UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 0-6253

SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

(870) 541-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $1.00 par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X     No    

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge in definitive proxy or in information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of common stock, par value $1.00 per share, held by non-affiliates on, February 10, 2004, was approximately $339,629,010.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes   X     No    

The number of shares outstanding of the Registrant’s Common Stock as of February 10, 2004 was 14,112,919.

Part III is incorporated by reference from the Registrant’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on March 30, 2004.

Introduction

        This year, the Company has chosen to combine our Annual Report to Shareholders with our Form 10-K, which is a document that U.S. pubic companies file with the Securities and Exchange Commission every year. Many readers are familiar with “Part II” of the Form 10-K, as it contains the business information and financial statements that were included in the financial sections of our past Annual Reports. These portions include information about our business that the Company believes will be of interest to investors. The Company hopes investors will find it useful to have all of this information available in a single document.

        The Securities and Exchange Commission allows the Company to report information in the Form 10-K by “incorporated by reference” from another part of the Form 10-K, or from the proxy statement. You will see that information is “incorporated by reference” in various parts of our Form 10-K.

        A more detailed table of contents for the entire Form 10-K follows:

FORM 10-K INDEX

PART I

The Company and the Banks

        Simmons First National Corporation (the “Company”) is a financial holding company registered under the Bank Holding Company Act of 1956. The Gramm-Leach-Bliley-Act (“GLB Act”) has substantially increased the financial activities that certain banks, bank holding companies, insurance companies and securities brokerage companies are permitted to undertake. Under the GLB Act, expanded activities in insurance underwriting, insurance sales, securities brokerage and securities underwriting not previously allowed for banks and bank holding companies are now permitted upon satisfaction of certain guidelines concerning management, capitalization and satisfaction of the applicable Community Reinvestment Act guidelines for the banks. Generally these new activities are permitted for bank holding companies whose banking subsidiaries are well managed, well capitalized and have at least a satisfactory rating under the Community Reinvestment Act. A bank holding company must apply to become a financial holding company and the Board of Governors of the Federal Reserve System must approve its application.

        The Company’s application to become a financial holding company was approved by the Board of Governors on March 13, 2000. The Company has reviewed the new activities permitted under the Act. If the appropriate opportunity presents itself, the Company is interested in expanding into other financial services. During the year ended 2003, the Company organized a securities brokerage subsidiary. At December 31, 2003, the subsidiary was not capitalized. However, the Company plans to capitalize it during the first quarter of 2004.

        The Company was the largest publicly traded financial holding company headquartered in Arkansas with consolidated total assets of $2.2 billion, consolidated loans of $1.4 billion, consolidated deposits of $1.8 billion and total equity capital of $210 million as of December 31, 2003. The Company owns seven community banks in Arkansas. Upon the completion of recently announced acquisitions, the Company’s banking subsidiaries will conduct their operations through 79 offices, of which 77 are financial centers, located in 45 communities in Arkansas.

        Simmons First National Bank (the “Bank”) is the Company’s lead bank. The Bank is a national bank, which has been in operation since 1903. The Bank’s primary market area, with the exception of its nationally provided credit card product, is Central and Western Arkansas. At December 31, 2003, the Bank had total assets of $1.2 billion, total loans of $732 million and total deposits of $965 million. Simmons First Trust Company N.A., a wholly owned subsidiary of the Bank, performs the Company’s trust and fiduciary business operations.

        Simmons First Bank of Jonesboro (“Simmons/Jonesboro”) is a state bank, which was acquired in 1984. Simmons/Jonesboro’s primary market area is Northeast Arkansas. At December 31, 2003, Simmons/Jonesboro had total assets of $190 million, total loans of $156 million and total deposits of $168 million.

        Simmons First Bank of South Arkansas (“Simmons/South”) is a state bank, which was acquired in 1984. Simmons/South’s primary market area is Southeast Arkansas. At December 31, 2003, Simmons/South had total assets of $134 million, total loans of $73 million and total deposits of $121 million.

        Simmons First Bank of Northwest Arkansas (“Simmons/Northwest”) is a state bank, which was acquired in 1995. Simmons/Northwest’s primary market area is Northwest Arkansas. At December 31, 2003, Simmons/Northwest had total assets of $230 million, total loans of $161 million and total deposits of $199 million.

        Simmons First Bank of Russellville (“Simmons/Russellville”) is a state bank, which was acquired in 1997. Simmons/Russellville’s primary market area is Russellville, Arkansas. At December 31, 2003, Simmons/Russellville had total assets of $196 million, total loans of $125 million and total deposits of $148 million.

