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, 2000 Commission File Number 06253
------------- -----
SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 71-0407808
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 Main Street Pine Bluff, Arkansas 71601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 870-541-1000
------------------
Not Applicable
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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 7,333,519
Class B, Common None
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
June 30, 2000 and December 31, 1999 3-4
Consolidated Statements of Income --
Three months and six months ended
June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows --
Six months ended June 30, 2000 and 1999 6
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8-17
Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-20
Review by Independent Certified Public Accountants 21
Part II: Other Information 22-24
<PAGE>
Part I: Summarized Financial Information
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
ASSETS
June 30, December 31,
(In thousands, except share data) 2000 1999
---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 49,013 $ 60,324
Interest bearing balances due from banks 29,973 15,381
Federal funds sold and securities purchased
under agreements to resell 27,510 5,500
---------- ----------
Cash and cash equivalents 106,496 81,205
Investment securities 399,045 409,279
Mortgage loans held for sale 7,465 6,814
Assets held in trading accounts 390 1,388
Loans 1,171,627 1,113,635
Allowance for loan losses (18,002) (17,085)
---------- ----------
Net loans 1,153,625 1,096,550
Premises and equipment 41,221 40,383
Foreclosed assets held for sale, net 1,249 747
Interest receivable 15,985 15,681
Intangible assets, net 25,992 27,226
Other assets 18,544 18,157
---------- ----------
TOTAL ASSETS $ 1,770,012 $ 1,697,430
========== ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
(In thousands, except share data) 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
LIABILITIES
Non-interest bearing transaction accounts $ 188,474 $ 170,571
Interest bearing transaction accounts and savings deposits 453,215 463,354
Time deposits 847,787 776,708
---------- ----------
Total deposits 1,489,476 1,410,633
Federal funds purchased and securities sold
under agreements to repurchase 47,556 60,496
Short-term debt 6,515 5,044
Long-term debt 44,134 46,219
Accrued interest and other liabilities 16,428 15,667
---------- ----------
Total liabilities 1,604,109 1,538,059
---------- ----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized 30,000,000 shares
7,333,519 issued and outstanding at 2000 and 7,315,575 at 1999 7,334 7,316
Surplus 50,992 50,770
Undivided profits 111,263 105,185
Accumulated other comprehensive income
Unrealized depreciation on available-for-sale securities,
net of income tax credit of $2,212 at 2000 and $2,340 at 1999 (3,686) (3,900)
---------- ----------
Total stockholders' equity 165,903 159,371
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,770,012 $ 1,697,430
=========== ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Income
Three Months and Six Months Ended June 30, 2000 and 1999
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 26,019 $ 23,106 $ 50,745 $ 45,826
Federal funds sold and securities purchased
under agreements to resell 565 461 917 1,392
Investment securities 5,966 5,958 11,873 11,860
Mortgage loans held for sale, net of unrealized gains (losses) 121 180 239 377
Assets held in trading accounts 65 16 83 33
Interest bearing balances due from banks 238 158 380 344
------- ------- ------- -------
TOTAL INTEREST INCOME 32,974 29,879 64,237 59,832
------- ------- ------- -------
INTEREST EXPENSE
Deposits 15,028 12,174 28,332 24,779
Federal funds purchased and securities sold
under agreements to repurchase 624 521 1,334 1,373
Short-term debt 131 15 248 42
Long-term debt 889 968 1,775 1,929
------- ------- ------- -------
TOTAL INTEREST EXPENSE 16,672 13,678 31,689 28,123
------- ------- ------- -------
NET INTEREST INCOME 16,302 16,201 32,548 31,709
Provision for loan losses 1,925 1,691 3,645 3,343
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 14,377 14,510 28,903 28,366
------- ------- ------- -------
NON-INTEREST INCOME
Trust income 1,290 1,062 2,504 2,252
Service charges on deposit accounts 1,905 1,795 3,632 3,459
Other service charges and fees 475 391 1,014 976
Income on sale of mortgage loans, net of commissions 391 447 756 1,058
Income on investment banking, net of commissions 87 106 175 240
Credit card fees 2,624 2,460 4,959 4,698
Other income 741 642 1,433 969
Gain on sale of securities, net -- -- -- --
------- ------- ------- -------
TOTAL NON-INTEREST INCOME 7,513 6,903 14,473 13,652
