SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
March 31, 1999
<PAGE>
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, 1999 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 6,521,088
Class B, Common None
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
March 31, 1999 and December 31, 1998 3-4
Consolidated Statements of Income --
Three months ended March 31, 1999 and 1998 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1999 and 1998 6
Consolidated Statements of Changes in Stockholders' Equity
Three months ended March 31, 1999 and 1998 7
Notes to Consolidated Financial Statements 8-18
Management's Discussion and Analysis of Financial
Condition and Results of Operations 19-22
Review by Independent Certified Public Accountants 23
Part II: Other Information 24-25
<PAGE>
Part I: Summarized Financial Information
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
ASSETS
March 31, December 31,
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 52,654 $ 50,139
Interest bearing balances due from banks 21,432 28,461
Federal funds sold and securities purchased
under agreements to resell 61,025 51,240
----------- ----------
Cash and cash equivalents 135,111 129,840
Investment securities 347,594 351,594
Mortgage loans held for sale 11,798 12,641
Assets held in trading accounts 3,057 78
Loans 947,663 968,410
Allowance for loan losses (15,699) (15,918)
------------ ------------
Net loans 931,964 952,492
Premises and equipment 36,670 35,271
Foreclosed assets held for sale, net 1,990 1,610
Interest receivable 13,949 14,346
Intangible assets, net 29,085 28,513
Other assets 14,072 14,087
----------- ----------
TOTAL ASSETS $ 1,525,290 $ 1,540,472
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Non-interest bearing transaction accounts $ 170,241 $ 161,488
Interest bearing transaction accounts and savings deposits 405,521 402,784
Time deposits 688,404 692,482
----------- -----------
Total deposits 1,264,166 1,256,754
Federal funds purchased and securities sold
under agreements to repurchase 53,140 71,432
Short-term debt 912 1,444
Long-term debt 49,526 49,899
Accrued interest and other liabilities 16,824 23,909
----------- -----------
Total liabilities 1,384,568 1,403,438
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized 30,000,000 shares 6,521,088
issued and outstanding
at 1999 and 6,454,135 at 1998 6,521 6,454
Surplus 48,112 45,791
Undivided profits 85,430 83,261
Accumulated other comprehensive income
Unrealized appreciation on available-for-sale securities,
net of income taxes of $375 at 1999 and $869 at 1998 659 1,528
----------- -----------
Total stockholders' equity 140,722 137,034
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,525,290 $ 1,540,472
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998
March 31,
(In thousands, except per share data) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Loans $ 21,285 $ 20,500
Federal funds sold and securities purchased
under agreements to resell 902 1,172
Investment securities 5,031 5,406
Mortgage loans held for sale, net of unrealized gains (losses) 197 116
Assets held in trading accounts 17 22
Interest bearing balances due from banks 186 143
--------- --------
TOTAL INTEREST INCOME 27,618 27,359
--------- --------
INTEREST EXPENSE
Deposits 11,556 12,367
Federal funds purchased and securities sold
under agreements to repurchase 795 681
Short-term debt 24 43
Long-term debt 961 1,043
--------- --------
TOTAL INTEREST EXPENSE 13,336 14,134
--------- --------
NET INTEREST INCOME 14,282 13,225
Provision for loan losses 1,602 1,268
--------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 12,680 11,957
--------- --------
NON-INTEREST INCOME
Trust income 1,008 812
Service charges on deposit accounts 1,540 1,458
Other service charges and fees 518 421
Income on sale of mortgage loans, net of commissions 611 631
Income on investment banking, net of commissions 134 270
Credit card fees 2,238 2,149
Mortgage servicing fees -- 1,378
Other income 320 214
Gains on sale of securities, net -- 34
--------- --------
TOTAL NON-INTEREST INCOME 6,369 7,367
--------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 7,605 7,536
Occupancy expense, net 798 902
Furniture and equipment expense 1,149 1,001
Loss on foreclosed assets 120 200
Merger-related 395 --
Other operating expenses 4,210 5,090
--------- --------
TOTAL NON-INTEREST EXPENSE 14,277 14,729
--------- --------
INCOME BEFORE INCOME TAXES 4,772 4,595
Provision for income taxes 1,495 1,353
--------- --------
NET INCOME $ 3,277 $ 3,242
======== =======
BASIC EARNINGS PER SHARE $ 0.50 $ 0.50
======== =======
