UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Exchange Act of 1934
For the fiscal year ended: December 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-6253
SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 71-0407808
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
501 Main Street, Pine Bluff, Arkansas 71601
(Address of principal executive offices) (Zip Code)
(870) 541-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------------------------------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $1.00 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or in information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of common stock, par value $1.00 per share, held by
non-affiliates on March 15, 2001, was approximately $136,281,123.
The number of shares outstanding of the Registrant's Common Stock as of March
15, 2001 was 7,073,316.
Part III is incorporated by reference from the Registrant's Proxy Statement
relating to the Annual Meeting of Shareholders to be held on April 24, 2001.
FORM 10-K INDEX
Part I
Item 1 Business..............................................................1
Item 2 Properties............................................................6
Item 3 Legal Proceedings.....................................................6
Item 4 Submission of Matters to a Vote of Security-Holders...................6
Part II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters...................................................7
Item 6 Selected Consolidated Financial Data..................................8
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................10
Item 8 Consolidated Financial Statements and Supplementary Data.............30
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................57
Part III
Item 10 Directors and Executive Officers of the Company......................57
Item 11 Executive Compensation...............................................57
Item 12 Security Ownership of Certain Beneficial Owners and Management.......57
Item 13 Certain Relationships and Related Transactions.......................57
Part IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K......57
Signatures...........................................................58
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. The
Gramm-Leach-Bliley-Act ("GLB Act") adopted by Congress and signed by the
President on November 12, 1999 has substantially increased the financial
activities that certain banks, bank holding companies, insurance companies and
securities brokerage companies are permitted to undertake. Under the GLB Act,
expanded activities in insurance underwriting, insurance sales, securities
brokerage and securities underwriting not previously allowed for banks and bank
holding companies are now permitted upon satisfaction of certain guidelines
concerning management, capitalization and satisfaction of the applicable
Community Reinvestment Act guidelines for the banks. Generally these new
activities are permitted for bank holding companies that are well managed, well
capitalized and whose banks have at least a satisfactory rating under the
Community Reinvestment Act. A bank holding company must apply to become a
financial holding company and 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 is reviewing
the new activities permitted under the Act but at this time has no definite
plans to commence any of the new activities.
The Company was the largest publicly traded bank holding company
headquartered in Arkansas with consolidated total assets of $1.9 billion,
consolidated loans of $1.3 billion, consolidated deposits of $1.6 billion and
total equity capital of $173 million as of December 31, 2000. The Company owns
eight community banks in Arkansas. The Company's banking subsidiaries conduct
their operations through 63 offices located in 33 communities in Arkansas.
Simmons First National Bank (the "Bank") is the Company's lead bank. The
Bank is a national bank, which has been in operation since 1903. The Bank's
primary market area, with the exception of its nationally provided credit card
is central and western Arkansas. At December 31, 2000, the Bank had total assets
of $945 million, total loans of $642 million and total deposits of $780 million.
During late 1999, the bank formed Simmons First Trust Company ("SFTC"), a wholly
owned subsidiary of the Bank. On January 1, 2000, all of the Bank's trust and
fiduciary business operations were transferred from the Bank's Trust and
Investment Management Division to SFTC.
Simmons First Bank of Jonesboro ("Simmons/Jonesboro") is a state bank,
which was acquired in 1984. Simmons/Jonesboro's primary market area is northeast
Arkansas. At December 31, 2000, Simmons/Jonesboro had total assets of $168
million, total loans of $139 million and total deposits of $152 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, 2000, Simmons/South had total assets of $69 million,
total loans of $41 million and total deposits of $63 million.
Simmons First Bank of Dumas ("Simmons/Dumas") is a state bank, which was
acquired in 1995. Simmons/Dumas's primary market area is Dumas, Arkansas. At
December 31, 2000, Simmons/Dumas had total assets of $35 million, total loans of
$21 million and total deposits of $31 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, 2000, Simmons/Northwest had total assets of
$208 million, total loans of $146 million and total deposits of $186 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, 2000, Simmons/Russellville had total
assets of $225 million, total loans of $138 million and total deposits of $174
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, 2000, Simmons/Searcy had total assets of $127 million, total loans
of $87 million and total deposits of $110 million.
Simmons First Bank of El Dorado, N.A. ("Simmons/El Dorado") is a national
bank, which was acquired in 1999. Simmons/El Dorado's primary market area is
south central Arkansas. At December 31, 2000, Simmons/El Dorado had total assets
of $165 million, total loans of $80 million and total deposits of $140 million.
The Company's subsidiaries provide complete banking services to individuals
and businesses throughout the market areas, which they serve. Services include
consumer (credit card, student and other consumer), real estate (construction,
single family residential and other commercial) and commercial (commercial,
agriculture and financial institutions) loans, checking, savings and time
deposits, trust and investment management services, and securities and
investment services.
Loan Risk Assessment
As a part of the ongoing risk assessment, the Bank has a Loan Loss Reserve
Committee that meets monthly to review the adequacy of the allowance for loan
losses. The Committee reviews the status of past due, non-performing and other
impaired loans on a loan-by-loan basis, including historical loan loss
information. However, for credit card and other consumer loans consideration is
given to more recent loss experience and current economic conditions. The
allowance for loan losses is determined based upon the aforementioned factors
and allocated to the individual loan categories. Also, an unallocated reserve is
established to compensate for the uncertainty in estimating loan losses,
including the possibility of improper risk ratings and specific reserve
allocations. The Committee reviews their analysis with management and the Bank's
Board of Directors on a monthly basis.
The Company has an independent loan review department. For the Bank, this
department reviews the allowance for loan loss on a monthly basis, performs an
independent loan analysis and prepares a detailed report on their analysis of
the adequacy of the allowance for loan losses on a quarterly basis. This
quarterly report is presented to the Company's Audit and Security Committee.
The Board of Directors of the other subsidiary banks review the adequacy of
their allowance for loan losses on a monthly basis giving consideration to past
due loans, non-performing loans, other impaired loans and current economic
conditions. Quarterly, the other subsidiary banks supply loan information to the
Company's loan review department for their review. The loan review department
prepares a detailed report of their analysis of the allowance for loan losses
for each bank. This report is presented to the Company's Audit and Security
Committee on a quarterly basis. On an annual basis, the loan review department
performs an on-site detailed review of the loan files to verify the accuracy of
information being supplied on a quarterly basis. The larger subsidiary banks
receive this review on a semi-annual basis.
Growth Strategy
The Company's growth strategy is to expand in its primary market areas by
capitalizing on opportunities presented within the State of Arkansas and, as
opportunities arise, expand through further banking acquisitions. Presently, the
most significant opportunities for growth will come internally. The company is
planning to invest in technology and in branch infrastructure and, although
these investments can be dilutive to earnings in the short-term, the Company
believes they will reward shareholders in the intermediate and long-term. For
example, the Company is planning to add two major branch locations in the Little
Rock metropolitan area during 2001 and is anticipating these new branches will
be break-even in approximately 24 months.
The Company is projecting continued growth of the loan portfolio for 2001,
particularly in the lead bank niche products and the primary growth markets of
Jonesboro, Northwest Arkansas, Fort Smith and Little Rock. However, the Company
recognizes that there is a shrinking deposit pool, which will be a challenge
going forward. The Company expects the competition for deposits in 2001 to
continue to be strong and plans for 2001 include identifying new sources of
funding. Thus, the Company expects to use a variety of funding sources to
sustain the growing asset base.
With an increased presence in Arkansas, ongoing investments in technology,
and enhanced products and services, the Company is positioned to meet the
customer demands of the State of Arkansas.
Competition
The activities engaged in by the Company and its subsidiaries are highly
competitive. In all aspects of its business, the Company encounters intense
competition from other banks, lending institutions, credit unions, savings and
loan associations, brokerage firms, mortgage companies, industrial loan
associations, finance companies, and several other financial and financial
service institutions. The amount of competition among commercial banks and other
financial institutions has increased significantly over the past few years since
the deregulation of the banking industry. The Company's subsidiary banks
actively compete with other banks and financial institutions in their efforts to
obtain deposits and make loans, in the scope and type of services offered, in
interest rates paid on time deposits and charged on loans and in other aspects
of commercial banking.
The Company's banking subsidiaries are also in competition with major
national and international retail banking establishments, brokerage firms and
other financial institutions within and outside Arkansas. Competition with these
financial institutions is expected to increase, especially with the increase in
interstate banking.
Employees
As of December 31, 2000, the Company and its subsidiaries had 927 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.
NAME AGE POSITION YEARS SERVED
- ----------------------------------------------------------------------------------------------------
J. Thomas May 54 Chairman, President and Chief Executive Officer 14
Barry L. Crow 58 Executive Vice President and 29
Chief Financial Officer
John L. Rush 66 Secretary 33
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. 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 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 (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 bank holding companies, including examination and
supervision by the Arkansas Bank Commissioner. Under Arkansas law, a bank
holding company is prohibited from owning more than one subsidiary bank, if any
subsidiary bank owned by the holding company has been chartered for less than 5
years and, further, requires the approval of the Arkansas Bank Commissioner for
any acquisition of more than 25% of the capital stock of any other bank located
in Arkansas. No bank acquisition may be approved if, after such acquisition, the
holding company would control, directly or indirectly, banks having 25% of the
total bank deposits in the State of Arkansas, excluding deposits of other banks
and public funds.
Legislation enacted in 1994, allows bank holding companies from any state
to acquire banks located in any state without regard to state law, provided that
the bank holding company (1) is adequately capitalized, (2) is adequately
managed, (3) would not control more than 10% of the insured deposits in the
United States or more than 30% of the insured deposits in such state, and (4)
such bank has been in existence at least five years if so required by the
applicable state law.
Subsidiary Banks
Simmons First National Bank and Simmons/El Dorado, as national banking
associations, are subject to regulation and supervision, of which regular bank
examinations are a part, by the Office of the Comptroller of the Currency of the
United States ("OCC"). Simmons/Jonesboro, Simmons/South, Simmons/Dumas and
Simmons/Northwest, as state chartered banks, are subject to the supervision and
regulation, of which regular bank examinations are a part, by the Federal
Deposit Insurance Corporation ("FDIC") and the Arkansas State Bank Department.
Simmons/Russellville and Simmons/Searcy, as state chartered member banks, are
subject to the supervision and regulation, of which regular bank examinations
are a part, by the Federal Reserve Board and the Arkansas State Bank Department.
The lending powers of each of the subsidiary banks are generally subject to
certain restrictions, including the amount, which may be lent to a single
borrower.
The subsidiary banks, with numerous exceptions, are subject to the
application of the laws of the State of Arkansas, including the limitation of
the maximum permissible interest rate on loans. The Arkansas limitation for
general loans is 5% over the Federal Reserve Discount Rate, with an additional
maximum limitation of 17% per annum for consumer loans and credit sales. Certain
loans secured by first liens on residential real estate and certain loans
controlled by federal law (e.g., guaranteed student loans, SBA loans, etc.) are
exempt from this limitation; however, a very substantial portion of the loans
made by the subsidiary banks, including all credit card loans, have historically
been subject to this limitation. One of the provisions of the GLB Act authorizes
insured banks with their principal office in the State of Arkansas to charge
interest at not more than the rate that any interstate bank with branches in the
State of Arkansas is permitted to charge. This provision may partially remove
the competitive disadvantage concerning the low interest rate ceiling that
Arkansas based banks have incurred over the recent years. Management is
currently studying the new law and the pending judicial action concerning the
new law. The Company has not yet implemented the increased interest rate
ceilings into its ordinary lending activities.
All of the Company's subsidiary banks are members of the FDIC, which
currently insures the deposits of each member bank to a maximum of $100,000 per
deposit relationship. For this protection, each bank pays a statutory assessment
to the FDIC each year.
Federal law substantially restricts transactions between banks and their
affiliates. As a result, the Company's subsidiary banks are limited in making
extensions of credit to the Company, investing in the stock or other securities
of the Company and engaging in other financial transactions with the Company.
Those transactions, which are permitted, must generally be undertaken on terms
at least as favorable to the bank, as those prevailing in comparable
transactions with independent third parties.
Potential Enforcement Action for Bank Holding Companies and Banks
Enforcement proceedings seeking civil or criminal sanctions may be
instituted against any bank, any director, officer, employee or agent of the
bank, that is believed by the federal banking agencies to be violating any
administrative pronouncement or engaged in unsafe and unsound practices. In
addition, the FDIC may terminate the insurance of accounts, upon determination
that the insured institution has engaged in certain wrongful conduct, or is in
an unsound condition to continue operations.
Risk-Weighted Capital Requirements for the Company and the Banks
Since 1993, banking organizations (including bank holding companies and
banks) were required to meet a minimum ratio of Total Capital to Total
Risk-Weighted Assets of 8%, of which at least 4% must be in the form of Tier 1
Capital. A well-capitalized institution is one that has at least a 10% "total
risk-based capital" ratio. For a tabular summary of the Company's risk-weighted
capital ratios, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Capital" and Note 18 of the Notes to Consolidated
Financial Statements.
A banking organization's qualifying total capital consists of two
components: Tier 1 Capital (core capital) and Tier 2 Capital (supplementary
capital). Tier 1 Capital is an amount equal to the sum of common shareholders'
equity, certain preferred stock and the minority interest in the equity accounts
of consolidated subsidiaries. For bank holding companies, goodwill may not be
included in Tier 1 Capital. Identifiable intangible assets may be included in
Tier 1 Capital for banks and bank holding companies, in accordance with certain
further requirements. At least 50% of the banking organization's total
regulatory capital must consist of Tier 1 Capital.
Tier 2 Capital is an amount equal to the sum of the qualifying portion of
the allowance for loan losses, certain preferred stock not included in Tier 1,
hybrid capital instruments (instruments with characteristics of debt and
equity), certain long-term debt securities and eligible term subordinated debt,
in an amount up to 50% of Tier 1 Capital. The eligibility of these items for
inclusion as Tier 2 Capital is subject to certain additional requirements and
limitations of the federal banking agencies.
Under the risk-based capital guidelines, balance sheet assets and certain
off-balance sheet items, such as standby letters of credit, are assigned to one
of four-risk weight categories (0%, 20%, 50%, or 100%), according to the nature
of the asset, its collateral or the identity of the obligor or guarantor. The
aggregate amount in each risk category is adjusted by the risk weight assigned
to that category, to determine weighted values, which are then added to
determine the total risk-weighted assets for the banking organization. For
example, an asset, such as a commercial loan, assigned to a 100% risk category,
is included in risk-weighted assets at its nominal face value, but a loan
secured by a one-to-four family residence is included at only 50% of its nominal
face value. The applicable ratios reflect capital, as so determined, divided by
risk-weighted assets, as so determined.
Federal Deposit Insurance Corporation Improvement Act
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA"),
enacted in 1991, requires the FDIC to increase assessment rates for insured
banks and authorizes one or more "special assessments", as necessary for the
repayment of funds borrowed by the FDIC or any other necessary purpose. As
directed in FDICIA, the FDIC has adopted a transitional risk-based assessment
system, under which the assessment rate for insured banks will vary, according
to the level of risk incurred in the bank's activities. The risk category and
risk-based assessment for a bank is determined from its classification, pursuant
to the regulation, as well capitalized, adequately capitalized or
undercapitalized.
FDICIA substantially revised the bank regulatory provisions of the Federal
Deposit Insurance Act and other federal banking statutes, requiring federal
banking agencies to establish capital measures and classifications. Pursuant to
the regulations issued under FDICIA, a depository institution will be deemed to
be well capitalized if it significantly exceeds the minimum level required for
each relevant capital measure; adequately capitalized if it meets each such
measure; undercapitalized if it fails to meet any such measure; significantly
undercapitalized if it is significantly below any such measure; and critically
undercapitalized if it fails to meet any critical capital level set forth in
regulations. The federal banking agencies must promptly mandate corrective
actions by banks that fail to meet the capital and related requirements, in
order to minimize losses to the FDIC. The FDIC and OCC advised the Company that
the subsidiary banks had been classified as well capitalized under these
regulations.
The federal banking agencies are required by FDICIA to prescribe standards
for banks and bank holding companies, relating to operations and management,
asset quality, earnings, stock valuation and compensation. A bank or bank
holding company that fails to comply with such standards will be required to
submit a plan designed to achieve compliance. If no plan is submitted or the
plan is not implemented, the bank or holding company would become subject to
additional regulatory action or enforcement proceedings.