------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and employee benefits 8,304 8,041 16,691 16,192
Occupancy expense, net 923 872 1,795 1,737
Furniture and equipment expense 1,274 1,193 2,555 2,418
Loss on foreclosed assets 77 42 128 180
Merger-related -- -- -- 395
Other operating expenses 4,672 4,817 9,361 9,288
------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 15,250 14,965 30,530 30,210
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 6,640 6,448 12,846 11,808
Provision for income taxes 2,031 1,879 3,909 3,531
------- ------- ------- -------
NET INCOME $ 4,609 $ 4,569 $ 8,937 $ 8,277
======= ======= ======= =======
BASIC EARNINGS PER SHARE $ 0.63 $ 0.62 $ 1.22 $ 1.13
======= ======= ======= =======
DILUTED EARNINGS PER SHARE $ 0.63 $ 0.62 $ 1.22 $ 1.12
======= ======= ======= =======
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999
June 30, June 30,
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net income $ 8,937 $ 8,277
Items not requiring (providing) cash
Depreciation and amortization 3,253 3,064
Provision for loan losses 3,645 3,343
Net amortization (accretion) of investment securities 214 (181)
Deferred income taxes (629) (244)
Provision for foreclosed assets 103 110
Changes in
Interest receivable (304) 560
Mortgage loans held for sale (651) 3,579
Assets held in trading accounts 998 (10,451)
Other assets (387) (2,102)
Accrued interest and other liabilities 1,264 (7,429)
Income taxes payable 126 (391)
--------- ---------
Net cash provided by (used in) operating activities 16,569 (1,865)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Net originations of loans (62,026) (7,241)
Purchase of premises and equipment, net (2,857) (3,838)
Proceeds from sale of foreclosed assets 701 345
Proceeds from maturities of available-for-sale securities 73,635 78,445
Purchases of available-for-sale securities (62,878) (94,510)
Proceeds from maturities of held-to-maturity securities 13,522 35,166
Purchases of held-to-maturity securities (14,045) (31,656)
--------- ---------
Net cash used in investing activities (53,948) (23,289)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 78,843 (24,102)
Net proceeds of short-term debt 1,471 5,603
Dividends paid (2,859) (2,659)
Proceeds from issuance of long-term debt -- 1,300
Repayments of long-term debt (2,085) (1,416)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (12,940) (16,397)
Issuance of common stock, net 240 252
--------- ---------
Net cash provided by (used in) financing activities 62,670 (37,419)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 25,291 (62,573)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 81,205 139,283
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 106,496 $ 76,710
========= =========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Six Months Ended June 30, 2000 and 1999
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, 1998 7,239 48,271 1,491 93,383 150,384
Comprehensive income
Net income -- -- -- 8,277 8,277
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $1,599 -- -- (2,705) -- (2,705)
--------
Comprehensive income 5,572
Exercise of stock options - 16,600 shares 16 247 -- -- 263
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
Common stock - $0.35 per share -- -- -- (2,283) (2,283)
Pooled institutions prior to pooling -- -- -- (376) (376)
-------- -------- -------- -------- --------
Balance, June 30, 1999 7,312 50,737 (1,214) 99,001 155,836
Comprehensive income
Net income -- -- -- 8,891 8,891
Change in unrealized depreciation on
available-for-sale securities, net of
income tax credit of $1,589 -- -- (2,686) -- (2,686)
--------
Comprehensive income 6,205
Exercise of stock options - 3,300 shares 4 33 -- -- 37
Cash dividends declared - $0.37 per share -- -- -- (2,707) (2,707)
-------- -------- -------- -------- --------
Balance, December 31, 1999 7,316 50,770 (3,900) 105,185 159,371
Comprehensive income
Net income -- -- -- 8,937 8,937
Change in unrealized depreciation on
available-for-sale securities, net of income
taxes of $128 -- -- 214 -- 214
--------
Comprehensive income 9,151
Exercise of stock options - 18,600 shares 19 238 -- -- 257
Securities exchanged under stock option plan (1) (16) -- -- (17)
Cash dividends declared - $0.39 per share -- -- -- (2,859) (2,859)
-------- -------- -------- --------- --------
Balance, June 30, 2000 $ 7,334 $ 50,992 $ (3,686) $ 111,263 $ 165,903
======= ======= ======= ======== ========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
CONDENSED 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, which were accounted for as
poolings-of-interests. The December 31, 1999 Consolidated Balance Sheet is as
reported in the Company's Form 10-K annual report for 1999 filed with the
Securities and Exchange Commission.
