SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
March 31, 1998
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 March 31, 1998 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 5,734,924
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1998 and December 31, 1997 3-4
Consolidated Statements of Income --
Three months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1998 and 1997 6
Consolidated Statements of Changes in Stockholders' Equity
Three months ended March 31, 1998 and 1997 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
Part I: Summarized Financial Information
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
ASSETS
<CAPTION>
March 31, December 31,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 50,481 $ 58,327
Interest bearing balances due from banks 10,570 4,106
Federal funds sold and securities purchased
under agreements to resell 96,050 64,565
----------- -----------
Cash and cash equivalents 157,101 126,998
Investment securities 345,646 316,365
Mortgage loans held for sale 10,289 8,758
Assets held in trading accounts 961 449
Loans 796,569 794,183
Allowance for loan losses (12,784) (12,628)
----------- -----------
Net loans 783,785 781,555
Premises and equipment 28,605 28,621
Foreclosed assets held for sale, net 1,316 1,099
Interest receivable 11,385 12,047
Mortgage servicing rights, net 5,961 6,703
Intangible assets, net 30,248 30,834
Other assets 12,637 12,716
----------- -----------
TOTAL ASSETS $ 1,387,934 $ 1,326,145
=========== ===========
</TABLE>
The December 31, 1997 Consolidated Balance Sheet is as reported in the
Corporation's 1997 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------------------
LIABILITIES (Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 192,026 $ 154,544
Interest bearing transaction accounts and savings deposits 341,459 337,133
Time deposits 608,980 612,824
----------- -----------
Total deposits 1,142,465 1,104,501
Federal funds purchased and securities sold
under agreements to repurchase 61,225 40,733
Short-term debt 1,890 4,589
Long-term debt 49,931 50,281
Accrued interest and other liabilities 18,229 13,959
----------- -----------
Total liabilities 1,273,740 1,214,063
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized
10,000,000 shares, 5,734,924 issued and outstanding
at 1998 and 5,726,212 at 1997 5,735 5,726
Surplus 45,132 45,059
Undivided profits 61,857 59,891
Unrealized appreciation on available-for-sale securities,
net of income taxes of $836 at 1998 and $799 at 1997 1,470 1,406
----------- -----------
Total stockholders' equity 114,194 112,082
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,387,934 $ 1,326,145
=========== ===========
</TABLE>
The December 31, 1997 Consolidated Balance Sheet is as reported in the
Corporation's 1997 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, 1998 and 1997
<CAPTION>
March 31, March 31,
(In thousands, except per share data) 1998 1997
- ----------------------------------------------------------------------------------------
(Unaudited)
INTEREST INCOME
<S> <C> <C>
Loans $18,024 $11,521
Federal funds sold and securities purchased
under agreements to resell 1,075 538
Investment securities 4,864 3,672
Mortgage loans held for sale, net of unrealized gains (losses) 116
117
Assets held in trading accounts 22 16
Interest bearing balances due from banks 130 77
------- -------
TOTAL INTEREST INCOME 24,231 15,941
------- -------
INTEREST EXPENSE
Deposits 10,890 6,537
Federal funds purchased and securities sold
under agreements to repurchase 654 463
Short-term debt 26 29
Long-term debt 981 26
------- -------
TOTAL INTEREST EXPENSE 12,551 7,055
------- -------
NET INTEREST INCOME 11,680 8,886
Provision for loan losses 1,129 764
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,551 8,122
------- -------
NON-INTEREST INCOME
Trust income 812 604
Service charges on deposit accounts 1,286 745
Other service charges and fees 357 309
Income on sale of mortgage loans, net of commissions 113 121
Income on investment banking, net of commissions 270 275
Credit card fees 2,149 2,194
Mortgage servicing and mortgage-related fees 1,896 1,706
Other income 163 272
Gains (losses) on sale of securities, net -- --
------- -------
TOTAL NON-INTEREST INCOME 7,046 6,226
