SIMMONS FIRST NATIONAL CORPORATION
Financial Statements
(Form 10-Q)
September 30, 2000
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 September 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 7,271,692
Class B, Common None
<PAGE>
SIMMONS FIRST NATIONAL CORPORATION
INDEX
Page No.
Part I: Summarized Financial Information
Consolidated Balance Sheets --
September 30, 2000 and December 31, 1999 3-4
Consolidated Statements of Income --
Three months and nine months ended
September 30, 2000 and 1999 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 2000 and 1999 6
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 2000 and 1999 7
Condensed 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 22-23
<PAGE>
Part I: Summarized Financial Information
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
ASSETS
September 30, December 31,
(In thousands, except share data) 2000 1999
----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Cash and non-interest bearing balances due from banks $ 56,705 $ 60,324
Interest bearing balances due from banks 19,218 15,381
Federal funds sold and securities purchased
under agreements to resell 5,650 5,500
----------- -----------
Cash and cash equivalents 81,573 81,205
Investment securities 401,735 409,279
Mortgage loans held for sale 12,177 6,814
Assets held in trading accounts 734 1,388
Loans 1,268,931 1,113,635
Allowance for loan losses (20,691) (17,085)
---------- -----------
Net loans 1,248,240 1,096,550
Premises and equipment 46,370 40,383
Foreclosed assets held for sale, net 1,226 747
Interest receivable 18,961 15,681
Intangible assets, net 35,664 27,226
Other assets 18,528 18,157
----------- -----------
TOTAL ASSETS $ 1,865,208 $ 1,697,430
=========== ===========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
(In thousands, except share data) 2000 1999
----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES
Non-interest bearing transaction accounts $ 195,678 $ 170,571
Interest bearing transaction accounts and savings deposits 445,513 463,354
Time deposits 897,227 776,708
----------- ------------
Total deposits 1,538,418 1,410,633
Federal funds purchased and securities sold
under agreements to repurchase 87,767 60,496
Short-term debt 9,524 5,044
Long-term debt 41,907 46,219
Accrued interest and other liabilities 18,046 15,667
----------- ------------
Total liabilities 1,695,662 1,538,059
----------- ------------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized 30,000,000 shares
7,271,692 issued and outstanding at 2000 and 7,315,575 at 1999 7,272 7,316
Surplus 49,713 50,770
Undivided profits 114,772 105,185
Accumulated other comprehensive income
Unrealized depreciation on available-for-sale securities,
net of income tax credit of $1,327 at 2000 and $2,340 at 1999 (2,211) (3,900)
----------- -----------
Total stockholders' equity 169,546 159,371
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,865,208 $ 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 Nine Months Ended September 30, 2000 and 1999
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands, except per share data) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 28,952 $ 23,992 $ 79,697 $ 69,818
Federal funds sold and securities purchased
under agreements to resell 332 150 1,249 1,542
Investment securities 5,864 5,958 17,737 17,818
Mortgage loans held for sale, net of unrealized gains (losses) 143 182 382 559
Assets held in trading accounts 5 15 88 48
Interest bearing balances due from banks 234 106 614 450
---------- --------- --------- --------
TOTAL INTEREST INCOME 35,530 30,403 99,767 90,235
---------- --------- --------- --------
INTEREST EXPENSE
Deposits 16,250 12,250 44,582 37,029
Federal funds purchased and securities sold
under agreements to repurchase 1,276 739 2,610 2,112
Short-term debt 163 74 411 116
Long-term debt 855 943 2,630 2,872
