SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
June 30, 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 June 30, 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 5,740,624
Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
June 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Income --
Three months and six months ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows --
Six months ended June 30, 1998 and 1997 6
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8-17
Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-21
Review by Independent Certified Public Accountants 22
Part II: Other Information 23-25
<PAGE>
Part I: Summarized Financial Information
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
ASSETS
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 52,203 $ 58,327
Interest bearing balances due from banks 3,512 4,106
Federal funds sold and securities purchased
under agreements to resell 41,175 64,565
----------- -----------
Cash and cash equivalents 96,890 126,998
Investment securities 323,202 316,365
Mortgage loans held for sale 7,256 8,758
Assets held in trading accounts 42 449
Loans 835,606 794,183
Allowance for loan losses (14,870) (12,628)
----------- -----------
Net loans 820,736 781,555
Premises and equipment 29,816 28,621
Foreclosed assets held for sale, net 1,076 1,099
Interest receivable 12,241 12,047
Mortgage servicing rights, net -- 6,703
Intangible assets, net 29,786 30,834
Other assets 17,889 12,716
----------- ------------
TOTAL ASSETS $ 1,338,934 $ 1,326,145
=========== ============
</TABLE>
The December 31, 1997 Consolidated Balance Sheet is as reported in the Company's
1997 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Simmons First National Corporation
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES (Unaudited)
<S> <C> <C>
Non-interest bearing transaction accounts $ 160,214 $ 154,544
Interest bearing transaction accounts and savings deposits 348,295 337,133
Time deposits 595,939 612,824
----------- -----------
Total deposits 1,104,448 1,104,501
Federal funds purchased and securities sold
under agreements to repurchase 42,495 40,733
Short-term debt 3,964 4,589
Long-term debt 49,582 50,281
Accrued interest and other liabilities 21,595 13,959
----------- -----------
Total liabilities 1,222,084 1,214,063
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized 30,000,000 shares
(authorized 10,000,000 shares in 1997), 5,740,624 issued and outstanding
at 1998 and 5,726,212 at 1997 5,741 5,726
Surplus 45,287 45,059
Undivided profits 64,383 59,891
Unrealized appreciation on available-for-sale securities,
net of income taxes of $818 at 1998 and $799 at 1997 1,439 1,406
----------- -----------
Total stockholders' equity 116,850 112,082
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,338,934 $ 1,326,145
=========== ============
</TABLE>
The December 31, 1997 Consolidated Balance Sheet is as reported in the Company's
1997 Annual Report to the Stockholders.
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Simmons First National Corporation
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 1998 and 1997
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans $ 18,471 $ 12,158 $ 36,495 $ 23,679
Federal funds sold and securities purchased
under agreements to resell 777 572 1,852 1,110
Investment securities 4,964 3,745 9,828 7,417
Mortgage loans held for sale, net of unrealized gains (losses) 117 79 233 196
Assets held in trading accounts 38 32 60 48
Interest bearing balances due from banks 74 61 204 138
---------- --------- --------- -------
TOTAL INTEREST INCOME 24,441 16,647 48,672 32,588
---------- --------- --------- -------
INTEREST EXPENSE
Deposits 10,869 6,859 21,759 13,396
Federal funds purchased and securities sold
under agreements to repurchase 656 485 1,310 948
Short-term debt 21 35 47 64
Long-term debt 990 56 1,971 82
---------- --------- --------- --------
TOTAL INTEREST EXPENSE 12,536 7,435 25,087 14,490
---------- --------- --------- -------
NET INTEREST INCOME 11,905 9,212 23,585 18,098
Provision for loan losses 3,720 881 4,849 1,645
--------- --------- --------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 8,185 8,331 18,736 16,453
--------- --------- --------- -------
NON-INTEREST INCOME
Trust income 749 523 1,561 1,127
Service charges on deposit accounts 1,389 859 2,675 1,604
Other service charges and fees 342 390 699 699
Income on sale of mortgage loans, net of commissions 91 102 204 223
Income on investment banking, net of commissions 547 127 817 402
Credit card fees 2,369 2,293 4,518 4,487
Mortgage servicing and mortgage-related fees 1,771 1,968 3,667 3,674
Other income 378 42 541 314
Gain on sale of mortgage servicing 3,273 -- 3,273 --
Gains on sale of securities, net 4 -- 4 --
--------- --------- --------- -------
TOTAL NON-INTEREST INCOME 10,913 6,304 17,959 12,530
--------- --------- --------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 7,029 5,513 13,979 11,149
Occupancy expense, net 837 597 1,659 1,218
Furniture and equipment expense 922 726 1,830 1,469
Loss on foreclosed assets 236 327 432 579
Other operating expenses 5,178 3,501 9,938 6,981
---------- --------- --------- -------
TOTAL NON-INTEREST EXPENSE 14,202 10,664 27,838 21,396
---------- -------- --------- -------
INCOME BEFORE INCOME TAXES 4,896 3,971 8,857 7,587
Provision for income taxes 1,451 1,157 2,587 2,185
---------- -------- --------- -------
NET INCOME $ 3,445 $ 2,814 $ 6,270 $ 5,402
========= ======== ======== =======
BASIC EARNINGS PER SHARE $ 0.60 $ 0.49 $ 1.09 $ 0.94
========= ======== ======== =======
DILUTED EARNINGS PER SHARE $ 0.59 $ 0.48 $ 1.07 $ 0.93
========= ======== ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997
<CAPTION>
June 30, June 30,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net income $ 6,270 $ 5,402
Items not requiring (providing) cash
Depreciation and amortization 3,512 2,397
Provision for loan losses 4,849 1,645
Net (accretion) amortization of investment securities (262) 184
Deferred income taxes (2,386) 15
Provision for foreclosed assets 136 23
Gain on sale of mortgage servicing (3,273) --
Gains on sale of securities, net (4) --
Gains on sale of premises and equipment -- (2)
Changes in
Interest receivable (194) 970
Mortgage loans held for sale 1,502 6,148
Assets held in trading accounts 407 (841)
Other assets (60) 5,314
Accrued interest and other liabilities 4,373 (377)
Income taxes payable 2,978 751
--------- ----------
Net cash provided by operating activities 17,848 21,629
--------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Net originations of loans (44,471) (37,299)
Sale of mortgage servicing 6,311 --
Purchase of premises and equipment (2,506) (1,872)
Proceeds from sale of premises and equipment 70 605
Proceeds from sale of foreclosed assets 328 --
Proceeds from maturities of available-for-sale securities 101,590 69,384
Purchases of available-for-sale securities (111,902) (92,811)
Proceeds from maturities of held-to-maturity securities 28,635 12,509
Purchases of held-to-maturity securities (24,861) (10,035)
---------- -----------
Net cash used in investing activities (46,806) (59,519)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (53) 17,516
Net (repayments) advances of short-term debt (625) 3,967
Dividends paid (1,778) (1,544)
Proceeds from issuance of long-term debt -- 17,250
