Edgar Filing: SIMMONS FIRST NATIONAL CORP

a5680739.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2008

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)

Not Applicable

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. S Yes £ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

£ Large accelerated filer

S Accelerated filer

£ Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). £ Yes S No

The number of shares outstanding of the Registrant’s Common Stock as of April 28, 2008 was 13,936,856.

Simmons First National Corporation

Quarterly Report on Form 10-Q

March 31, 2008

Table of Contents


		Page
Part I:	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets		3-4
	Consolidated Statements of Income		5
	Consolidated Statements of Cash Flows		6
	Consolidated Statements of Stockholders' Equity		7
	Condensed Notes to Consolidated Financial Statements		8-20
	Report of Independent Registered Public Accounting Firm		21
Item 2.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations		22-45
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		46-48
Item 4.	Controls and Procedures		49

Part II:	Other Information
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 6.	Exhibits		49-51

Signatures			52

Part I: Financial Information

Item 1. Financial Statements

Simmons First National Corporation

Consolidated Balance Sheets

March 31, 2008 and December 31, 2007

ASSETS

	March 31,			December 31,
(In thousands, except share data)	2008			2007
	(Unaudited)
Cash and non-interest bearing balances due from banks	$	86,891		$	82,630
Interest bearing balances due from banks		107,332			21,140
Federal funds sold		53,775			6,460
Cash and cash equivalents		247,998			110,230

Investment securities		571,408			530,930
Mortgage loans held for sale		7,735			11,097
Assets held in trading accounts		5,806			5,658
Loans		1,842,138			1,850,454
Allowance for loan losses		(25,392	)		(25,303	)
Net loans		1,816,746			1,825,151

Premises and equipment		77,281			75,473
Foreclosed assets held for sale, net		3,556			2,629
Interest receivable		19,696			21,345
Bank owned life insurance		38,400			38,039
Goodwill		60,605			60,605
Core deposit premiums		3,180			3,382
Other assets		9,347			7,908

TOTAL ASSETS	$	2,861,758		$	2,692,447

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Balance Sheets

March 31, 2008 and December 31, 2007

LIABILITIES AND STOCKHOLDERS’ EQUITY

	March 31,		December 31,
(In thousands, except share data)	2008		2007
	(Unaudited)
LIABILITIES
Non-interest bearing transaction accounts	$	327,627	$	310,181
Interest bearing transaction accounts and savings deposits		901,852		761,233
Time deposits		1,067,372		1,111,443
Total deposits		2,296,851		2,182,857
Federal funds purchased and securities sold
under agreements to repurchase		113,891		128,806
Short-term debt		590		1,777
Long-term debt		139,739		82,285
Accrued interest and other liabilities		29,898		24,316
Total liabilities		2,580,969		2,420,041

STOCKHOLDERS’ EQUITY
Capital stock
Class A, common, par value $0.01 a share, authorized
60,000,000 shares, 13,941,849 issued and outstanding
at 2008 and 13,918,368 at 2007		139		139
Surplus		40,655		41,019
Undivided profits		234,515		229,520
Accumulated other comprehensive income
Unrealized appreciation on available-for-sale securities,
net of income taxes of $3,288 at 2008 and $1,037 at 2007		5,480		1,728
Total stockholders’ equity		280,789		272,406

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,861,758	$	2,692,447

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Income

Three Months Ended March 31, 2008 and 2007

	Three Months Ended
	March 31,
(In thousands, except per share data)	2008		2007
	(Unaudited)
INTEREST INCOME
Loans	$	33,106	$	34,095
Federal funds sold		256		701
Investment securities		6,569		5,721
Mortgage loans held for sale		112		104
Assets held in trading accounts		1		18
Interest bearing balances due from banks		388		510
TOTAL INTEREST INCOME		40,432		41,149

INTEREST EXPENSE
Deposits		15,188		16,194
Federal funds purchased and securities sold
under agreements to repurchase		921		1,456
Short-term debt		20		70
Long-term debt		1,511		1,198
TOTAL INTEREST EXPENSE		17,640		18,918

