SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
June 30, 1996
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 June 30, 1996 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
-----------------
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 3,809,639
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 3-4
Consolidated Statements of Income --
Three months and six months ended
June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows --
Six months ended June 30, 1996 and 1995 6
Consolidated Statement of Changes in Stockholders'
Equity -- Six months ended
June 30, 1996 and 1995 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 Information 20
Part I
A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
<CAPTION>
June 30, December 31,
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and noninterest-bearing balances due from banks ......... $ 35,444 $ 36,179
Interest-bearing balances due from banks ..................... 4,387 2,398
Federal funds sold and securities purchased
under agreements to resell ................................. 8,530 34,845
------- -------
Cash and Cash Equivalents ................................ 48,361 73,422
Investment securities
Held-to-maturity .......................................... 125,816 134,433
Available-for-sale ........................................ 94,951 90,367
Mortgage loans held for sale, net of unrealized gains (losses) 16,504 26,159
Assets held in trading accounts .............................. 966 548
Loans ........................................................ 483,453 471,956
Allowance for possible loan losses ........................ (8,364) (8,418)
------- -------
Net loans ............................................... 475,089 463,538
Premises and equipment ....................................... 19,234 16,201
Foreclosed assets held for sale .............................. 879 1,017
Interest receivable .......................................... 8,495 7,953
Cost of loan servicing rights acquired ....................... 8,001 4,867
Excess of cost over fair value of net assets acquired,
at amortized cost .......................................... 3,374 3,677
Other assets ................................................. 14,495 17,702
------- -------
Total Assets ........... $816,165 $839,884
======= =======
</TABLE>
The December 31, 1995 Consolidated Balance Sheet is as reported in the
Corporation's 1995 Annual Report.
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Noninterest-bearing transaction accounts ........................ $105,492 $108,779
Interest-bearing transaction accounts and savings deposits ...... 245,912 251,065
Time deposits ................................................... 337,466 344,924
------- -------
Total Deposits .......................................... 688,870 704,768
Federal funds purchased and securities
sold under agreements to repurchase ........................... 14,985 20,861
Short-term debt ................................................. 2,862 1,405
Long-term debt .................................................. 1,087 4,757
Accrued interest and other liabilities .......................... 9,518 11,296
------- -------
Total Liabilities ....................................... 717,322 743,087
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STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share, authorized
10,000,000 shares, issued and outstanding 3,809,639
and 3,816,612 at 1996 and 1995, respectively ............... 19,048 19,083
Surplus ....................................................... 22,231 22,651
Undivided profits ............................................. 56,645 53,038
Unrealized appreciation on available-for-sale securities,
net of income taxes of $522 and $1,152 at 1996 and 1995,
respectively ................................................ 919 2,025
------- -------
Total Stockholders' Equity .............................. 98,843 96,797
------- -------
Total Liabilities and Stockholders' Equity $816,165 $839,884
======= =======
</TABLE>
The December 31, 1995 Consolidated Balance Sheet is as reported in the
Corporation's 1995 Annual Report.
