UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 2000 Commission File Number 06253 ------------- ----- SIMMONS FIRST NATIONAL CORPORATION (Exact name of registrant as specified in its charter) Arkansas 71-0407808 - ------------------------------------------------------------------------------- (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 7,333,519 Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION INDEX Page No. Part I: Summarized Financial Information Consolidated Balance Sheets -- June 30, 2000 and December 31, 1999 3-4 Consolidated Statements of Income -- Three months and six months ended June 30, 2000 and 1999 5 Consolidated Statements of Cash Flows -- Six months ended June 30, 2000 and 1999 6 Consolidated Statements of Changes in Stockholders' Equity Six months ended June 30, 2000 and 1999 7 Notes to Consolidated Financial Statements 8-17 Management's Discussion and Analysis of Financial Condition and Results of Operations 18-20 Review by Independent Certified Public Accountants 21 Part II: Other Information 22-24
Part I: Summarized Financial Information <TABLE> <CAPTION> Simmons First National Corporation Consolidated Balance Sheets June 30, 2000 and December 31, 1999 ASSETS June 30, December 31, (In thousands, except share data) 2000 1999 - --------------------------------------------------------------------------------------------------------------------------- (Unaudited) <S> <C> <C> Cash and non-interest bearing balances due from banks $ 49,013 $ 60,324 Interest bearing balances due from banks 29,973 15,381 Federal funds sold and securities purchased under agreements to resell 27,510 5,500 ---------- ---------- Cash and cash equivalents 106,496 81,205 Investment securities 399,045 409,279 Mortgage loans held for sale 7,465 6,814 Assets held in trading accounts 390 1,388 Loans 1,171,627 1,113,635 Allowance for loan losses (18,002) (17,085) ---------- ---------- Net loans 1,153,625 1,096,550 Premises and equipment 41,221 40,383 Foreclosed assets held for sale, net 1,249 747 Interest receivable 15,985 15,681 Intangible assets, net 25,992 27,226 Other assets 18,544 18,157 ---------- ---------- TOTAL ASSETS $ 1,770,012 $ 1,697,430 ========== ========== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Balance Sheets June 30, 2000 and December 31, 1999 LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31, (In thousands, except share data) 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> (Unaudited) LIABILITIES Non-interest bearing transaction accounts $ 188,474 $ 170,571 Interest bearing transaction accounts and savings deposits 453,215 463,354 Time deposits 847,787 776,708 ---------- ---------- Total deposits 1,489,476 1,410,633 Federal funds purchased and securities sold under agreements to repurchase 47,556 60,496 Short-term debt 6,515 5,044 Long-term debt 44,134 46,219 Accrued interest and other liabilities 16,428 15,667 ---------- ---------- Total liabilities 1,604,109 1,538,059 ---------- ---------- STOCKHOLDERS' EQUITY Capital stock Class A, common, par value $1 a share, authorized 30,000,000 shares 7,333,519 issued and outstanding at 2000 and 7,315,575 at 1999 7,334 7,316 Surplus 50,992 50,770 Undivided profits 111,263 105,185 Accumulated other comprehensive income Unrealized depreciation on available-for-sale securities, net of income tax credit of $2,212 at 2000 and $2,340 at 1999 (3,686) (3,900) ---------- ---------- Total stockholders' equity 165,903 159,371 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,770,012 $ 1,697,430 =========== ========== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Income Three Months and Six Months Ended June 30, 2000 and 1999 Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share data) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) <S> <C> <C> <C> <C> INTEREST INCOME Loans $ 26,019 $ 23,106 $ 50,745 $ 45,826 Federal funds sold and securities purchased under agreements to resell 565 461 917 1,392 Investment securities 5,966 5,958 11,873 11,860 Mortgage loans held for sale, net of unrealized gains (losses) 121 180 239 377 Assets held in trading accounts 65 16 83 33 Interest bearing balances due from banks 238 158 380 344 ------- ------- ------- ------- TOTAL INTEREST INCOME 32,974 29,879 64,237 59,832 ------- ------- ------- ------- INTEREST EXPENSE Deposits 15,028 12,174 28,332 24,779 Federal funds purchased and securities sold under agreements to repurchase 624 521 1,334 1,373 Short-term debt 131 15 248 42 Long-term debt 889 968 1,775 1,929 ------- ------- ------- ------- TOTAL INTEREST EXPENSE 16,672 13,678 31,689 28,123 ------- ------- ------- ------- NET INTEREST INCOME 16,302 16,201 32,548 31,709 Provision for loan losses 1,925 1,691 3,645 3,343 ------- ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 14,377 14,510 28,903 28,366 ------- ------- ------- ------- NON-INTEREST INCOME Trust income 1,290 1,062 2,504 2,252 Service charges on deposit accounts 1,905 1,795 3,632 3,459 Other service charges and fees 475 391 1,014 976 Income on sale of mortgage loans, net of commissions 391 447 756 1,058 Income on investment banking, net of commissions 87 106 175 240 Credit card fees 2,624 2,460 4,959 