        Simmons First Bank of Searcy (“Simmons/Searcy”) is a state bank, which was acquired in 1997. Simmons/Searcy’s primary market area is Searcy, Arkansas. At December 31, 2003, Simmons/Searcy had total assets of $118 million, total loans of $79 million and total deposits of $92 million.

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        Simmons First Bank of El Dorado, N.A. (“Simmons/El Dorado”) is a national bank, which was acquired in 1999. Simmons/El Dorado’s primary market area is South Central Arkansas. At December 31, 2003, Simmons/El Dorado had total assets of $193 million, total loans of $91 million and total deposits of $160 million.

        The Company’s subsidiaries provide complete banking services to individuals and businesses throughout the market areas they serve. Services include consumer (credit card, student and other consumer), real estate (construction, single family residential and other commercial) and commercial (commercial, agriculture and financial institutions) loans, checking, savings and time deposits, trust and investment management services, and securities and investment services.

Loan Risk Assessment

        As a part of the ongoing risk assessment, the Bank has a Loan Loss Reserve Committee that meets monthly to review the adequacy of the allowance for loan losses. The Committee reviews the status of past due, non-performing and other impaired loans on a loan-by-loan basis, including historical loan loss information, except for loans such as credit cards, 1-4 family owner occupied residential real estate loans and other consumer loans, which are collectively evaluated based on recent loss experience and current economic conditions. The allowance for loan losses is determined based upon the aforementioned factors and allocated to the individual loan categories. Also, an unallocated reserve is established to compensate for the uncertainty in estimating loan losses, including the possibility of improper risk ratings and specific reserve allocations. The Committee reviews their analysis with management and the Bank’s Board of Directors on a monthly basis.

        The Company has an independent loan review department. For the Bank, this department reviews the allowance for loan loss on a monthly basis, performs an independent loan analysis and prepares a detailed report on their analysis of the adequacy of the allowance for loan losses on a quarterly basis. This quarterly report is presented to the Bank’s Board of Directors.

        The Board of Directors of the other subsidiary banks review the adequacy of their allowance for loan losses on a monthly basis giving consideration to past due loans, non-performing loans, other impaired loans and current economic conditions. Monthly, the other subsidiary banks loan information is provided to the Company’s loan review department for their review. The loan review department prepares a detailed report of their analysis of the allowance for loan losses for each bank approximately twice a year. This report is then presented to the Company’s Audit and Security Committee. As a follow up, approximately twice a year, the loan review department performs an on-site detailed review of the loan files to verify the accuracy of information being provided on a monthly basis.

Growth Strategy

        The Company’s growth strategy is to focus on the State of Arkansas with a goal of a 10% statewide deposit market share. More specifically, the Company is interested in expansion by opening new financial centers or by acquisitions of financial centers with $200 million or more in total assets in growth or strategic markets. For example in 2004, the Company is planning additional branch locations in the Little Rock metropolitan area and will be completing the acquisition of Alliance Bancorporation, Inc. of Hot Springs, Arkansas with approximately $140 million in total assets. While new financial centers can be dilutive to earnings in the short-term, the Company believes they will reward shareholders in the intermediate and long-term. However, the Alliance acquisition is anticipated to be slightly EPS accretive during 2004.

        With an increased presence in Arkansas, ongoing investments in technology, and enhanced products and services, the Company is in position to meet the customer demands of the State of Arkansas.

Competition

        The activities engaged in by the Company and its subsidiaries are highly competitive. In all aspects of its business, the Company encounters intense competition from other banks, lending institutions, credit unions, savings and loan associations, brokerage firms, mortgage companies, industrial loan associations, finance companies, and several other financial and financial service institutions. The amount of competition among commercial banks and other financial institutions has increased significantly over the past few years since the deregulation of the banking industry. The Company’s subsidiary banks actively compete with other banks and financial institutions in their efforts to obtain deposits and make loans, in the scope and type of services offered, in interest rates paid on time deposits and charged on loans and in other aspects of commercial banking.

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        The Company’s banking subsidiaries are also in competition with major national and international retail banking establishments, brokerage firms and other financial institutions within and outside Arkansas. Competition with these financial institutions is expected to increase, especially with the increase in interstate banking.

Employees

        As of December 31, 2003, the Company and its subsidiaries had 1,042 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. The Board of Directors elects executive officers annually.

Board of Directors of the Company

        The following is a list of the Board of Directors of the Company as of December 31, 2003, along with their principal occupation.

        During the first quarter of 2004, the Company announced that Steven A. Cossé has joined the board of directors. Mr. Cossé is Senior Vice President and General Counsel of Murphy Oil Corporation.

