Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Exchange Act of 1934
For the fiscal year ended: December 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-6253
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)
(870) 541-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------------------------------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $1.00 par value
(Title of Class)
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 that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or in information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of common stock, par value $1.00 per share, held by
non-affiliates on March 17, 2000, was approximately $170,741,863.
The number of shares outstanding of the Registrant's Common Stock as of March
17, 2000 was 7,329,975.
Part III is incorporated by reference from the Registrant's Proxy Statement
relating to the Annual Meeting of Shareholders to be held on April 25, 2000.
FORM 10-K INDEX
Part I
Item 1 Business................................................................1
Item 2 Properties..............................................................6
Item 3 Legal Proceedings.......................................................6
Item 4 Submission of Matters to a Vote of Security-Holders.....................7
Part II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters...7
Item 6 Selected Consolidated Financial Data....................................8
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................10
Item 8 Consolidated Financial Statements and Supplementary Data...............31
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................58
Part III
Item 10 Directors and Executive Officers of the Company.......................58
Item 11 Executive Compensation................................................58
Item 12 Security Ownership of Certain Beneficial Owners and Managment.........58
Item 13 Certain Relationships and Related Transactions........................58
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.......58
Signatures............................................................59
PART I
ITEM 1. BUSINESS
The Company and the Banks
Simmons First National Corporation (the "Company") is a bank holding
company registered under the Bank Holding Company Act of 1956. At December 31,
1999, the Company was the third largest bank holding company headquartered in
Arkansas with consolidated total assets of $1.7 billion, consolidated loans of
$1.1 billion, consolidated deposits of $1.4 billion and total equity capital of
$159 million. The Company owns eight community banks in Arkansas. The Company's
banking subsidiaries conduct their operations through 54 offices located in 30
communities in Arkansas.
Simmons First National Bank (the "Bank") is the Company's lead bank. The
Bank is a national bank, which has been in operation since 1903. The Bank's
primary market area, with the exception of its nationally provided credit card
is central and western Arkansas. During 1999, the Company merged American State
Bank into the Bank. At December 31, 1999, the Bank had total assets of $814
million, total loans of $554 million and total deposits of $669 million. During
late 1999, the bank formed Simmons First Trust Company ("SFTC"), a wholly owned
subsidiary of the Bank. On January 1, 2000, all of the Bank's trust and
fiduciary business operations were transferred from the Bank's Trust and
Investment Management Division to SFTC.
Simmons First Bank of Jonesboro ("Simmons/Jonesboro") is a state bank,
which was acquired in 1984. Simmons/Jonesboro's primary market area is northeast
Arkansas. At December 31, 1999, Simmons/Jonesboro had total assets of $152
million, total loans of $120 million and total deposits of $134 million.
Simmons First Bank of South Arkansas ("Simmons/South") is a state bank,
which was acquired in 1984. Simmons/South's primary market area is southeast
Arkansas. At December 31, 1999, Simmons/South had total assets of $62 million,
total loans of $33 million and total deposits of $56 million.
Simmons First Bank of Dumas ("Simmons/Dumas") is a state bank, which was
acquired in 1995. Simmons/Dumas's primary market area is Dumas, Arkansas. At
December 31, 1999, Simmons/Dumas had total assets of $33 million, total loans of
$19 million and total deposits of $29 million.
Simmons First Bank of Northwest Arkansas ("Simmons/Northwest") is a state
bank, which was acquired in 1995. Simmons/Northwest's primary market area is
northwest Arkansas. During 1999, the Company acquired and merged the Bank of
Lincoln into Simmons/Northwest. At December 31, 1999, Simmons/Northwest had
total assets of $159 million, total loans of $109 million and total deposits of
$142 million.
Simmons First Bank of Russellville ("Simmons/Russellville") is a state
bank, which was acquired in 1997. Simmons/Russellville's primary market area is
Russellville, Arkansas. At December 31, 1999, Simmons/Russellville had total
assets of $223 million, total loans of $134 million and total deposits of $168
million.
Simmons First Bank of Searcy ("Simmons/Searcy") is a state bank, which was
acquired in 1997. Simmons/Searcy's primary market area is Searcy, Arkansas. At
December 31, 1999, Simmons/Searcy had total assets of $118 million, total loans
of $80 million and total deposits of $101 million.
Simmons First Bank of El Dorado, N.A. ("Simmons/El Dorado") is a national
bank, which was acquired in 1999. Simmons/El Dorado's primary market area is
south central Arkansas. At December 31, 1999, Simmons/El Dorado had total assets
of $156 million, total loans of $72 million and total deposits of $133 million.
The Company's subsidiaries provide complete banking services to individuals
and businesses throughout the market areas, which they serve. Services include
consumer (credit card, student and other consumer), real estate (construction,
single family residential and other commercial) and commercial (commercial,
agriculture and financial institutions) loans, checking, savings and time
deposits, trust and investment management services, and securities and
investment services.
Loan Risk Assessment
As a part of the ongoing risk assessment, the Bank has a Loan Loss Reserve
Committee that meets monthly to review the adequacy of the allowance for loan
losses. The Committee reviews the status of past due, non-performing and other
impaired loans on a loan by loan basis, including historical loan loss
information. However, for credit card and other consumer loans consideration is
given to more recent loss experience and current economic conditions. The
allowance for loan losses is determined based upon the aforementioned factors
and allocated to the individual loan categories. Also, an unallocated reserve is
established to compensate for the uncertainty in estimating loan losses,
including the possibility of improper risk ratings and specific reserve
allocations. The Committee reviews their analysis with management and the Bank's
Board of Directors on a monthly basis.
The Company has an independent loan review department. For the Bank, this
department reviews the allowance for loan loss on a monthly basis, performs an
independent loan analysis and prepares a detailed report on their analysis of
the adequacy of the allowance for loan losses on a quarterly basis. This
quarterly report is presented to the Company's Audit Committee.
The Board of Directors of the other subsidiary banks review the adequacy of
their allowance for loan losses on a monthly basis giving consideration to past
due loans, non-performing loans, other impaired loans and current economic
conditions. Quarterly, the other subsidiary banks supply loan information to the
Company's loan review department for their review. The loan review department
prepares a detailed report of their analysis of the allowance for loan losses
for each bank. This report is presented to the Company's Audit Committee on a
quarterly basis. On an annual basis, the loan review department performs an
on-site detailed review of the loan files to verify the accuracy of information
being supplied on a quarterly basis. The larger subsidiary banks receive this
review on a semi-annual basis.
Growth Strategy
The Company's growth strategy is to expand in its primary market areas by
capitalizing on opportunities presented within the State of Arkansas and
expanding through further banking acquisitions. The most significant
opportunities for internal growth will come from the community banks of
Simmons/Northwest, Simmons/Searcy and Simmons/Jonesboro, which are located in
some of the fastest growing areas in the state, and the Company's continued
expansion into the Little Rock market. With an increased presence in Arkansas,
ongoing investments in technology, and enhanced products and services, the
Company is positioned to meet the customer demands of the State of Arkansas.
Competition
The activities engaged in by the Company and its subsidiaries are highly
competitive. In all aspects of its business, the Company encounters intense
competition from other banks, lending institutions, credit unions, savings and
loan associations, brokerage firms, mortgage companies, industrial loan
associations, finance companies, and several other financial and financial
service institutions. The amount of competition among commercial banks and other
financial institutions has increased significantly over the past few years since
the deregulation of the banking industry. The Company's subsidiary banks
actively compete with other banks and financial institutions in their efforts to
obtain deposits and make loans, in the scope and type of services offered, in
interest rates paid on time deposits and charged on loans and in other aspects
of commercial banking.
The Company's banking subsidiaries are also in competition with major
national and international retail banking establishments, brokerage firms and
other financial institutions within and outside Arkansas. Competition with these
financial institutions is expected to increase, especially with the increase in
interstate banking.
Employees
As of December 31, 1999, the Company and its subsidiaries had 890 full time
equivalent employees. None of the employees are represented by any union or
similar groups, and the Company has not experienced any labor disputes or
strikes arising from any such organized labor groups. The Company considers its
relationship with its employees to be good.
Executive Officers of the Company
The following is a list of all executive officers of the Company. Executive
officers are elected annually by the Board of Directors.
NAME AGE POSITION YEARS SERVED
- ----------------------------------------------------------------------------------------------------
J. Thomas May 53 Chairman, President and Chief Executive Officer 13
Barry L. Crow 57 Executive Vice President and 28
Chief Financial Officer
John L. Rush 65 Secretary 32
SUPERVISION AND REGULATION
The Company
The Company, as a bank holding company, is subject to both federal and
state regulation. Under federal law, a bank holding company must generally
obtain approval from the Board of Governors of the Federal Reserve System
("FRB") before acquiring ownership or control of the assets or stock of a bank
or a bank holding company. Prior to approval of any proposed acquisition, the
FRB will review the effect on competition of the proposed acquisition, as well
as other regulatory issues.
The federal law generally prohibits a bank holding company from directly or
indirectly engaging in non-banking activities. This prohibition does not include
loan servicing, liquidating activities or other activities so closely related to
banking as to be a proper incident thereto.
As a bank holding company, the Company is required to file with the FRB an
annual report and such additional information as may be required by law. From
time to time, the FRB examines the financial condition of the Company and its
subsidiaries. The FRB, through civil and criminal sanctions, is authorized to
exercise enforcement powers over bank holding companies and non-banking
subsidiaries, to limit activities that represent unsafe or unsound practices or
constitute violations of law.
The Company is subject to certain laws and regulations of the State of
Arkansas applicable to bank holding companies, including examination and
supervision by the Arkansas Bank Commissioner. Under Arkansas law, a bank
holding company is prohibited from owning more than one subsidiary bank, if any
subsidiary bank owned by the holding company has been chartered for less than 5
years and, further, requires the approval of the Arkansas Bank Commissioner for
any acquisition of more than 25% of the capital stock of any other bank located
in Arkansas. No bank acquisition may be approved if, after such acquisition, the
holding company would control, directly or indirectly, banks having 25% of the
total bank deposits in the State of Arkansas, excluding deposits of other banks
and public funds.
Legislation enacted in 1994, allows bank holding companies from any state
to acquire banks located in any state without regard to state law, provided that
the bank holding company (1) is adequately capitalized, (2) is adequately
managed, (3) would not control more than 10% of the insured deposits in the
United States or more than 30% of the insured deposits in such state, and (4)
such bank has been in existence at least five years if so required by the
applicable state law.
The Gramm-Leach-Bliley-Act ("GLB Act") adopted by Congress and signed by
the President on November 11, 1999 has substantially increased the financial
activities that certain banks, bank holding companies, insurance companies and
securities brokerage companies are permitted to undertake. Under the GLB Act,
expanded activities in insurance underwriting, insurance sales, securities
brokerage and securities underwriting not previously allowed for banks and bank
holding companies are now permitted upon satisfaction of certain guidelines
concerning management, capitalization and satisfaction of the applicable
Community Reinvestment Act guidelines for the banks. Generally these new
activities are permitted for bank holding companies that are well managed, well
capitalized and whose banks have at least a satisfactory rating under the
Community Reinvestment Act. A bank holding company must apply to become a
financial holding company and its application must be approved by the Board of
Governors of the Federal Reserve System.
The Company's application to become a financial holding company was
approved by the Board of Governors on March 13, 2000. The Company is reviewing
the new activities permitted under the Act but at this time has no definite
plans to commence any of the new activities.
Subsidiary Banks
Simmons First National Bank and Simmons/El Dorado, as national banking
associations, are subject to regulation and supervision, of which regular bank
examinations are a part, by the Office of the Comptroller of the Currency of the
United States ("OCC"). Simmons/Jonesboro, Simmons/South, Simmons/Dumas and
Simmons/Northwest, as state chartered banks, are subject to the supervision and
regulation, of which regular bank examinations are a part, by the Federal
Deposit Insurance Corporation ("FDIC") and the Arkansas State Bank Department.
Simmons/Russellville and Simmons/Searcy, as state chartered member banks, are
subject to the supervision and regulation, of which regular bank examinations
are a part, by the Federal Reserve Board and the Arkansas State Bank Department.
The lending powers of each of the subsidiary banks are generally subject to
certain restrictions, including the amount, which may be lent to a single
borrower.
The subsidiary banks, with numerous exceptions, are subject to the
application of the laws of the State of Arkansas, including the limitation of
the maximum permissible interest rate on loans. The Arkansas limitation for
general loans is 5% over the Federal Reserve Discount Rate, with an additional
maximum limitation of 17% per annum for consumer loans and credit sales. Certain
loans secured by first liens on residential real estate and certain loans
controlled by federal law (e.g., guaranteed student loans, SBA loans, etc.) are
exempt from this limitation; however, a very substantial portion of the loans
made by the subsidiary banks, including all credit card loans, have historically
been subject to this limitation. One of the provisions of the GLB Act authorizes
insured banks with their principal office in the State of Arkansas to charge
interest at not more than the rate that any interstate bank with branches in the
State of Arkansas is permitted to charge. This provision may partially remove
the competitive disadvantage concerning the low interest rate ceiling that
Arkansas based banks have incurred over the recent years. The Company is
currently studying the new law and has not yet implemented the increased
interest rate ceilings into its ordinary lending activities.
All of the Company's subsidiary banks are members of the FDIC, which
currently insures the deposits of each member bank to a maximum of $100,000 per
deposit relationship. For this protection, each bank pays a statutory assessment
to the FDIC each year.
Federal law substantially restricts transactions between banks and their
affiliates. As a result, the Company's subsidiary banks are limited in making
extensions of credit to the Company, investing in the stock or other securities
of the Company and engaging in other financial transactions with the Company.
Those transactions, which are permitted, must generally be undertaken on terms
at least as favorable to the bank, as those prevailing in comparable
transactions with independent third parties.
Potential Enforcement Action for Bank Holding Companies and Banks
Enforcement proceedings seeking civil or criminal sanctions may be
instituted against any bank, any director, officer, employee or agent of the
bank, that is believed by the federal banking agencies to be violating any
administrative pronouncement or engaged in unsafe and unsound practices. In
addition, the FDIC may terminate the insurance of accounts, upon determination
that the insured institution has engaged in certain wrongful conduct, or is in
an unsound condition to continue operations.
Risk-Weighted Capital Requirements for the Company and the Banks
Since 1993, banking organizations (including bank holding companies and
banks) were required to meet a minimum ratio of Total Capital to Total
Risk-Weighted Assets of 8%, of which at least 4% must be in the form of Tier 1
Capital. A well-capitalized institution is one that has at least a 10% "total
risk-based capital" ratio. For a tabular summary of the Company's risk-weighted
capital ratios, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Capital" and Note 18 of the Notes to Consolidated
Financial Statements.
A banking organization's qualifying total capital consists of two
components: Tier 1 Capital (core capital) and Tier 2 Capital (supplementary
capital). Tier 1 Capital is an amount equal to the sum of common shareholders'
equity, certain preferred stock and the minority interest in the equity accounts
of consolidated subsidiaries. For bank holding companies, goodwill may not be
included in Tier 1 Capital. Identifiable intangible assets may be included in
Tier 1 Capital for banks and bank holding companies, in accordance with certain
further requirements. At least 50% of the banking organization's total
regulatory capital must consist of Tier 1 Capital.
