UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023


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

For the transition period from _____ to _____

Commission File Number 000-06253

SIMMONS FIRST NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)


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

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

(870) 541-1000

(Registrant’s telephone number, including area code)

Not Applicable

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

SFNC

The Nasdaq Global Select Market

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.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth company

☐

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

The number of shares outstanding of the Registrant’s Common Stock as of ~~November 2, 2022,~~May 3, 2023, was ~~126,969,648.~~127,327,408.

Simmons First National Corporation

Quarterly Report on Form 10-Q

~~September 30, 2022~~March 31, 2023

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 (Loss)	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders' Equity	7
	Condensed Notes to Consolidated Financial Statements	98
	Report of Independent Registered Public Accounting Firm	5347
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	5448
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8071
Item 4.	Controls and Procedures	8273

Part II:	Other Information
Item 1.	Legal Proceedings	8273
Item 1A.	Risk Factors	8374
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8374
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	*
Item 6.	Exhibits	8475

Signatures		8676

___________________

* No reportable information under this item.

Part I: Financial Information

Item 1. Financial Statements (Unaudited)

Simmons First National Corporation

Consolidated Balance Sheets

~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022


		September 30,		December 31,			March 31,		December 31,
(In thousands, except share data)	(In thousands, except share data)	2022		2021		(In thousands, except share data)	2023		2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and noninterest bearing balances due from banks	Cash and noninterest bearing balances due from banks	$	175,547	$	209,190	Cash and noninterest bearing balances due from banks	$	199,316	$	200,616
Interest bearing balances due from banks and federal funds sold	Interest bearing balances due from banks and federal funds sold	503,863		1,441,463		Interest bearing balances due from banks and federal funds sold	325,135		481,506
Cash and cash equivalents	Cash and cash equivalents	679,410		1,650,653		Cash and cash equivalents	524,451		682,122
Interest bearing balances due from banks - time	Interest bearing balances due from banks - time	1,290		1,882		Interest bearing balances due from banks - time	795		795
Investment securities:	Investment securities:					Investment securities:
Held-to-maturity, net of allowance for credit losses of $1,384 and $1,279 at September 30, 2022 and December 31, 2021, respectively		3,787,076		1,529,221
Available-for-sale, at estimated fair value (amortized cost of $4,484,131 and $7,130,861 at September 30, 2022 and December 31, 2021, respectively)		3,937,543		7,113,545
Held-to-maturity, net of allowance for credit losses of $1,888 and $1,388 at March 31, 2023 and December 31, 2022, respectively						Held-to-maturity, net of allowance for credit losses of $1,888 and $1,388 at March 31, 2023 and December 31, 2022, respectively	3,765,483		3,759,706
Available-for-sale, net of allowance for credit losses of $5,800 at March 31, 2023 (amortized cost of $4,186,431 and $4,331,413 at March 31, 2023 and December 31, 2022, respectively)						Available-for-sale, net of allowance for credit losses of $5,800 at March 31, 2023 (amortized cost of $4,186,431 and $4,331,413 at March 31, 2023 and December 31, 2022, respectively)	3,755,956		3,852,854
Total investments	Total investments	7,724,619		8,642,766		Total investments	7,521,439		7,612,560
Mortgage loans held for sale	Mortgage loans held for sale	12,759		36,356		Mortgage loans held for sale	4,244		3,486
Other loans held for sale		2,292		100
Loans	Loans	15,607,135		12,012,503		Loans	16,555,098		16,142,124
Allowance for credit losses on loans	Allowance for credit losses on loans	(197,589)		(205,332)		Allowance for credit losses on loans	(206,557)		(196,955)
Net loans	Net loans	15,409,546		11,807,171		Net loans	16,348,541		15,945,169
Premises and equipment	Premises and equipment	549,932		483,469		Premises and equipment	564,497		548,741
Foreclosed assets and other real estate owned	Foreclosed assets and other real estate owned	3,612		6,032		Foreclosed assets and other real estate owned	2,721		2,887
Interest receivable	Interest receivable	86,637		72,990		Interest receivable	98,775		102,892
Bank owned life insurance	Bank owned life insurance	488,364		445,305		Bank owned life insurance	493,191		491,340
Goodwill	Goodwill	1,309,000		1,146,007		Goodwill	1,320,799		1,319,598
Other intangible assets	Other intangible assets	133,059		106,235		Other intangible assets	124,854		128,951
Other assets	Other assets	675,554		325,793		Other assets	579,139		622,520
Total assets	Total assets	$	27,076,074	$	24,724,759	Total assets	$	27,583,446	$	27,461,061

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Noninterest bearing transaction accounts	Noninterest bearing transaction accounts	$	6,218,283	$	5,325,318	Noninterest bearing transaction accounts	$	5,489,434	$	6,016,651
Interest bearing transaction accounts and savings deposits	Interest bearing transaction accounts and savings deposits	12,103,994		11,588,770		Interest bearing transaction accounts and savings deposits	11,283,584		11,762,885
Time deposits	Time deposits	3,826,415		2,452,460		Time deposits	5,678,757		4,768,558
Total deposits	Total deposits	22,148,692		19,366,548		Total deposits	22,451,775		22,548,094
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	168,513		185,403		Federal funds purchased and securities sold under agreements to repurchase	142,862		160,403
Other borrowings	Other borrowings	964,772		1,337,973		Other borrowings	1,023,826		859,296
Subordinated notes and debentures	Subordinated notes and debentures	365,951		384,131		Subordinated notes and debentures	366,027		365,989
Accrued interest and other liabilities	Accrued interest and other liabilities	270,995		201,863		Accrued interest and other liabilities	259,055		257,917
Total liabilities	Total liabilities	23,918,923		21,475,918		Total liabilities	24,243,545		24,191,699

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, Class A, $0.01 par value; 350,000,000 and 175,000,000 shares authorized at September 30, 2022 and December 31, 2021, respectively; 126,943,467 and 112,715,444 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		1,269		1,127
Common stock, Class A, $0.01 par value; 350,000,000 shares authorized at March 31, 2023 and December 31, 2022; 127,282,192 and 127,046,654 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, Class A, $0.01 par value; 350,000,000 shares authorized at March 31, 2023 and December 31, 2022; 127,282,192 and 127,046,654 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	1,273		1,270
Surplus	Surplus	2,527,153		2,164,989		Surplus	2,533,589		2,530,066
Undivided profits	Undivided profits	1,196,459		1,093,270		Undivided profits	1,275,720		1,255,586
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(567,730)		(10,545)		Accumulated other comprehensive loss	(470,681)		(517,560)
Total stockholders’ equity	Total stockholders’ equity	3,157,151		3,248,841		Total stockholders’ equity	3,339,901		3,269,362
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	27,076,074	$	24,724,759	Total liabilities and stockholders’ equity	$	27,583,446	$	27,461,061

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Income

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		2022		2021		(In thousands, except per share data)	2023		2022
		(Unaudited)				(Unaudited)					(Unaudited)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Loans, including fees	Loans, including fees	$	187,347	$	132,216	$	478,101	$	417,444	Loans, including fees	$	227,498	$	127,176
Interest bearing balances due from banks and federal funds sold	Interest bearing balances due from banks and federal funds sold	1,141		763		2,907		2,212		Interest bearing balances due from banks and federal funds sold	2,783		649
Investment securities	Investment securities	40,954		30,717		112,514		79,418		Investment securities	48,774		33,712
Mortgage loans held for sale	Mortgage loans held for sale	178		230		568		1,255		Mortgage loans held for sale	82		190
Other loans held for sale		998		—		3,061		—
TOTAL INTEREST INCOME	TOTAL INTEREST INCOME	230,618		163,926		597,151		500,329		TOTAL INTEREST INCOME	279,137		161,727

INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Deposits	Deposits	25,429		9,116		42,000		33,077		Deposits	87,528		6,817
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	305		70		492		507		Federal funds purchased and securities sold under agreements to repurchase	323		68
Other borrowings	Other borrowings	6,048		4,893		15,671		14,592		Other borrowings	8,848		4,779
Subordinated notes and debentures	Subordinated notes and debentures	5,251		4,610		14,698		13,702		Subordinated notes and debentures	4,603		4,457
TOTAL INTEREST EXPENSE	TOTAL INTEREST EXPENSE	37,033		18,689		72,861		61,878		TOTAL INTEREST EXPENSE	101,302		16,121

NET INTEREST INCOME	NET INTEREST INCOME	193,585		145,237		524,290		438,451		NET INTEREST INCOME	177,835		145,606
Provision for credit losses	Provision for credit losses	103		(19,890)		14,048		(31,396)		Provision for credit losses	24,216		(19,914)

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	193,482		165,127		510,242		469,847		NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	153,619		165,520

NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Service charges on deposit accounts	Service charges on deposit accounts	12,560		11,557		34,635		31,322		Service charges on deposit accounts	12,437		10,696
Debit and credit card fees	Debit and credit card fees	7,685		7,102		23,358		20,785		Debit and credit card fees	7,952		7,449
Wealth management fees	Wealth management fees	8,562		7,877		23,744		23,130		Wealth management fees	7,365		7,968
Mortgage lending income	Mortgage lending income	2,593		5,818		9,383		16,755		Mortgage lending income	1,570		4,550
Bank owned life insurance income	Bank owned life insurance income	2,902		2,573		8,171		6,134		Bank owned life insurance income	2,973		2,706
Other service charges and fees	Other service charges and fees	2,085		1,964		5,593		5,934		Other service charges and fees	2,282		1,637
Gain (loss) on sale of securities, net		(22)		5,248		(226)		15,846
Loss on sale of securities, net										Loss on sale of securities, net	—		(54)
Other income	Other income	6,658		6,411		20,761		25,308		Other income	11,256		7,266
TOTAL NONINTEREST INCOME	TOTAL NONINTEREST INCOME	43,023		48,550		125,419		145,214		TOTAL NONINTEREST INCOME	45,835		42,218

NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	71,923		61,902		213,964		182,503		Salaries and employee benefits	77,038		67,906
Occupancy expense, net	Occupancy expense, net	11,674		9,361		32,701		27,764		Occupancy expense, net	11,578		10,023
Furniture and equipment expense	Furniture and equipment expense	5,394		4,895		15,273		15,169		Furniture and equipment expense	5,051		4,775
Other real estate and foreclosure expense	Other real estate and foreclosure expense	168		339		653		1,545		Other real estate and foreclosure expense	186		343
Deposit insurance	Deposit insurance	3,278		1,870		7,928		4,865		Deposit insurance	4,893		1,838
Merger related costs	Merger related costs	1,422		1,401		22,441		2,320		Merger related costs	1,396		1,886
Other operating expenses	Other operating expenses	45,084		34,565		131,213		107,826		Other operating expenses	43,086		41,646
TOTAL NONINTEREST EXPENSE	TOTAL NONINTEREST EXPENSE	138,943		114,333		424,173		341,992		TOTAL NONINTEREST EXPENSE	143,228		128,417

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	97,562		99,344		211,488		273,069		INCOME BEFORE INCOME TAXES	56,226		79,321
Provision for income taxes	Provision for income taxes	16,959		18,770		38,336		50,151		Provision for income taxes	10,637		14,226

NET INCOME	NET INCOME	80,603		80,574		173,152		222,918		NET INCOME	$	45,589	$	65,095
Preferred stock dividends		—		13		—		39
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS		$	80,603	$	80,561	$	173,152	$	222,879
BASIC EARNINGS PER SHARE	BASIC EARNINGS PER SHARE	$	0.63	$	0.75	$	1.41	$	2.06	BASIC EARNINGS PER SHARE	$	0.36	$	0.58
DILUTED EARNINGS PER SHARE	DILUTED EARNINGS PER SHARE	$	0.63	$	0.74	$	1.40	$	2.05	DILUTED EARNINGS PER SHARE	$	0.36	$	0.58

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Comprehensive Income (Loss)

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

Three Months Ended
September 30, Nine Months Ended September 30,
(In thousands) 2022 2021 2022 2021
(Unaudited) (Unaudited)
NET INCOME $ 80,603 $ 80,574 $ 173,152 $ 222,918
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding losses arising during the period on available-for-sale securities (195,540) (41,398) (639,915) (95,313)
Less: Reclassification adjustment for realized (losses) gains included in net income (22) 5,248 (226) 15,846
Less: Realized losses on available-for-sale securities interest rate hedges (41,412) (13,722) (101,443) (13,722)
Net unrealized gains (losses) on securities transferred from available for sale to held to maturity during the period — 1,106 (206,682) 1,106
Less: Accretion of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 4,700 — 9,401 —
Other comprehensive loss, before tax effect (158,806) (31,818) (754,329) (96,331)
Less: Tax effect of other comprehensive loss (41,504) (8,316) (197,144) (25,176)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (117,302) (23,502) (557,185) (71,155)
COMPREHENSIVE INCOME (LOSS) $ (36,699) $ 57,072 $ (384,033) $ 151,763


	Three Months Ended March 31,
(In thousands)	2023		2022
	(Unaudited)
NET INCOME	$	45,589	$	65,095

OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding gains (losses) arising during the period on available-for-sale securities	69,963		(465,708)
Less: Reclassification adjustment for realized losses included in net income	—		(54)
Less: Realized gains (losses) on available-for-sale securities interest rate hedges	13,545		(37,199)
Less: Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity	(7,048)		(84)
Other comprehensive income (loss), before tax effect	63,466		(428,371)
Less: Tax effect of other comprehensive income (loss)	16,587		(111,955)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	46,879		(316,416)

COMPREHENSIVE INCOME (LOSS)	$	92,468	$	(251,321)

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Cash Flows

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~


(In thousands)	(In thousands)	September 30, 2022		September 30, 2021		(In thousands)	March 31, 2023		March 31, 2022
		(Unaudited)					(Unaudited)
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	173,152	$	222,918	Net income	$	45,589	$	65,095
Adjustments to reconcile net income to net cash (used in) provided by operating activities:	Adjustments to reconcile net income to net cash (used in) provided by operating activities:					Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	36,660		35,396		Depreciation and amortization	12,012		11,637
Provision for credit losses	Provision for credit losses	14,048		(31,396)		Provision for credit losses	24,216		(19,914)
(Gain) loss on sale of investments		226		(15,846)
Net accretion of investment securities and assets		(32,531)		(36,929)
Loss on sale of investments						Loss on sale of investments	—		54
Net amortization (accretion) of investment securities and assets						Net amortization (accretion) of investment securities and assets	2,245		(13,176)
Net amortization on borrowings	Net amortization on borrowings	274		404		Net amortization on borrowings	38		111
Stock-based compensation expense	Stock-based compensation expense	11,475		12,591		Stock-based compensation expense	4,861		3,941
Gain on sale of premises and equipment, net of impairment		—		(591)
Gain on sale of foreclosed assets and other real estate owned		(424)		(76)
Loss (gain) on sale of foreclosed assets and other real estate owned						Loss (gain) on sale of foreclosed assets and other real estate owned	8		(235)
Gain on sale of mortgage loans held for sale	Gain on sale of mortgage loans held for sale	(7,187)		(29,222)		Gain on sale of mortgage loans held for sale	(1,423)		(2,931)
Gain on sale of loans		(282)		—
Gain on sale of branches		—		(5,316)
Deferred income taxes	Deferred income taxes	2,924		3,585		Deferred income taxes	(179)		9,107
Income from bank owned life insurance	Income from bank owned life insurance	(8,189)		(6,229)		Income from bank owned life insurance	(3,334)		(2,706)
Loss from early retirement of TruPS		365		—
Originations of mortgage loans held for sale	Originations of mortgage loans held for sale	(436,477)		(752,480)		Originations of mortgage loans held for sale	(50,269)		(189,361)
Proceeds from sale of mortgage loans held for sale	Proceeds from sale of mortgage loans held for sale	467,261		884,452		Proceeds from sale of mortgage loans held for sale	50,934		210,442
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Interest receivable	Interest receivable	(5,852)		4,191		Interest receivable	4,117		3,633
Other assets	Other assets	(18,712)		(22,677)		Other assets	22,581		(19,178)
Accrued interest and other liabilities	Accrued interest and other liabilities	34,850		(41,674)		Accrued interest and other liabilities	(2,621)		(5,045)
Income taxes payable	Income taxes payable	(5,373)		(1,199)		Income taxes payable	(10,028)		9,051
Net cash provided by operating activities	Net cash provided by operating activities	226,208		219,902		Net cash provided by operating activities	98,747		60,525

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Net change in loans	Net change in loans	(1,344,441)		2,056,058		Net change in loans	(412,077)		(22,060)
Proceeds from sale of loans	Proceeds from sale of loans	51,856		26,472		Proceeds from sale of loans	237		1,237
Net change in due from banks - time	Net change in due from banks - time	592		(201)		Net change in due from banks - time	—		25
Purchases of premises and equipment, net	Purchases of premises and equipment, net	(25,757)		(36,832)		Purchases of premises and equipment, net	(10,490)		(7,156)
Proceeds from sale of premises and equipment		—		5,621
Proceeds from sale of foreclosed assets and other real estate owned	Proceeds from sale of foreclosed assets and other real estate owned	3,476		14,594		Proceeds from sale of foreclosed assets and other real estate owned	289		1,623
Proceeds from sale of available-for-sale securities		—		342,577
Proceeds from maturities of available-for-sale securities	Proceeds from maturities of available-for-sale securities	974,625		559,259		Proceeds from maturities of available-for-sale securities	155,361		194,961
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(261,375)		(4,786,533)		Purchases of available-for-sale securities	(745)		(162,359)
Proceeds from maturities of held-to-maturity securities	Proceeds from maturities of held-to-maturity securities	60,215		13,804		Proceeds from maturities of held-to-maturity securities	16,979		17,491
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(329,660)		(694,734)		Purchases of held-to-maturity securities	(31,704)		(44,638)
Purchases of bank owned life insurance death benefits		—		(160,000)
Proceeds from bank owned life insurance death benefits	Proceeds from bank owned life insurance death benefits	1,873		3,814		Proceeds from bank owned life insurance death benefits	1,483		—
Disposition of assets and liabilities held for sale		—		(134,166)
Purchase of Spirit of Texas Bancshares, Inc.		276,396		—
Net cash used in investing activities	Net cash used in investing activities	(592,200)		(2,790,267)		Net cash used in investing activities	(280,667)		(20,876)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net change in deposits	Net change in deposits	63,128		1,075,422		Net change in deposits	(95,950)		25,874
Repayments of TruPS		(56,189)		—
Dividends paid on preferred stock		—		(39)
Dividends paid on common stock	Dividends paid on common stock	(69,963)		(58,319)		Dividends paid on common stock	(25,455)		(21,375)
Net change in other borrowed funds	Net change in other borrowed funds	(411,250)		(3,482)		Net change in other borrowed funds	164,530		(730)
Net change in federal funds purchased and securities sold under agreements to repurchase	Net change in federal funds purchased and securities sold under agreements to repurchase	(16,890)		(81,835)		Net change in federal funds purchased and securities sold under agreements to repurchase	(17,541)		11,425
Net shares issued (cancelled) under stock compensation plans	Net shares issued (cancelled) under stock compensation plans	(4,105)		1,222		Net shares issued (cancelled) under stock compensation plans	(2,168)		(3,575)
Shares issued under employee stock purchase plan	Shares issued under employee stock purchase plan	1,151		1,170		Shares issued under employee stock purchase plan	833		1,151
Repurchases of common stock	Repurchases of common stock	(111,133)		(54,513)		Repurchases of common stock	—		(16,055)
Net cash (used in) provided by financing activities		(605,251)		879,626
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	24,249		(3,285)

