~~0000090498 sfnc:AcquiredLoansMember us-gaap:ConsumerPortfolioSegmentMember sfnc:OtherConsumerLoansMember 2019-09-30~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-06253

SIMMONS FIRST NATIONAL ~~CORPORATION~~CORPORATION



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

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

(~~870~~) (870) 541-1000

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Simmons First National Corporation

Quarterly Report on Form 10-Q

~~September~~June 30, ~~2019~~2020

Table of Contents



		Page
Part I:	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders' Equity	7
	Condensed Notes to Consolidated Financial Statements	9
	Report of Independent Registered Public Accounting Firm	5049
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5150
Item 3.	Quantitative and Qualitative ~~Disclosure~~Disclosures About Market Risk	77
Item 4.	Controls and Procedures	79

Part II:	Other Information
Item 1.	Legal Proceedings	79
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	80

Signatures		82

___________________

* No reportable information under this item.

Part I: Financial Information


~~Part I:~~	~~Financial Information~~


~~Item 1.~~	~~Financial Statements (Unaudited)~~

Item 1. Financial Statements (Unaudited)

Simmons First National Corporation

Consolidated Balance Sheets

~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019


	June 30,		December 31,
(In thousands, except share data)	2020		2019
	(Unaudited)
ASSETS
Cash and non-interest bearing balances due from banks	$	234,998	$	277,208
Interest bearing balances due from banks and federal funds sold	2,310,162		719,415
Cash and cash equivalents	2,545,160		996,623
Interest bearing balances due from banks - time	4,561		4,554
Investment securities:
Held-to-maturity, net of allowance for credit losses of $307 at June 30, 2020	51,720		40,927
Available-for-sale, net of allowance for credit losses of $609 at June 30, 2020 (amortized cost of $2,428,548 and $3,263,151 at June 30, 2020 and December 31, 2019, respectively)	2,496,896		3,288,343
Total investments	2,548,616		3,329,270
Mortgage loans held for sale	120,034		58,102
Other assets held for sale	399		260,332
Loans	14,606,900		14,425,704
Allowance for credit losses on loans	(231,643)		(68,244)
Net loans	14,375,257		14,357,460
Premises and equipment	478,896		492,384
Premises held for sale	4,576		—
Foreclosed assets and other real estate owned	14,111		19,121
Interest receivable	79,772		62,707
Bank owned life insurance	256,643		254,152
Goodwill	1,064,765		1,055,520
Other intangible assets	117,823		127,340
Other assets	293,071		241,578
Total assets	$	21,903,684	$	21,259,143

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing transaction accounts	$	4,608,098	$	3,741,093
Interest bearing transaction accounts and savings deposits	8,978,045		9,090,878
Time deposits	3,029,975		3,276,969
Total deposits	16,616,118		16,108,940
Federal funds purchased and securities sold under agreements to repurchase	387,025		150,145
Other borrowings	1,393,689		1,297,599
Subordinated debentures	382,604		388,260
Other liabilities held for sale	—		159,853
Accrued interest and other liabilities	219,545		165,422
Total liabilities	18,998,981		18,270,219

Stockholders’ equity:
Preferred stock, 40,040,000 shares authorized; Series D, $0.01 par value, $1,000 liquidation value per share; 767 shares issued and outstanding at June 30, 2020 and December 31, 2019	767		767
Common stock, Class A, $0.01 par value; 175,000,000 shares authorized at June 30, 2020 and December 31, 2019; 108,994,389 and 113,628,601 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,090		1,136
Surplus	2,029,383		2,117,282
Undivided profits	819,153		848,848
Accumulated other comprehensive income	54,310		20,891
Total stockholders’ equity	2,904,703		2,988,924
Total liabilities and stockholders’ equity	$	21,903,684	$	21,259,143

September 30, December 31,
(In thousands, except share data) 2019 2018
(Unaudited)
ASSETS

Cash and non-interest bearing balances due from banks $ 161,440
$ 171,792
Interest bearing balances due from banks and federal funds sold 368,530
661,666
Cash and cash equivalents 529,970
833,458
Interest bearing balances due from banks - time 5,041
4,934
Investment securities:
Held-to-maturity 42,237
289,194
Available-for-sale 2,356,134
2,151,752
Total investments 2,398,371
2,440,946
Mortgage loans held for sale 50,099
26,799
Loans:
Legacy loans 9,643,365
8,430,388
Allowance for loan losses (65,993 ) (56,599 )
Loans acquired, net of discount and allowance 3,359,587
3,292,783
Net loans 12,936,959
11,666,572
Premises and equipment 378,678
295,060
Foreclosed assets and other real estate owned 19,576
25,565
Interest receivable 53,966
49,938
Bank owned life insurance 234,655
193,170
Goodwill 926,648
845,687
Other intangible assets 101,149
91,334
Other assets 123,399
69,874
Total assets $ 17,758,511
$ 16,543,337

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing transaction accounts $ 3,044,330
$ 2,672,405
Interest bearing transaction accounts and savings deposits 7,337,571
6,830,191
Time deposits 3,086,108
2,896,156
Total deposits 13,468,009

12,398,752
Federal funds purchased and securities sold under agreements to repurchase 116,536
95,792
Other borrowings 1,098,395
1,345,450
Subordinated debentures 354,223
353,950
Accrued interest and other liabilities 174,277
102,959
Total liabilities 15,211,440

14,296,903

Stockholders’ equity:
Common stock, Class A, $0.01 par value; 175,000,000 shares authorized at September 30, 2019 and December 31, 2018; 96,613,855 and 92,347,643 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 966
923
Surplus 1,708,058
1,597,944
Undivided profits 814,338
674,941
Accumulated other comprehensive income (loss) 23,709
(27,374 )
Total stockholders’ equity 2,547,071
2,246,434
Total liabilities and stockholders’ equity $ 17,758,511
$ 16,543,337

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Income

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2019 2018 2019 2018
(Unaudited) (Unaudited)
INTEREST INCOME
Loans $ 179,971
$ 162,438
$ 517,533
$ 456,041
Interest bearing balances due from banks and federal funds sold 1,586
1,405
4,861
3,828
Investment securities 15,367
14,640
49,273
41,558
Mortgage loans held for sale 382
501
924
964
TOTAL INTEREST INCOME 197,306
178,984
572,591
502,391

INTEREST EXPENSE
Deposits 36,936
24,390
102,482
58,448
Federal funds purchased and securities sold under agreements to repurchase 249
104
642
302
Other borrowings 5,381
6,240
18,393
16,520
Subordinated notes and debentures 4,576
5,282
13,528
12,350
TOTAL INTEREST EXPENSE 47,142
36,016
135,045
87,620

NET INTEREST INCOME 150,164
142,968
437,546
414,771
Provision for loan losses 21,973
10,345
38,337
28,528

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 128,191
132,623
399,209
386,243

NON-INTEREST INCOME
Trust income 6,108
6,277
17,610
17,148
Service charges on deposit accounts 10,825
10,837
31,450
31,245
Other service charges and fees 1,308
1,201
3,909
5,968
Mortgage lending income 4,509
1,521
10,988
7,773
SBA lending income 956
304
2,348
1,627
Investment banking income 513
664
1,491
2,312
Debit and credit card fees 7,059
6,820
20,369
25,721
Bank owned life insurance income 1,302
1,105
3,357
3,310
Gain on sale of securities, net 7,374
54
12,937
53
Other income 43,821
4,942
52,083
14,151
TOTAL NON-INTEREST INCOME 83,775
33,725
156,542
109,308

NON-INTEREST EXPENSE
Salaries and employee benefits 52,065
55,515
164,560
167,550
Occupancy expense, net 8,342
7,713
22,736
22,594
Furniture and equipment expense 4,898
3,761
12,462
12,184
Other real estate and foreclosure expense 1,125
538
2,353
2,940
Deposit insurance —
2,248
4,550
6,232
Merger related costs 2,556
804
11,548
3,980
Other operating expenses 37,879
29,674
100,808
81,353
TOTAL NON-INTEREST EXPENSE 106,865
100,253
319,017
296,833

INCOME BEFORE INCOME TAXES 105,101
66,095
236,734
198,718
Provision for income taxes 23,275
10,902
51,289
38,651

NET INCOME 81,826
55,193
185,445
160,067
Preferred stock dividends —
—
326
—
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 81,826
$ 55,193
$ 185,119
$ 160,067
BASIC EARNINGS PER SHARE $ 0.85
$ 0.60
$ 1.95
$ 1.74
DILUTED EARNINGS PER SHARE $ 0.84
$ 0.59
$ 1.94
$ 1.72


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share data)	2020		2019		2020		2019
	(Unaudited)						(Unaudited)
INTEREST INCOME
Loans	$	176,910	$	178,122	$	364,476	$	337,562
Interest bearing balances due from banks and federal funds sold	603		1,121		3,044		3,275
Investment securities	13,473		15,666		32,416		31,947
Mortgage loans held for sale	668		332		949		542
TOTAL INTEREST INCOME	191,654		195,241		400,885		373,326

INTEREST EXPENSE
Deposits	18,006		34,796		49,283		65,546
Federal funds purchased and securities sold under agreements to repurchase	337		257		1,096		393
Other borrowings	4,963		6,219		9,840		13,012
Subordinated notes and debentures	4,667		4,541		9,502		8,952
TOTAL INTEREST EXPENSE	27,973		45,813		69,721		87,903

NET INTEREST INCOME	163,681		149,428		331,164		285,423
Provision for credit losses	26,915		7,079		53,049		16,364

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	136,766		142,349		278,115		269,059

NON-INTEREST INCOME
Trust income	7,253		5,794		14,404		11,502
Service charges on deposit accounts	8,570		10,557		21,898		20,625
Other service charges and fees	1,489		1,312		3,077		2,601
Mortgage lending income	12,459		3,656		17,505		6,479
SBA lending income	245		895		541		1,392
Investment banking income	571		360		1,448		978
Debit and credit card fees	7,996		7,212		15,910		13,310
Bank owned life insurance income	1,445		1,260		2,743		2,055
Gain on sale of securities, net	390		2,823		32,485		5,563
Other income	9,809		6,065		22,610		10,221
TOTAL NON-INTEREST INCOME	50,227		39,934		132,621		74,726

NON-INTEREST EXPENSE
Salaries and employee benefits	57,644		56,128		125,568		112,495
Occupancy expense, net	9,217		6,919		18,727		14,394
Furniture and equipment expense	6,144		4,206		11,867		7,564
Other real estate and foreclosure expense	274		591		599		1,228
Deposit insurance	2,838		2,510		5,313		4,550
Merger related costs	1,830		7,522		2,898		8,992
Other operating expenses	34,651		32,867		73,439		62,929
TOTAL NON-INTEREST EXPENSE	112,598		110,743		238,411		212,152

INCOME BEFORE INCOME TAXES	74,395		71,540		172,325		131,633
Provision for income taxes	15,593		15,616		36,287		28,014

NET INCOME	58,802		55,924		136,038		103,619
Preferred stock dividends	13		326		26		326
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	58,789	$	55,598	$	136,012	$	103,293
BASIC EARNINGS PER SHARE	$	0.54	$	0.58	$	1.23	$	1.10
DILUTED EARNINGS PER SHARE	$	0.54	$	0.58	$	1.22	$	1.09

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Comprehensive Income

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2019 2018 2019 2018
(Unaudited) (Unaudited)
NET INCOME $ 81,826
$ 55,193
$ 185,445
$ 160,067

OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding gains (losses) arising during the period on available-for-sale securities 18,736
(10,583 ) 79,547
(41,612 )
Unrealized holding gain on the transfer of held-to-maturity securities to available-for-sale per ASU 2017-12 —
—
2,547
—
Less: Reclassification adjustment for realized gains (losses) included in net income 7,374
54
12,937
53
Other comprehensive gain (loss), before tax effect 11,362
(10,637 ) 69,157
(41,665 )
Less: Tax effect of other comprehensive income (loss) 2,969
(2,780 ) 18,074
(10,889 )

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 8,393
(7,857 ) 51,083
(30,776 )

COMPREHENSIVE INCOME $ 90,219
$ 47,336
$ 236,528
$ 129,291


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
	(Unaudited)						(Unaudited)
NET INCOME	$	58,802	$	55,924	$	136,038	$	103,619

OTHER COMPREHENSIVE INCOME
Unrealized holding gains arising during the period on available-for-sale securities	22,159		31,681		77,728		60,811
Unrealized holding gain on the transfer of held-to-maturity securities to available-for-sale per ASU 2017-12	—		—		—		2,547
Less: Reclassification adjustment for realized gains included in net income	390		2,823		32,485		5,563
Other comprehensive income, before tax effect	21,769		28,858		45,243		57,795
Less: Tax effect of other comprehensive income	5,689		7,542		11,824		15,105

TOTAL OTHER COMPREHENSIVE INCOME	16,080		21,316		33,419		42,690

COMPREHENSIVE INCOME	$	74,882	$	77,240	$	169,457	$	146,309

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Cash Flows

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019


(In thousands)	June 30, 2020		June 30, 2019
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	136,038	$	103,619
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	24,148		16,019
Provision for credit losses	53,049		16,364
(Benefit) provision for credit losses on unfunded commitments	(8,000)		950
Gain on sale of investments	(32,485)		(5,563)
Net accretion of investment securities and assets	(30,078)		(22,663)
Net amortization on borrowings	271		182
Stock-based compensation expense	7,577		6,249
Gain on sale of foreclosed assets held for sale	(400)		(16)
Gain on sale of mortgage loans held for sale	(14,993)		(8,257)
Gain on sale of other intangibles	(301)		—
Gain on sale of branches	(8,094)		—
Fair value write-down of closed branches	1,465		—
Deferred income taxes	4,616		4,940
Income from bank owned life insurance	(3,245)		(2,136)
Originations of mortgage loans held for sale	(470,797)		(282,204)
Proceeds from sale of mortgage loans held for sale	423,858		282,861
Changes in assets and liabilities:
Interest receivable	(18,021)		(1,494)
Lease right-of-use assets	5,995		(2,469)
Other assets	(19,676)		18,911
Accrued interest and other liabilities	70,270		(5,326)
Income taxes payable	(34,233)		2,553
Net cash provided by operating activities	86,964		122,520

INVESTING ACTIVITIES
Net originations of loans	(318,795)		(302,151)
Proceeds from sale of loans	4,600		—
(Increase) decrease in due from banks - time	(7)		395
Purchases of premises and equipment, net	(19,784)		(21,689)
Proceeds from sale of foreclosed assets held for sale	6,173		9,870
Proceeds from sale of available-for-sale securities	1,201,778		449,107
Proceeds from maturities of available-for-sale securities	2,048,453		296,409
Purchases of available-for-sale securities	(2,386,878)		(383,416)
Proceeds from maturities of held-to-maturity securities	5,932		25,406
Purchases of held-to-maturity securities	(16,997)		—
Proceeds from bank owned life insurance death benefits	763		1,310
Disposition of assets and liabilities held for sale	181,261		1,393
Purchase of Reliance Bancshares, Inc.	—		(37,017)
Net cash provided by investing activities	706,499		39,617

FINANCING ACTIVITIES
Net change in deposits	561,185		(107,806)
Repayments of subordinated debentures	(5,927)		—
Dividends paid on preferred stock	(26)		(326)
Dividends paid on common stock	(37,606)		(30,265)
Net change in other borrowed funds	96,090		(178,756)
Net change in federal funds purchased and securities sold under agreements to repurchase	236,880		20,532
Net shares cancelled under stock compensation plans	(3,171)		(3,030)
Shares issued under employee stock purchase plan	956		1,312
Retirement of preferred stock	—		(42,000)
Repurchases of common stock	(93,307)		—
Net cash provided by (used in) financing activities	755,074		(340,339)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,548,537		(178,202)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	996,623		833,458

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,545,160	$	655,256

(In thousands) September 30, 2019 September 30, 2018
(Unaudited)
OPERATING ACTIVITIES

Net income $ 185,445
$ 160,067
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 25,462
20,810
Provision for loan losses 38,337
28,528
Gain on sale of investments (12,937 ) (53 )
Net accretion of investment securities and assets (35,272 ) (41,423 )
Net amortization (accretion) on borrowings 273
(471 )
Stock-based compensation expense 9,316
8,448
(Gain) loss on sale of foreclosed assets held for sale (16 ) 150
Gain on sale of mortgage loans held for sale (14,196 ) (9,675 )
Loss (gain) on sale of loans 4,451
(10 )
Gain on sale of Visa, Inc. class B common stock (42,860 ) —
Fair value write-down of closed branches —
954
Deferred income taxes 10,933
7,316
Income from bank owned life insurance (3,438 ) (3,310 )
Originations of mortgage loans held for sale (499,178 ) (424,751 )
Proceeds from sale of mortgage loans held for sale 490,674
410,269
Changes in assets and liabilities:
Interest receivable (679 ) (7,798 )
Lease right-of-use assets (1,370 ) —
Other assets 3,802
(24,695 )
Accrued interest and other liabilities 10,881
23,821
Income taxes payable 18,722
3,956
Net cash provided by operating activities 188,350

152,133

INVESTING ACTIVITIES
Net originations of loans (299,013 ) (1,034,175 )
Proceeds from sale of loans 104,587
24,977
Decrease (increase) in due from banks - time 395
(640 )
Purchases of premises and equipment, net (37,523 ) (17,084 )
Proceeds from sale of foreclosed assets held for sale 16,139
20,739
Proceeds from sale of available-for-sale securities 561,374
7,726
Proceeds from maturities of available-for-sale securities 405,090
197,464
Purchases of available-for-sale securities (593,700 ) (634,791 )
Proceeds from maturities of held-to-maturity securities 29,179
46,515
Purchases of held-to-maturity securities —
(1,172 )
Purchases of bank owned life insurance —
(4,000 )
Proceeds from bank owned life insurance death benefits 1,310
616
Disposition of assets and liabilities held for sale 1,245
(58,295 )
Purchase of Reliance Bancshares, Inc. (37,017 ) —
Net cash provided by (used in) investing activities 152,066
(1,452,120 )

FINANCING ACTIVITIES
Net change in deposits (156,010 ) 995,631
Proceeds from issuance of subordinated notes —
326,355
Repayments of subordinated debentures —
(94,915 )
Dividends paid on preferred stock (326 ) —
Dividends paid on common stock (45,722 ) (41,766 )
Net change in other borrowed funds (404,455 ) 40,893
Net change in federal funds purchased and securities sold under agreements to repurchase 6,598
(13,231 )
Net shares issued under stock compensation plans (3,301 ) 1,756
Shares issued under employee stock purchase plan 1,312
1,026
Retirement of preferred stock (42,000 ) —
Net cash (used in) provided by financing activities (643,904 )
1,215,749

DECREASE IN CASH AND CASH EQUIVALENTS (303,488 ) (84,238 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 833,458
598,042

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 529,970

$ 513,804

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

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

Undivided
Profits
Total
Three Months Ended September 30, 2019
Balance, June 30, 2019 (Unaudited) $ —
$ 966
$ 1,705,262
$ 15,316
$ 747,969
$ 2,469,513

Comprehensive income —
—
—
8,393
81,826
90,219
Stock-based compensation plans, net – 23,199 shares —
—
2,796
—
—
2,796
Dividends on common stock – $0.16 per share —
—
—
—
(15,457 ) (15,457 )

Balance, September 30, 2019 (Unaudited) $ —
$ 966
$ 1,708,058
$ 23,709
$ 814,338
$ 2,547,071

Three Months Ended September 30, 2018
Balance, June 30, 2018 (Unaudited) $ —
$ 923
$ 1,594,342
$ (40,183 ) $ 591,826
$ 2,146,908

Comprehensive income —
—
—
(7,857 ) 55,193
47,336
Stock-based compensation plans, net – 14,245 shares —
—
2,919
—
—
2,919
Dividends on common stock – $0.15 per share —
—
—
—
(13,844 ) (13,844 )

Balance, September 30, 2018 (Unaudited) $ —
$ 923
$ 1,597,261
$ (48,040 ) $ 633,175
$ 2,183,319


(In thousands, except share data)	Preferred Stock		Common Stock		Surplus		Accumulated Other Comprehensive Income (Loss)		Undivided Profits		Total
Three Months Ended June 30, 2020
Balance, March 31, 2020 (Unaudited)	$	767	$	1,090	$	2,026,420	$	38,230	$	778,893	$	2,845,400

Comprehensive income	—		—		—		16,080		58,802		74,882
Stock-based compensation plans, net – 28,058 shares	—		—		2,963		—		—		2,963
Dividends on preferred stock	—		—		—		—		(13)		(13)
Dividends on common stock – $0.17 per share	—		—		—		—		(18,529)		(18,529)

Balance, June 30, 2020 (Unaudited)	$	767	$	1,090	$	2,029,383	$	54,310	$	819,153	$	2,904,703

Three Months Ended June 30, 2019
Balance, March 31, 2019 (Unaudited)	$	—	$	926	$	1,599,566	$	(6,000)	$	707,829	$	2,302,321

Comprehensive income	—		—		—		21,316		55,924		77,240
Stock-based compensation plans, net – 22,672 shares	—		—		2,906		—		—		2,906
Stock issued for Reliance acquisition – 3,999,623 shares	42,000		40		102,790		—		—		144,830
Retirement of preferred stock	(42,000)		—		—		—		—		(42,000)
Dividends on preferred stock	—		—		—		—		(326)		(326)
Dividends on common stock – $0.16 per share	—		—		—		—		(15,458)		(15,458)

Balance, June 30, 2019 (Unaudited)	$	—	$	966	$	1,705,262	$	15,316	$	747,969	$	2,469,513

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019


(In thousands, except share data)	Preferred Stock		Common Stock		Surplus		Accumulated Other Comprehensive Income (Loss)		Undivided Profits		Total
Six Months Ended June 30, 2020
Balance, December 31, 2019	$	767	$	1,136	$	2,117,282	$	20,891	$	848,848	$	2,988,924

Impact of ASU 2016-13 adoption	—		—		—		—		(128,101)		(128,101)
Comprehensive income	—		—		—		33,419		136,038		169,457
Stock issued for employee stock purchase plan – 43,681 shares	—		1		955		—		—		956
Stock-based compensation plans, net – 244,443 shares	—		2		4,404		—		—		4,406
Stock repurchases – 4,922,336 shares	—		(49)		(93,258)		—		—		(93,307)
Dividends on preferred stock	—		—		—		—		(26)		(26)
Dividends on common stock – $0.34 per share	—		—		—		—		(37,606)		(37,606)

Balance, June 30, 2020 (Unaudited)	$	767	$	1,090	$	2,029,383	$	54,310	$	819,153	$	2,904,703

Six Months Ended June 30, 2019
Balance, December 31, 2018	$	—	$	923	$	1,597,944	$	(27,374)	$	674,941	$	2,246,434

Comprehensive income	—		—		—		42,690		103,619		146,309
Stock issued for employee stock purchase plan – 60,413 shares	—		1		1,311		—		—		1,312
Stock-based compensation plans, net – 182,977 shares	—		2		3,217		—		—		3,219
Stock issued for Reliance acquisition – 3,999,623 shares	42,000		40		102,790		—		—		144,830
Preferred stock retirement	(42,000)		—		—		—		—		(42,000)
Dividends on preferred stock	—		—		—		—		(326)		(326)
Dividends on common stock – $0.32 per share	—		—		—		—		(30,265)		(30,265)

Balance, June 30, 2019 (Unaudited)	$	—	$	966	$	1,705,262	$	15,316	$	747,969	$	2,469,513

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

Undivided
Profits
Total
Nine Months Ended September 30, 2019
Balance, December 31, 2018 $ —
$ 923
$ 1,597,944
$ (27,374 ) $ 674,941
$ 2,246,434

Comprehensive income —
—
—
51,083
185,445
236,528
Stock issued for employee stock purchase plan – 60,413 shares —
1
1,311
—
—
1,312
Stock-based compensation plans, net – 206,176 shares —
2
6,013
—
—
6,015
Stock issued for Reliance acquisition – 3,999,623 shares 42,000
40
102,790
—
—
144,830
Preferred stock retirement (42,000 ) —
—
—
—
(42,000 )
Dividends on preferred stock —
—
—
—
(326 ) (326 )
Dividends on common stock – $0.48 per share —
—
—
—
(45,722 ) (45,722 )

Balance, September 30, 2019 (Unaudited) $ —
$ 966

$ 1,708,058

$ 23,709

$ 814,338

$ 2,547,071

Nine Months Ended September 30, 2018
Balance, December 31, 2017 $ —
$ 920

$ 1,586,034

$ (17,264 )
$ 514,874

$ 2,084,564

Comprehensive income —
—
—
(30,776 ) 160,067
129,291
Stock issued for employee stock purchase plan – 39,782 shares —
—
1,026
—
—
1,026
Stock-based compensation plans, net – 226,715 shares —
3
10,201
—
—
10,204
Dividends on common stock – $0.45 per share —
—
—
—
(41,766 ) (41,766 )

Balance, September 30, 2018 (Unaudited) $ —
$ 923

$ 1,597,261

$ (48,040 )
$ 633,175

$ 2,183,319

See Condensed Notes to Consolidated Financial Statements.

SIMMONS FIRST NATIONAL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS

Description of Business and Organizational Structure

Simmons First National Corporation ~~(the “Company”~~(“Company”) is a financial holding company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank, an Arkansas state-chartered bank that ~~began as a community bank~~has been in operation since 1903. ~~Simmons Bank is the parent company of~~ Simmons First Insurance Services, Inc. ~~(an insurance agency)~~ and Simmons First Insurance Services of TN, LLC ~~(an~~are wholly-owned subsidiaries of Simmons Bank and are insurance ~~agency).~~agencies that offer various lines of personal and corporate insurance coverage to individual and commercial customers. The Company, through its subsidiaries, conducts banking operations from 212 financial centers conveniently located in communities throughout Arkansas, Colorado, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas. The Company, through its subsidiaries, offers, among other things, consumer, real estate and commercial loans; checking, savings and time deposits; and specialized products and services (such as credit cards, trust and fiduciary services, investments, agricultural finance lending, equipment lending, insurance and ~~small business administration~~Small Business Administration (“SBA”) lending). from approximately 226 financial centers located throughout market areas in Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosures for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, ~~2018,~~2019, was derived from audited financial statements. In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair presentation of interim results of operations, including normal recurring accruals. Significant intercompany accounts and transactions have been eliminated in consolidation. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which was filed with the SEC on February 27, ~~2019.~~2020.

The preparation of financial statements, in accordance with accounting principles generally accepted in the United States (“US GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income items and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements and actual results may differ from these estimates. Such estimates include, but are not limited to, the Company’s allowance for ~~loan~~credit losses.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income.

Recently Adopted Accounting Standards

~~Cloud Computing Arrangements~~Fair Value Measurement Disclosures – In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~ (“ASU 2018-15”), that amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The internal-use software guidance states that only qualifying costs incurred during the application development stage can be capitalized. The effective date is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with the applicable guidance. At the time of adoption, entities will be required to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. The Company early adopted ASU 2018-15 in the first quarter 2019 and elected to apply the guidance prospectively to all software implementation costs incurred after the date of adoption. As of September 30, 2019, $1.1 million of applicable software implementation costs have been capitalized and have not had a material impact on our financial position or results of operations.

~~Derivatives and Hedging: Targeted Improvements~~ ~~- In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ (“ASU 2017-12”), that changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in order to better align a company’s risk management activities and financial reporting for hedging relationships. In summary, this amendment 1) expands the types of transactions eligible for hedge accounting; 2) eliminates the separate measurement and presentation of hedge ineffectiveness; 3) simplifies the requirements around the assessment of hedge effectiveness; 4) provides companies more time to finalize hedge documentation; and 5) enhances presentation and disclosure requirements. The effective date was for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. All transition requirements and elections should be applied to existing hedging relationships on the date of adoption and the effects should be reflected as of the beginning of the fiscal year of adoption. As part of this new guidance, entities are allowed to designate as the hedged item, an amount that is not expected to be affected by prepayments, defaults or other events affecting the timing and amount of cash flows in a closed portfolio of prepayable financial instruments (this is referred to as the “last-of-layer” method). Under the last-of-layer method, entities are able to reclassify, only at the time of adoption, eligible callable debt securities from held-to-maturity to available-for-sale without tainting its intentions to hold future debt securities to maturity. The available-for-sale security must be reported at fair value and any unrealized gain or loss must be recorded as an adjustment to other comprehensive income upon adoption. The Company evaluated its held-to-maturity portfolio during the first quarter 2019 and identified certain municipal bonds with a fair value of $216.4 million that met the last-of-layer criteria under ASU 2017-12 and as a result, reclassified those to available-for-sale and recorded an unrealized gain of $2.5 million during the first quarter 2019.

~~Goodwill Impairment~~ ~~– In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ (“ASU 2017-04”), that eliminates Step 2 from the goodwill impairment test which required entities to compare the implied fair value of goodwill to its carrying amount. Under the amendments, the goodwill impairment will be measured as the excess of the reporting unit’s carrying amount over its fair value. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The effective date is for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual impairment tests beginning in 2017. The Company early adopted ASU 2017-04 during the second quarter 2019 to coincide with the Company’s formal impairment analysis. See Note 7, Goodwill and Other Intangible Assets, for additional information.