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 generally must 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.

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        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. Those bank holding companies, including the Company, which have elected to qualify as financial holding companies are also authorized to engage in financial activities. Financial activities include any activity that is financial in nature or any activity that is incidental or complimentary to a financial activity.

        As a financial 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 (including financial 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 financial and bank holding companies, including examination and supervision by the Arkansas Bank Commissioner. Under Arkansas law, a financial or bank holding company is prohibited from owning more than one subsidiary bank, if any subsidiary bank owned by the holding company has been chartered for less than 5 years and, further, requires the approval of the Arkansas Bank Commissioner for any acquisition of more than 25% of the capital stock of any other bank located in Arkansas. No bank acquisition may be approved if, after such acquisition, the holding company would control, directly or indirectly, banks having 25% of the total bank deposits in the State of Arkansas, excluding deposits of other banks and public funds.

        Legislation enacted in 1994, allows bank holding companies (including financial holding companies) from any state to acquire banks located in any state without regard to state law, provided that the 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, Simmons/El Dorado and Simmons First Trust Company N.A., as national banking associations, are subject to regulation and supervision, of which regular bank examinations are a part, by the Office of the Comptroller of the Currency of the United States (“OCC”). Simmons/Jonesboro, Simmons/South and Simmons/Northwest, as state chartered banks, are subject to the supervision and regulation, of which regular bank examinations are a part, by the Federal Deposit Insurance Corporation (“FDIC”) and the Arkansas State Bank Department. Simmons/Russellville and Simmons/Searcy, as state chartered member banks, are subject to the supervision and regulation, of which regular bank examinations are a part, by the Federal Reserve Board and the Arkansas State Bank Department. The lending powers of each of the subsidiary banks are generally subject to certain restrictions, including the amount, which may be lent to a single borrower.

        Prior to passage of the GLB Act in 1999, the subsidiary banks, with numerous exceptions, were subject to the application of the laws of the State of Arkansas, which included the limitation of the maximum permissible interest rate on loans. The Arkansas limitation for general loans was 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.) were exempt from this limitation; however, a substantial portion of the loans made by the subsidiary banks, including all credit card loans, have historically been subject to this limitation. The GLB Act included a provision which would set the maximum interest rate on loans made in Arkansas, by banks with Arkansas as their home state, at the greater of the rate authorized by Arkansas law or the highest rate permitted by any of the out-of-state banks which maintain branches in Arkansas. An action was brought in the Western District of Arkansas, attacking the validity of the statute in 2000. Subsequently, the District Court issued a decision upholding the statute, and during October 2001, the Eighth Circuit Court of Appeals upheld the statute on appeal. Thus, in the fourth quarter of 2001, the Company began to implement the changes permitted by the GLB Act.

        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.

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        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 financial or bank holding company, any director, officer, employee or agent of the bank or holding company, that is believed by the federal banking agencies to be violating any administrative pronouncement or engaged in unsafe and unsound practices. In addition, the FDIC may terminate the insurance of accounts, upon determination that the insured institution has engaged in certain wrongful conduct, or is in an unsound condition to continue operations.

Risk-Weighted Capital Requirements for the Company and the Banks

        Since 1993, banking organizations (including financial holding companies, 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 19 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, hybrid capital instruments (instruments with characteristics of debt and equity), in an amount up to 25% of Tier 1 Capital, certain preferred stock and the minority interest in the equity accounts of consolidated subsidiaries. For bank holding companies and financial holding companies, goodwill may not be included in Tier 1 Capital. Identifiable intangible assets may be included in Tier 1 Capital for banking organizations, in accordance with certain further requirements. At least 50% of the banking organization’s total regulatory capital must consist of Tier 1 Capital.

        Tier 2 Capital is an amount equal to the sum of the qualifying portion of the allowance for loan losses, certain preferred stock not included in Tier 1, hybrid capital instruments (instruments with characteristics of debt and equity), certain long-term debt securities and eligible term subordinated debt, in an amount up to 50% of Tier 1 Capital. The eligibility of these items for inclusion as Tier 2 Capital is subject to certain additional requirements and limitations of the federal banking agencies.

        Under the risk-based capital guidelines, balance sheet assets and certain off-balance sheet items, such as standby letters of credit, are assigned to one of four-risk weight categories (0%, 20%, 50%, or 100%), according to the nature of the asset, its collateral or the identity of the obligor or guarantor. The aggregate amount in each risk category is adjusted by the risk weight assigned to that category, to determine weighted values, which are then added to determine the total risk-weighted assets for the banking organization. For example, an asset, such as a commercial loan, assigned to a 100% risk category, is included in risk-weighted assets at its nominal face value, but a loan secured by a one-to-four family residence is included at only 50% of its nominal face value. The applicable ratios reflect capital, as so determined, divided by risk-weighted assets, as so determined.