DECREASE IN CASH AND CASH EQUIVALENTS		(971,243)		(1,690,739)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(157,671)		36,364
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,650,653		3,472,152		CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	682,122		1,650,653

CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	679,410	$	1,781,413	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	524,451	$	1,687,017

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Three Months Ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022

(In thousands, except share data) Preferred Stock Common
Stock Surplus Accumulated
Other
Comprehensive
(Loss) Income Undivided
Profits Total
Three Months Ended September 30, 2022
Balance, June 30, 2022 (Unaudited) $ — $ 1,288 $ 2,569,060 $ (450,428) $ 1,139,975 $ 3,259,895
Comprehensive (loss) income — — — (117,302) 80,603 (36,699)
Stock-based compensation plans, net – 39,416 shares — — 3,111 — — 3,111
Stock repurchases – 1,883,713 shares — (19) (45,018) — — (45,037)
Dividends on common stock – $0.19 per share — — — — (24,119) (24,119)
Balance, September 30, 2022 (Unaudited) $ — $ 1,269 $ 2,527,153 $ (567,730) $ 1,196,459 $ 3,157,151
Three Months Ended September 30, 2021
Balance, June 30, 2021 (Unaudited) $ 767 $ 1,084 $ 2,021,128 $ 12,073 $ 1,004,314 $ 3,039,366
Comprehensive (loss) income — — — (23,502) 80,574 57,072
Stock-based compensation plans, net – 22,767 shares — — 4,848 — — 4,848
Stock repurchases – 1,806,205 shares — (18) (51,415) — — (51,433)
Dividends on preferred stock — — — — (13) (13)
Dividends on common stock – $0.18 per share — — — — (19,309) (19,309)
Balance, September 30, 2021 (Unaudited) $ 767 $ 1,066 $ 1,974,561 $ (11,429) $ 1,065,566 $ 3,030,531

~~See Condensed Notes to Consolidated Financial Statements.~~

~~Simmons First National Corporation~~

~~Consolidated Statements of Stockholders’ Equity~~

~~Nine Months Ended September 30, 2022 and 2021~~

(In thousands, except share data) Preferred Stock Common
Stock Surplus Accumulated
Other
Comprehensive
(Loss) Income Undivided
Profits Total
Nine Months Ended September 30, 2022
Balance, December 31, 2021 $ — $ 1,127 $ 2,164,989 $ (10,545) $ 1,093,270 $ 3,248,841
Comprehensive (loss) income — — — (557,185) 173,152 (384,033)
Stock issued for employee stock purchase plan – 59,475 shares — 1 1,150 — — 1,151
Stock-based compensation plans, net – 326,236 shares — 2 7,368 — — 7,370
Stock issued for Spirit acquisition - 18,275,074 shares — 183 464,735 — — 464,918
Stock repurchases – 4,432,762 shares — (44) (111,089) — — (111,133)
Dividends on common stock – $0.57 per share — — — — (69,963) (69,963)
Balance, September 30, 2022 (Unaudited) $ — $ 1,269 $ 2,527,153 $ (567,730) $ 1,196,459 $ 3,157,151
Nine Months Ended September 30, 2021
Balance, December 31, 2020 $ 767 $ 1,081 $ 2,014,076 $ 59,726 $ 901,006 $ 2,976,656
Comprehensive (loss) income — — — (71,155) 222,918 151,763
Stock issued for employee stock purchase plan – 60,697 shares — 1 1,169 — — 1,170
Stock-based compensation plans, net – 401,993 shares — 3 13,810 — — 13,813
Stock repurchases – 1,937,121 shares — (19) (54,494) — — (54,513)
Dividends on preferred stock — — — — (39) (39)
Dividends on common stock – $0.54 per share — — — — (58,319) (58,319)
Balance, September 30, 2021 (Unaudited) $ 767 $ 1,066 $ 1,974,561 $ (11,429) $ 1,065,566 $ 3,030,531


(In thousands, except share data)	Common Stock		Surplus		Accumulated Other Comprehensive (Loss) Income		Undivided Profits		Total
Three Months Ended March 31, 2023
Balance, December 31, 2022	$	1,270	$	2,530,066	$	(517,560)	$	1,255,586	$	3,269,362

Comprehensive income	—		—		46,879		45,589		92,468
Stock issued for employee stock purchase plan – 42,510 shares	—		833		—		—		833
Stock-based compensation plans, net – 193,028 shares	3		2,690		—		—		2,693
Dividends on common stock – $0.20 per share	—		—		—		(25,455)		(25,455)

Balance, March 31, 2023 (Unaudited)	$	1,273	$	2,533,589	$	(470,681)	$	1,275,720	$	3,339,901

Three Months Ended March 31, 2022
Balance, December 31, 2021	$	1,127	$	2,164,989	$	(10,545)	$	1,093,270	$	3,248,841

Comprehensive (loss) income	—		—		(316,416)		65,095		(251,321)
Stock issued for employee stock purchase plan – 59,475 shares	1		1,150		—		—		1,151
Stock-based compensation plans, net – 244,361 shares	2		364		—		—		366
Stock repurchases – 513,725 shares	(5)		(16,050)		—		—		(16,055)
Dividends on common stock – $0.19 per share	—		—		—		(21,375)		(21,375)

Balance, March 31, 2022 (Unaudited)	$	1,125	$	2,150,453	$	(326,961)	$	1,136,990	$	2,961,607

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 (“Company”) is a Mid-South financial holding company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank, an Arkansas state-chartered bank that has been in operation since 1903 (“Simmons Bank” or the “Bank”). Simmons First Insurance Services, Inc. and Simmons First Insurance Services of TN, LLC are wholly-owned subsidiaries of Simmons Bank and are insurance agencies that offer various lines of personal and corporate insurance coverage to individual and commercial customers. 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 (“SBA”) lending) from approximately ~~230~~231 financial centers as of ~~September 30, 2022,~~March 31, 2023, located throughout market areas in Arkansas, 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, ~~2021,~~2022, 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, ~~2021,~~2022, which was filed with the SEC on February ~~25, 2022.~~27, 2023.

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 credit losses.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the valuation of acquired loans. Management obtains independent appraisals for significant properties in connection with the determination of the allowance for credit losses and the valuation of foreclosed assets.

Recently Adopted Accounting Standards

~~Reference Rate Reform~~Investment-Income Taxes –- In March ~~2020,~~2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”), that introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit). ASU 2023-02 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2023, with early adoption permitted. The Company elected to early adopt ASU 2023-02 and apply the proportional amortization method for all income tax credits during the first quarter 2023 by utilizing the modified retrospective method. The adoption of ASU 2023-02 did not have a material impact on the Company’s results of operations, financial position or disclosures.

Credit Losses on Financial Instruments - In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings made to borrowers experiencing financial difficulty. ASU 2022-02 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis. As a result, comparative disclosures to prior periods will not be available until such time as both periods disclosed are subject to the new guidance. The adoption of ASU 2022-02 did not have a material impact on the Company’s results of operations or financial position. See Note 5, Loans and Allowance for Credit Losses, for additional information.

Fair Value Hedging - In March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. ASU 2022-01 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The adoption of 2022-01 did not have a material impact on the Company’s results of operations, financial position or disclosures.

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. LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) announced that the majority of LIBOR rates will no longer be published after December 31, ~~2021, although a number~~2021. Effective January 1, 2022, the ICE Benchmark Administration Limited, the administrator of ~~key settings~~the LIBOR, ceased the publication of one-week and two-month USD LIBOR and will ~~continue until~~cease the publications of the remaining tenors of USD LIBOR (one, three, six and 12-month) immediately after June ~~2023, to support the rundown of legacy contracts only. As a result, LIBOR should be discontinued as a reference rate.~~30, 2023.

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). The Company formed a LIBOR Transition Team in 2020, has created standard LIBOR replacement language for new and modified loan notes, and is monitoring the remaining loans with LIBOR rates monthly to ensure progress in updating these loans with acceptable LIBOR replacement language or converting them to other interest rates. During 2021, the Company did not offer LIBOR-indexed rates on loans which it originated, although it did participate in some shared credit agreements originated by other banks subject to the Company’s determination that the LIBOR replacement language in the loan documents met the Company’s standards. Pursuant to the Joint Regulatory Statement on LIBOR transition issued in October 2021, the ~~Company,~~Company’s policy, as of January 1, 2022, is not ~~entering~~

to enter into any new LIBOR-based credit agreements and is not ~~extending, renewing,~~extend, renew, or ~~modifying any~~modify prior LIBOR credit agreements without requiring conversion of the agreements to other interest rates. The adoption of ASU 2020-04 has not had a material impact on the Company’s financial position or results of operations.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which clarifies that certain optional expedients and exceptions in ~~Accounting Standard Codification (“ASC”)~~ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the “discounting transition”). ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 did not have a material impact on the Company’s financial position or results of operations.

In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”). ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

Leases - In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (“ASU 2021-05”), that amends lease classification requirements for lessors. In accordance with ASU 2021-05, lessors should classify and account for a lease that have variable lease payments that do not depend on a reference index rate as an operating lease if both of the following criteria are met: i) the lease would have been classified as a sales-type lease or a direct financing lease under the previous lease classification criteria and ii) sales-type or direct financing lease classification would result in a Day 1 loss. ASU 2021-05 iswas effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of ASU ~~No.~~ 2021-05 did not have a material impact on the Company’s results of operations, financial position or disclosures.

~~Recently Issued Accounting Standards~~

~~Fair Value Hedging~~ - In ~~March 2022,~~ the ~~FASB issued ASU No. 2022-01,~~ ~~Derivatives~~first quarter of 2023, the Company refined the current expected credit losses calculation process by improving systems, models, processes, methodology, and ~~Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method~~ ~~(“ASU 2022-01”), which clarifies~~assumptions used within the ~~guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU amends~~calculation. After multiple parallel runs during the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. This scope expansion is consistentfirst quarter 2023 with the ~~FASB’s efforts~~former process, it was determined that the changes did not and are not expected to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. ASU 2022-01 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on the Company’s resultsresult in material differences of ~~operations, financial position and disclosures.~~

~~Credit Losses on Financial Instruments~~ ~~- In March 2022, the FASB issued ASU 2022-02,~~ ~~Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~ (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings made to borrowers experiencing financial difficulty. ASU 2022-02 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures.results.

There have been no other significant changes to the Company’s accounting policies disclosed in Note 1, Summary of Significant Accounting Policies, of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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

Spirit of Texas Bancshares, Inc.

On April 8, 2022, the Company completed its merger with Spirit of Texas Bancshares, Inc. (“Spirit”) pursuant to the terms of the Agreement and Plan of Merger dated as of November 18, 2021 (“Spirit Agreement”), at which time Spirit merged with and into the Company, with the Company continuing as the surviving corporation. The Company issued 18,275,074 shares of its common stock valued at approximately $464.9 million as of April 8, 2022, plus $1,393,508.90 in cash, in exchange for all outstanding shares of Spirit capital stock (and common stock equivalents) to effect the merger.

Prior to the acquisition, Spirit, headquartered in Conroe, Texas, conducted banking business through its subsidiary bank, Spirit of Texas Bank SSB, from 35 branches located primarily in the Texas Triangle - consisting of Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas - with additional locations in the Bryan-College Station, Corpus Christi and Tyler metropolitan areas, along with offices in North Central and South Texas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately ~~$3.12~~$3.11 billion in assets, including approximately $2.29 billion in loans (inclusive of loan discounts), and approximately $2.72 billion in deposits.

Goodwill of ~~$162.3~~$174.1 million was recorded as a result of the transaction. The merger strengthened the Company’s position in the Texas market 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 Spirit acquisition, as of the acquisition date, is as follows:

(In thousands) Acquired from Spirit Fair Value Adjustments Fair Value
Assets Acquired
Cash and due from banks $ 277,790 $ — $ 277,790
Investment securities 362,088 (13,401) 348,687
Loans acquired 2,314,085 (19,925) 2,294,160
Allowance for credit losses on loans (17,005) 11,905 (5,100)
Premises and equipment 84,135 (19,029) 65,106
Bank owned life insurance 36,890 — 36,890
Goodwill 77,681 (77,681) —
Core deposit and other intangible assets 6,245 32,386 38,631
Other assets 58,403 3,582 61,985
Total assets acquired $ 3,200,312 $ (82,163) $ 3,118,149


(In thousands)	(In thousands)	Acquired from Spirit		Fair Value Adjustments		Fair Value		(In thousands)	Acquired from Spirit		Fair Value Adjustments		Fair Value
Assets Acquired								Assets Acquired
Cash and due from banks								Cash and due from banks	$	277,790	$	—	$	277,790
Investment securities								Investment securities	362,088		(13,401)		348,687
Loans acquired								Loans acquired	2,314,085		(19,925)		2,294,160
Allowance for credit losses on loans								Allowance for credit losses on loans	(17,005)		7,382		(9,623)
Premises and equipment								Premises and equipment	84,135		(19,074)		65,061
Bank owned life insurance								Bank owned life insurance	36,890		—		36,890
Goodwill								Goodwill	77,681		(77,681)		—
Core deposit and other intangible assets								Core deposit and other intangible assets	6,245		32,386		38,631
Other assets								Other assets	58,403		(3,411)		54,992
Total assets acquired								Total assets acquired	$	3,200,312	$	(93,724)	$	3,106,588

Liabilities Assumed	Liabilities Assumed							Liabilities Assumed
Deposits:	Deposits:							Deposits:
Noninterest bearing transaction accounts	Noninterest bearing transaction accounts	$	825,228	$	(165)	$	825,063	Noninterest bearing transaction accounts	$	825,228	$	(534)	$	824,694
Interest bearing transaction accounts and savings deposits	Interest bearing transaction accounts and savings deposits	1,383,663		—		1,383,663		Interest bearing transaction accounts and savings deposits	1,383,663		—		1,383,663
Time deposits	Time deposits	509,209		1,081		510,290		Time deposits	509,209		1,081		510,290
Total deposits	Total deposits	2,718,100		916		2,719,016		Total deposits	2,718,100		547		2,718,647
Other borrowings	Other borrowings	37,547		503		38,050		Other borrowings	37,547		503		38,050
Subordinated debentures	Subordinated debentures	36,491		879		37,370		Subordinated debentures	36,491		879		37,370
Accrued interest and other liabilities	Accrued interest and other liabilities	23,667		(3,918)		19,749		Accrued interest and other liabilities	23,667		(3,311)		20,356
Total liabilities assumed	Total liabilities assumed	2,815,805		(1,620)		2,814,185		Total liabilities assumed	2,815,805		(1,382)		2,814,423
Equity	Equity	384,507		(384,507)		—		Equity	384,507		(384,507)		—
Total equity assumed	Total equity assumed	384,507		(384,507)		—		Total equity assumed	384,507		(384,507)		—
Total liabilities and equity assumed	Total liabilities and equity assumed	$	3,200,312	$	(386,127)	$	2,814,185	Total liabilities and equity assumed	$	3,200,312	$	(385,889)	$	2,814,423
Net assets acquired	Net assets acquired					303,964		Net assets acquired					292,165
Purchase price	Purchase price					466,311		Purchase price					466,311
Goodwill	Goodwill					$	162,347	Goodwill					$	174,146

~~The purchase price allocation and certain fair value measurements remain preliminary due to~~During 2023, 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~~finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities ~~in this transaction within one year of the completion of the merger. Therefore, adjustments~~related to the ~~estimated amounts and carrying values may occur.~~Spirit acquisition.

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

~~Landmark Community Bank~~Summary of Unaudited Pro forma Information

~~On October 8,~~The unaudited pro forma information below for the years ended December 31, 2022 and 2021 gives effect to the Spirit acquisition as if the acquisition had occurred on January 1, 2021. Pro forma earnings for the year ended December 31, 2022 were adjusted to exclude $18.7 million of acquisition-related costs, net of tax, incurred by the Company ~~completed its acquisition of Landmark Community Bank (“Landmark”) pursuant to the terms~~during 2022. The pro forma financial information is not necessarily indicative of the ~~Agreement and Plan~~results of ~~Merger dated~~operations if the acquisition had been effective as of June 4, 2021 (“Landmark Agreement”), at which time Landmark merged with and into Simmons Bank, with Simmons Bank continuing as the surviving entity. The Company issued 4,499,872 shares of its common stock valued at approximately $138.2 million as of October 8, 2021, plus $6,451,727.43 in cash, in exchange for all outstanding shares of Landmark capital stock (and common stock equivalents) to effect the merger.this date.

Prior to the acquisition, Landmark, headquartered in Collierville, Tennessee, conducted banking business from 8 branches located in the Memphis and Nashville, Tennessee, metropolitan areas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $968.8 million in assets, including approximately $789.5 million in loans (inclusive of loan discounts), and approximately $802.7 million in deposits.


(In thousands, except per share data)	2022		2021
Revenue(1)	$	912,631	$	927,061
Net income	$	264,522	$	307,752
Diluted earnings per share	$	2.04	$	2.40

_________________________

Goodwill of $31.4 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.

(1) Net interest income plus non-interest income.

