Edgar Filing: SIMMONS FIRST NATIONAL CORP

a5617986.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

T	Annual Report Pursuant to Section 13 or 15(d) of the Exchange Act of 1934

For the fiscal year ended: December 31, 2007

£	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 0-6253

SIMMONS FIRST NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Arkansas	71-0407808
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification No.)

501 Main Street, Pine Bluff, Arkansas	71601
(Address of principal executive offices)	(Zip Code)

(870) 541-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value	The Nasdaq Stock Market®
(Title of each class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. £ Yes S No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. £ Yes S No

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or in information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

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

£ Large accelerated filer S Accelerated filer £ Non-accelerated filer

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

The aggregate market value of the Registrant’s Common Stock, par value $0.01 per share, held by non-affiliates on June 30, 2007, was $347,617,887 based upon the last trade price as reported on the Nasdaq Global Select Market® of $27.59.

The number of shares outstanding of the Registrant's Common Stock as of February 4, 2008 was 13,934,570.

Part III is incorporated by reference from the Registrant's Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 8, 2008.

Introduction

The Company has chosen to combine our Annual Report to Shareholders with our Form 10-K, which is a document that U.S. public companies file with the Securities and Exchange Commission every year. Many readers are familiar with “Part II” of the Form 10-K, as it contains the business information and financial statements that were included in the financial sections of our past Annual Reports. These portions include information about our business that the Company believes will be of interest to investors. The Company hopes investors will find it useful to have all of this information available in a single document.

The Securities and Exchange Commission allows the Company to report information in the Form 10-K by “incorporated by reference” from another part of the Form 10-K, or from the proxy statement. You will see that information is “incorporated by reference” in various parts of our Form 10-K.

A more detailed table of contents for the entire Form 10-K follows:

FORM 10-K INDEX

Part I

Item 1	Business	1
Item 1A	Risk Factors	6
Item 1B	Unresolved Staff Comments	7
Item 2	Properties	7
Item 3	Legal Proceedings	7
Item 4	Submission of Matters to a Vote of Security-Holders	8

Part II

Item 5	Market for Registrant's Common Equity and Related Stockholder Matters	8
Item 6	Selected Consolidated Financial Data	10
Item 7	Management's Discussion and Analysis of Financial Condition and
	Results of Operations	12
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8	Consolidated Financial Statements and Supplementary Data	40
Item 9	Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure	72
Item 9A	Controls and Procedures	72
Item 9B	Other Information	72

Part III

Item 10	Directors and Executive Officers of the Company	72
Item 11	Executive Compensation	72
Item 12	Security Ownership of Certain Beneficial Owners and Management	72
Item 13	Certain Relationships and Related Transactions	72
Item 14	Principal Accounting Fees and Services	72

Part IV

Item 15	Exhibits and Financial Statement Schedules	73
	Signatures	75

PART I

ITEM 1. BUSINESS

The Company and the Banks

Simmons First National Corporation (the “Company”) is a financial holding company registered under the Bank Holding Company Act of 1956. The Gramm-Leach-Bliley-Act ("GLB Act") has substantially increased the financial activities that certain banks, bank holding companies, insurance companies and securities brokerage companies are permitted to undertake. Under the GLB Act, expanded activities in insurance underwriting, insurance sales, securities brokerage and securities underwriting not previously allowed for banks and bank holding companies are now permitted upon satisfaction of certain guidelines concerning management, capitalization and satisfaction of the applicable Community Reinvestment Act guidelines for the banks. Generally these new activities are permitted for bank holding companies whose banking subsidiaries are well managed, well capitalized and have at least a satisfactory rating under the Community Reinvestment Act. A bank holding company must apply to become a financial holding company and the Board of Governors of the Federal Reserve System must approve its application.

The Company's application to become a financial holding company was approved by the Board of Governors on March 13, 2000. The Company has reviewed the new activities permitted under the Act. If the appropriate opportunity presents itself, the Company is interested in expanding into other financial services.

The Company is a publicly traded financial holding company headquartered in Arkansas with consolidated total assets of $2.7 billion, consolidated loans of $1.9 billion, consolidated deposits of $2.2 billion and total equity capital of $272 million as of December 31, 2007. The Company owns eight community banks in Arkansas. The Company and its eight banking subsidiaries conduct their operations through 86 offices, of which 83 are financial centers, located in 48 communities in Arkansas.

Simmons First National Bank (the “Bank”) is the Company’s lead bank. The Bank is a national bank, which has been in operation since 1903. The Bank's primary market area, with the exception of its nationally provided credit card product, is Central and Western Arkansas. At December 31, 2007 the Bank had total assets of $1.3 billion, total loans of $914 million and total deposits of $1.0 billion. Simmons First Trust Company N.A., a wholly owned subsidiary of the Bank, performs the trust and fiduciary business operations for the Bank as well as the Company. Simmons First Investment Group, Inc. (“SFIG”), a wholly owned subsidiary of the Bank, which is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the National Association of Securities Dealers (“NASD”), performs the broker-dealer operations of the Bank.

Simmons First Bank of Jonesboro (“Simmons/Jonesboro”) is a state bank, which was acquired in 1984. Simmons/Jonesboro’s primary market area is Northeast Arkansas. At December 31, 2007, Simmons/Jonesboro had total assets of $267 million, total loans of $217 million and total deposits of $236 million.

Simmons First Bank of South Arkansas (“Simmons/South”) is a state bank, which was acquired in 1984. Simmons/South’s primary market area is Southeast Arkansas. At December 31, 2007, Simmons/South had total assets of $147 million, total loans of $81 million and total deposits of $128 million.

Simmons First Bank of Northwest Arkansas (“Simmons/Northwest”) is a state bank, which was acquired in 1995. Simmons/Northwest’s primary market area is Northwest Arkansas. At December 31, 2007, Simmons/Northwest had total assets of $287 million, total loans of $214 million and total deposits of $243 million.

Simmons First Bank of Russellville (“Simmons/Russellville”) is a state bank, which was acquired in 1997. Simmons/Russellville’s primary market area is Russellville, Arkansas. At December 31, 2007, Simmons/Russellville had total assets of $195 million, total loans of $123 million and total deposits of $148 million.

Simmons First Bank of Searcy (“Simmons/Searcy”) is a state bank, which was acquired in 1997. Simmons/Searcy’s primary market area is Searcy, Arkansas. At December 31, 2007, Simmons/Searcy had total assets of $142 million, total loans of $102 million and total deposits of $112 million.

Simmons First Bank of El Dorado, N.A. (“Simmons/El Dorado”) is a national bank, which was acquired in 1999. Simmons/El Dorado’s primary market area is South Central Arkansas. At December 31, 2007, Simmons/El Dorado had total assets of $243 million, total loans of $121 million and total deposits of $212 million. Simmons First Bank of Hot Springs (“Simmons/Hot Springs”) is a state bank, which was acquired in 2004. Simmons/Hot Springs’ primary market area is Hot Springs, Arkansas. At December 31, 2007, Simmons/Hot Springs had total assets of $152 million, total loans of $78 million and total deposits of $114 million.

The Company's subsidiaries provide complete banking services to individuals and businesses throughout the market areas they serve. Services include consumer (credit card, student and other consumer), real estate (construction, single family residential and other commercial) and commercial (commercial, agriculture and financial institutions) loans, checking, savings and time deposits, trust and investment management services, and securities and investment services.

Loan Risk Assessment

As part of the ongoing risk assessment, the Company has an Asset Quality Review Committee of management that meets quarterly to review the adequacy of the allowance for loan losses. The Committee reviews the status of past due, non-performing and other impaired loans, reserve ratios, and additional performance indicators for all of its subsidiary banks. The allowance for loan losses is determined based upon the aforementioned performance factors, and adjustments are made accordingly. Also, an unallocated reserve is established to compensate for the uncertainty in estimating loan losses, including the possibility of improper risk ratings and specific reserve allocations.

The Board of Directors of each of the Company's subsidiary banks reviews the adequacy of its allowance for loan losses on a monthly basis giving consideration to past due loans, non-performing loans, other impaired loans, and current economic conditions. The Company's loan review department monitors each of its subsidiary bank's loan information monthly. In addition, the loan review department prepares an analysis of the allowance for loan losses for each subsidiary bank twice a year, and reports the results to the Company's Audit and Security Committee. In order to verify the accuracy of the monthly analysis of the allowance for loan losses, the loan review department performs an on-site detailed review of each subsidiary bank's loan files on a semi-annual basis. Additionally, the Company has instituted a Special Asset Committee for the purpose of reviewing criticized loans in regard to collateral adequacy, workout strategies, and proper reserve allocations.

Growth Strategy

The Company's growth strategy is to primarily focus on the state of Arkansas. More specifically, the Company is interested in expansion by opening new financial centers or by acquisitions of financial centers in growth or strategic markets, preferably with assets totaling $200 million or more. The Company added its first financial centers in the Arkansas markets of North Little Rock, Beebe and Paragould during 2007. New locations were opened in Little Rock and El Dorado during 2006. In 2005 the Company added three branch locations in the Little Rock/Conway metropolitan area, one in the Fayetteville/Springdale/Rogers metropolitan area and one in the Fort Smith metropolitan area. For 2008, the Company plans to add a financial center in Little Rock, as well as a new headquarters facility for Simmons/Northwest in Rogers. While new financial centers can be dilutive to earnings in the short-term, the Company believes they will reward shareholders in the intermediate and long-term. As completion of its desired footprint within the state of Arkansas nears, the Company is evaluating opportunities to expand into contiguous states.

With an expanded presence in Arkansas, ongoing investments in technology, and enhanced products and services, the Company is in position to meet the demands of customers in the markets it serves.

Competition

The activities engaged in by the Company and its subsidiaries are highly competitive. In all aspects of its business, the Company encounters intense competition from other banks, lending institutions, credit unions, savings and loan associations, brokerage firms, mortgage companies, industrial loan associations, finance companies, and several other financial and financial service institutions. The amount of competition among commercial banks and other financial institutions has increased significantly over the past few years since the deregulation of the banking industry. The Company's subsidiary banks actively compete with other banks and financial institutions in their efforts to obtain deposits and make loans, in the scope and type of services offered, in interest rates paid on time deposits and charged on loans and in other aspects of commercial banking.

The Company's banking subsidiaries are also in competition with major national and international retail banking establishments, brokerage firms and other financial institutions within and outside Arkansas. Competition with these financial institutions is expected to increase, especially with the increase in interstate banking.

Employees

As of February 4, 2008, the Company and its subsidiaries had approximately 1,103 full time equivalent employees. None of the employees is represented by any union or similar groups, and the Company has not experienced any labor disputes or strikes arising from any such organized labor groups. The Company considers its relationship with its employees to be good.

Executive Officers of the Company

The following is a list of all executive officers of the Company. The Board of Directors elects executive officers annually.

NAME	AGE	POSITION	YEARS SERVED

J. Thomas May	61	Chairman and Chief Executive Officer	21
David L. Bartlett	56	President and Chief Operating Officer	11
Robert A. Fehlman	43	Executive Vice President and Chief Financial Officer	19
Marty D. Casteel	56	Executive Vice President	19
Robert C. Dill	64	Executive Vice President, Marketing	41
David W. Garner	38	Senior Vice President and Controller	10
Tommie K. Jones	60	Senior Vice President and Human Resources Director	33
L. Ann Gill	60	Senior Vice President and Auditor	42
Kevin J. Archer	44	Senior Vice President/Credit Policy and Risk Assessment	12
John L. Rush	73	Secretary	40

Board of Directors of the Company

The following is a list of the Board of Directors of the Company as of December 31, 2007, along with their principal occupation.

NAME	PRINCIPAL OCCUPATION

William E. Clark II (1)	Chairman and Chief Executive Officer
	CDI Contractors, LLC

Steven A. Cossé	Executive Vice President and General Counsel
	Murphy Oil Corporation

Edward Drilling (1)	President
	AT&T Arkansas

George A. Makris, Jr.	President
	M.K. Distributors, Inc.

J. Thomas May	Chairman and Chief Executive Officer
	Simmons First National Corporation

W. Scott McGeorge	President
	Pine Bluff Sand and Gravel Company

Stanley E. Reed	President
	Farm Bureau Mutual Insurance of Arkansas

Harry L. Ryburn, D.D.S.	Orthodontist (retired)

Robert L. Shoptaw	Chief Executive Officer
	Arkansas Blue Cross and Blue Shield

Henry F. Trotter, Jr.	President
	Trotter Ford, Inc.; Trotter Auto, Inc.

(1) Mr. Clark and Mr. Drilling were elected to the Board of Directors of the Company on December 10, 2007, effective January 3, 2008.

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 generally must 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. Bank holding companies, including the Company, which have elected to qualify as financial holding companies, are authorized to engage in financial activities. Financial activities include any activity that is financial in nature or any activity that is incidental or complimentary to a financial activity.

As a financial holding company, the Company is required to file with the FRB an annual report and such additional information as may be required by law. From time to time, the FRB examines the financial condition of the Company and its subsidiaries. The FRB, through civil and criminal sanctions, is authorized to exercise enforcement powers over bank holding companies (including financial holding companies) and non-banking subsidiaries, to limit activities that represent unsafe or unsound practices or constitute violations of law.

The Company is subject to certain laws and regulations of the state of Arkansas applicable to financial and bank holding companies, including examination and supervision by the Arkansas Bank Commissioner. Under Arkansas law, a financial or 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 five years and, further, requires the approval of the Arkansas Bank Commissioner for any acquisition of more than 25% of the capital stock of any other bank located in Arkansas. No bank acquisition may be approved if, after such acquisition, the holding company would control, directly or indirectly, banks having 25% of the total bank deposits in the state of Arkansas, excluding deposits of other banks and public funds.

Legislation enacted in 1994, allows bank holding companies (including financial holding companies) from any state to acquire banks located in any state without regard to state law, provided that the holding company (1) is adequately capitalized, (2) is adequately managed, (3) would not control more than 10% of the insured deposits in the United States or more than 30% of the insured deposits in such state, and (4) such bank has been in existence at least five years if so required by the applicable state law.

Subsidiary Banks

The Bank, Simmons/El Dorado and Simmons First Trust Company N.A., as national banking associations, are subject to regulation and supervision, of which regular bank examinations are a part, by the Office of the Comptroller of the Currency of the United States ("OCC"). Simmons/Jonesboro, Simmons/South, Simmons/Northwest and Simmons/Hot Springs, as state chartered banks, are subject to the supervision and regulation, of which regular bank examinations are a part, by the Federal Deposit Insurance Corporation ("FDIC") and the Arkansas State Bank Department. Simmons/Russellville and Simmons/Searcy, as state chartered member banks, are subject to the supervision and regulation, of which regular bank examinations are a part, by the Federal Reserve Board and the Arkansas State Bank Department. The lending powers of each of the subsidiary banks are generally subject to certain restrictions, including the amount, which may be lent to a single borrower.

Prior to passage of the GLB Act in 1999, the subsidiary banks, with numerous exceptions, were subject to the application of the laws of the state of Arkansas, regarding the limitation of the maximum permissible interest rate on loans. The Arkansas limitation for general loans was 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.) were exempt from this limitation; however, a substantial portion of the loans made by the subsidiary banks, including all credit card loans, have historically been subject to this limitation. The GLB Act included a provision which sets the maximum interest rate on loans made in Arkansas, by banks with Arkansas as their home state, at the greater of the rate authorized by Arkansas law or the highest rate permitted by any of the out-of-state banks which maintain branches in Arkansas. An action was brought in the Western District of Arkansas, attacking the validity of the statute in 2000. Subsequently, the District Court issued a decision upholding the statute, and during October 2001, the Eighth Circuit Court of Appeals upheld the statute on appeal. Thus, in the fourth quarter of 2001, the Company began to implement the changes permitted by the GLB Act.

All of the Company's subsidiary banks are members of the FDIC, which provides insurance on deposits of each member bank up to applicable limits by the Deposit Insurance Fund. 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 financial or bank holding company, any director, officer, employee or agent of the bank or holding company, which is believed by the federal banking agencies to be violating any administrative pronouncement or engaged in unsafe and unsound practices. In addition, the FDIC may terminate the insurance of accounts, upon determination that the insured institution has engaged in certain wrongful conduct, or is in an unsound condition to continue operations.

Risk-Weighted Capital Requirements for the Company and the Banks

Since 1993, banking organizations (including financial holding companies, bank holding companies and banks) were required to meet a minimum ratio of Total Capital to Total Risk-Weighted Assets of 8%, of which at least 4% must be in the form of Tier 1 Capital. A well-capitalized institution is one that has at least a 10% "total risk-based capital" ratio. For a tabular summary of the Company’s risk-weighted capital ratios, see "Management's Discussion and Analysis of Financial Condition and Results of Operations – Capital" and Note 19, Stockholders’ Equity, of the Notes to Consolidated Financial Statements.

A banking organization's qualifying total capital consists of two components: Tier 1 Capital and Tier 2 Capital. Tier 1 Capital is an amount equal to the sum of common shareholders' equity, hybrid capital instruments (instruments with characteristics of debt and equity) in an amount up to 25% of Tier 1 Capital, certain preferred stock and the minority interest in the equity accounts of consolidated subsidiaries. For bank holding companies and financial holding companies, goodwill may not be included in Tier 1 Capital. Identifiable intangible assets may be included in Tier 1 Capital for banking organizations, in accordance with certain further requirements. At least 50% of the banking organization's total regulatory capital must consist of Tier 1 Capital.

Tier 2 Capital is an amount equal to the sum of the qualifying portion of the allowance for loan losses, certain preferred stock not included in Tier 1, hybrid capital instruments (instruments with characteristics of debt and equity), certain long-term debt securities and eligible term subordinated debt, in an amount up to 50% of Tier 1 Capital. The eligibility of these items for inclusion as Tier 2 Capital is subject to certain additional requirements and limitations of the federal banking agencies.

Under the risk-based capital guidelines, balance sheet assets and certain off-balance sheet items, such as standby letters of credit, are assigned to one of four-risk weight categories (0%, 20%, 50%, or 100%), according to the nature of the asset, its collateral or the identity of the obligor or guarantor. The aggregate amount in each risk category is adjusted by the risk weight assigned to that category, to determine weighted values, which are then added to determine the total risk-weighted assets for the banking organization. For example, an asset, such as a commercial loan, assigned to a 100% risk category, is included in risk-weighted assets at its nominal face value, but a loan secured by a one-to-four family residence is included at only 50% of its nominal face value. The applicable ratios reflect capital, as so determined, divided by risk-weighted assets, as so determined.

Federal Deposit Insurance Corporation Improvement Act

The Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), enacted in 1991, requires the FDIC to increase assessment rates for insured banks and authorizes one or more "special assessments," as necessary for the repayment of funds borrowed by the FDIC or any other necessary purpose. As directed in FDICIA, the FDIC has adopted a transitional risk-based assessment system, under which the assessment rate for insured banks will vary, according to the level of risk incurred in the bank's activities. The risk category and risk-based assessment for a bank is determined from its classification, pursuant to the regulation, as well capitalized, adequately capitalized or undercapitalized.

FDICIA substantially revised the bank regulatory provisions of the Federal Deposit Insurance Act and other federal banking statutes, requiring federal banking agencies to establish capital measures and classifications. Pursuant to the regulations issued under FDICIA, a depository institution will be deemed to be well capitalized if it significantly exceeds the minimum level required for each relevant capital measure; adequately capitalized if it meets each such measure; undercapitalized if it fails to meet any such measure; significantly undercapitalized if it is significantly below any such measure; and critically undercapitalized if it fails to meet any critical capital level set forth in regulations. The federal banking agencies must promptly mandate corrective actions by banks that fail to meet the capital and related requirements, in order to minimize losses to the FDIC. The FDIC and OCC advised the Company that the subsidiary banks have 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 (including financial holding companies), relating to operations and management, asset quality, earnings, stock valuation and compensation. A bank or bank holding company that fails to comply with such standards will be required to submit a plan designed to achieve compliance. If no plan is submitted or the plan is not implemented, the bank or holding company would become subject to additional regulatory action or enforcement proceedings.

