UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Exchange Act of 1934
Date
of
Report (Date of earliest event reported) July 21, 2005
SIMMONS
FIRST NATIONAL CORPORATION
(Exact
name of registrant as specified in its charter)
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Arkansas
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0-6253
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71-0407808
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(State
or other jurisdiction
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(Commission
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(I.R.S.
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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501
Main Street, Pine Bluff, Arkansas
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71601
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(Address
of principal executive offices)
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(Zip
Code)
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(870)
541-1000
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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ITEM:
2.02 RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The
following text is the script used by J. Thomas May, Chairman and Chief Executive
Officer, Barry L. Crow, Chief Operating Officer, and Robert A. Fehlman, Chief
Financial Officer, of Simmons First National Corporation during the Company’s
Second Quarter Earnings Release Conference Call held at 3:00 P.M. Central Time
on July 21, 2005.
Good
afternoon, I am Bob Fehlman, Chief Financial Officer of Simmons First National
Corporation, and we want to welcome you to our second quarter earnings
teleconference and web cast. Here with me today is Tommy May, our Chief
Executive Officer and Barry Crow, our Chief Operating Officer.
The
purpose of this call is to discuss the information and data provided by the
Company in our regular quarterly earnings release issued this morning. We will
begin our discussion with prepared comments, and then we will entertain
questions. We have invited the analysts from the investment firms that provide
research on our Company to participate in the question and answer session.
Our
other guests in this conference call are in a listen-only mode.
Our
earnings release has been filed on Form 8-K and is also located at
simmonsfirst.com in the Investor Relations earnings release section of our
website.
I
would
remind you of the special cautionary notice regarding forward-looking statements
and that certain matters discussed in this presentation may constitute
forward-looking statements and may involve certain known and unknown risks,
uncertainties and other factors which may cause actual results to be materially
different from our current expectations, performance or achievements. Additional
information concerning these factors can be found in the closing paragraphs
of
our press release and in our Form 10-K.
With
that
said, I will turn the call over to Tommy May.
Thank
you
Bob, and welcome everyone to our second quarter conference call. In our press
release issued earlier today, Simmons First National Corporation reported record
second quarter 2005 earnings of $6.9 million, or $0.47 diluted EPS.
This
represents a $655,000, or $0.05 increase in diluted EPS over the same period
last year, an increase of approximately 10.4%.
For
the
six-month period ended June 30, 2005, net income was $12.8 million,
an
increase of $1.1 million, or a 9.4% increase over the same period in 2004.
Diluted earnings per share for the six-month period were $0.87, an increase
of
$0.08, or 10.1%.
The
second quarter results were excellent for Simmons First. We are very pleased
with our earnings performance, loan growth, and continued improvement in asset
quality. The increase in earnings over the same quarter last year is primarily
the result of an improvement in net interest margin, driven by the growth in
our
loan portfolio, coupled with a modest 1.9% increase in non-interest
expense. Now let’s take a few minutes and discuss each of these
areas.
On
a
quarter over quarter basis, the Company’s net interest margin increased 10 basis
points to 4.15%. This increase is primarily attributable to growth in the loan
portfolio and a reduction in interest expense associated with the 2004
prepayment of $17.3 million of trust preferred securities. While we are pleased
with the 10 basis point margin improvement during the second quarter, we have
experienced, as anticipated in our last earnings release, a slight compression
of 2 basis points on a linked quarter basis due to competitive pressures on
deposit repricing. In all likelihood, we will see a continuation of deposit
repricing as interest rates continue to rise from 50 year lows. As noted in
our
last conference call, we continue to anticipate a flat to slightly compressed
margin for the balance of 2005.
Non-interest
income for Q2 2005 was $10.8 million. While this total is relatively flat when
compared to the same period in 2004, there are several items that warrant
discussion.
Like
most
of the banking industry, we experienced a decline in the volume of mortgage
production when compared to Q2 2004. For Q2 2005, mortgage revenue decreased
$330,000 from the same quarter last year.
As
you
will recall, we reported in 2004 that we increased our student loan sales due
to
competitive pressures from consolidation lenders. As expected, student loan
sales returned to a more normal level in 2005. As a result, premiums from the
sale of student loans in Q2 2005 decreased by approximately $200,000.
During
Q2
2005, we sold certain investment securities obtained in a prior acquisition
that
did not fit our current investment portfolio strategy. As a result of
this
liquidation, we recognized a one-time after-tax loss
of $168,000.
On
a
positive note, service charges on deposit accounts increased $386,000, or 10%
over the same period last year. This increase can be primarily attributed to
normal growth in transaction accounts and improvements in the fee structure
associated with our deposit accounts.
As
we
discussed in our previous earnings teleconference, we have invested $25 million
in Bank Owned Life Insurance. For Q2 2005, this investment contributed
approximately $190,000 on an after-tax basis to non-interest income. Since
these
dollars were previously an earning asset, it should be noted that the net pickup
is approximately $100,000 after-tax, on a quarterly basis.