1211

~~A summary, at fair value,~~As previously discussed, the Company’s acquisition of ~~the assets acquired and liabilities assumed in the Landmark acquisition, as of the acquisition date, is as follows:~~

(In thousands) Acquired from Landmark Fair Value Adjustments Fair Value
Assets Acquired
Cash and due from banks $ 27,591 $ — $ 27,591
Due from banks - time 100 — 100
Investment securities 114,793 (125) 114,668
Loans acquired 785,551 3,953 789,504
Allowance for credit losses on loans (5,980) 3,621 (2,359)
Premises and equipment 9,540 (4,099) 5,441
Bank owned life insurance 21,287 — 21,287
Core deposit intangible 88 4,071 4,159
Other assets 13,036 (4,605) 8,431
Total assets acquired $ 966,006 $ 2,816 $ 968,822
Liabilities Assumed
Deposits:
Noninterest bearing transaction accounts $ 110,393 $ — $ 110,393
Interest bearing transaction accounts and savings deposits 425,777 — 425,777
Time deposits 266,835 (334) 266,501
Total deposits 803,005 (334) 802,671
Other borrowings 47,023 — 47,023
Accrued interest and other liabilities 8,459 (3,122) 5,337
Total liabilities assumed 858,487 (3,456) 855,031
Equity 107,519 (107,519) —
Total equity assumed 107,519 (107,519) —
Total liabilities and equity assumed $ 966,006 $ (110,975) $ 855,031
Net assets acquired 113,791
Purchase price 145,195
Goodwill $ 31,404

~~During~~Spirit was completed on April 8, 2022, ~~the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities related to Landmark.~~

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

~~Triumph Bancshares, Inc.~~

On October 8, 2021, the Company completed its merger with Triumph Bancshares, Inc. (“Triumph”) pursuant to the terms of the Agreement and Plan of Merger dated as of June 4, 2021 (“Triumph Agreement”), at which time ~~Triumph merged with and~~Spirit was fully integrated into the ~~Company, with~~Company’s operations. As a result, it is impracticable for the Company ~~continuing~~to provide certain post-closing information, such as ~~the surviving corporation. The Company issued 4,164,712 shares of its common stock valued at approximately $127.9 million~~revenue and earnings, as ~~of October 8, 2021, plus $1,693,402.93 in cash, in exchange for all outstanding shares of Triumph capital stock (and common stock equivalents) to effect the merger.~~

~~Prior~~it relates to the acquisition, Triumph, headquartered in Memphis, Tennessee, conducted banking business through its subsidiary bank, Triumph Bank, from 6 branches located in the Memphis and Nashville, Tennessee, metropolitan areas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $847.2 million in assets, including approximately $698.8 million in loans (inclusive of loan discounts), and approximately $719.7 million in deposits.

Goodwill of $39.9 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 Triumph acquisition, as of the acquisition date, is as follows:~~

(In thousands) Acquired from Triumph Fair Value Adjustments Fair Value
Assets Acquired
Cash and due from banks $ 7,484 $ — $ 7,484
Due from banks - time 495 — 495
Investment securities 130,571 (1,116) 129,455
Loans acquired 702,460 (3,674) 698,786
Allowance for credit losses on loans (12,617) 1,525 (11,092)
Premises and equipment 2,774 484 3,258
Goodwill 1,550 (1,550) —
Core deposit intangible — 5,136 5,136
Other assets 12,806 897 13,703
Total assets acquired $ 845,523 $ 1,702 $ 847,225
Liabilities Assumed
Deposits:
Noninterest bearing transaction accounts $ 115,729 $ — $ 115,729
Interest bearing transaction accounts and savings deposits 383,434 — 383,434
Time deposits 219,477 1,094 220,571
Total deposits 718,640 1,094 719,734
Securities sold under agreement to repurchase 2,854 — 2,854
Other borrowings 30,700 — 30,700
Accrued interest and other liabilities 2,882 455 3,337
Total liabilities assumed 755,076 1,549 756,625
Equity 90,446 (90,446) —
Total equity assumed 90,446 (90,446) —
Total liabilities and equity assumed $ 845,522 $ (88,897) $ 756,625
Net assets acquired 90,600
Purchase price 130,544
Goodwill $ 39,944

~~During 2022, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities related to Triumph.~~

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

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the ~~acquisitions~~acquisition 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. See Note 5, Loans and Allowance for Credit Losses, in the accompanying Notes to Consolidated Financial Statements for additional information related to purchased financial assets with credit deterioration.

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 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 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.~~

Other borrowings – The fair value of other borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and 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 fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities. The adjustment also establishes a liability for unfunded commitments equal to the 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.

NOTE 3: INVESTMENT SECURITIES

Held-to-maturity securities (“HTM”), which include any security for which the Company has both 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 effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date.

Available-for-sale securities (“AFS”), 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 effective yield method over the estimated life of the security. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date.

During the quarters ended June 30, 2022 and September 30, 2021, the Company transferred, at fair value, $1.99 billion and $500.8 million, respectively, of securities from the available-for-sale portfolio to the held-to-maturity portfolio. ~~The~~As of March 31, 2023, the related remaining combined net unrealized losses of ~~$148.3~~$141.0 million ~~and net unrealized gains of $738,000, respectively,~~ in accumulated other comprehensive income (loss) will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer.

The amortized cost, fair value and allowance for credit losses of investment securities that are classified as HTM are as follows:


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

September 30, 2022
March 31, 2023														March 31, 2023
U.S. Government agencies	U.S. Government agencies	$	447,400	$	—	$	447,400	$	—	$	(97,871)	$	349,529	U.S. Government agencies	$	451,052	$	—	$	451,052	$	—	$	(92,267)	$	358,785
Mortgage-backed securities	Mortgage-backed securities	1,214,882		—		1,214,882		1,069		(131,437)		1,084,514		Mortgage-backed securities	1,201,418		—		1,201,418		27		(103,863)		1,097,582
State and political subdivisions	State and political subdivisions	1,865,310		(107)		1,865,203		60		(540,980)		1,324,283		State and political subdivisions	1,860,332		(362)		1,859,970		189		(393,539)		1,466,620
Other securities	Other securities	260,868		(1,277)		259,591		—		(33,877)		225,714		Other securities	254,569		(1,526)		253,043		—		(27,054)		225,989
Total HTM	Total HTM	$	3,788,460	$	(1,384)	$	3,787,076	$	1,129	$	(804,165)	$	2,984,040	Total HTM	$	3,767,371	$	(1,888)	$	3,765,483	$	216	$	(616,723)	$	3,148,976

December 31, 2021
December 31, 2022														December 31, 2022
U.S. Government agencies	U.S. Government agencies	$	232,609	$	—	$	232,609	$	—	$	(7,914)	$	224,695	U.S. Government agencies	$	448,012	$	—	$	448,012	$	—	$	(102,558)	$	345,454
Mortgage-backed securities	Mortgage-backed securities	70,342		—		70,342		232		(1,425)		69,149		Mortgage-backed securities	1,190,781		—		1,190,781		227		(118,960)		1,072,048
State and political subdivisions	State and political subdivisions	1,210,248		(1,197)		1,209,051		6,166		(8,462)		1,206,755		State and political subdivisions	1,861,102		(110)		1,860,992		56		(446,198)		1,414,850
Other securities	Other securities	17,301		(82)		17,219		—		(440)		16,779		Other securities	261,199		(1,278)		259,921		—		(29,040)		230,881
Total HTM	Total HTM	$	1,530,500	$	(1,279)	$	1,529,221	$	6,398	$	(18,241)	$	1,517,378	Total HTM	$	3,761,094	$	(1,388)	$	3,759,706	$	283	$	(696,756)	$	3,063,233

Mortgage-backed securities (“MBS”) are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties. All mortgage-backed securities included in the table above were issued by U.S. government agencies or corporations. As of ~~September 30, 2022,~~March 31, 2023, HTM MBS consists of ~~$150.0~~$146.5 million and ~~$1.06~~$1.05 billion of commercial MBS and residential MBS, respectively. As of December 31, ~~2021,~~2022, HTM MBS consists of ~~$4.9~~$149.2 million and ~~$65.5 million~~$1.04 billion of commercial MBS and residential MBS, respectively.

1613

The amortized cost, fair value and allowance for credit losses of investment securities that are classified as AFS are as follows:


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

September 30, 2022
March 31, 2023												March 31, 2023
U.S. Treasury	U.S. Treasury	$	2,250	$	—	$	—	$	(59)	$	2,191	U.S. Treasury	$	2,264	$	—	$	—	$	(44)	$	2,220
U.S. Government agencies	U.S. Government agencies	195,369		—		145		(7,454)		188,060		U.S. Government agencies	188,141		—		73		(6,371)		181,843
Mortgage-backed securities	Mortgage-backed securities	2,959,882		—		5		(289,539)		2,670,348		Mortgage-backed securities	2,664,735		—		37		(231,242)		2,433,530
State and political subdivisions	State and political subdivisions	1,054,356		—		244		(232,091)		822,509		State and political subdivisions	1,060,198		—		272		(164,574)		895,896
Other securities	Other securities	272,274		—		1		(17,840)		254,435		Other securities	271,093		(5,800)		—		(22,826)		242,467
Total AFS	Total AFS	$	4,484,131	$	—	$	395	$	(546,983)	$	3,937,543	Total AFS	$	4,186,431	$	(5,800)	$	382	$	(425,057)	$	3,755,956

December 31, 2021
December 31, 2022												December 31, 2022
U.S. Treasury	U.S. Treasury	$	300	$	—	$	—	$	—	$	300	U.S. Treasury	$	2,257	$	—	$	—	$	(60)	$	2,197
U.S. Government agencies	U.S. Government agencies	374,754		—		495		(10,608)		364,641		U.S. Government agencies	191,498		—		103		(7,322)		184,279
Mortgage-backed securities	Mortgage-backed securities	4,485,548		—		6,307		(43,239)		4,448,616		Mortgage-backed securities	2,809,319		—		20		(266,437)		2,542,902
State and political subdivisions	State and political subdivisions	1,791,097		—		30,556		(1,995)		1,819,658		State and political subdivisions	1,056,124		—		250		(185,300)		871,074
Other securities	Other securities	479,162		—		6,647		(5,479)		480,330		Other securities	272,215		—		—		(19,813)		252,402
Total AFS	Total AFS	$	7,130,861	$	—	$	44,005	$	(61,321)	$	7,113,545	Total AFS	$	4,331,413	$	—	$	373	$	(478,932)	$	3,852,854

As of ~~September 30, 2022,~~March 31, 2023, AFS MBS consists of ~~$1.17 billion~~$985.7 million and ~~$1.50~~$1.45 billion of commercial MBS and residential MBS, respectively. As of December 31, ~~2021,~~2022, AFS MBS consists of ~~$1.53~~$1.07 billion and ~~$2.92~~$1.47 billion of commercial MBS and residential MBS, respectively.

Accrued interest receivable on HTM and AFS securities at ~~September 30, 2022~~March 31, 2023 was ~~$17.7~~$17.4 million and ~~$16.2~~$16.7 million, respectively, and is included in interest receivable on the consolidated balance sheets. The Company has made the election to exclude all accrued interest receivable from securities from the estimate of credit losses.

The following table summarizes the Company’s AFS investments in an unrealized loss position for which an allowance for credit loss has not been recorded as of ~~September 30, 2022,~~March 31, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
(In thousands)	(In thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		(In thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
Available-for-sale	Available-for-sale													Available-for-sale
U.S. Treasury	U.S. Treasury	$	2,191	$	(59)	$	—	$	—	$	2,191	$	(59)	U.S. Treasury	$	2,220	$	(44)	$	—	$	—	$	2,220	$	(44)
U.S. Government agencies	U.S. Government agencies	116,968		(5,120)		53,942		(2,334)		170,910		(7,454)		U.S. Government agencies	85,993		(2,409)		80,154		(3,962)		166,147		(6,371)
Mortgage-backed securities	Mortgage-backed securities	1,115,220		(73,690)		1,545,776		(215,849)		2,660,996		(289,539)		Mortgage-backed securities	442,923		(7,396)		1,980,733		(223,846)		2,423,656		(231,242)
State and political subdivisions	State and political subdivisions	536,510		(79,426)		259,147		(152,665)		795,657		(232,091)		State and political subdivisions	47,760		(2,572)		813,859		(162,002)		861,619		(164,574)
Other securities	Other securities	212,701		(14,259)		36,243		(3,581)		248,944		(17,840)		Other securities	83,075		(8,499)		146,131		(8,527)		229,206		(17,026)
Total AFS	Total AFS	$	1,983,590	$	(172,554)	$	1,895,108	$	(374,429)	$	3,878,698	$	(546,983)	Total AFS	$	661,971	$	(20,920)	$	3,020,877	$	(398,337)	$	3,682,848	$	(419,257)

As of ~~September 30, 2022,~~March 31, 2023, the Company’s investment portfolio included ~~$3.94~~$3.76 billion of AFS securities, of which ~~$3.88~~$3.68 billion, or ~~98.5%~~98.1%, were in an unrealized loss position that were not deemed to have credit losses. A portion of the unrealized losses were related to the Company’s MBS, which are issued and guaranteed by U.S. government-sponsored entities and agencies, and the Company’s state and political subdivision securities, specifically investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities.

1714

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

Allowance for Credit Losses

All MBS 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, 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.

Regarding securities issued by state and political subdivisions and other HTM securities, ~~management~~the adequacy of the reserve for credit loss is determined quarterly based on methodology similar to the methodology for determining the loan allowance for credit losses. The methodology considers, but is not limited to: (i) issuer bond ratings, (ii) ~~historical loss rates for given bond ratings,~~issuer geography, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) ~~internal~~probability-weighted multiple scenario forecasts, and (v) ~~whether or not such securities provide insurance or other credit enhancement or are pre-refunded by~~ the ~~issuers.~~issuers’ size.

The following table details activity in the allowance for credit losses by investment security type for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 on the Company’s HTM and AFS securities ~~portfolio.~~portfolios.

(In thousands) State and Political Subdivisions Other
Securities Total
Three Months Ended September 30, 2022
Held-to-maturity
Beginning balance, July 1, 2022 $ 103 $ 1,278 $ 1,381
Provision for credit loss expense — — —
Net increase (decrease) in allowance on previously impaired securities 3 (3) —
Recoveries 1 2 3
Ending balance, September 30, 2022 $ 107 $ 1,277 $ 1,384
Nine Months Ended September 30, 2022
Held-to-maturity
Beginning balance, January 1, 2022 $ 1,197 $ 82 $ 1,279
Provision for credit loss expense — — —
Net increase (decrease) in allowance on previously impaired securities (1,180) 1,180 —
Recoveries 90 15 105
Ending balance, September 30, 2022 $ 107 $ 1,277 $ 1,384


(In thousands)	State and Political Subdivisions		Other Securities		Total
Three Months Ended March 31, 2023
Held-to-maturity
Beginning balance, January 1, 2023	$	110	$	1,278	$	1,388
Provision for credit loss expense	252		248		500
Ending balance, March 31, 2023	$	362	$	1,526	$	1,888

Available-for-sale
Beginning balance, January 1, 2023	$	—	$	—	$	—
Provision for credit loss expense	—		12,800		12,800
Securities charged-off	—		(7,000)		(7,000)
Ending balance, March 31, 2023	$	—	$	5,800	$	5,800

Activity in the allowance for credit losses by investment security type for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 on the Company’s HTM ~~and AFS~~ securities portfolio was as follows:

(In thousands) State and Political Subdivisions Other
Securities Total
Three Months Ended September 30, 2021
Held-to-maturity
Beginning balance, July 1, 2021 $ 871 $ 261 $ 1,132
Provision for credit loss expense 325 (325) —
Recoveries — 147 147
Ending balance, September 30, 2021 $ 1,196 $ 83 $ 1,279
Nine Months Ended September 30, 2021
Held-to-maturity
Beginning balance, January 1, 2021 $ 2,307 $ 608 $ 2,915
Provision for credit loss expense (1,111) (72) (1,183)
Securities charged-off — (600) (600)
Recoveries — 147 147
Ending balance, September 30, 2021 $ 1,196 $ 83 $ 1,279
Available-for-sale
Beginning balance, January 1, 2021 $ 217 $ 95 $ 312
Reduction due to sales — (11) (11)
Net decrease in allowance on previously impaired securities (217) (84) (301)
Ending balance, September 30, 2021 $ — $ — $ —


(In thousands)	State and Political Subdivisions		Other Securities		Total
Three Months Ended March 31, 2022
Held-to-maturity
Beginning balance, January 1, 2022	$	1,197	$	82	$	1,279
Provision for credit loss expense	—		—		—
Recoveries	88		10		98
Ending balance, March 31, 2022	$	1,285	$	92	$	1,377

Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, ~~there was no~~the provision for credit losses related to AFS securities recorded for the three ~~and nine~~ months ended ~~September 30, 2022. There~~March 31, 2023 was $12.8 million, while no provision for credit losses related to AFS securities was recorded during the three months ended March 31, 2022. During the three months ended March 31, 2023, the Company charged-off $7.0 million directly related to one corporate bond which was deemed uncollectible in the ~~three month period ended September 30, 2021 and it was reduced by $312,000 during~~period. The remaining allowance for credit loss on the ~~nine months ended September 30, 2021.~~AFS portfolio of $5.8 million at March 31, 2023 is related to outstanding exposure for two nonperforming corporate bonds.

The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of ~~September 30, 2022:~~March 31, 2023:


		State and Political Subdivisions											State and Political Subdivisions
(In thousands)	(In thousands)	Not Guaranteed or Pre-Refunded		Other Credit Enhancement or Insurance		Pre-Refunded		Total		Other Securities		(In thousands)	Not Guaranteed or Pre-Refunded		Other Credit Enhancement or Insurance		Pre-Refunded		Total		Other Securities
Aaa/AAA	Aaa/AAA	$	187,185	$	280,768	$	—	$	467,953	$	—	Aaa/AAA	$	183,761	$	287,490	$	—	$	471,251	$	—
Aa/AA	Aa/AA	671,239		502,057		—		1,173,296		—		Aa/AA	633,064		525,076		—		1,158,140		—
A	A	45,493		157,441		—		202,934		172,861		A	47,706		171,293		—		218,999		101,586
Baa/BBB	Baa/BBB	—		5,937		—		5,937		53,500		Baa/BBB	—		3,387		—		3,387		152,983
Not Rated	Not Rated	8,321		6,869		—		15,190		34,507		Not Rated	8,555		—		—		8,555		—
Total	Total	$	912,238	$	953,072	$	—	$	1,865,310	$	260,868	Total	$	873,086	$	987,246	$	—	$	1,860,332	$	254,569

Historical loss rates associated with securities having similar grades as those in the Company’s portfolio have generally not been significant. Pre-refunded securities, if any, have been defeased by the issuer and are fully secured by cash and/or U.S. Treasury securities held in escrow for payment to holders when the underlying call dates of the securities are reached. Securities with other credit enhancement or insurance continue to 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 losses related to these securities.

Income earned on securities for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Taxable:	Taxable:									Taxable:
Held-to-maturity	Held-to-maturity	$	10,679	$	1,127	$	23,169	$	2,477	Held-to-maturity	$	11,013	$	1,912
Available-for-sale	Available-for-sale	14,169		15,949		41,622		39,313		Available-for-sale	21,791		16,236

Non-taxable:	Non-taxable:									Non-taxable:
Held-to-maturity	Held-to-maturity	10,181		4,853		26,371		9,887		Held-to-maturity	10,126		6,102
Available-for-sale	Available-for-sale	5,925		8,788		21,352		27,741		Available-for-sale	5,844		9,462
Total	Total	$	40,954	$	30,717	$	112,514	$	79,418	Total	$	48,774	$	33,712

The amortized cost and estimated fair value by maturity of securities as of ~~September 30, 2022~~March 31, 2023 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					Held-to-Maturity				Available-for-Sale
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	One year or less	$	4,519	$	4,519	$	3,165	$	3,142	One year or less	$	2,413	$	2,413	$	12,552	$	12,376
After one through five years	After one through five years	7,671		7,449		184,193		177,833		After one through five years	6,455		6,332		184,643		178,272
After five through ten years	After five through ten years	327,461		284,166		268,732		248,862		After five through ten years	359,813		321,295		256,336		233,547
After ten years	After ten years	2,233,927		1,603,392		1,067,671		836,869		After ten years	2,197,272		1,721,354		1,067,885		897,951
Securities not due on a single maturity date	Securities not due on a single maturity date	1,214,882		1,084,514		2,959,882		2,670,348		Securities not due on a single maturity date	1,201,418		1,097,582		2,664,735		2,433,530
Other securities (no maturity)	Other securities (no maturity)	—		—		488		489		Other securities (no maturity)	—		—		280		280
Total	Total	$	3,788,460	$	2,984,040	$	4,484,131	$	3,937,543	Total	$	3,767,371	$	3,148,976	$	4,186,431	$	3,755,956

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to ~~$3.93~~$3.82 billion at ~~September 30, 2022~~March 31, 2023 and ~~$3.88~~$3.96 billion at December 31, ~~2021.~~2022.