~~Leases~~ ~~- In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 2016-02”), that establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance results in a more consistent representation of the rights and obligations arising from leases by requiring lessees to recognize the lease asset and lease liabilities that arise from leases in the consolidated balance sheet and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. The effective date was for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 requires entities to adopt the new lease standard using a modified retrospective transition method, meaning an entity initially applies the new lease standard at the beginning of the earliest period presented in the financial statements. Due to complexities associated with using this method, in July 2018, the FASB issued ASU No. 2018-11, ~~Leases (Topic 842): Targeted Improvements~~, to relieve entities of the requirement to present prior comparative years’ results when they adopt the new lease standard and giving entities the option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings. Adoption of ASU 2016-02 resulted in the recognition of right-of-use assets of $32.8 million and right-of-use liabilities of $32.8 million on the consolidated balance sheet with no material impact to the results of operations. The Company has elected to adopt the guidance using the optional transition method, which allows for a modified retrospective method of adoption with a cumulative effect adjustment to retained earnings without restating comparable periods. The Company also elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs as well as an exemption for short-term leases with a term of less than one year, whereby the Company did not recognize a lease liability or right-of-use asset on the consolidated balance sheet but instead will recognize lease payments as an expense over the lease term as appropriate. See Note 6, Right-of-Use Lease Assets and Lease Liabilities, for additional information related to the Company’s right-of-use lease obligations.

~~Recently Issued Accounting Standards~~

~~Fair Value Measurement Disclosures~~ ~~– In August 2018, the FASB issued ASU~~ No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), that eliminates, amends and adds disclosure requirements for fair value measurements. These amendments are part of FASB’s disclosure review project and they are expected to reduce costs for preparers while providing more decision-useful information for financial statement users. The eliminated disclosure requirements include the 1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; 2) the policy of timing of transfers between levels of the fair value hierarchy; and 3) the valuation processes for Level 3 fair value measurements. Among other modifications, the amended disclosure requirements remove the term “at a minimum” from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Under the new disclosure requirements, entities must disclose the changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is

effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. ~~The Company is currently evaluating~~ASU 2018-13 did not have a material impact on the ~~impact this standard will have on its~~Company’s fair value disclosures.

Credit Losses on Financial Instruments – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires earlier measurement of credit losses, expands the range of information considered in determining expected credit losses and enhances disclosures. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments replace the incurred loss impairment methodology in current US GAAP with a methodology (the current expected credit losses, or “CECL”, methodology) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses. This methodology replaces the multiple existing impairment methods in current guidance, which generally require that a loss be incurred before it is recognized. Within the life cycle of a loan or other financial asset, this new guidance will generally result in the earlier recognition of the provision for credit losses and the related allowance for credit losses than current practice. For available-for-sale debt securities that the Company intends to hold and where fair value is less than cost, credit-related impairment, if any, will be recognized through an allowance for credit losses and adjusted each period for changes in credit risk.

The effective date for these amendments is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. ~~The~~In preparation for implementation of ASU 2016-13, the Company ~~has~~ formed a cross functional team that ~~continues to assess~~assessed its data and system needs and ~~evaluate~~evaluated the potential impact of adopting the new guidance. The Company ~~anticipates~~anticipated a significant change in the processes and procedures to calculate the loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the ~~current~~prior accounting practice that ~~utilizes~~utilized the incurred loss model.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed in to law by the President of the United States and allows the option to temporarily defer or suspend the adoption of ASU 2016-13. During the deferral, a registrant would continue to use the incurred loss model for the allowance for loan and lease losses and would be in accordance with US GAAP. The Company has not elected to temporarily defer the adoption of ASU 2016-13 and adopted the new standard as of January 1, 2020. Upon adoption, the Company recorded an additional allowance for credit losses on loans of approximately $151.4 million and an adjustment to the reserve for unfunded commitments recorded in other liabilities of $24.0 million. The Company also recorded an additional allowance for credit losses on investment securities of $742,000. The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $128.1 million.

The significant impact to the Company’s allowance for credit losses at the date of adoption was driven by the substantial amount of loans acquired held by the Company. The Company had approximately one third of total loans categorized as acquired at the adoption date with very little reserve allocated to them due to the previous incurred loss impairment methodology. As such, the amount of the CECL adoption impact was greater on the Company when compared to a non-acquisitive bank.

In December 2018, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “agencies”) issued a final rule revising regulatory capital rules in anticipation of the adoption of ASU 2016-13 that ~~provides~~provided an option to phase in over a three year period on a straight line basis the day-one impact on earnings and ~~tier one capital. Due~~Tier 1 capital (the “CECL Transition Provision”).

In March 2020 and in response to ~~this final~~the COVID-19 pandemic, the agencies issued a new regulatory capital rule revising the CECL Transition Provision to delay the estimated impact on regulatory capital stemming from the implementation of ASU 2016-13. The rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years an estimate of CECL’s effect on regulatory ~~agencies,~~capital, followed by a three-year transition period (the “2020 CECL Transition Provision”). The Company elected to apply the 2020 CECL Transition Provision.

In connection with the adoption of ASU 2016-13, the Company revised certain accounting policies and implemented certain accounting policy elections. The revised accounting policies are described below:

Allowance for Credit Losses - Held-to-Maturity (“HTM”) Securities - The Company measures expected credit losses on HTM securities on a collective basis by major security type with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. See Note 3, Investment Securities, for additional information related to the Company’s allowance for credit losses on HTM securities.

Allowance for Credit Losses - Available-for-Sale (“AFS”) Securities - For AFS securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or whether it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of these criteria regarding intent or requirement to sell is met, the AFS security amortized cost basis is written down to fair value through income. If the criteria is not met, the Company is ~~continuing~~required to ~~research~~assess whether the decline in fair value has resulted from credit losses or noncredit-related factors. If the assessment indicates a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and ~~study options~~an allowance for ~~recording~~credit loss is recorded through income as a ~~one-time adjustment or structuring any capital impact over an allowable period~~component of ~~time. The impact will be reflected as an adjustment to beginning retained earnings,~~provision for credit loss expense. If the assessment indicates that a credit loss does not exist, the Company records the decline in fair value through other comprehensive income, net of related income ~~taxes, at adoption.~~

~~Based~~tax effects. The Company has made the election to exclude accrued interest receivable on ~~a preliminary analysis performed,~~AFS securities from the ~~Company previously disclosed that~~estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses ~~was estimated to increase by approximately 130% to 170% over~~are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance ~~based on June 30, 2019 loan balances. When purchase discounts are considered,~~when management believes the ~~increase~~uncollectibility of an AFS security is expected to be 10% to 30% over the June 30, 2019 total credit coverage ratio. These estimates were based upon the Company’s analysis of current macroeconomic conditions, assumptions and forecasts at the point in time at which the initial guidance was given and did not include the impactconfirmed or when either of the ~~Company’s acquisition of The Landrum Company. When factoring in the Company’s recent acquisition of The Landrum Company (see~~criteria regarding intent or requirement to sell is met. See Note ~~2, Acquisitions,~~3, Investment Securities, for additional information related to the Company’s allowance for credit losses on AFS securities.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their amortized cost basis, which is the unpaid principal balance outstanding, net of unearned income, deferred loan fees and costs, premiums and discounts associated with acquisition date fair value adjustments on acquired loans, and any direct principal charge-offs. The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and report accrued interest separately from the related loan balance on the consolidated balance sheets. Further information regarding accounting policies related to past due loans, non-accrual loans, and troubled-debt restructurings is presented in Note 5, Loans and Allowance for Credit Losses.

The Company used the ~~acquisition),~~prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company increased the allowance for credit losses ~~is estimated to increase~~ by approximately ~~165%~~$5.4 million at adoption for the assets previously identified as PCI. In accordance with ASU 2016-13, the Company did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

Collateral Dependent Loans - Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to ~~215% over~~be provided substantially through the operation or sale of the collateral, the allowance for credit loss is measured based on the difference between the fair value of the collateral and ~~when purchase discounts are considered,~~ the ~~increase~~amortized cost basis of the asset as of the measurement date. When repayment is expected to be ~~5% to 25% over~~from the ~~total credit coverage ratio.~~

~~These estimates are subject to change based on continuing review and challenge~~operation of the models, methodologies and judgments. The impact at adoption will also be influenced by the loan portfolio composition and quality at the adoption date, as well as, macroeconomic conditions and forecast at that time. The adoption of ASU 2016-13 in 2020 could also impact the Company’s ongoing earnings, perhaps materially.

Implementation efforts for the adoption of CECL have been underway, including model development and validation, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Model validations and user acceptance testing commenced in the first quarter of 2019, with loss forecast modeling taking place in the third quarter of 2019. The Company intends to utilize a single macroeconomic scenario in estimating expected credit losses. Reasonable and supportable forecast periods and methods to revert to historical averages to arrive at lifetimecollateral, expected credit losses ~~vary~~are calculated as the amount by ~~product.~~which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures - The allowance for credit losses on off-balance-sheet credit exposures is a liability account representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit. No allowance for credit loss is recognized if the Company has the unconditional right to cancel the obligation. The allowance for credit loss is reported as a component of accrued interest and other liabilities in the consolidated balance sheets. Adjustments to the allowance are reported in the income statement as a component of other operating expenses.

Recently Issued Accounting Standards

Reference Rate Reform – In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides relief for companies preparing for discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”). LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities. After 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides optional expedients and exceptions to contracts, hedging relationships and other transactions affected by reference rate reform. The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features. Optional expedients for hedge accounting permits changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provides relief for assessing hedge effectiveness for cash flow hedges. Companies are able to apply ASU 2020-04 immediately; however, the guidance will only be available for a limited time (generally through December 31, 2022). As of June 30, 2020, the Company has not made any modifications to hedges or other instruments that reference an interest rate that is expected to be discontinued.

Income Taxes – In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), that removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 introduces the following new guidance: i) guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction and ii) a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax. Additionally, ASU 2019-12 changes the following current guidance: i) making an intraperiod allocation, if there is a loss in continuing operations and gains outside of continuing operations, ii) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting, iii) accounting for tax law changes and year-to-date losses in interim periods, and iv) determining how to apply the income tax guidance to franchise taxes that are partially based on income. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating all of the amendments in ASU 2019-12 and has ~~completed decisions around model methodologies, and relevant elections are being finalized.~~not yet determined the impact of this new standard.

There have been no other significant changes to the Company’s accounting policies from the ~~2018~~2019 Form 10-K. Presently, the Company is not aware of any other changes to the Accounting Standards Codification that will have a material impact on its present or future financial position or results of operations.

NOTE 2: ACQUISITIONS

The Landrum Company

On October 31, 2019, the Company completed its merger with The Landrum Company (“Landrum”), pursuant to the terms of the Agreement and Plan of Merger dated as of July 30, 2019 (“Landrum Agreement”), at which time Landrum was merged with and into the Company, with the Company continuing as the surviving corporation. Pursuant to the terms of the Landrum Agreement, the shares of Landrum Class A Common Voting Stock, par value $0.01 per share, and Landrum Class B Common Nonvoting Stock, par value $0.01 per share, were converted into the right to receive, in the aggregate, approximately 17,350,000 shares of the Company’s common stock, and each share of Landrum’s series E preferred stock was converted into the right to receive 1 share of the Company’s comparable series D preferred stock. The Company issued 17,349,722 shares of its common stock and 767 shares of its series D preferred stock, par value $0.01 per share, in exchange for all outstanding shares of Landrum capital stock to effect the merger.

Prior to the acquisition, Landrum, headquartered in Columbia, Missouri, conducted banking business through its subsidiary bank, Landmark Bank, from 39 branches located in Missouri, Oklahoma and Texas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $3.4 billion in assets, including approximately $2.0 billion in loans (inclusive of loan discounts), and approximately $3.0 billion in deposits. The systems conversion occurred on February 14, 2020, at which time Landmark Bank merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $140.6 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.

A summary, at fair value, of the assets acquired and liabilities assumed in the Landrum acquisition, as of the acquisition date, is as follows:


(In thousands)	Acquired from Landrum		Fair Value Adjustments		Fair Value
Assets Acquired
Cash and due from banks	$	215,285	$	—	$	215,285
Due from banks - time	248		—		248
Investment securities	1,021,755		4,228		1,025,983
Loans acquired	2,049,137		(43,651)		2,005,486
Allowance for loan losses	(22,736)		22,736		—
Foreclosed assets	373		(183)		190
Premises and equipment	63,878		18,867		82,745
Bank owned life insurance	19,206		—		19,206
Goodwill	407		(407)		—
Core deposit intangible	—		24,345		24,345
Other intangibles	412		4,704		5,116
Other assets	33,924		(13,290)		20,634
Total assets acquired	$	3,381,889	$	17,349	$	3,399,238

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	716,675	$	—	$	716,675
Interest bearing transaction accounts and savings deposits	1,465,429		—		1,465,429
Time deposits	867,197		299		867,496
Total deposits	3,049,301		299		3,049,600
Other borrowings	10,055		—		10,055
Subordinated debentures	34,794		(877)		33,917
Accrued interest and other liabilities	31,057		(586)		30,471
Total liabilities assumed	3,125,207		(1,164)		3,124,043
Equity	256,682		(256,682)		—
Total equity assumed	256,682		(256,682)		—
Total liabilities and equity assumed	$	3,381,889	$	(257,846)	$	3,124,043
Net assets acquired					275,195
Purchase price					415,779
Goodwill					$	140,584

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction over the next few months, within one year of the merger. Therefore, adjustments to the estimated amounts and carrying values may occur.

The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Landrum subsequent to the acquisition date.

Reliance Bancshares, Inc.

On April 12, 2019, the Company completed its merger with Reliance Bancshares, Inc. (“Reliance”), headquartered in the St. Louis, Missouri, metropolitan area, pursuant to the terms of the Agreement and Plan of Merger (“Reliance Agreement”), dated November 13, 2018, as amended February 11, 2019. In the merger, each outstanding share of Reliance common stock, as well as each Reliance common stock equivalent was canceled and converted into the right to receive shares of the Company’s common stock and/or cash in accordance with the terms of the Reliance Agreement. In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock was converted into the right to receive 1 share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each share of Reliance’s Series C Preferred Stock was converted into the right to receive 1 share of Simmons’ comparable Series C Preferred Stock (unless the holder of such Series C Preferred Stock elected to receive alternate consideration in accordance with the Reliance Agreement). The Company issued 3,999,623 shares of its common stock and paid $62.7 million in cash to effect the merger. The Company also issued $42.0 million of ~~preferred stock in exchange for all outstanding shares of Reliance preferred stock.~~its Series A Preferred Stock and Series B Preferred Stock. On May 13, 2019, the Company redeemed all of the preferred stock issued in connection with the merger, and paid all accrued and unpaid dividends up to the date of redemption. On October 29, 2019, the Company amended its Amended and Restated Articles of Incorporation to cancel the Series C Preferred Stock, having 140 authorized shares, of which 0 shares ~~have~~were ever ~~been~~ issued or outstanding.

Prior to the ~~merger,~~acquisition, Reliance conducted banking business through its subsidiary bank, Reliance Bank, from 22 branches located in Missouri and Illinois. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $1.5 billion in assets, including approximately $1.1 billion in loans (inclusive of loan discounts), and approximately $1.2 billion in deposits. Contemporaneously with the completion of the Reliance merger, Reliance Bank was merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of ~~$81.0~~$78.5 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s St. Louis metropolitan area footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.

A summary, at fair value, of the assets acquired and liabilities assumed in the Reliance ~~transaction,~~acquisition, as of the acquisition date, is as follows:


(In thousands)	Acquired from Reliance		Fair Value Adjustments		Fair Value
Assets Acquired
Cash and due from banks	$	25,693	$	—	$	25,693
Due from banks - time	502		—		502
Investment securities	287,983		(1,873)		286,110
Loans acquired	1,138,527		(41,657)		1,096,870
Allowance for loan losses	(10,808)		10,808		—
Foreclosed assets	11,092		(5,180)		5,912
Premises and equipment	32,452		(3,001)		29,451
Bank owned life insurance	39,348		—		39,348
Core deposit intangible	—		18,350		18,350
Other assets	25,165		6,911		32,076
Total assets acquired	$	1,549,954	$	(15,642)	$	1,534,312

(In thousands) Acquired from Reliance Fair Value Adjustments Fair Value
Assets Acquired
Cash and due from banks $ 25,693
$ —
$ 25,693
Due from banks - time 502
—
502
Investment securities 287,983
(1,763 ) 286,220
Loans acquired 1,138,527
(41,657 ) 1,096,870
Allowance for loan losses (10,808 ) 10,808
—
Foreclosed assets 11,092
(5,180 ) 5,912
Premises and equipment 32,452
(3,001 ) 29,451
Bank owned life insurance 39,348
—
39,348
Core deposit intangible —
18,350
18,350
Other assets 25,165
5,001
30,166
Total assets acquired $ 1,549,954
$ (17,442 ) $ 1,532,512

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts $ 108,845
$ (33 ) $ 108,812
Interest bearing transaction accounts and savings deposits 639,798
—
639,798
Time deposits 478,415
(1,758 ) 476,657
Total deposits 1,227,058
(1,791 ) 1,225,267
Securities sold under agreement to repurchase 14,146
—
14,146
Other borrowings 162,900
(5,500 ) 157,400
Accrued interest and other liabilities 8,185
936
9,121
Total liabilities assumed 1,412,289
(6,355 ) 1,405,934
Equity 137,665
(95,665 ) 42,000
Total equity assumed 137,665
(95,665 ) 42,000
Total liabilities and equity assumed $ 1,549,954
$ (102,020 ) $ 1,447,934
Net assets acquired 84,578
Purchase price 165,539
Goodwill $ 80,961


(In thousands)	Acquired from Reliance		Fair Value Adjustments		Fair Value
Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	108,845	$	(33)	$	108,812
Interest bearing transaction accounts and savings deposits	639,798		—		639,798
Time deposits	478,415		(1,758)		476,657
Total deposits	1,227,058		(1,791)		1,225,267
Securities sold under agreement to repurchase	14,146		—		14,146
Other borrowings	162,900		(5,500)		157,400
Accrued interest and other liabilities	8,185		268		8,453
Total liabilities assumed	1,412,289		(7,023)		1,405,266
Equity	137,665		(137,665)		—
Total equity assumed	137,665		(137,665)		—
Total liabilities and equity assumed	$	1,549,954	$	(144,688)	$	1,405,266
Net assets acquired					129,046
Purchase price					207,539
Goodwill					$	78,493

During 2020, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities.

The ~~purchase price allocation and certain fair value measurements remain preliminary due to~~Company’s operating results include the ~~timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis~~operating results of the acquired assets and assumed liabilities ~~in this transaction over the next few months, within one year~~ of ~~the merger. Therefore, adjustments~~Reliance subsequent to the ~~estimated amounts and carrying values may occur.~~acquisition date.

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above.

Cash and due from banks and time deposits due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan

was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

Foreclosed assets – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

Premises and equipment – Bank premises and equipment were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired.

Bank owned life insurance – Bank owned life insurance is carried at its current cash surrender value, which is the most reasonable estimate of fair value.

Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill. Goodwill established prior to the acquisitions, if applicable, was written off.

Core deposit intangible – This intangible asset represents the value of the relationships that the acquired banks had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits. Any core deposit intangible established prior to the acquisitions, if applicable, was written off.

Other intangibles – These intangible assets represent the value of the relationship that Landrum had with their trust and wealth management customers. The fair value of these intangible assets was estimated based on a combination of discounted cash flow methodology and a market valuation approach. Intangible assets for Landrum also included mortgage servicing rights. Other intangibles established prior to the acquisitions, if applicable, were written off.

Other assets – The fair value adjustment results from certain assets whose value was estimated to be more or less than book value, such as certain prepaid assets, receivables and other miscellaneous assets. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the ~~difference.~~difference when material.

Securities sold under agreement to repurchase – The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities.

~~FHLB and other~~Other borrowings – The fair value of ~~Federal Home Loan Bank (“FHLB”)~~other borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and ~~other borrowings~~maturities.

Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Accrued interest and other liabilities – The adjustment establishes a liability for unfunded commitments equal to the ~~estimated~~ fair value of that liability at the date of acquisition. The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value.

~~The Landrum Company (Subsequent Event - Acquisition)~~

On July 30, 2019, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with The Landrum Company (“Landrum”), headquartered in Columbia, Missouri. The merger was completed on October 31, 2019, at which time The Landrum Company was merged with and into the Company, with the Company continuing as the surviving corporation. Pursuant to the terms of the Agreement, the shares of Landrum Class A Common Voting Stock, par value $0.01 per share, and Landrum Class B Common Nonvoting Stock, par value $0.01 per share, were converted into the right to receive, in the aggregate, approximately 17,350,000 shares of the Company’s common stock and each share of Landrum’s series E preferred stock was converted into the right to receive one share of the Company’s comparable series D preferred stock.

Prior to the acquisition, Landrum conducted banking business from 39 branches located in Missouri, Oklahoma and Texas. As of September 30, 2019, Landrum had approximately $3.3 billion in assets, $2.0 billion in loans and $2.9 billion in deposits.

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Due to the recent October 31, 2019 closing, management remains in the early stages of reviewing the estimated fair values and evaluating the assumed tax positions of this merger. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction over the next few months, within one year of the merger.

NOTE 3: 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, further discussed below. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity.

The amortized cost, ~~and~~ fair value and allowance for credit losses of investment securities that are classified as ~~held-to-maturity (“HTM”) and available-for-sale (“AFS”)~~HTM are as follows:


(In thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
Held-to-Maturity

June 30, 2020
Mortgage-backed securities	$	25,980	$	—	$	25,980	$	798	$	(1)	$	26,777
State and political subdivisions	24,872		(95)		24,777		1,125		(2)		25,900
Other securities	1,175		(212)		963		111		—		1,074
Total HTM	$	52,027	$	(307)	$	51,720	$	2,034	$	(3)	$	53,751

September 30, 2019 December 31, 2018
(In thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross Unrealized
(Losses)

Estimated
Fair
Value

Amortized
Cost

Gross
Unrealized
Gains

Gross Unrealized
(Losses)

Estimated
Fair
Value
Held-to-Maturity

U.S. Government agencies $ —
$ —
$ —
$ —
$ 16,990
$ —
$ (49 ) $ 16,941
Mortgage-backed securities 11,549
93
(42 ) 11,600
13,346
5
(412 ) 12,939
State and political subdivisions 28,692
931
—
29,623
256,863
3,029
(954 ) 258,938
Other securities 1,996
83
—
2,079
1,995
17
—
2,012
Total HTM $ 42,237

$ 1,107

$ (42 )
$ 43,302

$ 289,194

$ 3,051

$ (1,415 )
$ 290,830

Available-for-Sale
U.S. Government agencies $ 177,712
$ 1,629
$ (1,202 ) $ 178,139
$ 157,523
$ 518
$ (3,740 ) $ 154,301
Mortgage-backed securities 1,332,130
9,405
(3,741 ) 1,337,794
1,552,487
3,097
(32,684 ) 1,522,900
State and political subdivisions 658,984
22,290
(72 ) 681,202
320,142
171
(5,470 ) 314,843
Other securities 158,280
719
—
158,999
157,471
2,251
(14 ) 159,708
Total AFS $ 2,327,106

$ 34,043

$ (5,015 )
$ 2,356,134

$ 2,187,623

$ 6,037

$ (41,908 )
$ 2,151,752

~~Securities with limited marketability, such~~


(In thousands)	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
December 31, 2019
Mortgage-backed securities	$	10,796	$	—	$	10,796	$	71	$	(59)	$	10,808
State and political subdivisions	27,082		—		27,082		849		—		27,931
Other securities	3,049		—		3,049		67		—		3,116
Total HTM	$	40,927	$	—	$	40,927	$	987	$	(59)	$	41,855

The amortized cost, fair value and allowance for credit losses of investment securities that are classified as ~~stock in the Federal Reserve Bank~~AFS are as follows:


(In thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
Available-for-sale

June 30, 2020
U.S. Government agencies	$	210,496	$	—	$	1,416	$	(991)	$	210,921
Mortgage-backed securities	1,125,484		—		28,804		(202)		1,154,086
State and political subdivisions	1,015,625		(371)		39,510		(696)		1,054,068
Other securities	76,943		(238)		1,354		(238)		77,821
Total AFS	$	2,428,548	$	(609)	$	71,084	$	(2,127)	$	2,496,896

December 31, 2019
U.S. Treasury	$	449,729	$	—	$	112	$	(112)	$	449,729
U.S. Government agencies	194,207		—		1,313		(1,271)		194,249
Mortgage-backed securities	1,738,584		—		8,510		(4,149)		1,742,945
State and political subdivisions	860,539		—		20,983		(998)		880,524
Other securities	20,092		—		822		(18)		20,896
Total AFS	$	3,263,151	$	—	$	31,740	$	(6,548)	$	3,288,343

Accrued interest receivable on HTM and ~~the FHLB, are carried at cost and are reported as other~~ AFS securities at June 30, 2020 was $247,000 and $12.7 million, respectively, and is included in interest receivable on the ~~table above.~~

~~Certain investment~~consolidated balance sheets. The Company has made the election to exclude all accrued interest receivable from securities ~~are valued at less than their historical cost. Total fair value~~from the estimate of these investments at September 30, 2019 and December 31, 2018, was $710.6 million and $1.7 billion, which is approximately 29.6% and 70.3%, respectively, of the Company’s combined AFS and HTM investment portfolios.

credit losses.

The following table ~~shows the gross unrealized losses and fair value of~~summarizes the Company’s AFS investments ~~with~~in an unrealized ~~losses,~~loss position for which an allowance for credit loss has not been recorded as of June 30, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss ~~position at September 30, 2019:~~position:

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

Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses

Estimated
Fair
Value

Gross
Unrealized
Losses
Held-to-Maturity

Mortgage-backed securities $ 3,408
$ (15 ) $ 2,575
$ (27 ) $ 5,983
$ (42 )
State and political subdivisions 635
—
15
—
650
—
Total HTM $ 4,043

$ (15 )
$ 2,590

$ (27 )
$ 6,633

$ (42 )

Available-for-Sale
U.S. Government agencies $ 16,662
$ (36 ) $ 90,974
$ (1,166 ) $ 107,636
$ (1,202 )
Mortgage-backed securities 133,538
(528 ) 435,207
(3,213 ) 568,745
(3,741 )
State and political subdivisions 24,278
(41 ) 3,297
(31 ) 27,575
(72 )
Total AFS $ 174,478

$ (605 )
$ 529,478

$ (4,410 )
$ 703,956

$ (5,015 )


	Less Than 12 Months						12 Months or More						Total
(In thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Available-for-sale
U.S. Government agencies	$	3,209	$	(3)	$	56,007	$	(988)	$	59,216	$	(991)
Mortgage-backed securities	47,380		(161)		4,266		(41)		51,646		(202)
State and political subdivisions	30,468		(324)		388		(1)		30,856		(325)
Total AFS	$	81,057	$	(488)	$	60,661	$	(1,030)	$	141,718	$	(1,518)

~~The declines reflected~~

As of June 30, 2020, the Company’s investment portfolio included $2.5 billion of AFS securities, of which $141.7 million, or 5.7%, were in an unrealized loss position that are not deemed to have credit losses. A portion of the ~~preceding table primarily resulted from~~unrealized losses were related to the Company’s mortgage-backed securities, which are issued and guaranteed by U.S. government-sponsored entities and agencies, and the Company’s state and political securities, specifically investments in insured fixed rate municipal bonds meaning issuers continue to make timely principal and interest payments under the contractual terms of the securities.

Furthermore, the decline in fair value for ~~these~~each of the above AFS securities is attributable to the rates for those investments yielding less than current market rates. ~~Based on evaluation~~Management does not believe any of ~~available evidence, management~~the securities are impaired due to reasons of credit quality. Management believes the declines in fair value for ~~these~~the securities are temporary. Management does not have the intent to sell ~~these~~the securities, and management believes it is more likely than not the Company will not have to sell ~~these~~the securities before recovery of their amortized cost ~~basis less any current period~~basis.

Allowance for Credit Losses

All of the mortgage-backed securities held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Accordingly, no allowance for credit losses has been recorded for these securities.

~~Declines~~Regarding securities issued by state and political subdivisions and other HTM securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts, (v) whether or not such securities provide insurance or other credit enhancement or pre-refunded by the issuers.

The following table details activity in the ~~fair value of~~allowance for credit losses by investment security type for the three and six months ended June 30, 2020 on the Company’s HTM and AFS securities ~~below their cost that are deemed~~held.


(In thousands)	State and Political Subdivisions		Other Securities		Total
Three Months Ended June 30, 2020
Held-to-Maturity
Beginning balance, April 1, 2020	$	97	$	312	$	409
Provision for credit loss expense	(2)		(100)		(102)
Ending balance, June 30, 2020	$	95	$	212	$	307

Available-for-sale
Beginning balance, April 1, 2020	$	95	$	174	$	269
Credit losses on securities not previously recorded	370		160		530
Net increase (decrease) in allowance on previously impaired securities	(94)		(96)		(190)
Ending balance, June 30, 2020	$	371	$	238	$	609

Six Months Ended June 30, 2020
Held-to-Maturity
Beginning balance, January 1, 2020	$	—	$	—	$	—
Impact of ASU 2016-13 adoption	58		311		369
Provision for credit loss expense	37		(99)		(62)
Ending balance, June 30, 2020	$	95	$	212	$	307

Available-for-sale
Beginning balance, January 1, 2020	$	—	$	—	$	—
Impact of ASU 2016-13 adoption	373		—		373
Credit losses on securities not previously recorded	77		192		269
Reduction due to sales	(142)		—		(142)
Net increase (decrease) in allowance on previously impaired securities	63		46		109
Ending balance, June 30, 2020	$	371	$	238	$	609

During the three and six months ended June 30, 2020, the provision for credit losses was $340,000 and $236,000, respectively, related to beAFS securities.