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 results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-K
annual report for 1999 filed with the Securities and Exchange
Commission.
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 six months ended June 30,
2000 and 1999 is as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 8,937 $ 8,277
-------- -------
Average common shares outstanding 7,327 7,300
Average common share stock options outstanding 22 77
--------- -------
Average diluted common shares 7,349 7,377
--------- -------
Basic earnings per share $ 1.22 $ 1.13
======== =======
Diluted earnings per share $ 1.22 $ 1.12
======== =======
</TABLE>
<PAGE>
NOTE 2: ACQUISITIONS
On January 15, 1999, the Company and Lincoln Bankshares, Inc. ("LBI")
merged. This merger 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. 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. The Company merged the Bank of
Lincoln into Simmons First Bank of Northwest Arkansas during the second quarter
of 1999.
On July 9, 1999, the Company and NBC Bank Corp. ("NBC") merged in a
pooling-of-interests transaction. Stockholders of NBC received 784,887 shares of
Simmons First National Corporation stock in exchange for NBC shares in the
transaction. NBC owned National Bank of Commerce, El Dorado, Arkansas with
assets, as of July 9, 1999, of $155 million. The Company changed the name of
National Bank of Commerce to Simmons First Bank of El Dorado, N.A. The Company
is operating Simmons First Bank of El Dorado, N.A. as a separate community bank
with the same board of directors and management.
On July 17, 2000, the Company expanded its coverage of Central and
Northwest Arkansas with a $7.6 million cash purchase of two Conway and six
Northwest Arkansas locations from First Financial Banc Corporation. Simmons
First National Bank acquired the two offices in Conway and Simmons First Bank of
Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July
14, 2000, the eight locations combined had total loans of $72 million and total
deposits of $71 million.
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,
2000 1999
-------------------------------------------- ------------------------------------------
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 $ 16,563 $ 13 $ (142) $ 16,434 $ 13,576 $ 10 $ (115) $ 13,471
U.S. Government
agencies 36,607 25 (1,018) 35,614 36,654 57 (1,169) 35,542
Mortgage-backed
securities 15,240 68 (339) 14,969 16,920 84 (258) 16,746
State and political
subdivisions 106,234 672 (2,064) 104,842 107,157 662 (2,107) 105,712
Other securities 82 -- (1) 81 85 -- (2) 83
--------- ------ ----- --------- --------- ------ ------ ---------
$ 174,726 $ 778 $(3,564) $ 171,940 $ 174,392 $ 813 $(3,651) $ 171,554
========= ====== ====== ========= ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 35,391 $ 14 $ (141) $ 35,264 $ 41,492 $ 83 $ (133) $ 41,442
U.S. Government
agencies 162,685 1 (5,794) 156,892 166,143 -- (6,287) 159,856
Mortgage-backed
securities 15,107 57 (210) 14,954 16,954 26 (234) 16,746
State and political
subdivisions 6,652 101 (72) 6,681 6,432 88 (88) 6,432
Other securities 10,130 398 -- 10,528 9,859 552 -- 10,411
--------- ------ ----- --------- --------- ------ ------ ---------
$ 229,965 $ 571 $(6,217) $ 224,319 $ 240,880 $ 749 $(6,742) $ 234,887
========= ====== ====== ========= ========== ====== ====== =========
</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 $268,288,000 at June 30, 2000 and $277,789,000 at December 31, 1999.