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans ..................................................... $10,716 $ 9,729 $21,202 $18,545
Federal funds sold and securities purchased
under agreements to resell .............................. 382 548 929 918
Investment securities-taxable ............................. 2,626 2,506 5,293 4,816
Investment securities-non-taxable ......................... 789 743 1,559 1,430
Mortgage loans held for sale, net of unrealized gains ..... 388 190 788 333
Assets held in trading accounts ........................... 30 14 40 23
Interest-bearing balances due from banks .................. 77 28 106 55
------ ------ ------ ------
TOTAL INTEREST INCOME ............................. 15,008 13,758 29,917 26,120
------ ------ ------ ------
INTEREST EXPENSE
Interest bearing transaction accounts and savings deposits 1,710 1,506 3,344 2,855
Time deposits ............................................. 4,627 3,860 9,415 6,847
Federal funds purchased and securities
sold under agreements to repurchase ..................... 276 335 667 683
Short-term debt ........................................... 14 16 28 41
Long-term debt ............................................ 102 271 206 528
------ ------ ------ ------
TOTAL INTEREST EXPENSE ............................ 6,729 5,988 13,660 10,954
------ ------ ------ ------
NET INTEREST INCOME ........................................... 8,279 7,770 16,257 15,166
Provision for possible loan losses ........................ 502 452 1,003 901
------ ------ ------ ------
NET INTEREST AFTER PROVISION FOR LOAN LOSSES .................. 7,777 7,318 15,254 14,265
------ ------ ------ ------
NON-INTEREST INCOME
Trust department income ................................... 476 376 1,029 794
Service charges on deposit accounts ....................... 746 697 1,485 1,297
Other service charges and fees ............................ 363 201 592 402
Income (loss) on sale of mortgage loans, net of commissions (58) 54 48 146
Income on investment banking, net of commissions .......... 39 196 339 319
Net realized gains on securities .......................... 118 -- 269 --
Credit card fees .......................................... 2,433 2,571 4,690 4,970
Loan servicing fees ....................................... 1,620 1,450 3,223 2,836
Other operating income .................................... 216 287 357 1,031
------ ------ ------ ------
TOTAL NON-INTEREST INCOME ......................... 5,953 5,832 12,032 11,795
------ ------ ------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits ............................ 5,420 5,310 11,050 10,533
Occupancy expense, net .................................... 569 591 1,148 1,123
Furniture and equipment expense ........................... 558 522 1,119 1,031
Loss on foreclosed assets ................................. 282 339 563 692
Other operating expenses .................................. 3,133 3,087 6,532 6,162
------ ------ ------ ------
TOTAL NON-INTEREST EXPENSE ........................ 9,962 9,849 20,412 19,541
------ ------ ------ ------
INCOME BEFORE INCOME TAXES .................................... 3,768 3,301 6,874 6,519
Provision for income taxes ................................ 1,107 908 1,971 1,873
------ ------ ------ ------
NET INCOME .................................................... $ 2,661 $ 2,393 $ 4,903 $ 4,646
====== ====== ====== ======
EARNINGS PER AVERAGE COMMON SHARE ............................. $ 0.70 $ 0.63 $ 1.29 $ 1.24
====== ====== ====== ======
DIVIDENDS PER COMMON SHARE .................................... $ 0.18 $ 0.15 $ 0.34 $ 0.28
====== ====== ====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
Six Months Ended
June 30, June 30,
(In thousands) 1996 1995
- -----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <c
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 4,903 $ 4,646
Items not requiring (providing) cash
Depreciation and amortization ............................. 1,472 443
Provision for possible loan losses ........................ 1,003 901
Amortization of premiums and accretion of discounts
on investment securities and mortgage-backed certificates 139 (50)
Provision for foreclosed assets ........................... 108 156
Net realized losses on securities ........................ (269) --
Losses on sale of premises and equipment .................. (13) --
Deferred income taxes ..................................... 84 (123)
Changes in:
Interest receivable ....................................... (542) (1,164)
Mortgage loans held for sale .............................. 9,655 (10,115)
Other assets .............................................. (1,718) (6,122)
Accrued interest and other liabilities .................... (274) 2,148
Income taxes payable ...................................... 25 (597)
Trading accounts .......................................... (418) 2,253
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Net cash provided by (used in) operating activities 14,155 (7,624)
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CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans ................................... (12,608) (26,323)
Purchase of premises and equipment .......................... (3,627) (5,173)