The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other ~~than temporary are reflected~~securities as of June 30, 2020:


	State and Political Subdivisions
(In thousands)	Not Guaranteed or Pre-Refunded		Other Credit Enhancement or Insurance		Pre-Refunded		Total		Other Securities
Aaa/AAA	$	2,112	$	—	$	—	$	2,112	$	—
Aa/AA	11,512		5,922		—		17,434		—
A	961		1,147		—		2,108		—
Not Rated	2,849		369		—		3,218		1,175
Total	$	17,434	$	7,438	$	—	$	24,872	$	1,175

Historical loss rates associated with securities having similar grades as those in ~~earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i)~~ the ~~length of time and the extent to which the fair value has~~Company’s portfolio have generally not been ~~less than cost, (ii) the financial condition and near-term prospects of~~significant. Pre-refunded securities, if any, have been defeased by the issuer and ~~(iii) the intent and ability of the Company~~are fully secured by cash and/or U.S. Treasury securities held in escrow for payment to ~~retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.~~

Management has the ability and intent to hold the securities classified as HTM until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of September 30, 2019, management also had the ability and intent to hold the securities classified as AFS for a period of time sufficient for a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the timeholders when the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe anycall dates of the securities are ~~impaired due~~reached. Securities with other credit enhancement or insurance continue to ~~reasons~~make timely principal and interest payments under the contractual terms of the securities. Accordingly, no allowance for credit losses has been recorded for these securities as there is no current expectation of credit ~~quality. Accordingly, as of September 30, 2019, management believes the impairments detailed in the table above are temporary. Should the impairment of any of~~losses related to 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.securities.

Income earned on securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, is as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Taxable:

Held-to-maturity $ 248
$ 528
$ 975
$ 1,641
Available-for-sale 10,166
10,364
34,422
29,614

Non-taxable:
Held-to-maturity 83
1,828
1,334
5,661
Available-for-sale 4,870
1,920
12,542
4,642
Total $ 15,367
$ 14,640
$ 49,273
$ 41,558


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Taxable:
Held-to-maturity	$	288	$	289	$	459	$	727
Available-for-sale	7,086		10,777		19,667		22,297

Non-taxable:
Held-to-maturity	68		89		140		1,251
Available-for-sale	6,031		4,511		12,150		7,672
Total	$	13,473	$	15,666	$	32,416	$	31,947

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
(In thousands)
Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value
One year or less $ 5,039
$ 5,057
$ 7,599
$ 7,605
After one through five years 17,346
17,703
70,442
70,750
After five through ten years 5,561
5,858
139,421
142,101
After ten years 2,742
3,084
632,504
652,404
Securities not due on a single maturity date 11,549
11,600
1,332,130
1,337,794
Other securities (no maturity) —
—
145,010
145,480
Total $ 42,237

$ 43,302

$ 2,327,106

$ 2,356,134


	Held-to-Maturity						Available-for-Sale
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	4,928	$	4,962	$	15,006	$	15,077
After one through five years	15,201		15,793		35,995		36,348
After five through ten years	5,918		6,219		203,777		205,627
After ten years	—		—		1,047,772		1,084,495
Securities not due on a single maturity date	25,980		26,777		1,125,484		1,154,086
Other securities (no maturity)	—		—		514		1,263
Total	$	52,027	$	53,751	$	2,428,548	$	2,496,896

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to ~~$1.12~~$1.38 billion at ~~September~~June 30, ~~2019~~2020 and ~~$1.02~~$1.73 billion at December 31, ~~2018.~~2019.

There were approximately ~~$7.6 million~~$391,000 of gross realized gains and ~~$3,000~~$1,000 of gross realized losses from the sale of securities during the three months ended ~~September~~June 30, ~~2019,~~2020, and approximately ~~$12.9~~$32.5 million of gross realized gains and ~~$3,000~~$2,600 of gross realized losses from the sale of securities during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. During the ~~third quarter 2019,~~first half of 2020, the Company sold approximately ~~$89 million~~$1.2 billion of ~~bonds as part of a plan~~investment securities to rebalance its investment portfolio resulting in a net gain on the sale of securities of $7.3 million. The gross realized gains recognized for the nine months ended September 30, 2019 is primarily due to the bond sale conducted during the third quarter 2019 as previously discussed and the adjustments made to the bond portfolio during the first quarter based upon projected cash flow changes.create additional liquidity. There were approximately ~~$41,000~~$2.8 million of gross realized gains and 0 gross realized losses from the sale of securities during the three months ended ~~September~~June 30, ~~2018,~~2019, and approximately ~~$54,000~~$5.6 million of gross realized gains and ~~$1,000 of~~0 gross realized losses from the sale of securities during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The income tax expense/benefit related to security gain/losses was 26.135% of the gross amounts in 2020 and 2019.

NOTE 4: OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Colorado Branch Sale

On February 10, 2020, the Company’s subsidiary bank, Simmons Bank, entered into a Branch Purchase and Assumption Agreement (the “First Western Agreement”) with First Western Trust Bank (“First Western”), a wholly-owned subsidiary of First Western Financial, Inc.

On May 18, 2020, First Western completed its purchase of certain assets and assumption of certain liabilities (“Colorado Branch Sale”) associated with four Simmons Bank locations in Denver, Englewood, Highlands Ranch, and Lone Tree, Colorado (collectively, the “Colorado Branches”). Pursuant to the terms of the First Western Agreement, First Western assumed certain deposit liabilities and acquired certain loans, as well as cash, personal property and other fixed assets associated with the Colorado Branches.

Texas Branch Sale

On December 20, 2019, the Company’s subsidiary bank, Simmons Bank, entered into a Branch Purchase and Assumption Agreement (the “Spirit Agreement”) with Spirit of Texas Bank, SSB (“Spirit”), a wholly-owned subsidiary of Spirit of Texas Bancshares, Inc.

On February 28, 2020, Spirit completed its purchase of certain assets and assumption of certain liabilities (“Texas Branch Sale”) associated with five Simmons Bank locations in Austin, San Antonio, and Tilden, Texas (collectively, the “Texas Branches”). Pursuant to the terms of the Spirit Agreement, Spirit assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, personal property and other fixed assets associated with the Texas Branches.

The ~~state~~Company recognized a combined gain on sale of $8.1 million related to the Texas Branches and ~~political subdivision debt obligations are predominately non-rated bonds representing small issuances, primarily~~Colorado Branches in ~~Arkansas, Missouri, Oklahoma, Tennessee and Texas issues, which are evaluated on an ongoing basis.~~the six month period ended June 30, 2020.

NOTE 4:5: LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

At ~~September~~June 30, ~~2019,~~2020, the Company’s loan portfolio was ~~$13.00~~$14.61 billion, compared to ~~$11.72~~$14.43 billion at December 31, ~~2018.~~2019. The various categories of loans are summarized as follows:


	June 30,		December 31,
(In thousands)	2020		2019
Consumer:
Credit cards	$	184,348	$	204,802
Other consumer	214,024		249,195
Total consumer	398,372		453,997
Real Estate:
Construction and development	2,010,256		2,248,673
Single family residential	2,207,087		2,414,753
Other commercial	6,316,444		6,358,514
Total real estate	10,533,787		11,021,940
Commercial:
Commercial	3,038,216		2,451,119
Agricultural	217,715		191,525
Total commercial	3,255,931		2,642,644
Other	418,810		307,123
Total loans	$	14,606,900	$	14,425,704

(In thousands) September 30, 2019 December 31, 2018
Consumer:

Credit cards $ 195,083
$ 204,173
Other consumer 208,643
201,297
Total consumer 403,726

405,470
Real Estate:
Construction 1,712,858
1,300,723
Single family residential 1,448,455
1,440,443
Other commercial 3,630,708
3,225,287
Total real estate 6,792,021

5,966,453
Commercial:
Commercial 1,894,819
1,774,909
Agricultural 213,753
164,514
Total commercial 2,108,572

1,939,423
Other 339,046
119,042
Loans 9,643,365
8,430,388
Loans acquired, net of discount and allowance ⁽¹⁾
3,359,587
3,292,783
Total loans $ 13,002,952

$ 11,723,171

~~_____________________________~~

~~(1) See Note 5, Loans Acquired, for segregation~~The above table presents total loans at amortized cost. The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as net deferred origination fees totaling $82.2 million and $91.6 million at June 30, 2020 and December 31, 2019, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans ~~acquired by loan class.~~held for investment, totaled $66.9 million and $48.9 million at June 30, 2020 and December 31, 2019, respectively, and is included in interest receivable on the consolidated balance sheets.

Loan Origination/Risk Management – 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 ~~loans~~credit losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its 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. Furthermore, a factor that influenced the Company’s judgment regarding the allowance for loan losses consists of a nine-year historical loss average segregated by each primary loan sector. On an annual basis, historical loss rates are calculated for each sector.

Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate – The real estate loan portfolio consists of construction and development loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within commercial real

estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the

overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely.

Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

~~Nonaccrual~~The amortized cost basis of nonaccrual loans ~~excluding loans acquired,~~ segregated by class of loans are as follows:

(In thousands) September 30, 2019 December 31, 2018
Consumer:

Credit cards $ 521
$ 296
Other consumer 1,634
2,159
Total consumer 2,155

2,455
Real estate:
Construction 1,805
1,269
Single family residential 16,191
11,939
Other commercial 16,985
7,205
Total real estate 34,981

20,413
Commercial:
Commercial 35,018
10,049
Agricultural 567
1,284
Total commercial 35,585

11,333
Total $ 72,721

$ 34,201


	June 30,		December 31,
(In thousands)	2020		2019
Consumer:
Credit cards	$	223	$	382
Other consumer	1,912		1,705
Total consumer	2,135		2,087
Real estate:
Construction and development	6,501		5,289
Single family residential	32,244		27,695
Other commercial	36,255		16,582
Total real estate	75,000		49,566
Commercial:
Commercial	53,538		40,924
Agricultural	710		753
Total commercial	54,248		41,677
Total	$	131,383	$	93,330

Nonaccrual loans for which there is no related allowance for credit losses as of June 30, 2020 had an amortized cost of $18.0 million. These loans are individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method.

An age analysis of the amortized cost basis of past due loans, ~~excluding~~including nonaccrual loans, ~~acquired,~~ segregated by class of loans is as follows:

(In thousands)
Gross
30-89 Days
Past Due

90 Days
or More
Past Due

Total
Past Due
Current
Total
Loans

90 Days
Past Due &
Accruing
September 30, 2019

Consumer:

Credit cards $ 958
$ 650
$ 1,608
$ 193,475
$ 195,083
$ 130
Other consumer 3,383
694
4,077
204,566
208,643
14
Total consumer 4,341

1,344

5,685

398,041

403,726

144
Real estate:
Construction 3,690
613
4,303
1,708,555
1,712,858
—
Single family residential 10,022
6,395
16,417
1,432,038
1,448,455
—
Other commercial 8,009
3,385
11,394
3,619,314
3,630,708
—
Total real estate 21,721

10,393

32,114

6,759,907

6,792,021

—
Commercial:
Commercial 4,999
10,990
15,989
1,878,830
1,894,819
11
Agricultural 285
349
634
213,119
213,753
—
Total commercial 5,284

11,339

16,623

2,091,949

2,108,572

11
Other —
—
—
339,046
339,046
—
Total $ 31,346

$ 23,076

$ 54,422

$ 9,588,943

$ 9,643,365

$ 155

December 31, 2018
Consumer:
Credit cards $ 1,033
$ 506
$ 1,539
$ 202,634
$ 204,173
$ 209
Other consumer 4,264
896
5,160
196,137
201,297
4
Total consumer 5,297

1,402

6,699

398,771

405,470

213
Real estate:
Construction 533
308
841
1,299,882
1,300,723
—
Single family residential 7,769
4,127
11,896
1,428,547
1,440,443
—
Other commercial 3,379
2,773
6,152
3,219,135
3,225,287
—
Total real estate 11,681

7,208

18,889

5,947,564

5,966,453

—
Commercial:
Commercial 4,472
5,105
9,577
1,765,332
1,774,909
11
Agricultural 467
1,055
1,522
162,992
164,514
—
Total commercial 4,939

6,160

11,099

1,928,324

1,939,423

11
Other —
—
—
119,042
119,042
—
Total $ 21,917

$ 14,770

$ 36,687

$ 8,393,701

$ 8,430,388

$ 224

~~Impaired Loans~~ – 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 loans, including scheduled principal and interest payments. 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. Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent.

Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.

~~Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows:~~


(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing
June 30, 2020
Consumer:
Credit cards	$	672	$	262	$	934	$	183,414	$	184,348	$	262
Other consumer	2,626		724		3,350		210,674		214,024		1
Total consumer	3,298		986		4,284		394,088		398,372		263
Real estate:
Construction and development	3,574		4,698		8,272		2,001,984		2,010,256		—
Single family residential	13,805		15,389		29,194		2,177,893		2,207,087		—
Other commercial	4,665		19,480		24,145		6,292,299		6,316,444		50
Total real estate	22,044		39,567		61,611		10,472,176		10,533,787		50
Commercial:
Commercial	6,413		14,891		21,304		3,016,912		3,038,216		180
Agricultural	411		401		812		216,903		217,715		1
Total commercial	6,824		15,292		22,116		3,233,815		3,255,931		181
Other	—		—		—		418,810		418,810		—
Total	$	32,166	$	55,845	$	88,011	$	14,518,889	$	14,606,900	$	494

December 31, 2019
Consumer:
Credit cards	$	848	$	641	$	1,489	$	203,313	$	204,802	$	259
Other consumer	4,884		735		5,619		243,576		249,195		—
Total consumer	5,732		1,376		7,108		446,889		453,997		259
Real estate:
Construction and development	5,792		1,078		6,870		2,241,803		2,248,673		—
Single family residential	26,318		13,789		40,107		2,374,646		2,414,753		597
Other commercial	7,645		6,450		14,095		6,344,419		6,358,514		—
Total real estate	39,755		21,317		61,072		10,960,868		11,021,940		597
Commercial:
Commercial	10,579		13,551		24,130		2,426,989		2,451,119		—
Agricultural	1,223		456		1,679		189,846		191,525		—
Total commercial	11,802		14,007		25,809		2,616,835		2,642,644		—
Other	—		—		—		307,123		307,123		—
Total	$	57,289	$	36,700	$	93,989	$	14,331,715	$	14,425,704	$	856

(In thousands)
Unpaid
Contractual
Principal
Balance

Recorded Investment
With No
Allowance

Recorded
Investment
With Allowance

Total
Recorded
Investment

Related
Allowance

Average
Investment in
Impaired
Loans

Interest
Income
Recognized

Average
Investment in
Impaired
Loans

Interest
Income
Recognized
September 30, 2019

Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Consumer:
Credit cards $ 521
$ 521
$ —
$ 521
$ —
$ 423
$ 40
$ 370
$ 110
Other consumer 1,783
1,634
—
1,634
—
1,603
9
1,730
33
Total consumer 2,304

2,155

—

2,155

—
2,026
49
2,100
143
Real estate:
Construction 1,898
1,708
97
1,805
—
1,972
10
1,946
38
Single family residential 17,526
13,985
2,206
16,191
31
15,920
85
14,812
287
Other commercial 15,642
4,200
11,007
15,207
628
11,739
77
10,365
201
Total real estate 35,066

19,893

13,310

33,203

659
29,631
172
27,123
526
Commercial:
Commercial 50,712
10,153
23,930
34,083
4,620
32,020
176
26,379
511
Agricultural 583
450
116
566
—
873
3
1,010
20
Total commercial 51,295

10,603

24,046

34,649

4,620
32,893
179
27,389
531
Total $ 88,665

$ 32,651

$ 37,356

$ 70,007

$ 5,279
$ 64,550
$ 400
$ 56,612
$ 1,200

December 31, 2018

Three Months Ended
September 30, 2018 Nine Months Ended
September 30, 2018
Consumer:

Credit cards $ 296
$ 296
$ —
$ 296
$ —
$ 283
$ 35
$ 259
$ 60
Other consumer 2,311
2,159
—
2,159
—
3,561
28
4,109
96
Total consumer 2,607
2,455
—
2,455
—
3,844
63
4,368
156
Real estate:
Construction 1,344
784
485
1,269
211
1,411
11
1,747
41
Single family residential 12,906
11,468
616
12,084
36
13,577
98
13,550
315
Other commercial 8,434
5,442
5,458
10,900
—
12,282
108
14,284
332
Total real estate 22,684
17,694
6,559
24,253
247
27,270
217
29,581
688
Commercial:
Commercial 10,361
7,254
4,628
11,882
437
11,840
108
9,533
222
Agricultural 2,419
1,180
—
1,180
—
1,355
12
1,470
34
Total commercial 12,780
8,434
4,628
13,062
437
13,195
120
11,003
256
Total $ 38,071
$ 28,583
$ 11,187
$ 39,770
$ 684
$ 44,309
$ 400
$ 44,952
$ 1,100

At September 30, 2019 and December 31, 2018, impaired loans, net of government guarantees and excluding loans acquired, totaled $70.0 million and $39.8 million, respectively. Allocations of the allowance for loan losses relativeThe following table presents information pertaining to impaired loans ~~were $5.3 million and $684,000 at September 30, 2019 and~~as of December 31, ~~2018, respectively. Approximately $400,000 and $1,200,000~~2019, in accordance with previous US GAAP prior to the adoption of interest income was recognized on average impaired loans of $64.6 million and $56.6 million for the three and nine months ended September 30, 2019. Interest income recognized on impaired loans on a cash basis during the three and nine months ended September 30, 2019 and 2018 was not material.ASU 2016-13.

~~Included in certain impaired loan categories are troubled debt restructurings (“TDRs”).~~


(In thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Investment in Impaired Loans			Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2019													Three Months Ended June 30, 2019							Six Months Ended June 30, 2019
Consumer:
Credit cards	$	382	$	382	$	—	$	382	$	—	$	332		$	40	$	320	$	70
Other consumer	1,537		1,378		—		1,378		—		1,563			12		1,762		25
Total consumer	1,919		1,760		—		1,760		—		1,895			52		2,082		95
Real estate:
Construction and development	4,648		4,466		72		4,538		4		2,355			14		1,993		28
Single family residential	19,466		15,139		2,963		18,102		42		15,486			105		14,351		203
Other commercial	10,645		4,713		3,740		8,453		694		7,676			59		8,751		123
Total real estate	34,759		24,318		6,775		31,093		740		25,517			178		25,095		354
Commercial:
Commercial	53,436		6,582		28,998		35,580		5,007		29,776			187		23,811		335
Agricultural	525		383		116		499		—		1,148			8		1,159		16
Total commercial	53,961		6,965		29,114		36,079		5,007		30,924			195		24,970		351
Total	$	90,639	$	33,043	$	35,889	$	68,932	$	5,747	$	58,336		$	425	$	52,147	$	800

When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) results and the Company classifies the loan as a TDR. The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

~~Under ASC Topic 310-10-35 –~~ ~~Subsequent Measurement~~, a TDR is considered to be impaired, and an impairment analysis must be performed. The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is needed.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. The Company returns TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.

The provisions in the CARES Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. See discussion of the loans modified under the CARES Act in Note 24, Recent Events.

TDRs are individually evaluated for expected credit losses. The Company assesses the exposure for each modification, either by the fair value of the underlying collateral or the present value of expected cash flows, and determines if a specific allowance for credit losses is needed.

The following table presents a summary of TDRs ~~excluding loans acquired,~~ segregated by class of loans.

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans
(Dollars in thousands) Number Balance Number Balance Number Balance
September 30, 2019
Real estate:
Construction —
$ —
1
$ 97
1
$ 97
Single-family residential 6
549
10
627
16
1,176
Other commercial 2
3,166
2
950
4
4,116
Total real estate 8

3,715

13

1,674

21

5,389
Commercial:
Commercial 4
2,804
3
84
7
2,888
Total commercial 4

2,804

3

84

7

2,888
Total 12

$ 6,519

16

$ 1,758

28

$ 8,277

December 31, 2018
Real estate:
Construction —
$ —
3
$ 485
3
$ 485
Single-family residential 6
230
10
616
16
846
Other commercial 2
3,306
2
1,027
4
4,333
Total real estate 8

3,536

15

2,128

23

5,664
Commercial:
Commercial 4
2,833
6
718
10
3,551
Total commercial 4

2,833

6

718

10

3,551
Total 12

$ 6,369

21

$ 2,846

33

$ 9,215

The following table presents loans that were restructured as TDRs during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020. There were 0 loans restructured as TDRs during the three and ~~2018, excluding loans acquired, segregated by class of loans.~~six month periods ended June 30, 2019.

Modification Type
(Dollars in thousands)
Number of
Loans

Balance Prior
to TDR
Balance at September 30,
Change in
Maturity
Date

Change in
Rate

Financial Impact
on Date of
Restructure
Three and Nine Months Ended September 30, 2019
Real estate:
Single-family residential 1
$ 330
$ 330
$ 330
$ —
$ —
Total real estate 1
330
330
330
—
�� —
Total 1
$ 330
$ 330
$ 330
$ —
$ —

Three Months Ended September 30, 2018
Real estate:
Construction 1
$ 99
$ 98
$ 98
$ —
$ —
Other commercial 2
392
390
390
—
212
Total real estate 3
491
488
488
—
212
Commercial:
Commercial 3
2,363
2,358
2,358
—
190
Total commercial 3
2,363
2,358
2,358
—
190
Total 6
$ 2,854
$ 2,846
$ 2,846
$ —
$ 402

Nine Months Ended September 30, 2018
Consumer:
Other consumer 1
$ 91
$ 91
$ 91
$ —
$ —
Total consumer 1
91
91
91
—
—
Real estate:
Construction 1
99
98
98
—
—
Single-family residential 1
61
62
62
—
—
Other commercial 2
392
390
390
—
212
Total real estate 4
552
550
550
—
212
Commercial:
Commercial 3
2,363
2,358
2,358
—
190
Total commercial 3
2,363
2,358
2,358
—
190
Total 8
$ 3,006
$ 2,999
$ 2,999
$ —
$ 402



(Dollars in thousands)	Number of loans	Balance Prior to TDR		Balance at June 30,		Change in Maturity Date		Change in Rate		Financial Impact on Date of Restructure
Three and Six Months Ended June 30, 2020
Real estate:
Single-family residential	1	$	147	$	147	$	147	$	—	$	—
Total real estate	1	$	147	$	147	$	147	$	—	$	—

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the Company modified 1 loan with a recorded investment of ~~$330,000~~$147,000 prior to modification which was deemed troubled debt restructuring. The restructured loan was modified by deferring amortized principal payments, changing the maturity date and requiring ~~interest-only~~interest only payments for a period of up to 12 months. ~~Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure.~~

During the three months ended September 30, 2018, the Company modified 6 loans with a recorded investment of $2.9 million and during the nine months ended September 30, 2018, the Company modified 8 loans with a recorded investment of $3.0 million prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments, changing the maturity date and requiring interest-only payments for a period of up to 12 months. Based on the fair value of the collateral, aA specific reserve of ~~$402,000~~$7,200 was determined necessary for ~~these loans. Also, there was no immediate~~this loan.

~~financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.~~

There were ~~4 loans consisting of commercial and real estate construction~~0 loans considered TDRs for which a payment default occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2019. The Company charged off approximately $552,000 for these loans.~~2020. There was 1 commercial ~~real estate~~ loan considered a TDR for which a payment default occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. A charge-off of ~~$66,300~~approximately $138,000 was recorded for this ~~loan and $294,300 was transferred to OREO.~~loan. The Company defines a payment default as a payment received more than 90 days after its due date.

In addition to the TDRs that occurred during the periods provided in the preceding tables, the Company had TDRs with pre-modification loan balances, specifically in commercial real estate, of $294,300 at September 30, 2018, for which OREO was received in full or partial satisfaction of the loans. There were 0 TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three or ~~nine~~six month periods ended ~~September~~June 30, 2020 or 2019. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$3,925,000~~$4,395,000 and ~~$3,899,000,~~$5,789,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$4,401,000~~$2,321,000 and ~~$3,530,000,~~$4,458,000, respectively, of OREO secured by residential real estate properties.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions inof the ~~States of Arkansas, Colorado, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.~~Company’s local markets.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review. A description of the general characteristics of the 8 risk ratings is as follows:

•Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.

•Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).

•Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

•Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

•Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

• ~~– This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.~~

~~Risk Rate 2 – Pass (Good)~~ - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).

~~Risk Rate 3 – Pass (Acceptable – Average)~~ - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

~~Risk Rate 4 – Pass (Monitor)~~ - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

~~Risk Rate 5 – Special Mention~~ - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.

~~Risk Rate 7 – Doubtful~~ - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.

~~Risk Rate 8 – Loss~~ - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.

Loans acquired are evaluated using this internal grading system. Loans acquired are evaluated individually and include purchased credit impaired loans of $3.1 million and $4.1 million that are accounted for under ASC Topic 310-30 and are classified as substandard (Risk Rating 6) as of September 30, 2019 and December 31, 2018, respectively. Of the remaining loans acquired and accounted for under ASC Topic 310-20, $37.4 million and $50.4 million were classified (Risk Ratings 6, 7 and 8 – see classified loans discussion below) at September 30, 2019 and December 31, 2018, respectively.

~~Purchased credit impaired loans are loans that showed evidence of deterioration of credit quality since origination and for which it is probable, at acquisition,~~ that the Company will ~~be unable to collect all amounts contractually owed. Their fair value was initially based on~~sustain some loss if the ~~estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows~~deficiencies are not ~~estimable, discounted at prevailing market rates~~corrected. This does not imply ultimate loss of ~~interest. The difference between~~ the ~~undiscounted cash flows expected at acquisition~~principal, but may involve burdensome administrative expenses and the ~~fair~~accompanying cost to carry the loan.

•Risk Rate 7 – Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.

•Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value ~~at acquisition~~that their continuance as bankable assets is ~~recognized~~not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as ~~interest income on a level-yield method over~~Loss and charged-off in the ~~life~~period in which they become uncollectible.

The Company monitors credit quality in the consumer portfolio by delinquency status. The delinquency status of loans is updated daily. A description of the ~~loan. Contractually required~~delinquency credit quality indicators is as follows:

•Current - Loans in this category are either current in payments ~~for interest and principal that exceed the undiscounted cash flows expected at acquisition~~or are not recognized as a yield adjustment. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment.

~~Classified~~under 30 days past due. These loans for the Company include loans in Risk Ratings 6, 7 and 8. Loans may be classified, but not considered impaired, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for loan impairment testing. Loans rated 6 – 8 that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans. (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to ~~not be impaired~~have a normal level of risk.

•30-89 Days Past Due - Loans in this category are between 30 and 89 days past due and are ~~not included~~subject to the Company’s loss mitigation process. These loans are considered to have a moderate level of risk.

•90+ Days Past Due - Loans in ~~impaired loans. Total classified~~this category are over 90 days past due and are placed on nonaccrual status. These loans ~~excluding~~have been subject to the Company’s loss mitigation process and foreclosure and/or charge-off proceedings have commenced.

The following table presents a summary of loans ~~accounted for under ASC Topic 310-30, were $146.2 million and $119.0 million,~~by credit quality indicator, other than pass or current, as of ~~September~~June 30, ~~2019 and December 31, 2018, respectively.~~2020 segregated by class of loans.


