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, 2002 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 7,091,200 Class B, Common None
SIMMONS FIRST NATIONAL CORPORATION INDEX Page No. Part I: Summarized Financial Information Consolidated Balance Sheets -- March 31, 2002 and December 31, 2001 3-4 Consolidated Statements of Income -- Three months ended March 31, 2002 and 2001 5 Consolidated Statements of Cash Flows -- Three months ended March 31, 2002 and 2001 6 Consolidated Statements of Stockholders' Equity Three months ended March 31, 2002 and 2001 7 Condensed Notes to Consolidated Financial Statements 8-17 Management's Discussion and Analysis of Financial Condition and Results of Operations 18-30 Review by Independent Certified Public Accountants 31 Part II: Other Information 32-33
Part I: Summarized Financial Information <TABLE> <CAPTION> Simmons First National Corporation Consolidated Balance Sheets March 31, 2002 and December 31, 2001 ASSETS March 31, December 31, (In thousands, except share data) 2002 2001 - ------------------------------------------------------------------------------------------------------------------------- (Unaudited) <S> <C> <C> Cash and non-interest bearing balances due from banks $ 66,966 $ 81,785 Interest bearing balances due from banks 46,343 55,356 Federal funds sold and securities purchased under agreements to resell 80,000 57,700 ----------- ----------- Cash and cash equivalents 193,309 194,841 Investment securities 441,162 447,305 Mortgage loans held for sale 12,277 24,971 Assets held in trading accounts 131 896 Loans 1,228,591 1,258,784 Allowance for loan losses (20,152) (20,496) ----------- ----------- Net loans 1,208,439 1,238,288 Premises and equipment 44,306 45,537 Foreclosed assets held for sale, net 2,182 1,084 Interest receivable 15,124 15,764 Intangible assets, net 32,265 32,186 Other assets 16,926 16,046 ----------- ----------- TOTAL ASSETS $ 1,966,121 $ 2,016,918 ========== ========== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Balance Sheets March 31, 2002 and December 31, 2001 LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, (In thousands, except share data) 2002 2001 - --------------------------------------------------------------------------------------------------------------------------- (Unaudited) <S> <C> <C> LIABILITIES Non-interest bearing transaction accounts $ 220,149 $ 247,235 Interest bearing transaction accounts and savings deposits 540,601 517,856 Time deposits 871,716 921,313 ------------ ------------ Total deposits 1,632,466 1,686,404 Federal funds purchased and securities sold under agreements to repurchase 81,794 86,635 Short-term debt 7,221 3,801 Long-term debt 42,784 42,150 Accrued interest and other liabilities 17,073 15,565 ------------ ------------ Total liabilities 1,781,338 1,834,555 ------------ ------------ STOCKHOLDERS' EQUITY Capital stock Class A, common, par value $1 a share, authorized 30,000,000 shares, 7,091,200 issued and outstanding at 2002 and 7,087,185 at 2001 7,091 7,087 Surplus 45,326 45,278 Undivided profits 131,828 128,519 Accumulated other comprehensive income Unrealized appreciation on available-for-sale securities, net of income taxes of $439 in 2002 and $887 in 2001 538 1,479 ------------ ------------ Total stockholders' equity 184,783 182,363 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,966,121 $ 2,016,918 =========== =========== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Income Three Months Ended March 31, 2002 and 2001 Three Months Ended March 31 (In thousands, except per share data) 2002 2001 - --------------------------------------------------------------------------------------------------- (Unaudited) <S> <C> <C> INTEREST INCOME Loans $ 24,106 $ 29,161 Federal funds sold and securities purchased under agreements to resell 328 639 Investment securities 4,923 5,700 Mortgage loans held for sale, net of unrealized gains (losses) 233 172 Assets held in trading accounts 2 7 Interest bearing balances due from banks 281 335 --------- --------- TOTAL INTEREST INCOME 29,873 36,014 --------- --------- INTEREST EXPENSE Deposits 10,568 17,078 Federal funds purchased and securities sold under agreements to repurchase 397 1,057 Short-term debt 41 104 Long-term debt 806 819 --------- --------- TOTAL INTEREST EXPENSE 11,812 19,058 --------- --------- NET INTEREST INCOME 18,061 16,956 Provision for loan losses 2,361 1,853 --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 15,700 15,103 --------- --------- NON-INTEREST INCOME Trust income 1,390 1,407 Service charges on deposit accounts 2,238 2,101 Other service charges and fees 411 468 Income on sale of mortgage loans, net of commissions 811 624 Income on investment banking, net of commissions 266 222 Credit card fees 2,338 2,456 Other income 918 815 Gain on sale of securities, net -- -- --------- --------- - TOTAL NON-INTEREST INCOME 8,372 8,093 --------- --------- NON-INTEREST EXPENSE Salaries and employee benefits 9,950 9,003 Occupancy expense, net 1,126 1,166 Furniture and equipment expense 1,292 1,336 Loss on foreclosed assets 43 75 Other operating expenses 4,618 5,237 --------- --------- TOTAL NON-INTEREST EXPENSE 17,029 16,817 --------- --------- INCOME