Proceeds from sale of fixed assets .......................... 246 2,154
Proceeds from the sale of foreclosed assets ................. 83 256
Proceeds from sale of available-for-sale securities ......... 265 --
Proceeds from maturities of available-for-sale securities ... 51,716 4,850
Purchases of available-for-sale securities .................. (59,054) (16,985)
Proceeds from maturities of held-to-maturity securities ..... 43,003 7,747
Purchases of held-to-maturity securities .................... (33,502) (28,720)
------- -------
Net cash used in investing activities ............... (13,478) (62,194)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transaction accounts
and savings deposits ...................................... (8,440) (388)
Net issuance of time deposits ............................... (7,458) 59,172
Repayments of other borrowings .............................. (55,691) (89,049)
Proceeds from other borrowings .............................. 53,478 90,479
Dividends paid .............................................. (1,296) (1,051)
Net decrease in federal funds purchased
and securities sold under agreements to repurchase ........ (5,876) (344)
Issuance (repurchase) of common stock ....................... (455) 3,520
------- -------
Net cash used in financing activities ............... (25,738) 62,339
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS ........................ (25,061) (7,479)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................. 73,422 74,002
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 48,361 $ 66,523
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<CAPTION>
NET
UNREALIZED
COMMON GAIN ON AFS UNDIVIDED
(In thousands) STOCK SURPLUS SECURITIES PROFITS TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 @$25.50 PER SHARE) ..... 686 2,814 3,500
NET INCOME ............................. 4,646 4,646
CASH DIVIDENDS DECLARED
($.28 PER SHARE) ..................... (1,051) (1,051)
CHANGE IN UNREALIZED APPRECIATION
ON AVAILABLE-FOR-SALE SECURITIES,
NET OF INCOME TAXES OF $290 .......... 489 489
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1995 ................. 19,083 22,651 722 48,848 91,304
NET INCOME ............................. 5,373 5,373
CASH DIVIDENDS DECLARED
($.31 PER SHARE) ....................... (1,183) (1,183)
CHANGE IN UNREALIZED APPRECIATION
ON AVAILABLE-FOR-SALE SECURITIES,
NET OF INCOME TAXES OF $742 .......... 1,303 1,303
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1995 ............. 19,083 22,651 2,025 53,038 96,797
EXERCISE OF STOCK OPTIONS--10,000 SHARES 50 62 112
REPURCHASE OF COMMON STOCK ............. (85) (482) (567)
NET INCOME ............................. 4,903 4,903
CASH DIVIDENDS DECLARED
($.34 PER SHARE) ..................... (1,296) (1,296)
CHANGE IN UNREALIZED DEPRECIATION
ON AVAILABLE-FOR-SALE SECURITIES,
NET OF INCOME TAX CREDIT OF $630 ..... (1,106) (1,106)
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1996 ................ $ 19,048 $ 22,231 $ 919 $ 56,645 $ 98,843
======= ======= ======= ======= =======
</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 26-29 of the 1995 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>
June 30, 1996 December 31, 1995
----------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held to Maturity
U.S. Treasury .... $ 25,862 $ 157 $ (332) $ 25,687 $ 45,920 $ 400 $ (46) $ 46,274
U.S. Government
agencies ........ 32,122 158 (703) 31,577 23,569 692 (18) 24,243
Mortgage-backed
securities ...... 5,867 18 (141) 5,744 6,344 37 (55) 6,326
State and political
subdivisions .... 61,476 960 (717) 61,719 58,154 1,536 (356) 59,334
Other securities .. 489 2 (8) 483 446 11 -- 457
-------- -------- -------- -------- -------- -------- -------- --------
$ 125,816 $ 1,295 $ (1,901) $ 125,210 $ 134,433 $ 2,676 $ (475) $ 136,634
======== ======== ======== ======== ======== ======== ======== ========
Available For Sale
U.S. Treasury .... $ 67,603 $ 952 $ (164) $ 68,391 $ 72,258 $ 2,102 $ (3) $ 74,357
U.S. Government
agencies ........ 22,769 129 (151) 22,747 11,905 264 (35) 12,134
State and political
subdivisions .... 50 -- -- 50 51 -- -- 51
Other securities .. 3,088 675 -- 3,763 2,976 851 (2) 3,825
-------- -------- -------- -------- -------- -------- -------- --------
$ 93,510 $ 1,756 $ (315) $ 94,951 $ 87,190 $ 3,217 $ (40) $ 90,367
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Maturities of investment securities at June 30, 1996
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One year or less ................. $ 8,683 $ 8,723 $ 47,853 $ 47,956
After one through five years ..... 55,310 55,195 42,569 43,232
After five through ten years ..... 50,146 49,267 -- --
After ten years .................. 5,321 5,798 -- --
Mortgage-backed securities not due
on a single maturity date ...... 5,867 5,744 -- --
Other securities ................. 489 483 3,088 3,763
------- ------- ------- -------
$125,816 $125,210 $ 93,510 $ 94,951
======= ======= ======= =======
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $90,044,000 at June 30, 1996, and
$107,133,000 at December 31, 1995. The approximate fair value of pledged
securities amounted to $90,308,000 at June 30, 1996 and $110,319,000 at December
31, 1995.
