SIMMONS FIRST NATIONAL CORPORATION
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Financial Statements
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(Form 10-Q)
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September 30, 1995
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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, 1995 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 3,816,612
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
September 30, 1995 and December 31, 1994 3-4
Consolidated Statements of Income --
Three months and nine months ended
September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1995 and 1994 6
Consolidated Statement of Changes in Stockholders'
Equity -- Nine months ended
September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8-16
Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-18
Review by Independent Certified Public Accountants 19
Part II: Other 20
Part I
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A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
ASSETS
------
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1995 1994
- -----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 30,040 $ 33,476
Interest-bearing balances due from banks 653 101
Federal funds sold and securities purchased
under agreements to resell 16,825 40,425
--------- ---------
Cash and cash equivalents 47,518 74,002
Investment securities (Note 2)
Securities held to maturity 164,984 142,374
Securities available for sale 44,453 29,610
Mortgage loans held for sale 24,155 8,720
Assets held in trading accounts 831 2,734
Loans 466,983 418,392
Allowance for loan losses (Note 3) (8,338) (7,790)
--------- ---------
Net loans (Note 3) 458,645 410,602
Premises and equipment 15,400 12,115
Foreclosed assets held for sale, net 1,047 1,730
Interest receivable 8,450 6,289
Cost of loan-servicing rights acquired 4,427 3,825
Excess of cost over fair value of net assets acquired,
at amortized cost 3,849 2,392
Other assets 23,616 18,869
--------- ---------
Total Assets $ 797,375 $ 713,262
========= =========
</TABLE>
The December 31, 1994 Consolidated Balance Sheet is as reported in the
Corporation's 1994 Annual Report.
See Notes to Consolidated Financial Statements.
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1995 1994
- -----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest-bearing transaction accounts $ 101,591 $ 109,564
Interest-bearing transaction and
savings deposits 239,467 228,649
Time deposits (Note 9) 328,539 245,325
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Total Deposits 669,597 583,538
Federal funds purchased and securities
sold under agreements to repurchase 16,004 23,931
Borrowed funds 7,355 13,765
Other liabilities 11,073 8,328
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Total Liabilities 704,029 629,562
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STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share,
authorized 10,000,000 shares;
issued and outstanding 3,816,612 and
3,677,378 at 1995 and 1994, respectively 19,083 18,387
Surplus 22,651 19,827
Unrealized appreciation
on available-for-sale securities, net of income
taxes of $387 and $120 at 1995 and 1994,
respectively 666 233
Undivided profits (Note 12) 50,946 45,253
---------- ----------
Total Stockholders' Equity $ 93,346 $ 83,700
---------- ----------
Total Liabilities and
Stockholders' Equity $ 797,375 $ 713,262
========== ==========
</TABLE>
The December 31, 1994 Consolidated Balance Sheet is as reported in the
Corporation's 1994 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, 1995 AND 1994
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share figures) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 10,683 $ 8,093 $ 29,228 $ 22,595
Federal funds sold and securities
purchased under agreements to resell 253 183 1,171 588
Investment securities - taxable
Held to maturity 1,824 1,419 5,226 4,342
Available for sale 745 678 2,159 2,261
Investment securities - non-taxable
Held to maturity 733 673 2,162 2,066
