-----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, RyHJZzMzcez+KwOCuB8c1SC5m4GQaiSo03T2oqQC829wY4W3E0m4NLcGoleAvBsF tumR/Vqpd/7tYJUjEOprcA== 0000090498-98-000010.txt : 19980505 0000090498-98-000010.hdr.sgml : 19980505 ACCESSION NUMBER: 0000090498-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980504 SROS: NASD 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: 98609478 BUSINESS ADDRESS: STREET 1: 501 MAIN STREET STREET 2: C/O SIMMONS FIRST NATIONAL CORP CITY: PINE BLUFF STATE: AR ZIP: 71601 BUSINESS PHONE: 5015411000 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 SIMMONS FIRST NATIONAL CORPORATION Financial Statements (Form 10-Q) March 31, 1998 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, 1998 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 5,734,924 Class B, Common None SIMMONS FIRST NATIONAL CORPORATION INDEX Page No. Part I: Summarized Financial Information Consolidated Balance Sheets -- March 31, 1998 and December 31, 1997 3-4 Consolidated Statements of Income -- Three months ended March 31, 1998 and 1997 5 Consolidated Statements of Cash Flows -- Three months ended March 31, 1998 and 1997 6 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 1998 and 1997 7 Notes to Consolidated Financial Statements 8-17 Management's Discussion and Analysis of Financial Condition and Results of Operations 18-19 Review by Independent Certified Public Accountants 20 Part II: Other Information 21 Part I: Summarized Financial Information Simmons First National Corporation Consolidated Balance Sheets March 31, 1998 and December 31, 1997 ASSETS
March 31, December 31, (In thousands) 1998 1997 - --------------------------------------------------------------------------------------- (Unaudited) Cash and non-interest bearing balances due from banks $ 50,481 $ 58,327 Interest bearing balances due from banks 10,570 4,106 Federal funds sold and securities purchased under agreements to resell 96,050 64,565 ----------- ----------- Cash and cash equivalents 157,101 126,998 Investment securities 345,646 316,365 Mortgage loans held for sale 10,289 8,758 Assets held in trading accounts 961 449 Loans 796,569 794,183 Allowance for loan losses (12,784) (12,628) ----------- ----------- Net loans 783,785 781,555 Premises and equipment 28,605 28,621 Foreclosed assets held for sale, net 1,316 1,099 Interest receivable 11,385 12,047 Mortgage servicing rights, net 5,961 6,703 Intangible assets, net 30,248 30,834 Other assets 12,637 12,716 ----------- ----------- TOTAL ASSETS $ 1,387,934 $ 1,326,145 =========== ===========
The December 31, 1997 Consolidated Balance Sheet is as reported in the Corporation's 1997 Annual Report to the Stockholders. See Notes to Consolidated Financial Statements. Simmons First National Corporation Consolidated Balance Sheets March 31, 1998 and December 31, 1997 LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31, (In thousands) 1998 1997 - ------------------------------------------------------------------------------------------- LIABILITIES (Unaudited) Non-interest bearing transaction accounts $ 192,026 $ 154,544 Interest bearing transaction accounts and savings deposits 341,459 337,133 Time deposits 608,980 612,824 ----------- ----------- Total deposits 1,142,465 1,104,501 Federal funds purchased and securities sold under agreements to repurchase 61,225 40,733 Short-term debt 1,890 4,589 Long-term debt 49,931 50,281 Accrued interest and other liabilities 18,229 13,959 ----------- ----------- Total liabilities 1,273,740 1,214,063 ----------- ----------- STOCKHOLDERS' EQUITY Capital stock Class A, common, par value $1 a share, authorized 10,000,000 shares, 5,734,924 issued and outstanding at 1998 and 5,726,212 at 1997 5,735 5,726 Surplus 45,132 45,059 Undivided profits 61,857 59,891 Unrealized appreciation on available-for-sale securities, net of income taxes of $836 at 1998 and $799 at 1997 1,470 1,406 ----------- ----------- Total stockholders' equity 114,194 112,082 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,387,934 $ 1,326,145 =========== ===========
The December 31, 1997 Consolidated Balance Sheet is as reported in the Corporation's 1997 Annual Report to the Stockholders. See Notes to Consolidated Financial Statements. Simmons First National Corporation Consolidated Statements of Income Three Months Ended March 31, 1998 and 1997
