UNITED STATES
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, 1997 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 870-541-1350
---------------
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 common
stock.
Class A, Common 5,724,412
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Income --
Three months and Nine months ended
September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1997 and 1996 6
Consolidated Statements of Changes in Stockholders'
Equity -- Nine months ended
September 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8-17
Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-19
Review by Independent Certified Public Accountants 20
Part II: Other Information 21-22
Part I: Summarized Financial Information
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
<CAPTION>
ASSETS
September 30, December 31,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 52,531 $ 41,989
Interest bearing balances due from banks 3,713 8,312
Federal funds sold and securities purchased
under agreements to resell 42,795 18,980
----------- -----------
Cash and cash equivalents 99,039 69,281
Investment securities 295,805 237,662
Mortgage loans held for sale, net of unrealized gains (losses) 4,977 10,101
Assets held in trading accounts 90 182
Loans 796,164 510,813
Allowance for loan losses (12,626) (8,366)
----------- -----------
Net loans 783,538 502,447
Premises and equipment 28,712 20,764
Foreclosed assets held for sale 1,230 903
Interest receivable 11,956 9,675
Cost of loan servicing rights acquired 7,327 8,906
Excess of cost over fair value of net assets acquired, at amortized cost 31,360 3,164
Other assets 12,004 18,247
----------- -----------
TOTAL ASSETS $ 1,276,038 $ 881,332
=========== ===========
</TABLE>
The December 31, 1996 Consolidated Balance Sheet is as reported in the
Corporation's 1996 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 141,682 $ 126,568
Interest bearing transaction accounts and savings deposits 326,744 264,554
Time deposits 590,795 345,245
---------- ----------
Total deposits 1,059,221 736,367
Federal funds purchased and securities sold
under agreements to repurchase 25,893 29,079
Short-term debt 15,679 1,484
Long-term debt 50,633 1,067
Accrued interest and other liabilities 15,085 10,510
---------- ----------
Total liabilities 1,166,511 778,507
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share (par value $5 a share in 1996),
authorized 10,000,000 shares, 5,724,412 issued and outstanding at 1997 and
5,705,415 at 1996 5,724 28,527
Surplus 44,957 22,040
Undivided profits 57,549 51,106
Unrealized appreciation on available-for-sale securities,
net of income taxes of $738 at 1997 and $655 at 1996 1,297 1,152
---------- ----------
Total stockholders' equity 109,527 102,825
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,276,038 $ 881,332
========== ==========
</TABLE>
The December 31, 1996 Consolidated Balance Sheet is as reported in the
Corporation's 1996 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, 1997 and 1996
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share data) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 16,593 $ 11,509 $ 40,272 $ 32,711
Federal funds sold and securities purchased
under agreements to resell 321 156 1,431 1,086
Investment securities 4,374 3,336 11,791 10,187
Mortgage loans held for sale, net of unrealized gains (losses) 81 312 277
1,101
Assets held in trading accounts 76 17 124 57
Interest bearing balances due from banks 46 72 184 178
-------- -------- -------- --------
TOTAL INTEREST INCOME 21,491 15,402 54,079 45,320
-------- -------- -------- --------
INTEREST EXPENSE
Interest bearing transaction accounts and savings deposits 2,251 1,804 6,107 5,148
Time deposits 7,146 4,584 16,686 13,999
Federal funds purchased and securities sold
under agreements to repurchase 367 290 1,315 957
Short-term debt 228 21 292 50
Long-term debt 663 27 745 232
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 10,655 6,726 25,145 20,386
-------- -------- -------- --------
NET INTEREST INCOME 10,836 8,676 28,934 24,934
Provision for loan losses 1,111 503 2,756 1,506
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 9,725 8,173 26,178 23,428
-------- -------- -------- --------
NON-INTEREST INCOME
Trust department income 706 562 1,833 1,592
Service charges on deposit accounts 1,159 847 2,763 2,332
Other service charges and fees 277 251 976 843
Income on sale of mortgage loans, net of commissions 119 94 342 142
Income on investment banking, net of commissions 344 157 746 496
Credit card fees 2,406 2,415 6,893 7,105
Loan servicing fees 2,088 1,936 5,762 5,159
Other income 115 113 429 468
Investment securities gains, net (1) -- (1) 270
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 7,213 6,375 19,743 18,407
