A little short-term pain for long-term gain. That sums up Simmons First’s third quarter earnings.
Simmons First National Corp. third quarter profits fell short of last year’s results and analysts’ expectation on Thursday as the Pine Bluff-based bank absorbs two recent FDIC-backed out-of-state acquisitions.
For the period ended Sept. 30, Simmons reported third quarter net income of $7.6 million of 44 cents per share, down 1.3 percent compared to $7.7 million or 54 cents for the same period in 2009. Wall Street, on average, expected the Arkansas bank to report third quarter earnings of 46 cents per share, according to Thomson Reuters.
Simmons Chairman and CEO J. Thomas May said that while the impact of recent acquisition activity has negatively affected the past three quarters, the Arkansas bank should see a financial boost in the fourth quarter.
"Overall, we are pleased with our third quarter results. Highlights of the quarter include record net interest income, improvement in our net interest margin and continued good asset quality compared to the rest of the industry," said May. "While the impact of our 2009 stock offering was dilutive to our third quarter EPS (earnings per share) by approximately $0.09, the excess capital positions us to continue to take advantage of unprecedented acquisition opportunities through FDIC assisted transactions of failed banks.”
“We have seen the dilutive impact of the offering over the past three quarters; in contrast, we will see the accretive impact from our two acquisitions beginning in the fourth quarter," May added.
Earlier in the month, Simmons reached an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase substantially all of the assets and to assume substantially all of the deposits and certain other liabilities of Olathe, Kan.-based Security Savings Bank. As a result of the acquisition, Simmons entered Kansas for the first time with nine branches located in the communities of Olathe, Overland Park, Leawood, Salina and Wichita.
In May, Simmons reached its first deal with the FDIC to purchase a bank outside the state of Arkansas. That deal allowed the Arkansas regional bank to purchase substantially all of the assets and to assume substantially all of the deposits and certain other liabilities of Southwest Community Bank in Springfield, Mo. In the second quarter, Simmons recognized a pre-tax gain of $3.0 million on the transaction, and the acquisition also contributed nine cents per share to the company’s earnings.
Overall, Simmons’ total assets for the quarter were $3.0 billion, an increase of 3.5% from $2.9 billion at September 30, 2009.
Total loans, excluding those covered by FDIC loss share agreements, were $1.7 billion at September 30, 2010, a decrease of 9.6 percent from the same period in 2009.
"As expected, we saw a $41 million decrease in our student loan portfolio as a result of the decision by the administration and congress to eliminate the private sector from providing student loans,” May said. “Additionally, like the rest of the industry, we continue to experience weak loan demand as a result of the recession. We believe loan demand is likely to remain soft for the balance of 2010, but we are committed and positioned to meet the borrowing needs of our consumer and business customers."
Simmons‘ total deposits for the quarter were $2.4 billion, an increase of $50.9 million, or 2.2% compared to the same period in 2009. Simmons’ stockholders’ equity was $384 million.
At Thursday’s opening bell, Simmons’ shares were trading at $29.22, up 21 cents.