Repayments of long-term debt (699) (23)
Net increase in federal funds purchased
and securities sold under agreements to repurchase 1,762 6,368
Issuance of common stock, net 243 95
--------- ----------
Net cash (used in) provided by financing activities (1,150) 43,629
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (30,108) 5,739
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 126,998 69,281
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 96,890 $ 75,020
========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 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 5,402 5,402
Change in unrealized appreciation on
available-for-sale securities, net of income
tax credit of $47 (82) (82)
----------
Comprehensive income 5,320
Common stock par value change (22,822) 22,822
Exercise of stock options--19,500 shares 20 138 158
Securities exchanged under stock option plan (2) (61) (63)
Cash dividends declared ($0.27 per share) (1,544) (1,544)
-------- -------- ---------- -------- ---------
Balance, June 30, 1997 5,723 44,939 1,070 54,964 106,696
Comprehensive income
Net income 6,587 6,587
Change in unrealized appreciation on
available-for-sale securities, net of income
taxes of $191 336 336
----------
Comprehensive income 6,923
Exercise of stock options--3,600 shares 3 120 123
Cash dividends declared ($0.29 per share) (1,660) (1,660)
-------- -------- ---------- -------- ----------
Balance, December 31, 1997 5,726 45,059 1,406 59,891 112,082
Comprehensive income
Net income 6,270 6,270
Change in unrealized appreciation on
available-for-sale securities, net of income
taxes of $19 33 33
----------
Comprehensive income 6,303
Exercise of stock options--14,900 shares 15 251 266
Securities exchanged under stock option plan (23) (23)
Cash dividends declared ($0.31 per share) (1,778) (1,778)
-------- -------- ---------- -------- ----------
Balance, June 30, 1998 $ 5,741 $ 45,287 $ 1,439 $ 64,383 $ 116,850
======== ======== ========== ======== =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
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 Company 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 common 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 for the six months ended June 30, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 6,270 $ 5,402
--------- --------
Average common shares outstanding 5,732 5,713
Average common share stock options outstanding 124 75
--------- -------
Average diluted common shares 5,856 5,788
--------- -------
Basic earnings per share $ 1.09 $ 0.94
======== =======
Diluted earnings per share $ 1.07 $ 0.93
======== =======
</TABLE>
<PAGE>
NOTE 2: 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 3: INVESTMENT SECURITIES
The amortized cost and fair value of investment securities that are
classified as held-to-maturity and available-for-sale are as follows:
<TABLE>
<CAPTION>
June 30, 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 $ 15,952 $ 152 $ (16) $ 16,088 $ 17,610 $ 158 $ (37) $ 17,731
U.S. Government
agencies 50,362 416 (19) 50,759 55,662 462 (61) 56,063
Mortgage-backed
securities 2,837 12 (22) 2,827 3,350 14 (30) 3,334
State and political
subdivisions 82,973 1,565 (116) 84,422 79,039 1,638 (284) 80,393
Other securities 96 2 -- 98 229 2 -- 231
--------- ------ ----- --------- --------- ------ ------ ---------
$ 152,220 $ 2,147 $ (173) $ 154,194 $ 155,890 $ 2,274 $ (412) $ 157,752
========= ====== ====== ========= ========= ====== ======= =========
Available-for-Sale
U.S. Treasury $ 65,245 $ 717 $ (11) $ 65,951 $ 70,402 $ 763 $ (24) $ 71,141
U.S. Government
agencies 96,566 280 (142) 96,704 80,812 298 (50) 81,060
State and political
subdivisions 446 1 -- 447 451 -- -- 451
Other securities 6,480 1,400 -- 7,880 6,601 1,222 -- 7,823
--------- ------ ----- --------- --------- ------ ------ ---------
$ 168,737 $ 2,398 $ (153) $ 170,982 $ 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 $172,757,000 at June 30, 1998 and
$170,047,000 at December 31, 1997. The approximate fair value of pledged
securities amounted to $174,265,000 at June 30, 1998 and $171,068,000 at
December 31, 1997.
The book value of securities sold under agreements to repurchase
amounted to $13,835,000 and $8,413,000 for June 30, 1998 and December 31, 1997,
respectively.
<PAGE>
Income earned on securities for the six months ended June 30, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $ 2,487 $ 2,032
Available-for-sale 5,270 3,743
Non-taxable
Held-to-maturity 2,062 1,642
Available-for-sale 9 --
-------- -----
Total $ 9,828 $ 7,417
======== =======
</TABLE>
Maturities of investment securities at June 30, 1998 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 $ 23,116 $ 23,151 $ 43,769 $ 43,863
After one through five years 74,281 75,015 88,891 89,499
After five through ten years 46,589 47,147 29,597 29,740
After ten years 5,301 5,956 -- --
Mortgage-backed securities not due
on a single date 2,837 2,827 -- --
Other securities 96 98 6,480 7,880
---------- ---------- ---------- ---------
Total $ 152,220 $ 154,194 $ 168,737 $ 170,982
========== ========== ========== =========
</TABLE>
The table below shows gross realized gains and losses during the first
six months of 1998 and 1997.
<TABLE>
<CAPTION>
June 30,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Proceeds from sales $ -- $ --
---------- ----------
(Does not include called bonds)
Gross gains 4 --
Gross losses -- --
---------- ----------
Securities gains (losses) $ 4 $ --
========== ==========
</TABLE>
Approximately 8.5 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.
<PAGE>
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $ 165,014 $ 179,828
Student loans 63,778 63,291
Other consumer 122,202 112,754
Real estate
Construction 47,084 43,212
Single family residential 127,810 122,581
Other commercial 134,978 118,112
Commercial
Commercial 120,477 110,480
Agricultural 42,205 31,161
Financial institutions 6,414 6,073
Other 5,644 6,691
------------ -----------
Total loans before allowance for loan losses $ 835,606 $ 794,183
============ ===========
</TABLE>
During the first six months of 1998, foreclosed assets held for sale
decreased $23,000 to $1,076,000 and are carried at the lower of cost or fair
market value. Non-accrual loans and other non-performing loans for the Company
at June 30, 1998, were $5,677,000 and $2,282,000, respectively, bringing the
total of non-performing assets to $9,035,000.
<PAGE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 12,628 $ 8,366
Additions
Provision charged to expense 4,849 1,645
--------- --------
17,477 10,011
Deductions
Losses charged to allowance, net of recoveries
of $302 and $303 for the first six months of
1998 and 1997, respectively 2,607 1,653
-------- -------
Balance, June 30 $ 14,870 $ 8,358
========= -------
Additions
Allowance for loan losses of acquired institutions 4,028
Provision charged to expense 2,368
14,754
Deductions
Losses charged to allowance, net of recoveries
of $277 for the last six months of
1997 2,126
-------
Balance, end of year $ 12,628
=======
</TABLE>
At June 30, 1998 and December 31, 1997, impaired loans totaled
$8,981,000 and $7,972,000, respectively, all of which had reserves allocated. An
allowance of $2,376,000 and $2,033,000 for possible losses related to those
loans at June 30, 1998 and December 31, 1997, respectively.