March 31, March 31, (In thousands, except per share data) 1998 1997 - ---------------------------------------------------------------------------------------- (Unaudited) INTEREST INCOME Loans $18,024 $11,521 Federal funds sold and securities purchased under agreements to resell 1,075 538 Investment securities 4,864 3,672 Mortgage loans held for sale, net of unrealized gains (losses) 116 117 Assets held in trading accounts 22 16 Interest bearing balances due from banks 130 77 ------- ------- TOTAL INTEREST INCOME 24,231 15,941 ------- ------- INTEREST EXPENSE Deposits 10,890 6,537 Federal funds purchased and securities sold under agreements to repurchase 654 463 Short-term debt 26 29 Long-term debt 981 26 ------- ------- TOTAL INTEREST EXPENSE 12,551 7,055 ------- ------- NET INTEREST INCOME 11,680 8,886 Provision for loan losses 1,129 764 ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,551 8,122 ------- ------- NON-INTEREST INCOME Trust income 812 604 Service charges on deposit accounts 1,286 745 Other service charges and fees 357 309 Income on sale of mortgage loans, net of commissions 113 121 Income on investment banking, net of commissions 270 275 Credit card fees 2,149 2,194 Mortgage servicing and mortgage-related fees 1,896 1,706 Other income 163 272 Gains (losses) on sale of securities, net -- -- ------- ------- TOTAL NON-INTEREST INCOME 7,046 6,226 ------- ------- NON-INTEREST EXPENSE Salaries and employee benefits 6,950 5,636 Occupancy expense, net 822 621 Furniture and equipment expense 908 743 Loss on foreclosed assets 196 252 Other operating expense 4,760 3,480 ------- ------- TOTAL NON-INTEREST EXPENSE 13,636 10,732 ------- ------- INCOME BEFORE INCOME TAXES 3,961 3,616 Provision for income taxes 1,136 1,028 ------- ------- NET INCOME $ 2,825 $ 2,588 ======= ======= BASIC EARNINGS PER SHARE $ 0.49 $ 0.45 ======= ======= DILUTED EARNINGS PER SHARE $ 0.48 $ 0.45 ======= =======
See Notes to Consolidated Financial Statements. Simmons First National Corporation Consolidated Statements of Cash Flows Three Months Ended March 31, 1998 and 1997
March 31, March 31, (In thousands) 1998 1997 - ------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited) Net income $ 2,825 $ 2,588 Items not requiring (providing) cash Depreciation and amortization 2,078 1,151 Provision for loan losses 1,129 764 Net (accretion) amortization of investment securities (130) 651 Deferred income taxes 9 (40) Provision for foreclosed assets 15 81 Gains on sale of premises and equipment -- (1) Changes in Interest receivable 662 1,554 Mortgage loans held for sale (1,531) 4,190 Assets held in trading accounts (512) (54) Other assets 79 1,676 Accrued interest and other liabilities 3,079 (39) Income taxes payable 1,182 1,138 --------- --------- Net cash provided by operating activities 8,885 13,659 --------- --------- CASH FLOW FROM INVESTING ACTIVITIES Net origination's of loans (3,692) (6,093) Purchase of premises and equipment (804) (901) Proceeds from sale of premises and equipment 70 338 Proceeds from sale of foreclosed assets 101 -- Proceeds from maturities of available-for-sale securities 25,095 21,560 Purchases of available-for-sale securities (52,729) (23,900) Proceeds from maturities of held-to-maturity securities 13,951 4,320 Purchases of held-to-maturity securities (15,404) (4,287) --------- --------- Net cash used in investing activities (33,412) (8,963) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 37,964 8,065 Net (repayments) advances of short-term debt (2,699) 844 Dividends paid (859) (743) Repayments of long-term debt (350) (11) Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 20,492 (791) Issuance of common stock, net 82 82 --------- --------- Net cash provided by financing activities 54,630 7,446 --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 30,103 12,142 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 126,998 69,281 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 157,101 $ 81,423 ========= =========
See Notes to Consolidated Financial Statements. Simmons First National Corporation Consolidated Statements of Changes in Stockholders' Equity Three Months Ended March 31, 1998 and 1997