DILUTED EARNINGS PER SHARE $ 0.50 $ 0.49
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998
March 31, March 31,
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,277 $ 3,242
Items not requiring (providing) cash
Depreciation and amortization 1,439 2,206
Provision for loan losses 1,602 1,268
Net accretion of investment securities (169) (126)
Deferred income taxes 341 12
Provision for foreclosed assets 56 15
Gains on sale of securities, net -- (34)
Changes in
Interest receivable 397 832
Mortgage loans held for sale 843 (1,531)
Assets held in trading accounts (2,979) (512)
Other assets 15 (514)
Accrued interest and other liabilities (6,834) 3,158
Income taxes payable 513 1,355
---------- -----------
Net cash (used in) provided by operating activities (1,499) 9,371
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Net repayments (originations) of loans 18,383 (4,970)
Purchase of premises and equipment (2,228) (887)
Proceeds from sale of foreclosed assets 107 273
Proceeds from sale of available-for-sale securities - 1,125
Proceeds from maturities of available-for-sale securities 44,826 28,182
Purchases of available-for-sale securities (53,398) (53,797)
Proceeds from maturities of held-to-maturity securities 26,275 16,036
Purchases of held-to-maturity securities (14,403) (17,076)
---------- -----------
Net cash provided by (used in) investing activities 19,562 (31,114)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 7,412 38,686
Net repayments of short-term debt (532) (2,957)
Dividends paid (1,108) (859)
Repayments of long-term debt (373) (380)
Net (decrease) increase in federal funds purchased
and securities sold under agreements to repurchase (18,292) 20,978
Issuance of common stock, net 101 82
---------- -----------
Net cash (used in) provided by financing activities (12,792) 55,550
---------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 5,271 33,807
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 129,840 137,762
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 135,111 $ 171,569
========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 1999 and 1998
Accumulated
Other
Common Comprehensive Undivided
(In thousands, except per share data) Stock Surplus Income Profits Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997, $ 6,191 $ 46,015 $ 1,216 $ 67,590 $ 121,012
as previously reported
Adjustment for pooling-of-interest 245 (485) -- 4,619 4,379
--------- --------- ----------- --------- ----------
Balance, December 31, 1997, as restated 6,436 45,530 1,216 72,209 125,391
Comprehensive income
Net income -- -- -- 3,242 3,242
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $34 -- -- 59 -- 59
----------
Comprehensive income 3,301
Exercise of stock options--9,200 shares 9 96 -- -- 105
Securities exchanged under stock option plan -- (23) -- -- (23)
Cash dividends declared
Common stock ($0.15 per share) -- -- -- (859) (859)
Pooled institutions prior to pooling -- -- -- -- --
--------- --------- ---------- --------- ----------
Balance, March 31, 1998 6,445 45,603 1,275 74,592 127,915
Comprehensive income
Net income -- -- -- 11,597 11,597
Change in unrealized appreciation on
available-for-sale securities,
net of income taxes of $144 -- -- 253 -- 253
----------
Comprehensive income 11,850
Exercise of stock options--9,500 shares 9 205 -- -- 214
Other stock transaction of pooled
institution prior to pooling -- (17) -- -- (17)
Cash dividends declared
Common stock ($0.49 per share) -- -- -- (2,895) (2,895)
Pooled institutions prior to pooling -- -- -- (33) (33)
--------- --------- ---------- --------- ----------
Balance, December 31, 1998 6,454 45,791 1,528 83,261 137,034
Comprehensive income
Net income -- -- -- 3,277 3,277
Change in unrealized appreciation on
available-for-sale securities,
net of income taxes of $495 -- -- (869) -- (869)
----------
Comprehensive income 2,408
Exercise of stock options--10,300 shares 10 102 -- -- 112
Securities exchanged under stock option plan -- (11) -- -- (11)
Common stock issued in connection with the
purchase of the minority shares of the Bank
of Lincoln - 56,997 shares 57 2,230 -- -- 2,287
Cash dividends declared ($0.17 per share) -- -- -- (1,108) (1,108)
--------- --------- ---------- --------- ----------
Balance, March 31, 1999 $ 6,521 $ 48,112 $ 659 $ 85,430 $ 140,722
======== ======== ========= ======== =========
</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 financial information
has been restated for the mergers with American Bancshares of Arkansas, Inc
("ABA") and Lincoln Bankshares, Inc. ("LBI") which were accounted for as
poolings-of-interests.