Federal Deposit Insurance Corporation Improvement Act

        The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”), enacted in 1991, requires the FDIC to increase assessment rates for insured banks and authorizes one or more “special assessments”, as necessary for the repayment of funds borrowed by the FDIC or any other necessary purpose. As directed in FDICIA, the FDIC has adopted a transitional risk-based assessment system, under which the assessment rate for insured banks will vary, according to the level of risk incurred in the bank’s activities. The risk category and risk-based assessment for a bank is determined from its classification, pursuant to the regulation, as well capitalized, adequately capitalized or undercapitalized.

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        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 FDIC and OCC advised the Company that the subsidiary banks have 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 (including financial holding companies), relating to operations and management, asset quality, earnings, stock valuation and compensation. A bank or bank holding company that fails to comply with such standards will be required to submit a plan designed to achieve compliance. If no plan is submitted or the plan is not implemented, the bank or holding company would become subject to additional regulatory action or enforcement proceedings.

        A variety of other provisions included in FDICIA may affect the operations of the Company and the subsidiary banks, including new reporting requirements, revised regulatory standards for real estate lending, “truth in savings” provisions, and the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch.

Securities and Exchange Commission Filings

        The Company maintains an Internet website at www.simmonsfirst.com. On this website under the section, investor relation — documents, the Company makes the filings with the Securities and Exchange Commission available free of charge.

        The principal offices of the Company and the Bank consist of an eleven-story office building and adjacent office space, located in the central business district of the city of Pine Bluff, Arkansas. The building and adjacent office space is comprised of approximately 119,000 square feet of usable floor space, approximately 7,000 square feet of which is leased to a tenant as office space.

        The Company and its subsidiaries own or lease additional offices throughout the State of Arkansas. As of December 31, 2003, the Company’s seven banks are conducting financial operations from 73 offices, of which 71 are financial centers, in 43 communities throughout Arkansas.

        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. However, on October 1, 2003, an action in Pulaski County Circuit Court was filed by Thomas F. Carter, Tena P. Carter and certain related entities against Simmons First Bank of South Arkansas and Simmons First National Bank alleging wrongful conduct by the banks in the collection of certain loans. The plaintiffs are seeking $2,000,000 in compensatory damages and $10,000,000 in punitive damages. Management is currently conducting an internal review of the facts and circumstances surrounding this matter and has filed a Motion to Dismiss. At this time, no basis for any material liability has been identified. The banks plan to vigorously defend the claims asserted in the suit.

        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.

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PART II

        The Company’s common stock trades on The Nasdaq Stock Market^® in the National Market System under the symbol “SFNC”. The following table sets forth, for all the periods indicated, cash dividends paid, and the high and low closing bid prices for the Company’s common stock, adjusted to reflect the effect of the two for one stock split on May 1, 2003.

        At December 31, 2003, the Common Stock was held of record by approximately 1,389 stockholders. On February 10, 2004, the last sale price for the Common Stock as reported by The Nasdaq Stock Market^® was $28.25 per share.

        The Company’s policy is to declare regular quarterly dividends based upon the Company’s earnings, financial position, capital requirements and such other factors deemed relevant by the Board of Directors. This dividend policy is subject to change, however, and the payment of dividends by the Company is necessarily dependent upon the availability of earnings and the Company’s financial condition in the future. The payment of dividends on the Common Stock is also subject to regulatory capital requirements.

        The Company’s principal source of funds for dividend payments to its stockholders is dividends received from its subsidiary banks. Under applicable banking laws, the declaration of dividends by the Bank and Simmons/El Dorado in any year, in excess of its net profits, as defined, for that year, combined with its retained net profits of the preceding two, must be approved by the Office of the Comptroller of the Currency. Further, as to Simmons/Jonesboro, Simmons/Northwest, Simmons/South, Simmons/Russellville and Simmons/Searcy regulators have specified that the maximum dividends state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. At December 31, 2003, approximately $16 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 “Quantitative and Qualitative Disclosures About Market Risk — Liquidity and Market Risk Management,” and Note 19 of Notes to Consolidated Financial Statements.

Recent Sales of Unregistered Securities

        The following transactions are sales of unregistered shares of Class A Common Stock of the registrant, for the fourth quarter of 2003, which were issued to executive and senior management officers upon the exercise of rights granted under one of the Company’s stock option plans. No underwriters were involved and no underwriter’s discount or commissions were involved. Exemption from registration is claimed under Section 4(2) of the Securities Act of 1933 as private placements. The Company received cash and/or exchanged shares of the Company’s Class A Common Stock as the consideration for the transactions.