Interest of $155,000 and $125,000 was recognized on average impaired
loans of $8,539,000 and $4,707,000 as of June 30, 1998 and 1997, respectively.
Interest recognized on impaired loans on a cash basis during the first six
months of 1998 and 1997 was immaterial.
<PAGE>
NOTE 5: TIME DEPOSITS
Time deposits include approximately $173,376,000 and $188,522,000 of
certificates of deposit of $100,000 or more at June 30, 1998, and December 31,
1997, respectively.
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 4,973 $ 2,170
Deferred income taxes (2,386) 15
--------------- ---------------
Provision for income taxes $ 2,587 $ 2,185
=============== ===============
</TABLE>
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet are shown below:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 4,741 $ 3,432
Valuation of foreclosed assets
held for sale 337 286
Deferred compensation payable 471 436
Deferred loan fee income 694 622
Mortgage servicing reserves 968 --
Other 767 812
---------------- ----------------
Total deferred tax assets 7,978 5,588
---------------- ----------------
Deferred tax liabilities
Accumulated depreciation (869) (868)
Available-for-sale securities (818) (799)
Other (484) (481)
---------------- ----------------
Total deferred tax liabilities (2,171) (2,148)
---------------- ---------------
Net deferred tax assets included in other
assets on balance sheets $ 5,807 $ 3,440
=============== ===============
</TABLE>
<PAGE>
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below:
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 3,011 $ 2,579
Increase (decrease) resulting from:
Tax exempt income (732) (614)
Other differences, net 308 220
--------------- ---------------
Actual tax provision $ 2,587 $ 2,185
=============== ===============
</TABLE>
NOTE 7: LONG-TERM DEBT
Long-term debt at June 30, 1998 and December 31, 1997, consisted of the
following components, <TABLE> <CAPTION>
June 30, 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 997 1,021
5.62% to 8.41% FHLB advances due 1998 to 2015,
secured by residential real estate loans 11,335 12,010
Trust preferred securities 17,250 17,250
--------------- ---------------
$ 49,582 $ 50,281
=============== ===============
</TABLE>
During the second quarter of 1997, the Company 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
Company. The sole assets of the Trust are $17.8 million aggregate principal
amount of the Company's 9.12% Subordinated Debenture Notes due 2027 which are
redeemable beginning in 2002. Such securities qualify as Tier 1 Capital for
regulatory purposes. <PAGE>
Aggregate annual maturities of long-term debt at June 30, 1998 are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ 3,626
1999 3,259
2000 3,257
2001 3,170
2002 3,088
Thereafter 33,182
----------------
Total $ 49,582
================
</TABLE>
NOTE 8: CONTINGENT LIABILITIES
A number of legal proceedings exist in which the Company 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 Company and its
subsidiaries.
NOTE 9: CAPITAL STOCK
At the April 28, 1998 annual meeting of shareholders, an amendment to
the Articles of Incorporation was approved increasing the number of authorized
shares of Class A Common Stock of the Company from 10,000,000 to 30,000,000
shares.
NOTE 10: UNDIVIDED PROFITS
The subsidiary banks are subject to a legal limitation on dividends
that can be paid to the parent company 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 June 30, 1998, the
bank subsidiaries had approximately $4 million available for payment of
dividends to the Company 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 June 30, 1998, each of the seven subsidiary banks met the
capital standards for a well-capitalized institution. The Company's "total
risk-based capital" ratio was 12.92% at June 30, 1998.
<PAGE>
NOTE 11: STOCK OPTIONS AND RESTRICTED STOCK
As of June 30, 1998, 288,050 shares of common stock of the Company had
been granted through an employee stock option incentive plan. There were 119,600
exercisable options at the end of the second quarter of 1998. Fifty-one thousand
five hundred shares have been issued upon exercise of options. As of June 30,
1998, six thousand shares of common stock of the Company had been granted and
issued as Bonus Shares of restricted stock.
NOTE 12: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands) 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 25,052 $ 14,208
Income taxes
paid $ 2,946 $ 1,490
</TABLE>
NOTE 13: CERTAIN TRANSACTIONS
From time to time the Company 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.
<PAGE>
NOTE 14: COMMITMENTS AND CREDIT RISK
The seven affiliate banks of the Company grant agribusiness,
commercial, consumer, and residential loans to their customers. Included in the
Company's diversified loan portfolio is unsecured debt in the form of credit
card receivables that comprised approximately 19.7% and 22.6% of the portfolio,
as of June 30, 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 June 30, 1998, the Company had outstanding commitments to extend
credit aggregating approximately $193,394,000 and $128,432,000 for credit card
commitments and other loan commitments, respectively. At December 31, 1997, the
Company 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 Company, 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
Company had total outstanding letters of credit amounting to $9,327,000 and
$6,775,000 at June 30, 1998 and December 31, 1997, respectively, with terms
ranging from 90 days to one year.
NOTE 15: SUBSEQUENT EVENT
On July 24, 1998, an announcement was made jointly by the Chief
Executive Officers of both the Company and American Bancshares of Arkansas, Inc.
("ABA') regarding the execution of a definitive agreement under the terms of
which ABA will be merged into the Company in a transaction valued at
approximately $21,850,000. Stockholders of ABA will receive Simmons First
National Corporation stock in exchange for ABA shares in the transaction. The
transaction is expected to close in late 1998.
ABA owns American State Bank, Charleston Arkansas with consolidated
assets as of June 30, 1998 of $88 million. As a part of the transaction American
State Bank will be merged into Simmons First National Bank, during early 1999.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1998, was $3,445,000, an
increase of $631,000, or 22.4%, over the same period in 1997. Basic earnings per
share for the three-month periods ended June 30, 1998 and 1997, were $0.60 and
$0.49, respectively. Diluted earnings per share for the three-month periods
ended June 30, 1998 and 1997, were $0.59 and $0.48, respectively. Earnings for
the six-month period ended June 30, 1998, were $6,270,000 or an increase of
$868,000 over the June 30, 1997 earnings of $5,402,000. Year-to-date basic
earnings on a per share basis as of June 30, 1998 were $1.09 compared to $0.94
at June 30, 1997, reflecting a 16.0% increase. Year-to-date diluted earnings on
a per share basis as of June 30, 1998 were $1.07 compared to $0.93 at June 30,
1997, reflecting a 15.1% increase.