Unrealized Appreciation On Available- Common For-Sale Undivided (In thousands) Stock Surplus Securities, Net Profits Total - ---------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 $ 28,527 $ 22,040 $ 1,152 $ 51,106 $ 102,825 Comprehensive income Net income 2,588 2,588 Change in unrealized appreciation on available-for-sale securities, net of income tax credit of $420 (742) (742) ----------- Comprehensive income 1,846 Exercise of stock options--10,500 shares 53 48 101 Securities exchanged under stock option plan (4) (15) (19) Cash dividends declared ($0.13 per share) (743) (743) -------- -------- ---------- --------- ---------- Balance, March 31, 1997 28,576 22,073 410 52,951 104,010 Comprehensive income Net income 9,401 9,401 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $564 996 996 ---------- Comprehensive income 10,397 Exercise of stock options--12,600 shares 13 167 180 Securities exchanged under stock option plan (1) (43) (44) Common stock par value change (22,862) 22,862 Cash dividends declared ($0.43 per share) (2,461) (2,461) -------- -------- ---------- --------- ---------- Balance, December 31, 1997 5,726 45,059 1,406 59,891 112,082 Comprehensive income Net income 2,825 2,825 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $37 64 64 ---------- Comprehensive income 2,889 Exercise of stock options--9,200 shares 9 96 105 Securities exchanged under stock option plan (23) (23) Cash dividends declared ($0.15 per share) (859) (859) -------- -------- ---------- --------- ---------- Balance, March 31, 1998 $ 5,735 $ 45,132 $ 1,470 $ 61,857 $ 114,194 ======== ======== ========== ======== =========
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 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 24-27 of the 1997 Annual Report to shareholders. Earnings Per Share Effective December 15, 1997, the Corporation adopted the provisions of SFAS No. 128, Earnings Per Share (EPS), which requires dual presentation of basic and diluted EPS for all entities with complex capital structures. Basic earnings per share is computed based on the weighted average number of 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 is as follows:
March 31, March 31, (In thousands, except per share data) 1998 1997 - ------------------------------------------------------------------- Net Income $2,825 $2,588 ------ ------ Average common shares outstanding 5,728 5,708 Average common share stock options outstanding 128 70 ------ ------ Average diluted common shares 5,856 5,778 ------ ------ Basic earnings per share $ 0.49 $ 0.45 ====== ====== Diluted earnings per share $ 0.48 $ 0.45 ====== ======
NOTE 2: INVESTMENT SECURITIES The amortized cost and fair value of investments in debt securities that are held-to-maturity and available-for-sale are as follows:
March 31, December 31, 1998 1997 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 $ 18,055 $ 172 $ (20) $ 18,207 $ 17,610 $ 158 $ (37) $ 17,731 U.S. Government agencies 55,776 488 (47) 56,217 55,662 462 (61) 56,063 Mortgage-backed securities 3,129 17 (16) 3,130 3,350 14 (30) 3,334 State and political subdivisions 80,236 1,594 (73) 81,757 79,039 1,638 (284) 80,393 Other securities 213 2 -- 215 229 2 -- 231 --------- ------ ----- --------- --------- ------ ------ --------- $ 157,409 $ 2,273 $ (156) $ 159,526 $ 155,890 $ 2,274 $ (412) $ 157,752 ========= ====== ====== ========= ========= ====== ======= ========= Available-for-Sale U.S. Treasury $ 89,659 $ 821 $ (16) $ 90,464 $ 70,402 $ 763 $ (24) $ 71,141 U.S. Government agencies 89,185 335 (50) 89,470 80,812 298 (50) 81,060 State and political subdivisions 448 2 -- 450 451 -- -- 451 Other securities 6,637 1,216 -- 7,853 6,601 1,222 -- 7,823 --------- ------ ----- --------- --------- ------ ------ --------- $ 185,929 $ 2,374 $ (66) $ 188,237 $ 158,266 $ 2,283 $ (74) $ 160,475 ========= ====== ====== ========= ========= ====== ======= =========
The book value of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $173,764,000 at March 31, 1998 and $170,047,000 at December 31, 1997. The approximate fair value of pledged securities amounted to $175,101,000 at March 31, 1998 and $171,068,000 at December 31, 1997. The book value of securities sold under agreements to repurchase amounted to $9,610,000 and $8,413,000 for March 31, 1998 and December 31, 1997, respectively. Income earned on securities for the three months ended March 31, 1998 and 1997 is as follows:
(In thousands) 1998 1997 ------------------------------------- Taxable Held-to-maturity $1,284 $1,018 Available-for-sale 2,558 1,833 Non-taxable Held-to-maturity 1,017 821 Available-for-sale 5 -- ------ ------ Total $4,864 $3,672 ====== ======