A variety of other provisions included in FDICIA may affect the operations
of the Company and the subsidiary banks, including new reporting requirements,
revised regulatory standards for real estate lending, "truth in savings"
provisions, and the requirement that a depository institution give 90 days prior
notice to customers and regulatory authorities before closing any branch.
ITEM 2. PROPERTIES
The principal offices of the Company and the Bank consist of an
eleven-story office building and adjacent office space, located in the central
business district of the city of Pine Bluff, Arkansas. The building and adjacent
office space is comprised of approximately 166,000 square feet of floor space,
approximately 7,500 square feet of which is leased to a tenant as office space.
The Company and its subsidiaries own or lease additional offices throughout
the State of Arkansas. As of December 31, 2000, the company's eight banks are
conducting financial operations from 63 offices in 33 communities throughout
Arkansas.
ITEM 3. LEGAL PROCEEDINGS
The Company and/or its subsidiary banks have various unrelated legal
proceedings, most of which involve loan foreclosure activity pending, which, in
the aggregate, are not expected to have a material adverse effect on the
financial position of the Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security-holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market(R) under the
symbol "SFNCA". The following table sets forth, for all the periods indicated,
cash dividends paid, and the high and low closing bid prices for the Company's
common stock.
Quarterly
Price Per Dividends
Common Share Per Common
High Low Share(1)
- ----------------------------------------------------------------------------------------------------
2000
1st quarter $ 27.50 $ 21.00 $ 0.19
2nd quarter 25.00 18.13 0.20
3rd quarter 22.50 20.06 0.20
4th quarter 22.75 19.00 0.21
1999
1st quarter $ 40.50 $ 31.80 $ 0.17
2nd quarter 38.50 31.38 0.18
3rd quarter 34.00 29.00 0.18
4th quarter 30.50 23.00 0.19
<FN>
(1) Dividends per common share are historical amounts.
</FN>
At December 31, 2000, the Common Stock was held of record by approximately
1,450 stockholders. On March 15, 2001, the last sale price for the Common Stock
as reported by The Nasdaq Stock Market(R) was $23.1875 per share.
The Company's policy is to declare regular quarterly dividends based upon
the Company's earnings, financial position, capital requirements and such other
factors deemed relevant by the Board of Directors. This dividend policy is
subject to change, however, and the payment of dividends by the Company is
necessarily dependent upon the availability of earnings and the Company's
financial condition in the future. The payment of dividends on the Common Stock
is also subject to regulatory capital requirements.
The Company's principal source of funds for dividend payments to its
stockholders is dividends received from its subsidiary banks. Under applicable
banking laws, the declaration of dividends by the Bank and Simmons/El Dorado in
any year, in excess of the sum of net income of such bank for that year and
retained earnings for the preceding two years, must be approved by the Office of
the Comptroller of the Currency. Further, as to Simmons/Jonesboro,
Simmons/Dumas, Simmons/Northwest, Simmons/South, Simmons/Russellville and
Simmons/Searcy regulators have specified that the maximum dividends state banks
may pay to the parent company without prior approval is 75% of the current year
earnings plus 75% of the retained net earnings of the preceding year. At
December 31, 2000, approximately $12.8 million was available for the payment of
dividends by the subsidiary banks without regulatory approval. For further
discussion of restrictions on the payment of dividends, see "Management's
Discussion and Analysis of Financial Condition-Liquidity and Market Risk
Management," and Note 18 of Notes to Consolidated Financial Statements.
Recent Sales of Unregistered Securities
The following transactions are sales of unregistered shares of Class A
Common Stock of the registrant, which were issued to executive and senior
management officers upon the exercise of rights granted under either the Simmons
First National Corporation Incentive and Non-qualified Stock Option Plan or the
Simmons First National Corporation Executive Stock Incentive Plan. No
underwriters were involved and no underwriter's discount or commissions were
involved. Exemption from registration is claimed under Section 4(2) of the
Securities Act of 1933 as private placements. Unless noted otherwise, the
registrant received cash as the consideration for the transaction.
Number
Identity Date of Sale of Shares Price(1) Type of Transaction
- ----------------------------------------------------------------------------------------------------------------------------------
1 Officer November, 2000 1,500 12.333 Incentive Stock Option
1 Officer November, 2000 300 15.583 Incentive Stock Option
1 Officer December, 2000 300 15.833 Incentive Stock Option
7 Officers December, 2000 3,300 20.500 Incentive Stock Option
- --------
<FN>
Notes:
1. The per share price paid for incentive stock options represents the fair
market value of the stock as determined under the terms of the Plan on the
date incentive stock option was granted to the officer. The price paid has
been adjusted to reflect the effect of the 50% stock dividend paid on
December 6, 1996.
</FN>
Forward Looking Statements
Statements in this 10-K that are not historical facts should be considered
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are the Company's
current estimates or expectations of future events or future results. As such
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from projected results discussed in
this Report. These include variations in management projections or market
forecasts and the actions that management could take in response to these
changes.
The Company or its executive officers and directors on behalf of the
Company, may from time to time make forward-looking statements. When used in
this report, any press release or oral statements, the words "estimate",
"project", "anticipate", "expect", "intend", "believe", "plan", "goal", and
words of like import are intended to identify forward-looking statements in
addition to statements specifically identified as forward-looking statements.
These statements, projections or future plans, could be affected by a number of
factors that the Company is necessarily unable to predict with accuracy,
including future changes in interest rates, general credit quality, economic
activity, consumer behavior, government monetary policy, legislation and
regulation, competition, credit, market and operating risk, and loan demand. In
addition, the Company's future results of operations, discussions of future
plans and other forward-looking statements contained in Management's Discussion
and Analysis and elsewhere in this Form 10-K involve a number of risks and
uncertainties, including risks relating to the uncertainties created by the
enactment of the Gramm-Leach-Bliley Financial Modernization Act of 1999. As a
result of variations in such factors, actual results may differ materially from
any forward-looking statements.
Forward-looking statements speak only as of the date they are made. The
Company will not update forward-looking statements to reflect factual
assumptions, circumstances or events which have changed after a forward-looking
statement was made.
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, 2000, 1999,
1998, 1997, and 1996 were derived from consolidated financial statements of the
Company, which were audited by Baird, Kurtz & Dobson. 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) 2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
Income statement data:
Net interest income $ 67,061 $ 64,731 $ 60,466 $ 51,836 $ 44,180
Provision for loan losses 7,531 6,551 8,309 5,215 2,564
Net interest income after provision
for loan losses 59,530 58,180 52,157 46,621 41,616
Non-interest income 30,355 28,277 33,635 30,201 27,679
Non-interest expense 62,556 61,929 62,639 55,261 50,286
Provision for income taxes 8,460 7,360 6,666 6,591 5,671
Net income 18,869 17,168 16,487 14,970 13,338
Per share data:
Basic earnings 2.59 2.35 2.28 2.08 1.85
Diluted earnings 2.58 2.33 2.24 2.05 1.83
Diluted cash operating earnings (2) 2.83 2.74 2.52 2.15 1.87
Book value 24.14 21.78 20.77 19.13 17.63
Dividends 0.80 0.72 0.64 0.56 0.48
Balance sheet data at period end:
Assets 1,912,493 1,697,430 1,687,010 1,625,492 1,165,556
Loans 1,294,710 1,113,635 1,034,462 965,865 669,575
Allowance for loan losses 21,157 17,085 16,812 15,215 10,506
Deposits 1,605,586 1,410,633 1,381,003 1,363,344 984,914
Long-term debt 41,681 46,219 49,899 53,558 1,067
Stockholders' equity 173,343 159,371 150,384 138,128 126,907
Capital ratios at period end:
Stockholders' equity to
total assets 9.06% 9.39% 8.91% 8.50% 10.89%
Leverage (3) 8.41% 9.10% 8.39% 7.77% 10.95%
Tier 1 11.97% 13.67% 12.81% 12.19% 17.84%
Total risk-based 13.26% 14.96% 14.06% 13.49% 19.11%
Selected ratios:
Return on average assets 1.05% 1.02% 1.00% 1.10% 1.18%
Return on average equity 11.33% 10.92% 11.31% 11.21% 10.78%
Net interest margin (4) 4.24% 4.41% 4.17% 4.35% 4.50%
Cash operating efficiency ratio (5) 59.55% 60.05% 64.12% 64.20% 67.64%
Allowance/nonperforming loans 192.97% 167.37% 167.30% 155.03% 167.05%
Allowance for loan losses as a
percentage of period-end loans 1.63% 1.53% 1.63% 1.58% 1.57%
Nonperforming loans as a percentage
of period-end loans 0.85% 0.92% 0.97% 1.02% 0.98%
Net charge-offs as a percentage
of average total assets 0.34% 0.37% 0.41% 0.33% 0.21%
Dividend payout 30.85% 31.26% 29.83% 29.16% 24.85%
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(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) Cash operating earnings are net income excluding amortization of intangible
assets and merger-related expenses.
(3) Leverage ratio is Tier 1 capital to quarterly average total assets less
intangible assets and gross unrealized gains/losses on available-for-sale
investments.
(4) Fully taxable equivalent (assuming an effective income tax rate of 37.50%
for 2000 through 1999 and 36.25% for 1998 through 1996).
(5) Cash operating efficiency ratio is non-interest expense excluding
amortization of intangible assets and merger-related expenses divided by
the total of fully taxable equivalent net interest income and non-interest
income excluding the gain on sale of mortgage servicing.
</FN>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- --------------------------------------------------------------------------------
Simmons First National Corporation achieved operating earnings (net income
excluding merger-related expenses) of $18,869,000, or $2.58 diluted operating
earnings per share for the twelve-month period ended December 31, 2000. These
earnings reflect an increase of $319,000, or $0.06 per share over the December
31, 1999 operating earnings of $18,550,000, or $2.52 diluted operating earnings
per share. Net income for the same period increased $1,701,000, or $0.25 diluted
earnings per share, of which $1,382,000, or $0.19 per share, was attributable to
after tax merger-related expenses incurred in 1999. The operating earnings for
2000 were predominantly influenced by solid growth in the loan portfolio and
deposits. However, this growth was offset from a 17 basis point decline in the
net interest margin from 1999 to 2000.
Because of the Company's previous cash acquisitions, cash operating
earnings (net income excluding amortization of intangible assets and
merger-related expenses) are an integral component of earnings. Diluted cash
operating earnings, on a per share basis, were $2.83 in 2000 compared to $2.74
in 1999. Cash operating return on average assets was 1.18% and cash operating
return on average stockholders' equity was 12.56% for 2000, compared with 1.23%
and 12.98%, respectively, for 1999.
Total assets for the Company at December 31, 2000, were $1.912 billion, an
increase of $215 million, or 12.7%, over the same figure at December 31, 1999.
During the third quarter of 2000, the Company completed the acquisition of eight
branches. This acquisition increased consolidated total assets by $72 million.
Stockholders' equity at the end of the fourth quarter of 2000 was $173.3
million, a $14.0 million, or 8.8%, increase from December 31, 1999.
Asset quality remains strong with the allowance for loan losses as a
percent of total loans at 1.63% and 1.53% as of December 31, 2000 and 1999,
respectively. As of December 31, 2000, non-performing loans equaled 0.85% of
total loans compared to 0.92% as of year-end 1999. At year-end 2000, the
allowance for loan losses equaled 193% of non-performing loans compared to 167%
at year-end 1999.
Simmons First National Corporation is an Arkansas based, Arkansas
committed, financial holding company, with community banks in Pine Bluff,
Jonesboro, Lake Village, Dumas, Rogers, Russellville, Searcy and El Dorado,
Arkansas. The Company's eight banks conduct financial operations from 63 offices
in 33 communities throughout Arkansas.
Acquisitions
- --------------------------------------------------------------------------------
On December 8, 1998, the Company and American Bancshares of Arkansas, Inc.
("ABA") merged in a pooling-of-interests transaction. Stockholders of ABA
received 464,885 shares of Simmons First National Corporation stock in exchange
for ABA shares in the transaction. ABA owned American State Bank ("ASB"),
Charleston, Arkansas with assets, as of December 8, 1998, of $90 million. The
Company merged ASB into Simmons First National Bank during the first quarter of
1999.
On January 15, 1999, the Company and Lincoln Bankshares, Inc. ("LBI")
merged. This merger was accounted for as a pooling-of-interests, except for the
acquisition of the minority shares (17.9%) of the Bank of Lincoln, which were
accounted for on a purchase accounting basis. Stockholders of LBI received
301,823 shares of Simmons First National Corporation stock in exchange for LBI
shares in the transaction. LBI owned the Bank of Lincoln ("BOL"), Lincoln,
Arkansas with assets, as of January 15, 1999, of $75 million. The Company merged
BOL into Simmons First Bank of Northwest Arkansas during the second quarter of
1999.
On July 9, 1999, the Company and NBC Bank Corp. ("NBC") merged in a
pooling-of-interests transaction. Stockholders of NBC received 784,887 shares of
Simmons First National Corporation stock in exchange for NBC shares in the
transaction. NBC owned National Bank of Commerce, El Dorado, Arkansas with
assets, as of July 9, 1999, of $155 million. The Company changed the name of
National Bank of Commerce to Simmons First Bank of El Dorado, N.A. The Company
continues to operate Simmons First Bank of El Dorado, N.A. as a separate
community bank with the same board of directors and management.
On July 17, 2000, the Company expanded its coverage of Central and
Northwest Arkansas with a $7.6 million cash purchase of two Conway and six
Northwest Arkansas locations from First Financial Banc Corporation. Simmons
First National Bank acquired the two offices in Conway and Simmons First Bank of
Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July
14, 2000, the eight locations combined had total loans of $71.8 million, total
deposits of $71.0 million and net assets of $8.5 million.
Stock Repurchase
- --------------------------------------------------------------------------------
On June 12, 2000, the Company announced a stock repurchase program. This
program authorizes the repurchase of up to 200,000 common shares, or
approximately 2.7 percent of the outstanding common shares as of June 12, 2000.
Under the repurchase program, there is no time limit for the stock repurchases,
nor is there a minimum number of shares the Company intends to repurchase. The
shares are to be purchased from time to time at prevailing market prices,
through open market or unsolicited negotiated transactions, depending upon
market conditions. As of December 31, 2000, the Company had repurchased 156,827
shares of stock with a weighted average repurchase price of $20.58 per share.
On January 23, 2001, the Company announced the expansion of the previously
mentioned stock repurchase program. This expansion authorizes the repurchase of
an additional 200,000 common shares, or approximately 2.8 percent of the
outstanding common shares as of January 23, 2001. The Company may discontinue
purchases at any time that management determines additional purchases are not
warranted. The Company intends to use the repurchased shares to satisfy stock
option exercise, payment of future stock dividends and general corporate
purposes.
Sale of Mortgage Servicing
- -------------------------------------------------------------------------------
On June 30, 1998, the Company sold its residential mortgage-servicing
portfolio resulting in a $3.3 million gain. The portfolio consisted of
approximately $1.2 billion in residential mortgage loans. The portfolio sale did
not and will not have a material impact on current or future earnings of the
Company.
Net Interest Income
- --------------------------------------------------------------------------------
Net interest income, the Company's principal source of earnings, is the
difference between the interest income generated by earning assets and the total
interest cost of the deposits and borrowings obtained to fund those assets.
Factors that determine the level of net interest income include the volume of
earning assets and interest bearing liabilities, yields earned and rates paid,
the level of non-performing loans and the amount of non-interest bearing
liabilities supporting earning assets. Net interest income is analyzed in the
discussion and tables below on a fully taxable equivalent basis. The adjustment
to convert certain income to a fully taxable equivalent basis consists of
dividing tax-exempt income by one minus the combined federal and state income
tax rate (37.50%, 37.50% and 36.25% for 2000, 1999 and 1998, respectively).
For the year ended December 31, 2000, net interest income on a fully
taxable equivalent basis was $70.0 million, an increase of approximately $2.3
million, or 3.4%, from 1999 net interest income. The increase in 2000 in net
interest income was the result of a $15.2 million increase in interest income
and a $12.9 million increase in interest expense. Interest income increased from
1999 to 2000 as a result of a higher yield earned on earning assets and from
growth in the loan portfolio and an improvement in fees on loans. The increase
in interest expense from 1999 to 2000 was the result of a higher cost of funds
and from deposit growth. Yield on earning assets and cost of funds were higher
in 2000 as the result of higher average interest rates during 2000. As a result
of these factors, the net interest margin was 4.24% in 2000, compared to 4.41%
in 1999. Presently, the company is not expecting net interest margin to return
to the levels reported for 1999.
For the year ended December 31, 1999, net interest income on a fully
taxable equivalent basis was $67.7 million, an increase of approximately $4.8
million, or 7.6%, from comparable figures in 1998. The increase in 1999 in net
interest income was the result of stable interest income and declining interest
expense. Interest income remained stable from 1998 to 1999 as a result of a
lower yield earned on earning assets offset by growth in the loan portfolio and
an improvement in fees on loans. The decline in interest expense from 1998 to
1999 was the result of a lower cost of funds. Yield on earning assets and cost
of funds was lower in 1999 as the result of lower average interest rates during
1999. The net interest margin was 4.41% in 1999, compared to 4.17% in 1998.
Table 1 and 2 reflect an analysis of net interest income on a fully taxable
equivalent basis for the years ended December 31, 2000, 1999 and 1998,
respectively, as well as changes in fully taxable equivalent net interest margin
for the years 2000 versus 1999 and 1999 versus 1998.
Table 1: Analysis of Net Interest Income
(FTE =Fully Taxable Equivalent)
Years Ended December 31
--------------------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Interest income $ 136,754 $ 121,490 $ 122,040
FTE adjustment 2,909 2,944 2,409
--------- --------- ---------
Interest income - FTE 139,663 124,434 124,449
Interest expense 69,693 56,759 61,574
--------- --------- ---------
Net interest income - FTE $ 69,970 $ 67,675 $ 62,875
========= ========= =========
Yield on earning assets - FTE 8.47% 8.10% 8.26%
Cost of interest bearing liabilities 4.90% 4.29% 4.71%
Net interest spread - FTE 3.57% 3.81% 3.55%
Net interest margin - FTE 4.24% 4.41% 4.17%
Table 2: Changes in Fully Taxable Equivalent Net Interest Margin
(In thousands) 2000 vs. 1999 1999 vs.1998
- ---------------------------------------------------------------------------------------------------------------------
Increase due to change in earning assets $ 11,451 $ 4,188
Increase (decrease) due to change in earning asset yields 3,778 (4,203)
(Decrease) increase due to change in interest rates paid on
interest bearing liabilities (7,658) 4,921
Decrease due to change in interest bearing liabilities (5,276) (106)
-------- --------
Increase in net interest income $ 2,295 $ 4,800
======== ========
Table 3 shows, for each major category of earning assets and interest
bearing liabilities, the average amount outstanding, the interest earned or
expensed on such amount and the average rate earned or expensed for each of the
years in the three-year period ended December 31, 2000. The table also shows the
average rate earned on all earning assets, the average rate expensed on all
interest bearing liabilities, the net interest spread and the net interest
margin for the same periods. The analysis is presented on a fully taxable
equivalent basis. Non-accrual loans were included in average loans for the
purpose of calculating the rate earned on total loans.
Table 3: Average Balance Sheets and Net Interest Income Analysis
Years Ended December 31
-------------------------------------------------------------------------------------
2000 1999 1998
--------------------------- ------------------------- -----------------------------
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 $ 14,495 $ 890 6.14 $ 11,071 $ 535 4.83 $ 9,262 $ 517 5.58
Federal funds sold 22,170 1,530 6.90 39,815 1,759 4.42 75,840 3,850 5.08
Investment securities - taxable 291,076 18,164 6.24 305,773 18,287 5.98 314,154 19,548 6.22
Investment securities - non-taxable 113,047 8,062 7.13 114,762 8,428 7.34 101,862 7,500 7.36
Mortgage loans held for sale 7,285 542 7.44 9,969 712 7.14 8,135 581 7.14
Assets held in trading accounts 1,373 95 6.92 1,309 72 5.50 1,996 97 4.86
Loans 1,199,288 110,380 9.20 1,052,619 94,641 8.99 995,316 92,356 9.28
--------- ------- ---------- ------- --------- -------
Total interest earning assets 1,648,734 139,663 8.47 1,535,318 124,434 8.10 1,506,565 124,449 8.26
------- ------- -------
Non-earning assets 145,280 140,310 145,235
--------- --------- ---------
Total assets $1,794,014 $1,675,628 $1,651,800
========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings accounts $ 444,879 $ 12,816 2.88 $ 448,327 $ 12,125 2.70 $ 421,042 $ 12,213 2.90
Time deposits 860,269 49,055 5.70 755,238 37,752 5.00 765,308 42,029 5.49
--------- ------- --------- ------- --------- -------
Total interest bearing deposits 1,305,148 61,871 4.74 1,203,565 49,877 4.14 1,186,350 54,242 4.57
Federal funds purchased and securities
sold under agreement to repurchase 64,304 3,833 5.96 67,359 2,913 4.32 64,270 3,009 4.68
Other borrowed funds
Short-term debt 9,371 516 5.51 3,418 165 4.83 3,740 226 6.04
Long-term debt 43,255 3,473 8.03 48,694 3,804 7.81 51,685 4,097 7.93
--------- ------- --------- ------- --------- -------
Total interest bearing liabilities 1,422,078 69,693 4.90 1,323,036 56,759 4.29 1,306,045 61,574 4.71
------- ------- -------
Non-interest bearing liabilities
Non-interest bearing deposits 188,220 178,103 180,519
Other liabilities 17,199 17,285 19,421
--------- --------- ---------
Total liabilities 1,627,497 1,518,424 1,505,985
Stockholders' equity 166,517 157,204 145,815
--------- -------- ---------
Total liabilities and
stockholders' equity $1,794,014 $1,675,628 $1,651,800
========= ========= =========
Net interest spread 3.57 3.81 3.55
Net interest margin $ 69,970 4.24 $ 67,675 4.41 $ 62,875 4.17
======= ======= =======
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, 2000 and 1999 as compared to prior years. The changes in interest
rate and volume have been allocated to changes in average volume and changes in
average rates, in proportion to the relationship of absolute dollar amounts of
the changes in rates and volume.
Table 4: Volume/Rate Analysis
Years Ended December 31
-------------------------------------------------------------------
2000 over 1999 1999 over 1998
-------------------------------- ---------------------------------
(In thousands, on a fully Yield/ Yield/
taxable equivalent basis) Volume Rate Total Volume Rate Total
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in
Interest income
Interest bearing balances
due from banks $ 189 $ 166 $ 355 $ 93 $ (75) $ 18
Federal funds sold (973) 744 (229) (1,643) (448) (2,091)
Investment securities - taxable (899) 776 (123) (513) (748) (1,261)
Investment securities - non-taxable (125) (241) (366) 947 (19) 928
Mortgage loans held for sale (199) 29 (170) 131 -- 131
Assets held in trading accounts 4 19 23 (37) 12 (25)
Loans 13,454 2,285 15,739 5,210 (2,925) 2,285
-------- ------- ------- ------- ------- -------
Total 11,451 3,778 15,229 4,188 (4,203) (15)
-------- ------- ------- ------- ------- -------
Interest expense
Interest bearing transaction and
savings accounts (94) 785 691 766 (854) (88)
Time deposits 5,617 5,686 11,303 (547) (3,730) (4,277)
Federal funds purchased
and securities sold under
agreements to repurchase (137) 1,057 920 141 (237) (96)
Other borrowed funds
Short-term debt 325 26 351 (19) (42) (61)
Long-term debt (435) 104 (331) (235) (58) (293)
------- ------- ------- ------- ------- -------
Total 5,276 7,658 12,934 106 (4,921) (4,815)
------- ------- ------- ------- ------- -------
Increase (decrease) in
net interest income $ 6,175 $ (3,880) $ 2,295 $ 4,082 $ 718 $ 4,800
======= ======= ======= ======= ======= =======
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 2000, 1999 and 1998 was $7.5, $6.6 and $8.3 million, respectively.
The primary reason for the increase in the 2000 provision is the growth in the
loan portfolio from 1999 to 2000. The decrease from 1998 to 1999 was
attributable to an increased provision during 1998. Factors increasing the 1998
provision included growth in loans, increased indirect lending, unfavorable
weather and market conditions in the agriculture industry and an increased level
of consumer bankruptcies. The provision for loan losses as a percentage of
average loans for 2000, 1999 and 1998 was 0.63%, 0.62% and 0.83%, respectively.
Non-Interest Income
- --------------------------------------------------------------------------------
Total non-interest income was $30.4 million in 2000, compared to $28.3
million in 1999 and $33.6 million in 1998. Non-interest income for 2000 is
principally derived from recurring fee income, which includes service charges,
trust fees and credit card fees. Non-interest income also includes income on the
sale of mortgage loans and investment banking profits.
During the second quarter of 1998 the Company sold its $1.2 billion
residential mortgage-servicing portfolio. The sale of the mortgage-servicing
portfolio resulted in a $3.3 million gain on sale and the elimination of
mortgage servicing fees.
Table 5 shows non-interest income for the years ended December 31, 2000,
1999 and 1998, respectively, as well as changes in 2000 from 1999 and in 1999
from 1998.
Table 5: Non-Interest Income
Years Ended December 31 2000 1999
----------------------- Change from Change from
(In thousands) 2000 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
Trust income $ 5,282 $ 4,666 $ 4,037 $ 616 13.20% $ 629 15.58%
Service charges on deposit accounts 7,998 7,007 6,820 991 14.14 187 2.74
Other service charges and fees 1,804 1,759 1,626 45 2.56 133 8.18
Income on sale of mortgage loans,
net of commissions 1,727 2,021 2,247 (294) -14.55 (226) -10.06
Income on investment banking,
net of commissions 259 266 1,044 (7) -2.63 (778) -74.52
Credit card fees 10,522 10,214 9,484 308 3.02 730 7.70
Mortgage servicing fees -- -- 3,030 -- -- (3,030) -100.00
Other income 2,763 2,344 2,074 419 17.88 270 13.02
Gain on sale of mortgage servicing -- -- 3,273 -- -- (3,273) -100.00
------- -------- ------- ------ -------
Total non-interest income $ 30,355 $ 28,277 $ 33,635 $ 2,078 7.35% $ (5,358) -15.93%
======= ======== ======= ====== =======
Recurring fee income for 2000 was $25.6 million, an increase of $2.0
million, or 8.3%, when compared with 1999 figures. Recurring fee income for 1999
was $23.6 million, an increase of $1.6 million, or 7.6%, when compared with 1998
figures. In 2000, trust fees increased $616,000, service charges on deposit
accounts increased $991,000 and credit card fees increased $308,000 from the
1999 level. In 1999, trust fees increased $629,000 from the 1998 level, while
credit card fees increased $730,000. The increase in trust fees for 2000 is
primarily the result of growth in the number of trust relationships and an
improved fee structure. The increase in trust fees for 1999 is primarily the
result of growth in the number of trust relationships. The increase in credit
card fees for 2000 and 1999 is the result of growth in the credit card
portfolio. The increase in service charges on deposit accounts for 2000 is the
result of internal deposit growth, an improved fee structure and the acquisition
completed during July 2000.
Non-Interest Expense
- -------------------------------------------------------------------------------
Non-interest expense consists of salaries and employee benefits, occupancy,
equipment, foreclosure losses, merger-related costs, gain or loss on sold or
called securities and other expenses necessary for the operation of the Company.
Management remains committed to controlling the level of non-interest expense,
through the continued use of expense control measures that have been installed.
The Company utilizes an extensive profit planning and reporting system involving
all affiliates. 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 2000 was $62.6 million, an increase of $2.5
million (excluding merger-related expenses) or 4.1%, from 1999. The increase in
non-interest expense in 2000, compared to 1999 reflects the acquisition
completed during July 2000 and the normal increased cost of doing business.
Non-interest expense (excluding merger-related expenses) for 1999 was $60.1
million, a decrease of $2.1 million, or 3.4%, from 1998. The decrease in
non-interest expense in 1999, compared to 1998 primarily reflects the sale of
Company's $1.2 billion residential mortgage-servicing portfolio and no
additional Year 2000 expenses for 1999. However, the normal increased cost of
doing business offset part of these expense reductions.
Table 6 below shows non-interest expense for the years ended December 31,
2000, 1999 and 1998, respectively, as well as changes to 2000 from 1999 and 1999
from 1998, respectively.
Table 6: Non-Interest Expense
Years Ended December 31 2000 1999
----------------------- Change from Change from
(In thousands) 2000 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
Salaries and employee benefits $ 33,544 $ 32,395 $ 31,833 $1,149 3.55% $ 562 1.77%
Occupancy expense, net 3,873 3,578 3,858 295 8.24 (280) -7.26
Furniture and equipment expense 5,246 5,003 4,448 243 4.86 555 12.48
Loss on foreclosed assets 254 364 738 (110) -30.22 (374) -50.68
Merger-related -- 1,843 466 (1,843) -100.00 1,377 295.49
Loss on sale of securities, net -- -- 165 -- -- (165) -100.00
Other operating expenses
Professional services 1,532 1,444 1,920 88 6.09 (476) -24.79
Postage 2,057 1,895 1,836 162 8.55 59 3.21
Telephone 1,417 1,419 1,279 (2) -0.14 140 10.95
Credit card expenses 1,704 1,624 1,495 80 4.93 129 8.63
Operating supplies 1,501 1,524 1,517 (23) 1.51 7 0.46
FDIC insurance 299 232 248 67 28.88 (16) -6.45
Year 2000 -- -- 500 -- -- (500) -100.00
Amortization of MSR's -- -- 1,223 -- -- (1,223) -100.00
Amortization of intangibles 2,811 2,469 2,385 342 13.85 84 3.52
Other expense 8,318 8,139 8,728 179 2.20 (589) -6.75
------- -------- ------- ----- ------
Total non-interest expense $ 62,556 $ 61,929 $ 62,639 $ 627 1.01% $ (710) -1.13%
======= ======== ======= ===== ======
Income Taxes
- -------------------------------------------------------------------------------
The provision for income taxes for 2000 was $8.5 million, compared to $7.4
million in 1999 and $6.7 million in 1998. The effective income tax rates for the
years ended 2000, 1999 and 1998 were 31.0%, 30.0% and 28.8%, respectively.
Earnings/Ratios Excluding Intangibles and Merger-Related Expenses
- -------------------------------------------------------------------------------
Table 7 reconciles reported earnings to net income excluding intangible
amortization and merger-related expenses (cash operating) for the years ended
December 31, 2000 and 1999. Table 8 presents the calculation of the cash
operating return on assets and cash operating return on equity for the years
ended December 31, 2000 and 1999. The Company specifically formulated these
calculations and the results may not be comparable to similarly titled measures
reported by other companies. Also, cash operating earnings are not entirely
available for use by management. See the Consolidated Statements of Cash Flows
and Notes to the Financial Statements for other information regarding funds
available for use by management.
Table 7: Earnings Excluding Intangibles and Merger-Related Expenses
Reported Intangible Merger-Related "Cash Operating"
(In thousands) Earnings Amortization Expenses Earnings
- -------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2000
- ----------------------------
Income before income taxes $ 27,329 $ 2,811 $ -- $ 30,140
Provision for income taxes 8,460 939 -- 9,399
-------- -------- -------- --------
Net Income $ 18,869 $ 1,872 $ -- $ 20,741
======== ======== ======== ========
Basic earnings per common share $ 2.59 $ 0.25 $ -- $ 2.84
======== ======== ======== ========
Diluted earnings per common share $ 2.58 $ 0.25 $ -- $ 2.83
======== ======== ======== ========
Year Ended December 31, 1999
- ----------------------------
Income before income taxes $ 24,528 $ 2,469 $ 1,843 $ 28,840
Provision for income taxes 7,360 813 461 8,634
-------- -------- -------- --------
Net Income $ 17,168 $ 1,656 $ 1,382 $ 20,206
======== ======== ======== ========
Basic earnings per common share $ 2.35 $ 0.23 $ 0.19 $ 2.77
======== ======== ======== ========
Diluted earnings per common share $ 2.33 $ 0.22 $ 0.19 $ 2.74
======== ======== ======== ========
Table 8: Ratios Excluding Intangibles and Merger-Related Expenses
Years Ended December 31,
------------------------
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
Cash Operating ROA: A/(B-D) 1.18% 1.23%
Cash Operating ROE: A/(C-E) 12.56% 12.98%
Cash operating earnings $ 20,741 $ 20,206 (A)
Average total assets 1,794,014 1,675,628 (B)
Average stockholders' equity 166,517 157,204 (C)
Average total intangible assets 30,813 28,449 (D)
Average intangible assets remaining in
stockholders' equity 1,391 1,503 (E)
Loan Portfolio
- -------------------------------------------------------------------------------
The Company's loan portfolio averaged $1.199 billion during 2000 and $1.053
billion during 1999. As of December 31, 2000, total loans were $1.295 billion,
compared to $1.114 billion on December 31, 1999. The most significant components
of the loan portfolio were loans to businesses (commercial loans and commercial
real estate loans) and individuals (consumer loans, credit card loans and
single-family residential real estate loans).
