Back to GetFilings.com
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 (Fee Required) For the fiscal year ended: December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
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)
(501) 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, $5.00 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 $5.00 per share, held by
non-affiliates on March 17, 1997, was approximately $132,385,000.
The number of shares outstanding of the Registrant's Common Stock as of March
17, 1997 was 5,715,194.
Part III is incorporated by reference from the Registrant's Proxy Statement
relating to the Annual Meeting of Shareholders to be held on April 22, 1997.
FORM 10-K INDEX
Part I
Item 1 Business...........................................................
The Company and the Banks........................................
Competition......................................................
Employees........................................................
Executive Officers of the Company................................
Supervision and Regulation.......................................
Item 2 Properties.........................................................
Item 3 Legal Proceedings..................................................
Item 4 Submission of Matters to a Vote of Security-Holders................
Part II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters
Item 6 Selected Consolidated Financial Data...............................
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................
Item 8 Consolidated Financial Statements and Supplementary Data...........
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...............................................
Part III
Item 10 Directors and Executive Officers of the Company....................
Item 11 Executive Compensation.............................................
Item 12 Security Ownership of Certain Beneficial Owners and Management.....
Item 13 Certain Relationships and Related Transactions.....................
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....
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,
1996 the Company had consolidated total assets of $881.3 million, consolidated
net loans of $502.4 million and total equity capital of $102.8 million. The
Company owns five subsidiary banks in Arkansas. Its lead bank, Simmons First
National 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 and mortgage banking services, is the State of
Arkansas. The Company also owns four community banks, Simmons First Bank of
Jonesboro ("Simmons/Jonesboro"), and Simmons First Bank of South Arkansas
("Simmons/South"), both acquired in 1984; Simmons First Bank of Dumas
("Simmons/Dumas") and Simmons First Bank of Northwest Arkansas
("Simmons/Northwest"), both acquired in 1995. Simmons/Northwest, formerly
Simmons First Bank of Dermott, changed its name when the charter was moved to
Rogers, Arkansas, in August, 1996. The three branches of "the Bank" located in
Rogers, Springdale, and Bella Vista, Arkansas, were then sold to the relocated
bank. Headquarters for Simmons/Northwest is now the Rogers office. The banking
facility remaining at Dermott, along with its assets and liabilities, were then
transferred to Simmons/South, formerly knows as Simmons First Bank of Lake
Village. The Dermott location is now a branch of Simmons/South. The Company's
banking subsidiaries conduct their operations through 29 branches located in 15
communities in Arkansas.
Through its banking subsidiaries, the Company emphasizes retail banking
services, and it considers the Bank to be a national leader in providing credit
card services. The Bank has offered credit card services since 1967, and at
December 31, 1996, the Bank had approximately 166.3 million in credit cards in
the loan portfolio, representing approximately 33% of total consolidated loans.
The Bank has consistently employed stringent, subjectively-based credit
standards in making credit decisions concerning card applicants, rather than
using a credit scoring, or statistical profile system typically employed by
other credit card issuers. Management believes this individualized approach to
decision-making, emphasizing credit histories and individual borrower profiles,
has been a significant positive factor in producing a high quality credit card
loan portfolio, which continues to rank far below the national averages in
delinquency and net loss ratios.
The Bank is a leading provider of guaranteed student loans in Arkansas.
On December 31, 1996, the Bank owned and serviced student loans totaling
approximately $64 million, or approximately 13% of the Company's total
consolidated loans.
The Company provides mortgage banking services through the Bank's
production, sale and servicing of residential real estate mortgages on
properties located primarily in the South, Midwest and Southwest United States.
At December 31, 1996, the Bank was servicing, primarily for others,
approximately $1.5 billion of residential real estate mortgages.
The Company's banks also provide commercial banking services to
individuals and businesses, including a wide range of commercial and
agricultural loans, deposit, checking and savings accounts, personal and
corporate trust services and investment management, and securities and
investment services through selected banking locations in the State of Arkansas.
Growth Strategy
The Company's growth strategy is to expand in its primary market area
of the State of Arkansas, by capitalizing on its recent entry into Northwest
Arkansas, one of the fastest growing areas in the state, and emphasizing
commercial and agricultural lending in that area, and by expanding through
further banking acquisitions where the Company believes the acquired assets can
be redeployed into higher yielding credit card loans and other retail banking
services.
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.
Management believes that the single most important competitive factor
in the credit card business is price, in the form of interest rates and
membership fees charged to cardholders, discount fees charged to participating
merchants, and the level of fees and credits shared with members of the agent
bank network for their participation in the Bank's network. Maintenance of the
Bank's agent bank network is a key element in maintaining the Bank's dominant
position in the credit card business in Arkansas.
Management believes that the Bank's principal competitive strength in
both the Arkansas and national markets for new cardholder business has been its
low interest rate charged to cardholders and the resulting favorable national
recognition. Within the past few years, more Arkansas banks have commenced or
recommenced active marketing as a Visa and MasterCard issuer inside and outside
the state. Management cannot predict the effect on its credit card business of
these and other new entrants into the market, but believes the Bank's continuous
participation and experience in this market since 1967 provides it with unique
marketing and other strengths in competing for new cardholder business.
As more credit card issuers have entered the market for merchant
customers in Arkansas during the past several years, competition has intensified
for merchant customers and their related business, primarily on the basis of
price and quality of service. Independent sales organizations employed by out of
state processors constitute the majority of this increased competition. While
the Bank's merchant purchase volume has shown a modest increase for recent
years, management believes that most card issuers in the Arkansas market have
experienced declines in their merchant purchase volume and expects the Bank's
merchant purchase volume will experience a period of limited growth in
the future due to these continuing competitive conditions.
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 March 15, 1997, the Company and its subsidiaries had 613 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 50 President and Chief Executive Officer 10
Barry L. Crow 54 Executive Vice President and 25
Chief Financial Officer
John L. Rush 62 Secretary 29
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
five years and, further, requires the approval of the Arkansas Bank Commissioner
for any acquisition of more than 10% 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, became effective September 29, 1995, which
now 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.
Subsidiary Banks
Simmons First National Bank, a national banking association, is 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. 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. This 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, are subject to this
limitation.
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. Recent legislation has
significantly expanded the enforcement powers of the federal banking agencies
and increased the penalties for violations of the law and regulations.
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 21 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 100% 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.
Recent Legislation for Bank Holding Companies and Banks
As part of the omnibus spending bill passed by Congress in September,
1996, banks which have acquired thrift deposits must contribute to the
re-capitalization of the Savings Association Insurance Fund (SAIF). For "the
Bank", the one-time pretax charge of $687,000 was charged against third quarter,
1996, earnings.
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, and 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 properties of the Company and the Bank consist of an
eleven-story office building, located in the central business district of the
city of Pine Bluff, Arkansas. Originally constructed in 1929, the entire
building has since been completely renovated and modernized. The building is
comprised of approximately 107,000 square feet of floor space, approximately
7,500 square feet of which is leased to a tenant as office space. The office
building is situated on approximately one-fourth of a city block, the remainder
of which, together with approximately one additional city block of adjacent
property, is presently being used as a parking complex for customers of the
Company and its subsidiaries, tenants of the Company and its subsidiaries and
their customers, and the public. Additional office space was made available in
1980, with the renovation of a storage facility to provide a 9,601 square foot
office complex, now housing the Company and its subsidiary real estate and
investment departments. In 1992, additional office space was made available for
its activities, when the Company purchased a three-story concrete office
building, containing approximately 38,000 square feet of space, across the
street from its main bank building in Pine Bluff, Arkansas. A portion of the
building had been leased by the Company prior to the purchase. In 1994, the
Company completed renovation of that building which is occupied by the credit
card, marketing, and human resources divisions. Also in 1994, an additional
6,000 square feet of space was made available when the Company purchased a
three-story brick building adjoining the one purchased in 1992. This added
another 5,000 square feet of storage in addition to the office space for a total
of approximately 11,000 square feet. This facility houses the Company's student
loan operation. The Company and the Bank also operate seven drive-in banking
facilities, located throughout the city of Pine Bluff, and banking facilities at
Watson Chapel, White Hall, Sherrill, Fort Smith, Gould, Grady, Star City, and
the most recent branch facility which opened in February, 1996 in Little Rock,
Arkansas. The largest banking facility comprises approximately 107,000 square
feet of floor space, and the smallest comprises approximately 800 square feet.
The principal property of Simmons/South consists of a one-story
building located in the central business area of the city of Lake Village,
comprising approximately 6,000 square feet of floor space. In addition,
Simmons/South operates a branch in Dermott, Arkansas.
The principal property of Simmons/Jonesboro consists of a three-story
building, located in the central business district of the city of Jonesboro,
Arkansas, comprising approximately 47,108 square feet of floor space, 14,252 of
which is under lease to third parties. In addition, Simmons/Jonesboro operates
two drive-in banking facilities located in that city.
The principal property of Simmons/Dumas is a one-story structure,
located on the corner of the busiest intersection of Dumas, Arkansas. The
building, built in 1973, was recently remodeled and has approximately 5,800
square feet of space.
The principal property of Simmons/Northwest is a one-story structure,
located at North 8th and West Maple in Rogers, Arkansas. The facility was built
in 1996 and contains approximately 10,000 square feet of space, all of which is
being utilized by the bank.
All of the above properties are owned in fee simple and unencumbered,
except (a) approximately one-fourth city block in Pine Bluff, which is leased
from various persons for terms expiring in 2007 with options to extend for an
additional 50 years, which leased parcels comprise a portion of the parking
complex and lie partially under a small portion of a one-floor extension of the
main office building, (b) the lands upon which five of the drive-in banking
facilities in Pine Bluff are situated, two of which parcels are leased for a
term expiring in 2007, one in 2000, one in 2010, and one in 2035, the lands on
which the Bella Vista and one of the Fort Smith facilities, which are leased for
terms expiring in 2000 and 1997, respectively, the offices of the mortgage
marketing and dealer bank divisions, located in Little Rock, Arkansas, comprise
approximately 20,000 square feet of a 36,000 square foot, three-story leased
building, the lease terms of which expired at the end of 1996, and (c) the
building and land described in a preceding paragraph for the banking facility in
Jonesboro, which has a first mortgage lien to an insurance company with monthly
payments of approximately $12,000 including interest at 9.75%.
The Company and its subsidiaries also own or lease various small
parcels of land, on some of which are located improvements, the aggregate of
which would comprise an insignificant portion of the properties of registrant
and its subsidiaries.
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 Common Stock is traded and quoted on the over-the-counter NASDAQ
National Market System 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 Common Stock as reported by NASDAQ.
Quarterly
Price Per Dividends
Common Share Per Common
High Low Share
- ------------------------------------------------------------------------------
1996
1st quarter $ 22.67 $ 20.50 $ 0.11
2nd quarter 22.42 22.00 0.12
3rd quarter 23.00 21.83 0.12
4th quarter 27.25 26.00 0.13
1995
1st quarter $ 17.50 $ 15.00 $ 0.09
2nd quarter 18.67 16.83 0.10
3rd quarter 18.83 18.00 0.10
4th quarter 20.67 18.50 0.11
At December 31, 1996, the Common Stock was held of record by
approximately 1,231 stockholders. On March 17, 1997, the last sale price for the
Common Stock as reported by NASDAQ was $27.75 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 in any year, in excess of
the sum of net income 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 and
Simmons/South, regulators have specified that the maximum dividends state banks
may pay to the parent company without prior approval is 50% of the current year
earnings. At December 31, 1996, approximately $17 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
Interest Rate Sensitivity," and Note 21 of Notes to Consolidated Financial
Statements.
