10-Q 1 q10-0301.txt MARCH 31, 2001 FORM 10-Q 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, 2001 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 870-541-1000 ------------------ 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 7,072,216 Class B, Common None SIMMONS FIRST NATIONAL CORPORATION INDEX Page No. Part I: Summarized Financial Information Consolidated Balance Sheets -- March 31, 2001 and December 31, 2000 3-4 Consolidated Statements of Income -- Three months ended March 31, 2001 and 2000 5 Consolidated Statements of Cash Flows -- Three months ended March 31, 2001 and 2000 6 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 2001 and 2000 7 Condensed Notes to Consolidated Financial Statements 8-17 Management's Discussion and Analysis of Financial Condition and Results of Operations 18-31 Review by Independent Certified Public Accountants 32 Part II: Other Information 33-34 Part I: Summarized Financial Information
Simmons First National Corporation Consolidated Balance Sheets March 31, 2001 and December 31, 2000 ASSETS March 31, December 31, (In thousands, except share data) 2001 2000 --------------------------------------------------------------------------------------------------------------------------- (Unaudited) Cash and non-interest bearing balances due from banks $ 66,375 $ 77,495 Interest bearing balances due from banks 29,838 12,990 Federal funds sold and securities purchased under agreements to resell 85,000 20,650 ---------- ---------- Cash and cash equivalents 181,213 111,135 Investment securities 372,775 398,483 Mortgage loans held for sale 16,494 8,934 Assets held in trading accounts 43 1,127 Loans 1,280,400 1,294,710 Allowance for loan losses (21,368) (21,157) ---------- ----------- Net loans 1,259,032 1,273,553 Premises and equipment 46,288 46,597 Foreclosed assets held for sale, net 1,211 1,104 Interest receivable 17,476 18,878 Intangible assets, net 34,456 35,241 Other assets 16,609 17,441 ---------- ---------- TOTAL ASSETS $ 1,945,597 $ 1,912,493 =========== ===========
See Condensed Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Balance Sheets March 31, 2001 and December 31, 2000 LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, (In thousands, except share data) 2001 2000 -------------------------------------------------------------------------------------------------------------------------- (Unaudited) LIABILITIES Non-interest bearing transaction accounts $ 214,632 $ 213,312 Interest bearing transaction accounts and savings deposits 465,490 471,609 Time deposits 944,853 920,665 ----------- ----------- Total deposits 1,624,975 1,605,586 Federal funds purchased and securities sold under agreements to repurchase 76,531 67,250 Short-term debt 6,298 4,070 Long-term debt 41,457 41,681 Accrued interest and other liabilities 21,335 20,563 ----------- ----------- Total liabilities 1,770,596 1,739,150 ----------- ----------- STOCKHOLDERS' EQUITY Capital stock Class A, common, par value $1 a share, authorized 30,000,000 shares, 7,072,216 issued and outstanding at 2001 and 7,180,966 at 2000 7,072 7,181 Surplus 45,355 47,964 Undivided profits 121,301 118,232 Accumulated other comprehensive income Unrealized appreciation (depreciation) on available-for-sale securities, net of income taxes of $764 at 2001 and income tax credit of $20 at 2000 1,273 (34) ----------- ----------- Total stockholders' equity 175,001 173,343 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,945,597 $ 1,912,493 =========== ===========
See Condensed Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Income Three Months Ended March 31, 2001 and 2000 Three Months Ended March 31 (In thousands, except per share data) 2001 2000 ------------------------------------------------------------------------------------------------------------ (Unaudited) INTEREST INCOME Loans $ 29,161 $ 24,726 Federal funds sold and securities purchased under agreements to resell 639 352 Investment securities 5,700 5,907 Mortgage loans held for sale, net of unrealized gains (losses) 172 118 Assets held in trading accounts 7 18 Interest bearing balances due from banks 335 142 --------- --------- TOTAL INTEREST INCOME 36,014 31,263 --------- --------- INTEREST EXPENSE Deposits 17,078 13,304 Federal funds purchased and securities sold under agreements to repurchase 1,057 710 Short-term debt 104 117 Long-term debt 819 886 --------- --------- TOTAL INTEREST EXPENSE 19,058 15,017 --------- --------- NET INTEREST INCOME 16,956 16,246 Provision for loan losses 1,853 1,720 --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 15,103 14,526 --------- --------- NON-INTEREST INCOME Trust income 1,407 1,214 Service charges on deposit accounts 2,101 1,727 Other service charges and fees 528 539 Income on sale of mortgage loans, net of commissions 624 365 Income on investment banking, net of commissions 162 88 Credit card fees 2,456 2,335 Other income 815 692 Gain on sale of securities, net -- -- --------- --------- TOTAL NON-INTEREST INCOME 8,093 6,960 --------- --------- NON-INTEREST EXPENSE Salaries and employee benefits 9,003 8,387 Occupancy expense, net 1,166 872 Furniture and equipment expense 1,336 1,281 Loss on foreclosed assets 75 51 Other operating expenses 5,237 4,689 --------- --------- TOTAL NON-INTEREST EXPENSE 16,817 15,280 --------- --------- INCOME BEFORE INCOME TAXES 6,379 6,206 Provision for income taxes 1,825 1,878 --------- --------- NET INCOME $ 4,554 $ 4,328 ======== ======== BASIC EARNINGS PER SHARE $ 0.64 $ 0.59 ======== ======== DILUTED EARNINGS PER SHARE $ 0.64 $ 0.59 ======== ========
See Condensed Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Cash Flows Three Months Ended March 31, 2001 and 2000 March 31, March 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,554 $ 4,328 Items not requiring (providing) cash Depreciation and amortization 1,945 1,632 Provision for loan losses 1,853 1,720 Net (accretion) amortization of investment securities (450) 11 Deferred income taxes (211) (152) Provision for foreclosed assets 33 32 Changes in Interest receivable 1,402 369 Mortgage loans held for sale (7,560) (330) Assets held in trading accounts 1,084 574 Other assets 832 617 Accrued interest and other liabilities (980) 1,109 Income taxes payable 1,963 990 --------- --------- Net cash provided by operating activities 4,465 10,900 --------- --------- CASH FLOW FROM INVESTING ACTIVITIES Net collection (originations) of loans 12,366 (25,284) Purchase of premises and equipment, net (851) (1,011) Proceeds from sale of foreclosed assets 162 238 Proceeds from maturities of available-for-sale securities 77,496 31,105 Purchases of available-for-sale securities (29,470) (32,237) Proceeds from maturities of held-to-maturity securities 21,174 6,630 Purchases of held-to-maturity securities (41,735) (2,985) --------- --------- Net cash provided by (used in) investing activities 39,142 (23,544) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 19,389 69,482 Net proceeds of short-term debt 2,228 3,937 Dividends paid (1,485) (1,392) Repayments of long-term debt (224) (1,858) Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 9,281 (16,325) (Repurchase) issuance of common stock, net (2,718) 169 --------- --------- Net cash provided by financing activities 26,471 54,013 --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 70,078 41,369 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 111,135 81,205 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 181,213 $ 122,574 ========= =========
See Condensed Notes to Consolidated Financial Statements.