The Company seeks to manage its credit risk by diversifying its loan
portfolio, determining that borrowers have adequate sources of cash flow for
loan repayment without liquidation of collateral, obtaining and monitoring
collateral, providing an adequate allowance for loan losses and regularly
reviewing loans through the internal loan review process. The loan portfolio is
diversified by borrower, purpose and industry and, in the case of credit card
loans, which are unsecured, by geographic region. The Company seeks to use
diversification within the loan portfolio to reduce credit risk, thereby
minimizing the adverse impact on the portfolio, if weaknesses develop in either
the economy or a particular segment of borrowers. Collateral requirements are
based on credit assessments of borrowers and may be used to recover the debt in
case of default. The Company uses the allowance for loan losses as a method to
value the loan portfolio at its estimated collectible amount. Loans are
regularly reviewed to facilitate the identification and monitoring of
deteriorating credits.
Consumer loans consist of credit card loans, student loans and other
consumer loans. Consumer loans were $457.3 million at December 31, 2000, or
35.3% of total loans, compared to $435.4 million, or 39.1% of total loans at
December 31, 1999. The consumer loan increase from 1999 to 2000 is the result of
the Company's higher credit card volume and the acquisition of eight branch
locations during the third quarter of 2000. The credit card volume increase was
the result of an expanded marketing effort for that product.
Real estate loans consist of construction loans, single-family residential
loans and commercial loans. Real estate loans were $600.7 million at December
31, 2000, or 46.4% of total loans, compared to $497.1 million, or 44.7% of total
loans at December 31, 1999. The real estate loan increase from 1999 to 2000 is
the result of the acquisition of eight branch locations during the third quarter
of 2000 and continued demand for real estate loans.
Commercial loans consist of commercial loans, agricultural loans and
financial institution loans. Commercial loans were $220.6 million at December
31, 2000, or 17.0% of total loans, compared to $176.3 million, or 15.8% of total
loans at December 31, 1999. The commercial loan increase from 1999 to 2000 is
the result of strong commercial loan demand.
The amounts of loans outstanding at the indicated dates are reflected in
table 9, according to type of loan.
Table 9: Loan Portfolio
Years Ended December 31
---------------------------------------------------------------
(In thousands) 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
Consumer
Credit cards $ 197,567 $ 187,242 $ 165,622 $ 179,828 $ 166,346
Student loans 67,145 66,739 66,134 63,291 64,193
Other consumer 192,595 181,380 155,767 139,282 88,543
Real Estate
Construction 69,169 53,925 63,037 52,976 28,703
Single family residential 244,377 202,886 194,174 184,539 114,261
Other commercial 287,170 240,259 223,368 178,517 98,591
Commercial
Commercial 161,134 137,827 112,800 115,684 65,989
Agricultural 57,164 35,337 40,706 38,169 27,950
Financial institutions 2,339 3,165 5,656 6,073 8,469
Other 16,050 4,875 7,198 7,506 6,530
--------- --------- --------- --------- ---------
Total loans $1,294,710 $1,113,635 $1,034,462 $ 965,865 $ 669,575
========= ========= ========= ========= =========
Table 10 reflects the remaining maturities and interest rate sensitivity of
loans at December 31, 2000.
Table 10: Maturity and Interest Rate Sensitivity of Loans
Over 1
year
1 year through Over
(In thousands) or less 5 years 5 years Total
- ---------------------------------------------------------------------------------------------------
Consumer $ 369,954 $ 87,003 $ 350 $ 457,307
Real estate 327,499 262,086 11,131 600,716
Commercial 178,549 39,952 2,136 220,637
Other 9,087 3,271 3,692 16,050
---------- --------- -------- ----------
Total $ 885,089 $ 392,312 $ 17,309 $ 1,294,710
========== ========= ======== ==========
Predetermined rate $ 657,630 $ 372,555 $ 17,309 $ 1,047,494
Floating rate 227,459 19,757 -- 247,216
---------- --------- -------- ----------
Total $ 885,089 $ 392,312 $ 17,309 $ 1,294,710
========== ========= ======== ==========
Asset Quality
- -------------------------------------------------------------------------------
A loan is considered impaired when it is probable that the Company will not
receive all amounts due according to the contracted terms of the loans. This
includes nonaccrual loans and certain loans identified by management.
Non-performing loans are comprised of (a) nonaccrual loans, (b) loans that
are contractually past due 90 days and (c) other loans for which terms have been
restructured to provide a reduction or deferral of interest or principal,
because of deterioration in the financial position of the borrower. The
subsidiary banks recognize income principally on the accrual basis of
accounting. When loans are classified as nonaccrual, the accrued interest is
charged off and no further interest is accrued. Loans, excluding credit card
loans, are placed on a nonaccrual basis either: (1) when there are serious
doubts regarding the collectability of principal or interest, or (2) when
payment of interest or principal is 90 days or more past due and either (i) not
fully secured or (ii) not in the process of collection. If a loan is determined
by management to be uncollectable, the portion of the loan determined to be
uncollectible is then charged to the allowance for loan losses. Credit card
loans are classified as impaired when payment of interest or principal is 90
days past due. Litigation accounts are placed on nonaccrual until such time as
deemed uncollectible. Credit card loans are generally charged off when payment
of interest or principal exceeds 180 days past due, but are turned over to the
credit card recovery department, to be pursued until such time as they are
determined, on a case-by-case basis, to be uncollectable.
At December 31, 2000, impaired loans were $18.1 million compared to $12.1
million and $13.3 million in 1999 and 1998, respectively. The increase in
impaired loans from 1999 to 2000 primarily relates to several large commercial
borrowers that are still performing, but for which management has internally
identified as impaired. Management has evaluated the underlying collateral on
each loan and has allocated specific reserves in order to absorb any potential
loss if the collateral were ultimately foreclosed. At December 31, 2000,
non-performing loans were $11.0 million compared to $10.2 million and $10.0
million in 1999 and 1998, respectively
Table 11 presents information concerning non-performing assets, including
nonaccrual and restructured loans and other real estate owned.
Table 11: Non-performing Assets
Years Ended December 31
--------------------------------------------------------------
(In thousands) 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
Nonaccrual loans $ 8,212 $ 7,666 $ 6,959 $ 7,054 $ 3,729
Loans past due 90 days or more
(principal or interest payments) 2,752 2,542 2,972 2,417 2,560
Restructured -- -- 118 343 --
-------- ------- -------- -------- -------
Total non-performing loans 10,964 10,208 10,049 9,814 6,289
-------- ------- -------- -------- -------
Other non-performing assets
Foreclosed assets held for sale 1,104 747 2,156 2,095 1,368
Other non-performing assets 196 56 29 -- 6
-------- ------- -------- -------- -------
Total other non-performing assets 1,300 803 2,185 2,095 1,374
-------- ------- -------- -------- -------
Total non-performing assets $ 12,264 $ 11,011 $ 12,234 $ 11,909 $ 7,663
======== ======= ======== ======== =======
Allowance for loan losses to
non-performing loans 192.97% 167.37% 167.30% 155.03% 167.05%
Non-performing loans to total loans 0.85% 0.92% 0.97% 1.02% 0.94%
Non-performing assets to total assets 0.64% 0.65% 0.73% 0.73% 0.66%
Approximately $756,000, $689,000 and $646,000 of interest income would have
been recorded for the periods ended December 31, 2000, 1999 and 1998,
respectively, if the nonaccrual loans had been accruing interest in accordance
with their original terms. There was no interest income on the nonaccrual loans
recorded for the years ended December 31, 2000, 1999 and 1998.
Allowance for Loan Losses
- -------------------------------------------------------------------------------
An analysis of the allowance for loan losses for the last five years is
shown in table 12.
Table 12: Allowance for Loan Losses
(In thousands) 2000 1999 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 17,085 $16,812 $ 15,215 $10,506 $10,303
-------- ------ ------- ------ ------
Loans charged off
Credit card 3,384 3,156 3,734 3,283 2,392
Other consumer 2,349 2,419 1,398 919 615
Real estate 606 621 1,272 465 76
Commercial 1,410 1,498 1,367 731 151
-------- ------- ------- ------ ------
Total loans charged off 7,749 7,694 7,771 5,398 3,234
-------- ------- -------- ------ ------
Recoveries of loans previously charged off
Credit card 468 444 398 365 309
Other consumer 800 588 291 192 245
Real estate 92 231 121 144 69
Commercial 325 153 249 163 250
-------- ------- -------- ------ ------
Total recoveries 1,685 1,416 1,059 864 873
-------- ------- -------- ------ ------
Net loans charged off 6,064 6,278 6,712 4,534 2,361
Allowance for loan losses of
acquired institutions 2,605 -- -- 4,028 --
Provision for loan losses 7,531 6,551 8,309 5,215 2,564
-------- ------- -------- ------ ------
Balance, end of year $ 21,157 $17,085 $ 16,812 $15,215 $10,506
======== ====== ======= ====== ======
Net charge-offs to average loans 0.51% 0.60% 0.67% 0.56% 0.37%
Allowance for loan losses to period-end loans 1.63% 1.53% 1.63% 1.58% 1.57%
Allowance for loan losses to net charge-offs 348.9% 272.1% 250.5% 335.6% 445.0%
The amount of provision to the allowance during the year 2000 was based on
management's judgment, with consideration given to the composition of the
portfolio, historical loan loss experience, assessment of current economic
conditions, past due loans and net losses from loans charged off for the last
five years. It is management's practice to review the allowance on a monthly
basis to determine whether additional provisions should be made to the allowance
after considering the factors noted above.
The Company allocates the allowance for loan losses according to the amount
deemed to be reasonably necessary to provide for losses incurred within the
categories of loans set forth in table 13.
Table 13: Allocation of Allowance for Loan Losses
December 31
-------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------- ------------------ ----------------- ------------------ -----------------
Allowance % of Allowance % of Allowance % of Allowance % of Allowance % of
(In thousands) Amount loans* Amount loans* Amount loans* Amount loans* Amount loans*
- -------------------------------------------------------------------------------------------------------------------
Credit cards $ 3,947 15.3% $ 3,300 16.8% $ 3,552 16.0% $ 3,339 18.6% $ 2,626 24.8%
Consumer 2,167 20.1% 1,918 22.3% 1,959 21.5% 1,731 21.0% 543 22.8%
Real Estate 7,602 46.4% 7,155 44.7% 6,367 46.4% 5,307 43.0% 3,687 36.1%
Commercial 3,603 17.0% 3,244 15.8% 2,637 15.4% 2,641 16.6% 1,214 15.3%
Other -- 1.2% -- 0.4% 12 0.7% 10 0.8% 4 1.0%
Unallocated 3,838 1,468 2,285 2,187 2,432
------ ------ ------ ------ ------
Total $21,157 100.0% $17,085 100.0% $16,812 100.0% $15,215 100.0% $10,506 100.0%
====== ====== ====== ====== ======
<FN>
*Percentage of loans in each category to total loans.
</FN>
The unallocated reserve generally serves to compensate for the uncertainty
in estimating loan losses, including the possibility of improper risk ratings
and specific reserve allocations. The unallocated reserve is a result of
potential risk factors that cannot be quantified at December 31, 2000, including
the risks associated with increased lending, the recent acquisitions and a
slowing economy.
Investments and Securities
- --------------------------------------------------------------------------------
The Company's securities portfolio is the second largest component of
earning assets and provides a significant source of revenue. Securities within
the portfolio are classified as either held-to-maturity, available-for-sale or
trading.
Held-to-maturity securities, which include any security for which
management has the positive intent and ability to hold until maturity, are
carried at historical cost, adjusted for amortization of premiums and accretion
of discounts. Premiums and discounts are amortized and accreted, respectively,
to interest income using the constant yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are included
in income when earned.
Available-for-sale securities, which include any security for which
management has no immediate plans to sell, but which may be sold in the future,
are carried at fair value. Realized gains and losses, based on amortized cost of
the specific security, are included in other income. Unrealized gains and losses
are recorded, net of related income tax effects, in stockholders' equity.
Premiums and discounts are amortized and accreted, respectively, to interest
income, using the constant yield method over the period to maturity. Interest
and dividends on investments in debt and equity securities are included in
income when earned.
The Company's philosophy regarding investments is conservative, based on
investment type and maturity. Investments in the portfolio primarily include
U.S. Treasury securities, U.S. government agencies, mortgage-backed securities
and municipal securities. The Company's general policy is not to invest in
derivative type investments, except for collateralized mortgage-backed
securities for which collection of principal and interest is not subordinated to
significant superior rights held by others.
Held-to-maturity and available-for-sale investment securities were $184.4
million and $214.0 million, respectively, at December 31, 2000, compared to the
held-to-maturity amount of $174.4 million and available-for-sale amount of
$234.9 million at December 31, 1999.
As of December 31, 2000, $62.9 million, or 34.1%, of the held-to-maturity
securities were invested in U.S. Treasury securities and obligations of U.S.
government agencies, 82.2% of which will mature in less than five years. In the
available-for-sale securities, $180.5 million, or 84.3% were in U.S. Treasury
and U.S. government agency securities, 81.8% of which will mature in less than
five years.
In order to reduce the Company's income tax burden, an additional $110.4
million, or 59.9%, of the held-to-maturity securities portfolio, as of December
31, 2000, was invested in tax-exempt obligations of state and political
subdivisions. In the available-for-sale securities, $6.8 million, or 3.2% were
invested in tax-exempt obligations of state and political subdivisions. Most of
the state and political subdivision debt obligations are non-rated bonds and
represent relatively small, Arkansas issues, which are evaluated on an ongoing
basis. There are no securities of any one state and political subdivision issuer
exceeding ten percent of the Company's stockholders' equity at December 31,
2000.
The Company has approximately $11.1 million, or 6.0%, in mortgaged-backed
securities in the held-to-maturity portfolio at December 31, 2000. In the
available-for-sale securities, $15.2 million, or 7.1% were invested in
mortgaged-backed securities.
As of December 31, 2000, the held-to-maturity investment portfolio had
gross unrealized gains of $2.1 million and gross unrealized losses of $864,000.
Net realized losses from called or sold available-for-sale securities for 2000
and 1999 were zero, compared to net realized losses of $165,000 in 1998.
Trading securities, which include any security held primarily for near-term
sale, are carried at fair value. Gains and losses on trading securities are
included in other income. The Company's trading account is established and
maintained for the benefit of investment banking. The trading account is
typically used to provide inventory for resale and is not used to take advantage
of short-term price movements.
Table 14 presents the carrying value and fair value of investment
securities for each of the years indicated.
