Simmons First Announces 47% Increase in Core Earnings

PINE BLUFF, Ark., Jan. 22, 2015 (GLOBE NEWSWIRE) -- Simmons First National Corporation (Nasdaq:SFNC) today announced record core earnings of $11.4 million for the fourth quarter of 2014, an increase of $3.6 million, or 47%, compared to the same quarter last year. Diluted core earnings per share were $0.64, an increase of $0.16. Core earnings exclude $1.2 million in net after-tax earnings. Adjusted for the non-core items, net income was $12.6 million for the fourth quarter of 2014, an increase of $8.9 million, or 234%, compared to the same quarter last year.

Year-to-date core earnings were $38.7 million, an increase of $11.1 million, or 40%, compared to 2013. Year-to-date diluted core earnings per share were $2.29, an increase of $0.60, or 36%. Year-to-date net income was $35.7 million, an increase of $12.5 million, or 54%, compared to 2013. Year-to-date diluted earnings per share were $2.11, an increase of $0.69, or 49%.

"We are pleased with our ability to integrate our acquisitions and continue to make good progress with our efficiency initiatives, both in revenue enhancement and in expense control," commented George A. Makris, Jr., Chairman and CEO.

Loans

Total loans, including those acquired, were $2.7 billion at December 31, 2014, an increase of $333 million, or 13.8%, compared to the same period in 2013. Legacy loans (all loans excluding acquired loans) grew $311 million, or 17.9%. Acquired loans increased by $22 million, net of discounts.

Deposits

At December 31, 2014, total deposits were $3.9 billion, an increase of $163 million, or 4.4%, compared to the same period in 2013. Total non-time deposits totaled $2.9 billion, or 75% of total deposits.

Net Interest Income

The Company's net interest income for the fourth quarter of 2014 was $47.4 million, an increase of $7.8 million, or 19.6%, 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 4.65% for the quarter ended December 31, 2014, a 5 basis point decline 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 acquired loans. Each quarter, the Company estimates the cash flows expected to be collected from the acquired loans, and adjustments may or may not be required. The cash flows estimate has increased based on payment histories and reduced loss expectations of the loans. This resulted in increased interest income recognized during the quarter on certain loans and interest income that is spread on a level-yield basis over the remaining expected lives of 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 loans 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 $17.0 million and the remaining adjustment to the indemnification assets that will reduce non-interest income is $10.6 million. Of the remaining adjustments, we expect to recognize $9.1 million of interest income and a $7.9 million reduction of non-interest income, for a net increase to pre-tax income of approximately $1.2 million during 2015. The accretable yield adjustments recorded in future periods will change as the Company continues to evaluate expected cash flows from the acquired loans.

Non-Interest Income

Non-interest income for the fourth quarter was $21.5 million, an increase of $13.8 million compared to the fourth quarter of 2013. Losses on FDIC covered assets decreased $5.0 million primarily due to lower indemnification asset amortization. Included in non-interest income were $4.6 million in gains from the sale of branch facilities that were closed as part the integration of Metropolitan. 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 a full quarter impact of the Metropolitan and Delta Trust acquisitions.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2014 was $47.0 million, an increase of $5.3 million compared to the same period in 2013. Included in the quarter were $1.2 million of various merger related costs for the Company's acquisition of Delta Trust. During the fourth quarter of 2013, the Company recorded $6.4 million in merger related costs for acquisition of Metropolitan, resulting in a decrease in merger related expenses of $5.2 million. The Company recorded $2.5 million during the quarter for one-time compensation related accruals and change-in-control payments. The Company also funded an endowment for the Simmons First Foundation with a $1.0 million contribution. OREO write-downs resulted in an $833 increase in expense compared to the previous year.  The remaining increase in non-interest expense was primarily due to incremental operating expenses of the 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 December 31, 2014, acquired loans covered by loss share were carried at $107 million, OREO covered by loss share was carried at $12 million and the FDIC loss share indemnification asset was carried at $23 million. Acquired loans and OREO not covered by loss share were carried at $576 million and $33 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 December 31, 2014, the allowance for loan losses was $29.0 million on legacy loans and $1.0 million on covered loans, and the loan credit mark was $77.2 million, for a total of $107.2 million of coverage. This equates to a total coverage ratio of 3.8% of gross loans. The ratio of credit mark and related allowance to acquired loans was 10.3%." The Company's allowance for loan losses at December 31, 2014, was 1.41% of total loans and 223% of non-performing loans. Non-performing loans as a percent of total loans were 0.63%. Non-performing assets decreased $4.8 million from the previous quarter to $58.0 million. For 2014, the year-to-date net charge-off ratio, excluding credit cards, was 0.20%, and the year-to-date credit card charge-off ratio was 1.27%.

Capital

At December 31, 2014, stockholders' equity was $494 million, book value per share was $27.38 and tangible book value per share was $20.15. The Company's ratio of stockholders' equity to total assets was 10.7% and its ratio of tangible common equity to tangible assets was 8.1%.

Simmons First National Corporation

Simmons First National Corporation is an Arkansas based financial holding company with total assets of $4.6 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, January 22, 2015. 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 61558218. 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.