-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HVlcw1p0EOKk+WhNTWvSj6ugE/dHbSAMnOO1CuHQBOwH5vvhebZlK3RsJsWLrsV2 PWaiW1wWu22yDTDMI+L9mQ== 0000090498-99-000014.txt : 19990513 0000090498-99-000014.hdr.sgml : 19990513 ACCESSION NUMBER: 0000090498-99-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMMONS FIRST NATIONAL CORP CENTRAL INDEX KEY: 0000090498 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 710407808 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06253 FILM NUMBER: 99618243 BUSINESS ADDRESS: STREET 1: 501 MAIN STREET STREET 2: C/O SIMMONS FIRST NATIONAL CORP CITY: PINE BLUFF STATE: AR ZIP: 71601 BUSINESS PHONE: 8705411000 MAIL ADDRESS: STREET 1: 501 MAIN STREET STREET 2: C/O SIMMONS FIRST NATIONAL CORP CITY: PINE BLUFF STATE: AR ZIP: 71601 10-Q 1 MARCH 31, 1999 QUARTER ENDED 10-Q SIMMONS FIRST NATIONAL CORPORATION Financial Statements (Form 10-Q) March 31, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1999 Commission File Number 06253 -------------- ----- SIMMONS FIRST NATIONAL CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Arkansas 71-0407808 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 501 Main Street Pine Bluff, Arkansas 71601 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 870-541-1350 ------------ Not Applicable - ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period) and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of issuer's classes of common stock. Class A, Common 6,521,088 Class B, Common None SIMMONS FIRST NATIONAL CORPORATION INDEX Page No. Part I: Summarized Financial Information Consolidated Balance Sheets -- March 31, 1999 and December 31, 1998 3-4 Consolidated Statements of Income -- Three months ended March 31, 1999 and 1998 5 Consolidated Statements of Cash Flows -- Three months ended March 31, 1999 and 1998 6 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 1999 and 1998 7 Notes to Consolidated Financial Statements 8-18 Management's Discussion and Analysis of Financial Condition and Results of Operations 19-22 Review by Independent Certified Public Accountants 23 Part II: Other Information 24-25 Part I: Summarized Financial Information
Simmons First National Corporation Consolidated Balance Sheets March 31, 1999 and December 31, 1998 ASSETS March 31, December 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- (Unaudited) Cash and non-interest bearing balances due from banks $ 52,654 $ 50,139 Interest bearing balances due from banks 21,432 28,461 Federal funds sold and securities purchased under agreements to resell 61,025 51,240 ----------- ---------- Cash and cash equivalents 135,111 129,840 Investment securities 347,594 351,594 Mortgage loans held for sale 11,798 12,641 Assets held in trading accounts 3,057 78 Loans 947,663 968,410 Allowance for loan losses (15,699) (15,918) ------------ ------------ Net loans 931,964 952,492 Premises and equipment 36,670 35,271 Foreclosed assets held for sale, net 1,990 1,610 Interest receivable 13,949 14,346 Intangible assets, net 29,085 28,513 Other assets 14,072 14,087 ----------- ---------- TOTAL ASSETS $ 1,525,290 $ 1,540,472 ========== ==========
See Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Balance Sheets March 31, 1999 and December 31, 1998 LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- (Unaudited) LIABILITIES Non-interest bearing transaction accounts $ 170,241 $ 161,488 Interest bearing transaction accounts and savings deposits 405,521 402,784 Time deposits 688,404 692,482 ----------- ----------- Total deposits 1,264,166 1,256,754 Federal funds purchased and securities sold under agreements to repurchase 53,140 71,432 Short-term debt 912 1,444 Long-term debt 49,526 49,899 Accrued interest and other liabilities 16,824 23,909 ----------- ----------- Total liabilities 1,384,568 1,403,438 ----------- ----------- STOCKHOLDERS' EQUITY Capital stock Class A, common, par value $1 a share, authorized 30,000,000 shares 6,521,088 issued and outstanding at 1999 and 6,454,135 at 1998 6,521 6,454 Surplus 48,112 45,791 Undivided profits 85,430 83,261 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes of $375 at 1999 and $869 at 1998 659 1,528 ----------- ----------- Total stockholders' equity 140,722 137,034 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,525,290 $ 1,540,472 ========== ==========
See Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Income Three Months Ended March 31, 1999 and 1998 March 31, (In thousands, except per share data) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- (Unaudited) INTEREST INCOME Loans $ 21,285 $ 20,500 Federal funds sold and securities purchased under agreements to resell 902 1,172 Investment securities 5,031 5,406 Mortgage loans held for sale, net of unrealized gains (losses) 197 116 Assets held in trading accounts 17 22 Interest bearing balances due from banks 186 143 --------- -------- TOTAL INTEREST INCOME 27,618 27,359 --------- -------- INTEREST EXPENSE Deposits 11,556 12,367 Federal funds purchased and securities sold under agreements to repurchase 795 681 Short-term debt 24 43 Long-term debt 961 1,043 --------- -------- TOTAL INTEREST EXPENSE 13,336 14,134 --------- -------- NET INTEREST INCOME 14,282 13,225 Provision for loan losses 1,602 1,268 --------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,680 11,957 --------- -------- NON-INTEREST INCOME Trust income 1,008 812 Service charges on deposit accounts 1,540 1,458 Other service charges and fees 518 421 Income on sale of mortgage loans, net of commissions 611 631 Income on investment banking, net of commissions 134 270 Credit card fees 2,238 2,149 Mortgage servicing fees -- 1,378 Other income 320 214 Gains on sale of securities, net -- 34 --------- -------- TOTAL NON-INTEREST INCOME 6,369 7,367 --------- -------- NON-INTEREST EXPENSE Salaries and employee benefits 7,605 7,536 Occupancy expense, net 798 902 Furniture and equipment expense 1,149 1,001 Loss on foreclosed assets 120 200 Merger-related 395 -- Other operating expenses 4,210 5,090 --------- -------- TOTAL NON-INTEREST EXPENSE 14,277 14,729 --------- -------- INCOME BEFORE INCOME TAXES 4,772 4,595 Provision for income taxes 1,495 1,353 --------- -------- NET INCOME $ 3,277 $ 3,242 ======== ======= BASIC EARNINGS PER SHARE $ 0.50 $ 0.50 ======== ======= DILUTED EARNINGS PER SHARE $ 0.50 $ 0.49 ======== =======
See Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Cash Flows Three Months Ended March 31, 1999 and 1998 March 31, March 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,277 $ 3,242 Items not requiring (providing) cash Depreciation and amortization 1,439 2,206 Provision for loan losses 1,602 1,268 Net accretion of investment securities (169) (126) Deferred income taxes 341 12 Provision for foreclosed assets 56 15 Gains on sale of securities, net -- (34) Changes in Interest receivable 397 832 Mortgage loans held for sale 843 (1,531) Assets held in trading accounts (2,979) (512) Other assets 15 (514) Accrued interest and other liabilities (6,834) 3,158 Income taxes payable 513 1,355 ---------- ----------- Net cash (used in) provided by operating activities (1,499) 9,371 ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Net repayments (originations) of loans 18,383 (4,970) Purchase of premises and equipment (2,228) (887) Proceeds from sale of foreclosed assets 107 273 Proceeds from sale of available-for-sale securities - 1,125 Proceeds from maturities of available-for-sale securities 44,826 28,182 Purchases of available-for-sale securities (53,398) (53,797) Proceeds from maturities of held-to-maturity securities 26,275 16,036 Purchases of held-to-maturity securities (14,403) (17,076) ---------- ----------- Net cash provided by (used in) investing activities 19,562 (31,114) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 7,412 38,686 Net repayments of short-term debt (532) (2,957) Dividends paid (1,108) (859) Repayments of long-term debt (373) (380) Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase (18,292) 20,978 Issuance of common stock, net 101 82 ---------- ----------- Net cash (used in) provided by financing activities (12,792) 55,550 ---------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 5,271 33,807 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 129,840 137,762 ---------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 135,111 $ 171,569 ========= ==========
See Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Changes in Stockholders' Equity Three Months Ended March 31, 1999 and 1998 Accumulated Other Common Comprehensive Undivided (In thousands, except per share data) Stock Surplus Income Profits Total - -------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997, $ 6,191 $ 46,015 $ 1,216 $ 67,590 $ 121,012 as previously reported Adjustment for pooling-of-interest 245 (485) -- 4,619 4,379 --------- --------- ----------- --------- ---------- Balance, December 31, 1997, as restated 6,436 45,530 1,216 72,209 125,391 Comprehensive income Net income -- -- -- 3,242 3,242 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $34 -- -- 59 -- 59 ---------- Comprehensive income 3,301 Exercise of stock options--9,200 shares 9 96 -- -- 105 Securities exchanged under stock option plan -- (23) -- -- (23) Cash dividends declared Common stock ($0.15 per share) -- -- -- (859) (859) Pooled institutions prior to pooling -- -- -- -- -- --------- --------- ---------- --------- ---------- Balance, March 31, 1998 6,445 45,603 1,275 74,592 127,915 Comprehensive income Net income -- -- -- 11,597 11,597 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $144 -- -- 253 -- 253 ---------- Comprehensive income 11,850 Exercise of stock options--9,500 shares 9 205 -- -- 214 Other stock transaction of pooled institution prior to pooling -- (17) -- -- (17) Cash dividends declared Common stock ($0.49 per share) -- -- -- (2,895) (2,895) Pooled institutions prior to pooling -- -- -- (33) (33) --------- --------- ---------- --------- ---------- Balance, December 31, 1998 6,454 45,791 1,528 83,261 137,034 Comprehensive income Net income -- -- -- 3,277 3,277 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $495 -- -- (869) -- (869) ---------- Comprehensive income 2,408 Exercise of stock options--10,300 shares 10 102 -- -- 112 Securities exchanged under stock option plan -- (11) -- -- (11) Common stock issued in connection with the purchase of the minority shares of the Bank of Lincoln - 56,997 shares 57 2,230 -- -- 2,287 Cash dividends declared ($0.17 per share) -- -- -- (1,108) (1,108) --------- --------- ---------- --------- ---------- Balance, March 31, 1999 $ 6,521 $ 48,112 $ 659 $ 85,430 $ 140,722 ======== ======== ========= ======== =========