Simmons First National Corporation Consolidated Statements of Changes in Stockholders' Equity Three Months Ended March 31, 2001 and 2000 Accumulated Other Common Comprehensive Undivided (In thousands, except share data) Stock Surplus Income Profits Total -------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 7,316 50,770 (3,900) 105,185 159,371 Comprehensive income Net income -- -- -- 4,328 4,328 Change in unrealized depreciation on available-for-sale securities, net of income taxes of $190 -- -- 317 -- 317 -------- Comprehensive income 4,645 Exercise of stock options - 14,400 shares 14 160 -- -- 174 Securities exchanged under stock option plan -- (5) -- -- (5) Cash dividends declared - $0.19 per share -- -- -- (1,392) (1,392) ------ ------- ------- -------- -------- Balance, March 31, 2000 7,330 50,925 (3,583) 108,121 162,793 Comprehensive income Net income -- -- -- 14,541 14,541 Change in unrealized depreciation on available-for-sale securities, net of income taxes of $2,130 -- -- 3,549 -- 3,549 -------- Comprehensive income 18,090 Exercise of stock options - 11,400 shares 12 184 -- -- 196 Securities exchanged under stock option plan (4) (74) -- -- (78) Repurchase of common stock - 156,827 shares (157) (3,071) -- -- (3,228) Cash dividends declared - $0.61 per share -- -- -- (4,430) (4,430) ------ ------- ------- -------- -------- Balance, December 31, 2000 7,181 47,964 (34) 118,232 173,343 Comprehensive income Net income -- -- -- 4,554 4,554 Change in unrealized depreciation on available-for-sale securities, net of income taxes of $782 -- -- 1,307 -- 1,307 -------- Comprehensive income 5,861 Exercise of stock options - 12,100 shares 12 142 -- -- 154 Securities exchanged under stock option plan (2) (43) -- -- (45) Repurchase of common stock - 118,955 shares (119) (2,708) -- -- (2,827) Cash dividends declared - $0.21 per share -- -- -- (1,485) (1,485) ------ ------- ------- -------- -------- Balance, March 31, 2001 $7,072 $45,355 $ 1,273 $121,301 $175,001 ===== ====== ====== ======= =======
See Condensed Notes to Consolidated Financial Statements. 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 2000 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 three months ended March 31, 2001 and 2000 is as follows:
(In thousands, except per share data) 2001 2000 ------------------------------------------------------------------------------------------------------------------- Net Income $ 4,554 $ 4,328 -------- ------- Average common shares outstanding 7,121 7,322 Average common share stock options outstanding 20 26 --------- ------- Average diluted common shares 7,141 7,348 --------- ------- Basic earnings per share $ 0.64 $ 0.59 ======== ======= Diluted earnings per share $ 0.64 $ 0.59 ======== =======
NOTE 2: ACQUISITIONS 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 $71.8 million, total deposits of $71.0 million and net assets of $8.5 million. The total acquisition cost exceeded the fair value of tangible assets and liabilities acquired by $10.8 million. The intangible assets are being amortized using the straight-line method over 15 years. 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, 2001 2000 --------------------------------------------- ----------------------------------------- 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 $ 24,702 $ 580 $ -- $ 25,282 $ 21,923 $ 246 $ (8) $ 22,161 U.S. Government agencies 60,997 448 (1) 61,444 40,965 229 (145) 41,049 Mortgage-backed securities 10,153 81 (23) 10,211 11,065 46 (117) 10,994 State and political subdivisions 109,076 2,525 (75) 111,526 110,380 1,593 (594) 111,379 Other securities 178 -- -- 178 80 -- -- 80 --------- ------ ----- --------- --------- ------ ------ --------- $ 205,106 $ 3,634 $ (99) $ 208,641 $ 184,413 $ 2,114 $ (864) $ 185,663 ========= ====== ===== ========= ========= ====== ====== ========= Available-for-Sale ------------------ U.S. Treasury $ 21,271 $ 384 $ -- $ 21,655 $ 23,889 $ 160 $ (12) $ 24,037 U.S. Government agencies 112,379 846 (6) 113,219 157,434 167 (1,165) 156,436 Mortgage-backed securities 14,432 126 (57) 14,501 15,266 55 (140) 15,181 State and political subdivisions 6,621 298 (7) 6,912 6,621 217 (17) 6,821 Other securities 10,566 816 -- 11,382 10,541 1,054 -- 11,595 --------- ------ ----- --------- --------- ------ ------ --------- $ 165,269 $ 2,470 $ (70) $ 167,669 $ 213,751 $ 1,653 $(1,334) $ 214,070 ========= ====== ===== ========= ========= ====== ====== =========
The carrying value, which approximates the market value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $258,194,000 at March 31, 2001 and $279,286,000 at December 31, 2000. The book value of securities sold under agreements to repurchase amounted to $20,701,000 and $34,235,000 for March 31, 2001 and December 31, 2000 respectively. Income earned on securities for the three months ended March 31, 2001 and 2000 is as follows:
(In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------------------- Taxable Held-to-maturity $ 1,372 $ 1,024 Available-for-sale 2,938 3,547 Non-taxable Held-to-maturity 1,300 1,251 Available-for-sale 90 85 -------- ------- Total $ 5,700 $ 5,907 ======== =======
Maturities of investment securities at March 31, 2001 are as follows:
Held-to-Maturity Available-for-Sale -------------------------- ------------------------- Amortized Fair Amortized Fair (In thousands) Cost Value Cost Value ------------------------------------------------------------------------------------------------- One year or less $ 26,943 $ 27,086 $ 27,538 $ 27,784 After one through five years 111,507 112,967 87,870 88,686 After five through ten years 50,400 51,807 28,586 29,023 After ten years 16,078 16,603 10,709 10,794 Other securities 178 178 10,566 11,382 ---------- ---------- ---------- --------- Total $ 205,106 $ 208,641 $ 165,269 $ 167,669 ========== ========== ========== =========
There were no gross realized gains or losses as of March 31, 2001 and 2000. 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) 2001 2000 ---------------------------------------------------------------------------------------------------------- Consumer Credit cards $ 185,411 $ 197,567 Student loans 74,562 67,145 Other consumer 187,408 192,595 Real estate Construction 70,123 69,169 Single family residential 240,049 244,377 Other commercial 284,397 287,170 Commercial Commercial 173,040 161,134 Agricultural 49,274 57,164 Financial institutions 4,741 2,339 Other 11,395 16,050 ------------ ----------- Total loans before allowance for loan losses $ 1,280,400 $ 1,294,710 ============ ===========
