SIMMONS FIRST NATIONAL CORPORATION
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Financial Statements
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(Form 10-Q)
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March 31, 1994
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<PAGE>
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 March 31, 1994 Commission File Number 06253
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SIMMONS FIRST NATIONAL CORPORATION
- - ------------------------------------------------------------------------------
(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
---- ----
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Indicate the number of shares outstanding of each of issuer's classes of
securities.
Class A, Common 3,677,378
Class B, Common None
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1994 and December 31, 1993 3-4
Consolidated Statements of Income --
Three Months ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows --
Three Months ended March 31, 1994 and 1993 6-7
Consolidated Statement of Changes in Stockholders'
Equity -- Three Months ended March 31, 1994 and 1993 8
Notes to Consolidated Financial Statements 9-16
Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Review by Independent Certified Public Accountants 18
Part II: Other Information
<PAGE>
Part I
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A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
ASSETS
-------
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1994 1993
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 34,114 $ 35,020
Federal funds sold and securities purchased
under agreements to resell 27,340 14,070
---------- ----------
Cash and cash equivalents 61,454 49,090
Investment securities (Note 6)
Securities held to maturity 148,996 198,626
Securities available for sale 57,201
Mortgage loans held for delivery
against commitments 34,930 47,775
Assets held in trading accounts 1,774 3,759
Loans 372,026 394,426
Allowance for loan losses (Note 5) (7,512) (7,430)
---------- ----------
Net loans (Note 5) 364,514 386,996
Premises and equipment 10,632 10,220
Foreclosed assets held for sale, net 2,359 2,877
Interest receivable 5,782 5,829
Other assets 33,511 33,588
---------- ----------
Total Assets $ 721,153 $ 738,760
========== ==========
</TABLE>
The December 31, 1993 Consolidated Balance Sheet is as reported in the
Company's 1993 Annual Report.
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1994 1993
- - ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 116,240 $ 135,468
Interest bearing transaction and
savings deposits 236,139 224,730
Time deposits (Note 9) 243,240 250,157
---------- ----------
Total Deposits 595,619 610,355
Federal funds purchased and securities
sold under agreements to repurchase 22,668 26,347
Borrowed funds 14,305 17,191
Other liabilities 10,281 9,532
---------- ----------
Total Liabilities 642,873 663,425
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share,
authorized 10,000,000 shares;
issued and outstanding 3,677,378
1993 and 1994 18,387 18,387
Surplus 19,827 19,827
Net unrealized gain (loss) on securities
available for sale 687 --
Undivided profits (Note 10) 39,379 37,121
---------- ----------
Total Stockholders' Equity $ 78,280 $ 75,335
---------- ----------
Total Liabilities and
Stockholders' Equity $ 721,153 $ 738,760
========== ==========
</TABLE>
The December 31, 1993 Consolidated Balance Sheet is as reported in the
Company's 1993 Annual Report.