On October 29, 1996, the Company declared a 50% stock dividend. An
additional share of stock was distributed to shareholders for each two shares
owned 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, 1996, 1995,
1994, 1993, and 1992 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 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) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ 33,805 $ 31,764 $ 29,259 $ 28,450 $ 26,525
Provision for loan losses 2,341 2,092 2,050 3,006 3,741
Net interest income after provision
for loan losses 31,464 29,672 27,209 25,444 22,784
Non-interest income 25,116 24,365 24,847 26,129 25,578
Non-interest expense 41,956 39,820 38,415 38,711 37,978
Income tax expense 4,323 4,198 3,781 3,466 2,907
Net income 10,301 10,019 9,860 9,396 7,477
Per share data:
Earnings 1.81 1.77 1.79 1.85 1.73
Book value 18.02 16.91 15.17 13.66 12.02
Dividends 0.48 0.40 0.31 0.27 0.27
Balance sheet data at period end:
Assets 881,332 839,884 713,262 738,760 705,903
Loans 510,813 471,956 418,392 394,426 367,655
Allowance for loan losses 8,366 8,418 7,790 7,430 5,748
Deposits 736,367 704,768 583,538 610,355 590,409
Long term debt and capital notes 1,067 4,757 12,144 12,178 12,208
Stockholders' equity 102,825 96,797 83,700 75,335 51,219
Capital ratios at period end:
Stockholders' equity to
total assets 11.67% 11.53% 11.73% 10.20% 7.26%
Leverage (2) 11.70% 10.91% 11.47% 10.21% 6.90%
Tier 1 risk-based 18.66% 18.63% 19.25% 17.19% 12.27%
Total risk-based 19.91% 20.03% 21.56% 20.01% 15.76%
Selected ratios:
Return on average assets 1.22% 1.30% 1.39% 1.33% 1.09%
Return on average common equity 10.31% 10.95% 12.28% 14.31% 15.43%
Net interest margin(3) 4.65% 4.77% 4.80% 4.75% 4.56%
Allowance/nonperforming loans 168.58% 260.46% 248.73% 177.92% 94.84%
Allowance for loan losses as a
percentage of average loans 1.73% 1.91% 1.99% 1.88% 1.60%
Nonperforming loans as a percentage
of period-end loans 0.97% 0.68% 0.75% 1.06% 1.65%
Net charge-offs as a percentage
of average total assets 0.28% 0.24% 0.24% 0.19% 0.48%
Dividend payout 26.47% 22.79% 17.32% 14.59% 15.61%
- ---------------------
(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. (2) Leverage ratio is Tier
1 capital to average total assets less intangible assets and gross unrealized
gains/losses on available-for-sale investments. (3) Fully taxable equivalent
(36.25% for 1996 and 1995 and 34% for 1994 through 1992).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Simmons First National Corporation (SFNC) is a multi-bank holding company,
comprised of five commercial bank subsidiaries, with $881.3 million in assets,
as of December 31, 1996.
The Company achieved record earnings performance in 1996. Earnings for
the twelve-month period ended December 31, 1996, were $10,754,000, or $1.89 per
share, before the impact of a one-time, pretax charge of $687,000, as the
Company's assessment for the recapitalization of the Savings Association
Insurance Fund (SAIF). This assessment was imposed by Congress on all financial
institutions which acquired thrift deposits. These figures compare to
$10,019,000, or $1.77 per share, for the twelve-month period ended December 31,
1995, an increase of 7.3%. After the SAIF charge, year-to-date earnings for 1996
were $10,301,000, or $1.81 per share. Return on average assets was 1.22% in
1996, compared to 1.30% in 1995, and 1.39% in 1994. Return on average equity was
10.31% in 1996, compared to 10.95% in 1995, and 12.28% in 1994. On a per share
basis, net income for 1996 was $1.81, compared to $1.77 in 1995 and $1.79 in
1994. Dividends per share for 1996 were $0.48 compared to $0.40 in 1995 and
$0.31 in 1994.
Stockholders' equity at December 31, 1996, was $102.8 million, an
increase of 6.2% over the 1995 amount. On December 6, 1996, an additional
1,901,776 shares were issued when a 50 percent stock dividend was paid, bringing
the total number of shares outstanding to 5,705,415. Earnings per common share
and dividends per common share presented in the financial statements have been
restated retroactively to reflect the effects of the stock dividend on a
consistent basis. In January, 1996, the Company announced the adoption of a
stock repurchase program which would authorize the repurchase of up to 100,000
shares of outstanding stock annually. As of December 31, 1996, 20,900 shares of
stock had been repurchased. During 1995 and 1996, 3,000 and 16,500 shares of
stock, respectively, were issued relative to exercised stock options.
Acquisitions
On April 1, 1995, the Company completed the acquisition of Dumas
Bancshares, Inc. (DBI) by issuing 205,851 shares of common stock and utilizing
cash of $1.5 million in a transaction valued at $5 million. DBI was merged into
the Company. DBI owned Dumas State Bank, Dumas, Arkansas, and First State Bank,
Gould, Arkansas, with consolidated assets at March 31, 1995, of approximately
$42 million. First State Bank, which had branches in Grady and Star City,
Arkansas, in addition to its primary location in Gould, Arkansas, was merged
into Simmons First National Bank, SFNC's lead bank, and Dumas State Bank became
Simmons First Bank of Dumas and has continued to operate as a subsidiary bank of
the Company.
On August 1, 1995, the Company completed the acquisition of Dermott
State Bank Bancshares, Inc. (DSBB), located in Dermott, Arkansas, in a cash
transaction valued at approximately $2.4 million. DSBB, the single-bank holding
company for Dermott State Bank, had at the time of acquisition approximately $20
million in consolidated assets. DSBB was liquidated into the Company and Dermott
State Bank became Simmons First Bank of Dermott.
In February, 1996, the flagship bank, Simmons First National Bank,
located in Pine Bluff, opened an additional branch in Little Rock, Arkansas,
bringing the number of total branches to twenty-four.
On August, 1996, the Company repositioned its banking operations to
benefit its customers through improved personal service and operating
efficiency. The Simmons First Bank of Dermott charter was moved to Rogers,
Arkansas. The three branches of Simmons First National Bank, located in Rogers,
Springdale, and Bella Vista, Arkansas, were acquired by the relocated bank and
the bank name was changed to Simmons First Bank of Northwest Arkansas, whose
headquarters is now the Rogers office. The banking facility remaining at
Dermott, along with its assets and liabilities, was transferred to Simmons First
Bank of Lake Village, Arkansas and is now a branch of that bank. The name of
Simmons First Bank of Lake Village was subsequently changed to Simmons First
Bank of South Arkansas. At year-end, 1996, the Company was conducting financial
operations from 29 offices in 15 communities located throughout Arkansas.
Subsequent Events
On March 21, 1997, an announcement was made jointly by the Chief
Executive Officers of both the Company and First Commercial Corporation of
Little Rock, Arkansas regarding a definitive agreement which had been entered
into by the two bank holding companies. Under the terms of the agreement, SFNC
will acquire all the outstanding capital stock of First Bank of Arkansas,
Searcy, Arkansas and First Bank of Arkansas, Russellville, Arkansas, in a cash
purchase transaction valued at $53 million. The banks to be acquired had
consolidated assets, as adjusted, of approximately $310 million, as of December
31, 1996. The sale of these two banks by First Commercial was necessitated by
regulatory issues relative to the pending merger of First Commercial and the
parent company of First Bank of Arkansas at Searcy and First Bank of Arkansas at
Russellville. After completion of the transaction, SFNC will own seven banks in
the state of Arkansas and will be conducting banking operations from 39 offices
in 21 communities.
Earnings Review For the Years 1996, 1995 and 1994
In 1996, the Company reported record net earnings of $10.3 million, and
earnings per share of $1.81. This compares to net earnings of $10.0 million and
$9.9 million, and earnings per share of $1.77 and $1.79, reported in 1995 and
1994, respectively. The earnings increase in 1996 was predominantly the result
of growth in earning assets and an increase in non-interest income from trust
services, service charges and other fee income.
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 (36.25% for 1996 and 1995 and 34% for 1994).
For the year ended December 31, 1996, net interest income on a fully
taxable equivalent basis was $35.5 million, an increase of approximately $2.2
million, or 6.5%, from 1995 net interest income. The increase in 1996 in net
interest income resulted primarily from the growth in earning assets. The growth
offset a decrease in net interest margin resulting from a higher cost of funds.
The net interest margin was 4.65% in 1996, compared to 4.77% in 1995 and 4.80%
in 1994. For the year ended December 31, 1995, net interest income on a fully
taxable equivalent basis was $33.3 million, an increase of approximately $2.7
million, or 8.8%, from comparable figures in 1994. The increase in 1995 in net
interest income resulted primarily from a $60.0 million increase in average
earning assets, coupled with a stable net interest margin. The tables below
reflect an analysis of net interest income on a fully taxable equivalent basis
for the years ended December 31, 1996, 1995 and 1994, respectively, as well as
changes in fully taxable equivalent net interest income for the years 1996
versus 1995 and 1995 versus 1994.
Analysis of Net Interest Income
(FTE =Fully Taxable Equivalent)
Years Ended December 31
(In thousands) 1996 1995 1994
- ----------------------------------------------------------------------
Interest income $61,367 $56,229 $45,727
FTE adjustment 1,692 1,551 1,373
------- ------- -------
Interest income - FTE 63,059 57,780 47,100
Interest expense 27,562 24,465 16,468
------- ------- -------
Net interest income - FTE $35,497 $33,315 $30,632
======= ======= =======
Yield on earning assets - FTE 8.26% 8.27% 7.38%
Cost of interest bearing liabilities 4.36% 4.28% 3.20%
Net interest spread - FTE 3.90% 3.99% 4.18%
Net interest margin - FTE 4.65% 4.77% 4.80%
Changes in Fully Taxable Equivalent Net Interest Margin
1996 1995
vs. vs.
(In thousands) 1995 1994
- --------------------------------------------------------------------------------
Increase due to change in earning assets $ 5,713 $ 4,718
Increase (decrease) due to change in earning asset yields (434) 5,962
Decrease due to change in interest rates paid on
interest bearing liabilities (559) (7,569)
Decrease due to change in interest bearing liabilities (2,538) (428)
------- -------
Increase in net interest income $ 2,182 $ 2,683
======= =======
The following table 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, 1996. 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. Nonaccrual loans were included in average loans for
the purpose of calculating the rate earned on total loans.
UnderFinancial Accounting Standard Board Statement No. 91 (FAS 91), loan
fees and related costs are deferred and amortized as part of interest income.
Average Balance Sheets and Net Interest Income Analysis
Years Ended December 31
-------------------------------------------------------------------------------------
1996 1995 1994
---------------------------- ---------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate(%) Balance Expense Rate(%) Balance Expense Rate(%)
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
Earning Assets
Interest bearing balances
due from banks $ 5,258 $ 291 5.54 $ 2,069 $ 120 5.82 $ 1,408 $ 55 3.88
Federal funds sold 32,213 1,680 5.22 33,571 1,858 5.54 27,812 1,218 4.38
Investment securities - taxable 161,537 10,499 6.50 150,871 10,080 6.68 138,459 8,499 6.14
Investment securities - non-taxable 60,951 4,739 7.78 54,164 4,378 8.08 50,605 4,027 7.96
Mortgage loans held for sale,
net of unrealized gains (losses) 17,768 1,333 7.50 16,383 1,250 7.63 27,957 2,081 7.44
Assets held in trading accounts 1,110 68 6.13 1,513 88 5.83 1,687 103 6.11
Loans 484,578 44,449 9.17 440,109 40,006 9.09 390,501 31,117 7.97
------- ------ -------- ------- -------- -------
Total interest earning assets 763,415 63,059 8.26 698,680 57,780 8.27 638,429 47,100 7.38
------ ------- -------
Non-earning assets 81,710 74,023 71,377
------- -------- --------
Total assets $ 845,125 $ 772,703 $ 709,806
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts $ 254,812 $ 7,106 2.79 $ 235,411 $ 6,167 2.62 $ 232,351 $ 5,248 2.26
Time deposits 343,906 18,663 5.43 300,530 16,097 5.36 241,786 9,223 3.81
-------- ------- -------- ------- -------- -------
Total interest bearing deposits 598,718 25,769 4.30 535,941 22,264 4.15 474,137 14,471 3.05
Federal funds purchased and
securities sold under agreement
to repurchase 27,681 1,406 5.08 24,862 1,308 5.26 24,021 962 4.00
Other borrowed funds
Short-term debt 2,369 129 5.44 1,511 92 6.06 4,001 163 4.07
Long-term debt 1,086 106 9.87 1,124 110 9.78 1,161 122 10.49
Capital notes 1,775 152 8.56 7,853 691 8.80 11,000 750 6.82
-------- ------- -------- ------- -------- -------
Total interest bearing
liabilities 631,629 27,562 4.36 571,291 24,465 4.28 514,320 16,468 3.20
------- -------
Non-interest bearing liabilities
Non-interest bearing deposits 103,546 99,839 105,856
Other liabilities 10,033 10,067 9,323
-------- -------- --------
Total liabilities 745,208 681,197 629,499
-------- -------- --------
Stockholders' equity 99,917 91,506 80,307
-------- -------- --------
Total liabilities and
stockholders' equity $ 845,125 $ 772,703 $ 709,806
======== ======== ========
Net interest margin $ 35,497 4.65 $ 33,315 4.77 $ 30,632 4.80
======= ======= =======
The following table 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, 1996 and 1995, 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.