During the first three months of 2001, foreclosed assets held for sale increased $107,000 to $1,211,000 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, 2001, were $147,000, $9,817,000 and $2,121,000, respectively, bringing the total of non-performing assets to $13,296,000. Transactions in the allowance for loan losses are as follows:
March 31, December 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 21,157 $ 17,085 Additions Provision charged to expense 1,853 1,720 --------- -------- 23,010 18,805 Deductions Losses charged to allowance, net of recoveries of $420 and $595 for the first three months of 2001 and 2000, respectively 1,642 1,086 -------- ------- Balance, March 31 $ 21,368 $ 17,719 ========= ------- Additions Allowance for loan losses of acquired branches 2,605 Provision charged to expense 5,811 -------- 26,135 Deductions Losses charged to allowance, net of recoveries of $1,090 for the last nine months of 2000 4,978 ------- Balance, end of year $ 21,157 =======
At March 31, 2001 and December 31, 2000, impaired loans totaled $21,803,000 and $18,099,000, respectively. All impaired loans had designated reserves for possible loan losses. Reserves relative to impaired loans at March 31, 2001, were $4,101,000 and $3,070,000 at December 31, 2000. Approximately, $266,000 and $120,000 of interest income was recognized on average impaired loans of $19,951,000 and $11,780,000 as of March 31, 2001 and 2000, respectively. Interest recognized on impaired loans on a cash basis during the first three months of 2001 and 2000 was immaterial. NOTE 5: TIME DEPOSITS Time deposits include approximately $348,167,000 and $324,969,000 of certificates of deposit of $100,000 or more at March 31, 2001 and December 31, 2000, respectively. NOTE 6: INCOME TAXES The provision for income taxes is comprised of the following components:
March 31, March 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------- Income taxes currently payable $ 2,036 $ 2,030 Deferred income taxes (211) (152) --------------- --------------- Provision for income taxes $ 1,825 $ 1,878 =============== ===============
The tax effects of temporary differences related to deferred taxes shown on the balance sheet are shown below:
March 31, December 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------- Deferred tax assets Allowance for loan losses $ 7,893 $ 7,696 Valuation of foreclosed assets 240 231 Deferred compensation payable 701 708 Deferred loan fee income 354 414 Vacation compensation 458 453 Mortgage servicing reserve 386 384 Loan interest 136 126 Available-for-sale securities -- 20 Other 193 127 ---------------- ---------------- Total deferred tax assets 10,361 10,159 ---------------- ---------------- Deferred tax liabilities Accumulated depreciation (1,550) (1,577) Available-for-sale securities (764) -- FHLB stock dividends (628) (590) Other (202) (202) ----------------- ---------------- Total deferred tax liabilities (3,144) (2,369) ---------------- ---------------- Net deferred tax assets included in other assets on balance sheets $ 7,217 $ 7,790 =============== ===============
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) 2001 2000 ------------------------------------------------------------------------------------------------------- Computed at the statutory rate (35%) $ 2,233 $ 2,172 Increase (decrease) resulting from: Tax exempt income (545) (480) Other differences, net 137 186 --------------- --------------- Actual tax provision $ 1,825 $ 1,878 =============== ===============
NOTE 7: LONG-TERM DEBT Long-term debt at March 31, 2001 and December 31, 2000, consisted of the following components,
March 31, December 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------------------- 7.32% note due 2007, unsecured $ 14,000 $ 14,000 9.75% note due 2008, secured by land and building 841 857 5.62% to 8.41% FHLB advances due 2000 to 2018, secured by residential real estate loans 9,366 9,574 Trust preferred securities 17,250 17,250 --------------- --------------- $ 41,457 $ 41,681 =============== ===============
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, 2001 are:
Annual (In thousands) Year Maturities ------------------------------------------------------------------------------------------------------- 2001 $ 2,669 2002 2,925 2003 2,871 2004 2,876 2005 2,953 Thereafter 27,163 --------------- Total $ 41,457 ===============
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, 2001, the bank subsidiaries had approximately $8.5 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, 2001, each of the eight subsidiary banks met the capital standards for a well-capitalized institution. The Company's "total risk-based capital" ratio was 13.5% at March 31, 2001. NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK At March 31, 2001, the Company had stock options outstanding of 223,350 shares and stock options exercisable of 176,140 shares. During the first three months of 2001, there were 12,100 shares issued upon exercise of stock options and no additional stock options of the Company were granted. No additional shares of common stock of the Company were granted or issued as bonus shares of restricted stock, during the first three months of 2001. NOTE 11: ADDITIONAL CASH FLOW INFORMATION
Three Months Ended March 31, (In thousands) 2001 2000 ---------------------------------------------------------------------------------------- Interest paid $ 18,955 $ 15,025 Income taxes paid $ 73 $ 1,040