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2020 (YTD)		2019		2018		2017		2016		2015 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total
Consumer - credit cards
Delinquency:
30-89 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	672	$	—	$	672
90+ days past due	—		—		—		—		—		—		262		—		262
Total consumer - credit cards	—		—		—		—		—		—		934		—		934
Consumer - other
Delinquency:
30-89 days past due	89		446		387		576		633		71		424		—		2,626
90+ days past due	31		110		107		291		135		29		21		—		724
Total consumer - other	120		556		494		867		768		100		445		—		3,350
Real estate - C&D
Risk rating:
5 internal grade	—		43		17		1,947		20		—		—		—		2,027
6 internal grade	241		2,988		425		197		422		1,082		850		799		7,004
7 internal grade	—		—		—		—		—		—		—		—		—
Total real estate - C&D	241		3,031		442		2,144		442		1,082		850		799		9,031
Real estate - SF residential
Delinquency:
30-89 days past due	321		2,074		1,980		1,415		1,796		4,553		1,666		—		13,805
90+ days past due	—		2,402		2,916		2,378		1,518		3,822		2,353		—		15,389
Total real estate - SF residential	321		4,476		4,896		3,793		3,314		8,375		4,019		—		29,194
Real estate - other commercial
Risk rating:
5 internal grade	18,591		2,425		11,530		1,049		1,349		2,591		18,027		24,917		80,479
6 internal grade	35,258		6,008		8,995		4,411		4,110		13,502		39,073		10,077		121,434
7 internal grade	—		—		—		—		—		—		—		—		—
Total real estate - other commercial	53,849		8,433		20,525		5,460		5,459		16,093		57,100		34,994		201,913
Commercial
Risk rating:
5 internal grade	3,377		325		478		136		233		58		46,465		—		51,072
6 internal grade	9,588		5,098		4,885		2,024		1,168		697		55,123		860		79,443
7 internal grade	—		—		—		—		—		—		—		—		—
Total commercial	12,965		5,423		5,363		2,160		1,401		755		101,588		860		130,515
Commercial - agriculture
Risk rating:
5 internal grade	—		86		15		379		—		—		37		—		517
6 internal grade	21		112		193		95		149		11		63		—		644
7 internal grade	—		—		—		—		—		—		—		—		—
Total commercial - agriculture	21		198		208		474		149		11		100		—		1,161
Total	$	67,517	$	22,117	$	31,928	$	14,898	$	11,533	$	26,416	$	165,036	$	36,653	$	376,098

The following table presents a summary of loans by credit risk rating as of ~~September 30, 2019 and~~ December 31, ~~2018,~~2019 segregated by class of loans. ~~Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.~~


(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total
December 31, 2019
Consumer:
Credit cards	$	204,161	$	—	$	641	$	—	$	—	$	204,802
Other consumer	247,668		—		2,026		—		—		249,694
Total consumer	451,829		—		2,667		—		—		454,496
Real estate:
Construction and development	2,229,019		70		7,735		—		37		2,236,861
Single family residential	2,394,284		6,049		41,601		130		—		2,442,064
Other commercial	6,068,425		69,745		67,429		—		—		6,205,599
Total real estate	10,691,728		75,864		116,765		130		37		10,884,524
Commercial:
Commercial	2,384,263		26,713		84,317		43		180		2,495,516
Agricultural	309,741		41		5,672		—		—		315,454
Total commercial	2,694,004		26,754		89,989		43		180		2,810,970
Other	275,714		—		—		—		—		275,714
Total	$	14,113,275	$	102,618	$	209,421	$	173	$	217	$	14,425,704

(In thousands)
Risk Rate
1-4

Risk Rate
5

Risk Rate
6

Risk Rate
7

Risk Rate
8
Total
September 30, 2019

Consumer:

Credit cards $ 194,433
$ —
$ 650
$ —
$ —
$ 195,083
Other consumer 206,647
—
1,996
—
—
208,643
Total consumer 401,080

—

2,646

—

—

403,726
Real estate:
Construction 1,705,376
1,456
6,026
—
—
1,712,858
Single family residential 1,422,086
3,246
23,119
4
—
1,448,455
Other commercial 3,571,706
33,030
25,972
—
—
3,630,708
Total real estate 6,699,168

37,732

55,117

4

—

6,792,021
Commercial:
Commercial 1,837,374
10,420
47,025
—
—
1,894,819
Agricultural 213,072
69
612
—
—
213,753
Total commercial 2,050,446

10,489

47,637

—

—

2,108,572
Other 339,046
—
—
—
—
339,046
Loans acquired 3,272,024
46,796
40,639
128
—
3,359,587
Total $ 12,761,764

$ 95,017

$ 146,039

$ 132

$ —

$ 13,002,952

(In thousands)
Risk Rate
1-4

Risk Rate
5

Risk Rate
6

Risk Rate
7

Risk Rate
8
Total
December 31, 2018

Consumer:

Credit cards $ 203,667
$ —
$ 506
$ —
$ —
$ 204,173
Other consumer 198,840
—
2,457
—
—
201,297
Total consumer 402,507

—

2,963

—

—

405,470
Real estate:
Construction 1,296,988
1,910
1,825
—
—
1,300,723
Single family residential 1,420,052
1,628
18,528
235
—
1,440,443
Other commercial 3,193,289
17,169
14,829
—
—
3,225,287
Total real estate 5,910,329

20,707

35,182

235

—

5,966,453
Commercial:
Commercial 1,742,002
8,357
24,550
—
—
1,774,909
Agricultural 162,824
75
1,615
—
—
164,514
Total commercial 1,904,826

8,432

26,165

—

—

1,939,423
Other 119,042
—
—
—
—
119,042
Loans acquired 3,187,083
51,255
54,097
348
—
3,292,783
Total $ 11,523,787

$ 80,394

$ 118,407

$ 583

$ —

$ 11,723,171

Allowance for ~~Loan~~Credit Losses

Allowance for ~~Loan~~Credit Losses – The allowance for ~~loan~~credit losses is a reserve established through a provision for ~~loan~~credit losses charged to expense, which represents management’s best estimate of ~~probable~~lifetime expected losses ~~that have been incurred within the existing portfolio of loans.~~based on reasonable and supportable forecasts, historical loss experience, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for ~~estimated~~expected loan losses and risks inherent in the loan portfolio. The Company’s allowance for ~~loan~~credit loss methodology includes ~~allowance allocations~~reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for the effective interest rate used to discount prepayments, in accordance with ASC Topic ~~310-10,~~326-20, ~~Receivables, and allowance allocations calculated in accordance with ASC Topic 450-20,~~ ~~Loss Contingencies~~Financial Instruments - Credit Losses. Accordingly, the methodology is based on the Company’s ~~internal grading system, specific impairment analysis,~~reasonable and supportable economic forecasts, historical loss experience, and other qualitative ~~and quantitative factors.~~adjustments.

~~As mentioned above, allocations~~Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated into homogeneous segments for assessment. Reserve factors are based on estimated probability of default and loss given default for each segment. The estimates are determined based on economic forecasts over the reasonable and supportable forecast period based on projected performance of economic variables that have a statistical relationship with the historical loss experience of the segments. For contractual periods that extend beyond the one-year forecast period, the estimates revert to average historical loss experiences over a one-year period on a straight-line basis.

The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for. Qualitative adjustments include, but are not limited to:

•Changes in asset quality - Adjustments related to trending credit quality metrics including delinquency, nonperforming loans, charge-offs, and risk ratings that may not be fully accounted for ~~loan losses are categorized as either specific allocations or general allocations.~~in the reserve factor.

~~A loan is considered impaired when it is probable that~~•Changes in the ~~Company will not receive all amounts due according to the contractual terms~~nature and volume of the portfolio - Adjustments related to current changes in the loan portfolio that are not fully represented or accounted for in the reserve factors.

•Changes in lending and loan monitoring policies and procedures - Adjustments related to current changes in lending and loan monitoring procedures as well as review of specific internal policy compliance metrics.

•Changes in the experience, ability, and depth of lending management and other relevant staff - Adjustments to measure increasing or decreasing credit risk related to lending and loan monitoring management.

•Changes in the value of underlying collateral of collateralized loans - Adjustments related to improving or deterioration of the value of underlying collateral that are not fully captured in the reserve factors.

•Changes in and the existence and effect of any concentrations of credit - Adjustments related to credit risk of specific industries that are not fully captured in the reserve factors.

•Changes in regional and local economic and business conditions and developments - Adjustments related to expected and current economic conditions at a regional or local-level that are not fully captured within the Company’s reasonable and supportable forecast.

•Data imprecisions due to limited historical loss data - Adjustments related to limited historical loss data that is representative of the collective loan portfolio.

Loans that do not share similar risk characteristics are evaluated on an individual basis. These evaluations are typically performed on loans with a deteriorated internal risk rating or are classified as a troubled debt restructuring. The allowance for credit loss is determined based on several methods including ~~scheduled principal and interest payments.~~ estimating the fair value of the underlying collateral or the present value of expected cash flows.

For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral ~~analysis.~~analysis adjusted for selling costs, when appropriate. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for ~~loan~~credit losses as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $55.0 million as further detailed in the table below. The ~~general allocation is calculated monthly based on management’s assessment~~collateral securing these loans consist of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. The Company establishes general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residentialcommercial real estate ~~loans~~properties, residential properties, other business assets, and ~~other consumer loans.~~secured energy production assets.


(In thousands)	Real Estate Collateral		Energy		Other Collateral		Total
Construction and development	$	2,465	$	—	$	—	$	2,465
Single family residential	5,479		—		—		5,479
Other commercial real estate	18,654		—		—		18,654
Commercial	—		21,755		6,696		28,451
Total	$	26,598	$	21,755	$	6,696	$	55,049

The following table details activity in the allowance for ~~loan~~credit losses by portfolio segment for ~~legacy~~ loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(In thousands) Commercial
Real
Estate

Credit
Card

Other
Consumer
and Other
Total
Three Months Ended September 30, 2019
Balance, beginning of period ⁽²⁾
$ 21,739
$ 34,917
$ 3,951
$ 2,460
$ 63,067
Provision for loan losses ⁽¹⁾
19,150
2,405
946
(528 ) 21,973
Charge-offs (17,729 ) (907 ) (1,117 ) (1,059 ) (20,812 )
Recoveries 65
55
223
1,422
1,765
Net charge-offs (17,664 ) (852 ) (894 ) 363
(19,047 )
Balance, September 30, 2019 ⁽²⁾
$ 23,225
$ 36,470
$ 4,003
$ 2,295
$ 65,993

Nine Months Ended September 30, 2019
Balance, beginning of period ⁽²⁾
$ 20,514
$ 29,743
$ 3,923
$ 2,419
$ 56,599
Provision for loan losses ⁽¹⁾
23,980
7,929
2,644
1,320
35,873
Charge-offs (21,564 ) (1,552 ) (3,298 ) (3,497 ) (29,911 )
Recoveries 295
350
734
2,053
3,432
Net charge-offs (21,269 ) (1,202 ) (2,564 ) (1,444 ) (26,479 )
Balance, September 30, 2019 ⁽²⁾
$ 23,225
$ 36,470
$ 4,003
$ 2,295
$ 65,993

Period-end amount allocated to:
Loans individually evaluated for impairment $ 4,620
$ 659
$ —
$ —
$ 5,279
Loans collectively evaluated for impairment 18,605
35,811
4,003
2,295
60,714
Balance, September 30, 2019 ⁽²⁾
$ 23,225

$ 36,470

$ 4,003

$ 2,295

$ 65,993


(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Allowance for credit losses:
Three Months Ended June 30, 2020
Beginning balance, April 1, 2020	$	76,327	$	141,022	$	7,817	$	18,029	$	243,195
Provision for credit loss expense	18,400		10,020		3,943		(5,685)		26,678
Charge-offs	(35,687)		(1,824)		(1,053)		(592)		(39,156)
Recoveries	98		253		272		303		926
Net charge-offs	(35,589)		(1,571)		(781)		(289)		(38,230)
Ending balance, June 30, 2020	$	59,138	$	149,471	$	10,979	$	12,055	$	231,643


(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Six Months Ended June 30, 2020
Beginning balance, January 1, 2020 - prior to adoption of CECL	$	22,863	$	39,161	$	4,051	$	2,169	$	68,244
Impact of CECL adoption	22,733		114,314		2,232		12,098		151,377
Provision for credit loss expense	49,307		(2,138)		6,693		(987)		52,875
Charge-offs	(36,210)		(2,220)		(2,494)		(1,971)		(42,895)
Recoveries	445		354		497		746		2,042
Net charge-offs	(35,765)		(1,866)		(1,997)		(1,225)		(40,853)
Ending balance, June 30, 2020	$	59,138	$	149,471	$	10,979	$	12,055	$	231,643

(1) Provision for loan losses of $0 and $2,464,000 attributable to loans acquired was excluded from this table for the three and nine months ended September 30, 2019, respectively (total provision for loan losses for the three and nine months ended September 30, 2019 was $21,973,000 and $38,337,000). There were $515,000 and $2,862,000 in charge-offs for loans acquired during the three and nine months ended September 30, 2019, respectively, and recoveries of $900,000 for loans acquired during the nine month period ended September 30, 2019, resulting in an ending balance in the allowance related to loans acquired of $597,000.

(2) Allowance for loan losses at September 30, 2019 includes $597,000 allowance for loans acquired (not shown in the table above). Allowance for loan losses at June 30, 2019 and December 31, 2018 includes $1,112,000 and $95,000, respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2019 was $66,590,000 and total allowance for loan losses at June 30, 2019 and December 31, 2018 was $64,179,000 and $56,694,000, respectively.

Activity in the allowance for ~~loan~~credit losses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was as follows:

~~______________________~~

(3) Provision for loan losses of $0 and $1,837,000 attributable to loans acquired was excluded from this table for the three and nine months ended September 30, 2018, respectively (total provision for loan losses for the three and nine months ended September 30, 2018 was $10,345,000 and $28,528,000, respectively). There were $699,000 and $910,000 in charge-offs for loans acquired during the three and nine months ended September 30, 2018, respectively, resulting in an ending balance in the allowance related to loans acquired of $1,345,000.

(4) Allowance for loan losses at September 30, 2018, June 30, 2018 and December 31, 2017 includes $1,345,000, $2,044,000 and $418,000, respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2018, June 30, 2018 and December 31, 2017 was $56,703,000, $53,776,000 and $42,086,000, respectively.

(5) Allowance for loan losses at December 31, 2018 includes $95,000 allowance for loans acquired (not shown in the table above). The total allowance for loan losses at December 31, 2018 was $56,694,000.

The Company’s recorded investment in loans, excluding loans acquired, related to each balance in the allowance for loan losses by portfolio segment on the basis of the Company’s impairment methodology was as follows:

(In thousands) Commercial
Real
Estate

Credit
Card

Other
Consumer
and Other
Total
September 30, 2019

Loans individually evaluated for impairment $ 34,649
$ 33,203
$ 521
$ 1,634
$ 70,007
Loans collectively evaluated for impairment 2,073,923
6,758,818
194,562
546,055
9,573,358
Balance, end of period $ 2,108,572

$ 6,792,021

$ 195,083

$ 547,689

$ 9,643,365

December 31, 2018
Loans individually evaluated for impairment $ 13,062
$ 24,253
$ 296
$ 2,159
$ 39,770
Loans collectively evaluated for impairment 1,926,361
5,942,200
203,877
318,180
8,390,618
Balance, end of period $ 1,939,423

$ 5,966,453

$ 204,173

$ 320,339

$ 8,430,388

~~NOTE 5: LOANS ACQUIRED~~


(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Allowance for credit losses:
Three Months Ended June 30, 2019
Beginning balance, April 1, 2019	$	19,394	$	34,870	$	3,919	$	2,372	$	60,555
Provision for credit losses	2,956		2,681		800		642		7,079
Charge-offs	(1,963)		(1,216)		(1,039)		(964)		(5,182)
Recoveries	967		158		271		331		1,727
Net charge-offs	(996)		(1,058)		(768)		(633)		(3,455)
Ending balance, June 30, 2019	$	21,354	$	36,493	$	3,951	$	2,381	$	64,179

Six Months Ended June 30, 2019
Beginning balance, January 1, 2019	$	20,514	$	29,838	$	3,923	$	2,419	$	56,694
Provision for credit losses	4,830		7,988		1,698		1,848		16,364
Charge-offs	(5,115)		(1,633)		(2,181)		(2,517)		(11,446)
Recoveries	1,125		300		511		631		2,567
Net charge-offs	(3,990)		(1,333)		(1,670)		(1,886)		(8,879)
Ending balance, June 30, 2019	$	21,354	$	36,493	$	3,951	$	2,381	$	64,179

~~The Company accounts for its acquisitions under ASC Topic 805,~~
~~Business Combinations, which requires~~

Four energy credits within the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the loans acquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820, ~~Fair Value Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.~~

~~The Company evaluates non-impaired loans acquired in accordance with the provisions of ASC Topic 310-20,~~ ~~Nonrefundable Fees and Other Costs~~. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. The Company evaluates purchased impaired loans in accordance with the provisions of ASC Topic 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.~~

For impaired loans accounted for under ASC Topic 310-30, the Company continues to estimate cash flows expected to be collected on purchased credit impaired loans. The Company evaluates, at each balance sheet date, whether the present value of the purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in the consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining life of the purchased credit impaired loan.

~~During~~Commercial segment were charged off during the second quarter ~~2019,~~of 2020 for a total of $32.6 million, of which $27.1 million was specifically reserved for at March 31, 2020. The primary driver for the ~~Company evaluated $1.097 billion of net loans ($1.127 billion gross loans less $30.6 million discount) purchased~~change in ~~conjunction with~~ the acquisition of Reliance, described in Note 2, Acquisitions, in accordance with the provisions of ASC Topic 310-20. The Company evaluated the remaining $176,000 of net loans ($385,000 gross loans less $209,000 discount) purchased in conjunction with the acquisition of Relianceprovision for ~~impairment in accordance with the provisions of ASC Topic 310-30.~~

~~The following table reflects the carrying value of all loans acquired as of September 30, 2019 and December 31, 2018:~~

Total loans acquired ⁽¹⁾

~~________________________~~

~~(1) Loans acquired are reported net of a $597,000 and $95,000 allowance at September 30, 2019 and December 31, 2018, respectively.~~

Nonaccrual loans acquired, excluding purchased credit impaired loans accounted for under ASC Topic 310-30, segregated by class of loans, are as follows (see Note 4, Loans and Allowance for Loan Losses, for discussion of nonaccrual loans):

(In thousands) September 30, 2019 December 31, 2018

Consumer:

Other consumer $ 71
$ 140
Real estate:
Construction 48
114
Single family residential 4,492
6,603
Other commercial 1,029
1,167
Total real estate 5,569

7,884
Commercial:
Commercial 1,636
13,578
Agricultural 23
38
Total commercial 1,659

13,616
Total $ 7,299

$ 21,640

~~An age analysis of past due loans acquired segregated by class of loans, is as follows (see Note 4, Loans and Allowance for Loan Losses, for discussion of past due loans):~~

December 31, 2018
Consumer:
Other consumer $ 337
$ 49
$ 386
$ 15,272
$ 15,658
$ 2
Real estate:
Construction 8,283
27
8,310
421,295
429,605
—
Single family residential 4,706
3,049
7,755
558,433
566,188
—
Other commercial 168
577
745
1,847,934
1,848,679
—
Total real estate 13,157
3,653
16,810
2,827,662
2,844,472
—
Commercial:
Commercial 1,302
9,542
10,844
420,070
430,914
—
Agricultural 31
5
36
1,703
1,739
—
Total commercial 1,333
9,547
10,880
421,773
432,653
—

Total $ 14,827
$ 13,249
$ 28,076
$ 3,264,707
$ 3,292,783
$ 2

The following table presents a summary of loans acquired by credit risk rating, segregated by class of loans (see Note 4, Loans and Allowance for Loan Losses, for discussion of loan risk rating). Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.

December 31, 2018
Consumer:
Other consumer $ 15,380
$ —
$ 278
$ —
$ —
$ 15,658
Real estate:
Construction 393,122
27,621
8,862
—
—
429,605
Single family residential 553,460
2,081
10,299
348
—
566,188
Other commercial 1,822,179
9,137
17,363
—
—
1,848,679
Total real estate 2,768,761
38,839
36,524
348
—
2,844,472
Commercial:
Commercial 401,300
12,416
17,198
—
—
430,914
Agricultural 1,642
—
97
—
—
1,739
Total commercial 402,942
12,416
17,295
—
—
432,653

Total $ 3,187,083
$ 51,255
$ 54,097
$ 348
$ —
$ 3,292,783

~~Loans acquired were individually evaluated and recorded at estimated fair value, including estimated~~ credit losses ~~at the time of acquisition. These loans are systematically reviewed~~was related to updated credit loss forecasts using multiple Moody’s economic scenarios. The baseline economic forecast was weighted 68% by the Company, while the downside scenarios of S-2 and S-3 were weighted 22% and 10%, respectively, to ~~determine~~capture the ~~risk~~possibility of ~~losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar~~a longer, more prolonged recovery to the ~~Company’s legacy~~economies that affect the loan ~~portfolio, with most focus being placed on those loans which include the larger loan relationships and those loans which exhibit higher risk characteristics.~~portfolio.

Reserve for Unfunded Commitments

In addition to the ~~accretable yield on loans acquired not considered~~allowance for credit losses, the Company has established a reserve for unfunded commitments, classified in other liabilities. This reserve is maintained at a level management believes to be ~~impaired,~~sufficient to absorb losses arising from unfunded loan commitments. The reserve for unfunded commitments as of June 30, 2020 and December 31, 2019 was $24.4 million and $8.4 million, respectively. The increase from year end was due to the ~~amount~~adoption of CECL. The adequacy of the ~~estimated cash flows expected~~reserve for unfunded commitments is determined monthly based on methodology similar to ~~be received from~~ the ~~purchased~~methodology for determining the allowance for credit ~~impaired loans~~losses. For the six months ended June 30, 2020 and 2019, net adjustments to the reserve for unfunded commitments were a benefit of $8.0 million and an expense of $950,000, respectively, and were included in excess of the fair values recorded for the purchased credit impaired loans is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. Each quarter, the Company estimates the cash flows expected to be collected from the acquired purchased credit impaired loans, and adjustments may or may not be required. This has resulted in an increase in interest income that is spread on a level-yield basis over the remaining expected lives of the loans.other non-interest expense.

~~Changes in the carrying amount of the accretable yield for all purchased impaired loans were as follows for the three and nine months ended September 30, 2019 and 2018.~~

Three Months Ended
September 30, 2018 Nine Months Ended
September 30, 2018
(In thousands)
Accretable
Yield

Carrying
Amount of
Loans

Accretable
Yield

Carrying
Amount of
Loans
Beginning balance $ 1,382
$ 13,995
$ 620
$ 17,116
Additions —
—
—
—
Accretable yield adjustments 717
—
1,895
—
Accretion (635 ) 635
(1,051 ) 1,051
Payments and other reductions, net —
(9,664 ) —
(13,201 )
Balance, ending $ 1,464
$ 4,966
$ 1,464
$ 4,966

Purchased impaired loans are evaluated on an individual borrower basis. Because some loans evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows, the Company recorded a provision and established an allowance for loan loss for loans acquired resulting in a total allowance on loans acquired of $597,000 at September 30, 2019 and $95,000 at December 31, 2018. The provision on loans acquired for the three and nine months ended September 30, 2019 was $0 and $2,464,000, respectively. The provision on loans acquired for the three and nine months ended September 30, 2018 was $0 and $1,837,000, respectively.

NOTE 6: RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES

As of the first quarter 2019, the Company accounts for its leases in accordance with ASC Topic 842, Leases, which requires recognition of most leases, including operating leases, with a term greater than 12 months on the balance sheet. At lease commencement, the lease contract is reviewed to determine whether the contract is a finance lease or an operating lease; a lease liability is recognized on a discounted basis, related to the Company’s obligation to make lease payments; and a right-of-use asset is also recognized related to the Company’s right to use, or control the use of, a specified asset for the lease term. The Company accounts for lease and non-lease components (such as taxes, insurance and common area maintenance costs) separately as such amounts are generally readily determinable under the lease contracts. Lease payments over the expected term are discounted using the Company’s FHLB advance rates for borrowings of similar term. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The Company’s leases are classified as operating leases with a term, including expected renewal or termination options, greater than one year, and are related to certain office facilities and office equipment. ~~As of September 30, 2019, right-of-use~~Right-of-use lease assets included in premises and equipment ~~are $34.1~~were $34.7 million and ~~lease~~$40.7 million at June 30, 2020 and December 31, 2019, respectively. Lease liabilities included in other liabilities ~~are $34.3 million. During the three and nine months ended September 30, 2019, the Company recognized lease expense of $2.8~~were $34.8 million and ~~$8.1~~$40.9 million ~~respectively,~~at June 30, 2020 and ~~the weighted average discount rate was 3.47%. At September 30,~~December 31, 2019, ~~the weighted average remaining lease term was 8.63 years.~~

~~See the~~
~~Recently Adopted Accounting Standards~~ ~~section of Note 1, Preparation of Interim Financial Statements, for additional~~

Other information related to the ~~adoption of ASC Topic 842.~~Company’s operating leases is presented in the table below:


	Three Months Ended June 30,							Six Months Ended June 30,
	2020		2019		2020			2019
Operating lease cost	$	3,443,100	$	2,613,600	$	6,643,600		$	6,048,500
Weighted average remaining lease term					8.53 years			8.92 years
Weighted average discount rate					3.25		%	3.47		%

NOTE 7: PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation and amortization. Total premises and equipment, net at June 30, 2020 and December 31, 2019 were as follows:


	June 30,		December 31,
(In thousands)	2020		2019
Right-of-use lease assets	$	34,680	$	40,675
Premises and equipment:
Land	96,607		99,931
Buildings and improvements	306,951		309,290
Furniture, fixtures and equipment	98,383		99,343
Software	63,995		56,012
Construction in progress	6,635		6,998
Accumulated depreciation and amortization	(128,355)		(119,865)
Total premises and equipment, net	$	478,896	$	492,384

NOTE 7:8: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is tested annually, or more often than annually, if circumstances warrant, 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 ~~$926.6 million~~$1.065 billion at ~~September~~June 30, ~~2019~~2020 and ~~$845.7 million~~$1.056 billion at December 31, ~~2018.~~2019.

~~The~~During 2019, the Company recorded ~~$81.0~~$131.3 million and $78.5 million of goodwill ~~during the second quarter 2019~~ as a result of its ~~acquisition~~acquisitions of ~~Reliance.~~ Landrum and Reliance, respectively. During the first half of 2020, goodwill increased $9.2 million related to the continued assessment of the fair value and assumed tax position of the Landrum acquisition.

Goodwill impairment was neither indicated nor recorded during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 or the year ended December 31, ~~2018.~~2019. During the first quarter of 2020, the Company’s share price began to decline as the markets in the United States responded to the global COVID-19 pandemic. As a result of that economic decline, the effect on share price and other factors, the Company performed an interim goodwill impairment qualitative assessment during the first quarter and concluded no impairment existed. During the second quarter of 2020, the Company performed the annual goodwill impairment analysis and concluded that it is more likely-than-not that the fair value of goodwill continues to exceed its carrying value and therefore, goodwill is not impaired.

Core deposit premiums represent the value of the relationships that acquired banks had with their deposit customers and are amortized over periods ranging from 10 years to 15 years and are periodically evaluated, at least annually, as to the recoverability of their carrying value. ~~Core deposit premiums~~Other intangible assets represent the value of ~~$18.4 million were recorded during the second quarter 2019 as part of the Reliance acquisition. Additionally, intangible assets~~other acquired relationships, including relationships with trust and wealth management customers, and are being amortized over various periods ranging from 10 years to 15 years.

~~The~~Changes in the carrying amount and accumulated amortization of the Company’s ~~goodwill~~core deposit premiums and other ~~intangibles (carrying basis and accumulated amortization)~~intangible assets at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019 were as follows:

Acquisitions⁽¹⁾

Disposition of intangible asset⁽²⁾

Acquisitions⁽³⁾

(In thousands) September 30, 2019 December 31, 2018
Goodwill $ 926,648
$ 845,687
Core deposit premiums:
Gross carrying amount 124,334
105,984
Accumulated amortization (33,918 ) (26,177 )
Core deposit premiums, net 90,416

79,807
Books of business intangible:
Gross carrying amount 15,234
15,234
Accumulated amortization (4,501 ) (3,707 )
Books of business intangible, net 10,733

11,527
Other intangible assets, net 101,149
91,334
Total goodwill and other intangible assets $ 1,027,797

$ 937,021
_________________________

(1) Core deposit premiums of $24.3 million and $18.4 million were recorded during 2019 as part of the Landrum and Reliance acquisitions, respectively. See Note 2, Acquisitions, for additional information on acquisitions completed in 2019.

(2) Adjustments recorded for the premiums on certain deposit liabilities associated with the sale of the Texas Branches and Colorado Branches.

(3) The Company recorded $5.1 million during 2019 primarily related to the wealth management operations acquired from Landrum. See Note 2, Acquisitions, for additional information on acquisitions completed in 2019.