Volume/Rate Analysis
Years Ended December 31
----------------------------------------------------------------------
1996 over 1995 1995 over 1994
--------------------------------- ----------------------------------
Yield/ Yield/
Volume Rate Total Volume Rate Total
- ----------------------------------------------------------------------------------------------------------------
Incease (decrease) in
Interest income
Interest earning time deposits $ 176 $ (5) $ 171 $ 31 $ 34 $ 65
Federal funds sold (73) (105) (178) 281 359 640
Investment securities - taxable 897 (478) 419 811 770 1,581
Investment securities - non-taxable 528 (167) 361 281 70 351
Mortgage loans held for sale, net of
unrealized gains (losses) 104 (21) 83 (884) 53 (831)
Assets held in trading accounts (24) 4 (20) (10) (5) (15)
Loans 4,105 338 4,443 4,208 4,681 8,889
-------- -------- -------- -------- -------- --------
Total 5,713 (434) 5,279 4,718 5,962 10,680
-------- -------- -------- -------- -------- --------
Interest expense
Interest bearing transaction and
savings accounts 525 414 939 70 849 919
Time deposits 2,353 213 2,566 2,595 4,279 6,874
Federal funds purchased
and securities sold under
agreements to repurchase 141 (43) 98 34 312 346
Other borrowed funds
Short-term debt 45 (8) 37 (337) 266 (71)
Long-term debt (4) 1 (3) (4) 1 (3)
Capital notes (521) (18) (539) (1,930) 1,862 (68)
-------- -------- -------- -------- -------- --------
Total 2,539 559 3,098 428 7,569 7,997
-------- -------- -------- -------- -------- --------
Increase (decrease) in
net interest income $ 3,174 $ (993) $ 2,181 $ 4,290 $ (1,607) $ 2,683
======== ======== ======== ======== ======== ========
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 1996 was $2.3 million, which was a slight increase, when compared
to the provisions in 1995 and 1994. The provision for 1995 and 1994 was $2.1
million.
Non-Interest Income
Total non-interest income was $25.1 million in 1996, compared to
$24.4 million in 1995 and $24.8 million in 1994. Non-interest income is
principally derived from three sources: fee income, which includes service
charges on deposit accounts, trust fees, credit card fees, and loan servicing
fees; income on the sale of mortgage loans and investment banking profits; and
any gain or loss on sold or called securities.
The table below shows non-interest income for the years ended
December 31, 1996, 1995 and 1994, respectively, as well as changes in 1996 from
1995 and in 1995 from 1994.
Non-Interest Income
1996 1995
Years Ended December 31 Change from Change from
(In thousands) 1996 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Trust income $ 2,166 $ 1,790 $ 1,763 $ 376 21.01% $ 27 1.53%
Service charges on deposit accounts 3,222 2,768 2,263 454 16.40 505 22.32
Other service charges & fees 1,069 825 853 244 29.58 (28) -3.28
Income on sale of mortgage loans,
net of commissions 287 325 (758) (38) -11.69 1,083 -142.88
Income on investment banking,
net of commissions 758 1,017 1,247 (259) -25.47 (230) -18.44
Credit card fees 9,601 10,114 10,636 (513) -5.07 (522) -4.91
Loan servicing fees 7,095 6,092 6,817 1,003 16.46 (725) -10.64
Other operating income 648 1,400 1,896 (752) 53.71 (496) -26.16
Investment securities gains
(losses), net 270 34 130 236 694.12 (96) -73.85
------- ------- ------- ------- -------
Total non-interest income $ 25,116 $ 24,365 $ 24,847 $ 751 3.08% $ (482) -1.94%
======= ======= ======= ======= =======
Fee income for 1996 was $23.2 million, an increase of $1.6 million, or
7.4%, when compared with 1995 figures. Fee income for 1995 was $21.6 million, a
decrease of $.7 million, or 3.1%, when compared with 1994 figures. In 1996,
credit card fees decreased $0.5 million from the 1995 level, while loan service
fees increased $1.0 million. In 1995, both credit card and loan servicing fees
decreased $0.5 and $0.7, respectively, primarily due to a lower volume of credit
card fees, resulting from an increase in national competition and a lower volume
of mortgage loans serviced.
On the consolidated statements of income, income from the sale of
mortgage loans and dealer bank profits is presented net of commissions. The
income recorded in these accounts results from the Company's investment banking
operation, as well as fee income associated with the purchase of single family
residential loans, the securitization of those loans, and subsequent sale and
delivery of those securities against prior commitments. For 1996, income from
these areas totaled $1.0 million, compared to $1.3 million in 1995 and $.5
million in 1994. The increase in 1995, when compared to 1994, is primarily
attributable to 1994 mortgage marketing losses of $1.0 million. The resulting
reduced level of operating income for these two operations for 1995 can be
directly attributed to the negative impact of rising interest rates on the
nation's mortgage and securities markets. The overall reduction in mortgage
income for 1994 was partially offset by a sale of a portion of the Company's
servicing rights, which resulted in other income of $.7 million.
Non-Interest Expense
Non-interest expense consists of salaries and employee benefits,
occupancy, equipment 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 1996 was $42.0 million, an increase of $2.2
million, or 5.4%, from 1995. Non-interest expense for 1995 was $39.8 million, an
increase of $1.4 million, or 3.7%, from 1994. The increase in non-interest
expense in 1996, compared to 1995, primarily reflects the Company's entry into
the Little Rock market, an expansion of the Company's Springdale facility, and
the increased amortization of mortgage servicing rights associated with the
acquisition of approximately $400 million in mortgage loan servicing.
The table below shows non-interest expense for the years ended December
31, 1996, 1995 and 1994, respectively, as well as changes from 1996 to 1995 and
1995 to 1994, respectively.
Non-Interest Expense
1996 1995
Years Ended December 31 Change from Change from
(In thousands) 1996 1995 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------
Salaries and employee benefits $ 21,774 $ 21,192 $ 20,104 $ 582 2.75% $ 1,088 5.41%
Occupancy expense, net 2,310 2,512 2,043 (202) -8.05 469 22.96
Furniture & equipment expense 2,416 2,167 1,964 249 11.50 203 10.34
Loss on foreclosed assets 1,135 1,401 1,641 (266) -18.99 (240) -14.63
Other expenses
Professional services 1,553 1,400 1,634 153 10.92 (234) -14.32
Postage 1,277 1,319 1,234 (42) -3.18 85 6.89
Telephone 861 841 771 20 2.38 70 9.08
Credit card expenses 1,426 1,445 1,458 (19) -1.32 (13) -0.89
Operating supplies 958 846 695 112 13.23 151 21.73
FDIC insurance 942 830 1,307 112 13.49 (477) -36.50
Miscellaneous expenses 7,304 5,867 5,564 1,437 24.49 303 5.45
------- -------- ------- ------ -------
Total non-interest expense $ 41,956 $ 39,820 $ 38,415 $ 2,136 5.36% $ 1,405 3.66%
======= ======== ======= ====== =======
Income Taxes
The provision for income taxes for 1996 was $4.3 million, compared to
$4.2 million in 1995 and $3.8 million in 1994. The effective income tax rates
for the years ended 1996, 1995 and 1994 were 29.6%, 29.5% and 27.8%,
respectively.
Loan Portfolio
The Company's loan portfolio averaged $484.6 million during 1996 and
$440.1 million during 1995. As of December 31, 1996, total loans were $510.8
million, compared to $472.0 million on December 31, 1995. The most significant
components of the loan portfolio were loans to individuals, in the form of
credit card loans, student loans, and single family residential real estate
loans. The loan figures for 1995 include $28.4 million in loans as a result of
the Company's two acquisitions.
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 $295.9 million at December 31, 1996, or
57.9% of total loans, compared to $275.5 million, or 58.4% of total loans at
December 31, 1995. At year end, 1996, credit card loans were $166.3 million, or
32.6% of total loans, versus $154.8 million, or 32.8% of total loans at December
31, 1995. This increase in credit card loans relates, in part, to the Company's
efforts to maintain its market share through a variety of programs that
encourage additional volume with minimum credit risk.
At the end of 1996, commercial, agricultural and financial institution
loans were $70.8 million, or 13.9% of total loans, a 7.0% increase from 1995
year end's $66.2 million. Real estate construction loans at December 31, 1996,
were $20.3 million, or 4.0% of total loans, compared to $15.2 million, or 3.2%
of total loans at the end of 1995. Single family real estate loans at December
31, 1996, were $57.3 million, or 11.2% of total loans, compared to $53.6
million, or 11.4% of total loans at December 31, 1995.
During 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, (FAS 114), "Accounting by Creditors for Impairment of a
Loan", which requires that impaired loans be measured, based on the present
value of expected cash flows discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral, if the loan is collateral dependent. The adoption of
FAS 114 did not have a material impact on financial results.
The amount of loans outstanding at the indicated dates are reflected in
the following table, according to type of loan.
Loan Portfolio
Years Ended December 31
(In thousands) 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
Consumer
Credit cards $ 166,346 $ 154,808 $ 164,501 $ 168,673 $ 162,251
Student loans 64,193 63,492 62,836 65,379 58,727
Other consumer 65,384 57,166 40,739 36,763 31,878
Real Estate
Construction 20,325 15,177 6,232 6,281 4,708
Single family residential 57,251 53,556 43,045 36,297 41,733
Other commercial 60,439 59,012 44,141 37,853 27,991
Commercial
Commercial 41,375 36,553 29,047 20,007 20,833
Agricultural 21,003 20,588 16,048 16,088 12,917
Financial institutions 8,469 9,058 6,681 3,087 3,142
Other 6,028 2,546 5,122 3,998 3,475
--------- --------- ----------- --------- ---------
Total loans $ 510,813 $ 471,956 $ 418,392 $ 394,426 $ 367,655
========= ========= ========== ========= =========
The following table reflects the remaining maturities and interest rate
sensitivity of loans at December 31, 1996.
Maturity and Interest Rate Sensitivity of Loans
Over 1
year
1 year through Over
(In thousands) or less 5 years 5 years Total
- ---------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $ 51,822 $ 18,596 $ 429 $ 70,847
Real estate construction 11,887 8,107 331 20,325
Other 271,460 120,716 27,465 419,641
---------- --------- -------- ---------
Total $ 335,169 $ 147,419 $ 28,225 $ 510,813
========== ========= ======== =========
Predetermined rate $ 87,669 $ 138,458 $ 22,028 $ 248,155
Floating rate 247,500 8,961 6,197 262,658
--------- -------- ------- --------
Total $ 335,169 $ 147,419 $ 28,225 $ 510,813
========== ========== ========== =========
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
which 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 a 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 collectibility 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 uncollectible, the portion of the loan determined to be
uncollectible is then charged to the allowance for loan losses. Credit card
loans are classified as sub-standard 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 uncollectible.
At December 31, 1996, non-performing loans were $5.0 million compared
to $3.2 million and $3.1 million in 1995 and 1994, respectively. This increase
in non-performing loans can be attributed to an increase in credit card loans in
bankruptcy and 90 days past due in commercial loans.
The following tables present information concerning nonperforming
assets, including nonaccrual and restructured loans and other real estate owned.
Non-performing Assets
Years Ended December 31
(In thousands) 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
Nonaccrual loans $ 2,652 $ 1,638 $ 2,052 $ 2,813 $ 4,374
Loans past due 90 days or more
(principal or interest payments) 2,311 1,594 965 1,019 1,337
Restructured -- -- 115 344 350
-------- ------- -------- -------- -------
Total non-performing loans(1) 4,963 3,232 3,132 4,176 6,061
-------- ------- -------- -------- -------
Other non-performing assets
Foreclosed assets held for sale(2) 903 1,017 1,726 2,877 4,059
Other non-performing assets 6 7 780 992 212
-------- ------- -------- -------- -------
Total other non-performing assets 909 1,024 2,506 3,869 4,271
-------- ------- -------- -------- -------
Total non-performing assets $ 5,872 $ 4,256 $ 5,638 $ 8,045 $ 10,332
======== ======= ======== ======== =======
Net charge-offs to average loans 0.49% 0.41% 0.43% 0.36% 0.91%
Allowance for loan losses to total loans 1.64% 1.78% 1.86% 1.88% 1.56%
Allowance for loan losses to
non-performing loans 168.58% 260.46% 248.73% 177.92% 94.84%
Non-performing loans to total loans 0.97% 0.68% 0.75% 1.06% 1.65%
Non-performing assets to total assets 0.67% 0.51% 0.79% 1.09% 1.46%
- ---------------------------
(1) Impaired loans of $4,963 includes all non-performing loans and certain other
loans identified by management. (2) Assets constituting foreclosed assets held
for sale are generally marked down to appraised value less estimated selling
expense at the time of transfer from the loan portfolio, and are appraised
annually thereafter.
Approximately $184,000 and $172,000 of interest income would have been
recorded for the periods ended December 31, 1996 and 1995, 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
periods ended December 31, 1996 and 1995.