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. 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 14.5% and 15.3% of the portfolio, as of March 31, 2001 and December 31, 2000, 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, 2001, the Company had outstanding commitments to extend credit aggregating approximately $253,138,000 and $183,596,000 for credit card commitments and other loan commitments, respectively. At December 31, 2000, the Company had outstanding commitments to extend credit aggregating approximately $246,550,000 and $157,859,000 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 $2,754,000 and $3,400,000 at March 31, 2001 and December 31, 2000, respectively, with terms ranging from 90 days to one year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW -------- Simmons First National Corporation achieved record first quarter earnings of $4,554,000, or $0.64 diluted earnings per share for the three-month period ended March 31, 2001. These earnings reflect an increase of $226,000, or $0.05 per share over the March 31, 2000 earnings of $4,328,000, or $0.59 diluted earnings per share. Return on average assets and return on average stockholders' equity for the three-month period ended March 31, 2001, was 0.96% and 10.56%, compared to 1.02% and 10.66%, respectively, for the same period in 2000. The first quarter earnings for 2001 were predominantly influenced by solid growth (March 31, 2000 to March 31, 2001) in the loan portfolio and deposits. However, this growth was offset from a 26 basis point decline in the first quarter net interest margin from March 31, 2000 to March 31, 2001. Because of the Company's previous cash acquisitions, cash earnings (net income excluding amortization of intangible assets) are an integral component of earnings. Diluted cash earnings, on a per share basis, as of March 31, 2001 were $0.71 an increase of $0.06, or 9.2% when compared to $0.65 as of March 31, 2000. Cash return on average assets was 1.09% and cash return on average stockholders' equity was 11.85% for the three-month period ended March 31, 2001, compared with 1.13% and 11.79%, respectively, for the same period in 2000. Total assets for the Company at March 31, 2001, were $1.946 billion, an increase of $33 million over the same figure at December 31, 2000. Stockholders' equity at the end of the first quarter of 2001 was $175.0 million, a $1.7 million, or 1.0%, increase from December 31, 2000. During the 1st quarter of 2001 the Company repurchased 118,955 common shares of stock. This stock repurchase decreased stockholders' equity by $2.8 million. Asset quality remains strong with the allowance for loan losses as a percent of total loans at 1.67% and 1.63% as of March 31, 2001 and December 31, 2000, respectively. As of March 31, 2001, non-performing loans equaled 0.93% of total loans compared to 0.85% as of year-end 2000. As of March 31, 2001, the allowance for loan losses equaled 179% of non-performing loans compared to 193% at year-end 2000. Simmons First National Corporation is an Arkansas based, Arkansas committed, financial holding company, with community banks in Pine Bluff, Jonesboro, Lake Village, Dumas, Rogers, Russellville, Searcy and El Dorado, Arkansas. The Company's eight banks conduct financial operations from 63 offices in 33 communities throughout Arkansas. ACQUISITIONS ------------ 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 $71.8 million, total deposits of $71.0 million and net assets of $8.5 million. The total acquisition cost exceeded the fair value of tangible assets and liabilities acquired by $10.8 million. The intangible assets are being amortized using the straight-line method over 15 years. STOCK REPURCHASE ---------------- On January 23, 2001, the Company announced the expansion of the stock repurchase program. This expansion authorized the repurchase of an additional 200,000 common shares. The expanded program now has authorized the repurchase of up to 400,000 common shares. Under the repurchase program, there is no time limit for the stock repurchases, nor is there a minimum number of shares the Company intends to repurchase. The Company may discontinue purchases at any time that management determines additional purchases are not warranted. The shares are to be purchased from time to time at prevailing market prices, through open market or unsolicited negotiated transactions, depending upon market conditions. The Company intends to use the repurchased shares to satisfy stock option exercise, payment of future stock dividends and general corporate purposes. During the three-month period ended March 31, 2001, the Company repurchased 118,955 common shares of stock with a weighted average repurchase price of $23.77 per share. As of March 31, 2001, the Company has repurchased a total of 275,782 common shares of stock with a weighted average repurchase price of $21.96 per share. The Company anticipates the repurchase program will have a positive impact on earnings per share of approximately $0.07 for 2001 year to date earnings. NET INTEREST INCOME ------------------- Net interest income, the Company's principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors that determine the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and the amount of non-interest bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate (37.50% for March 31, 2001 and 2000). For the three-month period ended March 31, 2001, net interest income on a fully taxable equivalent basis was $17.7 million, an increase of $754,000, or 4.4%, from the same period in 2000. The increase in net interest income was the result of a $4.8 million increase in interest income and a $4.0 million increase in interest expense. Interest income increased as a result of a higher yield earned on earning assets and from growth in the loan portfolio. The increase in interest expense was the result of a higher cost of funds and from deposit growth. Although, interest rates were declining during the first three months of 2001, the earning assets and interest bearing liabilities have not had enough time to complete the adjustment period. Thus, the yield on earning assets and cost of funds remained higher in the first three months of 2001 versus the first three months of 2000. As a result of these factors, the net interest margin declined 26 basis points to 4.08% for the three-month period ended March 31, 2001, when compared to 4.34% for the same period in 2000. Table 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three-month periods ended March 31, 2001 and 2000, respectively, as well as changes in fully taxable equivalent net interest margin for the three-month periods ended March 31, 2001 versus March 31, 2000.