The book value of securities sold under agreements to repurchase amounted
to $165,000 and $1,417,000 for June 30, 1996 and December 31, 1995,
respectively.
The table below shows gross realized gains and losses during the first
six months of 1996 and 1995.
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 1996 1995
- --------------------------------------------------
<S> <C> <C>
Proceeds from sales ..... $ 265 $ --
------- -------
Gross gains ............. 269 --
Gross losses ............ -- --
------- -------
Securities gains (losses) $ 269 $ --
======= =======
</TABLE>
As of December 15, 1995, the Corporation redesignated held-to-maturity
securities with an aggregate amortized cost of $40,193,000 and net unrealized
gains of $1,905,000 to the available-for-sale portfolio. The redesignation was
prompted by the announcement by the Financial Accounting Standards Board to
allow a one-time redesignation and reflects management's revised expectations of
liquidity needs.
Approximately 12 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 POSSIBLE LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Loans
Consumer
Credit card ............................ $ 144,705 $ 154,808
Student loan ........................... 66,105 63,492
Other consumer ......................... 61,647 57,166
Real estate
Construction ........................... 17,080 15,177
Single family residential .............. 56,131 54,341
Other commercial ....................... 59,682 59,012
Commercial
Commercial ............................. 36,653 36,553
Agricultural ........................... 28,761 20,588
Financial institutions ................. 9,898 9,058
Other ..................................... 3,510 2,546
-------- --------
Total loans before unearned discount and
allowances for possible loan losses .. 484,172 472,741
Unearned discount ......................... (719) (785)
Allowance for possible loan losses ........ (8,364) (8,418)
-------- --------
Net Loans ........................... $ 475,089 $ 463,538
======== ========
</TABLE>
During the first six months of 1996, foreclosed assets held for sale
decreased to $879,000 and are carried at the lower of cost or fair market value.
Other non-performing assets, non-accrual loans and other non-performing loans
for the Corporation at June 30, 1996, were $6,000, $1,571,000 and $1,741,000,
respectively, bringing the total of non-performing assets to $4,197,000.
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Allowance for Possible Loan Losses
Balance, beginning of year ................ $ 8,418 $ 7,790
Additions
Provision charged to expense ........... 1,003 901
Allowance for loan losses
of acquired institutions ............ 314
--------- ---------
9,421 9,005
Deductions
Losses charged to allowance, net of
recoveries of $221 and $213 for
the first six months of 1996 and 1995,
respectively ......................... 1,057 751
--------- ---------
Balance, June 30 .......................... $ 8,364 $ 8,254
=========
Additions
Provision charged to expense ........... 1,191
Allowance for loan losses
of acquired institutions ............ 47
---------
9,492
Deductions
Losses charged to allowance,
net of recoveries of $266
for the last six months of
1995 1,074
---------
Balance, end of year ......................... $ 8,418
=========
</TABLE>
At June 30, 1996 and December 31, 1995, impaired loans totaled
$4,558,000 and $4,564,000, respectively, all of which had reserves allocated. An
allowance of $857,000 and $832,000 for possible losses related to those loans at
June 30, 1996 and December 31, 1995, respectively.
Interest of $130,000 and $88,000 was recognized on average impaired
loans of $4,523,000 and $3,548,000 as of June 30, 1996 and 1995, respectively.
Interest recognized on impaired loans on a cash basis during the first six
months of 1996 and 1995 was immaterial.
