SIMMONS FIRST NATIONAL CORP (SFNC) stock intrinsic value fair value estimate & owner earnings analysis

Simmons First National is a 120-year-old Arkansas bank holding company operating about 222 financial centers across Arkansas, Missouri, Tennessee, Texas, Oklahoma and Kansas, with roughly $24.8 billion of assets and $19.7 billion of deposits at June 30, 2026. It earns money the ordinary way: gathering local deposits and lending them out, mostly against real estate (about $13.4 billion of its roughly $17 billion loan book), plus fees from mortgage, trust and card businesses. It grew to its present size largely by acquiring other banks, most significantly Southwest Bancorp and First Texas in late 2017, which roughly doubled the company. How we measured earnings. We start from operating cash flow, strip out short-term swings in receivables, payables and the mortgage loans it holds briefly before selling, and deduct stock compensation and the capital spending needed to maintain the branch network. For a lender we also deduct the provision for credit losses: it is an accounting charge rather than a cash payment, but it stands in for real loan losses, which never pass through operating cash flow, so leaving it out would overstate what owners earn. On that basis owner earnings per share were $1.93 (2018), $1.39 (2019), $1.52 (2020), $1.80 (2021), $1.93 (2022), $1.66 (2023), $1.42 (2024) and $1.88 (2025). We use 2018 onward because the business before the 2017 acquisitions was much smaller and different. That eight-year window covers near-zero rates, the pandemic credit scare and the 2023-2024 squeeze when deposit costs rose faster than old fixed-rate bonds and loans could reprice, which makes it a full cycle. The median is $1.73. What happened in 2025. The company reported a $397.6 million loss for 2025, but that is mostly one accounting event. In the third quarter it sold about $3.16 billion of low-yielding bonds acquired in the low-rate years, booking an $801.5 million pre-tax loss ($625.6 million after tax). It used the proceeds to pay down expensive wholesale and brokered funding and Federal Home Loan Bank advances, and it raised $326.9 million of new common equity to rebuild capital, which increased the share count by about 15%. The loss had already happened economically when rates rose in 2022; selling simply made it final. We treat it as a non-cash charge and do not let it lower the earnings base. Two clean quarters since then confirm the benefit. Net interest income was $397.8 million in the first half of 2026 against $335.2 million a year earlier, and net income was $135.2 million, or $0.93 per diluted share. On our measure, first-half 2026 owner earnings annualize to roughly $1.65-1.80 per share on the larger share count. We set the starting level at $1.75: in line with the cycle median and supported by those two quarters, but not lifted to the best quarter. Growth check. Owner earnings per share rose 32% in 2025 ($1.42 to $1.88). Our base case assumes year 1 at $1.75, slightly below that and well below the trailing growth rate. We credit no growth after that. Deposits have shrunk from $22.5 billion at the end of 2022 to $19.7 billion, partly by design because high-cost brokered and public funds were deliberately run off, but they were still falling in the first half of 2026. Management says it is "cautiously optimistic" about modest loan growth, but that is a hope, not a contract. The company's own growth record is acquisitions paid for largely with new shares, which is not self-funded, repeatable growth, so it is left out. Debt. Simmons is a bank, so deposits, Federal Home Loan Bank advances and its $325 million of 6.25% subordinated notes (issued in 2025 to refinance 5% notes) are the raw material of the business, and interest is an operating cost already deducted in owner earnings. We therefore value owner earnings directly and do not subtract borrowings separately. Leverage is reflected in the bear case. Base case, about $29.17 per share. Owner earnings hold flat at $1.75 per share in nominal terms for ten years and beyond, with all of it available for dividends and buybacks because the balance sheet is not assumed to grow. Holding earnings flat in dollars means a slow decline in real terms, which we think is a fair price for a deposit franchise that has served the same communities for over a century but is not currently growing. Discounted at 6%, that is $29.17. Bear case, about $17.52 per share. Three things go wrong, each already visible in the filings. First, the margin benefit fades and earnings fall back toward the 2024 level of about $1.45 as funding competition returns. Second, one bad credit year: real estate is three-quarters of the loan book, commercial net charge-offs already ran at 1.48% in 2025, and we assume a one-time extra loss of about $150 million pre-tax, cutting that year to $0.65 per share. That is well within the bank's capital (common equity Tier 1 of about 11.6% at year-end 2025) and would not require new shares. Third, the deposit base keeps shrinking and acquired deposit relationships keep wearing away, so earnings decline about 2% a year from year 4 forever. Discounted at 6%, that gives $17.52. Bull case, about $36.06 per share. The bank's own levers work. Older fixed-rate loans reprice upward as they mature, adding to the repositioning benefit, so owner earnings reach $2.05 by year 3. Modest organic loan growth of 2% a year then follows, funded by keeping back about $0.29 per share a year of earnings (2% of roughly $14 of tangible equity per share) so capital ratios hold. Earnings stay flat after year 10. Discounted at 6%, that gives $36.06. Margin-of-safety price, $17.50. The range runs from about $17.50 to $36, which is moderate for a bank. From $17.50, if the shares move to base value over three years, the base case implies about 22% a year including roughly $0.86 a year of dividends. From that price the bear case implies roughly the starting value back plus a dividend yield near 5%. The margin-of-safety price is $17.50. The upside depends on the repositioning benefit lasting through a credit cycle, and the bank's history of share-funded acquisitions has repeatedly diluted per-share results. Changes since our previous analysis. Our previous estimates were $13.30 / $29.40 / $39.35 with a $19.10 margin-of-safety price. That work used different discount rates for each case and added an excess-capital amount on top. We now use a single 6% rate, charge risk only through what happens in each case, and deduct loan-loss provisions from earnings. The bear case rises because two quarters of post-repositioning results now show the higher earnings are real, so a fall below the 2024 trough no longer looks like a 10-in-100 outcome. The bull case falls because we no longer add excess capital on top of earnings and we charge for the capital that growth requires. The margin-of-safety price falls to $17.50 because the bear case, not a fixed discount to the base, now sets it. What would make this wrong: a commercial real estate downturn concentrated in Texas or Arkansas larger than one bad year; deposit outflows that force the bank back into expensive wholesale funding; or another large acquisition paid for in shares at a poor price. On the upside, sustained loan growth funded from retained earnings would justify more than our base case. We could not reconcile one item from the filings alone: in 2023-2025, an unusually large reduction in "other assets" lifted reported operating cash flow by $90-264 million a year. We excluded it as a working-capital movement, so it does not affect our figures.