Table 14: Investment Securities
Years Ended December 31
---------------------------------------------------------------------------------------
2000 1999
--------------------------------------------- -----------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ---------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 21,923 $ 246 $ (8) $ 22,161 $ 13,576 $ 10 $ (115) $ 13,471
U.S. Government
agencies 40,965 229 (145) 41,049 36,654 57 (1,169) 35,542
Mortgage-backed
securities 11,065 46 (117) 10,994 16,920 84 (258) 16,746
State and political
subdivisions 110,380 1,593 (594) 111,379 107,157 662 (2,107) 105,712
Other securities 80 -- -- 80 85 -- (2) 83
--------- ------ ------- --------- --------- ------ ------ ---------
$ 184,413 $ 2,114 $ (864) $ 185,663 $ 174,392 $ 813 $(3,651) $ 171,554
========= ====== ======= ========= ========= ====== ====== =========
Available-for-Sale
U.S. Treasury $ 23,889 $ 160 $ (12) $ 24,037 $ 41,492 $ 83 $ (133) $ 41,442
U.S. Government
agencies 157,434 167 (1,165) 156,436 166,143 -- (6,287) 159,856
Mortgage-backed
securities 15,266 55 (140) 15,181 16,954 26 (234) 16,746
State and political
subdivisions 6,621 217 (17) 6,821 6,432 88 (88) 6,432
Other securities 10,541 1,054 -- 11,595 9,859 552 -- 10,411
--------- ------ ------- --------- --------- ------ ------ ---------
$ 213,751 $ 1,653 $ (1,334) $ 214,070 $ 240,880 $ 749 $(6,742) $ 234,887
========= ====== ======= ========= ========= ====== ====== =========
Total Investments $ 398,164 $ 3,767 $ (2,198) $ 399,733 $ 415,272 $ 1,562 $(10,393) $ 406,441
========= ====== ======= ========= ========= ====== ======= =========
Table 15 reflects the amortized cost and estimated fair value of debt
securities at December 31, 2000, by contractual maturity, the weighted average
yields (for tax-exempt obligations on a fully taxable basis, assuming a 37.5%
tax rate) of such securities and the taxable equivalent adjustment used in
calculating yields. Expected maturities will differ from contractual maturities,
because borrowers may have the right to call or prepay obligations, with or
without call or prepayment penalties.
Table 15: Maturity Distribution of Investment Securities
December 31, 2000
------------------------------------------------------------------------------------
Over Over
1 year 5 years
1 year through through Over No fixed Par Fair
(In thousands) or less 5 years 10 years 10 years maturity Total Value Value
- -------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 9,245 $ 12,678 $ -- $ -- $ -- $ 21,923 $ 22,000 $ 22,161
U.S. Government
agencies 5,491 24,262 11,212 -- -- 40,965 41,185 41,049
Mortgage-backed
securities 407 97 172 10,389 -- 11,065 10,920 10,994
State and political
subdivisions 9,894 47,070 45,747 7,669 -- 110,380 110,610 111,379
Other securities -- -- -- -- 80 80 80 80
-------- ------- -------- ------- -------- -------- -------- --------
Total $ 25,037 $ 84,107 $ 57,131 $ 18,058 $ 80 $ 184,413 $ 184,795 $ 185,663
======== ======= ======== ======= ======== ======== ======== ========
Percentage of total 13.5% 45.6% 31.0% 9.8% 0.1% 100.0%
======= ======= ======== ======= ======== ========
Weighted average yield 5.6% 5.3% 5.3% 6.2% 6.9% 5.4%
======= ======= ======== ======= ======== ========
Available-for-Sale
U.S. Treasury $ 10,977 $ 12,912 $ -- $ -- $ -- $ 23,889 $ 23,950 $ 24,037
U.S. Government
agencies 13,262 111,134 33,038 -- -- 157,434 157,566 156,436
Mortgage-backed
securities 215 1,251 2,435 11,365 -- 15,266 15,023 15,181
State and political
subdivisions 469 1,556 4,296 300 -- 6,621 6,630 6,821
Other securities -- -- -- -- 10,541 10,541 10,541 11,595
-------- ------- -------- ------- -------- -------- -------- --------
Total $ 24,923 $126,853 $ 39,769 $ 11,665 $ 10,541 $ 213,751 $ 213,710 $ 214,070
======== ======= ======== ======= ======== ======== ======== ========
Percentage of total 11.7% 59.3% 18.6% 5.5% 4.9% 100.0%
======== ======= ======== ======= ======== ========
Weighted average yield 5.7% 6.1% 6.4% 6.7% 6.5% 6.2%
======== ======= ======== ======= ======== ========
Deposits
- --------------------------------------------------------------------------------
Deposits are the Company's primary source of funding for earning assets.
The Company offers a variety of products designed to attract and retain
customers, with the primary focus on core deposits.
Total average deposits for 2000 were $1.493 billion, compared to $1.382
billion in 1999. As of December 31, 2000, total deposits were $1.606 billion,
compared to $1.411 billion on December 31, 1999. The year-end balances of time
deposits over $100,000 were $325.0 million in 2000, compared to $225.3 million
in 1999. The increase in deposits from 1999 to 2000 is primarily attributable to
the acquisition of eight branches in July 2000 and the Company's focus on
internal growth.
Table 16 reflects the classification of the average deposits and the
average rate paid on each deposit category, which are in excess of 10 percent of
average total deposits for the three years ended December 31, 2000.
Table 16: Average Deposits Balances and Rates
December 31
-----------------------------------------------------------------------
2000 1999 1998
---------------------- ----------------------- ------------------------
Average Average Average Average Average Average
(In thousands) Amount Rate Paid Amount Rate Paid Amount Rate Paid
- ------------------------------------------------------------------------------------------------------------
Non-interest bearing demand
deposits $ 188,220 -- $ 178,103 -- $ 180,519 --
Interest bearing transaction and
savings deposits 444,879 2.88% 448,327 2.70% 421,042 2.90%
Time deposits
$100,000 or more 273,129 5.80% 211,929 5.03% 223,434 5.48%
Other time deposits 587,140 5.66% 543,309 4.99% 541,874 5.50%
--------- --------- ---------
Total $1,493,368 $1,381,668 $1,366,869
========= ========= =========
The Company's maturities of large denomination time deposits at December
31, 2000 and 1999 are presented in table 17.
Table 17: Maturities of Large Denomination Time Deposits
Time Certificates of Deposit
($100,000 or more)
December 31
--------------------------------------------------------
2000 1999
--------------------------- ---------------------------
(In thousands) Balance Percent Balance Percent
- ----------------------------------------------------------------------------------------------------
Maturing
Three months or less $ 115,772 35.63% $ 69,592 30.89%
Over 3 months to 6 months 86,649 26.66% 66,978 29.73%
Over 6 months to 12 months 87,134 26.81% 58,846 26.12%
Over 12 months 35,414 10.90% 29,874 13.26%
---------- ----------
Total $ 324,969 100.00% $ 225,290 100.00%
========== ==========
Short-Term Borrowings
- --------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase
were $67.3 million at December 31, 2000, as compared to $60.5 million at
December 31, 1999. Other short-term borrowings, consisting of U.S. Treasury
Notes, were $4.1 million at December 31, 2000, as compared to $5.0 million at
December 31, 1999.
The Company has historically funded its growth in earning assets through
the use of core deposits, large certificates of deposits from local markets,
FHLB short-term borrowings and federal funds purchased. While management
anticipates that these sources will provide necessary funding in the near
future, the Company recognizes that there is a shrinking deposit pool, which
will be a challenge going forward. The Company expects the competition for
deposits in 2001 to continue to be strong and plans for 2001 include identifying
new sources of funding. Thus, the Company expects to use a variety of funding
sources to sustain the growing asset base. However, the Company's general policy
is to avoid the use of brokered deposits.
Long-Term Debt
- --------------------------------------------------------------------------------
The Company's long-term debt was $41.7 million and $46.2 million at
December 31, 2000 and 1999, respectively. The outstanding balance for December
31, 2000 includes $14.0 million in long-term debt and $17.3 million of trust
preferred securities. Such securities qualify as Tier 1 Capital for regulatory
purposes. This debt was incurred to fund a portion of the purchase price of the
acquisitions completed in a previous year. The Company also has assumed FHLB
long-term advances during acquisitions. The outstanding balance for FHLB
long-term advances was $9.6 million as of December 31, 2000.
Capital
- --------------------------------------------------------------------------------
At December 31, 2000, total capital reached $173.3 million, another
milestone in the Company's history. Capital represents shareholder ownership in
the Company -- the book value of assets in excess of liabilities. At year-end
2000, the Company's equity to asset ratio was 9.06% compared to 9.39% at
year-end 1999. This decrease is primarily attributable to the Company's cash
acquisition of eight branches and the stock repurchase program initiated during
the year 2000.
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, 2000, the leverage ratio and the
Tier 1 capital ratio was 8.41% and 11.97%, respectively, while the Company's
total risk-based capital ratio was 13.26%, all of which exceed the capital
minimums established in the risk-based capital requirements.
The Company's risk-based capital ratios at December 31, 2000 and 1999 are
presented in table 18.
Table 18: Risk-Based Capital
December 31
------------------------------
(In thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------
Tier 1 capital
Stockholders' equity $ 173,343 $ 159,371
Trust preferred securities 17,250 17,250
Intangible assets (35,241) (27,226)
Unrealized loss on available-
for-sale securities 34 3,900
Other (916) (951)
--------- ---------
Total Tier 1 capital 154,470 152,344
--------- ---------
Tier 2 capital
Qualifying unrealized gain on
available-for-sale equity securities 475 400
Qualifying allowance for loan losses 16,193 13,967
--------- ---------
Total Tier 2 capital 16,668 14,367
--------- ---------
Total risk-based capital $ 171,138 $ 166,711
========= =========
Risk weighted assets $1,290,494 $1,114,226
========= =========
Ratios at end of year
Leverage ratio 8.41% 9.10%
Tier 1 capital 11.97% 13.67%
Total risk-based capital 13.26% 14.96%
Minimum guidelines
Leverage ratio 4.00% 4.00%
Tier 1 capital 4.00% 4.00%
Total risk-based capital 8.00% 8.00%
Liquidity and Market Risk Management
- --------------------------------------------------------------------------------
Parent Company
The Company has leveraged its investment in subsidiary banks and depends
upon the dividends paid to it, as the sole shareholder of the subsidiary banks,
as a principal source of funds for debt service requirements. At December 31,
2000, undivided profits of the Company's subsidiaries were approximately $106
million, of which approximately $12.8 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 monitor 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, 2000, cash and cash
equivalents, trading and available-for-sale securities and mortgage loans held
for sale were 17.5% of total assets, as compared to 19.1% at December 31, 1999.
Market Risk Management
Market risk arises from changes in interest rates. The Company has risk
management policies to monitor and limit exposure to market risk. In asset and
liability management activities, policies are in place that are designed to
minimize structural interest rate risk. The measurement of market risk
associated with financial instruments is meaningful only when all related and
offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 13 of Notes to Consolidated Financial Statements.
Interest Rate Sensitivity
Interest rate risk represents the potential impact of interest rate changes
on net income and capital resulting from mismatches in repricing opportunities
of assets and liabilities over a period of time. A number of tools are used to
monitor and manage interest rate risk, including simulation models and interest
sensitivity (Gap) analysis. Management uses simulation models to estimate the
effects of changing interest rates and various balance sheet strategies on the
level of the Company's net income and capital. As a means of limiting interest
rate risk to an acceptable level, management may alter the mix of floating and
fixed-rate assets and liabilities, change pricing schedules and manage
investment maturities during future security purchases.
The simulation models incorporate management's assumptions regarding the
level of interest rates or balance changes for indeterminate maturity deposits
for a given level of market rate changes. These assumptions have been developed
through anticipated pricing behavior. Key assumptions in the simulation models
include the relative timing of prepayments, cash flows and maturities. In
addition, the impact of planned growth and anticipated new business is factored
into the simulation models. These assumptions are inherently uncertain and, as a
result, the models cannot precisely estimate net interest income or precisely
predict the impact of a change in interest rates on net income or capital.
Actual results will differ from simulated results due to the timing, magnitude
and frequency of interest rate changes and changes in market conditions and
management strategies, among other factors.
Table 19 presents the Company's interest rate sensitivity position at
December 31, 2000. This Gap analysis is based on a point in time and may not be
meaningful because assets and liabilities are categorized according to
contractual maturities (investment securities are according to call dates) and
repricing periods rather than estimating more realistic behaviors, as is done in
the simulation models. Also, the Gap analysis does not consider subsequent
changes in interest rate level or spreads between asset and liability
categories.
Table 19: Interest Rate Sensitivity
Interest Rate Sensitivity Period
----------------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1 to 2 2-5 Over 5
(In thousands, except ratios) Days Days Days Days Years Years Years Total
- ----------------------------------------------------------------------------------------------------------------------------
Earning assets
Short-term investments $ 33,640 $ -- $ -- $ -- $ -- $ -- $ -- $ 33,640
Assets held in trading
accounts 1,127 -- -- -- -- -- -- 1,127
Investment securities 34,623 6,954 11,762 18,700 49,672 157,811 118,961 398,483
Mortgage loans held for sale 8,934 -- -- -- -- -- -- 8,934
Loans 170,908 296,592 150,364 267,225 222,878 169,434 17,309 1,294,710
-------- -------- -------- -------- -------- -------- -------- ---------
Total earning assets 249,232 303,546 162,126 285,925 272,550 327,245 136,270 1,736,894
-------- -------- -------- -------- -------- -------- -------- ---------
Interest bearing liabilities
Interest bearing transaction
and savings accounts 234,209 -- -- -- 47,480 142,440 47,480 471,609
Time deposits 159,623 128,079 220,628 266,684 125,688 19,884 79 920,665
Short-term borrowings 71,320 -- -- -- -- -- -- 71,320
Long-term debt 74 149 223 2,447 2,925 8,700 27,163 41,681
-------- -------- -------- -------- -------- -------- -------- ---------
Total interest bearing
liabilities 465,226 128,228 220,851 269,131 176,093 171,024 74,722 1,505,275
-------- -------- -------- -------- -------- -------- -------- ---------
Interest rate sensitivity Gap $ (215,994) $ 175,318 $ (58,725) $ 16,794 $ 96,457 $ 156,221 $ 61,548 $ 231,619
========= ======== ======== ======== ======== ======== ======== =========
Cumulative interest rate
sensitivity Gap $ (215,994) $ (40,676) $ (99,401) $ (82,607) $ 13,850 $ 170,071 $ 231,619
Cumulative rate sensitive assets
to rate sensitive liabilities 53.6% 93.1% 87.8% 92.4% 101.1% 111.9% 115.4%
Cumulative Gap as a % of
earning assets -12.4% -2.3% -5.7% -4.8% 0.8% 9.8% 13.3%
Quarterly Results
- --------------------------------------------------------------------------------
Selected unaudited quarterly financial information for the last eight
quarters is shown in table 20.