------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 6,950 5,636
Occupancy expense, net 822 621
Furniture and equipment expense 908 743
Loss on foreclosed assets 196 252
Other operating expense 4,760 3,480
------- -------
TOTAL NON-INTEREST EXPENSE 13,636 10,732
------- -------
INCOME BEFORE INCOME TAXES 3,961 3,616
Provision for income taxes 1,136 1,028
------- -------
NET INCOME $ 2,825 $ 2,588
======= =======
BASIC EARNINGS PER SHARE $ 0.49 $ 0.45
======= =======
DILUTED EARNINGS PER SHARE $ 0.48 $ 0.45
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
<CAPTION>
March 31, March 31,
(In thousands) 1998 1997
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net income $ 2,825 $ 2,588
Items not requiring (providing) cash
Depreciation and amortization 2,078 1,151
Provision for loan losses 1,129 764
Net (accretion) amortization of investment securities (130) 651
Deferred income taxes 9 (40)
Provision for foreclosed assets 15 81
Gains on sale of premises and equipment -- (1)
Changes in
Interest receivable 662 1,554
Mortgage loans held for sale (1,531) 4,190
Assets held in trading accounts (512) (54)
Other assets 79 1,676
Accrued interest and other liabilities 3,079 (39)
Income taxes payable 1,182 1,138
--------- ---------
Net cash provided by operating activities 8,885 13,659
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Net origination's of loans (3,692) (6,093)
Purchase of premises and equipment (804) (901)
Proceeds from sale of premises and equipment 70 338
Proceeds from sale of foreclosed assets 101 --
Proceeds from maturities of available-for-sale securities 25,095 21,560
Purchases of available-for-sale securities (52,729) (23,900)
Proceeds from maturities of held-to-maturity securities 13,951 4,320
Purchases of held-to-maturity securities (15,404) (4,287)
--------- ---------
Net cash used in investing activities (33,412) (8,963)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 37,964 8,065
Net (repayments) advances of short-term debt (2,699) 844
Dividends paid (859) (743)
Repayments of long-term debt (350) (11)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase 20,492 (791)
Issuance of common stock, net 82 82
--------- ---------
Net cash provided by financing activities 54,630 7,446
--------- ---------
INCREASE IN CASH AND
CASH EQUIVALENTS 30,103 12,142
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 126,998 69,281
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 157,101 $ 81,423
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 1998 and 1997
<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, 1996 $ 28,527 $ 22,040 $ 1,152 $ 51,106 $ 102,825
Comprehensive income
Net income 2,588 2,588
Change in unrealized appreciation on
available-for-sale securities,
net of income tax credit of $420 (742) (742)
-----------
Comprehensive income 1,846
Exercise of stock options--10,500 shares 53 48 101
Securities exchanged under stock option plan (4) (15) (19)
Cash dividends declared ($0.13 per share) (743) (743)
-------- -------- ---------- --------- ----------
Balance, March 31, 1997 28,576 22,073 410 52,951 104,010
Comprehensive income
Net income 9,401 9,401
Change in unrealized appreciation on
available-for-sale securities, net of income
taxes of $564 996 996
----------
Comprehensive income 10,397
Exercise of stock options--12,600 shares 13 167 180
Securities exchanged under stock option plan (1) (43) (44)
Common stock par value change (22,862) 22,862
Cash dividends declared ($0.43 per share) (2,461) (2,461)
-------- -------- ---------- --------- ----------
Balance, December 31, 1997 5,726 45,059 1,406 59,891 112,082
Comprehensive income
Net income 2,825 2,825
Change in unrealized appreciation on
available-for-sale securities, net of income
taxes of $37 64 64
----------
Comprehensive income 2,889
Exercise of stock options--9,200 shares 9 96 105
Securities exchanged under stock option plan (23) (23)
Cash dividends declared ($0.15 per share) (859) (859)
-------- -------- ---------- --------- ----------
Balance, March 31, 1998 $ 5,735 $ 45,132 $ 1,470 $ 61,857 $ 114,194
======== ======== ========== ======== =========
</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 24-27 of the 1997 Annual Report to
shareholders.