NET INTEREST INCOME		22,792		22,231
Provision for loan losses		1,467		751

NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		21,325		21,480

NON-INTEREST INCOME
Trust income		1,648		1,637
Service charges on deposit accounts		3,434		3,497
Other service charges and fees		753		808
Income on sale of mortgage loans, net of commissions		721		679
Income on investment banking, net of commissions		449		150
Credit card fees		3,173		2,649
Premiums on sale of student loans		624		882
Bank owned life insurance income		361		364
Gain on mandatory partial redemption of Visa shares		2,973		--
Other income		856		788
TOTAL NON-INTEREST INCOME		14,992		11,454

NON-INTEREST EXPENSE
Salaries and employee benefits		14,208		13,725
Occupancy expense, net		1,810		1,650
Furniture and equipment expense		1,490		1,466
Loss on foreclosed assets		42		24
Deposit insurance		88		67
Other operating expenses		5,492		6,282
TOTAL NON-INTEREST EXPENSE		23,130		23,214

INCOME BEFORE INCOME TAXES		13,187		9,720
Provision for income taxes		4,371		3,083

NET INCOME	$	8,816	$	6,637

BASIC EARNINGS PER SHARE	$	0.63	$	0.47
DILUTED EARNINGS PER SHARE	$	0.63	$	0.46

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2008 and 2007

	March 31,			March 31,
(In thousands)	2008			2007
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	8,816		$	6,637
Items not requiring (providing) cash
Depreciation and amortization		1,384			1,408
Provision for loan losses		1,467			751
Gain on mandatory partial redemption of Visa shares		(2,973	)		--
Net (accretion) amortization of investment securities		(150	)		48
Stock-based compensation expense		60			44
Deferred income taxes		189			110
Bank owned life insurance income		(361	)		(364	)
Changes in
Interest receivable		1,649			662
Mortgage loans held for sale		3,362			(1,627	)
Assets held in trading accounts		(148	)		(5,977	)
Other assets		(1,464	)		905
Accrued interest and other liabilities		37			249
Income taxes payable		4,182			2,589
Net cash provided by operating activities		16,050			5,435

INVESTING ACTIVITIES
Net collections (originations) of loans		5,431			(16,551	)
Purchases of premises and equipment, net		(2,990	)		(2,718	)
Proceeds from sale of foreclosed assets		580			446
Proceeds from mandatory partial redemption of Visa shares		2,973			--
Proceeds from maturities of available-for-sale securities		164,335			35,756
Purchases of available-for-sale securities		(208,994	)		(25,980	)
Proceeds from maturities of held-to-maturity securities		15,023			4,220
Purchases of held-to-maturity securities		(6,940	)		(6,188	)
Net cash used in investing activities		(30,582	)		(11,015	)

FINANCING ACTIVITIES
Net increase in deposits		113,994			31,390
Net repayments of short-term debt		(1,187	)		(1,105	)
Dividends paid		(2,647	)		(2,548	)
Proceeds from issuance of long-term debt		63,662			6,975
Repayment of long-term debt		(6,208	)		(6,704	)
Net (decrease) increase in federal funds purchased and
securities sold under agreements to repurchase		(14,915	)		3,625
Repurchase of common stock, net		(399	)		(1,807	)
Net cash provided by financing activities		152,300			29,826

INCREASE IN CASH AND CASH EQUIVALENTS		137,768			24,246
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		110,230			151,151

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	247,998		$	175,397

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2008 and 2007

							Accumulated
							Other
	Common						Comprehensive			Undivided
(In thousands, except share data)	Stock			Surplus			Income (loss)			Profits			Total


Balance, December 31, 2006	$	142		$	48,678		$	(2,198	)	$	212,394		$	259,016
Comprehensive income
Net income		--			--			--			6,637			6,637
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $513		--			--			854			--			854
Comprehensive income														7,491
Exercise of stock options – 15,800 shares		--			281			--			--			281
Securities exchanged under stock option plan		--			(98	)		--			--			(98	)
Stock granted under
stock-based compensation plans		--			19			--			--			19
Repurchase of common stock – 69,678 shares		(1	)		(1,990	)		--			--			(1,991	)
Dividends paid – $0.18 per share		--			--			--			(2,548	)		(2,548	)