Tier 2 Capital is an amount equal to the sum of the qualifying portion of
the allowance for loan losses, certain preferred stock not included in Tier 1,
hybrid capital instruments (instruments with characteristics of debt and
equity), certain long-term debt securities and eligible term subordinated debt,
in an amount up to 50% of Tier 1 Capital. The eligibility of these items for
inclusion as Tier 2 Capital is subject to certain additional requirements and
limitations of the federal banking agencies.
Under the risk-based capital guidelines, balance sheet assets and certain
off-balance sheet items, such as standby letters of credit, are assigned to one
of four risk weight categories (0%, 20%, 50%, or 100%), according to the nature
of the asset, its collateral or the identity of the obligor or guarantor. The
aggregate amount in each risk category is adjusted by the risk weight assigned
to that category, to determine weighted values, which are then added to
determine the total risk-weighted assets for the banking organization. For
example, an asset, such as a commercial loan, assigned to a 100% risk category,
is included in risk-weighted assets at its nominal face value, but a loan
secured by a one-to-four family residence is included at only 50% of its nominal
face value. The applicable ratios reflect capital, as so determined, divided by
risk-weighted assets, as so determined.
Federal Deposit Insurance Corporation Improvement Act
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
enacted in 1991, requires the FDIC to increase assessment rates for insured
banks and authorizes one or more "special assessments", as necessary for the
repayment of funds borrowed by the FDIC or any other necessary purpose. As
directed in FDICIA, the FDIC has adopted a transitional risk-based assessment
system, under which the assessment rate for insured banks will vary, according
to the level of risk incurred in the bank's activities. The risk category and
risk-based assessment for a bank is determined from its classification, pursuant
to the regulation, as well capitalized, adequately capitalized or
undercapitalized.
FDICIA substantially revised the bank regulatory provisions of the Federal
Deposit Insurance Act and other federal banking statutes, requiring federal
banking agencies to establish capital measures and classifications. Pursuant to
the regulations issued under FDICIA, a depository institution will be deemed to
be well capitalized if it significantly exceeds the minimum level required for
each relevant capital measure; adequately capitalized if it meets each such
measure; undercapitalized if it fails to meet any such measure; significantly
undercapitalized if it is significantly below any such measure; and critically
undercapitalized if it fails to meet any critical capital level set forth in
regulations. The federal banking agencies must promptly mandate corrective
actions by banks that fail to meet the capital and related requirements, in
order to minimize losses to the FDIC. The Company was advised by the FDIC and
OCC that the subsidiary banks had been classified as well capitalized under
these regulations.
The federal banking agencies are required by FDICIA to prescribe standards
for banks and bank holding companies, relating to operations and management,
asset quality, earnings, stock valuation and compensation. A bank or bank
holding company that fails to comply with such standards will be required to
submit a plan designed to achieve compliance. If no plan is submitted or the
plan is not implemented, the bank or holding company would become subject to
additional regulatory action or enforcement proceedings.
A variety of other provisions included in FDICIA may affect the operations
of the Company and the subsidiary banks, including new reporting requirements,
revised regulatory standards for real estate lending, "truth in savings"
provisions, and the requirement that a depository institution give 90 days prior
notice to customers and regulatory authorities before closing any branch.
ITEM 2. PROPERTIES
The principal offices of the Company and the Bank consist of an
eleven-story office building and adjacent office space, located in the central
business district of the city of Pine Bluff, Arkansas. The building and adjacent
office space is comprised of approximately 166,000 square feet of floor space,
approximately 7,500 square feet of which is leased to a tenant as office space.
The Company and its subsidiaries own or lease additional offices throughout
the State of Arkansas. As of December 31, 1999, the company's eight banks are
conducting financial operations from 54 offices in 30 communities throughout
Arkansas.
ITEM 3. LEGAL PROCEEDINGS
The Company and/or its subsidiary banks have various unrelated legal
proceedings, most of which involve loan foreclosure activity pending, which, in
the aggregate, are not expected to have a material adverse effect on the
financial position of the Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security-holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market(R)under the
symbol "SFNCA". The following table sets forth, for all the periods indicated,
cash dividends paid, and the high and low bid prices for the Company's common
stock.
Quarterly
Price Per Dividends
Common Share Per Common
High Low Share(1)
- ----------------------------------------------------------------------------------------------------
1999
1st quarter $ 40.50 $ 31.80 $ 0.17
2nd quarter 38.50 31.38 0.18
3rd quarter 34.00 29.00 0.18
4th quarter 30.50 23.00 0.19
1998
1st quarter $ 53.25 $ 42.00 $ 0.15
2nd quarter 50.75 43.25 0.16
3rd quarter 49.50 33.75 0.16
4th quarter 44.88 33.63 0.17
(1) Dividends per common share are historical amounts.
At December 31, 1999, the Common Stock was held of record by approximately
1,506 stockholders. On March 17, 2000, the last sale price for the Common Stock
as reported by The Nasdaq Stock Market(R) was $27.50 per share.
The Company's policy is to declare regular quarterly dividends based upon
the Company's earnings, financial position, capital requirements and such other
factors deemed relevant by the Board of Directors. This dividend policy is
subject to change, however, and the payment of dividends by the Company is
necessarily dependent upon the availability of earnings and the Company's
financial condition in the future. The payment of dividends on the Common Stock
is also subject to regulatory capital requirements.
The Company's principal source of funds for dividend payments to its
stockholders is dividends received from its subsidiary banks. Under applicable
banking laws, the declaration of dividends by the Bank and Simmons/El Dorado in
any year, in excess of the sum of net income of such bank for that year and
retained earnings for the preceding two years, must be approved by the Office of
the Comptroller of the Currency. Further, as to Simmons/Jonesboro,
Simmons/Dumas, Simmons/Northwest, Simmons/South, Simmons/Russellville and
Simmons/Searcy regulators have specified that the maximum dividends state banks
may pay to the parent company without prior approval is 75% of the current year
earnings plus 75% of the retained net earnings of the preceding year. At
December 31, 1999, approximately $10 million was available for the payment of
dividends by the subsidiary banks without regulatory approval. For further
discussion of restrictions on the payment of dividends, see "Management's
Discussion and Analysis of Financial Condition-Liquidity and Market Risk
Management," and Note 18 of Notes to Consolidated Financial Statements.
Recent Sales of Unregistered Securities
The following transactions are sales of unregistered shares of Class A
Common Stock of the registrant which were issued to executive and senior
management officers upon the exercise of rights granted under either the Simmons
First National Corporation Incentive and Non-qualified Stock Option Plan or the
Simmons First National Corporation Executive Stock Incentive Plan. No
underwriters were involved and no underwriter's discount or commissions were
involved. Exemption from registration is claimed under Section 4(2) of the
Securities Act of 1933 as private placements. Unless noted otherwise, the
registrant received cash as the consideration for the transaction.
Number
Identity Date of Sale of Shares Price(1) Type of Transaction
- -----------------------------------------------------------------------------------
1 Officer November, 1999 1,500 12.333 Incentive Stock Option
1 Officer November, 1999 300 15.583 Incentive Stock Option
- ----------
Notes:
1. The per share price paid for incentive stock options represents the fair
market value of the sock as determined under the terms of the Plan on the
date incentive stock option was granted to the officer. The price paid has
been adjusted to reflect the effect of the 50% stock dividend paid on
December 6, 1996.
Forward Looking Statements
When used in this Form 10-K or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be",
"will allow", "intends to", "will likely result", "are expected to ", "will
continue", "is anticipated", "estimate", "project", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and to
advise readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive, and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data
concerning the Company and is qualified in its entirety by the detailed
information and consolidated financial statements, including notes thereto,
included elsewhere in this annual report. The income statement, balance sheet
and per common share data as of and for the years ended December 31, 1999, 1998,
1997, 1996, and 1995 were derived from consolidated financial statements of the
Company, which were audited by Baird, Kurtz & Dobson. Earnings per common share
and dividends per common share presented in the financial statements have been
restated retroactively to reflect the effects of the October 29, 1996 50% stock
dividend on a consistent basis. The selected consolidated financial data set
forth below should be read in conjunction with the financial statements of the
Company and related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this annual
report.
- ----------------------------------------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended December 31(1)
---------------------------------------------------------
(In thousands,
except per share data) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ 64,731 $ 60,466 $ 51,836 $ 44,180 $ 41,162
Provision for loan losses 6,551 8,309 5,215 2,564 2,580
Net interest income after provision
for loan losses 58,180 52,157 46,621 41,616 38,582
Non-interest income 28,277 33,635 30,201 27,679 26,586
Non-interest expense 61,929 62,639 55,261 50,286 47,879
Provision for income taxes 7,360 6,666 6,591 5,671 5,250
Net income 17,168 16,487 14,970 13,338 12,039
Per share data:
Basic earnings 2.35 2.28 2.08 1.85 1.68
Diluted earnings 2.33 2.24 2.05 1.83 1.67
Diluted cash operating earnings(2) 2.74 2.52 2.15 1.87 1.71
Book value 21.78 20.77 19.13 17.63 16.44
Dividends(3) 0.72 0.64 0.56 0.48 0.40
Balance sheet data at period end:
Assets 1,697,430 1,687,010 1,625,492 1,165,556 1,115,288
Loans 1,113,635 1,034,462 965,865 669,575 615,528
Allowance for loan losses 17,085 16,812 15,215 10,506 10,303
Deposits 1,410,633 1,381,003 1,363,344 984,914 950,060
Long-term debt 46,219 49,899 53,558 1,067 4,757
Stockholders' equity 159,371 150,384 138,128 126,907 118,718
Capital ratios at period end:
Stockholders' equity to
total assets 9.39% 8.91% 8.50% 10.89% 10.64%
Leverage (4) 9.10% 8.39% 7.77% 10.95% 10.19%
Tier 1 13.67% 12.81% 12.19% 17.84% 17.51%
Total risk-based 14.96% 14.06% 13.49% 19.11% 18.86%
Selected ratios:
Return on average assets 1.02% 1.00% 1.10% 1.18% 1.15%
Return on average equity 10.92% 11.31% 11.21% 10.78% 10.67%
Net interest margin (5) 4.41% 4.17% 4.35% 4.50% 4.53%
Allowance/nonperforming loans 167.37% 167.30% 155.03% 167.05% 223.35%
Allowance for loan losses as a
percentage of average loans 1.62% 1.69% 1.89% 1.64% 1.77%
Nonperforming loans as a percentage
of period-end loans 0.92% 0.97% 1.02% 0.98% 0.75%
Net charge-offs as a percentage
of average total assets 0.37% 0.41% 0.33% 0.21% 0.22%
Dividend payout 31.26% 29.83% 29.16% 24.85% 20.91%
- --------------------------------------------------------------------------------
(1) The selected consolidated financial data set forth above should be read in
conjunction with the financial statements of the Company and related
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this Annual Report. All financial information
has been restated for mergers accounted for as pooling-of-interests. (2) Cash
operating earnings are net income excluding amortization of intangible assets
and merger-related expenses.
(3) Dividends per common share are historical amounts.
(4) Leverage ratio is Tier 1 capital to quarterly average total assets less
intangible assets and gross unrealized gains/losses on available-for-sale
investments.
(5) Fully taxable equivalent (assuming an effective income tax rate of 37.5% for
1999 and 36.25% for 1998 through 1995).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- -------------------------------------------------------------------------------
Simmons First National Corporation (SFNC) achieved record operating
earnings (net income excluding merger-related expenses) in 1999. Operating
earnings for the year ended December 31, 1999, were $18,550,000 or an increase
of $1,643,000 over the December 31, 1998 operating earnings of $16,907,000.
Diluted operating earnings per share for the year ended 1999 were $2.52, an
increase of 9.6% from $2.30 in 1998. Operating return on average assets and
operating return on average stockholders' equity for the year ended December 31,
1999 was 1.11% and 11.80% compared to 1.02% and 11.59%, respectively, for the
same period in 1998. The record operating earnings for 1999 were predominantly
influenced from quality growth in the loan portfolio and an improvement in fees
on loans. All financial information has been restated for the mergers accounted
for as a pooling-of-interests.
In connection with mergers during the year ended December 31, 1999 and
1998, after tax merger-related expenses totaled $1,382,000, or $0.19 per share
and $420,000, or $0.06 per share, respectively. After the merger-related
expenses, the Company's year ended December 31, 1999 and 1998, earnings were
$17,168,000 or $2.33 diluted earnings per share and $16,487,000 or $2.24 diluted
earnings per share, respectively.
Because of the Company's previous cash acquisitions, cash operating
earnings (net income excluding amortization of intangible assets and
merger-related expenses) are an integral component of earnings. Diluted cash
operating earnings, on a per share basis, were $2.74 in 1999 compared to $2.52
in 1998 reflecting an 8.7% increase. Cash operating return on average assets was
1.23% and cash operating return on average stockholders' equity was 12.98% for
1999, compared with 1.14% and 12.72%, respectively, for 1998.
Total assets for the Company at December 31, 1999 and 1998, were $1.7
billion. Stockholders' equity at the end of 1999 was $159.4 million, a $9.0
million, or 6.0%, increase from the year ended December 31, 1998.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.53% as of December 31, 1999. As of December 31,
1999, non-performing loans equaled 0.92% of total loans, while the allowance for
loan losses equaled 167% of non-performing loans.
Simmons First National Corporation is an Arkansas based, Arkansas
committed, multi-bank holding company. The Company has eight community banks in
Pine Bluff, Jonesboro, Lake Village, Dumas, Rogers, Russellville, Searcy and El
Dorado, Arkansas. The Company's banks conduct financial operations from 54
offices in 30 communities throughout Arkansas.
Acquisitions
- -------------------------------------------------------------------------------
On August 1, 1997, Simmons First National Corporation acquired all the
outstanding capital stock of First Bank of Arkansas, Searcy, Arkansas and First
Bank of Arkansas, Russellville, Arkansas, in a cash purchase transaction of $53
million and changed the respective names of the banks to Simmons First Bank of
Searcy and Simmons First Bank of Russellville. The banks acquired had
consolidated assets of $362 million, as of August 1, 1997.
On December 8, 1998, the Company and American Bancshares of Arkansas, Inc.
("ABA") merged in a pooling-of-interests transaction. Stockholders of ABA
received 464,885 shares of Simmons First National Corporation stock in exchange
for ABA shares in the transaction. ABA owned American State Bank ("ASB"),
Charleston, Arkansas with assets, as of December 8, 1998, of $90 million. The
Company merged ASB into Simmons First National Bank during the first quarter of
1999.
On January 15, 1999, the Company and 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 ("BOL"), Lincoln,
Arkansas with assets, as of January 15, 1999, of $75 million. The Company merged
BOL 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
will continue to operate Simmons First Bank of El Dorado, N.A. as a separate
community bank with the same board of directors and management.
On March 27, 2000, an announcement was made jointly by the Chief Executive
Officers of both the Company and First Financial Banc Corporation regarding the
execution of a definitive agreement under the terms of which First Financial
will sell eight of its Arkansas locations to the Company. Simmons First National
Bank will acquire two Conway branches. Simmons First Bank of Northwest Arkansas
will acquire two Fayetteville locations, two Spingdale facilities and one branch
each in Rogers and Siloam Springs. The eight locations have approximately $68
million in loans and $70 million in total deposits. The transaction is expected
to close during the third quarter of 2000.
Sale of Mortgage Servicing
- --------------------------------------------------------------------------------
On June 30, 1998, the Company sold its residential mortgage-servicing
portfolio resulting in a $3.3 million gain. The portfolio consisted of
approximately $1.2 billion in residential mortgage loans.
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%, 36.25% and 36.25% for 1999, 1998 and 1997, respectively).
For the year ended December 31, 1999, net interest income on a fully
taxable equivalent basis was $67.7 million, an increase of approximately $4.8
million, or 7.6%, from 1998 net interest income. The increase in 1999 in net
interest income was the result of stable interest income and declining interest
expense. Interest income remained stable from 1998 to 1999 as a result of a
lower yield earned on earning assets offset by growth in the loan portfolio and
an improvement in fees on loans. The decline in interest expense from 1998 to
1999 was the result of a lower cost of funds. Yield on earning assets and cost
of funds was lower in 1999 as the result of lower average interest rates during
1999. The net interest margin was 4.41% in 1999, compared to 4.17% in 1998 and
4.35% in 1997. For the year ended December 31, 1998, net interest income on a
fully taxable equivalent basis was $62.9 million, an increase of approximately
$9.0 million, or 16.7%, from comparable figures in 1997. The increase in 1998
net interest income resulted primarily from the growth due to purchase
acquisitions during 1997 and other growth in the loan portfolio. The growth
offset a decrease in net interest margin resulting from a higher cost of funds.
The higher cost of funds is the result of the long-term debt issued during 1997
for purchase acquisitions. Table 1 and 2 reflect an analysis of net interest
income on a fully taxable equivalent basis for the years ended December 31,
1999, 1998 and 1997, respectively, as well as changes in fully taxable
equivalent net interest margin for the years 1999 versus 1998 and 1998 versus
1997.
Table 1: Analysis of Net Interest Income
(FTE =Fully Taxable Equivalent)
Years Ended December 31
-------------------------------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
Interest income $ 121,490 $ 122,040 $100,640
FTE adjustment 2,944 2,409 2,064
--------- --------- --------
Interest income - FTE 124,434 124,449 102,704
Interest expense 56,759 61,574 48,804
--------- --------- --------
Net interest income - FTE $ 67,675 $ 62,875 $ 53,900
========= ========= ========
Yield on earning assets - FTE 8.10% 8.26% 8.29%
Cost of interest bearing liabilities 4.29% 4.71% 4.62%
Net interest spread - FTE 3.81% 3.55% 3.67%
Net interest margin - FTE 4.41% 4.17% 4.35%
Table 2: Changes in Fully Taxable Equivalent Net Interest Margin
(In thousands) 1999 vs. 1998 1998 vs.1997
- -----------------------------------------------------------------------------------------------------------------
Increase due to change in earning assets $ 4,188 $ 22,403
Decrease due to change in earning asset yields (4,203) (658)
Increase (decrease) due to change in interest rates paid on
interest bearing liabilities 4,921 (60)
Decrease due to change in interest bearing liabilities (106) (12,710)
--------- --------
Increase in net interest income $ 4,800 $ 8,975
========= ========
Table 3 shows, for each major category of earning assets and interest
bearing liabilities, the average amount outstanding, the interest earned or
expensed on such amount and the average rate earned or expensed for each of the
years in the three-year period ended December 31, 1999. 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
Years Ended December 31
------------------------------------------------------------------------------
1999 1998 1997
----------------------- ------------------------ -----------------------
Average Income/Yield/ Average Income/ Yield/ Average Income/Yield/
(In thousands) Balance ExpenseRate(%) Balance Expense Rate(%) Balance ExpenseRate(%)
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Earning Assets
Interest bearing balances
due from banks $ 11,071 $ 535 4.83 $ 9,262 $ 517 5.58 $ 7,370 $ 384 5.21
Federal funds sold 39,815 1,759 4.42 75,840 3,850 5.08 52,315 2,923 5.59
Investment securities-taxable 305,773 18,287 5.98 314,154 19,548 6.22 281,829 18,082 6.42
Investment securities-non-taxable 114,762 8,428 7.34 101,862 7,500 7.36 83,211 6,266 7.53
Mortgage loans held for sale 9,969 712 7.14 8,135 581 7.14 5,567 407 7.31
Assets held in trading accounts 1,309 72 5.50 1,996 97 4.86 3,118 209 6.70
Loans 1,052,619 94,641 8.99 995,316 92,356 9.28 805,984 74,433 9.24
---------- -------- ---------- -------- --------- --------
Total interest earning assets 1,535,318 124,434 8.10 1,506,565 124,449 8.26 1,239,394 102,704 8.29
Non-earning assets 140,310 -------- 145,235 -------- 118,768 --------
---------- ---------- ----------
Total assets $1,675,628 $1,651,800 $1,358,162
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts $ 448,327 $ 12,125 2.70 $ 421,042 $ 12,213 2.90 $ 363,875 $ 10,502 2.89
Time deposits 755,238 37,752 5.00 765,308 42,029 5.49 618,450 33,645 5.44
---------- -------- ---------- -------- ---------- --------
Total interest bearing
deposits 1,203,565 49,877 4.14 1,186,350 54,242 4.57 982,325 44,147 4.49
Federal funds purchased and
securities sold under agreement
to repurchase 67,359 2,913 4.32 64,270 3,009 4.68 44,859 2,339 5.21
Other borrowed funds
Short-term debt 3,418 165 4.83 3,740 226 6.04 5,091 263 5.17
Long-term debt 48,694 3,804 7.81 51,685 4,097 7.93 24,763 2,055 8.30
---------- -------- ---------- -------- --------- -------
Total interest bearing
liabilities 1,323,036 56,759 4.29 1,306,045 61,574 4.71 1,057,038 48,804 4.62
-------- -------- -------
Non-interest bearing liabilities
Non-interest bearing deposits 178,103 180,519 152,248
Other liabilities 17,285 19,421 15,395
---------- ---------- ---------
Total liabilities 1,518,424 1,505,985 1,224,681
Stockholders' equity 157,204 145,815 133,481
---------- ---------- ---------
Total liabilities and
stockholders' equity $1,675,628 $1,651,800 $1,358,162
========== ========== ==========
Net interest margin $ 67,675 4.41 $ 62,875 4.17 $ 53,900 4.35
======== ======== ========
Table 4 shows changes in interest income and interest expense, resulting
from changes in volume and changes in interest rates for each of the years ended
December 31, 1999 and 1998 as compared to prior years. 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
Years Ended December 31 (1)
------------------------------------------------------------
1999 over 1998 1998 over 1997
---------------------------- ---------------------------
(In thousands, on a fully Yield/ Yield/
taxable equivalent basis) Volume Rate Total Volume Rate Total
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in
Interest income
Interest bearing balances
due from banks $ 93 $ (75) $ 18 $ 104 $ 29 $ 133
Federal funds sold (1,643) (448) (2,091) 1,214 (287) 927
Investment securities - taxable (513) (748) (1,261) 2,024 (558) 1,466
Investment securities - non-taxable 947 (19) 928 1,376 (142) 1,234
Mortgage loans held for sale 131 -- 131 183 (9) 174
Assets held in trading accounts (37) 12 (25) (64) (48) (112)
Loans 5,210 (2,925) 2,285 17,566 357 17,923
-------- -------- -------- -------- -------- --------
Total 4,188 (4,203) (15) 22,403 (658) 21,745
-------- -------- -------- -------- -------- --------
Interest expense
Interest bearing transaction and
savings accounts 766 (854) (88) 1,658 53 1,711
Time deposits (547) (3,730) (4,277) 8,062 322 8,384
Federal funds purchased
and securities sold under
agreements to repurchase 141 (237) (96) 929 (259) 670
Other borrowed funds
Short-term debt (19) (42) (61) (77) 40 (37)
Long-term debt (235) (58) (293) 2,138 (96) 2,042
-------- -------- -------- -------- -------- --------
Total 106 (4,921) (4,815) 12,710 60 12,770
-------- -------- -------- -------- -------- --------
Increase (decrease) in
net interest income $ 4,082 $ 718 $ 4,800 $ 9,693 $ (718) $ 8,975
======== ======== ======== ======== ======== ========
(1) Change due to mix (both volume and rate) has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar amounts to
the changes in each.
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 1999, 1998 and 1997 was $6.6, $8.3 and $5.2 million, respectively.
The decrease from 1998 to 1999 and the increase from 1997 to 1998 were
attributable to an increased provision during 1998. The provision in 1998 was
increased $3.1 million from 1997 to 1998 as a result of an $2.2 million increase
in net charge-offs and an increase in impaired loans of $2.1 million for the
same period. Other factors increasing the 1998 provision included growth in
loans, increased indirect lending, unfavorable weather and market conditions in
the agriculture industry and an increased level of consumer bankruptcies. The
provision for loan losses as a percentage of average loans for 1999, 1998 and
1997 was 0.62%, 0.83% and 0.65%, respectively.
Non-Interest Income
- --------------------------------------------------------------------------------
Total non-interest income was $28.3 million in 1999, compared to $33.6
million in 1998 and $30.2 million in 1997. Non-interest income for 1999 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.
During the second quarter of 1998 the Company sold its $1.2 billion
residential mortgage-servicing portfolio. The sale of the mortgage-servicing
portfolio resulted in a $3.3 million gain on sale and the elimination of
mortgage servicing fees.
Table 5 shows non-interest income for the years ended December 31, 1999,
1998 and 1997, respectively, as well as changes in 1999 from 1998 and in 1998
from 1997.
Table 5: Non-Interest Income
Years Ended December 31 1999 1998
------------------------- Change from Change from
(In thousands) 1999 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
Trust income $ 4,666 $ 4,037 $ 3,186 $ 629 15.58% $ 851 26.71%
Service charges on deposit accounts 7,007 6,820 5,378 187 2.74 1,442 26.81
Other service charges and fees 1,759 1,626 1,675 133 8.18 (49) -2.93
Income on sale of mortgage loans,
net of commissions 2,021 2,247 1,426 (226) -10.06 821 57.57
Income on investment banking,
net of commissions 266 1,044 1,061 (778) -74.52 (17) -1.60
Credit card fees 10,214 9,484 9,433 730 7.70 51 0.54
Mortgage servicing fees -- 3,030 5,599 (3,030) -100.00 (2,569) -45.88
Other income 2,344 2,074 2,443 270 13.02 (369) -15.10
Gain on sale of mortgage servicing -- 3,273 -- (3,273) -100.00 3,273 --
-------- --------- -------- ------- -------
Total non-interest income $ 28,277 $ 33,635 $ 30,201 $(5,358) -15.93% $ 3,434 11.37%
======== ========= ======== ======= =======
Recurring fee income for 1999 was $23.6 million, an increase of $1.6
million, or 7.6%, when compared with 1998 figures. Recurring fee income for 1998
was $22.0 million, an increase of $2.3 million, or 11.7%, when compared with
1997 figures. In 1999, trust fees increased $629,000 from the 1998 level, while
credit card fees increased $730,000. In 1998, trust fees increased $851,000 from
the 1997 level, while service charges on deposit accounts increased $1.4
million. The increase in trust fees for 1999 and 1998 is primarily the result of
growth in the number of trust relationships. The increase in credit card fees
for 1999 is the result of growth in the credit card portfolio. The increase in
service charges on deposit accounts for 1998 is the result of purchase
acquisitions during 1997.
Non-Interest Expense
- --------------------------------------------------------------------------------
Non-interest expense consists of salaries and employee benefits, occupancy,
equipment, foreclosure losses, merger-related costs, gain or loss on sold or
called securities 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. Monthly and annual profit plans are developed, including
manpower and capital expenditure budgets, based on a needs assessment of the
business plan for the upcoming year. 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 1999 was $61.9 million, a decrease of $710,000, or
1.1%, from 1998. The decrease in non-interest expense in 1999, compared to 1998
primarily reflects the sale of Company's $1.2 billion residential
mortgage-servicing portfolio and no additional Year 2000 expenses for 1999.
However, $1.4 million in additional merger-related expenses and the normal
increased cost of doing business offset these expense reductions. Non-interest
expense for 1998 was $62.6 million, an increase of $7.4 million, or 13.4%, from
1997. The increase in non-interest expense in 1998, compared to 1997 primarily
reflects the Company's purchase acquisitions on August 1, 1997, merger-related
expenses and Year 2000 expenses. These increases were offset by expense
reduction associated with the sale of the Company's residential
mortgage-servicing portfolio.
Table 6 below shows non-interest expense for the years ended December 31,
1999, 1998 and 1997, respectively, as well as changes to 1999 from 1998 and 1998
from 1997, respectively.
Table 6: Non-Interest Expense
Years Ended December 31 1999 1998
------------------------- Change from Change from
(In thousands) 1999 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
Salaries and employee benefits $ 32,395 $ 31,833 $ 28,226 $ 562 1.77% $ 3,607 12.78%
Occupancy expense, net 3,578 3,858 3,535 (280) -7.26 323 9.14
Furniture and equipment expense 5,003 4,448 3,863 555 12.48 585 15.14
Loss on foreclosed assets 364 738 1,197 (374) -50.68 (459) -38.35
Merger-related 1,843 466 -- 1,377 295.49 466 --
Loss on sale of securities, net -- 165 108 (165) -100.00 57 52.78
Other operating expenses
Professional services 1,444 1,920 1,883 (476) -24.79 37 1.96
Postage 1,895 1,836 1,434 59 3.21 402 28.03
Telephone 1,419 1,279 1,082 140 10.95 197 18.21
Credit card expenses 1,624 1,495 1,413 129 8.63 82 5.80
Operating supplies 1,524 1,517 1,389 7 0.46 128 9.22
FDIC insurance 232 248 312 (16) -6.45 (64) -20.51
Year 2000 -- 500 -- (500) -100.00 500 --
Amortization of MSR's -- 1,223 2,578 (1,223) -100.00 (1,355) -52.56
Amortization of intangibles 2,469 2,385 1,264 84 3.52 1,121 88.69
Other expenses 8,139 8,728 6,977 (589) -6.75 1,751 25.10
-------- --------- -------- ------- --------
Total non-interest expense $ 61,929 $ 62,639 $ 55,261 $ (710) -1.13% $ 7,378 13.35%
======== ========= ======== ======= ========
Income Taxes
- --------------------------------------------------------------------------------
The provision for income taxes for 1999 was $7.4 million, compared to $6.7
million in 1998 and $6.6 million in 1997. The effective income tax rates for the
years ended 1999, 1998 and 1997 were 30.0%, 28.8% and 30.6%, respectively.
Earnings/Ratios Excluding Intangibles and Merger-Related Expenses
- --------------------------------------------------------------------------------
Table 7 reconciles reported earnings to net income excluding intangible
amortization and merger-related expenses (cash operating) for the year ended
December 31, 1999. Table 8 presents the calculation of the cash operating return
on assets and cash operating return on equity for the year ended December 31,
1999. The Company specifically formulated these calculations and the results may
not be comparable to similarly titled measures reported by other companies.
Also, cash operating earnings are not entirely available for use by management.
See the Consolidated Statements of Cash Flows and Notes to the Financial
Statements for other information regarding funds available for use by
management.
Table 7: Earnings Excluding Intangibles and Merger-Related Expenses
Year ended December 31, 1999
----------------------------------------------------------------
Reported Intangible Merger-Related "Cash Operating"
(In thousands) Earnings Amortization Expenses Earnings
- -------------------------------------------------------------------------------------------------------------
Income before income taxes $ 24,528 $ 2,469 $ 1,843 $ 28,840
Provision for income taxes 7,360 813 461 8,634
--------- --------- --------- ---------
Net Income $ 17,168 $ 1,656 $ 1,382 $ 20,206
========= ========= ========= =========
Basic earnings per common share $ 2.35 $ 0.23 $ 0.19 $ 2.77
========= ========= ========= =========
Diluted earnings per common share $ 2.33 $ 0.22 $ 0.19 $ 2.74
========= ========= ========= =========
Table 8: Ratios Excluding Intangibles and Merger-Related Expenses
(In thousands) Year ended December 31, 1999
- ------------------------------------------------------------------------------------------------------------
Cash Operating ROA: A/(B-D) 1.23%
Cash Operating ROE: A/(C-E) 12.98%
Cash operating earnings $ 20,206 (A)
Average total assets 1,675,628 (B)
Average stockholders' equity 157,204 (C)
Average total intangible assets 28,449 (D)
Average intangible assets remaining in
stockholders' equity 1,503 (E)
Loan Portfolio
- --------------------------------------------------------------------------------
The Company's loan portfolio averaged $1.053 billion during 1999 and $995
million during 1998. As of December 31, 1999, total loans were $1.114 billion,
compared to $1.034 billion on December 31, 1998. The most significant components
of the loan portfolio were commercial real estate loans, loans to individuals in
the form of credit card loans, student 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, 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 $435.4 million at December 31, 1999, or
39.1% of total loans, compared to $387.5 million, or 37.5% of total loans at
December 31, 1998. The consumer loan increase from 1998 to 1999 is the result of
the Company's higher credit card volume and increased indirect lending (loans
originated by third parties, which are underwritten and purchased by the
Company). These increases were the result of an expanded marketing effort of
those products.
Real estate loans consist of construction loans, single family residential
loans and commercial loans. Real estate loans were $497.1 million at December
31, 1999, or 44.7% of total loans, compared to $480.6 million, or 46.4% of total
loans at December 31, 1998. The real estate loan increase from 1998 to 1999 is
the result of lower average interest rates.
Commercial loans consist of commercial loans, agricultural loans and
financial institution loans. Commercial loans were $176.3 million at December
31, 1999, or 15.8% of total loans, compared to $159.2 million, or 15.4% of total
loans at December 31, 1998. The commercial loan increase from 1998 to 1999 is
the result of favorable economic conditions.
The amounts of loans outstanding at the indicated dates are reflected in
table 9, according to type of loan.
Table 9: Loan Portfolio
Years Ended December 31
------------------------------------------------------------
(In thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
Consumer
Credit cards $ 187,242 $ 165,622 $ 179,828 $ 166,346 $ 154,808
Student loans 66,739 66,134 63,291 64,193 63,492
Other consumer 181,380 155,767 139,282 88,543 79,037
Real Estate
Construction 53,925 63,037 52,976 28,703 24,310
Single family residential 202,886 194,174 184,539 114,261 107,740
Other commercial 240,259 223,368 178,517 98,591 90,590
Commercial
Commercial 137,827 112,800 115,684 65,989 55,794
Agricultural 35,337 40,706 38,169 27,950 27,582
Financial institutions 3,165 5,656 6,073 8,469 9,058
Other 4,875 7,198 7,506 6,530 3,117
---------- ---------- ----------- ---------- ----------
Total loans $1,113,635 $1,034,462 $ 965,865 $ 669,575 $ 615,528
========== ========== =========== ========== ==========
Table 10 reflects the remaining maturities and interest rate sensitivity of
loans at December 31, 1999.
Table 10: Maturity and Interest Rate Sensitivity of Loans
Over 1
year
1 year through Over
(In thousands) or less 5 years 5 years Total
- -------------------------------------------------------------------------------------------------
Consumer $ 359,774 $ 75,431 $ 156 $ 435,361
Real estate 259,608 227,512 9,950 497,070
Commercial 130,603 43,556 2,170 176,329
Other 4,244 591 40 4,875
----------- ---------- --------- -----------
Total $ 754,229 $ 347,090 $ 12,316 $ 1,113,635
=========== ========== ========= ===========
Predetermined rate $ 528,003 $ 347,090 $ 12,316 $ 887,409
Floating rate 226,226 -- -- 226,226
----------- ---------- --------- -----------
Total $ 754,229 $ 347,090 $ 12,316 $ 1,113,635
=========== ========== ========= ===========
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 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 December 31, 1999, impaired loans were $12.1 million compared to $13.3
million and $11.2 million in 1998 and 1997, respectively. At December 31, 1999,
non-performing loans were $10.2 million compared to $10.0 million and $9.8
million in 1998 and 1997, respectively
Table 11 presents information concerning non-performing assets, including
nonaccrual and restructured loans and other real estate owned.
Table 11: Non-performing Assets
Years Ended December 31
-----------------------------------------------------------
(In thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
Nonaccrual loans $ 7,666 $ 6,959 $ 7,054 $ 3,729 $ 2,515
Loans past due 90 days or more
(principal or interest payments) 2,542 2,972 2,417 2,560 1,817
Restructured -- 118 343 -- 281
--------- -------- --------- --------- --------
Total non-performing loans 10,208 10,049 9,814 6,289 4,613
--------- -------- --------- --------- --------
Other non-performing assets
Foreclosed assets held for sale 747 2,156 2,095 1,368 1,485
Other non-performing assets 56 29 -- 6 7
--------- -------- --------- --------- --------
Total other non-performing assets 803 2,185 2,095 1,374 1,492
--------- -------- --------- --------- --------
Total non-performing assets $ 11,011 $ 12,234 $ 11,909 $ 7,663 $ 6,105
========= ======== ========= ========= ========
Allowance for loan losses to
non-performing loans 167.37% 167.30% 155.03% 167.05% 223.35%
Non-performing loans to total loans 0.92% 0.97% 1.02% 0.94% 0.75%
Non-performing assets to total assets 0.65% 0.73% 0.73% 0.66% 0.55%
Approximately $689,000, $646,000 and $652,000 of interest income would have
been recorded for the periods ended December 31, 1999, 1998 and 1997,
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 years ended December 31, 1999, 1998 and 1997.
Allowance for Loan Losses
- --------------------------------------------------------------------------------
An analysis of the allowance for loan losses for the last five years is
shown in table 12.
Table 12: Allowance for Loan Losses
(In thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
alance, beginning of year $ 16,812 $ 15,215 $ 10,506 $ 10,303 $ 9,660
--------- --------- -------- --------- ---------
Loans charged off
Credit card 3,156 3,734 3,283 2,392 1,851
Other consumer 2,419 1,398 919 615 635
Real estate 621 1,272 465 76 176
Commercial 1,498 1,367 731 151 265
--------- --------- -------- --------- ---------
Total loans charged off 7,694 7,771 5,398 3,234 2,927
--------- --------- -------- --------- ---------
Recoveries of loans previously charged off
Credit card 444 398 365 309 143
Other consumer 588 291 192 245 323
Real estate 231 121 144 69 73
Commercial 153 249 163 250 90
--------- --------- -------- --------- ---------
Total recoveries 1,416 1,059 864 873 629
--------- --------- -------- --------- ---------
Net loans charged off 6,278 6,712 4,534 2,361 2,298
Allowance for loan losses of
acquired institutions -- -- 4,028 -- 361
Provision for loan losses 6,551 8,309 5,215 2,564 2,580
--------- --------- -------- --------- ---------
Balance, end of year $ 17,085 $16,812 $ 15,215 $ 10,506 $ 10,303
========= ========= ======== ========= =========
Net charge-offs to average loans 0.60% 0.67% 0.56% 0.37% 0.39%
Allowance for loan losses to total loans 1.53% 1.63% 1.58% 1.57% 1.67%
Allowance for loan losses to net charge-offs 272.1% 250.5% 335.6% 445.0% 448.3%
The amount of provisions to the allowance during the year 1999 were 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.
The Company allocates the allowance for loan losses according to the amount
deemed to be reasonably necessary to provide for losses incurred within the
categories of loans set forth in table 13.
Table 13: Allocation of Allowance for Loan Losses
December 31
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ---------------- ---------------- --------------- ----------------
Allowance % of Allowance % of Allowance % of Allowance % of Allowance % of
(In thousands) Amount loans* Amount loans* Amount loans* Amount loans* Amount loans*
- --------------------------------------------------------------------------------------------------------------
Credit cards $3,300 16.8% $ 3,552 16.0% $3,339 18.6% $ 2,626 24.8% $ 2,658 25.2%
Consumer 1,918 22.3% 1,959 21.5% 1,731 21.0% 543 22.8% 503 23.2%
Real Estate 7,155 44.7% 6,367 46.4% 5,307 43.0% 3,687 36.1% 3,544 36.1%
Commercial 3,244 15.8% 2,637 15.4% 2,641 16.6% 1,214 15.3% 1,251 15.0%
Other -- 0.4% 12 0.7% 10 0.8% 4 1.0% 5 0.5%
Unallocated 1,468 2,285 2,187 2,432 2,342
------- ------- ------- ------- -------
Total $17,085 100.0% $16,812 100.0% $15,215 100.0% $10,506 100.0% $10,303 100.0%
======= ======= ======= ======= =======
*Percentage of loans in each category to total loans.
The unallocated reserve generally serves to compensate for the uncertainty
in estimating loan losses, including the possibility of improper risk ratings
and specific reserve allocations. The unallocated reserve is a result of
potential risk factors that cannot be quantified at December 31, 1999, including
the impact of increased indirect lending and consumer bankruptcies inherent in
the present portfolio.
Investments and Securities
- --------------------------------------------------------------------------------
The Company's securities portfolio is the second largest component of
earning assets and provides a significant source of revenue. Securities within
the portfolio are classified as either held-to-maturity, available-for-sale or
trading.
Held-to-maturity securities, which include any security for which
management has the positive intent and ability to hold until maturity, are
carried at historical cost, adjusted for amortization of premiums and accretion
of discounts. Premiums and discounts are amortized and accreted, respectively,
to interest income using the constant yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are included
in income when earned.
Available-for-sale securities, which include any security for which
management has no immediate plans to sell, but which may be sold in the future,
are carried at fair value. Realized gains and losses, based on amortized cost of
the specific security, are included in other income. Unrealized gains and losses
are recorded, net of related income tax effects, in stockholders' equity.
Premiums and discounts are amortized and accreted, respectively, to interest
income, using the constant yield method over the period to maturity. Interest
and dividends on investments in debt and equity securities are included in
income when earned.
The Company's philosophy regarding investments is conservative, based on
investment type and maturity. Investments in the portfolio primarily include
U.S. Treasury securities, U.S. government agencies, mortgage-backed securities
and municipal securities. The Company's general policy is not to invest in
derivative type investments, except for collateralized mortgage-backed
securities for which collection of principal and interest is not subordinated to
significant superior rights held by others.
Held-to-maturity and available-for-sale investment securities were $174.4
million and $234.9 million, respectively, at December 31, 1999, compared to the
held-to-maturity amount of $191.7 million and available-for-sale amount of
$224.7 million at December 31, 1998.
As of December 31, 1999, $50.2 million, or 28.8%, of the held-to-maturity
securities were invested in U.S. Treasury securities and obligations of U.S.
government agencies, 76.0% of which will mature in less than five years. In the
available-for-sale securities, $201.3 million, or 85.7% were in U.S. Treasury
and U.S. government agency securities, 77.6% of which will mature in less than
five years.
In order to reduce the Company's income tax burden, an additional $107.2
million, or 61.5%, of the held-to-maturity securities portfolio, as of December
31, 1999, was invested in tax-exempt obligations of state and political
subdivisions. In the available-for-sale securities, $6.4 million, or 2.7% were
invested in tax-exempt obligations of state and political subdivisions. There
are no securities of any one state and political subdivision issuer exceeding
ten percent of the Company's stockholders' equity at December 31, 1999.
The Company has approximately $16.9 million, or 9.7%, in mortgaged-backed
securities in the held-to-maturity portfolio at December 31, 1999. In the
available-for-sale securities, $16.7 million, or 7.1% were invested in
mortgaged-backed securities.
As of December 31, 1999, the held-to-maturity investment portfolio had
gross unrealized gains of $813,000 and gross unrealized losses of $3.7 million.
Net realized losses from called or sold available-for-sale securities for 1999
were zero, compared to net realized losses of $165,000 in 1998 and $108,000 in
1997.
Trading securities, which include any security held primarily for near-term
sale, are carried at fair value. Gains and losses on trading securities are
included in other income. The Company's trading account is established and
maintained for the benefit of investment banking. The trading account is
typically used to provide inventory for resale and is not used to take advantage
of short-term price movements.
Table 14 presents the carrying value and fair value of investment
securities for each of the years indicated.
Table 14: Investment Securities
Years Ended December 31
--------------------------------------------------------------------------------------
1999 1998
------------------------------------------- -----------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ---------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 13,576 $ 10 $ (115) $ 13,471 $ 25,116 $ 424 $ (1) $ 25,539
U.S. Government
agencies 36,654 57 (1,169) 35,542 35,770 474 (48) 36,196
Mortgage-backed
securities 16,920 84 (258) 16,746 19,756 113 (170) 19,699
State and political
subdivisions 107,157 662 (2,107) 105,712 110,997 2,766 (100) 113,663
Other securities 85 -- (2) 83 92 3 -- 95
---------- ------- -------- ---------- ---------- ------- ------- ----------
$ 174,392 $ 813 $ (3,651) $ 171,554 $ 191,731 $ 3,780 $ (319) $ 195,192
========== ======= ======== ========== ========== ======= ======= ==========
Available-for-Sale
U.S. Treasury $ 41,492 $ 83 $ (133) $ 41,442 $ 51,796 $ 1,081 $ -- $ 52,877
U.S. Government
agencies 166,143 -- (6,287) 159,856 131,996 486 (147) 132,335
Mortgage-backed
securities 16,954 26 (234) 16,746 25,256 58 (230) 25,084
State and political
subdivisions 6,432 88 (88) 6,432 4,816 57 (9) 4,864
Other securities 9,859 552 -- 10,411 8,246 1,523 (252) 9,517
---------- ------- -------- ---------- ---------- ------- ------- ----------
$ 240,880 $ 749 $ (6,742) $ 234,887 $ 222,110 $ 3,205 $ (638) $ 224,677
========== ======= ======== ========== ========== ======= ======= ==========
Total Investments $ 415,272 $ 1,562 $(10,393) $ 406,441 $ 413,841 $ 6,985 $ (957) $ 419,869
========== ======= ======== ========== ========== ======= ======= ==========
Table 15 reflects the amortized cost and estimated fair value of debt
securities at December 31, 1999, by contractual maturity, the weighted average
yields (for tax-exempt obligations on a fully taxable basis, assuming a 37.5%
tax rate) of such securities and the taxable equivalent adjustment used in
calculating yields. Expected maturities will differ from contractual maturities,
because borrowers may have the right to call or prepay obligations, with or
without call or prepayment penalties.
