Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS.
THE COMPANY AND THE BANKS
The Simmons First National Corporation (the "Company") is a bank holding company registered under the Bank Holding Company Act of 1956. At December 31, 1994, the Company had consolidated total assets of $713.3 million, consolidated net loans of $410.6 million and total equity capital of $83.7 million. The Company owns three subsidiary banks in Arkansas. Its lead bank, Simmons First National Bank (the "Bank"), is a national bank which has been in operation since 1903. The Bank's primary market area, with the exception of its nationally-provided credit card and mortgage banking services, is the State of Arkansas. The Company also owns two community banks, Simmons First Bank of Jonesboro ("Simmons/Jonesboro"), and Simmons First Bank of Lake Village ("Simmons/Lake Village"), both acquired in 1984. The Company's banking subsidiaries conduct their operations through 21 branches located in 10 communities in Arkansas.
Through its banking subsidiaries, the Company emphasizes retail banking services, and it considers the Bank to be a national leader in providing credit card services. The Bank has offered credit card services since 1967, and at December 31, 1994, the Bank had approximately 184,000 active Visa and MasterCard accounts in all 50 states, the District of Columbia and certain U.S. territories, with outstanding balances totalling $164.5 million, or approximately 40% of total consolidated loans. Approximately 58% of the Bank's cardholders, representing approximately 68% of the aggregate outstanding balances in the credit card portfolio, reside outside the State of Arkansas. The Bank has consistently employed stringent, subjectively-based credit standards in making credit decisions concerning card applicants, rather than using a credit scoring, or statistical profile system typically employed by other credit card issuers. Management believes this individualized approach to decision-making, emphasizing credit histories and individual borrower profiles, has been a significant positive factor in producing a high quality credit card loan portfolio. At December 31, 1994, the Bank's credit card delinquency and net loss ratios were 0.43% and 0.88%, respectively, compared to the national averages of such ratios for all Visa card issuers of 3.10% and 3.43%, respectively. The Bank's credit card delinquency and net loss ratios for 1994 are believed by management to be among the lowest such ratios for all credit card providers in the United States.
The Bank is a leading provider of guaranteed student loans in Arkansas. The Bank originated approximately $28 million in student loans to over 9,500 borrowers during 1994. On December 31, 1994, the Bank owned and serviced approximately 15,000 outstanding student loans totalling approximately $63 million, or approximately 15% of the Company's total consolidated loans.
The Company provides mortgage banking services through the Bank's production, sale and servicing of residential real estate mortgages on properties located primarily in the South, Midwest and Southwest United States. At December 31, 1994, the Bank serviced, primarily for others, approximately 28,000 mortgages with an aggregate principal balance of approximately $1.2 billion.
The Company's banks also provide commercial banking services to individuals and businesses, including a wide range of commercial and agricultural loans, deposit, checking and savings accounts, personal and corporate trust services and investment management, and securities and investment services through selected banking locations in the State of Arkansas.
Growth Strategy
The Company's growth strategy is to expand in its primary market area of the State of Arkansas, by capitalizing on its recent entry into Northwest Arkansas, one of the fastest growing areas in the state, and emphasizing commercial and agricultural lending in that area, and by expanding through further banking acquisitions where the Company believes the acquired assets can be redeployed into higher yielding credit card loans and other retail banking services.
COMPETITION
The activities engaged in by the Company and its subsidiaries are highly competitive. In all aspects of its business, the Company encounters intense competition from other banks, lending institutions, credit unions, savings and loan associations, brokerage firms, mortgage companies, industrial loan associations, finance companies, and several other financial and financial service institutions. The amount of competition among commercial banks and other financial institutions has increased significantly over the past few years since the deregulation of the banking industry. The Company's subsidiary banks actively compete with other banks and financial institutions in their efforts to obtain deposits and make loans, in the scope and type of services offered, in interest rates paid on time deposits and charged on loans and in other aspects of commercial banking.
Management believes that the single most important competitive factor in the credit card business is price, in the form of interest rates and membership fees charged to cardholders, discount fees charged to participating merchants, and the level of fees and credits shared with members of the agent bank network for their participation in the Bank's network. Maintenance of the Bank's agent bank network is a key element in maintaining the Bank's dominant position in the credit card business in Arkansas.
Management believes that the Bank's principal competitive strength in both the Arkansas and national markets for new cardholder business has been its low interest rate charged to cardholders and resulting favorable national recognition. In 1993, a large bank holding company in Arkansas, which has substantially greater financial resources than those of the Company, recommenced active marketing as a card issuer for Visa and MasterCard inside and outside Arkansas, after having discontinued such activities several years ago, and has advertised interest rates on its credit cards competitive with the rates charged by the Bank. Another large, Arkansas-based bank holding company, recently acquired by Boatman's of St. Louis, also has increased its market share as a credit card issuer. Management cannot predict the effect on its credit card business of these and other new entrants into the market, but believes the Bank's continuous participation and experience in this market since 1967 provides it with unique marketing and other strengths in competing for new cardholder business.
As more credit card issuers have entered the market for merchant customers in Arkansas during the past three years, competition has intensified for merchant customers and their related business, primarily on the basis of price and quality of service. While the Bank's merchant purchase volume has remained flat during the past three years, management believes that most established card issuers in the Arkansas market have experienced declines in their merchant purchase volume as a result of the increased competition. Management expects that the Bank's merchant purchase volume will remain flat or decline in the future as a result of continuing competitive conditions.
The Company's banking subsidiaries are also in competition with major national and international retail banking establishments, brokerage firms and other financial institutions within and outside Arkansas. Competition with these financial institutions is expected to increase, especially with the passage of legislation authorizing interstate banking.
According to information obtained from the Arkansas Association of Bank Holding Companies, during 1994 there were approximately 30 multi-bank holding companies doing business in Arkansas and approximately 102 additional single bank holding companies. As of December 31, 1994, the Company was the sixth largest multi-bank holding company doing business in Arkansas, based upon total assets and total deposits.
EMPLOYEES
As of March 15, 1995, the Company and its subsidiaries had 611 full time equivalent employees. None of the employees are represented by any union or similar groups, and the Company has not experienced any labor disputes or strikes arising from any such organized labor groups. The Company considers its relationship with its employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of all executive officers of the Company. All of said officers are elected annually by the Board of Directors.
SUPERVISION AND REGULATION
THE COMPANY
The Company, as a bank holding company, is subject to both federal and state regulation. Under federal law, a bank holding company must generally obtain approval from the Board of Governors of the Federal Reserve System ("FRB") before acquiring ownership or control of the assets or stock of a bank or a bank holding company. Prior to approval of any proposed acquisition, the FRB will review the effect on competition of the proposed acquisition, as well as other regulatory issues.
The federal law generally prohibits a bank holding company from directly or indirectly engaging in non-banking activities. This prohibition does not include loan servicing, liquidating activities or other activities so closely related to banking as to be a proper incident thereto.
As a bank holding company, the Company is required to file with the FRB an annual report and such additional information as may be required by law. From time to time, the FRB examines the financial condition of the Company and its subsidiaries. The FRB, through civil and criminal sanctions, is authorized to exercise enforcement powers over bank holding companies and non-banking subsidiaries, to limit activities that represent unsafe or unsound practices or constitute violations of law.
The Company is subject to certain laws and regulations of the State of Arkansas applicable to bank holding companies, including examination and supervision by the Arkansas Bank Commissioner. Under Arkansas law, a bank holding company is prohibited from owning more than one subsidiary bank, if any subsidiary bank owned by the holding company has been chartered for less than 10 years and, further, requires the approval of the Arkansas Bank Commissioner for any acquisition of more than 10% of the capital stock of any other bank located in Arkansas. No bank acquisition may be approved if, after such acquisition, the holding company would control, directly or indirectly, banks having 25% of the total bank deposits in the State of Arkansas, excluding deposits of other banks and public funds.
