Simmons First National (SFNC)

Regional banking company Simmons First National (NASDAQ:SFNC) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 426% year on year to -$569.5 million. Its non-GAAP profit of $0.46 per share was in line with analysts’ consensus estimates.

Company Overview

With roots dating back to 1903 and a presence across Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, Simmons First National (NASDAQ:SFNC) is a regional bank holding company that provides banking and financial services to individuals and businesses.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Simmons First National competes with other regional banks operating in the southern and midwestern United States, including Regions Financial (NYSE:RF), Prosperity Bancshares (NYSE:PB), Bank OZK (NASDAQ:OZK), and Trustmark Corporation (NASDAQ:TRMK).

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Unfortunately, Simmons First National struggled to consistently increase demand as its $75.58 million of revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Simmons First National’s annualized revenue declines of 1.8% over the last two years align with its five-year trend, suggesting its demand has consistently shrunk.

Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Simmons First National missed Wall Street’s estimates and reported a rather uninspiring 426% year-on-year revenue decline, generating -$569.5 million of revenue. This was due to a $801.5 million pre-tax loss on the sale of low-yielding securities that were sold in connection with the previously mentioned balance sheet repositioning included in noninterest income

Net interest income made up 73.4% of the company’s total revenue during the last five years, meaning lending operations are Simmons First National’s largest source of revenue.

Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Simmons First National, its EPS declined by 9% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Simmons First National, its two-year annual EPS declines of 9.2% are similar to its five-year trend. These results were bad no matter how you slice the data.

In Q3, Simmons First National reported adjusted EPS of $0.46, up from $0.37 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Simmons First National’s full-year EPS of $1.55 to grow 25.5%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Simmons First National’s TBVPS declined at a 3.5% annual clip over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 4.6% annually over the last two years ($14.77 to $13.45 per share).

Over the next 12 months, Consensus estimates call for Simmons First National’s TBVPS to grow by 11.5% to $14.99, solid growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Simmons First National has averaged a Tier 1 capital ratio of 12.1%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Simmons First National has averaged an ROE of 2.9%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We struggled to find many positives in these results. Its revenue missed and its EPS was in line with Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 3.6% to $17.38 immediately after reporting.

When considering an investment in Simmons First National, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

We see the value of companies driving economic growth, but in the case of Simmons First National, we’re out. For starters, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its TBVPS has declined over the last five years. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Simmons First National’s P/B ratio based on the next 12 months is 0.8x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $22.80 on the company (compared to the current share price of $17.38).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.