-------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 6,083 5,353 17,232 16,404
Occupancy expense, net 751 650 1,969 1,798
Furniture and equipment expense 864 532 2,333 1,652
Loss on foreclosed assets 156 271 735 831
Other expense 4,278 4,040 11,259 10,574
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 12,132 10,846 33,528 31,259
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 4,806 3,702 12,393 10,576
Provision for income taxes 1,420 1,154 3,605 3,125
-------- -------- -------- --------
NET INCOME $ 3,386 $ 2,548 $ 8,788 $ 7,451
======== ======== ======== ========
EARNINGS PER AVERAGE COMMON SHARE $ 0.59 $ 0.45 $ 1.53 $ 1.31
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ 0.14 $ 0.12 $ 0.41 $ 0.35
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996
<CAPTION>
September 30, September 30,
(In thousands, except per share data) 1997 1996
- -------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,788 $ 7,451
Items not requiring (providing) cash
Depreciation and amortization 4,090 2,979
Provision for loan losses 2,756 3,125
Amortization of premiums and accretion of discounts on
investment securities 104 183
Deferred income taxes (280) 119
Provision for foreclosed assets 97 135
Investment securities losses (gains), net 1 (270)
Gain on sale of premises and equipment (1) (28)
Changes in
Interest receivable 622 (890)
Mortgage loans held for sale, net of unrealized gains (losses) 5,124
9,504
Assets held in trading accounts 92 168
Other assets 6,595 (8,466)
Accounts payable and accrued expenses 891 1,480
Income taxes payable 562 (294)
--------- ---------
Net cash provided by operating activities 29,441 15,196
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Net origination's of loans (74,495) (38,206)
Purchases of institutions, net of funds acquired (16,040) --
Purchase of premises and equipment (2,392) (5,266)
Proceeds from sale of premises and equipment 859 246
Proceeds from sale of foreclosed assets 147 92
Proceeds from sale of available-for-sale securities 849 265
Proceeds from maturities of available-for-sale securities 182,597 80,992
Purchases of available-for-sale securities (179,642) (84,706)
Proceeds from maturities of held-to-maturity securities 23,091 47,712
Purchases of held-to-maturity securities (10,540) (38,601)
--------- ---------
Net cash used in investing activities (75,566) (37,472)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transaction accounts and
savings deposits 8,940 7,094
Net increase (decrease) in time deposits 22,835 (1,466)
Net increase in other borrowings 14,195 7,103
Dividends paid (2,345) (1,982)
Proceeds from issuance of long-term debt 37,250 --
Repayments of long-term debt (263) --
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase (4,843) 131
Issuance (repurchase) of common stock 114 (607)
--------- ---------
Net cash provided by financing activities 75,883 10,273
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 29,758 (12,003)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 69,281 73,422
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 99,039 $ 61,419
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 30, 1997 and 1996
<CAPTION>
Unrealized
Appreciation
On Available-
Common For-Sale Undivided
(In thousands) Stock Surplus Securities, Net Profits Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 19,083 $ 22,651 $ 2,025 $ 53,038 $ 96,797
Exercise of stock options--16,500 shares 55 70 125
Repurchase of common stock (95) (535) (630)
Securities exchanged under employee
employee option plan (15) (87) (102)
Net income 7,451 7,451
Cash dividends declared ($0.35 per share) (1,982) (1,982)
Change in unrealized appreciation 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
Repurchase of common stock (10) (59) (69)
Common stock dividend
-1,901,776 shares 9,509 (9,509)
Net income 2,850 2,850
Cash dividends declared ($0.13 per share) (742) (742)
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $58 102 102
-------- -------- ---------- -------- ---------
Balance, December 31, 1996 28,527 22,040 1,152 51,106 102,825
Common stock par value change (22,822) 22,822
Exercise of stock options--21,300 shares 21 156 177
Securities exchanged under employee
employee option plan (2) (61) (63)
Net income 8,788 8,788
Cash dividends declared ($0.41 per share) (2,345) (2,345)
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $82 145 145
-------- -------- ---------- -------- ---------
Balance, September 30, 1997 $ 5,724 $ 44,957 $ 1,297 $ 57,549 $ 109,527
======== ======== ========== ======== =========
</TABLE>
See Notes to Consolidated Financial Statements.
SIMMONS FIRST NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Simmons
First National Corporation and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.