A variety of other provisions included in FDICIA may affect the operations of the Company and the subsidiary banks, including new reporting requirements, revised regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch.

Available Information

The Company maintains an Internet website at www.simmonsfirst.com. On this website under the section, investor relations – documents, the Company makes its filings with the Securities and Exchange Commission available free of charge. Additionally, the Company has adopted and posted on its website a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer.

ITEM 1A. RISK FACTORS

Investments in the Company’s common stock involve risk. The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, including:

•	changes in securities analysts’ estimates of financial performance

•	volatility of stock market prices and volumes

•	rumors or erroneous information

•	changes in market valuations of similar companies

•	changes in interest rates

•	new developments in the banking industry

•	variations in quarterly or annual operating results

•	new litigation or changes in existing litigation

•	regulatory actions

•	changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies

If the Company does not adjust to changes in the financial services industry, its financial performance may suffer. The Company’s ability to maintain its history of strong financial performance and return on investment to shareholders will depend in part on its ability to expand its scope of available financial services to its customers. In addition to other banks, competitors include securities dealers, brokers, mortgage bankers, investment advisors, and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial service providers.

Future governmental regulation and legislation could limit growth. The Company and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations. Changes to these laws could affect the Company’s ability to deliver or expand its services and diminish the value of its business.

Changes in interest rates could reduce income and cash flow. The Company’s income and cash flow depends to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and other borrowings. Interest rates are beyond the Company’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits.

Additional risks and uncertainties could have a negative effect on the financial performance of the Company and the Company’s common stock. Some of these factors are general economic and financial market conditions, competition, continuing consolidation in the financial services industry, new litigation or changes in existing litigation, regulatory actions, and losses.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

There are currently no unresolved Commission staff comments.

ITEM 2.

PROPERTIES

The principal offices of the Company and the Bank consist of an eleven-story office building and adjacent office space, located in the central business district of the city of Pine Bluff, Arkansas. Additionally, the Company has corporate offices located in Little Rock, Arkansas.

The Company and its subsidiaries own or lease additional offices throughout the state of Arkansas. The Company and its eight banks conduct financial operations from 86 offices, of which 83 are financial centers, in 48 communities throughout Arkansas.

ITEM 3.

LEGAL PROCEEDINGS

The Company and/or its subsidiaries have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries. The Company or its subsidiaries remain the subject of one (1) lawsuit asserting claims against the Company or its subsidiaries.

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

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

No matters were submitted to a vote of security-holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s Common Stock trades on The Nasdaq Stock MarketÒ in the Global Select Market System under the symbol “SFNC”. The following table sets forth, for all the periods indicated, cash dividends declared, and the high and low closing bid prices for the Company’s Common Stock.

					Quarterly
	Price Per				Dividends
	Common Share				Per Common
	High		Low		Share

2007
1st quarter	$	32.19	$	25.33	$	0.18
2nd quarter		30.49		25.75		0.18
3rd quarter		29.00		22.33		0.18
4th quarter		29.48		23.81		0.19

2006
1st quarter	$	29.76	$	27.50	$	0.16
2nd quarter		30.36		25.00		0.17
3rd quarter		30.26		26.31		0.17
4th quarter		32.97		28.01		0.18

As of February 4, 2008, there were 1,400 shareholders of record of the Company’s Common Stock.

The Company's policy is to declare regular quarterly dividends based upon the Company's earnings, financial position, capital requirements and such other factors deemed relevant by the Board of Directors. This dividend policy is subject to change, however, and the payment of dividends by the Company is necessarily dependent upon the availability of earnings and the Company's financial condition in the future. The payment of dividends on the Common Stock is also subject to regulatory capital requirements.

The Company's principal source of funds for dividend payments to its stockholders is dividends received from its subsidiary banks. Under applicable banking laws, the declaration of dividends by the Bank and Simmons/El Dorado in any year, in excess of its net profits, as defined, for that year, combined with its retained net profits of the preceding two years, must be approved by the Office of the Comptroller of the Currency. Further, as to Simmons/Jonesboro, Simmons/Northwest, Simmons/South, Simmons/Hot Springs, Simmons/Russellville and Simmons/Searcy regulators have specified that the maximum dividends state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. At December 31, 2007, approximately $10.7 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 "Quantitative and Qualitative Disclosures About Market Risk – Liquidity and Market Risk Management," and Note 19, Stockholders’ Equity, of Notes to Consolidated Financial Statements.

Stock Repurchase

The Company made the following purchases of its common stock during the three months ended December 31, 2007:

					Total Number		Maximum
					of Shares		Number of
	Total Number		Average		Purchased as		Shares that May
	of Shares		Price Paid		Part of Publicly		Yet be Purchased
Period	Purchased		Per Share		Announced Plans		Under the Plans

October 1 – October 31		8,247		27.00		8,247		37,889
November 1 – November 30		9,500		25.71		9,500		699,000
December 1 – December 31		8,148		26.55		8,148		690,852
Total		25,895	$	26.38		25,895

At the beginning of the calendar year 2007, the Company had a stock repurchase program which authorized the repurchase of up to 733,485 shares of common stock. On November 28, 2007, the Company announced the substantial completion of the existing stock repurchase program and the adoption by the Board of Directors of a new stock repurchase program. The new program authorizes the repurchase of up to 700,000 shares of Class A common stock, or approximately 5% of the outstanding common stock. Under the repurchase program, there is no time limit for the stock repurchases, nor is there a minimum number of shares the Company intends to repurchase. The Company may discontinue purchases at any time that management determines additional purchases are not warranted. The shares are to be purchased from time to time at prevailing market prices, through open market or unsolicited negotiated transactions, depending upon market conditions. The Company intends to use the repurchased shares to satisfy stock option exercise, payment of future stock dividends and general corporate purposes.

Performance Graph

The performance graph below compares the cumulative total shareholder return on the Company’s Common Stock with the cumulative total return on the equity securities of companies included in the NASDAQ Bank Stock Index and the S&P 500 Stock Index. The graph assumes an investment of $100 on December 31, 2002 and reinvestment of dividends on the date of payment without commissions. The performance graph represents past performance and should not be considered to be an indication of future performance.

		Period Ending
Index	12/31/02	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07
Simmons First National Corporation	100.00	154.04	165.29	161.87	187.82	162.89
NASDAQ Bank Index	100.00	129.93	144.21	137.97	153.15	119.35
S&P 500 Index	100.00	128.68	142.69	149.70	173.34	182.86

Forward Looking Statements

Certain statements contained in this Annual Report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “estimate,” “expect,” “foresee,” “may,” “might,” “will,” “would,” “could” or “intend,” future or conditional verb tenses, and variations or negatives of such terms. These forward-looking statements include, without limitation, those relating to the Company’s future growth, revenue, assets, asset quality, profitability and customer service, critical accounting policies, net interest margin, non-interest revenue, market conditions related to the Company’s stock repurchase program, allowance for loan losses, the effect of certain new accounting standards on the Company’s financial statements, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, capital resources, market risk, earnings, effect of pending litigation, acquisition strategy, legal and regulatory limitations and compliance and competition.

We caution the reader not to place undue reliance on the forward-looking statements contained in this Report in that actual results could differ materially from those indicated in such forward-looking statements, due to a variety of factors. These factors include, but are not limited to, changes in the Company’s operating or expansion strategy, availability of and costs associated with obtaining adequate and timely sources of liquidity, the ability to maintain credit quality, possible adverse rulings, judgments, settlements and other outcomes of pending litigation, including Visa litigation, the ability of the Company to collect amounts due under loan agreements, changes in consumer preferences, effectiveness of the Company’s interest rate risk management strategies, laws and regulations affecting financial institutions in general or relating to taxes, the effect of pending or future legislation, the ability of the Company to repurchase its Common Stock on favorable terms and other risk factors. Other relevant risk factors may be detailed from time to time in the Company’s press releases and filings with the Securities and Exchange Commission. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this Report.

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 report. The income statement, balance sheet and per common share data as of and for the years ended December 31, 2007, 2006, 2005, 2004, and 2003 were derived from consolidated financial statements of the Company, which were audited by BKD, LLP. 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 report.


SELECTED CONSOLIDATED FINANCIAL DATA

	Years Ended December 31 (1)
(In thousands,
except per share data)	2007			2006			2005			2004			2003

Income statement data:
Net interest income	$	92,116		$	88,804		$	90,257		$	85,636		$	77,870
Provision for loan losses		4,181			3,762			7,526			8,027			8,786
Net interest income after provision
for loan losses		87,935			85,042			82,731			77,609			69,084
Non-interest income		46,003			43,947			42,318			40,705			38,717
Non-interest expense		94,197			89,068			85,584			82,385			73,117
Provision for income taxes		12,381			12,440			12,503			11,483			10,894
Net income		27,360			27,481			26,962			24,446			23,790

Per share data:
Basic earnings		1.95			1.93			1.88			1.68			1.69
Diluted earnings		1.92			1.90			1.84			1.65			1.65
Diluted operating earnings (2)		1.97			1.90			1.84			1.68			1.62
Book value		19.57			18.24			17.04			16.29			14.89
Dividends		0.73			0.68			0.61			0.57			0.53

Balance sheet data at period end:
Assets		2,692,447			2,651,413			2,523,768			2,413,944			2,235,778
Loans		1,850,454			1,783,495			1,718,107			1,571,376			1,418,314
Allowance for loan losses		25,303			25,385			26,923			26,508			25,347
Deposits		2,182,857			2,175,531			2,059,958			1,959,195			1,803,468
Long-term debt		82,285			83,311			87,020			94,663			100,916
Stockholders’ equity		272,406			259,016			244,085			238,222			209,995

Capital ratios at period end:
Stockholders’ equity to
total assets		10.12	%		9.75	%		9.67	%		9.87	%		9.39	%
Leverage (3)		9.06	%		8.83	%		8.62	%		8.46	%		9.89	%
Tier 1		12.43	%		12.38	%		12.26	%		12.72	%		14.12	%
Total risk-based		13.69	%		13.64	%		13.54	%		14.00	%		15.40	%

Selected ratios:
Return on average assets		1.03	%		1.07	%		1.08	%		1.03	%		1.18	%
Return on average equity		10.26	%		10.93	%		11.24	%		10.64	%		11.57	%
Return on average tangible equity (4)		13.78	%		15.03	%		15.79	%		14.94	%		14.03	%
Net interest margin (5)		3.96	%		3.96	%		4.13	%		4.08	%		4.34	%
Allowance/nonperforming loans		226.10	%		234.05	%		319.48	%		220.84	%		219.13	%
Allowance for loan losses as a
percentage of period-end loans		1.37	%		1.42	%		1.57	%		1.69	%		1.79	%
Nonperforming loans as a percentage
of period-end loans		0.60	%		0.56	%		0.49	%		0.76	%		0.82	%
Net charge-offs as a percentage
of average total assets		0.16	%		0.15	%		0.28	%		0.34	%		0.41	%
Dividend payout		38.02	%		35.79	%		33.15	%		38.80	%		31.14	%

(1) The selected consolidated financial data set forth above should be read in conjunction with the financial statements of the Company and related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this report.

(2) Diluted operating earnings exclude the following nonrecurring items. In 2007, the Company recorded a $0.05 reduction in EPS from litigation expense associated with the recognition of certain contingent liabilities related to Visa, Inc.’s litigation. In 2004, the Company recorded a $0.03 reduction in EPS from the write off of deferred debt issuance cost associated with the redemption of trust preferred securities. In 2003, the Company recorded a $0.03 addition to EPS resulting from the sale of its mortgage servicing portfolio.

(3) Leverage ratio is Tier 1 capital to quarterly average total assets less intangible assets and gross unrealized gains/losses on available-for-sale investments.

(4) Tangible calculations eliminate the effect of goodwill and acquisition related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable.

(5) Fully taxable equivalent (assuming an income tax rate of 37.5%).

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2007 Overview

Simmons First National Corporation recorded net income of $27,360,000 for the year ended December 31, 2007, a 0.4% decrease from net income of $27,481,000 in 2006. Net income in 2005 was $26,962,000. Diluted earnings per share increased $0.02, or 1.1%, to $1.92 in 2007 compared to $1.90 in 2006. Diluted earnings per share in 2005 were $1.84. The Company’s return on average assets and return on average stockholders’ equity for the year ended December 31, 2007, were 1.03% and 10.26%, compared to 1.07% and 10.93%, respectively, for the year ended 2006.

Operating earnings (net income less nonrecurring items) for the years ended December 31, 2007, and 2006, were $28,104,000 and $27,481,000, respectively. Diluted operating earnings per share for these same periods were $1.97 and $1.90, respectively, an increase of $0.07 per share, or 3.7%. During the fourth quarter 2007, the Company recorded a nonrecurring $744,000 after tax charge, or a $0.05 reduction in diluted earnings per share, related to indemnification obligations with Visa U.S.A. litigation. For further discussion related to the Visa U.S.A. litigation, see the analysis of “Non-Interest Expense” included elsewhere in this section.

At December 31, 2007, the Company’s loan portfolio totaled $1.850 billion, which is a $67.0 million, or 3.8%, increase from the same period last year. This increase is due primarily to a $29 million, or 11.8%, increase in commercial loans and a $23 million, or 15.8%, increase in credit cards. Loan growth was somewhat mitigated by a $16 million decline in development and construction loans due to a slow down in the industry, and a $9 million decline in student loans due to early sales in order to avoid consolidation lenders.

Asset quality remained strong with the allowance for loan losses at 1.37% of total loans and 226% of non-performing loans at December 31, 2007. The Company does not own any securities backed by subprime mortgage assets, and has no mortgage loan products that target subprime borrowers; therefore, our financial results and asset quality have not been significantly affected by the current subprime mortgage crisis.

Total assets for the Company at December 31, 2007, were $2.692 billion, an increase of $41 million, or 1.5%, over the period ended December 31, 2006. Stockholders’ equity as of December 31, 2007 was $272 million, an increase of $13.4 million, or approximately 5.2%, from December 31, 2006.

Simmons First National Corporation is an Arkansas based, Arkansas committed financial holding company with $2.7 billion in assets and eight community banks in Pine Bluff, Lake Village, Jonesboro, Rogers, Searcy, Russellville, El Dorado and Hot Springs, Arkansas. The Company’s eight banks conduct financial operations from 86 offices, of which 83 are financial centers, in 48 communities.

Critical Accounting Policies

Overview

The accounting and reporting policies followed by the Company conform, in all material respects, to generally accepted accounting principles and to general practices within the financial services industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

The Company considers accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements.

The accounting policies that we view as critical to us are those relating to estimates and judgments regarding (a) the determination of the adequacy of the allowance for loan losses, (b) the valuation of goodwill and the useful lives applied to intangible assets, (c) the valuation of employee benefit plans, and (d) income taxes.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance is maintained at a level considered adequate to provide for potential loan losses related to specifically identified loans as well as probable credit losses inherent in the remainder of the loan portfolio that have been incurred as of period end. This estimate is based on management's evaluation of the loan portfolio, as well as on prevailing and anticipated economic conditions and historical losses by loan category. General reserves have been established, based upon the aforementioned factors and allocated to the individual loan categories. Allowances are accrued on specific loans evaluated for impairment for which the basis of each loan, including accrued interest, exceeds the discounted amount of expected future collections of interest and principal or, alternatively, the fair value of loan collateral. The unallocated reserve generally serves to compensate for the uncertainty in estimating loan losses, including the possibility of changes in risk ratings and specific reserve allocations in the loan portfolio as a result of the Company’s ongoing risk management system.

A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan. This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Specific allocations are applied when quantifiable factors are present requiring a greater allocation than that established using the classified asset approach, as defined by the Office of the Comptroller of the Currency. Accrual of interest is discontinued and interest accrued and unpaid is removed at the time such amounts are delinquent 90 days, unless management is aware of circumstances which warrant continuing the interest accrual. Interest is recognized for nonaccrual loans only upon receipt and only after all principal amounts are current according to the terms of the contract.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. The Company performs an annual goodwill impairment test in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 142 (“SFAS No. 142”), which requires that goodwill and intangible assets that have indefinite lives no longer be amortized but be reviewed for impairment annually, or more frequently if certain conditions occur. Prior to the adoption of SFAS No. 142, goodwill was being amortized using the straight-line method over a period of 15 years. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

Employee Benefit Plans

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

In accordance with FASB Statement No. 123, Share-Based Payment (Revised 2004) (“SFAS No. 123R), the fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses various assumptions. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. For additional information, see Note 11, Employee Benefit Plans, in the accompanying Notes to Consolidated Financial Statements included elsewhere in this report.

Income Taxes

The Company is subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where it conducts business. Due to the complexity of these laws, taxpayers and the taxing authorities may subject these laws to different interpretations. Management must make conclusions and estimates about the application of these innately intricate laws, related regulations, and case law. When preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. Taxing authorities have the ability to challenge management’s analysis of the tax law or any reinterpretation management makes in its ongoing assessment of facts and the developing case law. Management assesses the reasonableness of its effective tax rate quarterly based on its current estimate of net income and the applicable taxes expected for the full year. On a quarterly basis, management also reviews circumstances and developments in tax law affecting the reasonableness of deferred tax assets and liabilities and reserves for contingent tax liabilities.

Acquisitions

On November 1, 2005, the Company completed a branch purchase in which Bank of Little Rock sold its Southwest Little Rock, Arkansas location at 8500 Geyer Springs Road to Simmons First National Bank, a subsidiary of the Company. The acquisition included approximately $3.5 million in total deposits in addition to the fixed assets used in the branch operation. No loans were involved in the transaction. As a result of this transaction, the Company recorded additional goodwill and core deposit premiums of $151,000 and $31,000, respectively.

The system integration for the 2005 acquisition was completed on the acquisition date.

Net Interest Income

Net interest income, the Company's principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors that determine the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and the amount of non-interest bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate of 37.50%.

The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Company’s loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, began 2005 at 5.25% and increased 50 basis points in each of the four quarters to end the year at 7.25%. During 2006, the prime interest rate increased 50 basis points in the first quarter and 50 basis points in the second quarter to end the year at 8.25%. During 2007, the prime interest rate decreased 50 basis points in the third quarter and 50 basis points in the fourth quarter to end the year at 7.25%. The Federal Funds rate, which is the cost to banks of immediately available overnight funds, began 2005 at 2.25%. During 2005, the Federal Funds rate increased 50 basis points in each of the four quarters to end the year at 4.25%. During 2006, the Federal Funds rate increased 50 basis points in the first quarter and 50 basis points in the second quarter to end the year at 5.25%. During 2007, the Federal Funds rate decreased 50 basis points in the third quarter and 50 basis points in the fourth quarter to end the year at 4.25%.

The Company’s practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. Historically, approximately 70% of the Company’s loan portfolio and approximately 80% of the Company’s time deposits have repriced in one year or less. These historical percentages are consistent with the Company’s current interest rate sensitivity.

For the year ended December 31, 2007, net interest income on a fully taxable equivalent basis was $95.6 million, an increase of $3.6 million, or 3.9%, from the same period in 2006. The increase in net interest income was the result of a $15.5 million increase in interest income offset by an $11.9 million increase in interest expense. As a result, the net interest margin was 3.96% for the year ended December 31, 2007, unchanged from 2006.