Balance, March 31, 2007 (Unaudited)		141			46,890			(1,344	)		216,483			262,170
Comprehensive income
Net income		--			--			--			20,723			20,723
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $1,843		--			--			3,072			--			3,072
Comprehensive income														23,795
Stock issued as bonus shares – 15,146 shares		--			419			--			--			419
Exercise of stock options – 17,920 shares		--			228			--			--			228
Stock granted under
stock-based compensation plans		--			159			--			--			159
Securities exchanged under stock option plan		--			(105	)		--			--			(105	)
Repurchase of common stock – 251,048 shares		(2	)		(6,572	)		--			--			(6,574	)
Dividends paid – $0.55 per share		--			--			--			(7,686	)		(7,686	)

Balance, December 31, 2007		139			41,019			1,728			229,520			272,406
Cumulative effect of adoption of a new accounting
principle on January 1, 2008 (Note 1)		--			--			--			(1,174	)		(1,174	)
Comprehensive income
Net income		--			--			--			8,816			8,816
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $2,251		--			--			3,752			--			3,752
Comprehensive income														12,568
Stock issued for employee stock											--
purchase plan – 5,359 shares		--			135			--						135
Exercise of stock options – 66,830 shares		1			827			--			--			828
Stock granted under
stock-based compensation plans		--			35			--			--			35
Securities exchanged under stock option plan		(1	)		(737	)		--			--			(738	)
Repurchase of common stock – 23,480 shares		--			(624	)		--			--			(624	)
Dividends paid – $0.19 per share		--			--			--			(2,647	)		(2,647	)

Balance, March 31, 2008 (Unaudited)	$	139		$	40,655		$	5,480		$	234,515		$	280,789

See Condensed Notes to Consolidated Financial Statements.

SIMMONS FIRST NATIONAL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Simmons First National Corporation and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

All adjustments made to the unaudited financial statements were of a normal recurring nature. In the opinion of management, all adjustments necessary for a fair presentation of the results of interim periods have been made. Certain prior year amounts are reclassified to conform to current year classification. The consolidated balance sheet of the Company as of December 31, 2007 has been derived from the audited consolidated balance sheet of the Company as of that date. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2007 filed with the Securities and Exchange Commission.

Recently Issued Accounting Pronouncements

Emerging Issues Task Force (“EITF”) Issue No. 06-4, Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, requires the recognition of a liability and related compensation expense for endorsement split-dollar life insurance policies that provide a benefit to an employee that extends to post-retirement periods. Under EITF 06-4, life insurance policies purchased for the purpose of providing such benefits do not effectively settle an entity's obligation to the employee. Accordingly, the entity must recognize a liability and related compensation expense during the employee's active service period based on the future cost of insurance to be incurred during the employee's retirement. If the entity has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in Statement of Financial Accounting Standards (“SFAS”) No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions. The Company adopted EITF 06-4 on January 1, 2008 as a change in accounting principle through a cumulative-effect adjustment to retained earnings totaling $1,174,000. The Company does not expect the adoption of EITF 06-4 to have a material impact on the Company’s ongoing financial position or results of operations.

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. For additional information, see Note 16 – Fair Value Measurements.

In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument by instrument, with certain exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. While SFAS 159 is effective for the Company beginning January 1, 2008, the Company has not elected the fair value option that is offered by this statement.

There have been no other significant changes to the Company’s accounting policies from the 2007 Form 10-K.

Earnings Per Share

Basic earnings per share are computed based on the weighted average number of common 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.

Following is the computation of per share earnings for the three months ended March 31, 2008 and 2007.