Net income for the second quarter of 1998 includes several
non-recurring items. A gain of $3.3 million, or $0.36 per share after tax, was
recognized from the sale of its $1.2 billion residential mortgage-servicing
portfolio. Also, the Company increased its allowance for loan losses by $2.5
million, or $0.28 per share after tax. This was the result of continued cautions
to the financial services industry from regulators regarding reserve levels and
rising consumer bankruptcies effecting the credit card industry. Additionally,
the Company expensed $500,000 or $0.05 per share after tax for software testing
and hardware replacement related to the Year 2000 issue. If the earnings for the
second quarter of 1998 were adjusted for the non-recurring items, earnings would
have been $0.57 per share.
The Company's return on average assets and return on average
stockholder's equity for the three-month period ended June 30, 1998 was 1.03%
and 11.89%, compared to 1.25% and 10.34%, respectively, for the same period in
1997. The Company's return on average assets and return on average stockholder's
equity for the six-month period ended June 30, 1998 was 0.95% and 11.00%,
compared to 1.22% and 10.27%, respectively, for the same period in 1997.
Basic cash earnings (net income excluding amortization of intangibles)
for the second quarter of 1998 were $0.67 per share compared with $0.50 for the
second quarter of 1997, reflecting a 34.0% increase. Year-to-date basic cash
earnings on a per share basis as of June 30, 1998 were $1.23 compared to $0.97
at June 30, 1997, reflecting a 26.8% increase. Cash return on average assets was
1.08% and cash return on average stockholders' equity was 12.33% for the
six-month period ended June 30, 1998, compared with 1.26% and 10.55%,
respectively, for the same period in 1997.
On August 1, 1997, the Company 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. On August 1, 1997, the banks acquired
had consolidated assets, as adjusted, of $362 million.
Net interest income, the difference between interest income and
interest expense, for the three-month period ended June 30, 1998, increased
$2,693,000, or 29.2%, when compared to the same period in 1997. During the
second quarter, interest income increased $7,794,000, or 46.8%, while interest
expense increased $5,101,000, or 68.6%, when compared to the same period in
1997. For the six-months ended June 30, 1998 and 1997, net interest income was
$25,087,000 and $14,490,000, respectively. This represents an increase of
$10,597,000, or 73.1%. Year-to-date interest income for the six-month periods
ended June 30, 1998 and 1997 was up $16,084,000, to $48,672,000, over the
$32,588,000 reported as for June 30, 1997, which signifies a 49.4% increase.
Year-to-date interest expense at June 30, 1998 and 1997, was $25,087,000 and
$14,490,000, respectively, which equates to a 73.1% increase. These figures
reflect the acquisition of FBAR and FBAS and the long-term debt associated with
these acquisitions.
The provision for loan losses for the second quarter of 1998 (excluding
the $2,530,000 non-recurring provision) was $1,190,000, compared to $881,000 for
the same period of 1997, resulting in a $309,000, or 35.1%, increase. For the
six months ended June 30, 1998 and 1997, the provision (excluding the $2,530,000
non-recurring provision) was $2,319,000 and $1,645,000, respectively, resulting
in a 41.0% increase. The increase from 1997 to 1998 is attributable to
acquisitions, growth in loans and bankruptcies in the bankcard portfolio.
Non-interest income (excluding the gain on sale of mortgage servicing
and gain on securities sold), for the second quarter ended June 30, 1998, was
$7,636,000, a 21.1% increase over the $6,304,000 reported for the same period in
1997. For the six-months ended June 30, 1997 and 1996, non-interest income
(excluding the gain on sale of mortgage servicing and gain on securities sold)
was $14,682,000, a 17.2% increase over the $12,530,000 reported for the same
period in 1997. Total fee income for both the three-month and six-month periods
ended June 30, 1998 was up 9.7% and 13.2%, respectively.
During the three months ended June 30, 1998, non-interest expense
(excluding the non-recurring Year 2000 expenses) increased $3,038,000, or 28.5%,
over the same period in 1997. This increase reflects the normal increase in the
cost of doing business, coupled with acquisitions. Year-to-date non-interest
expense (excluding the non-recurring Year 2000 expenses) was $27,338,000 at June
30, 1998, compared to $21,396,000, for the same period ended June 30, 1997. The
increase reflects the acquisitions and the normal increase in the cost of doing
business.
Total assets for the Company at June 30, 1998, were $1.339 billion, an
increase of $13 million, or 0.98%, over the same figure at December 31, 1997.
Deposits at June 30, 1998, totaled $1.1 billion, equal to the figure at December
31, 1997. Stockholders' equity at the end of the second quarter was
$116,850,000, an increase of $4,768,000, or 4.3%, from the December 31, 1997
figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.78% as of June 30, 1998, compared to 1.59% at
December 31, 1997. As of June 30, 1998, the allowance for loan losses as a
percent of total loans excluding government-guaranteed student loans was 1.93%.
As of June 30, 1998, non-performing loans equaled 0.95% of total loans, while
the allowance for loan losses equaled 187% of non-performing loans.
On June 30, 1998 Simmons First National Bank sold its residential
mortgage-servicing portfolio to First Commercial Mortgage Company resulting in a
$3.3 million gain. The portfolio consists of approximately $1.2 billion in
residential mortgage loans. The portfolio sale will not have a material impact
on future earnings of the Company.
During the second quarter of 1998, the Company amended 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 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 Company'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 June 30, 1998, each bank was within established
guidelines and total corporate liquidity was strong. At June 30, 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 20.6% of total assets.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. In 1996, as
part of its strategic plan to provide quality customer service, introduce new
products and improve operating efficiencies, the Company began converting all of
its software and hardware systems to state-of-the-art technology. As a byproduct
of this effort, the Year 2000 issue has been addressed. The Company has now
completed the Year 2000 identification of mission critical systems, vendors,
large borrowers and large depositors requiring assessment and testing. During
the second quarter the Company expensed $500,000 for software testing and
hardware replacement related to the Year 2000 issue. The Company is utilizing
both internal and external resources to test the software for Year 2000
modifications. The testing of internal mission critical systems is scheduled to
be substantially completed by December 31, 1998. The testing with vendors, large
borrowers and large depositors will be completed by June 30, 1999. The
replacement of non-compliant systems is presently underway and will be completed
in 1999.
The Company is in the process of converting the two banks acquired on
August 1, 1997 to the Company's systems and these conversions are scheduled for
the fourth quarter of 1998. On July 24, 1998, an announcement was made jointly
by the Chief Executive Officers of both the Company and American Bancshares of
Arkansas, Inc. regarding the execution of a definitive agreement under the terms
of which ABA, and its affiliate ASB, will be merged into the Company. The
transaction is expected to close in late 1998 or early 1999. ASB will be
converted to the Company's systems during early 1999. As part of the Company's
due diligence process associated with a potential acquisition, the prospect's
Year 2000 compliance and readiness is thoroughly evaluated. The Company has
contingency plans if the above conversions are not completed before December 31,
1999.