4,698 Other income 741 642 1,433 969 Gain on sale of securities, net -- -- -- -- ------- ------- ------- ------- TOTAL NON-INTEREST INCOME 7,513 6,903 14,473 13,652 ------- ------- ------- ------- NON-INTEREST EXPENSE Salaries and employee benefits 8,304 8,041 16,691 16,192 Occupancy expense, net 923 872 1,795 1,737 Furniture and equipment expense 1,274 1,193 2,555 2,418 Loss on foreclosed assets 77 42 128 180 Merger-related -- -- -- 395 Other operating expenses 4,672 4,817 9,361 9,288 ------- ------- ------- ------- TOTAL NON-INTEREST EXPENSE 15,250 14,965 30,530 30,210 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 6,640 6,448 12,846 11,808 Provision for income taxes 2,031 1,879 3,909 3,531 ------- ------- ------- ------- NET INCOME $ 4,609 $ 4,569 $ 8,937 $ 8,277 ======= ======= ======= ======= BASIC EARNINGS PER SHARE $ 0.63 $ 0.62 $ 1.22 $ 1.13 ======= ======= ======= ======= DILUTED EARNINGS PER SHARE $ 0.63 $ 0.62 $ 1.22 $ 1.12 ======= ======= ======= ======= </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Cash Flows Six Months Ended June 30, 2000 and 1999 June 30, June 30, (In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES (Unaudited) <S> <C> <C> Net income $ 8,937 $ 8,277 Items not requiring (providing) cash Depreciation and amortization 3,253 3,064 Provision for loan losses 3,645 3,343 Net amortization (accretion) of investment securities 214 (181) Deferred income taxes (629) (244) Provision for foreclosed assets 103 110 Changes in Interest receivable (304) 560 Mortgage loans held for sale (651) 3,579 Assets held in trading accounts 998 (10,451) Other assets (387) (2,102) Accrued interest and other liabilities 1,264 (7,429) Income taxes payable 126 (391) --------- --------- Net cash provided by (used in) operating activities 16,569 (1,865) --------- --------- CASH FLOW FROM INVESTING ACTIVITIES Net originations of loans (62,026) (7,241) Purchase of premises and equipment, net (2,857) (3,838) Proceeds from sale of foreclosed assets 701 345 Proceeds from maturities of available-for-sale securities 73,635 78,445 Purchases of available-for-sale securities (62,878) (94,510) Proceeds from maturities of held-to-maturity securities 13,522 35,166 Purchases of held-to-maturity securities (14,045) (31,656) --------- --------- Net cash used in investing activities (53,948) (23,289) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits 78,843 (24,102) Net proceeds of short-term debt 1,471 5,603 Dividends paid (2,859) (2,659) Proceeds from issuance of long-term debt -- 1,300 Repayments of long-term debt (2,085) (1,416) Net decrease in federal funds purchased and securities sold under agreements to repurchase (12,940) (16,397) Issuance of common stock, net 240 252 --------- --------- Net cash provided by (used in) financing activities 62,670 (37,419) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 25,291 (62,573) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 81,205 139,283 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 106,496 $ 76,710 ========= ========= </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Changes in Stockholders' Equity Six Months Ended June 30, 2000 and 1999 Accumulated Other Common Comprehensive Undivided (In thousands, except per share data) Stock Surplus Income Profits Total - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Balance, December 31, 1998 7,239 48,271 1,491 93,383 150,384 Comprehensive income Net income -- -- -- 8,277 8,277 Change in unrealized appreciation on available-for-sale securities, net of income tax credit of $1,599 -- -- (2,705) -- (2,705) -------- Comprehensive income 5,572 Exercise of stock options - 16,600 shares 16 247 -- -- 263 Securities exchanged under stock option plan -- (11) -- -- (11) Common stock issued in connection with the purchase of the minority shares of the Bank of Lincoln - 56,997 shares 57 2,230 -- -- 2,287 Cash dividends declared Common stock - $0.35 per share -- -- -- (2,283) (2,283) Pooled institutions prior to pooling -- -- -- (376) (376) -------- -------- -------- -------- -------- Balance, June 30, 1999 7,312 50,737 (1,214) 99,001 155,836 Comprehensive income Net income -- -- -- 8,891 8,891 Change in unrealized depreciation on available-for-sale securities, net of income tax credit of $1,589 -- -- (2,686) -- (2,686) -------- Comprehensive income 6,205 Exercise of stock options - 3,300 shares 4 33 -- -- 37 Cash dividends declared - $0.37 per share -- -- -- (2,707) (2,707) -------- -------- -------- -------- -------- Balance, December 31, 1999 7,316 50,770 (3,900) 105,185 159,371 Comprehensive income Net income -- -- -- 8,937 8,937 Change in unrealized depreciation on available-for-sale securities, net of income taxes of $128 -- -- 214 -- 214 -------- Comprehensive income 9,151 Exercise of stock options - 18,600 shares 19 238 -- -- 257 Securities exchanged under stock option plan (1) (16) -- -- (17) Cash dividends declared - $0.39 per share -- -- -- (2,859) (2,859) -------- -------- -------- --------- -------- Balance, June 30, 2000 $ 7,334 $ 50,992 $ (3,686) $ 111,263 $ 165,903 ======= ======= ======= ======== ======== </TABLE> See Condensed Notes to Consolidated Financial Statements.
