Simmons Bank ends FDIC loss share agreement

The holding company for Simmons First National Bank announced this week that the bank has entered into an understanding to terminate a number of loss share agreements with the Federal Deposit Insurance Corp., according to a release.

The loss share agreements — essentially a tool that allows the FDIC to absorb a certain amount of losses and protect the buyer during the the takeover of a failed asset — were related to the Simmons’ acquisition of assets and assumption of liabilities of four failed banks through FDIC-assisted transactions in 2010 and 2012, according to the release.

Simmons participated in the acquisition of failed banks in various communities across Kansas and Missouri during the financial crisis, including Security Savings Bank, which had two branches in Wichita. Security Savings locations were shut down by regulators in October 2010.

“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,” said George Makris, Simmons First National Corp. chairman and CEO. “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.”

Under the terms of the agreement, the FDIC made a net payment of nearly $2.4 million to the bank as consideration for the early termination of the loss share agreements. In the third quarter of this fiscal year, the company expects to realize a corresponding one-time pre-tax charge of almost $7.5 million resulting primarily from the write-off of the remaining FDIC indemnification assets and settlement charges paid to the FDIC, according to the release.

As a result of entering into the early termination agreements, assets that were covered by the loss share arrangements, including covered loans in the amount of $93.1 million and covered real estate owned in the amount of $12.8 million as of June 30, will be reclassified as non-covered assets as of Sept. 30, according to the release.

“Overall this is a very positive step for both the bank and our clients,” said Andrea Andersen Scarpelli, who works out of Wichita as Simmons Bank’s community president and regional senior credit officer. “Our group has worked very hard over the last several years to reach agreements with clients to reduce the overall losses that would have been greater if the FDIC had taken control of the assets. By exiting the agreement, we will continue to retain these assets and fold them into our remaining network to continue to serve the communities we operate in.”

Arkansas-based Simmons First National Corp. claims assets of more than $7.5 billion and conducts financial operations in Arkansas, Kansas, Missouri and Tennessee. Simmons Bank has two Wichita locations.

This story was originally published September 18, 2015 at 1:31 PM with the headline "Simmons Bank ends FDIC loss share agreement."