Maturities of investment securities at March 31, 1998
Held-to-Maturity Available-for-Sale Amortized Fair Amortized Fair (In thousands) Cost Value Cost Value One year or less $ 19,233 $ 20,025 $ 63,556 $ 63,662 After one through five years 70,545 71,908 93,440 90,155 After five through ten years 54,714 54,874 20,798 25,067 After ten years 9,575 9,374 1,498 1,500 Mortgage-backed securities not due on a single date 3,129 3,130 -- -- Other securities 213 215 6,637 7,853 ---------- ---------- ---------- --------- Total $ 157,409 $ 159,526 $ 185,929 $ 188,237 ========== ========== ========== =========
The table below shows gross realized gains and losses during the first three months of 1998 and 1997.
March 31, (In thousands) 1998 1997 - --------------------------------------------------------------------------- Proceeds from sales $ -- $ -- ---------- ---------- (Does not include called bonds) Gross gains -- -- Gross losses -- -- ---------- ---------- Securities gains (losses) $ -- $ -- ========== ==========
Approximately 8.9 percent of the state and political subdivision securities are rated A or above. Of the remaining securities, most are non-rated bonds and represent small, Arkansas issues, which are evaluated on an ongoing basis. NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES The various categories are summarized as follows:
March 31, December 31, (In thousands) 1998 1997 - --------------------------------------------------------------------------------------------------------- Consumer Credit cards $ 164,841 $ 179,828 Student loans 69,272 63,291 Other consumer 113,155 112,754 Real estate Construction 44,964 43,212 Single family residential 121,874 122,581 Other commercial 122,570 118,112 Commercial Commercial 115,392 110,480 Agricultural 27,252 31,161 Financial institutions 6,505 6,073 Other 10,744 6,691 ------------ ----------- Total loans before allowance for loan losses $ 796,569 $ 794,183 ============ ===========
During the first three months of 1998, foreclosed assets held for sale increased $217,000 to $1,316,000 and are carried at the lower of cost or fair market value. Non-accrual loans and other non-performing loans for the Corporation at March 31, 1998, $5,640,000 and $2,311,000, respectively, bringing the total of non-performing assets to $9,267,000. Transactions in the allowance for loan losses are as follows:
March 31, December 31, (In thousands) 1998 1997 - ----------------------------------------------------------------------------------------------------------------- Balance, beginning of year $ 12,628 $ 8,366 Additions Provision charged to expense 1,129 764 --------- -------- 13,757 9,130 Deductions Losses charged to allowance, net of recoveries of $143 and $174 for the first three months of 1998 and 1997, respectively 973 833 -------- ------- Balance, March 31 $ 12,784 $ 8,297 ========= ------- Additions Allowance for loan losses of acquired institutions 4,028 Provision charged to expense 3,249 15,574 Deductions Losses charged to allowance, net of recoveries of $406 for the last nine months of 1997 2,946 ------- Balance, end of year $ 12,628 =======
At March 31, 1998 and December 31, 1997, impaired loans totaled $8,602,000 and $7,972,000, respectively, all of which had reserves allocated. An allowance of $2,398,000 and $2,033,000 for possible losses related to those loans at March 31, 1998 and December 31, 1997, respectively. Interest of $66,000 and $59,000 was recognized on average impaired loans of $8,287,000 and $4,300,000 as of March 31, 1998 and 1997, respectively. Interest recognized on impaired loans on a cash basis during the first three months of 1998 and 1997 was immaterial. NOTE 4: ACQUISITIONS On August 1, 1997, Simmons First National Corporation acquired all the outstanding capital stock of First Bank of Arkansas, Searcy, Arkansas and First Bank of Arkansas, Russellville, Arkansas, in a cash purchase transaction of $53 million. The banks acquired had consolidated assets, as adjusted of $362 million, as of August 1, 1997, NOTE 5: CERTAIN TRANSACTIONS From time to time the Corporation 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 Simmons First National Bank, Simmons First Bank of South Arkansas, Simmons First Bank of Jonesboro, Simmons First Bank of Dumas, Simmons First Bank of Northwest Arkansas, Simmons First Bank of Russellville, and Simmons First Bank of Searcy. 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 6: STOCK OPTIONS AND RESTRICTED STOCK As of March 31, 1998, 288,050 shares of common stock of the Corporation had been granted through an employee stock option incentive plan. There were 122,300 exercisable options at the end of the first quarter of 1998. Forty-eight thousand eight hundred shares have been issued upon exercise of options. As of March 31, 1998, three thousand shares of common stock of the corporation had been granted and issued as Bonus Shares of restricted stock. NOTE 7: ADDITIONAL CASH FLOW INFORMATION