(In thousands, except per share data)	2008		2007

Net Income	$	8,816	$	6,637

Average common shares outstanding		13,930		14,178
Average potential dilutive common shares		139		217
Average diluted common shares		14,069		14,395

Basic earnings per share	$	0.63	$	0.47
Diluted earnings per share	$	0.63	$	0.46

NOTE 2: INVESTMENT SECURITIES

The amortized cost and fair value of investment securities that are classified as held-to-maturity and available-for-sale are as follows:

	March 31,									December 31,
	2008									2007
			Gross		Gross			Estimaed				Gross		Gross			Estimated
	Amortized		Unrealized		Urealized			Fair		Amortized		Unealized		Unrealized			Fair
(In thousands)	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value

Held-to-Maturity
U.S. Treasury	$	1,500	$	20		--		$	1,520	$	1,500	$	14	$	--		$	1,514
U.S. Government
agencies		24,000		1,012		--			25,012		37,000		722		(19	)		37,703
Mortgage-backed
securities		121		3		--			124		129		2		--			131
State and political
subdivisions		154,166		1,844		(315	)		155,695		149,262		1,089		(354	)		149,997
Other securities		2,407		--		--			2,407		2,393		--		--			2,393

	$	182,194	$	2,879	$	(315	)	$	184,758	$	190,284	$	1,827	$	(373	)	$	191,738

Available-for-Sale
U.S. Treasury	$	2,500	$	10	$	--		$	2,510	$	5,498	$	26	$	--		$	5,524
U.S. Government
agencies		338,250		8,675		--			346,925		317,998		3,090		(299	)		320,789
Mortgage-backed
securities		2,921		56		(16	)		2,961		2,923		--		(165	)		2,758
State and political
subdivisions		635		2		--			637		855		3		--			858
Other securities		36,140		41		--			36,181		10,608		109		--			10,717

	$	380,446	$	8,784	$	(16	)	$	389,214	$	337,882	$	3,228	$	(464	)	$	340,646

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $412,266,000 at March 31, 2008 and $410,645,000 at December 31, 2007.

The book value of securities sold under agreements to repurchase amounted to $90,776,000 and $91,466,000 for March 31, 2008 and December 31, 2007, respectively.

Income earned on securities for the three months ended March 31, 2008 and 2007 is as follows:

(In thousands)	2008		2007

Taxable
Held-to-maturity	$	436	$	725
Available-for-sale		4,607		3,761

Non-taxable
Held-to-maturity		1,516		1,219
Available-for-sale		10		16

Total	$	6,569	$	5,721

Maturities of investment securities at March 31, 2008 are as follows:

	Held-to-Maturity				Available-for-Sale
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value

One year or less	$	20,768	$	20,867	$	23,521	$	23,557
After one through five years		43,921		44,695		23,309		23,463
After five through ten years		82,605		84,307		292,293		300,805
After ten years		33,423		33,412		5,183		5,210
Other securities		1,477		1,477		36,140		36,179

Total	$	182,194	$	184,758	$	380,446	$	389,214

There were no realized gains or losses on investment securities for the three-months ended March 31, 2008 or 2007.

The state and political subdivision debt obligations are primarily non-rated bonds and represent small, Arkansas issues, which are evaluated on an ongoing basis.

NOTE 3: LOANS AND ALLOWANCE FOR LOAN LOSSES

The various categories of loans are summarized as follows:

	March 31,		December 31,
(In thousands)	2008		2007

Consumer
Credit cards	$	158,701	$	166,044
Student loans		84,884		76,277
Other consumer		135,247		137,624
Real Estate
Construction		257,635		260,924
Single family residential		383,168		382,676
Other commercial		547,334		542,184
Commercial
Commercial		198,209		193,091
Agricultural		62,373		73,470
Financial institutions		4,503		7,440
Other		10,084		10,724

Total loans before allowance for loan losses	$	1,842,138	$	1,850,454

As of March 31, 2008, credit card loans, which are unsecured, were $158,701,000 or 8.6% of total loans, versus $166,044,000, or 9.0% of total loans at December 31, 2007. 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.

At March 31, 2008 and December 31, 2007, impaired loans totaled $12,942,000 and $12,519,000, respectively. All impaired loans had either specific or general allocations within the allowance for loan losses. Allocations of the allowance for loan losses relative to impaired loans were $3,106,000 at March 31, 2008 and $2,851,000 at December 31, 2007. Approximately $59,000 and $73,000 of interest income was recognized on average impaired loans of $12,731,000 and $11,320,000 as of March 31, 2008 and 2007, respectively. Interest recognized on impaired loans on a cash basis during the first three months of 2008 and 2007 was immaterial.

