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SIMMONS WON’T SPEND $60 MILLION FROM TREASURY

By Amy Riggin/OF THE COMMERCIAL STAFF
Wednesday, July 8, 2009 12:25 AM CDT

Simmons First National Corp. of Pine Bluff announced Tuesday that it will not participate in the U.S. Treasury’s Capital Purchase Program, meaning it won’t spend the $60 million in funding it was approved for in October.

“The Arkansas economy is doing well relative to many other geographic regions of our country and Simmons First continues to have strong asset quality, liquidity and capital,” said J. Thomas May, chairman and chief executive officer.

May said the decision came after executives monitored economic indicators and determined that the funding wasn’t needed. May has characterized the bank’s possible participation in the program as “simply an issue of insurance.”

“It was all about the state of the economy in that if we had drawn the money down we certainly planned to invest that in the short-term,” he said. “But it was going to be invested in the short-term so that we would be able to exit the program at the earliest possible moment.

“Obviously the earliest possible moment would be when we would see the economy begin to get better.”

May added that as the company monitored changes to the program since its approval in October, “we did not necessarily agree with all those changes” and “decided that the Capital Purchase Program was not in the best interest of our shareholders.”

May said Simmons’ strong balance sheet was “another major deciding factor.”

About 600 banks throughout the U.S. have participated, with Simmons being among the first to be approved. Tuesday’s statement said “funding was delayed due to extensions requested by Simmons First management.”

When Simmons’ shareholders gave executives the thumbs up to participate if they chose to do so during a special February meeting, May mentioned that the money could be used for future mergers and acquisitions.

“I think ultimately that began to change so we never really considered the CPP money as part of our acquisition strategy,” May said Tuesday. “The only way the CPP money could be used for acquisitions is if those dollars were used to acquire troubled banks. That’s not an area that we had a particular interest in.”

But he didn’t rule out future acquisitions.

“While we are not using the CPP in our acquisition strategy, we know that we have more than sufficient capital to be able to consummate an acquisition if we find the right one,” May said. “I think it’s fair to say over the last 10 years we have been very successful in growing through acquisitions and, as we have said at our shareholders meetings, it continues to be part of our strategy.

“Whether we find the right partner over the next 12 to 18 to 24 months will be the deciding factor.”

May noted that CPP rules regarding executive compensation — specifically that funds could not be used for certain things like bonuses — were not a factor.

“That never was an issue for us,” he said.

While the CPP was not the right fit for Simmons, May praised the program as “a very good initiative during this turbulent economy.”

May told shareholders in April that Simmons First, with total assets of $2.9 billion, was in the top 20 percent of its banking peer group in asset quality. It was in the top 20 percent for capital, with $290 million in equity capital.

First quarter earnings were $5.2 million compared to $8.8 million for the same period last year, when it received one-time earnings related to Visa Inc.’s initial public offering. Net interest income for the first quarter increased 2.6 percent to $23.4 million compared to $22.8 million for the same period of 2008.

Simmons is scheduled to release second quarter earnings July 16.

It has eight community banks in Pine Bluff, Lake Village, Jonesboro, Rogers, Searcy, Russellville, El Dorado and Hot Springs.

Shares of Simmons (Nasdaq: SFNC) closed down 43 cents Tuesday at $26.28.

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