Earnings Per Share
Effective December 15, 1997, the Corporation adopted the provisions of
SFAS No. 128, Earnings Per Share (EPS), which requires dual presentation of
basic and diluted EPS for all entities with complex capital structures. Basic
earnings per share is computed based on the weighted average number of shares
outstanding during each year. Diluted earnings per share is computed using the
weighted average common shares and all potential dilutive common shares
outstanding during the period.
The computation of per share earnings is as follows:
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands, except per share data) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Net Income $2,825 $2,588
------ ------
Average common shares outstanding 5,728 5,708
Average common share stock options outstanding 128 70
------ ------
Average diluted common shares 5,856 5,778
------ ------
Basic earnings per share $ 0.49 $ 0.45
====== ======
Diluted earnings per share $ 0.48 $ 0.45
====== ======
</TABLE>
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,
1998 1997
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- -------------------------------------------------------------------------------------------------------------
Held-to-Maturity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 18,055 $ 172 $ (20) $ 18,207 $ 17,610 $ 158 $ (37) $ 17,731
U.S. Government
agencies 55,776 488 (47) 56,217 55,662 462 (61) 56,063
Mortgage-backed
securities 3,129 17 (16) 3,130 3,350 14 (30) 3,334
State and political
subdivisions 80,236 1,594 (73) 81,757 79,039 1,638 (284) 80,393
Other securities 213 2 -- 215 229 2 -- 231
--------- ------ ----- --------- --------- ------ ------ ---------
$ 157,409 $ 2,273 $ (156) $ 159,526 $ 155,890 $ 2,274 $ (412) $ 157,752
========= ====== ====== ========= ========= ====== ======= =========
Available-for-Sale
U.S. Treasury $ 89,659 $ 821 $ (16) $ 90,464 $ 70,402 $ 763 $ (24) $ 71,141
U.S. Government
agencies 89,185 335 (50) 89,470 80,812 298 (50) 81,060
State and political
subdivisions 448 2 -- 450 451 -- -- 451
Other securities 6,637 1,216 -- 7,853 6,601 1,222 -- 7,823
--------- ------ ----- --------- --------- ------ ------ ---------
$ 185,929 $ 2,374 $ (66) $ 188,237 $ 158,266 $ 2,283 $ (74) $ 160,475
========= ====== ====== ========= ========= ====== ======= =========
</TABLE>
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $173,764,000 at March 31, 1998 and
$170,047,000 at December 31, 1997. The approximate fair value of pledged
securities amounted to $175,101,000 at March 31, 1998 and $171,068,000 at
December 31, 1997.
The book value of securities sold under agreements to repurchase
amounted to $9,610,000 and $8,413,000 for March 31, 1998 and December 31, 1997,
respectively.
Income earned on securities for the three months ended March 31, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
-------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $1,284 $1,018
Available-for-sale 2,558 1,833
Non-taxable
Held-to-maturity 1,017 821
Available-for-sale 5 --
------ ------
Total $4,864 $3,672
====== ======
</TABLE>
Maturities of investment securities at March 31, 1998
<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 $ 19,233 $ 20,025 $ 63,556 $ 63,662
After one through five years 70,545 71,908 93,440 90,155
After five through ten years 54,714 54,874 20,798 25,067
After ten years 9,575 9,374 1,498 1,500
Mortgage-backed securities not due
on a single date 3,129 3,130 -- --
Other securities 213 215 6,637 7,853
---------- ---------- ---------- ---------
Total $ 157,409 $ 159,526 $ 185,929 $ 188,237
========== ========== ========== =========
</TABLE>
The table below shows gross realized gains and losses during the first
three months of 1998 and 1997.