BEFORE INCOME TAXES 7,043 6,379 Provision for income taxes 2,102 1,825 --------- --------- NET INCOME $ 4,941 $ 4,554 ======== ======== BASIC EARNINGS PER SHARE $ 0.70 $ 0.64 ======== ======== DILUTED EARNINGS PER SHARE $ 0.69 $ 0.64 ======== ======== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Cash Flows Three Months Ended March 31, 2002 and 2001 March 31, March 31, (In thousands) 2002 2001 - ----------------------------------------------------------------------------------------------------------------- (Unaudited) <S> <C> <C> OPERATING ACTIVITIES Net income $ 4,941 $ 4,554 Items not requiring (providing) cash Depreciation and amortization 1,121 1,945 Provision for loan losses 2,361 1,853 Net accretion of investment securities (160) (450) Deferred income taxes (318) (211) Provision for losses on foreclosed assets 11 33 Changes in Interest receivable 640 1,402 Mortgage loans held for sale 12,694 (7,560) Assets held in trading accounts 765 1,084 Other assets (880) 832 Accrued interest and other liabilities (594) (980) Income taxes payable 2,420 1,963 ---------- ----------- Net cash provided by operating activities 23,001 4,465 ---------- ----------- INVESTING ACTIVITIES Net collection of loans 26,211 12,366 Sale (purchase) of premises and equipment, net 31 (851) Proceeds from sale of foreclosed assets 168 162 Proceeds from maturities of available-for-sale securities 164,696 77,496 Purchases of available-for-sale securities (149,890) (29,470) Proceeds from maturities of held-to-maturity securities 17,854 21,174 Purchases of held-to-maturity securities (27,298) (41,735) ---------- ----------- Net cash provided by investing activities 31,772 39,142 ---------- ----------- FINANCING ACTIVITIES Net (decrease) increase in deposits (53,938) 19,389 Net proceeds of short-term debt 3,420 2,228 Dividends paid (1,632) (1,485) Proceeds from issuance of long-term debt 850 -- Repayments of long-term debt (216) (224) Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase (4,841) 9,281 Issuance (repurchase) of common stock, net 52 (2,718) ---------- ----------- Net cash (used in) provided by financing activities (56,305) 26,471 ---------- ----------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,532) 70,078 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 194,841 111,135 ---------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 193,309 $ 181,213 ========= ========== </TABLE> See Condensed Notes to Consolidated Financial Statements.
<TABLE> <CAPTION> Simmons First National Corporation Consolidated Statements of Stockholders' Equity Three Months Ended March 31, 2002 and 2001 Accumulated Other Common Comprehensive Undivided (In thousands, except share data) Stock Surplus Income Profits Total - -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> 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 Comprehensive income Net income -- -- -- 11,974 11,974 Change in unrealized appreciation on available-for-sale securities, net of income taxes of $126 -- -- 206 -- 206 -------- Comprehensive income 12,180 Exercise of stock options - 50,600 shares 51 1,053 -- -- 1,104 Securities exchanged under stock option plan (11) (348) -- -- (359) Repurchase of common stock - 25,000 shares (25) (782) -- -- (807) Cash dividends declared - $0.67 per share -- -- -- (4,756) (4,756) -------- -------- -------- -------- -------- Balance, December 31, 2001 7,087 45,278 1,479 128,519 182,363 Comprehensive income Net income -- -- -- 4,941 4,941 Change in unrealized appreciation on available-for-sale securities, net of income tax credit of $448 -- -- (941) -- (941) -------- Comprehensive income 4,000 Exercise of stock options - 5,300 shares 5 88 -- -- 93 Securities exchanged under stock option plan (1) (40) -- -- (41) Cash dividends declared - $0.23 per share -- -- -- (1,632) (1,632) -------- -------- -------- -------- -------- Balance, March 31, 2002 $ 7,091 $ 45,326 $ 538 $131,828 $184,783 ======= ======= ======= ======= ======= </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 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 accounting principles generally accepted in the United States of America 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 2001 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, 2002 and 2001, is as follows: <TABLE> <CAPTION> (In thousands, except per share data) 2002 2001 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> Net Income $ 4,941 $ 4,554 --------- -------- Average common shares outstanding 7,089 7,121 Average common share stock options outstanding 89 20 --------- -------- Average diluted common shares 7,178 7,141 --------- -------- Basic earnings per share $ 0.70 $ 0.64 ======== ======= Diluted earnings per share $ 0.69 $ 0.64 ======== ======= </TABLE>