The $15.5 million increase in interest income for 2007 is primarily the result of a 39 basis point increase in the yield on earning assets associated with the repricing to a higher interest rate environment, along with a growth in loans. The higher interest rates resulted in a $8.5 million increase in interest income. More specifically, $5.1 million of the increase is associated with the repricing of the Company’s loan portfolio that resulted from loans that matured during the period or were tied to a rate that fluctuated with changes in market rates. Another $3.3 million of the increase was due to the repricing of the investment portfolio that resulted from investments that matured during the period or were tied to a rate that fluctuated with changes in market rates. As a result, the average rate earned on the loan portfolio increased 29 basis points from 7.50% to 7.79%, and the average rate on the investment portfolio increased 68 basis points from 4.41% to 5.09%. The growth in average loans accounted for an increase of $6.3 million in interest income.

The $11.9 million increase in interest expense for 2007 is primarily the result of a 45 basis point increase in the cost of funds due to competitive repricing during a higher interest rate environment, coupled with a $76 million increase in average interest bearing liabilities generated through internal growth. The higher interest rates accounted for an $8.6 million increase in interest expense. The most significant component of this increase was the $9.8 million increase associated with the repricing of the Company’s time deposits that resulted from time deposits that matured during the period or were tied to a rate that fluctuated with changes in market rates. As a result of this repricing, the average rate paid on time deposits increased 61 basis points from 4.05% to 4.66%. The higher level of average interest bearing liabilities resulted in a $3.2 million increase in interest expense. More specifically, the higher level of average interest bearing liabilities was primarily the result of increases of approximately $70.7 million from internal deposit growth.

For the year ended December 31, 2006, net interest income on a fully taxable equivalent basis was $92.0 million, a decrease of $1.5 million, or 1.6%, from the same period in 2005. The decrease in net interest income was the result of a $20.2 million increase in interest income offset by a $21.7 million increase in interest expense. As a result, the net interest margin decreased 17 basis points to 3.96% for the year ended December 31, 2006, when compared to 4.13% for 2005.

During January 2008, the federal funds rate and the prime interest rate each decreased 125 basis points to 3.00% and 6.00%, respectively. The Company currently believes it is reasonably possible the federal funds rate and the prime interest rate will decrease further in the foreseeable future; however, there can be no assurance to that effect or as to the magnitude of any decrease should a decrease occur, as changes in market interest rates are dependent upon a variety of factors that are beyond the Company’s control. The Company’ interest rate risk model reflects a slight margin compression for approximately 60 days, then turning positive. Due to the previously mentioned rate decreases and uncertainty of future rate movements, the Company anticipates a flat to slightly declining margin during 2008.

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the years ended December 31, 2007, 2006 and 2005, respectively, as well as changes in fully taxable equivalent net interest margin for the years 2007 versus 2006 and 2006 versus 2005.

Table 1:

Analysis of Net Interest Income

(FTE =Fully Taxable Equivalent)

	Years Ended December 31
(In thousands)	2007			2006			2005

Interest income	$	168,536		$	153,362		$	133,071
FTE adjustment		3,463			3,185			3,234

Interest income - FTE		171,999			156,547			136,305
Interest expense		76,420			64,558			42,814

Net interest income - FTE	$	95,579		$	91,989		$	93,491

Yield on earning assets - FTE		7.13	%		6.74	%		6.02	%

Cost of interest bearing liabilities		3.69	%		3.24	%		2.21	%

Net interest spread - FTE		3.44	%		3.50	%		3.81	%

Net interest margin - FTE		3.96	%		3.96	%		4.13	%

Table 2:

Changes in Fully Taxable Equivalent Net Interest Margin

(In thousands)	2007 vs. 2006			2006 vs. 2005

Increase due to change in earning assets	$	6,959		$	5,056
Increase due to change in earning asset yields		8,496			15,186
Decrease due to change in interest rates paid on
interest bearing liabilities		(8,638	)		(19,813	)
Decrease due to change in interest bearing liabilities		(3,226	)		(1,931	)

Increase (decrease) in net interest income	$	3,591		$	(1,502	)

Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for each of the years in the three-year period ended December 31, 2007. 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.

Table 3: Average Balance Sheets and Net Interest Income Analysis

	Years Ended December 31
	2007						2006						2005
	Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/
(In thousands)	Balance		Expense		Rate(%)		Balance		Expense		Rate(%)		Balance		Expense		Rate(%)

ASSETS

Earning Assets
Interest bearing balances
due from banks	$	22,957	$	1,161		5.06	$	22,746	$	1,072		4.71	$	20,837	$	580		2.78
Federal funds sold		26,798		1,418		5.29		20,223		1,057		5.23		30,598		925		3.02
Investment securities - taxable		395,388		18,362		4.64		410,445		15,705		3.83		425,030		13,898		3.27
Investment securities - non-taxable		131,369		8,454		6.44		117,931		7,573		6.42		122,047		7,670		6.28
Mortgage loans held for sale		7,971		505		6.34		7,666		476		6.21		9,356		552		5.90
Assets held in trading accounts		4,958		100		2.02		4,590		71		1.55		4,584		99		2.16
Loans		1,822,777		141,999		7.79		1,740,477		130,593		7.50		1,651,950		112,581		6.82
Total interest earning assets		2,412,218		171,999		7.13		2,324,078		156,547		6.74		2,264,402		136,305		6.02
Non-earning assets		254,656						251,261						233,132

Total assets	$	2,666,874					$	2,575,339					$	2,497,534


LIABILITIES AND
STOCKHOLDERS’ EQUITY

Liabilities
Interest bearing liabilities
Interest bearing transaction
and savings deposits	$	736,160	$	13,089		1.78	$	737,328	$	11,658		1.58	$	762,558	$	7,777		1.02
Time deposits		1,124,557		52,385		4.66		1,052,705		42,592		4.05		950,820		26,431		2.78
Total interest bearing deposits		1,860,717		65,474		3.52		1,790,033		54,250		3.03		1,713,378		34,208		2.00


Federal funds purchased and
securities sold under agreement
to repurchase		113,167		5,371		4.75		100,280		4,615		4.60		102,041		3,104		3.04
Other borrowed funds
Short-term debt		14,757		804		5.45		21,065		1,227		5.82		32,076		1,101		3.43
Long-term debt		81,408		4,771		5.86		82,525		4,466		5.41		89,590		4,401		4.91
Total interest bearing liabilities		2,070,049		76,420		3.69		1,993,903		64,558		3.24		1,937,085		42,814		2.21


Non-interest bearing liabilities
Non-interest bearing deposits		307,041						308,804						303,974
Other liabilities		23,156						21,114						16,499
Total liabilities		2,400,246						2,323,821						2,257,558
Stockholders’ equity		266,628						251,518						239,976
Total liabilities and
stockholders’ equity	$	2,666,874					$	2,575,339					$	2,497,534
Net interest spread						3.44						3.50						3.81
Net interest margin			$	95,579		3.96			$	91,989		3.96			$	93,491		4.13

Table 4 shows changes in interest income and interest expense, resulting from changes in volume and changes in interest rates for each of the years ended December 31, 2007 and 2006, as compared to prior years. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.

Table 4: Volume/Rate Analysis

	Years Ended December 31
	2007 over 2006									2006 over 2005
(In thousands, on a fully				Yield/									Yield/
taxable equivalent basis)	Volume			Rate			Total			Volume			Rate			Total

Increase (decrease) in

Interest income
Interest bearing balances
due from banks	$	10		$	79		$	89		$	57		$	435		$	492
Federal funds sold		348			13			361			(387	)		518			131
Investment securities - taxable		(594	)		3,252			2,658			(491	)		2,299			1,808
Investment securities - non-taxable		865			17			882			(263	)		166			(97	)
Mortgage loans held for sale		19			10			29			(104	)		28			(76	)
Assets held in trading accounts		6			24			30			--			(28	)		(28	)
Loans		6,305			5,101			11,406			6,244			11,768			18,012

Total		6,959			8,496			15,455			5,056			15,186			20,242

Interest expense
Interest bearing transaction and
savings deposits		(18	)		1,450			1,432			(265	)		4,145			3,880
Time deposits		3,044			6,749			9,793			3,078			13,083			16,161
Federal funds purchased
and securities sold under
agreements to repurchase		608			148			756			(55	)		1,566			1,511
Other borrowed funds
Short-term debt		(347	)		(75	)		(422	)		(465	)		591			126
Long-term debt		(61	)		366			305			(362	)		428			66

Total		3,226			8,638			11,864			1,931			19,813			21,744
Increase (decrease) in
net interest income	$	3,733		$	(142	)	$	3,591		$	3,125		$	(4,627	)	$	(1,502	)

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 level of provision to the allowance is based on management's judgment, with consideration given to the composition, maturity and other qualitative characteristics of the portfolio, historical loan loss experience, assessment of current economic conditions, past due and non-performing loans and net loan loss experience. It is management's practice to review the allowance on at least a quarterly basis, but generally on a monthly basis, to determine the level of provision made to the allowance after considering the factors noted above.

The provision for loan losses for 2007, 2006 and 2005 was $4.2 million, $3.8 million and $7.5 million, respectively. During 2007, the Company sustained a low rate of net credit card charge-offs of 1.14%, allowing the provision to remain at a level similar to that of 2006. However, the provision increased somewhat due to an increase in non-performing assets and in net loan charge-offs, particularly in the Northwest Arkansas region.

The provision reduction from 2005 to 2006 was primarily driven by two factors. First, credit card net charge-offs were down $2.6 million, from $4.0 million in 2005 to $1.4 million in 2006. The Company recorded credit card net charge-offs of 1.06% of credit card balances for 2006 compared to 2.85% for 2005. Second, there was improvement in the credit quality of the loan portfolio, particularly due to the payoff of two large credit relationships in 2006. One was upgraded two levels from substandard to watch, based on improved financial condition of the borrower, and was ultimately paid off. The other impaired relationship, graded substandard, was refinanced with another financial institution. A specific reserve was applied to both of these credit relationships. Additional loans were classified in 2006 as non-performing based upon various criteria; however, there were no specific reserve allocations required for these loans. The provision for loan losses was reduced due to the continued significant reduction in credit card charge-offs and the improvement in credit quality of loans with specific reserves.

Non-Interest Income

Total non-interest income was $46.0 million in 2007, compared to $43.9 million in 2006 and $42.3 million in 2005. Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and credit card fees. Non-interest income also includes income on the sale of mortgage loans, investment banking income, premiums on sale of student loans, income from the increase in cash surrender values of bank owned life insurance, and gains (losses) from sales of securities.

Table 5 shows non-interest income for the years ended December 31, 2007, 2006 and 2005, respectively, as well as changes in 2007 from 2006 and in 2006 from 2005.

Table 5: Non-Interest Income

								2007					2006
	Years Ended December 31							Change from					Change from
(In thousands)	2007		2006		2005			2006					2005

Trust income	$	6,218	$	5,612	$	5,589		$	606		10.80	%	$	23		0.41	%
Service charges on deposit accounts		14,794		15,795		15,818			(1,001	)	(6.34	)		(23	)	(0.15	)
Other service charges and fees		3,016		2,561		2,017			455		17.77			544		26.97
Income on sale of mortgage loans, net of commissions		2,766		2,849		2,919			(83	)	(2.91	)		(70	)	(2.40	)
Income on investment banking, net of commissions		623		341		416			282		82.70			(75	)	(18.03	)
Credit card fees		12,217		10,742		10,252			1,475		13.73			490		4.78
Premiums on sale of student loans		2,341		2,071		1,822			270		13.04			249		13.67
Bank owned life insurance income		1,493		1,523		953			(30	)	(1.97	)		570		59.81
Other income		2,535		2,453		2,700			82		3.34			(247	)	(9.15	)
Loss on sale of securities, net		--		--		(168	)		--		--			168		100.00
Total non-interest income	$	46,003	$	43,947	$	42,318		$	2,056		4.68	%	$	1,629		3.85	%

Recurring fee income for 2007 was $36.2 million, an increase of $1.5 million, or 4.4%, when compared with the 2006 amounts. Trust income increased by $606,000, mainly due to the addition of new customer accounts. Service charges on deposit accounts decreased by $1.0 million, principally due to reduced income on insufficient funds (“NSF”) charges. The decrease in NSF income is primarily due to the increase in consumer use of debit cards and internet banking, and the associated decrease in paper transactions. Other service charges and fees increased by $455,000, primarily due to an increase in ATM income, driven by an increase in pin based debit card volume and an improvement in the fee structure. Credit card fees increased $1.5 million, primarily due to a higher volume of credit and debit card transactions.

Recurring fee income for 2006 was $34.7 million, an increase of $1.0 million, or 3.0%, when compared with the 2005 amounts. This increase was principally the result of growth in ATM income due to increased volume and an improvement in the fee structure. The increase in credit card fees was primarily the result of a pricing change related to interchange fees, along with an increase in transaction volume.

During the year ended December 31, 2007, income on investment banking increased $282,000, or 82.7% from the year ended 2006. This improvement was due to additional sales volume driven by the yield curve and customers’ expectation of future interest rate decreases.

Premiums on sale of student loans increased by $270,000, or 13.0%, in 2007 over 2006. The increase was primarily due to accelerating the sale of student loans during 2007. Normally, as student loans reach payout status, the Company generally sells student loans into the secondary market. Because of changes in the industry relative to loan consolidations, and in order to protect the premium on these loans, the Company made the decision to sell student loans prior to the payout period. This resulted in recognition of premium in 2007 on loans that normally would have been sold in 2008. Premiums on sale of student loans increased by $249,000, or 13.7%, in 2006 over 2005 due to similar accelerated sales during 2006.

On April 29, 2005, the Company invested an additional $25 million in Bank Owned Life Insurance (“BOLI”). BOLI income increased by $570,000 in 2006 over 2005, primarily due to the timing of the investment, with approximately eight months of earnings in 2005 compared to a full year in 2006. The remainder of the increase can be attributed to an improved earnings credit on the investment in 2006.

There were no gains or losses on sale of securities during 2007 or 2006. During the second quarter of 2005, the Company sold certain available-for-sale investment securities obtained in a prior acquisition that did not fit its current investment portfolio strategy. As a result of this liquidation, the Company recognized an after-tax loss on sale of securities of $168,000.

Non-Interest Expense

Non-interest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for the operation of the Company. Management remains committed to controlling the level of non-interest expense, through the continued use of expense control measures that have been installed. The Company utilizes an extensive profit planning and reporting system involving all affiliates. Based on a needs assessment of the business plan for the upcoming year, monthly and annual profit plans are developed, including manpower and capital expenditure budgets. These profit plans are subject to extensive initial reviews and monitored by management on a monthly basis. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. Management also regularly monitors staffing levels at each affiliate, to ensure productivity and overhead are in line with existing workload requirements.

Non-interest expense for 2007 was $94.2 million, an increase of $5.1 million or 5.8%, from 2006. The increase in non-interest expense during 2007 compared to 2006 is primarily attributed to normal on-going operating expenses and the incremental expenses of approximately $634,000 associated with the operation of new financial centers opened during 2007. Also, during 2007, the Company recorded a nonrecurring expense of $1.2 million related to indemnification obligations with Visa U.S.A. litigation. When normalized for both the Visa litigation expense and the additional expenses from the expansion, non-interest expense for 2007 increased by 3.7% over 2006.

Credit card expense for 2007 increased $860,000, or 26.6%, over 2006, primarily due to the increased volume in credit card applications, card creation, interchange and other related expense resulting from initiatives the Company has taken to stabilize its credit card portfolio. See Loan Portfolio section for additional information.

Other non-interest expense for 2007 increased $2.1 million, or 19.2%, compared to 2006. The most significant components of the increase were the $1.2 million in expense related to indemnification obligations with Visa U.S.A. litigation and an increase of $442,000 of student loan origination fees paid by the Company in 2007.

In October 2007, the Company, as a member of Visa U.S.A. Inc. (Visa U.S.A.), received shares of restricted stock in Visa, Inc. (Visa) as a result of its participation in the global restructuring of Visa U.S.A., Visa Canada Association, and Visa International Service Association in preparation for an initial public offering. Visa U.S.A asserts that the Company and other Visa U.S.A. member banks are obligated to share in potential losses resulting from certain litigation. As stated above, the Company accrued $1.2 million in 2007 in connection with the Company’s obligation to indemnify Visa U.S.A. for costs and liabilities incurred in connection with certain litigation based on the Company’s proportionate membership interest in Visa U.S.A. With respect to the remaining litigation related to Visa U.S.A., at this time the Company does not know the probable outcome of such litigation and cannot reasonably estimate a range of loss. The Company will continue to monitor these litigation matters and record any change in the liability related to other litigation upon additional information becoming available. Also as a result of the guidance from the SEC, the Company will not reflect in its 2007 financial statements any value for its membership interest in Visa as a result of the Visa Reorganization. Upon successful completion of the anticipated IPO, expected to occur in the first half of 2008, the fair value of such interest will be realized based on the value of shares used to establish the escrow account and shares redeemed for cash (limited to the amount of the obligation recorded). The Company expects the value of these shares to exceed the aggregate amount of its recorded liability. While the Company expects these events to occur, there can be no assurance that the restructuring and initial public offering of Visa will be successful and that the shares of Visa allocated to the Company will have sufficient value to cover the Company’s obligations under the indemnification agreement. Furthermore, additional accruals may be required in future periods should the Company’s estimate of its obligations under the indemnification agreement change.

As stated above, the Company had a $442,000 increase in expense for payment of student loan origination fees in 2007 from 2006. The Federal Student Loan Program began a three-year phase out program of origination fees on its loans late in 2006. Most of the national market began waiving and absorbing the fees themselves during the phase-out period; therefore, as a leader in the Arkansas student loan market, the Company decided to do the same in order to prevent putting itself at a competitive disadvantage. Proper accounting for these fees requires them to be amortized over the period in which the Company holds the loans. The Company expensed $558,000 of student loan origination fees during 2007, compared to $116,000 in 2006, an increase of $442,000, or 381%. As future loans are originated with waived fees, management anticipates this expense to increase through March 31, 2008, then to gradually decline each quarter through the end of the three year phase-out period, March 31, 2009. Thereafter, the expense should decline as the remaining fees are amortized over the remaining life of the loans.

The Federal Deposit Insurance Reform Act of 2005 authorized eligible insured depository institutions to share a one-time assessment credit pool. Several of the Company’s subsidiary banks qualified for the credit, and were not required to pay FDIC deposit insurance since that time. However, during 2007, the credits at some of the banks were depleted. Other subsidiary banks will deplete their credits during the first half of 2008, resulting in an expected increase in deposit insurance expense of approximately $400,000 during 2008, compared with 2007.

Non-interest expense for 2006 was $89.1 million, an increase of $3.5 million or 4.1%, from 2005. The increase in non-interest expense during 2006 compared to 2005 is primarily attributed to normal on-going operating expenses and the incremental expenses of approximately $1.1 million associated with the operation of new financial centers opened during 2005 and 2006. When normalized for the additional expenses from the expansion, non-interest expense for 2006 increased by 2.8% over 2005.

The increase in credit card expense in 2006 over 2005 was primarily attributable to the Company’s travel rewards program. Accumulated travel rewards expire after 36 months. The Company has introduced several new initiatives to make its product more competitive. One of the key initiatives introduced in 2005 was to move as many qualifying accounts as possible from a standard VISA product to a Platinum VISA Rewards product. As a result of this conversion process, travel rewards expense increased in 2006 over 2005.

