SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
September 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 September 30, 1996 Commission File Number 06253
SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 71-0407808
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Main Street Pine Bluff, Arkansas 71601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 501-541-1350
Not Applicable
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 3,805,639
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Part I: Summarized Financial Information
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995
Consolidated Statements of Income --
Three months and nine months ended
September 30, 1996 and 1995
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and 1995
Consolidated Statement of Changes in Stockholders'
Equity -- Nine months ended
September 30, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Review by Independent Certified Public Accountants
Part II: Other Information
PART I
A. Summarized Financial Information
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and noninterest-bearing balances due from banks . $ 32,970 $ 36,179
Interest-bearing balances due from banks ............. 6,744 2,398
Federal funds sold and securities purchased
under agreements to resell ......................... 21,705 34,845
--------- ---------
Cash and Cash Equivalents ........................ 61,419 73,422
Investment securities
Held-to-maturity ................................... 124,223 134,433
Available-for-sale ................................. 93,472 90,367
Mortgage loans held for sale, net of unrealized gains 16,655 26,159
Assets held in trading accounts ...................... 380 548
Loans ................................................ 506,734 471,956
Allowance for possible loan losses ................ (8,300) (8,418)
--------- ---------
Net loans ....................................... 498,434 463,538
Premises and equipment ............................... 20,086 16,201
Foreclosed assets held for sale ...................... 975 1,017
Interest receivable .................................. 8,843 7,953
Cost of loan-servicing rights acquired ............... 9,183 4,867
Excess of cost over fair value of net assets acquired,
at amortized cost .................................. 3,251 3,677
Other assets ......................................... 20,343 17,702
--------- ---------
TOTAL ASSETS ................. $ 857,264 $ 839,884
========= =========
</TABLE>
The December 31, 1995 Consolidated Balance Sheet is as reported in the
Corporation's 1995 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Noninterest-bearing transaction accounts ....................... $103,142 $108,779
Interest-bearing transaction accounts and savings deposits ..... 263,796 251,065
Time deposits .................................................. 343,458 344,924
-------- --------
Total Deposits ......................................... 710,396 704,768
Federal funds purchased and securities
sold under agreements to repurchase .......................... 20,992 20,861
Short-term debt ................................................ 12,188 1,405
Long-term debt ................................................. 1,077 4,757
Accrued interest and other liabilities ......................... 11,927 11,296
-------- --------
TOTAL LIABILITIES .............................................. 756,580 743,087
-------- --------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share, authorized 10,000,000
shares, 3,805,639 issued and outstanding at 1996 and
3,816,612 at 1995 ......................................... 19,028 19,083
Surplus ...................................................... 22,099 22,651
Undivided profits ............................................ 58,507 53,038
Unrealized appreciation on available-for-sale securities,
net of income taxes of $597 at 1996 and
$1,151 at 1995 ............................................. 1,050 2,025
-------- --------
TOTAL STOCKHOLDERS' EQUITY ..................................... 100,684 96,797
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $857,264 $839,884
======== ========
</TABLE>
The December 31, 1995 Consolidated Balance Sheet is as reported in the
Corporation's 1995 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
September 30, September 30,
(In thousands, except per share data) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans ...................................................... $11,509 $10,683 $32,711 $29,228
Federal funds sold and securities purchased
under agreements to resell ............................... 156 253 1,086 1,171
Investment securities
Held-to-maturity ......................................... 2,541 2,569 7,833 7,388
Available-for-sale ....................................... 795 734 2,354 2,160
Mortgage loans held for sale, net of unrealized gains ...... 312 477 1,101 810
Assets held in trading accounts ............................ 17 19 57 43
Interest-bearing balances due from banks ................... 72 21 178 76
------- ------- ------- -------
TOTAL INTEREST INCOME ......................... 15,402 14,756 45,320 40,876
INTEREST EXPENSE
Interest-bearing transaction accounts and savings depos1,804 1,532 5,148 4,388
Time deposits .............................................. 4,584 4,443 13,999 11,290
Federal funds purchased and securities
sold under agreements to repurchase ...................... 290 271 957 954
Short-term debt ............................................ 21 39 50 80