See Notes to Consolidated Financial Statements. SIMMONS FIRST NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1: ACCOUNTING POLICIES The consolidated financial statements include the accounts of Simmons First National Corporation and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. All financial information has been restated for the mergers with American Bancshares of Arkansas, Inc ("ABA") and Lincoln Bankshares, Inc. ("LBI") which were accounted for as poolings-of-interests. All adjustments made to the unaudited financial statements were of a normal recurring nature. In the opinion of management, all adjustments necessary for a fair presentation of the results of interim periods have been made. Certain prior year amounts are reclassified to conform to current year classification. The accounting policies followed in the presentation of interim financial results are presented on pages 28-30 of the 1998 Annual Report to shareholders. Earnings Per Share Basic earnings per share is computed based on the weighted average number of common shares outstanding during each year. Diluted earnings per share is computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. The computation of per share earnings for the three months ended March 31, 1999 and 1998 is as follows:
(In thousands, except per share data) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Net Income $ 3,277 $ 3,242 -------- -------- Average common shares outstanding 6,506 6,437 Average common share stock options outstanding 81 128 --------- -------- Average diluted common shares 6,587 6,565 --------- -------- Basic earnings per share $ 0.50 $ 0.50 ======== ======== Diluted earnings per share $ 0.50 $ 0.49 ======== ========
NOTE 2: ACQUISITIONS On December 8, 1998, the Company and ABA merged in a pooling-of-interests transaction. Shareholders of ABA received 464,885 shares of Simmons First National Corporation stock in exchange for ABA shares in the transaction. ABA owned American State Bank, Charleston, Arkansas with assets, as of December 8, 1998 of $89 million. The Company merged American State Bank into Simmons First National Bank during the first quarter of 1999. On January 15, 1999, the Company acquired all the common stock of LBI. Stockholders of LBI received 301,823 shares of Simmons First National Corporation stock in exchange for LBI shares in the transaction. LBI owned the Bank of Lincoln, Lincoln, Arkansas with assets, as of January 15, 1999, of $75 million. This acquisition was accounted for as a pooling-of-interests, except for the acquisition of the minority shares (17.9%) of the Bank of Lincoln, which were accounted for on a purchase accounting basis. The Company plans to merge the Bank of Lincoln into Simmons First Bank of Northwest Arkansas during the second quarter of 1999. On March 22, 1999, an announcement was made jointly by the Chief Executive Officers of both the Company and NBC Bank Corp. ("NBC") regarding the execution of a definitive agreement under the terms of which NBC will be merged into the Company. Stockholders of NBC will receive 785,000 shares of Simmons First National Corporation stock in exchange for NBC shares in the transaction. The transaction is expected to close during the third quarter of 1999. NBC owns National Bank of Commerce, El Dorado, Arkansas with consolidated assets of $147 million as of December 31, 1998. After the merger, National Bank of Commerce will continue to operate as a separate community bank with the same board of directors, management and staff. 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:
March 31, December 31, 1999 1998 Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair (In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value - --------------------------------------------------------------------------------------------------------------- Held-to-Maturity U.S. Treasury $ 25,329 $ 244 $ (7) $ 25,566 $ 25,116 $ 424 $ (1) $ 25,539 U.S. Government agencies 25,161 265 (37) 25,389 35,770 474 (48) 36,196 Mortgage-backed securities 2,076 8 (13) 2,071 2,348 18 (13) 2,353 State and political subdivisions 98,231 2,212 (145) 100,298 99,385 2,343 (74) 101,654 Other securities 89 3 -- 92 92 3 -- 95 --------- ------ ----- --------- --------- ------ ------ --------- $ 150,886 $ 2,732 $ (202) $ 153,416 $ 162,711 $ 3,262 $ (136) $ 165,837 ========= ====== ====== ========= ========= ====== ======= ========= Available-for-Sale U.S. Treasury $ 46,084 $ 674 $ (14) $ 46,744 $ 51,047 $ 1,078 $ -- $ 52,125 U.S. Government agencies 140,155 145 (873) 139,427 125,527 417 (142) 125,802 Mortgage-backed securities 620 1 (1) 620 996 -- (1) 995 State and political subdivisions 438 3 -- 441 440 4 -- 444 Other securities 8,355 1,373 (252) 9,476 8,246 1,523 (252) 9,517 --------- ------ ------ --------- --------- ------ ------- --------- $ 195,652 $ 2,196 $(1,140) $ 196,708 $ 186,256 $ 3,022 $ (395) $ 188,883 ========= ====== ====== ======== ========= ====== ====== =========
