SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
March 31, 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 March 31, 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 3,813,639
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1996 and December 31, 1995 3-4
Consolidated Statements of Income --
Three months ended
March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1996 and 1995 6
Consolidated Statement of Changes in Stockholders'
Equity -- Three months ended
March 31, 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
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
<CAPTION>
March 31, December 31,
(In thousands) 1996 1995
- -----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest-bearing balances due from banks .... $ 29,469 $ 36,179
Interest-bearing balances due from banks ................. 3,110 2,398
Federal funds sold and securities purchased
under agreements to resell ............................. 39,530 34,845
------- -------
Cash and Cash Equivalents ............................ 72,109 73,422
Investment securities
Held-to-maturity ....................................... 137,553 134,433
Available-for-sale ..................................... 90,375 90,367
Mortgage loans held for sale, net of unrealized gains .... 27,785 26,159
Trading securities ....................................... 625 548
Loans .................................................... 462,759 471,956
Allowance for possible loan losses .................... (8,412) (8,418)
------- -------
Net loans ........................................... 454,347 463,538
Premises and equipment ................................... 17,565 16,201
Foreclosed assets held for sale .......................... 983 1,017
Interest receivable ...................................... 7,553 7,953
Cost of loan servicing rights acquired ................... 5,172 4,867
Excess of cost over fair value of net assets acquired,
at amortized cost ...................................... 3,493 3,677
Other assets ............................................. 14,920 17,702
------- -------
Total Assets .............. $832,480 $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
MARCH 31, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
(In thousands) 1996 1995
- ------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts ............... $102,132 $108,779
Interest-bearing transaction accounts and
savings deposits ....................................... 242,443 251,065
Time deposits ........................................... 350,228 344,924
------- -------
Total Deposits .................................. 694,803 704,768
Federal funds purchased and securities
sold under agreements to repurchase ................... 23,068 20,861
Short-term debt ......................................... 1,594 1,405
Long-term debt .......................................... 4,747 4,757
Accrued interest and other liabilities .................. 10,728 11,296
------- -------
Total Liabilities ............................... 734,940 743,087
------- -------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share, authorized
10,000,000 shares, issued and outstanding
3,813,639 and 3,816,612 at 1996 and 1995,
respectively ...................................... 19,068 19,083
Surplus ............................................... 22,368 22,651
Undivided profits ..................................... 54,669 53,038
Unrealized appreciation on available-for-sale
securities, net of income taxes of $817 and
$1,152 at 1996 and 1995, respectively .............. 1,435 2,025
------- -------
Total Stockholders' Equity ...................... 97,540 96,797
------- -------
Total Liabilities and Stockholders' Equity $832,480 $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 ENDED MARCH 31, 1996 AND 1995
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
(In thousands, except per share data) 1996 1995
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans .................................................... $10,485 $ 8,815
Federal funds sold and securities purchased
under agreements to resell ............................. 548 370
Investment securities
Held-to-maturity ....................................... 1,954 2,323
Available-for-sale ..................................... 1,483 674
Mortgage loans held for sale, net of unrealized gains .... 400 144
Trading securities ....................................... 10 10
Interest-bearing balances due from banks ................. 30 26
------ ------
TOTAL INTEREST INCOME ............................ 14,910 12,362
------ ------
INTEREST EXPENSE