Management believes completion of the Year 2000 modifications will not
have a material effect on the Company's future consolidated results of
operations or financial position.
<PAGE>
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 June
30, 1998 and for the three-months and six-months ended June 30, 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
August 6, 1998
<PAGE>
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 April, 1998 1,200 9.6250 Incentive Stock Option
1 Officer April, 1998 3,000 1.0000 Bonus Stock Plan
1 Officer May, 1998 1,500 6.6667 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 per share
price paid for shares issued under the Bonus Stock under the Simmons First
National Corporation Executive Stock Incentive Plan is set in the plan to
be the par value of the Class A common stock, $1.00.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual shareholders meeting of the Company was held on April 28,
1998. The matters submitted to the security holders for approval included
setting the number of directors at nine (9), the election of directors and one
amendment to the Articles of Incorporation of the Company.
(b) At the annual meeting, all nine (9) incumbent directors were re-elected
by proxies solicited pursuant to Section 14 of the Security Exchange Act of
1934, without any solicitation in opposition thereto.
(c) The amendment to the Articles of Incorporation submitted to the
Security Holders amended the Articles of Incorporation to increase the number of
authorized shares of Class A, $1.00 par value, common stock from 10,000,000 to
30,000,000. The Amendment was adopted and the results of the vote are shown in
following table.
The following table shows the required analysis of the voting by security
holders at the annual meeting:
<TABLE>
<CAPTION>
Voting of Shares
Action For Against Abstain
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Set Number of Directors at Nine (9) 4,464,200 12,130 28,279
Director Election:
Ayres 4,359,295 143,500
Floriani 4,360,287 143,500
Hutt 4,360,055 143,800
Makris 4,358,937 143,950
May 4,360,230 143,500
Perdue 4,360,230 143,500
Ryburn 4,358,730 144,100
Stone 4,360,230 143,500
Trotter 4,359,287 144,500
Amendment to
Articles 4,064,234 390,183 50,223
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 4 Restated Articles of Incorporation
<PAGE>
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: August 7, 1998 /s/ J. Thomas May
--------------------- --------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: August 7, 1998 /s/ Barry L. Crow
--------------------- ---------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT 4
ARTICLES OF RESTATEMENT OF THE
ARTICLES OF INCORPORATION OF
SIMMONS FIRST NATIONAL CORPORATION
Pursuant to the Arkansas Business Corporation Act, Simmons First
National Corporation does hereby adopt the following Articles of Restatement
of its Articles of Incorporation:
FIRST: The name of this Corporation is
SIMMONS FIRST NATIONAL CORPORATION.
SECOND: The duration of this Corporation and the period of its
existence shall be perpetual.
THIRD: The nature of the business of this Corporation and the objects
and purposes purposed to be transacted, promoted or carried on by it are as
follows, to-wit:
(a) To act as a holding company and to acquire and own stock or other
interest in other businesses of any lawful character, including specifically
banks, mortgage loan and servicing businesses, factoring businesses, and other
financially oriented businesses; and as shareholder or as owner of other
interest in such businesses, to exercise all rights incident thereto;
(b) To do all things herein set forth, and in addition, all such other acts
and things necessary or convenient or intended for the attainment of any of the
purposes of this Corporation and to participate in, engage in, carry on and
conduct any business that a natural person lawfully might or could do insofar as
such acts and business undertakings are permitted to be done by a corporation
organized under the general corporation laws of the State of Arkansas, with all
powers conferred upon corporations, specifically or by inference, under the laws
of the State of Arkansas.
FOURTH: The authorized capital stock of this Corporation shall consist of
30,000,000 shares of Class A common stock having a par value of $1.00 per share;
300 shares of Class B common stock having a par value of $1.00 per share; 50,000
shares of Class A preferred stock having a par value of $100.00 per share;
50,000 shares of Class B preferred stock having a par value of $100.00 per
share; all with the powers, privileges, incidents, preferences and limitations
hereinafter set forth:
(a) The entire voting power of this Corporation shall be vested in the
Class A common and Class B common stockholders, and the holders of each share of
the Class A common and Class B common stock shall be entitled to one vote, in
person or by proxy, for each share of such stock standing in his name on the
books of the Corporation. Except as may otherwise be provided or required by
law, the holders of Class A preferred stock and Class B preferred stock shall
have no power to vote and shall not be entitled to notice of any meeting of the
stockholders of the Corporation.
(b) Class A preferred stock, which may be issued at the discretion of the
Board of Directors of the Corporation for any price not less than the par value
stated per share, shall provide for cumulative dividends at a rate to be fixed
by the Board of Directors of the Corporation prior to the issuance thereof;
shall have such options for conversion into the common stock of the Corporation
as shall be designated by the Board of Directors; and when issued and
outstanding may be redeemed by the Corporation in the manner provided by its
Bylaws and upon authorization of the Board of Directors in whole or in part
thereof at a redemption price of Two Hundred Dollars per share together with the
amount of any accrued dividends which may have been unpaid at the time of
redemption. Class A preferred stock shall, in addition, have the following
incidents, powers, privileges, preferences and restrictions, to-wit:
(i) In the event of dissolution, voluntary or involuntary, liquidation
or winding up of the affairs of the Corporation, or any distribution of all of
its assets to its stockholders, the holders of record of Class A preferred stock
shall be entitled to receive One Hundred Dollars per share out of the assets
available for distribution on a par with the holders of record of Class B
preferred stock and before any other payments to stockholders are made
whatsoever. After the payment of the preferences here provided on Class A
preferred stock and elsewhere provided on Class B preferred stock, any remaining
assets available for distribution shall be prorated to the holders of common
stock. A consolidation, merger, or amalgamation of this Corporation shall not be
deemed a distribution of assets of the Corporation within the meaning of any of
the provisions of these Articles of Incorporation.
(ii) The dividends, at the rate established by the Board of Directors
upon the issuance of Class A preferred stock, shall be cumulative so that if the
Corporation fails in any fiscal year to pay such dividends on all of the issued
and outstanding Class A preferred stock, such deficiency in the dividends shall
be fully paid, but without interest, before any dividends shall be paid on or
set apart for any other class of stock outstanding from the Corporation. Subject
to this provision and other provisions for preferences upon dissolution or
liquidation, Class A preferred stock shall not be entitled to participate in any
other or additional surplus or net profits of the Corporation.
(iii) In the exercise of its right of redemption of Class A preferred
stock, the Board of Directors of the Corporation shall have full power and
discretion to select from the outstanding Class A preferred stock of the
Corporation particular shares for redemption, and its proceedings in this
connection shall not be subject to attack except for actual and intentional
fraud. In all instances, the Board shall have complete authority to determine
upon and take all the necessary proceedings fully to effect the redemption,
calling in and retirement of the shares selected for redemption, and the
cancellation of the certificates representing such shares. Upon completion of
such proceedings, the rights of the holders of the shares of such preferred
stock which have been redeemed and called in shall in all respects cease, except
that holders shall be entitled to receive the redemption price for their
respective shares.