Available for sale 1 -- 1 --
Mortgage loans held for sale 477 506 810 1,753
Assets held in trading account 19 19 43 76
Interest-bearing balances due from banks 21 6 76 26
--------- -------- --------- ---------
TOTAL INTEREST INCOME 14,756 11,577 40,876 33,707
--------- -------- --------- ---------
INTEREST EXPENSE
Deposits:
Interest-bearing transaction accounts and
savings deposits 1,532 1,360 4,388 3,863
Time deposits 4,443 2,292 11,290 6,619
Federal funds purchased and securities sold
under agreements to repurchase 271 211 954 613
Borrowed funds 204 292 773 722
--------- -------- --------- ---------
TOTAL INTEREST EXPENSE 6,450 4,155 17,405 11,817
--------- -------- --------- ---------
NET INTEREST INCOME 8,306 7,422 23,471 21,890
Provision for loan losses 506 525 1,407 1,575
--------- -------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,800 6,897 22,064 20,315
--------- -------- --------- ---------
NON-INTEREST INCOME
Trust income 474 437 1,268 1,288
Service charges on deposit accounts 705 550 2,001 1,657
Other service charges and fees 188 210 582 655
Income on sale of mortgage loans, net of commissions 164 (630) 343 (433)
Income on investment banking, net of commissions 231 188 550 1,085
Net realized gains (losses) on sales of
available-for-sale securities 35 74 35 130
Credit card fees 2,549 2,771 7,526 7,963
Loan servicing fees 1,579 1,746 4,517 5,323
Other operating income 189 815 1,223 1,529
--------- -------- --------- ---------
TOTAL NON-INTEREST INCOME 6,114 6,161 18,045 19,197
--------- -------- --------- ---------
NON-INTEREST EXPENSE
Salaries and employee benefits 5,307 4,885 15,840 15,255
Net occupancy expense 609 530 1,732 1,549
Equipment expense 582 499 1,613 1,483
Loss (income) on foreclosed assets 354 355 1,047 1,179
Other operating expense 3,182 3,083 9,477 9,443
--------- -------- --------- ---------
TOTAL NON-INTEREST EXPENSE 10,034 9,352 29,709 28,909
--------- -------- --------- ---------
NET INCOME BEFORE INCOME TAXES 3,880 3,706 10,400 10,603
Provision for income taxes (Note 8) 1,210 1,053 3,084 2,972
--------- -------- --------- ---------
NET INCOME $ 2,670 $ 2,653 $ 7,316 $ 7,631
========= ======== ========= =========
EARNINGS PER COMMON SHARE AVG $ 0.70 $ 0.73 $ 1.94 $ 2.08
========= ========= ========= =========
DIVIDENDS PER COMMON SHARE $ 0.15 $ 0.12 $ 0.43 $ 0.34
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Note 7)
Net Income $ 7,316 $ 7,631
Items not requiring/(providing) cash
Depreciation and amortization 748 1,260
Provision for loan losses 1,407 1,575
Amortization of premiums and accretion of
discounts on investment securities and mortgage-
backed certificates (69) (124)
Provision for real estate owned losses 125 127
(Gain)/loss on sale of investments 35 (130)
(Gain)/loss on sale of premises and equipment (11) (20)
Deferred income taxes (51) (107)
Changes in:
Accrued interest receivable (2,334) (378)
Mortgage loans held for sale (15,435) 23,555
Other assets (6,580) 6,950
Accounts payable and accrued expenses 2,663 (1,572)
Income taxes payable 53 1,263
Trading accounts 1,903 2,763
-------- --------
Net cash provided by/(used in) operating activities (10,230) 42,793
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (54,483) (14,032)
Purchase of premises and equipment (5,093) (2,446)
Proceeds from sale of fixed assets 101 498
Proceeds from the sale of foreclosed assets
held for sale 830 918
Proceeds from maturing a-f-s securities 12,650 38,782
Purchases of a-f-s securities (24,335) (22,312)
Proceeds from maturing h-t-m securities 23,549 31,731
Purchases of h-t-m securities (56,644) (18,255)
-------- --------
Net cash provided by/(used in) investing securities (103,425) 14,884
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase/(decrease) in demand deposits, money market,
all-in-one and savings accounts 10,596 (32,553)
Proceeds from sale/(repayment of) certificates of deposit 91,373 (10,661)
Repayments of other borrowings (112,721) (88,640)
Proceeds from other borrowings 106,391 90,971
Dividends paid (1,623) (1,250)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (7,927) (11,988)