Core deposit premium amortization expense recorded for the years ended December 31, 2007, 2006 and 2005, was $817,000, $830,000 and $830,000, respectively. The Company’s estimated amortization expense for each of the following five years is: 2008 – $807,000; 2009 – $802,000; 2010 – $698,000; 2011 – $451,000; and 2012 – $321,000. The estimated amortization expense decreases as core deposit premiums fully amortize in future years.

Table 6 below shows non-interest expense for the years ended December 31, 2007, 2006 and 2005, respectively, as well as changes in 2007 from 2006 and in 2006 from 2005.

Table 6: Non-Interest Expense

							2007					2006
	Years Ended December 31						Change from					Change from
(In thousands)	2007		2006		2005		2006					2005

Salaries and employee benefits	$	54,865	$	53,442	$	51,270	$	1,423		2.66	%	$	2,172		4.24	%
Occupancy expense, net		6,674		6,385		5,840		289		4.53			545		9.33
Furniture and equipment expense		5,865		5,718		5,758		147		2.57			(40	)	(0.69	)
Loss on foreclosed assets		212		136		191		76		55.88			(55	)	(28.80	)
Deposit insurance		328		270		279		58		21.48			(9	)	(3.23	)
Other operating expenses
Professional services		2,779		2,490		2,201		289		11.61			289		13.13
Postage		2,309		2,278		2,281		31		1.36			(3	)	(0.13	)
Telephone		1,820		1,961		1,847		(141	)	(7.19	)		114		6.17
Credit card expense		4,095		3,235		2,693		860		26.58			542		20.13
Operating supplies		1,669		1,611		1,555		58		3.60			56		3.60
Amortization of core deposits		817		830		830		(13	)	(1.57	)		--		0.00
Other expense		12,764		10,712		10,839		2,052		19.16			(127	)	(1.17	)
Total non-interest expense	$	94,197	$	89,068	$	85,584	$	5,129		5.76	%	$	3,484		4.07	%

Income Taxes

The provision for income taxes for 2007 was $12.4 million, compared to $12.4 million in 2006 and $12.5 million in 2005. The effective income tax rates for the years ended 2007, 2006 and 2005 were 31.2%, 31.2% and 31.7%, respectively.

Loan Portfolio

The Company's loan portfolio averaged $1.823 billion during 2007 and $1.740 billion during 2006. As of December 31, 2007, total loans were $1.850 billion, compared to $1.783 billion on December 31, 2006. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral, obtaining and monitoring collateral, providing an adequate allowance for loan losses and regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry and, in the case of credit card loans, which are unsecured, by geographic region. The Company seeks to use diversification within the loan portfolio to reduce credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. The Company uses the allowance for loan losses as a method to value the loan portfolio at its estimated collectable amount. Loans are regularly reviewed to facilitate the identification and monitoring of deteriorating credits.

Consumer loans consist of credit card loans, student loans and other consumer loans. Consumer loans were $379.9 million at December 31, 2007, or 20.5% of total loans, compared to $370.8 million, or 20.8% of total loans at December 31, 2006. The $9.2 million consumer loan increase from 2006 to 2007 is the result of a $22.7 million, or 15.8%, increase in credit cards, offset by a decline in student loans and other consumer loans.

The Company continues to experience significant competitive pressure from the credit card industry. From 2002 through 2005, the credit card portfolio decreased by approximately $10 million to $14 million each year, primarily due to closed accounts. However, the Company experienced a slow-down in this trend throughout 2006, with the credit card portfolio balance increasing by approximately $300,000 from December 31, 2005 to December 31, 2006. The credit card portfolio balance increased by a larger increment each quarter of 2007, when compared to the same period in 2006.

After five consecutive years of net decreases in the number of credit card accounts, the Company experienced an addition of 1,650 net new accounts in 2006. The Company added approximately 15,000 net new accounts in 2007. Management believes the increase in outstanding balances and the addition of new accounts are the result of the introduction of several initiatives over the past two years to make the Company’s credit card products more competitive. The latest of those initiatives was the introduction of a 7.25% fixed rate card in July 2006, with no fees and no rewards. While these results are positive, because of the significant competitive pressures in the credit card industry and uncertainty in the economy, management cannot be assured that the growth trend can be sustained.

As student loans reach payout status, the Company generally sells these loans into the secondary market. Because of changes in the industry relative to loan consolidations, and in order to protect the premium, the Company made the decision to sell some student loans prior to the payout period in 2006, and continued the practice throughout 2007. These early sales created a decline in the portfolio balance of student loans at December 31, 2007 and 2006.

Real estate loans consist of construction loans, single family residential loans and commercial loans. Real estate loans were $1.186 billion at December 31, 2007, or 64.1% of total loans, compared to $1.154 billion, or 64.7% of total loans at December 31, 2006, an increase of $32 million. Commercial real estate loans increased $29.8 million during 2007 and single-family residential loans increased by $18.2 million. Real estate loan growth was somewhat mitigated by a $16.5 million, or 5.9%, reduction in real estate development and construction loans due to the slow down in the industry.

Commercial loans consist of commercial loans, agricultural loans and financial institution loans. Commercial loans were $274.0 million at December 31, 2007, or 14.8% of total loans, compared to the $245.1 million, or 13.7% of total loans at December 31, 2006. This $28.9 million increase in commercial loans is primarily due to a $15.1 million increase in other commercial loans and an $11.1 million increase in agricultural loans.

The amounts of loans outstanding at the indicated dates are reflected in table 7, according to type of loan.

Table 7: Loan Portfolio

	Years Ended December 31

(In thousands)	2007		2006		2005		2004		2003

Consumer
Credit cards	$	166,044	$	143,359	$	143,058	$	155,326	$	165,919
Student loans		76,277		84,831		89,818		83,283		86,301
Other consumer		137,624		142,596		138,051		128,552		142,995
Real Estate
Construction		260,924		277,411		238,898		169,001		111,567
Single family residential		382,676		364,450		340,839		318,488		261,936
Other commercial		542,184		512,404		479,684		481,728		408,452
Commercial
Commercial		193,091		178,028		184,920		158,613		162,122
Agricultural		73,470		62,293		68,761		62,340		57,393
Financial institutions		7,440		4,766		20,499		1,079		6,370
Other		10,724		13,357		13,579		12,966		15,259

Total loans	$	1,850,454	$	1,783,495	$	1,718,107	$	1,571,376	$	1,418,314

Table 8 reflects the remaining maturities and interest rate sensitivity of loans at December 31, 2007.

Table 8: Maturity and Interest Rate Sensitivity of Loans

			Over 1
			year
	1 year		through		Over
(In thousands)	or less		5 years		5 years		Total

Consumer	$	303,577	$	75,652	$	716	$	379,945
Real estate		715,745		444,462		25,577		1,185,784
Commercial		215,246		57,558		1,197		274,001
Other		5,327		4,947		450		10,724

Total	$	1,239,895	$	582,619	$	27,940	$	1,850,454


Predetermined rate	$	669,830	$	520,576	$	27,768	$	1,218,174
Floating rate		570,065		62,043		172		632,280

Total	$	1,239,895	$	582,619	$	27,940	$	1,850,454

Asset Quality

A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contracted terms of the loans. Impaired loans include non-performing loans (loans past due 90 days or more and nonaccrual loans) and certain other loans identified by management that are still performing.

Non-performing loans are comprised of (a) nonaccrual loans, (b) loans that are contractually past due 90 days and (c) other loans for which terms have been restructured to provide a reduction or deferral of interest or principal, because of deterioration in the financial position of the borrower. The subsidiary banks recognize income principally on the accrual basis of accounting. When loans are classified as nonaccrual, generally, the accrued interest is charged off and no further interest is accrued. Loans, excluding credit card loans, are placed on a nonaccrual basis either: (1) when there are serious doubts regarding the collectability of principal or interest, or (2) when payment of interest or principal is 90 days or more past due and either (i) not fully secured or (ii) not in the process of collection. If a loan is determined by management to be uncollectable, the portion of the loan determined to be uncollectable is then charged to the allowance for loan losses.

Credit card loans are classified as impaired when payment of interest or principal is 90 days past due. Litigation accounts are placed on nonaccrual until such time as deemed uncollectable. Credit card loans are generally charged off when payment of interest or principal exceeds 180 days past due, but are turned over to the credit card recovery department, to be pursued until such time as they are determined, on a case-by-case basis, to be uncollectable.

Table 9 presents information concerning non-performing assets, including nonaccrual and restructured loans and other real estate owned.

Table 9: Non-performing Assets

	Years Ended December 31
(In thousands)	2007			2006			2005			2004			2003

Nonaccrual loans	$	9,909		$	8,958		$	7,296		$	10,918		$	10,049
Loans past due 90 days or more
(principal or interest payments)		1,282			1,097			1,131			1,085			1,518
Restructured		--			--			--			--			--
Total non-performing loans		11,191			10,055			8,427			12,003			11,567

Other non-performing assets
Foreclosed assets held for sale		2,629			1,940			1,540			1,839			2,979
Other non-performing assets		17			52			16			83			393
Total other non-performing assets		2,646			1,992			1,556			1,922			3,372

Total non-performing assets	$	13,837		$	12,047		$	9,983		$	13,925		$	14,939

Allowance for loan losses to
non-performing loans		226.10	%		252.46	%		319.48	%		220.84	%		219.13	%
Non-performing loans to total loans		0.60	%		0.56	%		0.49	%		0.76	%		0.82	%
Non-performing assets to total assets		0.51	%		0.45	%		0.40	%		0.58	%		0.67	%

There was no interest income on the nonaccrual loans recorded for the years ended December 31, 2007, 2006 and 2005.

At December 31, 2007, impaired loans were $12.5 million compared to $12.8 million in 2006. On an ongoing basis, management evaluates the underlying collateral on all impaired loans and allocates specific reserves, where appropriate, in order to absorb potential losses if the collateral were ultimately foreclosed.

Allowance for Loan Losses

Overview

The Company maintains an allowance for loan losses. This allowance is created through charges to income and maintained at a sufficient level to absorb expected losses in the Company’s loan portfolio. The allowance for loan losses is determined monthly based on management’s assessment of several factors such as 1) historical loss experience based on volumes and types of loans, 2) reviews or evaluations of the loan portfolio and allowance for loan losses, 3) trends in volume, maturity and composition of the portfolio, 4) off balance sheet credit risk, 5) volume and trends in delinquent and nonaccrual loans, 6) lending policies and procedures including those for loan losses, collections and recoveries, 7) national and local economic trends and conditions, 8) concentrations of credit that might affect loss experience across one or more components of the loan portfolio, 9) the experience, ability and depth of lending management and staff and 10) other factors and trends, which will affect specific loans or categories of loans.

As the Company evaluates the allowance for loan losses, it is categorized as follows: 1) specific allocations, 2) allocations for classified assets with no specific allocation, 3) general allocations for each major loan category and 4) unallocated portion.

Specific Allocations

Specific allocations are made when factors are present requiring a greater reserve than would be required when using the assigned risk rating allocation. As a general rule, if a specific allocation is warranted, it is the result of an analysis of a previously classified credit or relationship. The evaluation process in specific allocations for the Company includes a review of appraisals or other collateral analysis. These values are compared to the remaining outstanding principal balance. If a loss is determined to be reasonably possible, the possible loss is identified as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the expected future cash flows of the loan.

Allocations for Classified Assets with No Specific Allocation

The Company establishes allocations for loans rated “watch” through “doubtful” in accordance with the guidelines established by the regulatory agencies. A percentage rate is applied to each category of these loan categories to determine the level of dollar allocation.

General Allocations

The Company establishes general allocations for each major loan category. This section also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans. The allocations in this section are based on a historical review of loan loss experience and past due accounts. The Company gives consideration to trends, changes in loan mix, delinquencies, prior losses, and other related information.

Unallocated Portion

Allowance allocations other than specific, classified and general for the Company are included in unallocated.

Reserve for Unfunded Commitments

Historically, the Company has included reserves for unfunded commitments in the allowance for loan losses. On March 31, 2006, the reserve for unfunded commitments was reclassified from the allowance for loan losses to other liabilities. This reserve will be maintained at a level sufficient to absorb losses arising from unfunded loan commitments. The adequacy of the reserve for unfunded commitments is determined monthly based on methodology similar to the Company’s methodology for determining the allowance for loan losses. Future net adjustments to the reserve for unfunded commitments will be included in other non-interest expense.

An analysis of the allowance for loan losses for the last five years is shown in table 10.

Table 10: Allowance for Loan Losses

(In thousands)	2007			2006			2005			2004			2003

Balance, beginning of year	$	25,385		$	26,923		$	26,508		$	25,347		$	21,948

Loans charged off
Credit card		2,663			2,454			4,950			4,589			4,705
Other consumer		1,538			1,242			1,240			2,144			1,987
Real estate		1,916			1,868			1,048			1,263			1,504
Commercial		715			1,317			3,688			2,409			2,674
Total loans charged off		6,832			6,881			10,926			10,405			10,870

Recoveries of loans previously charged off
Credit card		1,024			1,040			832			720			670
Other consumer		483			629			636			683			644
Real estate		648			901			251			277			218
Commercial		414			536			2,096			751			987
Total recoveries		2,569			3,106			3,815			2,431			2,519
Net loans charged off		4,263			3,775			7,111			7,974			8,351
Allowance for loan losses of
acquired institutions		--			--			--			1,108			2,964
Reclass to reserve for unfunded commitments (1)		--			(1,525	)		--			--			--
Provision for loan losses		4,181			3,762			7,526			8,027			8,786

Balance, end of year	$	25,303		$	25,385		$	26,923		$	26,508		$	25,347

Net charge-offs to average loans		0.23	%		0.22	%		0.43	%		0.52	%		0.64	%
Allowance for loan losses to period-end loans		1.37	%		1.42	%		1.57	%		1.69	%		1.79	%
Allowance for loan losses to net charge-offs		593.55	%		672.45	%		378.6	%		332.4	%		303.5	%

(1) On March 31, 2006, the reserve for unfunded commitments was reclassified from the allowance for loan losses to other liabilities.

Provision for Loan Losses

The amount of provision to the allowance each year was based on management's judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic conditions, past due and non-performing loans and net loss experience. It is management's practice to review the allowance on at least a quarterly basis, but generally on a monthly basis, to determine the level of provision made to the allowance after considering the factors noted above.

Allocated Allowance for Loan Losses

The Company utilizes a consistent methodology in the calculation and application of its allowance for loan losses. Because there are portions of the portfolio that have not matured to the degree necessary to obtain reliable loss statistics from which to calculate estimated losses, the unallocated portion of the allowance is an integral component of the total allowance. Although unassigned to a particular credit relationship or product segment, this portion of the allowance is vital to safeguard against the imprecision inherent when estimating credit losses.

Several factors in the national economy, including interest rate volatility predicated by the Federal Reserve’s adjustments to the prime index over the past twenty-four months, the effect of fuel prices on the commercial and consumer markets, uncertainty in the residential housing market and other loan sectors which may be exhibiting weaknesses, further justifies the need for unallocated reserves.

As of December 31, 2007, the allowance for loan losses reflects a decrease of approximately $82,000 from December 31, 2006. As a general rule, the allocation in each category within the allowance reflects the overall changes in loan portfolio mix.

The Company’s allocation of the allowance for loans losses at December 31, 2007 remained relatively consistent with the allocation at December 31, 2006. The unallocated portion of the allowance decreased approximately $501,000 during the year ended December 31, 2007. This decrease in the unallocated portion of the allowance is primarily related to increases in general allocations based on growth in the loan portfolio.

The Company still has some concerns over the uncertainty of the economy and the impact of pricing in the poultry and timber industries in Arkansas. The Company is also cautious regarding the softening of the real estate market in Arkansas. Based on its analysis of loans within these business sectors, the Company believes the allowance for loan losses is adequate for the year ended December 31, 2007. Management actively monitors the status of these industries as they relate to the Company’s loan portfolio and makes changes to the allowance for loan losses as necessary.

The Company allocates the allowance for loan losses according to the amount deemed to be reasonably necessary to provide for losses incurred within the categories of loans set forth in table 11.

Table 11: Allocation of Allowance for Loan Losses

	December 31
	2007					2006					2005					2004					2003
	Allowance		% of			Allowance		% of			Allowance		% of			Allowance		% of			Allowance		% of
(In thousands)	Amount		loans(1)			Amount		loans(1)			Amount		loans(1)			Amount		loans(1)			Amount		loans(1)

Credit cards	$	3,841		9.0	%	$	3,702		8.0	%	$	3,887		8.3	%	$	4,217		9.9	%	$	3,913		11.7	%
Other consumer		1,501		11.5	%		1,402		12.8	%		1,158		13.3	%		1,097		13.5	%		1,597		16.2	%
Real estate		10,157		64.1	%		9,835		64.7	%		9,870		61.7	%		9,357		61.7	%		8,723		55.1	%
Commercial		2,528		14.8	%		2,856		13.7	%		5,857		15.9	%		4,820		14.1	%		5,113		15.9	%
Other		187		0.6	%		--		0.8	%		--		0.8	%		--		0.8	%		4		1.1	%
Unallocated		7,089					7,590					6,151					7,017					5,997

Total	$	25,303		100.0	%	$	25,385		100.0	%	$	26,923		100.0	%	$	26,508		100.0	%	$	25,347		100.0	%

(1) Percentage of loans in each category to total loans

Investments and Securities

The Company's securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as either held-to-maturity, available-for-sale or trading.

Held-to-maturity securities, which include any security for which management has the positive intent and ability to hold until maturity, are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity. Interest and dividends on investments in debt and equity securities are included in income when earned.

Available-for-sale securities, which include any security for which management has no immediate plans to sell, but which may be sold in the future, are carried at fair value. Realized gains and losses, based on amortized cost of the specific security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders' equity. Premiums and discounts are amortized and accreted, respectively, to interest income, using the constant yield method over the period to maturity. Interest and dividends on investments in debt and equity securities are included in income when earned.

The Company's philosophy regarding investments is conservative, based on investment type and maturity. Investments in the portfolio primarily include U.S. Treasury securities, U.S. Government agencies, mortgage-backed securities and municipal securities. The Company's general policy is not to invest in derivative type investments or high-risk securities, except for collateralized mortgage-backed securities for which collection of principal and interest is not subordinated to significant superior rights held by others.

Held-to-maturity and available-for-sale investment securities were $190.3 million and $340.6 million, respectively, at December 31, 2007, compared to the held-to-maturity amount of $179.9 million and available-for-sale amount of $347.2 million at December 31, 2006.

As of December 31, 2007, $38.5 million, or 20.2%, of the held-to-maturity securities were invested in U.S. Treasury securities and obligations of U.S. government agencies, 29.9% of which will mature in less than five years. In the available-for-sale securities, $323.5 million, or 95.8%, were in U.S. Treasury and U.S. government agency securities, 41.8% of which will mature in less than five years.

In order to reduce the Company's income tax burden, an additional $149.3 million, or 78.4%, of the held-to-maturity securities portfolio, as of December 31, 2007, was invested in tax-exempt obligations of state and political subdivisions. In the available-for-sale securities, $858,000, or 0.25% were invested in tax-exempt obligations of state and political subdivisions. Most of the state and political subdivision debt obligations are non-rated bonds and represent relatively small, Arkansas issues, which are evaluated on an ongoing basis. There are no securities of any one state and political subdivision issuer exceeding ten percent of the Company's stockholders' equity at December 31, 2007.

The Company has approximately $129,000, or 0.1%, in mortgaged-backed securities in the held-to-maturity portfolio at December 31, 2007. In the available-for-sale securities, $2.8 million, or 0.9% were invested in mortgaged-backed securities.

As of December 31, 2007, the held-to-maturity investment portfolio had gross unrealized gains of $1.827 million and gross unrealized losses of $373,000.