Three Months Ended March 31, (In thousands) 1998 1997 - --------------------------------------------------------------------------------------- Interest paid $ 12,521 $ 6,997 Income taxes paid $ -- $ 59
NOTE 8: INCOME TAXES The provision for income taxes is comprised of the following components:
March 31, March 31, (In thousands) 1998 1997 - ---------------------------------------------------------------------------------------------------- Income taxes currently payable $ 1,127 $ 1,068 Deferred income taxes 9 (40) --------------- ------------ Provision for income taxes $ 1,136 $ 1,028 =============== =============
The tax effects of temporary differences related to deferred taxes shown on the balance sheet are shown below:
March 31, December 31, (In thousands) 1998 1997 - ----------------------------------------------------------------------------------------------------- Deferred tax assets Allowance for loan losses $ 3,628 $ 3,432 Valuation of foreclosed assets held for sale 197 286 Deferred compensation payable 436 436 Deferred loan fee income 593 622 Other 771 812 --------------- ------------- Total deferred tax assets 5,625 5,588 --------------- --------------- Deferred tax liabilities Accumulated depreciation (888) (868) Available-for-sale securities (836) (799) Other (507) (481) --------------- ------------- Total deferred tax liabilities (2,231) (2,148) ---------------- --------------- Net deferred tax assets included in other assets on balance sheets $ 3,394 $ 3,440 =============== ===============
A reconciliation of income tax expense at the statutory rate to the Corporation's actual income tax expense is shown below:
March 31, March 31, (In thousands) 1998 1997 - ---------------------------------------------------------------------------------------------------- Computed at the statutory rate (34%) $ 1,347 $ 1,230 Increase (decrease) resulting from: Tax exempt income (362) (288) Other differences, net 151 86 --------------- --------------- Actual tax provision $ 1,136 $ 1,028 =============== ===============
NOTE 9: TIME DEPOSITS Time deposits include approximately $178,972,000 and $188,522,000 of certificates of deposit of $100,000 or more at March 31, 1998, and December 31, 1997, respectively. NOTE 10: COMMITMENTS AND CREDIT RISK The seven affiliate banks of the Corporation grant agribusiness, commercial, consumer, and residential loans to their customers. Included in the Corporation's diversified loan portfolio is unsecured debt in the form of credit card receivables that comprised approximately 20.7% and 22.6% of the portfolio, as of March 31, 1998 and December 31, 1997, 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, 1998, the Corporation had outstanding commitments to extend credit aggregating approximately $168,580,000 and $133,021,000 for credit card commitments and other loan commitments, respectively. At December 31, 1997, the Corporation had outstanding commitments to extend credit aggregating approximately $154,759,000 and $90,164,000 for credit card commitments and other loan commitments, respectively. Letters of credit are conditional commitments issued by the bank subsidiaries of the Corporation, 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 Corporation had total outstanding letters of credit amounting to $9,462,000 and $6,775,000 at March 31, 1998 and December 31, 1997, respectively, with terms ranging from 90 days to one year. Mortgage loans serviced for others totaled $1.2 billion and $1.3 billion at March 31, 1998 and December 31, 1997, respectively. A reserve has been established for potential loss obligations, based on management's evaluation of a number of variables, including the amount of delinquent loans serviced for other investors, length of delinquency, and amounts previously advanced on behalf of the borrower that the Corporation does not expect to recover. This reserve is netted against foreclosure receivables included in other assets. As of March 31, 1998 and December 31, 1997, this reserve balance was $777,000 and $710,000, respectively. NOTE 11: CONTINGENT LIABILITIES A number of legal proceedings exist in which the Corporation 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 Corporation and its subsidiaries. NOTE 12: LONG-TERM DEBT Long-term debt at March 31, 1998 and December 31, 1997, consisted of the following components,