---------- --------- --------- --------
TOTAL INTEREST EXPENSE 18,544 14,006 50,233 42,129
---------- --------- --------- --------
NET INTEREST INCOME 16,986 16,397 49,534 48,106
Provision for loan losses 1,892 1,619 5,537 4,962
---------- --------- --------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 15,094 14,778 43,997 43,144
---------- --------- --------- --------
NON-INTEREST INCOME
Trust income 1,496 1,239 4,000 3,491
Service charges on deposit accounts 2,176 1,749 5,808 5,208
Other service charges and fees 392 407 1,406 1,383
Income on sale of mortgage loans, net of commissions 521 533 1,277 1,591
Income on investment banking, net of commissions 13 34 188 274
Credit card fees 2,712 2,704 7,671 7,402
Other income 817 790 2,250 1,759
Gain on sale of securities, net 0 0 0 0
---------- --------- --------- --------
TOTAL NON-INTEREST INCOME 8,127 7,456 22,600 21,108
---------- --------- --------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 8,591 8,177 25,282 24,369
Occupancy expense, net 1,035 946 2,830 2,683
Furniture and equipment expense 1,336 1,294 3,891 3,712
Loss on foreclosed assets 66 117 194 297
Merger-related 0 1,448 0 1,843
Other operating expenses 4,947 4,839 14,308 14,127
---------- --------- --------- --------
TOTAL NON-INTEREST EXPENSE 15,975 16,821 46,505 47,031
---------- --------- --------- --------
INCOME BEFORE INCOME TAXES 7,246 5,413 20,092 17,221
Provision for income taxes 2,281 1,600 6,190 5,131
---------- --------- --------- --------
NET INCOME $ 4,965 $ 3,813 $ 13,902 $ 12,090
========== ========= ========= ========
BASIC EARNINGS PER SHARE $ 0.68 $ 0.53 $ 1.90 $ 1.66
========== ========= ========= ========
DILUTED EARNINGS PER SHARE $ 0.67 $ 0.52 $ 1.89 $ 1.64
========== ========= ========= ========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999
September 30, September 30,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net income $ 13,902 $ 12,090
Items not requiring (providing) cash
Depreciation and amortization 5,062 4,705
Provision for loan losses 5,537 4,962
Net amortization (accretion) of investment securities 403 (96)
Deferred income taxes (1,042) (707)
Provision for foreclosed assets 159 163
Changes in
Interest receivable (2,860) (1,060)
Mortgage loans held for sale (5,363) 2,672
Assets held in trading accounts 654 (1,167)
Other assets (304) (532)
Accrued interest and other liabilities 1,142 (6,377)
Income taxes payable 526 (906)
---------- -----------
Net cash provided by operating activities 17,816 13,747
---------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Net originations of loans (87,814) (66,868)
Purchase of branch locations, net funds paid (14,398) --
Purchase of premises and equipment, net (3,664) (5,029)
Proceeds from sale of foreclosed assets 799 1,248
Proceeds from maturities of available-for-sale securities 97,800 109,941
Purchases of available-for-sale securities (81,011) (119,854)
Proceeds from maturities of held-to-maturity securities 17,681 40,639
Purchases of held-to-maturity securities (25,640) (41,806)
---------- -----------
Net cash used in investing activities (96,247) (81,729)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 56,776 (15,085)
Net proceeds of short-term debt 4,480 6,826
Dividends paid (4,315) (3,976)
Proceeds from issuance of long-term debt -- 1,300
Repayments of long-term debt (4,312) (3,783)
Net increase in federal funds purchased and securities
sold under agreements to repurchase 27,271 10,872
(Repurchase) issuance of common stock, net (1,101) 265
---------- -----------
Net cash provided by (used in) financing activities 78,799 (3,581)
---------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 368 (71,563)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 81,205 139,283
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 81,573 $ 67,720
========== ===========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Simmons First National Corporation
