OREANDA-NEWS. Simmons First National Corporation today announced net income available to common shareholders of $22.9 million for the second quarter of 2016, an increase of $2.9 million, or 14.4 percent, compared with the same quarter last year. Diluted earnings per share were $0.75, an increase of $0.08, or 11.9 percent.

Included in second quarter 2016 results were $2.2 million of after-tax expenses related to noncore items. Excluding the impact of these items, core earnings were $25.1 million for the second quarter of 2016, an increase of $2.6 million, or 11.8 percent, compared with the same quarter last year. Diluted core earnings per share were $0.82, an increase of $0.07, or 9.3 percent.

Year-to-date net income was $46.4 million, an increase of $17.7 million, or 61.5 percent, compared with the same period of 2015. Year-to-date diluted earnings per share was $1.52, an increase of $0.42, or 38.2 percent. Year-to-date core earnings were $48.3 million, or $1.59 diluted core earnings per share.

“We are pleased with the results from the second quarter as we continue to absorb the acquisitions from the previous two years.  Competitive pressures and artificially low interest rates continue to put pressure on our net interest income but we have done a good job of diversifying our revenue through other lines of business such as our trust operations, mortgage lending, credit card services, and other wealth management offerings.  We will continue to focus on improving our efficiency throughout the remainder of the year,” said George A. Makris, Jr., chairman and CEO. “We also look forward to the completion of the merger with Citizens Bank in Athens, Tenn. later this year and the opportunity to welcome them to the Simmons family.”

Loans

Total loans, including those acquired, were $5.0 billion at June 30, 2016, an increase of $201 million, or 4.2 percent, compared with the same period in 2015. Legacy loans (all loans excluding acquired loans) grew $1.1 billion, or 42.7 percent. On a linked quarter basis, total loan growth was $83.8 million.

Deposits

At June 30, 2016, total deposits were $6.0 billion, a decrease of $142 million, or 2.3 percent, compared with the same period in 2015. Total non-time deposits were $4.8 billion, an increase of $100 million, or 2.1 percent, and comprised 80% of total deposits.

Net Interest Income

The company’s net interest income for the second quarter of 2016 was $66.6 million, a decrease of $6.6 million, or 9.0 percent, from the same period of 2015. This decrease was primarily driven by a $5.4 million decline in yield accretion on acquired loans. Included in interest income was the yield accretion recognized on acquired loans of $4.7 million and $10.1 million for the second quarter of 2016 and 2015, respectively. Net interest margin was 4.17 percent for the quarter ended June 30, 2016, a 30 basis-point decline from the same quarter of 2015. The company’s core net interest margin, excluding the accretion, was 3.88 percent for the second quarter of 2016, a 1 basis-point increase from the same quarter of 2015.

Non-Interest Income

Non-interest income for the second quarter was $36.9 million, an increase of $11.9 million compared with the second quarter of 2015. The increase in non-interest income was primarily due to gains recorded on the sale of securities that totaled $3.4 million as part of the bond portfolio rebalancing strategy.

The elimination of indemnification asset amortization due to the company’s 2015 termination of loss-sharing agreements with the FDIC resulted in a decrease of $3.1 million in losses on FDIC-covered assets in the second quarter compared with the same period in 2015. The remaining increase in non-interest income was due to additional mortgage lending, trust income and investment banking revenue.  

Non-Interest Expense

Non-interest expense for the second quarter of 2016 was $64.1 million, a decrease of $667,000 compared with the second quarter of 2015. Included in the quarter were $372,000 of merger-related expenses and $3.2 million of branch right-sizing expenses related to the closure of ten underperforming branches during the second quarter of 2016.

Salaries and benefits decreased by $2.0 million to $33.1 million in the current quarter of 2016, compared with $35.1 million in the same quarter of 2015. This decrease of 5.7% is a result of the company’s ongoing efficiency initiatives around expense control. This decrease was partially offset by an increase of $836,000 in furniture and equipment expense primarily related to maintenance contracts and equipment rent.

Asset Quality

All acquired loans are recorded at their discounted net present value; therefore, they are excluded from the computations of the asset quality ratios for the legacy loan portfolio, except for their inclusion in total assets.

At June 30, 2016, the allowance for loan losses for legacy loans was $33.5 million. The company's allowance for loan losses on legacy loans at June 30, 2016 was 0.90 percent of total loans and 77 percent of non-performing loans. In the legacy portfolio, non-performing loans as a percent of total loans were 1.17 percent.

The allowance for loan losses for acquired loans was $1.0 million and the acquired loan discount credit mark was $38.3 million. The allowances for loan losses and credit marks provide a total of $72.8 million of coverage, which equates to a total coverage ratio of 1.4 percent of gross loans. The ratio of credit mark and related allowance to acquired loans was 3.0 percent.

The 2016 year-to-date net charge-off ratio, excluding credit cards, was 24 basis points, and the year-to-date credit card charge-off ratio was 1.25 percent.

Capital

At June 30, 2016, common stockholders' equity was $1.1 billion, book value per share was $35.86 and tangible book value per share was $23.43. The company's ratio of stockholders' equity to total assets was 14.48 percent and its ratio of tangible common equity to tangible assets was 10.0 percent.

Simmons First National Corporation

Simmons First National Corporation is a financial holding company headquartered in Pine Bluff, Arkansas, with total assets of $7.5 billion. The company conducts financial operations in Arkansas, Kansas, Missouri and Tennessee. The company’s wholly owned subsidiary, Simmons Bank, offers comprehensive financial solutions delivered with client-centric approach. The company's common stock trades on the NASDAQ Global Select Market under the symbol "SFNC".