See Noted To Consolidated Financial Statements.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
<CAPTION>
Three Months Ended
March 31, March 31,
(Dollars in thousands, except per share figures) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans $ 7,150 $ 7,014
Federal funds sold and securities
purchased under agreements to resell 231 278
Investment securities - taxable
Held to maturity 1,468 2,731
Available for sale 738
Investment securities - non-taxable
Held to maturity 694 612
Mortgage loans held for delivery
against commitments 611 357
Trading account 32 90
Other interest 11 19
---------- ----------
TOTAL INTEREST INCOME 10,935 11,101
---------- ----------
INTEREST EXPENSE
Deposits 3,384 3,672
Borrowed funds 419 491
---------- ----------
TOTAL INTEREST EXPENSE 3,803 4,163
---------- ----------
NET INTEREST INCOME 7,132 6,938
Provision for loan losses 525 864
NET INTEREST INCOME AFTER PROVISION ---------- ----------
FOR LOAN LOSSES 6,607 6,074
NON-INTEREST INCOME ---------- ----------
Trust income 455 409
Service charges on deposit accounts 548 566
Other service charges and fees 237 254
Income on sale of mortgage loans and trading
account income, net of commissions 775 676
Securities gains (losses) 19 21
Other operating income 4,922 4,419
---------- ----------
TOTAL NON-INTEREST INCOME 6,956 6,345
NON-INTEREST EXPENSE ---------- ----------
Salaries and employee benefits 5,282 4,925
Net occupancy expense 480 466
Equipment expense 511 516
Other operating expense 3,665 3,557
---------- ----------
TOTAL NON-INTEREST EXPENSE 9,938 9,464
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NET INCOME BEFORE INCOME TAXES 3,625 2,955
Provision for income taxes (Note 8) 999 817
---------- ----------
NET INCOME $ 2,626 $ 2,138
========== ==========
<PAGE>
EARNINGS PER COMMON SHARE $ 0.71 $ 0.74
========== ==========
DIVIDENDS PER COMMON SHARE $ 0.10 $ 0.10
========== ==========
</TABLE>
See Notes To Consolidated Financial Statements.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
<CAPTION>
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 1994 1993
- - ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Note 3)
Net Income $ 2,626 $ 2,138
Items not requiring (providing) cash
Depreciation and amortization 429 408
Provision for loan losses 525 864
Amortization of premiums and accretion of
discounts on investment securities and
mortgage-backed certificates (72) 280
Provision for real estate owned losses 53 24
(Gain)/loss on sale of investments (28) (21)
(Gain) on sale of premises and equipment (4) (12)
Deferred income taxes (31) (209)
Changes in:
Accrued interest receivable 47 (219)
Mortgage loans held for delivery
against commitments 12,845 3,816
Prepaid expenses (7) (1,091)
Accounts payable and accrued expenses 1,547 75
Income taxes payable (798) (821)
Trading accounts 1,985 3,601
---------- ----------
Net cash provided by operating activities 19,117 8,833
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net collection of loans 21,844 18,169
Purchase of premises and equipment (1,127) (594)
Proceeds from sale of fixed assets 405 19
Proceeds from the sale of real estate owned 578 212
Proceeds from maturing investment securities 15,922 20,681
Purchase of investment securities (22,706) (32,525)
---------- ----------
Net cash provided by investing securities 14,916 5,962
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CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand deposits, money market,
all-in-one and savings accounts (7,819) 1,846
Net repayment of certificates of deposit (6,917) (9,256)
Repayments of other borrowings (235,530) (31,691)
Proceeds from other borrowings 232,644 31,967
Dividends paid (368) (287)
Net (increase) federal funds purchased and
securities sold under agreements to repurchase (3,679) (10,018)
---------- ----------
Net cash provided by (used in) financing
activities $ (21,669) $ 17,439
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Continued)
<CAPTION>
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 1994 1993
- - -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 12,364 $ (2,644)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 49,090 64,059
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 61,454 $ 61,415
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
<CAPTION>
-----------------------------------------------------------------------
NET UNREALIZED
GAIN (LOSS)
COMMON SEC. AVAIL. UNDIVIDED
(Dollars in Thousands) STOCK SURPLUS FOR SALE PROFITS TOTAL
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 14,362 7,742 29,115 51,219
Net income 2,138 2,138
Cash dividend declared (287) (287)
--------- --------- --------- --------- ---------
Balance, March 31, 1993 $ 14,362 $ 7,742 $ $ 30,966 $ 53,070
Sale of additional stock
June 10, 1993
(805,000 shares at $22 per share) 4,025 12,085 16,110
Net income 7,258 7,258
Cash dividends declared (1,103) (1,103)
--------- --------- --------- --------- ---------
Balance, December 31, 1993 $ 18,387 $ 19,827 $ $ 37,121 $ 75,335
SFAS 115 "Accounting for Certain
Investments in Debt and Equity
Securities", adopted
January 1, 1994. 687 687
Net income 2,626 2,626
Cash dividends declared (368) (368)
--------- --------- --------- --------- ---------
Balance, March 31, 1994 $ 18,387 $ 19,827 $ 687 $ 39,379 $ 78,280
========= ========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
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
On July 6, 1992, Mortgage Investment Corporation ("MIC"), formerly
InterAmericas Mortgage Corporation, filed suit alleging that Simmons First
National Bank ("Bank") made purported misrepresentations about the amount of
loan level detail of the loans in the Settlement Agreement of a prior suit
which the Bank had filed and won against InterAmericas Mortgage Corporation.