The book value of securities sold under agreements to repurchase amounted
to $39,836,000 and $39,956,000 for June 30, 2000 and December 31, 1999,
respectively.
Income earned on securities for the six months ended June 30, 2000 and 1999
is as follows:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $ 2,081 $ 2,249
Available-for-sale 7,113 6,838
Non-taxable
Held-to-maturity 2,505 2,666
Available-for-sale 174 107
-------- -------
Total $ 11,873 $ 11,860
======== =======
</TABLE>
Maturities of investment securities at June 30, 2000 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 $ 21,164 $ 21,109 $ 45,014 $ 44,788
After one through five years 78,623 77,371 115,979 112,375
After five through ten years 53,495 52,141 47,405 45,302
After ten years 21,362 21,238 11,437 11,326
Other securities 82 81 10,130 10,528
---------- ---------- ---------- ---------
Total $ 174,726 $ 171,940 $ 229,965 $ 224,319
========== ========== ========== =========
</TABLE>
There were no gross realized gains or losses as of June 30, 2000 and 1999.
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>
June 30, December 31,
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $ 183,853 $ 187,242
Student loans 65,595 66,739
Other consumer 184,097 181,380
Real estate
Construction 53,128 53,925
Single family residential 217,535 202,886
Other commercial 251,469 240,259
Commercial
Commercial 143,913 137,827
Agricultural 59,255 35,337
Financial institutions 2,397 3,165
Other 10,385 4,875
------------ -----------
Total loans before allowance for loan losses $ 1,171,627 $ 1,113,635
============ ===========
</TABLE>
During the first six months of 2000, foreclosed assets held for sale
increased $502,000 to $1,249,000 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 June 30, 2000, were $36,000, $6,648,000
and $2,145,000, respectively, bringing the total of non-performing assets to
$10,078,000.
<PAGE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 17,085 $ 16,812
Additions
Provision charged to expense 3,645 3,343
--------- --------
20,730 20,155
Deductions
Losses charged to allowance, net of recoveries
of $918 and $536 for the first six months of
2000 and 1999, respectively 2,728 2,924
-------- -------
Balance, June 30 $ 18,002 $ 17,231
========= -------
Additions
Provision charged to expense 3,208
--------
20,439
Deductions
Losses charged to allowance, net of recoveries
of $880 for the last six months of
1999 3,354
-------
Balance, end of year $ 17,085
=======
</TABLE>
At June 30, 2000 and December 31, 1999, impaired loans totaled $10,846,000
and $12,102,000, respectively. All impaired loans had designated reserves for
possible loan losses. Reserves relative to impaired loans at June 30, 2000, were
$2,100,000 and $2,803,000 at December 31, 1999.
Interest of $231,000 and $281,000 was recognized on average impaired loans
of $11,468,000 and $13,616,000 as of June 30, 2000 and 1999, respectively.
Interest recognized on impaired loans on a cash basis during the first six
months of 2000 and 1999 was immaterial.
<PAGE>
NOTE 5: TIME DEPOSITS
Time deposits include approximately $270,850,000 and $225,290,000 of
certificates of deposit of $100,000 or more at June 30, 2000 and December 31,
1999, respectively.