Acquisition of subsidiary (2,438)
Issuance of additional common stock 3,520
-------- --------
Net cash provided by/(used in) financing activities $ 87,171 $ (54,121)
-------- --------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS $ (26,484) $ 3,556
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 74,002 49,090
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 47,518 $ 52,646
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<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, 1993 $ 18,387 $ 19,827 $ $ 37,121 $ 75,335
Adoption of SFAS 115, "Accounting for
Certain Investments in Debt and Equity
Securities", January 1, 1994, net of
income taxes of $487 946 946
Net income 7,631 7,631
Cash dividend declared
($0.34 per share) (1,250) (1,250)
Change in unrealized appreciation/
(depreciation) on available-for-sale
securities, net of income tax credit
of $201 (392) (392)
--------- --------- --------- --------- ---------
Balance, September 30, 1994 18,387 19,827 554 43,502 82,270
Net income 2,229 2,229
Cash dividends declared
($0.13 per share) (478) (478)
Change in unrealized appreciation/
(depreciation) on available-for-sale
securities, net of income tax credit
of $166 (321) (321)
--------- --------- --------- --------- ---------
Balance, December 31, 1994 18,387 19,827 233 45,253 83,700
Exercise of stock options--2,000 shares 10 10 20
Common Stock issued in connection with
purchase of Dumas Bancshares, Inc.
(137,234 shares @$25.50 per share) 686 2,814 3,500
Net income 7,316 7,316
Cash dividends declared
($0.43 per share) (1,623) (1,623)
Change in unrealized appreciation/
(depreciation) on available-for-sale
securities, net of income taxes
of $267 433 433
--------- --------- --------- --------- ---------
Balance, September 30, 1995 $ 19,083 $ 22,651 $ 666 $ 50,946 $ 93,346
========= ========= ========= ========= =========
</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 25-27 of the 1994 Annual Report to
shareholders.
NOTE 2: 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, 1995 December 31, 1994
----------------------------------------------------------------------------------------------
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 $ 71,372 $ 1,651 $ (263) $ 72,760 $ 74,544 $ 349 $ (1,479) $ 73,414
U.S. Government
agencies 31,268 600 (57) 31,811 13,375 32 (289) 13,118
Mortgage-backed
securities 6,579 31 (104) 6,506 3,551 6 (244) 3,313
State and political
subdivisions 55,329 1,317 (366) 56,280 50,904 577 (1,962) 49,519
Other securities 436 3 -- 439
--------- --------- -------- --------- --------- --------- -------- ---------
$ 164,984 $ 3,602 $ (790) $ 167,796 $ 142,374 $ 964 $ (3,974) $ 139,364
========= ========= ======== ========= ========= ========= ======== =========
Available For Sale
U.S. Treasury $ 38,790 $ 359 $ (14) $ 39,135 $ 25,701 $ 96 $ (202) $ 25,595
U.S. Government
agencies 1,600 14 (5) 1,609 1,002 3 -- 1,005
State and political
subdivisions 101 -- -- 101 -- -- -- --
Other securities 2,909 701 (2) 3,608 2,554 457 (1) 3,010
--------- --------- -------- --------- --------- --------- -------- ---------
$ 43,400 $ 1,074 $ (21) $ 44,453 $ 29,257 $ 556 $ (203) $ 29,610
========= ======== ======== ========= ========= ========= ======= =========
</TABLE>
Maturities of investment securities at September 30, 1995
<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 or less $ 31,766 $ 31,850 $ 26,608 $ 26,682
After one through five years 77,527 79,417 13,883 14,163
After five through ten years 42,330 42,663 -- --
After ten years 6,346 6,921 -- --
Mortgage-backed securities not due
on a single maturity date 6,579 6,506 -- --
Other securities 436 439 2,909 3,608
--------- --------- --------- ---------
$ 164,984 $ 167,796 $ 43,400 $ 44,453
========= ========= ========= =========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $96,322,000 at September 30,
1995, and $70,981,000 at December 31, 1994. The approximate fair value of
pledged securities amounted to $98,249,000 at September 30, 1995 and
$70,217,000 at December 31, 1994.