Bank holding companies located in Arkansas are authorized to acquire banks and bank holding companies located in any of 17 states generally located in the Southern and Midwestern United States. Further, bank holding companies located in any of those states may acquire banks and bank holding companies located in Arkansas, if such state permits bank holding companies located in Arkansas to acquire banks and bank holding companies located in that state on a non-discriminatory basis. In 1994, legislation was enacted, effective September 29, 1995, which will allow bank holding companies from any state to acquire banks located in any state without regard to state law, provided that the bank holding company (1) is adeuately capitalized, (2) is adequately managed, (3) would not control more than 10% of the insured deposits in the United States or more than 30% of the insured deposits in such state, and (4) such bank has been in existence at least five years if so required by the applicable state law.
SUBSIDIARY BANKS
Simmons First National Bank, a national banking association, is subject to regulation and supervision, of which regular bank examinations are a part, by the Office of the Comptroller of the Currency of the United States ("OCC"). Simmons/Jonesboro and Simmons/Lake Village, as state chartered banks, are subject to the supervision and regulation, of which regular bank examinations are a part, by the Federal Deposit Insurance Corporation ("FDIC") and the Arkansas State Bank Department. The lending powers of each of the subsidiary banks are generally subject to certain restrictions, including the amount which may be lent to a single borrower.
The subsidiary banks, with numerous exceptions, are subject to the application of the laws of the State of Arkansas, including the limitation of the maximum permissible interest rate on loans. This limitation for general loans is 5% over the Federal Reserve Discount Rate, with an additional maximum limitation of 17% per annum for consumer loans and credit sales. Certain loans secured by first liens on residential real estate and certain loans controlled by federal law (e.g., guaranteed student loans, SBA loans, etc.) are exempt from this limitation; however, a very substantial portion of the loans made by the subsidiary banks, including all credit card loans, are subject to this limitation.
All of the Company's subsidiary banks are members of the FDIC, which currently insures the deposits of each member bank to a maximum of $100,000 per deposit relationship. For this protection, each bank pays a statutory assessment to the FDIC each year.
Federal law substantially restricts transactions between banks and their affiliates. As a result, the Company's subsidiary banks are limited in making extensions of credit to the Company, investing in the stock or other securities of the Company and engaging in other financial transactions with the Company. Those transactions which are permitted must generally be undertaken on terms at least as favorable to the bank, as those prevailing in comparable transactions with independent third parties.
POTENTIAL ENFORCEMENT ACTION FOR BANK HOLDING COMPANIES AND BANKS
Enforcement proceedings seeking civil or criminal sanctions may be instituted against any bank, any director, officer, employee or agent of the bank, that is believed by the federal banking agencies to be violating any administrative pronouncement or engaged in unsafe and unsound practices. In addition, the FDIC may terminate the insurance of accounts, upon determination that the insured institution has engaged in certain wrongful conduct, or is in an unsound condition to continue operations. Recent legislation has significantly expanded the enforcement powers of the federal banking agencies and increased the penalties for violations of the law and regulations.
RISK-WEIGHTED CAPITAL REQUIREMENTS FOR THE COMPANY AND THE BANKS
After December 31, 1992, banking organizations (including bank holding companies and banks) were required to meet a minimum ratio of Total Capital to Total Risk-Weighted Assets of 8%, of which at least 4% must be in the form of Tier 1 Capital. A well capitalized institution is one that has at least a 10% "total risk based capital" ratio. For a tabular summary of the Company and the subsidiary banks' risk-weighted capital ratios, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital."
A banking organization's qualifying total capital consists of two components: Tier 1 Capital (core capital) and Tier 2 Capital (supplementary capital). Tier 1 Capital is an amount equal to the sum of common shareholders' equity, certain preferred stock and the minority interest in the equity accounts of consolidated subsidiaries. For bank holding companies, goodwill may not be included in Tier 1 Capital after December 31, 1992. Identifiable intangible assets may be included in Tier 1 Capital for banks and bank holding companies, in accordance with certain further requirements. At least 50% of the banking organization's total regulatory capital must consist of Tier 1 Capital.
Tier 2 Capital is an amount equal to the sum of the qualifying portion of the allowance for loan losses, certain preferred stock not included in Tier 1, hybrid capital instruments (instruments with characteristics of debt and equity), certain long term debt securities and eligible term subordinated debt, in an amount up to 50% of Tier 1 Capital. The eligibility of these items for inclusion as Tier 2 Capital is subject to certain additional requirements and limitations of the federal banking agencies.
Under the risk-based capital guidelines, balance sheet assets and certain off-balance sheet items, such as standby letters of credit, are assigned to one of four risk weight categories (0%, 20%, 50%, or 100%), according to the nature of the asset, its collateral or the identity of the obligor or guarantor. The aggregate amount in each risk category is adjusted by the risk weight assigned to that category, to determine weighted values, which are then added to determine the total risk-weighted assets for the banking organization. For example, an asset, such as a commercial loan, assigned to a 100% risk category, is included in risk-weighted assets at its nominal face value, but a loan secured by a one-to-four family residence is included at only 50% of its nominal face value. The applicable ratios reflect capital, as so determined, divided by risk-weighted assets, as so determined.
RECENT LEGISLATION FOR BANK HOLDING COMPANIES AND BANKS
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), enacted in 1991, requires the FDIC to increase assessment rates for insured banks and authorizes one or more "special assessments", as necessary for the repayment of funds borrowed by the FDIC or any other necessary purpose. As directed in FDICIA, the FDIC has adopted a transitional risk-based assessment system, under which the assessment rate for insured banks will vary, according to the level of risk incurred in the bank's activities. The risk category and risk-based assessment for a bank is determined from its classification, pursuant to the regulation, as well capitalized, adequately capitalized or undercapitalized.
FDICIA substantially revised the bank regulatory provisions of the Federal Deposit Insurance Act and other federal banking statutes, requiring federal banking agencies to establish capital measures and classifications. Pursuant to the regulations issued under FDICIA, a depository institution will be deemed to be well capitalized if it significantly exceeds the minimum level required for each relevant capital measure; adequately capitalized if it meets each such measure; undercapitalized if it fails to meet any such measure; significantly undercapitalized if it is significantly below any such measure; and critically undercapitalized if it fails to meet any critical capital level set forth in regulations. The federal banking agencies must promptly mandate corrective actions by banks that fail to meet the capital and related requirements, in order to minimize losses to the FDIC. The Company was advised by the FDIC and OCC that the subsidiary banks had been classified as well capitalized under these regulations.
The federal banking agencies are required by FDICIA to prescribe standards for banks and bank holding companies, relating to operations and management, asset quality, earnings, and stock valuation and compensation. A bank or bank holding company that fails to comply with such standards will be required to submit a plan designed to achieve compliance. If no plan is submitted or the plan is not implemented, the bank or holding company would become subject to additional regulatory action or enforcement proceedings.
A variety of other provisions included in FDICIA may affect the operations of the Company and the subsidiary banks, including new reporting requirements, revised regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch.
ITEM 2.



ITEM 2. PROPERTIES.
The principal properties of the Company and the Bank consist of an eleven-story office building, located in the central business district of the City of Pine Bluff, Arkansas. Originally constructed in 1929, the entire building has since been completely renovated and modernized. The building is comprised of approximately 107,000 square feet of floor space, approximately 7,474 square feet of which is leased to a tenant as office space. The office building is situated on approximately one-fourth of a city block, the remainder of which, together with approximately one additional city block of adjacent property, is presently being used as a parking complex for customers of the Company and its subsidiaries, tenants of the Company and its subsidiaries and their customers, and the public. Additional office space was made available in 1980, with the renovation of a storage facility to provide a 9,601 square foot office complex, now housing the Company and its subsidiary real estate and investment departments. In 1992, additional office space was made available for the Bank's activities, when the Bank purchased a three- story concrete office building, containing approximately 38,000 square feet of space, across the street from its main bank building in Pine Bluff, Arkansas. The Bank leased a portion of the building prior to purchasing the building. In 1993, an additional 6,000 square feet were made available when the Company leased a three-story brick building adjoining the one purchased in 1992. This building was later purchased also. This added another 5,000 square feet of storage in addition to the office space for a total of approximately 11,000 square feet. This facility houses the Company's student loan operation. In late 1994, the Company completed renovation of the building purchased in 1992 and occupancy of the space commenced at that time. The Company and the Bank also operate eight drive-in banking facilities, located throughout the city of Pine Bluff, Arkansas, and banking facilities at Watson Chapel, White Hall and Sherrill, Arkansas, as well as the newly acquired offices at Fort Smith, Rogers, Springdale, and Bella Vista, Arkansas. The largest banking facility comprises approximately 4,200 square feet of floor space, and the smallest comprises approximately 300 square feet.
