Simmons, FDIC To End Loss Share Agreements, Plans 3Q Write-off Of $7.5 Million

Simmons First National Corp. has reached an agreement with the Federal Deposit Insurance Corp. that terminates the bank’s loss share agreements related to the bank’s acquisition of assets and assumption of liabilities of four failed banks between 2010 and 2012, the Pine Bluff-based regional bank announced Tuesday.

Under the terms of the agreement, the FDIC made a net payment of $2,368,000 to Simmons First National Bank as consideration for the early termination of the loss share agreements. Based on the agreement, Simmons said it expects to realize a corresponding one-time pre-tax write-off of almost $7.5 million related to the remaining FDIC indemnification assets and settlement charges paid to the federal regulator in the third quarter of its current fiscal year.

“We’re pleased to have successfully negotiated an agreement for the early termination of our loss share agreements with the FDIC,” said George Makris, Simmons First National Corp. chairman and CEO. “We believe that our participation with the FDIC in the resolution of these four troubled banks has been a success, not only for us and the FDIC but also for the customers and communities served by those institutions.”

Makris said the bank determined with the improved economic outlook, it was the right time to “wrap up” the loss share arrangements with the FDIC and transfer the banking assets into its regular banking operations.

“We expect to realize future benefits associated with the termination, such as reduced operating costs, retention of all loss recoveries and simplified financial reporting. However, with the termination of the loss share agreements, we will assume all of the risk of loss associated with any assets or expenses previously covered by the loss share agreements,” the Simmons CEO said.

As a result of entering into the early termination agreements, assets that were covered by the loss share arrangements, including covered loans in the amount of $93.1 million and covered real estate owned in the amount of $12.8 million as of June 30, will be reclassified as non-covered assets as of Sept. 30.

The loans that were previously covered by the loss share agreements will continue to be accounted for as purchased credit impaired loans. In addition, the early termination agreements eliminate the FDIC receivable for loss share agreements, which totaled $7.9 million as of June 30. About $6.6 million of the $13.0 million total indemnification assets as of June 30 was scheduled to be amortized against future earnings.

All rights and obligations of the bank and the FDIC under the FDIC loss share agreements, including the clawback provisions and the settlement of loss share and expense reimbursement claims, have been resolved and terminated under the termination agreement.

In early trading on Wednesday, Simmons shares were down 39 cents at $47.74.