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Notes:

Forward Looking Statements

        Certain statements contained in this Annual Report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “estimate,” “expect,” “foresee,” “may,” “might,” “will,” “would,” “could” or “intend,” future or conditional verb tenses, and variations or negatives of such terms. These forward-looking statements include, without limitation, those relating to the Company’s future growth, revenue, assets, asset quality, profitability and customer service, critical accounting policies, net interest margin, non-interest revenue, market conditions related to the Company’s stock repurchase program, allowance for loan losses, the effect of certain new accounting standards on the Company’s financial statements, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, capital resources, market risk, earnings, effect of pending litigation, acquisition strategy, legal and regulatory limitations and compliance and competition.

        We caution the reader not to place undue reliance on the forward-looking statements contained in this Report in that actual results could differ materially from those indicated in such forward-looking statements, due to a variety of factors. These factors include, but are not limited to, changes in the Company’s operating or expansion strategy, availability of and costs associated with obtaining adequate and timely sources of liquidity, the ability to maintain credit quality, possible adverse rulings, judgments, settlements and other outcomes of pending litigation, the ability of the Company to collect amounts due under loan agreements, changes in consumer preferences, effectiveness of the Company’s interest rate risk management strategies, laws and regulations affecting financial institutions in general or relating to taxes, the effect of pending or future legislation, the ability of the Company to repurchase its common stock on favorable terms and other risk factors. Other relevant risk factors may be detailed from time to time in the Company’s press releases and filings with the Securities and Exchange Commission. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this Report.

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        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 report. The income statement, balance sheet and per common share data as of and for the years ended December 31, 2003, 2002, 2001, 2000, and 1999 were derived from consolidated financial statements of the Company, which were audited by BKD, LLP. Earnings per common share and dividends per common share presented in the financial statements have been restated retroactively to reflect the effects of the May 1, 2003, two for one stock split for shareholders of record as of April 18, 2003. 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 report.

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SELECTED CONSOLIDATED FINANCIAL DATA

(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 report.

(2) Leverage ratio is Tier 1 capital to quarterly average total assets less intangible assets and gross unrealized gains/losses on available-for-sale investments.

(3) Fully taxable equivalent (assuming an effective income tax rate of 37.5%).

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        Simmons First National Corporation recorded record earnings of $23,790,000, or $1.65 diluted earnings per share for the twelve-month period ended December 31, 2003. These earnings reflect an increase of $1,712,000, or $0.11 per share from the December 31, 2002 earnings of $22,078,000, or $1.54 diluted earnings per share. The increase in earnings over last year is primarily attributable to the increased volume in the Company’s mortgage banking operation, a nonrecurring gain on the sale of mortgage servicing, growth in the loan portfolio, and a lower provision for loan losses, which correlates to the improved asset quality ratios. The Company’s return on average assets and return on average stockholders’ equity for the year ended December 31, 2003, was 1.18% and 11.57%, compared to 1.12% and 11.56%, respectively, for the year ended 2002.

        At December 31, 2003, the Company’s loan portfolio totaled $1.418 billion, which is a $161.0 million, or a 12.8%, increase from the same period last year. This increase is due partially to the recently completed acquisition of nine branches in North Central and Northeast Arkansas during the fourth quarter of 2003, which included $98.9 million in loans. The additional growth was attributable to increased loan demand the Company experienced in its construction and commercial real estate loan portfolios.

        As of December 2003, asset quality remained strong with non-performing loans lower by $690,000 from the same period last year. Non-performing loans to total loans improved to 0.82% from 0.97% from the same period last year, and the allowance for loan losses improved to 219% of non-performing loans, compared to 179% from the same period last year. At year-end, the allowance for loan losses equaled 1.79% of total loans, which is an improvement of 4 basis points from the 1.75% reflected at year-end 2002.

        Total assets for the Company at December 31, 2003, were $2.236 billion, an increase of $258.2 million, or 13.1%, over the same figure at December 31, 2002. Stockholders’ equity at December 31, 2003, was $210.0 million, a $12.4 million, or 6.3%, increase from December 31, 2002.

        Upon completion of the recently announced acquisitions, Simmons First National Corporation, a financial holding company, will have assets of approximately $2.4 billion, with eight community banks in Pine Bluff, Lake Village, Jonesboro, Rogers, Searcy, Russellville, El Dorado, and Hot Springs, Arkansas. The Company’s eight banks will conduct financial operations from 79 offices, of which 77 are financial centers, in 45 communities.