The carrying value, which approximates the market value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $192,938,000 at March 31, 1999 and $217,606,000 at December 31, 1998. The book value of securities sold under agreements to repurchase amounted to $17,230,000 and $24,742,000 for March 31, 1999 and December 31, 1998, respectively. Income earned on securities for the three months ended March 31, 1999 and 1998 is as follows:
(In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Taxable Held-to-maturity $ 893 $ 1,466 Available-for-sale 2,930 2,824 Non-taxable Held-to-maturity 1,203 1,111 Available-for-sale 5 5 -------- ------- Total $ 5,031 $ 5,406 ======== =======
Maturities of investment securities at March 31, 1999 are as follows:
Held-to-Maturity Available-for-Sale Amortized Fair Amortized Fair (In thousands) Cost Value Cost Value - ----------------------------------------------------------------------------------------------------- One year or less $ 22,533 $ 22,676 $ 33,120 $ 33,278 After one through five years 69,451 70,308 105,220 105,321 After five through ten years 50,431 51,223 48,752 48,429 After ten years 8,382 9,117 205 204 Other securities 89 92 8,355 9,476 ---------- ---------- ---------- --------- Total $ 150,886 $ 153,416 $ 195,652 $ 196,708 ========== ========== ========== =========
The gross realized gains of $0 and $34,000 and gross realized losses of $0 and $0 at March 31, 1999 and 1998, respectively, were the result of sales and/or calls of available-for-sale securities in 1998. Proceeds from sales of available-for-sale securities in 1998 were $1,125,000. Most of the state and political subdivision debt obligations are non-rated bonds and represent small, Arkansas issues, which are evaluated on an ongoing basis. NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES The various categories are summarized as follows:
March 31, December 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------------- Consumer Credit cards $ 150,725 $ 165,622 Student loans 70,525 66,134 Other consumer 149,522 146,411 Real estate Construction 51,721 60,487 Single family residential 175,286 173,769 Other commercial 194,867 203,479 Commercial Commercial 109,667 98,948 Agricultural 35,354 40,706 Financial institutions 5,024 5,656 Other 4,972 7,198 ------------ ----------- Total loans before allowance for loan losses $ 947,663 $ 968,410 ============ ===========
During the first three months of 1999, foreclosed assets held for sale increased $380,000 to $1,990,000 and are carried at the lower of cost or fair market value. Other non-performing assets, non-accrual loans and other non-performing loans for the Company at March 31, 1999, were $123,000, $7,739,000 and $2,853,000, respectively, bringing the total of non-performing assets to $12,705,000. Transactions in the allowance for loan losses are as follows:
March 31, December 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 15,918 $ 14,179 Additions Provision charged to expense 1,602 1,268 -------- -------- 17,520 15,447 Deductions Losses charged to allowance, net of recoveries of $229 and $161 for the first three months of 1999 and 1998, respectively 1,821 1,086 -------- -------- Balance, March 31 $ 15,699 $ 14,361 ======= ------- Additions Provision charged to expense 6,961 21,322 Deductions Losses charged to allowance, net of recoveries of $634 for the last nine months of 1998 5,404 ------- Balance, end of year $ 15,918 =======
At March 31, 1999 and December 31, 1998, impaired loans totaled $14,309,000 and $12,471,000, respectively, all of which had reserves allocated. An allowance of $2,826,000 and $2,768,000 for possible losses related to those loans at March 31, 1999 and December 31, 1998, respectively. Interest of $149,000 and $115,000 was recognized on average impaired loans of $13,390,000 and $11,001,000 as of March 31, 1999 and 1998, respectively. Interest recognized on impaired loans on a cash basis during the first three months of 1999 and 1998 was immaterial. NOTE 5: TIME DEPOSITS Time deposits include approximately $192,267,000 and $196,202,000 of certificates of deposit of $100,000 or more at March 31, 1999, and December 31, 1998, respectively. NOTE 6: INCOME TAXES The provision for income taxes is comprised of the following components:
March 31, March 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------- Income taxes currently payable $ 1,154 $ 1,341 Deferred income taxes 341 12 --------------- --------------- Provision for income taxes $ 1,495 $ 1,353 =============== ===============
The tax effects of temporary differences related to deferred taxes shown on the balance sheet are shown below:
March 31, December 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------- Deferred tax assets Allowance for loan losses $ 5,360 $ 5,278 Valuation of foreclosed assets held for sale 161 202 Deferred compensation payable 462 467 Deferred loan fee income 373 591 Mortgage servicing reserves 446 477 Other 709 683 ---------------- --------------- Total deferred tax assets 7,511 7,698 ---------------- --------------- Deferred tax liabilities Accumulated depreciation (992) (930) Available-for-sale securities (375) (869) Other (540) (448) ---------------- --------------- Total deferred tax liabilities (1,907) (2,247) ---------------- --------------- Net deferred tax assets included in other assets on balance sheets $ 5,604 $ 5,451 =============== ==============
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:
March 31, March 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------- Computed at the statutory rate (34%) $ 1,622 $ 1,562 Increase (decrease) resulting from: Tax exempt income (412) (394) Other differences, net 285 185 --------------- --------------- Actual tax provision $ 1,495 $ 1,353 =============== ===============
NOTE 7: LONG-TERM DEBT Long-term debt at March 31, 1999 and December 31, 1998, consisted of the following components,
March 31, December 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------- 7.32% note due 2007, unsecured $ 18,000 $ 18,000 9.75% note due 2008, secured by land and building 959 972 5.36% to 8.41% FHLB advances due 1999 to 2018, secured by residential real estate loans 13,317 13,677 Trust preferred securities 17,250 17,250 --------------- --------------- $ 49,526 $ 49,899 =============== ===============
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. Aggregate annual maturities of long-term debt at March 31, 1999 are:
Annual (In thousands) Year Maturities - ------------------------------------------------------------------------------------------------------- 1999 $ 3,120 2000 3,493 2001 3,407 2002 3,319 2003 3,281 Thereafter 32,906 ---------------- Total $ 49,526 ===============
NOTE 8: CONTINGENT LIABILITIES A number of legal proceedings exist in which the Company and/or its subsidiaries are either plaintiffs or defendants or both. Most of the lawsuits involve loan foreclosure activities. The various unrelated legal proceedings pending against the subsidiary banks in the aggregate are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries. NOTE 9: UNDIVIDED PROFITS The subsidiary banks are subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Comptroller of the Currency is required, if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits, as defined, for that year combined with its retained net profits of the preceding two years. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of current year earnings plus 75% of the retained net earnings of the preceding year. At March 31, 1999, the bank subsidiaries had approximately $5 million available for payment of dividends to the Company without prior approval of the regulatory agencies. The Federal Reserve Board's risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. The criteria for a well-capitalized institution are: a 5% "Tier l leverage capital" ratio, a 6% "Tier 1 risk-based capital" ratio, and a 10% "total risk-based capital" ratio. As of March 31, 1999, each of the eight subsidiary banks met the capital standards for a well-capitalized institution. The Company's "total risk-based capital" ratio was 14.74% at March 31, 1999. NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK As of March 31, 1999, 295,900 shares of common stock of the Company had been granted through an employee stock option incentive plan. There were 146,120 exercisable options at the end of the first quarter of 1999. Sixty-five thousand six hundred shares have been issued upon exercise of options. As of March 31, 1999, six thousand shares of common stock of the Company had been granted and issued as Bonus Shares of restricted stock. NOTE 11: ADDITIONAL CASH FLOW INFORMATION
Three Months Ended March 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------- Interest paid $ 13,912 $ 14,100 Income taxes paid $ 641 $ 44
NOTE 12: CERTAIN TRANSACTIONS From time to time the Company and its subsidiaries have made loans and other extensions of credit to directors, officers, their associates and members of their immediate families, and from time to time directors, officers and their associates and members of their immediate families have placed deposits with the Company's subsidiary banks. Such loans, other extensions of credit and deposits were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features. NOTE 13: COMMITMENTS AND CREDIT RISK The eight affiliate banks of the Company grant agribusiness, commercial, consumer, and residential loans to their customers. Included in the Company's diversified loan portfolio is unsecured debt in the form of credit card receivables that comprised approximately 15.9% and 17.1% of the portfolio, as of March 31, 1999 and December 31, 1998, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate, and residential real estate. At March 31, 1999, the Company had outstanding commitments