MIC also asserted that the Bank had failed to disclose an alleged dispute
between the Bank and Federal National Mortgage Association ("FNMA"), and MIC
further alleged that it would not have entered into the Settlement Agreement
had it known of the purported facts. The MIC complaint also alleges that the
Bank breached the Settlement Agreement by not acting reasonably to provide
loan level detail to a private mortgage insurance company and by changing an
indemnity provision. The complaint seeks compensatory damages of $1,000,000,
punitive damages of $500,000, plus attorneys' fees. Management is of the
opinion that the lawsuit is without merit and the likelihood of an unfavorable
outcome to the Bank is remote. A number of other legal proceedings exist in
which the Company 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 Company and its subsidiaries.
NOTE 3: ADDITIONAL CASH FLOW INFORMATION FOR QUARTER ENDED
MARCH 31, 1994 AND 1993
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Dollars in Thousands) 1994 1993
- - -------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 3,674 $ 4,202
Income taxes
paid $ 550 $ 139
</TABLE>
<PAGE>
NOTE 4: CERTAIN TRANSACTIONS
From time to time the Company 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>
March 31, December 31,
(Dollars in Thousands) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Loans:
Consumer:
Credit card $ 154,095 $ 168,673
Student loan 65,517 65,379
Other consumer 36,290 36,763
Real estate:
Construction 5,727 6,281
Single family residential 35,142 36,651
Other commercial 39,162 37,853
Commercial:
Commercial 20,836 20,007
Agricultural 10,322 16,088
Financial institutions 2,586 3,087
Other 2,684 3,998
Total loans before unearned discount and --------- ---------
allowances for loan losses 372,361 394,780
Unearned discount (335) (354)
Allowance for loan losses (7,512) (7,430)
--------- ---------
$ 364,514 $ 386,996
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
March 31, 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 525 864
--------- ---------
7,955 6,612
Deductions
Losses charged to allowance, net of
recoveries of $81,000 and $62,000 for
the first quarter of 1994 and 1993,
respectively 443 392
--------- ---------
Balance, March 31 $ 7,512 $ 6,220
=========
Additions
Provision charged to expense 2,142
---------
8,362
Deductions
Losses charged to allowance,
net of recoveries of $213,000
for the last nine months of
1993 932
---------
Balance, end of year $ 7,430
=========
</TABLE>
During the first quarter of 1994, foreclosed assets held for sale
decreased to $2,359,000 and are carried at the lower of cost or fair market
value. Nonaccrual loans and other non-performing assets for the Company at
March 31, 1994, were $3,908,000 and $992,000, respectively, bringing the total
of non-performing assets to $7,259,000.