The carrying basis and accumulated amortization of the Company’s other intangible assets at June 30, 2020 and December 31, 2019 were as follows:


	June 30,		December 31,
(In thousands)	2020		2019
Core deposit premiums:
Gross carrying amount	$	146,355	$	148,679
Accumulated amortization	(42,965)		(36,871)
Core deposit premiums, net	103,390		111,808
Books of business and other intangibles:
Gross carrying amount	19,938		20,350
Accumulated amortization	(5,505)		(4,818)
Books of business and other intangibles, net	14,433		15,532
Total other intangible assets, net	$	117,823	$	127,340

The Company’s estimated remaining amortization expense on ~~intangibles~~other intangible assets as of ~~September~~June 30, ~~2019~~2020 is as follows:

(In thousands) Year
Amortization
Expense
Remainder of 2019 $ 2,947
2020 11,776
2021 11,714
2022 11,662
2023 11,379
Thereafter 51,671
Total $ 101,149

NOTE 8:9: TIME DEPOSITS

Time deposits ~~include~~included approximately ~~$1.679~~$2.09 billion and ~~$1.443~~$2.15 billion of certificates of deposit of $100,000 or more, at ~~September~~June 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, respectively. Of this total approximately ~~$777.5 million~~$1.1 billion and ~~$753.2~~$837.3 million of certificates of deposit were over $250,000 at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

NOTE 9:10: INCOME TAXES

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

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Income taxes currently payable $ 17,282
$ 5,638
$ 40,356
$ 31,335
Deferred income taxes 5,993
5,264
10,933
7,316
Provision for income taxes $ 23,275
$ 10,902
$ 51,289
$ 38,651

The tax effects of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their ~~appropriate~~approximate tax effects, are as follows:

(In thousands) September 30, 2019 December 31, 2018
Deferred tax liabilities:
Goodwill and other intangible amortization $ (34,304 ) $ (30,471 )
Accumulated depreciation (16,587 ) (13,361 )
Unrealized gain on available-for-sale securities (6,811 ) —
Other (5,304 ) (5,360 )
Gross deferred tax liabilities (63,006 ) (49,192 )

Net deferred tax asset, included in other assets $ 8,878
$ 13,531

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown for the periods indicated below:

Computed at the statutory rate (21%)

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Computed at the statutory rate (21%)
$ 22,071
$ 13,880
$ 49,646
$ 41,731
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit 2,956
986
5,721
4,073
Tax exempt interest income (1,105 ) (833 ) (3,090 ) (2,292 )
Tax exempt earnings on BOLI (225 ) (186 ) (619 ) (562 )
Federal tax credits (730 ) —
(2,188 ) —
Other differences, net 308
(2,945 ) 1,819
(4,299 )
Actual tax provision $ 23,275
$ 10,902
$ 51,289
$ 38,651

The Company follows ASC Topic 740, Income Taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company has no history of expiring net operating loss carryforwards and is projecting significant pre-tax and financial taxable income in ~~2019 and in~~ future years. The Company expects to fully realize its deferred tax assets in the future.

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.

Section 382 of the Internal Revenue Code imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its U.S. net operating losses to reduce its tax liability. The Company has engaged in two tax-free reorganization transactions in which acquired net operating losses are limited pursuant to Section 382. In total, approximately ~~$85.9~~$77.8 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company, of which ~~$53.6~~$46.8 million is related to the Reliance acquisition that closed during second quarter 2019. All of the acquired Reliance net operating losses are expected to be fully utilized by ~~2029,~~2027, with the remaining acquired net operating loss carryforwards expected to be fully utilized by 2036.

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 ~~2015~~2016 tax year and forward. The Company’s various state income tax returns are generally open from the ~~2015~~2016 and later tax return years based on individual state statute of limitations.

NOTE ~~10:~~11: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company utilizes securities sold under agreements to repurchase to facilitate the needs of its customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis. The Company may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents.

The gross amount of recognized liabilities for repurchase agreements was ~~$116.3~~$335.2 million and ~~$95.5~~$133.2 million at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 is presented in the following tables.

Remaining Contractual Maturity of the Agreements
(In thousands)
Overnight and
Continuous
Up to 30 Days 30-90 Days
Greater than
90 Days
Total
September 30, 2019
Repurchase agreements:
U.S. Government agencies $ 116,286
$ —
$ —
$ —
$ 116,286

December 31, 2018
Repurchase agreements:
U.S. Government agencies $ 95,542
$ —
$ —
$ —
$ 95,542

NOTE ~~11:~~12: OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

Debt at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following components:

(In thousands) September 30, 2019 December 31, 2018
Other Borrowings

FHLB advances, net of discount, due 2019 to 2033, 1.38% to 7.37% secured by real estate loans $ 1,098,395
$ 1,345,450
Revolving credit agreement, due 10/4/2019, floating rate of 1.50% above the one month LIBOR rate, unsecured —
—
Total other borrowings 1,098,395

1,345,450

Subordinated Notes and Debentures
Subordinated notes payable, due 4/1/2028, fixed-to-floating rate (fixed rate of 5.00% through 3/31/2023, floating rate of 2.15% above the three month LIBOR rate, reset quarterly) 330,000
330,000
Trust preferred securities, net of discount, due 9/15/2037, floating rate of 1.37% above the three month LIBOR rate, reset quarterly 10,310
10,310
Trust preferred securities, net of discount, due 6/6/2037, floating rate of 1.57% above the three month LIBOR rate, reset quarterly, callable without penalty 10,310
10,310
Trust preferred securities, due 12/15/2035, floating rate of 1.45% above the three month LIBOR rate, reset quarterly, callable without penalty 6,702
6,702
Unamortized debt issuance costs (3,099 ) (3,372 )
Total subordinated notes and debentures 354,223

353,950
Total other borrowings and subordinated debt $ 1,452,618

$ 1,699,400

In March 2018, the Company issued $330.0 million in aggregate principal amount, of 5.00% Fixed-to-Floating Rate Subordinated Notes (“~~the~~ Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. The Company incurred $3.6 million in debt issuance costs related to the offering during March 2018. The Notes will mature on April 1, 2028 and will bear interest at an initial fixed rate of 5.00% per annum, payable semi-annually in arrears. From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month LIBOR rate plus 215 basis points, payable quarterly in arrears. The Notes will be subordinated in right of payment to the payment of the Company’s other existing and future senior indebtedness, including all of its general creditors. The Notes are obligations of ~~Simmons First National Corporation~~the Company only and are not obligations of, and are not guaranteed by, any of its subsidiaries. ~~During 2018, the~~The Company used a portion of the net proceeds from the sale of the Notes to repay certain outstanding ~~indebtedness, including the amounts borrowed under the Credit Agreement (described below), certain trust preferred securities, both discussed below, and unsecured debt from correspondent banks.~~indebtedness. The Notes qualify for Tier 2 capital treatment.

~~In 2017,~~The Company assumed subordinated debt of $33.9 million in connection with the Company entered into a Revolving Credit Agreement with U.S. Bank National Association (the “Credit Agreement”) and executed an unsecured Revolving Credit Note pursuant to which the Company may borrow, prepay and re-borrow up to $75.0 million, the proceedsLandrum acquisition in October 2019, of which ~~were primarily used to pay off amounts outstanding under a term note assumed with the First Texas acquisition. The Credit Agreement contained customary representations, warranties, and covenants~~$5.9 million was repaid during second quarter of the Company, including, among other things, covenants that impose various financial ratio requirements. In October 2018, the Company and U.S. Bank National Association entered into a First Amendment to the Credit Agreement, which extended the expiration date from October 5, 2018 to October 4, 2019, reduced the $75.0 million to $50.0 million, and increased the commitment fee on the unused portion from an annual rate of 0.25% to 0.30%. In December 2018, the Company entered into a Second Amendment to the Credit Agreement that clarified the financial metrics contained in certain affirmative covenants are evaluated on a consolidated basis. All amounts borrowed, together with applicable interest, fees, and other amounts owed by the Company were due and payable on October 4, 2019. The balance due under the Credit Agreement at September 30, 2019 and October 4, 2019 was $0. The Company did not renew the Credit Agreement upon the expiration date.2020.

At ~~September~~June 30, ~~2019,~~2020, the Company had ~~$1.09~~$1.35 billion of FHLB advances outstanding with original or expected maturities of one year or less, of which ~~$1.03~~$1.30 billion are FHLB Owns the Option (“FOTO”) advances. FOTO advances are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date. Typically, FOTO exercise dates follow a specified lockout period at the beginning of the term when FHLB cannot terminate the FOTO advance. If FHLB exercises its option to terminate the FOTO advance at one of the specified option exercise dates, there is no termination or prepayment fee, and replacement funding will be available at then-prevailing market rates, subject to FHLB’s credit and collateral requirements. The Company’s FOTO advances outstanding at ~~the end of the third quarter~~June 30, 2020 have maturity dates of ten years to fifteen years with lockout periods that have expired and, as a result, are considered and monitored by the Company as short-term advances. The possibility of the FHLB exercising the options is analyzed by the Company along with the market expected rate outcome.

The Company had total FHLB advances of ~~$1.10~~$1.36 billion at ~~September~~June 30, ~~2019,~~2020, with approximately ~~$3.1~~$2.8 billion of additional advances available from the FHLB. The FHLB advances are secured by mortgage loans and investment securities totaling approximately ~~$5.4~~$6.1 billion at ~~September~~June 30, ~~2019.~~2020.

The trust preferred securities are tax-advantaged issues that qualified for Tier 1 capital treatment until December 31, 2017, when the Company reached $15 billion in assets. They still qualify for inclusion as Tier 2 capital at ~~September~~June 30, ~~2019.~~2020. Distributions on these securities are included in interest expense on long-term debt. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole asset of each trust. The preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust are wholly-owned by the Company. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payments on the related junior subordinated debentures. The Company’s obligations under the junior subordinated securities and other relevant trust agreements, in the aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.

The Company’s long-term debt primarily includes subordinated debt and long-term FHLB advances with an original maturity of greater than one year. Aggregate annual maturities of long-term debt at ~~September~~June 30, ~~2019,~~2020, are as follows:

(In thousands) Year
Annual
Maturities
2019 $ 356
2020 2,105
2021 1,804
2022 948
2023 925
Thereafter 361,480
Total $ 367,618

NOTE ~~12:~~13: CONTINGENT LIABILITIES

The Company and/or its subsidiaries have various unrelated legal proceedings, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries.

NOTE ~~13:~~14: CAPITAL STOCK

On ~~January 18, 2018,~~February 27, 2009, at a special meeting, the ~~Board~~Company’s shareholders approved an amendment to the Articles of ~~Directors~~Incorporation to establish 40,040,000 authorized shares of preferred stock, $0.01 par value. The aggregate liquidation preference of all shares of preferred stock cannot exceed $80,000,000.

On February 12, 2019, the Company filed its Amended and Restated Articles of Incorporation (“February Amended Articles”) with the Arkansas Secretary of State. The February Amended Articles classified and designated three series of preferred stock out of the Corporation’s authorized preferred stock: Series A Preferred Stock, Par Value $0.01 Per Share (having 40,000 authorized shares); Series B Preferred Stock, Par Value $0.01 Per Share (having 2,000.02 authorized shares); and 7% Perpetual Convertible Preferred Stock, Par Value $0.01 Per Share, Series C (having 140 authorized shares).

On October 29, 2019, the Company ~~approved a two-for-one stock split~~filed its Amended and Restated Articles of Incorporation (“October Amended Articles”) with the Arkansas Secretary of State. The October Amended Articles classified and designated Series D Preferred Stock, Par Value $0.01 Per Share, out of the Company’s ~~outstanding Class A common stock (“Common Stock”) in~~authorized preferred stock. The October Amended Articles also canceled the ~~form~~Company’s 7% Perpetual Convertible Preferred Stock, Par Value $0.01 Per Share, Series C Preferred Stock, of ~~a 100% stock dividend for shareholders of record as of the close of business on January 30, 2018. The new~~which 0 shares were distributed by the Company’s transfer agent, Computershare, and the Company’s Common Stock began trading on a split-adjusted basis on the Nasdaq Global Select Market on February 9, 2018. All previously reported share and per share data included in filings subsequent to February 8, 2018 are restated to reflect the retroactive effect of this 2-for-one stock split.ever issued or outstanding.

On March 19, 2018, the Company filed a shelf registration with the SEC. The shelf registration statement provides increased flexibility and more efficient access to raise capital from time to time through the sale of common stock, preferred stock, debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, units or a combination thereof, subject to market conditions. Specific terms and prices are determined at the time of any offering under a separate prospectus supplement that the Company is required to file with the SEC at the time of the specific offering.

~~On April 19, 2018, shareholders of the Company approved an increase in the number of authorized shares from 120,000,000 to 175,000,000.~~

On July 23, 2012, the Company approved a stock repurchase program which authorized the repurchase of up to 1,700,000 shares ~~(split adjusted)~~ of ~~Common Stock.~~common stock. On October 22, 2019, the Company announced a new stock repurchase program (“Program”) that ~~replaces~~replaced the stock repurchase program approved on July 23, ~~2012. See Note 22, Subsequent Events,~~2012, under which the Company may repurchase up to $60,000,000 of its Class A common stock currently issued and outstanding. On March 5, 2020, the Company announced an amendment to the Program that increased the maximum amount that may be repurchased under the Program from $60,000,000 to $180,000,000. The Program will terminate on October 31, 2021 (unless terminated sooner).

Under the Program, the Company may repurchase shares of its common stock through open market and privately negotiated transactions or otherwise. The timing, pricing, and amount of any repurchases under the Program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of the Company’s common stock, corporate considerations, the Company’s working capital and investment requirements, general market and economic conditions, and legal requirements. The Program does not obligate the Company to repurchase any common stock and may be modified, discontinued, or suspended at any time without prior notice. The Company anticipates funding for this Program to come from available sources of liquidity, including cash on hand and future cash flow.

During the six months ended June 30, 2020, the Company repurchased 4,922,336 shares at an average price of $18.96 under the Program. NaN shares have been repurchased under the Program since March 31, 2020. Market conditions and the Company’s capital needs will drive decisions regarding additional, ~~information regarding this subsequent event.~~future stock repurchases. The Company had 0 repurchases of its common stock ~~pursuant to the repurchase program~~ during the three and ~~nine~~six month periods ended ~~September~~June 30, 2019.

On April 12, 2019, as part of the acquisition of Reliance, the Company issued 40,000 shares of Simmons Series A Preferred Stock and 2,000 shares Simmons Series B Preferred Stock in exchange for the outstanding shares of Reliance’s Series A Preferred Stock and Series B Preferred Stock. On May 13, 2019, the Company redeemed all of the preferred stock, including accrued and unpaid dividends.

NOTE ~~14:~~15: UNDIVIDED PROFITS

~~The~~Simmons Bank, the Company’s subsidiary bank, is subject to legal limitations on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Commissioner of the Arkansas State Bank Department is required if the total of all dividends declared by an Arkansas state bank in any calendar year exceeds seventy-five percent (75%) of the total of its net profits, as defined, for that year combined with seventy-five percent (75%) of its retained net profits of the preceding year. At ~~September~~June 30, ~~2019, the Company’s subsidiary bank~~2020, Simmons Bank had approximately ~~$128.8~~$165.1 million available for payment of dividends to the Company, without prior regulatory approval.

The risk-based capital guidelines of the Federal Reserve Board and the Arkansas State Bank Department include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. Under the Basel III Rules effective January 1, 2015, the criteria for a well-capitalized institution are: a 5% “Tier l leverage capital” ratio, an 8% “Tier 1 risk-based capital” ratio, 10% “total risk-based capital” ratio; and a ~~6.50%~~6.5% “common equity Tier 1 (CET1)” ratio.

The Company and Simmons Bank, must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements. The implementation of the capital conservation buffer began on January 1, 2016, at the 0.625% level and was phased in over a four year period (increasing by that amount on each subsequent January 1 until it reached 2.5% on January 1, 2019). Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses. As of ~~September~~June 30, ~~2019,~~2020, the Company and ~~its subsidiary bank~~Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules. The Company’s CET1 ratio was ~~10.25%~~11.85% at ~~September~~June 30, ~~2019.~~ 2020.

NOTE ~~15: STOCK BASED~~16: STOCK-BASED COMPENSATION

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, restricted stock awards, restricted stock units and performance stock units. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or ~~awarding~~awards of ~~performance~~stock appreciation rights, stock awards or ~~bonus~~units, or performance shares granted to directors, officers and other key employees.

The table below summarizes the transactions under the Company’s active ~~stock~~stock-based compensation plans for the ~~nine~~six months ended ~~September~~June 30, ~~2019:~~2020:

Stock Options
Outstanding

Non-vested
Stock Awards
Outstanding

Non-vested
Stock Units
Outstanding
(Shares in thousands)
Number
of Shares

Weighted
Average
Exercise
Price

Number
of Shares

Weighted
Average
Grant-Date
Fair Value

Number
of Shares

Weighted
Average
Grant-Date
Fair Value
Balance, January 1, 2019 695
$ 22.42
72
$ 21.45
817
$ 27.65
Granted —
—
—
—
516
26.07
Stock options exercised (1 ) 10.65
—
—
—
—
Stock awards/units vested (earned) —
—
(39 ) 20.12
(334 ) 26.45
Forfeited/expired —
—
(2 ) 21.82
(90 ) 28.29

Balance, September 30, 2019 694
$ 22.43
31
$ 23.16
909
$ 27.18

Exercisable, September 30, 2019 694
$ 22.43

The following table summarizes information about stock options under the plans outstanding at ~~September~~June 30, ~~2019:~~2020:

Options Outstanding Options Exercisable
Range of
Exercise Prices

Number
of Shares
(In thousands)

Weighted
Average
Remaining
Contractual
Life (Years)

Weighted
Average
Exercise
Price

Number
of Shares
(In thousands)

Weighted
Average
Exercise
Price
$ 9.46
— $ 9.46
1 2.30 $9.46 1 $9.46
10.65
— 10.65
3 3.32 10.65 3 10.65
10.76
— 10.76
2 0.30 10.76 2 10.76
20.29
— 20.29
71 5.25 20.29 71 20.29
20.36
— 20.36
3 5.13 20.36 3 20.36
22.20
— 22.20
74 5.48 22.20 74 22.20
22.75
— 22.75
436 5.86 22.75 436 22.75
23.51
— 23.51
97 6.30 23.51 97 23.51
24.07
— 24.07
7 5.96 24.07 7 24.07
$ 9.46
— $ 24.07
694 5.78 $22.43 694 $22.43

The table below summarizes the Company’s performance stock unit activity for the ~~nine~~six months ended ~~September~~June 30, ~~2019:~~2020:



(In thousands)	Performance Stock Units
Non-vested, January 1, ~~2019~~2020	~~177~~199
Granted	~~118~~116
Vested (earned)	~~(93~~(80)	)
Forfeited	(3(18)	)
Non-vested, ~~September~~June 30, ~~2019~~2020	~~199~~217

Stock-based compensation expense was ~~$9,316,000~~$7,577,000 and ~~$9,818,000~~$6,249,000 during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. There was 0 unrecognized stock-based compensation expense related to stock options at ~~September~~June 30, ~~2019.~~2020. Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was ~~$16,269,000~~$21,925,000 at ~~September~~June 30, ~~2019.~~2020. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was ~~1.7~~1.9 years.

The intrinsic value of stock options outstanding and stock options exercisable at ~~September~~June 30, ~~2019~~2020 was ~~$1,717,000 and $1,714,000, respectively.~~$28,000. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was ~~$24.90~~$17.11 as of ~~September~~June 30, ~~2019,~~2020, and the exercise price multiplied by the number of options outstanding. The total intrinsic value of stock options exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, was $6,000 and ~~$1,155,000,~~$5,000, respectively.

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. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. There were 0 stock options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

NOTE ~~16:~~17: EARNINGS PER SHARE (“EPS”)

Basic EPS is computed by dividing reported net income available to common stockholders by weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing reported net income available to common stockholders by the weighted average common shares and all potential dilutive common shares outstanding during the period.

The computation of earnings per share is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share data)	2020		2019		2020		2019
Net income available to common stockholders	$	58,789	$	55,598	$	136,012	$	103,293

Average common shares outstanding	108,982		96,098		110,936		94,318
Average potential dilutive common shares	148		270		148		270
Average diluted common shares	109,130		96,368		111,084		94,588

Basic earnings per share	$	0.54	$	0.58	$	1.23	$	1.10
Diluted earnings per share	$	0.54	$	0.58	$	1.22	$	1.09

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands, except per share data) 2019 2018 2019 2018
Net income available to common stockholders $ 81,826
$ 55,193
$ 185,119
$ 160,067

Average common shares outstanding 96,608
92,290
95,090
92,246
Average potential dilutive common shares 360
551
360
551
Average diluted common shares 96,968
92,841
95,450

92,797

Basic earnings per share $ 0.85
$ 0.60
$ 1.95
$ 1.74
Diluted earnings per share $ 0.84
$ 0.59
$ 1.94
$ 1.72

There were approximately 653,718 stock options excluded from the three and six months ended June 30, 2020 earnings per share calculations due to the average market prices of the Company’s common stock exceeding the related stock option exercise prices. There were 6,610 stock options excluded from the three months ended June 30, 2019 earnings per share calculation due to the average market price of the Company’s stock exceeding the related stock option exercise price. There were 0 stock options excluded from the earnings per share calculation for the six months ended June 30, 2019 due to the related exercise price exceeding the average market ~~price for the three and nine months ended September 30, 2019 and 2018.~~price.

NOTE ~~17:~~18: ADDITIONAL CASH FLOW INFORMATION

The following is a summary of the Company’s additional cash flow information:

Nine Months Ended
September 30,
(In thousands) 2019 2018
Interest paid $ 130,904
$ 78,987
Income taxes (refunded) paid 34,028
25,576
Transfers of loans to foreclosed assets held for sale 3,666
7,745
Transfers of premises to foreclosed assets and other real estate owned 556
3,690
Right-of use lease assets obtained in exchange for lessee operating lease liabilities (adoption of ASU 2016-02) 32,757
—


	Six Months Ended June 30,
(In thousands)	2020		2019
Interest paid	$	72,146	$	87,841
Income taxes paid (refunded)	3,196		28,253
Transfers of loans to foreclosed assets held for sale	1,147		1,506
Transfers of premises to foreclosed assets and other real estate owned	3,120		444
Transfers of premises to premises held for sale	1,072		—
Transfers of other real estate owned to premises held for sale	3,504		—
Right-of-use lease assets obtained in exchange for lessee operating lease liabilities (adoption of ASU 2016-02)	—		32,757
Transfers of loans to other assets held for sale	114,925		—
Transfers of deposits to other liabilities held for sale	58,405		—

NOTE ~~18:~~19: OTHER INCOME AND OTHER OPERATING EXPENSES

Other income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$43.8~~$9.8 million and ~~$52.1~~$22.6 million, respectively, ~~and primarily consisted of~~which included the ~~gain~~$8.1 million gains on sale of ~~Visa Inc. class B common stock of $42.9 million.~~the Texas Branch Sale and Colorado Branch Sale. Other income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$4.9~~$6.1 million and ~~$14.2~~$10.2 million, respectively.

Other operating expenses ~~consist~~consisted of the following:

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Professional services $ 4,310
$ 4,616
$ 12,125
$ 13,896
Postage 1,471
1,262
4,642
4,103
Telephone 2,507
1,248
5,605
4,217
Credit card expense 4,200
3,405
11,822
9,820
Marketing 7,021
2,912
12,514
6,334
Software and technology 6,531
4,733
16,607
10,716
Operating supplies 493
585
1,671
1,917
Amortization of intangibles 2,947
2,772
8,535
8,394
Branch right sizing expense 160
970
3,092
1,049
Other expense 8,239
7,171
24,195
20,907
Total other operating expenses $ 37,879
$ 29,674
$ 100,808

$ 81,353


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Professional services	$	3,921	$	3,492	$	9,750	$	7,815
Postage	1,769		1,445		4,005		3,171
Telephone	2,450		1,480		4,635		3,099
Credit card expense	4,582		3,762		8,964		7,622
Marketing	3,528		2,436		7,913		5,493
Software and technology	10,024		5,580		19,469		10,076
Operating supplies	828		560		1,764		1,178
Amortization of intangibles	3,369		2,947		6,782		5,588
Branch right sizing expense	1,721		2,887		1,959		2,932
Other expense	2,459		8,278		8,198		15,955
Total other operating expenses	$	34,651	$	32,867	$	73,439	$	62,929

NOTE ~~19:~~20: CERTAIN TRANSACTIONS

From time to time, the Company and its subsidiaries have made loans, other extensions of credit, and vendor contracts to directors, officers, their associates and members of their immediate families. Additionally, some directors, officers and their associates and members of their immediate families have placed deposits with the Company’s subsidiary bank, Simmons Bank. Such loans and other extensions of credit, deposits and vendor contracts (which were not material) were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with unrelated persons or through a competitive bid process. Further, in management’s opinion, these extensions of credit did not involve more than normal risk of collectability or present other unfavorable features.

NOTE ~~20:~~21: COMMITMENTS AND CREDIT RISK

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

At ~~September~~June 30, 2020, the Company had outstanding commitments to extend credit aggregating approximately $670,546,000 and $2,933,075,000 for credit card commitments and other loan commitments, respectively. At December 31, 2019, the Company had outstanding commitments to extend credit aggregating approximately ~~$598,992,000~~$634,788,000 and $3,310,794,000 for credit card commitments and other loan commitments. At December 31, 2018, the Company had outstanding commitments to extend credit aggregating approximately $560,863,000 and $3,455,471,000$3,991,931,000 for credit card commitments and other loan commitments, respectively.

Standby 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 ~~$49,447,000~~$63,279,000 and ~~$39,101,000~~$71,074,000 at ~~September~~June 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, respectively, with terms ranging from 9 months to 15 years. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had 0 deferred revenue under standby letter of credit agreements.

NOTE ~~21:~~22: FAIR VALUE MEASUREMENTS

ASC Topic 820, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Topic 820 describes three levels of inputs that may be used to measure fair value:

•

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

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

•Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

~~– Quoted prices in active markets for identical assets or liabilities.~~


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


•	~~Level 3 Inputs~~ ~~– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale securities – Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. Other securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. In order to ensure the fair values are consistent with ASC Topic 820, the Company periodically checks the fair values by comparing them to another pricing source, such as Bloomberg. The availability of pricing confirms Level 2 classification in the fair value hierarchy. The third-party pricing service is subject to an annual review of internal controls (SSAE 16), which is made available for the Company’s review. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company’s investment in U.S. Treasury securities, if any, is reported at fair value utilizing Level 1 inputs. The remainder of the Company’s available-for-sale securities are reported at fair value utilizing Level 2 inputs.

Derivative instruments – The Company’s derivative instruments are reported at fair value utilizing Level 2 inputs. The Company obtains fair value measurements from dealer quotes.

Other assets and other liabilities held for sale – The Company’s other assets and other liabilities held for sale are reported at fair value utilizing Level 3 inputs. See Note 4, Other Assets and Other Liabilities Held for Sale.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.


			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2020
Available-for-sale securities
U.S. Government agencies	$	210,921	$	—	$	210,921	$	—
Mortgage-backed securities	1,154,086		—		1,154,086		—
State and political subdivisions	1,054,068		—		1,054,068		—
Other securities	77,821		—		77,821		—
Other assets held for sale	399		—		—		399
Derivative asset	44,702		—		44,702		—
Derivative liability	(45,080)		—		(45,080)		—

December 31, 2019
Available-for-sale securities
U.S. Treasury	$	449,729	$	449,729	$	—	$	—
U.S. Government agencies	194,249		—		194,249		—
Mortgage-backed securities	1,742,945		—		1,742,945		—
States and political subdivisions	880,524		—		880,524		—
Other securities	20,896		—		20,896		—
Other assets held for sale	260,332		—		—		260,332
Derivative asset	14,903		—		14,903		—
Other liabilities held for sale	(159,853)		—		—		(159,853)
Derivative liability	(12,650)		—		(12,650)		—

Fair Value Measurements Using
(In thousands) Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)
September 30, 2019

Available-for-sale securities

U.S. Government agencies $ 178,139
$ —
$ 178,139
$ —
Mortgage-backed securities 1,337,794
—
1,337,794
—
State and political subdivisions 681,202
—
681,202
—
Other securities 158,999
—
158,999
—
Derivative asset 14,377
—
14,377
—
Derivative liability (14,478 ) —
(14,478 ) —

December 31, 2018
Available-for-sale securities
U.S. Government agencies $ 154,301
$ —
$ 154,301
$ —
Mortgage-backed securities 1,522,900
—
1,522,900
—
States and political subdivisions 314,843
—
314,843
—
Other securities 159,708
—
159,708
—
Derivative asset 6,242
—
6,242
—
Derivative liability (5,283 ) —
(5,283 ) —

Certain financial assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain ~~circumstances (for example, when there is evidence of impairment).~~circumstances. Financial assets and liabilities measured at fair value on a nonrecurring basis include the following:

~~Impaired~~Individually assessed loans ~~(collateral dependent)~~(collateral-dependent) – ~~Loan impairment is reported~~When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when ~~full payment under~~ the loan terms is not expected. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectabilityrepayment of a loan is ~~confirmed. Impaired~~expected to be substantially dependent on the liquidation of underlying collateral, the relationship is deemed collateral-dependent. Fair value of the loan is determined by establishing an allowance for credit loss for any exposure based on the valuation of the underlying collateral. The valuation of the collateral is determined by either an independent third-party appraisal or other collateral analysis. Discounts can be made by the Company based upon the overall evaluation of the independent appraisal. Collateral-dependent loans ~~that are collateral dependent~~ are classified within Level 3 of the fair value ~~hierarchy when impairment is determined using~~hierarchy. Collateral values supporting the ~~fair value method.~~individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations.

Appraisals are updated at renewal, if not more frequently, for all collateral dependent loans that are deemed impaired by way of impairment testing. Impairment testing is performed on all loans over $1.5 million rated Substandard or worse, all existing impaired loans regardless of size and all TDRs. All collateral dependent impaired loans meeting these thresholds have had updated appraisals or internally prepared evaluations within the last one to two years and these updated valuations are considered in the quarterly review and discussion of the corporate Special Asset Committee. On targeted CRE loans, appraisals/internally prepared valuations may be updated before the typical 1-3 year balloon/maturity period. If an updated valuation results in decreased value, a specific (ASC 310) impairment is placed against the loan, or a partial charge-down is initiated, depending on the circumstances and anticipation of the loan’s ability to remain a going concern, possibility of foreclosure, certain market factors, etc.