Table 1: Analysis of Net Interest Income (FTE =Fully Taxable Equivalent) Period Ended March 31 ------------------------------ (In thousands) 2001 2000 ----------------------------------------------------------------------------------------------------- Interest income $ 36,014 $ 31,263 FTE adjustment 750 706 ------------- ------------- Interest income - FTE 36,764 31,969 Interest expense 19,058 15,017 ------------- ------------- Net interest income - FTE $ 17,706 $ 16,952 ============ ============ Yield on earning assets - FTE 8.47% 8.18% Cost of interest bearing liabilities 5.08% 4.48% Net interest spread - FTE 3.39% 3.70% Net interest margin - FTE 4.08% 4.34%
Table 2: Changes in Fully Taxable Equivalent Net Interest Margin March 31, (In thousands) 2001 vs. 2000 ----------------------------------------------------------------------------------------------------------- Increase due to change in earning assets $ 4,035 Increase due to change in earning asset yields 760 Decrease due to change in interest bearing liabilities (2,245) Decrease due to change in interest rates paid on interest bearing liabilities (1,796) ---------------- Increase in net interest income $ 754 ===============
Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the periods ended March 31, 2001 and 2000. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Table 3: Average Balance Sheets and Net Interest Income Analysis Period Ended March 31 ---------------------------------------------------------------------- 2001 2000 --------------------------------- ----------------------------------- Average Income/ Yield/ Average Income/ Yield/ (In thousands) Balance Expense Rate(%) Balance Expense Rate(%) -------------------------------------------------------------------------------------------------------------- ASSETS ------ Earning Assets Interest bearing balances due from banks $ 25,202 $ 335 5.39 $ 9,977 $ 142 5.72 Federal funds sold 46,205 639 5.61 24,698 352 5.73 Investment securities - taxable 273,507 4,310 6.39 297,561 4,571 6.18 Investment securities - non-taxable 115,424 2,061 7.24 111,862 2,024 7.28 Mortgage loans held for sale 11,263 172 6.19 6,027 118 7.87 Assets held in trading accounts 693 7 4.10 1,326 18 5.46 Loans 1,287,630 29,240 9.21 1,120,836 24,744 8.88 ----------- --------- ----------- --------- Total interest earning assets 1,759,924 36,764 8.47 1,572,287 31,969 8.18 --------- --------- Non-earning assets 159,373 138,278 ----------- ----------- Total assets $ 1,919,297 $ 1,710,565 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY -------------------- Liabilities Interest bearing liabilities Interest bearing transaction and savings accounts $ 462,016 $ 3,181 2.79 $ 442,664 $ 2,972 2.70 Time deposits 930,942 13,897 6.05 793,767 10,332 5.24 ----------- --------- ----------- --------- Total interest bearing deposits 1,392,958 17,078 4.97 1,236,431 13,304 4.33 Federal funds purchased and securities sold under agreement to repurchase 81,472 1,057 5.26 57,622 710 4.96 Other borrowed funds Short-term debt 6,156 104 6.85 10,305 117 4.57 Long-term debt 41,538 819 8.00 44,812 886 7.95 ----------- --------- ----------- --------- Total interest bearing liabilities 1,522,124 19,058 5.08 1,349,170 15,017 4.48 --------- --------- Non-interest bearing liabilities Non-interest bearing deposits 202,688 182,282 Other liabilities 19,595 15,847 ----------- ----------- Total liabilities 1,744,407 1,547,299 Stockholders' equity 174,890 163,266 ----------- ----------- Total liabilities and stockholders' equity $ 1,919,297 $ 1,710,565 ========== ========== Net interest spread 3.39 3.70 Net interest margin $ 17,706 4.08 $ 16,952 4.34 ======== ========
Table 4 shows changes in interest income and interest expense, resulting from changes in volume and changes in interest rates for the three-month period ended March 31, 2001 as compared to the prior period. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Table 4: Volume/Rate Analysis Period Ended March 31 2001 over 2000 ---------------------------------------------------- (In thousands, on a fully Yield/ taxable equivalent basis) Volume Rate Total ----------------------------------------------------------------------------------------------------- Increase (decrease) in Interest income Interest bearing balances due from banks $ 203 $ (10) $ 193 Federal funds sold 297 (10) 287 Investment securities - taxable (377) 116 (261) Investment securities - non-taxable 64 (27) 37 Mortgage loans held for sale 85 (31) 54 Assets held in trading accounts (8) (3) (11) Loans 3,771 725 4,496 ------------- ------------- --------------- Total 4,035 760 4,795 ------------- ------------- --------------- Interest expense Interest bearing transaction and savings accounts 132 77 209 Time deposits 1,928 1,637 3,565 Federal funds purchased and securities sold under agreements to repurchase 307 40 347 Other borrowed funds Short-term debt (57) 44 (13) Long-term debt (65) (2) (67) ------------- ------------- --------------- Total 2,245 1,796 4,041 ------------- ------------- --------------- Increase (decrease) in net interest income $ 1,790 $ (1,036) $ 754 ============ ============ ==============
PROVISION FOR LOAN LOSSES ------------------------- The provision for loan losses represents management's determination of the amount necessary to be charged against the current period's earnings, in order to maintain the allowance for loan losses at a level, which is considered adequate, in relation to the estimated risk inherent in the loan portfolio. The provision for the three-month period ended March 31, 2001 and 2000 was $1.853 and $1.720 million, respectively. The primary reason for this increase is the growth in the loan portfolio from March 31 2000 to 2001. NON-INTEREST INCOME ------------------- Total non-interest income was $8.1 million for the three-month period ended March 31, 2001, compared to $7.0 million for the same period in 2000. Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and credit card fees. Non-interest income also includes income on the sale of mortgage loans and investment banking profits. Table 5 shows non-interest income for the three-month periods ended March 31, 2001 and 2000, respectively, as well as changes in 2001 from 2000.