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the following components:
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands) 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 4,538 $ 3,775
Deferred income taxes (629) (244)
--------------- ---------------
Provision for income taxes $ 3,909 $ 3,531
=============== ===============
</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) 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 6,540 $ 5,906
Valuation of foreclosed assets 201 201
Deferred compensation payable 668 659
Deferred loan fee income 624 564
Vacation compensation 463 439
Mortgage servicing reserve 393 457
Loan interest 233 160
Available-for-sale securities 2,212 2,340
Other 117 144
--------------- ---------------
Total deferred tax assets 11,451 10,870
--------------- ---------------
Deferred tax liabilities
Accumulated depreciation (1,484) (1,473)
FHLB stock dividends (501) (432)
Other (214) (214)
--------------- ---------------
Total deferred tax liabilities (2,199) (2,119)
--------------- ---------------
Net deferred tax assets included in other
assets on balance sheets $ 9,252 $ 8,751
=============== ===============
</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) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (35%) $ 4,496 $ 4,133
Increase (decrease) resulting from:
Tax exempt income (1,001) (975)
Other differences, net 414 373
--------------- ---------------
Actual tax provision $ 3,909 $ 3,531
=============== ===============
</TABLE>
NOTE 7: LONG-TERM DEBT
Long-term debt at June 30, 2000 and December 31, 1999, consisted of the
following components,
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands) 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7.32% note due 2007, unsecured $ 16,000 $ 16,000
9.75% note due 2008, secured by land and building 888 917
5.36% to 8.41% FHLB advances due 2000 to 2018,
secured by residential real estate loans 9,996 12,052
Trust preferred securities 17,250 17,250
--------------- ---------------
$ 44,134 $ 46,219
=============== ===============
</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 June 30, 2000 are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
---------------------------------------------------------------------------------------------------------
<S> <C>
2000 $ 2,454
2001 2,893
2002 2,925
2003 2,871
2004 2,876
Thereafter 30,115
---------------
Total $ 44,134
===============
</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 June 30, 2000, the
bank subsidiaries had approximately $10 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, 2000, each of the eight subsidiary banks met the
capital standards for a well-capitalized institution. The Company's "total
risk-based capital" ratio was 14.9% at June 30, 2000.
<PAGE>
NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK
At June 30, 2000, the Company had stock options outstanding of 226,000
shares and stock options exercisable of 174,480 shares. During the first six
months of 2000, there were 15,600 shares issued upon exercise of stock options
and no additional stock options of the Company were granted. Three thousand
additional shares of common stock of the Company were granted and issued as
bonus shares of restricted stock, during the first six months of 2000.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(In thousands) 2000 1999
-----------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 31,512 $ 29,427
Income taxes paid $ 4,412 $ 4,229
</TABLE>
Approximately, $9,000,000 of investment securities previously classified as
held-to-maturity was reclassified as available-for-sale during the second
quarter of 1999. This was the result the Company merging the Bank of Lincoln
into Simmons First Bank of Northwest Arkansas during the second quarter of 1999.
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. 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 15.7% and 16.8% of the portfolio, as of
June 30, 2000 and December 31, 1999, 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, 2000, the Company had outstanding commitments to extend credit
aggregating approximately $250,452,000 and $176,570,000 for credit card
commitments and other loan commitments, respectively. At December 31, 1999, the
Company had outstanding commitments to extend credit aggregating approximately
$227,358,000 and $105,145,000 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 $4,308,000 and
$3,035,000 at June 30, 2000 and December 31, 1999, 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 June 30, 2000, was $4,609,000, or $0.63
per diluted share. This compares with last year's second quarter earnings of
$4,569,000, or $0.62 per diluted share. The Company's return on average assets
and return on average stockholder's equity for the three-month period ended June
30, 2000 was 1.06% and 11.23%, compared to 1.10% and 11.74%, respectively, for
the same period in 1999. All financial information has been restated for the
mergers accounted for as poolings-of-interests.