All adjustments made to the unaudited financial statements were of a
normal recurring nature. In the opinion of management, all adjustments necessary
for a fair presentation of the results of interim periods have been made.
Certain prior year amounts are reclassified to conform to current year
classification.
The accounting policies followed in the presentation of interim
financial results are presented on pages 25-28 of the 1996 Annual Report to
shareholders.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of cost or fair
value, determined using an aggregate basis. Write-downs to fair value are
recognized as a charge to earnings at the time the decline in value occurs.
Forward commitments to sell mortgage loans are acquired to reduce market risk on
mortgage loans in the process of origination and mortgage loans held for sale.
Amounts paid to investors to obtain forward commitments are deferred until such
time as the related loans are sold. The fair values of the forward commitments
are not recognized into the financial statements. Gains and losses resulting
from sales of mortgage loans are recognized when the respective loans are sold
to investors. Gains and losses are determined by the difference between the
selling price and the carrying amount of the loans sold, net of discounts
collected or paid, commitment fees paid and considering a normal servicing rate.
Fees received from borrowers to guarantee the funding of mortgage loans held for
sale are recognized as income or expense when the loans are sold or when it
becomes evident that the commitment will not be used.
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, December 31,
1997 1996
--------------------------------------------- ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
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 $ 21,566 $ 139 $ (57) $ 21,648 $ 24,700 $ 179 $ (122) $ 24,757
U.S. Government
agencies 61,296 387 (83) 61,600 35,286 527 (167) 35,646
Mortgage-backed
securities 3,571 13 (44) 3,540 4,243 13 (69) 4,187
State and political
subdivisions 75,046 1,464 (196) 76,314 63,586 1,116 (327) 64,375
Other securities 214 1 -- 215 332 2 (4) 330
--------- ------ ----- --------- --------- ------ ------- ---------
$ 161,693 $ 2,004) $ (380) $ 163,317 $ 128,147 $ 1,837 $ (689) $ 129,295
========= ======= ====== ========= ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 70,001 $ 710 $ (37) $ 70,674 $ 63,248 $ 1,006 $ (55) $ 64,199
U.S. Government
agencies 54,688 250 (68) 54,870 41,358 186 (135) 41,409
Mortgage-backed
securities 409 1 -- 410 -- -- -- --
State and political
subdivisions 454 -- -- 454 -- -- -- --
Other securities 6,525 1,179 -- 7,704 3,102 805 -- 3,907
--------- ------ ----- --------- --------- ------ ------ ---------
$ 132,077 $ 2,140 $ (105) $ 134,112 $ 107,708 $ 1,997 $ (190) $ 109,515
========= ====== ====== ========= ========= ====== ====== =========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $170,055,000 at September 30, 1997
and $86,360,000 at December 31, 1996. The approximate fair value of pledged
securities amounted to $170,741,000 at September 30, 1997 and $87,399,000 at
December 31, 1996.
The book value of securities sold under agreements to repurchase
amounted to $6,893,000 and $169,000 for September 30, 1997 and December 31,
1996, respectively.
Income earned on securities for the nine months ended September 30,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $ 3,310 $ 3,244
Available-for-sale 5,929 4,589
Non-taxable
Held-to-maturity 2,549 2,354
Available-for-sale 3 --
------- -------
Total $11,791 $10,187
======= =======
</TABLE>
Maturities of investment securities at September 30, 1997 are shown
below:
<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 $ 16,240 $ 16,267 $ 33,739 $ 33,852
After one through five years 80,142 81,127 73,620 74,194
After five through ten years 51,220 51,796 16,286 16,480
After ten years 10,306 10,372 1,498 1,472
Mortgage-backed securities not due
on a single date 3,571 3,540 409 410
Other securities 214 215 6,525 7,704
---------- ---------- ---------- ---------
Total $ 161,693 $ 163,317 $ 132,077 $ 134,112
========== ========== ========== =========
</TABLE>
The table below shows gross realized gains and losses during the first nine
months of 1997 and 1996.