SIMMONS FIRST NATIONAL CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1: ACCOUNTING POLICIES The consolidated financial statements include the accounts of Simmons First National Corporation and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. All financial information has been restated for the mergers, which were accounted for as poolings-of-interests. The December 31, 1999 Consolidated Balance Sheet is as reported in the Company's Form 10-K annual report for 1999 filed with the Securities and Exchange Commission. All adjustments made to the unaudited financial statements were of a normal recurring nature. In the opinion of management, all adjustments necessary for a fair presentation of the results of interim periods have been made. Certain prior year amounts are reclassified to conform to current year classification. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 1999 filed with the Securities and Exchange Commission. Earnings Per Share Basic earnings per share is computed based on the weighted average number of common shares outstanding during each year. Diluted earnings per share is computed using the weighted average common shares and all potential dilutive common shares outstanding during the period. The computation of per share earnings for the six months ended June 30, 2000 and 1999 is as follows: <TABLE> <CAPTION> (In thousands, except per share data) 2000 1999 - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> Net Income $ 8,937 $ 8,277 -------- ------- Average common shares outstanding 7,327 7,300 Average common share stock options outstanding 22 77 --------- ------- Average diluted common shares 7,349 7,377 --------- ------- Basic earnings per share $ 1.22 $ 1.13 ======== ======= Diluted earnings per share $ 1.22 $ 1.12 ======== ======= </TABLE>
NOTE 2: ACQUISITIONS On January 15, 1999, the Company and Lincoln Bankshares, Inc. ("LBI") merged. This merger was accounted for as a pooling-of-interests, except for the acquisition of the minority shares (17.9%) of the Bank of Lincoln, which were accounted for on a purchase accounting basis. Stockholders of LBI received 301,823 shares of Simmons First National Corporation stock in exchange for LBI shares in the transaction. LBI owned the Bank of Lincoln, Lincoln, Arkansas with assets, as of January 15, 1999, of $75 million. The Company merged the Bank of Lincoln into Simmons First Bank of Northwest Arkansas during the second quarter of 1999. On July 9, 1999, the Company and NBC Bank Corp. ("NBC") merged in a pooling-of-interests transaction. Stockholders of NBC received 784,887 shares of Simmons First National Corporation stock in exchange for NBC shares in the transaction. NBC owned National Bank of Commerce, El Dorado, Arkansas with assets, as of July 9, 1999, of $155 million. The Company changed the name of National Bank of Commerce to Simmons First Bank of El Dorado, N.A. The Company is operating Simmons First Bank of El Dorado, N.A. as a separate community bank with the same board of directors and management. On July 17, 2000, the Company expanded its coverage of Central and Northwest Arkansas with a $7.6 million cash purchase of two Conway and six Northwest Arkansas locations from First Financial Banc Corporation. Simmons First National Bank acquired the two offices in Conway and Simmons First Bank of Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July 14, 2000, the eight locations combined had total loans of $72 million and total deposits of $71 million. NOTE 3: INVESTMENT SECURITIES The amortized cost and fair value of investment securities that are classified as held-to-maturity and available-for-sale are as follows: <TABLE> <CAPTION> June 30, December 31, 2000 1999 -------------------------------------------- ------------------------------------------ Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair (In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value - ---------------------------------------------------------------------------------------------------------------- Held-to-Maturity - ---------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> U.S. Treasury $ 16,563 $ 13 $ (142) $ 16,434 $ 13,576 $ 10 $ (115) $ 13,471 U.S. Government agencies 36,607 25 (1,018) 35,614 36,654 57 (1,169) 35,542 Mortgage-backed securities 15,240 68 (339) 14,969 16,920 84 (258) 16,746 State and political subdivisions 106,234 672 (2,064) 104,842 107,157 662 (2,107) 105,712 Other securities 82 -- (1) 81 85 -- (2) 83 --------- ------ ----- --------- --------- ------ ------ --------- $ 174,726 $ 778 $(3,564) $ 171,940 $ 174,392 $ 813 $(3,651) $ 171,554 ========= ====== ====== ========= ========= ====== ====== ========= Available-for-Sale U.S. Treasury $ 35,391 $ 14 $ (141) $ 35,264 $ 41,492 $ 83 $ (133) $ 41,442 U.S. Government agencies 162,685 1 (5,794) 156,892 166,143 -- (6,287) 159,856 Mortgage-backed securities 15,107 57 (210) 14,954 16,954 26 (234) 16,746 State and political subdivisions 6,652 101 (72) 6,681 6,432 88 (88) 6,432 Other securities 10,130 398 -- 10,528 9,859 552 -- 10,411 --------- ------ ----- --------- --------- ------ ------ --------- $ 229,965 $ 571 $(6,217) $ 224,319 $ 240,880 $ 749 $(6,742) $ 234,887 ========= ====== ====== ========= ========== ====== ====== ========= </TABLE>