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended September 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 -- -- -- 12,090 12,090
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $2,135 -- -- (3,558) -- (3,558)
----------
Comprehensive income 8,532
Exercise of stock options - 18,100 shares 18 258 -- -- 276
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 - $0.53 per share -- -- -- (3,600) (3,600)
Pooled institutions prior to pooling -- -- -- (376) (376)
-------- --------- ----------- --------- ----------
Balance, September 30, 1999 7,314 50,748 (2,067) 101,497 157,492
Comprehensive income
Net income -- -- -- 5,078 5,078
Change in unrealized depreciation on
available-for-sale securities, net of
income tax credit of $1,053 -- -- (1,833) -- (1,833)
----------
Comprehensive income 3,245
Exercise of stock options -1,800 shares 2 22 -- -- 24
Cash dividends declared - $0.19 per share -- -- -- (1,390) (1,390)
-------- --------- ----------- ---------- ----------
Balance, December 31, 1999 7,316 50,770 (3,900) 105,185 159,371
Comprehensive income
Net income -- -- -- 13,902 13,902
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $1,013 -- -- 1,689 -- 1,689
----------
Comprehensive income 15,591
Exercise of stock options - 20,400 shares 20 253 -- -- 273
Securities exchanged under stock option plan (1) (16) -- -- (17)
Repurchase of common stock - 63,627 shares (63) (1,294) -- -- (1,357)
Cash dividends declared - $0.59 per share -- -- -- (4,315) (4,315)
-------- --------- ----------- --------- ----------
Balance, September 30, 2000 $ 7,272 $ 49,713 $ (2,211) $ 114,772 $ 169,546
======== ========= =========== ========= ==========
</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 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 nine months ended September
30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
(In thousands, except per share data) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 13,902 $ 12,090
--------- --------
Average common shares outstanding 7,320 7,304
Average common share stock options outstanding 21 72
--------- --------
Average diluted common shares 7,341 7,376
--------- --------
Basic earnings per share $ 1.90 $ 1.66
========= ========
Diluted earnings per share $ 1.89 $ 1.64
========= ========
</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>
September 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
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
U.S. Treasury $ 19,516 $ 74 $ (62) $ 19,528 $ 13,576 $ 10 $ (115) $ 13,471
U.S. Government
agencies 40,950 63 (631) 40,382 36,654 57 (1,169) 35,542
Mortgage-backed
securities 14,296 60 (226) 14,130 16,920 84 (258) 16,746
State and political
subdivisions 107,147 1,160 (1,072) 107,235 107,157 662 (2,107) 105,712
Other securities 82 -- - 82 85 -- (2) 83
---------- ------- -------- ---------- ---------- ------- ------- ----------
$ 181,991 $ 1,357 $(1,991) $ 181,357 $ 174,392 $ 813 $(3,651) $ 171,554
========== ======= ======== ========== ========== ======= ======= ==========
Available-for-Sale
U.S. Treasury $ 27,152 $ 55 $ (61) $ 27,146 $ 41,492 $ 83 (133) $ 41,442
U.S. Government
agencies 164,760 30 (3,759) 161,031 166,143 -- (6,287) 159,856
Mortgage-backed
securities 14,065 37 (192) 13,910 16,954 26 (234) 16,746
State and political
subdivisions 6,621 146 (47) 6,720 6,432 88 (88) 6,432
Other securities 10,300 637 -- 10,937 9,859 552 -- 10,411
---------- ------- ------- ---------- ---------- ------- ------- ----------
$ 222,898 $ 905 $(4,059) $ 219,744 $ 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 $262,289,000 at September 30, 2000 and $277,789,000 at December 31,
1999.
The book value of securities sold under agreements to repurchase amounted
to $35,947,000 and $39,956,000 for September 30, 2000 and December 31, 1999,
respectively.