The principal property of Simmons/Lake Village consists of a one- story building located in the central business area of the City of Lake Village, comprising approximately 6,000 square feet of floor space.
The principal property of Simmons/Jonesboro consists of a three- story building, located in the central business district of the City of Jonesboro, Arkansas, comprising approximately 47,108 square feet of floor space, 14,252 feet of which is available for lease. In addition, Simmons/ Jonesboro operates two drive-in banking facilities located in that city.
All of the above properties are owned in fee simple and unencumbered, except (a) approximately one-fourth city block in Pine Bluff, which is leased from various persons for terms expiring in 2007 with options to extend for an additional 50 years, which leased parcels comprise a portion of the parking complex and lie partially under a small portion of a one-floor extension of the office building, (b) the lands upon which four of the drive- in banking facilities in Pine Bluff are situated, two of which parcels are leased for a term expiring in 1995, one in 1997, another in 2010, and the other of which parcels is leased for a term expiring in 2035, and (c) the building and land described in a preceding paragraph for the banking facility in Jonesboro, which has a first mortgage lien to an insurance company with monthly payments of $12,243 including interest at 9.75%. The newest Pine Bluff Office and the Rogers, Springdale, and Fort Smith Stonewood facilities were purchased during 1991. Lease agreements were signed during 1991 for the Bella Vista office, as well as the other two Fort Smith facilities. Terms of the Bella Vista and Fort Smith South lease expire in 1995 and 1997, respectively, and the Fort Smith Central Mall lease expires in 1995. The offices of the mortgage marketing and dealer bank divisions, located in Little Rock, Arkansas, comprise approximately 20,000 square feet of all floors of the three-story leased building, with approximately 36,000 total square feet available for lease. The lease expires in 1996.
The Company and its subsidiaries also own or lease various small parcels of land, on some of which are located improvements, the aggregate of which would comprise an insignificant portion of the properties of registrant and its subsidiaries.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company and/or its subsidiary banks have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security-holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5.

ITEM 5. PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION
The Common Stock is traded and quoted on the over-the-counter NASDAQ National Market System under the symbol "SFNCA." Prior to October 26, 1992, the Common Stock was traded on the NASDAQ over-the-counter market. The following table sets forth, for all the periods indicated, cash dividends paid, and the high and low bid prices for the Common Stock as reported by NASDAQ. Prior to 1993, historically, the Common Stock had not been actively traded. All price quotations and dividend information have been restated to reflect the 100% stock dividend on the Common Stock effected June 5, 1992.
At December 31, 1994, the Common Stock was held of record by approximately 1,218 stockholders. On March 16, 1995, the last sale price for the Common Stock as reported by NASDAQ was $24.25 per share.
The Company's policy is to declare regular quarterly dividends based upon the Company's earnings, financial position, capital requirements and such other factors deemed relevant by the Board of Directors. This dividend policy is subject to change, however, and the payment of dividends by the Company is necessarily dependent upon the availability of earnings and the Company's financial condition in the future. The payment of dividends on the Common Stock is also subject to regulatory capital requirements.
The Company's principal source of funds for dividend payments to its stockholders is dividends received from its subsidiary banks. Under applicable banking laws, the declaration of dividends by the Bank in any year, in excess of the sum of net income for that year and retained earnings for the preceding two years, must be approved by the Office of the Comptroller of the Currency. Further, as to Simmons/Jonesboro and Simmons/Lake Village, Arkansas bank regulators have specified that the maximum dividends state banks may pay to the parent company without prior approval is 50% of the current year earnings. At December 31, 1994, approximately $13.0 million was available for the payment of dividends by the subsidiary banks without regulatory approval. For further discussion of restrictions on the payment of dividends, see "Management's Discussion and Analysis of Financial Condition-Liquidity and Interest Rate Sensitivity," and Note 21 of Notes to Consolidated Financial Statements.
ITEM 6:

ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data concerning the Company and is qualified in its entirety by the detailed information and consolidated financial statements, including notes thereto, included elsewhere in this annual report. The income statement, balance sheet and per common share data as of and for the years ended December 31, 1994, 1993, 1992, 1991, and 1990 were derived from consolidated financial statements of the Company, which were audited by Baird, Kurtz & Dobson. The selected consolidated financial data set forth below should be read in conjunction with the financial statements of the Company and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this annual report.
ITEM 7:

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a multi-bank holding company, comprised of three commercial bank subsidiaries, with $713.3 million in assets, as of December 31, 1994.
The Company achieved record earnings performance in 1994. For the year ended December 31, 1994, net income totaled $9.9 million, a $.5 million, or 4.9%, increase over 1993 net income of $9.4 million. Return on average assets was 1.39% in 1994, compared to 1.33% in 1993, and 1.09% in 1992. Return on average equity was 12.28% in 1994, compared to 14.31% in 1993, and 15.43% in 1992. On a per share basis, net income for 1994 was $2.68, compared to $2.78 in 1993 and $2.60 in 1992. Dividends for 1994 were $.47, compared to dividends of $.40 in 1993 and 1992.
Stockholders' equity at December 31, 1994, was $83.7 million, an increase of 11.1% over the 1993 amount. The Company issued 805,000 shares of common stock during the second quarter of 1993. Earnings per common share presented in the financial statements have been computed to reflect the effects of the additional shares of stock.
ACQUISITIONS
On November 15, 1994, the Company entered into a definitive agreement with Dumas Bancshares, Inc. of Dumas Arkansas, under the terms of which Dumas Bancshares, Inc., will be merged into the Company during the first half of 1995.
INCOME STATEMENT REVIEW FOR THE YEARS 1994, 1993 AND 1992
In 1994, the Company reported record net earnings of $9.9 million, and earnings per share of $2.68. This compares to then-record net earnings of $9.4 million, and record earnings per share of $2.78, reported in 1993. The earnings increase in 1994 was the result of an increase in net interest margin, a $9.9 million increase in average earning assets, a decrease in non-interest expense and a reduction in the provision for loan losses.
Net Interest Income
Net interest income, the Company's principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors that determine the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned and rates paid, the level of non-performing loans, and the amount of non-interest- bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax exempt income by one minus the federal income tax rate (34% for 1994, 1993 and 1992).
For the year ended December 31, 1994, net interest income on a fully taxable equivalent basis was $30.6 million, an increase of approximately $.7 million, or 2.5%, from 1993 net interest income. The increase in net interest income resulted primarily from a $9.9 million increase in average earning assets, coupled with an increase in net interest margin. For the year ended December 31, 1993, net interest income on a fully taxable equivalent basis increased approximately $2.2 million, or 7.8%, from comparable figures in 1992. This increase in net interest income resulted primarily from a more precipitous drop in rates on interest-bearing liabilities than the related decline in yield on earning assets. The tables below reflect an analysis of net interest income on a fully taxable equivalent basis for the years ended December 31, 1994, 1993 and 1992, respectively, as well as changes in fully taxable equivalent net interest income for the years 1994 vs. 1993 and 1993 vs. 1992.
The following table shows, for each major category of earning assets and interest bearing liabilities, the average amount outstanding, the interest earned or expensed on such amount, and the average rate earned or expensed for each of the years in the three-year period ending December 31, 1994. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Nonaccrual loans were included in average loans for the purpose of calculating the rate earned on total loans. Under Financial Accounting Standard Board Statement No. 91 (FAS 91), loan fees and related costs are deferred and amortized as part of interest income.
The following table shows changes in interest income and interest expense, resulting from changes in volume and changes in interest rates for each of the years ended December 31, 1994 and 1993, as compared to prior years. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the change in rate and volume.