Table 15: Maturity Distribution of Investment Securities
December 31, 1999
--------------------------------------------------------------------------------
Over Over
1 year 5 years
1 year through through Over No fixed Par Fair
(In thousands) or less 5 years 10 years 10 years maturity Total Value Value
- -----------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 3,304 $ 10,272 $ -- $ -- $ -- $ 13,576 $ 13,550 $ 13,471
U.S. Government
agencies 3,004 21,608 12,042 -- -- 36,654 36,685 35,542
Mortgage-backed
securities 459 987 741 14,733 -- 16,920 16,756 16,746
State and political
subdivisions 10,712 44,884 42,630 8,931 -- 107,157 107,357 105,712
Other securities -- -- -- -- 85 85 83 83
--------- -------- --------- -------- --------- --------- --------- ---------
Total $ 17,479 $ 77,751 $ 55,413 $ 23,664 $ 85 $ 174,392 $ 174,431 $ 171,554
========= ======== ========= ======== ========= ========= ========= =========
Percentage of total 10.0% 44.6% 31.8% 13.5% 0.1% 100.0%
========= ======== ========= ======== ========= =========
Weighted average yield 7.0% 6.7% 7.1% 7.3% 6.8% 7.0%
========= ======== ========= ======== ========= =========
Available-for-Sale
U.S. Treasury $ 26,537 $ 14,955 $ -- $ -- $ -- $ 41,492 $ 41,550 $ 41,442
U.S. Government
agencies 23,886 90,870 51,387 -- -- 166,143 166,200 159,856
Mortgage-backed
securities -- 1,691 2,394 12,869 -- 16,954 16,573 16,746
State and political
subdivisions 430 1,224 4,432 346 -- 6,432 6,435 6,432
Other securities -- -- -- -- 9,859 9,859 9,859 10,411
--------- -------- --------- -------- --------- --------- --------- ---------
Total $ 50,853 $108,740 $ 58,213 $ 13,215 $ 9,859 $ 240,880 $ 240,617 $ 234,887
========= ======== ========= ======== ========= ========= ========= =========
Percentage of total 21.1% 45.1% 24.2% 5.5% 4.1% 100.0%
========= ======== ========= ======== ========= =========
Weighted average yield 5.8% 5.9% 6.5% 5.9% 5.4% 6.0%
========= ======== ========= ======== ========= =========
Deposits
- --------------------------------------------------------------------------------
Total average deposits for 1999 were $1.382 billion, compared to $1.367
billion in 1998. As of December 31, 1999, total deposits were $1.411 billion,
compared to $1.381 billion on December 31, 1998. The year-end balances of time
deposits over $100,000 were $225.3 million in 1999, compared to $218.1 million
in 1998.
Table 16 reflects the classification of the average deposits and the
average rate paid on each deposit category which are in excess of 10 percent of
average total deposits for the three years ended December 31, 1999.
Table 16: Average Deposits Balances and Rates
December 31
---------------------------------------------------------------------
1999 1998 1997
------------------- ------------------- ---------------------
Average Average Average Average Average Average
(In thousands) Amount Rate Paid Amount Rate Paid Amount Rate Paid
- ------------------------------------------------------------------------------------------------------------
Non-interest bearing demand
deposits $ 178,103 -- $ 180,519 -- $ 152,248 --
Interest bearing transaction and
savings deposits 448,327 2.70% 421,042 2.90% 363,875 2.89%
Time deposits
$100,000 or more 211,929 5.03% 223,434 5.48% 179,756 5.35%
Other time deposits 543,309 4.99% 541,874 5.50% 438,694 5.48%
----------- ----------- -----------
Total $ 1,381,668 $ 1,366,869 $ 1,134,573
=========== =========== ===========
The Company's maturities of large denomination time deposits at December
31, 1999 and 1998 are presented in table 17.
Table 17: Maturities of Large Denomination Time Deposits
Time Certificates of Deposit
($100,000 or more)
December 31
--------------------------------------------------------
1999 1998
-------------------------- ----------------------------
(In thousands) Balance Percent Balance Percent
- ----------------------------------------------------------------------------------------------------
Maturing
Three months or less $ 69,592 30.89% $ 84,114 38.56%
Over 3 months to 6 months 66,978 29.73% 72,798 33.37%
Over 6 months to 12 months 58,846 26.12% 41,652 19.10%
Over 12 months 29,874 13.26% 19,561 8.97%
----------- -----------
Total $ 225,290 100.00% $ 218,125 100.00%
=========== ===========
Short-Term Borrowings
- --------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase
were $60.5 million at December 31, 1999, as compared to $78.4 million at
December 31, 1998. Other short-term borrowings, consisting of U.S. Treasury
Notes, were $5.0 million at December 31, 1999, as compared to $1.6 million at
December 31, 1998.
The Company has historically funded its growth in earning assets through
the use of core deposits, large certificates of deposits from local markets and
federal funds purchased. Management anticipates that these sources will provide
necessary funding in the foreseeable future. The Company's general policy is to
avoid the use of brokered deposits.
Long-Term Debt
- --------------------------------------------------------------------------------
The Company's long-term debt was $46.2 million and $49.9 million at
December 31, 1999 and 1998, respectively. The outstanding balance for December
31, 1999 includes $16.0 million in long-term debt and $17.3 million of trust
preferred securities. This debt was incurred to fund a portion of the purchase
price of the acquisitions completed in 1997. The Company also has assumed FHLB
long-term advances during acquisitions. The outstanding balance for FHLB
long-term advances was $12.1 million as of December 31, 1999.
Capital
- --------------------------------------------------------------------------------
At December 31, 1999, the total capital reached $159.4 million, another
milestone in the Company's history. Capital represents shareholder ownership in
the Company -- the book value of assets in excess of liabilities. At year-end
1999, the Company's equity to asset ratio was 9.39% compared to 8.91% at
year-end 1998.
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 December 31, 1999, the Tier 1 capital ratio was
13.67%, while the Company's total risk-based capital ratio was 14.96%, both of
which exceed the capital minimums established in the risk-based capital
requirements.
The Company's risk-based capital ratios at December 31, 1999 and 1998 are
presented in table 18.
Table 18: Risk-Based Capital
December 31
----------------------------
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------
Tier 1 capital
Stockholders' equity $ 159,371 $ 150,384
Trust preferred securities 17,250 17,250
Intangible assets (27,226) (28,513)
Unrealized loss (gain) on
available-for-sale securities 3,900 (1,491)
Other (951) (986)
----------- ----------
Total Tier 1 capital 152,344 136,644
----------- ----------
Tier 2 capital
Qualifying unrealized gain on
available-for-sale equity securities 400 --
Qualifying allowance for loan losses 13,967 13,325
----------- ----------
Total Tier 2 capital 14,367 13,325
----------- ----------
Total risk-based capital $ 166,711 $ 149,969
=========== ==========
Risk weighted assets $ 1,114,226 $1,066,395
=========== ==========
Ratios at end of year
Leverage ratio 9.10% 8.39%
Tier 1 capital 13.67% 12.81%
Total risk-based capital 14.96% 14.06%
Minimum guidelines
Leverage ratio 4.00% 4.00%
Tier 1 capital 4.00% 4.00%
Total risk-based capital 8.00% 8.00%
Liquidity and Market Risk Management
- --------------------------------------------------------------------------------
Parent Company
The Company has leveraged its investment in subsidiary banks and depends
upon the dividends paid to it, as the sole shareholder of the subsidiary banks,
as a principal source of funds for debt service requirements. At December 31,
1999, undivided profits of the Company's subsidiaries were approximately $85
million, of which approximately $10 million was available for the payment of
dividends to the Company without regulatory approval. In addition to dividends,
other sources of liquidity for the Company are the sale of equity securities and
the borrowing of funds.
Banking Subsidiaries
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 investing activities. 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. A major responsibility
of management is to maximize net interest income within prudent liquidity
constraints. Internal corporate guidelines have been established to constantly
measure liquid assets, as well as relevant ratios concerning earning asset
levels and purchased funds. The management and board of directors of each bank
subsidiary monitors these same indicators and makes adjustments as needed. At
year end, each subsidiary bank was within established guidelines and total
corporate liquidity remains strong. At December 31, 1999, cash and cash
equivalents, trading and available-for-sale securities and mortgage loans held
for sale were 19.1% of total assets, as compared to 22.3% at December 31, 1998.
Market Risk Management
Market risk arises from changes in interest rates. The Company has risk
management policies to monitor and limit exposure to market risk. In asset and
liability management activities, policies are in place that are designed to
minimize structural interest rate risk. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 13 of Notes to Consolidated Financial Statements.
Interest Rate Sensitivity
Interest rate risk represents the potential impact of interest rate changes
on net income and capital resulting from mismatches in repricing opportunities
of assets and liabilities over a period of time. A number of tools are used to
monitor and manage interest rate risk, including simulation models and interest
sensitivity (GAP) analysis. Management uses simulation models to estimate the
effects of changing interest rates and various balance sheet strategies on the
level of the Company's net income and capital. As a means of limiting interest
rate risk to an acceptable level, management may alter the mix of floating - and
fixed-rate assets and liabilities, change pricing schedules and manage
investment maturities during future security purchases.
The simulation models incorporate management's assumptions regarding the
level of interest rates or balance changes for indeterminate maturity deposits
for a given level of market rate changes. These assumptions have been developed
through anticipated pricing behavior. Key assumptions in the simulation models
include the relative timing of prepayments, cash flows and maturities. In
addition, the impact of planned growth and anticipated new business is factored
into the simulation models. These assumptions are inherently uncertain and, as a
result, the models cannot precisely estimate net interest income or precisely
predict the impact of a change in interest rates on net income or capital.
Actual results will differ from simulated results due to the timing, magnitude
and frequency of interest rate changes and changes in market conditions and
management strategies, among other factors.
Table 19 presents the Company's interest rate sensitivity position at
December 31, 1999. This GAP analysis is based on a point in time and may not be
meaningful because assets and liabilities are categorized according to
contractual maturities (investment securities are according to call dates) and
repricing periods rather than estimating more realistic behaviors, as is done in
the simulation models. Also, the GAP analysis does not consider subsequent
changes in interest rate level or spreads between asset and liability
categories.
Table 19: Interest Rate Sensitivity
Interest Rate Sensitivity Period
---------------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1 to 2 2-5 Over 5
(In thousands, except ratios) Days Days Days Days Years Years Years Total
- --------------------------------------------------------------------------------------------------------------------
Earning assets
Short-term investments $ 20,881 $ -- $ -- $ -- $ -- $ -- $ -- $ 20,881
Assets held in trading
accounts 1,388 -- -- -- -- -- -- 1,388
Investment securities 7,012 38,116 36,856 64,798 83,975 91,343 87,179 409,279
Mortgage loans held for sale 6,814 -- -- -- -- -- -- 6,814
Loans 86,317 265,179 138,643 264,090 171,286 175,804 12,316 1,113,635
--------- --------- --------- --------- --------- --------- --------- ----------
Total earning assets 122,412 303,295 175,499 328,888 255,261 267,147 99,495 1,551,997
--------- --------- --------- --------- --------- --------- --------- ----------
Interest bearing liabilities
Interest bearing transaction
and savings accounts 204,059 -- -- -- 51,859 155,577 51,859 463,354
Time deposits 44,537 138,509 201,379 227,498 137,762 26,902 121 776,708
Short-term borrowings 65,540 -- -- -- -- -- -- 65,540
Long-term debt 110 221 331 2,660 3,237 9,388 30,272 46,219
--------- --------- --------- --------- --------- --------- --------- ----------
Total interest bearing
liabilities 314,246 138,730 201,710 230,158 192,858 191,867 82,252 1,351,821
--------- --------- --------- --------- --------- --------- --------- -----------
Interest rate
sensitivity GAP $(191,834) $ 164,565 $ (26,211) $ 98,730 $ 62,403 $ 75,280 $ 17,243 $ 200,176
========= ========= ========= ========= ========= ========= ========= ==========
Cumulative interest rate
sensitivity GAP $(191,834) $ (27,269) $ (53,480) $ 45,250 $ 107,653 $ 182,933 $ 200,176
Cumulative rate sensitive
assets to rate
sensitive liabilities 39.0% 94.0% 91.8% 105.1% 110.0% 114.4% 114.8%
Cumulative GAP as a % of
earning assets -12.4% -1.8% -3.4% 2.9% 6.9% 11.8% 12.9%
Impact of the Year 2000 Issue
- --------------------------------------------------------------------------------
The Company did not experience any significant down time or problems as a
result of the Year 2000 issue. The Company operated under normal conditions on
the first business day after January 1, 2000. The Company recognizes that the
Year 2000 issue poses a risk beyond January 1, 2000, as errors may not become
evident until after that date. However, the Company believes any errors will not
have a material impact on the Company's results of operations or financial
condition.
During the year ended December 31, 1999, the Company had no significant
expenses related to the Year 2000 issue. During the year ended December 31,
1998, the Company expensed $500,000 for software testing and hardware
replacement related to the Year 2000 issue. The Company's cumulative expenses
relating directly to the Year 2000 issue totaled $500,000.
Quarterly Results
- --------------------------------------------------------------------------------
Selected unaudited quarterly financial information for the last eight
quarters is shown in table 20.
Table 20: Quarterly Results
Quarter
-----------------------------------------------------
(In thousands, except per share data) First Second Third Fourth Total
- -----------------------------------------------------------------------------------------------------------
1999
Net interest income $ 15,508 $ 16,201 $ 16,397 $ 16,625 $ 64,731
Provision for loan losses 1,652 1,691 1,619 1,589 6,551
Non-interest income 6,749 6,903 7,456 7,169 28,277
Non-interest expense 15,245 14,965 16,821 14,898 61,929
Gains on sale of securities, net -- -- -- -- --
Net income 3,708 4,569 3,813 5,078 17,168
Diluted earnings per share 0.50 0.62 0.52 0.69 2.33
1998
Net interest income $ 14,539 $ 14,702 $ 15,557 $ 15,668 $ 60,466
Provision for loan losses 1,278 3,843 1,467 1,721 8,309
Non-interest income 7,698 11,597 7,358 6,982 33,635
Non-interest expense 15,595 16,338 15,168 15,538 62,639
Gains (losses) on sale of securities, net 34 15 (61) (153) (165)
Net income 3,751 4,298 4,518 3,920 16,487
Diluted earnings per share 0.51 0.58 0.62 0.53 2.24
- -----------------------------------------------------------------------------------------------------------
Quarterly information for 1999 and 1998 has been restated for mergers accounted
for as pooling-of-interests.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Independent Accountants' Report..........................................32
Consolidated Balance Sheets, December 31, 1999 and 1998..................33
Consolidated Statements of Income, Years Ended
December 31, 1999, 1998 and 1997.......................................34
Consolidated Statements of Cash Flows, Years Ended
December 31, 1999, 1998 and 1997.......................................35
Consolidated Statements of Changes in Stockholders' Equity, Years Ended
December 31, 1999, 1998 and 1997.......................................36
Notes to Consolidated Financial Statements,
December 31, 1999, 1998 and 1997.......................................37
Note: Supplementary Data may be found in Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Quarterly
Results" on page 30 hereof.
