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, 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
securities.
Class A, Common 5,715,194
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1997 and December 31, 1996 3-4
Consolidated Statements of Income --
Three months ended
March 31, 1997 and 1996 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1997 and 1996 6
Consolidated Statement of Changes in Stockholders'
Equity -- Three months ended
March 31, 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
<TABLE>
Part I
A. Summarized Financial Information
Simmons First National Corporation
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
ASSETS
<CAPTION>
March 31, December 31,
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 33,519 $ 41,989
Interest bearing balances due from banks 6,434 8,312
Federal funds sold and securities purchased
under agreements to resell 41,470 18,980
--------- ---------
Cash and cash equivalents 81,423 69,281
Investment securities 238,156 237,662
Mortgage loans held for sale, net of unrealized gains (losses) 5,911 10,101
Assets held in trading accounts 236 182
Loans 515,746 510,813
Allowance for loan losses (8,297) (8,366)
--------- ---------
Net loans 507,449 502,447
Premises and equipment 20,873 20,764
Foreclosed assets held for sale 975 903
Interest receivable 8,121 9,675
Cost of loan servicing rights acquired 8,374 8,906
Excess of cost over fair value of net assets acquired,
at amortized cost 3,099 3,164
Other assets 16,646 18,247
--------- ---------
TOTAL ASSETS $ 891,263 $ 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
March 31, 1997 and December 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Non-interest bearing transaction accounts $ 116,440 $ 126,568
Interest bearing transaction accounts and savings deposits 270,515 264,554
Time deposits 357,477 345,245
----------- -----------
Total deposits 744,432 736,367
Federal funds purchased and securities sold
under agreements to repurchase 28,288 29,079
Short-term debt 2,328 1,484
Long-term debt 1,056 1,067
Accrued interest and other liabilities 11,149 10,510
----------- -----------
Total liabilities 787,253 778,507
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share, authorized
10,000,000 shares, 5,715,194 issued and outstanding
at 1997 and 5,705,415 at 1996 28,576 28,527
Surplus 22,073 22,040
Undivided profits 52,951 51,106
Unrealized appreciation on available-for-sale securities,
net of income taxes of $235 at 1997 and $655 at 1996 410 1,152
----------- -----------
Total stockholders' equity 104,010 102,825
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 891,263 $ 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 Ended March 31, 1997 and 1996
<CAPTION>
March 31,
(In thousands, except per share data) 1997 1996
- ---------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans $11,521 $10,485
Federal funds sold and securities purchased
under agreements to resell 538 548
Investment securities 3,672 3,437
Mortgage loans held for sale, net of unrealized gains (losses) 117 400
Assets held in trading accounts 16 10
Interest bearing balances due from banks 77 30
------- -------
TOTAL INTEREST INCOME 15,941 14,910
------- -------
INTEREST EXPENSE
Interest bearing transaction accounts and savings deposits 1,884 1,634
Time deposits 4,653 4,788
Federal funds purchased and securities sold
under agreements to repurchase 463 391
Short-term debt 29 14
Long-term debt 26 104
------- -------
TOTAL INTEREST EXPENSE 7,055 6,931
------- -------
NET INTEREST INCOME 8,886 7,979
Provision for loan losses 764 502
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,122 7,477
------- -------
NON-INTEREST INCOME
Trust department income 604 553
Service charges on deposit accounts 745 739
Other service charges and fees 309 229
Income on sale of mortgage loans, net of commissions 121 106
Income on investment banking, net of commissions 275 300
Credit card fees 2,194 2,257
Loan servicing fees 1,706 1,603
Other income 272 140
Investment securities gains (losses), net -- 152
------- -------
TOTAL NON-INTEREST INCOME 6,226 6,079
------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 5,636 5,629
Occupancy expense, net 621 613