Long-term debt ............................................. 27 165 232 693
------- ------- ------- -------
TOTAL INTEREST EXPENSE .................... 6,726 6,450 20,386 17,405
------- ------- ------- -------
NET INTEREST INCOME ............................................ 8,676 8,306 24,934 23,471
Provision for possible loan losses ......................... 503 506 1,506 1,407
------- ------- ------- -------
NET INTEREST AFTER PROVISION FOR
POSSIBLE LOAN LOSSES ........................................... 8,173 7,800 23,428 22,064
------- ------- ------- -------
NON-INTEREST INCOME
Trust department income .................................... 562 474 1,592 1,268
Service charges on deposit accounts ........................ 847 705 2,332 2,001
Other service charges & fees ............................... 251 188 843 582
Income on sale of mortgage loans, net of commissions ....... 94 164 142 343
Income on investment banking, net of commissions ........... 157 231 496 550
Net realized gains on securities ........................... -- 35 270 35
Credit card fees ........................................... 2,415 2,549 7,105 7,526
Loan servicing fees ........................................ 1,936 1,579 5,159 4,517
Other operating income ..................................... 113 189 468 1,223
------- ------- ------- -------
TOTAL NON-INTEREST INCOME ................... 6,375 6,114 18,407 18,045
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits ............................. 5,353 5,307 16,404 15,840
Occupancy expense, net ..................................... 650 609 1,798 1,732
Furniture & equipment expense .............................. 532 582 1,652 1,613
Loss on foreclosed assets .................................. 271 354 831 1,047
Other operating expenses ................................... 4,040 3,182 10,574 9,477
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE .................. 10,846 10,034 31,259 29,709
------- ------- ------- -------
INCOME BEFORE INCOME TAXES ..................................... 3,702 3,880 10,576 10,400
Provision for income taxes ................................. 1,154 1,210 3,125 3,084
------- ------- ------- -------
NET INCOME ..................................................... $ 2,548 $ 2,670 $ 7,451 $ 7,316
======= ======= ======= =======
EARNINGS PER AVERAGE COMMON SHARE .............................. $ 0.67 $ 0.70 $ 1.96 $ 1.94
======= ======= ======= =======
DIVIDENDS PER COMMON SHARE ..................................... $ 0.18 $ 0.15 $ 0.52 $ 0.43
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<CAPTION>
NINE MONTHS
ENDED
September 30,
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 7,451 $ 7,316
Items not requiring (providing) cash
Depreciation and amortization ........................... 2,979 748
Provision for possible loan losses ...................... 3,125 1,407
Amortization of premiums and accretion of discounts on
investment securities and mortgage-backed certificates 183 (69)
Provision for foreclosed assets ......................... 135 125
Net realized gains (losses) on securities .............. (270) 35
Losses on sale of premises and equipment ................ (28) (11)
Deferred income taxes ................................... 119 (51)
Changes in
Interest receivable ..................................... (890) (2,334)
Mortgage loans held for sale ............................ 9,504 (15,435)
Other assets ............................................ (8,466) (6,580)
Accrued interest and other liabilities .................. 1,480 2,663
Income taxes payable .................................... (294) 53
Trading accounts ........................................ 168 1,903
-------- --------
Net cash provided by (used in) operating activites . 15,196 (10,230)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans ................................ (38,206) (54,483)
Purchase of premises and equipment ........................ (5,266) (5,093)
Proceeds from sale of fixed assets ........................ 246 101
Proceeds from sale of foreclosed assets ................... 92 830
Proceeds from sale of available-for sale securities ....... 265 --
Proceeds from maturities of available-for sale securities . 80,992 12,650
Purchases of available-for-sale securities ................ (84,706) (24,335)
Proceeds from maturies of held-to-maturity securities ..... 47,712 23,549
Purchases of held-to-maturity securities .................. (38,601) (56,644)
-------- --------
Net cash used in investing activites ........ (37,472) (103,425)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transaction accounts and savings deposits . 7,094 10,596
Net issuance of time deposits ............................ (1,466) 91,373
Repayments of other borrowings ............................ (576,492) (112,721)
Proceeds from other borrowings ............................ 583,595 106,391
Dividends paid ............................................ (1,982) (1,623)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase ...... 131 (7,927)
Acquisition of subsidiary ................................. (2,438)
Issuance (repurchase) of common stock ..................... (607) 3,520
-------- --------
Net cash provided by financing activities ...... $ 10,273 $ 87,171
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS ......................... $(12,003) $(26,484)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................. 73,422 74,002
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 61,419 $ 47,518