Provision for Loan Losses
The provision for loan losses represents management's determination of the amount necessary to be charged against the current period's earnings, in order to maintain the Allowance for Loan Losses at a level which is considered adequate, in relation to the estimated risk inherent in the loan portfolio. The provision for 1994 was $2.1 million, a decrease of $1.0 million, or 31.8%, when compared to the provision in 1993, reflecting a continuing improvement in asset quality. The provision for 1993 was $3.0 million, a decrease of $.7 million, or 19.7%, from 1992. The decreases in the provision for 1994 and 1993 relate primarily to the increase in coverage ratio (90 day past-due and nonaccrual loans) for nonperforming loans to 248.73% at December 31, 1994, compared to 177.92% at December 31, 1993. Nonperforming loans were reduced to a level of $3.1 million at December 31, 1994, compared to $4.2 million at December 31, 1993.
Non-Interest Income
Total non-interest income was $24.8 million in 1994, compared to $26.1 million in 1993 and $25.6 million in 1992. Non-interest income is principally derived from three sources: fee income, which includes service charges on deposit accounts, trust fees, credit card fees, and loan servicing fees; income on the sale of mortgage loans and dealer bank profits; and any gain or loss on sold or called securities.
The table below shows non-interest income for the years ended December 31, 1994, 1993 and 1992, respectively, as well as changes in 1994 from 1993 and in 1993 from 1992.
Fee income for 1994 was $22.3 million, a decrease of $.8 million, or 3.6%, when compared with 1993 figures. Fee income for 1993 was $23.2 million, up $1.0 million, or 4.5%, when compared with 1992 figures. The decrease for 1994 is primarily due to a slight decrease in the volume of credit card fees, as a result of the national competition. In 1994, credit card fees decreased $.2 million from the 1993 level of $10.9 million. In 1993, credit card fees increased $1.3 million from 1992, due to increased volume that resulted primarily from the Company's capitalizing on national media coverage of the Bank's having one of the lowest credit card rates in the United States. Loan service fees decreased $.5 million in 1994 and $.6 million in 1993, primarily due to a lower volume of refinanced mortgage loans and an increase in mortgage servicing amortization expense.
On the consolidated statements of income, income from the sale of mortgage loans and dealer bank profits is presented net of commissions. The income recorded in these accounts results from the Company's dealer bank operation, as well as fee income associated with the purchase of single family residential loans, the securitization of those loans, and subsequent sale and delivery of those securities against prior commitments. For 1994, income from these areas totaled $.5 million, compared to $2.4 million in 1993 and $2.7 million in 1992. This reduction in 1994, as compared to 1993, is primarily attributable to a mortgage marketing loss of $1.0 million and reduced profits in the dealer bank operation. The resulting reduced level of operating income for these two operations for 1994 can be directly attributed to the negative impact of rising interest rates on the nation's mortgage and securities markets. The overall reduction in mortgage income for 1994 was partially offset by a third quarter sale of a portion of the Bank's servicing rights, which resulted in other income of $.7 million.
Non-Interest Expense
Non-interest expense consists of salaries and employee benefits, occupancy, equipment and other expenses necessary for the operation of the Company. Management remains committed to controlling the level of non- interest expense, through the continued use of expense control measures that have been installed over the past six years. The Company utilizes an extensive profit planning and reporting system that involves all affiliates and their respective functional responsibility centers. Affiliate banks and associated responsibility centers develop detailed monthly and annual profit plans, including manpower and capital expenditure budgets, based on a needs assessment of the business plan for the upcoming year. These profit plans are subject to extensive initial reviews and then are monitored by the Company and bank management on a monthly basis. Variances from the plan are reviewed in detail monthly and, when required, management takes corrective action intended to ensure that financial goals are met. Company management also regularly monitors staffing levels at each affiliate, to ensure that productivity and overhead are in line with existing workload requirements.
Non-interest expense for 1994 was $38.4 million, a decrease of $.3 million, or 0.8%, from 1993. Non-interest expense for 1993 was $38.7 million, an increase of $.7 million, or 1.9%, from 1992. The slight decrease in 1994, compared to 1993, reflects the effects of continued emphasis on expense control measures.
The table below shows non-interest expense for the years ended December 31, 1994, 1993 and 1992, respectively, as well as changes from 1994 to 1993 and 1993 to 1992, respectively.
The following table reflects the remaining maturities of loans at December 31, 1994.
The following table reflects maturities for the above loans, segregated by interest rate type.
Asset Quality
Nonperforming loans are comprised of (a) nonaccrual loans, (b) loans which are contractually past due 90 days and (c) other loans for which terms have been restructured, to provide a reduction or deferral of interest or principal, because of a deterioration in the financial position of the borrower. The subsidiary banks recognize income principally on the accrual basis of accounting. When loans are classified as nonaccrual, the accrued interest is charged off, and no further interest is accrued. Loans, excluding credit card loans, are placed on a nonaccrual basis either: (1) when there are serious doubts regarding the collectibility of principal or interest, or (2) when payment of interest or principal is 90 days or more past due and either (i) not fully secured or (ii) not in the process of collection. If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the Allowance for Loan Losses. Credit card loans are classified as sub-standard when payment of interest or principal is 90 days past due. Litigation accounts are placed on nonaccrual until such time as deemed uncollectible. Credit card loans are charged off when payment of interest or principal exceeds 180 days past due, but are turned over to the credit card recovery department, to be pursued until such time as they are determined, on a case-by-case basis, to be uncollectible.
The following tables present information concerning nonperforming assets, including nonaccrual and restructured loans and other real estate owned.
Approximately $269,000 and $347,000 of interest income would have been recorded for the periods ended December 31, 1994 and 1993, respectively, if the nonaccrual loans had been accruing interest in accordance with their original terms. There was no interest income on the nonaccrual loans recorded for the period ended December 31, 1994.
Allowance for Loan Losses
An analysis of the Allowance for Loan Losses for the last five fiscal years is shown in the table below:
The amounts of additions to the allowance during the year 1994 were based on management's judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic conditions, past due loans, loans which could be future problems and net losses from loan charge-offs for the past five years. It is management's practice to review the allowance on a monthly basis, to determine whether additional provisions should be made to the allowance after considering the factors noted above.
The Bank's senior loan committee, comprised of outside directors, has oversight responsibility for approving commercial and individual loans in excess of $100,000 unsecured, and $200,000 secured, and monitoring loan delinquencies, the status of non-performing assets and the evaluation of allowance for loan losses. In addition, the committee ratifies and/or approves loans made by other banking subsidiaries in excess of 13.5% of any such bank's equity capital. The Bank's agricultural committee, composed of outside directors whose occupations are closely tied to the farming industry, have oversight responsibility for the agricultural loan portfolio. The responsibilities and approval authorities of this committee are the same as the senior loan committee, as they pertain to agricultural loans.
The Company's special services group is responsible for serving all subsidiaries of the Company in the audit, loan review, and compliance areas. In the area of loan review, periodic audits of each subsidiary are scheduled for the purpose of evaluating asset quality, adequacy of loan losses, and effectiveness of loan administration. The special services group prepares loan review reports, which identify deficiencies, establish recommendations for improvement, and outline management's proposed action plan for curing the deficiencies. This report is provided to a corporate audit committee, which includes outside members of the Company's Board of Directors and selected senior affiliate directors. The audit committee monitors the reported items until the exceptions are cleared.
Based on the above-noted procedures, management is of the opinion that the allowance at December 31, 1994, of $7.8 million is adequate. While management believes the current allowance is adequate, changing economic conditions and other conditions may require future additions to the allowance. Moreover, the allowance is subject to regulatory examination and determination as to adequacy. Although not presently anticipated, adjustments to the allowance may result from regulatory examinations.
The Company allocates the Allowance for Loan Losses according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the categories of loans set forth in the tables below.
Investments and Securities
The Company's securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities are classified as either trading, available-for-sale, or held-to-maturity.
Trading securities, which include any security held primarily for near-term sale, are carried at fair value. Gains and losses on trading securities, both realized and unrealized, are included in other income.
Available-for-sale securities, which include any security for which the subsidiary banks have no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the specific security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders' equity. Premiums and discounts are amortized and accreted, respectively, to interest income, using the constant-yield method over the period to maturity.