Table 20: Quarterly Results
Quarter
------------------------------------------
(In thousands, except per share data) First Second Third Fourth Total
- ----------------------------------------------------------------------------------------------------------
2000
Net interest income $ 16,246 $ 16,302 $ 16,986 $ 17,527 $ 67,061
Provision for loan losses 1,720 1,925 1,892 1,994 7,531
Non-interest income 6,960 7,513 8,127 7,755 30,355
Non-interest expense 15,280 15,250 15,975 16,051 62,556
Gains on sale of securities, net -- -- -- -- --
Net income 4,328 4,609 4,965 4,967 18,869
Diluted earnings per share 0.59 0.63 0.67 0.69 2.58
1999
Net interest income $ 15,508 $ 16,201 $ 16,397 $ 16,625 $ 64,731
Provision for loan losses 1,652 1,691 1,619 1,589 6,551
Non-interest income 6,749 6,903 7,456 7,169 28,277
Non-interest expense 15,245 14,965 16,821 14,898 61,929
Gains on sale of securities, net -- -- -- -- --
Net income 3,708 4,569 3,813 5,078 17,168
Diluted earnings per share 0.50 0.62 0.52 0.69 2.33
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Independent Accountants' Report............................................31
Consolidated Balance Sheets, December 31, 2000 and 1999....................32
Consolidated Statements of Income, Years Ended
December 31, 2000, 1999 and 1998.........................................33
Consolidated Statements of Cash Flows, Years Ended
December 31, 2000, 1999 and 1998.........................................34
Consolidated Statements of Changes in Stockholders' Equity,
Years Ended December 31, 2000, 1999 and 1998.............................35
Notes to Consolidated Financial Statements,
December 31, 2000, 1999 and 1998.........................................36
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 29 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, 2000 and 1999, 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, 2000. 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, 2000 and 1999, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2000, in conformity with generally accepted accounting
principles.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas
February 2, 2001
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 and 1999
(In thousands, except share data) 2000 1999
- ----------------------------------------------------------------------------------------------------------
ASSETS
Cash and non-interest bearing balances due from banks $ 77,495 $ 60,324
Interest bearing balances due from banks 12,990 15,381
Federal funds sold and securities purchased
under agreements to resell 20,650 5,500
----------- -----------
Cash and cash equivalents 111,135 81,205
Investment securities 398,483 409,279
Mortgage loans held for sale 8,934 6,814
Assets held in trading accounts 1,127 1,388
Loans 1,294,710 1,113,635
Allowance for loan losses (21,157) (17,085)
---------- -----------
Net loans 1,273,553 1,096,550
Premises and equipment 46,597 40,383
Foreclosed assets held for sale, net 1,104 747
Interest receivable 18,878 15,681
Intangible assets, net 35,241 27,226
Other assets 17,441 18,157
----------- -----------
TOTAL ASSETS $ 1,912,493 $ 1,697,430
=========== ===========
LIABILITIES
Non-interest bearing transaction accounts $ 213,312 $ 170,571
Interest bearing transaction accounts and savings deposits 471,609 463,354
Time deposits 920,665 776,708
----------- -----------
Total deposits 1,605,586 1,410,633
Federal funds purchased and securities sold
under agreements to repurchase 67,250 60,496
Short-term debt 4,070 5,044
Long-term debt 41,681 46,219
Accrued interest and other liabilities 20,563 15,667
----------- -----------
Total liabilities 1,739,150 1,538,059
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock
Class A, common, par value $1 a share, authorized
30,000,000 shares, 7,180,966 issued and outstanding
at 2000 and 7,315,575 at 1999 7,181 7,316
Surplus 47,964 50,770
Undivided profits 118,232 105,185
Accumulated other comprehensive income
Unrealized depreciation on available-for-sale
securities, net of income tax credit of $20 at 2000
and $2,340 at 1999 (34) (3,900)
----------- -----------
Total stockholders' equity 173,343 159,371
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,912,493 $ 1,697,430
=========== ===========
See Notes to Consolidated Financial Statements.
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
(In thousands, except per share data) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 110,112 $ 94,576 $ 92,290
Federal funds sold and securities purchased
under agreements to resell 1,530 1,759 3,850
Investment securities 23,585 23,836 24,705
Mortgage loans held for sale 542 712 581
Assets held in trading accounts 95 72 97
Interest bearing balances due from banks 890 535 517
--------- --------- ----------
TOTAL INTEREST INCOME 136,754 121,490 122,040
--------- --------- ----------
INTEREST EXPENSE
Deposits 61,871 49,877 54,242
Federal funds purchased and securities sold
under agreements to repurchase 3,833 2,913 3,009
Short-term debt 516 165 226
Long-term debt 3,473 3,804 4,097
--------- --------- ----------
TOTAL INTEREST EXPENSE 69,693 56,759 61,574
--------- --------- ----------
NET INTEREST INCOME 67,061 64,731 60,466
Provision for loan losses 7,531 6,551 8,309
--------- --------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 59,530 58,180 52,157
--------- --------- ----------
NON-INTEREST INCOME
Trust income 5,282 4,666 4,037
Service charges on deposit accounts 7,998 7,007 6,820
Other service charges and fees 1,804 1,759 1,626
Income on sale of mortgage loans, net of commissions 1,727 2,021 2,247
Income on investment banking, net of commissions 259 266 1,044
Credit card fees 10,522 10,214 9,484
Mortgage servicing fees -- -- 3,030
Other income 2,763 2,344 2,074
Gain on sale of mortgage servicing -- -- 3,273
--------- --------- ----------
TOTAL NON-INTEREST INCOME 30,355 28,277 33,635
--------- --------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 33,544 32,395 31,833
Occupancy expense, net 3,873 3,578 3,858
Furniture and equipment expense 5,246 5,003 4,448
Loss on foreclosed assets 254 364 738
Merger-related -- 1,843 466
Loss on sale of securities, net -- -- 165
Other operating expenses 19,639 18,746 21,131
--------- --------- ----------
TOTAL NON-INTEREST EXPENSE 62,556 61,929 62,639
--------- --------- ----------
INCOME BEFORE INCOME TAXES 27,329 24,528 23,153
Provision for income taxes 8,460 7,360 6,666
--------- --------- ----------
NET INCOME $ 18,869 $ 17,168 $ 16,487
========= ========= ==========
BASIC EARNINGS PER SHARE $ 2.59 $ 2.35 $ 2.28
========= ========= ==========
DILUTED EARNINGS PER SHARE $ 2.58 $ 2.33 $ 2.24
========= ========= ==========
See Notes to Consolidated Financial Statements.
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,869 $ 17,168 $ 16,487
Items not requiring (providing) cash
Depreciation and amortization 6,999 6,334 6,786
Provision for loan losses 7,531 6,551 8,309
Net amortization (accretion) of investment securities 214 (123) (176)
Deferred income taxes (1,359) (326) (1,631)
Provision for foreclosed assets 213 214 320
Gain on sale of mortgage servicing -- -- (3,273)
Loss on sale of securities, net -- -- 165
Changes in
Interest receivable (2,777) (200) (384)
Mortgage loans held for sale (2,120) 5,827 (3,883)
Assets held in trading accounts 261 (1,310) 371
Other assets 783 (1,191) 5
Accrued interest and other liabilities 3,124 (8,363) 7,036
Income taxes payable 1,313 (272) 931
--------- --------- ---------
Net cash provided by operating activities 33,051 24,309 31,063
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans (115,721) (85,902) (76,623)
Sale of mortgage servicing -- -- 11,677
Purchase of branch locations, net funds paid (14,398) -- --
Purchases of premises and equipment, net (4,890) (6,414) (6,915)
Proceeds from sale of foreclosed assets 1,017 1,646 934
Proceeds from sale of available-for-sale securities -- -- 1,500
Proceeds from maturities of available-for-sale securities 120,279 137,564 208,463
Purchases of available-for-sale securities (95,499) (144,068) (221,666)
Proceeds from maturities of held-to-maturity securities 27,818 53,356 71,873
Purchases of held-to-maturity securities (38,150) (44,991) (64,915)
---------- --------- ---------
Net cash used in investing activities (119,544) (88,809) (75,672)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 123,944 29,630 17,659
Net (repayments) advances of short-term debt (974) 3,420 (4,311)
Dividends paid (5,822) (5,366) (4,918)
Proceeds from issuance of long-term debt -- 1,300 305
Repayment of long-term debt (4,538) (4,980) (4,523)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 6,754 (17,871) 32,599
(Repurchase) issuance of common stock, net (2,941) 289 279
--------- --------- ---------
Net cash provided by financing activities 116,423 6,422 37,090
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 29,930 (58,078) (7,519)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 81,205 139,283 146,802
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 111,135 $ 81,205 $ 139,283
========= ========= =========
See Notes to Consolidated Financial Statements.
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
Accumulated
Other
Common Comprehensive Undivided
(In thousands, except share data) Stock Surplus Income Profits Total
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $ 7,221 $ 48,010 $ 1,083 $ 81,814 $ 138,128
Comprehensive income
Net income -- -- -- 16,487 16,487
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $229 -- -- 408 -- 408
---------
Comprehensive income 16,895
Exercise of stock options -- 18,700 shares 19 301 -- -- 320
Other stock transaction of pooled
institution prior to pooling -- (17) -- -- (17)
Securities exchanged under
employee option plan (1) (23) -- -- (24)
Cash dividends declared
Common stock ($0.64 per share) -- -- -- (3,754) (3,754)
Pooled institution prior to pooling -- -- -- (1,164) (1,164)
-------- -------- --------- --------- ---------
Balance, December 31, 1998 7,239 48,271 1,491 93,383 150,384
Comprehensive income
Net income -- -- -- 17,168 17,168
Change in unrealized appreciation on
available-for-sale securities, net of
income tax credit of $3,188 -- -- (5,391) -- (5,391)
---------
Comprehensive income 11,777
Exercise of stock options -- 19,900 shares 20 280 -- -- 300
Securities exchanged under
employee option plan -- (11) -- -- (11)
Common stock issued in connection with the
purchase of the minority shares of the Bank
of Lincoln - 56,997 shares 57 2,230 -- -- 2,287
Cash dividends declared
Common stock ($0.72 per share) -- -- -- (4,990) (4,990)
Pooled institution prior to pooling -- -- -- (376) (376)
-------- --------- --------- --------- ---------
Balance, December 31, 1999 7,316 50,770 (3,900) 105,185 159,371
Comprehensive income
Net income -- -- -- 18,869 18,869
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $2,320 -- -- 3,866 -- 3,866
---------
Comprehensive income 22,735
Exercise of stock options -- 25,800 shares 26 344 -- -- 370
Securities exchanged under
employee option plan (4) (79) -- -- (83)
Repurchase of common stock - 156,827 shares (157) (3,071) -- -- (3,228)
Cash dividends declared ($0.80 per share) -- -- -- (5,822) (5,822)
-------- --------- ---------- -------- ---------
Balance, December 31, 2000 $ 7,181 $ 47,964 $ (34) $ 118,232 $ 173,343
======== ======== =========== ======== =========
See Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Nature of Operations
Simmons First National Corporation is primarily engaged in providing a full
range of banking services to individual and corporate customers through its
subsidiaries and branch banks in Arkansas. The Company is subject to competition
from other financial institutions. The Company also is subject to the regulation
of certain federal and state agencies and undergoes periodic examinations by
those regulatory authorities.
Operating Segments
The Company is organized on a subsidiary bank-by-bank basis upon which
management makes decisions regarding how to allocate resources and assess
performance. Each of the subsidiary banks provides a group of similar community
banking services, including such products and services as loans; time deposits,
checking and savings accounts; personal and corporate trust services; credit
cards; investment management; and securities and investment services. The
individual bank segments have similar operating and economic characteristics and
have been reported as one aggregated operating segment.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, the valuation of
foreclosed assets and the allowance for foreclosure expenses. In connection with
the determination of the allowance for loan losses and the valuation of
foreclosed assets, management obtains independent appraisals for significant
properties.
Management believes that the allowance for loan losses, the valuation of
foreclosed assets and the allowance for foreclosure expenses are adequate. While
management uses available information to recognize losses on loans, foreclosed
assets held for sale and foreclosure expenses, changes in economic conditions,
particularly in Arkansas, may necessitate revision of these estimates in future
years. In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses, valuation of foreclosed assets and allowance for foreclosure expenses.
Such agencies may require the Company to recognize additional losses, based on
their judgment of information available to them at the time of their
examination.
Principles of Consolidation
The consolidated financial statements include the accounts of Simmons First
National Corporation and its subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Reclassifications
Various items within the accompanying financial statements for previous
years have been reclassified to provide more comparative information. These
reclassifications had no effect on net earnings.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers due from
banks, federal funds sold and securities purchased under agreements to resell as
cash equivalents.
Investments in Debt and Equity Securities
Held-to-maturity securities, which include any security for which the
banking subsidiaries have the positive intent and ability to hold until
maturity, are carried at historical cost adjusted for amortization of premiums
and accretion of discounts. Premiums and discounts are amortized and accreted,
respectively, to interest income using the constant yield method over the period
to maturity.
Available-for-sale securities, which include any security for which the
banking subsidiaries have no immediate plan to sell but which may be sold in the
future, are carried at fair value. Realized gains and losses, based on
specifically identified amortized cost of the individual security, are included
in other income. Unrealized gains and losses are recorded, net of related income
tax effects, in stockholders' equity. Premiums and discounts are amortized and
accreted, respectively, to interest income using the constant yield method over
the period to maturity.
Trading securities, which include any security held primarily for near-term
sale, are carried at fair value. Gains and losses on trading securities are
included in other income.
Interest and dividends on investments in debt and equity securities are
included in income when earned.
Mortgage Loans Held For Sale
Mortgage loans held for sale are carried at the lower of cost or fair
value, determined using an aggregate basis. Write-downs to fair value are
recognized as a charge to earnings at the time the decline in value occurs.
Forward commitments to sell mortgage loans are acquired to reduce market risk on
mortgage loans in the process of origination and mortgage loans held for sale.
The fair values of the forward commitments are not recognized in the financial
statements. Gains and losses resulting from sales of mortgage loans are
recognized when the respective loans are sold to investors. Gains and losses are
determined by the difference between the selling price and the carrying amount
of the loans sold, net of discounts collected or paid. Fees received from
borrowers to guarantee the funding of mortgage loans held for sale are
recognized as income or expense when the loans are sold or when it becomes
evident that the commitment will not be used.
Loans
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-offs are reported at their
outstanding principal adjusted for any loans charged off and any deferred fees
or costs on originated loans and unamortized premiums or discounts on purchased
loans.
Discounts and premiums on purchased residential real estate loans are
amortized to income using the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments. Discounts and
premiums on purchased consumer loans are recognized over the expected lives of
the loans using methods that approximate the interest method.
Allowance for Loan Losses
The allowance for loan losses is increased by provisions charged to expense
and reduced by loans charged off, net of recoveries. The allowance is maintained
at a level considered adequate to provide for potential loan losses related to
specifically identified loans as well as probable credit losses inherent in the
remainder of the loan portfolio that have been incurred as of December 31, 2000
and 1999. This estimate is based on management's evaluation of the loan
portfolio, as well as on prevailing and anticipated economic conditions and
historical losses by loan category. General reserves have been established,
based upon the aforementioned factors and allocated to the individual loan
categories. Allowances are accrued on specific loans evaluated for impairment
for which the basis of each loan, including accrued interest, exceeds the
discounted amount of expected future collections of interest and principal or,
alternatively, the fair value of loan collateral. The unallocated reserve
generally serves to compensate for the uncertainty in estimating loan losses,
including the possibility of changes in risk ratings and specific reserve
allocations in the loan portfolio as a result of the Company's ongoing risk
management system.
A loan is considered impaired when it is probable that the Company will not
receive all amounts due according to the contractual terms of the loan. This
includes loans that are delinquent 90 days or more (nonaccrual loans) and
certain other loans identified by management. Accrual of interest is
discontinued and interest accrued and unpaid is removed at the time such amounts
are delinquent 90 days. Interest is recognized for nonaccrual loans only upon
receipt and only after all principal amounts are current according to the terms
of the contract.
Premises and Equipment
Depreciable assets are stated at cost, less accumulated depreciation.
Depreciation is charged to expense, using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are capitalized and
amortized by the straight-line method over the terms of the respective leases or
the estimated useful lives of the improvements whichever is shorter.
Foreclosed Assets Held For Sale
Assets acquired by foreclosure or in settlement of debt and held for sale
are valued at estimated fair value, as of the date of foreclosure and a related
valuation allowance is provided for estimated costs to sell the assets.
Management evaluates the value of foreclosed assets held for sale periodically
and increases the valuation allowance for any subsequent declines in fair value.
Changes in the valuation allowance are charged or credited to other expense.
Intangible Assets
Intangible assets consist of "Goodwill" and "Core deposit premiums".
"Goodwill" represents the excess of cost over the fair value of net assets of
acquired subsidiaries and branches. "Core deposit premiums" represents the
amount allocated to the future earnings potential of acquired deposits. The
unamortized intangible assets are being amortized using the straight-line method
over periods ranging from 10 to 20 years.
Fee Income
Periodic bankcard fees, net of direct origination costs, are recognized as
revenue on a straight-line basis over the period the fee entitles the cardholder
to use the card. Origination fees and costs for other loans are being amortized
over the estimated life of the loan.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
Earnings Per Share
Basic earnings per share are computed based on the weighted average number
of shares outstanding during each year. Diluted earnings per share are computed
using the weighted average common shares and all potential dilutive common
shares outstanding during the period.
The computation of per share earnings is as follows:
(In thousands, except per share data) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 18,869 $ 17,168 $ 16,487
-------- -------- -------
Average common shares outstanding 7,299 7,307 7,233
Average common share stock options outstanding 20 67 113
--------- --------- --------
Average diluted common shares 7,319 7,374 7,346
--------- --------- --------
Basic earnings per share $ 2.59 $ 2.35 $ 2.28
======== ======== =======
Diluted earnings per share $ 2.58 $ 2.33 $ 2.24
======== ======== =======
NOTE 2: ACQUISITIONS
- --------------------------------------------------------------------------------
On December 8, 1998, the Company and American Bancshares of Arkansas, Inc.