<TABLE>
<CAPTION>
September 30,
(In thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ 849 $ 265
========== ==========
(Does not include called bonds)
Gross gains 2 270
Gross losses 3 --
---------- ----------
Securities gains (losses) $ (1) $ 270
=========== ==========
</TABLE>
Approximately 9.3 percent of the state and political subdivision
securities are rated A or above. Of the remaining securities, most are non-rated
bonds and represent small, Arkansas issues, which are evaluated on an ongoing
basis.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $172,850 $166,346
Student loans 63,640 64,193
Other consumer 114,928 65,384
Real estate
Construction 31,140 20,325
Single family residential 132,627 57,251
Other commercial 90,571 60,439
Commercial
Commercial 135,324 41,375
Agricultural 43,239 21,003
Financial institutions 7,038 8,469
Other 4,807 6,028
-------- --------
Total loans before allowance for loan losses $796,164 $510,813
======== ========
</TABLE>
During the first nine months of 1997, foreclosed assets held for sale
increased $327,000 to $1,230,000 and are carried at the lower of cost or fair
market value. Non-accrual loans and other non-performing loans for the
Corporation at September 30, 1997, $5,181,000 and $2,756,000, respectively,
bringing the total of non-performing assets to $9,167,000.
<TABLE>
Transactions in the allowance for loan losses are as follows:
<CAPTION>
September 30, December 31,
(In thousands) 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 8,366 $ 8,418
Additions
Allowance for loan losses of acquired institutions 4,028 --
Provision charged to expense 2,756 1,506
------- -------
15,150 9,924
Deductions
Losses charged to allowance, net of recoveries
of $442 and $324 for the first nine months of
1997 and 1996, respectively 2,524 1,624
------- -------
Balance, September 30 $12,626 $ 8,300
======= -------
Additions
Provision charged to expense 835
Deductions
Losses charged to allowance, net of recoveries
of $167 for the last three months of
1996 769
-------
Balance, end of year $ 8,366
=======
</TABLE>
At September 30, 1997 and December 31, 1996, impaired loans totaled
$9,788,000 and $4,912,000, respectively, all of which had reserves allocated. An
allowance of $1,680,000 and $831,000 for possible losses related to those loans
at September 30, 1997 and December 31, 1996, respectively.
Interest of $215,000 and $197,000 was recognized on average impaired
loans of $5,776,000 and $4,162,000 as of September 30, 1997 and 1996,
respectively. Interest recognized on impaired loans on a cash basis during the
first nine months of 1997 and 1996 was immaterial.
NOTE 4: ACQUISITIONS
In August, 1996, the Simmons First Bank of Dermott charter was moved to
Rogers, Arkansas. The three branches of Simmons First National Bank 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.
The banking facility remaining at Dermott, along with its assets and
liabilities, was 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.
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.
On August 1, 1997, Simmons First National Corporation acquired all the
outstanding capital stock of First Bank of Arkansas, Searcy, Arkansas and First
Bank of Arkansas, Russellville, Arkansas, in a cash purchase transaction of $53
million and changed the respective names of the banks to Simmons First Bank of
Searcy and Simmons First Bank of Russellville. The banks acquired had
consolidated assets, as adjusted of $362 million, as of August 1, 1997,
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, Simmons First Bank
of Northwest Arkansas, Simmons First Bank of Russellville, and Simmons First
Bank of Searcy. 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 AND RESTRICTED STOCK
As of September 30, 1997, options to acquire 260,800 shares of common
stock of the Corporation had been granted through employee stock option
incentive plans. There were 105,650 exercisable options at the end of the third
quarter of 1997. Thirty-seven thousand eight hundred shares have been issued
upon exercise of options. As of September 30, 1997, three thousand shares of
common stock of the corporation had been granted and issued as Bonus Shares of
restricted stock.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(In thousands) 1997 1996
- ------------------------------------------------
<S> <C> <C>
Interest paid $24,846 $20,280
Income taxes paid $ 3,313 $ 3,206
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
September 30, September 30,
(In thousands) 1997 1996
- -----------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 3,885 $ 3,006
Deferred income taxes (280) 119
------- -------
Provision for income taxes $ 3,605 $ 3,125
======= =======
</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) 1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 3,049 $ 2,952
Valuation of foreclosed assets
held for sale 314 299
Deferred compensation payable 559 445
Deferred loan fee income 680 642
Other 864 706
------- -------
Total deferred tax assets 5,466 5,044
------- -------
Deferred tax liabilities
Accumulated depreciation (801) (776)
Available-for-sale securities (738) (655)
Other (405) (288)
------- -------
Total deferred tax liabilities (1,944) (1,719)
------- -------
Net deferred tax assets included in other
assets on balance sheets $ 3,522 $ 3,325
======= =======
</TABLE>
A reconciliation of income tax expense at the statutory rate to the
Corporation's actual income tax expense is shown below:
<TABLE>
<CAPTION>
September 30, September 30,
(In thousands) 1997 1996
- ----------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 4,214 $ 3,596
Increase (decrease) resulting from:
Tax exempt income (926) (855)
Other differences, net 317 384
------- -------
Actual tax provision $ 3,605 $ 3,125
======= =======
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $188,528,000 and $88,731,000 of
certificates of deposit of $100,000 or more at September 30, 1997, and December
31, 1996, respectively.
NOTE 10: COMMITMENTS AND CREDIT RISK
The seven 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 21.7% and 32.6% of the portfolio,
as of September 30, 1997 and December 31, 1996, 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. The commitments extended over varying periods
of time, with the majority being disbursed within a one year period at fixed
rates of interest. 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, 1997, the Corporation had outstanding commitments to
extend credit aggregating approximately $164,424,000 and $110,957,000 for credit
card commitments and other loan commitments, respectively. At December 31, 1996,
the Corporation had outstanding commitments to extend credit aggregating
approximately $160,938,000 and $102,574,000 for credit card commitments and
other loan commitments, respectively.
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 $6,503,000 and
$2,113,000 at September 30, 1997 and December 31, 1996, respectively, with terms
ranging from 90 days to one year.
Mortgage loans serviced for others totaled $1,353,688,000 and
$1,477,945,000 at September 30, 1997 and December 31, 1996, respectively. A
reserve has been 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, 1997 and December 31, 1996, this
reserve balance was $729,000 and $566,000, 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: LONG-TERM DEBT
Long-term debt at September 30, 1997 and December 31, 1996, consisted of
the following components:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
7.32% note due 2007, secured by bank stock $ 20,000 $ --
9.75% note due 2008, secured by land and building 1,051 1,067
5.62% to 8.41% FHLB advances due 1998 to 2015,
secured by residental real estate loans 12,332 --
Trust preferred securities 17,250 --
-------- --------
$ 50,633 $ 1,067
======== ========
</TABLE>
During the second quarter of 1997, the Corporation formed a wholly
owned grantor trust subsidiary (the Trust) to issue preferred securities
(Preferred Securities) representing undivided beneficial interests in the assets
of the respective Trust and to invest the gross proceeds of such Preferred
Securities into notes of the Corporation. The sole assets of the Trust is $17.8
million aggregate principal amount of the Corporation's 9.12% Subordinated
Debenture Notes due 2027 which are redeemable beginning in 2002. Such securities
qualify as Tier 1 Capital for regulatory purposes.
Aggregate annual maturities of long-term debt at September 30, 1997
are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
- ---------------------------------------------------------------------
<S> <C> <C>
1997 $ 236
1998 3,980
1999 2,968
2000 3,010
2001 3,234
Thereafter 37,205
---------
Total $ 50,633
=========
</TABLE>
NOTE 13: 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 75% of current year earnings plus
75% of the retained net earnings of the preceding year. At September 30, 1997,
the bank subsidiaries had approximately $3 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 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, 1997, each of the seven subsidiary banks met
the capital standards for a well-capitalized institution. The Corporation's
"total risk-based capital" ratio was 12.8% at September 30, 1997.
NOTE 14: CAPITAL STOCK
At the April 22, 1997 annual meeting of shareholders, an amendment to
the Articles of Incorporation was approved reducing the par value of the class A
common stock of the Company from $5.00 to $1.00.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended September 30, 1997, was $3,386,000, an
increase of $838,000, or 32.9%, over the same period in 1996. Earnings per share
for the three-month periods ended September 30, 1997 and 1996, were $.59 and
$.45, respectively, when adjusted for the fifty percent stock dividend paid in
the fourth quarter of 1996. Net income for the third quarter of 1996 includes a
one-time, pretax charge of $687,000 to recapitalize the Savings Association
Insurance Fund (SAIF). The negative impact of this charge in 1996 to both the
quarterly and year-to-date earnings was $.08 per share. If the earnings for the
third quarter of 1996 were adjusted for the SAIF assessment, earnings for that
period would have been $.53 per share. Earnings for the nine-month period ended
September 30, 1997, were $8,788,000, or an increase of $1,337,000 over the
September 30, 1996 earnings of $7,451,000. Year-to-date earnings on a per share
basis as of September 30, 1997 were $1.53 compared to $1.31 at September 30,
1996, reflecting a 16.8% increase. Return on average assets and return on
average stockholder's equity for the nine-month period ended September 30, 1997
was 1.19% and 11.00%, compared to 1.20% and 10.06%, respectively, for the same
period in 1996.
