SIMMONS FIRST NATIONAL CORPORATION
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Financial Statements
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(Form 10-Q)
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September 30, 1994
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File Number 06253
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SIMMONS FIRST NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Arkansas 71-0407808
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Main Street Pine Bluff, Arkansas 71601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 501-541-1350
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Not Applicable
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Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Indicate the number of shares outstanding of each of issuer's classes of
securities.
Class A, Common 3,677,378
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
September 30, 1994 and December 31, 1993 3-4
Consolidated Statements of Income --
Three months and nine months
ended September 30, 1994 and 1993 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1994 and 1993 6-7
Consolidated Statement of Changes in Stockholders'
Equity -- Nine months ended
September 30, 1994 and 1993 8
Notes to Consolidated Financial Statements 9-16
Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-18
Review by Independent Certified Public Accountants 19
Part I
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A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
ASSETS
-------
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 31,456 $ 35,020
Federal funds sold and securities purchased
under agreements to resell 21,190 14,070
---------- ----------
Cash and cash equivalents 52,646 49,090
Investment securities (Note 6)
Securities held to maturity 139,879 198,626
Securities available for sale 29,608
Mortgage loans held for delivery
against commitments 24,220 47,775
Assets held in trading accounts 996 3,759
Loans 407,040 394,426
Allowance for loan losses (Note 5) (7,711) (7,430)
---------- ----------
Net loans (Note 5) 399,329 386,996
Premises and equipment 11,257 10,220
Foreclosed assets held for sale, net 1,956 2,877
Interest receivable 6,207 5,829
Other assets 26,417 33,588
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Total Assets $ 692,515 $ 738,760
========== ==========
</TABLE>
The December 31, 1993 Consolidated Balance Sheet is as reported in the
Corporation's 1993 Annual Report.
See Notes to Consolidated Financial Statements.
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 95,128 $ 135,468
Interest bearing transaction and
savings deposits 232,517 224,730
Time deposits (Note 9) 239,496 250,157
---------- ----------
Total Deposits 567,141 610,355
Federal funds purchased and securities
sold under agreements to repurchase 14,359 26,347
Borrowed funds 19,522 17,191
Other liabilities 9,223 9,532
---------- ----------
Total Liabilities 610,245 663,425
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share,
authorized 10,000,000 shares;
issued and outstanding 3,677,378
at 1993 and 1994 18,387 18,387
Surplus 19,827 19,827
Net unrealized gain (loss) on securities
available for sale 554
Undivided profits (Note 10) 43,502 37,121
---------- ----------
Total Stockholders' Equity $ 82,270 $ 75,335
---------- ----------
Total Liabilities and
Stockholders' Equity $ 692,515 $ 738,760
========== ==========
</TABLE>
The December 31, 1993 Consolidated Balance Sheet is as reported in the
Corporation's 1993 Annual Report.