NOTE 4: ACQUISITIONS
On April 1, 1995, and August 1, 1995, Simmons First National
Corporation acquired all outstanding stock of Dumas Bancshares, Inc. (DBI), and
Dermott State Bank Bancshares, Inc. (DSBB), respectively, in exchange for
137,234 shares of common stock valued at $25.50 per share and cash of
$3,900,000. DBI and DSBB were liquidated into the Corporation leaving Dumas
State Bank, First State Bank, and Dermott State Bank as subsidiaries of the
Corporation. First State Bank was then merged into Simmons First National Bank
and the names of the other two banks were changed to Simmons First Bank of Dumas
and Simmons First Bank of Dermott. The acquisitions were accounted for as
purchases, and the results of operations from the dates of acquisition are
included in the December 31, 1995 consolidated financial statements. The total
acquisition cost of $7,400,000 exceeded the fair value of net assets acquired by
$1,599,000.
In February, 1996, the flagship bank, Simmons First National, located
in Pine Bluff, opened an additional branch in Little Rock, Arkansas, bringing
its total branches to twenty-four.
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 June 30, 1996, 107,500 shares of common stock of the Corporation
had been granted through an employee stock option incentive plan. There were
58,300 exercisable options at the end of the second quarter of 1996. Twelve
thousand shares have been issued upon exercise of options.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands) 1996 1995
- -----------------------------------------
<S> <C> <C>
Interest paid $ 13,827 $ 10,256
Income taxes
paid ..... $ 1,813 $ 1,582
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 1996 1995
- ---------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,887 $ 1,996
Deferred income taxes ........ 84 (123)
------ ------
Provision for income taxes ... $ 1,971 $ 1,873
====== ======
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are shown below:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for possible loan losses ...... $ 2,923 $ 2,940
Valuation adjustment of foreclosed assets
held for sale ......................... 251 250
Deferred compensation payable ........... 430 444
Deferred loan fee income ................ 701 707
Other ................................... 828 847
------ ------
Total deferred tax assets .............. 5,133 5,188
------ ------
Deferred tax liabilities
Accumulated depreciation ................ (755) (718)
Available-for-sale securities .......... (522) (1,151)
Other ................................... (330) (338)
------ ------
Total deferred tax liabilities ....... (1,607) (2,207)
------ ------
Net deferred tax assets included in other
assets on balance sheets ............. $ 3,526 $ 2,981
====== ======
</TABLE>
A reconciliation of income tax expense at the statutory rate to the
Corporation's actual income tax expense is shown below:
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 2,337 $ 2,345
Increase (decrease) resulting from:
Tax exempt income ............... (525) (488)
Other difference, net ........... 159 16
------ ------
Actual tax provision ............... $ 1,971 $ 1,873
====== ======
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $93,211,000 and $104,906,000 of
certificates of deposit of $100,000 or more at June 30, 1996, and December 31,
1995, 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 29.9% and 32.8% of the portfolio,
as of June 30, 1996 and December 31, 1995, 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 June 30, 1996 and December 31, 1995, the Corporation had outstanding
commitments to originate loans aggregating approximately $88,811,000 and
$67,853,000, 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 $40,373,000 and $26,744,000
at June 30, 1996 and December 31, 1995, 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 $2,410,000 and
$1,954,000 at June 30, 1996 and December 31, 1995, 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 June 30, 1996, the Corporation had granted unused lines of credit to
borrowers aggregating approximately $16,642,000 and $161,213,000 for commercial
lines and open-end consumer lines, respectively. At December 31, 1995, unused
lines of credit to borrowers aggregated approximately $3,365,000 for commercial
lines and $157,068,000 for open-end consumer lines, respectively.