<TABLE>
<CAPTION>
March 31,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
---------- ----------
(Does not include called bonds)
Gross gains -- --
Gross losses -- --
---------- ----------
Securities gains (losses) $ -- $ --
========== ==========
</TABLE>
Approximately 8.9 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>
March 31, December 31,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $ 164,841 $ 179,828
Student loans 69,272 63,291
Other consumer 113,155 112,754
Real estate
Construction 44,964 43,212
Single family residential 121,874 122,581
Other commercial 122,570 118,112
Commercial
Commercial 115,392 110,480
Agricultural 27,252 31,161
Financial institutions 6,505 6,073
Other 10,744 6,691
------------ -----------
Total loans before allowance for loan losses $ 796,569 $ 794,183
============ ===========
</TABLE>
During the first three months of 1998, foreclosed assets held for sale
increased $217,000 to $1,316,000 and are carried at the lower of cost or fair
market value. Non-accrual loans and other non-performing loans for the
Corporation at March 31, 1998, $5,640,000 and $2,311,000, respectively, bringing
the total of non-performing assets to $9,267,000.
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 12,628 $ 8,366
Additions
Provision charged to expense 1,129 764
--------- --------
13,757 9,130
Deductions
Losses charged to allowance, net of recoveries
of $143 and $174 for the first three months of
1998 and 1997, respectively 973 833
-------- -------
Balance, March 31 $ 12,784 $ 8,297
========= -------
Additions
Allowance for loan losses of acquired institutions 4,028
Provision charged to expense 3,249
15,574
Deductions
Losses charged to allowance, net of recoveries
of $406 for the last nine months of
1997 2,946
-------
Balance, end of year $ 12,628
=======
</TABLE>
At March 31, 1998 and December 31, 1997, impaired loans totaled
$8,602,000 and $7,972,000, respectively, all of which had reserves allocated. An
allowance of $2,398,000 and $2,033,000 for possible losses related to those
loans at March 31, 1998 and December 31, 1997, respectively.
Interest of $66,000 and $59,000 was recognized on average impaired
loans of $8,287,000 and $4,300,000 as of March 31, 1998 and 1997, respectively.
Interest recognized on impaired loans on a cash basis during the first three
months of 1998 and 1997 was immaterial.
NOTE 4: ACQUISITIONS
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. 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 March 31, 1998, 288,050 shares of common stock of the Corporation
had been granted through an employee stock option incentive plan. There were
122,300 exercisable options at the end of the first quarter of 1998. Forty-eight
thousand eight hundred shares have been issued upon exercise of options. As of
March 31, 1998, 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>
Three Months Ended
March 31,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 12,521 $ 6,997
Income taxes
paid $ -- $ 59
</TABLE>
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands) 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,127 $ 1,068
Deferred income taxes 9 (40)
--------------- ------------
Provision for income taxes $ 1,136 $ 1,028
=============== =============
</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) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 3,628 $ 3,432
Valuation of foreclosed assets
held for sale 197 286
Deferred compensation payable 436 436
Deferred loan fee income 593 622
Other 771 812
--------------- -------------
Total deferred tax assets 5,625 5,588
--------------- ---------------
Deferred tax liabilities
Accumulated depreciation (888) (868)
Available-for-sale securities (836) (799)
Other (507) (481)
--------------- -------------
Total deferred tax liabilities (2,231) (2,148)
---------------- ---------------
Net deferred tax assets included in other
assets on balance sheets $ 3,394 $ 3,440
=============== ===============
</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) 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,347 $ 1,230
Increase (decrease) resulting from:
Tax exempt income (362) (288)
Other differences, net 151 86
--------------- ---------------
Actual tax provision $ 1,136 $ 1,028
=============== ===============
</TABLE>
NOTE 9: TIME DEPOSITS
Time deposits include approximately $178,972,000 and $188,522,000 of
certificates of deposit of $100,000 or more at March 31, 1998, and December 31,
1997, 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 20.7% and 22.6% of the portfolio,
as of March 31, 1998 and December 31, 1997, 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, 1998, the Corporation had outstanding commitments to
extend credit aggregating approximately $168,580,000 and $133,021,000 for credit
card commitments and other loan commitments, respectively. At December 31, 1997,
the Corporation had outstanding commitments to extend credit aggregating
approximately $154,759,000 and $90,164,000 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 $9,462,000 and
$6,775,000 at March 31, 1998 and December 31, 1997, respectively, with terms
ranging from 90 days to one year.