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 28-30 of the 1998 Annual Report to shareholders.
Earnings Per Share
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 three months ended March 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 3,277 $ 3,242
-------- --------
Average common shares outstanding 6,506 6,437
Average common share stock options outstanding 81 128
--------- --------
Average diluted common shares 6,587 6,565
--------- --------
Basic earnings per share $ 0.50 $ 0.50
======== ========
Diluted earnings per share $ 0.50 $ 0.49
======== ========
</TABLE>
<PAGE>
NOTE 2: ACQUISITIONS
On December 8, 1998, the Company and ABA merged in a pooling-of-interests
transaction. Shareholders of ABA received 464,885 shares of Simmons First
National Corporation stock in exchange for ABA shares in the transaction. ABA
owned American State Bank, Charleston, Arkansas with assets, as of December 8,
1998 of $89 million. The Company merged American State Bank into Simmons First
National Bank during the first quarter of 1999.
On January 15, 1999, the Company acquired all the common stock of LBI.
Stockholders of LBI received 301,823 shares of Simmons First National
Corporation stock in exchange for LBI shares in the transaction. LBI owned the
Bank of Lincoln, Lincoln, Arkansas with assets, as of January 15, 1999, of $75
million. This acquisition was accounted for as a pooling-of-interests, except
for the acquisition of the minority shares (17.9%) of the Bank of Lincoln, which
were accounted for on a purchase accounting basis. The Company plans to merge
the Bank of Lincoln into Simmons First Bank of Northwest Arkansas during the
second quarter of 1999.
On March 22, 1999, an announcement was made jointly by the Chief Executive
Officers of both the Company and NBC Bank Corp. ("NBC") regarding the execution
of a definitive agreement under the terms of which NBC will be merged into the
Company. Stockholders of NBC will receive 785,000 shares of Simmons First
National Corporation stock in exchange for NBC shares in the transaction. The
transaction is expected to close during the third quarter of 1999.
NBC owns National Bank of Commerce, El Dorado, Arkansas with consolidated
assets of $147 million as of December 31, 1998. After the merger, National Bank
of Commerce will continue to operate as a separate community bank with the same
board of directors, management and staff.
