23, 2025 at 14:03 PM EDT

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Regional banking company Simmons First National (NASDAQ: SFNC) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 7.2% year on year to $216 million. Its non-GAAP profit of $0.26 per share was 27.4% below analysts’ consensus estimates.

Is now the time to buy SFNC? Find out in our full research report (it’s free).

Simmons First National (SFNC) Q1 CY2025 Highlights:

Revenue: $216 million vs analyst estimates of $209.6 million (7.2% year-on-year growth, 3% beat)
Adjusted EPS: $0.26 vs analyst expectations of $0.36 (27.4% miss)
Market Capitalization: $2.3 billion

StockStory’s Take

Simmons First National’s first quarter results drew a negative market response, as rising credit costs weighed on profitability despite revenue growth that surpassed analyst expectations. Management attributed the quarter’s performance to continued net interest margin expansion, improved deposit mix, and growth in non-interest income. However, the need to proactively address two troubled loan relationships—one involving a St. Louis hotel and another tied to a fast-food franchise operator—led to substantially higher provision expenses. President Jay Brogdon explained, “We chose to take action and expedite our path toward resolution,” highlighting the company’s conservative stance on credit risk management.

Looking ahead, Simmons First National’s forward strategy centers on maintaining operating leverage, further optimizing its deposit base, and capturing benefits from favorable loan repricing. Management believes the company is well positioned to expand its net interest margin and achieve mid-teens growth in pre-provision net revenue, assuming the credit environment stabilizes. Brogdon noted that their net interest margin “could cross 3% sooner than originally anticipated, given positive trends in customer deposits and favorable asset repricing.” The company also expects continued resilience in asset quality, with reserves at the higher end of their modeled range.

Key Insights from Management’s Remarks

Management attributed this quarter’s revenue growth to expanding net interest margin and deposit remixing, while higher provision expenses from two specific credit issues drove the earnings shortfall.

Net interest margin expansion: Simmons delivered its fourth consecutive quarter of net interest margin improvement, as funding costs declined and fixed-rate loan repricing contributed to higher yields. Management expects this to remain a tailwind, particularly as deposit costs stabilize.
Deposit franchise momentum: The company saw customer deposits grow, with a 1.5% year-over-year increase in consumer checking accounts and a shift away from brokered and higher-cost funding. Management highlighted ongoing efforts to remix deposits into lower-cost transaction and DDA (demand deposit account) balances.
Non-interest income diversification: Growth in non-interest income was supported by strong loan production swap fees and expansion in fee-based businesses. Management emphasized the importance of diversified revenue streams beyond traditional lending.
Credit actions on troubled loans: Two loan relationships—one tied to a downtown St. Louis hotel and another to a fast-food franchise—were moved to non-accrual status, with substantial increases in specific reserves. Management described these actions as “proactive and conservative,” noting these situations are unique and not reflective of broader portfolio quality.
Expense management and fraud event: Adjusted expenses rose due to a $4.3 million deposit fraud charge linked to one of the troubled credits. Excluding this, expenses were flat to down from last quarter, reflecting ongoing cost control initiatives. Management reiterated their confidence in full-year expense guidance despite the one-time fraud impact.

Drivers of Future Performance

Simmons expects future performance to be shaped by margin expansion, disciplined expense management, and ongoing credit risk vigilance amid economic uncertainty.

Deposit optimization continues: Management is focused on growing core deposits and reducing reliance on brokered funding, aiming to further lower funding costs and support margin expansion. Initiatives include targeted campaigns to boost consumer checking accounts and strategic conversations during loan origination to attract deposits.
Credit quality monitoring: While the company believes credit issues are isolated, management acknowledged the possibility of further reserve building if economic conditions or baseline scenarios worsen. The allowance for credit losses is currently at the high end of the modeled range, and management expects to reassess this each quarter.
Expense discipline and recovery potential: The team remains committed to controlling non-interest expense, leveraging centralized procurement and headcount optimization. Management is also pursuing potential recovery from the recent fraud event, which could offset some expense pressure in coming quarters.

Catalysts in Upcoming Quarters

In the next few quarters, the StockStory team will be watching (1) progress on resolution and potential recovery from the two non-performing loan relationships, (2) trends in core deposit growth and continued reduction in brokered funding, and (3) the impact of evolving economic scenarios on credit reserve requirements. Execution on cost control and maintaining net interest margin momentum will also be critical markers of success.

Simmons First National currently trades at $18.48, up from $18.12 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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