Operating earnings (net income excluding merger-related expenses) for the
six-month period ended June 30, 2000, were $8,937,000, or an increase of
$265,000 over the June 30, 1999 earnings of $8,672,000. Diluted operating
earnings per share increased $0.04 to $1.22 for the six-month period ended June
30, 2000 from $1.18 in the same period of 1999. Operating return on average
assets and operating return on average stockholders' equity for the six-month
period ended June 30, 2000, was 1.04% and 10.97%, compared to 1.04% and 11.22%,
respectively, for the same period in 1999. In connection with the merger of
Lincoln Bankshares, Inc ("LBI"), during the first quarter 1999, merger-related
expenses totaled $395,000, or $0.06 per share after tax. After merger-related
expenses, Simmons First's six-month 1999 earnings were $8,277,000 or $1.12
diluted earnings per share.
Diluted cash operating earnings (net income excluding amortization of
intangibles and merger-related expenses) for the second quarter of 2000 were
$0.68 per share compared with $0.67 for the second quarter of 1999, reflecting a
$0.01 increase. Year-to-date diluted cash operating earnings, on a per share
basis as of June 30, 2000 was $1.33 compared to $1.29 at June 30, 1999,
reflecting a $0.04 increase. Cash operating return on average assets was 1.15%
and cash operating return on average stockholders' equity was 12.09% for the
six-month period ended June 30, 2000, compared with 1.16% and 12.40%,
respectively, for the same period in 1999.
Net interest margin (fully taxable equivalent) for the Company's second
quarter 2000 and six-month period ended June 30, 2000 were 4.23% and 4.28%,
respectively. These rates compared to 4.45% and 4.34% for the same periods
during 1999. These declines resulted from a rising interest-rate environment
that has placed downward pressure on the net interest margin of the Company. In
spite of the decline in interest margin the Company grew net interest income for
the second quarter of 2000. This growth was made possible as a result of the
12.8% growth in the loan portfolio over the same period last year. Net interest
income for the three-month period ended June 30, 2000, increased $101,000, or
0.6%, when compared to the same period in 1999. While the six-month ended June
30, 2000, net interest income increased $839,000, or 2.6% from the same period
in 1999.
<PAGE>
The provision for loan losses for the second quarter of 2000 was
$1,925,000, compared to $1,691,000 for the same period of 1999, resulting in a
$234,000 or 13.8% increase. For the six-months ended June 30, 2000 and 1999, the
provision was $3,645,000 and $3,343,000, respectively, resulting in a 9.0%
increase. The primary reason for the increase in the 2000 provision is the
growth in the loan portfolio from June 30, 1999 to June 30, 2000.
Non-interest income for the second quarter ended June 30, 2000, was
$7,513,000, a 8.8% increase over the $6,903,000 reported for the same period in
1999. For the six-months ended June 30, 2000, non-interest income was
$14,473,000, a 6.0% increase from the $13,652,000 reported for the same period
in 1999. These increases were primarily the result of successful internal
growth.
During the three-months ended June 30, 2000, non-interest expense increased
$285,000, or 1.9%, over the same period in 1999. Year-to-date non-interest
expense (excluding merger-related expenses) was $30,530,000 at June 30, 2000,
compared to $29,815,000, for the same period ended June 30, 1999, an increase of
$715,000 or 2.4%. These increases reflect the normal increase in the cost of
doing business.
FINANCIAL CONDITION
--------------------
Total assets for the Company at June 30, 2000, were $1.8 billion, an
increase of $73 million, or 4.3%, over the same figure at December 31, 1999.
Loans at June 30, 2000 totaled $1.2 billion, an increase of $58 million, or 5.2%
from the same figure at December 31, 1999. Deposits at June 30, 2000 totaled
$1.5 billion, an increase of $78 million, or 5.5% from the same figure at
December 31, 1999. Stockholders' equity at the end of the second quarter was
$165.9 million, an increase of $6.5 million or 4.1%, from the December 31, 1999
figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.54% as of June 30, 2000, compared to 1.53% at
December 31, 1999. As of June 30, 2000, non-performing loans equaled 0.75% of
total loans, while the allowance for loan losses equaled 205% 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
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, 2000, each bank was within established guidelines and
total corporate liquidity was strong. At June 30, 2000, 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 19.1% of total assets.