Foreclosed assets and other real estate owned – Foreclosed assets and other real estate owned are reported at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the

Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for ~~loan~~credit losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets and other real estate owned is estimated using Level 3 inputs based on unobservable market data. ~~As of September 30, 2019 and December 31, 2018, the fair value of foreclosed assets and other real estate owned less estimated costs to sell was $19.6 million and $25.6 million, respectively.~~

The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral-dependent ~~impaired~~ loans and foreclosed assets primarily relate to the specialized discounting criteria applied to the borrower’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the collateral, as well as other factors which may affect the collectability of the loan. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for instruments measured using Level 3 inputs could occur in the future. As the Company’s primary objective in the event of default would be to liquidate the collateral to settle the outstanding balance of the loan, collateral that is less marketable would receive a larger discount. ~~During the reported periods, collateral discounts ranged from 10% to 40% for commercial and residential real estate collateral.~~

Mortgage loans held for sale – Mortgage loans held for sale are reported at fair value if, on an aggregate basis, the fair value of the loans is less than cost. In determining whether the fair value of loans held for sale is less than cost when quoted market prices are not available, the Company may consider outstanding investor commitments, discounted cash flow analyses with market assumptions or the fair value of the collateral if the loan is collateral dependent. Such loans are classified within either Level 2 or Level 3 of the fair value hierarchy. Where assumptions are made using significant unobservable inputs, such loans held for sale are classified as Level 3. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, 0 mortgage loans held for sale were marked down and reported at fair value.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Fair Value Measurements Using
(In thousands) Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)
September 30, 2019

Impaired loans ^{(1) (2)} (collateral dependent)
$ 46,903
$ —
$ —
$ 46,903
Foreclosed assets and other real estate owned ⁽¹⁾
15,046
—
—
15,046

December 31, 2018
Impaired loans ^{(1) (2)} (collateral dependent)
$ 17,789
$ —
$ —
$ 17,789
Foreclosed assets and other real estate owned ⁽¹⁾
23,714
—
—
23,714


			Fair Value Measurements Using
(In thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2020
Individually assessed loans ^{(1) (2)}(collateral-dependent)	$	47,585	$	—	$	—	$	47,585
Foreclosed assets and other real estate owned ⁽¹⁾	2,995		—		—		2,995

December 31, 2019
Individually assessed loans ^{(1) (2)}(collateral-dependent)	$	49,190	$	—	$	—	$	49,190
Foreclosed assets and other real estate owned ⁽¹⁾	18,798		—		—		18,798

________________________

(1)These amounts represent the resulting carrying amounts on the consolidated balance sheets for ~~impaired collateral dependent~~collateral-dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period.

(2)~~Specific allocations~~Identified reserves of ~~$1,297,000~~$8,283,000 and ~~$2,738,000~~$1,297,000 were related to ~~the impaired collateral dependent~~collateral-dependent loans for which fair value re-measurements took place during the periods ended ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

ASC Topic 825, Financial Instruments, requires disclosure in annual and interim financial statements of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The following methods and assumptions were used to estimate the fair value of each class of financial instruments not previously disclosed.

Cash and cash equivalents – The carrying amount for cash and cash equivalents approximates fair value (Level 1).

Interest bearing balances due from banks – The fair value of interest bearing balances due from banks – time is estimated using a discounted cash flow calculation that applies the rates currently offered on deposits of similar remaining maturities (Level 2).

Held-to-maturity securities – Fair values for held-to-maturity securities equal quoted market prices, if available, such as for highly liquid government bonds (Level 1). If quoted market prices are not available, fair values are estimated based on quoted market prices of similar securities. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things (Level 2). In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

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. Additional factors considered include the type of loan and related collateral, variable or fixed rate, classification status, remaining term, interest rate, historical delinquencies, loan to value ratios, current market rates and remaining loan balance. The loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of similar loans. Estimated credit losses were also factored into the projected cash flows of the loans. The fair value of loans is estimated on an exit price basis incorporating the above factors (Level 3).

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) (Level 2). 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 (Level 3).

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 (Level 2).

Other borrowings – For short-term instruments, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value (Level 2).

Subordinated debentures – The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities (Level 2).

Accrued interest receivable/payable – The carrying amounts of accrued interest approximated fair value (Level 2).

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 fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:


	Carrying		Fair Value Measurements
(In thousands)	Amount		Level 1		Level 2		Level 3		Total
June 30, 2020
Financial assets:
Cash and cash equivalents	$	2,545,160	$	2,545,160	$	—	$	—	$	2,545,160
Interest bearing balances due from banks - time	4,561		—		4,561		—		4,561
Held-to-maturity securities	51,720		—		53,751		—		53,751
Mortgage loans held for sale	120,034		—		—		120,034		120,034
Interest receivable	79,772		—		79,772		—		79,772
Loans, net	14,375,257		—		—		14,420,889		14,420,889

Financial liabilities:
Non-interest bearing transaction accounts	4,608,098		—		4,608,098		—		4,608,098
Interest bearing transaction accounts and savings deposits	8,978,045		—		8,978,045		—		8,978,045
Time deposits	3,029,975		—		—		3,046,955		3,046,955
Federal funds purchased and securities sold under agreements to repurchase	387,025		—		387,025		—		387,025
Other borrowings	1,393,689		—		1,504,732		—		1,504,732
Subordinated notes and debentures	382,604		—		402,716		—		402,716
Interest payable	10,473		—		10,473		—		10,473

December 31, 2019
Financial assets:
Cash and cash equivalents	$	996,623	$	996,623	$	—	$	—	$	996,623
Interest bearing balances due from banks - time	4,554		—		4,554		—		4,554
Held-to-maturity securities	40,927		—		41,855		—		41,855
Mortgage loans held for sale	58,102		—		—		58,102		58,102
Interest receivable	62,707		—		62,707		—		62,707
Loans, net	14,357,460		—		—		14,290,188		14,290,188

Financial liabilities:
Non-interest bearing transaction accounts	3,741,093		—		3,741,093		—		3,741,093
Interest bearing transaction accounts and savings deposits	9,090,878		—		9,090,878		—		9,090,878
Time deposits	3,276,969		—		—		3,270,333		3,270,333
Federal funds purchased and securities sold under agreements to repurchase	150,145		—		150,145		—		150,145
Other borrowings	1,297,599		—		1,298,011		—		1,298,011
Subordinated debentures	388,260		—		397,088		—		397,088
Interest payable	12,898		—		12,898		—		12,898

Carrying Fair Value Measurements
(In thousands) Amount Level 1 Level 2 Level 3 Total
September 30, 2019

Financial assets:

Cash and cash equivalents $ 529,970
$ 529,970
$ —
$ —
$ 529,970
Interest bearing balances due from banks - time 5,041
—
5,041
—
5,041
Held-to-maturity securities 42,237
—
43,302
—
43,302
Mortgage loans held for sale 50,099
—
—
50,099
50,099
Interest receivable 53,966
—
53,966
—
53,966
Legacy loans, net 9,577,372
—
—
9,505,701
9,505,701
Loans acquired, net 3,359,587
—
—
3,334,446
3,334,446

Financial liabilities:
Non-interest bearing transaction accounts 3,044,330
—
3,044,330
—
3,044,330
Interest bearing transaction accounts and savings deposits 7,337,571
—
7,337,571
—
7,337,571
Time deposits 3,086,108
—
—
3,080,775
3,080,775
Federal funds purchased and securities sold under agreements to repurchase 116,536
—
116,536
—
116,536
Other borrowings 1,098,395
—
1,099,171
—
1,099,171
Subordinated notes and debentures 354,223
—
366,289
—
366,289
Interest payable 15,404
—
15,404
—
15,404

December 31, 2018
Financial assets:
Cash and cash equivalents $ 833,458
$ 833,458
$ —
$ —
$ 833,458
Interest bearing balances due from banks - time 4,934
—
4,934
—
4,934
Held-to-maturity securities 289,194
—
290,830
—
290,830
Mortgage loans held for sale 26,799
—
—
26,799
26,799
Interest receivable 49,938
—
49,938
—
49,938
Legacy loans, net 8,373,789
—
—
8,280,690
8,280,690
Loans acquired, net 3,292,783
—
—
3,256,174
3,256,174

Financial liabilities:
Non-interest bearing transaction accounts 2,672,405
—
2,672,405
—
2,672,405
Interest bearing transaction accounts and savings deposits 6,830,191
—
6,830,191
—
6,830,191
Time deposits 2,896,156
—
—
2,872,342
2,872,342
Federal funds purchased and securities sold under agreements to repurchase 95,792
—
95,792
—
95,792
Other borrowings 1,345,450
—
1,342,868
—
1,342,868
Subordinated debentures 353,950
—
355,812
—
355,812
Interest payable 9,897
—
9,897
—
9,897

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

NOTE ~~22: SUBSEQUENT EVENTS~~23: DERIVATIVE INSTRUMENTS

~~On October 22,~~The Company utilizes derivative instruments to manage exposure to various types of interest rate risk for itself and its customers within policy guidelines. Transactions should only be entered into with an associated underlying exposure. All derivative instruments are carried at fair value.

Derivative contracts involve the risk of dealing with institutional derivative counterparties and their ability to meet contractual terms. Institutional counterparties must have an investment grade credit rating and be approved by the Company’s asset/liability management committee. In arranging these products for its customers, the Company assumes additional credit risk from the customer and from the dealer counterparty with whom the transaction is undertaken. Credit risk exists due to the default credit risk created in the exchange of the payments over a period of time. Credit exposure on interest rate swaps is limited to the net favorable value and interest payments of all swaps with each counterparty. Access to collateral in the event of default is reasonably assured. Therefore, credit exposure may be reduced by the amount of collateral pledged by the counterparty.

Hedge Structures

The Company will seek to enter derivative structures that most effectively address the risk exposure and structural terms of the underlying position being hedged. The term and notional principal amount of a hedge transaction will not exceed the term or principal amount of the underlying exposure. In addition, the Company will use hedge indices which are the same as, or highly correlated to, the index or rate on the underlying exposure. Derivative credit exposure is monitored on an ongoing basis for each customer transaction and aggregate exposure to each counterparty is tracked. The Company has set a maximum outstanding notional contract amount at 10% of the Company’s assets.

Customer Risk Management Interest Rate Swaps

The Company’s qualified loan customers have the opportunity to participate in its interest rate swap program for the purpose of managing interest rate risk on their variable rate loans with the Company. The Company enters into such agreements with customers, then offsetting agreements are executed between the Company and an approved dealer counterparty to minimize market risk from changes in interest rates. The counterparty contracts are identical to customer contracts in terms of notional amounts, interest rates, and maturity dates, except for a fixed pricing spread or fee paid to the Company by the dealer counterparty. These interest rate swaps carry varying degrees of credit, interest rate and market or liquidity risks. The fair value of these derivative instruments is recognized as either derivative assets or liabilities in the accompanying consolidated balance sheets. The Company has a limited number of swaps that are standalone without a similar agreement with the loan customer.

The Company has entered into interest rate swap agreements that effectively convert the loan interest rate from floating rate based on LIBOR or Prime rate to a fixed rate for the customer. The Company has entered into offsetting agreements with dealer counterparties. The following table summarizes the fair values of loan derivative contracts recorded in the accompanying consolidated balance sheets.


	June 30, 2020						December 31, 2019
(In thousands)	Notional		Fair Value		Notional		Fair Value
Derivative assets	$	445,660	$	44,702	$	401,969	$	14,903
Derivative liabilities	455,010		45,080		387,075		12,650

Risk Participation Agreements

The Company has a limited number of Risk Participation Agreement swaps, that are associated with loan participations, where the Company is not the counterparty to the interest rate swaps that are associated with the risk participation sold. The interest rate swap mark to market only impacts the Company if the swap is in a liability position to the counterparty and the customer defaults on payments to the counterparty. The notional amount of these contingent agreements is $52.2 million as of June 30, 2020.

Energy Hedging

During 2019, the Company ~~announced that its Board~~began providing energy derivative services to qualifying, high quality oil and gas borrowers for hedging purposes. The Company serves as an intermediary on energy derivative products between the Company’s borrowers and dealers. The Company will only enter into back-to-back trades, thus maintaining a balanced book between the dealer and the borrower.

Energy hedging risk exposure to the Company’s customer increases as energy prices for crude oil and natural gas rise. As prices decrease, exposure to the exchange increases. These risks are mitigated by customer credit underwriting policies and establishing a predetermined hedge line for each borrower and by monitoring the exchange margin.

The outstanding notional value as of ~~Directors authorized a new stock repurchase program (the “Program”) under which~~June 30, 2020 for energy hedging Customer Sell to Company swaps were $12.6 million and the corresponding Company Sell to Dealer swaps were $12.6 million and the corresponding net fair value of the derivative asset and derivative liability was $514,800.

NOTE 24: RECENT EVENTS

The coronavirus (COVID-19) pandemic has placed significant health, economic and other major pressure on the communities the Company ~~may repurchase up~~serves, the United States and the entire world. In March 2020, Congress passed the CARES Act, which is designed to ~~$60,000,000~~provide comprehensive relief to individuals and businesses following the unprecedented impact of the COVID-19 pandemic. The Company has implemented a number of procedures in response to the pandemic to support the safety and well being of its ~~Class A common stock currently issued~~employees, customers and ~~outstanding. The Program will terminate on October 31, 2021 (unless terminated sooner). The new Program replaces~~shareholders that continue through the ~~Company’s existing stock repurchase program, which was announced on July 23, 2012.~~date of filing this report. Some of the implemented procedures include:

~~Under~~•Addressing the Program, the Company may repurchase shares of its common stock through open market and privately negotiated transactions or otherwise. The timing, pricing, and amount of any repurchases under the Program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market pricesafety of the Company’s ~~common stock, corporate considerations, the Company’s working capital~~226 branches, following local, state, and ~~investment requirements, general market and economic conditions, and legal requirements. The Program does not obligate~~federal guidelines. In March, the Company announced the temporary closure of 52 branches and increased its focus on the enhanced digital banking experience. Many of the branches have now been reopened, however we will continue to ~~repurchase any common stock~~review our branch network;

•Holding regular executive and pandemic task force meetings to address issues that change rapidly;

•Implementing business continuity plans to help ensure that customers have adequate access to banking services;

•Providing extensions and deferrals to loan customers affected by COVID-19 provided such customers were not 30 days or more past due at December 31, 2019. Through June 30, 2020, the Company has modified more than 4,600 loans totaling approximately $3.3 billion; and

•Participating in both appropriations of the CARES Act Paycheck Protection Program (“PPP”) that provides 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assist with mortgage interest, rent and utilities. Notably, these small business loans may be ~~modified, discontinued, or suspended at any time without prior notice.~~forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions during this crisis. The Company ~~anticipates funding for~~originated over 7,800 PPP loans with a balance of $963.7 million at June 30, 2020.

The Company continues to closely monitor this ~~Program~~pandemic and expects to ~~come~~make future changes to respond to the pandemic as this situation continues to evolve. Further economic downturns accompanying this pandemic, or a delayed economic recovery from ~~available sources~~this pandemic, could result in increased deterioration in credit quality, past due loans, loans charge offs and collateral value declines, which could cause our results of ~~liquidity, including cash on hand~~operations and ~~future cash flow.~~financial condition to be negatively impacted.

On October 29, 2019, the Company filed its Amended and Restated Articles of Incorporation (“Amended Articles”) with the Arkansas Secretary of State. The Amended Articles classified and designated Series D Preferred Stock, Par Value $0.01 Per Share (“Series D Preferred Stock”) out of the Company’s authorized preferred stock. The Amended Articles also canceled the Company’s 7% Perpetual Convertible Preferred Stock, Par Value $0.01 Per Share, Series C (“Series C Preferred Stock”), having 140 authorized shares, of which 0 shares have ever been issued or outstanding. The Amended Articles were effective as of October 29, 2019.

~~Please refer to Note 2, Acquisitions, for a discussion of the Company’s recent acquisition of The Landrum Company that closed on October 31, 2019.~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee, Board of Directors and Stockholders

Simmons First National Corporation

Pine Bluff, Arkansas

Results of Review of Interim Financial Statements

We have reviewed the condensed consolidated balance sheet of Simmons First National Corporation (“the Company”) as of ~~September~~June 30, ~~2019,~~2020, and the related condensed consolidated statements of income, comprehensive income and stockholders’ equity for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, and cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, ~~2018,~~2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 27, ~~2019,~~2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2018,~~2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Emphasis of Matter

As discussed in Note 1 to the condensed consolidated financial statements, the Company has changed its method of accounting for the allowance for credit losses in 2020 due to the adoption of Topic 326.

/s/ BKD, LLP

Little Rock, Arkansas

August 6, 2020

~~November 7, 2019~~


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Our net income for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$81.8~~$58.8 million, or ~~$0.84~~$0.54 diluted earnings per share, ~~increases~~an increase of ~~$26.6~~$3.2 million and ~~$0.25,~~a decrease of $0.04, respectively, compared to the ~~third~~second quarter ~~2018.~~of 2019. Included in both ~~third~~second quarter ~~2019~~2020 and ~~2018~~2019 results were non-core items related to our acquisitions, early retirement ~~program expenses~~programs and branch right sizing initiatives. Also included in our 2020 results are the gains associated with the Texas Branch Sale and Colorado Branch Sale. Excluding all non-core items, core earnings for the three months ended ~~September~~June 30, ~~2019~~2020 were ~~$84.0~~$60.1 million, or ~~$0.87~~$0.55 core diluted earnings per share, compared to ~~$56.5~~$65.5 million, or ~~$0.61~~$0.68 core diluted earnings per share for the three months ended ~~September~~June 30, ~~2018.~~2019. See ~~“Reconciliation~~“GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

We are very pleased with our operating results this quarter. We continue to have very strong loan demand opportunities throughout our footprint although our customers are displaying cautious optimism regarding the uncertainty in the world economy and interest rate adjustments. We had several notable events during the third quarter 2019 that affected our operating results. First, provision expense increased $15 million primarily related to the charge-off of a participation interest in a shared national credit to White Star Petroleum, LLC (“White Star”) (further discussed below in “Provision for Loan Losses”). Second, we sold Visa Inc. class B common stock resulting in a gain of $42.9 million, and in connection with that sale, we contributed $4 million to the Simmons First Foundation so it may continue its work to provide community development grants throughout our footprint. Third, we sold $114 million of primarily commercial real estate (“CRE”) loans resulting in a net loss of $5.1 million.

Net income for the ~~nine~~first six months ~~ended September 30, 2019~~of 2020 was ~~$185.1~~$136.0 million, or $1.94 diluted earnings per share, increases of $25.1 million and $0.22, respectively, compared to the same period in 2018. Excluding all non-core items, core earnings for the nine months ended September 30, 2019 were $198.5 million, or $2.08 core$1.22 diluted earnings per share, compared to ~~$163.8~~$103.3 million, or ~~$1.76 core~~$1.09 diluted earnings per share, for the same period in ~~2018.~~2019. Excluding the non-core items, year-to-date core earnings were $134.0 million, an increase of $19.5 million compared to the same period in prior year. Core diluted earnings per share for the first half of 2020 were $1.21, equal to the same period in 2019. See ~~“Reconciliation~~“GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

~~In April 2019, we~~We completed the acquisition of ~~Reliance Bancshares, Inc. (“Reliance”). Contemporaneously with the Reliance acquisition, Reliance’s~~The Landrum Company, including its wholly-owned bank subsidiary, ~~bank, Reliance~~Landmark Bank, in October 2019. The systems conversion of Landmark Bank was merged with and into Simmons Bank, with Simmons Bank as the surviving entity. We are excited about the Reliance transaction and the opportunities we now have in the St. Louis market due to our increased presence.completed during February 2020. See Note 2, Acquisitions, in the accompanying Condensed Notes to Consolidated Financial Statements ~~included elsewhere in this report,~~ for additional information related to this acquisition.

~~In 2018,~~On February 28, 2020, we ~~announced~~completed the Texas Branch Sale of five Simmons Bank locations in Austin, San Antonio and Tilden, Texas. Additionally, on May 18, 2020 we completed the Colorado Branch Sale of four Simmons Bank locations in Denver, Englewood, Highlands Ranch and Lone Tree, Colorado. The Company recognized a combined gain on sale of $8.1 million on the Texas Branches and Colorado Branches.

Early in 2020, we offered qualifying associates an early retirement option resulting in $493,000 of non-core expense during the second quarter. We expect ongoing net annualized savings of approximately $2.9 million from this program.

We continuously evaluate our Next Generation Banking (“NGB”) strategic initiative that we believe positions us to provide competitive banking services well into the future. Through this program, we have evaluated the primary information technology systems and functions that supportbranch network as part of our analysis of our profitability of our operations and ~~are improving or replacing many of them~~the efficiency with ~~updated and/or enhanced~~which we deliver banking ~~technologies. This initiative will, among other things, assist us in~~services to our ~~efforts to create a differentiated experience for our customers across all channels, including digital.~~

~~We are beginning to see real changes as~~markets. As a result of this ongoing evaluation, we closed 11 branch locations during June 2020, with estimated net annual cost savings of approximately $2.4 million related to these locations. In addition, we expect to close an additional 23 branch locations and one loan production office during the fourth quarter of 2020, with an expected net annual cost savings of approximately $6.8 million.

We have added over 38,000 new digital banking users since the end of February 2020. In March 2020, for the first time, we had more weekly transactions using digital channels than at the branches, and our ~~NGB investments. For example,~~mobile deposit usage has seen an increase of 75% since the end of February. During May 2020, we ~~accomplished a major milestone in the third quarter 2019 when we successfully~~ completed the ~~migration~~conversion of ~~our core banking platform~~all consumer customers to our ~~vendor hosted environment. The transition was very successful~~new online platform. All consumer customers are now on the same online and ~~has increased security and the reliability of our systems. In addition, in October 2019, we successfully launched our new~~ mobile banking application. Our new application makes us a formidable competitor in mobile banking, and customer response to date has been very positive. We will continue to expand customer offerings through our digital channel.platforms, including acquired institutions.

Stockholders’ equity as of ~~September~~June 30, ~~2019~~2020 was ~~$2.5~~$2.9 billion, book value per share was ~~$26.36~~$26.64 and tangible book value per share was ~~$15.73.~~$15.79. Our ratio of common stockholders’ equity to total assets was ~~14.3%~~13.26% and the ratio of tangible common stockholders’ equity to tangible assets was ~~9.1%~~8.31% at ~~September~~June 30, ~~2019.~~2020. See ~~“Reconciliation~~“GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures. The Company’s Tier I1 leverage ratio of ~~9.1%~~8.78%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” levels (see Table 12 in the Capital section of this Item).

Total loans ~~including loans acquired,~~ were ~~$13.003 billion at September 30, 2019, compared to $13.127~~$14.61 billion at June 30, ~~2019 and $11.723~~2020, compared to $14.37 billion at ~~December~~March 31, ~~2018. During the third quarter 2019, we reduced our real estate loan portfolio as part of an effort to manage our CRE concentration.~~2020 and $13.13 billion at June 30, 2019. The increase ~~in our overall loan balance since year-end 2018 was~~from prior year is primarily due to the ~~Reliance Bank merger completed in April 2019.~~

~~As mentioned above, during~~Landrum acquisition. Sequentially, total loans increased $232.6 million from the first quarter we incurred a loss related to the White Star bankruptcy. The White Star loss is disappointing and contrary to the credit culture at Simmons. Because we were only a participant in the shared national credit, we were limited both in our ability to act unilaterally and in our access to timely information. We have learned some valuable lessons from this experience. We have made changes to our credit underwriting and approval processes that are consistent with our conservative

credit culture. We will work to exit all purchased syndicated energy credits. Currently we have $187 million in syndicated energy loans in which Simmons is not the lead bank. We expect to exit at least $120 million of these credits by2020. During the second quarter of ~~next year.~~2020, we had $963.7 million in loan originations under the Paycheck Protection Program (“PPP”) of the CARES Act. See the COVID-19 Impact section below for additional information.

At ~~September~~June 30, ~~2019,~~2020, the allowance for ~~loan~~credit losses ~~for legacy~~on loans was ~~$66.0~~$231.6 million. ~~The~~We adopted the new credit loss methodology, CECL, on January 1, 2020. Upon adoption, we recorded an additional allowance for ~~loan~~credit losses of approximately $151.4 million, an adjustment to the reserve for ~~loans acquired was $597,000~~unfunded commitments of $24.0 million, and ~~the acquired loan discount credit mark was $60.4 million. The allowances for loan losses and credit marks provide~~ a ~~total~~related $128.1 million adjustment to retained earnings net of ~~$127.0 million of coverage, which equates to a total coverage ratio of 1.0% of gross loans. The ratio of credit mark and related allowance to loans acquired was 1.8%.~~taxes.

~~On October 31, 2019, we completed our previously announced acquisition of The Landrum Company. We are excited about the expanded market presence in several states as a result of this acquisition.~~

Simmons First National Corporation is an Arkansas-based financial holding company that, as of ~~September~~June 30, ~~2019,~~2020, has approximately ~~$17.8~~$21.9 billion in consolidated assets and, through its subsidiaries, conducts financial operations ~~throughout~~in Arkansas, ~~Colorado,~~ Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

COVID-19 Impact

As discussed in Note 24, Recent Events, in the accompanying Condensed Notes to the Consolidated Financial Statements, we have been actively managing our response to the unfolding COVID-19 pandemic. During the first quarter, we sold approximately $1.1 billion in securities to increase liquidity in response to potential customer withdrawals of deposits as well as for anticipated funding of PPP loans. As of June 30, 2020, the Company has approximately $2.5 billion in cash and cash equivalents and is well capitalized, which management believes has allowed us to continue to approach the crisis from a position of strength.

Through June 30, 2020, we originated approximately 7,800 PPP loans with an average balance of $123,000 per loan. Approximately 93% of our PPP loans had a balance of less than $350,000 at the end of the quarter. The following table categorizes our PPP loans by outstanding balance as of June 30, 2020:


	Number of			Balance
(Dollars in thousands)	Loans	% of Loans		June 30, 2020		% of Balance
PPP loan balance less than $350,000	7,286	93	%	$	392,329	41	%
PPP loan balance $350,000 or less than $2 million	478	6	%	355,415		37	%
PPP loan balance $2 million to $10 million	62	1	%	215,968		22	%
Total	7,826	100	%	$	963,712	100	%

PPP loans are 100% federally guaranteed and have a zero percent risk-weight for regulatory capital ratios. As a result, excluding PPP loans from total assets, common equity to total assets was 13.9% and tangible common equity to tangible assets was 8.7% as of June 30, 2020. See “GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

We are dedicated to supporting our customers and communities throughout this period of uncertainty. As a show of this support, we have:

•Donated masks, gloves and hand sanitizers to healthcare facilities, police and a community group delivering meals.

•Sponsored a live streaming concert from Simmons Bank Arena to benefit the Feeding America food banks and the Hunger Relief Alliance, raising over $30,000.

•Donated over $100,000 to various community support groups throughout our footprint to be used for COVID-19 response.

•Delivered food and care packages to support police, firefighters, emergency responders and healthcare workers.

We believe our associates have done a commendable job of adapting to the changes that have occurred over the past four months. We continue to operate in an uncertain environment, and we expect to continue to adjust as necessary. We have consolidated various operations to provide capacity for continued service to our customers and communities.

Further economic downturns accompanying this pandemic, or a delayed economic recovery from this pandemic, could result in increased deterioration in credit quality, past due loans, loans charge offs and collateral value declines, which could cause our results of operations and financial condition to be negatively impacted.

CRITICAL ACCOUNTING POLICIES

Overview

We follow accounting and reporting policies that conform, in all material respects, to ~~generally accepted accounting principles~~US GAAP 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 we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

We consider 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 our 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~~credit losses, (b) acquisition accounting and valuation of loans, (c) the valuation of goodwill and the useful lives applied to intangible assets, (d) the valuation of stock-based compensation plans and (e) income taxes.

Allowance for ~~Loan~~Credit Losses ~~on Loans Not Acquired~~

The allowance for credit losses is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical loss experience, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected loan losses ~~is management’s estimate of probable losses~~and risks inherent in the loan portfolio. ~~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~~Our allowance for ~~loan~~credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses. Accordingly, the methodology is ~~calculated monthly~~ based on ~~management’s assessment of several factors such as (1)~~our reasonable and supportable economic forecasts, historical loss experience, based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. We establish general allocations for each major loan category. This category 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. General reserves have been established, based upon~~qualitative adjustments. For further information see the ~~aforementioned factors and allocated to the individual loan categories. Allowances are accrued~~section Allowance for probable losses 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.Credit Losses below.

Our evaluation of the allowance for ~~loan~~credit losses is inherently subjective as it requires material estimates. The actual amounts of ~~loan~~credit losses realized in the near term could differ from the amounts estimated in arriving at the allowance for ~~loan~~credit losses reported in the financial statements.

~~Refer to~~ On January 1, 2020, the ~~Recently Issued Accounting Standards~~ ~~section in~~Company adopted the new CECL methodology. See Note 1, Preparation of Interim Financial Statements, in the accompanying Condensed Notes to Consolidated Financial Statements for ~~discussion regarding the pending accounting~~additional information.