(iv) Whenever any shares of Class A preferred stock of the Corporation
are purchased or redeemed as herein authorized, the Corporation may, by
resolution of its Board of Directors, retire such shares, and thereupon this
Corporation shall, in connection with the retirement of such shares, cause to be
filed a certificate of reduction of capital.
(v) The Board of Directors may elect to issue the Class A preferred
stock authorized for this Corporation in series each having such dividend rates
and conversion options into the common stock of this Corporation as they may
elect at the time of the issue of any series and these rights and incidents may
differ between such series, provided that the required filing of a certificate
stating the respective rights and incidents of each series are filed as required
by law.
(c) Class B preferred stock, which may be issued at the discretion of the
Board of Directors of the Corporation for any price not less than the par values
stated per share, shall provide for preferential (after payment of dividends on
any outstanding Class A preferred stock) non-cumulative dividends at a rate to
be fixed by the Board of Directors of the Corporation prior to the issuance
thereof; shall have such conversion options as shall be designated by the Board
of Directors into the common stock of the Corporation and the time and method
within which the same may be exercised; and when issued and outstanding may be
redeemed by the Corporation in the manner provided by its Bylaws and upon
authorization of the Board of Directors in whole or in any part thereof at a
redemption price of Two Hundred Dollars per share together with the amount of
any accrued dividends which may have been declared but remain unpaid at the time
of redemption. Class B preferred stock shall, in addition, have the following
incidents, powers, privileges, preferences and restrictions, to-wit:
(i) In the event of any dissolution, voluntary or involuntary,
liquidation or winding up of the affairs of the Corporation, or any distribution
of all of its assets to its stockholders, the holders of record of Class B
preferred stock shall be entitled to receive One Dollar per share out of the
assets available for distribution on a par with the holders of Class A preferred
stock. After the payment of the preferences here provided for, Class B preferred
stock and as elsewhere herein provided for Class A preferred stock, any
remaining assets available for distribution will be prorated to the holders of
the common stock. A consolidation, merger or amalgamation of the Corporation
shall not be deemed a distribution of assets of the Corporation within the
meaning of any of the provisions of these Articles of Incorporation.
(ii) The dividends, at the rate established by the Board of Directors
upon the issuance of Class B preferred stock, shall be non-cumulative, but such
dividends shall be paid before any dividends are declared or paid on any other
class of stock outstanding from the Corporation, except the dividend established
by the Board of Directors on Class A preferred stock then outstanding. Subject
to this provision and other provisions for preferences upon dissolution or
liquidation, holders of Class B preferred stock shall not be entitled to
participate in any other or additional surplus or net profits of the
Corporation.
(iii) In the exercise of its right of redemption of Class B preferred
stock, the Board of Directors of the Corporation shall have full power and
discretion to select from the outstanding Class B preferred stock of the
Corporation particular shares for redemption, and its proceedings in this
connection shall not be subject to attack except for actual and intentional
fraud. In all instances, the Board shall have complete authority to determine
upon and take the necessary proceedings fully to effect the redemption, calling
in and retirement of the shares selected for redemption, and the cancellation of
the certificates representing such shares. Upon completion of such proceedings,
the rights of holders of the shares of such preferred stock which have been
redeemed and called in shall in all respects cease, except that such holders
shall be entitled to receive the redemption price for their respective shares.
(iv) Whenever any shares of Class B preferred stock of the Corporation
are purchased or redeemed as herein authorized, the Corporation may, by
resolution of its Board of Directors, retire such shares, and thereupon this
Corporation shall, in connection with the retirement of such shares, cause to be
filed a certificate of reduction of capital.
(v) The Board of Directors may elect to issue the Class B preferred
stock authorized for this Corporation in series, each having such dividend rates
and conversion options into the common stock of this Corporation as they may
elect at the time of the issue of any series, and these rights and incidents may
be differ between each series, provided that the required filing of a
certificate stating the respective rights and incidents of each series are filed
as required by law.
(d) Certificates evidencing the allotment of shares to subscribers vest in
the subscriber or his assignee, to the extent of actual ownership as provided by
law, the right to participate in dividends and vote shares or fractional shares
of stock.
(e) In the event that two successive annual dividends payable on the Class
A preferred stock are in default, then immediately upon the happening of such
event and until such defaults and all defaults subsequent thereto are made good,
the holders of Class A preferred stock shall be entitled to one vote for each
share of such stock at any meeting of the Corporation in the same manner and to
the same extent as if such share of Class A preferred stock were a share of
Class A common stock or Class B common stock of the Corporation. Upon payment in
full of the defaulted dividends, the voting power shall again be vested
exclusively in the common stockholders.
(f) No stockholder of the Corporation, whether of common or preferred
stock, shall because of his ownership of stock have a pre-emptive or other right
to purchase, subscribe for, or take any part of the stock or any part of the
notes, debentures, bonds or other securities convertible into or carrying
options or warrants to purchase stock of the Corporation issued, optioned, or
sold by it. Any part of the capital stock and any part of the notes, debentures,
bonds or other securities convertible into or carrying options or warrants to
purchase stock of the Corporation authorized by the Articles of Incorporation or
any amendment thereto duly filed, may at any time be issued, optioned for sale,
and sold or disposed of by the Corporation pursuant to resolution of its Board
of Directors to such persons and upon such terms as to such Board may seem
proper without first offering such stock or securities or any part thereof to
existing stockholders of any class.
(g) The Board of Directors of the Corporation shall have the power, at
their discretion, to prepare and cause to be issued convertible bonds or
debentures of the Corporation, whether or not secured by a sinking fund, pledge
or other commitment, having such rights, conversion options into the common or
preferred stock of the Corporation, bearing such interest, having such maturity
dates, with such restrictions, incidents, privileges, and characteristics, and
in such amounts, total and individually, as may be determined by the Board of
Directors to be appropriate for the corporate purposes.
FIFTH: The Corporation shall not commence business until it has
received consideration of the value of at least Three Hundred Dollars for the
issuance of its shares of stock.
SIXTH: The initial office of the Corporation shall be at Fifth and Main
Streets in the City of Pine Bluff, Arkansas, and the name of the resident agent
of the Corporation is J. Thomas May, whose address is 2111 Country Club Lane,
Pine Bluff, Arkansas.
SEVENTH: The name and post office address of the incorporator is Wayne
A. Stone, 10 Westridge Drive, Pine Bluff, Arkansas.
EIGHTH: The Board of Directors of this Corporation shall consist of not
less than five (5) nor more than twenty-five (25) persons, the exact number of
directors within such minimum and maximum limits to be fixed and determined,
from time to time, by resolution of majority of the full Board of Directors or
by resolution of the shareholders at any annual or special meeting thereof. Any
vacancy in the Board of Directors for any reason, including an increase in the
number thereof, may be filled by action of the Board of Directors.