Income earned on securities for the nine months ended September 30, 2000
and 1999 is as follows:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxable
Held-to-maturity $ 3,188 $ 3,273
Available-for-sale 10,514 10,389
Non-taxable
Held-to-maturity 3,771 3,989
Available-for-sale 264 167
--------- --------
Total $ 17,737 $ 17,818
========= ========
</TABLE>
Maturities of investment securities at September 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 $ 24,211 $ 24,216 $ 38,222 $ 38,095
After one through five years 82,936 82,507 120,473 118,234
After five through ten years 54,233 53,861 43,203 41,886
After ten years 20,529 20,691 10,700 10,592
Other securities 82 82 10,300 10,937
----------- ----------- ----------- ----------
Total $ 181,991 $ 181,357 $ 222,898 $ 219,744
=========== =========== =========== ==========
</TABLE>
There were no gross realized gains or losses as of September 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>
September 30, December 31,
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer
Credit cards $ 186,342 $ 187,242
Student loans 66,071 66,739
Other consumer 194,421 181,380
Real estate
Construction 71,383 53,925
Single family residential 243,791 202,886
Other commercial 275,091 240,259
Commercial
Commercial 146,156 137,827
Agricultural 70,064 35,337
Financial institutions 2,379 3,165
Other 13,233 4,875
------------- ------------
Total loans before allowance for loan losses $ 1,268,931 $ 1,113,635
============= ============
</TABLE>
During the first nine months of 2000, foreclosed assets held for sale
increased $479,000 to $1,226,000 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 September 30, 2000, were $100,000,
$9,622,000 and $2,643,000, respectively, bringing the total of non-performing
assets to $13,591,000.
<PAGE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 17,085 $ 16,812
Additions
Allowance for loan losses of acquired branches 2,155 --
Provision charged to expense 5,537 4,962
--------- --------
24,777 21,774
Deductions
Losses charged to allowance, net of recoveries
of $1,386 and $1,030 for the first nine months of
2000 and 1999, respectively 4,086 4,194
--------- --------
Balance, September 30 $ 20,691 $ 17,580
========= --------
Additions
Provision charged to expense 1,589
--------
19,169
Deductions
Losses charged to allowance, net of recoveries
of $386 for the last three months of
1999 2,084
--------
Balance, end of year $ 17,085
========
</TABLE>
At September 30, 2000 and December 31, 1999, impaired loans totaled
$14,153,000 and $12,102,000, respectively. All impaired loans had designated
reserves for possible loan losses. Reserves relative to impaired loans at
September 30, 2000, were $2,400,000 and $2,803,000 at December 31, 1999.
Interest of $359,000 and $419,000 was recognized on average impaired loans
of $12,140,000 and $13,518,000 as of September 30, 2000 and 1999, respectively.
Interest recognized on impaired loans on a cash basis during the first nine
months of 2000 and 1999 was immaterial.
<PAGE>
NOTE 5: TIME DEPOSITS
Time deposits include approximately $291,399,000 and $225,290,000 of
certificates of deposit of $100,000 or more at September 30, 2000 and December
31, 1999, respectively.
NOTE 6: INCOME TAXES
The provision for income taxes is comprised of the following components:
<TABLE>
<CAPTION>
September 30, September 30,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income taxes currently payable $ 7,232 $ 5,838
Deferred income taxes (1,042) (707)
---------------- ----------------
Provision for income taxes $ 6,190 $ 5,131
================ ================
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the balance sheet are shown below:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for loan losses $ 7,548 $ 5,906
Valuation of foreclosed assets 223 201
Deferred compensation payable 668 659
Deferred loan fee income 420 564
Vacation compensation 440 439
Mortgage servicing reserve 384 457
Loan interest 98 160
Available-for-sale securities 1,327 2,340
Other 119 144
---------------- ----------------
Total deferred tax assets 11,227 10,870
---------------- ----------------
Deferred tax liabilities
Accumulated depreciation (1,561) (1,473)
FHLB stock dividends (554) (432)
Other (332) (214)
---------------- ----------------
Total deferred tax liabilities (2,447) (2,119)
---------------- ----------------
Net deferred tax assets included in other
assets on balance sheets $ 8,780 $ 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>
September 30, September 30,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computed at the statutory rate (35%) $ 7,032 $ 6,027
Increase (decrease) resulting from:
Tax exempt income (1,530) (1,485)
Other differences, net 688 589
---------------- ----------------
Actual tax provision $ 6,190 $ 5,131
================ ================
</TABLE>
NOTE 7: LONG-TERM DEBT
Long-term debt at September 30, 2000 and December 31, 1999, consisted of
the following components,
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.32% note due 2007, unsecured $ 14,000 $ 16,000
9.75% note due 2008, secured by land and building 873 917
5.36% to 8.41% FHLB advances due 2000 to 2018,
secured by residential real estate loans 9,784 12,052
Trust preferred securities 17,250 17,250
---------------- ----------------
$ 41,907 $ 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 September 30, 2000 are:
<TABLE>
<CAPTION>
Annual
(In thousands) Year Maturities
-------------------------------------------------------------------------------------------------------
<S> <C>
2000 $ 227
2001 2,893
2002 2,925
2003 2,871
2004 2,876
Thereafter 30,115
----------------
Total $ 41,907
================
</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 September 30, 2000,
the bank subsidiaries had approximately $11 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 September 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 13.3% at September 30, 2000.