Table 5: Non-Interest Income Period Ended March 31 2001 --------------------- Change from (In thousands) 2001 2000 2000 ------------------------------------------------------------------------------------------------------------------- Trust income $ 1,407 $ 1,214 $ 193 15.90% Service charges on deposit accounts 2,101 1,727 374 21.66 Other service charges and fees 528 539 (11) -2.04 Income on sale of mortgage loans, net of commissions 624 365 259 70.96 Income on investment banking, net of commissions 162 88 74 84.09 Credit card fees 2,456 2,335 121 5.18 Other income 815 692 123 17.77 ----------- ----------- -------- Total non-interest income $ 8,093 $ 6,960 $ 1,133 16.28% ========== ========== =======
Recurring fee income for the three-month period ended March 31, 2001 was $6.5 million, an increase of approximately $700,000, or 11.6%, when compared with the same period for 2000. For the three-month period ended March 31, 2001, trust fees increased $193,000, service charges on deposit accounts increased $374,000 and credit card fees increased $121,000 from the March 31, 2000 level. The increase in trust fees for 2001 is primarily the result of growth in the number of trust relationships and an improved fee structure. The increase in credit card fees for 2001 is the result of growth in the credit card portfolio (March 31, 2000 to March 31, 2001). The increase in service charges on deposit accounts for 2001 is the result of internal deposit growth, an improved fee structure and the acquisition completed during July 2000. During the three-month period ended March 31, 2001, income on the sale of mortgage loans increased $259,000 from the same period during 2000. This increase was the result of a higher mortgage origination volume for the 1st quarter 2001 compared the 1st quarter of 2000. This increase in volume was primarily the result of the 1st quarter 2001 decline in mortgage interest rates. NON-INTEREST EXPENSE -------------------- Non-interest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for the operation of the Company. Management remains committed to controlling the level of non-interest expense, through the continued use of expense control measures that have been installed. The Company utilizes an extensive profit planning and reporting system involving all affiliates. Based on a needs assessment of the business plan for the upcoming year, monthly and annual profit plans are developed, including manpower and capital expenditure budgets. These profit plans are subject to extensive initial reviews and monitored by management on a monthly basis. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. Management also regularly monitors staffing levels at each affiliate, to ensure productivity and overhead are in line with existing workload requirements. Non-interest expense for the three-month period ended March 31, 2001 was $16.8 million, an increase of $1.5 million or 10.1%, from the same period in 2000. The increase in non-interest expense in first three months of 2001, compared to first three months of 2000 reflects the acquisition completed during July 2000 and the normal increased cost of doing business. Table 6 below shows non-interest expense for the periods ended March 31, 2001 and 2000, respectively, as well as changes to the first three months of 2001 from first three months of 2000, respectively.
Table 6: Non-Interest Expense Period Ended March 31 2001 --------------------- Change from (In thousands) 2001 2000 2000 ------------------------------------------------------------------------------------------------------------------- Salaries and employee benefits $ 9,003 $ 8,387 $ 616 7.34% Occupancy expense, net 1,166 872 294 33.72 Furniture and equipment expense 1,336 1,281 55 4.29 Loss on foreclosed assets 75 51 24 47.06 Other operating expenses Professional services 423 384 39 10.16 Postage 510 530 (20) -3.77 Telephone 380 337 43 12.76 Credit card expenses 424 404 20 4.95 Operating supplies 403 355 48 13.52 FDIC insurance 76 76 -- 0.00 Amortization of intangibles 785 618 167 27.03 Other expense 2,236 1,985 251 12.64 -------------- ------------- ---------- Total non-interest expense $ 16,817 $ 15,280 $ 1,537 10.06% ============= ============ =========
EARNINGS/RATIOS EXCLUDING INTANGIBLES ------------------------------------- Table 7 reconciles reported earnings to net income excluding intangible amortization (cash earnings) for the three-month periods ended March 31, 2001 and 2000. Table 8 presents the calculation of the cash return on assets and cash return on equity for the three-month periods ended March 31, 2001 and 2000. The Company specifically formulated these calculations and the results may not be comparable to similarly titled measures reported by other companies. Also, cash earnings are not entirely available for use by management. See the Consolidated Statements of Cash Flows and Notes to the Financial Statements for other information regarding funds available for use by management.
