Simmons First Announces 45% Increase in Core Earnings

PINE BLUFF, Ark., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Simmons First National Corporation (Nasdaq:SFNC) today announced record core earnings of $10.7 million for the third quarter of 2014, an increase of $3.3 million, or 45.0%, compared to the same quarter last year. Diluted core earnings per share were a record $0.63, an increase of $0.18, or 40.0%. Core earnings exclude $1.9 million in net after-tax expenses. Including the non-core items, net income was $8.8 million and diluted earnings per share were $0.52.

Year-to-date core earnings were $27.3 million, an increase of $7.5 million, or 37.6%, compared to the same period of 2013. Year-to-date diluted core earnings per share were $1.65, an increase of $0.44, or 36.4%. Year-to-date net income was $23.0 million, or $1.39 diluted earnings per share.

"We are pleased with the financial results from another active quarter. We closed our acquisition of Delta Trust & Bank at the end of August and have our systems conversion scheduled tomorrow. We completed our legacy charter consolidation into Simmons Bank, and again reported record core earnings and record core earnings per share," commented George A. Makris, Jr., Chairman and CEO.

Loans

Total loans, including those acquired, were $2.8 billion at September 30, 2014, an increase of $799 million, or 40.8%, compared to the same period in 2013. Acquired loans increased by $577 million, net of discounts, while legacy loans (all loans excluding acquired loans) grew $222 million, or 12.8%. "We remain encouraged by the consistent double digit legacy loan growth we have seen this year. We continue to achieve nice loan growth in virtually every market we serve, specifically in St. Louis, Wichita, Central Arkansas and in our national equipment finance program," added Makris.

Deposits

At September 30, 2014, total deposits were $3.9 billion, an increase of $1.1 billion, or 37.7%, compared to the same period in 2013. Total non-time deposits totaled $2.9 billion, or 73% of total deposits.

Net Interest Income

The Company's net interest income for the third quarter of 2014 was $41.8 million, an increase of $10.2 million, or 32.3%, from the same period of 2013. This increase was driven by growth in the legacy loan portfolio and earning assets acquired through the Metropolitan and Delta Trust transactions. Net interest margin was 4.36% for the quarter ended September 30, 2014, a 9 basis point increase from the same quarter of 2013. Included in interest income for both periods was the additional yield accretion recognized as a result of updated estimates of the cash flows of the loan pools acquired in the Company's FDIC-assisted transactions. Each quarter, the Company estimates the cash flows expected to be collected from the acquired loan pools, and adjustments may or may not be required. The cash flows estimate has increased based on payment histories and reduced loss expectations of the loan pools. This resulted in increased interest income that is spread on a level-yield basis over the remaining expected lives of the loan pools. The increases in expected cash flows also reduce the amount of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets.

The impact of the adjustments on the Company's financial results for the current reporting period is shown below:

Because these adjustments will be recognized over the remaining lives of the loan pools and the remainder of the loss sharing agreements, respectively, they will impact future periods as well. The current estimate of the remaining accretable yield adjustment that will positively impact interest income is $19.3 million and the remaining adjustment to the indemnification assets that will reduce non-interest income is $10.5 million. Of the remaining adjustments, we expect to recognize $3.6 million of interest income and a $2.9 million reduction of non-interest income, for a net increase to pre-tax income of approximately $0.7 million during the remainder of 2014. The accretable yield adjustments recorded in future periods will change as the Company continues to evaluate expected cash flows from the acquired loan pools.

Non-Interest Income

Non-interest income for the third quarter was $16.0 million, an increase of $5.7 million compared to the third quarter of 2013. Included in non-interest income were $0.9 million in gains from the sale of branches that were closed as part the integration of Metropolitan and $0.8 million from the recovery of Metropolitan loans that were charged off prior to acquisition. The remaining increase in non-interest income was primarily due to additional trust income, service charge and fee income and mortgage lending income resulting from the Metropolitan and Delta Trust acquisitions.