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share figures) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 8,093 $ 7,174 $ 22,595 $ 21,027
Federal funds sold and securities
purchased under agreements to resell 183 142 588 584
Investment securities - taxable
Held to maturity 1,419 2,479 4,342 7,924
Available for sale 678 2,261
Investment securities - non-taxable
Held to maturity 673 663 2,066 1,934
Mortgage loans held for delivery
against commitments 506 598 1,753 1,559
Trading account 19 16 76 138
Other interest 6 13 26 47
------- ------- ------- -------
TOTAL INTEREST INCOME 11,577 11,085 33,707 33,213
------- ------- ------- -------
INTEREST EXPENSE
Deposits 3,652 3,521 10,482 10,765
Borrowed funds 503 374 1,335 1,298
------- ------- ------- -------
TOTAL INTEREST EXPENSE 4,155 3,895 11,817 12,063
------- ------- ------- -------
NET INTEREST INCOME 7,422 7,190 21,890 21,150
Provision for loan losses 525 714 1,575 2,292
NET INTEREST INCOME AFTER PROVISION ------- ------- ------- -------
FOR LOAN LOSSES 6,897 6,476 20,315 18,858
NON-INTEREST INCOME ------- ------- ------- -------
Trust income 437 477 1,288 1,345
Service charges on deposit accounts 550 580 1,657 1,719
Other service charges and fees 210 197 655 650
Income (loss) on sale of mortgage loans and trading
account income, net of commissions (442) 600 652 1,740
Securities gains (losses) 74 70 130 91
Other operating income 5,332 4,722 14,815 13,725
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 6,161 6,646 19,197 19,270
NON-INTEREST EXPENSE ------- ------- ------- -------
Salaries and employee benefits 4,885 4,877 15,255 14,626
Net occupancy expense 530 490 1,549 1,434
Equipment expense 499 463 1,483 1,467
Other operating expense 3,438 3,787 10,622 10,982
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 9,352 9,617 28,909 28,509
------- ------- ------- -------
NET INCOME BEFORE INCOME TAXES 3,706 3,505 10,603 9,619
Provision for income taxes (Note 8) 1,053 999 2,972 2,655
------- ------- ------- -------
NET INCOME $ 2,653 $ 2,506 $ 7,631 $ 6,964
======= ======= ======= =======
EARNINGS PER COMMON SHARE AVG $ 0.73 $ 0.68 $ 2.08 $ 2.13
======= ======= ======= =======
DIVIDENDS PER COMMON SHARE $ 0.12 $ 0.10 $ 0.34 $ 0.30
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<CAPTION>
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 1994 1993
- ---------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Note 3)
Net Income $ 7,631 $ 6,964
Items not requiring (providing) cash
Depreciation and amortization 1,260 1,320
Provision for loan losses 1,575 2,292
Amortization of premiums and accretion of
discounts on investment securities and mortgage-
backed certificates (124) 539
Provision for real estate owned losses 127 171
(Gain)/loss on sale of investments (130) (91)
(Gain) on sale of premises and equipment (20) (15)
Deferred income taxes (107) (419)
Changes in:
Accrued interest receivable (378) 722
Mortgage loans held for delivery
against commitments 23,555 (14,395)
Prepaid expenses 6,950 (1,303)
Accounts payable and accrued expenses (1,572) 311
Income taxes payable 1,263 (501)
Trading accounts 2,763 (40)
-------- --------
Net cash provided (used) by operating activities 42,793 (4,445)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net collection of loans (14,032) (12,395)
Purchase of premises and equipment (2,446) (2,262)
Proceeds from sale of fixed assets 498 605
Proceeds from the sale of real estate owned 918 615
Proceeds from maturing investment securities 70,513 88,146
Purchase of investment securities (40,567) (83,010)
-------- --------
Net cash provided (used) by investing securities 14,884 (8,301)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, money market,
all-in-one and savings accounts (32,553) 95,315
Net repayment of certificates of deposit (10,661) (107,309)
Repayments of other borrowings (88,640) (89,558)
Proceeds from other borrowings 90,971 91,253
Dividends paid (1,250) (1,022)
Net (increase) federal funds purchased and
securities sold under agreements to repurchase (11,988) (19,341)
Sale of common stock 16,110
-------- --------
Net cash used in financing activities $ (54,121) $ (14,552)
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Continued)
<CAPTION>
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 1994 1993
- ---------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 3,556 $ (27,298)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 49,090 64,059
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 52,646 $ 36,761
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<CAPTION>
NET UNREALIZED
GAIN (LOSS)
COMMON SECURITIES UNDIVIDED
(Dollars in Thousands) STOCK SURPLUS AFS PROFITS TOTAL
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 14,362 $ 7,742 $ $ 29,115 $ 51,219
Sale of additional stock
June 10, 1993 (805,000 shares
at $22 per share) 4,025 12,085 16,110
Net income 6,964 6,964
Cash dividend declared (1,023) (1,023)
--------- --------- --------- --------- ---------
Balance, September 30, 1993 18,387 19,827 35,056 73,270
Net income 2,433 2,433
Cash dividends declared (368) (368)
--------- --------- --------- --------- ---------
Balance, December 31, 1993 18,387 19,827 37,121 75,335
Net unrealized gain (loss)
on securities available for sale
(SFAS 115 "Accounting for Certain
Investments in Debt and Equity
Securities", adopted
January 1, 1994.) 554 554
Net income 7,631 7,631
Cash dividends declared (1,250) (1,250)
--------- --------- --------- --------- ---------
Balance, September 30, 1994 $ 18,387 $ 19,827 $ 554 $ 43,502 $ 82,270
========= ========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
SIMMONS FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: ACCOUNTING POLICIES
The consolidated financial statements include the accounts of
Simmons First National Corporation and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation.