NOTE 2: ACQUISITIONS On March 7, 2002, an announcement was made jointly by the Chief Executive Officers of both the Company and HEARTLAND Community Bank regarding the execution of a definitive agreement under the terms of which HEARTLAND will sell its Monticello, Arkansas location to Simmons First Bank of South Arkansas, a wholly owned subsidiary of the Company. The acquisition will involve approximately $9 million in loans and $13 million in total deposits. The transaction is expected to close during the third quarter of 2002. 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> March 31, December 31, 2002 2001 --------------------------------------------- ----------------------------------------- Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair (In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Held-to-Maturity - ---------------- U.S. Treasury $ 32,240 $ 572 $ (53) $ 32,759 $ 27,528 $ 826 $ -- $ 28,354 U.S. Government agencies 47,484 225 (286) 47,423 36,992 451 (108) 37,335 Mortgage-backed securities 5,942 69 (4) 6,007 6,681 105 -- 6,786 State and political subdivisions 115,009 2,449 (130) 117,328 119,824 2,255 (152) 121,927 Other securities 100 -- -- 100 100 -- -- 100 ---------- ------- ------- ---------- ---------- ------- ------- ---------- $ 200,775 $ 3,315 $ (473) $ 203,617 $ 191,125 $ 3,637 $ (260) $ 194,502 ========= ====== ====== ========= ========= ====== ====== ========= Available-for-Sale - ------------------ U.S. Treasury $ 10,519 $ 202 $ (36) $ 10,685 $ 18,071 $ 349 $ (12) $ 18,408 U.S. Government agencies 188,540 947 (1,079) 188,408 214,190 1,792 (492) 215,490 Mortgage-backed securities 6,207 45 (35) 6,217 6,975 69 (40) 7,004 State and political subdivisions 4,979 237 -- 5,216 5,194 205 -- 5,399 Other securities 28,966 895 -- 29,861 9,056 823 -- 9,879 ---------- ------- ------- ---------- ---------- -------- -------- ---------- $ 239,211 $ 2,326 $(1,150) $ 240,387 $ 253,486 $ 3,238 $ (544) $ 256,180 ========= ====== ====== ========= ========= ======= ======= ========= </TABLE>
The carrying value, which approximates the market value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $295,269,000 at March 31, 2002 and $290,915,000 at December 31, 2001. The book value of securities sold under agreements to repurchase amounted to $37,839,000 and $35,990,000 for March 31, 2002 and December 31, 2001, respectively. Income earned on securities for the three months ended March 31, 2002 and 2001, is as follows: <TABLE> <CAPTION> (In thousands) 2002 2001 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> Taxable Held-to-maturity $ 926 $ 1,372 Available-for-sale 2,593 2,938 Non-taxable Held-to-maturity 1,333 1,300 Available-for-sale 71 90 --------- -------- Total $ 4,923 $ 5,700 ======== ======= </TABLE> Maturities of investment securities at March 31, 2002 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 $ 35,188 $ 35,607 $ 27,261 $ 27,336 After one through five years 119,417 120,513 173,224 173,170 After five through ten years 36,759 37,903 5,246 5,481 After ten years 9,311 9,494 4,514 4,539 Other securities 100 100 28,966 29,861 ----------- ----------- ----------- ---------- Total $ 200,775 $ 203,617 $ 239,211 $ 240,387 ========== ========== ========== ========= </TABLE> There were no gross realized gains or losses as of March 31, 2002 and 2001. 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> March 31, December 31, (In thousands) 2002 2001 - --------------------------------------------------------------------------------------------------------- <S> <C> <C> Consumer Credit cards $ 181,867 $ 196,710 Student loans 84,186 74,860 Other consumer 170,649 179,138 Real Estate Construction 80,120 83,628 Single family residential 223,146 224,122 Other commercial 260,346 263,539 Commercial Commercial 151,436 153,617 Agricultural 54,234 60,794 Financial institutions 7,600 5,861 Other 15,007 16,515 ------------ ----------- Total loans before allowance for loan losses $ 1,228,591 $ 1,258,784 ============ =========== </TABLE> During the first three months of 2002, foreclosed assets held for sale increased $1,098,000 to $2,182,000 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, 2002, were $492,000, $11,194,000 and $3,268,000, respectively, bringing the total of non-performing assets to $17,136,000.
Transactions in the allowance for loan losses are as follows: <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - ----------------------------------------------------------------------------------------------------------------- <S> <C> <C> Balance, beginning of year $ 20,496 $ 21,157 Additions Provision charged to expense 2,361 1,853 --------- -------- 22,857 23,010 Deductions Losses charged to allowance, net of recoveries of $560 and $420 for the first three months of 2002 and 2001, respectively 2,705 1,642 --------- -------- Balance, March 31 $ 20,152 $ 21,368 ========= ------- Additions Provision charged to expense 8,105 -------- 29,473 Deductions Losses charged to allowance, net of recoveries of $1,309 for the last nine months of 2001 8,977 -------- Balance, end of year $ 20,496 ======= </TABLE> At March 31, 2002 and December 31, 2001, impaired loans totaled $20,598,000 and $21,012,000, respectively. All impaired loans had designated reserves for possible loan losses. Reserves relative to impaired loans at March 31, 2002, were $3,577,000 and $4,093,000 at December 31, 2001. Approximately, $182,000 and $266,000 of interest income were recognized on average impaired loans of $20,805,000 and $19,951,000 as of March 31, 2002 and 2001, respectively. Interest recognized on impaired loans on a cash basis during the first three months of 2002 and 2001 was immaterial.
NOTE 5: TIME DEPOSITS Time deposits include approximately $331,066,000 and $341,085,000 of certificates of deposit of $100,000 or more at March 31, 2002 and December 31, 2001, respectively. NOTE 6: INCOME TAXES The provision for income taxes is comprised of the following components: <TABLE> <CAPTION> March 31, March 31, (In thousands) 2002 2001 - ------------------------------------------------------------------------------------------------- <S> <C> <C> Income taxes currently payable $ 2,420 $ 2,036 Deferred income taxes (318) (211) ------------- ------------- Provision for income taxes $ 2,102 $ 1,825 ============ ============ </TABLE> The tax effects of temporary differences related to deferred taxes shown on the balance sheet are shown below: <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> Deferred tax assets Allowance for loan losses $ 6,853 $ 6,611 Valuation of foreclosed assets 112 113 Deferred compensation payable 593 631 Deferred loan fee income 229 277 Vacation compensation 572 496 Mortgage servicing reserve 368 365 Loan interest 139 139 Other 196 189 ---------------- ---------------- Total deferred tax assets 9,062 8,821 ---------------- ---------------- Deferred tax liabilities Accumulated depreciation (1,445) (1,534) Available-for-sale securities (439) (887) FHLB stock dividends (709) (697) Other (202) (202) ---------------- ---------------- Total deferred tax liabilities (2,795) (3,320) ---------------- ---------------- Net deferred tax assets included in other assets on balance sheets $ 6,267 $ 5,501 =============== =============== </TABLE>
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below: <TABLE> <CAPTION> March 31, March 31, (In thousands) 2002 2001 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> Computed at the statutory rate (35%) $ 2,465 $ 2,233 Increase (decrease) resulting from: Tax exempt income (565) (545) Other differences, net 202 137 ---------------- ---------------- Actual tax provision $ 2,102 $ 1,825 =============== =============== </TABLE> NOTE 7: LONG-TERM DEBT Long-term debt at March 31, 2002 and December 31, 2001, consisted of the following components, <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> 7.32% note due 2007, unsecured $ 12,000 $ 12,000 1.83% to 8.41% FHLB advances due 2001 to 2021, secured by residential real estate loans 13,534 12,900 Trust preferred securities 17,250 17,250 ---------------- ---------------- $ 42,784 $ 42,150 =============== =============== </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 prior to maturity at the option of the Company on or after June 30, 2002. Trust preferred securities qualify as Tier 1 Capital for regulatory purposes.
Aggregate annual maturities of long-term debt at March 31, 2002, are: <TABLE> <CAPTION> Annual (In thousands) Year Maturities - ------------------------------------------------------------------------------------------------------- <S> <C> 2002 $ 5,714 2003 2,879 2004 2,879 2005 2,887 2006 2,906 Thereafter 25,519 ---------------- Total $ 42,784 =============== </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 March 31, 2002, 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 March 31, 2002, each of the seven subsidiary banks met the capital standards for a well-capitalized institution. The Company's "total risk-based capital" ratio was 14.59% at March 31, 2002.
NOTE 10: STOCK OPTIONS AND RESTRICTED STOCK At March 31, 2002, the Company had stock options outstanding of 400,150 shares and stock options exercisable of 207,920 shares. During the first three months of 2002, there were 5,300 shares issued upon exercise of stock options and 4,500 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 2002. NOTE 11: ADDITIONAL CASH FLOW INFORMATION <TABLE> <CAPTION> Three Months Ended March 31, (In thousands) 2002 2001 - ---------------------------------------------------------------------------------------- <S> <C> <C> Interest paid $ 13,109 $ 18,955 Income taxes paid $ -- $ 73 </TABLE> 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 seven 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 14.8% and 15.6% of the portfolio, as of March 31, 2002 and December 31, 2001, 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, 2002, the Company had outstanding commitments to extend credit aggregating approximately $234,974,000 and $282,595,000 for credit card commitments and other loan commitments, respectively. At December 31, 2001, the Company had outstanding commitments to extend credit aggregating approximately $230,783,000 and $203,808,000 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 $4,010,000 and $4,218,000 at March 31, 2002 and December 31, 2001, 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 $4,941,000, or $0.69 diluted earnings per share for the three-month period ended March 31, 2002. These earnings reflect an increase of $387,000, or $0.05 per share over the March 31, 2001, earnings of $4,554,000, or $0.64 diluted earnings per share. Return on average assets and return on average stockholders' equity for the three-month period ended March 31, 2002, was 1.00% and 10.79%, compared to 0.96% and 10.56%, respectively, for the same period in 2001. The increase in first quarter earnings were primarily due to improvement in the Company's net interest margin, combined with the change in the accounting standards related to the amortization of goodwill. Total assets for the Company at March 31, 2002, were $1.966 billion, a decrease of $50.8 million from the same figure at December 31, 2001. Average quarter to date total assets for the Company during the first quarter of 2002 was $2.011 billion, an increase of $91 million over the average for the first quarter of 2001. Stockholders' equity at the end of the first quarter of 2002 was $184.8 million, a $2.4 million, or 1.3%, increase from December 31, 2001. The allowance for loan losses as a percent of total loans equaled 1.64% and 1.63% as of March 31, 2002 and December 31, 2001, respectively. As of March 31, 2002, non-performing loans equaled 1.18% of total loans compared to 1.19% as of year-end 2001. As of March 31, 2002, the allowance for loan losses equaled 139% of non-performing loans compared to 137% at year-end 2001. Simmons First National Corporation is an Arkansas based, Arkansas committed, financial holding company, with community banks in Pine Bluff, Jonesboro, Lake Village, Rogers, Russellville, Searcy and El Dorado, Arkansas. The Company's seven banks conduct financial operations from 64 offices in 33 communities throughout Arkansas. ACQUISITIONS - ------------ On March 7, 2002, an announcement was made jointly by the Chief Executive Officers of both the Company and HEARTLAND Community Bank regarding the execution of a definitive agreement under the terms of which HEARTLAND will sell its Monticello, Arkansas location to Simmons First Bank of South Arkansas, a wholly owned subsidiary of the Company. The acquisition will involve approximately $9 million in loans and $13 million in total deposits. The transaction is expected to close during the third quarter of 2002.
STOCK REPURCHASE - ---------------- The Company has a stock repurchase program, which is authorized to repurchase 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, 2002, the Company did not repurchase any common shares of stock. As of March 31, 2002, the Company has repurchased a total of 300,782 common shares of stock with a weighted average repurchase price of $22.81 per share. 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, 2002 and 2001). Net interest margin improved six basis points to 4.14% for the three-month period ended March 31, 2002, when compared to 4.08% for the same period in 2001. During the year ended December 31, 2001, the Federal Reserve decreased the discount rate by 475 basis points in an effort to stimulate a stagnant and declining economy. Historically, the Federal Reserve's actions to decrease interest rates would have negatively affected the net interest margin of the Company. This was not the result for the first quarter of 2002 due to the changes in Arkansas usury law last year. More specifically, the first quarter of 2002 represents the first full quarter the Company was able to fully utilize the changes in the Arkansas usury law made possible through the Gramm-Leach-Bliley Act, which was confirmed by the Eighth Circuit Court of Appeals in October 2001.
For the three-month period ended March 31, 2002, net interest income on a fully taxable equivalent basis was $18.9 million, an increase of $1.2 million, or 6.8%, from the same period in 2001. The increase in net interest income was the result of a $6.0 million decrease in interest income and a $7.2 million decrease in interest expense. Interest income decreased as a result of a 3.7% reduction in the average loan portfolio and a 175 basis point decrease in the yield earned on earning assets associated with the decline in interest rates. These declines were mitigated by a $93 million increase in average earning assets. Correspondently, total interest expense decreased from a 205 basis points drop in cost of funds, due to repricing opportunities during the falling interest rate environment last year. 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, 2002 and 2001, respectively, as well as changes in fully taxable equivalent net interest margin for the three-month periods ended March 31, 2002 versus March 31, 2001. Table 1: Analysis of Net Interest Income (FTE =Fully Taxable Equivalent) <TABLE> <CAPTION> Period Ended March 31 (In thousands) 2002 2001 - ----------------------------------------------------------------------------------------------------- <S> <C> <C> Interest income $ 29,873 $ 36,014 FTE adjustment 854 750 ------------- ------------- Interest income - FTE 30,727 36,764 Interest expense 11,812 19,058 ------------- ------------- Net interest income - FTE $ 18,915 $ 17,706 ============ ============ Yield on earning assets - FTE 6.72% 8.47% Cost of interest bearing liabilities 3.03% 5.08% Net interest spread - FTE 3.69% 3.39% Net interest margin - FTE 4.14% 4.08% </TABLE> Table 2: Changes in Fully Taxable Equivalent Net Interest Margin <TABLE> <CAPTION> March 31, (In thousands) 2002 vs. 2001 - ---------------------------------------------------------------------------------------------------------- <S> <C> Increase due to change in earning assets $ 450 Decrease due to change in earning asset yields (6,487) Decrease due to change in interest bearing liabilities (257) Increase due to change in interest rates paid on interest bearing liabilities 7,503 ---------------- Increase in net interest income $ 1,209 =============== </TABLE>
Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the periods ended March 31, 2002 and 2001. 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 <TABLE> <CAPTION> Period Ended March 31 ---------------------------------------------------------------------- 2002 2001 --------------------------------- ----------------------------------- Average Income/ Yield/ Average Income/ Yield/ (In thousands) Balance Expense Rate(%) Balance Expense Rate(%) - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> ASSETS - ------ Earning Assets Interest bearing balances due from banks $ 69,675 $ 281 1.64 $ 25,202 $ 335 5.39 Federal funds sold 80,015 328 1.66 46,205 639 5.61 Investment securities - taxable 327,469 3,519 4.36 273,507 4,310 6.39 Investment securities - non-taxable 121,789 2,135 7.11 115,424 2,061 7.24 Mortgage loans held for sale 13,768 233 6.86 11,263 172 6.19 Assets held in trading accounts 286 2 2.84 693 7 4.10 Loans 1,240,293 24,229 7.92 1,287,630 29,240 9.21 ----------- --------- ----------- --------- Total interest earning assets 1,853,295 30,727 6.72 1,759,924 36,764 8.47 --------- --------- Non-earning assets 157,429 159,373 ----------- ----------- Total assets $ 2,010,724 $ 1,919,297 ========== ========== LIABILITIES AND - --------------- STOCKHOLDERS' EQUITY - -------------------- Liabilities Interest bearing liabilities Interest bearing transaction and savings accounts $ 529,158 $ 1,600 1.23 $ 462,016 $ 3,181 2.79 Time deposits 906,569 8,968 4.01 930,942 13,897 6.05 ----------- --------- ----------- --------- Total interest bearing deposits 1,435,727 10,568 2.99 1,392,958 17,078 4.97 Federal funds purchased and securities sold under agreement to repurchase 98,567 397 1.63 81,472 1,057 5.26 Other borrowed funds Short-term debt 5,849 41 2.84 6,156 104 6.85 Long-term debt 42,668 806 7.66 41,538 819 8.00 ----------- --------- ----------- --------- Total interest bearing liabilities 1,582,811 11,812 3.03 1,522,124 19,058 5.08 --------- --------- Non-interest bearing liabilities Non-interest bearing deposits 226,834 202,688 Other liabilities 15,349 19,595 ----------- ----------- Total liabilities 1,824,994 1,744,407 Stockholders' equity 185,730 174,890 ----------- ----------- Total liabilities and stockholders' equity $ 2,010,724 $ 1,919,297 ========== ========== Net interest spread 3.69 3.39 Net interest margin $ 18,915 4.14 $ 17,706 4.08 ======== ======== </TABLE>
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, 2002, 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 <TABLE> <CAPTION> Period Ended March 31 2002 over 2001 ---------------------------------------------------- (In thousands, on a fully Yield/ taxable equivalent basis) Volume Rate Total - ----------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Increase (decrease) in Interest income Interest bearing balances due from banks $ 296 $ (350) $ (54) Federal funds sold 300 (611) (311) Investment securities - taxable 747 (1,538) (791) Investment securities - non-taxable 113 (39) 74 Mortgage loans held for sale 41 20 61 Assets held in trading accounts (3) (2) (5) Loans (1,044) (3,967) (5,011) ------------- ------------- --------------- Total 450 (6,487) (6,037) ------------- ------------- --------------- Interest expense Interest bearing transaction and savings accounts 409 (1,990) (1,581) Time deposits (355) (4,574) (4,929) Federal funds purchased and securities sold under agreements to repurchase 186 (846) (660) Other borrowed funds Short-term debt (5) (58) (63) Long-term debt 22 (35) (13) ------------- ------------- --------------- Total 257 (7,503) (7,246) ------------- ------------- --------------- Increase in net interest income $ 193 $ 1,016 $ 1,209 ============ ============ ============== </TABLE>
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, 2002 and 2001, was $2.361 and $1.853 million, respectively. The primary reason for additional provision is the increase in the non-performing loans from March 31, 2001 to 2002. NON-INTEREST INCOME - ------------------- Total non-interest income was $8.4 million for the three-month period ended March 31, 2002, compared to $8.1 million for the same period in 2001. 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, 2002 and 2001, respectively, as well as changes in 2002 from 2001. Table 5: Non-Interest Income <TABLE> <CAPTION> Period Ended March 31 2002 --------------------- Change from (In thousands) 2002 2001 2001 - --------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Trust income $ 1,390 $ 1,407 $ (17) -1.21% Service charges on deposit accounts 2,238 2,101 137 6.52 Other service charges and fees 411 468 (57) -12.18 Income on sale of mortgage loans, net of commissions 811 624 187 29.97 Income on investment banking, net of commissions 266 222 44 19.82 Credit card fees 2,338 2,456 (118) -4.80 Other income 918 815 103 12.64 ----------- ----------- -------- Total non-interest income $ 8,372 $ 8,093 $ 279 3.45% ========== ========== ======= </TABLE> Recurring fee income for the three-month period ended March 31, 2002, was $6.4 million, which is virtually unchanged from the three-month period ended March 31, 2001. For the three-month period ended March 31, 2002, service charges on deposit accounts increased $137,000 and credit card fees decreased $118,000 from the March 31, 2001, level. The decrease in credit card fees for 2002 is the result of a decline in the number of accounts in the credit card portfolio (March 31, 2001 to March 31, 2002). The increase in service charges on deposit accounts for 2002 is primarily the result of internal deposit growth and an improved fee structure During the three-month period ended March 31, 2002, income on the sale of mortgage loans increased $187,000 from the same period during 2001. This increase was the result of a higher mortgage origination volume for the first quarter 2002 compared to the first quarter of 2001. This growth in volume is result of the lower interest rate environment.
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, 2002, was $17.0 million, an increase of $212,000 or 1.26%, from the same period in 2001. The increase in non-interest expense during the first three months of 2002, compared to the first three months of 2001 is primarily derived from the $947,000 increase in salary and employee benefits offset by the $757,000 decrease in amortization of intangibles. The salary and employee benefits increase is associated with normal salary adjustments, increased cost of health insurance, the addition of two new financial centers in Little Rock and a change in the Company's vacation policy. The vacation policy change created a special non-cash expense of $189,000 during the first quarter of 2002. The decrease in the amortization of intangibles was due to the Company adopting the Financial Accounting Standards Board SFAS No. 142, Goodwill and Other Intangible Assets effective January 1, 2002. The new rule eliminated most of the Company's goodwill amortization. Table 6 below shows non-interest expense for the periods ended March 31, 2002 and 2001, respectively, as well as changes to the first three months of 2002 from first three months of 2001, respectively. Table 6: Non-Interest Expense <TABLE> <CAPTION> Period Ended March 31 2002 --------------------- Change from (In thousands) 2002 2001 2001 - --------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Salaries and employee benefits $ 9,950 $ 9,003 $ 947 10.52% Occupancy expense, net 1,126 1,166 (40) -3.43 Furniture and equipment expense 1,292 1,336 (44) -3.29 Loss on foreclosed assets 43 75 (32) -42.67 Other operating expenses Professional services 480 423 57 13.48 Postage 504 510 (6) -1.18 Telephone 377 380 (3) -0.79 Credit card expenses 422 424 (2) -0.47 Operating supplies 398 403 (5) -1.24 FDIC insurance 78 76 2 2.63 Amortization of intangibles 28 785 (757) -96.43 Other expense 2,331 2,236 95 4.25 -------------- ------------- ---------- Total non-interest expense $ 17,029 $ 16,817 $ 212 1.26% ============= ============ ========= </TABLE>
LOAN PORTFOLIO - -------------- The Company's loan portfolio averaged $1.240 billion and $1.288 billion during the first three months of 2002 and 2001, respectively. As of March 31, 2002, total loans were $1.229 billion, compared to $1.259 billion on December 31, 2001. 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 $436.7 million at March 31, 2002, or 35.5% of total loans, compared to $450.7 million, or 35.8% of total loans at December 31, 2001. The consumer loan decrease from December 31, 2001 to March 31, 2002 is the result of the Company's lower credit card portfolio and indirect lending, which was offset by an increase in student loans. The credit card portfolio decrease was primarily the result of seasonality in the Company's portfolio for that product combined with a decline in the number of cardholder accounts. The decline in indirect consumer loans was the result of zero percent car manufacturer incentives and a planned reduction by the Company of that product based on the risk-reward relationship. The increase in student loans was a result of greater demand for that product. Real estate loans consist of construction loans, single-family residential loans and commercial loans. Real estate loans were $563.6 million at March 31, 2002, or 45.9% of total loans, which is comparable to the $571.3 million, or 45.4% of total loans at December 31, 2001. Commercial loans consist of commercial loans, agricultural loans and financial institution loans. Commercial loans were $213.3 million at March 31, 2002, or 17.4% of total loans, compared to $220.3 million, or 17.5% of total loans at December 31, 2001. The commercial loan decrease from December 31, 2001 to March 31, 2002, is primarily the result of the Company's seasonality of agricultural lending. The amounts of loans outstanding at the indicated dates are reflected in Table 7, according to type of loan.
Table 7: Loan Portfolio <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - -------------------------------------------------------------------------------------------- <S> <C> <C> Consumer Credit cards $ 181,867 $ 196,710 Student loans 84,186 74,860 Other consumer 170,649 179,138 Real Estate Construction 80,120 83,628 Single family residential 223,146 224,122 Other commercial 260,346 263,539 Commercial Commercial 151,436 153,617 Agricultural 54,234 60,794 Financial institutions 7,600 5,861 Other 15,007 16,515 ------------- ------------- Total loans $ 1,228,591 $ 1,258,784 ============ ============ </TABLE> 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, 2002, impaired loans were $20.6 million compared to $21.0 million at December 31, 2001. The decrease in impaired loans from December 31, 2001, primarily relates to the $485,000 reduction of non-performing loans. 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 8 presents information concerning non-performing assets, including nonaccrual and other real estate owned. Table 8: Non-performing Assets <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - ---------------------------------------------------------------------------------------- <S> <C> <C> Nonaccrual loans $ 11,194 $ 11,956 Loans past due 90 days or more (principal or interest payments) 3,268 2,991 ------------- ------------- Total non-performing loans 14,462 14,947 ------------- ------------- Other non-performing assets Foreclosed assets held for sale 2,182 1,084 Other non-performing assets 492 631 ------------- ------------- Total other non-performing assets 2,674 1,715 ------------- ------------- Total non-performing assets $ 17,136 $ 16,662 ============ ============ Allowance for loan losses to non-performing loans 139.34% 137.12% Non-performing loans to total loans 1.18% 1.19% Non-performing assets to total assets 0.87% 0.83% </TABLE> Approximately $219,000 and $223,000 of interest income would have been recorded for the three-month periods ended March 31, 2002 and 2001, 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, 2002 and 2001.
ALLOWANCE FOR LOAN LOSSES - ------------------------- An analysis of the allowance for loan losses is shown in Table 9. Table 9: Allowance for Loan Losses <TABLE> <CAPTION> (In thousands) 2002 2001 - ----------------------------------------------------------------------------------------------- <S> <C> <C> Balance, beginning of year $ 20,496 $ 21,157 --------------- -------------- Loans charged off Credit card 1,191 965 Other consumer 677 617 Real estate 444 209 Commercial 953 271 ---------------- --------------- Total loans charged off 3,265 2,062 ---------------- --------------- Recoveries of loans previously charged off Credit card 129 131 Other consumer 233 192 Real estate 82 63 Commercial 116 34 ---------------- --------------- Total recoveries 560 420 ---------------- --------------- Net loans charged off 2,705 1,642 Provision for loan losses 2,361 1,853 ---------------- --------------- Balance, March 31 $ 20,152 $ 21,368 =============== -------------- Loans charged off Credit card 3,466 Other consumer 2,446 Real estate 1,169 Commercial 3,205 --------------- Total loans charged off 10,286 --------------- Recoveries of loans previously charged off Credit card 384 Other consumer 476 Real estate 83 Commercial 366 --------------- Total recoveries 1,309 --------------- Net loans charged off 8,977 Provision for loan losses 8,105 --------------- Balance, end of year $ 20,496 ============== </TABLE>
The amount of provision to the allowance during the three-month periods ended March 31, 2002 and 2001, and for the year ended 2001 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, 2002, were $1.632 billion, compared to $1.686 billion on December 31, 2001. The decrease in deposits from December 31, 2001 to March 31, 2002, is primarily attributable to a decrease in certificates of deposit. As of March 31, 2002, time deposits were $871.7 million, a decrease of $49.6 million over the $921.3 million reported as of December 31, 2001. The decrease in certificates of deposits was the result of a first quarter 2002 strategic decision made by the Company, which allowed those deposits to decrease in the same relationship as the decrease in loan portfolio. CAPITAL - ------- At March 31, 2002, total capital reached $184.8 million. Capital represents shareholder ownership in the Company -- the book value of assets in excess of liabilities. At March 31, 2002, the Company's equity to asset ratio was 9.4% compared to 9.0% at year-end 2001. 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, 2002, the leverage ratio and the Tier 1 capital ratio was 8.5% and 13.3%, respectively, while the Company's total risk-based capital ratio was 14.6%, all of which exceed the capital minimums established in the risk-based capital requirements. The Company's risk-based capital ratios at March 31, 2002 and December 31, 2001, are presented in table 10.
Table 10: Risk-Based Capital <TABLE> <CAPTION> March 31, December 31, (In thousands) 2002 2001 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> Tier 1 capital Stockholders' equity $ 184,783 $ 182,363 Trust preferred securities 17,250 17,250 Intangible assets (32,265) (32,186) Unrealized gain on available- for-sale securities (538) (1,479) Other (873) (881) --------------- --------------- Total Tier 1 capital 168,357 165,067 -------------- -------------- Tier 2 capital Qualifying unrealized gain on available-for-sale equity securities 403 370 Qualifying allowance for loan losses 15,873 16,209 -------------- -------------- Total Tier 2 capital 16,276 16,579 -------------- -------------- Total risk-based capital $ 184,633 $ 181,646 ============= ============= Risk weighted assets $ 1,265,544 $ 1,292,798 ============= ============= Assets for leverage ratio $ 1,977,586 $ 1,996,383 ============= ============= Ratios at end of year Leverage ratio 8.51% 8.27% Tier 1 capital 13.30% 12.77% Total risk-based capital 14.59% 14.05% Minimum guidelines Leverage ratio 4.00% 4.00% Tier 1 capital 4.00% 4.00% Total risk-based capital 8.00% 8.00% </TABLE> 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 2001 (Form 10-K) filed with the Securities and Exchange Commission.
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BKD, LLP Certified Public Accountants 200 East Eleventh Pine Bluff, Arkansas Board of Directors Simmons First National Corporation Pine Bluff, Arkansas We have reviewed the accompanying consolidated balance sheet of SIMMONS FIRST NATIONAL CORPORATION as of March 31, 2002, and the related consolidated statements of income for the three-month periods ended March 31, 2002 and 2001 and cash flows and changes in stockholders' equity for the three-month periods ended March 31, 2002 and 2001. 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 auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2001, 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 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ BKD, LLP BKD, LLP Pine Bluff, Arkansas May 8, 2002
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 (i) the Simmons First National Corporation Incentive and Non-qualified Stock Option Plan (ii) the Simmons First National Corporation Executive Stock Incentive Plan, or (iii) the Simmons First National Corporation Executive Stock Incentive Plan - 2001. 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> 2 Officers January, 2002 2,100 15.8333 Incentive Stock Option 6 Officers February, 2002 2,100 15.8333 Incentive Stock Option 1 Officer March, 2002 200 21.1250 Incentive Stock Option 1 Officer March, 2002 300 24.4375 Incentive Stock Option 1 Officer March, 2002 600 25.6667 Incentive Stock Option <FN> - -------------- 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. </FN> </TABLE> Item 6. Reports on Form 8-K The registrant filed Form 8-K on January 17, 2002. The report contained the text of a press release issued by the registrant concerning the announcement of 2001 earnings. The registrant filed Form 8-K on March 1, 2002. The report contained the text of a press release issued by the registrant concerning the declaration of a quarterly cash dividend. The registrant filed Form 8-K on March 8, 2002. The report contained the text of a press release issued by the registrant concerning the purchase of a banking office in Monticello, Arkansas.
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 8, 2002 /s/ J. Thomas May ------------------ --------------------------------------- J. Thomas May, Chairman, President and Chief Executive Officer Date: May 8, 2002 /s/ Barry L. Crow ------------------ --------------------------------------- Barry L. Crow, Executive Vice President and Chief Financial Officer