Simmons First National Corp. (Nasdaq: SFNC) this week terminated a Federal Deposit Insurance Corp. loss-share agreement on a failed bank purchase that brought the Pine Bluff, Ark.-based company into Springfield and Missouri.
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May 2008, the Missouri Division of Finance shut down Southwest Community Bank, and that same month, with FDIC assistance, Simmons First bought the troubled bank. On Tuesday, Simmons First accepted a payment of $2.4 million from the FDIC to terminate the loss-share agreement for Southwest Community, as well as three other troubled banks the company bought in 2010 and 2012, according to a news release.
“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,” Simmons First Chairman and CEO George Makris said in the release. “In light of the improved economic environment, we’ve determined that the time is right to wrap up the loss-share arrangements with the FDIC and transfer these banking assets into our regular banking operations.”
The company expects to take a one-time, pretax charge of around $7.5 million in FDIC write-offs.
Under loss-share agreements, the FDIC absorbs a portion of the loss on assets to minimize risk. Terminating the agreements on the four banks means Simmons First will lose that coverage on $93.1 million in loans and $12.8 million in covered real estate. They’ll be reclassified as noncovered assets on Sept. 30, according to the release.
“We expect to realize future benefits associated with the termination, such as reduced operating costs, retention of all loss recoveries and simplified financial reporting,” Makris said in the release. “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.”
On May 14, 2010, Simmons First purchased Southwest Community’s $92.7 million in assets, which included $64.7 million in loans and other real estate, $25.7 million in cash and $6.1 million in investment securities. The company also agreed to assume $97.5 million in liabilities, including $97.3 million in deposits, according to a financial statement provided to Springfield Business Journal.
The other terminated loss-share agreements covered the assets of Olatha, Kan.-based Securities Savings Bank, which Simmons First bought in 2010, and Sedalia-based Excel Bank and St. Louis-based Truman Bank, both of which it picked up in 2012.
SFNC shares were trading at $48.79 as of 10:20 a.m., just under a 52-week high of $48.85.