Interest bearing transaction accounts and savings deposits 1,634 1,349
Time deposits ............................................ 4,788 2,987
Federal funds purchased and securities
sold under agreements to repurchase .................... 391 348
Short-term debt .......................................... 14 24
Long-term debt ........................................... 104 259
------ ------
TOTAL INTEREST EXPENSE ........................... 6,931 4,967
------ ------
NET INTEREST INCOME .......................................... 7,979 7,395
Provision for possible loan losses ....................... 502 449
------ ------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES .................................... 7,477 6,946
------ ------
NON-INTEREST INCOME
Trust department income .................................. 553 418
Service charges on deposit accounts ...................... 739 599
Other service charges and fees ........................... 229 200
Income on sale of mortgage loans, net of commissions ..... 106 92
Income on investment banking, net of commissions ......... 300 123
Net realized gains on securities ......................... 152 1
Credit card fees ......................................... 2,257 2,399
Loan service fees ........................................ 1,603 1,386
Other operating income ................................... 140 745
------ ------
TOTAL NON-INTEREST INCOME ........................ 6,079 5,963
------ ------
NON-INTEREST EXPENSE
Salaries and employee benefits ........................... 5,629 5,223
Occupancy expense, net ................................... 613 532
Furniture & equipment expense ............................ 561 509
Loss on foreclosed assets ................................ 281 353
Other operating expenses ................................. 3,366 3,073
------ ------
TOTAL NON-INTEREST EXPENSE ....................... 10,450 9,690
------ ------
INCOME BEFORE INCOME TAXES ................................... 3,106 3,219
Provision for income taxes ............................... 864 966
------ ------
NET INCOME ................................................... $ 2,242 $ 2,253
====== ======
EARNINGS PER AVERAGE COMMON SHARE ............................ $ 0.59 $ 0.61
====== ======
DIVIDENDS PER COMMON SHARE ................................... $ 0.16 $ 0.13
====== ======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<CAPTION>
Three Months Ended
March 31, March 31,
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 2,242 $ 2,253
Items not requiring (providing) cash
Depreciation and amortization ............................. 961 407
Provision for possible loan losses ........................ 502 449
Amortization of premiums and accretion of discounts
on investment securities and mortgage-backed certificates (334) (34)
Provision for foreclosed assets ........................... 80 40
Net realized gains/(losses) on securities ................ 152 (1)
Gain on sale of premises and equipment .................... 4 --
Deferred income taxes ..................................... 7 (127)
Changes in
Interest receivable ....................................... 400 44
Mortgage loans held for sale .............................. (1,626) 443
Other assets .............................................. 1,284 1,660
Accrued interest and other liabilities .................... 600 (5,191)
Income taxes payable ...................................... (68) 818
Trading securities ........................................ (77) 116
------- -------
Net cash provided by operating activities .......... 4,127 877
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net collections of loans .................................... 8,638 12,371
Purchase of premises and equipment .......................... (1,879) (1,098)
Proceeds from sale of fixed assets .......................... 155 --
Proceeds from the sale of foreclosed assets ................. 5 102
Proceeds from the sale of available-for-sale securities ..... 145 --
Proceeds from maturities of available-for sale securities ... 20,270 2,500
Purchases of available-for-sale securities .................. (21,564) (7,500)
Proceeds from maturities of held-to-maturity securities ..... 23,582 12,994
Purchases of held-to-maturity securities .................... (26,304) (28,723)
------- -------
Net cash provided by (used in) investing activities 3,048 (9,354)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transaction accounts
and savings deposits ...................................... (15,269) (15,184)
Net increase in time deposits .............................. 5,304 12,515
Repayments of other borrowings .............................. (34,132) (73,501)
Proceeds from other borrowings .............................. 34,311 72,483
Dividends paid .............................................. (611) (478)
Net increase (decrease) federal funds purchased
and securities sold under agreements to repurchase ........ 2,207 (3,061)
Repurchase of common stock .................................. (298) --
------- -------
Net cash used in financing activities ............... (8,488) (7,226)
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS ......................... (1,313) (15,703)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................. 73,422 74,002
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 72,109 $ 58,299
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
SIMMONS FIRST NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<CAPTION>
NET
UNREALIZED
COMMON GAIN 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
NET INCOME ............................ 2,253 2,253
CASH DIVIDENDS DECLARED
($.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
EXERCISE OF STOCK OPTIONS--2,000 SHARES 10 10 20
COMMON STOCK ISSUED IN CONNECTION
WITH PURCHASE OF DUMAS BANCSHARES, INC
(137,234 SHARES @$25.50 PER SHARE) .... 686 2,814 3,500
NET INCOME ............................ 7,766 7,766
CASH DIVIDENDS DECLARED
($.46 PER SHARE) .................... (1,756) (1,756)
CHANGE IN UNREALIZED APPRECIATION
ON AVAILABLE-FOR-SALE SECURITIES,
NET OF INCOME TAXES OF $882 ......... 1,550 1,550
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1995 ............ 19,083 22,651 2,025 53,038 96,797
EXERCISE OF STOCK OPTIONS--9,000 SHARES 45 57 102
REPURCHASE OF COMMON STOCK ............ (60) (340) (400)
NET INCOME ............................ 2,242 2,242
CASH DIVIDENDS DECLARED
($.16 PER SHARE) .................... (611) (611)
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AVAILABLE-FOR-SALE
SECURITIES, NET OF INCOME TAX CREDIT
OF $335 ............................. (590) (590)
-------- ------- -------- -------- --------
BALANCE, MARCH 31, 1996 .............. $ 19,068 $ 22,368 $ 1,435 $ 54,669 $ 97,540
======== ======= ======== ======== ========
</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>
March 31, 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 ..... $ 36,921 $ 247 $ (239) $ 36,929 $ 45,920 $ 400 $ (46) $ 46,274
U.S. Government
agencies ........ 34,835 386 (342) 34,879 23,569 692 (18) 24,243
Mortgage-backed
securities ...... 6,136 24 (88) 6,072 6,344 37 (55) 6,326
State and political
subdivisions .... 59,245 1,250 (277) 60,218 58,154 1,536 (356) 59,334
Other securities .. 416 2 (4) 414 446 11 -- 457
-------- -------- -------- -------- -------- -------- -------- --------
$ 137,553 $ 1,909 $ (950) $ 138,512 $ 134,433 $ 2,676 $ (475) $ 136,634
======== ======== ======== ======== ======== ======== ======== ========
Available For Sale
U.S. Treasury ..... $ 73,080 $ 1,432 $ (82) $ 74,430 $ 72,258 $ 2,102 $ (3) $ 74,357
U.S. Government
agencies ........ 11,957 189 (82) 12,064 11,905 264 (35) 12,134
State and political
subdivisions .... 50 -- -- 50 51 -- -- 51
Other securities .. 3,036 796 (1) 3,831 2,976 851 (2) 3,825
-------- -------- -------- -------- -------- -------- -------- --------
$ 88,123 $ 2,417 $ (165) $ 90,375 $ 87,190 $ 3,217 $ (40) $ 90,367
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Maturities of investment securities at March 31, 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 ................. $ 24,330 $ 24,340 $ 42,345 $ 42,466
After one through five years ..... 52,942 53,253 42,742 44,078
After five through ten years ..... 47,707 47,858 -- --
After ten years .................. 6,022 6,575 -- --
Mortgage-backed securities not due
on a single maturity date ...... 6,136 6,072 -- --
Other securities ................. 416 414 3,036 3,831
------- ------- ------- -------
$137,553 $138,512 $ 88,123 $ 90,375
======= ======= ======= =======
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $101,913,000 at March 31, 1996, and
$107,133,000 at December 31, 1995. The approximate fair value of pledged
securities amounted to $103,636,000 at March 31, 1996 and $110,319,000 at
December 31, 1995.
The book value of securities sold under agreements to repurchase amounted
to $663,000 and $1,417,000 for March 31, 1996 and December 31, 1995,
respectively.
The table below shows gross realized gains and losses during the first
three months of 1996 and 1995. There were no proceeds from sales at March 31,
1995 because the gains were the result of called bonds.