Allowance for Loan Losses
An analysis of the allowance for loan losses for the last five years is
shown in the table below:
(In thousands) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 8,418 $ 7,790 $ 7,430 $ 5,748 $ 5,302
------- ------ ------- ------ ------
Loans charged off
Consumer
Credit cards 2,392 1,851 1,690 1,761 1,944
Student loans 15 9 2 2 11
Other consumer 363 414 152 171 127
------- ------ ------- ------ ------
Total consumer 2,770 2,274 1,844 1,934 2,082
------- ------ ------- ------ ------
Real Estate
Construction -- -- -- 40 5
Single family residential 33 7 213 31 44
Other commercial 3 1 -- 6 168
------- ------ ------- ------ ------
Total real estate 36 8 213 77 217
------- ------ ------- ------ ------
Commercial
Commercial 74 22 -- 40 1,297
Agricultural 4 -- 53 -- 74
------- ------ ------- ------ ------
Total commercial 78 22 53 40 1,371
------- ------ ------- ------ ------
Total loans charged off 2,884 2,304 2,110 2,051 3,670
------- ------ ------- ------ ------
Recoveries of loans previously charged off
Consumer
Credit cards 309 143 306 211 196
Student loans -- -- 2 1 18
Other consumer 153 284 70 77 44
------- ------ ------- ------ ------
Total consumer 462 427 378 289 258
------- ------ ------- ------ ------
Real estate
Single family residential 8 6 7 5 24
Other commercial -- 4 16 3 81
------- ------ ------- ------ ------
Total real estate 8 10 23 8 105
------- ------ ------- ------ ------
Commercial
Commercial 20 33 18 345 12
Agricultural 1 9 1 85 --
------- ------ ------- ------ ------
Total commercial 21 42 19 430 12
------- ------ ------- ------ ------
Total recoveries 491 479 420 727 375
------- ------ ------- ------ ------
Net loans charged off 2,393 1,825 1,690 1,324 3,295
Allowance for loan losses of
acquired institutions -- 361 -- -- --
Additions to reserve charged to
operating expense 2,341 2,092 2,050 3,006 3,741
------- ------ ------- ------ ------
Balance, end of year $ 8,366 $ 8,418 $ 7,790 $ 7,430 $ 5,748
======= ====== ======= ====== ======
The amounts of additions to the allowance during the year 1996 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, loans which could be future problems 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 the possibility of
losses being incurred within the categories of loans set forth in the table
below:
Allocation of Allowance for Loan Losses
December 31
1996 1995 1994 1993 1992
---------------- ---------------- ----------------- ---------------- ------------------
Allowance % of Allowance % of Allowance % of Allowance % of Allowance % of
(In thousands) Amount loans* Amount loans* Amount loans* Amount loans* Amount loans*
- ---------------------------------------------------------------------------------------------------------------
Consumer
Credit cards $2,626 32.5% $ 2,658 32.8% $2,625 39.3% $ 2,430 42.8% $2,232 44.0%
Student loans 100 12.6% 100 13.5% 100 15.0% 100 16.6% 100 16.0%
Other consumer 123 12.8% 162 12.2% 324 9.8% 299 9.3% 483 8.7%
Real estate
Construction 128 4.0% -- 3.2% -- 1.5% 13 1.6% 74 1.3%
Single family
residential 1,706 11.3% 822 11.3% 343 10.3% 1,009 9.2% 310 11.5%
Other commercial 751 11.8% 1,882 12.5% 1,510 10.6% 701 9.6% 1,261 7.6%
Commercial
Commercial 518 8.1% 452 7.7% 362 6.9% 339 5.1% 295 5.7%
Agricultural 120 4.1% -- 1.9% 32 3.8% -- 4.1% 188 3.5%
Financial institutions -- 1.6% 387 4.4% 145 1.6% 161 0.8% -- 0.8%
Other -- 1.2% -- 0.5% -- 1.2% -- 0.9% 3 0.9%
Unallocated 2,294 -- 1,955 -- 2,349 -- 2,378 -- 802 --
----- ------ ----- ------ -----
Total $8,366 100.0% $ 8,418 100.0% $7,790 100.0% $ 7,430 100.0% $5,748 100.0%
===== ====== ===== ====== =====
*Percentage of loans in each category to total loans
Investments and Securities
The Company's securities portfolio is the second largest component of
earning assets and provides a significant source of revenue. Securities 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.
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 specifically
identified 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.
Held-to-maturity and available-for-sale investment securities were
$128.1 million and $109.5 million, respectively, at December 31, 1996, compared
to the held-to-maturity amount of $134.4 million and available-for-sale amount
of $90.4 at December 31, 1995. The Company's philosophy regarding investments is
conservative, based on investment type and maturity. Investments in the
held-to-maturity portfolio include U.S. Treasury securities, U.S. government
agencies, mortgage-backed securities, and municipal securities. As of December
31, 1996, $60.0 million, or 46.8%, of the held-to-maturity securities were
invested in U.S. Treasury securities and obligations of U.S. government
agencies, of which approximately $19 million, or 14.5%, was invested in
securities with maturities of one year or less, and $21 million, or 16.7%, was
invested in securities with maturities of one to five years. In the
available-for-sale securities, $105.6 million, or 96.4% of the securities were
in U.S. Treasuries and obligations of U.S. government agencies, 89% of which
will mature in less than five years. In order to reduce the Company's income tax
burden, an additional $63.6 million, or 49.6%, of the held-to-maturity
securities portfolio, was invested in tax-exempt obligations of state and
political subdivisions. There are no securities of any one issuer exceeding ten
percent of the Company's stockholders' equity at December 31, 1996. The Company
has approximately $4.2 million, or 3.3%, in GNMA and other mortgaged-backed
securities in the held-to-maturity portfolio. 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.
As of December 31, 1996, the held-to-maturity investment portfolio had
gross unrealized gains of $1.8 million and gross unrealized losses of $.7
million. Net realized gains from called or sold available-for-sale securities
for 1996 were $270,000, up from net realized gains of $34,000 in 1995, and
$130,000 in 1994.
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.
The Company's trading account is established and maintained for the
benefit of the investment banking division. All activities in the account are
performed by investment banking personnel solely for operations in that
division. The trading account is typically used to provide inventory for resale
and is not used to take advantage of short-term price movements.
The table below presents the carrying value and fair value of
investment securities for each of the years indicated.
Investment Securities
Years Ended December 31
----------------------------------------------------------------------------------------
1996 1995
--------------------------------------------- ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ----------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 24,700 $ 179 $ (122) $ 24,757 $ 45,920 $ 400 $ (46) $ 46,274
U.S. Government
agencies 35,286 527 (167) 35,646 23,569 692 (18) 24,243
Mortgage-backed
securities 4,243 13 (69) 4,187 6,344 37 (55) 6,326
State and political
subdivisions 63,586 1,116 (327) 64,375 58,154 1,536 (356) 59,334
Other securities 332 2 (4) 330 446 11 -- 457
--------- ------ ----- --------- --------- ------ ------ ---------
$ 128,147 $ 1,837 $ (689) $ 129,295 $ 134,433 $ 2,676 $ (475) $ 136,634
========= ====== ===== ========= ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 63,248 $ 1,006 $ (55) $ 64,199 $ 72,258 $ 2,102 $ (3) $ 74,357
U.S. Government
agencies 41,358 186 (135) 41,409 11,905 264 (35) 12,134
State and political
subdivisions -- -- -- -- 51 -- -- 51
Other securities 3,102 805 -- 3,907 2,976 851 (2) 3,825
--------- ------ ----- --------- --------- ------ ------ ---------
$ 107,708 $ 1,997 $ (190) $ 109,515 $ 87,190 $ 3,217 $ (40) $ 90,367
========= ====== ===== ========= ========= ====== ====== =========
Years Ended December 31
---------------------------------------------
1994
---------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value
- ---------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 74,544 $ 349 $(1,479) $ 73,414
U.S. Government
agencies 13,375 32 (289) 13,118
Mortgage-backed
securities 3,551 6 (244) 3,313
State and political
subdivisions 50,904 577 (1,962) 49,519
Other securities -- -- -- --
--------- ------ ----- ---------
$ 142,374 $ 964 $(3,974) $ 139,364
========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 25,701 $ 96 $ (202) $ 25,595
U.S. Government
agencies 1,002 3 -- 1,005
State and political
subdivisions -- -- -- --
Other securities 2,554 457 (1) 3,010
--------- ------ ----- ---------
$ 29,257 $ 556 $ (203) $ 29,610
========= ====== ===== =========
The following table reflects the amortized cost and estimated market
value of debt securities at December 31, 1996, by contractual maturity, the
weighted average yields (for tax-exempt obligations on a fully taxable basis,
assuming a 36.25% 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.
Maturity Distribution of Investment Securities
December 31, 1996
------------------------------------------------------------------------------------
Over Over
1 year 5 years
1 year through through Over No fixed Par Market
(In thousands) or less 5 years 10 years 10 years maturity Total Value Value
- -------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 14,091 $ 8,829 $ 1,780 $ -- $ -- $ 24,700 $ 24,600 $ 24,756
U.S. Government
agencies 4,443 12,548 18,295 -- -- 35,286 35,428 35,647
Mortgage-backed
securities -- -- -- -- 4,243 4,243 4,197 4,187
State and political
subdivisions 3,642 25,271 28,998 5,675 -- 63,586 63,763 64,375
Other securities -- -- -- -- 332 332 332 330
-------- ------- -------- ------- -------- -------- -------- --------
Total $ 22,176 $ 46,648 $ 49,073 $ 5,675 $ 4,575 $ 128,147 $ 128,320 $ 129,295
======== ======= ======== ======= ======== ======== ======== ========
Percentage of total 17.31% 36.40% 38.29% 4.43% 3.57% 100.00%
======= ====== ======= ====== ======= =======
Weighted average 6.04% 7.32% 7.30% 10.46% 6.59% 7.20%
======= ====== ======= ====== ======= =======
Available-for-Sale
U.S. Treasury $ 30,085 $ 31,714 $ 1,449 $ -- $ -- $ 63,248 $ 63,347 $ 64,199
U.S. Government
agencies 11,769 18,687 10,902 -- -- 41,358 41,525 41,409
State and political
subdivisions -- -- -- -- -- -- -- --
Other securities -- -- -- -- 3,102 3,102 -- 3,907
-------- ------- -------- ------- -------- -------- -------- --------
Total $ 41,854 $ 50,401 $ 12,351 $ -- $ 3,102 $ 107,708 $ 104,872 $ 109,515
======== ======= ======== ======= ======== ======== ======== ========
Percentage of total 38.86% 46.79% 11.47% -- 2.88% 100.00%
======= ====== ======= ====== ======= =======
Weighted average 6.60% 6.84% 6.79% -- 5.89% 6.74%
======= ====== ======= ====== ======= =======
Deposits
Total average deposits for 1996 were $702.3 million, compared to $635.8
million in 1995. The year-end balances of time deposits over $100,000 were $88.7
million in 1996, compared to $104.9 million in 1995. The increase at year end
1995 was due in part to the assumption of deposits through acquisitions.
The following table 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, 1996.
Average Deposits Balances and Rates
December 31
------------------------------------------------------------------------
1996 1995 1994
---------------------- ----------------------- -------------------------
Average Average Average Average Average Average
(In thousands) Amount rate paid Amount rate paid Amount rate paid
- -------------------------------------------------------------------------------------------------------------
Non-interest bearing demand
deposits $ 103,546 -- $ 99,839 -- $ 105,856 --
Interest bearing transaction and
savings deposits 254,812 2.79% 235,411 2.62% 232,351 2.26%
Time deposits
$100,000 or more 97,376 5.50% 79,486 5.53% 53,479 3.61%
Other time deposits 246,530 5.40% 221,044 5.29% 188,307 3.87%
--------- ---------- ---------
Total $ 702,264 $ 635,780 $ 579,993
========= ========== =========
The following table set forth by time remaining to maturity, deposits
(exclusive of regular savings) in amounts of $100,000 or more at December 31,
1996 and 1995, respectively.
Maturities of Large Denomination Time Deposits
Time Certificates of Deposit
($100,000 or more)
-------------------------------------------------------
December 31
-------------------------------------------------------
1996 1995
--------------------------- --------------------------
(In thousands) Balance Percent Balance Percent
- ---------------------------------------------------------------------------------------------------
Maturing
Three months or less $ 38,326 43.19% $ 41,434 39.50%
Over 3 months to 6 months 27,550 31.05% 37,881 36.11%
Over 6 months to 12 months 16,705 18.83% 19,269 18.37%
Over 12 months 6,150 6.93% 6,322 6.02%
---------- ----------
Total $ 88,731 100.00% $ 104,906 100.00%
========== ==========
Short-Term Borrowings
Federal funds purchased and securities sold under agreements to
repurchase were $29.1 million at December 31, 1996, as compared to $20.9 million
at December 31, 1995. Other short-term borrowings, consisting of U.S. Treasury
Note borrowings were $1.5 million at December 31, 1996, as compared to $1.4
million at December 31, 1995.
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 $1.1 million and $4.8 million at
December 31, 1996 and 1995, respectively. In 1996, the Company prepaid the
remaining $3.7 million in capital notes, originally due to mature June 30, 1997,
twelve months prior to their original due date. Long-term debt at December 31,
1996, consisted of a mortgage note payable to Mutual Benefit Life Insurance
Corporation.
Capital
At December 31, 1996, the total capital reached $102.8 million, another
milestone in the Company's history. Capital represents shareholder ownership in
the Company -- the book value of assets in excess of liabilities. With an equity
to asset ratio of 11.7% as of December 31, 1996, the Company's strong capital
position relative to peers, provides flexibility to finance future growth and
maintain the confidence of deposit customers, investors, and banking regulatory
agencies.