NINTH: The affairs and business of this Corporation shall be controlled and
conducted by the Board of Directors. The Board of Directors may make By-Laws for
the management of the affairs and business of this Corporation, from time to
time, and may amend or repeal such By-Laws. In addition, the Corporation and
Board of Directors shall have all the powers provided for boards of directors
and corporations under the laws of the State of Arkansas, including, but not
limited to, the power to create an Executive Committee from among their number,
to provide for the day-to-day management and operations of the Corporation's
affairs.
TENTH: The private property of the stockholders shall not be subject
to the payment of the corporate debts to any extent whatsoever.
ELEVENTH: (a)(1) Except as otherwise expressly provided in this Article, in
the event that any person becomes an Interested Stockholder (as hereinafter
defined), then any acquisition of additional Voting Shares (as hereinafter
defined), other than through a Business Combination (as hereinafter defined), by
such Interested Stockholder shall only be pursuant to a Tender Offer ( as
hereinafter defined) to acquire, for cash, any and all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors ("Voting Shares") not owned by such Interested Stockholder at the Fair
Price (as hereinafter defined).
(2) The provisions of this section (a) shall not apply to any person
exempted from the requirements of this section by the Board of Directors in a
resolution passed before the person becomes an Interested Stockholder.
(3) A Tender Offer shall be made on the terms and subject to the
conditions as set forth below:
(i) All expenses associated with the making and conduct of
the Tender Offer shall be the sole responsibility of the Interested
Stockholder; and
(ii) The Tender Offer shall be an offer to purchase any and all
outstanding Voting Shares not owned by the Interested Stockholder at a price per
share not less than the Fair Price, net to the seller in cash. Shares tendered
pursuant to valid guarantees of delivery before the initial expiration date of
the Tender Offer, specifically identifying certificates therefor, shall be
deemed to be validly tendered for purposes of the Tender Offer. The initial
expiration of the Tender Offer shall not be less than twenty (20) business days
after the commencement of the Tender Offer.
(b) In addition to any affirmative vote required by law, and except as
otherwise expressly provided in this Article:
(1) any merger or consolidation of the Corporation with or into
any other Corporation, or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) of all or
substantially all of the property and assets of the Corporation, or
(3) the adoption of any plan or proposal of liquidation or
dissolution of the Corporation; or
(4) any reclassification of the Corporation's securities (including
any stock split); shall require the affirmative vote of the holders of at least
80% of the outstanding Voting Shares, unless such Business Combination is
approved by 80% of the Continuing Directors (as hereinafter defined) of the
Corporation. Such affirmative vote of the shareholders or directors shall be
required, notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement or otherwise.
(c) The provisions of sections (a) and (b) of this Article shall not be
applicable to any Business Combination or stock acquisition, and such Business
Combination or stock acquisition shall require only such affirmative vote as is
required by law and any other provisions of these Articles of Incorporation, if
any, if such transaction has been approved by 80% of the Continuing Directors of
the Corporation.
(d) For purposes of this Article:
(1) "Business Combination" means any transaction which is referred to
in any one or more paragraphs (1) through (4) of section (b) of this Article.
(2) "Person" includes a natural person, corporation, partnership,
association, joint stock company, trust, unincorporated association or other
entity. When two or more Persons act as a partnership, limited partnership,
syndicate or other group for the purpose of acquiring, holding or disposing of
common stock, such syndicate or group shall be deemed a Person for purposes of
this Article.
(3) "Interested Stockholder" means any Person (other than the
Corporation), any Subsidiary (as hereinafter defined) or any Employee Stock
Ownership Trust or other compensation plan of the Corporation, who or which as
of any date immediately prior to the consummation of any transaction described
in this Article:
(i) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares; or
(ii) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or indirectly, of not
less than 6% of the then outstanding Voting Shares.
(4) "Tender Offer" means a tender offer for cash made in accordance
with the then applicable rules and regulations of the Securities and Exchange
Commission issued pursuant to Section 14(d) of the Securities Exchange Act of
1934, as amended.
(5) "Fair Price" means the amount payable by the Interested
Stockholder in respect of each Voting Share, which shall be the greater amount
determined on either of the following bases:
(i) The highest price per share of Voting Shares including
commissions paid to brokers or dealers for solicitation or other services, at
which Voting Shares held by the Interested Stockholder were acquired pursuant to
any market purchase or otherwise within the preceding twenty-four (24) full
calendar months prior to the commencement of the Tender Offer. For purposes of
this subsection (i), if the consideration paid in any such acquisition of Voting
Shares consisted, in whole or part, of consideration other than cash, then such
other consideration shall be valued at the market value thereof at the time of
the payment.
(ii) The highest sale price per share of the Voting Shares for
any trading day during the preceding twenty-four (24) full calendar months prior
to the commencement of the Tender Offer. For purposes of this subsection (ii),
the sale price for any trading day shall be the last sale price per share of
Voting Shares as reported in the National Association of Securities Dealers
Automated Quotation System.
(6) "Beneficial Ownership" means any right or power through any
contract, arrangement, understanding, relationship or otherwise to exercise,
directly or indirectly, (1) voting power, which includes the power to vote, or
to direct the voting of, the Voting Shares, or (2) investment power, which
includes the power to dispose of, or to direct the disposition of, the Voting
Shares.
Notwithstanding the foregoing, Beneficial Ownership shall not include (1)
ownership by a registered broker holding shares of Voting Shares in its street
name for customers, or (2) ownership by an employee plan maintained for the
Company's employees, provided that each employee is entitled to vote the shares
in the trust which are allocable to him.
(7) A person shall be a "beneficial owner" of any Voting Shares:
(i) which such Person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such Person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such first mentioned Person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any Voting Shares.
(8) An "Affiliate" of, or a Person "affiliated" with, a specified
Person, is a Person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with
the Person specified.
(9) The term "Associate" used to indicate a relationship with any
Person means (1) any corporation or organization (other than the Corporation or
a majority-owned subsidiary of the Corporation) of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities, (2) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, or (3) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
(10) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (7) of section (d) above, but shall not include
any other Voting Shares which may be issuable pursuant to any agreement or upon
exercise of conversion rights, warrants, or options, or otherwise.
(11) "Proponent" means any Person (or its Affiliates or Associates)
which makes any Tender Offer for the Voting Shares or proposes any Business
Combination directly affecting the Corporation or its subsidiaries.
(12) "Continuing Directors" means the incumbent directors of the
Corporation on the date immediately preceding the date the Proponent (or its
Affiliates or Associates) became an Interested Stockholder. In the event the
Proponent (or its Affiliates or Associates) is not an Interested Stockholder,
then all directors of the Corporation shall be Continuing Directors.
(13) "Subsidiary" shall mean a corporation of which a majority of each
class of equity is owned, directly or indirectly, by the Corporation.