The Company had no gross realized gains during the years ended December 31, 2007, 2006 and 2005, resulting from the sales and/or calls of securities. There were no gross realized losses resulting from sales and/or calls of securities for the years ended December 31, 2007 and 2006, with $275,000 of gross realized losses during 2005.

Trading securities, which include any security held primarily for near-term sale, are carried at fair value. Gains and losses on trading securities are included in other income. The Company's trading account is established and maintained for the benefit of investment banking. The trading account is typically used to provide inventory for resale and is not used to take advantage of short-term price movements.

Table 12 presents the carrying value and fair value of investment securities for each of the years indicated.

Table 12: Investment Securities

	Years Ended December 31
	2007									2006
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value

Held-to-Maturity
U.S. Treasury	$	1,500	$	14	$	--		$	1,514	$	--	$	--	$	--		$	--
U.S. Government
agencies		37,000		722		(19	)		37,703		54,998		367		(272	)		55,093
Mortgage-backed
securities		129		2		--			131		155		3		(1	)		157
State and political
subdivisions		149,262		1,089		(354	)		149,997		122,472		667		(892	)		122,247
Other securities		2,393		--		--			2,393		2,319		--		--			2,319

Total	$	190,284	$	1,827	$	(373	)	$	191,738	$	179,944	$	1,037	$	(1,165	)	$	179,816

Available-for-Sale
U.S. Treasury	$	5,498	$	26	$	--		$	5,524	$	6,970	$	--	$	(30	)	$	6,940
U.S. Government
agencies		317,998		3,090		(299	)		320,789		326,301		287		(4,177	)		322,411
Mortgage-backed
securities		2,923		--		(165	)		2,758		3,032		--		(76	)		2,956
State and political
subdivisions		855		3		--			858		1,360		10		--			1,370
Other securities		10,608		109		--			10,717		13,035		470		--			13,505

Total	$	337,882	$	3,228	$	(464	)	$	340,646	$	350,698	$	767	$	(4,283	)	$	347,182

Table 13 reflects the amortized cost and estimated fair value of securities at December 31, 2007, by contractual maturity and the weighted average yields (for tax-exempt obligations on a fully taxable equivalent basis, assuming a 37.5% tax rate) of such securities. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.

Table 13: Maturity Distribution of Investment Securities

	December 31, 2007
				Over			Over
				1 year			5 years
	1 year			through			through			Over			No fixed						Par		Fair
(In thousands)	or less			5 years			10 years			10 years			maturity			Total			Value		Value

Held-to-Maturity
U.S. Treasury	$	1,500		$	--		$	--		$	--		$	--		$	1,500		$	1,500	$	1,514
U.S. Government
agencies		8,000			2,000			27,000			--			--			37,000			37,000		37,703
Mortgage-backed
securities		--			--			43			86			--			129			129		131
State and political
subdivisions		14,803			43,753			61,004			29,702			--			149,262			149,334		149,997
Other securities		--			--			--			930			1,463			2,393			2,393		2,393

Total	$	24,303		$	45,753		$	88,047		$	30,718		$	1,463		$	190,284		$	190,356	$	191,738

Percentage of total		12.8	%		24.0	%		46.3	%		16.1	%		0.8	%		100.0	%

Weighted average yield		3.9	%		4.1	%		4.6	%		4.2	%		3.1	%		4.3	%

Available-for-Sale
U.S. Treasury	$	5,498		$	--		$	--		$	--		$	--		$	5,498		$	5,500	$	5,524
U.S. Government
agencies		86,697			43,183			188,118			--			--			317,998			318,066		320,789
Mortgage-backed
securities		--			1			849			2,073			--			2,923			2,967		2,758
State and political
subdivisions		395			460			--			--			--			855			855		858
Other securities		--			--			--			--			10,608			10,608			10,717		10,717

Total	$	92,590		$	43,644		$	188,967		$	2,073		$	10,608		$	337,882		$	338,105	$	340,646

Percentage of total		27.4	%		12.9	%		55.9	%		0.6	%		3.2	%		100.0	%

Weighted average yield		3.9	%		4.6	%		5.7	%		5.2	%		6.5	%		5.1	%

Deposits

Deposits are the Company’s primary source of funding for earning assets and are primarily developed through the Company’s network of 83 financial centers. The Company offers a variety of products designed to attract and retain customers with a continuing focus on developing core deposits. The Company’s core deposits consist of all deposits excluding time deposits of $100,000 or more and brokered deposits. As of December 31, 2007, core deposits comprised 77.5% of the Company’s total deposits.

The Company continually monitors the funding requirements at each affiliate bank, along with competitive interest rates in the markets it serves. Because of the Company’s community banking philosophy, affiliate executives in the local markets establish the interest rates offered on both core and non-core deposits. This approach ensures that the interest rates being paid are competitively priced for each particular deposit product and structured to meet the funding requirements. The Company believes it is paying a competitive rate, when compared with pricing in those markets.

The Company manages its interest expense through deposit pricing and does not anticipate a significant change in total deposits. The Company believes that additional funds can be attracted and deposit growth can be accelerated through deposit pricing if it experiences increased loan demand or other liquidity needs. The Company began to utilize brokered deposits during 2005 as an additional source of funding to meet liquidity needs.

The Company’s total deposits as of December 31, 2007 were $2.183 billion, an increase of $7 million, or 0.32%, from $2.176 billion at December 31, 2006. The Company had $39 million and $50 million of brokered deposits at December 31, 2007 and 2006, respectively.

Table 14 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, 2007.

Table 14: Average Deposit Balances and Rates

	December 31
	2007					2006					2005
	Average		Average			Average		Average			Average		Average
(In thousands)	Amount		Rate Paid			Amount		Rate Paid			Amount		Rate Paid

Non-interest bearing transaction
accounts	$	307,041		--		$	308,804		--		$	303,974		--
Interest bearing transaction and
savings deposits		736,160		1.78	%		737,328		1.58	%		762,558		1.02	%
Time deposits
$100,000 or more		441,854		4.83	%		407,778		4.08	%		371,871		2.83	%
Other time deposits		682,703		4.55	%		644,927		3.92	%		578,949		2.74	%

Total	$	2,167,758		3.02	%	$	2,098,837		2.59	%	$	2,017,352		1.79	%

The Company's maturities of large denomination time deposits at December 31, 2007 and 2006 are presented in table 15.

Table 15: Maturities of Large Denomination Time Deposits

	Time Certificates of Deposit
	($100,000 or more)
	December 31
	2007					2006
(In thousands)	Balance		Percent			Balance		Percent

Maturing
Three months or less	$	188,388		41.7	%	$	123,214		27.4	%
Over 3 months to 6 months		101,297		22.4	%		108,716		24.1	%
Over 6 months to 12 months		120,924		26.7	%		145,716		32.4	%
Over 12 months		41,653		9.2	%		72,664		16.1	%

Total	$	452,262		100.00	%	$	450,310		100.00	%

Short-Term Debt

Federal funds purchased and securities sold under agreements to repurchase were $128.8 million at December 31, 2007, as compared to $105.0 million at December 31, 2006. Other short-term borrowings, consisting of U.S. TT&L Notes and short-term FHLB borrowings, were $1.8 million at December 31, 2007, as compared to $6.1 million at December 31, 2006.

The Company has historically funded its growth in earning assets through the use of core deposits, large certificates of deposits from local markets, FHLB borrowings and Federal funds purchased. Management anticipates that these sources will provide necessary funding in the foreseeable future.

Long-Term Debt

The Company’s long-term debt was $82.3 million and $83.3 million at December 31, 2007 and 2006, respectively. The outstanding balance for December 31, 2007 includes $51.4 million in FHLB long-term advances and $30.9 million of trust preferred securities. The outstanding balance for December 31, 2006, includes $2.0 million in long-term debt, $50.4 million in FHLB long-term advances and $30.9 million of trust preferred securities.

During the year ended December 31, 2007, the Company decreased long-term debt by $1.0 million, or 1.2% from December 31, 2006. This decrease is attributable to the Company’s final annual $2.0 million payment on its note payable along with scheduled principal pay downs on FHLB long-term advances, offset by additional FHLB long-term advances.

Aggregate annual maturities of long-term debt at December 31, 2007 are presented in table 16.

Table 16: Maturities of Long-Term Debt

		Annual
(In thousands)	Year	Maturities

	2008	$	12,859
	2009		5,700
	2010		5,647
	2011		4,577
	2012		3,749
	Thereafter		49,753
	Total	$	82,285

Capital

Overview

At December 31, 2007, total capital reached $272.4 million. Capital represents shareholder ownership in the Company – the book value of assets in excess of liabilities. At December 31, 2007, the Company’s equity to asset ratio was 10.12% compared to 9.75% at year-end 2006.

Capital Stock

At the Company’s annual shareholder meeting held on April 10, 2007, the shareholders approved an amendment to the Articles of Incorporation increasing the number of authorized shares of Class A, $0.01 par value, Common Stock from 30,000,000 to 60,000,000. Class A Common Stock is the Company’s only outstanding class of stock.

Stock Repurchase

During the year ended December 31, 2007, the Company repurchased a total of 320,726 shares of stock with a weighted average repurchase price of $26.75 per share. Under the current stock repurchase plan, the Company can repurchase an additional 690,852 shares.

Cash Dividends

The Company declared cash dividends on its Common Stock of $0.73 per share for the twelve months ended December 31, 2007, compared to $0.68 per share for the twelve months ended December 31, 2006. In recent years, the Company increased dividends no less than annually and presently plans to continue with this practice.

Parent Company Liquidity

The primary liquidity needs of the Parent Company are the payment of dividends to shareholders, the funding of debt obligations and the share repurchase plan. The primary sources for meeting these liquidity needs are the current cash on hand at the parent company and the future dividends received from the eight affiliate banks. Payment of dividends by the eight affiliate banks is subject to various regulatory limitations. Reference is made to Item 7A, Liquidity and Qualitative Disclosures About Market Risk discussion for additional information regarding the parent company’s liquidity.

Risk-Based Capital

The Company’s subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2007, the Company meets all capital adequacy requirements to which it is subject.

As of the most recent notification from regulatory agencies, the subsidiaries were well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and subsidiaries must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institutions’ categories.

The Company's risk-based capital ratios at December 31, 2007 and 2006 are presented in table 17.

Table 17: Risk-Based Capital

	December 31
(In thousands)	2007			2006

Tier 1 capital
Stockholders’ equity	$	272,406		$	259,016
Trust preferred securities		30,000			30,000
Goodwill and core deposit premiums		(63,706	)		(64,334	)
Unrealized loss on available-
for-sale securities		(1,728	)		2,198
Other		--			--

Total Tier 1 capital		236,972			226,880

Tier 2 capital
Qualifying unrealized gain on
available-for-sale equity securities		52			167
Qualifying allowance for loan losses		23,866			22,953

Total Tier 2 capital		23,918			23,120

Total risk-based capital	$	260,890		$	250,000

Risk weighted assets	$	1,906,321		$	1,831,063

Ratios at end of year
Leverage ratio		9.06	%		8.83	%
Tier 1 capital		12.43	%		12.39	%
Total risk-based capital		13.69	%		13.64	%
Minimum guidelines
Leverage ratio		4.00	%		4.00	%
Tier 1 capital		4.00	%		4.00	%
Total risk-based capital		8.00	%		8.00	%

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

In the normal course of business, the Company enters into a number of financial commitments. Examples of these commitments include but are not limited to long-term debt financing, operating lease obligations, unfunded loan commitments and letters of credit.

The Company’s long-term debt at December 31, 2007, includes notes payable, FHLB long-term advances and trust preferred securities, all of which the Company is contractually obligated to repay in future periods.

Operating lease obligations entered into by the Company are generally associated with the operation of a few of the Company’s financial centers located throughout the state of Arkansas. The financial obligation by the Company on these locations is considered immaterial due to the limited number of financial centers, which operate under an agreement of this type.

Commitments to extend credit and letters of credit are legally binding, conditional agreements generally having fixed expiration or termination dates. These commitments generally require customers to maintain certain credit standards and are established based on management’s credit assessment of the customer. The commitments may expire without being drawn upon. Therefore, the total commitment does not necessarily represent future requirements.

The funding requirements of the Company's most significant financial commitments, at December 31, 2007 are shown in table 18.

Table 18: Funding Requirements of Financial Commitments

	Payments due by period
	Less than		1-3		3-5		Greater than
(In thousands)	1 Year		Years		Years		5 Years		Total

Long-term debt	$	12,859	$	11,347	$	8,326	$	49,753	$	82,285
Credit card loan commitments		244,052		--		--		--		244,052
Other loan commitments		411,421		--		--		--		411,421
Letters of credit		9,906		--		--		--		9,906

The Company has $64.0 million and $64.8 million total goodwill and core deposit premiums for the periods ended December 31, 2007 and December 31, 2006, respectively. Because of the Company’s high level of these two intangible assets, management believes a useful calculation is tangible return on equity. This non-GAAP calculation for the twelve months ended December 31, 2007, 2006, 2005, 2004 and 2003, which is similar to the GAAP calculation of return on average stockholders’ equity, is presented in table 19.

Table 19: Return on Tangible Equity

(In thousands)	2007			2006			2005			2004			2003

Twelve months ended

Return on average stockholders equity: (A/C)		10.26	%		10.93	%		11.24	%		10.64	%		11.57	%
Return on tangible equity: (A+B)/(C-D)		13.78	%		15.03	%		15.79	%		14.94	%		14.03	%

Net income	$	27,360		$	27,481		$	26,962		$	24,446		$	23,790	(A)
Amortization of intangibles, net of taxes		511			519			522			494			108	(B)
Average stockholders' equity		266,628			251,518			239,976			229,719			205,683	(C)
Average goodwill and core deposits, net		64,409			65,233			65,913			62,836			35,335	(D)

During the fourth quarter 2007, the Company recorded a nonrecurring $744,000 after tax charge, or a $0.05 reduction in diluted earnings per share, related to indemnification obligations with Visa U.S.A. litigation. For further discussion related to the Visa U.S.A. litigation, see the analysis of “Non-Interest Expense” included elsewhere in this section. On December 31, 2004, the Company recorded a nonrecurring $470,000 after tax charge, or a $0.03 reduction in diluted earnings per share, related to the write off of deferred debt issuance cost associated with the redemption of its 9.12% trust preferred securities. During the second quarter 2003, the Company recorded a nonrecurring $0.03 addition to earnings per share, resulting from the sale of its mortgage servicing portfolio. In light of these events, management believes operating earnings (earnings excluding nonrecurring items) is a useful calculation in reflection the Company’s performance. This non-GAAP calculation for the twelve months ended December 31, 2007, 2006, 2005, 2004 and 2003 is presented in table 20.

Table 20: Operating Earnings

(In thousands, except share data)	2007			2006		2005		2004			2003

Twelve months ended

Net Income	$	27,360		$	27,481	$	26,962	$	24,446		$	23,790
Nonrecurring items
Write off of deferred debt issuance cost		--			--		--		771			--
Gain on sale of mortgage servicing		--			--		--		--			(771	)
VISA litigation expense		1,220			--		--		--			--
Tax effect		(476	)		--		--		(301	)		301
Net nonrecurring items		744			--		--		470			(470	)
Operating Income	$	28,104		$	27,481	$	26,962	$	24,916		$	23,320

Diluted earnings per share	$	1.92		$	1.90	$	1.84	$	1.65		$	1.65
Nonrecurring items
Write off of deferred debt issuance cost		--			--		--		0.05			--
Gain on sale of mortgage servicing		--			--		--		--			(0.05	)
VISA litigation expense		0.09			--		--		--			--
Tax effect		(0.04	)		--		--		(0.02	)		0.02
Net nonrecurring items		0.05			--		--		0.03			(0.03	)
Diluted operating earnings per share	$	1.97		$	1.90	$	1.84	$	1.68		$	1.62

Quarterly Results

Selected unaudited quarterly financial information for the last eight quarters is shown in table 21.

Table 21: Quarterly Results

	Quarter
(In thousands, except per share data)	First		Second		Third		Fourth		Total

2007
Net interest income	$	22,231	$	22,793	$	23,570	$	23,522	$	92,116
Provision for loan losses		751		831		850		1,749		4,181
Non-interest income		11,454		11,337		11,373		11,839		46,003
Non-interest expense		23,214		23,011		23,223		24,749		94,197
Net income		6,637		7,031		7,500		6,192		27,360
Basic earnings per share		0.47		0.50		0.53		0.45		1.95
Diluted earnings per share		0.46		0.49		0.53		0.44		1.92

2006
Net interest income	$	21,952	$	22,192	$	22,377	$	22,283	$	88,804
Provision for loan losses		1,708		789		602		663		3,762
Non-interest income		10,612		11,516		11,026		10,793		43,947
Non-interest expense		22,125		22,301		22,135		22,507		89,068
Net income		5,988		7,296		7,447		6,750		27,481
Basic earnings per share		0.42		0.51		0.53		0.47		1.93
Diluted earnings per share		0.41		0.51		0.51		0.47		1.90

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Liquidity and Market Risk Management

Parent Company

The Company has leveraged its investment in subsidiary banks and depends upon the dividends paid to it, as the sole shareholder of the subsidiary banks, as a principal source of funds for dividends to shareholders, stock repurchases and debt service requirements. At December 31, 2007, undivided profits of the Company's subsidiaries were approximately $155 million, of which approximately $11 million was available for the payment of dividends to the Company without regulatory approval. In addition to dividends, other sources of liquidity for the Company are the sale of equity securities and the borrowing of funds.

Banking Subsidiaries

Generally speaking, the Company's banking subsidiaries rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash used in investing activities. Typical of most banking companies, significant financing activities include: deposit gathering; use of short-term borrowing facilities, such as Federal funds purchased and repurchase agreements; and the issuance of long-term debt. The banks' primary investing activities include loan originations and purchases of investment securities, offset by loan payoffs and investment maturities.

Liquidity represents an institution's ability to provide funds to satisfy demands from depositors and borrowers, by either converting assets into cash or accessing new or existing sources of incremental funds. A major responsibility of management is to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to constantly measure liquid assets, as well as relevant ratios concerning earning asset levels and purchased funds. The management and board of directors of each bank subsidiary monitor these same indicators and make adjustments as needed. At December 31, 2007, each subsidiary bank was within established guidelines and total corporate liquidity remains strong. At December 31, 2007, cash and cash equivalents, trading and available-for-sale securities and mortgage loans held for sale were 17.4% of total assets, as compared to 19.4% at December 31, 2006.

Liquidity Management

The objective of the Company’s liquidity management is to access adequate sources of funding to ensure that cash flow requirements of depositors and borrowers are met in an orderly and timely manner. Sources of liquidity are managed so that reliance on any one funding source is kept to a minimum. The Company’s liquidity sources are prioritized for both availability and time to activation.

The Company’s liquidity is a primary consideration in determining funding needs and is an integral part of asset/liability management. Pricing of the liability side is a major component of interest margin and spread management. Adequate liquidity is a necessity in addressing this critical task. There are six primary and secondary sources of liquidity available to the Company. The particular liquidity need and timeframe determine the use of these sources.

The first source of liquidity available to the Company is Federal funds. Federal funds, primarily from downstream correspondent banks, are available on a daily basis and are used to meet the normal fluctuations of a dynamic balance sheet. In addition, the Company and its affiliates have approximately $106 million in Federal funds lines of credit from upstream correspondent banks that can be accessed, when needed. In order to ensure availability of these upstream funds, the Company has a plan for rotating the usage of the funds among the upstream correspondent banks, thereby providing approximately $40 million in funds on a given day. Historical monitoring of these funds has made it possible for the Company to project seasonal fluctuations and structure its funding requirements on a month-to-month basis.