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
COMMON ON AFS UNDIVIDED
(In thousands) STOCK SURPLUS SECURITIES PROFITS TOTAL
- ----------------------------------------------------------------------------------------------------
<S> <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 @$25.50 per share) ...... 686 2,814 3,500
Net income .............................. 7,316 7,316
Cash dividends declared
($.34 per share) ...................... (1,623) (1,623)
Change in unrealized appreciation
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
Net income .............................. 2,703 2,703
Cash dividends declared ($0.25 per share) (611) (611)
Change in unrealized appreciation
on available-for-sale
securities, net of income taxes of $765 1,359 1,359
-------- -------- -------- -------- --------
Balance, December 31, 1995 .............. 19,083 22,651 2,025 53,038 96,797
Exercise of stock options--11,000 shares 55 70 125
Repurchase of common stock .............. (110) (622) (732)
Net income .............................. 7,451 7,451
Cash Dividends declared ($0.52 per share) (1,982) (1,982)
Change in unrealized depreciation
on available-for-sale
securities, net of income tax credit
of $555 ............................... (975) (975)
-------- -------- -------- -------- --------
Balance, September 30, 1996 ............ $ 19,028 $ 22,099 $ 1,050 $ 58,507 $100,684
======== ======== ======== ======== ========
</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>
September 30, 1996 December 31, 1995
-------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Fair Amortized 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 .......... $ 25,753 $ 165 $ (208) $ 25,710 $ 45,920 $ 400 $ (46) $ 46,274
U.S.Gov't agencies .... 31,505 208 (334) 31,379 23,569 692 (18) 24,243
Mortgage-backed
securities .......... 4,444 10 (104) 4,350 6,344 37 (55) 6,326
State and political
subdivisions ........ 62,206 1,095 (429) 62,872 58,154 1,536 (356) 59,334
Other securities ...... 315 1 (5) 311 446 11 -- 457
--------- --------- --------- --------- --------- --------- --------- ---------
$ 124,223 $ 1,479 $ (1,080) $ 124,622 $ 134,433 $ 2,676 $ (475) $ 136,634
========= ========= ========= ========= ========= ========= ========= =========
Available-for-Sale
U.S.Treasury .......... $ 65,407 $ 963 $ (98) $ 66,272 $ 72,258 $ 2,102 $ (3) $ 74,357
U.S.Gov't agencies .... 23,318 133 (105) 23,346 11,905 264 (35) 12,134
State and political
subdivisions ........ -- -- -- -- 51 -- -- 51
Other securities ...... 3,100 754 (0) 3,854 2,976 851 (2) 3,825
--------- --------- --------- --------- --------- --------- --------- ---------
$ 91,825 $ 1,850 $ (203) $ 93,472 $ 87,190 $ 3,217 $ (40) $ 90,367
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $89,269,000 at September 30, 1996,
and $107,133,000 at December 31, 1995. The approximate fair value of pledged
securities amounted to $89,864,000 at September 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 September 30, 1996 and December 31, 1995,
respectively.
Maturities of investment securities at September 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 ............................ $ 15,493 $ 15,496 $ 46,317 $ 46,507
After one through five years ................ 48,993 49,298 42,408 43,111
After five through ten years ................ 49,505 49,159 -- --
After ten years ............................. 5,473 6,008 -- --
Mortgage-backed securities not due
on a single date .......................... 4,444 4,350 -- --
Other securities ............................ 315 311 3,100 3,854
-------- -------- -------- --------
$124,223 $124,622 $ 91,825 $ 93,472
======== ======== ======== ========
</TABLE>
The table below shows gross realized gains and losses during the first
nine months of 1996 and 1995. The gains recorded at September 30, 1995 related
to called bonds rather than sales.
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- --------------------------------------------
September 30,
<S> <C> <C>
Proceeds from sales ..... $ 265 $ --
----- -----
Gross gains ............. 270 35
Gross losses ............ -- --
----- -----
Securities gains (losses) $ 270 $ 35
===== =====
</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 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 POSSIBLE LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Loans
Consumer
Credit card ............................ $ 152,153 $ 154,808
Student loans .......................... 65,999 63,492
Individuals - other .................... 61,525 57,166
Real estate
Construction ........................... 22,080 15,177
Single family residential .............. 57,804 54,341
Other commercial ....................... 59,690 59,012
Commercial
Commercial ............................. 38,721 36,553
Agri ................................... 34,803 20,588
Financial institutions ................. 9,358 9,058
Other .................................... 5,271 2,546
--------- ---------
Total loans before unearned discount and
allowances for possible loan lossess . 507,404 472,741
Unearned discount ........................ (670) (785)
Allowance for possible loan lossess ...... (8,300) (8,418)
--------- ---------
Net loans ............................ $ 498,434 $ 463,538
========= =========
</TABLE>
During the first nine months of 1996, foreclosed assets held for sale
decreased to $975,000 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 September 30, 1996, were $6,000, $1,505,000 and
$2,011,000, respectively, bringing the total of non-performing assets to
$4,497,000.
