a6025298.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 June 30, 2009                                                                          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 July 23, 2009, was 14,039,211.
 
 
Simmons First National Corporation
Quarterly Report on Form 10-Q
June 30, 2009


Table of Contents
 
   
Page
     
 
 
 
3-4
 
5
 
6
 
7
 
8-26
 
27
 
 
28-55
56-58
59
     
 
59
59
60
61-63
     
 
64
 
 
Part I:      Financial Information
Item 1.     Financial Statements

Simmons First National Corporation
Consolidated Balance Sheets
June 30, 2009 and December 31, 2008
 
ASSETS
 
   
June 30,
    
December 31,
  
(In thousands, except share data)
  
2009
    
2008
  
   
(Unaudited)
        
Cash and non-interest bearing balances due from banks
   $ 53,956     $ 71,801  
Interest bearing balances due from banks
     52,321       61,085  
Federal funds sold
     8,300       6,650  
Cash and cash equivalents
     114,577       139,536  
                 
Investment securities
     630,869       646,134  
Mortgage loans held for sale
     14,868       10,336  
Assets held in trading accounts
     6,051       5,754  
Loans
     1,943,460       1,933,074  
Allowance for loan losses
     (25,032 )     (25,841 )
Net loans
     1,918,428       1,907,233  
                 
Premises and equipment
     78,649       78,904  
Foreclosed assets held for sale, net
     5,147       2,995  
Interest receivable
     18,131       20,930  
Bank owned life insurance
     40,319       39,617  
Goodwill
     60,605       60,605  
Core deposit premiums
     2,172       2,575  
Other assets
     8,015       8,490  
                 
TOTAL ASSETS
   $ 2,897,831     $ 2,923,109  
 
See Condensed Notes to Consolidated Financial Statements.
3
Simmons First National Corporation
Consolidated Balance Sheets
June 30, 2009 and December 31, 2008
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
   
June 30,
    
December 31,
  
(In thousands, except share data)
  
2009
    
2008
  
   
(Unaudited)
        
LIABILITIES
            
Non-interest bearing transaction accounts
   $ 324,686     $ 334,998  
Interest bearing transaction accounts and savings deposits
     1,065,646       1,026,824  
Time deposits
     928,812       974,511  
Total deposits
     2,319,144       2,336,333  
Federal funds purchased and securities sold
                
under agreements to repurchase
     98,146       115,449  
Short-term debt
     2,647       1,112  
Long-term debt
     162,726       158,671  
Accrued interest and other liabilities
     22,953       22,752  
Total liabilities
     2,605,616       2,634,317  
                 
STOCKHOLDERS’ EQUITY
                
Preferred stock, $0.01 par value; 40,040,000 shares authorized
                
and unissued at 2009; no shares authorized at 2008
     --       --  
Common stock, Class A, $0.01 par value; 60,000,000 shares authorized;
                
14,036,274 and 13,960,680 shares issued and outstanding
                
at June 30, 2009, and December 31, 2008, respectively
     140       140  
Surplus
     40,824       40,807  
Undivided profits
     250,070       244,655  
Accumulated other comprehensive income
                
Unrealized appreciation on available-for-sale securities,
                
net of income taxes of $709 at 2009 and $1,913 at 2008
     1,181       3,190  
Total stockholders’ equity
     292,215       288,792  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 2,897,831     $ 2,923,109  
 
See Condensed Notes to Consolidated Financial Statements.
4
Simmons First National Corporation
Consolidated Statements of Income
Three and Six Months Ended June 30, 2009 and 2008
 
   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
(In thousands, except per share data)
  
2009
    
2008
    
2009
    
2008
  
 
  
(Unaudited)
    
(Unaudited)
  
INTEREST INCOME
                        
Loans
   $ 28,017     $ 31,159     $ 56,251     $ 64,264  
Federal funds sold
     14       285       15       540  
Investment securities
     5,256       7,055       11,673       13,624  
Mortgage loans held for sale
     195       113       353       226  
Assets held in trading accounts
     5       41       10       42  
Interest bearing balances due from banks
     70       487       148       875  
TOTAL INTEREST INCOME
     33,557       39,140       68,450       79,571  
                                 
INTEREST EXPENSE
                                
Deposits
     7,901       13,905       17,404       29,092  
Federal funds purchased and securities sold
                                
under agreements to repurchase
     182       463       425       1,385  
Short-term debt
     6       19       12       38  
Long-term debt
     1,748       1,655       3,496       3,166  
TOTAL INTEREST EXPENSE
     9,837       16,042       21,337       33,681  
                                 
NET INTEREST INCOME
     23,720       23,098       47,113       45,890  
Provision for loan losses
     2,622       2,214       4,760       3,681  
                                 
NET INTEREST INCOME AFTER PROVISION
                                
FOR LOAN LOSSES
     21,098       20,884       42,353       42,209  
 
                               
NON-INTEREST INCOME
                                
Trust income
     1,223       1,450       2,549       3,098  
Service charges on deposit accounts
     4,571       3,691       8,298       7,125  
Other service charges and fees
     646       621       1,392       1,374  
Income on sale of mortgage loans, net of commissions
     1,361       760       2,400       1,482  
Income on investment banking, net of commissions
     675       199       1,086       648  
Credit card fees
     3,597       3,480       6,750       6,653  
Premiums on sale of student loans
     286       507       286       1,132  
Bank owned life insurance income
     299       425       677       787  
Gain on mandatory partial redemption of Visa shares
     --       --       --       2,973  
Other income
     556       587       1,235       1,440  
Gain on sale of securities, net of taxes
     90       --       90       --  
TOTAL NON-INTEREST INCOME
     13,304       11,720       24,763       26,712  
                                 
NON-INTEREST EXPENSE
                                
Salaries and employee benefits
     14,674       14,433       29,257       28,641  
Occupancy expense, net
     1,824       1,804       3,713       3,615  
Furniture and equipment expense
     1,527       1,472       3,070       2,962  
Other real estate and foreclosure expense
     90       87       160       129  
Deposit insurance
     2,557       113       3,090       201  
Other operating expenses
     6,279       6,300       13,319       11,791  
TOTAL NON-INTEREST EXPENSE
     26,951       24,209       52,609       47,339  
                                 
INCOME BEFORE INCOME TAXES
     7,451       8,395       14,507       21,582  
Provision for income taxes
     1,942       2,401       3,762       6,772  
                                 
NET INCOME
   $ 5,509     $ 5,994     $ 10,745     $ 14,810  
BASIC EARNINGS PER SHARE
   $ 0.40     $ 0.43     $ 0.77     $ 1.06  
DILUTED EARNINGS PER SHARE
   $ 0.39     $ 0.42     $ 0.76     $ 1.05  
 
See Condensed Notes to Consolidated Financial Statements.
5
Simmons First National Corporation
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2009 and 2008
 
   
June 30,
    
June 30,
  
(In thousands)
  
2009
    
2008
  
 
  
(Unaudited)
  
OPERATING ACTIVITIES
            
Net income
   $ 10,745     $ 14,810  
Items not requiring (providing) cash
                
Depreciation and amortization
     2,943       2,810  
Provision for loan losses
     4,760       3,681  
Gain on mandatory partial redemption of Visa shares
     --       (2,973 )
Gain on sale of investment securities
     (144 )     --  
Net (amortization) accretion of investment securities
     (101 )     141  
Stock-based compensation expense
     344       382  
Deferred income taxes
     861       233  
Bank owned life insurance income
     (677 )     (787 )
Changes in
                
Interest receivable
     2,799       482  
Mortgage loans held for sale
     (4,532 )     (484 )
Assets held in trading accounts
     (297 )     4,654  
Other assets
     (1,151 )     (1,280 )
Accrued interest and other liabilities
     (1,424 )     (3,104 )
Income taxes payable
     764       683  
Net cash provided by operating activities
     14,890       19,248  
                 
INVESTING ACTIVITIES
                
Net collections of loans
     (20,437 )     (65,586 )
Purchases of premises and equipment, net
     (2,285 )     (5,232 )
Proceeds from sale of foreclosed assets
     2,330       3,669  
Proceeds from mandatory partial redemption of Visa shares
     --       2,973  
Sales (purchases) of short-term investment securities
     23,879       (48,525 )
Proceeds from sale of available-for-sale securities
     194       --  
Proceeds from maturities of available-for-sale securities
     537,302       209,200  
Purchases of available-for-sale securities
     (382,136 )     (262,017 )
Proceeds from maturities of held-to-maturity securities
     72,994       24,325  
Purchases of held-to-maturity securities
     (238,732 )     (20,468 )
Purchases of bank owned life insurance
     (25 )     (25 )
Net cash used in investing activities
     (6,916 )     (161,686 )
                 
FINANCING ACTIVITIES
                
Net (decrease) increase in deposits
     (17,189 )     180,126  
Net change in short-term debt
     1,535       2,772  
Dividends paid
     (5,330 )     (5,297 )
Proceeds from issuance of long-term debt
     7,266       78,047  
Repayment of long-term debt
     (3,211 )     (9,429 )
Net change in federal funds purchased and
                
securities sold under agreements to repurchase
     (17,303 )     (13,252 )
Shares issued (exchanged) under stock compensation plans, net
     1,299       773  
Repurchase of common stock
     --       (1,280 )
Net cash (used in) provided by financing activities
     (32,933 )     232,460  
                 
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
     (24,959 )     90,022  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     139,536       110,230  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 114,577     $ 200,252  
 
See Condensed Notes to Consolidated Financial Statements.
6
Simmons First National Corporation
Consolidated Statements of Stockholders’ Equity
Six Months Ended June 30, 2009 and 2008
 
               
Accumulated
              
               
Other
              
   
Common
          
Comprehensive
    
Undivided
        
(In thousands, except share data)
  
Stock
    
Surplus
    
Income (loss)
    
Profits
    
Total
  
                               
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 12)
     --       --       --       (1,174 )     (1,174 )
   Comprehensive income
                                        
      Net income
     --       --       --       14,810       14,810  
      Change in unrealized appreciation on
                                        
        available-for-sale securities, net of
                                        
        income tax credits of $1,349
     --       --       (2,249 )     --       (2,249 )
   Comprehensive income
                                     12,561  
   Stock issued as bonus shares – 14,640 shares
     --       444       --       --       444  
   Stock issued for employee stock
                                        
       purchase plan – 5,359 shares
     --       135       --       --       135  
   Exercise of stock options – 80,577 shares
     1       1,005       --       --       1,006  
   Stock granted under
                                        
      stock-based compensation plans
     --       162       --       --       162  
   Securities exchanged under stock option plan
     (1 )     (811 )     --       --       (812 )
   Repurchase of common stock – 45,180 shares
     --       (1,280 )     --       --       (1,280 )
   Cash dividends declared – $0.38 per share
     --       --       --       (5,297 )     (5,297 )
                                         
Balance, June 30, 2008 (Unaudited)
     139       40,674       (521 )     237,859       278,151  
   Comprehensive income
                                        
      Net income
     --       --       --       12,100       12,100  
      Change in unrealized appreciation on
                                        
        available-for-sale securities, net of
                                        
        income taxes of $2,226
     --       --       3,711       --       3,711  
   Comprehensive income
                                     15,811  
   Stock issued as bonus shares – 2,850 shares
     --       86       --       --       86  
   Exercise of stock options – 16,920 shares
     --       202       --       --       202  
   Stock granted under
                                        
      stock-based compensation plans
     --       7       --       --       7  
   Securities exchanged under stock option plan
     1       (162 )     --       --       (161 )
   Cash dividends declared – $0.38 per share
     --       --       --       (5,304 )     (5,304 )
                                         
Balance, December 31, 2008
     140       40,807       3,190       244,655       288,792  
   Comprehensive income
                                        
      Net income
     --       --       --       10,745       10,745  
      Change in unrealized appreciation on
                                        
        available-for-sale securities, net of
                                        
        income tax credits of $1,205
     --       --       (2,009 )     --       (2,009 )
   Comprehensive income
                                     8,736  
   Stock issued as bonus shares – 27,915 shares
     --       702       --       --       702  
   Non-vested bonus shares
     --       (1,374 )     --       --       (1,374 )
   Stock issued for employee stock
                                        
       purchase plan – 5,823 shares
     --       141       --       --       141  
   Exercise of stock options – 45,200 shares
     --       551       --       --       551  
   Stock granted under
                                        
      stock-based compensation plans
     --       92       --       --       92  
   Securities exchanged under stock option plan
     --       (95 )     --       --       (95 )
   Cash dividends declared – $0.38 per share
     --       --       --       (5,330 )     (5,330 )
                                         
Balance, June 30, 2009 (Unaudited)
   $ 140     $ 40,824     $ 1,181     $ 250,070     $ 292,215  
 
See Condensed Notes to Consolidated Financial Statements.
7
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, 2008, 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 2008 filed with the Securities and Exchange Commission.

Subsequent events have been evaluated through August 10, 2009, which is the date the financial statements were issued.

Recently Issued Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards (“SFAS”) No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB Statement No. 5.  SFAS 160 amends Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS 160 clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements.  Among other requirements, SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest.  It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest.  SFAS 160 was effective on January 1, 2009, and did not have a material impact on the Company’s ongoing financial position or results of operations.

In March 2008, FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133.  SFAS 161 amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, to amend and enhance the disclosure requirements of SFAS 133 to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedge items are accounted for under SFAS 133 and its related interpretations and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows.  To meet those objectives, SFAS 161 requires qualitative disclosures about objectives and strategies for using derivative instruments, quantitative disclosures about fair values of derivative instruments and their gains and losses and disclosures about credit-risk-related contingent features of the derivative instruments and their potential impact on an entity’s liquidity.  SFAS 161 was effective on January 1, 2009, and did not have a material impact on the Company’s ongoing financial position or results of operations.
 
 
8
 
In May 2009, FASB issued SFAS No. 165, Subsequent Events.  SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  SFAS 165 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date.  SFAS 165 became effective for the Company’s financial statements for periods ending after June 15, 2009, and did not have a significant impact on the Company’s ongoing financial position or results of operations.

In April 2009, the FASB finalized four FASB Staff Positions (“FSPs”) regarding the accounting treatment for investments, including mortgage-backed securities.  These FSPs changed the method for determining if an other-than-temporary impairment (“OTTI”) exists and the amount of OTTI to be recorded through an entity’s income statement.  The changes brought about by the FSPs are intended to provide greater clarity and reflect a more accurate representation of the credit and noncredit components of an OTTI event.  The four FSPs are as follows:

·  
FSP SFAS 157-3 Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active clarifies the application of SFAS 157, Fair Value Measurements, in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.

·  
FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity for the Assets or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly provides guidelines for making fair value measurements more consistent with the principles presented in SFAS 157.

·  
FSP SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-than-temporary impairments, provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities.

·  
FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, enhances consistency in financial reporting by increasing the frequency of fair value disclosures.

These staff positions were effective for financial statements issued for periods ending after June 15, 2009, and did not have a material impact on the Company’s ongoing financial position or results of operations.

There have been no other significant changes to the Company’s accounting policies from the 2008 Form 10-K.
 
9
 
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 and six months ended June 30, 2009 and 2008.

   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
(In thousands, except per share data)
  
2009
    
2008
    
2009
    
2008
  
Net income
   $ 5,509     $ 5,994     $ 10,745     $ 14,810  
                                 
Average common shares outstanding
     14,022       13,940       14,007       13,935  
Average potential dilutive common shares
     86     $ 153       86       153  
Average diluted common shares
     14,108       14,093       14,093       14,088  
                                 
Basic earnings per share
   $ 0.40     $ 0.43     $ 0.77     $ 1.06  
Diluted earnings per share
   $ 0.39     $ 0.42     $ 0.76     $ 1.05  

 
Stock options to purchase 158,150 and 49,190 shares for the three and six months ended June 30, 2009 and 2008, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

10
 
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:

   
June 30,
    
December 31,
  
   
2009
    
2008
  
         
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. Government
                                                
  agencies
   $ 149,698     $ 367     $ (549 )   $ 149,516     $ 18,000     $ 629     $ --     $ 18,629  
Mortgage-backed
                                                                
  securities
     98       2       --       100       109       2       --       111  
State and political
                                                                
  subdivisions
     202,195       1,778       (1,498 )     202,475       168,262       1,264       (1,876 )     167,650  
Other securities
     930       1       (1 )     930       930       --       --       930  
                                                                 
    $ 352,921     $ 2,148     $ (2,048 )   $ 353,021     $ 187,301     $ 1,895     $ (1,876 )   $ 187,320  
                                                                 
Available-for-Sale
                                                                
U.S. Treasury
   $ 4,992     $ 66     $ --     $ 5,058     $ 5,976     $ 113     $ --     $ 6,089  
U.S. Government
                                                                
  agencies
     193,806       1,718       (288 )     195,236       346,585       5,444       (868 )     351,161  
Mortgage-backed
                                                                
  securities
     2,903       43       (10 )     2,936       2,909       37       (67 )     2,879  
State and political
                                                                
  subdivisions
     485       1       --       486       635       2       --       637  
Other securities
     73,872       363       (3 )     74,232       97,625       448       (6 )     98,067  
                                                                 
    $ 276,058     $ 2,191     $ (301 )   $ 277,948     $ 453,730     $ 6,044     $ (941 )   $ 458,833  

Certain investment securities are valued at less than their historical cost.  These declines primarily resulted from the rate for these investments yielding less than current market rates.  Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary.  Management does not have the intent to sell these securities and management believes it is more likely than not the Company will not have to sell these securities before recovery of their amortized cost basis less any current period credit losses.  Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.
 
11
 
As of June 30, 2009, securities with unrealized losses, segregated by length of impairment, were as follows:
 
   
Less Than 12 Months
    
12 Months or More
    
Total
  
   
Estimated
    
Gross
    
Estimated
    
Gross
    
Estimated
    
Gross
  
   
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
(In thousands)
  
Value
    
Losses
    
Value
    
Losses
    
Value
    
Losses
  
                                     
Held-to-Maturity
                                    
                                     
U.S. Government agencies
   $ 125,149     $ 549     $ --     $