A second source of liquidity is the retail deposits available through the Company’s network of affiliate banks throughout Arkansas. Although this method can be a somewhat more expensive alternative to supplying liquidity, this source can be used to meet intermediate term liquidity needs.

Third, the Company’s affiliate banks have lines of credits available with the Federal Home Loan Bank. While the Company uses portions of those lines to match off longer-term mortgage loans, the Company also uses those lines to meet liquidity needs. Approximately $428 million of these lines of credit are currently available, if needed.

Fourth, the Company uses a laddered investment portfolio that ensures there is a steady source of intermediate term liquidity. These funds can be used to meet seasonal loan patterns and other intermediate term balance sheet fluctuations. Approximately 64% of the investment portfolio is classified as available-for-sale. The Company also uses securities held in the securities portfolio to pledge when obtaining public funds.

The fifth source of liquidity is the ability to access large deposits from both the public and private sector to fund short-term liquidity needs.

Finally, the Company has established a $5 million unsecured line of credit with a major commercial bank that could be used to meet unexpected liquidity needs at both the parent company level as well as at any affiliate bank.

The Company believes the various sources available are ample liquidity for short-term, intermediate-term and long-term liquidity.

Market Risk Management

Market risk arises from changes in interest rates. The Company has risk management policies to monitor and limit exposure to market risk. In asset and liability management activities, policies designed to minimize structural interest rate risk are in place. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified.

Interest Rate Sensitivity

Interest rate risk represents the potential impact of interest rate changes on net income and capital resulting from mismatches in repricing opportunities of assets and liabilities over a period of time. A number of tools are used to monitor and manage interest rate risk, including simulation models and interest sensitivity gap analysis. Management uses simulation models to estimate the effects of changing interest rates and various balance sheet strategies on the level of the Company’s net income and capital. As a means of limiting interest rate risk to an acceptable level, management may alter the mix of floating and fixed-rate assets and liabilities, change pricing schedules and manage investment maturities during future security purchases.

The simulation model incorporates management’s assumptions regarding the level of interest rates or balance changes for indeterminate maturity deposits for a given level of market rate changes. These assumptions have been developed through anticipated pricing behavior. Key assumptions in the simulation models include the relative timing of prepayments, cash flows and maturities. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of a change in interest rates on net income or capital. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors.

The table below presents the Company’s interest rate sensitivity position at December 31, 2007. This analysis is based on a point in time and may not be meaningful because assets and liabilities are categorized according to contractual maturities, repricing periods and expected cash flows rather than estimating more realistic behaviors, as is done in the simulation models. Also, this analysis does not consider subsequent changes in interest rate level or spreads between asset and liability categories.

Table: 22 Interest Rate Sensitivity

	Interest Rate Sensitivity Period
		0-30			31-90			91-180			181-365			1-2			2-5		Over 5
(In thousands, except ratios)	Days			Days			Days			Days			Years			Years			Years			Total

Earning assets
Short-term investments	$	27,600		$	--		$	--		$	--		$	--		$	--		$	--		$	27,600
Assets held in trading
accounts		2,694			--			2,964			--			--			--			--			5,658
Investment securities		89,347			23,878			71,103			56,805			159,839			72,101			57,857			530,930
Mortgage loans held for sale		11,097			--			--			--			--			--			--			11,097
Loans		587,465			167,138			159,624			318,746			271,514			311,105			34,862			1,850,454
Total earning assets		718,203			191,016			233,691			375,551			431,353			383,206			92,719			2,425,739

Interest bearing liabilities
Interest bearing transaction
and savings deposits		446,077			--			--			--			63,031			189,093			63,032			761,233
Time deposits		149,350			278,314			254,324			309,063			98,480			21,912			--			1,111,443
Short-term debt		130,583			--			--			--			--			--			--			130,583
Long-term debt		630			15,943			2,287			4,762			5,763			25,308			27,592			82,285
Total interest bearing
liabilities		726,640			294,257			256,611			313,825			167,274			236,313			90,624			2,085,544

Interest rate sensitivity Gap	$	(8,437	)	$	(103,241	)	$	(22,920	)	$	61,726		$	264,079		$	146,893		$	2,095		$	340,195
Cumulative interest rate
sensitivity Gap	$	(8,437	)	$	(111,678	)	$	(134,598	)	$	(72,872	)	$	191,207		$	338,100		$	340,195
Cumulative rate sensitive assets
to rate sensitive liabilities		98.8	%		89.1	%		89.5	%		95.4	%		110.9	%		116.9	%		116.3	%
Cumulative Gap as a % of
earning assets		(0.3	)%		(4.6	)%		(5.5	)%		(3.0	)%		7.9	%		13.9	%		14.0	%

ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

Management’s Report on Internal Control Over Financial Reporting	41
Report of Independent Registered Public Accounting Firm
Report on Internal Control Over Financial Reporting	42
Report on Consolidated Financial Statements	43
Consolidated Balance Sheets, December 31, 2007 and 2006	44
Consolidated Statements of Income, Years Ended
December 31, 2007, 2006 and 2005	45
Consolidated Statements of Cash Flows, Years Ended
December 31, 2007, 2006 and 2005	46
Consolidated Statements of Stockholders’ Equity, Years Ended
December 31, 2007, 2006 and 2005	47
Notes to Consolidated Financial Statements,
December 31, 2007, 2006 and 2005	48

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 36 hereof.

Management’s Report on Internal Control Over Financial Reporting

The management of Simmons First National Corporation (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2007, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2007, based on those criteria.

BKD, LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, immediately follows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee, Board of Directors and Stockholders

Simmons First National Corporation

Pine Bluff, Arkansas

We have audited Simmons First National Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenances of records that, in reasonable details, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Simmons First National Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Simmons First National Corporation and our report dated February 21, 2008, expressed an unqualified opinion thereon.

BKD, LLP

/s/ BKD, LLP

Pine Bluff, Arkansas

February 21, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee, Board of Directors and Stockholders

Simmons First National Corporation

Pine Bluff, Arkansas

We have audited the accompanying consolidated balance sheets of Simmons First National Corporation as of December 31, 2007, and 2006, and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the years in the three-year period ended December 31, 2007. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and 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, 2007, and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Simmons First National Corporation’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 21, 2008, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

BKD, LLP

/s/ BKD, LLP

Pine Bluff, Arkansas

February 21, 2008

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 and 2006

(In thousands, except share data)	2007			2006

ASSETS

Cash and non-interest bearing balances due from banks	$	82,630		$	83,452
Interest bearing balances due from banks		21,140			45,829
Federal funds sold		6,460			21,870
Cash and cash equivalents		110,230			151,151
Investment securities		530,930			527,126
Mortgage loans held for sale		11,097			7,091
Assets held in trading accounts		5,658			4,487
Loans		1,850,454			1,783,495
Allowance for loan losses		(25,303	)		(25,385	)
Net loans		1,825,151			1,758,110
Premises and equipment		75,473			67,926
Foreclosed assets held for sale, net		2,629			1,940
Interest receivable		21,345			21,974
Bank owned life insurance		38,039			36,133
Goodwill		60,605			60,605
Core deposit premiums		3,382			4,199
Other assets		7,908			10,671
TOTAL ASSETS	$	2,692,447		$	2,651,413

LIABILITIES

Non-interest bearing transaction accounts	$	310,181		$	305,327
Interest bearing transaction accounts and savings deposits		761,233			738,763
Time deposits		1,111,443			1,131,441
Total deposits		2,182,857			2,175,531
Federal funds purchased and securities sold
under agreements to repurchase		128,806			105,036
Short-term debt		1,777			6,114
Long-term debt		82,285			83,311
Accrued interest and other liabilities		24,316			22,405
Total liabilities		2,420,041			2,392,397

STOCKHOLDERS’ EQUITY

Capital stock
Class A, common, par value $0.01 a share, authorized
60,000,000 shares at 2007, and 30,000,000 shares at 2006
13,918,368 issued and outstanding at 2007 and 14,196,855 at 2006		139		142
Surplus		41,019		48,678
Undivided profits		229,520		212,394
Accumulated other comprehensive income (loss)
Unrealized appreciation (depreciation) on available-for-sale
securities, net of income taxes of $1,037 at 2007
and income tax credits $1,319 at 2006		1,728		(2,198	)
Total stockholders’ equity		272,406		259,016
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,692,447	$	2,651,413

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

(In thousands, except per share data)	2007		2006		2005

INTEREST INCOME
Loans	$	141,706	$	130,248	$	112,238
Federal funds sold		1,418		1,057		925
Investment securities		23,646		20,438		18,677
Mortgage loans held for sale		505		476		552
Assets held in trading accounts		100		71		99
Interest bearing balances due from banks		1,161		1,072		580
TOTAL INTEREST INCOME		168,536		153,362		133,071

INTEREST EXPENSE
Deposits		65,474		54,250		34,208
Federal funds purchased and securities sold
under agreements to repurchase		5,371		4,615		3,104
Short-term debt		804		1,227		1,101
Long-term debt		4,771		4,466		4,401
TOTAL INTEREST EXPENSE		76,420		64,558		42,814

NET INTEREST INCOME		92,116		88,804		90,257
Provision for loan losses		4,181		3,762		7,526
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES		87,935		85,042		82,731
NON-INTEREST INCOME
Trust income		6,218		5,612		5,589
Service charges on deposit accounts		14,794		15,795		15,818
Other service charges and fees		3,016		2,561		2,017
Income on sale of mortgage loans, net of commissions		2,766		2,849		2,919
Income on investment banking, net of commissions		623		341		416
Credit card fees		12,217		10,742		10,252
Premiums on sale of student loans		2,341		2,071		1,822
Bank owned life insurance income		1,493		1,523		953
Other income		2,535		2,453		2,700
Loss on sale of securities, net of taxes		--		--		(168	)
TOTAL NON-INTEREST INCOME		46,003		43,947		42,318

NON-INTEREST EXPENSE
Salaries and employee benefits		54,865		53,442		51,270
Occupancy expense, net		6,674		6,385		5,840
Furniture and equipment expense		5,865		5,718		5,758
Loss on foreclosed assets		212		136		191
Deposit insurance		328		270		279
Other operating expenses		26,253		23,117		22,246
TOTAL NON-INTEREST EXPENSE		94,197		89,068		85,584
INCOME BEFORE INCOME TAXES		39,741		39,921		39,465
Provision for income taxes		12,381		12,440		12,503
NET INCOME	$	27,360	$	27,481	$	26,962
BASIC EARNINGS PER SHARE	$	1.95	$	1.93	$	1.88
DILUTED EARNINGS PER SHARE	$	1.92	$	1.90	$	1.84

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

(In thousands)	2007			2006			2005

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	27,360		$	27,481		$	26,962
Items not requiring (providing) cash
Depreciation and amortization		5,510			5,501			4,861
Provision for loan losses		4,181			3,762			7,526
Net amortization of investment securities		116			188			370
Deferred income taxes		865			2,221			1,342
Loss on sale of securities, net of taxes		--			--			168
Bank owned life insurance income		(1,493	)		(1,523	)		(953	)
Changes in
Interest receivable		629			(3,220	)		(4,506	)
Mortgage loans held for sale		(4,006	)		766			1,389
Assets held in trading accounts		(1,171	)		143			285
Other assets		2,763			3,508			(1,949	)
Accrued interest and other liabilities		508			3,596			1,366
Income taxes payable		538			(863	)		142
Net cash provided by operating activities		35,800			41,560			37,003

CASH FLOWS FROM INVESTING ACTIVITIES
Net originations of loans		(75,161	)		(72,137	)		(156,243	)
Purchase of bank and branch locations,
net funds received		--			--			1,945
Purchases of premises and equipment, net		(12,240	)		(9,238	)		(10,150	)
Proceeds from sale of foreclosed assets		3,250			1,049			2,700
Proceeds from sale of securities		--			2,161			1,225
Proceeds from maturities of available-for-sale securities		146,379			130,345			88,382
Purchases of available-for-sale securities		(136,033	)		(106,088	)		(73,921	)
Proceeds from maturities of held-to-maturity securities		31,123			29,431			32,921
Purchases of held-to-maturity securities		(41,466	)		(59,213	)		(32,220	)
Purchases of bank owned life insurance		(413	)		(1,341	)		(25,000	)
Net cash used in investing activities		(84,561	)		(85,031	)		(170,361	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits		7,326			115,573			98,609
Net change in short-term debt		(4,337	)		(1,917	)		5,658
Dividends paid		(10,234	)		(9,666	)		(8,757	)
Proceeds from issuance of long-term debt		10,786			7,275			1,821
Repayment of long-term debt		(11,812	)		(10,984	)		(9,464	)
Net change in Federal funds purchased and
securities sold under agreements to repurchase		23,770			(2,187	)		2,438
Repurchase of common stock, net		(7,659	)		(5,045	)		(9,105	)
Net cash provided by financing activities		7,840			93,049			81,200
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS		(40,921	)		49,578			(52,158	)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR		151,151			101,573			153,731
CASH AND CASH EQUIVALENTS, END OF YEAR	$	110,230		$	151,151		$	101,573

See Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

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

Balance, December 31, 2004	$	146		$	62,826		$	(1,124	)	$	176,374		$	238,222
Comprehensive income
Net income		--			--			--			26,962			26,962
Change in unrealized depreciation on
available-for-sale securities, net of
income tax credits of $1,942		--			--			(3,236	)		--			(3,236	)
Comprehensive income														23,726
Stock issued as bonus shares – 5,620 shares		--			138			--			--			138
Exercise of stock options – 106,420 shares		1			1,432			--			--			1,433
Securities exchanged under stock option plan		--			(988	)		--			--			(988	)
Repurchase of common stock
– 371,453 shares		(4	)		(9,685	)		--			--			(9,689	)
Cash dividends declared ($0.61 per share)		--			--			--			(8,757	)		(8,757	)
Balance, December 31, 2005		143			53,723			(4,360	)		194,579			244,085
Comprehensive income
Net income		--			--			--			27,481			27,481
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $1,296		--			--			2,162			--			2,162
Comprehensive income														29,643
Stock issued as bonus shares – 10,200 shares		--			275			--			--			275
Exercise of stock options – 106,880 shares		1			1,516			--			--			1,517
Stock granted under
stock-based compensation plans		--			88			--			--			88
Securities exchanged under stock option plan		--			(1,291	)		--			--			(1,291	)
Repurchase of common stock
– 203,100 shares		(2	)		(5,633	)		--			--			(5,635	)
Cash dividends declared ($0.68 per share)		--			--			--			(9,666	)		(9,666	)
Balance, December 31, 2006		142			48,678			(2,198	)		212,394			259,016
Comprehensive income
Net income		--			--			--			27,360			27,360
Change in unrealized depreciation on
available-for-sale securities, net of
income taxes of $1,037		--			--			3,926			--			3,926
Comprehensive income														31,286
Stock issued as bonus shares – 15,146 shares		--			419			--			--			419
Exercise of stock options – 33,720 shares		--			509			--			--			509
Stock granted under
stock-based compensation plans		--			178			--			--			178
Securities exchanged under stock option plan		--			(203	)		--			--			(203	)
Repurchase of common stock
– 320,726 shares		(3	)		(8,562	)		--			--			(8,565	)
Cash dividends declared ($0.73 per share)		--			--			--			(10,234	)		(10,234	)
Balance, December 31, 2007	$	139		$	41,019		$	1,728		$	229,520		$	272,406

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Simmons First National Corporation is primarily engaged in providing a full range of banking services to individual and corporate customers through its subsidiaries and their branch banks in Arkansas. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

Operating Segments

The Company is organized on a subsidiary bank-by-bank basis upon which management makes decisions regarding how to allocate resources and assess performance. Each of the subsidiary banks provides a group of similar community banking services, including such products and services as loans; time deposits, checking and savings accounts; personal and corporate trust services; credit cards; investment management; and securities and investment services. The individual bank segments have similar operating and economic characteristics and have been reported as one aggregated operating segment.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the valuation of foreclosed assets and the allowance for foreclosure expenses. In connection with the determination of the allowance for loan losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.

Principles of Consolidation

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

Reclassifications

Various items within the accompanying financial statements for previous years have been reclassified to provide more comparative information. These reclassifications had no effect on net earnings.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers due from banks, Federal funds sold and securities purchased under agreements to resell as cash equivalents.

Investment Securities

Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity.

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders' equity. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity.

Trading securities, which include any security held primarily for near-term sale, are carried at fair value. Gains and losses on trading securities are included in other income.

Interest and dividends on investments in debt and equity securities are included in income when earned.

Mortgage Loans Held For Sale

Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Write-downs to fair value are recognized as a charge to earnings at the time the decline in value occurs. Forward commitments to sell mortgage loans are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are not mandatory forward commitments. These commitments are structured on a best efforts basis; therefore the Company is not required to substitute another loan or to buyback the commitment if the original loan does not fund. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. Fees received from borrowers to guarantee the funding of mortgage loans held for sale are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-offs are reported at their outstanding principal adjusted for any loans charged off and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the estimated life of the loan. Generally, loans are placed on nonaccrual status at ninety days past due and interest is considered a loss, unless the loan is well secured and in the process of collection.

Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Derivative Financial Instruments

The Company may enter into derivative contracts for the purposes of managing exposure to interest rate risk to meet the financing needs of its customers. The Company records all derivatives on the balance sheet at fair value. Historically, the Company’s policy has been not to invest in derivative type investments but in an effort to meet the financing needs of its customers, the Company entered into its first fair value hedge during the second quarter of 2003. Fair value hedges include interest rate swap agreements on fixed rate loans. For derivatives designated as hedging the exposure to changes in the fair value of the hedged item, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain of the hedging instrument. The fair value hedge is considered to be highly effective and any hedge ineffectiveness was deemed not material. The notional amount of the loan being hedged was $1.8 million at December 31, 2007 and $1.9 million at December 31, 2006.

Allowance for Loan Losses

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.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of acquired subsidiaries and branches. Financial Accounting Standards Board Statement No’s. 142 and No. 147 eliminated the amortization for these assets as of January 1, 2002. While goodwill is not amortized, impairment testing of goodwill is performed annually, or more frequently if certain conditions occur.

Core Deposit Premiums

Core deposit premiums represent the amount allocated to the future earnings potential of acquired deposits. The unamortized core deposit premiums are being amortized using both straight-line and accelerated methods over periods ranging from 8 to 11 years. Unamortized core deposit premiums are tested for impairment annually, or more frequently if certain conditions occur.

Fee Income

Periodic bankcard fees, net of direct origination costs, are recognized as revenue on a straight-line basis over the period the fee entitles the cardholder to use the card. Origination fees and costs for other loans are being amortized over the estimated life of the loan.

Income Taxes

Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

Earnings Per Share

Basic earnings per share are computed based on the weighted average number of shares outstanding during each year. Diluted earnings per share are computed using the weighted average common shares and all potential dilutive common shares outstanding during the period.

The computation of per share earnings is as follows:

(In thousands, except per share data)	2007		2006		2005

Net Income	$	27,360	$	27,481	$	26,962

Average common shares outstanding		14,044		14,226		14,375
Average common share stock options outstanding		197		248		312
Average diluted common shares		14,241		14,474		14,687

Basic earnings per share	$	1.95	$	1.93	$	1.88
Diluted earnings per share	$	1.92	$	1.90	$	1.84

Stock-Based Compensation

On January 1, 2006, the Company began recognizing compensation expense for stock options with the adoption of Statement of Financial Accounting Standards (SFAS) No. 123, Share-Based Payment (Revised 2004). See Note 11, Employee Benefit Plans, for additional information.