March 31, December 31, (In thousands) 1998 1997 - ----------------------------------------------------------------------------------------------------- 7.32% note due 2007, unsecured $ 20,000 $ 20,000 9.75% note due 2008, secured by land and building 1,010 1,021 5.62% to 8.41% FHLB advances due 1998 to 2015, secured by residental real estate loans 11,671 12,010 Trust preferred securities 17,250 17,250 --------------- --------------- $ 49,931 $ 50,281 =============== ===============
During the second quarter of 1997, the Corporation formed 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 Corporation. The sole assets of the Trust are $17.8 million aggregate principal amount of the Corporation'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, 1998 are:
Annual (In thousands) Year Maturities - ---------------------------------------------------------------------------------------------------- 1998 $ 3,975 1999 3,259 2000 3,257 2001 3,170 2002 3,088 Thereafter 33,182 ---------------- Total $ 49,931 ================
NOTE 13: UNDIVIDED PROFITS The subsidiary banks are subject to a legal limitation on dividends that can be paid to the parent corporation 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, 1998, the bank subsidiaries had approximately $3 million available for payment of dividends to the Corporation 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, 1998, each of the seven subsidiary banks met the capital standards for a well-capitalized institution. The Corporation's "total risk-based capital" ratio was 13.1% at March 31, 1998. NOTE 14: CAPITAL STOCK At the April 22, 1997 annual meeting of shareholders, an amendment to the Articles of Incorporation was approved reducing the par value of the class A common stock of the Company from $5.00 to $1.00. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net income for the quarter ended March 31, 1998, was $2,825,000, an increase of $237,000, or 9.2%, over the same period in 1997. Basic earnings per share for the three-month periods ended March 31, 1998 and 1997, were $0.49 and $0.45, respectively. Diluted earnings per share for the three-month periods ended March 31, 1998 and 1997, were $0.48 and $0.45, respectively. Return on average assets and return an average stockholder's equity for the three-month period ended March 31, 1998 was 0.88% and 10.08%, compared to 1.19% and 10.07%, respectively, for the same period in 1997. Cash earnings (net income excluding amortization of intangibles) for the first quarter of 1998 were $0.56 per share compared with $0.47 for the first quarter of 1997, reflecting a 19.1% increase. Cash return on average assets was 1.02% and cash return on average stockholders' equity was 11.41% for the three-month period ended March 31, 1998, compared with 1.23% and 10.36%, respectively, for the same period in 1997. Growth in both loans and deposits coupled with an increase in non-interest income, contributed to the Company's record earnings performance in the first quarter 1998. As of August 1, 1997, the Corporation completed the acquisition of First Bank of Arkansas (FBAR), Russellville, Arkansas and First Bank of Arkansas (FBAS), Searcy, Arkansas in a cash purchase transaction of $53 million. This transaction was partially financed through the issuance of $20 million in long-term debt and $17 million in trust preferred securities. The banks acquired had consolidated assets, as adjusted, of $362 million, as of August 1, 1997. Net interest income, the difference between interest income and interest expense, for the three-month period ended March 31, 1998, increased $2,794,000, or 31.4%, when compared to the same period in 1997. During the first quarter, interest income increased $8,290,000, or 52.0%, while interest expense increased $5,496,000, or 77.9%, when compared to the same period in 