Now,
let
me move to the expense category. Non-interest expense for the second quarter
was
$21.0 million, an increase of $397,000, or 1.9% from the same period in 2004.
While we are very pleased with this modest increase, we do expect to see
increases in non-interest expense related to the previously announced expansion
of our branching network. Later in this discussion, we will give you an update
on our expansion progress.
Shifting
our focus to the loan portfolio, we reported total loans of $1.7 billion,
an increase of $119 million, or 7.7%. The growth was attributable to increased
demand experienced in the commercial and real estate loan portfolios, which
in
aggregate increased 11%. However, as we have discussed in our last several
teleconferences, we continue to experience significant competitive pressure
from
the credit card industry and financing incentives from automobile
manufacturers.
Over
the
last two years, our credit card portfolio has decreased by approximately $10
million per year, and we anticipate the same reduction relative to the average
portfolio for 2005. As noted in our Q2 2005 conference call, in order to reverse
this trend, we have introduced several new initiatives to make our product
more
competitive. Let me take a moment to update you on the status of these
initiatives.
We
have
been relatively successful in our primary initiative to move as many qualifying
accounts as possible from our standard VISA product to our Platinum VISA Rewards
product. To date, we have converted 8,000 accounts, or approximately 30% of
the
targeted accounts, to the Platinum card. Additionally, we have begun to see
an
increase in volume from our expanded rewards program. Needless to say, our
credit card portfolio carries a very significant potential premium that is
not
reflected on our balance sheet, and is a significant contributor to the earnings
of the Company.
We
are
very pleased with the trend we see, as asset quality for the second quarter
continued to strengthen. Non-performing assets decreased by $2.9 million from
the same period last year, a 20% decrease. On a quarter over quarter basis,
the
non-performing asset ratio improved from 94 basis points to 70 basis points,
a
24 basis point improvement. On a linked quarter basis, non-performing assets
decreased by approximately $1.6 million. Non-performing loans to total loans
improved to 61 basis points from 83 basis points. The allowance for loan losses
improved to 267% of non-performing loans as of June 30, 2005 compared to 213%
as
of June 30, 2004. At quarter end, the allowance for loan losses equaled 1.63%
of
total loans.
The
annualized net charge-off ratio for the second quarter of 2005 was 33 basis
points. Excluding credit cards, the annualized net charge-off ratio was 11
basis
points. As a reminder, the credit card net charge-offs as a percent of the
credit card portfolio was 2.68% for Q2 2005, 300 basis points below the industry
average of 5.68%.
The
Company’s stock repurchase program authorizes the repurchase of up to 5% of the
outstanding common stock, or approximately 730,000 shares. During Q2 2005,
the
Company repurchased approximately 36,000 shares. Year to date the Company has
repurchased approximately 297,000 shares of stock with a weighted average
repurchase price of $25.74 per share. Of these shares, 47,000 were a part of
our
repurchase plan, while 250,000 shares were negotiated in a private transaction
that was outside of our plan. There are approximately 618,000 shares remaining
under the current repurchase plan.
Let
us
take a minute to update you on our current branch expansion plans. You will
recall that our expansion focus is on the growth markets of Arkansas.
Construction is underway on a new branch facility in Bentonville, our first
entry into that fast-growing community. We expect this branch to open in Q4
2005. When this branch is completed, we will have 11 financial centers in
Northwest Arkansas MSA, the fastest growing region of Arkansas.
Construction
has begun on a new branch facility in Van Buren, which compliments our branch
network in Ft. Smith, the second largest city in Arkansas. When this branch
is
completed in the fall of 2005, we will have 5 financial centers in the
Fort
Smith area.
In
Central Arkansas, we have just opened a new branch in Little Rock, have another
branch under construction in Little Rock, and are nearing completion on a
facility in Conway. When these new locations come on line, we will have 9
financial centers in the Little Rock MSA.
In
addition, we have acquired or are in the process of acquiring property for
expansion in 2006. These locations include Rogers, El Dorado, Beebe,
Ft. Smith, Paragould, and Little Rock.
We
remind
our listeners that Simmons First experiences seasonality in our quarterly
earnings due to our agricultural lending and credit card portfolios and
quarterly estimates should always reflect this seasonality.
As
an
additional note, we reported at our annual shareholders’ meeting in April that
Barry Crow, our Executive Vice President and Chief Operating Officer, has
announced his retirement, effective December 31, 2005. As you already know,
Bob
Fehlman was promoted last year to Chief Financial Officer as part of our overall
succession planning.
This
concludes our prepared comments and we would like to now open the phone line
for
questions from our analysts. Let me ask Lori to come back on the line and,
once
again, explain how to queue in for questions.
SIGNATURE
Pursuant
to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly
caused this report to be signed on its behalf by the undersigned, hereunto
duly
authorized.
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SIMMONS
FIRST NATIONAL CORPORATION |
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| Date: July
21, 2005 |
By: |
/s/
Robert A. Fehlman
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Robert
A. Fehlman, Senior Vice President
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and
Chief Financial
Officer
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