Held-to-maturity securities, which include any security for which the subsidiary banks have the positive intent and ability to hold until maturity, are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income, using the constant-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are included in income when earned.
Held-to-maturity and available-for-sale investment securities were $142.4 million and $29.6 million, respectively, at December 31, 1994, compared to the combined amount of $198.6 million at December 31, 1993. The Company's philosophy regarding investments is conservative, based on investment type and maturity. Investments in the held-to-maturity portfolio include U.S. Treasury securities, U.S. government agencies, mortgage-backed securities, and municipal securities. As of December 31, 1994, $87.9 million, or 61.8%, of the held-to-maturity securities were invested in U.S. Treasury securities and obligations of U.S. government agencies, of which $21.9 million, or 15.4%, was invested in securities with maturities of one year or less, and $61.8 million, or 43.4%, was invested in securities with maturities of one to five years. In the available-for-sale securities, $26.6 million, or 89.8% of the securities were in U.S. Treasuries and obligations of U.S. government agencies, all of which will mature in less than five years. In order to reduce the Company's income tax burden, an additional $50.9 million, or 35.8%, of the held-to-maturity securities portfolio, was invested in tax-exempt obligations of state and political subdivisions. There are no tax-exempt securities in the available-for-sale portfolio. There are no securities of any one issuer exceeding ten percent of the Company's stockholders' equity at December 31, 1994. The Company has approximately $3.5 million, or 2.5%, in GNMA and other mortgaged-backed securities in its held-to-maturity portfolio. It is the Company's general policy not to invest in derivative type investments, except for collateralized mortgage-backed securities for which collection of principal and interest is not subordinated to significant superior rights held by others.
As of December 31, 1994, the held-to-maturity investment portfolio has gross unrealized gains of $1.0 million and gross unrealized losses of $4.0 million. Net realized gains from called securities for 1994 were $130,000, down from net realized gains of $140,000 in 1993, and up from net realized gains of $59,000 in 1992.
The table below presents the carrying value and the fair value of investment securities for each of the years indicated.
The following table reflects the amortized cost and estimated market value of debt securities at December 31, 1994, by contractual maturity, the weighted average yields (for tax-exempt obligations on a fully taxable basis, assuming a 34% tax rate) of such securities and the taxable equilvalent adjustment used in calculating the yields. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
As of January 1, 1994, the Company adopted Financial Accounting Standard Board Statement (FAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires the classification of securities into one of three categories: Trading, Available-for-Sale or Held-to-Maturity.
Trading account securities are used to provide inventory for resale. These securities will be carried at market value and will be included in short-term investments. Gains and losses, both realized and unrealized, are reflected in earnings.
Debt securities are classified as Held-to-Maturity when the Company has the positive intent and ability to hold the securities to maturity. Held- to-Maturity securities will be stated at amortized cost.
Securities not classified as Trading or Held-to-Maturity will be classified as Available-for-Sale. Available-for-Sale securities will be stated at fair value, with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity. The Company may sell these securities prior to maturity in response to liquidity demands. They also may be used as a means of adjusting the interest rate sensitivity of the Company's balance sheet, through sale and reinvestment. As of December 31, 1994, the adoption of FAS No. 115 resulted in a net increase in stockholders' equity of approximately $233,000. This increase in stockholders' equity will adjust in future periods, as changes in market conditions occur.
Trading Portfolio
The Company's trading account is established and maintained for the benefit of the dealer bank division. All activities in the account are performed by dealer bank personnel solely for operations in that division. The trading account is typically used to provide inventory for resale and is not used to take advantage of short-term price movements.
Deposits and Short-Term Borrowings
Total average deposits for 1994 were $580.0 million, compared to $585.6 million in 1993. The year-end balances of time deposits over $100,000 were $55.2 million in 1994, compared to $61.4 million in 1993.
The following table reflects the classification of the average deposits and the average rate paid on each deposit category which are in excess of 10 percent of average total deposits for the three years ended December 31, 1994.
The following table sets forth by time remaining to maturity, deposits (exclusive of regular savings) in amounts of $100,000 or more at December 31, 1994 and 1993, respectively.
Federal funds purchased and securities sold under agreements to repurchase were $23.9 million at December 31, 1994, as compared to $26.3 million at December 31, 1993. Other short-term borrowings, consisting of U.S. Treasury Note borrowings, decreased at December 31, 1994, to $1.6 million, as compared to $5.0 million at December 31, 1993.
The Company has historically funded its growth in earning assets through the use of core deposits, large certificates of deposits from local markets, and federal funds purchased. On May 12, 1993, the Company issued and sold 700,000 shares of Class A Common Stock. And on June 10, 1993, the Company issued and sold an additional 105,000 shares. The net proceeds to the Company stockholders' equity after expenses was $16.1 million. Management anticipates that these sources will provide necessary funding in the foreseeable future. It is the Company's general policy to avoid the use of brokered deposits.
Long Term Debt
The Companys' long-term debt was $12.1 million and $12.2 million at December 31, 1994 and 1993, respectively. The Company's Capital Notes, due June 30, 1997, of which $11.0 million were outstanding at December 31, 1994 and 1993, respectively, are the major component of the Company's long- term debt. Interest on the Capital Notes is payable quarterly, and the interest rate is adjusted quarterly to the then prime rate offered by Chase Manhattan in New York. At December 31, 1994, the Chase Manhattan Bank, N.A., prime rate was 7.75%.
Capital
Appropriate capital management is essential to finance future growth and maintain the confidence of deposit customers, investors, and banking regulatory agencies. The Federal Reserve Board has approved new risk-based guidelines which establish a risk-adjusted ratio, relating capital to different categories of assets and off-balance sheet exposures, such as loan commitments and standby letters of credit. With respect to capital, the guidelines place a strong emphasis on tangible common stockholders' equity as the core element of the capital base, with appropriate recognition of other components of capital. The guidelines set a minimum risk-adjusted ratio for total capital of 8.0% by the end of 1992. At December 31, 1994, the Tier 1 Capital ratio was 19.25%, while the Company's risk-adjusted ratio for total capital, as of December 31, 1994, was 21.56%, both of which exceed the capital minimums established in the new risk-based capital requirements.
The Company's risk-based capital ratios at December 31, 1994 and 1993 are presented below, followed by the capital ratios of each of the three bank subsidiaries, as of December 31, 1994.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Parent Company
The Company has leveraged its investment in subsidiary banks and depends upon the dividends paid to it, as the sole shareholder of the subsidiary banks, as a principal source of funds for debt service require- ments. At December 31, 1994, retained earnings of the Company's subsidiaries were approximately $62.7 million, of which approximately $13.0 million was available for the payment of dividends to the Company without regulatory approval. In addition to dividends, other sources of liquidity for the Company are the sale of equity securities and the borrowing of funds.
Banking Subsidiaries
Generally speaking, the Company's banking subsidiaries rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash used in their investing activities. As is typical of most banking companies, significant financing activities include: deposit gathering; use of short-term borrowing facilities, such as federal funds purchased and repurchase agreements; and the issuance of long-term debt. The banks' primary investing activities include loan originations and purchases of investment securities, offset by loan payoffs and investment maturities.
Liquidity represents an institution's ability to provide funds to satisfy demands from depositors and borrowers, by either converting assets into cash or accessing new or existing sources of incremental funds. It is a major responsibility of management to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to constantly measure liquid assets, as well as relevant ratios concerning earning asset levels and purchased funds. Each bank subsidiary is also required to monitor these same indicators and report regularly to its own senior management and board of directors. At year end, each bank was within established guidelines, and total corporate liquidity was strong. At December 31, 1994, cash and cash equivalents, trading and available-for-sale securities, and mortgage loans held for sale were 16.13% of total assets, as compared to 13.62% at December 31, 1993.
Interest Rate Sensitivity
Management continuously reviews the Company's exposure to changes in interest rates. Among the factors considered during its evaluations are changes in the mix of earning assets, growth of earning assets, interest rate spreads and repricing periods. Management forecasts and models the impact various interest rate fluctuations would have on net interest income. One such model measures the interest rate sensitivity gap, which presents, at a particular point in time, the matching of interest rate sensitive assets with interest rate sensitive liabilities.