SFAS No. 123R requires pro forma disclosures of net income and earnings per share for all periods prior to the adoption of the fair value accounting method for stock-based employee compensation. The pro forma disclosures presented in Note 11, Employee Benefit Plans, use the fair value method of SFAS 123 to measure compensation expense for stock-based compensation plans for years prior to 2006.

NOTE 2: ACQUISITIONS

The system integration for the 2005 acquisition was completed on the acquisition date.

NOTE 3: INVESTMENT SECURITIES

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

	Years Ended December 31
	2007									2006
	Gross		Gross		Estimated							Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value

Held-to-Maturity

U.S. Treasury	$	1,500	$	14	$	--		$	1,514	$	--	$	--	$	--		$	--
U.S. Government
agencies		37,000		722		(19	)		37,703		54,998		367		(272	)		55,093
Mortgage-backed
securities		129		2		--			131		155		3		(1	)		157
State and political
subdivisions		149,262		1,089		(354	)		149,997		122,472		667		(892	)		122,247
Other securities		2,393		--		--			2,393		2,319		--		--			2,319

Total	$	190,284	$	1,827	$	(373	)	$	191,738	$	179,944	$	1,037	$	(1,165	)	$	179,816

Available-for-Sale

U.S. Treasury	$	5,498	$	26	$	--		$	5,524	$	6,970	$	--	$	(30	)	$	6,940
U.S. Government
agencies		317,998		3,090		(299	)		320,789		326,301		287		(4,177	)		322,411
Mortgage-backed
securities		2,923		--		(165	)		2,758		3,032		--		(76	)		2,956
State and political
subdivisions		855		3		--			858		1,360		10		--			1,370
Other securities		10,608		109		--			10,717		13,035		470		--			13,505

Total	$	337,882	$	3,228	$	(464	)	$	340,646	$	350,698	$	767	$	(4,283	)	$	347,182

Certain investment securities are valued at less than their historical cost. Total fair value of these investments at December 31, 2007, was $153.8 million, which is approximately 29.0% of the Company’s available-for-sale and held-to-maturity investment portfolio. These declines primarily resulted from previous increases in market interest rates.

Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. It is management’s intent to hold these securities to maturity.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the Company’s investments’ estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2007:

	Less Than 12 Months				12 Months or More				Total
	Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses

Held-to-Maturity

U.S. Government Agencies	$	--	$	--	$	6,981	$	19	$	6,981	$	19
Mortgage-backed securities		721		--		--		--		721		--
State and political subdivisions		9,717		93		32,921		261		42,638		354

Total	$	10,438	$	93	$	39,902	$	280	$	50,340	$	373

Available-for-Sale

U.S. Government Agencies	$	15,931	$	21	$	84,755	$	278	$	100,686	$	299
Mortgage-backed securities		--		--		2,757		165		2,757		165

Total	$	15,931	$	21	$	87,512	$	443	$	103,443	$	464

The following table shows the Company’s investments’ estimated fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2006:

	Less Than 12 Months				12 Months or More					Total
	Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses

Held-to-Maturity

U.S. Government Agencies	$	9,990	$	8	$	22,736	$	264	$	32,726	$	272
Mortgage-backed securities		--		--		86		1		86		1
State and political subdivisions		17,290		139		49,328		753		66,618		892

Total	$	27,280	$	147	$	72,150	$	1,018	$	99,430	$	1,165

Available-for-Sale

U.S. Treasury	$	2,471	$	2	$	4,469	$	28	$	6,940	$	30
U.S. Government Agencies		42,455		287		252,679		3,890		295,134		4,177
Mortgage-backed securities		788		23		2,167		53		2,955		76

Total	$	45,714	$	312	$	259,315	$	3,971	$	305,029	$	4,283

Income earned on the above securities for the years ended December 31, 2007, 2006 and 2005 is as follows:

(In thousands)	2007		2006		2005

Taxable
Held-to-maturity	$	2,521	$	2,007	$	1,056
Available-for-sale		15,841		13,698		12,842

Non-taxable
Held-to-maturity		5,228		4,635		4,588
Available-for-sale		56		98		191

Total	$	23,646	$	20,438	$	18,677

The Statement of Stockholders’ Equity includes other comprehensive income (loss). Other comprehensive income (loss) for the Company includes the change in the unrealized appreciation (depreciation) on available-for-sale securities. The changes in the unrealized appreciation (depreciation) on available-for-sale securities for the years ended December 31, 2007, 2006, and 2005 are as follows:

(In thousands)	2007		2006		2005

Unrealized holding gains (losses) arising during the period	$	3,926	$	2,162	$	(3,511	)
Losses realized in net income		--		--		275

Net change in unrealized appreciation (depreciation)
on available-for-sale securities	$	3,926	$	2,162	$	(3,236	)

The amortized cost and estimated fair value by maturity of securities are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities.

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

One year or less	$	24,303	$	24,327	$	92,590	$	92,386
After one through five years		45,753		46,042		43,644		43,658
After five through ten years		88,047		89,119		188,967		191,966
After ten years		30,718		30,787		2,073		1,919
Other securities		1,463		1,463		10,608		10,717

Total	$	190,284	$	191,738	$	337,882	$	340,646

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $410,645,000 at December 31, 2007 and $400,668,000 at December 31, 2006.

The book value of securities sold under agreements to repurchase amounted to $91,466,000 and $80,566,000 for December 31, 2007 and 2006, respectively.

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

NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES

The various categories of loans are summarized as follows:

(In thousands)	2007		2006

Consumer
Credit cards	$	166,044	$	143,359
Student loans		76,277		84,831
Other consumer		137,624		142,596
Real estate
Construction		260,924		277,411
Single family residential		382,676		364,450
Other commercial		542,184		512,404
Commercial
Commercial		193,091		178,028
Agricultural		73,470		62,293
Financial institutions		7,440		4,766
Other		10,724		13,357

Total loans before allowance for loan losses	$	1,850,454	$	1,783,495

At December 31, 2007 and 2006, impaired loans totaled $12,519,000 and $12,829,000, respectively. All impaired loans had either specific or general allocations within the allowance for loan losses. Allocations of the allowance for loan losses relative to impaired loans at December 31, 2007 and 2006 were $2,851,000 and $3,418,000, respectively. Approximately, $203,000, $350,000 and $452,000 of interest income was recognized on average impaired loans of $11,724,000, $13,072,000 and $15,748,000 for 2007, 2006 and 2005 respectively. Interest recognized on impaired loans on a cash basis during 2007, 2006 and 2005 was immaterial.

At December 31, 2007 and 2006, accruing loans delinquent 90 days or more totaled $1,282,000 and $1,097,000, respectively. Non-accruing loans at December 31, 2007 and 2006 were $9,909,000 and $8,958,000, respectively.

As of December 31, 2007, credit card loans, which are unsecured, were $166,044,000 or 9.0%, of total loans versus $143,359,000 or 8.0%, of total loans at December 31, 2006. The credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Credit card loans are regularly reviewed to facilitate the identification and monitoring of creditworthiness.

Transactions in the allowance for loan losses are as follows:

(In thousands)	2007		2006		2005

Balance, beginning of year	$	25,385	$	26,923	$	26,508
Additions
Provision for loan losses		4,181		3,762		7,526
		29,566		30,685		34,034
Deductions
Losses charged to allowance, net of recoveries
of $2,569 for 2007, $3,106 for 2006 and $3,815 for 2005		4,263		3,775		7,111
Reclassification of reserve for unfunded commitments (1)		--		1,525		--

Balance, end of year	$	25,303	$	25,385	$	26,923

(1) On March 31, 2006, the reserve for unfunded commitments was reclassified from the allowance for loan losses to other liabilities.

NOTE 5: GOODWILL AND CORE DEPOSIT PREMIUMS

Goodwill is tested annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. Goodwill totaled $60.6 million at December 31, 2007, unchanged from December 31, 2006, as the Company made no acquisitions during the year ended December 31, 2007, and no goodwill impairment was recorded.

The carrying basis and accumulated amortization of core deposit premiums (net of core deposit premiums that were fully amortized) at December 31, 2007 and 2006 were:


	December 31, 2007						December 31, 2006
	Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated
(In thousands)	Amount		Amortization		Net		Amount		Amortization		Net

Core deposit premiums	$	7,246	$	3,864	$	3,382	$	7,246	$	3,047	$	4,199

NOTE 6: TIME DEPOSITS

Time deposits included approximately $452,262,000 and $450,310,000 of certificates of deposit of $100,000 or more, at December 31, 2007 and 2006, respectively. Brokered deposits were $39,185,000 and $42,522,000 at December 31, 2007 and 2006, respectively. At December 31, 2007, time deposits with a remaining maturity of one year or more amounted to $120,777,000. Maturities of all time deposits are as follows: 2008 – $990,666,000; 2009 – $98,480,000; 2010 – $21,607,000; 2011 – $504,000; 2012 – $186,000 and none thereafter.

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 interest margin.

NOTE 7: INCOME TAXES

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

(In thousands)	2007			2006			2005

Income taxes currently payable	$	11,516		$	10,219		$	11,161
Deferred income taxes		865			2,221			1,342

Provision for income taxes	$	12,381		$	12,440		$	12,503

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

(In thousands)	2007			2006

Deferred tax assets
Allowance for loan losses	$	8,705		$	8,543
Valuation of foreclosed assets		63			63
Deferred compensation payable		1,432			1,275
FHLB advances		29			58
Vacation compensation		820			740
Loan interest		88			140
Available-for-sale securities		--			1,319
Other		234			174
		11,371			12,312
Deferred tax liabilities
Accumulated depreciation		(558	)		(852	)
Deferred loan fee income and expenses, net		(954	)		(787	)
FHLB stock dividends		(717	)		(887	)
Goodwill and core deposit premium amortization		(7,341	)		(6,051	)
Available-for-sale securities		(1,037	)		--
Other		(1,130	)		(880	)
		(11,737	)		(9,457	)

Net deferred tax (liability) asset	$	(366	)	$	2,855

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

(In thousands)	2007			2006			2005

Computed at the statutory rate (35%)	$	13,910		$	13,972		$	13,813
Increase (decrease) resulting from
Tax exempt income		(2,020	)		(1,858	)		(1,882	)
Non-deductible interest		328			276			187
State income taxes		647			792			862
Other non-deductible expenses		96			97			86
Other differences, net		(580	)		(839	)		(563	)

Actual tax provision	$	12,381		$	12,440		$	12,503

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

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

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

NOTE 8: SHORT-TERM AND LONG-TERM DEBT

Long-term debt at December 31, 2007, and 2006 consisted of the following components.

(In thousands)	2007		2006

Note Payable, due July 2007, at a floating rate of
0.90% above the one-month LIBOR rate, reset
monthly, unsecured	$	--	$	2,000
FHLB advances, due 2008 to 2032, 2.78% to 8.41%,
secured by residential real estate loans		51,355		50,381
Trust preferred securities, due 2033, fixed at 8.25%,
callable in 2008 without penalty		10,310		10,310
Trust preferred securities, due 2033, floating rate
of 2.80% above the three-month LIBOR rate,
reset quarterly, callable in 2008 without penalty		10,310		10,310
Trust preferred securities, due 2033, fixed rate of 6.97%
through 2010, thereafter, at a floating rate of
2.80% above the three-month LIBOR rate, reset
quarterly, callable in 2010 without penalty		10,310		10,310

Total long-term debt	$	82,285	$	83,311

At December 31, 2007 the Company had Federal Home Loan Bank (“FHLB”) advances with original maturities of one year or less of $1.5 million with a weighted average rate of 4.30% which are not included in the above table.

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

Aggregate annual maturities of long-term debt at December 31, 2007 are:

		Annual
(In thousands)	Year	Maturities

	2008	$	12,859
	2009		5,700
	2010		5,647
	2011		4,577
	2012		3,749
	Thereafter		49,753

	Total	$	82,285

NOTE 9: CAPITAL STOCK

NOTE 10: TRANSACTIONS WITH RELATED PARTIES

At December 31, 2007 and 2006, the subsidiary banks had extensions of credit to executive officers, directors and to companies in which the banks' executive officers or directors were principal owners, in the amount of $30.4 million in 2007 and $51.4 million in 2006.

(In thousands)	2007			2006

Balance, beginning of year	$	51,442		$	61,544
New extensions of credit		8,704			26,734
Repayments		(29,701	)		(36,836	)

Balance, end of year	$	30,445		$	51,442

In management's opinion, such loans and other extensions of credit and deposits (which were not material) were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management's opinion, these extensions of credit did not involve more than the normal risk of collectability or present other unfavorable features.

NOTE 11: EMPLOYEE BENEFIT PLANS

Retirement Plans

The Company’s 401(k) retirement plan covers substantially all employees. Contribution expense totaled $550,000, $525,000 and $505,000, in 2007, 2006 and 2005, respectively.

The Company has a discretionary profit sharing and employee stock ownership plan covering substantially all employees. Contribution expense totaled $2,490,000 for 2007, $2,370,000 for 2006 and $2,258,000 for 2005.

The Company also provides 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 $358,000 for 2007, $481,000 for 2006 and $306,000 for 2005. 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 percent discount factor.

Employee Stock Purchase Plan

The Company established an Employee Stock Purchase Plan in 2007 which generally allows participants to make contributions of up 3% of the employee’s salary, up to a maximum of $7,500 per year, for the purpose of acquiring the Company’s stock. Substantially all employees with at least two years of service are eligible for the plan. At the end of each plan year, full shares of the Company’s stock are purchased for each employee based on that employee’s contributions. The stock is purchased for an amount equal to 95% of its fair market value at the end of the plan year, or, if lower, 95% of its fair market value at the beginning of the plan year.

Stock-Based Compensation Plans

Prior to January 1, 2006, employee compensation expense under stock option plans was reported only if options were granted below market price at grant date in accordance with the intrinsic value method of Accounting Principles Board Opinion (APB) No.25, "Accounting for Stock Issued to Employees," and related interpretations. Because the exercise price of the Company's employee stock options always equaled the market price of the underlying stock on the date of grant, no compensation expense was recognized on options granted. As stated in Note 1, Significant Accounting Policies, the Company adopted the provisions of SFAS 123R on January 1, 2006. SFAS 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the measurement date, which is generally the date of the grant. The Company transitioned to fair-value based accounting for stock-based compensation using a modified version of prospective application ("modified prospective application"). Under modified prospective application, as it is applicable to the Company, SFAS 123R applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (generally referring to non-vested awards) that were outstanding as of January 1, 2006, will be recognized as the remaining requisite service is rendered during the period of and/or the periods after the adoption of SFAS 123R. The attribution of compensation cost for those earlier awards is based on the same method and on the same grant date fair values previously determined for the pro forma disclosures required for companies that did not previously adopt the fair value accounting method for stock-based employee compensation.

Stock-based compensation expense for all stock-based compensation awards granted after January 1, 2006, is based on the grant date fair value. For all awards except stock option awards, the grant date fair value is the market value per share as of the grant date. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Company's employee stock options.

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

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses various assumptions. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeitures are estimated at the time of grant, and are based partially on historical experience.

The table below summarizes the transactions under the Company's active stock compensation plans at December 31, 2007, 2006 and 2005 and changes during the years then ended:

	Stock Options					Non-Vested Stock
	Outstanding					Awards Outstanding
				Weighted					Weighted
	Number			Average		Number			Average
	of Shares			Exercise		of Shares			Grant-Date
	(000)			Price		(000)			Fair-Value

Balance, January 1, 2005		676		$	14.00		17		$	24.66
Granted		40			24.53		6			24.50
Stock Options Exercised		(106	)		13.46		--			--
Stock Awards Vested		--			--		(5	)		24.62
Forfeited/Expired		(1	)		22.63		--			--

Balance, December 31, 2005		609			14.77		18			24.63
Granted		60			26.19		10			26.96
Stock Options Exercised		(107	)		14.19		--			--
Stock Awards Vested		--			--		(6	)		24.60
Forfeited/Expired		(45	)		13.50		--			--

Balance, December 31, 2006		517			16.32		22			25.69
Granted		57			28.42		15			27.68
Stock Options Exercised		(34	)		15.11		--			--
Stock Awards Vested		--			--		(6	)		25.31
Forfeited/Expired		(4	)		12.13		--			--

Balance, December 31, 2007		536		$	17.71		31		$	26.72

Exercisable, December 31, 2007		439		$	15.62

The following table summarizes information about stock options under the plans outstanding at December 31, 2007:

	Options Outstanding					Options Exercisable
			Weighted
			Average	Weighted				Weighted
	Number		Remaining	Average		Number		Average
Range of	of Shares		Contractual	Exercise		of Shares		Exercise
Exercise Prices	(000)		Life	Price		(000)		Price

$10.56-$12.22		307	1.4 Years	$	12.08		307	$	12.08
15.35-16.32		13	1.5 Years		15.85		13		15.85
23.78-24.50		98	3.9 Years		24.06		91		24.06
26.19-28.42		118	5.9 Years		27.27		28		26.93

Stock-based compensation expense totaled $338 thousand in 2007, $233 thousand in 2006 and $117 thousand in 2005. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. Unrecognized stock-based compensation expense related to stock options totaled $446 thousand at December 31, 2007. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.93 years. Unrecognized stock-based compensation expense related to non-vested stock awards was $841 thousand at December 31, 2007. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.92 years.

Aggregate intrinsic value of outstanding stock options and exercisable stock options was $4.7 million and $4.8 million at December 31, 2007. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $26.50 at December 31, 2007, and the exercise price multiplied by the number of options outstanding. The total intrinsic value of stock options exercised was $384 thousand in 2007, $1.6 million in 2006 and $1.4 million in 2005.

The fair value of the Company’s employee stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted-average fair value of stock options granted was $5.96 for 2007, $5.01 for 2006 and $5.11 for 2005. The Company estimated expected market price volatility and expected term of the options based on historical data and other factors. The weighted-average assumptions used to determine the fair value of options granted are detailed in the table below:

	2007			2006			2005
Expected dividend yield		2.53	%		2.67	%		2.61	%
Expected stock price volatility		19.00	%		17.74	%		16.00	%
Risk-free interest rate		5.17	%		4.84	%		5.17	%
Expected life of options	7 - 10 Years			5 - 10 Years			7 Years

The following pro forma information presents net income and earnings per share for 2005 as if the fair value method of SFAS 123R had been applied to measure compensation cost for stock-based compensation plans.

(In thousands, except per share data)	2005
Net income, as reported	$	26,962
Add: Stock-based employee compensation included
in reported net income, net of related tax effects		73
Less: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects		(544	)
Pro forma net income	$	26,491
Earnings per share:
Basic – as reported	$	1.88
Basic – pro forma		1.84
Diluted – as reported		1.84
Diluted – pro forma		1.80

NOTE 12: ADDITIONAL CASH FLOW INFORMATION

In connection with cash acquisitions accounted for using the purchase method, the Company acquired assets and assumed liabilities as follows:

(In thousands)	2007		2006		2005

Liabilities assumed	$	--	$	--	$	2,156
Fair value of assets acquired		--		--		311
Cash received		--		--		1,845
Funds acquired		--		--		100
Net funds received	$	--	$	--	$	1,945

Additional cash payment information

Interest paid	$	76,958	$	65,108	$	41,007
Income taxes paid		10,563		7,926		11,232

NOTE 13: OTHER OPERATING EXPENSES

Other operating expenses consist of the following:

(In thousands)	2007		2006		2005

Professional services	$	2,780	$	2,490	$	2,201
Postage		2,309		2,278		2,281
Telephone		1,820		1,961		1,847
Credit card expense		4,095		3,235		2,693
Operating supplies		1,669		1,611		1,555
Amortization of core deposit premiums		817		830		830
Other expense		12,763		10,712		10,839
Total	$	26,253	$	23,117	$	22,246

The Company had aggregate annual equipment rental expense of approximately $546,000 in 2007, $534,000 in 2006 and $481,000 in 2005. The Company had aggregate annual occupancy rental expense of approximately $1,168,000 in 2007, $1,106,000 in 2006 and $1,111,000 in 2005.