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, 1996, the tier 1 capital ratio was
18.6%, while the Company's risk-adjusted ratio for total capital, as of December
31, 1996, was 19.9%, both of which exceed the capital minimums established in
the new risk-based capital requirements.
The Company's risk-based capital ratios at December 31, 1996 and 1995
are presented below.
Risk-Based Capital
December 31
(In thousands) 1996 1995
- -----------------------------------------------------------------
Tier 1 capital
Stockholders' equity $102,825 $ 96,797
Less Goodwill 3,164 3,677
Less unrealized gain on
available for sale securities 1,152 2,025
-------- --------
Total tier 1 capital $ 98,509 $ 91,095
======== ========
Tier 2 capital
Qualifying allowance for loan losses 6,621 6,141
Qualifying long-term debt -- 730
-------- --------
Total capital $105,130 $ 97,966
======== ========
Risk weighted assets $527,931 $488,981
======== ========
Ratios at end of year
Leverage ratio 11.20% 10.91%
Risk-based capital
Tier 1 capital 18.66% 18.63%
Total capital 19.91% 20.03%
Minimum guidelines
Leverage ratio 4.00% 4.00%
Tier 1 capital 4.00% 4.00%
Total capital 8.00% 8.00%
Liquidity and Interest Rate Sensitivity
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, 1996, undivided profits of the Company's subsidiaries were approximately $51
million, of which approximately $17 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, 1996, cash and cash
equivalents, trading and available-for-sale securities, and mortgage loans held
for sale were 21.5% of total assets, as compared to 22.7% at December 31, 1995.
Interest Rate Sensitivity
Management continually reviews the Company's exposure to changes in
interest rates. Among the factors considered during its evaluations are changes
in the mix of earning assets, growth of earning assets, interest rate spreads
and repricing periods. Management forecasts and models the impact various
interest rate fluctuations would have on net interest income. One such model
measures the interest rate sensitivity gap, which presents, at a particular
point in time, the matching of interest rate sensitive assets with interest rate
sensitive liabilities.
As shown in the schedule below, the ratio of cumulative rate sensitive
assets to rate sensitive liabilities at six months and one year, was
approximately 96% and 113%, respectively. A financial institution is considered
to be liability sensitive, or as having a negative GAP, when the amount of its
interest bearing liabilities maturing or repricing within a given time period
exceeds the amount of its interest earning assets also maturing or repricing
within that time period. Conversely, an institution is considered to be asset
sensitive, or as having a positive GAP, when the amount of its interest bearing
liabilities maturing and repricing is less than the amount of its interest
earning assets also maturing or repricing during the same period. Generally, in
a falling interest rate environment, a negative GAP should result in an increase
in net interest income, and in a rising interest rate environment this negative
GAP should adversely affect net interest income. The converse would be true for
a positive GAP: the long-term effect of rising interest rates would tend to
increase net interest income because of the positive GAP ratio. However, the
negative GAP for the short-term would cause a decrease in net interest income,
as a result of rising rates for approximately six months. Since conditions
change on a daily basis, these theoretical conclusions may not be indicative of
actual future results.
Interest Rate Sensitivity
Interest Rate Sensitivity Period
---------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1 to 5 Over 5
(In thousands, except ratios) Days Days Days Days Years Years Total
- ---------------------------------------------------------------------------------------------------------------
Earning assets
Short-term investments $ 27,292 $ -- $ -- $ -- $ -- $ -- $ 27,292
Assets held in trading accounts 182 -- -- -- -- -- 182
Investment securities 16,029 19,935 24,278 53,644 91,434 32,342 237,662
Mortgage loans held for sale,
net of unrealized gains
(losses) 10,101 -- -- -- -- -- 10,101
Loans 64,902 192,950 29,472 100,718 107,944 14,827 510,813
Total earning assets 118,506 212,885 53,750 154,362 199,378 47,169 786,050
------- ------- ------- ------- ------- ------ -------
Interest bearing liabilities
Interest bearing transaction
and savings accounts 142,250 -- -- -- 100,185 22,120 264,554
Time deposits 57,653 70,438 99,171 78,648 39,334 -- 345,245
Short-term borrowings 30,563 -- -- -- -- -- 30,563
Long-term debt 4 8 12 24 221 798 1,067
------ -------- ------- -------- -------- -------- --------
Total interest bearing
liabilities 230,470 70,446 99,183 78,672 139,740 22,918 641,429
------- -------- -------- -------- ------- -------- -------
Interest rate sensitivity gap (111,964) 142,439 (45,433) 75,690 59,638 24,251 144,621
Cumulative interest rate
sensitivity gap (111,964) 30,475 (14,958) 60,732 120,370 144,621
Cumulative rate sensitive assets
to rate sensitive liabilities 51.4% 110.1% 96.3% 112.7% 119.5% 122.6%
Cumulative gap as a % of
earning assets 14.2% 3.9% -1.9% 7.7% 15.3% 18.4%
Quarterly Results
Selected unaudited quarterly financial information for the last eight
quarters is shown in the table below.
Quarter
-----------------------------------------------
(In thousands, except per share data) First Second Third Fourth Total
- --------------------------------------------------------------------------------------------------------
1996
Net interest income $ 7,979 $ 8,279 $ 8,676 $ 8,871 $ 33,805
Provision for loan losses 502 502 503 834 2,341
Non-interest income 6,079 5,953 6,375 6,709 25,116
Non-interest expense 10,450 9,962 10,846 10,698 41,956
Net realized gain on securities 152 118 -- -- 270
Net income 2,242 2,661 2,548 2,850 10,301
Earnings per common share (1) 0.39 0.47 0.45 0.50 1.81
1995
Net interest income $ 7,395 $ 7,770 $ 8,306 $ 8,293 $ 31,764
Provision for loan losses 449 452 506 685 2,092
Non-interest income 6,099 5,832 6,114 6,320 24,365
Non-interest expense 9,826 9,849 10,034 10,111 39,820
Net realized gain (loss) on securities 1 -- 35 (2) 34
Net income 2,253 2,393 2,670 2,703 10,019
Earnings per common share (1) 0.41 0.42 0.47 0.47 1.77
(1) Adjusted to give retroactive consideration to stock dividend in December, 1996.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Item 1 Independent Accountants' Report....................................
Consolidated Balance Sheets December 31, 1996 and 1995.............
Consolidated Statements of Income Years Ended
December 31, 1996, 1995 and 1994................................
Consolidated Statements of Cash Flow Years Ended
December 31, 1996, 1995 and 1994................................
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994....................
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994................................
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 31 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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
The Company changed its method of accounting for investment securities
in 1994.
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
January 29, 1997
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 and 1995
(In thousands) 1996 1995
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and non-interest bearing balances due from banks $ 41,989 $ 36,179
Interest bearing balances due from banks 8,312 2,398
Federal funds sold and securities purchased
under agreements to resell 18,980 34,845
------------ ------------
Cash and cash equivalents 69,281 73,422
Investment securities 237,662 224,800
Mortgage loans held for sale, net of unrealized gains (losses) 10,101 26,159
Assets held in trading accounts 182 548
Loans 510,813 471,956
Allowance for loan losses (8,366) (8,418)
------------ ------------
Net loans 502,447 463,538
Premises and equipment 20,764 16,201
Foreclosed assets held for sale 903 1,017
Interest receivable 9,675 7,953
Cost of loan servicing rights acquired 8,906 4,867
Excess of cost over fair value of net assets acquired, at amortized cost 3,164 3,677
Other assets 18,247 17,702
------------ ------------
TOTAL ASSETS $ 881,332 $ 839,884
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-interest bearing transaction accounts $ 126,568 $ 108,779
Interest bearing transaction accounts and savings deposits 264,554 251,065
Time deposits 345,245 344,924
------------ ------------
Total deposits 736,367 704,768
Federal funds purchased and securities sold
under agreements to repurchase 29,079 20,861
Short-term debt 1,484 1,405
Long-term debt 1,067 1,107
Capital notes -- 3,650
Accrued interest and other liabilities 10,510 11,296
------------ ------------
Total liabilities 778,507 743,087
------------ ------------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $5 a share, authorized 10,000,000
shares, 5,705,415 issued and outstanding at 1996 and
5,724,918 at 1995 28,527 19,083
Surplus 22,040 22,651
Undivided profits 51,106 53,038
Unrealized appreciation on available-for-sale securities,
net of income taxes of $655 at 1996 and $1,151 at 1995 1,152 2,025
------------ ------------
Total stockholders' equity 102,825 96,797
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 881,332 $ 839,884
============ ============
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands, except per share data) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 44,333 $ 39,917 $ 31,035
Federal funds sold and securities purchased
under agreements to resell 1,680 1,858 1,218
Investment securities 13,664 12,996 11,237
Mortgage loans held for sale, net of unrealized gains (losses) 1,333 1,250 2,081
Assets held in trading accounts 66 88 101
Interest bearing balances due from banks 291 120 55
-------- -------- --------
TOTAL INTEREST INCOME 61,367 56,229 45,727
-------- -------- --------
INTEREST EXPENSE
Interest bearing transaction accounts and savings deposits 7,106 6,167 5,248
Time deposits 18,663 16,097 9,223
Federal funds purchased and securities sold
under agreements to repurchase 1,406 1,308 962
Short-term debt 129 92 163
Long-term debt 106 110 122
Capital notes 152 691 750
-------- -------- --------
TOTAL INTEREST EXPENSE 27,562 24,465 16,468
-------- -------- --------
NET INTEREST INCOME 33,805 31,764 29,259
Provision for loan losses 2,341 2,092 2,050
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 31,464 29,672 27,209
-------- -------- --------
NON-INTEREST INCOME
Trust department income 2,166 1,790 1,763
Service charges on deposit accounts 3,222 2,768 2,263
Other service charges and fees 1,069 825 853
Income on sale of mortgage loans, net of commissions 287 325 (758)
Income on investment banking, net of commissions 758 1,017 1,247
Credit card fees 9,601 10,114 10,636
Loan servicing fees 7,095 6,092 6,817
Other income 648 1,400 1,896
Investment securities gains (losses), net 270 34 130
-------- -------- --------
TOTAL NON-INTEREST INCOME 25,116 24,365 24,847
-------- -------- --------
NON-INTEREST EXPENSE
Salaries and employee benefits 21,774 21,192 20,104
Occupancy expense, net 2,310 2,512 2,043
Furniture and equipment expense 2,416 2,167 1,964
Loss on foreclosed assets 1,135 1,401 1,641
Other expense 14,321 12,548 12,663
-------- -------- --------
TOTAL NON-INTEREST EXPENSE 41,956 39,820 38,415
-------- -------- --------
INCOME BEFORE INCOME TAXES 14,624 14,217 13,641
Provision for income taxes 4,323 4,198 3,781
-------- -------- --------
NET INCOME $ 10,301 $ 10,019 $ 9,860
======== ======== ========
EARNINGS PER AVERAGE COMMON SHARE $ 1.81 $ 1.77 $ 1.79
======== ======== ========
DIVIDENDS PER COMMON SHARE $ 0.48 $ 0.40 $ 0.31
======== ======== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,301 $ 10,019 $ 9,860
Items not requiring (providing) cash
Depreciation and amortization 4,095 3,254 1,341
Provision for loan losses 2,341 2,092 2,050
Amortization of premiums and accretion of discounts on
investment securities (148) 1,076 50
Deferred income taxes 152 (134) 63
Provision for foreclosed assets 121 176 151
Investment securities gains (losses), net (270) (34) (130)
(Gain) loss on sale of premises and equipment (141) 6 (25)
Changes in
Interest receivable (1,722) (1,664) (460)
Mortgage loans held for sale, net of unrealized gains (losses) 16,058 (17,438)
39,055
Assets held in trading accounts 366 2,186 1,025
Other assets (631) (1,160) 8,181
Accounts payable and accrued expenses (2,339) 2,507 (1,606)
Income taxes payable 64 (685) 219
--------- --------- ---------
Net cash provided by operating activities 28,247 201 59,774
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Net originations of loans (41,389) (25,371) (25,939)
Purchase of premises and equipment (7,596) (8,301) (3,634)
Proceeds from sale of premises and equipment 1,646 4,505 745
Proceeds from sale of foreclosed assets 92 848 1,279
Proceeds from sale of available-for-sale securities 265 -- --
Proceeds from maturities of available-for-sale securities 112,632 18,851 98,209
Purchases of available-for-sale securities (130,694) (73,879) (103,709)
Proceeds from maturities of held-to-maturity securities 50,419 84,364 78,890
Purchases of held-to-maturity securities (44,410) (59,846) (46,316)
Purchase of mortgage servicing rights (6,159) -- --
--------- --------- ---------
Net cash used in investing activities (65,194) (58,829) (475)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in transaction accounts and
savings deposits 31,278 (4,635) (21,985)
Net increase (decrease) in time deposits 321 72,722 (4,832)
Net repayments of other borrowings (3,611) (7,603) (3,426)
Dividends paid (2,724) (2,234) (1,728)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase 8,218 (3,070) (2,416)
Net cash and cash equivalents received in acquisitions -- 2,848 --
Issuance (repurchase) of common stock (676) 20 --
--------- --------- ---------
Net cash provided by (used in) financing activities 32,806 58,048 (34,387)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,141) (580) 24,912
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 73,422 74,002 49,090
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 69,281 $ 73,422 $ 74,002
========= ========= =========
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, and 1994
Unrealized
Appreciation
On Available-
Common For-Sale Undivided
(In thousands) Stock Surplus Securities, Net Profits Total
- --------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $ 18,387 $ 19,827 $ $ 37,121 $ 75,335
Adoption of FAS 115, net of income
taxes of $487 946 946
Net income 9,860 9,860
Cash dividends declared ($0.31 per share) (1,728) (1,728)
Change in unrealized appreciation on
available for sale securities, net of
income tax credit of $367 (713) (713)
-------- -------- ---------- -------- ---------
Balance, December 31, 1994 18,387 19,827 233 45,253 83,700
Exercise of stock options--3,000 shares 10 10 20
Common stock issued in connection
with purchase of Dumas Bancshares, Inc.