Transactions in the allowance for loan losses are as follows:

(In thousands)	2008		2007

Balance, beginning of year	$	25,303	$	25,385
Additions
Provision charged to expense		1,467		751
		26,770		26,136
Deductions
Losses charged to allowance, net of recoveries
of $437 and $689 for the first three months of
2008 and 2007, respectively		1,378		985

Balance, March 31	$	25,392		25,151

Additions
Provision charged to expense				3,430
Deductions
Losses charged to allowance, net of recoveries
of $1,880 for the last nine months of 2007				3,278

Balance, end of year			$	25,303

NOTE 4: GOODWILL AND CORE DEPOSIT PREMIUMS

Goodwill is tested annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements.

Core deposit premiums are periodically evaluated as to the recoverability of their carrying value.

The carrying basis and accumulated amortization of core deposit premiums (net of core deposit premiums that were fully amortized) at March 31, 2008 and December 31, 2007, were as follows:

	March 31,			December 31,
(In thousands)	2008			2007

Gross carrying amount	$	6,822		$	6,822
Accumulated amortization		(3,642	)		(3,440	)

Net core deposit premiums	$	3,180		$	3,382

Core deposit premium amortization expense recorded for the three months ended March 31, 2008 and 2007, was $202,000 and $207,000, respectively. The Company’s estimated amortization expense for the remainder of 2008 is $605,000, and for each of the following four years is: 2009 – $802,000; 2010 – $699,000; 2011 – $451,000; and 2012 – $321,000.

NOTE 5: TIME DEPOSITS

Time deposits include approximately $449,199,000 and $452,262,000 of certificates of deposit of $100,000 or more at March 31, 2008 and December 31, 2007 respectively.

NOTE 6: INCOME TAXES

The provision for income taxes is comprised of the following components:

	March 31,		March 31,
(In thousands)	2008		2007

Income taxes currently payable	$	4,182	$	2,973
Deferred income taxes		189		110

Provision for income taxes	$	4,371	$	3,083

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

	March 31,			December 31,
(In thousands)	2008			2007

Deferred tax assets
Allowance for loan losses	$	8,772		$	8,705
Valuation of foreclosed assets		64			63
Deferred compensation payable		1,450			1,432
FHLB advances		25			29
Vacation compensation		831			820
Loan interest		88			88
Other		270			234
Total deferred tax assets		11,500			11,371

Deferred tax liabilities
Accumulated depreciation		(475	)		(558	)
Deferred loan fee income and expenses, net		(1,038	)		(954	)
FHLB stock dividends		(743	)		(717	)
Goodwill and core deposit premium amortization		(7,629	)		(7,341	)
Available-for-sale securities		(3,288	)		(1,037	)
Other		(1,133	)		(1,130	)
Total deferred tax liabilities		(14,306	)		(11,737	)

Net deferred tax liabilities included in other
liabilities on balance sheets	$	(2,806	)	$	(366	)

A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:

	March 31,			March 31,
(In thousands)	2008			2007

Computed at the statutory rate (35%)	$	4,615		$	3,402

Increase (decrease) resulting from:
Tax exempt income		(570	)		(482	)
Other differences, net		326			163

Actual tax provision	$	4,371		$	3,083

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109, effective January 1, 2007. Interpretation 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. Interpretation 48 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. Adoption of Interpretation 48 did not have a significant impact on the Company’s financial position, operations or cash flows.

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction. The Company’s U.S. federal income tax returns are open and subject to examinations from the 2004 tax year and forward. The Company’s various state income tax returns are generally open from the 2004 and later tax return years based on individual state statute of limitations.

NOTE 7: SHORT-TERM AND LONG-TERM DEBT

Long-term debt at March 31, 2008 and December 31, 2007, consisted of the following components:

	March 31,		December 31,
(In thousands)	2008		2007

FHLB advances, due 2008 to 2033, 2.40% to 8.41%
secured by real estate loans	$	108,809	$	51,355
Trust preferred securities, due 2033,
fixed at 8.25%, callable in 2008 without penalty		10,310		10,310
Trust preferred securities, due 2033,
floating rate of 2.80% above the three-month LIBOR
rate, reset quarterly, callable in 2008 without penalty		10,310		10,310
Trust preferred securities, due 2033,
fixed rate of 6.97% through 2010, thereafter,
at a floating rate of 2.80% above the three-month
LIBOR rate, reset quarterly, callable
in 2010 without penalty		10,310		10,310

	$	139,739	$	82,285

At March 31, 2008, the Company had no Federal Home Loan Bank (“FHLB”) advances with original maturities of one year or less.

