Simmons raises US$300m to reposition balance sheet
Simmons First National raised an upsized US$300m late on Monday from an overnight stock sale to help reorganise its underwater securities portfolio.
Stephens, Keefe Bruyette & Woods and Morgan Stanley priced 16.2m shares at US$18.50, the high end of the US$18.25–$18.50 range and a 7.9% discount to Monday's closing price of US$20.08. The banks wall-crossed investors ahead of publicly launching what was to have been a US$250m offering.
The Arkansas-based community bank is using the proceeds to offset US$609m of after-tax losses it expects to incur on the planned sale of a US$2.9bn portfolio of low-yielding securities for US$2.4bn that it had classified as held-to-maturity (HTM) and investing in new, higher-yielding securities.
Simmons’ shares closed above issue price on Tuesday at US$19.71.
The portfolio being sold represents the bulk of the US$3.6bn of HTM securities Simmons held as of June 30.
“We expect this contemplated balance sheet repositioning to improve our net interest margin, increase liquidity for future loan growth and better position our portfolio for potential change in interest rates,” the bank outlined in the offering prospectus.
The balance sheet optimisation and equity sale will be accretive to both earnings and book value, adding 14% to pro forma Q2 earnings per share and increasing book value per share to US$13.41, Simmons outlined in marketing materials, although that assumed a US$250m equity sale.