The carrying value, which approximates the market value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $268,288,000 at June 30, 2000 and $277,789,000 at December 31, 1999. The book value of securities sold under agreements to repurchase amounted to $39,836,000 and $39,956,000 for June 30, 2000 and December 31, 1999, respectively. Income earned on securities for the six months ended June 30, 2000 and 1999 is as follows: <TABLE> <CAPTION> (In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> Taxable Held-to-maturity $ 2,081 $ 2,249 Available-for-sale 7,113 6,838 Non-taxable Held-to-maturity 2,505 2,666 Available-for-sale 174 107 -------- ------- Total $ 11,873 $ 11,860 ======== ======= </TABLE> Maturities of investment securities at June 30, 2000 are as follows: <TABLE> <CAPTION> Held-to-Maturity Available-for-Sale -------------------------- --------------------- Amortized Fair Amortized Fair (In thousands) Cost Value Cost Value - ------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> One year or less $ 21,164 $ 21,109 $ 45,014 $ 44,788 After one through five years 78,623 77,371 115,979 112,375 After five through ten years 53,495 52,141 47,405 45,302 After ten years 21,362 21,238 11,437 11,326 Other securities 82 81 10,130 10,528 ---------- ---------- ---------- --------- Total $ 174,726 $ 171,940 $ 229,965 $ 224,319 ========== ========== ========== ========= </TABLE> There were no gross realized gains or losses as of June 30, 2000 and 1999. Most of the state and political subdivision debt obligations are non-rated bonds and represent small, Arkansas issues, which are evaluated on an ongoing basis.
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES The various categories are summarized as follows: <TABLE> <CAPTION> June 30, December 31, (In thousands) 2000 1999 - ---------------------------------------------------------------------------------------------------------- <S> <C> <C> Consumer Credit cards $ 183,853 $ 187,242 Student loans 65,595 66,739 Other consumer 184,097 181,380 Real estate Construction 53,128 53,925 Single family residential 217,535 202,886 Other commercial 251,469 240,259 Commercial Commercial 143,913 137,827 Agricultural 59,255 35,337 Financial institutions 2,397 3,165 Other 10,385 4,875 ------------ ----------- Total loans before allowance for loan losses $ 1,171,627 $ 1,113,635 ============ =========== </TABLE> During the first six months of 2000, foreclosed assets held for sale increased $502,000 to $1,249,000 and are carried at the lower of cost or fair market value. Other non-performing assets, non-accrual loans and other non-performing loans for the Company at June 30, 2000, were $36,000, $6,648,000 and $2,145,000, respectively, bringing the total of non-performing assets to $10,078,000.
Transactions in the allowance for loan losses are as follows: <TABLE> <CAPTION> June 30, December 31, (In thousands) 2000 1999 - ----------------------------------------------------------------------------------------------------------------- <S> <C> <C> Balance, beginning of year $ 17,085 $ 16,812 Additions Provision charged to expense 3,645 3,343 --------- -------- 20,730 20,155 Deductions Losses charged to allowance, net of recoveries of $918 and $536 for the first six months of 2000 and 1999, respectively 2,728 2,924 -------- ------- Balance, June 30 $ 18,002 $ 17,231 ========= ------- Additions Provision charged to expense 3,208 -------- 20,439 Deductions Losses charged to allowance, net of recoveries of $880 for the last six months of 1999 3,354 ------- Balance, end of year $ 17,085 ======= </TABLE> At June 30, 2000 and December 31, 1999, impaired loans totaled $10,846,000 and $12,102,000, respectively. All impaired loans had designated reserves for possible loan losses. Reserves relative to impaired loans at June 30, 2000, were $2,100,000 and $2,803,000 at December 31, 1999. Interest of $231,000 and $281,000 was recognized on average impaired loans of $11,468,000 and $13,616,000 as of June 30, 2000 and 1999, respectively. Interest recognized on impaired loans on a cash basis during the first six months of 2000 and 1999 was immaterial.