<PAGE>
NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK
At September 30, 2000, the Company had stock options outstanding of 245,200
shares and stock options exercisable of 178,280 shares. During the first nine
months of 2000, there were 17,400 shares issued upon exercise of stock options
and 21,000 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 nine months of 2000.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(In thousands) 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 49,749 $ 43,484
Income taxes paid $ 6,706 $ 6,774
</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 14.7% and 16.8% of the portfolio, as of
September 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 September 30, 2000, the Company had outstanding commitments to extend
credit aggregating approximately $253,318,000 and $179,967,000 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 $3,811,000 and
$3,035,000 at September 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
Operating earnings (net income excluding merger-related expenses) for the
quarter ended September 30, 2000, was $4,965,000, or $0.67 per diluted share.
This compares with last year's third quarter operating earnings of $4,800,000,
or $0.65 per diluted share. The Company's operating return on average assets and
operating return on average stockholders' equity for the three-month period
ended September 30, 2000 was 1.08% and 11.77%, compared to 1.15% and 12.06%,
respectively, for the same period in 1999. In connection with the merger of NBC
Bank Corp. ("NBC"), during the third quarter of 1999, after tax merger-related
expenses totaled $987,000, or $0.13 per share. After merger-related expenses,
Simmons First's third quarter 1999 earnings were $3,813,000 or $0.52 diluted
earnings per share
Operating earnings for the nine-month period ended September 30, 2000, were
$13,902,000, or an increase of $430,000 over the September 30, 1999 earnings of
$13,472,000. Diluted operating earnings per share increased $0.06 to $1.89 for
the nine-month period ended September 30, 2000 from $1.83 in the same period of
1999. Operating return on average assets and operating return on average
stockholders' equity for the nine-month period ended September 30, 2000, was
1.05% and 11.25%, compared to 1.08% and 11.51%, respectively, for the same
period in 1999. In connection with the mergers of Lincoln Bankshares, Inc.
("LBI") and NBC, during the nine-month period ended September 30, 1999 after tax
merger-related expenses totaled $1,382,000, or $0.19 per share. After
merger-related expenses, Simmons First's nine-month period ended September 30,
1999 earnings were $12,090,000 or $1.64 diluted earnings per share.
Diluted cash operating earnings (net income excluding amortization of
intangibles and merger-related expenses) for the third quarter of 2000 were
$0.75 per share compared with $0.71 for the third quarter of 1999, reflecting a
$0.04 increase. Year-to-date diluted cash operating earnings, on a per share
basis as of September 30, 2000 were $2.08 compared to $1.99 at September 30,
1999, reflecting a $0.09 increase. Cash operating return on average assets was
1.17% and cash operating return on average stockholders' equity was 12.44% for
the nine-month period ended September 30, 2000, compared with 1.20% and 12.71%,
respectively, for the same period in 1999.