Cash earnings (net income excluding amortization of intangibles) for
the third quarter of 1997 were $.64 per share compared with $.46 for the third
quarter of 1996, reflecting a 39.1% increase. Year-to-date cash earnings on a
per share basis as of September 30, 1997 were $1.61 compared to $1.34 at
September 30, 1996, reflecting a 20.2% increase. Cash return on average assets
was 1.26% and cash return on average stockholders' equity was 11.53% for the
nine-month period ended September 30, 1997, compared with 1.24% and 10.34%,
respectively, for the same period in 1996.
Growth in earning assets, coupled with an increase in non-interest
income, contributed to the Company's earnings performance in the third quarter
1997, compared to the same period in 1996.
As of August 1, 1997, the Corporation completed the acquisition of
First Bank of Arkansas, Russellville, Arkansas and First Bank of Arkansas,
Searcy, Arkansas in a cash purchase transaction of $53 million. This transaction
was partially financed with the proceeds of the issuance of long-term debt,
$20,000,000 and the proceeds of the prior issuance of Simmons First Capital
Trust Preferred Securities, $17,250,000. The banks acquired had consolidated
assets, as adjusted, of $362 million, as of August 1, 1997.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended September 30, 1997, increased
$2,160,000, or 24.9%, when compared to the same period in 1996, due to the
increase in earning assets and a strong interest margin. During the third
quarter, interest income increased $6,089,000, or 39.5%, while interest expense
increased $3,929,000, or 58.4%, when compared to the same period in 1996. For
the nine-months ended September 30, 1997 and 1996, net interest income was
$28,934,000 and $24,934,000, respectively. This represents an increase of
$4,000,000, or 16.0%. Interest income for the nine-month periods ended September
30, 1997 and 1996 was up $8,759,000, to $54,079,000, over the $45,320,000
reported as for September 30, 1996, which signifies a 19.3% increase.
Year-to-date interest expense at September 30, 1997 and 1996, was $25,145,000
and $20,386,000, respectively, which equates to a 23.3% increase in the cost of
funding the growth in the balance sheet in 1997 when compared to 1996.
The provision for loan losses for the third quarter of 1997 was
$1,111,000, compared to $503,000 for the same period of 1996, resulting in a
$608,000, or 121%, increase. For the nine months ended September 30, 1997 and
1996, the provision was $2,756,000 and $1,506,000, respectively, also resulting
in a 83% increase.
Non-interest income, exclusive of net gains on securities sold, for the
third quarter ended September 30, 1997, was $7,214,000, a 13.2% increase over
the $6,375,000 reported for the same period in 1996. For the nine-months ended
September 30, 1996 and 1995, non-interest income, exclusive of net gains on
securities sold, was $19,744,000 and $18,407,000, respectively. Total fee income
for both the three-month and nine-month periods ended September 30, 1997 was up
10.4% and 7.0%, respectively.
During the three months ended September 30, 1997, non-interest expense
increased $1,286,000, or 11.9%, over the same period in 1996. This increase
reflects the normal increase in the cost of doing business, coupled with
acquisition's. Year-to-date non-interest expense was $33,528,000 at September
30, 1997, compared to $31,259,000, for the same period ended September 30, 1996.
Total assets for the Corporation at September 30, 1997, were $1.276
billion, an increase of $394.7 million, or 44.8%, over the same figure at
December 31, 1996. Deposits at September 30, 1997, totaled $1.059 billion, a
increase of $323 million, or 43.8%, from the same figure at December 31, 1996.
Stockholders' equity at the end of the third quarter was $109,527,000, an
increase of $6,702,000, or 6.5%, from the December 31, 1996 figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.59% as of September 30, 1997, compared to 1.64% for
the same date in 1996. As of September 30, 1997, non-performing loans equaled
1.0% of total loans, while the allowance for loan losses equaled 159% of
non-performing loans.