<PAGE>
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>
March 31, December 31,
1999 1998
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
U.S. Treasury $ 25,329 $ 244 $ (7) $ 25,566 $ 25,116 $ 424 $ (1) $ 25,539
U.S. Government
agencies 25,161 265 (37) 25,389 35,770 474 (48) 36,196
Mortgage-backed
securities 2,076 8 (13) 2,071 2,348 18 (13) 2,353
State and political
subdivisions 98,231 2,212 (145) 100,298 99,385 2,343 (74) 101,654
Other securities 89 3 -- 92 92 3 -- 95
--------- ------ ----- --------- --------- ------ ------ ---------
$ 150,886 $ 2,732 $ (202) $ 153,416 $ 162,711 $ 3,262 $ (136) $ 165,837
========= ====== ====== ========= ========= ====== ======= =========
Available-for-Sale
U.S. Treasury $ 46,084 $ 674 $ (14) $ 46,744 $ 51,047 $ 1,078 $ -- $ 52,125
U.S. Government
agencies 140,155 145 (873) 139,427 125,527 417 (142) 125,802
Mortgage-backed
securities 620 1 (1) 620 996 -- (1) 995
State and political
subdivisions 438 3 -- 441 440 4 -- 444
Other securities 8,355 1,373 (252) 9,476 8,246 1,523 (252) 9,517
--------- ------ ------ --------- --------- ------ ------- ---------
$ 195,652 $ 2,196 $(1,140) $ 196,708 $ 186,256 $ 3,022 $ (395) $ 188,883
========= ====== ====== ======== ========= ====== ====== =========
</TABLE>
<PAGE>
The carrying value, which approximates the market value, of securities
pledged as collateral, to secure public deposits and for other purposes,
amounted to $192,938,000 at March 31, 1999 and $217,606,000 at December 31,
1998.
The book value of securities sold under agreements to repurchase amounted
to $17,230,000 and $24,742,000 for March 31, 1999 and December 31, 1998,
respectively.
Income earned on securities for the three months ended March 31, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $ 893 $ 1,466
Available-for-sale 2,930 2,824
Non-taxable
Held-to-maturity 1,203 1,111
Available-for-sale 5 5
-------- -------
Total $ 5,031 $ 5,406
======== =======
</TABLE>
Maturities of investment securities at March 31, 1999 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 $ 22,533 $ 22,676 $ 33,120 $ 33,278
After one through five years 69,451 70,308 105,220 105,321
After five through ten years 50,431 51,223 48,752 48,429
After ten years 8,382 9,117 205 204
Other securities 89 92 8,355 9,476
---------- ---------- ---------- ---------
Total $ 150,886 $ 153,416 $ 195,652 $ 196,708
========== ========== ========== =========
</TABLE>
The gross realized gains of $0 and $34,000 and gross realized losses of $0
and $0 at March 31, 1999 and 1998, respectively, were the result of sales and/or
calls of available-for-sale securities in 1998. Proceeds from sales of
available-for-sale securities in 1998 were $1,125,000.
Most of the state and political subdivision debt obligations 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>
March 31, December 31,
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $ 150,725 $ 165,622
Student loans 70,525 66,134
Other consumer 149,522 146,411
Real estate
Construction 51,721 60,487
Single family residential 175,286 173,769
Other commercial 194,867 203,479
Commercial
Commercial 109,667 98,948
Agricultural 35,354 40,706
Financial institutions 5,024 5,656
Other 4,972 7,198
------------ -----------
Total loans before allowance for loan losses $ 947,663 $ 968,410
============ ===========
</TABLE>
During the first three months of 1999, foreclosed assets held for sale
increased $380,000 to $1,990,000 and are carried at the lower of cost or fair
market value. Other non-performing assets, non-accrual loans and other
non-performing loans for the Company at March 31, 1999, were $123,000,
$7,739,000 and $2,853,000, respectively, bringing the total of non-performing
assets to $12,705,000.
<PAGE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 15,918 $ 14,179
Additions
Provision charged to expense 1,602 1,268
-------- --------
17,520 15,447
Deductions
Losses charged to allowance, net of recoveries
of $229 and $161 for the first three months of
1999 and 1998, respectively 1,821 1,086
-------- --------
Balance, March 31 $ 15,699 $ 14,361
======= -------
Additions
Provision charged to expense 6,961
21,322
Deductions
Losses charged to allowance, net of recoveries
of $634 for the last nine months of
1998 5,404
-------
Balance, end of year $ 15,918
=======
</TABLE>
At March 31, 1999 and December 31, 1998, impaired loans totaled $14,309,000
and $12,471,000, respectively, all of which had reserves allocated. An allowance
of $2,826,000 and $2,768,000 for possible losses related to those loans at March
31, 1999 and December 31, 1998, respectively.