The book value of securities sold under agreements to repurchase amounted
to $1,159,000 and $196,000 for September 30, 1995 and December 31, 1994,
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.
During the third quarter of 1995, there were no unrealized gains or
losses on trading securities.
During the first nine months of 1995 and 1994, 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, September 30,
(Dollars in Thousands) 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
---------- ----------
Gross gains 35 134
Gross losses -- 4
---------- ----------
Securities gains (losses) $ 35 $ 130
========== ==========
</TABLE>
Approximately 13 percent of the state and political subdivision
securities are rated A or above. Of the remaining securities, most are non-
rated bonds and represent small, Arkansas issues, which are evaluated on an
ongoing basis.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Loans:
Consumer:
Credit card $ 146,780 $ 164,501
Student loan 58,654 62,836
Other consumer 54,515 40,739
Real estate:
Construction 13,029 6,232
Single family residential 53,051 43,629
Other commercial 58,771 44,141
Commercial:
Commercial 33,168 29,047
Agricultural 36,886 16,048
Financial institutions 10,662 6,681
Other 2,278 5,122
--------- ---------
Total loans before unearned discount and
allowances for loan losses 467,794 418,976
Unearned discount (811) (584)
Allowance for loan losses (8,338) (7,790)
--------- ---------
Net Loans $ 458,645 $ 410,602
========= =========
</TABLE>
During the third quarter of 1995, foreclosed assets held for sale
decreased to $1,047,000 and are carried at the lower of cost or fair market
value. Non-accrual loans and other non-performing loans for the Corporation
at September 30, 1995, were $1,491,000 and $848,000, respectively, bringing
the total of non-performing assets to $3,386,000.
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in Thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Allowance for Loan Losses:
Balance, beginning of year $ 7,790 $ 7,430
Additions
Provision charged to expense 1,407 1,575
Allowance for loan losses of
acquired institutions 350
-------- --------
9,547 9,005
Deductions
Losses charged to allowance, net of
recoveries of $373,000 and $300,000 for
the first nine months of 1995 and 1994,
respectively 1,209 1,294
-------- --------
Balance, September 30 $ 8,338 $ 7,711
======== --------
Additions
Provision charged to expense 475
--------
8,186
Deductions
Losses charged to allowance,
net of recoveries of $120,000
for the last three months of
1994 396
--------
Balance, end of year $ 7,790
========
</TABLE>
As of January 1, 1995, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan. SFAS 114 requires discounting expected future cash
flows to measure impairment of certain loans, or, as a practical expedient,
impairment measurements based on the loan's observable market price or the
fair value of collateral if the loan is collateral dependent. The adoption
of SFAS 114 did not increase the 1995 loan loss provision.
Total impaired loans at December 31, 1994, were $3,766,000. At
that time, $587,000 of the allowance for loan losses related to those loans.
All impaired loans had designated reserves for possible loan losses.
At September 30, 1995, impaired loans totaled $3,415,000, all of
which had reserves allocated. An allowance of $649,000 for possible losses
related to those loans.
Interest of $88,000 was recognized on average impaired loans of
$3,495,000 as of September 30, 1995. No interest was recognized on impaired
loans on a cash basis during the first nine months of 1995.
NOTE 4: ACQUISITIONS
On April 1, 1995, the acquisition of Dumas Bancshares, Inc. (DBI) was
completed and DBI was merged into Simmons First National Corporation (SFNC)
in a transaction valued at $5 million.
DBI owned Dumas State Bank, Dumas, Arkansas, and First State Bank, Gould,
Arkansas, with consolidated assets at March 31, 1995, of approximately $42
million. First State Bank, which has branches in Grady and Star City,
Arkansas, in addition to its primary location in Gould, Arkansas, was merged
into Simmons First National Bank, SFNC's lead bank, and Dumas State Bank
became Simmons First Bank of Dumas and will continue to operate as a
subsidiary bank of the Corporation.