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands) 1996 1995
- ------------------------------------------------
<S> <C> <C>
Proceeds from sales ..... $ 145 $ --
----- -----
Gross gains ............. 152 1
Gross losses ............ -- --
----- -----
Securities gains (losses) $ 152 $ 1
===== =====
</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 recent 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>
March 31, December 31,
(In thousands) 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Loans
Consumer
Credit card ............................ $ 144,651 $ 154,808
Student loan ........................... 67,386 63,492
Other consumer ......................... 59,832 57,166
Real estate
Construction ........................... 16,066 15,177
Single family residential .............. 53,040 54,341
Other commercial ....................... 59,855 59,012
Commercial
Commercial ............................. 36,698 36,553
Agricultural ........................... 14,756 20,588
Financial institutions ................. 8,537 9,058
Other ..................................... 2,701 2,546
-------- --------
Total loans before unearned discount and
allowances for possible loan losses .. 463,522 472,741
Unearned discount ......................... (763) (785)
Allowance for possible loan losses ........ (8,412) (8,418)
-------- --------
Net Loans ........................... $ 454,347 $ 463,538
======== ========
</TABLE>
During the first quarter of 1996, foreclosed assets held for sale
decreased to $983,000 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 March 31, 1996, were $7,000, $1,623,000 and $1,513,000,
respectively, bringing the total of non-performing assets to $4,126,000.
<TABLE>
<CAPTION>
March 31, 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 ............. 502 449
----- -----
8,920 8,239
Deductions
Losses charged to allowance, net of
recoveries of $103 and $114 for
the first three months of 1996 and 1995,
respectively ........................... 508 322
----- -----
Balance, March 31 ........................... $8,412 $7,917
===== -----
Additions
Provision charged to expense ............. 1,643
Allowance for loan losses
of acquired institutions .............. 361
-----
2,004
Deductions
Losses charged to allowance,
net of recoveries of $365
for the last nine months of
1995 1,503
-----
Balance, end of year ........................... $8,418
=====
</TABLE>
As of January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a
Loan. SFAS 114 requires discounting expected future cash flows to measure
impairment of certain loans, or, as a practical expedient, impairment
measurements based on the loan's observable market price or the fair value of
collateral if the loan is collateral dependent. The adoption of SFAS 114 did not
increase the 1995 loan loss provision.
At March 31, 1996 and December 31, 1995, impaired loans totaled
$4,564,000, all of which had reserves allocated. An allowance of $890,000 and
$832,000 for possible losses related to those loans at March 31, 1996 and
December 31, 1995, respectively.
Interest of $65,000 and $38,000 was recognized on average impaired
loans of $4,543,000 and $3,527,000 as of March 31, 1996 and 1995, respectively.
Interest recognized on impaired loans on a cash basis during the first three
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.
Unaudited proforma consolidated operations assuming the purchases were
made at the beginning of 1995 are shown below.
<TABLE>
<CAPTION>
(In thousands) 1995
- -----------------------------
<S> <C>
Total revenue .... $82,213
Net income ....... 10,168
Earnings per share 2.66
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred had the acquisitions been on these dates, nor are they necessarily
indicative of future operations.
Pro forma data reflect the adjusted depreciation and amortization from
adjusting DBI and DSBB assets to market value. No adjustment was made to reflect
the combined impact of operations on income tax expenses of the separate
companies.
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 March 31, 1996, 107,500 shares of common stock of the Corporation
had been granted through an incentive stock option plan. There were
52,500 exercisable options at the end of the first quarter of 1996. Eleven
thousand shares have been issued upon exercise of options.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands) 1996 1995
- -------------------------------------
<S> <C> <C>
Interest paid $ 6,898 $ 4,808
Income taxes
paid ..... $ 86 $ --
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands) 1996 1995
- -----------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 857 $ 1,093
Deferred income taxes ........ 7 (127)
------ ------
Provision for income taxes ... $ 864 $ 966
====== ======
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are shown below:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses ............... $ 2,938 $ 2,940
Valuation adjustment of foreclosed assets
held for sale ......................... 252 250
Deferred compensation payable ........... 434 444
Deferred loan fee income ................ 704 707
Other ................................... 837 847
------ ------
Total deferred tax assets .............. 5,165 5,188
------ ------
Deferred tax liabilities
Accumulated depreciation ................ (731) (718)
Available-for-sale securities .......... (814) (1,151)