All adjustments made to the unaudited financial statements were of a
normal recurring nature. In the opinion of management, all adjustments
necessary for a fair presentation of the results of interim periods have been
made. Certain prior year amounts are reclassified to conform to current year
classification.
The accounting policies followed in the presentation of interim financial
results are presented on pages 30-32 of the 1993 Annual Report to
shareholders.
NOTE 2: CONTINGENT LIABILITIES
A number of legal proceedings exist in which the Corporation and/or
its subsidiaries are either plaintiffs or defendants or both. Most of the
lawsuits involve loan foreclosure activities. The various unrelated legal
proceedings pending against the subsidiary banks in the aggregate are not
expected to have a material adverse effect on the financial position of the
Corporation and its subsidiaries.
NOTE 3: ADDITIONAL CASH FLOW INFORMATION FOR NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(Dollars in Thousands) 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 11,790 $ 12,240
Income taxes paid $ 3,209 $ 3,064
</TABLE>
NOTE 4: CERTAIN TRANSACTIONS
From time to time the Corporation and its subsidiaries have made
loans and other extensions of credit to directors, officers, their associates
and members of their immediate families, and from time to time directors,
officers and their associates and members of their immediate families have
placed deposits with Simmons First National Bank, Simmons First Bank of Lake
Village, and Simmons First Bank of Jonesboro. Such loans, other extensions
of credit and deposits were made in the ordinary course of business, on
substantially the same terms (including interest rates and collateral) as
those prevailing at the time for comparable transactions with other persons
and did not involve more than normal risk of collectibility or present other
unfavorable features.
NOTE 5: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Loans:
Consumer:
Credit card $ 157,670 $ 168,673
Student loan 56,544 65,379
Other consumer 40,433 36,763
Real estate:
Construction 5,569 6,281
Single family residential 38,471 36,651
Other commercial 44,606 37,853
Commercial:
Commercial 28,668 20,007
Agricultural 29,495 16,088
Financial institutions 2,936 3,087
Other 2,951 3,998
--------- ---------
Total loans before unearned discount and
allowances for loan losses 407,343 394,780
Unearned discount (303) (354)
Allowance for loan losses (7,711) (7,430)
--------- ---------
$ 399,329 $ 386,996
========= =========
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for Loan Losses:
Balance, beginning of year $ 7,430 $ 5,748
Additions
Provision charged to expense 1,575 2,292
--------- ---------
9,005 8,040
Deductions
Losses charged to allowance, net of
recoveries of $300,000 and $324,000 for
the first nine months of 1994 and 1993,
respectively 1,294 1,165
--------- ---------
Balance, September 30 $ 7,711 $ 6,875
=========
Additions
Provision charged to expense 714
---------
7,589
Deductions
Losses charged to allowance,
net of recoveries of $403,000
for the last three months of
1993 159
---------
Balance, end of year $ 7,430
=========
</TABLE>
During the first quarter of 1994, foreclosed assets held for sale
decreased to $1,956,000 and are carried at the lower of cost or fair market
value. Nonaccrual loans and other non-performing assets for the Corporation
at September 30, 1994, were $3,973,000 and $780,000, respectively, bringing
the total of non-performing assets to $6,709,000.