NOTE 5: TIME DEPOSITS Time deposits include approximately $270,850,000 and $225,290,000 of certificates of deposit of $100,000 or more at June 30, 2000 and December 31, 1999, respectively. NOTE 6: INCOME TAXES The provision for income taxes is comprised of the following components: <TABLE> <CAPTION> June 30, June 30, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> Income taxes currently payable $ 4,538 $ 3,775 Deferred income taxes (629) (244) --------------- --------------- Provision for income taxes $ 3,909 $ 3,531 =============== =============== </TABLE> The tax effects of temporary differences related to deferred taxes shown on the balance sheet are shown below: <TABLE> <CAPTION> June 30, December 31, (In thousands) 2000 1999 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> Deferred tax assets Allowance for loan losses $ 6,540 $ 5,906 Valuation of foreclosed assets 201 201 Deferred compensation payable 668 659 Deferred loan fee income 624 564 Vacation compensation 463 439 Mortgage servicing reserve 393 457 Loan interest 233 160 Available-for-sale securities 2,212 2,340 Other 117 144 --------------- --------------- Total deferred tax assets 11,451 10,870 --------------- --------------- Deferred tax liabilities Accumulated depreciation (1,484) (1,473) FHLB stock dividends (501) (432) Other (214) (214) --------------- --------------- Total deferred tax liabilities (2,199) (2,119) --------------- --------------- Net deferred tax assets included in other assets on balance sheets $ 9,252 $ 8,751 =============== =============== </TABLE>
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below: <TABLE> <CAPTION> June 30, June 30, (In thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> Computed at the statutory rate (35%) $ 4,496 $ 4,133 Increase (decrease) resulting from: Tax exempt income (1,001) (975) Other differences, net 414 373 --------------- --------------- Actual tax provision $ 3,909 $ 3,531 =============== =============== </TABLE> NOTE 7: LONG-TERM DEBT Long-term debt at June 30, 2000 and December 31, 1999, consisted of the following components, <TABLE> <CAPTION> June 30, December 31, (In thousands) 2000 1999 - --------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> 7.32% note due 2007, unsecured $ 16,000 $ 16,000 9.75% note due 2008, secured by land and building 888 917 5.36% to 8.41% FHLB advances due 2000 to 2018, secured by residential real estate loans 9,996 12,052 Trust preferred securities 17,250 17,250 --------------- --------------- $ 44,134 $ 46,219 =============== =============== </TABLE> The Company owns a wholly owned grantor trust subsidiary (the Trust) to issue preferred securities representing undivided beneficial interests in the assets of the respective Trust and to invest the gross proceeds of such preferred securities into notes of the Company. The sole assets of the Trust are $17.8 million aggregate principal amount of the Company's 9.12% Subordinated Debenture Notes due 2027 which are redeemable beginning in 2002. Such securities qualify as Tier 1 Capital for regulatory purposes.
Aggregate annual maturities of long-term debt at June 30, 2000 are: <TABLE> <CAPTION> Annual (In thousands) Year Maturities - --------------------------------------------------------------------------------------------------------- <S> <C> 2000 $ 2,454 2001 2,893 2002 2,925 2003 2,871 2004 2,876 Thereafter 30,115 --------------- Total $ 44,134 =============== </TABLE> NOTE 8: CONTINGENT LIABILITIES A number of legal proceedings exist in which the Company and/or its subsidiaries are either plaintiffs or defendants or both. Most of the lawsuits involve loan foreclosure activities. The various unrelated legal proceedings pending against the subsidiary banks in the aggregate are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries. NOTE 9: UNDIVIDED PROFITS The subsidiary banks are subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Comptroller of the Currency is required, if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits, as defined, for that year combined with its retained net profits of the preceding two years. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of current year earnings plus 75% of the retained net earnings of the preceding year. At June 30, 2000, the bank subsidiaries had approximately $10 million available for payment of dividends to the Company without prior approval of the regulatory agencies. The Federal Reserve Board's risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. The criteria for a well-capitalized institution are: a 5% "Tier l leverage capital" ratio, a 6% "Tier 1 risk-based capital" ratio, and a 10% "total risk-based capital" ratio. As of June 30, 2000, each of the eight subsidiary banks met the capital standards for a well-capitalized institution. The Company's "total risk-based capital" ratio was 14.9% at June 30, 2000.
NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK At June 30, 2000, the Company had stock options outstanding of 226,000 shares and stock options exercisable of 174,480 shares. During the first six months of 2000, there were 15,600 shares issued upon exercise of stock options and no additional stock options of the Company were granted. Three thousand additional shares of common stock of the Company were granted and issued as bonus shares of restricted stock, during the first six months of 2000. NOTE 11: ADDITIONAL CASH FLOW INFORMATION <TABLE> <CAPTION> Six Months Ended June 30, (In thousands) 2000 1999 - ----------------------------------------------------------------------------------------- <S> <C> <C> Interest paid $ 31,512 $ 29,427 Income taxes paid $ 4,412 $ 4,229 </TABLE> Approximately, $9,000,000 of investment securities previously classified as held-to-maturity was reclassified as available-for-sale during the second quarter of 1999. This was the result the Company merging the Bank of Lincoln into Simmons First Bank of Northwest Arkansas during the second quarter of 1999. NOTE 12: CERTAIN TRANSACTIONS From time to time the Company and its subsidiaries have made loans and other extensions of credit to directors, officers, their associates and members of their immediate families. From time to time directors, officers and their associates and members of their immediate families have placed deposits with the Company's subsidiary banks. Such loans, other extensions of credit and deposits were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features.
NOTE 13: COMMITMENTS AND CREDIT RISK The eight affiliate banks of the Company grant agribusiness, commercial, consumer, and residential loans to their customers. Included in the Company's diversified loan portfolio is unsecured debt in the form of credit card receivables that comprised approximately 15.7% and 16.8% of the portfolio, as of June 30, 2000 and December 31, 1999, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate, and residential real estate. At June 30, 2000, the Company had outstanding commitments to extend credit aggregating approximately $250,452,000 and $176,570,000 for credit card commitments and other loan commitments, respectively. At December 31, 1999, the Company had outstanding commitments to extend credit aggregating approximately $227,358,000 and $105,145,000 for credit card commitments and other loan commitments, respectively. Letters of credit are conditional commitments issued by the bank subsidiaries of the Company, to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $4,308,000 and $3,035,000 at June 30, 2000 and December 31, 1999, respectively, with terms ranging from 90 days to one year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Net income for the quarter ended June 30, 2000, was $4,609,000, or $0.63 per diluted share. This compares with last year's second quarter earnings of $4,569,000, or $0.62 per diluted share. The Company's return on average assets and return on average stockholder's equity for the three-month period ended June 30, 2000 was 1.06% and 11.23%, compared to 1.10% and 11.74%, respectively, for the same period in 1999. All financial information has been restated for the mergers accounted for as poolings-of-interests. Operating earnings (net income excluding merger-related expenses) for the six-month period ended June 30, 2000, were $8,937,000, or an increase of $265,000 over the June 30, 1999 earnings of $8,672,000. Diluted operating earnings per share increased $0.04 to $1.22 for the six-month period ended June 30, 2000 from $1.18 in the same period of 1999. Operating return on average assets and operating return on average stockholders' equity for the six-month period ended June 30, 2000, was 1.04% and 10.97%, compared to 1.04% and 11.22%, respectively, for the same period in 1999. In connection with the merger of Lincoln Bankshares, Inc ("LBI"), during the first quarter 1999, merger-related expenses totaled $395,000, or $0.06 per share after tax. After merger-related expenses, Simmons First's six-month 1999 earnings were $8,277,000 or $1.12 diluted earnings per share. Diluted cash operating earnings (net income excluding amortization of intangibles and merger-related expenses) for the second quarter of 2000 were $0.68 per share compared with $0.67 for the second quarter of 1999, reflecting a $0.01 increase. Year-to-date diluted cash operating earnings, on a per share basis as of June 30, 2000 was $1.33 compared to $1.29 at June 30, 1999, reflecting a $0.04 increase. Cash operating return on average assets was 1.15% and cash operating return on average stockholders' equity was 12.09% for the six-month period ended June 30, 2000, compared with 1.16% and 12.40%, respectively, for the same period in 1999. Net interest margin (fully taxable equivalent) for the Company's second quarter 2000 and six-month period ended June 30, 2000 were 4.23% and 4.28%, respectively. These rates compared to 4.45% and 4.34% for the same periods during 1999. These declines resulted from a rising interest-rate environment that has placed downward pressure on the net interest margin of the Company. In spite of the decline in interest margin the Company grew net interest income for the second quarter of 2000. This growth was made possible as a result of the 12.8% growth in the loan portfolio over the same period last year. Net interest income for the three-month period ended June 30, 2000, increased $101,000, or 0.6%, when compared to the same period in 1999. While the six-month ended June 30, 2000, net interest income increased $839,000, or 2.6% from the same period in 1999.