Other ................................... (309) (338)
------ ------
Total deferred tax liabilities ....... (1,854) (2,207)
------ ------
Net deferred tax assets included in other
assets on balance sheets ............. $ 3,311 $ 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>
March 31, March 31,
(In thousands) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,056 $ 1,093
Increase (decrease) resulting from:
Tax exempt income ............... (258) (222)
Other difference, net ........... 66 95
------ ------
Actual tax provision ............... $ 864 $ 966
====== ======
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $105,695,000 and $104,906,000 of
certificates of deposit of $100,000 or more at March 31, 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 31.3% and 32.8% of the portfolio,
as of March 31, 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 March 31, 1996 and December 31, 1995, the Corporation had
outstanding commitments to originate loans aggregating approximately $92,025,000
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 $43,069,000 and $26,744,000
at March 31, 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 $2,171,000 and
$1,954,000 at March 31, 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 March 31, 1996, the Corporation had granted unused lines of credit
to borrowers aggregating approximately $4,929,000 and $162,560,000 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 $1,236,399,000 and
$1,224,467,000 at March 31, 1996 and December 31, 1995, respectively, of which
mortgage-backed securities serviced totaled $1,136,790,000 and $1,166,906,000 at
March 31, 1996 and December 31, 1995, respectively. Simmons First National Bank
serviced VA loans subject to certain recourse provisions totaling approximately
$136,094,000 and $145,185,000, at March 31, 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 March 31, 1996 and December 31, 1995, this
reserve balance was $534,000 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
March 31, 1996, the bank subsidiaries had approximately $12.4 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 March 31, 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 21.0% at March 31, 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 March 31, 1996, was $2,242,000, a
decrease of $11,000, or .49%, over the same period of 1995. Earnings per share
for the three-month periods ended March 31, 1996 and 1995, were $.59 and $.61,
respectively.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended March 31, 1996 and 1995, were 1.08% and 1.31%,
respectively. Annualized return on equity (ROE) for the same three-month periods
were 9.22% and 10.71%, respectively.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended March 31, 1996, increased
$584,000, or 7.9%, when compared to the same period in 1995. The increase is
primarily due to the growth in earning assets due to the acquisition consummated
in the second and third quarters of 1995. During the first quarter, interest
income increased $2,548,000, or 20.6%, while interest expense increased
$1,964,000, or 39.5%, when compared to the same period in 1995.
Continued improvement in asset quality has resulted in allowance for
possible loan losses to be at 1.82% of total loans at March 31, 1996, compared
to 1.95% at March 31, 1995. The provision for the first quarter of 1996 was
$502,000, compared to $449,000 for the same period of 1995, resulting in a
$53,000, or 11.8%, increase.
Non-interest income, exclusive of net gains on securities sold, for the
first quarter ended March 31, 1996, was $5,927,000, a decrease of $35,000, or
.59%, from the same period in 1995. The 1995 non-interest income does, however,
include $603,000 in non-recurring income.
During the three months ended March 31, 1996, non-interest expense
increased $760,000, or 7.8%, over the same period in 1995. This increase
reflects the normal increase in the cost of doing business along with the
inclusion of the operating costs associated with the acquisitions completed in
1995.
At March 31, 1996, total assets for the Corporation were $832,480,000,
an increase of $7,404,000, or .88%, from the same figure at December 31, 1995,
and $122,866,000, or 17.3% from the same figure at March 31, 1995. Deposits at
March 31, 1996, totaled $694,803,000, an decrease of $9,965,000, or 1.4%, from
the same figure at December 31, 1995. Compared to March 31, 1995, deposits show
an increase of $113,934,000, or 19.6%.
Stockholders' equity at the end of the quarter was $97,540,000, an increase
of $743,000, or .77%, 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 March 31, 1996, each bank was within established
guidelines and total corporate liquidity was strong. At March 31, 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
22.9% 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 March
31, 1996 and for the three-month periods ended March 31, 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.
/s/ BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
May 2, 1996
Part II
Other Information
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: 5/10/96 /s/ J. Thomas May
------------------ ----------------------------------------
J. Thomas May, Chairman
and Chief Executive Officer
Date: 5/10/96 /s/ Barry L. Crow
------------------ ----------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
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