Mortgage loans serviced for others totaled $1,410,858,000 and
$1,224,467,000 at June 30, 1996 and December 31, 1995, respectively, of which
mortgage-backed securities serviced totaled $1,343,266,000 and $1,166,906,000 at
June 30, 1996 and December 31, 1995, respectively. Simmons First National Bank
serviced VA loans subject to certain recourse provisions totaling approximately
$137,599,000 and $145,185,000, at June 30, 1996 and December 31, 1995,
respectively. A reserve was established for potential loss obligations, based on
management's evaluation of a number of variables, including the amount of
delinquent loans serviced for other investors, length of delinquency, and
amounts previously advanced on behalf of the borrower that the Corporation does
not expect to recover. This reserve is netted against foreclosure receivables
included in other assets. As of June 30, 1996 and December 31, 1995, this
reserve balance was $600,000 and $573,000, respectively.
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
June 30, 1996, the bank subsidiaries had approximately $13.9 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 June 30, 1996, each of the five subsidiary banks met the
capital standards for a well-capitalized institution. The Corporation's total
capital to total risk-weighted assets ratio was 20.7% at June 30, 1996, 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 June 30, 1996, was $2,661,000, an
increase of $268,000, or 11.2%, over the same period of 1995. Earnings per share
for the three-month periods ended June 30, 1996 and 1995, were $.70 and $.63,
respectively. Earnings for the six-month period ended June 30, 1996, were
$4,903,000, or $257,000 over the June 30, 1995 earnings of $4,646,000.
Year-to-date earnings on a per share basis as of June 30, 1996 were $1.29,
compared to $1.24 at June 30, 1995. This denotes a 4.0% increase.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended June 30, 1996 and 1995, were 1.28% and 1.26%,
respectively. Annualized return on equity (ROE) for the same three-month periods
were 10.85% and 10.34 %, respectively.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended June 30, 1996, increased
$509,000, or 6.6%, when compared to the same period in 1995, due to the increase
in earning assets and yield. During the second quarter, interest income
increased $1,250,000, or 9.1%, while interest expense increased $741,000, or
12.4%, when compared to the same period in 1995. For the six-months ended June
30, 1996 and 1995, net interest income was $16,257,000 and $15,166,000,
respectively. This represents an increase of $1,091,000, or 7.2%. Interest
income for the six-month periods ended June 30, 1996 and 1995, was up
$3,797,000, to $29,917,000, over the $26,120,000 reported as of June 30, 1995,
which signifies a 14.5% increase. Year-to-date interest expense at June 30, 1996
and 1995, was $13,660,000 and $10,954,000, respectively, which equates to a
24.7% increase in the cost of funding the growth in the balance sheet in 1996
when compared to 1995.
The provision for possible loan losses for the second quarter of 1996
was $502,000, compared to $452,000 for the same period of 1995, resulting in a
$50,000, or 11.0%, increase. For the six months ended June 30, 1996 and 1995,
the provision was $1,003,000 and $901,000, respectively, also resulting in an
11% increase.
Non-interest income, exclusive of net gains on securities sold, for the
second quarter ended June 30, 1996, was $5,835,000, a slight increase over the
$5,832,000 reported form the same period in 1995. For the six-months ended June
30, 1996 and 1995, non-interest income was $12,032,000 and $11,795,000,
respectively. This $237,000, or 2.0% increase becomes even more significant when
you consider that the 1995 figures contain $398,000 in tax adjusted
non-recurring income. Total fee income for both the three-month and six-month
periods ended June 30, 1996 and 1995 was up 7%.
During the three months ended June 30, 1996, non-interest expense
increased $113,000, or 1.1%, over the same period in 1995. This increase
reflects the normal increase in the cost of doing business. Year-to-date
non-interest expense was $20,412,000 at June 30, 1996, compared to $19,541,000,
for the same period ended June 30, 1995, reflecting the Corporation's expansion
into the Little Rock and Springdale markets and the write-off of mortgage
servicing rights associated with the prepayment of mortgage loans during the
first quarter of 1996.
On June 30, 1996, the Corporation pre-paid the remaining $3.6 million
of its initial $11.0 million in capital notes, twelve months prior to their
original due date. In 1995, the Corporation pre-paid $7.4 million of the capital
notes.