<TABLE>
<CAPTION>
September 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 ...... 1,506 1,407
Allowance for loan losses of
acquired institutions ........ -- 350
------- -------
9,924 9,547
Deductions
Losses charged to allowance, net of
recoveries of $324 and $373 for
the first nine months of 1996
and 1995, respectively ....... 1,624 1,209
------- -------
Balance,September 30 ................. $ 8,300 8,338
======= =======
Additions
Provision charged to expense ...... 685
Allowance for loan losses of
acquired institutions ........ 11
-------
9,034
Deductions
Losses charged to allowance, net of
recoveries of $106 for
the last three months of 1995.. 616
-------
Balance, end of year ................. $ 8,418
=======
</TABLE>
At September 30, 1996 and December 31, 1995, impaired loans totaled
$4,263,000 and $4,564,000, respectively, all of which had reserves allocated. An
allowance of $802,000 and $832,000 for possible losses related to those loans at
September 30, 1996 and December 31, 1995, respectively.
Interest of $197,000 and $88,000 was recognized on average impaired
loans of $4,162,000 and $3,495,000 as of September 30, 1996 and 1995,
respectively. Interest recognized on impaired loans on a cash basis during the
first nine 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.
In August, 1996, the Simmons First Bank of Dermott charter was moved to
Rogers, Arkansas. The three branches of Simmons First National Bank of Pine
Bluff located in Rogers, Springdale, and Bella Vista, Arkansas were then sold to
the relocated bank and the bank name was changed to Simmons First Bank of
Northwest Arkansas, whose headquarters is now the Rogers office. The banking
facility remaining at Dermott, along with its assets and liabilities, were then
transferred to Simmons First Bank of Lake Village, Arkansas and is now a branch
of that bank. The name of Simmons First Bank of Lake Village was subsequently
changed to Simmons First Bank of South Arkansas.
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 South Arkansas,
Simmons First Bank of Jonesboro, Simmons First Bank of Dumas and Simmons First
Bank of Northwest Arkansas. 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, 1996, 107,500 shares of common stock of the
Corporation had been granted through an employee stock option incentive plan.
There were 61,300 exercisable options at the end of the third quarter of 1996.
Thirteen thousand shares have been issued upon exercise of options.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(In thousands) 1996 1995
- ---------------------------------------
<S> <C> <C>
Interest paid $20,280 $16,365
Income taxes
paid ..... $ 3,206 $ 3,031
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
September 30, September 30,
(In thousands) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 3,006 $ 3,135
Deferred income taxes ........ 119 (51)
------- -------
Provision for income taxes ... $ 3,125 $ 3,084
======= =======
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are shown below:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for possible loan losses ...... $ 2,915 $ 2,940
Valuation adjustment of foreclosed assets
held for sale ......................... 303 250
Deferred compensation payable ........... 436 444
Deferred loan fee income ................ 690 707
Other ................................... 733 847
------- -------
Total deferred tax assets .............. 5,077 5,188
------- -------
Deferred tax liabilities
Accumulated depreciation ................ (728) (718)
Available-for-sale securities .......... (597) (1,151)
Other ................................... (336) (338)
------- -------
Total deferred tax liabilities ....... (1,661) (2,207)
------- -------
Net deferred tax assets included in other
assets on balance sheets ............. $ 3,416 $ 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>
September 30,
(In thousands) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 3,596 $ 3,770
Increase (decrease) resulting from:
Tax exempt income ............... (855) (736)
Other differences, net .......... 384 50
------- -------
Actual tax provision ............... $ 3,125 $ 3,084
======= =======
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $93,912,000 and $104,906,000 of
certificates of deposit of $100,000 or more at September 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 30.0% and 32.8% of the portfolio,
as of September 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 September 30, 1996 and December 31, 1995, the Corporation had
outstanding commitments to originate loans aggregating approximately $75,074,000
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 $42,525,000 and $26,744,000
at September 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 $2,170,000 and
$1,954,000 at September 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 September 30, 1996, the Corporation had granted unused lines of
credit to borrowers aggregating approximately $6,381,000 and $154,425,000 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 $1,495,133,000 and
$1,224,467,000 at September 30, 1996 and December 31, 1995, respectively, of
which mortgage-backed securities serviced totaled $1,430,611,000 and
$1,166,906,000 at September 30, 1996 and December 31, 1995, respectively.
Simmons First National Bank serviced VA loans subject to certain recourse
provisions totaling approximately $135,076,000 and $145,185,000, at September
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 September
30, 1996 and December 31, 1995, this reserve balance was $617,000 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
September 30, 1996, the bank subsidiaries had approximately $15.4 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, 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 19.7% at September 30,
1996, well above the minimum required.