NOTE 14: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and Cash Equivalents

The carrying amount for cash and cash equivalents approximates fair value.

Investment Securities

Fair values for investment securities equal quoted market prices, if available. If quoted market prices are not available, fair values are estimated based on quoted market prices of similar securities.

Loans

The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of accrued interest approximates its fair value.

Deposits

The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date (i.e., their carrying amount). The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.

Federal Funds Purchased, Securities Sold Under Agreement to Repurchase

and Short-Term Debt

The carrying amount for Federal funds purchased, securities sold under agreement to repurchase and short-term debt are a reasonable estimate of fair value.

Long-Term Debt

Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Extend Credit, Letters of Credit and Lines of Credit

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

The following table represents estimated fair values of the Company's financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows. This method involves significant judgments by management considering the uncertainties of economic conditions and other factors inherent in the risk management of financial instruments. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	December 31, 2007				December 31, 2006
	Carrying		Fair		Carrying		Fair
(In thousands)	Amount		Value		Amount		Value

Financial assets
Cash and cash equivalents	$	110,230	$	110,230	$	151,151	$	151,151
Held-to-maturity securities		190,284		191,738		179,944		179,816
Available-for-sale securities		340,646		340,646		347,182		347,182
Assets held in trading accounts		5,658		5,658		4,487		4,487
Mortgage loans held for sale		11,097		11,097		7,091		7,091
Interest receivable		21,345		21,345		21,974		21,974
Loans, net		1,825,151		1,824,235		1,758,110		1,777,257

Financial liabilities
Non-interest bearing transaction accounts		310,181		310,181		305,327		305,327
Interest bearing transaction accounts and
savings deposits		761,233		761,233		738,763		738,763
Time deposits		1,111,443		1,116,368		1,131,441		1,150,274
Federal funds purchased and securities
sold under agreements to repurchase		128,806		128,806		105,036		105,036
Short-term debt		1,777		1,777		6,114		6,114
Long-term debt		82,285		94,590		83,311		85,125
Interest payable		6,757		6,757		7,296		7,296

The fair value of commitments to extend credit and letters of credit is not presented since management believes the fair value to be insignificant.

NOTE 15: SIGNIFICANT ESTIMATES AND CONCENTRATIONS

Accounting principles generally accepted in the United Sates of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses and certain concentrations of credit risk are reflected in Note 4, Loans and Allowance for Loan Losses.

NOTE 16: COMMITMENTS AND CREDIT RISK

The Company grants agri-business, credit card, commercial and residential loans to customers throughout Arkansas. 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, 2007, the Company had outstanding commitments to extend credit aggregating approximately $244,052,000 and $411,421,000 for credit card commitments and other loan commitments, respectively. At December 31, 2006, the Company had outstanding commitments to extend credit aggregating approximately $202,047,000 and $529,697,000 for credit card commitments and other loan commitments, respectively.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $9,906,000 and $5,477,000 at December 31, 2007 and 2006, respectively, with terms ranging from 90 days to three years. The Company’s deferred revenue under standby letter of credit agreements was approximately $42,000 and $35,000 at December 31, 2007 and 2006, respectively.

At December 31, 2007, the Company did not have concentrations of 5% or more of the investment portfolio in bonds issued by a single municipality.

NOTE 17: NEW ACCOUNTING STANDARDS

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also requires expanded disclosure with respect to the uncertainty in income taxes. The Company adopted FIN 48 on January 1, 2007, with no significant impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. SFAS No. 157 is effective for the Company on January 1, 2008 and is not expected to have a material effect on the Company’s financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS No. 159”), to provide companies with an option to report selected financial assets and liabilities at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement shall be effective as of the beginning of each reporting entity's first fiscal year that begins after November 15, 2007. SFAS No. 159 is effective for the Company on January 1, 2008 and is not expected to have a material effect on the Company’s financial position or results of operations.

In September 2006, the FASB Emerging Issue Task Force (“EITF”) issued EITF 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. The EITF determined that for an endorsement split-dollar life insurance arrangement within the scope of the Issue, the employer should recognize a liability for future benefits in accordance with SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, or APB Opinion 12, Omnibus Opinion-1967, based on the substantive agreement with the employee. In March 2007, the FASB EITF issued ElTF 06-10, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements. The EITF determined that an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement in accordance with either Statement 106 (if, in substance, a postretirement benefit plan exists) or Opinion 12 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee. These Issues are effective for fiscal years beginning after December 15, 2007, with earlier application permitted. Entities should recognize the effects of applying EITF 06-4 through either (a) a change in accounting principle through a cumulative effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. As of December 31, 2007, the Company has split-dollar life insurance arrangements with executives of the Company that have death benefits. EITF 06-4 is effective for the Company on January 1, 2008. The Company has elected to apply EITF 06-4 through a change in accounting principle through a cumulative-effect adjustment to retained earnings of approximately $1 million as of January 1, 2008. The Company does not expect the adoption of EITF 06-4 to have a material impact on the Company’s ongoing financial position or results of operations.

Presently, the Company is not aware of any other changes from the Financial Accounting Standards Board that will have a material impact on the Company’s present or future financial position or results of operations.

NOTE 18: CONTINGENT LIABILITIES

The Company and/or its subsidiaries have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries. The Company or its subsidiaries remain the subject of the following lawsuit asserting claims against the Company or its subsidiaries.

Also, in October 2007, the Company, as a member of Visa U.S.A. Inc. (Visa U.S.A.), received shares of restricted stock in Visa, Inc. (Visa) as a result of its participation in the global restructuring of Visa U.S.A., Visa Canada Association, and Visa International Service Association in preparation for an initial public offering. Visa U.S.A asserts that the Company and other Visa U.S.A. member banks are obligated to share in potential losses resulting from certain litigation. The Company accrued $1.2 million in 2007 in connection with the Company’s obligation to indemnify Visa U.S.A. for costs and liabilities incurred in connection with certain litigation based on the Company’s proportionate membership interest in Visa U.S.A. With respect to the remaining litigation related to Visa U.S.A., at this time the Company does not know the probable outcome of such litigation and cannot reasonably estimate a range of loss. The Company will continue to monitor these litigation matters and record any change in the liability related to other litigation upon additional information becoming available. Also as a result of the guidance from the SEC, the Company will not reflect in its 2007 financial statements any value for its membership interest in Visa as a result of the Visa Reorganization. Upon successful completion of the anticipated IPO, expected to occur in the first half of 2008, the fair value of such interest will be realized based on the value of shares used to establish the escrow account and shares redeemed for cash (limited to the amount of the obligation recorded). The Company expects the value of these shares to exceed the aggregate amount of its recorded liability. While the Company expects these events to occur, there can be no assurance that the restructuring and initial public offering of Visa will be successful and that the shares of Visa allocated to the Company will have sufficient value to cover the Company’s obligations under the indemnification agreement. Furthermore, additional accruals may be required in future periods should the Company’s estimate of its obligations under the indemnification agreement change.

NOTE 19: STOCKHOLDERS’ EQUITY

The Company’s subsidiaries are subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Office of the Comptroller of the Currency is required, if the total of all the dividends declared by a national bank in any calendar year exceeds the total of its net profits, as defined, for that year, combined with its retained net profits of the preceding two years. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. At December 31, 2007, the Company subsidiaries had approximately $10.7 million in undivided profits available for payment of dividends to the Company, without prior approval of the regulatory agencies.

The Company’s actual capital amounts and ratios along with the Company’s most significant subsidiaries are presented in the following table.

									To Be Well
					Minimum				Capitalized Under
					For Capital				Prompt Corrective
	Actual				Adequacy Purposes				Action Provision
(In thousands)	Amount		Ratio-%		Amount		Ratio-%		Amount		Ratio-%

As of December 31, 2007
Total Risk-Based Capital Ratio
Simmons First National Corporation	$	260,890		13.7	$	152,345		8.0	$	N/A
Simmons First National Bank		104,961		11.2		74,972		8.0		93,715		10.0
Simmons First Bank of Jonesboro		25,510		12.3		16,592		8.0		20,740		10.0
Simmons First Bank of Russellville		20,349		15.7		10,369		8.0		12,961		10.0
Simmons First Bank of Northwest Arkansas		23,803		10.7		17,797		8.0		22,246		10.0
Simmons First Bank of El Dorado		19,741		14.0		11,281		8.0		14,101		10.0
Tier 1 Capital Ratio
Simmons First National Corporation		236,972		12.4		76,443		4.0		N/A
Simmons First National Bank		95,523		10.2		37,460		4.0		56,190		6.0
Simmons First Bank of Jonesboro		23,085		11.2		8,245		4.0		12,367		6.0
Simmons First Bank of Russellville		18,726		14.5		5,166		4.0		7,749		6.0
Simmons First Bank of Northwest Arkansas		21,008		9.4		8,940		4.0		13,409		6.0
Simmons First Bank of El Dorado		18,045		12.8		5,639		4.0		8,459		6.0
Leverage Ratio
Simmons First National Corporation		236,972		9.1		104,164		4.0		N/A
Simmons First National Bank		95,523		7.5		50,946		4.0		63,682		5.0
Simmons First Bank of Jonesboro		23,085		8.6		10,737		4.0		13,422		5.0
Simmons First Bank of Russellville		18,726		10.4		7,202		4.0		9,003		5.0
Simmons First Bank of Northwest Arkansas		21,008		7.5		11,204		4.0		14,005		5.0
Simmons First Bank of El Dorado		18,045		8.1		8,911		4.0		11,139		5.0
As of December 31, 2006
Total Risk-Based Capital Ratio
Simmons First National Corporation	$	250,000		13.6	$	147,059		8.0	$	N/A
Simmons First National Bank		100,895		11.3		71,430		8.0		89,288		10.0
Simmons First Bank of Jonesboro		23,743		11.8		16,097		8.0		20,121		10.0
Simmons First Bank of Russellville		19,789		15.4		10,280		8.0		12,850		10.0
Simmons First Bank of Northwest Arkansas		22,699		10.6		17,131		8.0		21,414		10.0
Simmons First Bank of El Dorado		18,728		14.0		10,702		8.0		13,377		10.0
Tier 1 Capital Ratio
Simmons First National Corporation		226,880		12.4		73,187		4.0		N/A
Simmons First National Bank		91,859		10.3		35,673		4.0		53,510		6.0
Simmons First Bank of Jonesboro		21,217		10.5		8,083		4.0		12,124		6.0
Simmons First Bank of Russellville		18,176		14.1		5,156		4.0		7,734		6.0
Simmons First Bank of Northwest Arkansas		20,133		9.4		8,567		4.0		12,851		6.0
Simmons First Bank of El Dorado		17,278		12.9		5,358		4.0		8,036		6.0
Leverage Ratio
Simmons First National Corporation		226,880		8.8		103,127		4.0		N/A
Simmons First National Bank		91,859		7.4		50,334		4.0		62,917		5.0
Simmons First Bank of Jonesboro		21,217		8.0		10,609		4.0		13,261		5.0
Simmons First Bank of Russellville		18,176		9.8		7,419		4.0		9,273		5.0
Simmons First Bank of Northwest Arkansas		20,133		7.4		11,032		4.0		13,790		5.0
Simmons First Bank of El Dorado		17,278		7.9		8,748		4.0		10,935		5.0

NOTE 20: CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

CONDENSED BALANCE SHEETS

DECEMBER 31, 2007 and 2006

(In thousands)	2007		2006

ASSETS
Cash and cash equivalents	$	6,442	$	6,858
Investment securities		2,447		2,490
Investments in wholly-owned subsidiaries		288,744		275,872
Intangible assets, net		133		134
Premises and equipment		2,492		2,664
Other assets		6,661		7,006
TOTAL ASSETS	$	306,919	$	295,024

LIABILITIES
Long-term debt	$	30,930	$	32,930
Other liabilities		3,583		3,078
Total liabilities		34,513		36,008

STOCKHOLDERS’ EQUITY
Common stock		139		142
Surplus		41,019		48,678
Undivided profits		229,520		212,394
Accumulated other comprehensive income (loss)
Unrealized appreciation (depreciation) on available-for-sale
securities, net of income taxes of $1,037 at 2007
and income tax credits of $1,319 at 2006		1,728		(2,198	)
Total stockholders’ equity		272,406		259,016
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	306,919	$	295,024

CONDENSED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

(In thousands)	2007			2006			2005

INCOME
Dividends from subsidiaries	$	21,548		$	20,472		$	18,394
Other income		6,288			5,809			5,473
		27,836			26,281			23,867
EXPENSE		10,797			10,111			9,346
Income before income taxes and equity in
undistributed net income of subsidiaries		17,039			16,170			14,521
Provision for income taxes		(1,438	)		(1,546	)		(1,342	)

Income before equity in undistributed net
income of subsidiaries		18,477			17,716			15,863
Equity in undistributed net income of subsidiaries		8,883			9,765			11,099

NET INCOME	$	27,360		$	27,481		$	26,962

CONDENSED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

(In thousands)	2007			2006			2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	27,360		$	27,481		$	26,962
Items not requiring (providing) cash
Depreciation and amortization		298			213			178
Deferred income taxes		33			226			(134	)
Equity in undistributed income of bank subsidiaries		(8,883	)		(9,765	)		(11,099	)

Changes in
Other assets		366			(996	)		1,066
Other liabilities		505			(58	)		936
Net cash provided by operating activities		19,679			17,101			17,909

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of premises and equipment		(126	)		(629	)		(232	)
Return of capital from subsidiary		--			1,706			--
Purchase of held-to-maturity securities		(74	)		(4,100	)		(1,530	)
Proceeds from sale of investment securities		--			4,640			550
Net cash (used in) provided by investing activities		(200	)		1,617			(1,212	)

CASH FLOWS FROM FINANCING ACTIVITIES

Principal reduction on long-term debt		(2,000	)		(2,000	)		(2,000	)
Dividends paid		(10,234	)		(9,666	)		(8,757	)
Repurchase of common stock, net		(7,661	)		(5,047	)		(9,105	)
Net cash used in financing activities		(19,895	)		(16,713	)		(19,862	)

(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS		(416	)		2,005			(3,165	)

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR		6,858			4,853			8,018

CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,442		$	6,858		$	4,853

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No items are reportable.

ITEM 9A.

CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. The Company's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in 15 C. F. R. 240.13a-14(c) and 15 C. F. R. 240.15-14(c)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's current disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of evaluation.

ITEM 9B.

OTHER INFORMATION

No items are reportable.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Incorporated herein by reference from the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held April 8, 2008, to be filed pursuant to Regulation 14A on or about March 7, 2008.

ITEM 11.

EXECUTIVE COMPENSATION

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1 and 2. Financial Statements and any Financial Statement Schedules

The financial statements and financial statement schedules listed in the accompanying index to the consolidated financial statements and financial statement schedules are filed as part of this report.

(b) Listing of Exhibits

Exhibit No. Description

3.1

Restated Articles of Incorporation of Simmons First National Corporation (incorporated by reference to Exhibit 3.1 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2007 (File No. 6253)).

3.2

Amended By-Laws of Simmons First National Corporation.*

10.1

Amended and Restated Trust Agreement, dated as of December 16, 2003, among the Company, Deutsche Bank Trust Company Americas, Deutsche Bank Trust Company Delaware and each of J. Thomas May, Barry L. Crow and Bob Fehlman as administrative trustees, with respect to Simmons First Capital Trust II (incorporated by reference to Exhibit 10.1 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.2

Guarantee Agreement, dated as of December 16, 2003, between the Company and Deutsche Bank Trust Company Americas, as guarantee trustee, with respect to Simmons First Capital Trust II (incorporated by reference to Exhibit 10.2 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.3

Junior Subordinated Indenture, dated as of December 16, 2003, among the Company and Deutsche Bank Trust Company Americas, as trustee, with respect to the junior subordinated note held by Simmons First Capital Trust II (incorporated by reference to Exhibit 10.3 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.4

Amended and Restated Trust Agreement, dated as of December 16, 2003, among the Company, Deutsche Bank Trust Company Americas, Deutsche Bank Trust Company Delaware and each of J. Thomas May, Barry L. Crow and Bob Fehlman as administrative trustees, with respect to Simmons First Capital Trust III (incorporated by reference to Exhibit 10.4 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.5

Guarantee Agreement, dated as of December 16, 2003, between the Company and Deutsche Bank Trust Company Americas, as guarantee trustee, with respect to Simmons First Capital Trust III (incorporated by reference to Exhibit 10.5 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.6

Junior Subordinated Indenture, dated as of December 16, 2003, among the Company and Deutsche Bank Trust Company Americas, as trustee, with respect to the junior subordinated note held by Simmons First Capital Trust III (incorporated by reference to Exhibit 10.6 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.7

Amended and Restated Trust Agreement, dated as of December 16, 2003, among the Company, Deutsche Bank Trust Company Americas, Deutsche Bank Trust Company Delaware and each of J. Thomas May, Barry L. Crow and Bob Fehlman as administrative trustees, with respect to Simmons First Capital Trust IV (incorporated by reference to Exhibit 10.7 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.8

Guarantee Agreement, dated as of December 16, 2003, between the Company and Deutsche Bank Trust Company Americas, as guarantee trustee, with respect to Simmons First Capital Trust IV (incorporated by reference to Exhibit 10.8 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.9

Junior Subordinated Indenture, dated as of December 16, 2003, among the Company and Deutsche Bank Trust Company Americas, as trustee, with respect to the junior subordinated note held by Simmons First Capital Trust IV (incorporated by reference to Exhibit 10.9 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

10.10

Long-Term Executive Incentive Agreement, dated as of January 1, 2005, by and between the Company and J. Thomas May (incorporated by reference to Exhibit 10.10 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2005 (File No. 0-6253)).

Code of Ethics, dated December 2003, for CEO, CFO, controller and other accounting officers (incorporated by reference to Exhibit 14 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2003 (File No. 6253)).

31.1

Rule 13a-14(a)/15d-14(a) Certification - J. Thomas May, Chairman and Chief Executive Officer.*

31.2

Rule 13a-14(a)/15d-14(a) Certification – Robert A. Fehlman, Executive Vice President and Chief Financial Officer.*

32.1

Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – J. Thomas May, Chairman and Chief Executive Officer.*

32.2

Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Robert A. Fehlman, Executive Vice President and Chief Financial Officer.*

* Filed herewith.

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	February 25, 2008
		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 or about February 25, 2008.

Signature	Title


/s/ J. Thomas May	Chairman and Chief Executive Officer
J. Thomas May	and Director


/s/ Robert A. Fehlman	Executive Vice President and Chief Financial Officer
Robert A. Fehlman	(Principal Financial and Accounting Officer)


/s/ William E. Clark II	Director
William E. Clark II


/s/ Steven A. Cossé	Director
Steven A. Cossé


/s/ Edward Drilling	Director
Edward Drilling


/s/ George A. Makris, Jr.	Director
George A. Makris, Jr.


/s/ W. Scott McGeorge	Director
W. Scott McGeorge


/s/ Stanley E. Reed	Director
Stanley E. Reed


/s/ Harry L. Ryburn	Director
Harry L. Ryburn


/s/ Robert L. Shoptaw	Director
Robert L. Shoptaw


/s/ Henry F. Trotter, Jr.	Director
Henry F. Trotter, Jr.