The trust preferred securities are tax-advantaged issues that qualify for Tier 1 capital treatment. Distributions on these securities are included in interest expense on long-term debt. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole asset of each trust. The preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust are wholly-owned by the Company. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated debentures. The Company’s obligations under the junior subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.

Aggregate annual maturities of long-term debt at March 31, 2008 are:

		Annual
(In thousands)	Year	Maturities

	2008	$	6,884
	2009		5,968
	2010		26,902
	2011		34,373
	2012		4,060
	Thereafter		61,552

	Total	$	139,739

NOTE 8: CONTINGENT LIABILITIES

The Company and/or its subsidiaries 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. The Company or its subsidiaries remain the subject of one (1) lawsuit asserting claims against the Company or its subsidiaries.

On October 1, 2003, an action in Pulaski County Circuit Court was filed by Thomas F. Carter, Tena P. Carter and certain related entities against Simmons First Bank of South Arkansas and Simmons First National Bank alleging wrongful conduct by the banks in the collection of certain loans. The Company was later added as a party defendant. The plaintiffs are seeking $2,000,000 in compensatory damages and $10,000,000 in punitive damages. The Company and the banks have filed Motions to Dismiss. The plaintiffs were granted additional time to discover any evidence for litigation, and have submitted such findings. At the hearing on the Motions for Summary Judgment, the Court dismissed Simmons First National Bank due to lack of venue. Venue has been changed to Jefferson County for the Company and Simmons First Bank of South Arkansas. At this time, no basis for any material liability has been identified. Non-binding mediation is set for June 24, 2008. The Company and the bank continue to vigorously defend the claims asserted in the suit.

NOTE 9: CAPITAL STOCK

On November 28, 2007, the Company announced the adoption by the Board of Directors of a stock repurchase program. The program authorizes the repurchase of up to 700,000 shares of Class A common stock, or approximately 5% of the outstanding common stock. Under the repurchase program, there is no time limit for the stock repurchases, nor is there a minimum number of shares the Company intends to repurchase. The Company may discontinue purchases at any time that management determines additional purchases are not warranted. The shares are to be purchased from time to time at prevailing market prices, through open market or unsolicited negotiated transactions, depending upon market conditions. The Company intends to use the repurchased shares to satisfy stock option exercises, payment of future stock dividends and general corporate purposes.

During the three-month period ended March 31, 2008, the Company repurchased 23,480 shares of stock under the repurchase plan with a weighted average repurchase price of $26.65 per share. Under the current stock repurchase plan, the Company can repurchase an additional 624,490 shares.

NOTE 10: UNDIVIDED PROFITS

The Company’s subsidiary banks are subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Comptroller of the Currency is required, if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits, as defined, for that year combined with its retained net profits of the preceding two years. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of current year earnings plus 75% of the retained net earnings of the preceding year. At March 31, 2008, the bank subsidiaries had approximately $15.7 million available for payment of dividends to the Company, without prior approval of the regulatory agencies.

The Federal Reserve Board's risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. The criteria for a well-capitalized institution are: a 5% "Tier l leverage capital" ratio, a 6% "Tier 1 risk-based capital" ratio, and a 10% "total risk-based capital" ratio. As of March 31, 2008, each of the eight subsidiary banks met the capital standards for a well-capitalized institution. The Company's “total risk-based capital” ratio was 13.65% at March 31, 2008.

NOTE 11: STOCK BASED COMPENSATION

The Company’s Board of Directors has adopted various stock compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, and bonus stock awards. Pursuant to the plans, shares are reserved for future issuance by the Company, upon exercise of stock options or awarding of bonus shares granted to directors, officers and other key employees.