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
origination's 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, 1997, each bank was within established
guidelines and total corporate liquidity was strong. At September 30, 1997, cash
and due from banks, securities available for sale and held in trading accounts,
federal funds sold and securities purchased under agreements for resell, and
mortgage loans held for sale were 18.7% 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 16 of the accompanying Form 10-Q,
of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of
September 30, 1997 and for the nine-months ended September 30, 1997 and 1996, 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, 1996, and
the related consolidated statements of income, cash flows and changes in
stockholders' equity for the year then ended (not presented herein), and in our
report dated January 29, 1997, 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, 1996,
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
October 30, 1997
Part II: Other Information
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities. The following transactions are
sales of unregistered shares of Class A Common Stock of the registrant which
were issued to executive and senior management officers upon the exercise of
rights granted under either the Simmons First National Corporation Incentive and
Non-Qualified Stock Option Plan or the Simmons First National Corporation
Executive Stock Incentive Plan. No underwriters were involved and no
underwriter's discount or commissions were involved. Exemption from registration
is claimed under Section 4(2) of the Securities Act of 1933 as private
placements. Unless noted otherwise, the registrant received cash as the
consideration for the transaction.
<TABLE>
<CAPTION>
Number Type of
Identity(1) Date of Sale of Shares Price(2) Transaction
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Officer August, 1997 300 $25.6667 Incentive Stock Option
1 Officer September, 1997 1,500 $ 8.2917 Incentive Stock Option
_______________
<FN>
Notes:
1. The transactions are grouped to show sales of stock based upon exercises
of rights by officers of the registrant or its subsidiaries under the stock
plans which occurred at the same price during a calendar month.
2. The per share price paid for incentive stock options represents the fair
market value of the stock as determined under the terms of the Plan on the date
the incentive stock option was granted to the officer. The price paid and number
of shares issued has been adjusted to reflect the effect of the stock dividends
paid by the Company since the option was granted.
</FN>
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
The registrant filed 1 Form 8-K during the quarter on August 11, 1997. The
report contained disclosures under Item 2 concerning the acquisition of First
Bank of Arkansas, Russellville and First Bank of Arkansas, Searcy and
incorporated by reference to Form 8-K, filed on June 6, 1997, the combined
financial statements of First Bank of Arkansas, Russellville and First Bank of
Arkansas, Searcy, as of December 31, 1996 (audited) and March 31, 1997
(unaudited) and for the periods then ended, the statements of income and cash
flows for the three (3) months ended March 31, 1996 (unaudited) and the pro
forma condensed combining financial information of SFNC, First Bank of Arkansas,
Russellville and First Bank of Arkansas, Searcy, for the year ended December 31,
1996 and as of and for the quarter ended March 31, 1997.
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: 10/30/97 /s/ J. Thomas May
--------------- --------------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: 10/30/97 /s/ Barry L. Crow
--------------- --------------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 52,531
<INT-BEARING-DEPOSITS> 3,713
<FED-FUNDS-SOLD> 42,795
<TRADING-ASSETS> 90
<INVESTMENTS-HELD-FOR-SALE> 134,112
<INVESTMENTS-CARRYING> 161,693
<INVESTMENTS-MARKET> 163,317
<LOANS> 796,164
<ALLOWANCE> 12,626
<TOTAL-ASSETS> 1,276,038
<DEPOSITS> 1,059,221
<SHORT-TERM> 15,679
<LIABILITIES-OTHER> 15,085
<LONG-TERM> 50,633
0
0
<COMMON> 5,724
<OTHER-SE> 103,803
<TOTAL-LIABILITIES-AND-EQUITY> 1,276,038
<INTEREST-LOAN> 40,272
<INTEREST-INVEST> 11,791
<INTEREST-OTHER> 2,016
<INTEREST-TOTAL> 54,079
<INTEREST-DEPOSIT> 22,793
<INTEREST-EXPENSE> 25,145
<INTEREST-INCOME-NET> 28,934
<LOAN-LOSSES> 2,756
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 33,528
<INCOME-PRETAX> 12,393
<INCOME-PRE-EXTRAORDINARY> 8,788
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,788
<EPS-PRIMARY> 1.53
<EPS-DILUTED> 1.53
<YIELD-ACTUAL> 4.55
<LOANS-NON> 5,181
<LOANS-PAST> 2,756
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,366
<CHARGE-OFFS> 4,028
<RECOVERIES> 442
<ALLOWANCE-CLOSE> 12,626
<ALLOWANCE-DOMESTIC> 12,626
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