<PAGE>
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>
March 31, 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 $ 79,652 $ 2,515 $ (505) $ 81,662 $ 132,778 $ 5,599 $ (33) $ 138,344
U.S. Government
agencies 12,100 281 (29) 12,352 13,215 546 (28) 13,733
Mortgage-backed
securities 3,934 23 (113) 3,844 1,008 24 (10) 1,022
State and political
subdivisions 50,831 1,320 (830) 51,321 49,438 2,680 (52) 52,066
Other securities 2,479 255 2,734 2,187 365 (1) 2,551
--------- --------- ---------- ---------- ---------- ---------- --------- ---------
$ 148,996 $ 4,394 $ (1,477) $ 151,913 $ 198,626 $ 9,214 $ (124) $ 207,716
========= ========= ========== ========== ========== ========== ========= =========
Available For Sale
U.S. Treasury $ 54,646 $ 1,023 $ (40) $ 55,629
U.S. Government
agencies 1,504 59 1,563
Mortgage-backed
securities
State and political
subdivisions
Other securities 10 0 (1) 9
--------- --------- ---------- ----------
$ 56,160 $ 1,082 $ (41) $ 57,201
========= ========= ========== ==========
</TABLE>
Maturities of investment securities at March 31, 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 $ 20,954 $ 21,075 $ 42,027 $ 42,232
After one through five years 72,413 74,148 14,133 14,969
After five through ten years 43,607 43,993
After ten years 5,609 6,119
Mortgage-backed securities not due
on a single maturity date 3,934 3,844
Other securities 2,479 2,734
----------- ----------- ----------- -----------
$ 148,996 $ 151,913 $ 56,160 $ 57,201
=========== =========== =========== ===========
</TABLE>
<PAGE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $67,084,000 at March 31, 1994,
and $74,492,000 at December 31, 1993. The approximate fair value of pledged
securities amounted to $71,985,000 at March 31, 1994 and $79,588,000 at
December 31, 1993.
The book value of securities sold under agreements to repurchase
amounted to $123,000 and $152,000 for March 31, 1994 and December 31, 1993,
respectively.
As of January 1, 1994, the Company 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 Company
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 $ 946
Net change for period (259)
------------
Balance, March 31, 1994 $ 687
============
</TABLE>
The table below shows the mark-to-market adjustment made for the
first quarter to the securities held in trading accounts:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1993 $ 3,759
Net Securities traded (1,989)
Mark-to-market adjustment 4
------------
Balance, March 31, 1994 $ 1,774
============
</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.
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
----------- -----------
Gross gains 28 21
Gross losses 9 --
----------- -----------
Securities gains (losses) $ 19 $ 21
=========== ===========
</TABLE>
Approximately 15 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 March 31, 1994, 63,000 shares of common stock of the Company
had been granted through an employee stock option incentive plan. There were
29,600 exercisable shares at the end of the first quarter, none of which had
been issued.
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
March 31, March 31,
(Dollars in Thousands) 1994 1993
- - ----------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,030 $ 604
Increase in future income tax benefits (31) (28)
---------- ----------
Provision for income taxes $ 999 $ 576
========== ==========
</TABLE>
<PAGE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are:
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1994 1993
- - ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 2,960 $ 2,929
Valuation adjustment of foreclosed
assets held for sale 346 470
Deferred compensation payable 365 342
Deferred loan fee income 853 980
Other 870 706
---------- ----------
Total deferred tax assets 5,394 5,427
---------- ----------
Deferred tax liabilities:
Accumulated depreciation (386) (389)
Other (5)
---------- ----------
Total deferred tax liabilities (391) (389)
---------- ----------
Net Deferred tax assets before
valuation allowance $ 5,003 $ 5,038
---------- ----------
Valuation allowance:
Beginning balance (564) (466)
Change during period 4 (98)
---------- ----------
Ending balance (560) (564)
---------- ----------
Net deferred tax asset $ 4,443 $ 4,474
========== ==========
</TABLE>
The valuation allowance related to the benefits of state income tax carry
forwards included in deferred tax assets.
A reconciliation of income tax expense at the statutory rate to the Company's
actual income tax expense is shown below:
<TABLE>
<CAPTION>
March 31, March 31,
(Dollars in Thousands) 1994 1993
- - -----------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,243 $ 1,019
Increase (decrease) resulting from:
Tax exempt income (233) (224)
Other difference, net (11) 26
---------- ----------
Actual tax provision $ 999 $ 821
========== ==========
</TABLE>
<PAGE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $56,265,000 and $61,353,000 of
certificates of deposit of $100,000 or more at March 31, 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 company 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 March 31, 1994, the bank subsidiaries had approximately $10.8
million available for payment of dividends to the Company, 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 March 31, 1994, each of the three subsidiary banks met the
capital standards for a well-capitalized institution. The Company's total
capital to total risk-weighted assets ratio was 22.0% at March 31, 1994, well
above the minimum required.