~~pronouncement that will replace the current incurred loss accounting model for the allowance for loan losses, which will be effective on January 1, 2020.~~

Acquisition Accounting, Loans ~~Acquired~~

We account for our acquisitions under ~~Accounting Standards Codification (“ASC”)~~ASC Topic 805, Business Combinations, which requires the use of the ~~purchase~~acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. Our historical acquisitions all occurred under previous US GAAP prior to our adoption of CECL. No allowance for loan losses related to the acquired loans ~~acquired is~~was recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. The fair value estimates associated with the loans ~~include~~included estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

We evaluate loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. ~~These loans are not considered to be impaired loans. We evaluate purchased impaired loans in accordance with the provisions of ASC Topic 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. All loans acquired are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.

For impaired loans accounted for under ASC Topic 310-30, we continue to estimate cash flows expected to be collected on purchased credit impaired loans. We evaluate at each balance sheet date whether the present value of our purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in our consolidated statement of income. For any significant increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the remaining life of the purchased credit impaired loan.

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. We perform an annual goodwill impairment test, and more than annually if circumstances warrant, in accordance with ASC Topic 350, Intangibles – Goodwill and Other,, as amended by ASU 2011-08 – Testing Goodwill for ~~Impairment~~.Impairment. ASC Topic 350 requires that goodwill and intangible assets that have indefinite lives be reviewed for impairment annually or more frequently if certain conditions occur. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

During the first quarter of 2020, our share price began to decline as the markets in the United States responded to the global COVID-19 pandemic. As a result of that economic decline, the effect on our share price and other factors, we performed an interim goodwill impairment qualitative assessment during the first quarter and concluded no impairment existed. During the second quarter of 2020, we performed our annual goodwill impairment test and concluded that it is more likely-than-not that the fair value of our goodwill continues to exceed its carrying value and therefore, goodwill is not impaired.

~~Stock-based~~

Stock-Based Compensation Plans

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

In accordance with ASC Topic 718, Compensation – Stock Compensation, 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 ~~15, Stock Based~~16, Stock-Based Compensation, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report.

Income Taxes

We are subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where we conduct 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 income 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.

~~The adoption of ASU 2016-09 –~~ ~~Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting, decreased the effective tax rate during 2018 as the new standard impacted how the income tax effects associated with stock-based compensation are recognized.~~

~~IMPACTS OF GROWTH~~

~~During 2017, through both internal growth and acquisitions, the assets of the Company exceeded the $10 billion threshold.~~

The Dodd-Frank Act and associated Federal Reserve regulations cap the interchange rate on debit card transactions that can be charged by banks that, together with their affiliates, have at least $10 billion in assets at $0.21 per transaction plus five basis points multiplied by the value of the transaction. The cap goes into effect July 1st of the year following the year in which a bank reaches the $10 billion asset threshold. Simmons Bank, when viewed together with its affiliates, had assets in excess of $10 billion at December 31, 2017, and therefore, became subject to the interchange rate cap effective July 1, 2018. The interchange rate cap resulted in a $5.9 million reduction in debit card fees for year-to-date 2019 when compared to the same period of 2018.

As of December 31, 2017, the Company exceeded $15 billion in total assets and the grandfather provisions applicable to its trust preferred securities no longer apply, and trust preferred securities are no longer included as Tier 1 capital. Trust preferred securities and qualifying subordinated debt is included as total Tier 2 capital.

The Dodd-Frank Act also previously required banks and bank holding companies with more than $10 billion in assets to conduct annual stress tests, report the results to regulators and publicly disclose such results. As a result of regulatory reform signed into law during the second quarter of 2018, the Company and Simmons Bank are no longer required to conduct an annual stress test of capital under the Dodd-Frank Act. In anticipation of becoming subject to this requirement, the Company and Simmons Bank had begun the necessary preparations, including undertaking a gap analysis, implementing enhancements to the audit and compliance departments, and investing in various information technology systems.

Additionally, the Dodd-Frank Act established the Bureau of Consumer Financial Protection (the “CFPB”) and granted it supervisory authority over banks with total assets of more than $10 billion. Simmons Bank, with assets now exceeding $10 billion, is subject to CFPB oversight with respect to its compliance with federal consumer financial laws. Simmons Bank will continue to be subject to the oversight of its other regulators with respect to matters outside the scope of the CFPB’s jurisdiction. The CFPB has broad rule-making, supervisory and examination authority, as well as expanded data collecting and enforcement powers, all of which is expected to impact the operations of Simmons Bank.

It is also important to note that the Dodd-Frank Act changed how the FDIC calculates deposit insurance premiums payable by insured depository institutions. The Dodd-Frank Act directed the FDIC to amend its assessment regulations so that assessments are generally based upon a depository institution’s average total consolidated assets less the average tangible equity of the insured depository institution during the assessment period. Assessments were previously based on the amount of an institution’s insured deposits. Now that Simmons Bank exceeds $10 billion in total assets, it is subject to the assessment rates assigned to larger banks which may result in higher deposit insurance premiums.

NET INTEREST INCOME

Overview

Net interest income, our 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 26.135% ~~for periods beginning January 1, 2018.~~.

Our 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,~~In the last several years, on average, approximately ~~65%~~40% of our loan portfolio and approximately ~~75%~~80% of our time deposits have repriced in one year or less. Our current interest rate sensitivity shows that approximately ~~54%~~51% of our loans and ~~80%~~76% of our time deposits will reprice in the next year.

Net Interest Income Quarter-to-Date Analysis

For the three month period ended ~~September~~June 30, ~~2019,~~2020, net interest income on a fully taxable equivalent basis was ~~$152.0~~$166.0 million, an increase of ~~$7.6~~$14.9 million, or ~~5.3%~~9.9%, over the same period in ~~2018.~~2019. The increase in net interest income was primarily the result of a ~~$18.8~~$17.8 million ~~increase~~decrease in interest ~~income~~expense partially offset by a ~~$11.1 million increase~~reduction in interest ~~expense.~~income of $2.9 million.

The ~~increase~~reduction in interest income primarily resulted from ~~a $17.6~~decreases of $1.1 million ~~increase~~and $1.7 million in interest income on loans and ~~an increase~~investment securities, respectively. During the second quarter of ~~$1.1 million in interest income on investment securities. The increase in loan volume during 2019~~2020, we generated ~~$19.5~~$24.8 million of additional interest income due to an increase in loan volume, primarily from our ~~Reliance~~Landrum acquisition completed during ~~April~~the fourth quarter 2019, while a 774 basis point decline in yield resulted in a ~~$1.9~~$25.8 million decrease in interest income. The loan yield for the second quarter of 2020 was 4.84% compared to 5.58% for the same period in 2019. The PPP loan yield was approximately 2.33% (including accretion of net fees), which decreased the loan yield by 10 basis points. Excluding the PPP loans, loan yield for the second quarter 2020 was 4.94%. See “GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

Included in interest income is the additional yield accretion recognized as a result of updated estimates of the cash flows of our loans ~~acquired, as discussed in Note 5, Loans Acquired, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report.~~acquired. Each quarter, we estimate the cash flows expected to be collected from the loans acquired, and adjustments may or may not be required. The cash flows estimate ~~has increased~~may increase or decrease based on payment histories and ~~reduced~~ loss expectations of the loans. ~~This resulted in increased~~The resulting adjustment to interest income ~~that~~ is spread on a level-yield basis over the remaining expected lives of the loans. For the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, interest income included ~~$9.3~~$11.7 million and ~~$10.0~~$10.2 million, respectively, for the yield accretion recognized on loans acquired.

The ~~$11.1~~$17.8 million ~~increase~~decrease in interest expense is mostly due to the ~~growth~~decline in our deposit ~~accounts from organic growth as well as the Reliance acquisition,~~account rates and ~~although the Federal Reserve did lower interest rates during the third quarter 2019, the rates were higher in the third quarter 2019 when compared to the same quarter in 2018.~~our FHLB borrowing rates. Interest expense ~~increased $4.2 million due to deposit growth primarily from the Reliance acquisition and $8.4~~decreased $21.2 million due to the ~~increase~~decrease in yield of 3578 basis points on interest-bearing deposit ~~accounts.~~accounts and $1.8 million due to the decrease in yield of 52 basis points on FHLB borrowings. These ~~increases~~decreases were partially offset by ~~a reduction~~an increase of $4.4 million in ~~FHLB borrowings in third quarter 2019 compared~~deposit growth primarily due to the ~~same quarter in 2018.~~Landrum acquisition.

Net Interest Income Year-to-Date Analysis

For the ~~nine~~six month period ended ~~September~~June 30, ~~2019,~~2020, net interest income on a fully taxable equivalent basis was ~~$442.7~~$335.8 million, an increase of ~~$24.1~~$47.1 million, or ~~5.8%~~16.3%, over the same period in ~~2018.~~2019. The increase in net interest income was the result of a ~~$71.5~~$28.9 million increase in interest income ~~partially offset by~~coupled with a ~~$47.4~~$18.2 million ~~increase~~decrease in interest expense.

The increase in interest income primarily resulted from a ~~$61.6~~$27.2 million increase in interest income on loans and an increase of ~~$9.0~~$1.6 million in interest income on investment securities. ~~Increases~~The increase in loan volume ~~increased interest income by $54.5 million~~ during the first ~~nine~~six months of 2020 generated $61.2 million of additional interest income, primarily from our Landrum and Reliance acquisitions completed during 2019, ~~due to both organic loan growth and our Reliance acquisition. Interest income also increased $7.1 million due to an increase~~while a 54 basis point decline in yield ~~of 9 basis points on loans during 2019.~~resulted in a $34.0 million decrease in interest income.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, interest income included ~~$26.1~~$23.6 million and ~~$31.4~~$16.8 million, respectively, for the yield accretion recognized on loans acquired.

The ~~$47.4~~$18.2 million ~~increase~~decrease in interest expense is ~~due to growth in deposit accounts, higher cost of deposits~~mostly due to the ~~rising-rate environment during 2018~~decrease in our deposit account rates and ~~the first half of 2019 and the increase in rates for~~our FHLB ~~borrowings.~~borrowing rates. Interest expense ~~increased $10.9 million due to deposit growth, $33.2~~decreased $27.4 million due to the ~~increase~~decrease in yield of 4853 basis points on interest-bearing deposit accounts and ~~$3.2~~$4.2 million due to the ~~increase~~decrease in yield of 3564 basis points on FHLB borrowings. These decreases were partially offset by an increase of $11.1 million in deposit growth primarily due to the Landrum and Reliance acquisitions completed in 2019.

Net Interest Margin

Our net interest margin decreased 1752 basis points to ~~3.81%~~3.42% for the three month period ended ~~September~~June 30, ~~2019,~~2020, when compared to ~~3.98%~~3.94% for the same period in ~~2018.~~2019. Normalized for all accretion, our core net interest margin ~~(non-GAAP)~~ for the three months ended ~~September~~June 30, 2020 and 2019 was 3.18% and ~~2018 was 3.58% and 3.71%~~3.67%, respectively. For the ~~nine~~six month period ended ~~September~~June 30, ~~2019,~~2020, our net interest margin decreased 1835 basis points to ~~3.86%~~3.55% when compared to ~~4.04%~~3.90% for the same period in ~~2018.~~2019.

Since the first quarter of 2018, loan yield has increased 9 basis points and core loan yield has increased 24 basis points while cost of interest bearing deposits has risen 66 basis points and the cost of borrowed funds has increased 82 basis points. The ~~decrease~~decreases in ~~both~~ the net interest margin during the three and six months ended June 30, 2020 were primarily driven by the lower interest rate environment, additional liquidity created in response to the COVID-19 pandemic, and the lower yielding PPP loans originated during the second quarter of 2020. The impact of these items on the second quarter 2020 core net interest margin was 25 basis points, bringing the core net interest margin adjusted for PPP loans and additional liquidity to 3.43%. See “GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

During March 2020, the ~~three and nine month periods ended September 30, 2019 is a direct result~~Federal Open Market Committee, or FOMC, of the ~~prior rising~~Federal Reserve substantially reduced interest rates in response to the economic crisis brought on by the COVID-19 pandemic. Because our interest bearing deposits are repricing more quickly in response to the substantial interest rate ~~environment. We~~cuts in March 2020 than we can manage the rate decrease in our variable rate loan portfolio also caused by such cuts, we expect continued pressure on the net interest margin ~~from~~for the ~~recent Federal Reserve rate reductions due to immediate downward repricing on the portion~~remainder of ~~our loans that are variable rate while the ability to reprice deposits will lag the reductions.~~2020.

Net Interest Income Tables

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, as well as changes in fully taxable equivalent net interest margin for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 versus ~~September~~June 30, ~~2018.~~2019.

Table 1: Analysis of Net Interest Margin

(FTE = Fully Taxable Equivalent using an effective tax rate of 26.135%)


	Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2020			2019			2020			2019
Interest income	$	191,654		$	195,241		$	400,885		$	373,326
FTE adjustment	2,350			1,706			4,655			3,307
Interest income – FTE	194,004			196,947			405,540			376,633
Interest expense	27,973			45,813			69,721			87,903
Net interest income – FTE	$	166,031		$	151,134		$	335,819		$	288,730

Yield on earning assets – FTE	4.00		%	5.13		%	4.28		%	5.09		%
Cost of interest bearing liabilities	0.78		%	1.53		%	0.98		%	1.53		%
Net interest spread – FTE	3.22		%	3.60		%	3.30		%	3.56		%
Net interest margin – FTE	3.42		%	3.94		%	3.55		%	3.90		%

Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Interest income $ 197,306
$ 178,984
$ 572,591
$ 502,391
FTE adjustment 1,843
1,393
5,150
3,831
Interest income – FTE 199,149
180,377
577,741

506,222
Interest expense 47,142
36,016
135,045
87,620
Net interest income – FTE $ 152,007
$ 144,361
$ 442,696

$ 418,602

Yield on earning assets – FTE 4.99 % 4.98 % 5.04 % 4.89 %
Cost of interest bearing liabilities 1.55 % 1.29 % 1.54 % 1.10 %
Net interest spread – FTE 3.44 % 3.69 % 3.50 % 3.79 %
Net interest margin – FTE 3.81 % 3.98 % 3.86 % 4.04 %

Table 2: Changes in Fully Taxable Equivalent Net Interest Margin


	Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2019 vs. 2018			2019 vs. 2018			(In thousands)	2020 vs. 2019		2020 vs. 2019
Increase due to change in earning assets	$	20,336		$	59,278		Increase due to change in earning assets	$	28,949	$	74,760
Increase due to change in earning asset yields	(1,564		)	12,241
Decrease due to change in earning asset yields							Decrease due to change in earning asset yields	(31,892)		(45,853)
Decrease due to change in interest bearing liabilities	(2,710		)	(10,194		)	Decrease due to change in interest bearing liabilities	(5,670)		(13,732)
Decrease due to change in interest rates paid on interest bearing liabilities	(8,416		)	(37,231		)
Increase due to change in interest rates paid on interest bearing liabilities							Increase due to change in interest rates paid on interest bearing liabilities	23,510		31,914
Increase in net interest income	$	7,646		$	24,094		Increase in net interest income	$	14,897	$	47,089

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 the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. 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

(FTE = Fully Taxable Equivalent using an effective tax rate of 26.135%)


	Three Months Ended June 30,
	2020									2019
	Average		Income/		Yield/	Average		Income/		Yield/
(In thousands)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)
ASSETS
Earning assets:
Interest bearing balances due from banks and federal funds sold	$	2,190,878	$	603	0.11	$	276,370	$	1,121	1.63
Investment securities - taxable	1,642,083		7,131		1.75	1,641,986		11,066		2.70
Investment securities - non-taxable	866,944		8,434		3.91	624,898		6,209		3.99
Mortgage loans held for sale	86,264		668		3.11	32,030		332		4.16
Loans	14,731,306		177,168		4.84	12,814,386		178,219		5.58
Total interest earning assets	19,517,475		194,004		4.00	15,389,670		196,947		5.13
Non-earning assets	2,304,798					1,993,202
Total assets	$	21,822,273				$	17,382,872

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Interest bearing liabilities:
Interest bearing transaction and savings deposits	$	9,138,563	$	7,203	0.32	$	7,139,356	$	20,190	1.13
Time deposits	3,057,153		10,803		1.42	3,072,246		14,606		1.91	��
Total interest bearing deposits	12,195,716		18,006		0.59	10,211,602		34,796		1.37
Federal funds purchased and securities sold under agreements to repurchase	392,633		337		0.35	133,242		257		0.77
Other borrowings	1,395,109		4,963		1.43	1,277,450		6,219		1.95
Subordinated debt and debentures	387,422		4,667		4.84	354,088		4,541		5.14
Total interest bearing liabilities	14,370,880		27,973		0.78	11,976,382		45,813		1.53

Non-interest bearing liabilities:
Non-interest bearing deposits	4,354,781					2,834,452
Other liabilities	216,508					207,500
Total liabilities	18,942,169					15,018,334
Stockholders’ equity	2,880,104					2,364,538
Total liabilities and stockholders’ equity	$	21,822,273				$	17,382,872
Net interest spread					3.22					3.60
Net interest margin			$	166,031	3.42			$	151,134	3.94


	Three Months Ended September 30,											Six Months Ended June 30,
	2019					2018						2020									2019
	Average		Income/		Yield/	Average		Income/		Yield/		Average		Income/		Yield/	Average		Income/		Yield/
(In thousands)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)	(In thousands)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)
ASSETS											ASSETS
Earning assets:											Earning assets:
Interest bearing balances due from banks and federal funds sold	$	344,761	$	1,586	1.83	$	373,528	$	1,405	1.49	Interest bearing balances due from banks and federal funds sold	$	1,477,759	$	3,044	0.41	$	335,089	$	3,275	1.97
Investment securities - taxable	1,712,672		10,414		2.41	1,775,193		10,892		2.43	Investment securities - taxable	1,983,134		19,883		2.02	1,683,534		23,024		2.76
Investment securities - non-taxable	681,505		6,687		3.89	539,135		5,064		3.73	Investment securities - non-taxable	883,585		16,749		3.81	608,012		12,043		3.99
Mortgage loans held for sale	39,551		382		3.83	43,554		501		4.56	Mortgage loans held for sale	64,927		949		2.94	24,922		542		4.39
Loans	13,052,943		180,080		5.47	11,641,843		162,515		5.54	Loans	14,640,082		364,915		5.01	12,265,936		337,749		5.55
Total interest earning assets	15,831,432		199,149		4.99	14,373,253		180,377		4.98	Total interest earning assets	19,049,487		405,540		4.28	14,917,493		376,633		5.09
Non-earning assets	1,889,166					1,667,631					Non-earning assets	2,321,761					1,928,035
Total assets	$	17,720,598				$	16,040,884				Total assets	$	21,371,248				$	16,845,528

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY										LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:											Liabilities:
Interest bearing liabilities:											Interest bearing liabilities:
Interest bearing transaction and savings deposits	$	7,322,395	$	21,363	1.16	$	6,840,403	$	16,373	0.95	Interest bearing transaction and savings deposits	$	9,072,133	$	25,157	0.56	$	6,945,274	$	38,620	1.12
Time deposits	3,122,422		15,573		1.98	2,379,142		8,017		1.34	Time deposits	3,104,030		24,126		1.56	2,927,722		26,926		1.85
Total interest bearing deposits	10,444,817		36,936		1.40	9,219,545		24,390		1.05	Total interest bearing deposits	12,176,163		49,283		0.81	9,872,996		65,546		1.34
Federal funds purchased and securities sold under agreements to repurchase	123,883		249		0.80	107,770		104		0.38	Federal funds purchased and securities sold under agreements to repurchase	361,768		1,096		0.61	121,338		393		0.65
Other borrowings	1,127,886		5,381		1.89	1,375,052		6,240		1.80	Other borrowings	1,357,677		9,840		1.46	1,251,000		13,012		2.10
Subordinated debt and debentures	354,178		4,576		5.13	379,168		5,282		5.53	Subordinated debt and debentures	387,876		9,502		4.93	354,043		8,952		5.10
Total interest bearing liabilities	12,050,764		47,142		1.55	11,081,535		36,016		1.29	Total interest bearing liabilities	14,283,484		69,721		0.98	11,599,377		87,903		1.53

Non-interest bearing liabilities:											Non-interest bearing liabilities:
Non-interest bearing deposits	3,012,544					2,679,469					Non-interest bearing deposits	3,978,728					2,771,435
Other liabilities	288,517					103,315					Other liabilities	213,918					167,678
Total liabilities	15,351,825					13,864,319					Total liabilities	18,476,130					14,538,490
Stockholders’ equity	2,368,773					2,176,565					Stockholders’ equity	2,895,118					2,307,038
Total liabilities and stockholders’ equity	$	17,720,598				$	16,040,884				Total liabilities and stockholders’ equity	$	21,371,248				$	16,845,528
Net interest spread					3.44					3.69	Net interest spread					3.30					3.56
Net interest margin			$	152,007	3.81			$	144,361	3.98	Net interest margin			$	335,819	3.55			$	288,730	3.90

Nine Months Ended September 30,
2019 2018
Average Income/ Yield/ Average Income/ Yield/
(In thousands) Balance Expense Rate (%) Balance Expense Rate (%)
ASSETS
Earning assets:
Interest bearing balances due from banks and federal funds sold $ 338,349
$ 4,861
1.92 $ 378,468
$ 3,828
1.35
Investment securities - taxable 1,795,103
35,397
2.64 1,714,898
31,255
2.44
Investment securities - non-taxable 632,780
18,730
3.96 505,170
13,918
3.68
Mortgage loans held for sale 29,852
924
4.14 29,111
964
4.43
Loans 12,530,348
517,829
5.53 11,209,992
456,257
5.44
Total interest earning assets 15,326,432
577,741
5.04 13,837,639
506,222
4.89
Non-earning assets 1,813,987
1,736,123

Total assets $ 17,140,419
$ 15,573,762

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Interest bearing liabilities:

Interest bearing transaction and savings deposits $ 7,072,363
$ 59,983
1.13 $ 6,664,347
$ 39,414
0.79
Time deposits 2,993,336
42,499
1.90 2,206,873
19,034
1.15
Total interest bearing deposits 10,065,699
102,482
1.36 8,871,220
58,448
0.88
Federal funds purchased and securities sold under agreements to repurchase 122,195
642
0.70 111,760
302
0.36
Other borrowings 1,209,511
18,393
2.03 1,311,781
16,520
1.68
Subordinated debt and debentures 354,088
13,528
5.11 336,990
12,350
4.90
Total interest bearing liabilities 11,751,493
135,045
1.54 10,631,751
87,620
1.10

Non-interest bearing liabilities:
Non-interest bearing deposits 2,852,687
2,673,285

Other liabilities 208,397
129,908

Total liabilities 14,812,577
13,434,944

Stockholders’ equity 2,327,842
2,138,818

Total liabilities and stockholders’ equity $ 17,140,419
$ 15,573,762

Net interest spread 3.50 3.79
Net interest margin $ 442,696
3.86 $ 418,602
4.04

Table 4 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2019,~~2020, as compared to the same periods of the prior year. 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


	Three Months Ended June 30,										Six Months Ended June 30,
	2020 vs. 2019										2020 vs. 2019
(In thousands, on a fully taxable equivalent basis)	Volume		Yield/ Rate		Total		Volume		Yield/ Rate		Total
Increase (decrease) in:
Interest income:
Interest bearing balances due from banks and federal funds sold	$	1,386	$	(1,904)	$	(518)	$	4,011	$	(4,242)	$	(231)
Investment securities - taxable	1		(3,936)		(3,935)		3,659		(6,800)		(3,141)
Investment securities - non-taxable	2,358		(133)		2,225		5,243		(537)		4,706
Mortgage loans held for sale	438		(102)		336		633		(226)		407
Loans	24,766		(25,817)		(1,051)		61,214		(34,048)		27,166
Total	28,949		(31,892)		(2,943)		74,760		(45,853)		28,907

Interest expense:
Interest bearing transaction and savings accounts	4,514		(17,501)		(12,987)		9,579		(23,042)		(13,463)
Time deposits	(72)		(3,731)		(3,803)		1,551		(4,351)		(2,800)
Federal funds purchased and securities sold under agreements to repurchase	283		(203)		80		731		(28)		703
Other borrowings	534		(1,790)		(1,256)		1,036		(4,208)		(3,172)
Subordinated notes and debentures	411		(285)		126		835		(285)		550
Total	5,670		(23,510)		(17,840)		13,732		(31,914)		(18,182)
Increase (decrease) in net interest income	$	23,279	$	(8,382)	$	14,897	$	61,028	$	(13,939)	$	47,089

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 vs. 2018 2019 vs. 2018
(In thousands, on a fully taxable equivalent basis) Volume
Yield/
Rate
Total Volume
Yield/
Rate
Total
Increase (decrease) in:

Interest income:

Interest bearing balances due from banks and federal funds sold $ (114 ) $ 295
$ 181
$ (440 ) $ 1,473
$ 1,033
Investment securities - taxable (382 ) (96 ) (478 ) 1,506
2,636
4,142
Investment securities - non-taxable 1,388
235
1,623
3,718
1,094
4,812
Mortgage loans held for sale (43 ) (76 ) (119 ) 24
(64 ) (40 )
Loans 19,487
(1,922 ) 17,565
54,470
7,102
61,572
Total 20,336
(1,564 ) 18,772
59,278

12,241

71,519

Interest expense:
Interest bearing transaction and savings accounts 1,216
3,774
4,990
2,542
18,027
20,569
Time deposits 2,979
4,577
7,556
8,341
15,124
23,465
Federal funds purchased and securities sold under agreements to repurchase 18
127
145
30
310
340
Other borrowings (1,167 ) 308
(859 ) (1,361 ) 3,234
1,873
Subordinated notes and debentures (336 ) (370 ) (706 ) 642
536
1,178
Total 2,710
8,416
11,126
10,194

37,231

47,425
Increase (decrease) in net interest income $ 17,626
$ (9,980 ) $ 7,646
$ 49,084

$ (24,990 )
$ 24,094

PROVISION FOR ~~LOAN~~CREDIT LOSSES

The provision for ~~loan~~credit 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~~credit losses at a level considered appropriate in relation to the estimated lifetime 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, assessment of current economic conditions, past due and non-performing loans and historical net ~~loan~~credit loss experience. It is management’s practice to review the allowance on a monthly basis and, after considering the factors previously noted, to determine the level of provision made to the allowance.

The provision for ~~loan~~credit losses for the three and six month ~~period~~periods ended ~~September~~June 30, ~~2019~~2020, was ~~$22.0~~$26.9 million and $53.0 million, respectively, compared to ~~$10.3~~$7.1 million and $16.4 million for the same ~~period in 2018, an increase~~periods ended June 30, 2019, increases of ~~$11.6~~$19.8 million and $36.7 million. The ~~provision for~~increase during the quarter ended June 30, 2020 was primarily related to updated credit loss forecast models using multiple Moody’s economic scenarios. The updates capture the possibility of a longer, more prolonged recovery to the economies that affect the loan ~~losses for~~portfolio. The increase during the ~~nine~~six month period ended ~~September~~June 30, ~~2019, was $38.3 million, compared to $28.5 million for the nine month period ended September 30, 2018,~~2020 also included an ~~increase of $9.8 million. The increase in both periods was due to the special~~additional provision ~~made during the third quarter 2019~~ related to White Star. We were a participant in a shared national credit to White Star. White Star became the subject of bankruptcy proceedings earlier this year, and on September 30, 2019, the bankruptcy court authorized the sale of White Star assets through a Section 363 proceeding under the U.S. Bankruptcy Code. Our portion of the shared national credit was $19.1 million. Based upon the anticipated net proceeds from the pending bankruptcy sale, our loss recorded in third quarter 2019 was $14.7 million. As a result, we increased the provision by $15 million to increase the allowance to an appropriate level consistent with our historical ratios. See Allowance for Loan Losses section for additional information.

Additionally, the provision on loans acquired for the three and nine months ended September 30, 2019 was $0 and $2.5 million, respectively. The year-to-date provision was primarily the result of identifying certain loansproblem energy credits, subsequently charged-off during first quarter 2019, specific to an acquired portfolio in our Dallas market which were poorly structured or were poorly managed post-funding. We carefully reviewed these loans for potential losses and believe we have adequately identified any risk associated with the loans. In addition, a portion of the loans identified during the first quarter were subsequently paid off in the second quarter of ~~2019.~~2020 for a total of $32.6 million, that experienced further deterioration beginning in first quarter of 2020 and were negatively impacted by the sharp decline in commodity pricing. The ~~recovery on this loan~~remainder of the increase was ~~added~~related to the economic impact of the COVID-19 pandemic that is incorporated in the Company’s allowance for ~~acquired loans.~~credit losses.

The provision on loans acquired for the three and nine month periods ended September 30, 2018 was $0 and $1.8 million, respectively, and was the result of a decrease in expected cash flows from the evaluation of credit marks on certain purchased credit impaired loans.

NON-INTEREST INCOME

Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and debit and credit card fees. Non-interest income also includes income on the sale of mortgage and SBA loans, investment banking income, income from the increase in cash surrender values of bank owned life insurance and gains (losses) from sales of securities.