Mortgage loans serviced for others totaled $1.2 billion and $1.3
billion at March 31, 1998 and December 31, 1997, 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, 1998 and December 31, 1997, this reserve balance
was $777,000 and $710,000, 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 March 31, 1998 and December 31, 1997, consisted of the
following components,
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
7.32% note due 2007, unsecured $ 20,000 $ 20,000
9.75% note due 2008, secured by land and building 1,010 1,021
5.62% to 8.41% FHLB advances due 1998 to 2015,
secured by residental real estate loans 11,671 12,010
Trust preferred securities 17,250 17,250
--------------- ---------------
$ 49,931 $ 50,281
=============== ===============
</TABLE>
During the second quarter of 1997, the Corporation formed a wholly
owned grantor trust subsidiary (the Trust) to issue 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 are $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 March 31, 1998 are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ 3,975
1999 3,259
2000 3,257
2001 3,170
2002 3,088
Thereafter 33,182
----------------
Total $ 49,931
================
</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 March 31, 1998, 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 March 31, 1998, each of the seven subsidiary banks met the
capital standards for a well-capitalized institution. The Corporation's "total
risk-based capital" ratio was 13.1% at March 31, 1998.
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 March 31, 1998, was $2,825,000, an
increase of $237,000, or 9.2%, over the same period in 1997. Basic earnings per
share for the three-month periods ended March 31, 1998 and 1997, were $0.49 and
$0.45, respectively. Diluted earnings per share for the three-month periods
ended March 31, 1998 and 1997, were $0.48 and $0.45, respectively. Return on
average assets and return an average stockholder's equity for the three-month
period ended March 31, 1998 was 0.88% and 10.08%, compared to 1.19% and 10.07%,
respectively, for the same period in 1997.
Cash earnings (net income excluding amortization of intangibles) for
the first quarter of 1998 were $0.56 per share compared with $0.47 for the first
quarter of 1997, reflecting a 19.1% increase. Cash return on average assets was
1.02% and cash return on average stockholders' equity was 11.41% for the
three-month period ended March 31, 1998, compared with 1.23% and 10.36%,
respectively, for the same period in 1997.
Growth in both loans and deposits coupled with an increase in
non-interest income, contributed to the Company's record earnings performance in
the first quarter 1998.
As of August 1, 1997, the Corporation completed the acquisition of
First Bank of Arkansas (FBAR), Russellville, Arkansas and First Bank of Arkansas
(FBAS), Searcy, Arkansas in a cash purchase transaction of $53 million. This
transaction was partially financed through the issuance of $20 million in
long-term debt and $17 million in trust preferred securities. 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 March 31, 1998, increased
$2,794,000, or 31.4%, when compared to the same period in 1997. During the first
quarter, interest income increased $8,290,000, or 52.0%, while interest expense
increased $5,496,000, or 77.9%, when compared to the same period in 1997. These
figures reflect the acquistion of FBAR and FBAS and the long-term debt
associated with these acquistions.
The provision for loan losses for the first quarter of 1998 was
$1,129,000, compared to $764,000 for the same period of 1997, resulting in a
$365,000, or 47.8%, increase. The increase from 1998 to 1997 is attributable to
acquisitions, growth in loans and bankruptcies in the bankcard portfolio.
Non-interest income, exclusive of net gains on securities sold, for the
first quarter ended March 31, 1998, was $7,046,000, a 13.2% increase over the
$6,226,000 reported for the same period in 1997. Total fee income for the
three-month period ended March 31, 1998 was up 16.9%.
During the three months ended March 31, 1998, non-interest expense
increased $2,904,000, or 27.1%, over the same period in 1997. The increase from
1998 to 1997 includes a $470,000 increase in the amortization of intangibles
attributable to the acquisition of FBAR and FBAS. The increase reflects the
acquisitions and the normal increase in the cost of doing business.