Overview

        Management has reviewed its various accounting policies. Based on this review, management believes the policies most critical to the Company are the policies associated with its lending practices including the accounting for the allowance for loan losses, treatment of goodwill, recognition of fee income, estimates of income taxes, and employee benefit plan as it relates to stock options.

Loans

        Loans the Company 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. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the estimated life of the loan. Generally, loans are placed on non-accrual status at ninety days past due and interest is considered a loss, unless the loan is well secured and in the process of collection.

        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.

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Allowance for Loan Losses

        The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

        The allowance is maintained at a level considered adequate to provide for potential loan losses related to specifically identified loans as well as probable credit losses inherent in the remainder of the loan portfolio that have been incurred as of period end. This estimate is based on management’s evaluation of the loan portfolio, as well as on prevailing and anticipated economic conditions and historical losses by loan category. General reserves have been established, based upon the aforementioned factors and allocated to the individual loan categories. Allowances are accrued on specific loans evaluated for impairment for which the basis of each loan, including accrued interest, exceeds the discounted amount of expected future collections of interest and principal or, alternatively, the fair value of loan collateral. The unallocated reserve generally serves to compensate for the uncertainty in estimating loan losses, including the possibility of changes in risk ratings and specific reserve allocations in the loan portfolio as a result of the Company’s ongoing risk management system.

        A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan. This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Specific allocations are applied when quantifiable factors are present requiring a greater allocation than that established using the classified asset approach, as defined by the Office of the Comptroller of the Currency. Accrual of interest is discontinued and interest accrued and unpaid is removed at the time such amounts are delinquent 90 days, unless management is aware of circumstances which warrant continuing the interest accrual. Interest is recognized for nonaccrual loans only upon receipt and only after all principal amounts are current according to the terms of the contract.

Goodwill

        Goodwill represents the excess of cost over the fair value of net assets of acquired subsidiaries and branches. Financial Accounting Standards Board Statement No. 142 and No. 147 eliminated the amortization for these assets as of January 1, 2002. Although goodwill is not being amortized, it is tested annually for impairment.

Fee Income

        Periodic bankcard fees, net of direct origination costs, are recognized as revenue on a straight-line basis over the period the fee entitles the cardholder to use the card. Origination fees and costs for other loans are being amortized over the estimated life of the loan.

Income Taxes

        Deferred tax assets and liabilities 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.

Employee Benefit Plans

        The Company has a stock-based employee compensation plan. The Company accounts for this plan under recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the grant date.

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        On October 8, 2003, the Company announced the execution of a definitive agreement under the terms of which, Alliance Bancorporation, Inc. (ABI) will be merged into Simmons First National Corporation. ABI owns Alliance Bank of Hot Springs, Hot Springs, Arkansas with consolidated assets of approximately $140 million. The transaction is expected to close during the first quarter of 2004. After the merger, Alliance will continue to operate as a separate community bank with the same board of directors, management and staff.

        On November 21, 2003, the Company completed the purchase of nine financial centers from Union Planters Bank, N.A. Six locations in North Central Arkansas include Clinton, Marshall, Mountain View, Fairfield Bay, Leslie and Bee Branch. Three locations in Northeast Arkansas communities include Hardy, Cherokee Village and Mammoth Spring. The nine locations have combined deposits of $130 million with acquired assets of $119 million including selected loans, premises, cash and other assets. As a result of this transaction, the Company recorded additional goodwill and core deposits of $12,282,000 and $4,817,000, respectively

        On July 19, 2002, the Company expanded its coverage in South Arkansas with the purchase of the Monticello location from HEARTLAND Community Bank. Simmons First Bank of South Arkansas, a wholly owned subsidiary of the Company, acquired the Monticello office. As of July 19, 2002, the new location had total loans of $8 million and total deposits of $13 million. As a result of this transaction, the Company recorded additional goodwill and core deposits of $1,058,000 and $217,000, respectively.

        During the second quarter 2003, the Company recorded a nonrecurring $0.03 addition to earnings per share. On June 30, 1998, the Company sold its $1.2 billion residential mortgage-servicing portfolio. As a result of this sale, the Company established a reserve for potential liabilities due to certain representations and warranties made on the sale date. The time period for making claims under the terms of the mortgage servicing sale’s representations and warranties expired on June 30, 2003. Thus, the Company reversed this remaining reserve in the second quarter of 2003, which is reflected in the $771,000 pre-tax gain on sale of mortgage servicing. Excluding this nonrecurring gain, the Company would have reported $1.62 diluted earnings per share for the year ended December 31, 2003.