On August 1, 1995, the acquisition of Dermott State Bank Bancshares, Inc.
(DSBB), located in Dermott, Arkansas, was completed by Simmons First National
Corporation in a cash transaction valued at approximately $2.4 million. DSBB,
the single-bank holding company for Dermott State Bank, had at the time of
acquisition approximately $20 million in consolidated assets. Dermott State
Bank became Simmons First Bank of Dermott and has continued to operate as a
subsidiary bank of the Corporation.
NOTE 5: 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,
Simmons First Bank of Jonesboro, Simmons First Bank of Dumas and Simmons First
Bank of Dermott. 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 6: STOCK OPTIONS
As of September 30, 1995, 80,000 shares of common stock of the
Corporation had been granted through an employee stock option incentive plan.
There were 51,600 exercisable options at the end of the third quarter and
2,000 shares had been issued upon exercise of options.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(Dollars in Thousands) 1995 1994
- -------------------------------------------------------
<S> <C> <C>
Interest paid $ 16,365 $ 11,790
Income taxes
paid $ 3,031 $ 3,209
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following components:
<TABLE>
<CAPTION>
September 30, September 30,
(Dollars in Thousands) 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 3,135 $ 3,079
Increase in future income tax benefits (51) (107)
-------- --------
Provision for income taxes $ 3,084 $ 2,972
======== ========
</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) 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 3,012 $ 2,744
Valuation adjustment of foreclosed assets
held for sale 222 281
Deferred compensation payable 370 373
Deferred loan fee income 765 773
Other 631 645
-------- --------
Total deferred tax assets 5,000 4,816
-------- --------
Deferred tax liabilities:
Accumulated depreciation (595) (405)
Available-for-sale securities (324) (120)
-------- --------
Total deferred tax liabilities (919) (525)
-------- --------
Net Deferred tax assets before
valuation allowance $ 4,081 $ 4,291
-------- --------
Valuation allowance:
Beginning balance -- (564)
Change during period -- 564
-------- --------
Ending balance -- --
-------- --------
Net deferred tax asset $ 4,081 $ 4,291
======== ========
</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) 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 3,770 $ 3,039
Increase (decrease) resulting from:
Tax exempt income (736) (614)
Liquidation of foreclosed assets held for sale 457
Other difference, net 50 90
-------- --------
Actual tax provision $ 3,084 $ 2,972
======== ========
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $93,145,000 and $55,222,000 of
certificates of deposit of $100,000 or more at September 30, 1995, and
December 31, 1994, respectively.
NOTE 10: COMMITMENTS AND CREDIT RISK
The five 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 31.4% and 39.3% of the
portfolio, as of September 30, 1995 and December 31, 1994, 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 counterparty. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, commercial
real estate, and residential real estate.
At September 30, 1995 and December 31, 1994, the Corporation had
outstanding commitments to originate loans aggregating approximately
$74,802,000 and $47,733,000, 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 $45,974,000
and $16,519,000 at September 30, 1995 and December 31, 1994, 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 $1,343,000 and $918,000 at September 30, 1995 and December 31,
1994, 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 counterparty. 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, 1995, the Corporation had granted unused lines of credit
to borrowers aggregating approximately $4,542,000 and $162,812,000 for
commercial lines and open-end consumer lines, respectively. At December 31,
1994, unused lines of credit to borrowers aggregated approximately $4,568,000
for commercial lines and $143,563,000 for open-end consumer lines,
respectively.
Mortgage loans serviced for others totaled $1,206,339,000 and
$1,228,311,000 at September 30, 1995 and December 31, 1994, respectively, of
which mortgage-backed securities serviced totaled $1,136,790,000 and
$1,027,855,000 at September 30, 1995 and December 31, 1994, respectively.
Simmons First National Bank serviced VA loans subject to certain recourse
provisions totaling approximately $145,185,000 and $156,650,000, at
September 30, 1995 and December 31, 1994, 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,
1995 and December 31, 1994, this reserve balance was $41,000 and $210,000,
respectively, and is included in other liabilities.
NOTE 11: 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 12: 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, 1995, the bank subsidiaries
had approximately $14.1 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% at 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 are: 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, 1995, each of the four subsidiary
banks met the capital standards for a well-capitalized institution. The
Corporation's total capital to total risk-weighted assets ratio was 19.7% at
September 30, 1995, well above the minimum required.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net income for the quarter ended September 30, 1995, was $2,670,000, an
increase of $17,000, or .64%, over the same period of 1994. Earnings per
share for the three-month periods ended September 30, 1995 and September 30,
1994, were $.70 and $.73, respectively. Year-to-date earnings for 1995 were
$7,316,000, a decrease of $315,000, or 4.1%, over earnings of the first nine
months of 1994. Per share earnings for the nine-month periods ended
September 30, 1995 and 1994, were $1.94 and $2.08, respectively.
The Corporation's annualized return on average assets (ROA) for the three-
month periods ended September 30, 1995 and 1994, were 1.35% and 1.51%,
respectively. For the nine-month periods ended September 30, 1995 and 1994,
annualized ROA were 1.31 and 1.44%, respectively. Annualized return on equity
(ROE) for the same nine-month periods were 10.83% and 12.86%, respectively.
Net interest income, the difference between interest income and interest
expense, for the three-month period ended September 30, 1995, increased
$884,000, or 11.9%, when compared to the same period in 1994. During the
third quarter, interest income increased $3,179,000, or 24.5%, and interest
expense increased $2,295,000, or 55.2%, when compared to the same period in
1994. Total interest income figures for the nine months ended September 30,
1995 and 1994, were $40,876,000 and $33,707,000, respectively. Total
interest expense for this same period in 1995 increased $5,588,000 to
$17,405,000, resulting in a net interest income of $23,471,000, a 7.2%
increase during the nine-month period in 1995, when compared to the same
period figures of 1994. 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 1995, to $506,000,
compared to $525,000 for the same period of 1994, resulting in a $19,000, or
3.6%, decrease. The year-to-date provision for loan losses decreased
$168,000, to $1,407,000 from $1,575,000 at September 30, 1994, a 10.7%
reduction.
Non-interest income for the third quarter ending at September 30, 1995
was $6,114,000, a reduction of $47,000, or .8%, from the same period in 1994.
For the nine-month periods ended September 30, 1995 and 1994, non-interest
income was down 6.0% to 18,045,000 from $19,197,000. This is primarily
attributable to reduced profits in the mortgage, dealer bank, and bank card
operations as a result of the unstable interest rate environment that has
existed.
During the three months ended September 30, 1995, non-interest expense
increased $682,000, or 7.3%, over the same period in 1994. For the first nine
months of 1995 and 1994, non-interest expense was $29,709,000 and $28,909,000,
respectively. This $800,000 increase is related to the acquisitions completed
in 1995.
At September 30, 1995, total assets for the Corporation were $797,375,000,
an increase of $84,113,000, or 11.8%, from the same figure at December 31,
1994. Deposits at September 30, 1995, totaled $669,597,000, an increase of
$86,059,000, or 14.7%, from the same figure at December 31, 1994.
Stockholders' equity at the end of the quarter was $93,346,000, an
increase of $9,646,000, or 11.5%, from the December 31, 1994 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, 1995, each bank
was within established guidelines and total corporate liquidity was strong.
At September 30, 1995, cash and due from banks, securities available for
sale, federal funds sold and securities purchased under agreements for
resale, and mortgage loans held for sale were 14.7% 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 7 of the accompanying Form
10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as
of September 30, 1995 and for the three-month and nine-month periods ended
September 30, 1995 and 1994, 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, 1994,
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 27, 1995, 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, 1994, 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, 1995
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: 11/6/95 /s/ J. Thomas May
----------------- ------------------------------------
J. Thomas May
President and Chief Executive Officer
Date: 11/6/95 /s/ Barry L. Crow
----------------- --------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
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