Total non-interest income was ~~$83.8~~$50.2 million for the three month period ended ~~September~~June 30, ~~2019,~~2020, an increase of approximately ~~$50.1~~$10.3 million, or ~~148.4%~~25.8%, compared to the ~~third quarter 2018. For the nine month~~same period ~~ended September 30,~~in 2019, primarily driven by increases in trust income and mortgage lending income. Conversely, we had decreases in total ~~non-interest income was $156.5 million, an increase~~service charges on deposit accounts and fees of ~~approximately $47.2~~$1.8 million, or ~~43.2%~~15.2%, ~~compared~~primarily attributable to ~~the first nine months of 2018.~~

~~The majority of the increase~~a reduction in ~~both the three and nine month periods ended September 30, 2019 was~~customer transactions related to the ~~gain on sale~~impact of the ~~Visa Inc. class B common stock of $42.9 million. Additionally, during 2019 we have been focused on rebalancing our investment portfolio~~COVID-19 pandemic and ~~consequently have recognized additional~~lower gains on the sale of securities during second quarter of 2020.

For the six month period ended June 30, 2020, total non-interest income was $132.6 million, an increase of approximately $57.9 million, or 77.5%, compared to the same period in ~~both periods.~~2019. During the ~~nine months ended September 30, 2019,~~first half of 2020, we sold approximately ~~$551 million~~$1.2 billion of investment securities resulting in a net gain of ~~$12.9~~$32.5 million. ~~Increases~~The majority of the investment securities were sold in March 2020, in response to the unfolding events of the COVID-19 pandemic, as we focused on the creation of additional liquidity and strengthening our balance sheet. We used a portion of the liquidity generated by these investment security sales to fund PPP loans originated during second quarter of 2020. We plan to reinvest back into our investment portfolio when the PPP loans are repaid, subject to economic conditions and other concerns at such time. Additionally, the gains on sale from the Texas Branch Sale and Colorado Branch Sales of $8.1 million, which we consider a non-core item, contributed to the increase during 2020.

The increase in mortgage lending income ~~were due to~~in both the three and six month periods ended June 30, 2020 was a ~~strong real estate housing market driven by the recent interest rate decreases.~~

~~Debit card fees decreased $5.9 million in 2019 compared to 2018 as a direct~~ result of the ~~Durbin amendment that became effective for the Company during the third quarter 2018.~~current low mortgage interest rate environment as well as increased business related to our Landrum and Reliance acquisitions.

Table 5 shows non-interest income for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, as well as changes in ~~2019~~2020 from ~~2018.~~2019.

Table 5: Non-Interest Income


																				Three Months Ended June 30,						2020 Change from						Six Months Ended June 30,				2020 Change from
	Three Months Ended September 30,				2019 Change from					Nine Months Ended September 30,				2019 Change from
(In thousands)	2019		2018		2018					2019		2018		2018
(Dollars in thousands)																			(Dollars in thousands)	2020		2019		2019						2020		2019		2019
Trust income	$	6,108	$	6,277	$	(169	)	(2.7	)%	$	17,610	$	17,148	$	462		2.7	%	Trust income	$	7,253	$	5,794	$	1,459	25.2	%	$	14,404	$	11,502	$	2,902	25.2	%
Service charges on deposit accounts	10,825		10,837		(12		)	(0.1	)	31,450		31,245		205			0.7		Service charges on deposit accounts	8,570		10,557		(1,987)		(18.8)		21,898		20,625		1,273		6.2
Other service charges and fees	1,308		1,201		107			8.9		3,909		5,968		(2,059		)	(34.5	)	Other service charges and fees	1,489		1,312		177		13.5		3,077		2,601		476		18.3
Mortgage lending income	4,509		1,521		2,988			196.5		10,988		7,773		3,215			41.4		Mortgage lending income	12,459		3,656		8,803		*		17,505		6,479		11,026		170.2
SBA lending income	956		304		652			214.5		2,348		1,627		721			44.3		SBA lending income	245		895		(650)		(72.6)		541		1,392		(851)		(61.1)
Investment banking income	513		664		(151		)	(22.7	)	1,491		2,312		(821		)	(35.5	)	Investment banking income	571		360		211		58.6		1,448		978		470		48.1
Debit and credit card fees	7,059		6,820		239			3.5		20,369		25,721		(5,352		)	(20.8	)	Debit and credit card fees	7,996		7,212		784		10.9		15,910		13,310		2,600		19.5
Bank owned life insurance income	1,302		1,105		197			17.8		3,357		3,310		47			1.4		Bank owned life insurance income	1,445		1,260		185		14.7		2,743		2,055		688		33.5
Gain (loss) on sale of securities, net	7,374		54		7,320			*		12,937		53		12,884			*
Gain on sale of Visa, Inc. class B common stock	42,860		—		42,860			*		42,860		—		42,860			*
Gain on sale of securities, net																			Gain on sale of securities, net	390		2,823		(2,433)		(86.2)		32,485		5,563		26,922		*
Gain on sale of banking operations, net																			Gain on sale of banking operations, net	2,204		—		2,204		*		8,093		—		8,093		*
Other income	961		4,942		(3,981		)	(80.6	)	9,223		14,151		(4,928		)	(34.8	)	Other income	7,605		6,065		1,540		25.4		14,517		10,221		4,296		42.0
Total non-interest income	$	83,775	$	33,725	$	50,050		148.4	%	$	156,542	$	109,308	$	47,234		43.2	%	Total non-interest income	$	50,227	$	39,934	$	10,293	25.8	%	$	132,621	$	74,726	$	57,895	77.5	%

_____________________________

Recurring fee income (total service charges, trust fees, debit and credit card fees) for the three month period ended ~~September~~June 30, ~~2019~~2020 was $25.3 million, an increase of ~~$165,000~~$433,000 from the same period in ~~2018.~~2019. Recurring fee income for the ~~nine~~six month period ended ~~September~~June 30, ~~2019,~~2020, was ~~$73.3~~$55.3 million, ~~a decrease~~an increase of ~~$6.7~~$7.3 million from the ~~same~~six month period ~~in 2018,~~ended June 30, 2019, primarily ~~due to~~ the ~~reduction in debit card fees as previously discussed.~~result of the Landrum and Reliance acquisitions completed during 2019.

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.~~our operations. Management remains committed to controlling the level of non-interest expense through the continued use of expense control measures. We utilize an extensive profit planning and reporting system involving all subsidiaries. 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 monthly. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. We also regularly monitor staffing levels at each subsidiary to ensure productivity and overhead are in line with existing workload requirements.

Non-interest expense for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$106.9~~$112.6 million, an increase of ~~$6.6~~$1.9 million, or ~~6.6%~~1.7%, from the same period in ~~2018. The third~~2019. Non-interest expense during the second quarter ~~2019~~of 2020 included ~~$2.9~~$4.0 million of pre-tax non-core items: ~~$2.6~~$1.8 million of merger-related costs, ~~due to the Reliance acquisition, $177,000~~$493,000 of early retirement program expenses, and ~~$160,000~~$1.7 million of branch-right sizing costs. Normalizing for these non-core costs, core non-interest expense for the three months ended ~~September~~June 30, ~~2019~~2020 increased ~~$5.5~~$11.2 million, or ~~5.6%~~11.4%, from the same period in ~~2018.~~2019.

Non-interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$319.0~~$238.4 million, an increase of ~~$22.2~~$26.3 million, or ~~7.5%~~12.4%, from the same period in ~~2018.~~2019. Normalizing for the non-core costs, core non-interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 increased ~~$9.1~~$36.1 million, or ~~3.1%~~18.3%, from the same period in ~~2018. As previously mentioned,~~2019. See “GAAP Reconciliation of Non-GAAP Measures” below for additional discussion of non-GAAP measures.

The increases during both periods were primarily due to the incremental operating expenses from the Landrum and Reliance acquisitions completed during 2019. Also, our ~~NGB~~Next Generation Banking (“NGB”) technology initiative is well underway and the incremental software and technology expenditures of ~~$5.9~~$9.4 million during the first ~~nine~~six months of ~~2019~~2020 were primarily related to this initiative. Additionally, marketing costs increased year over year primarily due to the $4 million donation to the Simmons First Foundation during third quarter 2019 and also incorporating a comprehensive community banking marketing philosophy over our expanded footprint during the year. The early retirement option offered to qualifying associates in the first quarter of this year contributed to the decline in salaries and employee benefit expense during 2019. The reduction in deposit insurance expense was primarily due to a credit assessment received from the FDIC during the third quarter 2019 for $2.3 million.

Table 6 below shows non-interest expense for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, as well as changes in ~~2019~~2020 from ~~2018.~~2019.



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30,			December 31,
(In thousands, except share data)	2019			2018
	(Unaudited)
ASSETS
Cash and non-interest bearing balances due from banks	$	161,440		$	171,792
Interest bearing balances due from banks and federal funds sold	368,530			661,666
Cash and cash equivalents	529,970			833,458
Interest bearing balances due from banks - time	5,041			4,934
Investment securities:
Held-to-maturity	42,237			289,194
Available-for-sale	2,356,134			2,151,752
Total investments	2,398,371			2,440,946
Mortgage loans held for sale	50,099			26,799
Loans:
Legacy loans	9,643,365			8,430,388
Allowance for loan losses	(65,993		)	(56,599		)
Loans acquired, net of discount and allowance	3,359,587			3,292,783
Net loans	12,936,959			11,666,572
Premises and equipment	378,678			295,060
Foreclosed assets and other real estate owned	19,576			25,565
Interest receivable	53,966			49,938
Bank owned life insurance	234,655			193,170
Goodwill	926,648			845,687
Other intangible assets	101,149			91,334
Other assets	123,399			69,874
Total assets	$	17,758,511		$	16,543,337

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing transaction accounts	$	3,044,330		$	2,672,405
Interest bearing transaction accounts and savings deposits	7,337,571			6,830,191
Time deposits	3,086,108			2,896,156
Total deposits	13,468,009			12,398,752
Federal funds purchased and securities sold under agreements to repurchase	116,536			95,792
Other borrowings	1,098,395			1,345,450
Subordinated debentures	354,223			353,950
Accrued interest and other liabilities	174,277			102,959
Total liabilities	15,211,440			14,296,903

Stockholders’ equity:
Common stock, Class A, $0.01 par value; 175,000,000 shares authorized at September 30, 2019 and December 31, 2018; 96,613,855 and 92,347,643 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	966			923
Surplus	1,708,058			1,597,944
Undivided profits	814,338			674,941
Accumulated other comprehensive income (loss)	23,709			(27,374		)
Total stockholders’ equity	2,547,071			2,246,434
Total liabilities and stockholders’ equity	$	17,758,511		$	16,543,337



	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2019		2018		2019		2018
	(Unaudited)				(Unaudited)
INTEREST INCOME
Loans	$	179,971	$	162,438	$	517,533	$	456,041
Interest bearing balances due from banks and federal funds sold	1,586		1,405		4,861		3,828
Investment securities	15,367		14,640		49,273		41,558
Mortgage loans held for sale	382		501		924		964
TOTAL INTEREST INCOME	197,306		178,984		572,591		502,391

INTEREST EXPENSE
Deposits	36,936		24,390		102,482		58,448
Federal funds purchased and securities sold under agreements to repurchase	249		104		642		302
Other borrowings	5,381		6,240		18,393		16,520
Subordinated notes and debentures	4,576		5,282		13,528		12,350
TOTAL INTEREST EXPENSE	47,142		36,016		135,045		87,620

NET INTEREST INCOME	150,164		142,968		437,546		414,771
Provision for loan losses	21,973		10,345		38,337		28,528

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	128,191		132,623		399,209		386,243

NON-INTEREST INCOME
Trust income	6,108		6,277		17,610		17,148
Service charges on deposit accounts	10,825		10,837		31,450		31,245
Other service charges and fees	1,308		1,201		3,909		5,968
Mortgage lending income	4,509		1,521		10,988		7,773
SBA lending income	956		304		2,348		1,627
Investment banking income	513		664		1,491		2,312
Debit and credit card fees	7,059		6,820		20,369		25,721
Bank owned life insurance income	1,302		1,105		3,357		3,310
Gain on sale of securities, net	7,374		54		12,937		53
Other income	43,821		4,942		52,083		14,151
TOTAL NON-INTEREST INCOME	83,775		33,725		156,542		109,308

NON-INTEREST EXPENSE
Salaries and employee benefits	52,065		55,515		164,560		167,550
Occupancy expense, net	8,342		7,713		22,736		22,594
Furniture and equipment expense	4,898		3,761		12,462		12,184
Other real estate and foreclosure expense	1,125		538		2,353		2,940
Deposit insurance	—		2,248		4,550		6,232
Merger related costs	2,556		804		11,548		3,980
Other operating expenses	37,879		29,674		100,808		81,353
TOTAL NON-INTEREST EXPENSE	106,865		100,253		319,017		296,833

INCOME BEFORE INCOME TAXES	105,101		66,095		236,734		198,718
Provision for income taxes	23,275		10,902		51,289		38,651

NET INCOME	81,826		55,193		185,445		160,067
Preferred stock dividends	—		—		326		—
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	81,826	$	55,193	$	185,119	$	160,067
BASIC EARNINGS PER SHARE	$	0.85	$	0.60	$	1.95	$	1.74
DILUTED EARNINGS PER SHARE	$	0.84	$	0.59	$	1.94	$	1.72



(In thousands)	September 30, 2019			September 30, 2018
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	185,445		$	160,067
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	25,462			20,810
Provision for loan losses	38,337			28,528
Gain on sale of investments	(12,937		)	(53		)
Net accretion of investment securities and assets	(35,272		)	(41,423		)
Net amortization (accretion) on borrowings	273			(471		)
Stock-based compensation expense	9,316			8,448
(Gain) loss on sale of foreclosed assets held for sale	(16		)	150
Gain on sale of mortgage loans held for sale	(14,196		)	(9,675		)
Loss (gain) on sale of loans	4,451			(10		)
Gain on sale of Visa, Inc. class B common stock	(42,860		)	—
Fair value write-down of closed branches	—			954
Deferred income taxes	10,933			7,316
Income from bank owned life insurance	(3,438		)	(3,310		)
Originations of mortgage loans held for sale	(499,178		)	(424,751		)
Proceeds from sale of mortgage loans held for sale	490,674			410,269
Changes in assets and liabilities:
Interest receivable	(679		)	(7,798		)
Lease right-of-use assets	(1,370		)	—
Other assets	3,802			(24,695		)
Accrued interest and other liabilities	10,881			23,821
Income taxes payable	18,722			3,956
Net cash provided by operating activities	188,350			152,133

INVESTING ACTIVITIES
Net originations of loans	(299,013		)	(1,034,175		)
Proceeds from sale of loans	104,587			24,977
Decrease (increase) in due from banks - time	395			(640		)
Purchases of premises and equipment, net	(37,523		)	(17,084		)
Proceeds from sale of foreclosed assets held for sale	16,139			20,739
Proceeds from sale of available-for-sale securities	561,374			7,726
Proceeds from maturities of available-for-sale securities	405,090			197,464
Purchases of available-for-sale securities	(593,700		)	(634,791		)
Proceeds from maturities of held-to-maturity securities	29,179			46,515
Purchases of held-to-maturity securities	—			(1,172		)
Purchases of bank owned life insurance	—			(4,000		)
Proceeds from bank owned life insurance death benefits	1,310			616
Disposition of assets and liabilities held for sale	1,245			(58,295		)
Purchase of Reliance Bancshares, Inc.	(37,017		)	—
Net cash provided by (used in) investing activities	152,066			(1,452,120		)

FINANCING ACTIVITIES
Net change in deposits	(156,010		)	995,631
Proceeds from issuance of subordinated notes	—			326,355
Repayments of subordinated debentures	—			(94,915		)
Dividends paid on preferred stock	(326		)	—
Dividends paid on common stock	(45,722		)	(41,766		)
Net change in other borrowed funds	(404,455		)	40,893
Net change in federal funds purchased and securities sold under agreements to repurchase	6,598			(13,231		)
Net shares issued under stock compensation plans	(3,301		)	1,756
Shares issued under employee stock purchase plan	1,312			1,026
Retirement of preferred stock	(42,000		)	—
Net cash (used in) provided by financing activities	(643,904		)	1,215,749

DECREASE IN CASH AND CASH EQUIVALENTS	(303,488		)	(84,238		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	833,458			598,042

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	529,970		$	513,804



	September 30, 2019									December 31, 2018
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
Held-to-Maturity
U.S. Government agencies	$	—	$	—	$	—		$	—	$	16,990	$	—	$	(49	)	$	16,941
Mortgage-backed securities	11,549		93		(42		)	11,600		13,346		5		(412		)	12,939
State and political subdivisions	28,692		931		—			29,623		256,863		3,029		(954		)	258,938
Other securities	1,996		83		—			2,079		1,995		17		—			2,012
Total HTM	$	42,237	$	1,107	$	(42	)	$	43,302	$	289,194	$	3,051	$	(1,415	)	$	290,830

Available-for-Sale
U.S. Government agencies	$	177,712	$	1,629	$	(1,202	)	$	178,139	$	157,523	$	518	$	(3,740	)	$	154,301
Mortgage-backed securities	1,332,130		9,405		(3,741		)	1,337,794		1,552,487		3,097		(32,684		)	1,522,900
State and political subdivisions	658,984		22,290		(72		)	681,202		320,142		171		(5,470		)	314,843
Other securities	158,280		719		—			158,999		157,471		2,251		(14		)	159,708
Total AFS	$	2,327,106	$	34,043	$	(5,015	)	$	2,356,134	$	2,187,623	$	6,037	$	(41,908	)	$	2,151,752



December 31, 2018											Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
Consumer:
Credit cards	$	296	$	296	$	—	$	296	$	—	$	283	$	35	$	259	$	60
Other consumer	2,311		2,159		—		2,159		—		3,561		28		4,109		96
Total consumer	2,607		2,455		—		2,455		—		3,844		63		4,368		156
Real estate:
Construction	1,344		784		485		1,269		211		1,411		11		1,747		41
Single family residential	12,906		11,468		616		12,084		36		13,577		98		13,550		315
Other commercial	8,434		5,442		5,458		10,900		—		12,282		108		14,284		332
Total real estate	22,684		17,694		6,559		24,253		247		27,270		217		29,581		688
Commercial:
Commercial	10,361		7,254		4,628		11,882		437		11,840		108		9,533		222
Agricultural	2,419		1,180		—		1,180		—		1,355		12		1,470		34
Total commercial	12,780		8,434		4,628		13,062		437		13,195		120		11,003		256
Total	$	38,071	$	28,583	$	11,187	$	39,770	$	684	$	44,309	$	400	$	44,952	$	1,100


	Accruing TDR Loans				Nonaccrual TDR Loans					Total TDR Loans
(Dollars in thousands)	Number	Balance		Number	Balance		Number	Balance
June 30, 2020
Real estate:
Single-family residential	12	$	1,221	7	$	680	19	$	1,901
Other commercial	—	—		2	70		2	70
Total real estate	12	1,221		9	750		21	1,971
Commercial:
Commercial	4	2,739		3	68		7	2,807
Total commercial	4	2,739		3	68		7	2,807
Total	16	$	3,960	12	$	818	28	$	4,778

December 31, 2019
Real estate:
Construction and development	—	$	—	1	$	72	1	$	72
Single-family residential	7	1,151		12	671		19	1,822
Other commercial	1	476		2	80		3	556
Total real estate	8	1,627		15	823		23	2,450
Commercial:
Commercial	4	2,784		3	79		7	2,863
Total commercial	4	2,784		3	79		7	2,863
Total	12	$	4,411	18	$	902	30	$	5,313



						Modification Type
(Dollars in thousands)	Number of Loans	Balance Prior to TDR		Balance at September 30,		Change in Maturity Date		Change in Rate			Financial Impact on Date of Restructure
Three and Nine Months Ended September 30, 2019
Real estate:
Single-family residential	1	$	330	$	330	$	330	$	—		$	—
Total real estate	1	330		330		330		—		��	—
Total	1	$	330	$	330	$	330	$	—		$	—

Three Months Ended September 30, 2018
Real estate:
Construction	1	$	99	$	98	$	98	$	—		$	—
Other commercial	2	392		390		390		—			212
Total real estate	3	491		488		488		—			212
Commercial:
Commercial	3	2,363		2,358		2,358		—			190
Total commercial	3	2,363		2,358		2,358		—			190
Total	6	$	2,854	$	2,846	$	2,846	$	—		$	402

Nine Months Ended September 30, 2018
Consumer:
Other consumer	1	$	91	$	91	$	91	$	—		$	—
Total consumer	1	91		91		91		—			—
Real estate:
Construction	1	99		98		98		—			—
Single-family residential	1	61		62		62		—			—
Other commercial	2	392		390		390		—			212
Total real estate	4	552		550		550		—			212
Commercial:
Commercial	3	2,363		2,358		2,358		—			190
Total commercial	3	2,363		2,358		2,358		—			190
Total	8	$	3,006	$	2,999	$	2,999	$	—		$	402



	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
(In thousands)	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
Beginning balance	$	1,461		$	3,487		$	1,460		$	4,050
Additions	—			—			—			175
Accretable yield adjustments	10			—			38			—
Accretion	(12		)	12			(39		)	39
Payments and other reductions, net	—			(422		)	—			(1,187		)
Balance, ending	$	1,459		$	3,077		$	1,459		$	3,077


(In thousands)	Year	Amortization Expense
	Remainder of 2020	$	6,714
	2021	13,379
	2022	13,327
	2023	13,044
	2024	12,141
	Thereafter	59,218
	Total	$	117,823


	Remaining Contractual Maturity of the Agreements
(In thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
June 30, 2020
Repurchase agreements:
U.S. Government agencies	$	335,230	$	—	$	—	$	—	$	335,230

December 31, 2019
Repurchase agreements:
U.S. Government agencies	$	133,220	$	—	$	—	$	—	$	133,220



(In thousands)	Year	Annual Maturities
	2019	$	356
	2020	2,105
	2021	1,804
	2022	948
	2023	925
	Thereafter	361,480
	Total	$	367,618


	Stock Options Outstanding				Non-vested Stock Awards Outstanding					Non-vested Stock Units Outstanding
(Shares in thousands)	Number of Shares	Weighted Average Exercise Price		Number of Shares	Weighted Average Grant-Date Fair Value		Number of Shares	Weighted Average Grant-Date Fair Value
Balance, January 1, 2020	692	$	22.46	21	$	23.19	1,152	$	26.79
Granted	—	—		—	—		480	22.37
Stock options exercised	(1)	10.71		—	—		—	—
Stock awards/units vested (earned)	—	—		(5)	21.15		(386)	26.07
Forfeited/expired	(33)	22.49		—	—		(62)	26.66

Balance, June 30, 2020	658	$	22.48	16	$	23.75	1,184	$	25.23

Exercisable, June 30, 2020	658	$	22.48


						Options Outstanding					Options Exercisable
Range of Exercise Prices							Number of Shares (In thousands)	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number of Shares (In thousands)	Weighted Average Exercise Price
$	9.46	—	$	9.46	1	1.55	$9.46	1	$9.46
10.65		—	10.65		3	2.58	10.65	3	10.65
20.29		—	20.29		66	3.70	20.29	66	20.29
20.36		—	20.36		2	4.38	20.36	2	20.36
22.20		—	22.20		74	3.63	22.20	74	22.20
22.75		—	22.75		412	4.39	22.75	412	22.75
23.51		—	23.51		93	4.80	23.51	93	23.51
24.07		—	24.07		7	5.21	24.07	7	24.07
$	9.46	—	$	24.07	658	4.29	$22.48	658	$22.48


(Dollars in thousands)	Loan Balance		%
Real estate rental and leasing	$	1,404,416	45.0	%
Accommodation and food services	743,940		23.8
Health care and social assistance	272,868		8.8
Construction	197,242		6.3
Retail trade	141,456		4.5
All other categories	362,238		11.6
Total	$	3,122,160	100.0	%


~~(1)~~	~~Includes nonaccrual TDRs of approximately $1.8 million at September 30, 2019 and $2.8 million at December 31, 2018.~~


~~(2)~~	~~Excludes all loans acquired, except for their inclusion in total assets.~~


~~(2)~~	~~Provision for loan losses of $3,299,000 attributable to loans acquired, was excluded from this table for 2018 (total 2018 provision for loan losses was $38,148,000).~~


~~(1)~~	~~Percentage of loans in each category to total loans, excluding loans acquired.~~


~~(2)~~	Allowance for loan losses at September 30, 2019 and December 31, 2018 includes $597,000 and $95,000, respectively, allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2019 and December 31, 2018 was $66,590,000 and $56,694,000, respectively.


~~(2)~~	~~See Note 16, Earnings Per Share, for number of shares used to determine EPS.~~


(Dollars in thousands)	Three Months Ended June 30, 2020
Total Tier 1 capital	$	1,820,488

Adjusted average assets for leverage ratio	$	20,742,824
Average PPP loans	(645,172)
Adjusted average assets less average PPP loans	$	20,097,652

Tier 1 leverage ratio	8.78		%
Tier 1 leverage ratio excluding average PPP loans (non-GAAP)	9.06		%


(Dollars in thousands)	Three Months Ended June 30, 2020
Loan interest income	$	177,168
PPP loan interest income	(3,733)
Loan interest income excluding PPP loans	$	173,435

Average loan balance	$	14,731,306
Average PPP loan balance	(645,172)
Average loan balance excluding PPP loans	$	14,086,134

Loan yield	4.84		%
Loan yield excluding PPP loans (non-GAAP)	4.94		%


~~Item 3.~~	~~Quantitative and Qualitative Disclosure About Market Risk~~



Interest Rate Scenario		% Change from Base
Up 200 basis points		~~4.64%~~8.09%
Up 100 basis points		~~2.24%~~3.90%
Down ~~100~~25 basis points		~~(2.37)~~(0.44)%
~~Down 200 basis points~~	~~(3.40)%~~


Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2020 - April 30, 2020	—	$	—	—	$	76,560,000
May 1, 2020 - May 31, 2020	147	17.02		—	$	76,560,000
June 1, 2020 - June 30, 2020	—	—		—	$	76,560,000
Total	147	$	17.02	—



	Total number of shares purchased⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs⁽²⁾	Maximum number of shares that may yet be purchased under the plans or programs
July 1, 2019 - July 31, 2019	1,394	$	23.22	—	308,272
August 1, 2019 - August 31, 2019	—	—		—	308,272
September 1, 2019 - September 30, 2019	2,001	25.11		—	308,272
Total	3,395	$	24.33	—	308,272


~~(1)~~	Total number of shares purchased consists of 3,395 shares of restricted stock repurchased in connection with employee tax withholding obligations under employee compensation plans, which are not purchases under any publicly announced plan.



2.1		Agreement and Plan of Merger, dated as of March 24, 2014, by and between Simmons First National Corporation and Delta Trust & Banking Corporation (incorporated by reference to Annex A to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on July 23, 2014 (File No. 000-06253)).
~~2.2~~	Agreement and Plan of Merger, dated as of May 6, 2014, by and between Simmons First National Corporation and Community First Bancshares, Inc., as amended on September 11, 2014 (incorporated by reference to Annex A to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on October 8, 2014 (File No. 000-06253)).
~~2.3~~	Agreement and Plan of Merger, dated as of May 27, 2014, by and between Simmons First National Corporation and Liberty Bancshares, Inc., as amended on September 11, 2014 (incorporated by reference to Annex B to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on October 8, 2014 (File No. 000-06253)).
~~2.4~~	Agreement and Plan of Merger, dated as of April 28, 2015, by and between Simmons First National Corporation and Ozark Trust & Investment Corporation (incorporated by reference to Exhibit 10.1 to Simmons First National Corporation’s Current Report on Form 8-K for April 29, 2015 (File No. 000-06253)).
~~2.5~~	Stock Purchase Agreement by and among Citizens National Bank, Citizens National Bancorp, Inc. and Simmons First National Corporation, dated as of May 18, 2016 (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for May 18, 2016 (File No. 000-06253)).
~~2.6~~	Agreement and Plan of Merger, dated as of November 17, 2016, by and between Simmons First National Corporation and Hardeman County Investment Company, Inc. (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for November 17, 2016 (File No. 000-06253)).
~~2.7~~	Agreement and Plan of Merger, dated as of December 14, 2016, by and between Simmons First National Corporation and Southwest Bancorp, Inc., as amended on July 19, 2017 (incorporated by reference to Exhibit 2.11 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2017 (File No. 000-06253)).



~~2.8~~	Agreement and Plan of Merger, dated as of January 23, 2017, by and between Simmons First National Corporation and First Texas, BHC, Inc., as amended on July 19, 2017 (incorporated by reference to Exhibit 2.12 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2017 (File No. 000-06253)).
~~2.9~~	Agreement and Plan of Merger, dated as of November 13, 2018, by and between Simmons First National Corporation and Reliance Bancshares, Inc., as amended on February 11, 2019 (incorporated by reference to Annex A to the Proxy Statement/Prospectus filed pursuant to Rule 424(b)(3) by Simmons First National Corporation for March 4, 2019 (File No. 333-229378)).
~~2.10~~2.2		Agreement and Plan of Merger, dated as of July 30, 2019, by and between Simmons First National Corporation and The Landrum Company (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for July 30, 2019 (File No. 000-06253)).
3.1		Amended and Restated Articles of Incorporation of Simmons First National Corporation, as amended on October 29, 2019 (incorporated by reference to Exhibit 3.1 to Simmons First National Corporation’s Current Report on Form 8-K ~~for~~filed November 1, 2019 (File No. 000-06253)).