Interest of $149,000 and $115,000 was recognized on average impaired loans
of $13,390,000 and $11,001,000 as of March 31, 1999 and 1998, respectively.
Interest recognized on impaired loans on a cash basis during the first three
months of 1999 and 1998 was immaterial.
<PAGE>
NOTE 5: TIME DEPOSITS
Time deposits include approximately $192,267,000 and $196,202,000 of
certificates of deposit of $100,000 or more at March 31, 1999, and December 31,
1998, respectively.
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the following components:
<TABLE>
<CAPTION>
March 31, March 31,
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 1,154 $ 1,341
Deferred income taxes 341 12
--------------- ---------------
Provision for income taxes $ 1,495 $ 1,353
=============== ===============
</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) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 5,360 $ 5,278
Valuation of foreclosed assets
held for sale 161 202
Deferred compensation payable 462 467
Deferred loan fee income 373 591
Mortgage servicing reserves 446 477
Other 709 683
---------------- ---------------
Total deferred tax assets 7,511 7,698
---------------- ---------------
Deferred tax liabilities
Accumulated depreciation (992) (930)
Available-for-sale securities (375) (869)
Other (540) (448)
---------------- ---------------
Total deferred tax liabilities (1,907) (2,247)
---------------- ---------------
Net deferred tax assets included in other
assets on balance sheets $ 5,604 $ 5,451
=============== ==============
</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>
March 31, March 31,
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (34%) $ 1,622 $ 1,562
Increase (decrease) resulting from:
Tax exempt income (412) (394)
Other differences, net 285 185
--------------- ---------------
Actual tax provision $ 1,495 $ 1,353
=============== ===============
</TABLE>
NOTE 7: LONG-TERM DEBT
Long-term debt at March 31, 1999 and December 31, 1998, consisted of the
following components,
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.32% note due 2007, unsecured $ 18,000 $ 18,000
9.75% note due 2008, secured by land and building 959 972
5.36% to 8.41% FHLB advances due 1999 to 2018,
secured by residential real estate loans 13,317 13,677
Trust preferred securities 17,250 17,250
--------------- ---------------
$ 49,526 $ 49,899
=============== ===============
</TABLE>
The Company owns 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 March 31, 1999 are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 3,120
2000 3,493
2001 3,407
2002 3,319
2003 3,281
Thereafter 32,906
----------------
Total $ 49,526
===============
</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: 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 March 31, 1999, the
bank subsidiaries had approximately $5 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 March 31, 1999, each of the eight subsidiary banks met the
capital standards for a well-capitalized institution. The Company's "total
risk-based capital" ratio was 14.74% at March 31, 1999.
<PAGE>
NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK
As of March 31, 1999, 295,900 shares of common stock of the Company had
been granted through an employee stock option incentive plan. There were 146,120
exercisable options at the end of the first quarter of 1999. Sixty-five thousand
six hundred shares have been issued upon exercise of options. As of March 31,
1999, six thousand shares of common stock of the Company had been granted and
issued as Bonus Shares of restricted stock.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 13,912 $ 14,100
Income taxes paid $ 641 $ 44
</TABLE>
NOTE 12: 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 the
Company's subsidiary banks. 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 13: COMMITMENTS AND CREDIT RISK
The eight 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 15.9% and 17.1% of the portfolio, as of
March 31, 1999 and December 31, 1998, 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, 1999, the Company had outstanding commitments to extend credit
aggregating approximately $160,727,000 and $128,208,000 for credit card
commitments and other loan commitments, respectively. At December 31, 1998, the
Company had outstanding commitments to extend credit aggregating approximately
$152,946,000 and $100,397,000 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 $6,408,000 and
$5,953,000 at March 31, 1999 and December 31, 1998, respectively, with terms
ranging from 90 days to one year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1999, was $3,277,000, an
increase of $35,000, or 1.1%, over the same period in 1998. Basic earnings per
share for the three-month periods ended March 31, 1999 and 1998, were $0.50.