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Simmons First National Corporation
Pine Bluff, Arkansas
We have audited the accompanying consolidated balance sheets of SIMMONS
FIRST NATIONAL CORPORATION as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SIMMONS
FIRST NATIONAL CORPORATION as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
February 4, 2000
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 1998
(In thousands, except share data) 1999 1998
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and non-interest bearing balances due from banks $ 60,324 $ 56,649
Interest bearing balances due from banks 15,381 28,469
Federal funds sold and securities purchased
under agreements to resell 5,500 54,165
------------ ------------
Cash and cash equivalents 81,205 139,283
Investment securities 409,279 416,408
Mortgage loans held for sale 6,814 12,641
Assets held in trading accounts 1,388 78
Loans 1,113,635 1,034,462
Allowance for loan losses (17,085) (16,812)
------------ ------------
Net loans 1,096,550 1,017,650
Premises and equipment 40,383 37,834
Foreclosed assets held for sale, net 747 2,156
Interest receivable 15,681 15,481
Intangible assets, net 27,226 28,513
Other assets 18,157 16,966
------------ ------------
TOTAL ASSETS $ 1,697,430 $ 1,687,010
============ ============
LIABILITIES
Non-interest bearing transaction accounts $ 170,571 $ 180,621
Interest bearing transaction accounts and savings deposits 463,354 442,765
Time deposits 776,708 757,617
------------ ------------
Total deposits 1,410,633 1,381,003
Federal funds purchased and securities sold
under agreements to repurchase 60,496 78,367
Short-term debt 5,044 1,624
Long-term debt 46,219 49,899
Accrued interest and other liabilities 15,667 25,733
------------- ------------
Total liabilities 1,538,059 1,536,626
------------- ------------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized 30,000,000 shares,
7,315,575 issued and outstanding
at 1999 and 7,239,022 at 1998 7,316 7,239
Surplus 50,770 48,271
Undivided profits 105,185 93,383
Accumulated other comprehensive income
Unrealized (depreciation) appreciation on available-for-sale
securities, net of income tax credit of $2,340 at 1999 and
income taxes of $848 at 1998 (3,900) 1,491
------------ ------------
Total stockholders' equity 159,371 150,384
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,697,430 $ 1,687,010
============ ============
See Notes to Consolidated Financial Statements.
- ------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(In thousands, except per share data) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 94,576 $ 92,290 $ 74,323
Federal funds sold and securities purchased
under agreements to resell 1,759 3,850 2,923
Investment securities 23,836 24,705 22,394
Mortgage loans held for sale 712 581 407
Assets held in trading accounts 72 97 209
Interest bearing balances due from banks 535 517 384
---------- ---------- ----------
TOTAL INTEREST INCOME 121,490 122,040 100,640
---------- ---------- ----------
INTEREST EXPENSE
Deposits 49,877 54,242 44,147
Federal funds purchased and securities sold
under agreements to repurchase 2,913 3,009 2,339
Short-term debt 165 226 263
Long-term debt 3,804 4,097 2,055
---------- --------- ----------
TOTAL INTEREST EXPENSE 56,759 61,574 48,804
---------- --------- ----------
NET INTEREST INCOME 64,731 60,466 51,836
Provision for loan losses 6,551 8,309 5,215
---------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 58,180 52,157 46,621
---------- --------- ----------
NON-INTEREST INCOME
Trust income 4,666 4,037 3,186
Service charges on deposit accounts 7,007 6,820 5,378
Other service charges and fees 1,759 1,626 1,675
Income on sale of mortgage loans, net of commissions 2,021 2,247 1,426
Income on investment banking, net of commissions 266 1,044 1,061
Credit card fees 10,214 9,484 9,433
Mortgage servicing fees -- 3,030 5,599
Other income 2,344 2,074 2,443
Gain on sale of mortgage servicing -- 3,273 --
---------- --------- ----------
TOTAL NON-INTEREST INCOME 28,277 33,635 30,201
---------- --------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 32,395 31,833 28,226
Occupancy expense, net 3,578 3,858 3,535
Furniture and equipment expense 5,003 4,448 3,863
Loss on foreclosed assets 364 738 1,197
Merger-related 1,843 466 --
Loss on sale of securities, net -- 165 108
Other operating expenses 18,746 21,131 18,332
---------- ---------- -----------
TOTAL NON-INTEREST EXPENSE 61,929 62,639 55,261
---------- ---------- -----------
INCOME BEFORE INCOME TAXES 24,528 23,153 21,561
Provision for income taxes 7,360 6,666 6,591
---------- ---------- -----------
NET INCOME $ 17,168 $ 16,487 $ 14,970
========== ========== ===========
BASIC EARNINGS PER SHARE $ 2.35 $ 2.28 $ 2.08
========== ========== ===========
DILUTED EARNINGS PER SHARE $ 2.33 $ 2.24 $ 2.05
========== ========== ===========
See Notes to Consolidated Financial Statements.
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 17,168 $ 16,487 $ 14,970
Items not requiring (providing) cash
Depreciation and amortization 6,334 6,786 6,349
Provision for loan losses 6,551 8,309 5,215
Net (accretion) amortization of investment securities (123) (176) 311
Deferred income taxes (326) (1,631) (480)
Provision for foreclosed assets 214 320 214
Gain on sale of mortgage servicing -- (3,273) --
Loss on sale of securities, net -- 165 108
Changes in
Interest receivable (200) (384) 454
Mortgage loans held for sale 5,827 (3,883) 1,343
Assets held in trading accounts (1,310) 371 1,142
Other assets (1,191) 5 6,168
Accrued interest and other liabilities (8,363) 7,036 1,101
Income taxes payable (272) 931 35
---------- ---------- ----------
Net cash provided by operating activities 24,309 31,063 36,930
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Net originations of loans (85,902) (76,623) (89,232)
Sale of mortgage servicing -- 11,677 --
Purchase of institutions, net funds paid -- -- (16,040)
Purchases of premises and equipment, net (6,414) (6,915) (2,456)
Proceeds from sale of foreclosed assets 1,646 934 1,416
Proceeds from sale of available-for-sale securities -- 1,500 1,339
Proceeds from maturities of available-for-sale securities 137,564 208,463 246,543
Purchases of available-for-sale securities (144,068) (221,666) (276,788)
Proceeds from maturities of held-to-maturity securities 53,356 71,873 53,860
Purchases of held-to-maturity securities (44,991) (64,915) (27,616)
Purchase of mortgage servicing rights -- -- (376)
---------- ---------- ----------
Net cash used in investing activities (88,809) (75,672) (109,350)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 29,630 17,659 87,351
Net advances (repayments) of short-term debt 3,420 (4,311) 3,047
Dividends paid (5,366) (4,918) (4,366)
Proceeds from issuance of long-term debt 1,300 305 40,550
Repayment of long-term debt (4,980) (4,523) (638)
Net (decrease) increase in federal funds purchased and
securities sold under agreements to repurchase (17,871) 32,599 8,883
Issuance of common stock, net 289 279 218
---------- ---------- ----------
Net cash provided by financing activities 6,422 37,090 135,045
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (58,078) (7,519) 62,625
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 139,283 146,802 84,177
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 81,205 $ 139,283 $ 146,802
========== ========== ==========
See Notes to Consolidated Financial Statements.
- ----------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
Accumulated
Other
Common Comprehensive Undivided
(In thousands, except share data) Stock Surplus Income Profits Total
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996,
as previously reported $ 28,992 $ 22,996 $ 894 $ 58,000 $ 110,882
Adjustment for pooling-of-interests 1,030 1,995 (210) 13,210 16,025
--------- --------- ----------- --------- ----------
Balance, December 31, 1996, as restated 30,022 24,991 684 71,210 126,907
Comprehensive income
Net income -- -- -- 14,970 14,970
Change in unrealized appreciation on
available-for-sale securities, net
of income tax credit of $223 -- -- 399 -- 399
---------
Comprehensive income 15,369
Exercise of stock options -- 23,100 shares 23 258 -- -- 281
Securities exchanged under
employee option plan (2) (61) -- -- (63)
Common stock par value change (22,822) 22,822 -- -- --
Cash dividends declared
Common stock ($0.56 per share) -- -- -- (3,204) (3,204)
Pooled institution prior to pooling -- -- -- (1,162) (1,162)
--------- --------- ----------- --------- ---------
Balance, December 31, 1997 7,221 48,010 1,083 81,814 138,128
Comprehensive income
Net income -- -- -- 16,487 16,487
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $229 -- -- 408 -- 408
---------
Comprehensive income 16,895
Exercise of stock options -- 18,700 shares 19 301 -- -- 320
Other stock transaction of pooled
institution prior to pooling -- (17) -- -- (17)
Securities exchanged under
employee option plan (1) (23) -- -- (24)
Cash dividends declared
Common stock ($0.64 per share) -- -- -- (3,754) (3,754)
Pooled institution prior to pooling -- -- -- (1,164) (1,164)
--------- --------- ----------- --------- ---------
Balance, December 31, 1998 7,239 48,271 1,491 93,383 150,384
Comprehensive income
Net income -- -- -- 17,168 17,168
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $3,188 -- -- (5,391) -- (5,391)
---------
Comprehensive income 11,777
Exercise of stock options -- 19,900 shares 20 280 -- -- 300
Securities exchanged under
employee 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 ($0.72 per share) -- -- -- (4,990) (4,990)
Pooled institution prior to pooling -- -- -- (376) (376)
--------- --------- ----------- --------- ----------
Balance, December 31, 1999 $ 7,316 $ 50,770 $ (3,900) $ 105,185 $ 159,371
========= ========= =========== ========= ==========
See Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Nature of Operations
Simmons First National Corporation is primarily engaged in providing a full
range of banking services to individual and corporate customers through its
subsidiaries and branch banks in Arkansas. The Company is subject to competition
from other financial institutions. The Company also is subject to the regulation
of certain federal and state agencies and undergoes periodic examinations by
those regulatory authorities.
Operating Segments
The Company is organized on a subsidiary bank-by-bank basis upon which
management makes decisions regarding how to allocate resources and assess
performance. Each of the subsidiary banks provides a group of similar community
banking services, including such products and services as loans; time deposit,
checking and savings accounts; personal and corporate trust services; credit
cards; investment management; and securities and investment services. The
individual bank segments have similar operating and economic characteristics and
have been reported as one aggregated operating segment.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, the valuation of
foreclosed assets and the allowance for foreclosure expenses. In connection with
the determination of the allowance for loan losses and the valuation of
foreclosed assets, management obtains independent appraisals for significant
properties.
Management believes that the allowance for loan losses, the valuation of
foreclosed assets and the allowance for foreclosure expenses are adequate. While
management uses available information to recognize losses on loans, foreclosed
assets held for sale and foreclosure expenses, changes in economic conditions,
particularly in Arkansas, may necessitate revision of these estimates in future
years. In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses, valuation of foreclosed assets and allowance for foreclosure expenses.
Such agencies may require the Company to recognize additional losses, based on
their judgment of information available to them at the time of their
examination.
Principles of Consolidation
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.
Reclassifications
Various items within the accompanying financial statements for previous
years have been reclassified to provide more comparative information. These
reclassifications had no effect on net earnings.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers due from
banks, federal funds sold and securities purchased under agreements to resell as
cash equivalents.
Investments in Debt and Equity Securities
Held-to-maturity securities, which include any security for which the
banking subsidiaries have the positive intent and ability to hold until
maturity, are carried at historical cost adjusted for amortization of premiums
and accretion of discounts. Premiums and discounts are amortized and accreted,
respectively, to interest income using the constant yield method over the period
to maturity.
Available-for-sale securities, which include any security for which the
banking subsidiaries have no immediate plan to sell but which may be sold in the
future, are carried at fair value. Realized gains and losses, based on
specifically identified amortized cost of the individual security, are included
in other income. Unrealized gains and losses are recorded, net of related income
tax effects, in stockholders' equity. Premiums and discounts are amortized and
accreted, respectively, to interest income using the constant yield method over
the period to maturity.
Trading securities, which include any security held primarily for near-term
sale, are carried at fair value. Gains and losses on trading securities are
included in other income.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
Mortgage Loans Held For Sale
Mortgage loans held for sale are carried at the lower of cost or fair
value, determined using an aggregate basis. Write-downs to fair value are
recognized as a charge to earnings at the time the decline in value occurs.
Forward commitments to sell mortgage loans are acquired to reduce market risk on
mortgage loans in the process of origination and mortgage loans held for sale.
The fair values of the forward commitments are not recognized in the financial
statements. Gains and losses resulting from sales of mortgage loans are
recognized when the respective loans are sold to investors. Gains and losses are
determined by the difference between the selling price and the carrying amount
of the loans sold, net of discounts collected or paid. Fees received from
borrowers to guarantee the funding of mortgage loans held for sale are
recognized as income or expense when the loans are sold or when it becomes
evident that the commitment will not be used.
Loans
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-offs are reported at their
outstanding principal adjusted for any loans charged off and any deferred fees
or costs on originated loans and unamortized premiums or discounts on purchased
loans.
Discounts and premiums on purchased residential real estate loans are
amortized to income using the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments. Discounts and
premiums on purchased consumer loans are recognized over the expected lives of
the loans using methods that approximate the interest method.
Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is maintained
at a level considered adequate to provide for potential loan losses related to
specifically identified loans as well as probable credit losses inherent in the
remainder of the loan portfolio that have been incurred as of December 31, 1999
and 1998. This estimate is based on management's evaluation of the loan
portfolio, as well as on prevailing and anticipated economic conditions and
historical losses by loan category. General reserves have been established,
based upon the aforementioned factors and allocated to the individual loan
categories. Allowances are accrued on specific loans evaluated for impairment
for which the basis of each loan, including accrued interest, exceeds the
discounted amount of expected future collections of interest and principal or,
alternatively, the fair value of loan collateral. The unallocated reserve
generally serves to compensate for the uncertainty in estimating loan losses,
including the possibility of changes in risk ratings and specific reserve
allocations in the loan portfolio as a result of the Company's ongoing risk
management system.
A loan is considered impaired when it is probable that the Company will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued and interest accrued and unpaid is removed at the time such amounts
are delinquent 90 days. Interest is recognized for nonaccrual loans only upon
receipt and only after all principal amounts are current according to the terms
of the contract.
Premises and Equipment
Depreciable assets are stated at cost, less accumulated depreciation.
Depreciation is charged to expense, using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are capitalized and
amortized by the straight-line method over the terms of the respective leases or
the estimated useful lives of the improvements, whichever is shorter.
Foreclosed Assets Held For Sale
Assets acquired by foreclosure or in settlement of debt and held for sale
are valued at estimated fair value, as of the date of foreclosure and a related
valuation allowance is provided for estimated costs to sell the assets.
Management evaluates the value of foreclosed assets held for sale periodically
and increases the valuation allowance for any subsequent declines in fair value.
Changes in the valuation allowance are charged or credited to other expense.
Intangible Assets
Intangible assets consist of "Goodwill" and "Core deposit premiums".
"Goodwill" represents the excess of cost over the fair value of net assets of
acquired subsidiaries and branches. "Core deposit premiums" represents the
amount allocated to the future earnings potential of acquired deposits. The
unamortized intangible assets are being amortized using the straight-line method
over periods ranging from 10 to 20 years.
Fee Income
Periodic bankcard fees, net of direct origination costs, are recognized as
revenue on a straight-line basis over the period the fee entitles the cardholder
to use the card. Origination fees and costs for other loans are not material in
the aggregate.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
Earnings Per Share
Basic earnings per share is computed based on the weighted average number
of shares outstanding during each year. Diluted earnings per share is computed
using the weighted average common shares and all potential dilutive common
shares outstanding during the period.