Furniture and equipment expense 743 561
Loss on foreclosed assets 252 281
Other expense 3,480 3,366
------- -------
TOTAL NON-INTEREST EXPENSE 10,732 10,450
------- -------
INCOME BEFORE INCOME TAXES 3,616 3,106
Provision for income taxes 1,028 864
------- -------
NET INCOME $ 2,588 $ 2,242
======= =======
EARNINGS PER AVERAGE COMMON SHARE $ .45 $ .39
======= =======
DIVIDENDS PER COMMON SHARE $ 0.13 $ 0.11
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
<CAPTION>
March 31,
(In thousands, except per share data) 1997 1996
- --------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,588 $ 2,242
Items not requiring (providing) cash
Depreciation and amortization 1,151 961
Provision for loan losses 764 502
Amortization of premiums and accretion of discounts on
investment securities 651 (334)
Deferred income taxes (40) 7
Provision for foreclosed assets 81 80
Investment securities gains, net -- 152
(Gain) loss on sale of premises and equipment (1) 4
Changes in
Interest receivable 1,554 400
Mortgage loans held for sale, net of unrealized gains (losses) 4,190
(1,626)
Assets held in trading accounts (54) (77)
Other assets 1,676 1,284
Accounts payable and accrued expenses (39) 600
Income taxes payable 1,138 (68)
-------- --------
Net cash provided by operating activities 13,659 4,127
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Net (originations) collections of loans (6,093) 8,638
Purchase of premises and equipment (901) (1,879)
Proceeds from sale of premises and equipment 338 155
Proceeds from sale of foreclosed assets -- 5
Proceeds from sale of available-for-sale securities -- 145
Proceeds from maturities of available-for-sale securities 21,560 20,270
Purchases of available-for-sale securities (23,900) (21,564)
Proceeds from maturities of held-to-maturity securities 4,320 23,582
Purchases of held-to-maturity securities (4,287) (26,304)
-------- --------
Net cash provided by (used in) investing activities (8,963) 3,048
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in transaction accounts and
savings deposits (4,167) (15,269)
Net increase in time deposits 12,232 5,304
Net increase in other borrowings 833 179
Dividends paid (743) (611)
Net increase in federal funds purchased
and securities sold under agreements to repurchase (791) 2,207
Issuance (repurchase) of common stock 82 (298)
-------- --------
Net cash provided by (used in) financing activities 7,446 (8,488)
-------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,142 (1,313)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 69,281 73,422
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 81,423 $ 72,109
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 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 $ 19,115 $ 22,619 $ 2,025 $ 53,038 $ 96,797
Common stock dividend paid in
December, 1996--1,901,776 shares 9,509 (9,509)
-------- -------- -------- -------- --------
Restated to reflect the common stock
dividend at December 31, 1995 28,624 22,619 2,025 43,529 96,797
Exercise of stock options--13,500 shares 68 34 102
Repurchase of common stock (90) (310) (400)
Net income 2,242 2,242
Cash dividends declared ($0.11 per share) (611) (611)
Change in unrealized appreciation on
available for sale securities, net of income
tax credit of $335 (590) (590)
-------- -------- -------- -------- --------
Balance, March 31, 1996 28,602 22,343 1,435 45,160 97,540
Exercise of stock options--3,000 shares 15 8 23
Repurchase of common stock (60) (341) (401)
Net income 8,059 8,059
Cash dividends declared ($0.37 per share) (2,113) (2,113)
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $162 (283) (283)
-------- -------- -------- -------- --------
Balance, December 31, 1996 28,527 22,040 1,152 51,106 102,825
Exercise of stock options--10,500 shares 53 48 101
Repurchase of common stock (4) (15) (19)
Net income 2,588 2,588
Cash dividends declared ($0.13 per share) (743) (743)
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $420 (742) (742)
-------- -------- -------- -------- --------
Balance, March 31, 1997 $ 28,576 $ 22,073 $ 410 $ 52,951 $104,010
======== ======== ======== ======== ========
</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.