Non-Interest Expense

Non-interest expense for the second quarter of 2014 was $44.4 million, an increase of $13.5 million compared to the same period in 2013. Due to the closing of the Delta Trust acquisition during the quarter, merger related costs for the quarter exceeded those of the same period last year by $3.4 million. Also included in the quarter were $196 thousand of charter consolidation costs from the systems conversion of the three remaining subsidiary banks that were merged into Simmons First National Bank in August. OREO expense increase by $1.5 million, primarily from the write-down of OREO properties to updated appraised values and from property taxes on acquired OREO. The remaining increase in non-interest expense was primarily due to incremental operating expenses of acquired Metropolitan and Delta Trust locations.

Asset Quality

Beginning in 2010, the Company has acquired loans and foreclosed real estate ("OREO") through FDIC-assisted acquisitions. Through the loss share provisions of the purchase and assumption agreements, the FDIC agreed to reimburse the Company for 80% of the losses incurred on the disposition of covered loans and OREO. The acquired loans and OREO and any related FDIC loss share indemnification asset were presented in the Company's financial reports with a carrying value equal to the discounted net present value of expected future proceeds. At September 30, 2014, acquired loans covered by loss share were carried at $118 million, OREO covered by loss share was carried at $15 million and the FDIC loss share indemnification asset was carried at $26 million. Acquired loans and OREO not covered by loss share were carried at $676 million and $38 million, respectively. As a result of using the discounted net present value method of valuing these assets, and due to the significant protection against possible losses provided by the FDIC loss share indemnification, all acquired assets, with the exception of OREO not covered by loss share, are excluded from the computations of the asset quality ratios for the legacy loan portfolio, except for their inclusion in total assets.

"It is important to remember that the acquired non-covered loans are protected by a credit mark and the acquired covered loans are protected by a credit mark and 80% loss coverage by the FDIC," explained Makris. "At September 30, 2014, the allowance for loan losses was $27.1 million and the loan credit mark was $93.9 million, for a total of $121.0 million of coverage. This equates to a total coverage ratio of 4.2% of gross loans. The ratio of credit mark to acquired loans was 10.6%." The Company's allowance for loan losses at September 30, 2014, was 1.38% of total loans and 227% of non-performing loans. Non-performing loans as a percent of total loans were 0.61%. Non-performing assets decreased $1.9 million from the previous quarter to $62.8 million. Through the third quarter of 2014, the year-to-date annualized net charge-off ratio, excluding credit cards, was 0.19%, and the year-to-date annualized credit card charge-off ratio was 1.22%.

Capital

At September 30, 2014, stockholders' equity was $483 million, book value per share was $26.82 and tangible book value per share was $19.72. The Company's ratio of stockholders' equity to total assets was 10.3% and its ratio of tangible common equity to tangible assets was 7.8%.

Simmons First National Corporation

Simmons First National Corporation is an Arkansas based financial holding company with total assets of $4.7 billion and conducting financial operations throughout Arkansas, Kansas and Missouri. The Company's common stock trades on the NASDAQ Global Select Market under the symbol "SFNC".

Conference Call

Management will conduct a conference call to review this information beginning at 3:00 p.m. Central Time on Thursday, October 23, 2014. Interested persons can listen to this call by dialing toll-free 1-866-298-7926 (United States and Canada only) and asking for the Simmons First National Corporation conference call, conference ID 17056028. In addition, the call will be available live or in recorded version on the Company's website at www.simmonsfirst.com.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP). The Company's management uses these non-GAAP financial measures in their analysis of the Company's performance. These measures typically adjust GAAP performance measures to include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or nonrecurring transactions. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward Looking Statements

Statements in this press release that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements of this type speak only as of the date of this news release. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors, including, but not limited to, economic conditions, credit quality, interest rates, loan demand and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect Simmons First National Corporation's financial results is included in its Form 10-K filing with the Securities and Exchange Commission.