to extend credit aggregating approximately $160,727,000 and $128,208,000 for credit card commitments and other loan commitments, respectively. At December 31, 1998, the Company had outstanding commitments to extend credit aggregating approximately $152,946,000 and $100,397,000 for credit card commitments and other loan commitments, respectively. Letters of credit are conditional commitments issued by the bank subsidiaries of the Company, to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $6,408,000 and $5,953,000 at March 31, 1999 and December 31, 1998, respectively, with terms ranging from 90 days to one year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net income for the quarter ended March 31, 1999, was $3,277,000, an increase of $35,000, or 1.1%, over the same period in 1998. Basic earnings per share for the three-month periods ended March 31, 1999 and 1998, were $0.50. Diluted earnings per share for the three-month periods ended March 31, 1999 and 1998, were $0.50 and $0.49, respectively. All financial information has been restated for the mergers with American Bancshares of Arkansas, Inc. ("ABA") and Lincoln Bankshares, Inc. ("LBI"). Both mergers were accounted for as poolings-of-interests In connection with the LBI merger, non-recurring merger-related expenses totaled $395,000, or $0.06 per share after tax. If earnings for 1999 were adjusted for the merger-related expenses, diluted earnings would have been $0.56 per share for the quarter ended March 31, 1999. The Company's return on average assets and return on average stockholder's equity for the three-month period ended March 31, 1999 was 0.86% and 9.43%, compared to 0.90% and 10.33%, respectively, for the same period in 1998. Diluted cash earnings (net income excluding amortization of intangibles) for the first quarter of 1999 and 1998 were $0.55 per share. Cash return on average assets was 0.98% and cash return on average stockholders' equity was 10.44% for the three-month period ended March 31, 1999, compared with 1.02% and 11.51%, respectively, for the same period in 1998. Net interest income, the difference between interest income and interest expense, for the three-month period ended March 31, 1999, increased $1,057,000, or 8.0%, when compared to the same period in 1998. During the first quarter, interest income increased $259,000, or 0.9%, while interest expense decreased $798,000, or 5.6%, when compared to the same period in 1998. These figures reflect growth in the loan portfolio and an increase in fees on loans offset by a decline in interest rates from 1998 to 1999. The provision for loan losses for the first quarter of 1999 was $1,602,000, compared to $1,268,000 for the same period of 1998, resulting in a $334,000, or 26.3%, increase. The increase from 1998 to 1999 is attributable to growth in loans (March 31, 1998 to March 31, 1999), increased indirect lending, unfavorable weather conditions during the crop production period, general market conditions in the agriculture industry and an increased level of consumer bankruptcies. Non-interest income for the first quarter ended March 31, 1999, was $6,369,000, a 13.5% decrease over the $7,367,000 reported for the same period in 1998. This decrease is due to the sale of the Company's mortgage servicing portfolio on June 30, 1998. Total recurring fee income for the three-month period ended March 31, 1999 was up 5.4% compared with the same period in 1998. During the three months ended March 31, 1999, non-interest expense decreased $452,000, or 3.1%, over the same period in 1998. This decrease reflects the sale of the Company's mortgage servicing portfolio offset by the normal increase in the cost of doing business and merger-related expenses. On June 30, 1998 Simmons First National Bank sold its residential mortgage-servicing portfolio to First Commercial Mortgage Company resulting in a $3.3 million gain. The portfolio consisted of approximately $1.2 billion in residential mortgage loans. The portfolio sale will not have a material impact on future earnings of the Company. FINANCIAL CONDITION Total assets for the Company at March 31, 1999, were $1.525 billion, a decrease of $15 million, or 1.0%, over the same figure at December 31, 1998. Deposits at March 31, 1999, totaled $1.264 billion, an increase of $7 million, or 0.6% from the same figure at December 31, 1998. Stockholders' equity at the end of the first quarter was $140,722,000, an increase of $3,688,000, or 2.7%, from the December 31, 1998 figure. Asset quality remains strong with the allowance for loan losses as a percent of total loans at 1.66% as of March 31, 1999, compared to 1.64% at December 31, 1998. As of March 31, 1999, non-performing loans equaled 1.12% of total loans, while the allowance for loan losses equaled 148.22% of non-performing loans. Generally speaking, the Company's banking subsidiaries rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash used in their investing activities. As is typical of most banking companies, significant financing activities include: deposit gathering; use of short-term borrowing