- --205,851 shares 686 2,814 3,500
Net income 10,019 10,019
Cash dividends declared ($0.40 per share) (2,234) (2,234)
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $1,032 1,792 1,792
-------- -------- ---------- -------- ---------
Balance, December 31, 1995 19,083 22,651 2,025 53,038 96,797
Exercise of stock options--16,500 shares 55 70 125
Repurchase of common stock (120) (681) (801)
Common stock dividend
- --1,901,776 shares 9,509 (9,509)
Net income 10,301 10,301
Cash dividends declared ($0.48 per share) (2,724) (2,724)
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $497 (873) (873)
-------- -------- ---------- -------- ---------
Balance, December 31, 1996 $ 28,527 $ 22,040 $ 1,152 $ 51,106 $ 102,825
======== ======== ========== ======== =========
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 and mortgage 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.
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
The Company considers all amounts due from banks and federal funds sold
as cash equivalents. The banking subsidiaries are required to maintain average
reserve balances with the Federal Reserve Bank, based on a percentage of
deposits. The average amounts of those reserve balances for the years ended
December 31, 1996 and 1995, were $4,976,000 and $3,888,000, respectively. The
Federal Reserve requirement on transaction account reserves was 10 percent
during 1996. Generally, federal funds are purchased and sold for varying periods
up to thirty days. These obligations are purchased from other financial
institutions and are held in the name of Simmons First National Bank at the
Federal Reserve Bank until maturity of the agreement.
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 by using an aggregate loan 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.
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 and the costs of servicing rights retained.
Fees received from borrowers to guarantee the funding of mortgage loans held for
sale and fees paid to investors to ensure the ultimate sale of such mortgage
loans 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,
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.
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.
Excess Cost Over Fair Value of Net Assets Acquired
Unamortized costs of subsidiaries purchased in 1984, in excess of the
estimated fair value of underlying net assets acquired, aggregated $647,000
(originally $2,646,000) at December 31, 1996, and are being amortized over a
20-year period, using the straight-line method.
Unamortized costs in excess of the estimated fair value of five branch
operations of failed savings and loans located in Fort Smith and Pine Bluff,
Arkansas purchased by the Company between 1990 and 1992, aggregated $922,000
(originally $2,473,000 ) at December 31, 1996. The amount allocated to the
future earnings potential of acquired deposits (originally $1,554,000), is being
amortized over ten years, using the straight-line method. The remaining
intangible (originally $919,000) is being amortized over fifteen years, using
the straight-line method.
Unamortized costs in excess of the estimated fair value of the three
branches of "Simmons/Northwest", which was originally failed savings and loans
located in Rogers, Springdale, and Bella Vista, Arkansas, purchased in 1990 by
"the Company" and transferred in 1996 from "the Bank" to "Simmons/Northwest",
aggregated $192,000 (originally $205,000) at December 31, 1996. The amount
allocated to the future earnings potential of acquired deposits (originally
$142,000), is being amortized over ten years, using the straight-line method.
The remaining intangible (originally $63,000) is being amortized over fifteen
years, using the straight-line method.
Unamortized costs of subsidiaries purchased in 1995, in excess of the
estimated fair value of underlying net assets acquired, aggregated $1,403,000
(originally $1,598,000) at December 31, 1996. The amount allocated to the future
earnings potential of acquired deposits (originally $820,000), is being
amortized over ten years, using the straight-line method. The remaining
intangible (originally $778,000) is being amortized over fifteen years, using
the straight-line method.
Amortization expense related to these acquisitions for the periods
ended December 31, 1996, 1995, and 1994 was $447,000, $438,000 and $426,000,
respectively.
Fee Income
Periodic bank card 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. Other loan fees, net of direct origination
costs, are recognized as revenue on a yield basis over the term of the loans.
Loan Servicing Rights
The cost of mortgage servicing rights acquired is amortized in
proportion to, and over the period of, estimated net servicing revenues.
Impairment of mortgage servicing rights is assessed based on the fair value of
those rights. Fair values are estimated using discounted cash flows based on a
current market interest rate. For purposes of measuring impairment, the rights
are stratified based on the predominant risk characteristics of the underlying
loans. The predominant characteristic currently used for stratification is type
of loan. The amount of impairment recognized is the amount by which the
capitalized mortgage servicing rights for a stratum exceed their fair value.
When participating interests in loans sold have an average contractual
interest rate, adjusted for normal servicing fees, that differs from the agreed
yield to the purchaser, gains or losses are recognized equal to the present
value of such differential over the estimated remaining life of such loans. The
resulting "excess servicing fees receivable" is amortized over the estimated
life using a method approximating the constant yield method.
The excess servicing fees receivable and the amortization thereon is
periodically evaluated in relation to estimated future net servicing revenues,
taking into consideration changes in interest rates, current prepayment rates,
and expected future cash flows. The Company evaluates the carrying value of the
excess servicing receivable by estimating the future net servicing income of the
portfolio based on management's best estimate of remaining loan lives.
Management is of the opinion that a valuation allowance was not needed.
During 1995, the Company adopted Statement of Financial Accounting
Standards Board No. 122 (FAS 122), "Accounting for Mortgage Servicing Rights".
FAS 122 requires that mortgage servicing rights retained for originated mortgage
loans that are sold or securitized be capitalized based on the cost of their
servicing rights. The adoption of FAS 122 did not have a material affect on the
Company's financial position or the results of its operation.
Allowance for Foreclosure Expenses
The Company charges income for expected costs that are incurred as a
result of the Company's responsibility as servicer of loans for other investors.
The charge to income is determined based on a number of variables, including the
amount of delinquent loans serviced for other investors, length of delinquency,
and amounts previously advanced on behalf of the borrower that the Company does
not expect to recover.
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
Earnings per share are based on the weighted average number of shares
outstanding during each year. Common stock equivalents, in the form of employee
stock options, were not dilutive. Weighted average shares outstanding were
5,711,181 for 1996, 5,669,148 for 1995 and 5,516,067 for 1994, after giving
retroactive consideration to the stock dividend in December, 1996.
NOTE 2: 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
----------------------------------------------------------------------------------------
1996 1995
--------------------------------------------- ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ----------------------------------------------------------------------------------------------------------------
Hled-to-Maturity
U.S. Treasury $ 24,700 $ 179 $ (122) $ 24,757 $ 45,920 $ 400 $ (46) $ 46,274
U.S. Government
agencies 35,286 527 (167) 35,646 23,569 692 (18) 24,243
Mortgage-backed
securities 4,243 13 (69) 4,187 6,344 37 (55) 6,326
State and political
subdivisions 63,586 1,116 (327) 64,375 58,154 1,536 (356) 59,334
Other securities 332 2 (4) 330 446 11 -- 457
--------- ------ ----- --------- --------- ------ ------ ---------
$ 128,147 $ 1,837 $ (689) $ 129,295 $ 134,433 $ 2,676 $ (475) $ 136,634
========= ====== ===== ========= ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 63,248 $ 1,006 $ (55) $ 64,199 $ 72,258 $ 2,102 $ (3) $ 74,357
U.S. Government
agencies 41,358 186 (135) 41,409 11,905 264 (35) 12,134
State and political
subdivisions -- -- -- -- 51 -- -- 51
Other securities 3,102 805 -- 3,907 2,976 851 (2) 3,825
--------- ------ ----- --------- --------- ------ ------ ---------
$ 107,708 $ 1,997 $ (190) $ 109,515 $ 87,190 $ 3,217 $ (40) $ 90,367
========= ====== ===== ========= ========= ====== ====== =========
Income earned on the above securities for the years ended December 31,
1996, 1995, and 1994 is as follows:
(In thousands) 1996 1995 1994
- ----------------------------------------------------
Taxable
Held-to-maturity $ 4,303 $ 6,949 $ 5,696
Available-for-sale 6,196 3,131 2,803
Non-taxable
Held-to-maturity 3,164 2,914 2,738
Available-for-sale 1 2 --
------- ------- -------
Total $13,664 $12,996 $11,237
======= ======= =======
Maturities of investment securities at December 31, 1996, are as
follows:
Held-to-Maturity Available-for-Sale
-------------------------- --------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
- --------------------------------------------------------------------------------------------------
One year or less $ 22,176 $ 22,189 $ 41,854 $ 42,052
After one through five years 46,648 47,107 50,401 51,168
After five through ten years 49,073 49,251 12,351 12,388
After ten years 5,675 6,231 -- --
Mortgage-backed securities not due
on a single date 4,243 4,187 -- --
Other securities 332 330 3,102 3,907
---------- ---------- ---------- ---------
Total $ 128,147 $ 129,295 $ 107,708 $ 109,515
========== ========== ========== =========
The book value of securities pledged as collateral, to secure public
deposits and for other purposes, amounted to $86,360,000 at December 31, 1996,
and $107,133,000 at December 31, 1995. The approximate fair value of pledged
securities amounted to $87,399,000 at December 31, 1996, and $110,319,000 at
December 31, 1995.
The book value of securities sold under agreement to repurchase
amounted to $169,000 and $1,417,000 for December 31, 1996 and 1995,
respectively.
The gross realized gains of $270,000 and $40,000, and gross realized
losses of $0 and $6,000, respectively, were the result of sold
available-for-sale securities in 1996 and called bonds in 1995. Proceeds from
sales in 1996 were $270,000.
As of December 15, 1995, the Company redesignated held-to-maturity
securities with an aggregate amortized cost of $40,193,000 and net unrealized
gains of $1,905,000 to the available-for-sale portfolio. The redesignation was
prompted by the announcement by the Financial Accounting Standards Board to
allow a one-time redesignation and reflects management's revised expectations of
liquidity needs.
Approximately 10 percent of the state and political subdivision debt
obligations are rated A or above. Of the remaining securities, most are nonrated
bonds and represent small, Arkansas issues, which are evaluated on an ongoing
basis.
NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories of loans are summarized as follows:
(In thousands) 1996 1995
- --------------------------------------------------------------------
Consumer
Credit cards $166,346 $154,808
Student loans 64,193 63,492
Other consumer 65,384 57,166
Real estate
Construction 20,325 15,177
Single family residential 57,251 53,556
Other commercial 60,439 59,012
Commercial
Commercial 41,375 36,553
Agricultural 21,003 20,588
Financial institutions 8,469 9,058
Other 6,028 2,546
-------- --------
Total loans before allowance for loan losses $510,813 $471,956
======== ========
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 (FAS 114), "Accounting by Creditors for Impairment
of a Loan". FAS 114 requires discounting expected future cash flows to measure
impairment of certain loans, or, as a practical expedient, impairment
measurements based on the loan's observable market price or the fair value of
collateral if the loan is collateral dependent. The adoption of FAS 114 did not
have a material impact on the financial results.
At December 31, 1996 and 1995, impaired loans totaled $4,912,000 and
$4,564,000, respectively. All impaired loans had designated reserves for
possible loan losses. Reserves relative to impaired loans at December 31, 1996
were $831,000 and $832,000 at December 31, 1995. Interest of $260,000 was
recognized on average impaired loans of $4,212,000 for 1996. Interest of
$200,000 was recognized on average impaired loans of $3,623,000 for 1995.
Interest recognized on impaired loans on a cash basis during 1996 or 1995 was
immaterial.
As of December 31, 1996, credit card loans, which are unsecured, were
$166,346,000, or 32.6%, of total loans versus $154,808,000, or 32.8% of total
loans at December 31, 1995. 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) 1996 1995 1994
- --------------------------------------------------------------------------------------
Balance, beginning of year $ 8,418 $ 7,790 $ 7,430
Additions
Provision charged to expense 2,341 2,092 2,050
Allowance for loan losses of acquired institutions -- 361 --
------- ------- -------
10,759 10,243 9,480
Deductions
Losses charged to allowance, net of recoveries
of $491 for 1996, $479 for 1995, and $420 for 1994 2,393 1,825 1,690
------- ------- -------
Balance, end of year $ 8,366 $ 8,418 $ 7,790
======= ======= =======
NOTE 4: ACQUISITIONS
On April 1, 1995, and August 1, 1995, the Company acquired all
outstanding stock of Dumas Bancshares, Inc. (DBI), and Dermott State Bank
Bancshares, Inc. (DSBB), respectively, in exchange for 205,851 shares of common
stock valued at $17.00 per share and cash of $3.9 million. DBI and DSBB were
liquidated into the Company leaving Dumas State Bank, First State Bank, and
Dermott State Bank as subsidiaries of the Company. First State Bank was merged
into Simmons First National Bank and the names of the two remaining banks were
changed to Simmons First Bank of Dumas and Simmons First Bank of Dermott. In
August, 1996, the Simmons First Bank of Dermott charter was moved to Rogers,
Arkansas. The three branches of Simmons First National Bank located in Rogers,
Springdale, and Bella Vista, Arkansas were then sold to the relocated bank and
the bank name was changed to Simmons First Bank of Northwest Arkansas. The
banking facility remaining at Dermott, along with its assets and liabilities,
was then transferred to Simmons First Bank of Lake Village, Arkansas and is now
a branch of that bank. The name of Simmons First Bank of Lake Village was
subsequently changed to Simmons First Bank of South Arkansas.
The acquisitions were accounted for as purchases, and the results of
operations from the dates of acquisition are included in the consolidated
financial statements. The total acquisition cost of $7.4 million exceeded the
market value of tangible assets and liabilities acquired by $1,598,000.
Unaudited pro forma consolidated operations assuming the purchases were made at
the beginning of each year are shown below.
(In thousands, except per share data) 1995 1994
- ----------------------------------------------------------------
Total revenue $82,213 $75,094
Net income 10,168 10,445
Earnings per share 1.77 1.83
The pro forma results are not necessarily indicative of what would have
occurred had the acquisitions been on these dates, nor are they necessarily
indicative of future operations.
Pro forma data reflect the adjusted depreciation and amortization from
adjusting DBI and DSBB assets to market value. No adjustment was made to reflect
the combined impact of operations on income tax expenses of the separate
companies.
NOTE 5: FORECLOSED ASSETS HELD FOR SALE
Transactions in the allowance for losses on foreclosed assets held for
sale were as follows:
(In thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------
Balance, beginning of year $ 47 $ 97 $ 166
Provisions charged to expense 121 8 151
Selling expenses incurred on foreclosed assets sold (124) (58) (220)
----- ----- -----
Balance, end of year $ 44 $ 47 $ 97
===== ===== =====
NOTE 6: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, are as
follows:
Estimated
(In thousands) 1996 1995 Useful lives
- ----------------------------------------------------------------
Land and improvements $ 3,576 $ 2,394
Buildings and improvements 19,010 15,733 10-50 years
Leasehold improvements 1,782 1,743 5-20 years
Equipment 15,638 15,689 3-10 years
------- -------
40,006 35,559
Less accumulated depreciation 19,242 19,358
------- -------
Net premises and equipment $20,764 $16,201
======= =======
NOTE 7: TIME DEPOSITS
Time deposits included approximately $88,731,000 and $104,906,000 of
certificates of deposit of $100,000 or more, at December 31, 1996 and 1995,
respectively.
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 8: INCOME TAXES
The provision for income taxes is comprised of the following
components:
(In thousands) 1996 1995 1994
- ----------------------------------------------------------------
Income taxes currently payable $ 4,171 $ 4,332 $ 3,718
Deferred income taxes 152 (134) 63
------- ------- -------
Provision for income taxes $ 4,323 $ 4,198 $ 3,781
======= ======= =======
Deferred income taxes related to the change in unrealized appreciation
on available-for-sale securities, shown in stockholders' equity, were
($497,000), $1,032,000 and ($367,000), for 1996, 1995 and 1994, respectively.
The tax effects of temporary differences related to deferred taxes
shown on the balance sheet were:
(In thousands) 1996 1995
- -----------------------------------------------------------------------
Deferred tax assets
Allowance for loan losses $ 2,952 $ 2,940
Valuation of foreclosed assets 299 250
Deferred compensation payable 445 444
Deferred loan fee income 642 707
Vacation compensation 312 313
Loan servicing reserve 208 190
Loan interest 164 230
Other 22 114
------- -------
5,044 5,188
------- -------
Deferred tax liabilities
Accumulated depreciation (776) (718)
Available-for-sale securities (655) (1,151)
Other (288) (338)
------- -------
(1,719) (2,207)
------- -------
Net deferred tax assets included in other assets
on balance sheets $ 3,325 $ 2,981
======= =======
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below.
(In thousands) 1996 1995 1994
- ----------------------------------------------------------------------
Computed at the statutory rate (34%) $ 4,972 $ 4,834 $ 4,637
Increase (decrease) resulting from
Tax exempt income (1,018) (935) (985)
Amortization of intangible assets 77 71 82
State income taxes 150 111 113
Non-deductible expenses 62 61 54
Other differences, net 80 56 (120)
------- ------- -------
Actual tax provision $ 4,323 $ 4,198 $ 3,781
======= ======= =======
NOTE 9: LONG-TERM DEBT AND CAPITAL NOTES
Long-term debt and capital notes at December 31, 1996 and 1995,
consisted of the following components.
(In thousands) 1996 1995
- -------------------------------------------
Capital notes $ -- $3,650
Other debt 1,067 1,107
------ ------
Total long-term debt $1,067 $4,757
====== ======
Long-term debt consists of a mortgage note payable to Mutual Benefit
Life Insurance Corporation, secured by land and building with a book value of
$2,142,000, payable in equal monthly installments of $12,000, including interest
at approximately 9.75% per annum. Final payment is due August, 2008.
Aggregate annual maturities of long-term debt at December 31, 1996 are:
Annual
(In thousands) Year Maturities
- -------------------------------------------------------------------------------
1997 $ 45
1998 49
1999 55
2000 60
2001 66
Thereafter 792
--------
Total $ 1,067
========
NOTE 10: CAPITAL STOCK
In addition to the common stock from which stock has been issued, as
shown on the balance sheet, 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.
In the second quarter of 1995, 3,000 shares of common stock, relative
to exercised stock options, were issued. During 1996, an additional 16,500
shares, also in the form of exercised stock options were issued.
On April 1, 1995, the Company issued 205,851 shares of common stock
valued at $17.00 per share in exchange for shares in Dumas Bancshares, Inc.
(DBI).
On December 6, 1996, the Company declared a 50% stock dividend, giving
each shareholder one share of stock for each two shares held on the issue date.
The number and price of shares listed above have been adjusted to reflect this
dividend.
NOTE 11: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1996 and 1995, the subsidiary banks had loans
outstanding to executive officers, directors, and to companies in which the
banks' executive officers or directors were principal owners, in the amount of
$9,474,000 in 1996, and $7,635,000 in 1995.
(In thousands) 1996
- ----------------------------------------
Balance, beginning of year $ 7,635
New loans 4,974
Repayments (3,135)
-------
Balance, end of year $ 9,474
=======
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 loans did not involve more than the normal risk
of collectibility or present other unfavorable features.
NOTE 12: EMPLOYEE BENEFIT PLANS
The Company's 401(k) retirement plan, which has been in effect since
January 1, 1991, covers substantially all employees. Employees may contribute up
to 12% of their compensation, with the Company and its subsidiaries matching 25%
of the employee's contribution on the first 5% of the employee's compensation.
The charges to income for this contribution in 1996, 1995 and 1994 were
$134,000, $129,000 and $125,000, respectively.
The Company and its subsidiaries have a discretionary profit sharing
and employee stock ownership plan covering all employees. The charges to income
for the plan were $730,000 for 1996, $640,000 for 1995, and $600,000 for 1994.
In 1990, the Board of Directors adopted an incentive and nonqualified
stock option plan. Pursuant to the plan, an aggregate of 210,000 shares were
reserved for future issuance by the Company, upon exercise of stock options to
be granted to officers and other key employees.
In 1996, The Financial Accounting Standards Board adopted Financial
Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation". This statement establishes an alternative fair value-based method
of accounting for stock-based compensation plans. The Company applies APB
Opinion 25 and related Interpretations in accounting for the plan, and no
compensation cost has been recognized. No fair value disclosures with respect to
stock options are presented because in the opinion of management such values do
not have a material effect.
The table below summarizes the transactions under the Company's stock
option plan at December 31, 1996, 1995 and 1994 and changes during the years
then ended:
1996 1995 1994
--------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercisable Shares Exercisable Shares Exercisable
(000) Price (000) Price (000) Price
- ----------------------------------------------------------------------------------------------
Outstanding, beginning of year 157 $ 12.96 104 $ 9.64 95 $ 9.08
Granted 49 25.56 56 18.82 9 15.58
Exercised (17) 7.11 (3) 6.67 -- --
----- ----- -----
Outstanding, end of year 189 16.80 157 12.96 104 9.64
===== ===== =====
Exercisable, end of year 113 $ 12.09 87 $ 8.59 64 $ 8.49
===== ===== =====
The following table summarizes information about stock options under the
plan outstanding at December 31, 1996:
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 75 1 year $ 9.61 75 $ 9.61
$ 15.58 to $ 25.67 114 3.5 years $ 21.67 38 $ 16.93
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 $196,000 for 1996,
$184,000 for 1995 and $128,000 for 1994. 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 13: ADDITIONAL CASH FLOW INFORMATION FOR 1996, 1995 and 1994
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------
Non-cash investing activities
Sale and financing of foreclosed assets held for sale $ -- $ 674 $ 148
Real estate acquired in settlement of debt 66 169 81
Common stock issued in connection with the DBI acquisition -- 3,500 --
The Company purchased all of the common stock of DBI and DSBB for
$7,400,000. In connection with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired $ 61,278
Cash paid for the capital stock (3,900)
Common stock issued (3,500)
-------
Liabilities assumed $ 53,878
========
Additional cash payment information
Interest paid $ 27,414 $ 23,093 $ 16,191
Income taxes paid 4,237 3,851 4,530
NOTE 14: OTHER EXPENSE
Other expense consists of the following:
(In thousands) 1996 1995 1994
- ------------------------------------------------------
Professional services $ 1,553 $ 1,400 $ 1,634
Postage 1,277 1,319 1,234
Telephone 861 841 771
Credit card expense 1,426 1,445 1,458
Operating supplies 958 846 695
FDIC insurance 942 830 1,307
Miscellaneous expense 7,304 5,867 5,564
------- ------- -------
Total $14,321 $12,548 $12,663
======= ======= =======
NOTE 15: 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.
Held-To-Maturity 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.
Available-For-Sale Securities and Trading Securities
Fair value for trading and available-for-sale securities, which also
are the amounts recognized in the balance sheet, equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimates
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
Other Borrowings
The carrying amount for federal funds purchased, securities sold under
agreement to repurchase, and other borrowings is a reasonable estimate of fair
value.
Long-Term Debt and Capital Notes
Rates currently available to the Company for debt with similar terms
and remaining maturities are used to estimate fair value of existing debt. The
fair value of the capital notes approximated the carrying value.
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, 1996 December 31, 1995
-------------------------- --------------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- --------------------------------------------------------------------------------------------------
Financial assets
Cash and cash equivalents $ 69,281 $ 69,281 $ 73,422 $ 73,422
Held-to-maturity securities 128,147 129,295 134,433 136,634
Available-for-sale securities 109,515 109,515 90,367 90,367
Assets held in trading accounts 182 182 548 548
Mortgage loans held for sale, net
of unrealized gains (losses) 10,101 10,101 26,159 26,159
Interest receivable 9,675 9,675 7,953 7,953
Loans, net 502,447 514,977 463,538 475,252
Financial liabilities
Non-interest bearing transaction accounts 126,568 126,568 108,779 108,779
Interest bearing transaction accounts and
savings deposits 264,554 264,554 251,065 251,065
Time deposits 345,245 348,589 344,924 351,163
Federal funds purchased and securities
sold under agreements to repurchase 29,079 29,079 20,861 20,861
Short-term debt 1,484 1,484 1,405 1,405
Capital notes -- -- 3,650 3,650
Long-term debt 1,067 1,162 1,107 1,137
Interest payable 3,238 3,238 3,090 3,090
Unrecognized financial instruments (net
of contract amount)
Letters of credit -- -- -- --
Lines of credit -- -- -- --
Forward commitments -- -- -- --
The fair value of commitments to extend credit and forward commitments
to sell mortgage loans do not differ materially from the notional or principal
amounts.
NOTE 16: 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 3.
NOTE 17: 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, 1996 and 1995, the Company had outstanding commitments
to originate portfolio loans aggregating approximately $79,710,000 and
$67,853,000, respectively. The commitments extended over varying periods of
time, with the majority being disbursed within a one year period. Loan
commitments at fixed rates of interest amounted to $64,616,000 and $26,744,000
at December 31, 1996 and 1995, respectively, with the remainder at floating
interest rates.