There were no gross realized gains and no gross realized losses recorded from the call of securities during the three months ended March 31, 2023, as they were recognized at book value of the security. There were approximately ~~$8,000~~$37,000 of gross realized gains and ~~$30,000~~$91,000 of gross realized losses from the sale and calls of securities during the three months ended ~~September 30, 2022, and approximately $45,000 of gross realized gains and $271,000 of gross realized losses from the sale and call of securities during the nine months ended September 30,~~March 31, 2022. There were approximately $5.3 million of gross realized gains and $24,500 of gross realized losses from the sale of securities during the three months ended September 30, 2021, and approximately $15.9 million of gross realized gains and $63,600 of gross realized losses from the sale of securities during the nine months ended September 30, 2021. The income tax expense/benefit related to security gains/losses was 26.135% of the gross amounts in ~~2022~~2023 and ~~2021.~~2022.

The Company has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair value of AFS securities. See Note 23: Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

NOTE 4: OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Spirit Acquisition

In connection with the acquisition of Spirit, ~~acquisition,~~ the Company acquired a portfolio of loans which were identified as held for sale by the acquired bank prior to the completion of the acquisition. These loans were valued at $35.2 million, net of fair value discounts, at the date of ~~acquisition. As of September 30, 2022, the remaining balance of loans held for sale, net of fair value discounts, was $2.3 million. The decrease in the~~acquisition with no remaining balance as ~~compared to June 30, 2022, is due to continued paydowns and the sale~~ of ~~a portion of loans within the acquired portfolio.~~March 31, 2023.

As of ~~September 30, 2022,~~March 31, 2023, there were no outstanding other liabilities held for sale.

~~Illinois Branch Sale~~

On November 30, 2020, the Company’s subsidiary bank, Simmons Bank, entered into a Branch Purchase and Assumption Agreement (the “Citizens Equity Agreement”) with Citizens Equity First Credit Union (“CEFCU”).

On March 12, 2021, CEFCU completed its purchase of certain assets and assumption of certain liabilities (“Illinois Branch Sale”) associated with four Simmons Bank locations in the Metro East area of Southern Illinois, near St. Louis (collectively, the “Illinois Branches”). Pursuant to the terms of the Citizens Equity Agreement, CEFCU assumed certain deposit liabilities and acquired certain loans, as well as cash, personal property and other fixed assets associated with the Illinois Branches. The loan and deposit balances of the Illinois Branches were $354,000 and $137.9 million, respectively.

~~The Company recognized a gain on sale of $5.3 million related to the Illinois Branches in the nine month period ended September 30, 2021.~~

NOTE 5: LOANS AND ALLOWANCE FOR CREDIT LOSSES

At ~~September 30, 2022,~~March 31, 2023, the Company’s loan portfolio was ~~$15.61~~$16.56 billion, compared to ~~$12.01~~$16.14 billion at December 31, ~~2021.~~2022. The various categories of loans are summarized as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Consumer:	Consumer:					Consumer:
Credit cards	Credit cards	$	192,559	$	187,052	Credit cards	$	188,590	$	196,928
Other consumer	Other consumer	180,604		168,318		Other consumer	142,817		152,882
Total consumer	Total consumer	373,163		355,370		Total consumer	331,407		349,810
Real Estate:	Real Estate:					Real Estate:
Construction and development	Construction and development	2,372,294		1,326,371		Construction and development	2,777,122		2,566,649
Single family residential	Single family residential	2,467,008		2,101,975		Single family residential	2,589,831		2,546,115
Other commercial	Other commercial	7,249,891		5,738,904		Other commercial	7,520,964		7,468,498
Total real estate	Total real estate	12,089,193		9,167,250		Total real estate	12,887,917		12,581,262
Commercial:	Commercial:					Commercial:
Commercial	Commercial	2,525,218		1,992,043		Commercial	2,669,731		2,632,290
Agricultural	Agricultural	263,539		168,717		Agricultural	220,641		205,623
Total commercial	Total commercial	2,788,757		2,160,760		Total commercial	2,890,372		2,837,913
Other	Other	356,022		329,123		Other	445,402		373,139
Total loans	Total loans	$	15,607,135	$	12,012,503	Total loans	$	16,555,098	$	16,142,124

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 ~~$29.1~~$19.2 million and ~~$21.5~~$26.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled ~~$52.7~~$64.7 million and ~~$39.8~~$65.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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; and providing an adequate allowance for 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.

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 economic downturns that result in increased unemployment. Other consumer loans include direct and indirect installment loans and account 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 (“C&D”), single family residential loans and commercial loans. C&D and commercial real estate (“CRE”) loans can be particularly sensitive to valuation of real estate. CRE 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 CRE – 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 duration. 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. Paycheck Protection Program (“PPP”) loans are also included in the commercial loan portfolio. 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.

Paycheck Protection Program Loans – The Company originated loans pursuant to multiple PPP appropriations of the Coronavirus Aid, Relief and Economic Security Act which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assistance with mortgage interest, rent and utilities. Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions. PPP loans have a zero percent risk-weight for regulatory capital ratios. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the total outstanding balance of PPP loans was ~~$12.1~~$7.8 million and ~~$116.7~~$8.9 million, respectively.

Other – The other loan portfolio includes mortgage warehouse loans, representing warehouse lines of credit to mortgage originators for the disbursement of newly originated 1-4 family residential loans. Also included in the other loan portfolio are loans to public sector customers, including state and local governments.

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.

2218

The amortized cost basis of nonaccrual loans segregated by category of loans are as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Consumer:	Consumer:					Consumer:
Credit cards	Credit cards	$	305	$	377	Credit cards	$	266	$	349
Other consumer	Other consumer	306		381		Other consumer	440		433
Total consumer	Total consumer	611		758		Total consumer	706		782
Real estate:	Real estate:					Real estate:
Construction and development	Construction and development	3,285		2,296		Construction and development	4,783		2,799
Single family residential	Single family residential	22,761		19,268		Single family residential	23,509		22,319
Other commercial	Other commercial	15,382		26,953		Other commercial	12,446		14,998
Total real estate	Total real estate	41,428		48,517		Total real estate	40,738		40,116
Commercial:	Commercial:					Commercial:
Commercial	Commercial	15,411		18,774		Commercial	21,628		17,356
Agricultural	Agricultural	74		152		Agricultural	143		177
Total commercial	Total commercial	15,485		18,926		Total commercial	21,771		17,533
Other	Other	10		3		Other	3		3
Total	Total	$	57,534	$	68,204	Total	$	63,218	$	58,434

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of ~~$13.7~~$14.3 million and ~~$14.5~~$16.9 million, respectively. 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, including nonaccrual loans, segregated by class of loans is as follows:


(In thousands)	(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		(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, 2022
March 31, 2023														March 31, 2023
Consumer:	Consumer:													Consumer:
Credit cards	Credit cards	$	1,348	$	267	$	1,615	$	190,944	$	192,559	$	201	Credit cards	$	1,695	$	385	$	2,080	$	186,510	$	188,590	$	301
Other consumer	Other consumer	814		119		933		179,671		180,604		—		Other consumer	970		308		1,278		141,539		142,817		—
Total consumer	Total consumer	2,162		386		2,548		370,615		373,163		201		Total consumer	2,665		693		3,358		328,049		331,407		301
Real estate:	Real estate:													Real estate:
Construction and development	Construction and development	1,613		1,631		3,244		2,369,050		2,372,294		—		Construction and development	383		4,384		4,767		2,772,355		2,777,122		—
Single family residential	Single family residential	11,175		11,250		22,425		2,444,583		2,467,008		—		Single family residential	19,220		9,415		28,635		2,561,196		2,589,831		—
Other commercial	Other commercial	5,461		8,182		13,643		7,236,248		7,249,891		—		Other commercial	3,643		3,709		7,352		7,513,612		7,520,964		—
Total real estate	Total real estate	18,249		21,063		39,312		12,049,881		12,089,193		—		Total real estate	23,246		17,508		40,754		12,847,163		12,887,917		—
Commercial:	Commercial:													Commercial:
Commercial	Commercial	4,474		7,008		11,482		2,513,736		2,525,218		41		Commercial	10,170		11,248		21,418		2,648,313		2,669,731		136
Agricultural	Agricultural	55		26		81		263,458		263,539		—		Agricultural	228		22		250		220,391		220,641		—
Total commercial	Total commercial	4,529		7,034		11,563		2,777,194		2,788,757		41		Total commercial	10,398		11,270		21,668		2,868,704		2,890,372		136
Other	Other	—		3		3		356,019		356,022		—		Other	—		3		3		445,399		445,402		—
Total	Total	$	24,940	$	28,486	$	53,426	$	15,553,709	$	15,607,135	$	242	Total	$	36,309	$	29,474	$	65,783	$	16,489,315	$	16,555,098	$	437

2319


(In thousands)	(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		(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
December 31, 2021
December 31, 2022														December 31, 2022
Consumer:	Consumer:													Consumer:
Credit cards	Credit cards	$	847	$	413	$	1,260	$	185,792	$	187,052	$	247	Credit cards	$	1,297	$	409	$	1,706	$	195,222	$	196,928	$	225
Other consumer	Other consumer	1,149		130		1,279		167,039		168,318		—		Other consumer	852		214		1,066		151,816		152,882		—
Total consumer	Total consumer	1,996		543		2,539		352,831		355,370		247		Total consumer	2,149		623		2,772		347,038		349,810		225
Real estate:	Real estate:													Real estate:
Construction and development	Construction and development	114		504		618		1,325,753		1,326,371		—		Construction and development	4,677		443		5,120		2,561,529		2,566,649		—
Single family residential	Single family residential	11,313		9,398		20,711		2,081,264		2,101,975		102		Single family residential	23,625		11,075		34,700		2,511,415		2,546,115		106
Other commercial	Other commercial	2,474		12,268		14,742		5,724,162		5,738,904		—		Other commercial	2,759		7,100		9,859		7,458,639		7,468,498		—
Total real estate	Total real estate	13,901		22,170		36,071		9,131,179		9,167,250		102		Total real estate	31,061		18,618		49,679		12,531,583		12,581,262		106
Commercial:	Commercial:													Commercial:
Commercial	Commercial	4,812		10,074		14,886		1,977,157		1,992,043		—		Commercial	5,034		7,575		12,609		2,619,681		2,632,290		176
Agricultural	Agricultural	13		117		130		168,587		168,717		—		Agricultural	111		67		178		205,445		205,623		—
Total commercial	Total commercial	4,825		10,191		15,016		2,145,744		2,160,760		—		Total commercial	5,145		7,642		12,787		2,825,126		2,837,913		176
Other	Other	—		3		3		329,120		329,123		—		Other	61		3		64		373,075		373,139		—
Total	Total	$	20,722	$	32,907	$	53,629	$	11,958,874	$	12,012,503	$	349	Total	$	38,416	$	26,886	$	65,302	$	16,076,822	$	16,142,124	$	507

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company has internal loan modification programs for borrowers experiencing financial difficulties. Modifications to borrowers experiencing financial difficulties may include interest rate reductions, principal or interest forgiveness and/or term extensions. The Company primarily uses interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

There were no loans modified for borrowers experiencing financial difficulties during the three month period ending March 31, 2023. There were no loans to borrowers experiencing financial difficulty that had a payment default during the three months ended March 31, 2023 and were modified in the twelve months prior to that default. The Company defines a payment default as a payment received more than 90 days after its due date.

At March 31, 2023 and December 31, 2022, the Company had $3,248,000 and $3,009,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At March 31, 2023 and December 31, 2022, the Company had $873,000 and $853,000, respectively, of OREO secured by residential real estate properties.

Troubled Debt Restructurings (Prior to the adoption of ASU 2022-02)

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

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

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

The following table presents a summary of TDRs segregated by class of ~~loans.~~loans as of December 31, 2022.

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans
(Dollars in thousands) Number Balance Number Balance Number Balance
September 30, 2022
Real estate:
Single-family residential 24 $ 1,868 12 $ 1,676 36 $ 3,544
Other commercial 1 1 — — 1 1
Total real estate 25 1,869 12 1,676 37 3,545
Commercial:
Commercial — — 3 1,351 3 1,351
Total commercial — — 3 1,351 3 1,351
Total 25 $ 1,869 15 $ 3,027 40 $ 4,896


		Accruing TDR Loans			Nonaccrual TDR Loans			Total TDR Loans				Accruing TDR Loans			Nonaccrual TDR Loans			Total TDR Loans
(Dollars in thousands)	(Dollars in thousands)	Number	Balance		Number	Balance		Number	Balance		(Dollars in thousands)	Number	Balance		Number	Balance		Number	Balance
December 31, 2021
Real estate:	Real estate:										Real estate:
Single-family residential	Single-family residential	28	$	3,087	14	$	1,196	42	$	4,283	Single-family residential	24	$	1,849	12	$	1,589	36	$	3,438
Other commercial	Other commercial	1	766		2	48		3	814		Other commercial	—	—		—	—		—	—
Total real estate	Total real estate	29	3,853		16	1,244		45	5,097		Total real estate	24	1,849		12	1,589		36	3,438
Commercial:	Commercial:										Commercial:
Commercial	Commercial	2	436		2	1,406		4	1,842		Commercial	—	—		1	33		1	33
Total commercial	Total commercial	2	436		2	1,406		4	1,842		Total commercial	—	—		1	33		1	33
Total	Total	31	$	4,289	18	$	2,650	49	$	6,939	Total	24	$	1,849	13	$	1,622	37	$	3,471

~~The following table presents loans that were restructured as TDRs during the three and nine month periods ended September 30, 2022 and nine months ended September 30, 2021.~~ There were no loans restructured as TDRs during the three months ended ~~September 30, 2021.~~

(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 Months Ended September 30, 2022
Real estate:
Other commercial 3 $ 747 $ 727 $ — $ 727 $ —
Total real estate 3 $ 747 $ 727 $ — $ 727 $ —
Nine Months Ended September 30, 2022
Real estate:
Other commercial 4 $ 760 $ 740 $ — $ 740 $ —
Total real estate 4 $ 760 $ 740 $ — $ 740 $ —
Nine Months Ended September 30, 2021
Real estate:
Other commercial 1 $ 784 $ 778 $ — $ 778 $ —
Total real estate 1 $ 784 $ 778 $ — $ 778 $ —
March 31, 2022.

During the three months ended September 30, 2022, the Company modified three loans with a recorded investment of $747,000 prior to modification, which were deemed TDRs. The restructured loans were modified by reducing the interest rate on the loan. No specific reserve was recorded with respect to these TDRs. Also, there was no immediate 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.

During the nine months ended September 30, 2022, the Company modified four loans with a recorded investment of $760,000 prior to modification, which were deemed TDRs. The restructured loans were modified by reducing the interest rate on the loan. No specific reserve was recorded with respect to these TDRs. Also, there was no immediate 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.

During the nine months ended September 30, 2021, the Company modified one loan with a recorded investment of $784,000 prior to modification, which was deemed a TDR. The restructured loan was modified by deferring amortized principal payments and requiring interest only payments for a period of up to 12 months. A specific reserve of approximately $5,100 was recorded with respect to this TDR. 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.

Additionally, there were no loans considered TDRs for which a payment default occurred during the ~~nine~~three months ended ~~September 30, 2022 or 2021. The Company defines a payment default as a payment received more than 90 days after its due date.~~March 31, 2022.

There were no TDRs with pre-modification loan balances for which Other Real Estate Owned (“OREO”) was received in full or partial satisfaction of the loans during the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2022 or 2021. At September 30, 2022 and December~~March 31, 2021, the Company had $3,389,000 and $1,806,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At September 30, 2022 and December 31, 2021, the Company had $524,000 and $831,000, respectively, of OREO secured by residential real estate properties.2022.

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 of the 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. 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 risk ratings is as follows:

•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.

•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”).

•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.

•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.

•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.

•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.

•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.

•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.

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

•Current - Loans in this category are either current in payments or are under 30 days past due. These loans are considered to 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 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 this category are 90 days or more past due and are placed on nonaccrual status. These loans have been subject to the Company’s loss mitigation process and foreclosure and/or charge-off proceedings have commenced.

The Company uses a dual risk rating scale that utilizes quantitative models and qualitative factors (“score cards”) to assist in determining the appropriate risk rating for its commercial loans. This dual risk rating methodology incorporates a “probability of default” analysis which utilizes quantified metrics such as loan terms and financial performance, as well as a “loss given default” analysis which utilizes collateral values and economics of the market, among other attributes. Model outputs are reviewed and analyzed to ensure the projected risk levels are commensurate with underwriting and credit leader expectations. The risk rating scale includes Probability of Default levels of 1 – 16 and Loss Given Default levels of A – I. The scale allows for more granular recognition of risk and diversification of grading among traditional Pass grades.

The following is a reconciliation between the expanded risk rating scale and the Company’s traditional risk rating segments utilized within the commercial loan classes presented in the credit quality indicator tables.

•Pass - Includes loans with an expanded risk rating of 1 through 11. Loans with a risk rating of 10 and 11 equate to loans included on management’s “watch list” and is intended to be utilized on a temporary basis for pass grade borrowers where a significant risk-modifying action is anticipated in the near term.

•Special Mention - Includes loans with an expanded risk rating of 12.

•Substandard - Includes loans with an expanded risk rating of 13 and 14.

•Doubtful and loss - Includes loans with an expanded risk rating of 15 and 16.

2722

The following table presents a summary of loans by credit quality indicator, as of ~~September 30, 2022,~~March 31, 2023, segregated by class of loans.


