| FOR IMMEDIATE RELEASE: | January 19, 2012 |
SIMMONS FIRST ANNOUNCES FOURTH QUARTER EARNINGS
Pine Bluff, AR – Simmons First National Corporation (NASDAQ-GS: SFNC) today announced net income of $6.3 million and diluted earnings per share of $0.37 for the quarter ended December 31, 2011. Regarding the quarterly earnings, J. Thomas May, Chairman and CEO, commented, “Because the fourth quarter of 2010 included a considerable non-core net gain, there is a significant variance when comparing quarter to quarter earnings results. Obviously, there is a lot of noise in our fourth quarter comparative results due to the October 15, 2010, FDIC-assisted acquisition in Kansas. After taxes, the combined fourth quarter 2010 non-recurring items from that acquisition contributed $9.7 million to net income, or $0.56 to diluted earnings per share. After adjusting for the acquisition, comparable core earnings for the fourth quarter 2010 were $6.9 million, or $0.40 diluted core earnings per share.”
For the year ended December 31, 2011, net income was $25.4 million, or $1.47 diluted earnings per share, compared to $37.1 million, or $2.15 diluted earnings per share for the same period in 2010. “Again,” added May, “GAAP results include non-recurring items from our 2010 acquisitions, along with other one-time income/expense items, which can distort comparative operating results. Normalizing for the non-recurring items in 2010 and 2011, core earnings for the year ended December 31, 2011, were $25.0 million, or $1.45 core earnings per share, compared to $26.0 million, or $1.51 core earnings per share.”
Total assets were $3.3 billion at December 31, 2011, unchanged from December 31, 2010.
Loans
Total loans, including those covered by FDIC loss share agreements, were $1.7 billion at December 31, 2011, a decrease of $177 million, or 9.3%, from the same period in 2010. “In our legacy portfolio, we experienced a decrease of $104 million, or 6.2%, compared to December 31, 2010. Additionally, like the rest of the financial industry in Arkansas, we continue to experience weak loan demand as a result of the overall general economic environment. We believe loan demand is likely to remain soft through the first quarter of 2012, and likely into the second quarter, but we are cautiously optimistic relative to improved loan demand in the last half of 2012,” commented May. Loans covered by FDIC loss share agreements, which provide 80% Government guaranteed protection against credit risk on those covered assets, were $158 million at December 31, 2011, compared to $232 million at December 31, 2010.
Deposits
At December 31, 2011, total deposits were $2.7 billion, an increase of $41 million, or 1.6%, compared to the same period in 2010. The December 31, 2011, deposits include $179 million of deposits in Missouri and Kansas. “While we continue our efforts to manage our high levels of liquidity, we remain focused on creating core deposit growth. We are very pleased with our ratio of non-time deposits as a percent of total deposits, which is a very favorable 67%,” added May.
Net Interest Income
The Company’s net interest income for the fourth quarter of 2011 increased 3.9% to $27.3 million compared to the same period of 2010. The increase was primarily due to additional yield accretion recognized as a result of updated estimates of the cash flows of the loan pools acquired in the Company’s 2010 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. During the fourth quarter of 2011, 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 was spread on a level-yield basis over the remaining expected lives of the loan pools. The increases in expected cash flows also reduced the amount of expected reimbursements under the loss sharing agreements with the FDIC, which are recorded as indemnification assets. The impact of the fourth quarter adjustments on the Company’s financial results for the current reporting period is shown below:
| | | Three Months Ended | | Year Ended |
| (In thousands, except basis points data) | | December 31, 2011 | | December 31, 2011 |
| Impact on net interest income/ | | | | | | | | | | | | | | | | |
| net interest margin (in basis points) | | $ | 1,124 | | | | 15 bps | | | $ | 1,124 | | | | 4 bps | |
| Non-interest income | | | (978 | ) | | | | | | | (978 | ) | | | | |
| Net impact to pre-tax income | | $ | 146 | | | | | | | $ | 146 | | | | | |
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 $22.6 million and the remaining adjustment to the indemnification assets that will reduce non-interest income is $19.9 million. Of the remaining adjustments, we expect to recognize $11.0 million of interest income and a $9.7 million reduction of non-interest income during 2012. The accretable yield adjustments recorded in future periods will change as we continue to evaluate expected cash flows from the acquired loan pools. Net interest margin was 3.76% for the quarter ended December 31, 2011, an increase of 16 basis points from the fourth quarter of 2010.