The provision for loan losses for the second quarter of 2000 was $1,925,000, compared to $1,691,000 for the same period of 1999, resulting in a $234,000 or 13.8% increase. For the six-months ended June 30, 2000 and 1999, the provision was $3,645,000 and $3,343,000, respectively, resulting in a 9.0% increase. The primary reason for the increase in the 2000 provision is the growth in the loan portfolio from June 30, 1999 to June 30, 2000. Non-interest income for the second quarter ended June 30, 2000, was $7,513,000, a 8.8% increase over the $6,903,000 reported for the same period in 1999. For the six-months ended June 30, 2000, non-interest income was $14,473,000, a 6.0% increase from the $13,652,000 reported for the same period in 1999. These increases were primarily the result of successful internal growth. During the three-months ended June 30, 2000, non-interest expense increased $285,000, or 1.9%, over the same period in 1999. Year-to-date non-interest expense (excluding merger-related expenses) was $30,530,000 at June 30, 2000, compared to $29,815,000, for the same period ended June 30, 1999, an increase of $715,000 or 2.4%. These increases reflect the normal increase in the cost of doing business. FINANCIAL CONDITION - -------------------- Total assets for the Company at June 30, 2000, were $1.8 billion, an increase of $73 million, or 4.3%, over the same figure at December 31, 1999. Loans at June 30, 2000 totaled $1.2 billion, an increase of $58 million, or 5.2% from the same figure at December 31, 1999. Deposits at June 30, 2000 totaled $1.5 billion, an increase of $78 million, or 5.5% from the same figure at December 31, 1999. Stockholders' equity at the end of the second quarter was $165.9 million, an increase of $6.5 million or 4.1%, from the December 31, 1999 figure. Asset quality remains strong with the allowance for loan losses as a percent of total loans at 1.54% as of June 30, 2000, compared to 1.53% at December 31, 1999. As of June 30, 2000, non-performing loans equaled 0.75% of total loans, while the allowance for loan losses equaled 205% of non-performing loans. Generally speaking, the Company's banking subsidiaries rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash used in their investing activities. As is typical of most banking companies, significant financing activities include: deposit gathering; use of short-term borrowing facilities, such as federal funds purchased and repurchase agreements; and the issuance of long-term debt. The banks' primary investing activities include loan originations and purchases of investment securities, offset by loan payoffs and investment maturities. Liquidity represents an institution's ability to provide funds to satisfy demands from depositors and borrowers, by either converting assets into cash or accessing new or existing sources of incremental funds. It is a major responsibility of management to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to measure liquid assets as well as relevant ratios concerning earning asset levels and purchased funds. Each bank subsidiary is also required to monitor these same indicators and report regularly to its own senior management and board of directors. At June 30, 2000, each bank was within established guidelines and total corporate liquidity was strong. At June 30, 2000, cash and due from banks, securities available for sale and held in trading accounts, federal funds sold and securities purchased under agreements for resell, and mortgage loans held for sale were 19.1% of total assets.