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2022 (YTD)		2021		2020		2019		2018		2017 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total		(In thousands)	2023 (YTD)		2022		2021		2020		2019		2018 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total
Consumer - credit cards	Consumer - credit cards																			Consumer - credit cards
Delinquency:	Delinquency:																			Delinquency:
Current	Current	$	—	$	—	$	—	$	—	$	—	$	—	$	190,944	$	—	$	190,944	Current	$	—	$	—	$	—	$	—	$	—	$	—	$	186,510	$	—	$	186,510
30-89 days past due	30-89 days past due	—		—		—		—		—		—		1,348		—		1,348		30-89 days past due	—		—		—		—		—		—		1,695		—		1,695
90+ days past due	90+ days past due	—		—		—		—		—		—		267		—		267		90+ days past due	—		—		—		—		—		—		385		—		385
Total consumer - credit cards	Total consumer - credit cards	—		—		—		—		—		—		192,559		—		192,559		Total consumer - credit cards	—		—		—		—		—		—		188,590		—		188,590
Current-period consumer - credit cards gross charge-offs																				Current-period consumer - credit cards gross charge-offs	—		—		—		—		—		—		1,076		—		1,076
Consumer - other	Consumer - other																			Consumer - other
Delinquency:	Delinquency:																			Delinquency:
Current	Current	101,692		31,531		12,111		5,375		3,465		3,514		21,980		3		179,671		Current	28,219		58,085		22,060		7,913		3,236		3,480		18,546		—		141,539
30-89 days past due	30-89 days past due	279		270		68		46		17		128		6		—		814		30-89 days past due	7		462		186		44		23		16		232		—		970
90+ days past due	90+ days past due	19		26		20		12		2		31		9		—		119		90+ days past due	—		130		26		29		11		27		85		—		308
Total consumer - other	Total consumer - other	101,990		31,827		12,199		5,433		3,484		3,673		21,995		3		180,604		Total consumer - other	28,226		58,677		22,272		7,986		3,270		3,523		18,863		—		142,817
Current-period consumer - other gross charge-offs																				Current-period consumer - other gross charge-offs	—		247		75		22		9		69		3		—		425
Real estate - C&D	Real estate - C&D																			Real estate - C&D
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	184,664		86,225		65,254		20,346		19,807		17,516		1,963,664		340		2,357,816		Pass	33,762		214,969		60,637		45,992		18,201		28,982		2,354,137		—		2,756,680
Special mention	Special mention	252		—		—		—		—		42		9,074		—		9,368		Special mention	—		—		—		—		—		—		7,439		—		7,439
Substandard	Substandard	1,005		85		10		14		31		138		3,827		—		5,110		Substandard	—		965		125		5		—		2,117		9,791		—		13,003
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		—		—
Total real estate - C&D	Total real estate - C&D	185,921		86,310		65,264		20,360		19,838		17,696		1,976,565		340		2,372,294		Total real estate - C&D	33,762		215,934		60,762		45,997		18,201		31,099		2,371,367		—		2,777,122
Current-period real estate - C&D gross charge-offs																				Current-period real estate - C&D gross charge-offs	—		1,154		—		—		—		—		—		—		1,154
Real estate - SF residential	Real estate - SF residential																			Real estate - SF residential
Delinquency:	Delinquency:																			Delinquency:
Current	Current	544,782		426,319		265,458		162,395		216,192		509,819		314,903		4,715		2,444,583		Current	98,604		681,842		396,986		252,806		146,993		650,695		332,539		731		2,561,196
30-89 days past due	30-89 days past due	453		1,070		1,222		420		1,786		5,435		789		—		11,175		30-89 days past due	—		1,640		3,128		1,408		1,453		9,761		1,830		—		19,220
90+ days past due	90+ days past due	160		904		565		936		1,212		5,793		1,680		—		11,250		90+ days past due	—		443		945		788		241		6,518		480		—		9,415
Total real estate - SF residential	Total real estate - SF residential	545,395		428,293		267,245		163,751		219,190		521,047		317,372		4,715		2,467,008		Total real estate - SF residential	98,604		683,925		401,059		255,002		148,687		666,974		334,849		731		2,589,831
Current-period real estate - SF residential gross charge-offs																				Current-period real estate - SF residential gross charge-offs	—		—		—		—		—		50		—		—		50
Real estate - other commercial	Real estate - other commercial																			Real estate - other commercial
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	1,498,718		1,544,045		646,921		339,571		241,678		758,803		1,882,897		19,646		6,932,279		Pass	143,975		1,796,637		1,435,738		596,675		295,324		762,808		2,179,206		—		7,210,363
Special mention	Special mention	30,970		13,928		31,702		208		6,768		37,207		49,083		—		169,866		Special mention	2,986		1,625		35,008		31,519		2,895		38,953		100,567		—		213,553
Substandard	Substandard	22,117		16,487		15,292		4,624		8,377		36,445		44,404		—		147,746		Substandard	599		7,854		18,781		1,550		4,241		26,317		37,706		—		97,048
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		—		—
Total real estate - other commercial	Total real estate - other commercial	1,551,805		1,574,460		693,915		344,403		256,823		832,455		1,976,384		19,646		7,249,891		Total real estate - other commercial	147,560		1,806,116		1,489,527		629,744		302,460		828,078		2,317,479		—		7,520,964
Commercial
Risk rating:
Pass		503,656		330,386		167,711		75,215		43,335		54,340		1,281,039		27,220		2,482,902
Special mention		51		1,080		34		58		8		963		2,042		—		4,236
Substandard		2,247		6,059		764		1,014		1,462		4,682		20,968		884		38,080
Doubtful and loss		—		—		—		—		—		—		—		—		—
Total commercial		505,954		337,525		168,509		76,287		44,805		59,985		1,304,049		28,104		2,525,218
Commercial - agriculture
Risk rating:
Pass		34,791		25,667		12,321		6,336		1,600		1,469		180,276		413		262,873
Special mention		—		—		—		—		—		—		—		—		—
Substandard		9		23		5		57		10		—		562		—		666
Doubtful and loss		—		—		—		—		—		—		—		—		—
Total commercial - agriculture		34,800		25,690		12,326		6,393		1,610		1,469		180,838		413		263,539
Other
Delinquency:
Current		96,254		30,852		8,599		5,529		20,537		26,057		167,238		953		356,019
30-89 days past due		—		—		—		—		—		—		—		—		—
90+ days past due		—		—		—		—		—		3		—		—		3
Total other		96,254		30,852		8,599		5,529		20,537		26,060		167,238		953		356,022
Total		$	3,022,119	$	2,514,957	$	1,228,057	$	622,156	$	566,287	$	1,462,385	$	6,137,000	$	54,174	$	15,607,135
Current-period real estate - other commercial gross charge-offs																				Current-period real estate - other commercial gross charge-offs	—		—		—		—		—		—		—		—		—

2823


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023 (YTD)		2022		2021		2020		2019		2018 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total
Commercial
Risk rating:
Pass	127,523		508,776		271,243		128,686		64,237		83,378		1,430,642		363		2,614,848
Special mention	16		12,398		1,066		24		50		1,020		10,589		—		25,163
Substandard	—		6,661		4,847		1,019		1,402		5,632		10,157		—		29,718
Doubtful and loss	—		—		—		—		—		2		—		—		2
Total commercial	127,539		527,835		277,156		129,729		65,689		90,032		1,451,388		363		2,669,731
Current-period commercial - gross charge-offs	—		165		69		47		91		33		5		—		410
Commercial - agriculture
Risk rating:
Pass	19,168		41,497		21,458		8,945		3,852		1,370		124,070		97		220,457
Special mention	—		—		—		—		14		—		—		—		14
Substandard	—		58		8		72		29		3		—		—		170
Doubtful and loss	—		—		—		—		—		—		—		—		—
Total commercial - agriculture	19,168		41,555		21,466		9,017		3,895		1,373		124,070		97		220,641
Current-period commercial - agriculture gross charge-offs	—		—		—		—		—		3		—		—		3
Other
Delinquency:
Current	20,160		151,015		29,183		7,750		4,435		44,220		188,636		—		445,399
30-89 days past due	—		—		—		—		—		—		—		—		—
90+ days past due	—		—		—		—		—		3		—		—		3
Total other	20,160		151,015		29,183		7,750		4,435		44,223		188,636		—		445,402
Current-period other - gross charge-offs	—		—		—		—		—		—		31		—		31
Total	$	475,019	$	3,485,057	$	2,301,425	$	1,085,225	$	546,637	$	1,665,302	$	6,995,242	$	1,191	$	16,555,098

The following table presents a summary of loans by credit quality indicator, as of December 31, ~~2021,~~2022, segregated by class of loans.


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		2016 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total		(In thousands)	2022		2021		2020		2019		2018		2017 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total
Consumer - credit cards	Consumer - credit cards																			Consumer - credit cards
Delinquency:	Delinquency:																			Delinquency:
Current	Current	$	—	$	—	$	—	$	—	$	—	$	—	$	185,792	$	—	$	185,792	Current	$	—	$	—	$	—	$	—	$	—	$	—	$	195,222	$	—	$	195,222
30-89 days past due	30-89 days past due	—		—		—		—		—		—		847		—		847		30-89 days past due	—		—		—		—		—		—		1,297		—		1,297
90+ days past due	90+ days past due	—		—		—		—		—		—		413		—		413		90+ days past due	—		—		—		—		—		—		409		—		409
Total consumer - credit cards	Total consumer - credit cards	—		—		—		—		—		—		187,052		—		187,052		Total consumer - credit cards	—		—		—		—		—		—		196,928		—		196,928
Consumer - other	Consumer - other																			Consumer - other
Delinquency:	Delinquency:																			Delinquency:
Current	Current	97,830		21,885		11,712		6,756		5,416		3,833		19,607		—		167,039		Current	86,303		26,339		10,071		3,804		2,671		2,275		20,350		3		151,816
30-89 days past due	30-89 days past due	265		121		164		49		219		156		175		—		1,149		30-89 days past due	298		241		135		13		34		119		12		—		852
90+ days past due	90+ days past due	23		23		28		21		13		22		—		—		130		90+ days past due	121		47		2		1		2		41		—		—		214
Total consumer - other	Total consumer - other	98,118		22,029		11,904		6,826		5,648		4,011		19,782		—		168,318		Total consumer - other	86,722		26,627		10,208		3,818		2,707		2,435		20,362		3		152,882
Real estate - C&D	Real estate - C&D																			Real estate - C&D
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	74,813		83,729		28,803		17,349		8,505		9,319		1,074,617		20,285		1,317,420		Pass	237,304		68,916		50,912		16,920		13,625		9,611		2,163,776		334		2,561,398
Special mention	Special mention	—		—		270		—		—		47		—		—		317		Special mention	—		—		—		—		—		41		1,342		—		1,383
Substandard	Substandard	191		77		16		54		324		423		5,598		1,951		8,634		Substandard	1,091		116		36		13		31		103		2,478		—		3,868
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		—		—
Total real estate - C&D	Total real estate - C&D	75,004		83,806		29,089		17,403		8,829		9,789		1,080,215		22,236		1,326,371		Total real estate - C&D	238,395		69,032		50,948		16,933		13,656		9,755		2,167,596		334		2,566,649
Real estate - SF residential	Real estate - SF residential																			Real estate - SF residential
Delinquency:	Delinquency:																			Delinquency:
Current	Current	419,605		335,788		185,190		260,037		193,110		421,957		256,155		9,422		2,081,264		Current	700,976		411,885		295,365		141,608		192,176		440,931		324,282		4,192		2,511,415
30-89 days past due	30-89 days past due	1,061		883		1,662		791		1,077		4,360		1,479		—		11,313		30-89 days past due	3,105		3,415		1,290		2,018		3,129		8,626		2,042		—		23,625
90+ days past due	90+ days past due	27		561		507		1,199		1,358		5,104		570		72		9,398		90+ days past due	586		871		885		968		1,017		6,312		436		—		11,075
Total real estate - SF residential	Total real estate - SF residential	420,693		337,232		187,359		262,027		195,545		431,421		258,204		9,494		2,101,975		Total real estate - SF residential	704,667		416,171		297,540		144,594		196,322		455,869		326,760		4,192		2,546,115
Real estate - other commercial	Real estate - other commercial																			Real estate - other commercial
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	1,349,746		807,701		375,824		267,696		476,029		537,493		1,409,099		164,856		5,388,444		Pass	1,917,352		1,482,049		768,630		254,986		179,729		428,027		2,093,379		19,469		7,143,621
Special mention	Special mention	28,151		30,981		2,799		6,650		39,361		4,801		38,638		1,608		152,989		Special mention	19,538		32,831		38,821		206		2,261		20,741		104,431		—		218,829
Substandard	Substandard	28,137		10,186		5,243		10,806		30,060		27,107		53,860		32,072		197,471		Substandard	24,639		3,399		27,399		2,544		2,026		15,217		30,824		—		106,048
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		—		—
Total real estate - other commercial	Total real estate - other commercial	1,406,034		848,868		383,866		285,152		545,450		569,401		1,501,597		198,536		5,738,904		Total real estate - other commercial	1,961,529		1,518,279		834,850		257,736		184,016		463,985		2,228,634		19,469		7,468,498
Commercial	Commercial																			Commercial
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	455,499		187,517		80,486		57,437		36,529		57,099		1,004,971		41,885		1,921,423		Pass	595,256		300,650		168,539		41,924		31,329		35,447		1,401,402		24,940		2,599,487
Special mention	Special mention	670		2,482		1,066		189		261		2,770		8,500		10,499		26,437		Special mention	199		1,700		11		32		—		927		2,708		80		5,657
Substandard	Substandard	3,436		18,381		4,397		1,196		578		850		8,242		7,103		44,183		Substandard	5,257		2,435		3,328		802		891		1,290		11,337		1,805		27,145
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		1		1
Total commercial	Total commercial	459,605		208,380		85,949		58,822		37,368		60,719		1,021,713		59,487		1,992,043		Total commercial	600,712		304,785		171,878		42,758		32,220		37,664		1,415,447		26,826		2,632,290
Commercial - agriculture	Commercial - agriculture																			Commercial - agriculture
Risk rating:	Risk rating:																			Risk rating:
Pass	Pass	32,780		20,230		10,253		3,646		2,364		459		98,245		327		168,304		Pass	44,377		22,901		12,044		4,483		1,029		369		119,342		310		204,855
Special mention	Special mention	—		—		—		—		—		—		—		—		—		Special mention	8		—		—		—		—		—		—		—		8
Substandard	Substandard	191		25		27		53		22		3		23		69		413		Substandard	55		8		78		49		10		—		560		—		760
Doubtful and loss	Doubtful and loss	—		—		—		—		—		—		—		—		—		Doubtful and loss	—		—		—		—		—		—		—		—		—
Total commercial - agriculture	Total commercial - agriculture	32,971		20,255		10,280		3,699		2,386		462		98,268		396		168,717		Total commercial - agriculture	44,440		22,909		12,122		4,532		1,039		369		119,902		310		205,623
Other	Other																			Other
Delinquency:	Delinquency:																			Delinquency:
Current	Current	24,247		4,740		1,236		22,438		6,692		5,578		264,189		—		329,120		Current	152,086		29,362		8,181		4,742		20,018		25,349		132,384		953		373,075
30-89 days past due	30-89 days past due	—		—		—		—		—		—		—		—		—		30-89 days past due	—		—		—		—		—		61		—		—		61
90+ days past due	90+ days past due	—		—		—		—		—		3		—		—		3		90+ days past due	—		—		—		—		—		3		—		—		3
Total other	Total other	24,247		4,740		1,236		22,438		6,692		5,581		264,189		—		329,123		Total other	152,086		29,362		8,181		4,742		20,018		25,413		132,384		953		373,139
Total	Total	$	2,516,672	$	1,525,310	$	709,683	$	656,367	$	801,918	$	1,081,384	$	4,431,020	$	290,149	$	12,012,503	Total	$	3,788,551	$	2,387,165	$	1,385,727	$	475,113	$	449,978	$	995,490	$	6,608,013	$	52,087	$	16,142,124

2925

Allowance for Credit Losses

Allowance for Credit Losses – 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,~~quantitative factors, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected loan losses and risks inherent in the loan portfolio. The Company’s allowance for 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 ~~the effective interest rate used to discount~~ prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses. Accordingly, the methodology is comprised of two components: individual assessments on loans with unique risk characteristics and collective assessments for loans that share similar risk characteristics. Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated for collective assessment. The Company uses statistically-based models that leverage assumptions about current and future economic conditions throughout the contractual life of the loan. Expected credit losses are estimated by either lifetime loss rates or expected loss cash flows based on three key parameters: probability-of-default (“PD”), exposure-at-default (“EAD”), and loss-given-default (“LGD”). Future economic conditions are incorporated to the ~~Company’s~~extent that they are reasonable and supportable. Beyond the reasonable and supportable periods, the economic ~~forecasts,~~variables revert to a historical ~~loss experience,~~equilibrium at a pace dependent on the state of the economy reflected within the economic scenarios. To determine the best estimate of credit losses as of March 31, 2023, the Company utilized a probability-weighted, multiple-scenario approach consisting of Baseline, Upside (S1), and Downside (S3) scenarios published by Moody’s Analytics in March 2023 that was updated to reflect the U.S. economic outlook. The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for. These factors may include but are not limited to portfolio trends and considerations, other ~~qualitative adjustments.~~economic considerations, policy actions, concentration risk, or imprecision risk.

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~~Loans 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, non-performing loans, charge-offs, and risk ratings that may not be fully accounted for in the reserve factor.~~

•~~Changes in the 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~~unique 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 estimating the fair value of the underlying collateral or the present value of expected cash flows.

rating. For a ~~collateral dependent~~collateral-dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral 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 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.~~

3026

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 ~~$77.1~~$101.4 million and ~~$47.1~~$70.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, as further detailed in the table below. The collateral securing these loans consist of commercial real estate properties, residential properties, and other business assets.