NOTE 13: SUBSEQUENT EVENTS
On October 29, 1996, the board of directors of the Corporation declared
a 50% stock dividend. An additional share of stock will be distributed to
shareholders for each two shares owned on the record date of November 20, 1996.
The stock dividend will be paid on December 6, 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended September 30, 1996, was $2,548,000, a
decrease of $122,000, or 4.6%, over the same period of 1995, after the impact of
a one-time pretax charge of $687,000 to re-capitalize the Savings Association
Insurance Fund (SAIF). As part of the omnibus spending bill passed by Congress
in September, banks which have acquired thrift deposits must contribute to the
re-capitalization plan. Earnings for the third quarter before the impact of the
charge was $3,001,000. Earnings per share for the three-month periods ended
September 30, 1996 and 1995, were $.67 and $.70, respectively. Earnings for the
nine-month period ended September 30, 1996, were $7,451,000, or $135,000 over
the September 30, 1995 earnings of $7,316,000. Year-to-date earnings on a per
share basis as of September 30, 1996 were $1.96, compared to $1.94 at September
30, 1995.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended September 30, 1996 and 1995, were 1.21% and 1.35%,
respectively. Annualized return on equity (ROE) for the same three-month periods
were 10.10% and 11.42 %, respectively.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended September 30, 1996, increased
$370,000, or 4.5%, when compared to the same period in 1995, due to the increase
in earning assets and yield. During the third quarter, interest income increased
$646,000, or 4.4%, while interest expense increased $276,000, or 4.3%, when
compared to the same period in 1995. For the nine-months ended September 30,
1996 and 1995, net interest income was $24,934,000 and $23,471,000,
respectively. This represents an increase of $1,463,000, or 6.2% in the 1996
figures over 1995. Interest income for the nine-month periods ended September
30, 1996 and 1995, was up $4,444,000, to $45,320,000, over the $40,876,000
reported as of September 30, 1995, which signifies a 10.8% increase.
Year-to-date interest expense at September 30, 1996 and 1995, was $20,386,000
and $17,405,000, respectively, which equates to a 17.1% 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 third quarter of 1996
was $503,000, compared to $506,000 for the same period of 1995. For the nine
months ended September 30, 1996 and 1995, the provision was $1,506,000 and
$1,407,000, respectively, resulting in an 7% increase.
Non-interest income, exclusive of net gains on securities sold, for the
third quarter ended September 30, 1996, was $6,375,000, a 4.9% increase over the
$6,079,000 reported for the same period in 1995. For the nine-months ended
September 30, 1996 and 1995, non-interest income was $18,407,000 and
$18,045,000, respectively. Total fee income for the three-month and nine-month
periods ended September 30, 1996 was up 9% and 7%, respectively, over the
comparable periods ended September 30, 1995.
During the three months ended September 30, 1996, non-interest expense
increased $812,000, or 8.1%, 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 $31,259,000 at September 30, 1996, compared to
$29,709,000, for the same period ended September 30, 1995, reflecting the
Corporation's entry into the Little Rock market, an expansion of the
Corporation's Springdale facility, 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 September 30, 1996, total assets for the Corporation were
$857,264,000, a increase of $17,380,000, or 2.1%, from the same figure at
December 31, 1995. Deposits at September 30, 1996, totaled $710,396,000, a
increase of $5,628,000, or .8%, from the same figure at December 31, 1995.
The allowance for possible loan losses as a percentage of total loans
was 1.64% at September 30, 1996. The coverage ratio (allowance for possible loan
losses as a percentage of non-performing loans) was 236.1% and foreclosed assets
furthered declined from the $1,017,000 at December 31, 1995, to $975,000 at
September 30, 1996.
Stockholders' equity at the end of the third quarter was $100,684,000, an
increase of $3,887,000, or 4%, 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 September 30, 1996, each bank was within established
guidelines and total corporate liquidity was strong. At September 30, 1996, cash
and due from banks, securities available for sale and held in trading accounts,
federal funds sold and securities purchased under agreements for resale, and
mortgage loans held for sale were 20.1% 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 17 of the accompanying Form 10-Q,
of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of
September 30, 1996 and for the three-month and nine-month periods ended
September 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
November 6, 1996
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: 11/13/96 /s/ J. Thomas May
------------ ---------------------------------------
J. Thomas May
Chairman and Chief Executive Officer
Date: 11/13/96 /s/ Barry L. Crow
------------ ---------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
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