Diluted earnings per share for the three-month periods ended March 31, 1999 and
1998, were $0.50 and $0.49, respectively. All financial information has been
restated for the mergers with American Bancshares of Arkansas, Inc. ("ABA") and
Lincoln Bankshares, Inc. ("LBI"). Both mergers were accounted for as
poolings-of-interests
In connection with the LBI merger, non-recurring merger-related expenses
totaled $395,000, or $0.06 per share after tax. If earnings for 1999 were
adjusted for the merger-related expenses, diluted earnings would have been $0.56
per share for the quarter ended March 31, 1999.
The Company's return on average assets and return on average stockholder's
equity for the three-month period ended March 31, 1999 was 0.86% and 9.43%,
compared to 0.90% and 10.33%, respectively, for the same period in 1998.
Diluted cash earnings (net income excluding amortization of intangibles)
for the first quarter of 1999 and 1998 were $0.55 per share. Cash return on
average assets was 0.98% and cash return on average stockholders' equity was
10.44% for the three-month period ended March 31, 1999, compared with 1.02% and
11.51%, respectively, for the same period in 1998.
Net interest income, the difference between interest income and interest
expense, for the three-month period ended March 31, 1999, increased $1,057,000,
or 8.0%, when compared to the same period in 1998. During the first quarter,
interest income increased $259,000, or 0.9%, while interest expense decreased
$798,000, or 5.6%, when compared to the same period in 1998. These figures
reflect growth in the loan portfolio and an increase in fees on loans offset by
a decline in interest rates from 1998 to 1999.
The provision for loan losses for the first quarter of 1999 was $1,602,000,
compared to $1,268,000 for the same period of 1998, resulting in a $334,000, or
26.3%, increase. The increase from 1998 to 1999 is attributable to growth in
loans (March 31, 1998 to March 31, 1999), increased indirect lending,
unfavorable weather conditions during the crop production period, general market
conditions in the agriculture industry and an increased level of consumer
bankruptcies.
Non-interest income for the first quarter ended March 31, 1999, was
$6,369,000, a 13.5% decrease over the $7,367,000 reported for the same period in
1998. This decrease is due to the sale of the Company's mortgage servicing
portfolio on June 30, 1998. Total recurring fee income for the three-month
period ended March 31, 1999 was up 5.4% compared with the same period in 1998.
During the three months ended March 31, 1999, non-interest expense
decreased $452,000, or 3.1%, over the same period in 1998. This decrease
reflects the sale of the Company's mortgage servicing portfolio offset by the
normal increase in the cost of doing business and merger-related expenses.
<PAGE>
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 consisted of approximately $1.2 billion in
residential mortgage loans. The portfolio sale will not have a material impact
on future earnings of the Company.
FINANCIAL CONDITION
Total assets for the Company at March 31, 1999, were $1.525 billion, a
decrease of $15 million, or 1.0%, over the same figure at December 31, 1998.
Deposits at March 31, 1999, totaled $1.264 billion, an increase of $7 million,
or 0.6% from the same figure at December 31, 1998. Stockholders' equity at the
end of the first quarter was $140,722,000, an increase of $3,688,000, or 2.7%,
from the December 31, 1998 figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.66% as of March 31, 1999, compared to 1.64% at
December 31, 1998. As of March 31, 1999, non-performing loans equaled 1.12% of
total loans, while the allowance for loan losses equaled 148.22% of
non-performing loans.
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 originations and
purchases of investment securities, offset by loan payoffs and investment
maturities.