As shown in the schedule below, the cumulative rate sensitive assets to rate sensitive liabilities at six months and one year, respectively, was 97.78% and 111.60%. A financial institution is considered to be liability sensitive, or as having a negative GAP, when the amount of its interest- bearing liabilities maturing or repricing within a given time period exceeds the amount of its interest-earning assets also maturing or repricing within that time period. Conversely, an institution is considered to be asset sensitive, or as having a positive GAP, when the amount of its interest- bearing liabilities maturing and repricing is less than the amount of its interest-earning assets also maturing or repricing during the same period. Generally, in a falling interest rate environment, a negative GAP should result in an increase in net interest income, and in a rising interest rate environment this negative GAP should adversely affect net interest income. The converse would be true for a positive GAP: the long-term effect of rising interest rates would tend to increase net interest income because of the positive GAP ratio. However, the negative GAP for the short-term would cause a decrease in net interest income, as a result of rising rates for approximately six months. Since conditions change on a daily basis, these theoretical conclusions may not be indicative of actual future results.
QUARTERLY RESULTS
Selected unaudited quarterly financial information for the latest eight quarters is shown in the table below.
ITEM 8.


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX Page ----
Independent Accountants' Report. . . . . . . . . . . . . . . . . . . . . 33 Consolidated Balance Sheets December 31, 1994 and 1993 . . . . . . . . . 34 Consolidated Statements of Income Years Ended December 31, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . 35 Consolidated Statements of Cash Flows Years Ended December 31, 1994, 1993, and 1992 . . . . . . . . . . . . . . . . . . . 36 Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 1994, 1993, and 1992. . . . . . . . . . 37 Notes to Consolidated Financial Statements December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Note: Supplementary Data may be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Quarterly Results" on page 11 hereof.
INDEPENDENT ACCOUNTANTS' REPORT -------------------------------
Board of Directors Simmons First National Corporation Pine Bluff, Arkansas
We have audited the accompanying consolidated balance sheets of SIMMONS FIRST NATIONAL CORPORATION as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SIMMONS FIRST NATIONAL CORPORATION as of December 31, 1994 and 1993, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 18 to the financial statements, the Company changed its method of accounting for investment securities in 1994.
/s/ Baird. Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Pine Bluff, Arkansas January 27, 1995
See Notes to Consolidated Financial Statments
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Simmons First National Corporation provides a full range of banking and mortgage services to individual and corporate customers through its subsidiaries and branch banks in Arkansas. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in accordance with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, as of the date of the balance sheet, and revenues and expenses for the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the Allowance for Loan Losses and the valuation of foreclosed assets. In connection with the determination of the Allowance for Loan Losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.
Management believes that the Allowance for Loan Losses and the valuation of foreclosed assets are adequate. While management uses available information to recognize losses on loans and the valuation of foreclosed assets, future losses may be accruable, based on changes in economic conditions, particularly in Arkansas. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Banks' Allowance for Loan Losses and valuation of foreclosed assets. Such agencies may require the Bank to recognize additional losses, based on their judgment of information available to them at the time of their examination.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Simmons First National Corporation and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Various items within the accompanying financial statements for previous years have been reclassified, to provide more comparative information. These reclassifications had no effect on net earnings.
CASH EQUIVALENTS
The Company considers all amounts due from banks and federal funds sold as cash equivalents. The banking subsidiaries are required to maintain average reserve balances with the Federal Reserve Bank, based on a percentage of deposits. The average amounts of those reserve balances for the years ended December 31, 1994 and 1993, were $4,402,000 and $6,312,000, respective- ly. The Federal Reserve requirement on transaction account reserves was ten percent during 1994. Generally, federal funds are purchased and sold for varying periods up to thirty days. These securities are purchased from other financial institutions and are held in the name of Simmons First National Bank at the Federal Reserve Bank until maturity of the agreement.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Trading securities, which include any security held primarily for near-term sale, are carried at fair value. Gains and losses on trading securities, both realized and unrealized, are included in other income.
Available-for-sale securities, which include any security for which the banking subsidiaries have no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders' equity. Premiums and discounts are amortized and accreted, respectively, to interest income using the level- yield method over the period to maturity.
Held-to-maturity securities, which include any security for which the banking subsidiaries have the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the level-yield method over the period to maturity.
Interest and dividends on investments in debt and equity securities are included in income when earned.
MORTGAGE LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an individual loan basis. Write-downs to fair value are recognized as a charge to earnings at the time the decline in value occurs. Forward commitments to sell mortgage loans are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid and considering a normal servicing rate. Fees received from borrowers to guarantee the funding of mortgage loans held for sale and fees paid to investors to ensure the ultimate sale of such mortgage loans are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used.
ALLOWANCE FOR LOAN LOSSES
The Allowance for Loan Losses is increased by provisions charged to expense and reduced by loans charged off, net of recoveries. The allowance is maintained at a level considered adequate to provide for potential loan losses, based on management's evaluation of the loan portfolio, as well as on prevailing and anticipated economic conditions and historical losses by loan category. General reserves have been established, based upon the aforementioned factors, and allocated to the individual loan categories. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful.
ALLOWANCE FOR LOSSES ON RESIDENTIAL MORTGAGE LOANS SERVICED FOR OTHERS
A recourse loss allowance on loans serviced for others, including Veterans Administration loans included in Government National Mortgage Association and Federal National Mortgage Association pools, is provided, based on management's evaluation of historical losses, as well as prevailing and anticipated economic conditions.
PREMISES AND EQUIPMENT
Depreciable assets are stated at cost, less accumulated depreciation. Depreciation is charged to expense, using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized by the straight-line method over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.
FORECLOSED ASSETS HELD FOR SALE
Assets acquired by foreclosure or in settlement of debt and held for sale are valued at estimated fair value, as of the date of foreclosure, and a related valuation allowance is provided for estimated costs to sell the assets. Management evaluates the value of foreclosed assets held for sale periodically and increases the valuation allowance for any subsequent declines in fair value. Changes in the valuation allowance are charged or credited to other expense.
Assets acquired by foreclosure also include loans upon which the foreclosure process is imminent or has been initiated but not completed and considered in-substance foreclosed. Such assets are carried at estimated fair value, and a related valuation allowance is provided for estimated costs to sell the assets.
EXCESS COSTS OVER FAIR VALUE OF NET ASSETS ACQUIRED
Unamortized costs of purchased subsidiaries, in excess of the estimated fair value of underlying net tangible assets acquired, aggregated $940,000 (originally $2,646,000) at December 31, 1994, and are being amortized over a 20-year period, using the straight-line method. Unamortized costs allocated to the future earnings potential of acquired deposits were $36,000 (originally $730,000) at December 31, 1994, and are being amortized over ten years, using the straight-line method. Amortization expense was $156,000 for 1994, and $192,000 for 1993 and 1992.
The amount paid in 1990 to the Resolution Trust Corporation of $1,994,000, to purchase four of the branch operations of First American Savings Bank of Fort Smith, Arkansas, has been allocated, in part, to the future earnings potential of acquired deposits (originally $1,360,000), which will be amortized over ten years, using the straight-line method. Unamortized costs at December 31, 1994, were $807,000. The remaining intangible (originally $634,000) will be amortized over fifteen years, using the straight-line method. Unamortized costs at December 31, 1994, were $347,000. Amortization for the periods ended December 31, 1994, 1993 and 1992, was $199,000, $205,000 and $210,000, respectively.
The amount paid to the Resolution Trust Corporation of $684,000, to purchase three of the branch operations of First Savings Bank of Arkansas and one branch of Home Federal Savings Association, has been allocated, in part, to the future earnings potential of acquired deposits (approximately $336,000), which will be amortized over ten years, using the straight-line method. The remaining intangible asset (originally $348,000) will be amortized over fifteen years, using the straight-line method. Amortization for the periods ended December 31, 1994, 1993 and 1992, was $73,000, $71,000 and $76,000, respectively.
FEE INCOME
Periodic bank card fees, net of direct origination costs, are recognized as revenue on a straight-line basis, over the period the fee entitles the cardholder to use the card. Other loan fees, net of direct origination costs, are recognized as revenue on a yield basis over the term of the loans.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets, if it is more likely than not that a deferred tax asset will not be realized.
EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of common shares outstanding during each year. Common share equivalents, in the form of employee stock options, were not dilutive. On April 13, 1992, the Board of Directors of the Company declared a 100% stock dividend. Earnings per common share and dividends per common share presented in the financial statements have been restated retroactively, to reflect the effects of the stock dividend on a consistent basis. Weighted average shares outstanding were 3,677,378, 3,378,200 and 2,872,378 for 1994, 1993 and 1992, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures about Fair Value of Financial Instruments" (FAS 107), requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth in Note 15 to the consolidated financial statements. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Also, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the fair value.
NOTE 2: INVESTMENT SECURITIES
The amortized cost and fair value of investments in debt securities that are classified as Held-to-Maturity and Available-for-Sale are as follows:
Maturities of investment securities at December 31, 1994, are as follows:
The book value of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $70,981,000 at December 31, 1994, and $74,492,000 at December 31, 1993. The approximate fair value of pledged securities amounted to $70,217,000 at December 31, 1994, and $79,588,000 at December 31, 1993.
The book value of securities sold under agreement to repurchase amounted to $196,000 and $152,000 for December 31, 1994 and December 31, 1993, respectively.
The net change in unrealized loss on trading securities was $4,000 for 1994.
During 1994 and 1993, there were no securities sold. The gross realized gains of $143,000 and $134,000, and gross realized losses of $3,000 and $4,000, respectively, shown in the table below were the result of called bonds.
Approximately 14 percent of the state and political subdivision debt obligations are rated A or above. Of the remaining securities, most are nonrated bonds and represent small, Arkansas issues, which are evaluated on an ongoing basis.
NOTE 3: ACQUISITIONS
On November 15, 1994, the Company entered into a definitive agreement to merge Dumas Bancshares, Inc. (DBI) of Dumas, Arkansas, into Simmons First National Corporation (SFNC) in a transaction valued at $5,000,000. Stockholders of DBI will be given certain limited options to choose between SFNC stock and cash as consideration in the transaction. The transaction is expected to close during the first half of 1995.
DBI owns Dumas State Bank, Dumas, Arkansas, and First State Bank, Gould, Arkansas, with consolidated assets at September 30, 1994, of approximately $43 million. First State Bank, which has branches in Grady and Star City, Arkansas, in addition to its primary location in Gould, Arkansas, will be merged into Simmons First National Bank, the Company's lead bank, and Dumas State Bank will continue its operations as a subsidiary of the Company.
NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES
The various categories are summarized as follows:
Loans on which the accrual of interest has been discontinued aggregated $2,052,000 and $2,813,000, at December 31, 1994 and 1993, respectively. If interest on those loans had been accrued, such income would have approximated $269,000 and $347,000 for 1994 and 1993, respectively.
NOTE 5: FORECLOSED ASSETS HELD FOR SALE
At December 31, 1994 and 1993, foreclosed assets held for sale included $81,000 and $363,000, respectively, in loans which were considered in-substance foreclosed.
Transactions in the allowance for losses on foreclosed assets were as follows:
NOTE 6: PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, are as follows:
NOTE 7: TIME DEPOSITS
Time deposits included approximately $55,222,000 and $61,353,000 of certificates of deposit of $100,000 or more, at December 31, 1994 and 1993, respectively.
Deposits are the Company's primary funding source for loans and investment securities. The mix and repricing alternatives can significantly affect the cost of this source of funds and, therefore, impact the margin.
NOTE 8: INCOME TAXES
The provision for income taxes is comprised of the following components:
Deferred income taxes related to the change in unrealized appreciation on available-for-sale securities, shown in stockholders' equity, was $120,000 for 1994.
The tax effects of temporary differences related to deferred taxes shown on the balance sheet were:
The valuation allowance relates to the benefits of state income tax carry-forwards included in deferred tax assets.
A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:
NOTE 9: LONG-TERM DEBT AND CAPITAL NOTES
Long-term debt and capital notes at December 31, 1994 and 1993, consisted of the following components:
Capital notes of Simmons First National Corporation are due June 30, 1997, with interest payable quarterly and rates adjusted quarterly to the then prime rate offered by Chase Manhattan in New York, which was adjusted at December 31, 1994, to 7.75%.
Other debt consists of a mortgage note payable to Mutual Benefit Life Insurance Corporation, secured by land and building with a book value of $2,021,000, payable in equal monthly installments of $12,000, including interest at approximately 9.75% per annum. Final payment is due August, 2008.
Aggregate annual maturities of long-term debt at December 31, 1994 are:
NOTE 10: CAPITAL STOCK
In addition to the common stock from which stock has been issued, as shown on the balance sheet, the following classes of stock have been authorized:
Class B common stock of $1.00 par value per share, authorized 300 shares: none issued.
Class A preferred stock of $100.00 par value per share, authorized 50,000 shares: none issued.
Class B preferred stock of $100.00 par value per share, authorized 50,000 shares: none issued.
On April 13, 1992, the board of directors of the Company declared a 100% stock dividend to shareholders of record on May 15, 1992, payable on June 5, 1992. Earnings per common share and dividends per common share presented in the financial statements have been restated retroactively, to reflect the effects of the stock dividend on a consistent basis.
On May 12, 1993, the Company issued and sold 700,000 shares of Class A Common Stock. And on June 10, 1993, the Company issued and sold an additional 105,000 shares. The net proceeds to the Company stockholders' equity after expenses was $16.1 million.
NOTE 11: TRANSACTIONS WITH RELATED PARTIES
At December 31, 1994 and 1993, the subsidiary banks had loans outstanding to executive officers, directors, and to companies in which the banks' executive officers or directors were principal owners, in the amount of $3,643,000 in 1994, and $4,687,000 in 1993.
In management's opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management's opinion, these loans did not involve more than the normal risk of collectibility or present other unfavorable features.
NOTE 12: EMPLOYEE BENEFIT PLANS
In October, 1990, the Board of Directors approved the adoption of a 401(k) retirement plan, effective January 1, 1991, covering substantially all employees. Employees may contribute up to 12% of their compensation, with the Company and its subsidiaries matching 25% of the employees' contribution on the first 5% of the employee's compensation. The charges to income for this contribution in 1994, 1993 and 1992 were $125,000, $106,000 and $94,000, respectively.
The Company and its subsidiaries have a discretionary profit sharing and employee stock ownership plan covering all employees. The charges to income for the plan were $600,000 for 1994, $550,000 for 1993, and $485,000 for 1992.
On May 14, 1990, the Board of Directors adopted an incentive and nonqualified stock option plan. Pursuant to the plan, an aggregate of 140,000 shares were reserved for future issuance by the Company, upon exercise of stock options to be granted to officers and other key employees.
The table below summarizes the transactions under the Company's stock option plan:
Also, Simmons First National Bank and Simmons First Bank Jonesboro have deferred compensation agreements with certain active and retired officers. The agreements provide monthly payments which, together with payments from the deferred annuities issued pursuant to the terminated pension plan, equal 50 percent of average compensation prior to retirement or death. The charges to income for the plans were $128,000 for 1994, $187,000 for 1993 and $120,000 for 1992. Such charges reflect the straight-line accrual over the employment period of the present value of benefits due each participant, as of their full eligibility date, using an 8% discount factor.
NOTE 13: ADDITIONAL CASH FLOW INFORMATION FOR 1994, 1993 AND 1992
NOTE 14: OTHER OPERATING EXPENSE
Other non-interest expense consists of the following:
NOTE 15: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
CASH AND CASH EQUIVALENTS
The carrying amount for cash and cash equivalents approximates fair value.
INVESTMENTS
For securities held as investments and in trading accounts, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated, using quoted market prices for similar securities. The carrying amount for available-for-sale and trading securities approximates fair value. The carrying amount of accrued interest receivable approximates its fair value.
MORTGAGE LOANS HELD FOR SALE
For homogeneous categories of loans, such as mortgage loans held for sale, fair value is estimated, using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.
LOANS
The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value.
