Bank Earnings Meet Expectations
Last updated Thursday, October 16, 2008 5:29 PM CDT in Business
By Kim Souza
THE MORNING NEWS
SPRINGDALE -- Another Arkansas bank reported respectable earnings to its shareholders Thursday, sending the stock of Pine Bluff-based Simmons First National Corporation up 13.7 percent by the final bell. After a week of ups and downs, Simmons First shares closed at $30.71, up $4.61 -- recovering all the losses from earlier in the week.
Matt Olney, analyst with Stephens Inc., predicted the bank would earn 46 cents per share in the quarter. Simmons First delivered exactly that, albeit 7 cents shy of the results the bank reported a year earlier.
The bank reported a net income of $6.47 million in the third quarter ending Sept. 30, compared to $7.5 million a year ago. The 13 percent decline in the period was directly related to a $2.21 million loan-loss provision made in the quarter. The bank said it made a special $500,000 loan-loss provision for its Northwest Arkansas division in the quarter, because of challenges in the regional economy.
CEO J. Thomas May told investors during a Thursday earnings call the bank would continue to aggressively monitor the region's progress and expects conditions to worsen before they improve by early 2010.
May said loans in Northwest Arkansas represent only 10.5 percent of the bank's total consolidated portfolio, and the bank has a seasoned veteran management team in place to work through the challenges.
The bank also indicated it took a $75,000 impairment charge in the recent quarter related to stock ownership in Fannie Mae, the mortgage giant taken over by the federal government last month.
During the quarter, the bank secured $55 million from the Home Loan Bank of Dallas to funnel extra liquidity throughout its eight operation regions, May said.
"It sounds like the bank is proactively dealing with the difficult operating conditions of tighter liquidity with its borrowings. This is a relatively cheap source of money for banks," said Tim Yeager, Arkansas Bankers chair at the University of Arkansas.
Simmons grew its total deposits in the period to $2.3 billion, up 5.6 percent from a year ago. The bank has recently focused on reducing its time deposits, a more expensive form of money, and increasing non-time core deposits such as savings money market accounts. In the past year the bank has grown savings deposits by $293 million, including $130 million in new money, May said.
The bank grew its total loans by 3.3 percent to $1.94 billion in the recent quarter -- attributed to real estate, credit card and student loans. May was pleased with the loan growth, despite fewer opportunities in the pipeline during the economic downturn.
Nonperforming loans were $14 million at the end of the quarter, compared with $10 million a year ago. The real estate and commercial loan sectors each showed rising delinquencies while consumer delinquencies shrank.
While problem loans continue to weigh down earnings, the bank said it holds no subprime assets in its portfolio and has a construction concentration of only 11.7 percent of the total loans it owns, "favorable to the industry average," May said.
As a credit card lender, the bank said it has opened 4,000 new accounts this year and has not seen a dramatic uptick in those delinquencies at this point. He credits the sector's performance to underwriting, but has made allowances for some softening in the coming months.
At A Glance
Simmons First National Bank
Sept. 08 Sept. 07 Pct. change
Earnings Per Share 46 cents 53 cents -13.2
Net Income $6.74 million $7.5 million -13.6
Return on Equity 9.11 11.16 -18.6
Total Assets $2.86 billion $2.72 billion 5.1
Return on Assets 0.89 1.11 -19.8
Source: Simmons First National Corporation
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