("ABA") merged in a pooling-of-interests transaction. Stockholders of ABA
received 464,885 shares of Simmons First National Corporation stock in exchange
for ABA shares in the transaction. ABA owned American State Bank ("ASB"),
Charleston, Arkansas with assets, as of December 8, 1998, of $90 million. ABA's
net interest income and net income for the year ended December 31, 1998 were
$3,096,000 and $493,000, respectively. The Company merged ASB into Simmons First
National Bank during the first quarter of 1999.
On January 15, 1999, the Company and Lincoln Bankshares, Inc. ("LBI")
merged. This merger was accounted for as a pooling-of-interests, except for the
acquisition of the minority shares (17.9%) of the Bank of Lincoln, which were
accounted for on a purchase accounting basis. Stockholders of LBI received
301,823 shares of Simmons First National Corporation stock in exchange for LBI
shares in the transaction. LBI owned the Bank of Lincoln ("BOL"), Lincoln,
Arkansas with assets, as of January 15, 1999, of $75 million. LBI's net interest
income and net income for the period ended January 15, 1999 were immaterial. The
Company merged BOL into Simmons First Bank of Northwest Arkansas during the
second quarter of 1999.
On July 9, 1999, the Company and NBC Bank Corp. ("NBC") merged in a
pooling-of-interests transaction. Stockholders of NBC received 784,887 shares of
Simmons First National Corporation stock in exchange for NBC shares in the
transaction. NBC owned National Bank of Commerce, El Dorado, Arkansas with
assets, as of July 9, 1999, of $155 million. NBC's net interest income and net
income for the period ended June 30, 1999, were $2,463,000 and $919,000,
respectively. The Company changed the name of National Bank of Commerce to
Simmons First Bank of El Dorado, N.A. The Company operates Simmons First Bank of
El Dorado, N.A. as a separate community bank with the same board of directors
and management.
On July 17, 2000, the Company expanded its coverage of Central and
Northwest Arkansas with a $7.6 million cash purchase of two Conway and six
Northwest Arkansas locations from First Financial Banc Corporation. Simmons
First National Bank acquired the two offices in Conway and Simmons First Bank of
Northwest Arkansas acquired the six offices in Northwest Arkansas. As of July
14, 2000, the eight locations combined had total loans of $71.8 million, total
deposits of $71.0 million and net assets of $8.5 million. The total acquisition
cost exceeded the fair value of tangible assets and liabilities acquired by
$10.8 million. The intangible assets are being amortized using the straight-line
method over 15 years.
The following table summarizes the impact of the pooling-of-interests
mergers on the Company's 1998 year end financial statements.
Simmons
(originally) Simmons
(In thousands) reported) LBI NBC Pooled
- -------------------------------------------------------------------------------------------------
December 31, 1998
Total assets $ 1,464,362 $ 76,110 $ 146,538 $ 1,687,010
Total equity 132,180 4,854 13,350 150,384
Net interest income 52,234 3,120 5,112 60,466
Non-interest income 31,664 576 1,395 33,635
Net income 14,331 508 1,648 16,487
NOTE 3: INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
The amortized cost and fair value of investment securities that are
classified as held-to-maturity and available-for-sale are as follows:
Years Ended December 31
------------------------------------------------------------------------------------------
2000 1999
----------------------------------------- -----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains (Losses) Value Cost Gains (Losses) Value
- ------------------------------------------------------------------------------------------------------------------
Held-to-Maturity
U.S. Treasury $ 21,923 $ 246 $ (8) $ 22,161 $ 13,576 $ 10 $ (115) $ 13,471
U.S. Government
agencies 40,965 229 (145) 41,049 36,654 57 (1,169) 35,542
Mortgage-backed
securities 11,065 46 (117) 10,994 16,920 84 (258) 16,746
State and political
subdivisions 110,380 1,593 (594) 111,379 107,157 662 (2,107) 105,712
Other securities 80 -- -- 80 85 -- (2) 83
--------- ------ ----- --------- --------- ------ -------- ---------
$ 184,413 $ 2,114 $ (864) $ 185,663 $ 174,392 $ 813 $ (3,651) $ 171,554
========= ====== ===== ========= ========= ====== ======== =========
Available-for-Sale
U.S. Treasury $ 23,889 $ 160 $ (12) $ 24,037 $ 41,492 $ 83 $ (133) $ 41,442
U.S. Government
agencies 157,434 167 (1,165) 156,436 166,143 -- (6,287) 159,856
Mortgage-backed
securities 15,266 55 (140) 15,181 16,954 26 (234) 16,746
State and political
subdivisions 6,621 217 (17) 6,821 6,432 88 (88) 6,432
Other securities 10,541 1,054 -- 11,595 9,859 552 -- 10,411
--------- ------ -------- -------- --------- ------ ------- ---------
$ 213,751 $ 1,653 $ (1,334) $ 214,070 $ 240,880 $ 749 $ (6,742) $ 234,887
========= ====== ======== ======== ========= ====== ======= =========
Income earned on the above securities for the years ended December 31,
2000, 1999 and 1998 is as follows:
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Taxable
Held-to-maturity $ 4,401 $ 4,377 $ 6,301
Available-for-sale 13,763 13,910 13,247
Non-taxable
Held-to-maturity 5,066 5,296 4,981
Available-for-sale 355 253 176
-------- -------- -------
Total $ 23,585 $ 23,836 $ 24,705
======== ======== =======
The Statement of Changes in Stockholders' Equity includes other
comprehensive income. Other comprehensive income for the Company includes the
change in the unrealized appreciation on available-for-sale securities. The
changes in the unrealized appreciation on available-for-sale securities for the
years ended December 31, 2000, 1999 and 1998 are as follows:
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Unrealized holding gains (losses)
arising during the period $ 3,866 $ (5,391) $ 243
Losses realized in net income -- -- 165
-------- -------- -------
Net change in unrealized appreciation on
available-for-sale securities $ 3,866 $ (5,391) $ 408
======== ======= =======
The amortized cost and estimated fair value by maturity of securities are
shown in the following table. Securities are classified according to their
contractual maturities without consideration of principal amortization,
potential prepayments or call options. Accordingly, actual maturities may differ
from contractual maturities.
Held-to-Maturity Available-for-Sale
-------------------------- -------------------------
Amortized Fair Amortized Fair
(In thousands) Cost Value Cost Value
- -------------------------------------------------------------------------------------------------
One year or less $ 25,037 $ 25,051 $ 24,923 $ 24,888
After one through five years 84,107 84,398 126,853 126,411
After five through ten years 57,131 57,851 39,769 39,554
After ten years 18,058 18,283 11,665 11,622
Other securities 80 80 10,541 11,595
---------- ---------- ---------- ---------
Total $ 184,413 $ 185,663 $ 213,751 $ 214,070
========== ========== ========== =========
The carrying value, which approximates the fair value, of securities
pledged as collateral, to secure public deposits and for other purposes,
amounted to $279,586,000 at December 31, 2000 and $277,789,000 at December 31,
1999.
Book value of securities sold under agreements to repurchase amounted to
$34,235,000 and $39,956,000 for December 31, 2000 and 1999, respectively.
Gross realized gains of $0, $0 and $50,000 resulting from sales and/or
calls of available-for-sale securities were realized for the years ended
December 31, 2000, 1999 and 1998, respectively. Gross realized losses of $0, $0
and $215,000 resulting from sales and/or calls of available-for-sale securities
were realized for the years ended December 31, 2000, 1999 and 1998,
respectively.
Most of the state and political subdivision debt obligations are non-rated
bonds and represent small Arkansas issues, which are evaluated on an ongoing
basis.
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------
The various categories of loans are summarized as follows:
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
Consumer
Credit cards $ 197,567 $ 187,242
Student loans 67,145 66,739
Other consumer 192,595 181,380
Real estate
Construction 69,169 53,925
Single family residential 244,377 202,886
Other commercial 287,170 240,259
Commercial
Commercial 161,134 137,827
Agricultural 57,164 35,337
Financial institutions 2,339 3,165
Other 16,050 4,875
--------- ---------
Total loans before allowance for loan losses $1,294,710 $1,113,635
========= =========
At December 31, 2000 and 1999, impaired loans totaled $18,099,000 and
$12,102,000, respectively. All impaired loans had designated reserves for
possible loan losses. Reserves relative to impaired loans at December 31, 2000,
were $3,070,000 and $2,803,000 at December 31, 1999. Interest of $539,000 was
recognized on average impaired loans of $13,331,000 for 2000. Interest of
$547,000 was recognized on average impaired loans of $13,234,000 for 1999.
Interest recognized on impaired loans on a cash basis during 2000 or 1999 was
immaterial.
As of December 31, 2000, credit card loans, which are unsecured, were
$197,567,000 or 15.3%, of total loans versus $187,242,000 or 16.8% of total
loans at December 31, 1999. 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) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 17,085 $ 16,812 $ 15,215
Additions
Provision for loan losses 7,531 6,551 8,309
Allowance for loan losses of acquired branches 2,605 -- --
------- -------- -------
27,221 23,363 23,524
Deductions
Losses charged to allowance, net of recoveries
of $1,685 for 2000, $1,416 for 1999 and $1,059 for 1998 6,064 6,278 6,712
------- ------- -------
Balance, end of year $ 21,157 $ 17,085 $ 16,812
======= ======= =======
NOTE 5: TIME DEPOSITS
- --------------------------------------------------------------------------------
Time deposits included approximately $324,969,000 and $225,290,000 of
certificates of deposit of $100,000 or more, at December 31, 2000 and 1999,
respectively. At December 31, 2000, time deposits with a remaining maturity of
one year or more amounted to $145,651,000. Maturities of all time deposits are
as follows: 2001 - $775,014,000; 2002 - $125,688,000; 2003 - $18,403,000; 2004 -
$706,000; 2005 - $775,000 and thereafter $79,000.
Deposits are the Company's primary funding source for loans and investment
securities. The mix and repricing alternatives can significantly affect the cost
of this source of funds and, therefore, impact the margin.
NOTE 6: INCOME TAXES
- --------------------------------------------------------------------------------
The provision for income taxes is comprised of the following components:
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Income taxes currently payable $ 9,819 $ 7,686 $ 8,297
Deferred income taxes (1,359) (326) (1,631)
-------- -------- --------
Provision for income taxes $ 8,460 $ 7,360 $ 6,666
======== ======== ========
The tax effects of temporary differences related to deferred taxes shown on
the balance sheet were:
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
Deferred tax assets
Allowance for loan losses $ 7,696 $ 5,906
Valuation of foreclosed assets 231 201
Deferred compensation payable 708 659
Deferred loan fee income 414 564
Vacation compensation 453 439
Mortgage servicing reserve 384 457
Loan interest 126 160
Available-for-sale securities 20 2,340
Other 127 144
------- -------
10,159 10,870
------- -------
Deferred tax liabilities
Accumulated depreciation (1,577) (1,473)
FHLB stock dividends (590) (432)
Other (202) (214)
------- -------
(2,369) (2,119)
------- -------
Net deferred tax assets included in other assets
on balance sheets $ 7,790 $ 8,751
======== =======
A reconciliation of income tax expense at the statutory rate to the
Company's actual income tax expense is shown below.
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Computed at the statutory rate (35%) $ 9,565 $ 8,585 $ 8,104
Increase (decrease) resulting from
Tax exempt income (2,075) (1,982) (1,807)
Non-deductible interest 377 264 223
Amortization of intangible assets 107 105 74
State income taxes 287 207 101
Other non-deductible expenses 109 331 161
Other differences, net 90 (150) (190)
------ ------- -------
Actual tax provision $ 8,460 $ 7,360 $ 6,666
====== ======= ======
NOTE 7: LONG-TERM DEBT
- -------------------------------------------------------------------------------
Long-term debt at December 31, 2000 and 1999 consisted of the following
components.
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
7.32% note due 2007, unsecured $ 14,000 $ 16,000
9.75% note due 2008, secured by land and building 857 917
5.62% to 8.41% FHLB advances due 1999 to 2018,
secured by residential real estate loans 9,574 12,052
Trust Preferred Securities 17,250 17,250
--------- ---------
Total long-term debt $ 41,681 $ 46,219
========= =========
The Company owns a wholly owned grantor trust subsidiary (the Trust) to
issue preferred securities representing undivided beneficial interests in the
assets of the Trust and to invest the gross proceeds of such Preferred
Securities into notes of the Corporation. The sole assets of the Trust are $17.8
million aggregate principal amount of the Corporation's 9.12% Subordinated
Debenture Notes due 2027 which are redeemable beginning in 2002. Such securities
qualify as Tier 1 Capital for regulatory purposes.
Aggregate annual maturities of long-term debt at December 31, 2000 are:
Annual
(In thousands) Year Maturities
- ----------------------------------------------------------------------------------------------------------
2001 $ 2,893
2002 2,925
2003 2,871
2004 2,876
2005 2,953
Thereafter 27,163
---------
Total $ 41,681
=========
NOTE 8: CAPITAL STOCK
- --------------------------------------------------------------------------------
In addition to the common stock outstanding, the following classes of stock
have been authorized.
Class B common stock of $1.00 par value per share, authorized 300 shares:
none issued.
Class A preferred stock of $100.00 par value per share, authorized 50,000
shares: none issued.
Class B preferred stock of $100.00 par value per share, authorized 50,000
shares: none issued.
On June 12, 2000, the Company announced a stock repurchase program. This
program authorizes the repurchase of up to 200,000 common shares, or
approximately 2.7 percent of the outstanding common shares as of June 12, 2000.
Under the repurchase program, there is no time limit for the stock repurchases,
nor is there a minimum number of shares the Company intends to repurchase. As of
December 31, 2000, the Company had repurchased 156,827 shares of stock with a
weighted average repurchase price of $20.58 per share.
On January 23, 2001, the Company announced the expansion of the previously
mentioned stock repurchase program. This expansion authorizes the repurchase of
an additional 200,000 common shares, or approximately 2.8 percent of the
outstanding common shares as of January 23, 2001.
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
- -------------------------------------------------------------------------------
At December 31, 2000 and 1999, the subsidiary banks had extensions of
credit to executive officers, directors and to companies in which the banks'
executive officers or directors were principal owners, in the amount of $25.9
million in 2000 and $28.6 million in 1999.
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
Balance, beginning of year $ 28,584 $ 26,869
New extensions of credit 18,942 24,120
Repayments (21,643) (22,405)
-------- -------
Balance, end of year $ 25,883 $ 28,584
======== =======
In management's opinion, such loans and other extensions of credit and
deposits were made in the ordinary course of business and were made on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with other persons. Further,
in management's opinion, these extensions of credit did not involve more than
the normal risk of collectability or present other unfavorable features.
NOTE 10: EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
The Company's 401(k) retirement plan covers substantially all employees.
Contribution expense totaled $258,000, $205,000 and $241,000, in 2000, 1999 and
1998, respectively.
The Company has a discretionary profit sharing and employee stock ownership
plan covering substantially all employees. Contribution expense totaled
$1,523,000 for 2000, $1,353,000 for 1999 and $1,105,000 for 1998.
The Board of Directors has adopted incentive and nonqualified stock option
plans. Pursuant to the plans, shares are reserved for future issuance by the
Company, upon exercise of stock options granted to officers and other key
employees. Three thousand shares of common stock of the Company were granted and
issued as bonus shares of restricted stock, during each of the years ended
December 31, 2000, 1999 and 1998.
The Company applies APB Opinion 25 and related Interpretations in
accounting for the plans and no compensation cost has been recognized. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted, net income and earnings per share would have been reduced
as indicated below:
(In thousands except per share data) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Net income - as reported $ 18,869 $ 17,168 $ 16,487
Net income - pro forma 18,818 17,062 16,283
Diluted earnings per share - as reported 2.58 2.33 2.24
Diluted earnings per share - pro forma 2.57 2.31 2.22
The above pro forma amounts include only the effect of 2000, 1999 and 1998
option grants and therefore may not be representative of the pro forma impact in
future years.