Liquidity represents an institution's ability to provide funds to satisfy
demands from depositors and borrowers, by either converting assets into cash or
accessing new or existing sources of incremental funds. It is a major
responsibility of management to maximize net interest income within prudent
liquidity constraints. Internal corporate guidelines have been established to
constantly measure liquid assets as well as relevant ratios concerning earning
asset levels and purchased funds. Each bank subsidiary is also required to
monitor these same indicators and report regularly to its own senior management
and board of directors. At March 31, 1999, each bank was within established
guidelines and total corporate liquidity was strong. At March 31, 1999, 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 22.7% of total assets.
ACQUISITIONS
In December 1998, the Company and ABA merged in a pooling-of-interests
transaction. Stockholders of ABA received 464,885 shares of Simmons First
National Corporation stock in exchange for ABA shares in the transaction. ABA
owned American State Bank ("ASB"), Charleston, Arkansas with assets, as of
December 31, 1998, of $90 million. The Company merged ASB into Simmons First
National Bank during the first quarter of 1999.
On January 15, 1999, the Company and LBI merged in a pooling-of-interests
transaction. Stockholders of LBI received 301,823 shares of Simmons First
National Corporation stock in exchange for LBI shares in the transaction. LBI
owned the Bank of Lincoln ("BOL"), Lincoln, Arkansas with assets, as of January
15, 1999, of $75 million. The Company plans to merge BOL into Simmons First Bank
of Northwest Arkansas during the second quarter of 1999.
<PAGE>
On March 22, 1999, an announcement was made jointly by the Chief Executive
Officers of both the Company and NBC Bank Corp. ("NBC") regarding the execution
of a definitive agreement under the terms of which NBC will be merged into the
Company. Stockholders of NBC will receive 785,000 shares of Simmons First
National Corporation stock in exchange for NBC shares in the transaction. The
transaction is expected to close during the third quarter of 1999.
NBC owns National Bank of Commerce, El Dorado, Arkansas with consolidated
assets of $147 million as of December 31, 1998. After the merger, National Bank
of Commerce will continue to operate as a separate community bank with the same
board of directors, management and staff.
IMPACT OF THE YEAR 2000 ISSUE
General
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Many computer
systems, software, and embedded computer chips may be unable to distinguish
between 1900 and 2000. If not corrected, this problem could create system errors
and failure resulting in the disruption of normal business operations.
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 core banking related software and hardware systems to
state-of-the-art technology. These conversions were completed in 1998. As a
byproduct of this effort, the Year 2000 issue was addressed.
State of Readiness
The Company has identified the following three key phases for addressing
the Year 2000 issues: analysis, testing, and remediation. The Company completed
the Year 2000 analysis by identification of mission critical systems, vendors,
large borrowers and large depositors requiring assessment and testing. The
Company is utilizing both internal and external resources to test its software
systems for Year 2000 compliance. At March 31, 1999, the Company's internal
missions critical testing was complete. The testing with vendors, payment system
providers and third party suppliers will be completed by June 30, 1999. The
replacement of non-compliant systems was completed at December 31, 1998. The
Company expects to substantially complete all phases by June 30, 1999, in
accordance with guidelines established by the Federal Financial Institutions
Examination Council (FFIEC).
Costs
During the three-month period ended March 31, 1999, the Company has no
significant expenses related to the Year 2000 issue. The Company is utilizing
internal personnel to complete all work associated with the Year 2000 project.
Therefore, management believes completion of the Year 2000 modifications and
subsequent testing will not have a material effect on the Company's future
consolidated results of operations or financial position.
<PAGE>
Risks
Although the Company's Year 2000 readiness is directed at reducing its
exposure, there can be no assurance that these efforts will fully mitigate the
effect of Year 2000 issues. In the event the Company fails to identify or
correct a material Year 2000 problem, there could be disruptions in normal
business operations, which could have a material adverse effect on the Company's
results of operations, liquidity or financial condition. Additionally, the
Company is subject to credit risk to the extent borrowers fail to adequately
address Year 2000 issues and to liquidity risk to the extent of deposit
withdrawals and to the extent its lenders are unable to provide the Company with
funds due to Year 2000 issues. Although it is not possible to quantify the
potential impact of these risks at this time, in future years, there may be
increases in problem loans, credit losses, and liquidity problems, as well as
the risk of litigation and potential losses from litigation related to the
foregoing.