At June 30, 1996, total assets for the Corporation were $816,165,000, a
decrease of $23,719,000, or 2.8%, from the same figure at December 31, 1995.
Deposits at June 30, 1996, totaled $688,870,000, a decrease of $15,898,000, or
2.3%, from the same figure at December 31, 1995.
The allowance for possible loan losses as a percentage of total loans
was 1.73% at June 30, 1996. The coverage ratio (allowance for possible loan
losses as a percentage of non-performing loans) was 252.5% and foreclosed assets
furthered declined from the $1,017,000 at December 31, 1995, to $879,000 at June
30, 1996.
Stockholders' equity at the end of the second quarter was $98,843,000, an
increase of $2,046,000, or 2.1%, from the December 31, 1995 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 June 30, 1996, each bank was within established
guidelines and total corporate liquidity was strong. At June 30, 1996, 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
19.7% 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 June
30, 1996 and for the three-month and six-month periods ended June 30, 1996 and
1995, 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, 1995, 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 February 2, 1996, 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, 1995,
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
August 7, 1996
Part II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual shareholders meeting of the Company was held on April
23,1996. The matters submitted to the security holders for approval included
setting the number of directors at nine (9) and the election of directors.
(b) At the annual meeting, all nine (9) nominees for director were elected
by the voting of proxies solicited pursuant to Section 14 of the Security
Exchange Act of 1934, without any solicitation in opposition thereto.
(c) The following table shows the required analysis of the voting by
security holders at the annual meeting:
<TABLE>
<CAPTION>
Voting Shares
Action For Against Abstain
<S> <C> <C> <C>
Set Number of
Directors
at Nine (9) ........... 3,300,097 4,413 18,591
Director Election:
W. E. Ayres ......... 3,296,849 0 25,057
Ben Floriani ........ 3,296,849 0 25,057
C. Ramon Greenwood .. 3,295,191 0 26,716
Lara F. Hutt, III ... 3,290,849 0 31,057
J. Thomas May ....... 3,296,849 0 25,057
David R. Perdue ..... 3,295,029 0 26,878
Harry L. Ryburn ..... 3,295,749 0 26,157
Donald W. Stone ..... 3,295,204 0 26,703
Henry F. Trotter, Jr 3,294,228 0 27,679
</TABLE>
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:
---------------------- ---------------------------------------
J. Thomas May
Chairman and Chief Executive Officer
Date:
---------------------- ---------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 35,444
<INT-BEARING-DEPOSITS> 4,387
<FED-FUNDS-SOLD> 8,530
<TRADING-ASSETS> 966
<INVESTMENTS-HELD-FOR-SALE> 94,451
<INVESTMENTS-CARRYING> 125,816
<INVESTMENTS-MARKET> 125,210
<LOANS> 483,453
<ALLOWANCE> 8,364
<TOTAL-ASSETS> 816,165
<DEPOSITS> 688,870
<SHORT-TERM> 2,862
<LIABILITIES-OTHER> 9,518
<LONG-TERM> 1,087
0
0
<COMMON> 19,048
<OTHER-SE> 79,795
<TOTAL-LIABILITIES-AND-EQUITY> 816,165
<INTEREST-LOAN> 21,202
<INTEREST-INVEST> 6,852
<INTEREST-OTHER> 1,863
<INTEREST-TOTAL> 29,917
<INTEREST-DEPOSIT> 12,759
<INTEREST-EXPENSE> 13,660
<INTEREST-INCOME-NET> 16,257
<LOAN-LOSSES> 1,003
<SECURITIES-GAINS> 269
<EXPENSE-OTHER> 20,412
<INCOME-PRETAX> 6,874
<INCOME-PRE-EXTRAORDINARY> 4,903
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,903
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<YIELD-ACTUAL> 4.53
<LOANS-NON> 1,571
<LOANS-PAST> 1,741
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,418
<CHARGE-OFFS> 1,278
<RECOVERIES> 221
<ALLOWANCE-CLOSE> 8,364
<ALLOWANCE-DOMESTIC> 8,364
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