<PAGE>
ACQUISITIONS
------------
On January 15, 1999, the Company and LBI merged in a pooling-of-interests
transaction, except for the acquisition of the minority shares (17.9%) of the
Bank of Lincoln, which were accounted for on a purchase accounting basis.
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. The Company merged the Bank of Lincoln into Simmons First Bank of
Northwest Arkansas during the second quarter of 1999.
On July 9, 1999, the Company acquired all the common stock of NBC Bank
Corp. in exchange for 784,887 shares of the Company's common stock. NBC Bank
Corp. owned National Bank of Commerce, El Dorado, Arkansas with assets of $155
million, as of July 9, 1999. The Company changed the name of National Bank of
Commerce to Simmons First Bank of El Dorado, N.A. The Company will continue to
operate Simmons First Bank of El Dorado, N.A. as a separate community bank with
the same board of directors, management and staff. This acquisition was
accounted for as a pooling-of-interests.
On July 17, 2000, the Company expanded its coverage of Central and
Northwest Arkansas with a $7.6 million cash purchase of two Conway and six
Northwest Arkansas locations from First Financial Banc Corporation. Simmons
First National Bank acquired the two offices in Conway and Simmons First Bank of
Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July
14, 2000, the eight locations combined had total loans of $72 million and total
deposits of $71 million.
STOCK REPURCHASE
----------------
On June 12, 2000, the Company announced a stock repurchase program. This
program authorizes the repurchase of up to 200,000 common shares, or
approximately 2.7 percent of the outstanding common shares. Under the repurchase
program, there is no time limit for the sock repurchases, nor are there a
minimum number of shares the Company intends to repurchase. As of June 30, 2000,
no shares have been repurchased through the repurchase program.
<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 Corporation
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, 2000 and
for the three-months and six-months ended June 30, 2000 and 1999, 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, 1999, 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 4, 2000, 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, 1999,
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
August 4, 2000
<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 Company 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. The Company received cash or exchanged shares of the Company's Class
A Common Stock as the consideration for the transactions.
<TABLE>
<CAPTION>
Number
Identity(1) Date of Sale of Shares Price(2) Type of Transaction
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Officer April, 2000 1,200 9.625 Incentive Stock Option
1 Officer April, 2000 3,000 1.000 Bonus Stock Plan
<FN>
Notes:
1. The transactions are grouped to show sales of stock based upon exercises of
rights by officers of the Company 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.
</FN>
</TABLE>
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual shareholders meeting of the Company was held on April 25,
2000. The matters submitted to the security holders for approval included
setting the number of directors at nine (9) and the election of directors.
(b) At the annual meeting, all nine (9) incumbent directors were re-elected
by proxies solicited pursuant to Section 14 of the Securities Exchange Act of
1934, without any solicitation in opposition thereto.
<PAGE>
The following table shows the required analysis of the voting by security
holders at the annual meeting:
<TABLE>
<CAPTION>
Voting of Shares
Broker
Action For Against Abstain Non-Votes
<S> <C> <C> <C> <C>
Set Number of
Directors
at Nine (9) 5,443,294 2,503 6,382 501,304
Director Election:
Ayres 5,450,115 0 13 499,999
Hutt 5,449,626 900 13 499,999
Makris 5,450,415 900 13 499,999
May 5,451,626 0 13 499,099
Perdue 5,451,626 0 13 499,099
Ryburn 5,450,726 900 13 499,999
Stone 5,451,014 0 13 499,099
Trotter 5,451,314 900 13 499,999
Watkins 5,451,314 0 13 499,099
</TABLE>
Item 6. Reports on Form 8-K
The registrant filed Form 8-K on June 13, 2000. The report contained the
text of a press release issued by the registrant concerning the adoption of a
stock repurchase program by the Company. The program authorizes the repurchase
of up to 200,000 shares, or approximately 2.7 percent of the outstanding shares.
<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, 2000 /s/ J. Thomas May
-------------------- --------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: August 7, 2000 /s/ Barry L. Crow
-------------------- --------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