The computation of per share earnings is as follows:
(In thousands, except per share data) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 17,168 $ 16,487 $ 14,970
--------- --------- --------
Average common shares outstanding 7,307 7,233 7,214
Average common share stock options outstanding 67 113 85
--------- --------- --------
Average diluted common shares 7,374 7,346 7,299
--------- --------- --------
Basic earnings per share $ 2.35 $ 2.28 $ 2.08
========= ========= ========
Diluted earnings per share $ 2.33 $ 2.24 $ 2.05
========= ========= ========
NOTE 2: ACQUISITIONS
- --------------------------------------------------------------------------------
On August 1, 1997, Simmons First National Corporation acquired all the
outstanding capital stock of First Bank of Arkansas ("FBAS"), Searcy, Arkansas
and First Bank of Arkansas ("FBAR"), Russellville, Arkansas, in a cash
transaction of $53 million and changed the respective names of the banks to
Simmons First Bank of Searcy and Simmons First Bank of Russellville. The
transaction was accounted for as a purchase and as such, the consolidated
operations of the Company include the operations of FBAS and FBAR from the
acquisition date. The banks acquired had consolidated assets, as adjusted, of
$362 million, as of August 1, 1997. The total acquisition cost exceeded the fair
value of tangible assets and liabilities acquired by $29 million. The intangible
assets are being amortized using the straight-line method over 15 years.
The following table presents condensed pro forma consolidated results of
operations as if the acquisitions of FBAS and FBAR had occurred at the beginning
of 1997. This information combines the historical results of operations of the
Company, FBAS and FBAR after the effect of purchase accounting adjustments. The
pro forma information does not purport to be indicative of the results that
would have been obtained if the operations had actually been combined during the
period presented and is not necessarily indicative of operating results to be
expected in future periods.
(In thousands, except per share data) 1997
- ----------------------------------------------------------------------------------------------------------
Total revenue $ 146,129
Net income 14,853
Basic earnings per share 2.06
Diluted earnings per share 2.03
On December 8, 1998, the Company and American Bancshares of Arkansas, Inc.
("ABA") merged in a pooling-of-interests transaction. Stockholders of ABA
received 464,885 shares of Simmons First National Corporation stock in exchange
for ABA shares in the transaction. ABA owned American State Bank ("ASB"),
Charleston, Arkansas with assets, as of December 8, 1998, of $90 million. ABA's
net interest income and net income for the year ended December 31, 1998 were
$3,096,000 and $493,000, respectively. The Company merged ASB into Simmons First
National Bank during the first quarter of 1999.
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 ("BOL"), Lincoln,
Arkansas with assets, as of January 15, 1999, of $75 million. LBI's net interest
income and net income for the period ended January 15, 1999 were immaterial. The
Company merged BOL 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. NBC's net interest income and net
income for the period ended June 30, 1999, were $2,463,000 and $919,000,
respectively. 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 and management.
The following table summarizes the impact of the pooling-of-interests
mergers on the Company's 1998 and 1997 year end financial statements.
Simmons
(originally) Simmons
(In thousands) reported) ABA(1) LBI NBC Pooled
- ------------------------------------------------------------------------------------------------------------------
December 31, 1998
Total assets $ 1,464,362 $ -- $ 76,110 $ 146,538 $ 1,687,010
Total equity 132,180 -- 4,854 13,350 150,384
Net interest income 52,234 -- 3,120 5,112 60,466
Non-interest income 31,664 -- 576 1,395 33,635
Net income 14,331 -- 508 1,648 16,487
December 31, 1997
Total assets $ 1,326,145 $ 85,732 $ 72,833 $ 140,782 $ 1,625,492
Total equity 112,082 8,930 4,379 12,737 138,128
Net interest income 40,415 3,245 2,956 5,220 51,836
Non-interest income 27,545 554 581 1,521 30,201
Net income 11,989 805 472 1,704 14,970
(1) Financial information for the year ended December 31, 1998 are included in
Simmons originally reported.
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:
Years Ended December 31
------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------- -------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- -----------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 13,576 $ 10 $ (115) $ 13,471 $ 25,116 $ 424 $ (1) $ 25,539
U.S. Government
agencies 36,654 57 (1,169) 35,542 35,770 474 (48) 36,196
Mortgage-backed
securities 16,920 84 (258) 16,746 19,756 113 (170) 19,699
State and political
subdivisions 107,157 662 (2,107) 105,712 110,997 2,766 (100) 113,663
Other securities 85 -- (2) 83 92 3 -- 95
---------- ------- ------- ---------- ---------- ------- ------- ----------
$ 174,392 $ 813 $(3,651) $ 171,554 $ 191,731 $ 3,780 $ (319) $ 195,192
========== ======= ======= ========== ========== ======= ======= ==========
Available-for-Sale
U.S. Treasury $ 41,492 $ 83 $ (133) $ 41,442 $ 51,796 $ 1,081 $ -- $ 52,877
U.S. Government
agencies 166,143 -- (6,287) 159,856 131,996 486 (147) 132,335
Mortgage-backed
securities 16,954 26 (234) 16,746 25,256 58 (230) 25,084
State and political
subdivisions 6,432 88 (88) 6,432 4,816 57 (9) 4,864
Other securities 9,859 552 -- 10,411 8,246 1,523 (252) 9,517
---------- ------- ------- --------- --------- ------- ------- ----------
$ 240,880 $ 749 $(6,742) $ 234,887 $ 222,110 $ 3,205 $ (638) $ 224,677
========== ======= ======= ========= ========= ======= ======= ==========
Income earned on the above securities for the years ended December 31,
1999, 1998 and 1997 is as follows:
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Taxable
Held-to-maturity $ 4,377 $ 6,301 $ 6,775
Available-for-sale 13,910 13,247 11,307
Non-taxable
Held-to-maturity 5,296 4,981 4,292
Available-for-sale 253 176 20
--------- --------- --------
Total $ 23,836 $ 24,705 $ 22,394
========= ========= ========
The Statement of Changes in Stockholders' Equity includes other
comprehensive income. Other comprehensive income for the Company includes the
change in the unrealized appreciation on available-for-sale securities. The
changes in the unrealized appreciation on available-for-sale securities for the
years ended December 31, 1999, 1998 and 1997 are as follows:
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Unrealized holding gains (losses)
arising during the period $ (5,391) $ 243 $ 291
Losses realized in net income -- 165 108
--------- --------- --------
Net change in unrealized appreciation on
available-for-sale securities $ (5,391) $ 408 $ 399
========= ========= ========
The amortized cost and estimated fair value by maturity of securities are
shown in the following table. Securities are classified according to their
contractual maturities without consideration of principal amortization,
potential prepayments or call options. Accordingly, actual maturities may differ
from contractual maturities.
Held-to-Maturity Available-for-Sale
------------------------- -------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
- --------------------------------------------------------------------------------------------------------
One year or less $ 17,479 $ 17,455 $ 50,853 $ 50,667
After one through five years 77,751 76,789 108,740 105,412
After five through ten years 55,413 53,723 58,213 55,331
After ten years 23,664 23,504 13,215 13,066
Other securities 85 83 9,859 10,411
----------- ----------- ----------- ----------
Total $ 174,392 $ 171,554 $ 240,880 $ 234,887
=========== =========== =========== ==========
The carrying value, which approximates the fair value, of securities
pledged as collateral, to secure public deposits and for other purposes,
amounted to $277,789,000 at December 31, 1999 and $239,070,000 at December 31,
1998.
Book value of securities sold under agreements to repurchase amounted to
$39,956,000 and $33,384,000 for December 31, 1999 and 1998, respectively.
Gross realized gains of $0, $50,000 and $29,000 resulting from sales and/or
calls of available-for-sale securities were realized for the years ended
December 31, 1999, 1998 and 1997, respectively. The gross realized losses of $0,
$215,000 and $137,000 resulting from sales and/or calls of available-for-sale
securities were realized for the years ended December 31, 1999, 1998 and 1997,
respectively.
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 of loans are summarized as follows:
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
Consumer
Credit cards $ 187,242 $ 165,622
Student loans 66,739 66,134
Other consumer 181,380 155,767
Real estate
Construction 53,925 63,037
Single family residential 202,886 194,174
Other commercial 240,259 223,368
Commercial
Commercial 137,827 112,800
Agricultural 35,337 40,706
Financial institutions 3,165 5,656
Other 4,875 7,198
----------- -----------
Total loans before allowance for loan losses $ 1,113,635 $ 1,034,462
=========== ===========
At December 31, 1999 and 1998, impaired loans totaled $12,102,000 and
$13,312,000, respectively. All impaired loans had designated reserves for
possible loan losses. Reserves relative to impaired loans at December 31, 1999,
were $2,803,000 and $2,894,000 at December 31, 1998. Interest of $547,000 was
recognized on average impaired loans of $13,234,000 for 1999. Interest of
$562,000 was recognized on average impaired loans of $13,238,000 for 1998.
Interest recognized on impaired loans on a cash basis during 1999 or 1998 was
immaterial.
As of December 31, 1999, credit card loans, which are unsecured, were
$187,242,000 or 16.8%, of total loans versus $165,622,000 or 16.0% of total
loans at December 31, 1998. The credit card loans are diversified by geographic
region to reduce credit risk and minimize any adverse impact on the portfolio.
Credit card loans are regularly reviewed to facilitate the identification and
monitoring of creditworthiness.
Transactions in the allowance for loan losses are as follows:
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 16,812 $ 15,215 $ 10,506
Additions
Provision for loan losses 6,551 8,309 5,215
Allowance for loan losses of acquired institutions -- -- 4,028
--------- --------- --------
23,363 23,524 19,749
Deductions
Losses charged to allowance, net of recoveries
of $1,416 for 1999, $1,059 for 1998 and $864 for 1997 6,278 6,712 4,534
--------- --------- --------
Balance, end of year $ 17,085 $ 16,812 $ 15,215
========= ========= ========
NOTE 5: TIME DEPOSITS
- --------------------------------------------------------------------------------
Time deposits included approximately $225,290,000 and $218,125,000 of
certificates of deposit of $100,000 or more, at December 31, 1999 and 1998,
respectively. At December 31, 1999, time deposits with a remaining maturity of
one year or more amounted to $164,785,000. Maturities of all time deposits are
as follows: 2000 - $611,923,000; 2001 - $137,762,000; 2002 - $18,181,000; 2003 -
$5,269,000; 2004 - $3,452,000 and thereafter $121,000.
Deposits are the Company's primary funding source for loans and investment
securities. The mix and repricing alternatives can significantly affect the cost
of this source of funds and, therefore, impact the margin.
NOTE 6: INCOME TAXES
- --------------------------------------------------------------------------------
The provision for income taxes is comprised of the following components:
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Income taxes currently payable $ 7,686 $ 8,297 $ 7,071
Deferred income taxes (326) (1,631) (480)
--------- --------- --------
Provision for income taxes $ 7,360 $ 6,666 $ 6,591
========= ========= ========
The tax effects of temporary differences related to deferred taxes shown on
the balance sheet were:
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------
Deferred tax assets
Allowance for loan losses $ 5,906 $ 5,294
Valuation of foreclosed assets 201 332
Deferred compensation payable 659 650
Deferred loan fee income 564 591
Vacation compensation 439 388
Mortgage servicing reserve 457 477
Loan interest 160 225
Available-for-sale securities 2,340 --
Other 144 70
--------- --------
10,870 8,027
--------- --------
Deferred tax liabilities
Accumulated depreciation (1,473) (930)
Available-for-sale securities -- (848)
FHLB stock dividends (432) (193)
Other (214) (819)
--------- --------
2,119 (2,790)
--------- --------
Net deferred tax assets included in other assets
on balance sheets $ 8,751 $ 5,237
========= ========
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below.
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Computed at the statutory rate (35%) $ 8,585 $ 8,104 $ 7,546
Increase (decrease) resulting from
Tax exempt income (1,982) (1,807) (1,434)
Amortization of intangible assets 105 74 35
State income taxes 207 101 235
Non-deductible expenses 331 161 154
Other differences, net 114 33 55
------- -------- -------
Actual tax provision $ 7,360 $ 6,666 $ 6,591
======= ======== =======
NOTE 7: LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt at December 31, 1999 and 1998, consisted of the following
components.
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
7.32% note due 2007, unsecured $ 16,000 $ 18,000
9.75% note due 2008, secured by land and building 917 972
5.62% to 8.41% FHLB advances due 1999 to 2018,
secured by residential real estate loans 12,052 13,677
Trust Preferred Securities 17,250 17,250
---------- ---------
Total long-term debt $ 46,219 $ 49,899
========== =========
During the second quarter of 1997, the Corporation formed a wholly owned
grantor trust subsidiary (the Trust) to issue preferred securities representing
undivided beneficial interests in the assets of the Trust and to invest the
gross proceeds of such Preferred Securities into notes of the Corporation. The
sole assets of the Trust are $17.8 million aggregate principal amount of the
Corporation's 9.12% Subordinated Debenture Notes due 2027 which are redeemable
beginning in 2002. Such securities qualify as Tier 1 Capital for regulatory
purposes.
Aggregate annual maturities of long-term debt at December 31, 1999 are:
Annual
(In thousands) Year Maturities
- -----------------------------------------------------------------------------------------------------------
2000 $ 3,322
2001 3,237
2002 3,148
2003 3,109
2004 3,131
Thereafter 30,272
----------
Total $ 46,219
==========
NOTE 8: CAPITAL STOCK
- --------------------------------------------------------------------------------
In addition to the common stock outstanding, the following classes of stock
have been authorized.
Class B common stock of $1.00 par value per share, authorized 300
shares: none issued.
Class A preferred stock of $100.00 par value per share, authorized 50,000
shares: none issued.
Class B preferred stock of $100.00 par value per share, authorized 50,000
shares: none issued.
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
- --------------------------------------------------------------------------------
At December 31, 1999 and 1998, the subsidiary banks had extensions of
credit to executive officers, directors and to companies in which the banks'
executive officers or directors were principal owners, in the amount of $28.6
million in 1999 and $26.9 million in 1998.
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 26,869 $ 21,717
New extensions of credit 24,120 21,024
Repayments (22,405) (15,872)
--------- --------
Balance, end of year $ 28,584 $ 26,869
========= ========
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these extensions of credit did not involve more than
the normal risk of collectability or present other unfavorable features.
NOTE 10: EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
The Company's 401(k) retirement plan covers substantially all employees.
Contribution expense totaled $205,000, $241,000 and $165,000, in 1999, 1998 and
1997, respectively.
The Company has a discretionary profit sharing and employee stock ownership
plan covering all employees. Contribution expense totaled $1,353,000 for 1999,
$1,105,000 for 1998 and $896,000 for 1997.
The Board of Directors has adopted incentive and nonqualified stock option
plans. Pursuant to the plans, shares are reserved for future issuance by the
Company, upon exercise of stock options granted to officers and other key
employees. As of December 31, 1999, nine thousand shares of common stock of the
Company had been granted and issued as bonus shares of restricted stock.
The Company applies APB Opinion 25 and related Interpretations in
accounting for the plans and no compensation cost has been recognized. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted, net income and earnings per share would have been reduced
as indicated below:
(In thousands except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Net income - as reported $ 17,168 $ 16,487 $ 14,970
Net income - pro forma 17,062 16,283 14,713
Diluted earnings per share - as reported 2.33 2.24 2.05
Diluted earnings per share - pro forma 2.31 2.22 2.02
The above pro forma amounts include only the effect of 1999, 1998 and 1997
option grants and therefore may not be representative of the pro forma impact in
future years.
The weighted average fair values of options granted during 1999, 1998 and
1997 were $6.28, $11.72 and $7.54 per share, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
1999 1998 1997
-------- -------- -------
Expected dividend yield 2.70% 1.41% 1.99%
Expected stock price volatility 16.00% 16.00% 16.00%
Risk-free interest rate 6.37% 5.09% 6.33%
Expected life of options 7 years 7 years 7 years
The table below summarizes the transactions under the Company's stock
option plans at December 31, 1999, 1998 and 1997 and changes during the years
then ended:
1999 1998 1997
------------------- ------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercisable Shares Exercisable Shares Exercisable
(000) Price (000) Price (000) Price
- -------------------------------------------------------------------------------------------------------------------
Outstanding, beginning of year 233 $ 23.61 221 $ 20.03 189 $ 16.80
Granted 30 24.07 31 40.83 56 26.65
Forfeited (1) 39.54 -- -- (1) 25.67
Exercised (20) 10.06 (19) 9.11 (23) 8.77
------ ------ ------
Outstanding, end of year 242 24.64 233 23.61 221 20.03
====== ====== ======
Exercisable, end of year 174 $ 22.07 146 $ 19.65 123 $ 16.51
====== ====== ======
The following table summarizes information about stock options under the
plan outstanding at December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------- ----------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices (000) Life Price (000) Price
- ----------------------------------------------------------------------------------------------------------------
$8.29 to $12.33 28 1 Year $9.56 28 $9.56
$15.58 to $20.50 63 3 Years $18.35 63 $18.35
$22.17 to $27.00 109 7 Years $25.98 66 $26.13
$32.00 to $45.25 42 5 Years $40.52 17 $40.41
Also, the Company has deferred compensation agreements with certain active
and retired officers. The agreements provide monthly payments which, together
with payments from the deferred annuities issued pursuant to the terminated
pension plan, equal 50 percent of average compensation prior to retirement or
death. The charges to income for the plans were $211,000 for 1999, $284,000 for
1998 and $181,000 for 1997. Such charges reflect the straight-line accrual over
the employment period of the present value of benefits due each participant, as
of their full eligibility date, using an 8% discount factor.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
- --------------------------------------------------------------------------------
In connection with acquisitions accounted for using the purchase method,
the Company acquired assets and assumed liabilities as follows:
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Fair value of assets acquired $ -- $ -- $ 361,862
Liabilities assumed -- -- (308,862)
--------- ---------- ----------
Cash paid -- -- 53,000
Funds acquired -- -- (36,960)
--------- ---------- ----------
Net funds paid $ -- $ -- $ 16,040
========= ========== ==========
Additional cash payment information
Interest paid $ 57,604 $ 61,895 $ 47,949
Income taxes paid 7,958 7,334 6,624
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: OTHER EXPENSE
- --------------------------------------------------------------------------------
Other operating expenses consist of the following:
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Professional services $ 1,444 $ 1,920 $ 1,883
Postage 1,895 1,836 1,434
Telephone 1,419 1,279 1,082
Credit card expense 1,624 1,495 1,413
Operating supplies 1,524 1,517 1,389
FDIC insurance 232 248 312
Year 2000 -- 500 --
Amortization of mortgage servicing rights -- 1,223 2,578
Amortization of intangible assets 2,469 2,385 1,264
Other expense 8,139 8,728 6,977
--------- --------- --------
Total $ 18,746 $ 21,131 $ 18,332
========= ========= ========
The Company had aggregate annual equipment rental expense of approximately
$1,084,000 in 1999, $1,022,000 in 1998 and $935,000 in 1997. The Company had
aggregate annual occupancy rental expense of approximately $556,000 in 1999,
$604,000 in 1998 and $559,000 in 1997.
NOTE 13: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents
The carrying amount for cash and cash equivalents approximates fair value.
Investment Securities
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
Mortgage Loans Held for Sale
For homogeneous categories of loans, such as mortgage loans held for sale,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.
Loans
The fair value of loans is estimated by discounting the future cash flows,
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest approximates its fair value.
Deposits
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date (i.e., their
carrying amount). The fair value of fixed-maturity time deposits is estimated
using a discounted cash flow calculation that applies the rates currently
offered for deposits of similar remaining maturities. The carrying amount of
accrued interest payable approximates its fair value.
Federal Funds Purchased, Securities Sold Under Agreement to Repurchase and
Short-Term Debt
The carrying amount for federal funds purchased, securities sold under
agreement to repurchase and short-term debt are a reasonable estimate of fair
value.
Long-Term Debt
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
Commitments to Extend Credit, Letters of Credit and Lines of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair values of letters of
credit and lines of credit are based on fees currently charged for similar
agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table represents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows. This method involves significant
judgments by management considering the uncertainties of economic conditions and
other factors inherent in the risk management of financial instruments. Fair
value is the estimated amount at which financial assets or liabilities could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. Because no market exists for certain of these
financial instruments and because management does not intend to sell these
financial instruments, the Company does not know whether the fair values shown
below represent values at which the respective financial instruments could be
sold individually or in the aggregate.
December 31, 1999 December 31, 1998
------------------------- --------------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- -------------------------------------------------------------------------------------------------
Financial assets
Cash and cash equivalents $ 81,205 $ 81,205 $ 139,283 $ 139,283
Held-to-maturity securities 174,392 171,554 191,731 195,192
Available-for-sale securities 234,887 234,887 224,677 224,677
Assets held in trading accounts 1,388 1,388 78 78
Mortgage loans held for sale 6,814 6,814 12,641 12,641
Interest receivable 15,681 15,681 15,481 15,481
Loans, net 1,096,550 1,092,725 1,017,650 1,032,613
Financial liabilities
Non-interest bearing transaction accounts 170,571 170,571 180,621 180,621
Interest bearing transaction accounts and
savings deposits 463,354 469,710 442,765 442,765
Time deposits 776,708 779,066 757,617 767,003
Federal funds purchased and securities
sold under agreements to repurchase 60,496 60,496 78,367 78,367
Short-term debt 5,044 5,044 1,624 1,624
Long-term debt 46,219 47,724 49,899 49,904
Interest payable 5,906 5,906 6,751 6,751
The fair value of commitments to extend credit and letters of credit is not
presented since management believes the fair value to be insignificant.
NOTE 14: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
- --------------------------------------------------------------------------------
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses and certain concentrations of
credit risk are reflected in Note 4.
NOTE 15: COMMITMENTS AND CREDIT RISK
- --------------------------------------------------------------------------------
The Company grants agri-business, credit card, commercial and residential
loans to customers throughout the state. 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 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. At December 31, 1998, the
Company had outstanding commitments to extend credit aggregating approximately
$152,946,000 and $109,038,000 for credit card commitments and other loan
commitments, respectively.
Letters of credit are conditional commitments issued by 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 $3,035,000 and $6,511,000 at December 31, 1999 and 1998,
respectively, with terms ranging from 90 days to one year.
At December 31, 1999, the Company did not have concentrations of 5% or more
of the investment portfolio in bonds issued by a single municipality.
NOTE 16: FUTURE CHANGES IN ACCOUNTING PRINCIPLE
- --------------------------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for financial statements for years beginning after June 15, 2000, as
amended by SFAS 137. Because of the limited use of derivatives, management does
not anticipate that the adoption of SFAS No. 133 will have a material impact on
the financial condition or operating results of the Company.
NOTE 17: CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------
The Company and/or its subsidiary banks have various unrelated legal
proceedings, most of which involve loan foreclosure activity pending, which, in
the aggregate, are not expected to have a material adverse effect on the
financial position of the Company and its subsidiaries.
NOTE 18: STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
The Company's subsidiaries 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 Office of the Comptroller of the
Currency is required, if the total of all the 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 the current
year earnings plus 75% of the retained net earnings of the preceding year. At
December 31, 1999, the Company subsidiaries had approximately $10 million in
undivided profits available for payment of dividends to the Company, without
prior approval of the regulatory agencies.
The Company's subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes that, as of December 31, 1999, the
Company meets all capital adequacy requirements to which it is subject.
As of the most recent notification from regulatory agencies, the
subsidiaries were well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Company and
subsidiaries must maintain minimum total risk-based, Tier 1 risk-based and Tier
1 leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institutions'
categories.
The Company's actual capital amounts and ratios along with the Company's
most significant subsidiaries are presented in the following table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
-------------------- --------------------- --------------------
(In thousands) Amount Ratio-% Amount Ratio-% Amount Ratio-%
- -----------------------------------------------------------------------------------------------------------------
As of December 31, 1999
Total Risk-Based Capital Ratio
Simmons First National Corporation $ 166,711 15.0 $ N/A $ N/A
Simmons First National Bank 79,094 13.9 45,522 8.0 56,902 10.0
Simmons First Bank of Russellville 26,324 19.8 10,636 8.0 13,295 10.0
Tier 1 Capital Ratio
Simmons First National Corporation 152,344 13.7 N/A N/A
Simmons First National Bank 71,568 12.6 22,720 4.0 34,080 6.0
Simmons First Bank of Russellville 24,656 18.5 5,331 4.0 7,997 6.0
Leverage Ratio
Simmons First National Corporation 152,344 9.1 N/A N/A
Simmons First National Bank 71,568 8.9 32,165 4.0 40,207 5.0
Simmons First Bank of Russellville 24,656 11.7 8,429 4.0 10,537 5.0
As of December 31, 1998
Total Risk-Based Capital Ratio
Simmons First National Corporation $ 149,969 14.1 $ N/A $ N/A
Simmons First National Bank 65,481 13.6 38,518 8.0 48,148 10.0
Simmons First Bank of Russellville 24,286 17.5 11,102 8.0 13,878 10.0
Tier 1 Capital Ratio
Simmons First National Corporation 136,644 12.8 N/A N/A
Simmons First National Bank 59,424 12.3 24,156 4.0 28,987 6.0
Simmons First Bank of Russellville 22,538 16.2 5,565 4.0 8,348 6.0
Leverage Ratio
Simmons First National Corporation 136,644 8.4 N/A N/A
Simmons First National Bank 59,424 8.3 28,638 4.0 35,798 5.0
Simmons First Bank of Russellville 22,538 10.2 8,838 4.0 11,048 5.0
NOTE 19: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
- --------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 and 1998
(In thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 3,980 $ 6,528
Investments in wholly-owned subsidiaries 173,844 171,151
Intangible assets, net 205 296
Investment securities 8,598 1,636
Premises and equipment 4,536 4,854
Other assets 4,654 4,963
---------- ---------
TOTAL ASSETS $ 195,817 $ 189,428
========== =========
LIABILITIES
Long-term debt $ 34,701 $ 36,756
Other liabilities 1,745 2,288
---------- ---------
Total liabilities 36,446 39,044
---------- ---------
STOCKHOLDERS' EQUITY
Common stock 7,316 7,239
Surplus 50,770 48,271
Undivided profits 105,185 93,383
Accumulated other comprehensive income
Unrealized (depreciation) appreciation on available-for-sale
securities, net of income tax credit of $2,340 at 1999 and
income taxes of $848 at 1998 (3,900) 1,491
---------- ---------
Total stockholders' equity 159,371 150,384
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 195,817 $ 189,428
========== =========
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Income
Dividends from subsidiaries $ 14,614 $ 11,904 $ 20,851
Other income 3,611 3,476 3,770
--------- --------- --------
18,225 15,380 24,621
Expenses 8,212 7,224 4,818
--------- --------- --------
Income before income taxes and equity in
undistributed net income of subsidiaries 10,013 8,156 19,803
Provision for income taxes (1,363) (1,375) (257)
--------- --------- --------
Income before equity in undistributed net
income of subsidiaries 11,376 9,531 20,060
Equity in undistributed net income of subsidiaries 5,792 6,956 (5,090)
--------- --------- --------
Net income $ 17,168 $ 16,487 $ 14,970
========= ========= ========
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 17,168 $ 16,487 $ 14,970
Items not requiring (providing) cash
Depreciation and amortization 386 388 398
Deferred income taxes (37) (28) (5)
Equity in undistributed income of bank subsidiaries (5,792) (6,956) 5,090
Changes in
Other assets 309 (1,428) (1,287)
Other liabilities (511) 326 (461)
---------- ---------- ----------
Net cash provided by operating activities 11,523 8,789 18,705
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of premises and equipment (264) (119) (225)
Sale of premises and equipment to subsidiary 287 -- --
Acquisition of subsidiaries -- -- (53,937)
Proceeds from maturities of held-to-maturity securities -- -- 3,435
Proceeds from maturities of available-for-sale securities 58,759 48,688 133,263
Purchase of available-for-sale securities (65,721) (46,117) (137,473)
----------- ---------- ----------
Net cash provided by (used in) investing activities (6,939) 2,452 (54,937)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reduction on long-term debt (2,055) (2,048) (46)
Proceeds from issuance of long-term debt -- -- 37,785
Dividends paid (5,366) (4,918) (4,366)
Issuance of common stock 289 279 218
----------- ---------- ----------
Net cash provided by (used in) financing activities (7,132) (6,687) 33,591
----------- ---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,548) 4,554 (2,641)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 6,528 1,974 4,615
----------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,980 $ 6,528 $ 1,974
=========== ========== ==========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No items are reportable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held April 25, 2000,
filed pursuant to Regulation 14A on March 17, 2000.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held April 25, 2000 filed
pursuant to Regulation 14A on March 17, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held April 25, 2000,
filed pursuant to Regulation 14A on March 17, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held April 25, 2000,
filed pursuant to Regulation 14A on March 17, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. Financial Statements and any Financial Statement Schedules
The financial statements and financial statement schedules listed in the
accompanying index to consolidated financial statements and financial statement
schedules are filed as part of this annual report.
(b) Reports on Form 8-K
There have been none filed subsequent to September 30, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
/s/ John L. Rush March 27, 2000
-------------------------------------
John L. Rush, Secretary
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 27, 2000.
Signature Title
/s/ J. Thomas May
- ---------------------- President, Chairman, Chief Executive Officer
J. Thomas May and Director
/s/ Barry L. Crow
- ---------------------- Executive Vice President and Chief Financial
Barry L. Crow Officer (Principal Financial and Accounting Officer)
/s/ W. E. Ayres
- ---------------------- Director
W. E. Ayres
/s/ Ben V. Floriani
- ---------------------- Director
Ben V. Floriani
/s/ Lara F. Hutt, III
- ---------------------- Director
Lara F. Hutt, III
/s/ George Makris, Jr.
- ---------------------- Director
George Makris, Jr.
/s/ David R. Perdue
- ---------------------- Director
David R. Perdue
/s/ Harry L. Ryburn
- ---------------------- Director
Harry L. Ryburn
/s/ Donald W. Stone
- ---------------------- Director
Donald W. Stone
/s/ Henry F. Trotter
- -------------------- Director
Henry F. Trotter, Jr.