The weighted average fair values of options granted during 2000, 1999 and
1998 were $3.92, $6.28 and $11.72 per share, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
2000 1999 1998
--------- --------- ---------
Expected dividend yield 3.81% 2.70% 1.41%
Expected stock price volatility 16.00% 16.00% 16.00%
Risk-free interest rate 6.12% 6.37% 5.09%
Expected life of options 7 years 7 years 7 years
The table below summarizes the transactions under the Company's stock
option plans at December 31, 2000, 1999 and 1998 and changes during the years
then ended:
2000 1999 1998
----------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercisable Shares Exercisable Shares Exercisable
(000) Price (000) Price (000) Price
- -------------------------------------------------------------------------------------------------------------------
Outstanding, beginning of year 242 $ 24.64 233 $ 23.61 221 $ 20.03
Granted 24 18.61 30 24.07 31 40.83
Forfeited/Expired (5) 19.69 (1) 39.54 -- --
Exercised (26) 11.68 (20) 10.06 (19) 9.11
--------- --------- --------
Outstanding, end of year 235 25.54 242 24.64 233 23.61
========= ========= ========
Exercisable, end of year 182 $ 24.57 174 $ 22.07 146 $ 19.65
========= ========= ========
The following table summarizes information about stock options under the
plan outstanding at December 31, 2000:
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 14 1 Year $ 9.35 14 $ 9.35
$15.58 to $21.13 71 3 Years $19.18 55 $18.58
$24.44 to $27.00 108 6 Years $26.01 87 $26.11
$32.00 to $45.25 42 4 Years $40.52 26 $40.49
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 $194,000 for 2000, $211,000 for
1999 and $284,000 for 1998. Such charges reflect the straight-line accrual over
the employment period of the present value of benefits due each participant, as
of their full eligibility date, using an 8% discount factor.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION
- -------------------------------------------------------------------------------
In connection with cash acquisitions accounted for using the purchase
method, the Company acquired assets and assumed liabilities as follows:
(In thousands) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------
Fair value of assets acquired $ 88,920 $ -- $ --
Liabilities assumed 72,827 -- --
------- --------- --------
Cash paid 16,093 -- --
Funds acquired 1,695 -- --
------- --------- --------
Net funds paid $ 14,398 $ -- $ --
======== ========= ========
Additional cash payment information
Interest paid $ 68,428 $ 57,604 $ 61,895
Income taxes paid 8,506 7,958 7,334
Approximately, $9,000,000 of investment securities previously classified as
held-to-maturity was reclassified as available-for-sale during the second
quarter of 1999. This was the result the Company merging the Bank of Lincoln
into Simmons First Bank of Northwest Arkansas during the second quarter of 1999.
NOTE 12: OTHER EXPENSE
- -------------------------------------------------------------------------------
Other operating expenses consist of the following:
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
Professional services $ 1,532 $ 1,444 $ 1,920
Postage 2,057 1,895 1,836
Telephone 1,417 1,419 1,279
Credit card expense 1,704 1,624 1,495
Operating supplies 1,501 1,524 1,517
FDIC insurance 299 232 248
Year 2000 -- -- 500
Amortization of mortgage servicing rights (MSR's) -- -- 1,223
Amortization of intangible assets 2,811 2,469 2,385
Other expense 8,318 8,139 8,728
-------- -------- --------
Total $ 19,639 $ 18,746 $ 21,131
======== ======== ========
The Company had aggregate annual equipment rental expense of approximately
$1,027,000 in 2000, $1,084,000 in 1999 and $1,022,000 in 1998. The Company had
aggregate annual occupancy rental expense of approximately $634,000 in 2000,
$556,000 in 1999 and $604,000 in 1998.
NOTE 13: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and Cash Equivalents
The carrying amount for cash and cash equivalents approximates fair value.
Investment Securities
Fair values for investment securities equal quoted market prices, if
available. If quoted market prices are not available, fair values are estimated
based on quoted market prices of similar securities.
Mortgage Loans Held for Sale
For homogeneous categories of loans, such as mortgage loans held for sale,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.
Loans
The fair value of loans is estimated by discounting the future cash flows,
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities. Loans with similar
characteristics were aggregated for purposes of the calculations. The carrying
amount of accrued interest approximates its fair value.
Deposits
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date (i.e., their
carrying amount). The fair value of fixed-maturity time deposits is estimated
using a discounted cash flow calculation that applies the rates currently
offered for deposits of similar remaining maturities. The carrying amount of
accrued interest payable approximates its fair value.
Federal Funds Purchased, Securities Sold Under Agreement to Repurchase and
Short-Term Debt
The carrying amount for federal funds purchased, securities sold under
agreement to repurchase and short-term debt are a reasonable estimate of fair
value.
Long-Term Debt
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate the fair value of existing debt.
Commitments to Extend Credit, Letters of Credit and Lines of Credit
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed
rate loan commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The fair values of letters of
credit and lines of credit are based on fees currently charged for similar
agreements or on the estimated cost to terminate or otherwise settle the
obligations with the counterparties at the reporting date.
The following table represents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows. This method involves significant
judgments by management considering the uncertainties of economic conditions and
other factors inherent in the risk management of financial instruments. Fair
value is the estimated amount at which financial assets or liabilities could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. Because no market exists for certain of these
financial instruments and because management does not intend to sell these
financial instruments, the Company does not know whether the fair values shown
below represent values at which the respective financial instruments could be
sold individually or in the aggregate.
December 31, 2000 December 31, 1999
-------------------------- -------------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
- -------------------------------------------------------------------------------------------------
Financial assets
Cash and cash equivalents $ 111,135 $ 111,135 $ 81,205 $ 81,205
Held-to-maturity securities 184,413 185,663 174,392 171,554
Available-for-sale securities 214,070 214,070 234,887 234,887
Assets held in trading accounts 1,127 1,127 1,388 1,388
Mortgage loans held for sale 8,934 8,934 6,814 6,814
Interest receivable 18,878 18,878 15,681 15,681
Loans, net 1,273,553 1,282,287 1,096,550 1,092,725
Financial liabilities
Non-interest bearing transaction accounts 213,312 213,312 170,571 170,571
Interest bearing transaction accounts and
savings deposits 471,609 477,939 463,354 469,710
Time deposits 920,665 928,349 776,708 779,066
Federal funds purchased and securities
sold under agreements to repurchase 67,250 67,250 60,496 60,496
Short-term debt 4,070 4,070 5,044 5,044
Long-term debt 41,681 43,671 46,219 47,724
Interest payable 7,171 7,171 5,906 5,906
The fair value of commitments to extend credit and letters of credit is not
presented since management believes the fair value to be insignificant.
NOTE 14: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
- --------------------------------------------------------------------------------
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain concentrations.
Estimates related to the allowance for loan losses and certain concentrations of
credit risk are reflected in Note 4.
NOTE 15: COMMITMENTS AND CREDIT RISK
- --------------------------------------------------------------------------------
The Company grants agri-business, credit card, commercial and residential
loans to customers throughout the state. Commitments to extend credit are
agreements to lend to a customer, as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since a portion of the commitments may expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
Each customer's creditworthiness is evaluated on a case-by-case basis. The
amount of collateral obtained, if deemed necessary, is based on management's
credit evaluation of the counterparty. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, commercial real
estate and residential real estate.
At December 31, 2000, the Company had outstanding commitments to extend
credit aggregating approximately $246,550,000 and $157,859,000 for credit card
commitments and other loan commitments, respectively. At December 31, 1999, the
Company had outstanding commitments to extend credit aggregating approximately
$227,358,000 and $105,145,000 for credit card commitments and other loan
commitments, respectively.
Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers. The Company had total outstanding letters of
credit amounting to $3,400,000 and $3,035,000 at December 31, 2000 and 1999,
respectively, with terms ranging from 90 days to one year.
At December 31, 2000, the Company did not have concentrations of 5% or more
of the investment portfolio in bonds issued by a single municipality.
NOTE 16: FUTURE CHANGES IN ACCOUNTING PRINCIPLE
- --------------------------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 requires that an enterprise recognize certain derivatives as either assets
or liabilities in the balance sheet and measure those instruments at fair value.
The statement is effective for the Company's fiscal year beginning January 1,
2001. Because of the Company's limited use of derivatives, management does not
anticipate that the adoption of SFAS No. 133 will have a material impact on the
financial condition or operating results of the Company.
NOTE 17: CONTINGENT LIABILITIES
- -------------------------------------------------------------------------------
The Company and/or its subsidiary banks have various unrelated legal
proceedings, most of which involve loan foreclosure activity pending, which, in
the aggregate, are not expected to have a material adverse effect on the
financial position of the Company and its subsidiaries.
NOTE 18: STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
The Company's subsidiaries are subject to a legal limitation on dividends
that can be paid to the parent company without prior approval of the applicable
regulatory agencies. The approval of the Office of the Comptroller of the
Currency is required, if the total of all the dividends declared by a national
bank in any calendar year exceeds the total of its net profits, as defined, for
that year, combined with its retained net profits of the preceding two years.
Arkansas bank regulators have specified that the maximum dividend limit state
banks may pay to the parent company without prior approval is 75% of the current
year earnings plus 75% of the retained net earnings of the preceding year. At
December 31, 2000, the Company subsidiaries had approximately $12.8 million in
undivided profits available for payment of dividends to the Company, without
prior approval of the regulatory agencies.
The Company's subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's capital
amounts and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes that, as of December 31, 2000, the
Company meets all capital adequacy requirements to which it is subject.
As of the most recent notification from regulatory agencies, the
subsidiaries were well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Company and
subsidiaries must maintain minimum total risk-based, Tier 1 risk-based and Tier
1 leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institutions'
categories.
The Company's actual capital amounts and ratios along with the Company's
most significant subsidiaries are presented in the following table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provision
-------------------- --------------------- ----------------------
(In thousands) Amount Ratio-% Amount Ratio-% Amount Ratio-%
- -------------------------------------------------------------------------------------------------------------------
As of December 31, 2000
Total Risk-Based Capital Ratio
Simmons First National Corporation $ 171,138 13.3 $ 103,240 8.0 $ N/A
Simmons First National Bank 78,304 11.8 53,088 8.0 66,359 10.0
Simmons First Bank of Russellville 28,413 20.5 11,088 8.0 13,860 10.0
Tier 1 Capital Ratio
Simmons First National Corporation 154,470 12.0 51,620 4.0 N/A
Simmons First National Bank 69,515 10.5 26,482 4.0 39,723 6.0
Simmons First Bank of Russellville 26,668 19.2 5,556 4.0 8,334 6.0
Leverage Ratio
Simmons First National Corporation 154,470 8.4 73,470 4.0 N/A
Simmons First National Bank 69,515 7.7 36,112 4.0 45,140 5.0
Simmons First Bank of Russellville 26,668 12.7 8,399 4.0 10,499 5.0
As of December 31, 1999
Total Risk-Based Capital Ratio
Simmons First National Corporation $ 166,711 15.0 $ 89,138 8.0 $ N/A
Simmons First National Bank 79,094 13.9 45,522 8.0 56,902 10.0
Simmons First Bank of Russellville 26,324 19.8 10,636 8.0 13,295 10.0
Tier 1 Capital Ratio
Simmons First National Corporation 152,344 13.7 44,569 4.0 N/A
Simmons First National Bank 71,568 12.6 22,720 4.0 34,080 6.0
Simmons First Bank of Russellville 24,656 18.5 5,331 4.0 7,997 6.0
Leverage Ratio
Simmons First National Corporation 152,344 9.1 66,964 4.0 N/A
Simmons First National Bank 71,568 8.9 32,165 4.0 40,207 5.0
Simmons First Bank of Russellville 24,656 11.7 8,429 4.0 10,537 5.0
NOTE 19: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
- --------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS
DECEMBER 31, 2000 and 1999
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 7,493 $ 3,980
Investments in wholly-owned subsidiaries 190,159 173,844
Intangible assets, net 116 205
Investment securities 1,721 8,598
Premises and equipment 4,500 4,536
Other assets 4,731 4,654
--------- --------
TOTAL ASSETS $ 208,720 $ 195,817
========= ========
LIABILITIES
Long-term debt $ 32,641 $ 34,701
Other liabilities 2,736 1,745
--------- --------
Total liabilities 35,377 36,446
--------- --------
STOCKHOLDERS' EQUITY
Common stock 7,181 7,316
Surplus 47,964 50,770
Undivided profits 118,232 105,185
Accumulated other comprehensive income
Unrealized depreciation on available-for-sale
securities, net of income tax credit of $20 at 2000
and $2,340 at 1999 (34) (3,900)
--------- --------
Total stockholders' equity 173,343 159,371
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 208,720 $ 195,817
========= ========
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
INCOME
Dividends from subsidiaries $ 13,238 $ 14,614 $ 11,904
Other income 4,536 3,611 3,476
-------- -------- --------
17,774 18,225 15,380
EXPENSE 7,144 8,212 7,224
-------- -------- --------
Income before income taxes and equity in
undistributed net income of subsidiaries 10,630 10,013 8,156
Provision for income taxes (788) (1,363) (1,375)
-------- -------- --------
Income before equity in undistributed net
income of subsidiaries 11,418 11,376 9,531
Equity in undistributed net income of subsidiaries 7,451 5,792 6,956
-------- -------- --------
NET INCOME $ 18,869 $ 17,168 $ 16,487
======== ======== ========
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
(In thousands) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,869 $ 17,168 $ 16,487
Items not requiring (providing) cash
Depreciation and amortization 381 386 388
Deferred income taxes 12 (37) (28)
Equity in undistributed income of bank subsidiaries (7,451) (5,792) (6,956)
Changes in
Other assets (77) 309 (1,428)
Other liabilities 981 (511) 326
--------- --------- ---------
Net cash provided by operating activities 12,715 11,523 8,789
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment (256) (264) (119)
Sale of premises and equipment to subsidiary -- 287 --
Capital contribution to subsidiary (5,000) -- --
Proceeds from maturities of available-for-sale securities 66,030 58,759 48,688
Purchases of available-for-sale securities (59,153) (65,721) (46,117)
--------- --------- ----------
Net cash provided by (used in) investing activities 1,621 (6,939) 2,452
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reduction on long-term debt (2,060) (2,055) (2,048)
Dividends paid (5,822) (5,366) (4,918)
(Repurchase) issuance of common stock, net (2,941) 289 279
--------- --------- ---------
Net cash provided by financing activities (10,823) (7,132) (6,687)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,513 (2,548) 4,554
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,980 6,528 1,974
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,493 $ 3,980 $ 6,528
========= ========= =========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No items are reportable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held April 24, 2001,
filed pursuant to Regulation 14A on March 20, 2001.
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 24, 2001 filed
pursuant to Regulation 14A on March 20, 2001.
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 24, 2001,
filed pursuant to Regulation 14A on March 20, 2001.
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 24, 2001,
filed pursuant to Regulation 14A on March 20, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. Financial Statements and any Financial Statement Schedules
The financial statements and financial statement schedules listed in the
accompanying index to the consolidated financial statements and financial
statement schedules are filed as part of this Annual Report.
(b) Reports on Form 8-K
The registrant filed Form 8-K on October 19, 2000. The report contained the
text of a press release issued by the registrant concerning the announcement of
third quarter earnings.
The registrant filed Form 8-K on December 12, 2000. The report contained
the text of a press release issued by the registrant concerning the declaration
of a quarterly dividend.
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, 2001
---------------------------------------
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, 2001.
Signature Title
--------- -----
/s/ J. Thomas May
- ------------------------ President, Chairman, Chief Executive Officer
J. Thomas May and Director
/s/ Barry L. Crow
- ------------------------ Executive Vice President and Chief Financial
Barry L. Crow Officer (Principal Financial and Accounting Officer)
/s/ W. E. Ayres
- ------------------------ Director
W. E. Ayres
/s/ Lara F. Hutt, III
- ------------------------ Director
Lara F. Hutt, III
/s/ George Makris, Jr.
- ------------------------ Director
George Makris, Jr.
/s/ David R. Perdue
- ------------------------ Director
David R. Perdue
/s/ Harry L. Ryburn
- ------------------------ Director
Harry L. Ryburn
/s/ Henry F. Trotter
- ------------------------ Director
Henry F. Trotter, Jr.
/s/ Jerry W. Watkins
- ------------------------ Director
Jerry W. Watkins