Table 7: Earnings Excluding Intangibles and Merger-Related Expenses Reported Intangible "Cash " (In thousands) Earnings Amortization Earnings ------------------------------------------------------------------------------------------------------------- Period Ended March 31, 2001 --------------------------- Income before income taxes $ 6,379 $ 785 $ 7,164 Provision for income taxes 1,825 267 2,092 --------- --------- --------- Net Income $ 4,554 $ 518 $ 5,072 ======== ======== ======== Basic earnings per common share $ 0.64 $ 0.07 $ 0.71 ======== ======== ======== Diluted earnings per common share $ 0.64 $ 0.07 $ 0.71 ======== ======== ======== Period Ended March 31, 2000 --------------------------- Income before income taxes $ 6,206 $ 618 $ 6,824 Provision for income taxes 1,878 203 2,081 --------- --------- --------- Net Income $ 4,328 $ 415 $ 4,743 ======== ======== ========= Basic earnings per common share $ 0.59 $ 0.06 $ 0.65 ======== ======== ======== Diluted earnings per common share $ 0.59 $ 0.06 $ 0.65 ======== ======== ========
Table 8: Ratios Excluding Intangibles and Merger-Related Expenses Period Ended March 31 --------------------------------- (In thousands) 2001 2000 ---------------------------------------------------------------------------------------------------------- Cash ROA: A/(B-D)*(G/F) 1.09% 1.13% Cash ROE: A/(C-E)*(G/F) 11.85% 11.79% Cash earnings $ 5,072 $ 4,743 (A) Average total assets 1,919,297 1,710,565 (B) Average stockholders' equity 174,890 163,266 (C) Average total intangible assets 34,840 26,914 (D) Average intangible assets remaining in stockholders' equity 1,321 1,433 (E) Total days during the period 90 91 (F) Total days during the year 365 366 (G)
LOAN PORTFOLIO -------------- The Company's loan portfolio averaged $1.288 billion and $1.121 billion during the first three months of 2001 and 2000, respectively. As of March 31, 2001, total loans were $1.280 billion, compared to $1.295 billion on December 31, 2000. The most significant components of the loan portfolio were loans to businesses (commercial loans and commercial real estate loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans). The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral, obtaining and monitoring collateral, providing an adequate allowance for loan losses and regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry and, in the case of credit card loans, which are unsecured, by geographic region. The Company seeks to use diversification within the loan portfolio to reduce credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. The Company uses the allowance for loan losses as a method to value the loan portfolio at its estimated collectible amount. Loans are regularly reviewed to facilitate the identification and monitoring of deteriorating credits. Consumer loans consist of credit card loans, student loans and other consumer loans. Consumer loans were $447.4 million at March 31, 2001, or 34.9% of total loans, compared to $457.3 million, or 35.3% of total loans at December 31, 2000. The consumer loan decrease from December 31, 2000 to March 31, 2001 is the result of the Company's lower credit card portfolio and other consumer loans. However, those lower levels were offset by an increase in student loans. The credit card portfolio decrease and the student loan increase was the result of seasonality in the Company's portfolio for those respective products. The decrease in other consumer loans is the result of a decline in the Company's indirect lending. Real estate loans consist of construction loans, single-family residential loans and commercial loans. Real estate loans were $594.6 million at March 31, 2001, or 46.4% of total loans, which is comparable to the $600.7 million, or 46.4% of total loans at December 31, 2000. Commercial loans consist of commercial loans, agricultural loans and financial institution loans. Commercial loans were $227.1 million at March 31, 2001, or 17.7% of total loans, compared to $220.6 million, or 17.0% of total loans at December 31, 2000. The commercial loan increase from December 31, 2000 to March 31, 2001 is the result of strong commercial loan demand. The amounts of loans outstanding at the indicated dates are reflected in Table 9, according to type of loan.
Table 9: Loan Portfolio March 31, December 31, (In thousands) 2001 2000 ---------------------------------------------------------------------------------------------------------------- Consumer Credit cards $ 185,411 $ 197,567 Student loans 74,562 67,145 Other consumer 187,408 192,595 Real Estate Construction 70,123 69,169 Single family residential 240,049 244,377 Other commercial 284,397 287,170 Commercial Commercial 173,040 161,134 Agricultural 49,274 57,164 Financial institutions 4,741 2,339 Other 11,395 16,050 ------------- ------------- Total loans $ 1,280,400 $ 1,294,710 ============ ============
ASSET QUALITY ------------- A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contracted terms of the loans. This includes loans past due 90 days or more, nonaccrual loans and certain loans identified by management. Non-performing loans are comprised of (a) nonaccrual loans, (b) loans that are contractually past due 90 days and (c) other loans for which terms have been restructured to provide a reduction or deferral of interest or principal, because of deterioration in the financial position of the borrower. The subsidiary banks recognize income principally on the accrual basis of accounting. When loans are classified as nonaccrual, the accrued interest is charged off and no further interest is accrued. Loans, excluding credit card loans, are placed on a nonaccrual basis either: (1) when there are serious doubts regarding the collectability of principal or interest, or (2) when payment of interest or principal is 90 days or more past due and either (i) not fully secured or (ii) not in the process of collection. If a loan is determined by management to be uncollectable, the portion of the loan determined to be uncollectible is then charged to the allowance for loan losses. Credit card loans are classified as impaired when payment of interest or principal is 90 days past due. Litigation accounts are placed on nonaccrual until such time as deemed uncollectible. Credit card loans are generally charged off when payment of interest or principal exceeds 180 days past due, but are turned over to the credit card recovery department, to be pursued until such time as they are determined, on a case-by-case basis, to be uncollectable. At March 31, 2001, impaired loans were $21.8 million compared to $18.1 million at December 31, 2000. The increase in impaired loans from December 31, 2000 primarily relates to an additional $2.8 million of borrowers that are still performing, but for which management has internally identified as impaired. Management has evaluated the underlying collateral on each loan and has allocated specific reserves in order to absorb any potential loss if the collateral were ultimately foreclosed. Table 10 presents information concerning non-performing assets, including nonaccrual and other real estate owned.
Table 10: Non-performing Assets March 31, December 31, (In thousands) 2001 2000 ------------------------------------------------------------------------------------------ Nonaccrual loans $ 9,817 $ 8,212 Loans past due 90 days or more (principal or interest payments) 2,121 2,752 ------------- ------------- Total non-performing loans 11,938 10,964 ------------- ------------- Other non-performing assets Foreclosed assets held for sale 1,211 1,104 Other non-performing assets 147 196 ------------- ------------ Total other non-performing assets 1,358 1,300 ------------- ------------ Total non-performing assets $ 13,296 $ 12,264 ============ ============ Allowance for loan losses to non-performing loans 178.99% 192.97% Non-performing loans to total loans 0.93% 0.85% Non-performing assets to total assets 0.68% 0.64%
Approximately $223,000 and $168,000 of interest income would have been recorded for the three-month periods ended March 31, 2001 and 2000, respectively, if the nonaccrual loans had been accruing interest in accordance with their original terms. There was no interest income on the nonaccrual loans recorded for the three-month periods ended March 31, 2001 and 2000. ALLOWANCE FOR LOAN LOSSES ------------------------- An analysis of the allowance for loan losses is shown in Table 11.