Net interest margin (fully taxable equivalent) for the Company's third
quarter 2000 and nine-month period ended September 30, 2000 were 4.18% and
4.25%, respectively. These rates compared to 4.46% and 4.40% 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 third quarter of 2000. This growth was made possible as
a result of the 15.7% increase in the loan portfolio over the same period last
year, with the purchase of eight additional locations on July 17, 2000
contributing to this growth. Net interest income for the three-month period
ended September 30, 2000, increased $589,000, or 3.6%, when compared to the same
period in 1999. While the nine-month ended September 30, 2000, net interest
income increased $1,428,000, or 3.0% from the same period in 1999.
<PAGE>
The provision for loan losses for the third quarter of 2000 was $1,892,000,
compared to $1,619,000 for the same period of 1999, resulting in a $273,000 or
16.9% increase. For the nine-months ended September 30, 2000 and 1999, the
provision was $5,537,000 and $4,962,000, respectively, resulting in a 11.6%
increase. The primary reason for the increase in the 2000 provision is the
growth in the loan portfolio from September 30, 1999 to September 30, 2000.
Non-interest income for the third quarter ended September 30, 2000, was
$8,127,000, a $671,000, or 9.0% increase over the $7,456,000 reported for the
same period in 1999. For the nine-months ended September 30, 2000, non-interest
income was $22,600,000, a $1,492,000, or 7.1% increase from the $21,108,000
reported for the same period in 1999. These increases were primarily the result
of successful internal growth of the Company, combined with the additional
non-interest income, which was the result of purchasing eight additional
locations on July 17, 2000.
During the three-months ended September 30, 2000, non-interest expense
(excluding merger-related expenses) increased $602,000, or 3.9%, over the same
period in 1999. Year-to-date non-interest expense (excluding merger-related
expenses) was $46,505,000 at September 30, 2000, compared to $45,188,000 for the
same period ended September 30, 1999, an increase of $1,317,000 or 2.9%. These
increases reflect the normal increase in the cost of doing business and the
additional non-interest expense, which was the result of purchasing eight
additional locations on July 17, 2000.
FINANCIAL CONDITION
Total assets for the Company at September 30, 2000, were $1.865 billion, an
increase of $168 million, or 9.9%, over the same figure at December 31, 1999.
Loans at September 30, 2000 totaled $1.269 billion, an increase of $155 million,
or 13.9% from the same figure at December 31, 1999. Deposits at September 30,
2000 totaled $1.538 billion, an increase of $128 million, or 9.1% from the same
figure at December 31, 1999. Stockholders' equity at the end of the third
quarter was $169.5 million, an increase of $10.1 million or 6.3%, from the
December 31, 1999 figure.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.63% as of September 30, 2000, compared to 1.53% at
December 31, 1999. As of September 30, 2000, non-performing loans equaled 0.97%
of total loans, while the allowance for loan losses equaled 168.69% 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.
<PAGE>
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 September 30, 2000, each bank was within established guidelines
and total corporate liquidity was strong. At September 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 16.8% of total assets.
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 in
exchange for 784,887 shares of the Company's common stock. NBC 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 September 30,
2000, the Company repurchased 63,627 shares of stock with a weighted average
repurchase price of $21.35 per share.
<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 reviewed the accompanying condensed consolidated balance sheet of
SIMMONS FIRST NATIONAL CORPORATION as of September 30, 2000, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended September 30, 2000 and 1999 and cash flows for the nine-month
periods ended September 30, 2000 and 1999. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of 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 consolidated 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
November 3, 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 Date of Sale of Shares Price(1) Type of Transaction
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Officer September, 2000 1,800 8.2917 Incentive Stock Option
1 Officer September, 2000 300 15.8333 Incentive Stock Option
<FN>
-------------
Notes:
1. 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 July 17, 2000. The report contained the
text of a press release issued by the registrant concerning the purchase of
eight First Financial Banc Corporation banking offices.
<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: November 6, 2000 /s/ J. Thomas May
-------------------- ---------------------------------------
J. Thomas May, Chairman,
President and Chief Executive Officer
Date: November 6, 2000 /s/ Barry L. Crow
-------------------- ---------------------------------------
Barry L. Crow, Executive Vice President
and Chief Financial Officer