        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 of 37.50%.

        Throughout 2001, the Federal Reserve Bank steadily decreased the Federal Funds rate by a total of 475 basis points to 1.75% in an effort to stimulate economic growth. In 2002, the Federal Reserve continued to decrease the Federal Funds rate from 1.75% at the end of 2001 to 1.25% at the end of 2002. This decline has continued in 2003, with another 25 basis point decrease, bringing the Federal Funds rate to 1.00% at December 31, 2003. This declining rate environment contributed to the decline in interest income. This decline was more than offset by a decline in interest expense, driven by the low interest rate environment, which resulted in growth in net interest income.

        The Company’s practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. Historically, approximately 70% of the Company’s loan portfolio and approximately 85% of the Company’s time deposits have repriced in one year or less. These historical amounts are consistent with current repricing.

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        For the year ended December 31, 2003, net interest income on a fully taxable equivalent basis was $81.0 million, an increase of $2.0 million, or 2.5%, from the same period in 2002. The increase in net interest income was the result of an $8.7 million decrease in interest income and a $10.7 million decrease in interest expense. As a result, the net interest margin decreased 3 basis points to 4.34% for the year ended December 31, 2003, when compared to 4.37% for 2002.

        The $8.7 million decrease in interest income for the year ended December 31, 2003, primarily is the result of a 67 basis point decrease in the yield earned on earning assets associated with the lower interest rate environment. The lower interest rates resulted in a $12.4 million decrease in interest income. More specifically, $9.1 million of the decrease is associated with the repricing of the Company’s loan portfolio that resulted from loans that matured during the period or were tied to a rate that fluctuated with changes in market rates. As a result, the average rate earned on the loan portfolio decreased 71 basis points from 7.62% to 6.91%. Offsetting the decline in interest rates for 2003 was growth in the Company’s loans portfolio. The loan growth contributed $3.5 million of additional interest income for 2003 versus 2002.

        The $10.7 million decrease in interest expense for the year ended December 31, 2003, primarily is the result of a 73 basis point decrease in cost of funds, due to repricing opportunities during the lower interest rate environment. More specifically, $8.1 million of the decrease is associated with management’s ability to reprice the Company’s time deposits that resulted from time deposits maturing during the period or were tied to a rate that fluctuated with changes in market rates. As a result, the average rate paid on time deposits decreased 98 basis points from 3.43% to 2.45%.

        For the year ended December 31, 2002, net interest income on a fully taxable equivalent basis was $79.0 million, an increase of $8.4 million, or 12.0%, from the same period in 2001. The increase in net interest income was the result of a $19.6 million decrease in fully taxable equivalent interest income and a $28.0 million decrease in interest expense. The decrease in interest income was the result of a lower yield earned on earning assets. The decrease in interest expense was the result of a lower cost of funds. The net interest margin improved 45 basis points to 4.37% for the year ended December 31, 2002, when compared to 3.92% for the same period in 2001. The year ended 2002 represents the first full year that the Company was able to fully utilize the changes in the Arkansas usury law made possible through the Gramm-Leach-Bliley Act, which was upheld by the Eighth Circuit Court of Appeals in October 2001. This ability to reprice the loan portfolio, coupled with the ongoing repricing of the deposit base that was driven by the Federal Reserve’s lowering of interest rates, enabled the Company to achieve considerable improvement in both net interest income and net interest margin.

        Table 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the years ended December 31, 2003, 2002 and 2001, respectively, as well as changes in fully taxable equivalent net interest margin for the years 2003 versus 2002 and 2002 versus 2001.

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(FTE =Fully Taxable Equivalent)

        Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for each of the years in the three-year period ended December 31, 2003. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.

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        Table 4 shows changes in interest income and interest expense, resulting from changes in volume and changes in interest rates for each of the years ended December 31, 2003 and 2002, 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.

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        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 2003, 2002 and 2001 was $8.8, $10.2 and $10.0 million, respectively. The decrease in the provision for loan losses for 2003 reflects the improvement in the Company’s asset quality ratios from 2002. On a historical note, during the reporting year ended 2001, the Company experienced an increase in classified assets at one community bank subsidiary. Thus, the Company increased the provision for loan losses at that subsidiary during the year ended 2001. While the Company’s asset quality improved during 2002, there continued to be significant uncertainties in the United States economy and concerns over the downturn in the catfish industry that affects one of the Company’s community banks. For that reason, management continued with an increased level of provision during 2002.