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, 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 $ 27,157 $ 94 $ (245) $ 27,006 $ 24,700 $ 179 $ (122) $ 24,757
U.S. Government
agencies 33,747 221 (575) 33,393 35,286 527 (167) 35,646
Mortgage-backed
securities 3,965 9 (111) 3,863 4,243 13 (69) 4,187
State and political
subdivisions 63,121 1,031 (520) 63,632 63,586 1,116 (327) 64,375
Other securities 332 1 (5) 328 332 2 (4) 330
-------- ----- ----- ------- -------- ----- ----- --------
$ 128,322 $ 1,356 $(1,456) $ 128,222 $ 128,147 $ 1,837 $ (689) $ 129,295
========= ====== ====== ======== ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 66,966 $ 552 $ (265) $ 67,253 $ 63,248 $ 1,006 $ (55) $ 64,199
U.S. Government
agencies 39,043 75 (516) 38,602 41,358 186 (135) 41,409
Other securities 3,180 799 -- 3,979 3,102 805 -- 3,907
-------- ----- ----- ------- -------- ----- ----- --------
$ 109,189 $ 1,426 $ (781) $ 109,834 $ 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 $94,917,000 at March 31, 1997, and
$86,360,000 at December 31, 1996. The approximate fair value of pledged
securities amounted to $94,868,000 at March 31, 1997 and $87,399,000 at December
31, 1996.
The book value of securities sold under agreements to repurchase amounted
to $1,318,000 and $169,000 for March 31, 1997 and December 31, 1996,
respectively.
Income earned on the above securities for the quarter ended March 31,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -----------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $1,018 $1,185
Available-for-sale 1,833 1,483
Non-taxable
Held-to-maturity 821 769
Available-for-sale -- --
------ ------
Total $3,672 $3,437
====== ======
</TABLE>
Maturities of investment securities at March 31, 1997, are as follows:
<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 $ 19,665 $ 19,663 $ 40,773 $ 40,904
After one through five years 53,224 53,245 52,887 52,901
After five through ten years 45,417 44,873 12,349 12,050
After ten years 5,719 6,250 -- --
Mortgage-backed securities not due
on a single date 3,965 3,863 -- --
Other securities 332 328 3,180 3,979
-------- -------- -------- --------
Total $128,322 $128,222 $109,189 $109,834
======== ======== ======== ========
</TABLE>
The table below shows gross realized gains and losses during the first
three months of 1997 and 1996.
<TABLE>
<CAPTION>
March 31,
(In thousands) 1997 1996
- -------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $152
---- ----
Gross gains -- 152
Gross losses -- --
---- ----
Securities gains (losses) $ -- $152
==== ====
</TABLE>
Approximately 10 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) 1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $159,361 $166,346
Student loans 68,726 64,193
Other consumer 66,234 65,384
Real estate
Construction 23,714 20,325
Single family residential 57,115 57,251
Other commercial 60,764 60,439
Commercial
Commercial 52,202 41,375
Agricultural 15,805 21,003
Financial institutions 7,883 8,469
Other 3,942 6,028
-------- --------
Total loans before allowance for loan losses $515,746 $510,813
======== ========
</TABLE>
During the first three months of 1997, foreclosed assets held for sale
increased 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 March 31, 1997, were $5,000, $2,967,000 and $1,457,000,
respectively, bringing the total of non-performing assets to $5,404,000.
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 8,366 $ 8,418
Additions
Provision charged to expense 764 502
------- -------
9,130 8,920
Deductions
Losses charged to allowance, net of recoveries
of $174 and $103 for the first three months of
1997 and 1996, respectively 833 508
------- -------
Balance, March 31 $ 8,297 $ 8,412
======= -------
Additions
Provision charged to expense 1,839
-------
10,251
Deductions
Losses charged to allowance, net of recoveries
of $388 for the last nine months of
1996 1,885
-------
Balance, end of year $ 8,366
=======
</TABLE>
At March 31, 1997 and December 31, 1996, impaired loans totaled
$4,607,000 and $4,912,000, respectively, all of which had reserves allocated. An
allowance of $923,000 and $831,000 for possible losses related to those loans at
March 31, 1997 and December 31, 1996, respectively.
Interest of $59,000 and $65,000 was recognized on average impaired
loans of $4,300,000 and $4,543,000 as of March 31, 1997 and 1996, respectively.
Interest recognized on impaired loans on a cash basis during the first three
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 March 21, 1997, an announcement was made jointly by the Chief
Executive Officers of both the Corporation and First Commercial Corporation of
Little Rock, Arkansas regarding a definitive agreement to acquire all of the
outstanding capital stock of First Bank of Arkansas, Searcy, Arkansas and First
Bank of Arkansas, Russellville, Arkansas, in a cash purchase transaction valued
at $53 million. The banks to be acquired had consolidated assets, as adjusted,
of approximately $310 million, as of December 31, 1996.
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 March 31, 1997, 208,500 shares of common stock of the Corporation
had been granted through an employee stock option incentive plan. There were
105,750 exercisable options at the end of the first quarter of 1997. Thirty
thousand shares have been issued upon exercise of options.
NOTE 7: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands) 1997 1996
- -------------------------------------------
<S> <C> <C>
Interest paid $6,997 $6,898
Income taxes
paid $ 59 $ 86
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
March 31,
(In thousands) 1997 1996
- -----------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,068 $ 857
Deferred income taxes (40) 7
------- -------
Provision for income taxes $ 1,028 $ 864
======= =======
</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) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 2,932 $ 2,952
Valuation of foreclosed assets
held for sale 309 299
Deferred compensation payable 441 445
Deferred loan fee income 668 642
Other 750 706
------- -------
Total deferred tax assets 5,100 5,044
------- -------
Deferred tax liabilities
Accumulated depreciation (785) (776)
Available-for-sale securities (234) (655)
Other (295) (288)
------- -------
Total deferred tax liabilities (1,314) (1,719)
------- -------
Net deferred tax assets included in other
assets on balance sheets $ 3,786 $ 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>
March 31,
(In thousands) 1997 1996
- -----------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,230 $ 1,056
Increase (decrease) resulting from:
Tax exempt income (288) (258)
Other differences, net 86 66
------- -------
Actual tax provision $ 1,028 $ 864
======= =======
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $97,747,000 and $88,731,000 of
certificates of deposit of $100,000 or more at March 31, 1997, and December 31,
1996, 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 30.9% and 32.6% of the portfolio,
as of March 31, 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. 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, 1997 and December 31, 1996, the Corporation had
outstanding commitments to originate loans aggregating approximately $62,524,000
and $79,710,000, 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 $50,019,000 and $64,616,000
at March 31, 1997 and December 31, 1996, 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 $3,022,000 and
$2,113,000 at March 31, 1997 and December 31, 1996, 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, 1997, the Corporation had granted unused lines of credit
to borrowers aggregating approximately $41,889,000 and $165,423,000 for
commercial lines and open-end consumer lines, respectively. At December 31,
1996, unused lines of credit to borrowers aggregated approximately $12,677,000
for commercial lines and $160,938,000 for open-end consumer lines, respectively.
Mortgage loans serviced for others totaled $1,448,501,000 and
$1,477,945,000 at March 31, 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 March 31, 1997 and December 31, 1996, this reserve balance
was $625,000 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: 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, 1997, the bank subsidiaries had approximately $12 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 March 31, 1997, each of the five subsidiary banks met the
capital standards for a well-capitalized institution. The Corporation's total
capital to total risk-weighted assets ratio was 20.1% at March 31, 1997, 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, 1997, was $2,588,000, an
increase of $346,000, or 15.4%, over the same period in 1996. Earnings per share
for the three-month periods ended March 31, 1997 and 1996, were $.45 and $.39,
respectively, when adjusted for the fifty percent stock dividend announced in
the fourth quarter of 1996.
The Corporation's annualized return on average assets (ROA) for the
three-month periods ended March 31, 1997 and 1996, were 1.19% and 1.08%,
respectively. Annualized return on equity (ROE) for the same three-month periods
were 10.07% and 9.22 %, respectively.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended March 31, 1997, increased
$907,000, or 11.4%, when compared to the same period in 1996, due to the
increase in earning assets and a strong interest margin. During the first
quarter, interest income increased $1,031,000, or 6.9%, while interest expense
increased a modest $124,000, or 1.8%, when compared to the same period in 1996.
The provision for loan losses for the first quarter of 1997 was $764,000,
compared to $502,000 for the same period of 1996.
Non-interest income, exclusive of net gains on securities sold, for the
first quarter ended March 31, 1997, was $6,226,000, a 5.0% increase over the
$5,927,000 reported for the same period in 1996.
During the three months ended March 31, 1997, non-interest expense
increased $282,000, or 2.7%, over the same period in 1996. This increase
reflects the normal increase in the cost of doing business.
At March 31, 1997, total assets for the Corporation were $891,263,000,
an increase of $9,931,000, or 1.1%, from the same figure at December 31, 1996,
and $58,783,000, or 7.1%, over the March 31, 1996 total. Deposits at March 31,
1997, totaled $744,432,000, an increase of $8,065,000, or 1.1%, from the same
figure at December 31, 1996.
The allowance for loan losses as a percentage of total loans was 1.61%
at March 31, 1997. The coverage ratio (allowance for loan losses as a percentage
of non-performing loans) was 187.5% and foreclosed assets increased slightly to
$975,000 from $903,000 at December 31, 1996.
Stockholders' equity at the end of the first quarter was $104,010,000, an
increase of $1,185,000, or 1.2%, from the December 31, 1996 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, 1997, each bank was within established
guidelines and total corporate liquidity was strong. At March 31, 1997, 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 21.9% 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, 1997 and for the three-months ended March 31, 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.
/s/ BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
May 7, 1997
Part II
A. 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: May 7, 1997 /s/ J. Thomas May
-------------- ---------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: May 7, 1997 /s/ Barry L. Crow
-------------- ---------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 33,519
<INT-BEARING-DEPOSITS> 6,434
<FED-FUNDS-SOLD> 41,470
<TRADING-ASSETS> 236
<INVESTMENTS-HELD-FOR-SALE> 109,834
<INVESTMENTS-CARRYING> 128,322
<INVESTMENTS-MARKET> 128,222
<LOANS> 515,746
<ALLOWANCE> 8,297
<TOTAL-ASSETS> 891,263
<DEPOSITS> 744,432
<SHORT-TERM> 2,328
<LIABILITIES-OTHER> 11,149
<LONG-TERM> 1,056
28,576
0
<COMMON> 0
<OTHER-SE> 75,434
<TOTAL-LIABILITIES-AND-EQUITY> 891,263
<INTEREST-LOAN> 11,521
<INTEREST-INVEST> 3,671
<INTEREST-OTHER> 748
<INTEREST-TOTAL> 15,941
<INTEREST-DEPOSIT> 6,537
<INTEREST-EXPENSE> 7,055
<INTEREST-INCOME-NET> 8,886
<LOAN-LOSSES> 764
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 10,732
<INCOME-PRETAX> 3,616
<INCOME-PRE-EXTRAORDINARY> 2,588
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,588
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<YIELD-ACTUAL> 4.72
<LOANS-NON> 2,967
<LOANS-PAST> 1,457
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,366
<CHARGE-OFFS> 1,007
<RECOVERIES> 174
<ALLOWANCE-CLOSE> 8,297
<ALLOWANCE-DOMESTIC> 8,297
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