Total assets for the Corporation at March 31, 1998, were $1.388
billion, an increase of $61.8 million, or 4.7%, over the same figure at December
31, 1997. Deposits at March 31, 1998, totaled $1.142 billion, an increase of
$38.0 million, or 3.4%, from the same figure at December 31, 1997. Stockholders'
equity at the end of the first quarter was $114,194,000, an increase of
$2,112,000, or 1.9%, from the December 31, 1997 figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.60% as of March 31, 1998, compared to 1.61% for the
same date in 1997. As of March 31, 1998, non-performing loans equaled 1.0% of
total loans, while the allowance for loan losses equaled 161% of non-performing
loans.
During the first quarter of 1998, the Company's board of directors
voted unanimously, to recommend the adoption of an amendment to the Articles of
Incorporation to increase the number of authorized shares of Class A Common
Stock ("Common Stock") of the Company from 10,000,000 to 30,000,000 shares. The
principal reason for the proposed amendment to increase the number of authorized
shares of the Common Stock is to provide sufficient shares to enable the Company
to issue additional shares, if needed, to effect future stock dividends or to
engage in acquisitive transactions.
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 March 31, 1998, each bank was within established
guidelines and total corporate liquidity was strong. At March 31, 1998, 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 25.7% 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 17 of the accompanying Form 10-Q,
of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of March
31, 1998 and for the three-months ended March 31, 1998 and 1997, 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, 1997, 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 30, 1998, 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, 1997,
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
April 28, 1998
Part II: Other Information
Item 2. Changes in Securities.
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
Identity(1) Date of Sale of Shares Price(2) Type of Transaction
- ---------- ------------ -------- -------- ----------------------
<S> <C> <C> <C> <C>
1 Officer February, 1998 300 22.1667 Incentive Stock Option
1 Officer February, 1998 300 25.6667 Incentive Stock Option
8 Officers March, 1998 8,100 9.6250 Incentive Stock Option
1 Officer March, 1998 500 25.6667 Incentive Stock Option
</TABLE>
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 has been
adjusted to reflect the effect of the 50% stock dividend paid on December 6,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMMONS FIRST NATIONAL CORPORATION
----------------------------------
(Registrant)
Date:May 1, 1998 /s/ J. Thomas May
----------- -----------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date:May 1, 1998 /s/ Barry L. Crow
----------- -----------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 50,481
<INT-BEARING-DEPOSITS> 10,570
<FED-FUNDS-SOLD> 96,050
<TRADING-ASSETS> 961
<INVESTMENTS-HELD-FOR-SALE> 188,237
<INVESTMENTS-CARRYING> 157,409
<INVESTMENTS-MARKET> 159,526
<LOANS> 796,569
<ALLOWANCE> 12,784
<TOTAL-ASSETS> 1,387,934
<DEPOSITS> 1,142,465
<SHORT-TERM> 1,890
<LIABILITIES-OTHER> 79,454
<LONG-TERM> 49,931
0
0
<COMMON> 5,735
<OTHER-SE> 108,459
<TOTAL-LIABILITIES-AND-EQUITY> 1,387,934
<INTEREST-LOAN> 18,024
<INTEREST-INVEST> 4,864
<INTEREST-OTHER> 1,343
<INTEREST-TOTAL> 24,231
<INTEREST-DEPOSIT> 10,890
<INTEREST-EXPENSE> 12,551
<INTEREST-INCOME-NET> 11,680
<LOAN-LOSSES> 1,129
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,636
<INCOME-PRETAX> 3,961
<INCOME-PRE-EXTRAORDINARY> 2,825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,825
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 4.21
<LOANS-NON> 5,640
<LOANS-PAST> 2,311
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,628
<CHARGE-OFFS> 1,116
<RECOVERIES> 143
<ALLOWANCE-CLOSE> 12,784
<ALLOWANCE-DOMESTIC> 12,784
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