(In thousands) Real Estate Collateral Other Collateral Total
September 30, 2022
Construction and development $ 2,683 $ — $ 2,683
Single family residential 1,008 — 1,008
Other commercial real estate 64,772 — 64,772
Commercial — 8,607 8,607
Total $ 68,463 $ 8,607 $ 77,070
December 31, 2021
Construction and development $ 2,489 $ — $ 2,489
Single family residential 1,838 — 1,838
Other commercial real estate 32,849 — 32,849
Commercial — 9,913 9,913
Total $ 37,176 $ 9,913 $ 47,089


(In thousands)	Real Estate Collateral		Other Collateral		Total
March 31, 2023
Construction and development	$	11,226	$	—	$	11,226
Single family residential	7,206		—		7,206
Other commercial real estate	74,779		—		74,779
Commercial	—		8,162		8,162
Total	$	93,211	$	8,162	$	101,373

December 31, 2022
Construction and development	$	2,156	$	—	$	2,156
Single family residential	—		—		—
Other commercial real estate	65,450		—		65,450
Commercial	—		3,320		3,320
Total	$	67,606	$	3,320	$	70,926

The following table details activity in the allowance for credit losses by portfolio segment for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. 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)	(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total		(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Allowance for credit losses:	Allowance for credit losses:											Allowance for credit losses:
Three Months Ended September 30, 2022
Beginning balance, July 1, 2022		$	32,817	$	166,481	$	6,609	$	6,704	$	212,611
Acquisition adjustment for PCD loans		1,057		—		—		—		1,057
Three Months Ended March 31, 2023												Three Months Ended March 31, 2023
Beginning balance, January 1, 2023												Beginning balance, January 1, 2023	$	34,406	$	150,795	$	5,140	$	6,614	$	196,955
Provision for credit loss expense	Provision for credit loss expense	(613)		(17,243)		1,119		840		(15,897)		Provision for credit loss expense	(4,804)		14,021		2,148		(449)		10,916
Charge-offs	Charge-offs	(1,873)		(130)		(903)		(506)		(3,412)		Charge-offs	(413)		(1,204)		(1,076)		(456)		(3,149)
Recoveries	Recoveries	720		1,982		250		278		3,230		Recoveries	1,067		294		234		240		1,835
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(1,153)		1,852		(653)		(228)		(182)		Net (charge-offs) recoveries	654		(910)		(842)		(216)		(1,314)
Ending balance, September 30, 2022		$	32,108	$	151,090	$	7,075	$	7,316	$	197,589
Ending balance, March 31, 2023												Ending balance, March 31, 2023	$	30,256	$	163,906	$	6,446	$	5,949	$	206,557

Nine Months Ended September 30, 2022
Beginning balance, January 1, 2022		$	17,458	$	179,270	$	3,987	$	4,617	$	205,332
Acquisition adjustment for PCD loans		1,911		3,187		—		2		5,100
Provision for credit loss expense		19,721		(33,436)		5,142		3,168		(5,405)
Charge-offs		(8,880)		(730)		(2,827)		(1,438)		(13,875)
Recoveries		1,898		2,799		773		967		6,437
Net (charge-offs) recoveries		(6,982)		2,069		(2,054)		(471)		(7,438)
Ending balance, September 30, 2022		$	32,108	$	151,090	$	7,075	$	7,316	$	197,589

Activity in the allowance for credit losses for the three months ended March 31, 2022 was as follows:


(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Allowance for credit losses:
Three Months Ended March 31, 2022
Beginning balance, January 1, 2022	$	17,458	$	179,270	$	3,987	$	4,617	$	205,332
Provision for credit loss expense	(2,519)		(17,822)		(447)		874		(19,914)
Charge-offs	(6,319)		(485)		(920)		(414)		(8,138)
Recoveries	557		426		274		387		1,644
Net charge-offs	(5,762)		(59)		(646)		(27)		(6,494)
Ending balance, March 31, 2022	$	9,177	$	161,389	$	2,894	$	5,464	$	178,924

3127

~~Activity in the allowance for credit losses for the three and nine months ended September 30, 2021 was as follows:~~

(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total
Allowance for credit losses:
Three Months Ended September 30, 2021
Beginning balance, July 1, 2021 $ 29,793 $ 188,388 $ 5,442 $ 3,616 $ 227,239
Provision for credit loss expense (11,853) (7,668) (247) (122) (19,890)
Charge-offs (932) (5,941) (711) (463) (8,047)
Recoveries 463 2,068 267 408 3,206
Net charge-offs (469) (3,873) (444) (55) (4,841)
Ending balance, September 30, 2021 $ 17,471 $ 176,847 $ 4,751 $ 3,439 $ 202,508
Nine Months Ended September 30, 2021
Beginning balance, January 1, 2021 $ 42,093 $ 182,868 $ 7,472 $ 5,617 $ 238,050
Provision for credit loss expense (25,453) (1,948) (763) (1,737) (29,901)
Charge-offs (2,099) (8,068) (2,759) (1,577) (14,503)
Recoveries 2,930 3,995 801 1,136 8,862
Net (charge-offs) recoveries 831 (4,073) (1,958) (441) (5,641)
Ending balance, September 30, 2021 $ 17,471 $ 176,847 $ 4,751 $ 3,439 $ 202,508

As of ~~September 30, 2022,~~March 31, 2023, the Company’s allowance for credit losses was considered sufficient based upon expected ~~loan level cash flows~~losses that were supported by scenario-weighted economic forecasts. The provision ~~recapture~~expense for the three months ended September 30, 2022 was primarily due to a release of $16.0 million driven by a reduction to certain industry specific qualitative factors related to overall improvement from pandemic related stresses to these industries. The provision recapture for the nine months ended September 30, 2022March 31, 2023 was primarily due to the ~~qualitative factor reduction previously noted coupled with~~loan growth experienced during the ~~improved asset credit quality metrics combined with improved Moody’s~~quarter, as well as the impact of updated economic ~~modeling scenarios, which more than offset the Day 2 provision expense related to the Spirit acquisition.~~assumptions.

Reserve for Unfunded Commitments

In addition to the 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 sufficient to absorb losses arising from unfunded loan commitments. The reserve for unfunded commitments ~~was $41.9 million and $22.4 million~~ as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022 was $41.9 million. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses. For the three month period ended September 30, 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $16.0 million due to the overall increase in unfunded commitments, primarily made up of commercial construction loans, which receive a higher reserve allocation than other loans. For the nine month period ended September 30, 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $19.5 million, made up of the increase previously discussed combined with the Day 2 provision related to the Spirit acquisition. These adjustments were included in the provision for credit losses in the statement of income. No adjustment was made to the reserve for unfunded commitments during the three month periods ended March 31, 2023, and ~~nine months ended September 30, 2021,~~2022, as it was considered sufficient to cover any loss expectations.

Provision for Credit Losses

Provision for credit losses is determined by the Company as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.

The components of the provision for credit losses for the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Provision for credit losses related to:	Provision for credit losses related to:									Provision for credit losses related to:
Loans	Loans	$	(15,897)	$	(19,890)	$	(5,405)	$	(29,901)	Loans	$	10,916	$	(19,914)
Unfunded commitments	Unfunded commitments	16,000		—		19,453		—		Unfunded commitments	—		—
Securities - HTM	Securities - HTM	—		—		—		(1,183)		Securities - HTM	500		—
Securities - AFS	Securities - AFS	—		—		—		(312)		Securities - AFS	12,800		—
Total	Total	$	103	$	(19,890)	$	14,048	$	(31,396)	Total	$	24,216	$	(19,914)

Purchased Credit Deteriorated (“PCD”) Loans

Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit loss on the date of acquisition using the same methodology as discussed in the Allowance for Credit Losses section included above.

The following table provides a summary of loans purchased ~~during the fourth quarter of 2021 as part of the Landmark acquisition with credit deterioration at acquisition:~~

(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total
Unpaid principal balance $ 11,046 $ 55,549 $ — $ 67 $ 66,662
PCD allowance for credit loss at acquisition (350) (2,008) — (1) (2,359)
Non-credit related discount (160) (2,415) — (2) (2,577)
Fair value of PCD loans $ 10,536 $ 51,126 $ — $ 64 $ 61,726

~~The following table provides a summary of loans purchased during the fourth quarter of 2021 as part of the Triumph acquisition with credit deterioration at acquisition:~~

(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total
Unpaid principal balance $ 40,466 $ 80,803 $ — $ 15 $ 121,284
PCD allowance for credit loss at acquisition (2,999) (8,093) — — (11,092)
Non-credit related discount (279) (1,314) — (1) (1,594)
Fair value of PCD loans $ 37,188 $ 71,396 $ — $ 14 $ 108,598

~~The following table provides a summary of loans purchased during the second quarter of 2022~~ as part of the Spirit acquisition with credit deterioration at acquisition:


(In thousands)	(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total		(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
Unpaid principal balance	Unpaid principal balance	$	8,258	$	66,534	$	—	$	59	$	74,851	Unpaid principal balance	$	8,258	$	66,534	$	—	$	59	$	74,851
PCD allowance for credit loss at acquisition	PCD allowance for credit loss at acquisition	(1,911)		(3,187)		—		(2)		(5,100)		PCD allowance for credit loss at acquisition	(6,433)		(3,187)		—		(2)		(9,622)
Non-credit related discount	Non-credit related discount	(378)		(998)		—		(1)		(1,377)		Non-credit related discount	(378)		(998)		—		(1)		(1,377)
Fair value of PCD loans	Fair value of PCD loans	$	5,969	$	62,349	$	—	$	56	$	68,374	Fair value of PCD loans	$	1,447	$	62,349	$	—	$	56	$	63,852

3328

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

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 Federal Home Loan Bank (“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. The following table presents information as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 related to the Company’s right-of-use lease assets, included in premises and equipment, and lease liabilities, included in accrued interest and other liabilities.


		September 30,			December 31,				March 31,			December 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			(Dollars in thousands)	2023			2022
Right-of-use lease assets	Right-of-use lease assets	$	49,308		$	48,855		Right-of-use lease assets	$	60,027		$	46,845
Lease liabilities	Lease liabilities	50,187			49,321			Lease liabilities	61,217			47,850

Weighted average remaining lease term	Weighted average remaining lease term	7.82 years			7.96 years			Weighted average remaining lease term	8.47 years			6.69 years
Weighted average discount rate	Weighted average discount rate	2.05		%	2.00		%	Weighted average discount rate	3.19		%	2.41		%

Operating lease cost for the three ~~and nine~~ month periods ended ~~September 30,~~March 31, 2023 and 2022 was ~~$3.6~~$3.9 million and ~~$10.5~~$3.2 million, ~~respectively, as compared to $2.8 million and $8.5 million for the same periods in 2021.~~respectively.

NOTE 7: PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation and amortization. Total premises and equipment, net at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Right-of-use lease assets	Right-of-use lease assets	$	49,308	$	48,855	Right-of-use lease assets	$	60,027	$	46,845
Premises and equipment:	Premises and equipment:					Premises and equipment:
Land	Land	123,068		101,728		Land	124,318		122,841
Buildings and improvements	Buildings and improvements	366,773		320,844		Buildings and improvements	375,842		370,530
Furniture, fixtures and equipment	Furniture, fixtures and equipment	117,111		107,122		Furniture, fixtures and equipment	125,443		122,029
Software	Software	67,515		66,947		Software	71,465		70,984
Construction in progress	Construction in progress	20,767		9,117		Construction in progress	14,943		15,488
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(194,610)		(171,144)		Accumulated depreciation and amortization	(207,541)		(199,976)
Total premises and equipment, net	Total premises and equipment, net	$	549,932	$	483,469	Total premises and equipment, net	$	564,497	$	548,741

3429

NOTE 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 ~~$1.31 billion and $1.15~~$1.32 billion at ~~September 30, 2022~~March 31, 2023 and December 31, 2021, respectively. Goodwill increased $163.0 million during the nine months ended September 30, 2022 primarily due to the Spirit acquisition, along with adjustments related to the continued assessment of the fair value and assumed tax position of the Landmark and Triumph acquisitions.2022.

Goodwill impairment was neither indicated nor recorded during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 or the year ended December 31, ~~2021.~~2022. During ~~the second quarter~~March of ~~2022, the Company performed an annual goodwill impairment analysis and concluded no impairment existed. Also during 2022,~~2023, the Company’s share price began to decline as markets in the United States (“US”) responded to ~~record inflation and other economic pressures.~~the sudden collapse of two US banks. As a result of the ~~effect on share price,~~decrease in the Company’s market capitalization, the Company performed an interim goodwill impairment ~~assessments during the second and third quarters~~qualitative assessment and concluded ~~no impairment existed during~~that it is more likely-than-not that the ~~periods.~~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. Other intangible assets represent the value of other acquired relationships, including relationships with trust and wealth management customers, and are being amortized over various periods ranging from 8 years to 15 years.

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Core deposit premiums:	Core deposit premiums:					Core deposit premiums:
Balance, beginning of year	Balance, beginning of year	$	93,862	$	97,363	Balance, beginning of year	$	116,016	$	93,862
Acquisitions(1)	Acquisitions(1)	36,500		9,295		Acquisitions(1)	—		36,500
Disposition of intangible asset(2)		—		(674)
Amortization	Amortization	(10,647)		(12,122)		Amortization	(3,689)		(14,346)
Balance, end of period	Balance, end of period	119,715		93,862		Balance, end of period	112,327		116,016
Books of business and other intangibles:	Books of business and other intangibles:					Books of business and other intangibles:
Balance, beginning of year	Balance, beginning of year	12,373		13,747		Balance, beginning of year	12,935		12,373
Acquisitions(3)		2,131		—
Acquisitions(2)						Acquisitions(2)	—		2,131
Amortization	Amortization	(1,160)		(1,374)		Amortization	(408)		(1,569)
Balance, end of period	Balance, end of period	13,344		12,373		Balance, end of period	12,527		12,935
Total other intangible assets, net	Total other intangible assets, net	$	133,059	$	106,235	Total other intangible assets, net	$	124,854	$	128,951

_________________________

(1) A core deposit premium of $36.5 million was recorded during 2022 as part of the Spirit acquisition. ~~Core deposit premiums of $5.1 million and $4.2 million were recorded during 2021 as part of the Triumph and Landmark acquisitions, respectively.~~ See Note 2, Acquisitions, for additional information on acquisitions.

(2) ~~Adjustments recorded for the premiums on certain deposit liabilities associated with the sale of banking operations.~~

~~(3)~~ The Company recorded $2.1 million during 2022 related to servicing assets acquired as part of the Spirit acquisition. See Note 2, Acquisitions, for additional information on acquisitions.

3530

The carrying basis and accumulated amortization of the Company’s other intangible assets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Core deposit premiums:	Core deposit premiums:					Core deposit premiums:
Gross carrying amount	Gross carrying amount	$	189,996	$	153,496	Gross carrying amount	$	187,467	$	189,996
Accumulated amortization	Accumulated amortization	(70,281)		(59,634)		Accumulated amortization	(75,140)		(73,980)
Core deposit premiums, net	Core deposit premiums, net	119,715		93,862		Core deposit premiums, net	112,327		116,016
Books of business and other intangibles:	Books of business and other intangibles:					Books of business and other intangibles:
Gross carrying amount	Gross carrying amount	22,068		19,937		Gross carrying amount	22,068		22,068
Accumulated amortization	Accumulated amortization	(8,724)		(7,564)		Accumulated amortization	(9,541)		(9,133)
Books of business and other intangibles, net	Books of business and other intangibles, net	13,344		12,373		Books of business and other intangibles, net	12,527		12,935
Total other intangible assets, net	Total other intangible assets, net	$	133,059	$	106,235	Total other intangible assets, net	$	124,854	$	128,951

The Company’s estimated remaining amortization expense on other intangible assets as of ~~September 30, 2022~~March 31, 2023 is as follows:

(In thousands) Year Amortization
Expense
Remainder of 2022 $ 4,108
2023 16,306
2024 15,403
2025 12,819
2026 12,346
Thereafter 72,077
Total $ 133,059


(In thousands)	Year	Amortization Expense
	Remainder of 2023	$	12,209
	2024	15,403
	2025	12,819
	2026	12,346
	2027	12,218
	Thereafter	59,859
	Total	$	124,854

NOTE 9: TIME DEPOSITS

Time deposits included approximately ~~$1.25~~$1.46 billion and ~~$784.9 million~~$1.08 billion of certificates of deposit over $250,000 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Brokered time deposits were ~~$1.82~~$2.95 billion and ~~$466.0 million~~$2.75 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

NOTE 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,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Income taxes currently payable	Income taxes currently payable	$	14,952	$	21,500	$	35,412	$	46,566	Income taxes currently payable	$	10,816	$	5,119
Deferred income taxes	Deferred income taxes	2,007		(2,730)		2,924		3,585		Deferred income taxes	(179)		9,107
Provision for income taxes	Provision for income taxes	$	16,959	$	18,770	$	38,336	$	50,151	Provision for income taxes	$	10,637	$	14,226

3631

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 approximate tax effects, are as follows:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Loans acquired	Loans acquired	$	7,459	$	4,832	Loans acquired	$	5,225	$	5,846
Allowance for credit losses	Allowance for credit losses	47,048		48,462		Allowance for credit losses	49,343		47,145
Valuation of foreclosed assets	Valuation of foreclosed assets	628		628		Valuation of foreclosed assets	523		523
Tax NOLs from acquisition	Tax NOLs from acquisition	12,423		13,537		Tax NOLs from acquisition	10,541		10,962
Deferred compensation payable	Deferred compensation payable	3,795		3,426		Deferred compensation payable	3,806		3,867
Accrued equity and other compensation	Accrued equity and other compensation	5,738		5,776		Accrued equity and other compensation	5,584		8,153
Acquired securities	Acquired securities	19,749		223		Acquired securities	7,646		7,651
Right-of-use lease liability	Right-of-use lease liability	12,194		11,984		Right-of-use lease liability	14,893		11,641
Unrealized loss on AFS securities	Unrealized loss on AFS securities	204,415		8,164		Unrealized loss on AFS securities	160,906		177,839
Allowance for unfunded commitments	Allowance for unfunded commitments	10,188		5,442		Allowance for unfunded commitments	10,200		10,200
Other	Other	5,905		7,202		Other	5,944		4,173
Gross deferred tax assets	Gross deferred tax assets	329,542		109,676		Gross deferred tax assets	274,611		288,000
Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:
Goodwill and other intangible amortization	Goodwill and other intangible amortization	(45,070)		(38,329)		Goodwill and other intangible amortization	(43,839)		(44,539)
Accumulated depreciation	Accumulated depreciation	(24,741)		(26,347)		Accumulated depreciation	(23,861)		(24,288)
Right-of-use lease asset	Right-of-use lease asset	(11,981)		(11,871)		Right-of-use lease asset	(14,603)		(11,396)
Unrealized gain on swaps	Unrealized gain on swaps	(29,279)		(2,767)		Unrealized gain on swaps	(22,624)		(25,836)
Other	Other	(4,233)		(3,718)		Other	(10,160)		(8,875)
Gross deferred tax liabilities	Gross deferred tax liabilities	(115,304)		(83,032)		Gross deferred tax liabilities	(115,087)		(114,934)

Net deferred tax asset	Net deferred tax asset	$	214,238	$	26,644	Net deferred tax asset	$	159,524	$	173,066

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:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Computed at the statutory rate (21%)	Computed at the statutory rate (21%)	$	20,488	$	20,859	$	44,412	$	57,336	Computed at the statutory rate (21%)	$	11,808	$	16,657
Increase (decrease) in taxes resulting from:	Increase (decrease) in taxes resulting from:									Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit	State income taxes, net of federal tax benefit	1,774		1,477		2,339		4,855		State income taxes, net of federal tax benefit	243		1,125
Stock-based compensation	Stock-based compensation	16		(22)		(89)		15		Stock-based compensation	312		(202)
Tax exempt interest income	Tax exempt interest income	(3,682)		(2,973)		(10,704)		(8,224)		Tax exempt interest income	(3,804)		(3,403)
Tax exempt earnings on BOLI	Tax exempt earnings on BOLI	(509)		(435)		(1,399)		(995)		Tax exempt earnings on BOLI	(561)		(425)
Federal tax credits	Federal tax credits	(301)		(491)		(1,838)		(1,670)		Federal tax credits	(439)		(588)
Other differences, net	Other differences, net	(827)		355		5,615		(1,166)		Other differences, net	3,078		1,062
Actual tax provision	Actual tax provision	$	16,959	$	18,770	$	38,336	$	50,151	Actual tax provision	$	10,637	$	14,226

3732

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 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~~four tax-free reorganization transactions in which acquired net operating losses are limited pursuant to Section 382. In total, approximately ~~$55.6~~$47.0 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company. All of the acquired net operating loss carryforwards are 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 ~~2018~~2019 tax year and forward. The Company’s various state income tax returns are generally open from the ~~2018~~2019 and later tax return years based on individual state statute of limitations.

