Pine Bluff, AR – Simmons First National Corporation (NASDAQ-GS: SFNC) today announced core first quarter 2013 net income of $6.1 million and diluted core earnings per share of $0.37. Core earnings exclude $146,000 in after-tax merger related expenses associated with the Company’s 2012 FDIC-assisted acquisitions. Including the merger related expenses, net income for the first quarter of 2013 was $5.9 million, or $0.36 diluted earnings per share.
“Considering interest rates continue at historical lows and due to the seasonality that we experience in the first quarter each year, we were pleased with our overall earnings performance. More so, we were pleased with the positive trends in our balance sheet, as reflected in our normalized organic loan growth of approximately 4%, which enabled us to produce a net interest margin of 4.01%. The organic loan growth, coupled with strong asset quality, bodes well for the balance of the year,” commented J. Thomas May, Chairman and CEO.
Total loans, including those acquired, were $1.8 billion at March 31, 2013, an increase of $176.6 million, or 10.7%, compared to the same period in 2012. Loans acquired in FDIC-assisted acquisitions grew $130.5 million, net of discounts, and legacy loans (excluding acquired loans) grew $45.4 million, or 2.9%. “This was the second consecutive quarter of organic loan growth. While still not enough to call a trend, we believe it is very positive in that the growth is coming throughout our markets in Arkansas, Kansas and Missouri. Needless to say, the economy remains in a slow recovery, which makes this growth even more significant,” added May.
At March 31, 2013, total deposits were $2.9 billion, an increase of $238 million, or 9.0%, compared to the same period in 2012. Total non-time deposits totaled $2.0 billion, or 71% of total deposits.
Net Interest Income
The Company’s net interest income for the first quarter of 2013 was $30.1 million, an increase of $2.4 million, or 8.5%, from the same period of 2012. Net interest margin was 4.01% for the quarter ended March 31, 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 2010 FDICassisted 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:
Three Months Ended
(In thousands) March 31
Impact on net interest income $ 2,947 $ 3,184
Non-interest income (2,828) (2,778)
Net impact to pre-tax income $ 119 $ 406
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 $22.1 million and the remaining adjustment to the indemnification assets that will reduce non-interest income is $19.1 million. Of the remaining adjustments, we expect to recognize $8.5 million of interest income and an $8.2 million reduction of non-interest income, for a net addition to pre-tax income of approximately $270,000, during the remainder of 2013. 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 for the first quarter was $11.3 million, an increase of $590,000, or 5.5%, compared to the first quarter of 2012.
Non-interest expense for the first quarter of 2013 was $31.9 million, an increase of $3.3 million compared to the same period in 2012. “Included in the quarter were $240,000 in merger related expenses and $2.9 million in normal operating expenses attributable to our 2012 FDIC-assisted acquisitions. Normalized for these acquisition related items, non-interest expense for the quarter increased by only 0.4%. Obviously, we continue to have excellent expense control as a result of the implementation of our efficiency initiatives,” added May.
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 March 31, 2013, acquired loans covered by loss share were carried at $182 million, OREO covered by loss share was carried at $28 million and the FDIC loss share indemnification asset was carried at $71 million. Acquired loans and OREO not covered by loss share were carried at $79 million and $9 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.
The Company’s allowance for loan losses was $27.7 million at March 31, 2013, or 1.75% of total loans and 237% of non-performing loans. Non-performing loans as a percent of total loans were 0.74% as of March 31, 2013, unchanged from December 31, 2012. “Included in our non-performing assets was $9.5 million, net of a credit mark, of non-covered OREO we acquired in our two recent FDIC-assisted transactions. Normalizing for the acquired OREO, our legacy non-performing assets decreased $0.6 million from the previous quarter. Our legacy non-performing assets as a percent of total assets of 0.94% as of March 31, 2013 continues to compare favorably to the industry and our peer group,” commented May. For the first quarter, the annualized net charge-off ratio, excluding credit cards, was 0.11%, and the annualized credit card charge-off ratio was 1.53%.
At March 31, 2013, stockholders’ equity was $406 million, book value per share was $24.62 and tangible book value per share was $20.73. The Company’s ratio of stockholders’ equity to total assets was 11.5% and its ratio of tangible common equity to tangible assets was 9.8%, as of March 31, 2013.
“Our exceptional level of capital puts us in the 80th percentile of our peer group and allows us to actively pursue the right opportunities that meet our strategic plan regarding mergers and acquisitions,” continued May. As of March 31, 2013, the Company’s regulatory capital ratios remain significantly higher than regulatory “well capitalized” guidelines:
“Well Capitalized” SFNC
Tier 1 Leverage Ratio 5.00% 10.83%
Tier 1 Risk-Based Capital Ratio 6.00% 19.63%
Total Risk-Based Capital Ratio 10.00% 20.88%
Stock Repurchase Program
During the first quarter of 2013, the Company repurchased approximately 94,000 shares at an average price of $25.59. The Company plans to continue to allocate its earnings, less dividends, to its stock repurchase program.
Simmons First National Corporation
Simmons First National Corporation is an eigh- bank financial holding company with community banks in Pine Bluff, Lake Village, Jonesboro, Rogers, Searcy, Russellville, El Dorado and Hot Springs, Arkansas. The Company’s eight banks conduct financial operations from 96 offices, of which 92 are financial centers, in 55 communities in Arkansas, Missouri and Kansas. The Company’s common stock trades on the NASDAQ Global Select Market under the symbol “SFNC”.
Management will conduct a conference call to review this information beginning at 3:00 p.m. Central Time on Thursday, April 18, 2013. Interested persons can listen to this call by dialing toll-free 1-888-428-9480 (United States and Canada only) and asking for the Simmons First National Corporation conference call. 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 exclude the effects of the amortization of intangibles and 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.