NOTE 11: COMMITMENTS AND CREDIT RISK
The three affiliate banks of the Company grant agribusiness,
commercial, consumer, and residential loans to their customers. Included in
the Company's diversified loan portfolio is unsecured debt in the form of
credit card receivables that comprised approximately 41.4% and 42.8% of the
portfolio, as of March 31, 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 March 31, 1994 and December 31, 1993, the Company had outstanding
commitments to originate loans aggregating approximately $64,867,000 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 $21,019,000 and $12,025,000
at March 31, 1994 and December 31, 1993, respectively, with the remainder at
<PAGE>
floating market rates.
Letters of credit are conditional commitments issued by the bank
subsidiaries of the Company, 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
Company had total outstanding letters of credit amounting to $1,120,000 and
$820,000 at March 31, 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 March 31, 1994, the Company had granted unused lines of credit to
borrowers aggregating approximately $3,615,000 and $145,124,000 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 $1,365,260,000 and
$1,395,424,000 at March 31, 1994 and December 31, 1993, respectively, of which
mortgage-backed securities serviced totaled $1,100,121,000 and $1,123,747,000
at March 31, 1994 and December 31, 1993, respectively. Simmons First National
Bank serviced VA loans subject to certain recourse provisions totaling
approximately $174,186,000 and $187,338,000, at March 31, 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 March 31, 1994 and December 31, 1993, this reserve balance
remained $310,000, and is included in other liabilities.
NOTE 12: EMPLOYEE BENEFIT PLANS
Financial Accounting Standards No 106, "Employer's Accounting for
Postretirement Benefits Other than Pensions" (FAS 106), has been adopted by
management with an effective date of January 1, 1993. The adoption of FAS 106
did not result in any material adjustments to earnings or material changes in
accounting treatment.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
Net income for the quarter ended March 31, 1994, was $2,626,000, an
increase of $488,000, or 22.8%, over the same period of 1993. Earnings per
share for the three month periods ended March 31, 1994 and March 31, 1993,
were $.71 and $.74, respectively.
The Company's return on average assets (ROA) for the three-month
periods ended March 31, 1994 and 1993, were 1.47% and 1.25%, respectively.
Annualized return on average stockholders' equity (ROE) for the three-month
periods ended March 31, 1994 and 1993, were 13.80% and 16.33%, respectively.
Net interest income, the difference between interest income and
interest expense, for the three month period ended March 31, 1994, increased
$194,000, or 2.8%, when compared to the same period in 1993. During the first
quarter, interest income decreased $166,000, or 1.5%, and interest expense
decreased $360,000, or 8.7%, when compared to the same period in 1993.
The provision for loan losses for the first quarter of 1994 was
$525,000, as compared to $864,000 for the same period of 1993.
During the first quarter of 1994, non-interest income increased
$611,000, or 9.4%, when compared to the first quarter of 1993. The primary
factor in this improvement was the resolution of two problem assets, resulting
in a non-recurring addition to non-interest income of $388,000 during the first
quarter of 1994.
During the three months ended March 31, 1994, non-interest expense
increased $474,000, or 5.0%, over the same period in 1993, primarily from
expenses associated with the potential acquisitions and the normal increase in
the costs of doing business.
FINANCIAL CONDITION
- - -------------------
Generally speaking, the Company'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 March 31, 1994, each bank was within established
guidelines and total corporate liquidity was strong. At March 31, 1994, cash
and due from banks, securities available for sale, and federal funds sold and
securities purchased under agreements for resale were 16.5% of total assets.
<PAGE>
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
March 31, 1994 and for the three month period ended March 31, 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
April 22, 1994
<PAGE>
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: 5/11/94 /s/W. E. Ayres
------------------------ ---------------------------------------
W. E. Ayres, Chairman
Date: 5/11/94 /s/Barry L. Crow
------------------------ ----------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<PAGE>