Table 11: Allowance for Loan Losses (In thousands) 2001 2000 ----------------------------------------------------------------------------------------------- Balance, beginning of year $ 21,157 $ 17,085 --------------- -------------- Loans charged off Credit card 965 745 Other consumer 617 396 Real estate 209 285 Commercial 271 255 ---------------- --------------- Total loans charged off 2,062 1,681 ---------------- --------------- Recoveries of loans previously charged off Credit card 131 113 Other consumer 192 235 Real estate 63 58 Commercial 34 189 ---------------- --------------- Total recoveries 420 595 ---------------- --------------- Net loans charged off 1,642 1,086 Provision for loan losses 1,853 1,720 ---------------- --------------- Balance, March 31 $ 21,368 $ 17,719 =============== -------------- Loans charged off Credit card 2,639 Other consumer 1,953 Real estate 321 Commercial 1,155 --------------- Total loans charged off 6,068 --------------- Recoveries of loans previously charged off Credit card 355 Other consumer 565 Real estate 34 Commercial 136 --------------- Total recoveries 1,090 --------------- Net loans charged off 4,978 Allowance for loan losses of acquired institutions 2,605 Provision for loan losses 5,811 --------------- Balance, end of year $ 21,157 ==============
The amount of provision to the allowance during the three-month periods ended March 31, 2001 and 2000 and for the year ended 2000 was based on management's judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic conditions, past due loans and net losses from loans charged off for the last five years. It is management's practice to review the allowance on a monthly basis to determine whether additional provisions should be made to the allowance after considering the factors noted above. DEPOSITS -------- Deposits are the Company's primary source of funding for earning assets. The Company offers a variety of products designed to attract and retain customers, with the primary focus on core deposits. Total deposits as of March 31, 2001 were $1.625 billion, compared to $1.606 billion on December 31, 2000. The increase in deposits from December 31, 2000 to March 31, 2001 is primarily attributable to an increase in large certificates of deposit from local markets. As of March 31, 2001 time deposits over $100,000 were $348.2 million, an increase of $23.2 million over the $325.0 million reported as of December 31, 2000. CAPITAL ------- At March 31, 2001, total capital reached $175.0 million. Capital represents shareholder ownership in the Company -- the book value of assets in excess of liabilities. At March 31 2001, the Company's equity to asset ratio was 8.99% compared to 9.06% at year-end 2000. This decrease is primarily attributable to the Company's stock repurchase program. The Federal Reserve Board's risk-based guidelines established a risk-adjusted ratio, relating capital to different categories of assets and off-balance sheet exposures, such as loan commitments and standby letters of credit. These guidelines place a strong emphasis on tangible stockholders' equity as the core element of the capital base, with appropriate recognition of other components of capital. At March 31, 2001, the leverage ratio and the Tier 1 capital ratio was 8.26% and 12.16%, respectively, while the Company's total risk-based capital ratio was 13.45%, all of which exceed the capital minimums established in the risk-based capital requirements. The Company's risk-based capital ratios at March 31, 2001 and December 31, 2000 are presented in table 12.
Table 12: Risk-Based Capital March 31, December 31, (In thousands) 2001 2000 ---------------------------------------------------------------------------------------------------------- Tier 1 capital Stockholders' equity $ 175,001 $ 173,343 Trust preferred securities 17,250 17,250 Intangible assets (34,456) (35,241) Unrealized (gain) loss on available- for-sale securities (1,273) 34 Other (907) (916) -------------- -------------- Total Tier 1 capital 155,615 154,470 -------------- -------------- Tier 2 capital Qualifying unrealized gain on available-for-sale equity securities 367 475 Qualifying allowance for loan losses 16,059 16,193 -------------- -------------- Total Tier 2 capital 16,426 16,668 -------------- -------------- Total risk-based capital $ 172,041 $ 171,138 ============= ============= Risk weighted assets $ 1,279,382 $ 1,290,494 ============= ============= Assets for leverage ratio $ 1,883,934 $ 1,837,163 ============= ============= Ratios at end of year Leverage ratio 8.26% 8.41% Tier 1 capital 12.16% 11.97% Total risk-based capital 13.45% 13.26% Minimum guidelines Leverage ratio 4.00% 4.00% Tier 1 capital 4.00% 4.00% Total risk-based capital 8.00% 8.00%
FORWARD-LOOKING STATEMENTS -------------------------- Statements in this report that are not historical facts should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements of this type speak only as of the date of this report. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors, including, but not limited to, economic conditions, credit quality, interest rates, loan demand and changes in the assumptions used in making the forward-looking statements, could cause actual results to differ materially from those contemplated by the forward-looking statements. Additional information on factors that might affect the Company's financial results is included in its annual report for 2000 (Form 10-K) filed with the Securities and Exchange Commission. 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 March 31, 2001, and the related condensed consolidated statements of income, cash flows and changes in stockholders' equity for the three-month periods ended March 31, 2001 and 2000. These financial statements are the responsibility of the company's management. We conducted our reviews 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 reviews, 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, 2000, 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, 2001, 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, 2000, 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 May 3, 2001 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.
Number Identity(1) Date of Sale of Shares Price(2) Type of Transaction -------------------------------------------------------------------------------------------------------------------- 2 Officers January, 2001 2,100 15.8333 Incentive Stock Option 8 Officers February, 2001 2,700 15.8333 Incentive Stock Option 6 Officers March, 2001 6,300 9.6250 Incentive Stock Option 1 Officer March, 2001 400 15.8333 Incentive Stock Option 1 Officer March, 2001 600 21.1250 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 22, 2001. The report contained the text of a press release issued by the registrant concerning the announcement of 2000 earnings. The registrant filed Form 8-K on January 23, 2001. The report contained the text of a press release issued by the registrant concerning the expansion of the Company's stock repurchase program. The registrant filed Form 8-K on March 1, 2001. The report contained the text of a press release issued by the registrant concerning the declaration of a quarterly cash dividend. 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 4, 2001 /s/ J. Thomas May ------------------ --------------------------------------- J. Thomas May, Chairman, President and Chief Executive Officer Date: May 4, 2001 /s/ Barry L. Crow ------------------ --------------------------------------- Barry L. Crow, Executive Vice President and Chief Financial Officer