ACQUISITIONS - ------------ On January 15, 1999, the Company and LBI merged in a pooling-of-interests transaction, except for the acquisition of the minority shares (17.9%) of the Bank of Lincoln, which were accounted for on a purchase accounting basis. Stockholders of LBI received 301,823 shares of Simmons First National Corporation stock in exchange for LBI shares in the transaction. LBI owned the Bank of Lincoln, Lincoln, Arkansas with assets, as of January 15, 1999, of $75 million. The Company merged the Bank of Lincoln into Simmons First Bank of Northwest Arkansas during the second quarter of 1999. On July 9, 1999, the Company acquired all the common stock of NBC Bank Corp. in exchange for 784,887 shares of the Company's common stock. NBC Bank Corp. owned National Bank of Commerce, El Dorado, Arkansas with assets of $155 million, as of July 9, 1999. The Company changed the name of National Bank of Commerce to Simmons First Bank of El Dorado, N.A. The Company will continue to operate Simmons First Bank of El Dorado, N.A. as a separate community bank with the same board of directors, management and staff. This acquisition was accounted for as a pooling-of-interests. On July 17, 2000, the Company expanded its coverage of Central and Northwest Arkansas with a $7.6 million cash purchase of two Conway and six Northwest Arkansas locations from First Financial Banc Corporation. Simmons First National Bank acquired the two offices in Conway and Simmons First Bank of Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July 14, 2000, the eight locations combined had total loans of $72 million and total deposits of $71 million. STOCK REPURCHASE - ---------------- On June 12, 2000, the Company announced a stock repurchase program. This program authorizes the repurchase of up to 200,000 common shares, or approximately 2.7 percent of the outstanding common shares. Under the repurchase program, there is no time limit for the sock repurchases, nor are there a minimum number of shares the Company intends to repurchase. As of June 30, 2000, no shares have been repurchased through the repurchase program.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BAIRD, KURTZ & DOBSON Certified Public Accountants 200 East Eleventh Pine Bluff, Arkansas Board of Directors Simmons First National Corporation Pine Bluff, Arkansas We have made a review of the accompanying consolidated condensed financial statements, appearing on pages 3 to 17 of the accompanying Form 10-Q, of SIMMONS FIRST NATIONAL CORPORATION and consolidated subsidiaries as of June 30, 2000 and for the three-months and six-months ended June 30, 2000 and 1999, in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1999, and the related consolidated statements of income, cash flows and changes in stockholders' equity for the year then ended (not presented herein), and in our report dated February 4, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ Baird, Kurtz & Dobson BAIRD, KURTZ & DOBSON Pine Bluff, Arkansas August 4, 2000
Part II: Other Information Item 2. Changes in Securities. Recent Sales of Unregistered Securities. The following transactions are sales of unregistered shares of Class A Common Stock of the Company which were issued to executive and senior management officers upon the exercise of rights granted under either the Simmons First National Corporation Incentive and Non-qualified Stock Option Plan or the Simmons First National Corporation Executive Stock Incentive Plan. No underwriters were involved and no underwriter's discount or commissions were involved. Exemption from registration is claimed under Section 4(2) of the Securities Act of 1933 as private placements. The Company received cash or exchanged shares of the Company's Class A Common Stock as the consideration for the transactions. <TABLE> <CAPTION> Number Identity(1) Date of Sale of Shares Price(2) Type of Transaction - ------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 1 Officer April, 2000 1,200 9.625 Incentive Stock Option 1 Officer April, 2000 3,000 1.000 Bonus Stock Plan <FN> Notes: 1. The transactions are grouped to show sales of stock based upon exercises of rights by officers of the Company or its subsidiaries under the stock plans, which occurred at the same price during a calendar month. 2. The per share price paid for incentive stock options represents the fair market value of the stock as determined under the terms of the Plan on the date the incentive stock option was granted to the officer. The per share price paid for shares issued under the Bonus Stock under the Simmons First National Corporation Executive Stock Incentive Plan is set in the plan to be the par value of the Class A common stock, $1.00. </FN> </TABLE> Item 4. Submission of Matters to a Vote of Security Holders. (a) The annual shareholders meeting of the Company was held on April 25, 2000. The matters submitted to the security holders for approval included setting the number of directors at nine (9) and the election of directors. (b) At the annual meeting, all nine (9) incumbent directors were re-elected by proxies solicited pursuant to Section 14 of the Securities Exchange Act of 1934, without any solicitation in opposition thereto.
The following table shows the required analysis of the voting by security holders at the annual meeting: <TABLE> <CAPTION> Voting of Shares Broker Action For Against Abstain Non-Votes <S> <C> <C> <C> <C> Set Number of Directors at Nine (9) 5,443,294 2,503 6,382 501,304 Director Election: Ayres 5,450,115 0 13 499,999 Hutt 5,449,626 900 13 499,999 Makris 5,450,415 900 13 499,999 May 5,451,626 0 13 499,099 Perdue 5,451,626 0 13 499,099 Ryburn 5,450,726 900 13 499,999 Stone 5,451,014 0 13 499,099 Trotter 5,451,314 900 13 499,999 Watkins 5,451,314 0 13 499,099 </TABLE> Item 6. Reports on Form 8-K The registrant filed Form 8-K on June 13, 2000. The report contained the text of a press release issued by the registrant concerning the adoption of a stock repurchase program by the Company. The program authorizes the repurchase of up to 200,000 shares, or approximately 2.7 percent of the outstanding shares.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIMMONS FIRST NATIONAL CORPORATION -------------------------------------- (Registrant) Date: August 7, 2000 /s/ J. Thomas May -------------------- -------------------------------------- J. Thomas May, Chairman, President and Chief Executive Officer Date: August 7, 2000 /s/ Barry L. Crow -------------------- -------------------------------------- Barry L. Crow, Executive Vice President and Chief Financial Officer