DEPOSITS
The fair value of demand deposits, savings accounts, NOW accounts, and certain money market deposits is the amount payable on demand at the reporting date (i.e., their carrying amount). The fair value of fixed-maturity time deposits is estimated, using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.
FEDERAL FUNDS PURCHASED, SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE, AND OTHER BORROWINGS
The carrying amount for federal funds purchased, securities sold under agreement to repurchase, and other borrowings is a reasonable estimate of fair value.
LONG-TERM DEBT AND CAPITAL NOTES PAYABLE
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.
COMMITMENTS TO EXTEND CREDIT, LETTERS OF CREDIT AND LINES OF CREDIT
The fair value of commitments is estimated, using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter- parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit and lines of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.
The following table represents estimated fair values of the Company's financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows. This method involves significant judgments by management considering the uncertainties of economic conditions and other factors inherent in the risk management of financial instruments. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.
The fair value of commitments to extend credit and forward commitments to sell mortgage loans do not differ materially from the notional or principal amounts.
NOTE 16: COMMITMENTS AND CREDIT RISK
The three subsidiary banks grant agri-business, credit card, commercial, and residential loans to customers throughout the state. Although the banks have a diversified loan portfolio, unsecured debt in the form of credit card receivables comprised approximately 39.3% and 42.8% of the portfolio, as of December 31, 1994 and 1993, respectively.
Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate, and residential real estate.
At December 31, 1994 and 1993, the Company had outstanding commitments to originate loans aggregating approximately $47,733,000 and $48,238,000, respectively. The commitments extended over varying periods of time, with the majority being disbursed within a one year period. Loan commitments at fixed rates of interest amounted to $16,519,000 and $12,025,000 at December 31, 1994 and 1993, respectively, with the remainder at floating interest rates.
Letters of credit are conditional commitments issued by the bank subsidiaries of 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 $918,000 and $820,000 at December 31, 1994 and 1993, respectively, with terms ranging from 95 days to one year.
Lines of credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines 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, upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate, and residential real estate. Management uses the same credit policies in granting lines of credit as it does for balance sheet instruments.
At December 31, 1994, the Company had granted unused lines of credit to borrowers, aggregating approximately $4,568,000 and $143,563,000 for commercial lines and open-end consumer lines. At December 31, 1993, unused lines of credit aggregated approximately $3,615,000 for commercial lines and $132,140,000 for open-end consumer lines.
Mortgage loans in the process of origination represent amounts which the subsidiary bank plans to fund within a normal period of 60 to 90 days and which are intended for sale to investors in the secondary market. Forward commitments to sell mortgage loans are obligations to deliver loans at a specified price on or before a specific future date. The subsidiary bank acquires such commitments to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale.
At December 31, 1994 and 1993, mortgage loans in process amounted to $11,748,000 and $54,733,000 and mortgage loans held for sale amounted to $8,720,000 and $47,775,000, respectively. Related forward commitments to sell mortgage loans during the same time frame amounted to $19,582,000 and $88,815,000, respectively.
Mortgage loans serviced for others totaled $1,228,311,000 and $1,395,424,000 at December 31, 1994 and 1993, respectively, of which mortgage- backed securities serviced totaled $1,027,855,000 and $1,123,747,000 at December 31, 1994 and 1993, respectively. At December 31, 1994, Simmons First National Bank serviced approximately $156,650,000 in Veterans Administration loans, subject to certain recourse provisions. A reserve of $210,000 has been established for potential loss obligations, based on management's evaluation of historical losses, as well as prevailing and anticipated economic conditions, giving consideration for specific reserves. Such reserve is included in other liabilities.
Below are the transactions in that reserve:
NOTE 17: LEASES
At December 31, 1994, 1993, and 1992, there were obligations under a number of long-term land and office operating leases, which required minimum annual rentals, aggregating approximately $553,000 for 1994, $589,000 for 1993, and $580,000 for 1992. The leases extend for varying periods, up to the year 2057.
Minimum annual rentals under these non-cancelable leases at December 31, 1994, are as follows:
The corporate subsidiaries are obligated under equipment leases on a month-to-month basis, which are expected to be renewed and had aggregate annual rentals of approximately $150,000 in 1994, $166,000 in 1993, and $242,000 in 1992. The subsidiaries are also obligated on one-year leases for office and storage space, having aggregate annual rentals of approximately $240,000 in 1994, $63,000 in 1993, and $113,000 in 1992.
NOTE 18: CHANGE IN ACCOUNTING PRINCIPLE
As of January 1, 1994, the Company adopted Financial Accounting Standards Board Statement No. 115 (FAS 115), "Accounting for Certain Investments in Debt and Equity Securities." FAS No. 115 requires the classification of securities into one of three categories: Trading, Available-for-sale, or Held-to-maturity. The adoption of FAS No. 115 resulted in a net increase in stockholders' equity of approximately $946,000.
NOTE 19: FUTURE CHANGES IN ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board recently adopted Financial Accounting Standards Board Statement No. 114 (FAS 114), "Accounting by Creditors for Impairment of a Loan", which requires that impaired loans be measured, based on the present value of expected cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral, if the loan is collateral dependent. This Statement applies to financial statements for fiscal year 1995. The adoption of FAS 114 is not expected to have a significant impact on the Company's consolidated financial statements.
NOTE 20: CONTINGENT LIABILITIES
The Company and/or its subsidiary banks have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries.
NOTE 21: UNDIVIDED PROFITS
The 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 Office of the Comptroller of the Currency is required, if the total of all the dividends declared by a national bank in any calendar year exceeds the total of its net profits, as defined, for that year, combined with its retained net profits of the preceding two years. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 50% of the current year earnings. At December 31, 1994, the bank subsidiaries had approximately $13,000,000 in undivided profits available for payment of dividends to the Company, without prior approval of the regulatory agencies. The most restrictive regulatory capital requirements at December 31, 1994 and 1993, were $35,322,000 and $35,392,000, respectively.
The risk-based capital guidelines of the Federal Reserve Board required a minimum risk-adjusted ratio for total capital of 8% by the end of 1992. The Federal Reserve Board has further refined its guidelines to 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 is one that has at least a 10% "total risk-based capital" ratio, a 6% "Tier 1 risk-based capital" ratio, and a 5% "Tier 1 leverage capital" ratio. At December 31, 1994, each of the three subsidiary banks met the capital standards for a well-capitalized institution. The Company's risk-based capital ratio at December 31, 1994, was 21.56%.
NOTE 22: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No items are reportable hereunder.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held April 25, 1995, to be filed pursuant to Regulation 14A.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held April 25, 1995, to be filed pursuant to Regulation 14A.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held April 25, 1995, to be filed pursuant to Regulation 14A.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held April 25, 1995, to be filed pursuant to Regulation 14A.
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2. Financial Statements and any Financial Statement Schedules
The financial statements and financial statement schedules listed in the accompanying index to consolidated financial statements and financial statement schedules are filed as part of this annual report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed as part of this annual report.
(b) Reports on Form 8-K
A Form 8-K, dated November 15, 1994, pertaining to the merger agreement between the Company and Dumas Bancshares, Inc., Dumas, Arkansas, was filed during the fourth quarter of 1994.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/ John L. Rush March 27, 1995 ---------------------------------------- John L. Rush, Secretary
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 27, 1995.
Signature Title ---------- -----
/s/ W. E. Ayres Chairman and Director ------------------------ W. E. Ayres
/s/ J. Thomas May President, Chief Executive ------------------------ Officer and Director J. Thomas May
/s/ Barry L. Crow Executive Vice President and Chief Financial ------------------------ Officer (Principal Financial and Accounting Officer) Barry L. Crow
/s/ Ben V. Floriani Director ------------------------ Ben V. Floriani
/s/ C. Ramon Greenwood Director ------------------------- C. Ramon Greenwood
/s/ Paul M. Henson Director ------------------------- Paul M. Henson
/s/ David R. Perdue Director ------------------------- David R. Perdue
/s/ Adam B. Robinson Director ------------------------ Adam B. Robinson
/s/ Harry L. Ryburn Director ------------------------ Harry L. Ryburn
/s/ Donald W. Stone Director ------------------------- Donald W. Stone