Mortgage loans serviced for others totaled $1,477,945,000 and
$1,224,467,000 at December 31, 1996 and 1995, respectively and are not included
in the accompanying balance sheets. A reserve of $566,000 has been established
for potential loss obligations, based on management's evaluation of a number of
variables, including the amount of delinquent loans serviced for other
investors, length of delinquency, and amounts previously advanced on behalf of
the borrower that the Company does not expect to recover. Such reserve is netted
against foreclosure receivables included in other assets. The transactions
included in that reserve are as follows:
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------
Balance, beginning of year $ 573 $ 210 $ 310
Additions
Provision charged to reserve 864 1,349 1,398
Deductions
Losses charged to reserve (871) (986) (1,498)
------- ------- -------
Balance, end of year $ 566 $ 573 $ 210
======= ======= =======
Custodial escrow balances maintained in connection with the foregoing
loan servicing, and included in deposits, were approximately $11,700,000 and
$12,300,000 at December 31, 1996 and 1995, respectively.
Mortgage loans in the process of origination represent amounts which
the Company plans to fund within a normal period of 60 to 90 days, and which are
intended for sale to investors in the secondary market. Forward commitments to
sell mortgage loans are obligations to deliver loans at a specified price on or
before a specified future date. The Company acquires such commitments to reduce
market risk on mortgage loans in the process of origination and mortgage loans
held for sale.
Total mortgage loans in the process of origination amounted to
$10,187,000 and $27,691,000, mortgage loans held for sale amounted to
$10,101,000 and $26,159,000, at December 31, 1996 and 1995, respectively.
Related forward commitments to sell mortgage loans amounted to approximately
$19,217,000 and $40,677,000 at December 31, 1996 and 1995, respectively.
Included in mortgage loans in the process of origination were commitments to
originate loans at fixed rates of interest of $9,531,000 and $26,127,000 at
December 31, 1996 and 1995, respectively.
Mortgage servicing rights of $6,159,000 and $2,413,000 were capitalized
in 1996 and 1995, respectively. Amortization of mortgage servicing rights was
$2,120,000, $1,371,000 and $359,000 in 1996, 1995 and 1994, 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
$2,113,000 and $1,954,000 at December 31, 1996 and 1995, respectively, with
terms ranging from 95 days to one year.
Lines of credit are agreements to lend to a customer, as long as there
is no violation of any condition established in the contract. Lines of credit
generally have fixed expiration dates. Since a portion of the line may expire
without being drawn upon, the total unused lines 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, upon
extension of credit, is based on management's credit evaluation of the borrower.
Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment, commercial real estate, and residential real estate.
Management uses the same credit policies in granting lines of credit as it does
for balance sheet instruments.
At December 31, 1996, the Company had granted unused lines of credit to
borrowers, aggregating approximately $12,677,000 and $160,938,000 for commercial
lines and open-end consumer lines. At December 31, 1995, unused lines of credit
aggregated approximately $3,365,000 for commercial lines and $157,068,000 for
open-end consumer lines.
At December 31, 1996, the Company did not have concentrations of 5% or
more of the investment portfolio in any bonds issued by a single municipality.
NOTE 18: LEASES
At December 31, 1996, 1995, and 1994, there were obligations under a
number of long-term land and office operating leases, which required minimum
annual rentals, aggregating approximately $311,000 for 1996, $316,000 for 1995,
and $553,000 for 1994. The leases extend for varying periods, up to the year
2057.
Minimum annual rentals under these non-cancelable leases at December
31, 1996, are as follows:
Annual
(In thousands) Year Rentals
- -------------------------------------------------------------------------------
1997-2001 (each year) $ 219
2002-2006 (five year aggregate) 836
2007-2011 (five year aggregate) 646
2012-2016 (five year aggregate) 646
2017 and thereafter (aggregate) 4,227
The corporate subsidiaries are obligated under equipment leases on a
month-to-month basis, which are expected to be renewed and had aggregate annual
rentals of approximately $376,000 in 1996, $148,000 in 1995, and $150,000 in
1994. The subsidiaries are also obligated on one-year leases for office and
storage space, having aggregate annual rentals of approximately $530,000 in
1996, $516,000 in 1995, and $240,000 in 1994.
NOTE 19: FUTURE CHANGES IN ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board recently adopted Statement No.
125, (FAS 125), "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". FAS 125, which originally was to become
effective for transactions that occur after December 31, 1996, imposes new rules
for determining when transfers of financial assets are accounted for as sales
versus when transfers are accounted for as borrowings. Management believes that
FAS 125 should have no significant impact on the Company's consolidated
financial statements.
NOTE 20: 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 21: 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 50% of
the current year earnings. At December 31, 1996, the Company subsidiaries had
approximately $17,000,000 in undivided profits available for payment of
dividends to the Company, without prior approval of the regulatory agencies. The
most restrictive regulatory capital requirements at December 31, 1996 and 1995,
were $37,618,000 and $36,733,000, respectively.
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 requires the Company to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes that, as of December 31, 1996,
the Company meets all capital adequacy requirements to which it is subject.
As of the most recent notification from regulatory agencies, the Company
was well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Company must maintain minimum
total risk-based, Tier I risk-based, and Tier I 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 are also presented in the
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, 1996
Total Capital (to Risk Weighted Assets)
Consolidated $ 105,130 19.9 $ N/A $ N/A
Simmons First National Bank 69,120 17.8 31,074 8.0 38,843 10.0
Simmons First Bank of South Arkansas 5,111 21.4 1,908 8.0 2,385 10.0
Simmons First Bank of Jonesboro 8,776 14.1 4,972 8.0 6,216 10.0
Simmons First Bank of Dumas 3,257 19.3 1,348 8.0 1,685 10.0
Simmons First Bank of Northwest Arkansas 5,910 15.7 3,020 8.0 3,775 10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated 98,509 18.7 N/A N/A
Simmons First National Bank 64,244 16.5 15,537 4.0 23,306 6.0
Simmons First Bank of South Arkansas 4,811 20.2 954 4.0 1,431 6.0
Simmons First Bank of Jonesboro 7,999 12.9 2,486 4.0 3,729 6.0
Simmons First Bank of Dumas 3,047 18.1 674 4.0 1,011 6.0
Simmons First Bank of Northwest Arkansas 5,598 14.8 1,510 4.0 2,265 6.0
Tier 1 Capital (to Average Assets)
Consolidated 98,509 11.7 N/A N/A
Simmons First National Bank 64,244 10.3 24,954 4.0 31,192 5.0
Simmons First Bank of South Arkansas 4,811 9.0 2,133 4.0 2,666 5.0
Simmons First Bank of Jonesboro 7,999 7.3 4,404 4.0 5,505 5.0
Simmons First Bank of Dumas 3,047 10.5 1,158 4.0 1,447 5.0
Simmons First Bank of Northwest Arkansas 5,598 9.2 2,432 4.0 3,040 5.0
As of December 31, 1995
Total Capital (to Risk Weighted Assets)
Consolidated 97,966 20.0 N/A N/A
Simmons First National Bank 63,533 16.3 31,232 8.0 39,040 10.0
Simmons First Bank of South Arkansas 3,779 24.5 1,232 8.0 1,541 10.0
Simmons First Bank of Jonesboro 7,592 13.0 4,666 8.0 5,833 10.0
Simmons First Bank of Dumas 3,013 19.4 1,245 8.0 1,557 10.0
Simmons First Bank of Northwest Arkansas 2,584 33.7 613 8.0 766 10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated 91,095 18.6 N/A N/A
Simmons First National Bank 58,628 15.0 15,616 4.0 23,424 6.0
Simmons First Bank of South Arkansas 3,584 23.3 616 4.0 924 6.0
Simmons First Bank of Jonesboro 6,862 11.8 2,333 4.0 3,500 6.0
Simmons First Bank of Dumas 2,818 18.1 623 4.0 934 6.0
Simmons First Bank of Northwest Arkansas 2,528 33.0 306 4.0 460 6.0
Tier 1 Capital (to Average Assets)
Consolidated 91,095 10.9 N/A N/A
Simmons First National Bank 58,628 9.0 25,933 4.0 32,416 5.0
Simmons First Bank of South Arkansas 3,584 10.6 1,347 4.0 1,684 5.0
Simmons First Bank of Jonesboro 6,862 7.1 3,888 4.0 4,859 5.0
Simmons First Bank of Dumas 2,818 10.6 1,066 4.0 1,333 5.0
Simmons First Bank of Northwest Arkansas 2,528 12.2 829 4.0 1,036 5.0
NOTE 22: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 and 1995
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 4,368 $ 898
Investments in wholly-owned subsidiaries 89,849 79,799
Excess cost over fair value of net assets acquired, at amortized cost 647 796
Investment securities 3,428 16,470
Premises and equipment 4,776 2,710
Other assets 1,183 1,042
-------- --------
TOTAL ASSETS $104,251 $101,715
======== ========
LIABILITIES
Borrowed Funds $ 1,067 $ 4,757
Other liabilities 359 161
-------- --------
Total liabilities 1,426 4,918
-------- --------
STOCKHOLDERS' EQUITY
Common stock 28,527 19,083
Surplus 22,040 22,651
Undivided profits 51,106 53,038
Unrealized appreciation on available-for-sale
securities, net of income taxes of $655 and
$1,151 at 1996 and 1995, respectively 1,152 2,025
-------- --------
Total stockholders' equity 102,825 96,797
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $104,251 $101,715
======== ========
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Income
Dividends from subsidiaries $ 3,170 $ 3,205 $ 3,659
Other income 3,653 4,256 1,702
------- ------- -------
6,823 7,461 5,361
Expenses 3,273 3,982 1,943
------- ------- -------
Income before income taxes and equity in
undistributed net income of subsidiaries 3,550 3,479 3,418
Provision for income taxes 171 137 (162)
------- ------- -------
Income before equity in undistributed net
income of subsidiaries 3,379 3,342 3,580
Equity in undistributed net income of subsidiaries 6,922 6,677 6,280
------- ------- -------
Net income $10,301 $10,019 $ 9,860
======= ======= =======
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,301 $ 10,019 $ 9,860
Items not requiring (providing) cash
Depreciation and amortization 319 331 280
Accretion -- (87) (346)
Deferred income taxes (15) (280) 73
Equity in undistributed income of bank subsidiaries (6,922) (6,677) (6,280)
Gain on sale of premises and equipment 8 9
Changes in
Accounts receivable (111) 26 539
Other liabilities 710 (716) (1,456)
-------- -------- --------
Net cash provided by operating activities 4,290 2,616 2,679
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of premises and equipment (2,274) (398) (182)
Proceeds from sale of premises and equipment -- 275 168
Acquisition of DBI and DSBB -- (3,664) --
Proceeds from maturities of held-to-maturity securities 19,867 24,000 24,806
Purchase of held-to-maturity securities (11,302) (30,082) --
Proceeds from maturities of available-for-sale securities 79,158 1,896 --
Purchase of available-for-sale securities (79,179) (12,197) --
-------- -------- --------
Net cash provided by (used in) investing activities 6,270 (20,170) 24,792
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reduction on long-term debt (3,690) (7,387) (34)
Dividends paid (2,724) (2,234) (1,728)
Issuance (repurchase) of common stock (676) 20
-------- -------- --------
Net cash used in financing activities (7,090) (9,601) (1,762)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,470 (27,155) 25,709
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 898 28,053 2,344
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,368 $ 898 $ 28,053
======== ======== ========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
No items are reportable here under.
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 22, 1997,
was filed pursuant to Regulation 14A on March 21, 1997.
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 22, 1997,
was filed pursuant to Regulation 14A on March 21, 1997.
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 22, 1997,
was filed pursuant to Regulation 14A on March 21, 1997.
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 22, 1997,
was filed pursuant to Regulation 14A on March 21, 1997.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORK 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.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed as part
of this annual report.
(b) Reports on Form 8-K
Form 8-K dated October 30, 1996, pertaining to a change in quarterly cash
dividends paid was filed during the quarter ended December 31, 1996. Form
8-K, dated March 26, 1997, pertaining to the definitive agreement entered
into by the Company and First Commercial Corporation relative to the purchase
by the Company of First Bank of Arkansas at Searcy and First Bank of Arkansas
at Russellville was filed during the first quarter of 1997.
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 26, 1997
----------------------------------------
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 26, 1997.
Signature Title
--------- -----
/s/ J. Thomas May
- ---------------------------------- President, Chairman, Chief Executive
J. Thomas May Officer 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
- ---------------------------------- Director
C. Ramon Greenwood
/s/ Lara F. Hutt, III
- ---------------------------------- Director
Lara F. Hutt, III
- ---------------------------------- Director
David R. Perdue
- ---------------------------------- Director
Harry L. Ryburn
/s/ Donald W. Stone
- ---------------------------------- Director
Donald W. Stone
/s/ Henry F. Trotter
- ---------------------------------- Director
Henry F. Trotter, Jr.