Contingency Plans
The Company has existing disaster recovery plans that address its response
to disruptions to business due to natural disasters, civil unrest, utility
outages or other occurrences. The Company is in the process of modifying the
disaster recovery plans to specifically address Year 2000 issues. The Company
intends to complete these contingency plans during the second quarter of 1999.
During the remainder of 1999, the contingency plans will be tested and
validated.
<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 18 of the accompanying Form 10-Q, of SIMMONS
FIRST NATIONAL CORPORATION and consolidated subsidiaries as of March 31, 1999
and for the three-months ended March 31, 1999 and 1998, 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, 1998, and the
related consolidated statements of income, cash flows and changes in
stockholders' equity for the year then ended (not presented herein), and in our
report dated February 2, 1999, 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, 1998,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ Baird, Kurtz & Dobson
-------------------------
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
April 29, 1999
<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 January, 1999 1,200 9.625 Incentive Stock Option
1 Officer February, 1999 1,200 9.625 Incentive Stock Option
7 Officers March, 1999 6,900 9.625 Incentive Stock Option
1 Officer March, 1999 300 15.833 Incentive Stock Option
1 Officer March, 1999 700 25.667 Incentive Stock Option
- ----------
<FN>
Notes:
1. The transactions are grouped to show sales of stock based upon exercises of
rights by officers of the registrant or its subsidiaries under the stock
plans which occurred at the same price during a calendar month.
2. The per share price paid for incentive stock options represents the fair
market value of the stock as determined under the terms of the Plan on the
date the incentive stock option was granted to the officer.
</FN>
</TABLE>
Item 6. Reports on Form 8-K
The registrant filed Form 8-K on January 20, 1999. The report contained the
text of a press release issued by the registrant concerning the completion of
the acquisition of Lincoln Bancshares, Inc.
The registrant filed Form 8-K on March 24, 1999. The report contained the
text of a press release issued by the registrant concerning the acquisition of
NBC Bank Corp.
<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: May 10, 1999 /s/ J. Thomas May
---------------- --------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: May 10, 1999 /s/ Barry L. Crow
----------------- --------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 52,654
<INT-BEARING-DEPOSITS> 21,432
<FED-FUNDS-SOLD> 61,025
<TRADING-ASSETS> 3,057
<INVESTMENTS-HELD-FOR-SALE> 196,708
<INVESTMENTS-CARRYING> 150,886
<INVESTMENTS-MARKET> 153,416
<LOANS> 947,663
<ALLOWANCE> 15,699
<TOTAL-ASSETS> 1,525,290
<DEPOSITS> 1,264,166
<SHORT-TERM> 912
<LIABILITIES-OTHER> 69,964
<LONG-TERM> 49,526
0
0
<COMMON> 6,521
<OTHER-SE> 134,201
<TOTAL-LIABILITIES-AND-EQUITY> 1,525,290
<INTEREST-LOAN> 21,285
<INTEREST-INVEST> 5,031
<INTEREST-OTHER> 1,302
<INTEREST-TOTAL> 27,618
<INTEREST-DEPOSIT> 11,556
<INTEREST-EXPENSE> 13,336
<INTEREST-INCOME-NET> 14,282
<LOAN-LOSSES> 1,602
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,277
<INCOME-PRETAX> 4,772
<INCOME-PRE-EXTRAORDINARY> 3,277
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,277
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
<YIELD-ACTUAL> 0
<LOANS-NON> 7,739
<LOANS-PAST> 2,853
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,198
<CHARGE-OFFS> 2,050
<RECOVERIES> 229
<ALLOWANCE-CLOSE> 15,699
<ALLOWANCE-DOMESTIC> 15,699
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