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        Total non-interest income was $38.7 million in 2003, compared to $35.3 million in 2002 and $33.6 million in 2001. Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and credit card fees. Non-interest income also includes income on the sale of mortgage loans and investment banking profits. Refer to the Sale of Mortgage Servicing discussion for additional information regarding the Company’s nonrecurring gain.

        Table 5 shows non-interest income for the years ended December 31, 2003, 2002 and 2001, respectively, as well as changes in 2003 from 2002 and in 2002 from 2001.

        Recurring fee income for 2003 was $27.4 million, an increase of $413,000, or 1.5%, when compared with the 2002 figures. This increase was attributable to the growth in trust fees and service charges on deposit accounts offset by the decease in credit card fees. The increase in trust fees is the result of general improvement in market conditions. The increase in service charges was primarily the result of growth in transaction accounts. The decrease in credit card fees was the result of a decline in the number of cardholders in the credit card portfolio, due to continuing competitive pressure in the credit card industry.

        Recurring fee income for 2002 was $27.0 million, an increase of $520,000, or 2.0%, when compared with the 2001 figures. This increase was attributable to the growth in service charges on deposit accounts offset by the decease in trust fees and credit card fees. The increase in service charges on deposit accounts for 2002 is the result of an improved fee structure. The decrease in trust fees was primarily the result of lower market valuations in the managed assets of the Trust Company, which was driven by the downturn in the market conditions in the United States. The decrease in credit card fees is the result of increased competitive pressures for that product, which has resulted in a decline of the Company’s credit card portfolio.

        During the years ended December 31, 2003 and 2002, combined income on the sale of mortgage loans and income on investment banking increased $1,939,000 and $774,000, respectively, from the years ended in 2002 and 2001. The increases were the result of a higher volume for those products during 2003 and 2002. The lower interest rate environment during 2003 and 2002 primarily drove the volume increases.

        The Company records several items in other income. The primary increase in other income was from an increase of the premiums received on the sale of student loans that moved into repayment status.

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        Non-interest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for the operation of the Company. Management remains committed to controlling the level of non-interest expense, through the continued use of expense control measures that have been installed. The Company utilizes an extensive profit planning and reporting system involving all affiliates. Based on a needs assessment of the business plan for the upcoming year, monthly and annual profit plans are developed, including manpower and capital expenditure budgets. These profit plans are subject to extensive initial reviews and monitored by management on a monthly basis. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. Management also regularly monitors staffing levels at each affiliate, to ensure productivity and overhead are in line with existing workload requirements.

        Non-interest expense for 2003 was $73.1million, an increase of $4.1 million or 5.9%, from 2002. The increase in non-interest expense during 2003, compared to 2002 is primarily attributed to the increase in salary and employee benefits combined with the increase in credit card expenses. The salary and employee benefits increase is associated with normal salary adjustments and the increased cost of health insurance. The credit card expense increase was primarily attributable the Company’s airline miles reward program. The current year ended was the Company’s third year in this program, which is typically the time frame when cardholders have accumulated enough miles to begin exercising their accrued miles. Based on continuing analysis of projected air miles usage, the Company increased the estimated liability associated with this program by $530,000 in 2003, of which $498,000 was accrued during the fourth quarter of 2003.

        Non-interest expense for 2002 was $69.0 million, an increase of $883,000 or 1.3%, from 2001. The relatively flat non-interest expense is primarily due to the increase in salary and employee benefits offset by the decrease in the amortization of goodwill and other intangibles. The salary and employee benefits increase is associated with normal salary adjustments, increased cost of health insurance, the opening of a new downtown financial center in Little Rock, during 2001, and a change in the Company’s vacation policy. The vacation policy change created a special non-cash expense of $189,000 during the first quarter of 2002. The decrease in the amortization of intangibles was due to the Company adopting the Financial Accounting Standards Board SFAS No. 142, Goodwill and Other Intangible Assets effective January 1, 2002. The new rule eliminated most of the Company’s amortization for 2002.

        Core deposit amortization expense recorded for the years ended December 31, 2003, 2002 and 2001, was $172,000, $78,000 and $101,000, respectively. The Company’s estimated amortization expense for each of the following five years is: 2004 — $688,000; 2005 — $687,000; 2006 — $684,000; 2007 — $672,000: and 2008 — $661,000, which does not include the additional amortization from the announced acquisition of ABI. The Company will be conducting an ABI core deposit study to determine the appropriate level of core deposit intangibles. Management expects those figures to be available after the completion of the ABI acquisition.

        Table 6 below shows non-interest expense for the years ended December 31, 2003, 2002 and 2001, respectively, as well as changes in 2003 from 2002 and in 2002 from 2001.

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