facilities, such as federal funds purchased and repurchase agreements; and the issuance of long-term debt. The banks' primary investing activities include loan originations and purchases of investment securities, offset by loan payoffs and investment maturities. Liquidity represents an institution's ability to provide funds to satisfy demands from depositors and borrowers, by either converting assets into cash or accessing new or existing sources of incremental funds. It is a major responsibility of management to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to constantly measure liquid assets as well as relevant ratios concerning earning asset levels and purchased funds. Each bank subsidiary is also required to monitor these same indicators and report regularly to its own senior management and board of directors. At March 31, 1999, each bank was within established guidelines and total corporate liquidity was strong. At March 31, 1999, cash and due from banks, securities available for sale and held in trading accounts, federal funds sold and securities purchased under agreements for resell, and mortgage loans held for sale were 22.7% of total assets. ACQUISITIONS In December 1998, the Company and ABA merged in a pooling-of-interests transaction. Stockholders of ABA received 464,885 shares of Simmons First National Corporation stock in exchange for ABA shares in the transaction. ABA owned American State Bank ("ASB"), Charleston, Arkansas with assets, as of December 31, 1998, of $90 million. The Company merged ASB into Simmons First National Bank during the first quarter of 1999. On January 15, 1999, the Company and LBI merged in a pooling-of-interests transaction. Stockholders of LBI received 301,823 shares of Simmons First National Corporation stock in exchange for LBI shares in the transaction. LBI owned the Bank of Lincoln ("BOL"), Lincoln, Arkansas with assets, as of January 15, 1999, of $75 million. The Company plans to merge BOL into Simmons First Bank of Northwest Arkansas during the second quarter of 1999. On March 22, 1999, an announcement was made jointly by the Chief Executive Officers of both the Company and NBC Bank Corp. ("NBC") regarding the execution of a definitive agreement under the terms of which NBC will be merged into the Company. Stockholders of NBC will receive 785,000 shares of Simmons First National Corporation stock in exchange for NBC shares in the transaction. The transaction is expected to close during the third quarter of 1999. NBC owns National Bank of Commerce, El Dorado, Arkansas with consolidated assets of $147 million as of December 31, 1998. After the merger, National Bank of Commerce will continue to operate as a separate community bank with the same board of directors, management and staff. IMPACT OF THE YEAR 2000 ISSUE General The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Many computer systems, software, and embedded computer chips may be unable to distinguish between 1900 and 2000. If not corrected, this problem could create system errors and failure resulting in the disruption of normal business operations. In 1996, as part of its strategic plan to provide quality customer service, introduce new products, and improve operating efficiencies, the Company began converting all of its core banking related software and hardware systems to state-of-the-art technology. These conversions were completed in 1998. As a byproduct of this effort, the Year 2000 issue was addressed. State of Readiness The Company has identified the following three key phases for addressing the Year 2000 issues: analysis, testing, and remediation. The Company completed the Year 2000 analysis by identification of mission critical systems, vendors, large borrowers and large depositors requiring assessment and testing. The Company is utilizing both internal and external resources to test its software systems for Year 2000 compliance. At March 31, 1999, the Company's internal missions critical testing was complete. The testing with vendors, payment system providers and third party suppliers will be completed by June 30, 1999. The replacement of non-compliant systems was completed at December 31, 1998. The Company expects to substantially complete all phases by June 30, 1999, in accordance with guidelines established by the Federal Financial Institutions Examination Council (FFIEC). Costs During the three-month period ended March 31, 1999, the Company has no significant expenses related to the Year 2000 issue. The Company is utilizing internal personnel to complete all work associated with the Year 2000 project. Therefore, management believes completion of the Year 2000 modifications and subsequent testing will not have a material effect on the Company's future consolidated results of operations or financial position. Risks Although the Company's Year 2000 readiness is directed at reducing its exposure, there can be no assurance that these efforts will fully mitigate the effect of Year 2000 issues. In the event the Company fails to identify or correct a material Year 2000 problem, there could be disruptions