The table below summarizes the transactions under the Company's active stock compensation plans for the three months ended March 31, 2008:

	Stock Options					Non-Vested Stock
	Outstanding					Awards Outstanding
				Weighted					Weighted
	Number			Average		Number			Average
	of			Exercise		of			Grant-Date
	Shares			Price		Shares			Fair-Value

Balance, January 1, 2008	$	535,450		$	17.71		31,478		$	26.72
Granted		--			--		--			--
Stock Options Exercised		(66,830	)		12.39		--			--
Stock Awards Vested		--			--		(900	)		27.67
Forfeited/Expired		(28,100	)		12.14		--			--

Balance, March 31, 2008	$	440,520		$	18.87		30,578		$	26.69

Exercisable, March 31, 2008	$	345,554		$	16.57

The following table summarizes information about stock options under the plans outstanding at March 31, 2008:

	Options Outstanding					Options Exercisable
			Weighted
			Average	Weighted				Weighted
			Remaining	Average				Average
Range of	Options		Contractual	Exercise		Options		Exercise
Exercise Prices	Outstanding		Life	Price		Exercisable		Price

$10.56 to $12.22		215,800	1.4 Years	$	12.07		215,800	$	12.07
$15.35 to $16.32		9,500	1.7 Years	$	15.88		9,500	$	15.88
$23.78 to $24.50		97,520	3.9 Years	$	24.06		90,494	$	24.05
$26.19 to $27.67		61,200	5.3 Years	$	26.20		19,860	$	26.21
$28.42 to $28.42		56,500	6.4 Years	$	28.42		9,900	$	28.42

Stock-based compensation expense totaled $59,766 and $44,300 during the three months ended March 31, 2008 and 2007, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. Unrecognized stock-based compensation expense related to stock options totaled $410,944 at March 31, 2008. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.83 years. Unrecognized stock-based compensation expense related to non-vested stock awards was $816,279 at March 31, 2008. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.73 years.

Aggregate intrinsic values of outstanding stock options and exercisable stock options at March 31, 2008 were $4.8 million and $4.5 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $29.73 as of March 31, 2008, and the exercise price multiplied by the number of options outstanding. The total intrinsic values of stock options exercised during the three months ended March 31, 2008 and 2007, were $1.2 million and $193,825, respectively.

NOTE 12: ADDITIONAL CASH FLOW INFORMATION

	Three Months Ended
	March 31,
(In thousands)	2008		2007

Interest paid	$	18,117	$	16,675
Income taxes paid	$	0	$	0

NOTE 13: OTHER OPERATING EXPENSES

Other operating expenses consist of the following:

	Three Months Ended
	March 31,
(In thousands)	2008			2007

Professional services	$	759		$	742
Postage		600			578
Telephone		450			411
Credit card expense		1,195			972
Operating supplies		460			459
Amortization of core deposit premiums		202			207
Visa litigation liability reversal		(1,220	)		--
Other expense		3,046			2,913

Total other operating expenses	$	5,492		$	6,282

NOTE 14: CERTAIN TRANSACTIONS

From time to time the Company and its subsidiaries have made loans and other extensions of credit to directors, officers, their associates and members of their immediate families. From time to time directors, officers and their associates and members of their immediate families have placed deposits with the Company’s subsidiary banks. Such loans, other extensions of credit and deposits were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features.

NOTE 15: COMMITMENTS AND CREDIT RISK

The Company grants agri-business, commercial and residential loans to customers throughout Arkansas, along with credit card loans to customers throughout the United States. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At March 31, 2008, the Company had outstanding commitments to extend credit aggregating approximately $246,273,000 and $448,300,000 for credit card commitments and other loan commitments, respectively. At December 31, 2007, the Company had outstanding commitments to extend credit aggregating approximately $244,052,000 and $411,421,000 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 $10,366,000 and $9,906,000 at March 31, 2008 and December 31, 2007, respectively, with terms ranging from 90 days to three years. At March 31, 2008 and December 31, 2007 the Company’s deferred revenue under standby letter of credit agreements is approximately $10,000 and $42,000, respectively.

NOTE 16: FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 has been applied prospectively as of the beginning of the year.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 also establishes a fair value hierarchy which requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

·	Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities

Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities