Edgar Filing: SIMMONS FIRST NATIONAL CORP

a6389643.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, 2010

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. x Yes o 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):

o Large accelerated filer

x Accelerated filer

o Non-accelerated filer

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

The number of shares outstanding of the Registrant’s Common Stock as of July 29, 2010, was 17,214,884.

Simmons First National Corporation

Quarterly Report on Form 10-Q

June 30, 2010

Table of Contents

		Page

Part I:	Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets	3

	Consolidated Statements of Income	4

	Consolidated Statements of Cash Flows	5

	Consolidated Statements of Stockholders' Equity	6

	Condensed Notes to Consolidated Financial Statements	7-29

	Report of Independent Registered Public Accounting Firm	30

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31-60

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	60-63

Item 4.	Controls and Procedures	64


Part II:	Other Information

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 6.	Exhibits	65-67


Signatures		68

Part I: Financial Information

Item 1. Financial Statements

Simmons First National Corporation

Consolidated Balance Sheets

June 30, 2010 and December 31, 2009

	June 30,			December 31,
(In thousands, except share data)	2010			2009
	(Unaudited)
ASSETS
Cash and non-interest bearing balances due from banks	$	80,883		$	71,575
Interest bearing balances due from banks		161,443			282,010
Federal funds sold		2,750			--
Cash and cash equivalents		245,076			353,585
Investment securities		660,049			646,915
Mortgage loans held for sale		18,298			8,397
Assets held in trading accounts		7,827			6,886
Loans		1,822,028			1,874,989
Allowance for loan losses		(25,881	)		(25,016	)
Net loans		1,796,147			1,849,973
Covered assets:
Loans, net of discount		39,346			--
Other real estate owned, net of discount		3,609			--
FDIC loss share receivable		12,614			--
Premises and equipment		76,349			78,126
Foreclosed assets held for sale, net		20,091			9,179
Interest receivable		16,264			17,881
Bank owned life insurance		48,258			40,920
Goodwill		60,605			60,605
Core deposit premiums		1,381			1,769
Other assets		19,211			19,086
Total assets	$	3,025,125		$	3,093,322

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing transaction accounts	$	358,171		$	363,154
Interest bearing transaction accounts and savings deposits		1,172,746			1,156,264
Time deposits		862,677			912,754
Total deposits		2,393,594			2,432,172
Federal funds purchased and securities sold under agreements to repurchase		84,456			105,910
Short-term debt		3,202			3,640
Long-term debt		138,893			159,823
Accrued interest and other liabilities		25,836			20,530
Total liabilities		2,645,981			2,722,075

Stockholders' equity:
Preferred stock, $0.01 par value; 40,040,000 shares authorized
and unissued at June 30, 2010 and December 31, 2009		--			--
Common stock, Class A, $0.01 par value; 60,000,000 shares authorized;
17,209,973 and 17,093,931 shares issued and outstanding
at June 30, 2010, and December 31, 2009, respectively		172			171
Surplus		112,851			111,694
Undivided profits		265,021			258,620
Accumulated other comprehensive income
Unrealized appreciation on available-for-sale securities, net of
income taxes of $710 at June 30, 2010 and $457 at December 31, 2009		1,100			762
Total stockholders' equity		379,144			371,247
Total liabilities and stockholders' equity	$	3,025,125		$	3,093,322

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Income

Three and Six Months Ended June 30, 2010 and 2009

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share data)	2010		2009		2010		2009
	(Unaudited)				(Unaudited)
INTEREST INCOME
Loans	$	26,691	$	28,017	$	53,479	$	56,251
Covered loans		213		--		213		--
Federal funds sold		2		14		7		15
Investment securities		4,465		5,256		8,997		11,673
Mortgage loans held for sale		149		195		218		353
Assets held in trading accounts		11		5		13		10
Interest bearing balances due from banks		173		70		364		148
TOTAL INTEREST INCOME		31,704		33,557		63,291		68,450

INTEREST EXPENSE
Deposits		4,839		7,901		10,276		17,404
Federal funds purchased and securities sold
under agreements to repurchase		123		182		273		425
Short-term debt		15		6		30		12
Long-term debt		1,522		1,748		3,095		3,496
TOTAL INTEREST EXPENSE		6,499		9,837		13,674		21,337

NET INTEREST INCOME		25,205		23,720		49,617		47,113
Provision for loan losses		3,758		2,622		6,990		4,760

NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		21,447		21,098		42,627		42,353

NON-INTEREST INCOME
Trust income		1,170		1,223		2,420		2,549
Service charges on deposit accounts		4,739		4,571		9,040		8,298
Other service charges and fees		671		646		1,451		1,392
Income on sale of mortgage loans, net of commissions		932		1,361		1,535		2,400
Income on investment banking, net of commissions		776		675		1,381		1,086
Credit card fees		4,043		3,597		7,720		6,750
Premiums on sale of student loans		545		286		545		286
Bank owned life insurance income		566		299		857		677
Gain on sale of securities, net		--		144		--		144
Gain on FDIC assisted transaction		3,037		--		3,037		--
Other income		769		556		1,463		1,235
TOTAL NON-INTEREST INCOME		17,248		13,358		29,449		24,817

NON-INTEREST EXPENSE
Salaries and employee benefits		15,064		14,674		30,230		29,257
Occupancy expense, net		1,844		1,824		3,726		3,713
Furniture and equipment expense		1,526		1,527		3,021		3,070
Other real estate and foreclosure expense		314		90		372		160
Deposit insurance		1,059		2,557		2,014		3,090
Other operating expenses		7,469		6,279		14,708		13,319
TOTAL NON-INTEREST EXPENSE		27,276		26,951		54,071		52,609

INCOME BEFORE INCOME TAXES		11,419		7,505		18,005		14,561
Provision for income taxes		3,438		1,996		5,068		3,816

NET INCOME	$	7,981	$	5,509	$	12,937	$	10,745
BASIC EARNINGS PER SHARE	$	0.46	$	0.40	$	0.75	$	0.77
DILUTED EARNINGS PER SHARE	$	0.46	$	0.39	$	0.75	$	0.76

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2010 and 2009

	June 30,			June 30,
(In thousands)	2010			2009
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	12,937		$	10,745
Items not requiring (providing) cash
Depreciation and amortization		2,854			2,943
Provision for loan losses		6,990			4,760
Gain on sale of investment securities		--			(144	)
Net amortization (accretion) of investment securities		16			(101	)
Stock-based compensation expense		502			344
Net accretion on FDIC loss share receivable		1,169			--
Gain on FDIC assisted transaction		(3,037	)		--
Deferred income taxes		2,030			861
Bank owned life insurance income		(857	)		(677	)
Changes in
Interest receivable		1,617			2,799
Mortgage loans held for sale		(9,901	)		(4,532	)
Assets held in trading accounts		(941	)		(297	)
Other assets		333			(899	)
Accrued interest and other liabilities		1,805			(1,424	)
Income taxes payable		(142	)		764
Net cash provided by operating activities		15,375			15,142

INVESTING ACTIVITIES
Net collections (originations) of loans		26,264			(20,437	)
Purchases of premises and equipment, net		(679	)		(2,285	)
Proceeds from sale of foreclosed assets		11,528			2,330
Net sales of short-term investment securities		--			23,879
Proceeds from sale of available-for-sale securities		--			194
Proceeds from maturities of available-for-sale securities		149,248			537,302
Purchases of available-for-sale securities		(165,235	)		(382,136	)
Proceeds from maturities of held-to-maturity securities		178,570			72,994
Purchases of held-to-maturity securities		(150,545	)		(238,732	)
Purchases of bank owned life insurance		(6,482	)		(25	)
Net cash proceeds received in FDIC assisted transaction		18,067			--
Net cash provided by (used in) investing activities		60,736			(6,916	)

FINANCING ACTIVITIES
Net change in deposits		(135,918	)		(17,189	)
Net change in short-term debt		(438	)		1,535
Dividends paid		(6,536	)		(5,330	)
Proceeds from issuance of long-term debt		3,200			7,266
Repayment of long-term debt		(24,130	)		(3,211	)
Net change in federal funds purchased and
securities sold under agreements to repurchase		(21,454	)		(17,303	)
Net shares issued under stock compensation plans		656			1,047
Net cash used in financing activities		(184,620	)		(33,185	)

DECREASE IN CASH AND CASH EQUIVALENTS		(108,509	)		(24,959	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		353,585			139,536

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	245,076		$	114,577

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2010 and 2009

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

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
Comprehensive income
Net income		--		--			--			14,465			14,465
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of ($251)		--		--			(419	)		--			(419	)
Comprehensive income													14,046
Stock issued from public stock offering, net of
offering costs of $4,178		30		70,456			--			--			70,486
Cancelled bonus shares - 1,113 shares		--		29			--			--			29
Non-vested bonus shares		--		166			--			--			166
Exercise of stock options - 11,500 shares		1		138			--			--			139
Stock granted under
stock-based compensation plans		--		88			--			--			88
Securities exchanged under stock option plan		--		(7	)		--			--			(7	)
Dividends paid - $0.38 per share		--		--			--			(5,915	)		(5,915	)

Balance, December 31, 2009		171		111,694			762			258,620			371,247
Comprehensive income
Net income		--		--			--			12,937			12,937
Change in unrealized appreciation on
available-for-sale securities, net of
income taxes of $218		--		--			338			--			338
Comprehensive income													13,275
Stock issued as bonus shares - 80,245 shares		1		203			--			--			204
Non-vested bonus shares		--		415			--			--			415
Stock issued for employee stock
purchase plan - 4,947 shares		--		131			--			--			131
Exercise of stock options - 38,018 shares		--		518			--			--			518
Stock granted under
stock-based compensation plans		--		87			--			--			87
Securities exchanged under stock option plan		--		(197	)		--			--			(197	)
Dividends paid - $0.38 per share		--		--			--			(6,536	)		(6,536	)

Balance, June 30, 2010 (Unaudited)	$	172	$	112,851		$	1,100		$	265,021		$	379,144

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, 2009, 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 2009 filed with the U.S. Securities and Exchange Commission (the “SEC”).

Recently Issued Accounting Pronouncements

In December 2009, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ASU 2009-17, Consolidation (Topic 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. ASU 2009-17 amends the consolidation guidance applicable to variable interest entities. The amendments to the consolidation guidance affect all entities, as well as qualifying special-purpose entities that were previously excluded from previous consolidation guidance. ASU 2009-17 was effective as of the beginning of the first annual reporting period that begins after November 15, 2009. Adoption of the new guidance did not have a significant impact on the Company’s ongoing financial position or results of operations.

In December 2009, the FASB issued ASU 2009-16, Transfers and Servicing (Topic 860) – Accounting for Transfers of Financial Assets. ASU 2009-16 amends the derecognition accounting and disclosure guidance. ASU 2009-16 eliminates the exemption from consolidation for Qualified Special Purpose Entities (“QSPEs”) and also requires a transferor to evaluate all existing QSPEs to determine whether they must be consolidated. ASU 2009-16 was effective as of the beginning of the first annual reporting period that begins after November 15, 2009, and did not have a significant impact on the Company’s ongoing financial position or results of operations.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements. ASU 2010-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. The Company’s disclosures about fair value measurements are presented in Note 17 – Fair Value Measurements. These new disclosure requirements were adopted by the Company during the period ended March 31, 2010, with the exception of the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. With respect to the portions of this ASU that were adopted during the period ended March 31, 2010, the adoption of this standard did not have a significant impact on the Company’s financial position, results of operations or disclosures. Management does not believe that the adoption of the remaining portion of this ASU will have a significant impact on the Company’s ongoing financial position, results of operation or disclosures.

In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855) – Amendments to Certain Recognition and Disclosure Requirements. The amendments remove the requirement for an SEC registrant to disclose the date through which subsequent events were evaluated as this requirement would have potentially conflicted with SEC reporting requirements. Removal of the disclosure requirement is not expected to affect the nature or timing of subsequent events evaluations performed by the Company. ASU 2010-09 became effective upon issuance.

There have been no other significant changes to the Company’s accounting policies from the 2009 Form 10-K.

Acquisition Accounting, Covered Loans and Related Loss Share Receivable

The Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, exclusive of the shared loss agreements with the Federal Deposit Insurance Corporation (“FDIC”). The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected on individual loans or on pools of loans sharing common risk characteristics and were treated in the aggregate when applying various valuation techniques . The Company evaluates at each balance sheet date whether the present value of its loans determined using the effective interest rates has decreased and if so, recognizes a provision for loan loss in its consolidated statement of income. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s or pool’s remaining life.

Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset (FDIC loss share receivable) is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared-loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties.

The shared-loss agreements continue to be measured on the same basis as the related indemnified loans. Because the acquired loans are subject to the accounting prescribed by ASC Topic 310, subsequent changes to the basis of the shared-loss agreements also follow that model. Deterioration in the credit quality of the loans (immediately recorded as an adjustment to the allowance for loan losses) would immediately increase the basis of the shared-loss agreements, with the offset recorded through the consolidated statement of income. Increases in the credit quality or cash flows of loans (reflected as an adjustment to yield and accreted into income over the remaining life of the loans) decrease the basis of the shared-loss agreements, with such decrease being accreted into income over 1) the same period or 2) the life of the shared-loss agreements, whichever is shorter. Loss assumptions used in the basis of the indemnified loans are consistent with the loss assumptions used to measure the indemnification asset. Fair value accounting incorporates into the fair value of the indemnification asset an element of the time value of money, which is accreted back into income over the life of the shared-loss agreements.

Upon the determination of an incurred loss the indemnification asset will be reduced by the amount owed by the FDIC. A corresponding, claim receivable is recorded until cash is received from the FDIC. For further discussion of the Company’s acquisitions and loan accounting, see Note 2 and Note 5 to the consolidated financial statements.

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, 2010 and 2009:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share data)	2010		2009		2010		2009

Net income	$	7,981	$	5,509	$	12,937	$	10,745

Average common shares outstanding		17,200		14,022		17,170		14,007
Average potential dilutive common shares		68		86		68		86
Average diluted common shares		17,268		14,108		17,238		14,093

Basic earnings per share	$	0.46	$	0.40	$	0.75	$	0.77
Diluted earnings per share	$	0.46	$	0.39	$	0.75	$	0.76

Stock options to purchase 100,290 and 158,150 shares for the three and six months ended June 30, 2010 and 2009, respectively, were not included in the earnings per share calculation because the exercise price exceeded the average market price.

NOTE 2: ACQUISITION

On May 14, 2010, the Company, through its wholly-owned subsidiary, Simmons First National Bank (the “Bank”), entered into a purchase and assumption agreement with loss share agreements with the Federal Deposit Insurance Corporation (“FDIC”) pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of Southwest Community Bank (“SWCB”) in Springfield, Missouri. As a result of this acquisition, the Company expands its footprint outside the Arkansas borders for the first time. The Company recognized a pre-tax gain of $3.0 million on this transaction and incurred pre-tax merger related costs of $0.4 million. A summary, at fair value, of the assets acquired and liabilities assumed is as follows:

	Acquired from		Fair Value			Fair
(In thousands)	the FDIC		Adjustments			Value

ASSETS
Cash and non-interest bearing balances due from banks	$	222	$	10,653		$	10,875
Interest bearing balances due from banks		7,192		--			7,192
Investment securities		24,850		--			24,850
Covered assets:
Loans		56,214		(16,037	)		40,177
Other real estate		6,538		(1,892	)		4,646
FDIC loss share receivable		--		13,783			13,783
Premises and equipment		10		--			10
Other assets		616		(159	)		457
Total assets	$	95,642	$	6,348		$	101,990

LIABILITIES
Deposits:
Non-interest bearing transaction accounts	$	5,063	$	--		$	5,063
Interest bearing transaction accounts and savings deposits		103		--			103
Time deposits		92,174		--			92,174
Total deposits		97,340		--			97,340
FDIC true-up payable		--		1,504			1,504
Accrued interest and other liabilities		109		--			109
Total liabilities	$	97,449	$	1,504		$	98,953

Gain on acquisition of SWCB						$	3,037

The Bank will share in the losses on assets covered under the loss share agreements. The FDIC will reimburse the Bank for 80% of all losses on covered assets. The loss sharing agreements entered into by the Bank and the FDIC in conjunction with the purchase and assumption agreement require that the Bank follow certain servicing procedures as specified in the loss share agreements or risk losing FDIC reimbursement of covered asset losses. Additionally, to the extent that actual losses incurred by the Bank under the loss share agreements are less than expected, the Bank may be required to reimburse the FDIC under the clawback provisions of the loss share agreements. At June 30, 2010, the covered loans and covered other real estate owned and the related FDIC loss share receivable (collectively, the “covered assets”) and the FDIC clawback payable were reported at the net present value of expected future amounts to be paid or received.

Purchased loans acquired in a business combination, including loans purchased in the SWCB acquisition, are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. Purchased loans are accounted for in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality accounting guidance for certain loans or debt securities acquired in a transfer, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges and an adjustment in accretable yield, recognized on a prospective basis over the loan’s or pool’s remaining life, which will have a positive impact on interest income.

On the acquisition date, the preliminary estimate of the contractually required payments for all acquired loans was $56.2 million, the cash flows expected to be collected were $43.3 million including interest, and the estimated fair value was $40.2 million. These amounts were determined based upon the remaining life of the acquired loans, including the effects of estimated prepayments, estimated loss ratios, the estimated value of the underlying collateral, and the net present value of cash flows expected to be received. The discount on covered loans that that would be accreted into future earnings of the Company based on expected cash flows totaled $16.0 million.

The Company expects to finalize its analysis of the acquired loans along with the other acquired assets and assumed liabilities in this transaction over the next twelve months. Therefore, adjustments to the estimated amounts and carrying values may occur.

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:

	June 30,									December 31,
	2010									2009
			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	$	4,000	$	27	$	--		$	4,027	$	--	$	--	$	--		$	--
U.S. Government
agencies		224,928		2,299		(22	)		227,205		254,229		799		(1,348	)		253,680
Mortgage-backed
securities		84		4		--			88		90		5		--			95
State and political
subdivisions		206,076		2,798		(521	)		208,353		208,812		2,728		(580	)		210,960
Other securities		930		--		--			930		930		--		--			930

	$	436,018	$	5,128	$	(543	)	$	440,603	$	464,061	$	3,532	$	(1,928	)	$	465,665

Available-for-Sale
U.S. Treasury	$	300	$	--	$	--		$	300	$	4,297	$	32	$	--		$	4,329
U.S. Government
agencies		205,232		1,286		(21	)		206,497		160,807		953		(236	)		161,524
Mortgage-backed
securities		2,845		166		(3	)		3,008		2,896		78		(2	)		2,972
Other securities		13,844		386		(4	)		14,226		13,633		399		(3	)		14,029

	$	222,221	$	1,838	$	(28	)	$	224,031	$	181,633	$	1,462	$	(241	)	$	182,854

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.

As of June 30, 2010, 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	$	10,606	$	22	$	--	$	--	$	10,606	$	22
State and political subdivisions		24,594		377		4,382		144		28,976		521

Total	$	35,200	$	399	$	4,382	$	144	$	39,582	$	543

Available-for-Sale

U.S. Government agencies	$	10,299	$	1	$	1,009	$	20	$	11,308	$	21
Mortgage-backed securities		397		2		120		1		517		3
Other securities		1		4		--		--		1		4

Total	$	10,697	$	7	$	1,129	$	21	$	11,826	$	28

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of June 30, 2010, management also had the ability and intent to hold the securities classified as available-for-sale for a period of time sufficient for a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of June 30, 2010, management believes the impairments detailed in the table above are temporary.

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $423,288,000 at June 30, 2010, and $446,189,000 at December 31, 2009.

The book value of securities sold under agreements to repurchase amounted to $67,341,000 and $80,050,000 for June 30, 2010, and December 31, 2009, respectively.

Income earned on securities for the six months ended June 30, 2010 and 2009, is as follows:

(In thousands)	2010		2009

Taxable
Held-to-maturity	$	2,412	$	828
Available-for-sale		2,426		7,148

Non-taxable
Held-to-maturity		4,159		3,683
Available-for-sale		--		14

Total	$	8,997	$	11,673

Maturities of investment securities at June 30, 2010, are as follows:

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

One year or less	$	9,336	$	9,444	$	599	$	599
After one through five years		188,738		190,486		133,598		133,735
After five through ten years		155,933		158,280		74,173		75,464
After ten years		82,011		82,393		7		7
Other securities		--		--		13,844		14,226

Total	$	436,018	$	440,603	$	222,221	$	224,031

There were no realized gains from the sale of securities for the three and six-month periods ended June 30, 2010, with gross realized gains of $144,000 recognized for the three and six-month periods ended June 30, 2009. There were no realized losses over the same periods.

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 4: LOANS AND ALLOWANCE FOR LOAN LOSSES

At June 30, 2010, the Company’s loan portfolio, excluding loans covered by FDIC loss share agreements, was $1.82 billion, compared to $1.87 billion at December 31, 2009. The various categories of loans, excluding loans covered by FDIC loss share agreements, are summarized as follows:

	June 30,		December 31,
(In thousands)	2010		2009

Consumer
Credit cards	$	180,591	$	189,154
Student loans		133,012		114,296
Other consumer		127,343		139,647
Total consumer		440,946		443,097
Real Estate
Construction		153,869		180,759
Single family residential		386,570		392,208
Other commercial		574,859		596,517
Total real estate		1,115,298		1,169,484
Commercial
Commercial		151,817		168,206
Agricultural		104,247		84,866
Financial institutions		--		3,885
Total commercial		256,064		256,957
Other		9,720		5,451

Total loans before allowance for loan losses	$	1,822,028	$	1,874,989

As of June 30, 2010, credit card loans, which are unsecured, were $180,591,000 or 9.9% of total loans, versus $189,154,000, or 10.1% of total loans at December 31, 2009. 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 June 30, 2010, and December 31, 2009, impaired loans, net of Government guarantees, totaled $55,124,000 and $46,859,000, respectively. Allocations of the allowance for loan losses relative to impaired loans were $7,014,000 at June 30, 2010, and $8,343,000 at December 31, 2009. During the second quarter of 2009, the Company made adjustments to its methodology in the evaluation of the collectability of loans, which added additional quantitative factors to the internal and external influences used in determining the credit quality of loans and the allocation of the allowance. This adjustment in methodology resulted in an addition to impaired loans from classified loans and a redistribution of allocated and unallocated reserves. Approximately $645,000 and $242,000 of interest income was recognized on average impaired loans of $57,432,000 and $27,203,000 as of June 30, 2010 and 2009, respectively. Interest recognized on impaired loans on a cash basis during the first six months of 2010 and 2009 was immaterial.

Transactions in the allowance for loan losses are as follows:

(In thousands)	2010		2009

Balance, beginning of year	$	25,016	$	25,841
Additions
Provision charged to expense		6,990		4,760
				30,601
Deductions
Losses charged to allowance, net of recoveries
of $3,172 and $2,104 for the first six months of
2010 and 2009, respectively		6,125		5,569

Balance, June 30	$	25,881		25,032

Additions
Provision charged to expense				5,556

Deductions
Losses charged to allowance, net of recoveries
of $1,583 for the last six months of 2009				5,572

Balance, end of year			$	25,016

NOTE 5: COVERED LOANS

The Company evaluated loans purchased in conjunction with the acquisitions of SWCB described in Note 2, Business Combinations, for impairment in accordance with the provisions of ASC Topic 310-30. Purchased covered loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. The following table reflects the carrying value of all purchased covered impaired loans as of June 30, 2010, for the SWCB FDIC assisted transaction:

	Loans Covered
	by FDIC Loss Share
	June 30,
(in thousands)	2010

Performing fixed rate loans	$	13,269
Criticized fixed rate loans		2,421
Sub-standard fixed rate loans		15,493
Total fixed rate loans		31,182
Performing variable rate loans		2,360
Criticized variable rate loans		148
Sub-standard variable rate loans		5,656
Total variable rate loans		8,164
Total covered loans (1)	$	39,346

(1)

These loans were not classified as non-performing assets at June 30, 2010, as the loans are accounted for on a pooled basis and the pools are considered to be performing. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans. The loans are grouped in pools sharing common risk characteristics and were treated in the aggregate when applying various valuation techniques.

The acquired loans were grouped into pools based on common risk characteristics and were recorded at their estimated fair values, which incorporated estimated credit losses at the acquisition dates. These loan pools are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to the Company’s non-covered loan portfolio, with most focus being placed on those loan pools which include the larger loan relationships and those loan pools which exhibit higher risk characteristics.

The following is a summary of the covered impaired loans acquired in the SWCB acquisition on May 14, 2010, as of the date of acquisition.

	Loans Covered
	by FDIC Loss Share
(in thousands)	May 14, 2010

Contractually required principal and interest at acquisition	$	58,739
Non-accretable difference (expected losses and foregone interest)		(15,396	)
Cash flows expected to be collected at acquisition		43,343
Accretable yield		(3,166	)
Basis in acquired loans at acquisition	$	40,177

As of the acquisition date, the preliminary estimates of contractually required payments receivable, including interest, for all covered impaired loans acquired in the SWCB transaction was $56.2 million. The cash flows expected to be collected as of the acquisition dates for these loans were $40.9 million, including interest. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments.

Changes in the carrying amount of the accretable yield for purchased impaired and non-impaired loans were not deemed material for the three months ended June 30, 2010.

There were no allowances for loan losses related to the purchased impaired loans at June 30, 2010.

NOTE 6: 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 June 30, 2010, and December 31, 2009, were as follows:

(In thousands)	June 30, 2010			December 31, 2009

Gross carrying amount	$	6,822		$	6,822
Accumulated amortization		(5,441	)		(5,053	)

Net core deposit premiums	$	1,381		$	1,769

Core deposit premium amortization expense recorded for the six months ended June 30, 2010 and 2009, was $388,000 and $403,000, respectively. The Company’s estimated amortization expense for the remainder of 2010 is $311,000, and for each of the following four years is: 2011 – $451,000; 2012 – $321,000; 2013 – $268,000; and 2014 – $30,000.

NOTE 7: TIME DEPOSITS

Time deposits include approximately $365,868,000 and $420,537,000 of certificates of deposit of $100,000 or more at June 30, 2010, and December 31, 2009, respectively.

NOTE 8: INCOME TAXES

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

	June 30,		June 30,
(In thousands)	2010		2009

Income taxes currently payable	$	3,038	$	2,955
Deferred income taxes		2,030		861

Provision for income taxes	$	5,068	$	3,816

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

	June 30,			December 31,
(In thousands)	2010			2009

Deferred tax assets
Allowance for loan losses	$	9,123		$	8,859
Valuation of foreclosed assets		103			99
Deferred compensation payable		1,735			1,603
Vacation compensation		946			898
Loan interest		203			195
Other		460			391
Total deferred tax assets		12,570			12,045

Deferred tax liabilities
Accumulated depreciation		(379	)		(451	)
Deferred loan fee income and expenses, net		(1,535	)		(1,310	)
FHLB stock dividends		(531	)		(503	)
Goodwill and core deposit premium amortization		(10,883	)		(9,805	)
Gain on acquisition		(1,191	)		--
Available-for-sale securities		(710	)		(457	)
Other		(1,762	)		(1,657	)
Total deferred tax liabilities		(16,991	)		(14,183	)

Net deferred tax liabilities included in other
liabilities on balance sheets	$	(4,421	)	$	(2,138	)

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

	June 30,			June 30,
(In thousands)	2010			2009

Computed at the statutory rate (35%)	$	6,302		$	5,096

Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit		352			120
Tax exempt interest income		(1,473	)		(1,359	)
Tax exempt earnings on BOLI		(300	)		(232	)
Other differences, net		187			191

Actual tax provision	$	5,068		$	3,816

The Company follows ASC Topic 740, Income Taxes, which 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. ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.

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 2006 tax year and forward. The Company’s various state income tax returns are generally open from the 2003 and later tax return years based on individual state statute of limitations.

NOTE 9: SHORT-TERM AND LONG-TERM DEBT

Long-term debt at June 30, 2010, and December 31, 2009, consisted of the following components:

	June 30,		December 31,
(In thousands)	2010		2009

FHLB advances, due 2010 to 2033, 2.02% to 8.41%
secured by residential real estate loans	$	107,963	$	128,893
Trust preferred securities, due 12/30/2033,
fixed at 8.25%, callable without penalty		10,310		10,310
Trust preferred securities, due 12/30/2033,
floating rate of 2.80% above the three month LIBOR
rate, reset quarterly, callable without penalty		10,310		10,310
Trust preferred securities, due 12/30/2033,
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

	$	138,893	$	159,823

At June 30, 2010, the Company had Federal Home Loan Bank (“FHLB”) advances with original maturities of one year or less of $2.0 million with a weighted average rate of 0.65% which are not included in the above table.

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 June 30, 2010, are:

		Annual
(In thousands)	Year	Maturities

	2010	$	3,038
	2011		43,927
	2012		6,858
	2013		16,825
	2014		5,159
	Thereafter		63,086

	Total	$	138,893

NOTE 10: 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 the following 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 (“South Arkansas”) and the Bank alleging wrongful conduct by the banks in the collection of certain loans. The Company was later added as a party defendant. The plaintiffs were seeking $2,000,000 in compensatory damages and $10,000,000 in punitive damages. The Company and the banks filed Motions to Dismiss. The plaintiffs were granted additional time to discover any evidence for litigation, and submitted such findings. At the hearing on the Motions for Summary Judgment, the Court dismissed the Bank due to lack of venue. Venue was changed to Jefferson County for the Company and South Arkansas. Non-binding mediation failed on June 24, 2008. A pretrial was conducted on July 24, 2008. Several dispositive motions previously filed were heard on April 9, 2009, and arguments were presented on June 22, 2009. On July 10, 2009, the Court issued its Order dismissing five claims, leaving only a single claim for further pursuit in this matter. On August 18, 2009, Plaintiffs took a nonsuit on their remaining claim of breach of good faith and fair dealing, thereby bringing all claims set forth in this action to a conclusion.

Plaintiffs subsequently filed their Notice of Appeal to the appellate court, lodged the transcript with the Arkansas Supreme Court Clerk, and filed their initial Brief. The Company and South Arkansas have timely filed their Brief in response. The Company seeks affirmance of the Court's dismissal of Plaintiffs' claims. At this time, no basis for any material liability has been identified.

NOTE 11: CAPITAL STOCK

On February 27, 2009, at a special meeting, the Company’s shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $0.01 par value. The aggregate liquidation preference of all shares of preferred stock cannot exceed $80,000,000. As of June 30, 2010, no preferred stock has been issued.

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. The Company may discontinue purchases at any time that management determines additional purchases are not warranted.

As part of its strategic focus on building capital, management suspended the Company’s stock repurchase program in July 2008. The Company has made no purchases of its common stock since that time. Under the current stock repurchase plan, the Company can repurchase an additional 645,672 shares. However, because of the recently completed stock offering and based on management’s strategy to retain capital, the Company does not anticipate resuming its stock repurchases during 2010.

On August 26, 2009, the Company filed a shelf registration statement with the SEC. The shelf registration statement, which was declared effective on September 9, 2009, allows the Company to raise capital from time to time, up to an aggregate of $175 million, through the sale of common stock, preferred stock, or a combination thereof, subject to market conditions. Specific terms and prices are determined at the time of any offering under a separate prospectus supplement that the Company is required to file with the SEC at the time of the specific offering.

In November 2009, the Company raised common equity through an underwritten public offering by issuing 2,650,000 shares of common stock at a price of $24.50 per share, less underwriting discounts and commissions. The net proceeds of the offering after deducting underwriting discounts and commissions and offering expenses were $61.3 million. In December 2009, the underwriters of the Company’s stock offering exercised and completed their option to purchase an additional 397,500 shares of common stock at $24.50 to cover over-allotments. The net proceeds of the exercise of the over-allotment option after deducting underwriting discounts and commissions were $9.2 million. The total net proceeds of the offering after deducting underwriting discounts and commissions and offering expenses were approximately $70.5 million.

NOTE 12: 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 June 30, 2010, the bank subsidiaries had approximately $16.1 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 June 30, 2010, each of the eight subsidiary banks met the capital standards for a well-capitalized institution. The Company's “total risk-based capital” ratio was 20.17% at June 30, 2010.

NOTE 13: 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 the 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 six months ended June 30, 2010:

Stock Options

Non-Vested Stock

Outstanding

Awards Outstanding

Weighted