NOTE 6: INVESTMENT SECURITIES
The amortized cost and fair value of investments in debt securities that are
Held to Maturity and Available For Sale are as follows:
<TABLE>
<CAPTION>
September 30, 1994 December 31, 1993
----------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
(Dollars in Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury $ 74,588 $ 1,134 $ (1,064) $ 74,658 $ 132,778 $ 5,599 $ (33) $ 138,344
U.S. Government
agencies 11,386 105 (190) 11,301 13,215 546 (28) 13,733
Mortgage-backed
securities 3,690 10 (197) 3,503 1,008 24 (10) 1,022
State and political
subdivisions 50,215 847 (1,074) 49,988 49,438 2,680 (52) 52,066
Other securities 2,187 365 (1) 2,551
--------- --------- ---------- --------- ---------- --------- --------- ----------
$ 139,879 $ 2,096 $ (2,525) $ 139,450 $ 198,626 $ 9,214 $ (124) $ 207,716
========= ========= ========== ========= ========== ========= ========= ==========
Available For Sale
U.S. Treasury $ 24,737 $ 412 $ (66) $ 25,083
U.S. Government
agencies 1,503 25 1,528
Mortgage-backed
securities
State and political
subdivisions
Other securities 2,528 470 (1) 2,997
--------- --------- ---------- ---------
$ 28,768 $ 907 $ (67) $ 29,608
========= ========= ========== =========
</TABLE>
Maturities of investment securities at September 30, 1994
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
Amortized Fair Amortized Fair
(Dollars in Thousands) Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One year of less $ 19,348 $ 19,348 $ 8,017 $ 8,151
After one through five years 70,750 70,664 18,223 18,460
After five through ten years 41,471 40,983
After ten years 4,620 4,952
Mortgage-backed securities not due
on a single maturity date 3,690 3,503
Other securities 2,528 2,997
----------- ---------- ----------- -----------
$ 139,879 $ 139,450 $ 28,768 $ 29,608
=========== ========== =========== ===========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $73,792,000 at September 30,
1994, and $74,492,000 at December 31, 1993. The approximate fair value of
pledged securities amounted to $74,422,000 at September 30, 1994 and
$79,588,000 at December 31, 1993.
The book value of securities sold under agreements to repurchase
amounted to $2,494,000 and $152,000 for September 30, 1994 and December 31,
1993, respectively.
As of January 1, 1994, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 115. "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires the
classification of securities into one of three categories: Trading, Available
for Sale, or Held to Maturity.
Management will determine the appropriate classification of debt
securities at the time of purchase and re-evaluate the classifications
periodically. Trading account securities are used to provide inventory for
resale. Debt securities are classified as held to maturity when the
Corporation has the positive intent and ability to hold the securities to
maturity. Securities not classified as held to maturity or trading are
classified as available for sale.
The following table shows the net change in the Net Unrealized Gain
and Loss on Securities Available for Sale shown in the equity section of the
Corporation's balance sheet:
<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1994 $ 624
Net change for period (70)
----------
Balance, September 30, 1994 $ 554
==========
</TABLE>
The table below shows the mark-to-market adjustment made for the
first nine months to the securities held in trading accounts:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1993 $ 3,759
Net Securities traded (2,759)
Mark-to-market adjustment (4)
----------
Balance, September 30, 1994 $ 996
==========
</TABLE>
During 1994 and 1993, there were no securities sold. The gross
realized gains and losses shown in the table below were the result of called
bonds.
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
--------- ---------
Gross gains 134 21
Gross losses 4 --
--------- ---------
Securities gains (losses) $ 130 $ 21
========= =========
</TABLE>
Approximately 14 percent of the state and political subdivisions are
rated A or above. Of the remaining securities, most are nonrated bonds and
represent small, Arkansas issues, which are evaluated on an ongoing basis.
NOTE 7: STOCK OPTIONS
As of September 30, 1994, 63,000 shares of common stock of the
Corporation had been granted through an employee stock option incentive plan.
There were 40,400 exercisable shares at the end of the third quarter, none of
which had been issued.
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
September 30, September 30,
(Dollars in Thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 3,079 $ 3,074
Increase in future income tax benefits (107) (419)
-------- --------
Provision for income taxes $ 2,972 $ 2,655
======== ========
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 3,150 $ 2,929
Valuation adjustment of foreclosed assets
held for sale 314 470
Deferred compensation payable 398 342
Deferred loan fee income 819 980
Other 807 706
-------- --------
Total deferred tax assets 5,488 5,427
---------------- -----------------
Deferred tax liabilities:
Accumulated depreciation (433) (389)
-------- --------
Total deferred tax liabilities (433) (389)
-------- --------
Net Deferred tax assets before
valuation allowance $ 5,055 $ 5,038
---------------- -----------------
Valuation allowance:
Beginning balance (543) (466)
Change during period (23) (98)
-------- --------
Ending balance (566) (564)
-------- --------
Net deferred tax asset $ 4,489 $ 4,474
======== ========
</TABLE>
A reconciliation of income tax expense at the statutory rate to the
Corporation's actual income tax expense is shown below:
<TABLE>
<CAPTION>
September 30, September 30,
(Dollars in Thousands) 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 3,039 $ 3,271
Increase (decrease) resulting from:
Tax exempt income (614) (663)
Liquidation of foreclosed assets held for sale 457
Other difference, net 90 47
-------- --------
Actual tax provision $ 2,972 $ 2,655
======== ========
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $48,919,000 and $61,353,000 of
certificates of deposit of $100,000 or more at September 30, 1994, and
December 31, 1993, respectively.
NOTE 10: UNDIVIDED PROFITS
The subsidiary banks are subject to a legal limitation on dividends
that can be paid to the parent corporation without prior approval of the
applicable regulatory agencies. The approval of the Comptroller of the
Currency is required, if the total of all dividends declared by a national
bank in any calendar year exceeds the total of its net profits, as defined,
for that year combined with its retained net profits of the preceding two
years. Arkansas bank regulators have specified that the maximum dividend
limit state banks may pay to the parent company without prior approval is 50%
of current year earnings. At September 30, 1994, the bank subsidiaries had
approximately $13.8 million available for payment of dividends to the
Corporation without prior approval of the regulatory agencies.
The Federal Reserve Board's risk-based capital guidelines require a
minimum risk-adjusted ratio for total capital of 8% by the end of 1992. The
Federal Reserve Board has further refined its guidelines to include the
definitions for (1) a well-capitalized institution, (2) an adequately-
capitalized institution, and (3) an undercapitalized institution. The
criteria for a well-capitalized institution is a 5% "Tier l leverage capital"
ratio, a 6% "Tier 1 risk-based capital" ratio, and a 10% "total risk-based
capital" ratio. As of September 30, 1994, each of the three subsidiary banks
met the capital standards for a well-capitalized institution. The
Corporation's total capital to total risk-weighted assets ratio was 21.0% at
September 30, 1994, well above the minimum required.
NOTE 11: COMMITMENTS AND CREDIT RISK
The three affiliate banks of the Corporation grant agribusiness,
commercial, consumer, and residential loans to their customers. Included in
the Corporation's diversified loan portfolio is unsecured debt in the form of
credit card receivables that comprised approximately 38.7% and 42.8% of the
portfolio, as of September 30, 1994 and December 31, 1993, respectively.
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since a portion of the commitments
may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's
creditworthiness is evaluated on a case-by-case basis. The amount of
collateral obtained, if deemed necessary, is based on management's credit
evaluation of the counter party. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, commercial
real estate, and residential real estate.
At September 30, 1994 and December 31, 1993, the Corporation had
outstanding commitments to originate loans aggregating approximately
$45,503,000 and $48,238,000, respectively. The commitments extended over
varying periods of time, with the majority being disbursed within a one year
period. Loan commitments at fixed rates of interest amounted to $16,601,000
and $12,025,000 at September 30, 1994 and December 31, 1993, respectively,
with the remainder at floating market rates.
Letters of credit are conditional commitments issued by the bank
subsidiaries of the Corporation, to guarantee the performance of a customer
to a third party. Those guarantees are primarily issued to support public
and private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans
to customers. The Corporation had total outstanding letters of credit
amounting to $821,000 and $820,000 at September 30, 1994 and December 31,
1993, respectively, with terms ranging from 90 days to one year.
Lines of credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Lines
of credit generally have fixed expiration dates. Since a portion of the line
may expire without being drawn upon, the total unused lines do not necessarily
represent future cash requirements. Each customer's creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary, upon extension of credit, is based on management's credit
evaluation of the counter party. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, commercial
real estate, and residential real estate. Management uses the same credit
policies in granting lines of credit as it does for on balance sheet
instruments.
At September 30, 1994, the Corporation had granted unused lines of
credit to borrowers aggregating approximately $5,012,000 and $153,416,000 for
commercial lines and open-end consumer lines, respectively. At December 31,
1993, unused lines of credit to borrowers aggregated approximately $3,615,000
for commercial lines and $132,140,000 for open-end consumer lines,
respectively.
Mortgage loans serviced for others totaled $1,311,043,000 and
$1,395,424,000 at September 30, 1994 and December 31, 1993, respectively, of
which mortgage-backed securities serviced totaled $1,097,842,000 and
$1,123,747,000 at September 30, 1994 and December 31, 1993, respectively.
Simmons First National Bank serviced VA loans subject to certain recourse
provisions totaling approximately $159,573,000 and $187,338,000, at September
30, 1994 and December 31, 1993, respectively. A reserve was established for
potential loss obligations, based on management's evaluation of historical
losses, as well as prevailing and anticipated economic conditions, giving
consideration for specific reserves. As of September 30, 1994 and December
31, 1993, this reserve balance was $210,000, and is included in other
liabilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net income for the quarter ended September 30, 1994, was $2,653,000,
an increase of $147,000, or 5.9%, over the same period of 1993. Earnings per
share for the three month periods ended September 30, 1994 and September 30,
1993, were $.73 and $.68, respectively. Year-to-date earnings for 1994 were
$7,631,000, an increase of $668,000 or 9.6%, over earnings of the first nine
months of 1993. Per share earnings for the nine month periods ended
September 30, 1994 and 1993, were $2.08 and $2.13, respectively.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended September 30, 1994 and 1993, were 1.51% and 1.40%,
respectively. For the nine month periods ended September 30, 1994 and 1993,
annualized ROA were 1.44% and 1.33%, respectively. Annualized return on
equity (ROE) for the same nine-month periods were 12.86% and 14.85%,
respectively.
Net interest income, the difference between interest income and
interest expense, for the three month period ended September 30, 1994,
increased $232,000, or 3.2%, when compared to the same period in 1993.
During the third quarter, interest income increased $492,000, or 4.4%, and
interest expense increased $260,000, or 6.7%, when compared to the same
period in 1993. Total interest income figures for the nine months ended
September 30, 1994 and 1993, were $33,707,000 and $33,212,000, respectively.
Total interest expense for this same period in 1994 decreased $246,000 to
$11,817,000, resulting in a net interest income of $21,890,000, a 3.5%
increase during the nine-month period in 1994, when compared to the same
period figures of 1993. These increases in net interest income can be
attributed to an increase in the Corporation's interest margin.
Continued improvement in asset quality resulted in a reduction in
the provision for loan losses for the third quarter of 1994, to $525,000,
compared to $714,000 for the same period of 1993 resulting in a $189,000, or
26.5% decrease. The year-to-date provision for loan losses decreased
$717,000, to $1,575,000 from $2,292,000 at September 30, 1993, a 31.3%
reduction.
A reduction of $485,000, in non-interest income during the third
quarter of 1994 and $73,000 for the nine-month period as compared to the 1993
figures, is primarily attributable to a mortgage marketing loss of $626,000
and reduced profits in the dealer bank operation. The resulting reduced
level of income for these two operations for the third quarter and nine-month
period ended September 30, 1994, can be directly attributed to the negative
impact of rising interest rates on the nation's mortgage and securities
markets and a breach of company policy limiting the amount of open positions
in mortgage marketing which led to increased exposure during this period.
The overall reduction in mortgage income was partially offset by the scheduled
sale of a portion of the Corporation's servicing rights, which resulted in a
profit of $733,000.
During the three months ended September 30, 1994, non-interest
expense decreased $265,000, or 2.8%, over the same period in 1993, For the
first nine months of 1994 and 1993, non-interest expense was $28,909,000 and
$28,509,000, respectively. This $400,000, or 1.4% increase primarily
reflects the normal increase in the costs of doing business.
At September 30, 1994, total assets for the Corporation were
$692,515,000, a decrease of $46,245,000, or 6.3%, from the same figure at
December 31, 1993. Deposits at September 30, 1994, totaled $567,141,000, a
decrease of $43,214,000 or 7.1%, from the same figure at December 31, 1993.
Approximately, $30,264,000 of the decrease in non-interest bearing deposits
is a direct result of the reduced level of mortgage refinancing attributed
to rising interest rates. An additional $8,648,000 of the decrease in non-
interest bearing deposits is the result of trust deposits for a bond called
during the fourth quarter of 1993.
Stockholders' equity at the end of the quarter was $82,270,000, an
increase of $6,935,000, or 9.2%, from the December 31, 1993 figure.
FINANCIAL CONDITION
- -------------------
Generally speaking, the Corporation's banking subsidiaries rely
upon net inflows of cash from financing activities, supplemented by net
inflows of cash from operating activities, to provide cash used in their
investing activities. As is typical of most banking companies, significant
financing activities include: deposit gathering; use of short-term borrowing
facilities, such as federal funds purchased and repurchase agreements; and
the issuance of long-term debt. The banks' primary investing activities
include loan originations and purchases of investment securities, offset by
loan payoffs and investment maturities.
Liquidity represents an institution's ability to provide funds to
satisfy demands from depositors and borrowers, by either converting assets
into cash or accessing new or existing sources of incremental funds. It is
a major responsibility of management to maximize net interest income within
prudent liquidity constraints. Internal corporate guidelines have been
established to constantly measure liquid assets as well as relevant ratios
concerning earning asset levels and purchased funds. Each bank subsidiary is
also required to monitor these same indicators and report regularly to its
own senior management and board of directors. At September 30, 1994, each
bank was within established guidelines and total corporate liquidity was
strong. At September 30, 1994, cash and due from banks, securities available
for sale, and federal funds sold and securities purchased under agreements
for resale were 11.9% of total assets.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BAIRD, KURTZ & DOBSON
Certified Public Accountants
200 East Eleventh
Pine Bluff, Arkansas
Board of Directors
Simmons First National Bank
Pine Bluff, Arkansas
We have made a review of the accompanying consolidated condensed
financial statements, appearing on pages 3 to 8 of the accompanying Form
10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as
of September 30, 1994 and for the three month and nine month periods ended
September 30, 1994 and 1993, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of interim
financial information, applying analytical review procedures to financial
data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an examination in
accordance with generally accepted auditing standards, the objective which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31, 1993,
and the related consolidated statements of income, cash flows and changes in
stockholders' equity for the year then ended (not presented herein) and in
our report dated January 28, 1994, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 1993, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
November 3, 1994
SIGNATURES
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 thereunto duly authorized.
SIMMONS FIRST NATIONAL CORPORATION
--------------------------------------
(Registrant)
Date: 11-10-94 /s/W. E. Ayres
-------------- --------------------------------------
W. E. Ayres
Chairman of the Board
Date: 11-10-94 /s/Barry L. Crow
-------------- ---------------------------------------
Barry L. Crow, Executive
Vice President
and Chief Financial Officer
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