(e) A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article on the basis of information known to
them, (1) if a Business Combination is proposed by or on behalf of an Interested
Stockholder or Affiliate of an Interested Stockholder, (2) the number of Voting
Shares beneficially owned by any Person, (3) whether a person is an Affiliate or
Associate of another, or (4) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in paragraph (7) of
section (d) above.
(f) Nothing contained in this Article shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law. The Board
of Directors is specifically authorized to seek equitable relief, including an
injunction, to enforce the provisions of the Article.
TWELFTH: (a) Every person who was or is a party of, is threatened to be
made party to, or is involved in, any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of the Corporation (or is or was serving at the
request of the Corporation as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust or other
enterprise) shall be indemnified and held harmless to the fullest extent legally
permissible under and pursuant to any procedure specified in the Arkansas
Business Corporation Act of 1965, as amended and as the same may be amended
hereafter, against all expenses, liabilities and losses (including attorney's
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. Such right of
indemnification shall be a contract right that may enforced in any lawful manner
by such person, and the Corporation may in the discretion of the Board of
Directors enter into indemnification agreements with its directors and officers.
Such right of indemnification shall not be exclusive of any other right which
such director or officer may have or hereafter acquire and, without limiting the
generality of such statement, he shall be entitled to his rights of
indemnification under any agreement, vote of stockholders, provision of law or
otherwise, as well as his rights under this section.
(b) The Board of Directors may cause the Corporation to purchase and
maintain insurance on behalf of any person who is, or was, a director of officer
of the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation or as its representative in a
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the Corporation would have the power to indemnify
such person.
(c) Expenses incurred by a director or officer of the Corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is, or was, a director or officer of the Corporation (or is or was
serving at the Corporation's request as a director or officer of another
corporation or as its representative in a partnership, joint venture, trust or
other enterprise) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding (1) upon authorization (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
are not parties to the action, suit or proceeding, (ii) if such a quorum is not
obtainable or, even if obtainable, if a quorum of disinterested directors so
directs, then by independent legal counsel in a written opinion, or (iii) by the
shareholders; and (2) upon receipt of an undertaking by, or on behalf of, such
person to repay such amount, if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized by relevant
provisions of the Arkansas Business Corporation Act of 1965 as the same now
exists or as it may hereafter be amended.
(d) If any provision of this Article or the application thereof to any
person or circumstance is adjudicated invalid, such invalidity shall not affect
other provisions or applications of this Article which lawfully can be given
without the invalid provision of this Article.
THIRTEENTH: In the event of any Tender Offer, merger offer or other
acquisitive offer for the shares or assets of the Corporation or any of its
subsidiaries, then, in addition to any other action required by law, the Board
of Directors shall consider the following factors in evaluating such offer,
prior to making any recommendation with respect to such offer:
(a) The likely impact of the proposed acquisitive transaction on the
Corporation, its subsidiaries, its shareholders, its employees and the
communities served by the Corporation and its subsidiaries;
(b) The timeliness of the offer and proposed transaction considering the
current business climate and the current business activities and plans of the
Corporation and its subsidiaries;
(c) The possibility of any legal defects, including but not limited to bank
and bank holding company regulatory matters, in the offer of proposed
transaction;
(d) The risk of non-consummation of the offer due to inadequate financing,
failure to obtain regulatory approval or such other risks as the Board may
identify;
(e) The current market price of the stock and the assets of the
Corporation and its subsidiaries;
(f) The book value of the stock of the Corporation;
(g) The relationship of the proposed price in the offer to the Board's
opinion of the current value of the Corporation and its subsidiaries in an
independently negotiated transaction;
(h) The relationship of the proposed price in the offer to the Board's
opinion of the future value of the Corporation and its subsidiaries as an
independent entity; and
(i) Any other factors which the Board deems pertinent.
No director who is an Affiliate or Associate (as defined in Article
Eleventh above) of the offeror shall participate in any manner whatsoever in the
above evaluation of the offer.
FOURTEENTH: Any amendment, repeal or modification of any of the terms of
the Articles of Incorporation of the Corporation shall, in addition to all other
requirements of law, require the approval of 80% of the shares entitled to vote
on such amendment, repeal or modification, unless such amendment, repeal or
modification shall have been approved by an affirmative vote of 80% of the
Continuing Directors of the Corporation (as defined in Article Eleventh above).
FIFTEENTH: The Corporation elects to be governed by and subject to the
Arkansas Business Corporation Act of 1987.
SIXTEENTH: To the fullest extent permitted by the Arkansas Business
Corporation Act, as it now exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.
IN WITNESS WHEREOF, the Chairman, President and Chief Executive Officer of
the Corporation has set his hand this 29th day of April, 1998.
SIMMONS FIRST NATIONAL CORPORATION
By /s/ J. Thomas May
--------------------------------------
J. Thomas May, Chairman, President and
Chief Executive Officer
CERTIFICATE
Pursuant to the Arkansas Business Corporation Act, Simmons First National
Corporation does hereby certify that the Articles of Incorporation, as duly
restated in the Articles of Restatement of Articles of Incorporation, were duly
adopted and restated by a resolution of the Board of Directors. The restatement
contains an amendment to Article FOURTH which was duly approved by the
shareholders and for which the following information is provided:
FIRST: The name of the corporation is: Simmons First National Corporation.
SECOND: The Articles of Incorporation are hereby amended by deleting the first
paragraph of Article FOURTH in its entirety and substituting the
following paragraph in lieu thereof:
FOURTH: The authorized capital stock of this Corporation shall
consist of 30,000,000 shares of Class A common stock having a par
value of $1.00 per share; 300 shares of Class B common stock having a
par value of $1.00 per share; 50,000 shares of Class A preferred stock
having a par value of $100.00 per share; 50,000 shares of Class B
preferred stock having a par value of $100.00 per share; all with the
powers, privileges, incidents, preferences and limitations hereinafter
set forth:
THIRD: The date of adoption of the Amendments was April 28, 1998.
FOURTH: There were 5,726,812 shares of Class A common stock outstanding on the
record date, February 18, 1998. Class A common Stock is the only class
of stock outstanding and constitutes the only voting group entitled to
vote on this amendment. The number of shares indisputably represented
at the shareholder's meeting was 4,504,640.
FIFTH: The number of shares which were voted for the amendment to Article
FOURTH was 4,064,234, the number of shares which were voted against
that amendment was 390,183 and the number of shares which abstained
were 50,223. The number of votes cast for the amendment is sufficient
for its adoption.
IN WITNESS WHEREOF, the Chairman, President and Chief Executive Officer of
Simmons First National Corporation has set his hand this 29th day of April,
1998.
SIMMONS FIRST NATIONAL CORPORATION
By /s/ J. Thomas May
--------------------------------------
J. Thomas May, Chairman, President and
Chief Executive Officer
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