SIMMONS FIRST NATIONAL CORPORATION
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Financial Statements
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(Form 10-Q)
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March 31, 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 March 31, 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 3,677,378
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1995 and December 31, 1994 3-4
Consolidated Statements of Income --
Three months ended
March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1995 and 1994 6
Consolidated Statement of Changes in Stockholders'
Equity -- Three months ended
March 31, 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 I
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A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
ASSETS
------
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1995 1994
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and due from banks $ 27,043 $ 33,476
Interest-bearing balances due from banks 56 101
Federal funds sold and securities purchased
under agreements to resell 31,200 40,425
---------- ----------
Cash and cash equivalents 58,299 74,002
Investment securities-taxable (Note 2)
Held-to-maturity 101,693 91,470
Available-for-sale 41,124 29,610
Investment securities-nontaxable
Held-to-maturity 50,322 50,904
Mortgage loans held for delivery
against commitments 8,277 8,720
Assets held in trading accounts 1,074 2,734
Loans-non-taxable 2,011 2,021
Loans-taxable 403,725 416,371
Allowance for loan losses (Note 3) (7,917) (7,790)
---------- ----------
Net loans (Note 3) 397,819 410,602
Premises and equipment 12,897 12,115
Foreclosed assets held for sale, net 1,551 1,730
Interest receivable 6,245 6,289
Cost of loan-servicing rights acquired 3,747 3,825
Excess of cost over fair value of net assets
acquired, at amortized cost 2,374 2,392
Other assets 24,192 18,869
---------- ----------
Total Assets $ 709,614 $ 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>
March 31, December 31,
(Dollars in Thousands) 1995 1994
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 107,340 $ 109,564
Interest bearing transaction and
savings deposits 215,689 228,649
Time deposits (Note 9) 257,840 245,325
---------- ----------
Total Deposits 580,869 583,538
Federal funds purchased and securities
sold under agreements to repurchase 20,870 23,931
Other borrowed funds:
Short-term debt 612 1,621
Long-term debt 1,135 1,144
Capital notes 11,000 11,000
Other liabilities 9,411 8,328
---------- ----------
Total Liabilities 623,897 629,562
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share,
authorized 10,000,000 shares;
issued and outstanding 3,677,378 18,387 18,387
Surplus 19,827 19,827
Net unrealized gain (loss) on securities
available for sale 475 233
Undivided profits (Note 12) 47,028 45,253
---------- ----------
Total Stockholders' Equity $ 85,717 $ 83,700
---------- ----------
Total Liabilities and
Stockholders' Equity $ 709,614 $ 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 ENDED MARCH 31, 1995 AND 1994
<CAPTION>
Three Months Ended
March 31,
(Dollars in thousands, except per share figures) 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Loans $ 8,815 $ 7,150
Federal funds sold and securities
purchased under agreements to resell 370 231
Investment securities - taxable
Held to maturity 1,636 1,468
Available for sale 674 738
Investment securities - non-taxable
Held to maturity 687 694
Mortgage loans held for delivery
against commitments 144 611
Trading account 10 32
Other interest 26 11
--------- ---------
TOTAL INTEREST INCOME 12,362 10,935
--------- ---------
INTEREST EXPENSE
Deposits
Interest-bearing transaction accounts
and savings deposits 1,349 1,217
Time deposits 2,987 2,167
Federal funds purchased and securities
sold under agreements to repurchase 348 214
Other borrowed funds:
Short-term debt 24 12
Long-term debt 28 32
Capital notes 231 161
--------- ---------
TOTAL INTEREST EXPENSE 4,967 3,803
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NET INTEREST INCOME 7,395 7,132
Provision for loan losses 449 525
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,946 6,607
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NON-INTEREST INCOME
Trust income 418 455
Service charges on deposit accounts 599 548
Other service charges and fees 200 237
Income on sale of mortgage loans, net of commissions 92 210
Income on investment banking, net of commissions 123 565
Net realized gains on securities 1 19
Credit card fees 2,399 2,464
Loan servicing fees 1,386 1,985
Other operating income 745 473
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TOTAL NON-INTEREST INCOME 5,963 6,956
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NON-INTEREST EXPENSE
Salaries and employee benefits 5,223 5,282
Net occupancy expense 532 480
Equipment expense 509 511
Loss on foreclosed assets 353 427
Other operating expense 3,073 3,238
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TOTAL NON-INTEREST EXPENSE 9,690 9,938
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NET INCOME BEFORE INCOME TAXES 3,219 3,625
Provision for income taxes (Note 8) 966 999
--------- ---------
NET INCOME $ 2,253 $ 2,626
========= =========
EARNINGS PER COMMON SHARE $ 0.61 $ 0.71
========= =========
DIVIDENDS PER COMMON SHARE $ 0.13 $ 0.10
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<CAPTION>
Three Months Ended
March 31, March 31,
(Dollars in Thousands) 1995 1994
- ------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,253 $ 2,626
Items not requiring (providing) cash
Depreciation and amortization 407 429
Provision for loan losses 449 525
Amortization of premiums and accretion of
discounts on investment securities and mortgage-
backed certificates (34) (72)
Provision for foreclosed assets 40 53
Net realized gain on securities (1) (28)
Gain on sale of premises and equipment -- (4)
Deferred income taxes (127) (31)
Changes in:
Accrued interest receivable 44 47
Mortgage loans held for sale 443 12,845
Other assets 1,660 (7)
Accounts payable and accrued expenses (5,191) 1,547
Income taxes payable 818 (798)
Trading accounts 116 1,985
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Net cash provided by operating activities 877 19,117
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CASH FLOWS FROM INVESTING ACTIVITIES
Net collection of loans 12,371 21,844
Purchase of premises and equipment (1,098) (1,127)
Proceeds from sale of fixed assets -- 405
Proceeds from the sale of foreclosed assets 102 578
Proceeds from maturities of available-for-sale securities 2,500 10,137
Purchases of available-for-sale securities (7,500) (4,541)
Proceeds from maturities of held-to-maturity securities 12,994 5,785
Purchases of held-to-maturity securities (28,723) (18,165)
--------- ---------
Net cash provided by (used in) investing securities (9,354) 14,916
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transactions accounts
savings deposits (15,184) (7,819)
Net issuance (repayment) of certificates of deposit 12,515 (6,917)
Repayments of other borrowings (73,501) (235,530)
Proceeds from other borrowings 72,483 232,644
Dividends paid (478) (368)
Net increase in federal funds purchased and
Securities sold under agreements to repurchase (3,061) (3,679)
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Net cash provided by financing activities (7,226) (21,669)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,703) 12,364
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 74,002 49,090
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 58,299 $ 61,454
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<CAPTION>
NET UNREALIZED
GAIN (LOSS)
COMMON SECURITIES UNDIVIDED
(Dollars in Thousands except per share data) 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 $487 946 946
Net income 2,626 2,626
Cash dividend declared
($.10 per share) (368) (368)
Change in unrealized appreciation
(depreciation) on available-for-sale
securities, net of income tax credit
of $133 (259) (259)
---------- ---------- ---------- ---------- ----------
Balance, March 31, 1994 18,387 19,827 687 39,379 78,280
Net income 7,234 7,234
Cash dividends declared
($0.37 per share) (1,360) (1,360)
Change in unrealized appreciation
(depreciation) on available-for-sale
securities, net of income tax credit
of $234 (454) (454)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 18,387 19,827 233 45,253 83,700
Net income 2,253 2,253
Cash dividends declared
($0.13 per share) (478) (478)
Change in unrealized appreciation
on available-for-sale securities,
net of income taxes of $150 242 242
---------- ---------- ---------- ---------- ----------
Balance, March 31, 1995 $ 18,387 $ 19,827 $ 475 $ 47,028 $ 85,717
========== ========== ========== ========== ==========
</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>
March 31, 1995 December 31, 1994
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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 $ 79,983 $ 1,142 $ (800) $ 80,325 $ 74,544 $ 349 $ (1,479) $ 73,414
U.S. Government
agencies 18,265 203 (163) 18,305 13,375 32 (289) 13,118
Mortgage-backed
securities 3,445 13 (153) 3,305 3,551 6 (244) 3,313
State and political
subdivisions 50,322 916 (959) 50,279 50,904 577 (1,962) 49,519
---------- ---------- --------- --------- ---------- ---------- ---------- ----------
$ 152,015 $ 2,274 $ (2,075) $ 152,214 $ 142,374 $ 964 $ (3,974) $ 139,364
========== ========== ========= ========= ========== ========== ========== ==========
Available-For-Sale
U.S. Treasury $ 36,792 $ 300 $ (67) $ 37,025 25,701 96 (202) $ 25,595
U.S. Government
agencies 1,002 10 -- 1,012 1,002 3 -- 1,005
Other securities 2,584 503 -- 3,087 2,554 457 (1) 3,010
---------- ---------- --------- --------- ---------- ---------- ---------- ----------
$ 40,378 $ 813 $ (67) $ 41,124 $ 29,257 $ 556 $ (203) $ 29,610
========== ========== ========= ========= ========== ========== ========== ==========
</TABLE>
Maturities of investment securities at March 31, 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 of less $ 36,224 $ 36,137 $ 19,400 $ 19,517
After one through five years 69,883 70,201 18,394 18,520
After five through ten years 37,183 36,783 -- --
After ten years 5,280 5,788 -- --
Mortgage-backed securities not due
on a single maturity date 3,445 3,305 -- --
Other securities -- -- 2,584 3,087
----------- ----------- ------------ -----------
$ 152,015 $ 152,214 $ 40,378 $ 41,124
=========== =========== ============ ===========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $85,999,000 at March 31, 1995,
and $70,981,000 at December 31, 1994. The approximate fair value of pledged
securities amounted to $86,574,000 at March 31, 1995, and $70,217,000 at
December 31, 1994.
The book value of securities sold under agreements to repurchase
amounted to $155,000 and $196,000 for March 31, 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 first quarter of 1995, there was no unrealized loss on
trading securities.
During the first three 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>
March 31, March 31,
(Dollars in Thousands) 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
----------- -----------
Gross gains 1 28
Gross losses -- (9)
----------- -----------
Securities gains (losses) $ 1 $ 19
=========== ===========
</TABLE>
Approximately 12 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 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in Thousands) 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loans:
Consumer:
Credit card $ 148,267 $ 164,501
Student loan 63,220 62,836
Other consumer 42,683 40,739
Real estate:
Construction 6,328 6,232
Single family residential 44,384 43,629
Other commercial 45,980 44,141
Commercial:
Commercial 31,790 29,047
Agricultural 10,317 16,048
Financial institutions 11,131 6,681
Other 2,498 5,122
----------------- -----------------
Total loans before unearned discount and
allowances for loan losses 406,598 418,976
Unearned discount (862) (584)
----------------- -----------------
Total loans after unearned discount and
before reserves 405,736 418,392
Allowance for loan losses (7,917) (7,790)
----------------- -----------------
Net Loans $ 397,819 $ 410,602
================= =================
</TABLE>
During the first quarter of 1995, foreclosed assets held for sale
decreased to $1,551,000 and are carried at the lower of cost or fair market
value. Nonaccrual and other non-performing loans for the Corporation at
March 31, 1995, were $2,744,000, bringing the total of non-performing assets
to $4,295,000.
<TABLE>
<CAPTION>
March 31, 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 449 525
----------------- -----------------
8,239 7,955
Deductions
Losses charged to allowance, net of
recoveries of $114 and $81 for
the first three months of 1995 and 1994,
respectively 322 443
----------------- -----------------
Balance, March 31 $ 7,917 7,512
=================
Additions
Provision charged to expense 1,525
-----------------
9,037
Deductions
Losses charged to allowance,
net of recoveries of $339
for the last nine months of
1994 1,247
-----------------
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. FAS 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 FAS 114 did not increase the 1995 loan loss provision.
Total impaired loans at December 31, 1994, was $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 losses.
At March 31, 1995, impaired loans totaled $3,462,000, all of which
had reserves allocated. An allowance of $645,000 for possible losses related
to those loans.
Interest of $38,000 was recognized on average impaired loans of
$3,527,000 as of March 31, 1995. No interest was recognized on impaired
loans on a cash basis during the first quarter 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 owns 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, will be
merged into Simmons First National Bank, the Corporation's lead bank, and
Dumas State Bank will become Simmons First Dumas and will continue to operate
as a subsidiary bank of the Corporation.
On April 25, 1995, the Corporation entered into a definitive
agreement to merge DSB Banschares, Inc. (DSBB) located in Dermott, Arkansas
into SFNC. The Corporation will acquire all of the outstanding capital stock
of DSBB in a cash purchase transaction valued at approximately $2.4 million.
DSBB, which owns Dermott State Bank, has consolidated assets as of March 31,
1995, of approximately $20 million.
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, 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 6: STOCK OPTIONS
As of March 31, 1995, 80,000 shares of common stock of the
Corporation had been granted through an employee stock option incentive plan.
There were 44,800 exercisable shares at the end of the first quarter, none of
which had been issued.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(Dollars in Thousands) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 4,808 $ 3,674
Income taxes
paid $ -- $ 550
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
March 31, March 31,
(Dollars in Thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,093 $ 1,030
Increase in future income tax benefits (127) (31)
------------ ------------
Provision for income taxes $ 966 $ 999
============ ============
</TABLE>
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) 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 2,870 $ 2,744
Valuation adjustment of foreclosed assets held for sale 293 281
Deferred compensation payable 357 373
Deferred loan fee income 776 773
Other 641 645
------------- -------------
Total deferred tax assets 4,937 4,816
------------- -------------
Deferred tax liabilities:
Accumulated depreciation (398) (405)
Available-for-sale securities (121) (120)
------------- -------------
Total deferred tax liabilities (519) (525)
------------- -------------
Net Deferred tax assets before
valuation allowance $ 4,418 $ 4,291
------------- -------------
Valuation allowance:
Beginning balance -- (564)
Change during period -- 564
------------- -------------
Ending balance -- --
------------- -------------
Net deferred tax asset $ 4,418 $ 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>
March 31, March 31,
(Dollars in Thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,093 $ 1,243
Increase (decrease) resulting from:
Tax exempt income (222) (233)
Other differences, net 95 (11)
------------ ------------
Actual tax provision $ 966 $ 999
============ ============
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $57,917,000 and $55,222,000 of
certificates of deposit of $100,000 or more at March 31, 1995, and December
31, 1994, respectively.
NOTE 10: 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 36.5% and 39.3% of the
portfolio, as of March 31, 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 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, 1995 and December 31, 1994, the Corporation had
outstanding commitments to originate loans aggregating approximately
$74,610,000 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 $33,850,000
and $16,519,000 at March 31, 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 $1,073,000 and $918,000 at March 31, 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 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, 1995, the Corporation had granted unused lines of credit
to borrowers aggregating approximately $27,017,000 and $170,884,000 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 $1,209,615,000 and
$1,228,311,000 at March 31, 1995 and December 31, 1994, respectively, of which
mortgage-backed securities serviced totaled $1,019,003,000 and $1,027,855,000
at March 31, 1995 and December 31, 1994, respectively. Simmons First National
Bank serviced VA loans subject to certain recourse provisions totaling
approximately $154,398,000 and $156,650,000, at March 31, 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 March 31, 1995 and December 31, 1994, this reserve
balance was $43,000 and $210,000, respectively, and is included in other
liabilities.
NOTE 11: CONTINGENT LIABILITIES
The Corporation and/or its subsidiary banks have various unrelated
legal proceedings, most of which involve loan foreclosure activity pending,
which, 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 March 31, 1995, the bank subsidiaries had
approximately $11.1 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 required
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, 1995, 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 22.5% at March 31,
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 March 31, 1995, was $2,253,000, an
decrease of $373,000, or 14.2%, over the same period of 1994. Earnings per
share for the three-month periods ended March 31, 1995 and March 31, 1994,
were $0.61 and $0.71, respectively.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended March 31, 1995 and 1994, were 1.31% and 1.47%,
respectively. Annualized return on equity (ROE) for the same three-month
periods were 10.71% and 13.80%, respectively.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended March 31, 1995, increased
$263,000, or 3.7%, when compared to the same period in 1994. During the first
quarter, interest income increased $1,427,000, or 13.1%, and interest expense
increased $1,164,000, or 30.6%, when compared to the same period in 1994.
These increases in net interest income can be attributed to an increase in
the Corporation's interest margin.
Continued improvement in asset quality led to a reduction in the
provision for loan losses for the first quarter of 1995, to $449,000,
compared to $525,000 for the same period of 1994 resulting in a $76,000, or
14.5% decrease.
Non-interest income at March 31, 1995, was $5,963,000, a reduction
of $993,000, or 14.3%, from the same period in 1994. This is primarily
attributable to reduced profits in the mortgage marketing and dealer bank
operations as a result of the negative impact of rising interest rates on the
nation's mortgage and securities markets.
For the three-months ended March 31, 1995, non-interest expense was
$9,690,000, a decrease of $248,000, or 2.5%, from the March 31, 1994 total of
$9,938,000. This decrease, primarily in the mortgage servicing operation, is
tied to the general slowdown nationally in mortgage lending and fixed income
securities sales.
At March 31, 1995, total assets for the Corporation were
$709,614,000, a decrease of $3,648,000, or 0.5%, from the same figure at
December 31, 1994. Deposits at March 31, 1995, totaled $580,869,000, a
decrease of $2,669,000 or 0.5%, from the same figure at December 31, 1994.
Stockholders' equity at the end of the first quarter was
$85,717,000, an increase of $2,017,000, or 2.4%, 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 March 31, 1995, each bank was
within established guidelines and total corporate liquidity was strong. At
March 31, 1995, cash and cash equivalents, trading and available-for-sale
securities, and mortgage loans held for sale were 15.3% 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 16 of the accompanying Form
10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as
of March 31, 1995, and for the three-month periods ended March 31, 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.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
May 8, 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: 5/11/95 /s/ J. Thomas May
-------------------- ---------------------------------------
J. Thomas May
President & Chief Executive Officer
Date: 5/11/95 /s/ Barry L. Crow
-------------------- ----------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
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