in normal business operations, which could have a material adverse effect on the Company's results of operations, liquidity or financial condition. Additionally, the Company is subject to credit risk to the extent borrowers fail to adequately address Year 2000 issues and to liquidity risk to the extent of deposit withdrawals and to the extent its lenders are unable to provide the Company with funds due to Year 2000 issues. Although it is not possible to quantify the potential impact of these risks at this time, in future years, there may be increases in problem loans, credit losses, and liquidity problems, as well as the risk of litigation and potential losses from litigation related to the foregoing. Contingency Plans The Company has existing disaster recovery plans that address its response to disruptions to business due to natural disasters, civil unrest, utility outages or other occurrences. The Company is in the process of modifying the disaster recovery plans to specifically address Year 2000 issues. The Company intends to complete these contingency plans during the second quarter of 1999. During the remainder of 1999, the contingency plans will be tested and validated. REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BAIRD, KURTZ & DOBSON Certified Public Accountants 200 East Eleventh Pine Bluff, Arkansas Board of Directors Simmons First National Bank Pine Bluff, Arkansas We have made a review of the accompanying consolidated condensed financial statements, appearing on pages 3 to 18 of the accompanying Form 10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of March 31, 1999 and for the three-months ended March 31, 1999 and 1998, in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1998, and the related consolidated statements of income, cash flows and changes in stockholders' equity for the year then ended (not presented herein), and in our report dated February 2, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1998, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ Baird, Kurtz & Dobson ------------------------- BAIRD, KURTZ & DOBSON Pine Bluff, Arkansas April 29, 1999 Part II: Other Information Item 2. Changes in Securities. Recent Sales of Unregistered Securities. The following transactions are sales of unregistered shares of Class A Common Stock of the registrant which were issued to executive and senior management officers upon the exercise of rights granted under either the Simmons First National Corporation Incentive and Non-qualified Stock Option Plan or the Simmons First National Corporation Executive Stock Incentive Plan. No underwriters were involved and no underwriter's discount or commissions were involved. Exemption from registration is claimed under Section 4(2) of the Securities Act of 1933 as private placements. Unless noted otherwise, the registrant received cash as the consideration for the transaction.
Number Identity(1) Date of Sale of Shares Price(2) Type of Transaction - ----------------------------------------------------------------------------------------------------------------------------------- 1 Officer January, 1999 1,200 9.625 Incentive Stock Option 1 Officer February, 1999 1,200 9.625 Incentive Stock Option 7 Officers March, 1999 6,900 9.625 Incentive Stock Option 1 Officer March, 1999 300 15.833 Incentive Stock Option 1 Officer March, 1999 700 25.667 Incentive Stock Option - ---------- Notes: 1. The transactions are grouped to show sales of stock based upon exercises of rights by officers of the registrant or its subsidiaries under the stock plans which occurred at the same price during a calendar month. 2. The per share price paid for incentive stock options represents the fair market value of the stock as determined under the terms of the Plan on the date the incentive stock option was granted to the officer.
Item 6. Reports on Form 8-K The registrant filed Form 8-K on January 20, 1999. The report contained the text of a press release issued by the registrant concerning the completion of the acquisition of Lincoln Bancshares, Inc. The registrant filed Form 8-K on March 24, 1999. The report contained the text of a press release issued by the registrant concerning the acquisition of NBC Bank Corp. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIMMONS FIRST NATIONAL CORPORATION ---------------------------------- (Registrant) Date: May 10, 1999 /s/ J. Thomas May ---------------- -------------------------------------- J. Thomas May, Chairman, President and Chief Executive Officer Date: May 10, 1999 /s/ Barry L. Crow ----------------- -------------------------------------- Barry L. Crow, Executive Vice President and Chief Financial Officer EX-27 2 ARTICLE 9 FDS FOR 10-K
9 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 52,654 21,432 61,025 3,057 196,708 150,886 153,416 947,663 15,699 1,525,290 1,264,166 912 69,964 49,526 0 0 6,521 134,201 1,525,290 21,285 5,031 1,302 27,618 11,556 13,336 14,282 1,602 0 14,277 4,772 3,277 0 0 3,277 0.50 0.50 0 7,739 2,853 0 0 15,198 2,050 229 15,699 15,699 0 0
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