1997. These figures reflect the acquistion of FBAR and FBAS and the long-term debt associated with these acquistions. The provision for loan losses for the first quarter of 1998 was $1,129,000, compared to $764,000 for the same period of 1997, resulting in a $365,000, or 47.8%, increase. The increase from 1998 to 1997 is attributable to acquisitions, growth in loans and bankruptcies in the bankcard portfolio. Non-interest income, exclusive of net gains on securities sold, for the first quarter ended March 31, 1998, was $7,046,000, a 13.2% increase over the $6,226,000 reported for the same period in 1997. Total fee income for the three-month period ended March 31, 1998 was up 16.9%. During the three months ended March 31, 1998, non-interest expense increased $2,904,000, or 27.1%, over the same period in 1997. The increase from 1998 to 1997 includes a $470,000 increase in the amortization of intangibles attributable to the acquisition of FBAR and FBAS. The increase reflects the acquisitions and the normal increase in the cost of doing business. Total assets for the Corporation at March 31, 1998, were $1.388 billion, an increase of $61.8 million, or 4.7%, over the same figure at December 31, 1997. Deposits at March 31, 1998, totaled $1.142 billion, an increase of $38.0 million, or 3.4%, from the same figure at December 31, 1997. Stockholders' equity at the end of the first quarter was $114,194,000, an increase of $2,112,000, or 1.9%, from the December 31, 1997 figure. Asset quality remains strong with the allowance for loan losses as a percent of total loans at 1.60% as of March 31, 1998, compared to 1.61% for the same date in 1997. As of March 31, 1998, non-performing loans equaled 1.0% of total loans, while the allowance for loan losses equaled 161% of non-performing loans. During the first quarter of 1998, the Company's board of directors voted unanimously, to recommend the adoption of an amendment to the Articles of Incorporation to increase the number of authorized shares of Class A Common Stock ("Common Stock") of the Company from 10,000,000 to 30,000,000 shares. The principal reason for the proposed amendment to increase the number of authorized shares of the Common Stock is to provide sufficient shares to enable the Company to issue additional shares, if needed, to effect future stock dividends or to engage in acquisitive transactions. FINANCIAL CONDITION Generally speaking, the Corporation'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 origination's 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, 1998, each bank was within established guidelines and total corporate liquidity was strong. At March 31, 1998, 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 25.7% of total assets. 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 17 of the accompanying Form 10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of March 31, 1998 and for the three-months ended March 31, 1998 and 1997, 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, 1997, 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 January 30, 1998, 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, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. BAIRD, KURTZ & DOBSON Pine Bluff, Arkansas April 28, 1998 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 February, 1998 300 22.1667 Incentive Stock Option 1 Officer February, 1998 300 25.6667 Incentive Stock Option 8 Officers March, 1998 8,100 9.6250 Incentive Stock Option 1 Officer March, 1998 500 25.6667 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. The price paid has been adjusted to reflect the effect of the 50% stock dividend paid on December 6, 1996. 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 1, 1998 /s/ J. Thomas May ----------- ----------------------------------------- J. Thomas May, Chairman, President and Chief Executive Officer Date:May 1, 1998 /s/ Barry L. Crow ----------- ----------------------------------------- Barry L. Crow, Executive Vice President and Chief Financial Officer EX-27 2
9 3-MOS DEC-31-1998 MAR-31-1998 50,481 10,570 96,050 961 188,237 157,409 159,526 796,569 12,784 1,387,934 1,142,465 1,890 79,454 49,931 0 0 5,735 108,459 1,387,934 18,024 4,864 1,343 24,231 10,890 12,551 11,680 1,129 0 13,636 3,961 2,825 0 0 2,825 0.49 0.48 4.21 5,640 2,311 0 0 12,628 1,116 143 12,784 12,784 0 0
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