NOTE 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 ~~$159.5~~$142.9 million and ~~$170.4~~$152.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 is presented in the following tables.


		Remaining Contractual Maturity of the Agreements											Remaining Contractual Maturity of the Agreements
(In thousands)	(In thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total		(In thousands)	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
September 30, 2022
March 31, 2023												March 31, 2023
Repurchase agreements:	Repurchase agreements:											Repurchase agreements:
U.S. Government agencies	U.S. Government agencies	$	159,513	$	—	$	—	$	—	$	159,513	U.S. Government agencies	$	142,862	$	—	$	—	$	—	$	142,862

December 31, 2021
December 31, 2022												December 31, 2022
Repurchase agreements:	Repurchase agreements:											Repurchase agreements:
U.S. Government agencies	U.S. Government agencies	$	170,403	$	—	$	—	$	—	$	170,403	U.S. Government agencies	$	152,403	$	—	$	—	$	—	$	152,403

3833

NOTE 12: OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

Debt at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consisted of the following components:


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Other Borrowings	Other Borrowings					Other Borrowings
FHLB advances, net of discount, due 2022 to 2034, 1.49% to 5.53% secured by real estate loans		$	934,147	$	1,306,143
FHLB advances, net of discount, due 2023 to 2033, 4.56% to 5.53% secured by real estate loans						FHLB advances, net of discount, due 2023 to 2033, 4.56% to 5.53% secured by real estate loans	$	1,003,429	$	838,487
Other long-term debt	Other long-term debt	30,625		31,830		Other long-term debt	20,397		20,809
Total other borrowings	Total other borrowings	964,772		1,337,973		Total other borrowings	1,023,826		859,296

Subordinated Notes and Debentures	Subordinated Notes and Debentures					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)	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		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
Subordinated notes payable, net of premium adjustments, due 7/31/2030, fixed-to-floating rate (fixed rate of 6.00% through 7/30/2025, floating rate of 5.92% above the three month SOFR rate, reset quarterly)	Subordinated notes payable, net of premium adjustments, due 7/31/2030, fixed-to-floating rate (fixed rate of 6.00% through 7/30/2025, floating rate of 5.92% above the three month SOFR rate, reset quarterly)	37,313		—		Subordinated notes payable, net of premium adjustments, due 7/31/2030, fixed-to-floating rate (fixed rate of 6.00% through 7/30/2025, floating rate of 5.92% above the three month SOFR rate, reset quarterly)	37,256		37,285
Trust preferred securities, due 9/15/2037, floating rate of 1.37% above the three month LIBOR rate, reset quarterly		—		10,310
Trust preferred securities, due 6/6/2037, floating rate of 1.57% above the three month LIBOR rate, reset quarterly, callable without penalty		—		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
Trust preferred securities, net of discount, due 6/15/2037, floating rate of 1.85% above the three month LIBOR rate, reset quarterly, callable without penalty		—		25,329
Trust preferred securities, net of discount, due 12/15/2036, floating rate of 1.85% above the three month LIBOR rate, reset quarterly, callable without penalty		—		3,041
Unamortized debt issuance costs	Unamortized debt issuance costs	(1,362)		(1,561)		Unamortized debt issuance costs	(1,229)		(1,296)
Total subordinated notes and debentures	Total subordinated notes and debentures	365,951		384,131		Total subordinated notes and debentures	366,027		365,989
Total other borrowings and subordinated debt	Total other borrowings and subordinated debt	$	1,330,723	$	1,722,104	Total other borrowings and subordinated debt	$	1,389,853	$	1,225,285

In March 2018, the Company issued $330.0 million in aggregate principal amount, of 5.00% Fixed-to-Floating Rate Subordinated Notes (“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 the Company only and are not obligations of, and are not guaranteed by, any of its subsidiaries. The Company used a portion of the net proceeds from the sale of the Notes to repay certain outstanding indebtedness. The Notes qualify for Tier 2 capital treatment.

The terms of the Company’s Notes utilize the three month LIBOR rate to determine the interest rate and expense due each quarter. The Company is currently reviewing all applicable documents and working with the debt holders and all relevant parties to determine the alternate interest rate index to be utilized, or other impacts, when LIBOR is discontinued.

The Company assumed subordinated debt in an aggregate principal amount, net of premium adjustments, of $37.4 million in connection with the Spirit acquisition in April 2022 (the “Spirit Notes”). The Spirit Notes will mature on July 31, 2030, and initially bear interest at a fixed annual rate of 6.00%, payable quarterly, in arrears, to, but excluding, July 31, 2025. From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears.

The Company had total FHLB advances of ~~$934.1~~$1.00 billion and $838.5 million ~~and $1.31 billion~~ at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, which are primarily ~~FHLB Owns the Option (“FOTO”) advances. FOTO~~fixed rate, fixed term advances, which are ~~a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier~~due less than ~~the maturity date~~one year from origination and therefore are classified as short-term advances by the Company. At ~~September 30, 2022,~~March 31, 2023, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately ~~$6.0~~$6.9 billion and the Company had approximately ~~$5.0~~$5.6 billion of additional advances available from the FHLB.

During the third quarter of 2022, the Company redeemed the five issuances of trust preferred securities which had an outstanding aggregate principal amount of $56.2 million. The Company recorded a loss of $365,000 related to the early retirement of debt, which represented the unamortized purchase discounts associated with the previously acquired trust preferred securities. Each of the trusts was 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 represented preferred beneficial interests in the assets of the respective trusts and were subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust were wholly-owned by the Company. The trust preferred securities were tax-advantaged issues that qualified for inclusion as Tier 2 capital.

The Company’s long-term debt primarily includes subordinated debt and other notes payable. Aggregate annual maturities of long-term debt at ~~September 30, 2022,~~March 31, 2023, are as follows:


Year	Year	(In thousands)		Year	(In thousands)
Remainder of 2022		$	429
2023		1,783
Remainder of 2023				Remainder of 2023	$	1,330
2024	2024	1,839		2024	1,822
2025	2025	4,841		2025	1,822
2026	2026	1,844		2026	1,824
2027				2027	1,920
Thereafter	Thereafter	389,986		Thereafter	381,128
Total	Total	$	400,722	Total	$	389,846

NOTE 13: CONTINGENT LIABILITIES

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings incidental to the conduct of our business, including proceedings based on breach of contract claims, lender liability claims, and other ordinary-course claims, some of which seek substantial relief or damages.

On May 22, 2019, Danny Walkingstick and Whitnye Fort filed a putative class action complaint against Simmons Bank in the United States District Court for the Western District of Missouri. The operative complaint alleges that Simmons Bank improperly charges overdraft fees on transactions that did not actually overdraw customers’ accounts by utilizing the checking account’s “available balance” to assess overdraft fees instead of the “ledger balance.” Plaintiffs’ claims include breach of contract and unjust enrichment, and they seek to represent a proposed class of all Simmons Bank checking account customers who were assessed an overdraft fee on a transaction that purportedly did not overdraw the account. Plaintiffs seek unspecified damages, costs, attorneys’ fees, pre- and post-judgment interest, and other relief as the Court deems proper for themselves and the putative class. Simmons Bank denies the allegations but has entered into a settlement agreement and release with the plaintiffs on behalf of themselves and the proposed class to resolve this matter, subject to the court’s final approval. The settlement is not expected to have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

On January 14, 2020, Susanne Pace filed a putative class action complaint in the Circuit Court of Boone County, Missouri against Landmark Bank, formerly a wholly-owned subsidiary of The Landrum Company, to which Simmons Bank is a successor by merger in connection with the Company’s acquisition of The Landrum Company, which closed in October 2019. The complaint alleges that Landmark Bank improperly charged overdraft fees where a transaction was initially authorized on sufficient funds but later settled negative due to intervening transactions. The complaint asserts a claim for breach of contract, which incorporates the implied duty of good faith and fair dealing. Plaintiff seeks to represent a proposed class of all Landmark Bank checking account customers from Missouri who were allegedly charged overdraft fees on transactions that did not overdraw their checking account. Plaintiff seeks unspecified actual, statutory, and punitive damages as well as costs, attorneys’ fees, prejudgment interest, an injunction, and other relief as the Court deems proper for herself and the putative class. Simmons Bank denies the allegations but has entered into a settlement agreement and release with the plaintiffs on behalf of themselves and the proposed class to resolve

this matter, subject to the court’s final approval. The settlement is not expected to have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

On June 29, 2020, Shunda Wilkins, Diann Graham, and David Watson filed a putative class action complaint against Simmons Bank in the United States District Court for the Eastern District of Arkansas. The complaint alleges that Simmons Bank improperly charges multiple insufficient funds or overdraft fees when a merchant resubmits a rejected payment request. The complaint asserts claims for breach of contract and unjust enrichment. Plaintiffs seek to represent a proposed class of all Simmons Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests. Plaintiffs seek unspecified damages, costs, attorney’s fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for themselves and the purported class. Simmons Bank denies the allegations and is vigorously defending the matter. On February 9, 2023, the district court denied plaintiffs’ motion for class certification, granted Simmons Bank’s motion for summary judgment in part, and granted Simmons Bank’s motion to exclude testimony of plaintiffs’ expert. The lawsuit remains pending.

We establish reserves for legal proceedings when potential losses become probable and can be reasonably estimated. While the ultimate resolution (including amounts thereof) of any legal proceedings, including the ~~matters~~matter described above, cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, consolidated results of operations, financial condition, or cash flows. It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to ~~our~~the Company’s results of operations for a given fiscal period.

NOTE 14: CAPITAL STOCK

On February 27, 2009, at a special meeting, the Company’s shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $0.01 par value. AsOn April 27, 2022, the Company’s shareholders approved amendments to the Company’s Articles of ~~September 30, 2022,~~Incorporation to remove an $80.0 million cap on the aggregate liquidation preference associated with the preferred stock and increase the number of ~~all~~authorized shares of ~~preferred~~the Company’s Class A common stock ~~cannot exceed $80,000,000.~~from 175,000,000 to 350,000,000.

On October 29, 2019, the Company filed 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 (“Series D Preferred Stock”), out of the Company’s authorized preferred stock. On ~~November 30, 2021,~~April 27, 2022, the ~~Company redeemed all~~Company’s shareholders approved an amendment to the Company’s Articles of Incorporation to remove the classification and designation for the Series D Preferred ~~Stock, including accrued and unpaid dividends.~~

~~On April 27, 2022, shareholders~~Stock. As of ~~the Company approved an increase in the number of authorized~~March 31, 2023, there were no shares of ~~its Class A common~~preferred stock ~~from 175,000,000 to 350,000,000.~~issued or outstanding.

Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the Company’s stock repurchase program originally established in October 2019 (“2019 Program”) that increased the amount of the Company’s Class A common stock that may be repurchased under the 2019 Program from a maximum of ~~$180~~$180.0 million to a maximum of $276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, ~~2022 (unless terminated sooner).~~2022.

During January 2022, the Company substantially exhausted the repurchase capacity under the 2019 Program. As a result, the Company’s Board of Directors authorized a new stock repurchase program in January 2022 (the “2022 Program”) under which the Company may repurchase up to $175.0 million of its Class A common stock currently issued and outstanding. The 2022 Program will terminate on January 31, 2024 (unless terminated sooner).

~~During~~No shares were repurchased during the three month period ended September 30, 2022, the Company repurchased 1,883,713 shares at an average price of $23.91 per share under the 2022 Program. During the nine month period ended September 30, 2022, the Company repurchased 513,725 shares at an average price of $31.25 per share under the 2019 Program and 3,919,037 shares at an average price of $24.26 per share under the 2022 Program, respectively. The 2022 Program repurchases were all completed during the second and third quarters of 2022.March 31, 2023. Market conditions and the Company’s capital needs will drive decisions regarding additional, future stock repurchases. During the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2021,~~March 31, 2022, the Company repurchased ~~1,806,205 shares at an average price of $28.48 per share and 1,937,121~~513,725 shares at an average price of ~~$28.14~~$31.25 per share ~~respectively,~~ under the 2019 Program.

Under the 2022 Program, which replaced the 2019 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 2022 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 2022 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 2022 Program to come from available sources of liquidity, including cash on hand and future cash flow.

NOTE 15: UNDIVIDED PROFITS

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 30, 2022,~~March 31, 2023, Simmons Bank had approximately ~~$175.1~~$330.1 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. 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 6.5% “common equity Tier 1 (CET1)” ratio.

The Company and Simmons Bank, must hold a capital conservation buffer of 2.5% composed of CET1 capital above its minimum risk-based capital requirements. Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses. As of ~~September 30, 2022,~~March 31, 2023, the Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules. The Company’s CET1 ratio was ~~11.73%~~11.87% at ~~September 30, 2022.~~March 31, 2023.

NOTE 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 awards of restricted stock, restricted stock units, or performance stock units granted to directors, officers and other key employees.

The table below summarizes the transactions under the Company’s active stock-based compensation plans for the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:


		Stock Options Outstanding			Non-vested Stock Awards Outstanding			Non-vested Stock Units Outstanding				Stock Options Outstanding			Non-vested Stock Awards Outstanding			Non-vested Stock Units Outstanding
(Shares in thousands)	(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		(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
Beginning balance, January 1, 2022		473	$	22.50	2	$	22.20	1,111	$	26.49
Beginning balance, January 1, 2023											Beginning balance, January 1, 2023	470	$	22.56	—	$	—	1,197	$	26.63
Granted	Granted	—	—		—	—		671	26.64		Granted	—	—		—	—		627	22.37
Stock options exercised	Stock options exercised	(2)	13.89		—	—		—	—		Stock options exercised	(1)	10.65		—	—		—	—
Stock awards/units vested (earned)	Stock awards/units vested (earned)	—	—		(2)	22.20		(397)	26.42		Stock awards/units vested (earned)	—	—		—	—		(290)	25.95
Forfeited/expired	Forfeited/expired	—	—		—	—		(80)	25.69		Forfeited/expired	—	—		—	—		(91)	24.79

Balance, September 30, 2022		471	$	22.54	—	$	—	1,305	$	26.66
Balance, March 31, 2023											Balance, March 31, 2023	469	$	22.58	—	$	—	1,443	$	25.01

Exercisable, September 30, 2022		471	$	22.54
Exercisable, March 31, 2023											Exercisable, March 31, 2023	469	$	22.58

The following table summarizes information about stock options under the plans outstanding at ~~September 30, 2022:~~March 31, 2023:


					Options Outstanding			Options Exercisable						Options Outstanding			Options Exercisable
Range of Exercise Prices	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	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
$	10.65	—	$	10.65	1	0.29	$10.65	1	$10.65	20.29	—	$	20.29	47	1.64	$20.29	47	$20.29
20.29		—	20.29		47	2.25	20.29	47	20.29
22.20	22.20	—	22.20		51	2.48	22.20	51	22.20	22.20	—	22.20		51	1.98	22.20	51	22.20
22.75	22.75	—	22.75		293	2.86	22.75	293	22.75	22.75	—	22.75		293	2.22	22.75	293	22.75
23.51	23.51	—	23.51		72	3.30	23.51	72	23.51	23.51	—	23.51		71	2.65	23.51	71	23.51
24.07	24.07	—	24.07		7	2.96	24.07	7	24.07	24.07	—	24.07		7	2.46	24.07	7	24.07
$	10.65	—	$	24.07	471	2.82	$22.54	471	$22.54	20.29	—	$	24.07	469	2.20	$22.58	469	$22.58

The table below summarizes the Company’s performance stock unit activity for the ~~nine~~three months ended ~~September 30, 2022:~~March 31, 2023:


(In thousands)						Performance Stock Units
Non-vested, January 1, ~~2022~~2023						~~257~~352
Granted						~~185~~302
Vested (earned)						~~(75)~~(72)
Forfeited						~~(12)~~(44)
Non-vested,~~September 30, 2022~~ March 31, 2023						~~355~~538

Stock-based compensation expense was ~~$11.5~~$4.9 million and ~~$12.6~~$3.9 million during the ~~nine~~three month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. There was no unrecognized stock-based compensation expense related to stock options at ~~September 30, 2022.~~March 31, 2023. Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was ~~$20.5~~$23.9 million at ~~September 30, 2022.~~March 31, 2023. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was ~~1.6~~1.9 years.

~~The~~There was no intrinsic value of stock options outstanding and stock options exercisable at ~~September 30, 2022 was $86,000.~~March 31, 2023. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was ~~$21.79~~$17.49 as of ~~September 30, 2022,~~March 31, 2023, and the exercise price multiplied by the number of options outstanding. ~~There was no~~

Total intrinsic value of stock options exercised during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 was $6,000, while ~~the total~~there was no intrinsic value of stock options exercised during the ~~nine~~three months ended ~~September 30, 2021 was $1.3 million.~~March 31, 2022.

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 no stock options granted during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

NOTE 17: EARNINGS PER SHARE (“EPS”)

Basic EPS is computed by dividing reported net income available to common stockholders by the 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		2022		2021		(In thousands, except per share data)	2023		2022
Net income available to common stockholders	Net income available to common stockholders	$	80,603	$	80,561	$	173,152	$	222,879	Net income available to common stockholders	$	45,589	$	65,095

Average common shares outstanding	Average common shares outstanding	127,884		107,822		122,935		108,130		Average common shares outstanding	127,186		112,439
Average potential dilutive common shares	Average potential dilutive common shares	452		538		452		538		Average potential dilutive common shares	330		588
Average diluted common shares	Average diluted common shares	128,336		108,360		123,387		108,668		Average diluted common shares	127,516		113,027

Basic earnings per share	Basic earnings per share	$	0.63	$	0.75	$	1.41	$	2.06	Basic earnings per share	$	0.36	$	0.58
Diluted earnings per share	Diluted earnings per share	$	0.63	$	0.74	$	1.40	$	2.05	Diluted earnings per share	$	0.36	$	0.58

There were ~~99,837~~422,180 stock options excluded from the three months ended ~~September 30, 2022~~March 31, 2023 earnings per share calculation due to the related stock option exercise price exceeding the average market price of the Company’s stock during the period. There were no stock options excluded from the earnings per share calculation for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 due to the ~~related exercise price exceeding the~~ average market ~~price. There were no~~price of the Company’s stock ~~options excluded from the earnings per share calculation for the three and nine months ended September 30, 2021 due to~~exceeding the related stock option exercise ~~price exceeding the average market~~ price.