Non-Interest Income
Non-interest income for the fourth quarter of 2011 was $12.8 million, a decrease of $20.8 million, or 61.8%, compared to the same period last year. “As I mentioned earlier, the fourth quarter of 2010 was a very noisy quarter, including $18.6 million of non-interest income from the bargain purchase gain and liquidation of the acquired investment portfolio related to our FDIC acquisition in Olathe, Kansas. On a normalized basis, non-interest income in the fourth quarter of 2011 decreased by $2.2 million, or 14.8%. Approximately $1.0 million of the decrease was due to reductions of the indemnification assets resulting from increased cash flows expected to be collected from the FDIC covered loan portfolios,” reiterated May.
Non-Interest Expense
Non-interest expense for the fourth quarter of 2011 was $28.5 million, a decrease of $2.0 million, compared to the same period in 2010. Non-interest expense in the fourth quarter of 2010 includes $2.0 million of merger related costs associated with the Company’s 2010 FDIC-assisted transaction. “Normalizing for the non-recurring acquisition costs, non-interest expense remained relatively flat as a result of the implementation of our efficiency initiatives and a decrease in deposit insurance premiums caused by changes in the FDIC’s assessment base and rates,” according to May.
Asset Quality
During 2010, the Company 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 such loans and OREO. The loans and OREO covered by the FDIC loss share agreements and the related FDIC loss share indemnification asset were presented in the Company's financial reports as "covered" assets (i.e., covered by the FDIC loss share agreements) with a carrying value equal to the discounted net present value of expected future proceeds. At December 31, 2011, loans covered by loss share were carried at $158 million (net of discount), OREO covered by loss share was carried at $12 million (net of discount) and the FDIC loss share indemnification asset was carried at $48 million. As a result of the FDIC loss share indemnification related to these assets and the discounted net present value method of valuing these assets, such assets are excluded from the computations of the following asset quality ratios, except for their inclusion in total assets.
The Company's allowance for loan losses was $30.1 million at December 31, 2011, or 1.91% of total loans and 186% of non-performing loans. Non-performing assets as a percent of total assets were 1.18% as of December 31, 2011, a decrease from 1.24% as of September 30, 2011. Non-performing loans as a percent of total loans were 1.02% as of December 31, 2011, a decrease from 1.14% as of September 30, 2011. These ratios include $2.5 million of Government guaranteed student loans that were over 90 days past due at the end of the quarter. Excluding the guaranteed past due student loans, non-performing assets as a percent of total assets were 1.10% and non-performing loans as a percent of total loans were 0.87%. “One of the strengths of our Company has always been the strength of our asset quality. Our ratio of non-performing assets continues to rank in the 82nd percentile of our peer group, which is a significant achievement considering the challenges of the economy,” commented May.
Excluding credit cards, the Company's annualized net charge-off ratio was 0.24% for the fourth quarter of 2011 and 0.30% for the full year of 2011. The credit card annualized net charge-off ratio was 2.20% for the fourth quarter and 2.06% for the full year. The Company’s credit card loss ratio is more than 300 basis points below the most recently published credit card charge-off industry average of over 5%.
Capital
At December 31, 2011, stockholders' equity was $408 million, book value per share was $23.70 and tangible book value per share was $20.09. The Company's ratio of stockholders' equity to total assets was 12.3% and its ratio of tangible stockholders’ equity to tangible assets was 10.6%, as of December 31, 2011.
“Our exceptional level of risk-based capital puts us in the 94th 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 December 31, 2011, the Company’s regulatory capital ratios remain significantly higher than regulatory “well capitalized” guidelines:
| | | | “Well Capitalized” | | | SFNC | | |
| | Tier 1 Leverage Ratio | | | 5.00 | % | | | 11.86 | % | |
| | Tier 1 Risk-Based Capital Ratio | | | 6.00 | % | | | 21.58 | % | |
| | Total Risk-Based Capital Ratio | | | 10.00 | % | | | 22.83 | % | |
Simmons First National Corporation is an eight 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 88 offices, of which 84 are financial centers, in 47 communities in Arkansas, Missouri and Kansas. 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, January 19, 2012. Interested persons can listen to this call by dialing 1-877-723-9522 (United States and Canada only) and asking for the Simmons First National Corporation conference call. A replay of the call will be available through 5:00 p.m. Central Time on January 26, 2012, by dialing 1-888-203-1112. The passcode for the replay is 7792047. 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 non-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.
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FOR MORE INFORMATION CONTACT:
DAVID W. GARNER
Senior Vice President and Investor Relations Officer
Simmons First National Corporation
(870) 541-1000