NOTE 18: ADDITIONAL CASH FLOW INFORMATION

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


		Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Interest paid	Interest paid	$	66,744	$	59,535	Interest paid	$	95,048	$	12,901
Income taxes (refunded) paid		14,674		46,693
Income taxes paid (refunded)						Income taxes paid (refunded)	207		(363)
Transfers of loans to foreclosed assets held for sale	Transfers of loans to foreclosed assets held for sale	632		3,516		Transfers of loans to foreclosed assets held for sale	131		474
Transfers of premises held for sale to other real estate owned		—		4,368
Transfers of assets held for sale to other assets	Transfers of assets held for sale to other assets	100		—		Transfers of assets held for sale to other assets	—		100
Transfers of premises held for sale to premises		—		5,610
Transfers of available-for-sale to held-to-maturity securities		1,992,542		500,809

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NOTE 19: OTHER INCOME AND OTHER OPERATING EXPENSES

Other income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 was ~~$6.7~~$11.3 million and ~~$20.8~~$7.3 million, respectively. ~~Other~~Included in other income ~~for~~in the ~~same periods in 2021~~first quarter 2023 was ~~$6.4~~a $4.0 million and $25.3 million, respectively. During the nine month period ended September 30, 2021, the Company recognized a gain on sale of $5.3 million related to the sale of banking operations and bank branches.legal reserve recapture associated with previously disclosed legal matters.

Other operating expenses consisted of the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Professional services	Professional services	$	4,339	$	4,399	$	13,987	$	14,207	Professional services	$	4,409	$	5,446
Postage	Postage	2,385		1,964		6,728		6,277		Postage	2,324		2,126
Telephone	Telephone	1,668		1,516		4,921		4,758		Telephone	1,731		1,558
Credit card expense	Credit card expense	3,149		2,727		8,892		7,588		Credit card expense	3,189		2,706
Marketing	Marketing	6,662		5,019		21,556		12,912		Marketing	6,210		6,140
Software and technology	Software and technology	10,340		10,134		30,565		30,242		Software and technology	10,356		10,147
Operating supplies	Operating supplies	441		605		1,852		2,013		Operating supplies	605		698
Amortization of intangibles	Amortization of intangibles	4,225		3,332		11,807		10,008		Amortization of intangibles	4,096		3,486
Branch right sizing expense	Branch right sizing expense	1,170		(3,280)		2,371		(2,187)		Branch right sizing expense	979		909
Other expense	Other expense	10,705		8,149		28,534		22,008		Other expense	9,187		8,430
Total other operating expenses	Total other operating expenses	$	45,084	$	34,565	$	131,213	$	107,826	Total other operating expenses	$	43,086	$	41,646

NOTE 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 21: COMMITMENTS AND CREDIT RISK

The Company grants agribusiness, commercial and residential loans to customers primarily throughout Arkansas, 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 30,~~March 31, 2023, the Company had outstanding commitments to extend credit aggregating approximately $711.9 million and $5.01 billion for credit card commitments and other loan commitments, respectively. At December 31, 2022, the Company had outstanding commitments to extend credit aggregating approximately $696.7 million and $5.62 billion for credit card commitments and other loan commitments, respectively. At December 31, 2021, the Company had outstanding commitments to extend credit aggregating approximately $685.3 million and $3.41$5.64 billion for credit card commitments and other loan commitments, respectively.

As of ~~September 30, 2022, the Company had outstanding commitments to originate fixed rate-rate mortgage loans of approximately $37.2 million. At December~~March 31, ~~2021,~~2023, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately ~~$108.5~~$35.4 million. At December 31, 2022, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $21.1 million. The commitments extend over varying periods of time with the majority being disbursed within a thirty-day period.

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 ~~$50.6~~$46.7 million and ~~$37.7~~$44.4 million at ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, with terms ranging from 9 months to 15 years. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no deferred revenue under standby letter of credit agreements.

The Company has purchased letters of credit from the FHLB as security for certain public deposits. The amount of the letters of credit was ~~$113.8~~$285.6 million and ~~$59.1~~$265.7 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and they expire in less than one year from issuance.

NOTE 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.

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 certain other financial products. 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. 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.

4640

Mortgage loans held for sale – Mortgage loans held for sale are reported at fair value on an aggregate basis. Adjustments to fair value are recognized monthly and reflected in earnings. In determining the fair value of loans held for sale, 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 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the aggregate fair value of mortgage loans held for sale exceeded their cost.

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.

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 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


				Fair Value Measurements Using									Fair Value Measurements Using
(In thousands)	(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)		(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, 2022
March 31, 2023										March 31, 2023
Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	2,191	$	2,191	$	—	$	—	U.S. Treasury	$	2,220	$	2,220	$	—	$	—
U.S. Government agencies	U.S. Government agencies	188,060		—		188,060		—		U.S. Government agencies	181,843		—		181,843		—
Mortgage-backed securities	Mortgage-backed securities	2,670,348		—		2,670,348		—		Mortgage-backed securities	2,433,530		—		2,433,530		—
State and political subdivisions	State and political subdivisions	822,509		—		822,509		—		State and political subdivisions	895,896		—		895,896		—
Other securities	Other securities	254,435		—		254,435		—		Other securities	242,467		—		242,467		—
Mortgage loans held for sale	Mortgage loans held for sale	12,759		—		—		12,759		Mortgage loans held for sale	4,244		—		—		4,244
Derivative asset	Derivative asset	149,637		—		149,637		—		Derivative asset	120,562		—		120,562		—
Derivative liability	Derivative liability	(39,119)		—		(39,119)		—		Derivative liability	(28,717)		—		(28,717)		—

December 31, 2021
December 31, 2022										December 31, 2022
Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	300	$	300	$	—	$	—	U.S. Treasury	$	2,197	$	2,197	$	—	$	—
U.S. Government agencies	U.S. Government agencies	364,641		—		364,641		—		U.S. Government agencies	184,279		—		184,279		—
Mortgage-backed securities	Mortgage-backed securities	4,448,616		—		4,448,616		—		Mortgage-backed securities	2,542,902		—		2,542,902		—
States and political subdivisions	States and political subdivisions	1,819,658		—		1,819,658		—		States and political subdivisions	871,074		—		871,074		—
Other securities	Other securities	480,330		—		480,330		—		Other securities	252,402		—		252,402		—
Mortgage loans held for sale	Mortgage loans held for sale	36,356		—		—		36,356		Mortgage loans held for sale	3,486		—		—		3,486
Derivative asset	Derivative asset	25,852		—		25,852		—		Derivative asset	139,323		—		139,323		—
Derivative liability	Derivative liability	(15,443)		—		(15,443)		—		Derivative liability	(34,440)		—		(34,440)		—

Certain 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. Assets and liabilities measured at fair value on a nonrecurring basis include the following:

Individually assessed loans (collateral-dependent) – When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is 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 are classified within Level 3 of the fair value hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition. Collateral values supporting the individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations.

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 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.

The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral-dependent 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.

The following table sets forth the Company’s assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.


				Fair Value Measurements Using									Fair Value Measurements Using
(In thousands)	(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)		(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, 2022
March 31, 2023										March 31, 2023
Individually assessed loans (1) (2) (collateral-dependent)	Individually assessed loans (1) (2) (collateral-dependent)	$	77,070	$	—	$	—	$	77,070	Individually assessed loans (1) (2) (collateral-dependent)	$	101,373	$	—	$	—	$	101,373
Foreclosed assets and other real estate owned (1)	Foreclosed assets and other real estate owned (1)	2,897		—		—		2,897		Foreclosed assets and other real estate owned (1)	400		—		—		400

December 31, 2021
December 31, 2022										December 31, 2022
Individually assessed loans (1) (2) (collateral-dependent)	Individually assessed loans (1) (2) (collateral-dependent)	$	47,089	$	—	$	—	$	47,089	Individually assessed loans (1) (2) (collateral-dependent)	$	70,926	$	—	$	—	$	70,926
Foreclosed assets and other real estate owned (1)	Foreclosed assets and other real estate owned (1)	4,875		—		—		4,875		Foreclosed assets and other real estate owned (1)	2,418		—		—		2,418

________________________

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

(2)Identified reserves of ~~$10,783,000~~$10,770,000 and ~~$4,214,000~~$5,214,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~and other loans held for sale~~ – 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.

4943

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


		Carrying		Fair Value Measurements									Carrying		Fair Value Measurements
(In thousands)	(In thousands)	Amount		Level 1		Level 2		Level 3		Total		(In thousands)	Amount		Level 1		Level 2		Level 3		Total
September 30, 2022
March 31, 2023												March 31, 2023
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	679,410	$	679,410	$	—	$	—	$	679,410	Cash and cash equivalents	$	524,451	$	524,451	$	—	$	—	$	524,451
Interest bearing balances due from banks - time	Interest bearing balances due from banks - time	1,290		—		1,290		—		1,290		Interest bearing balances due from banks - time	795		—		795		—		795
Held-to-maturity securities, net	Held-to-maturity securities, net	3,787,076		—		2,984,040		—		2,984,040		Held-to-maturity securities, net	3,765,483		—		3,148,976		—		3,148,976
Interest receivable	Interest receivable	86,637		—		86,637		—		86,637		Interest receivable	98,775		—		98,775		—		98,775
Loans and other loans held for sale, net		15,411,838		—		—		14,967,078		14,967,078
Loans, net												Loans, net	16,348,541		—		—		15,756,867		15,756,867

Financial liabilities:	Financial liabilities:											Financial liabilities:
Noninterest bearing transaction accounts	Noninterest bearing transaction accounts	6,218,283		—		6,218,283		—		6,218,283		Noninterest bearing transaction accounts	5,489,434		—		5,489,434		—		5,489,434
Interest bearing transaction accounts and savings deposits	Interest bearing transaction accounts and savings deposits	12,103,994		—		12,103,994		—		12,103,994		Interest bearing transaction accounts and savings deposits	11,283,584		—		11,283,584		—		11,283,584
Time deposits	Time deposits	3,826,415		—		—		3,761,408		3,761,408		Time deposits	5,678,757		—		—		5,618,066		5,618,066
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	168,513		—		168,513		—		168,513		Federal funds purchased and securities sold under agreements to repurchase	142,862		—		142,862		—		142,862
Other borrowings	Other borrowings	964,772		—		961,666		—		961,666		Other borrowings	1,023,826		—		1,022,546		—		1,022,546
Subordinated notes and debentures	Subordinated notes and debentures	365,951		—		362,823		—		362,823		Subordinated notes and debentures	366,027		—		363,921		—		363,921
Interest payable	Interest payable	13,077		—		13,077		—		13,077		Interest payable	22,663		—		22,663		—		22,663

December 31, 2021
December 31, 2022												December 31, 2022
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,650,653	$	1,650,653	$	—	$	—	$	1,650,653	Cash and cash equivalents	$	682,122	$	682,122	$	—	$	—	$	682,122
Interest bearing balances due from banks - time	Interest bearing balances due from banks - time	1,882		—		1,882		—		1,882		Interest bearing balances due from banks - time	795		—		795		—		795
Held-to-maturity securities, net	Held-to-maturity securities, net	1,529,221		—		1,517,378		—		1,517,378		Held-to-maturity securities, net	3,759,706		—		3,063,233		—		3,063,233
Interest receivable	Interest receivable	72,990		—		72,990		—		72,990		Interest receivable	102,892		—		102,892		—		102,892
Loans and other loans held for sale, net		11,807,171		—		—		11,922,735		11,922,735
Loans, net												Loans, net	15,945,169		—		—		15,573,555		15,573,555

Financial liabilities:	Financial liabilities:											Financial liabilities:
Noninterest bearing transaction accounts	Noninterest bearing transaction accounts	5,325,318		—		5,325,318		—		5,325,318		Noninterest bearing transaction accounts	6,016,651		—		6,016,651		—		6,016,651
Interest bearing transaction accounts and savings deposits	Interest bearing transaction accounts and savings deposits	11,588,770		—		11,588,770		—		11,588,770		Interest bearing transaction accounts and savings deposits	11,762,885		—		11,762,885		—		11,762,885
Time deposits	Time deposits	2,452,460		—		—		2,451,055		2,451,055		Time deposits	4,768,558		—		—		4,696,473		4,696,473
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	185,403		—		185,403		—		185,403		Federal funds purchased and securities sold under agreements to repurchase	160,403		—		160,403		—		160,403
Other borrowings	Other borrowings	1,337,973		—		1,393,711		—		1,393,711		Other borrowings	859,296		—		857,257		—		857,257
Subordinated notes and debentures	Subordinated notes and debentures	384,131		—		394,464		—		394,464		Subordinated notes and debentures	365,989		—		363,578		—		363,578
Interest payable	Interest payable	6,759		—		6,759		—		6,759		Interest payable	16,399		—		16,399		—		16,399

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.

5044

NOTE 23: DERIVATIVE INSTRUMENTS

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.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. During the third quarter of 2021, the Company began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable AFS securities. The hedging strategy converts the fixed interest rates to variable interest rates based on federal funds rates. The two year forward start date for these swaps will be effective beginning in the third quarter of 2023 and involve the payment of fixed interest rates with a weighted average of 1.21% in exchange for variable interest rates based on federal funds rates.

The following table summarizes the fair value hedges recorded in the accompanying consolidated balance sheets.

September 30, 2022

December 31, 2021

March 31, 2023

December 31, 2022

(In thousands)

Balance Sheet Location

Weighted Average Pay Rate

Receive Rate

Notional

Fair Value

Notional

Fair Value

(In thousands)

Balance Sheet Location

Weighted Average Pay Rate

Receive Rate

Notional

Fair Value

Notional

Fair Value

Derivative assets

Other assets

1.21%

Federal Funds

999,700

110,469

1,001,715

10,524

Derivative assets

Other assets

1.21%

Federal Funds

1,001,715

91,823

1,001,715

104,833

The following amounts were recorded on the balance sheet related to carrying amounts and cumulative basis adjustments for fair value hedges.


		Carrying Amount of Hedged Assets				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets					Carrying Amount of Hedged Assets				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets
Line Item on the Balance Sheet (In thousands)	Line Item on the Balance Sheet (In thousands)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		Line Item on the Balance Sheet (In thousands)	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Investment securities - Available-for-sale	Investment securities - Available-for-sale	$	716,275	$	1,063,173	$	110,469	$	10,524	Investment securities - Available-for-sale	$	956,241	$	944,115	$	93,105	$	106,321

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 following table summarizes the fair values of loan derivative contracts recorded in the accompanying consolidated balance sheets.


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(In thousands)	(In thousands)	Notional		Fair Value		Notional		Fair Value		(In thousands)	Notional		Fair Value		Notional		Fair Value
Derivative assets	Derivative assets	$	431,588	$	39,168	$	318,428	$	15,328	Derivative assets	$	466,496	$	28,739	$	413,968	$	34,490
Derivative liabilities	Derivative liabilities	432,582		39,119		321,985		15,443		Derivative liabilities	467,476		28,717		414,955		34,440

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 ~~$15.6~~$11.3 million as of ~~September 30, 2022.~~March 31, 2023.

Energy Hedging

The Company provides 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 ~~September 30, 2022~~March 31, 2023 for energy hedging Customer Sell to Company swaps were ~~$6.4 million~~$782,100 and the corresponding Company Sell to Dealer swaps were ~~$6.4 million~~$782,100 and the corresponding net fair value of the derivative asset and derivative liability was ~~$82,400.~~$23,800.

5246

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~Stockholders,~~Shareholders, Board of Directors and Audit Committee

Simmons First National Corporation

Pine Bluff, Arkansas

Results of Review of Interim Financial Statements

We have reviewed the consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of ~~September 30, 2022,~~March 31, 2023, and the related ~~condensed~~ consolidated statements of income, comprehensive income (loss) ~~and~~, stockholders’ equity ~~for the three-month and nine-month periods ended September 30, 2022 and 2021,~~ and cash flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 consolidated 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 and subsidiaries as of December 31, ~~2021,~~2022, 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 ~~25, 2022,~~27, 2023, 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, ~~2021,~~2022, 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 interim 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 review in accordance with the standards of the PCAOB. A review of interim financial information (statements) 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.

/s/ FORVIS, LLP

~~(formerly BKD, LLP)~~

Little Rock, Arkansas

~~November 4, 2022~~May 5, 2023

5347

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

As permitted by SEC rules, management presents a sequential quarterly analysis of the Company’s performance as we believe that comparing current quarter results to those of the immediately preceding fiscal quarter is more useful in identifying current business trends and provides a more relevant analysis of our business ~~results than comparing to the same period in the prior year.~~results. Accordingly, we have compared our results of operations for the three months ended ~~September 30, 2022~~March 31, 2023 to our results of operations for the three months ended ~~June 30,~~December 31, 2022 and March 31, 2022, as applicable, throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. ~~For additional information regarding the Company’s results for the three months ended June 30, 2022, please refer to our second quarter Form 10-Q filed with the SEC on August 5, 2022.~~

OVERVIEW

During the first quarter of 2023, significant turmoil within the financial services industry, was fueled by the failure of certain regional banks that utilized specialized business models, and continued inflationary pressures and recessionary fears, resulted in industry concerns around the level of uninsured deposits, liquidity, capital and operations. Despite these challenges, our focus remained on the fundamentals that have served us well during our 120-year history. We believe that our liquidity is solid and that our capital is strong:

•Deposits were relatively stable during the quarter, which highlights the granularity of our deposit base, as well as the long-term relationships we have with many of our customers. Total deposits as of March 31, 2023 were $22.45 billion compared to $22.55 billion as of December 31, 2022. Uninsured deposits as of March 31, 2023 were $5.27 billion or 23% of total deposits.

•Capital levels were steady during the quarter with all regulatory capital ratios remaining significantly above “well-capitalized” guidelines as of March 31, 2023 (see Table 12 in the Capital section below). As of March 31, 2023, our ratio of common equity to total assets was 12.11%, the ratio of tangible common equity to tangible assets was 7.25% and our Tier 1 leverage ratio was 9.24%.

•Key credit quality metrics as of March 31, 2023 also remained solid with our nonperforming loan coverage ratio at 324% and our allowance for credit losses as a percent of total loans ratio was 1.25%.

•Significant liquidity position with a loan to deposit ratio of 74% as of March 31, 2023, compared to 72% as of December 31, 2022. Additional liquidity sources available to us as of March 31, 2023 totaled $10.78 billion.

Our net income for the three months ended ~~September 30, 2022~~March 31, 2023 was ~~$80.6~~$45.6 million, or ~~$0.63~~$0.36 diluted earnings per share, ~~increases~~compared to net income of ~~$53.1~~$83.3 million, or $0.65 diluted earnings per share and ~~$0.42, respectively, compared to~~$65.1 million, or $0.58 diluted earnings per share for the three months ended ~~June 30, 2022.~~December 31, 2022 and March 31, 2022, respectively. Included in ~~both~~each comparative period end results were certain items related to our acquisitions and branch right sizing initiatives, while the results for the three months ended ~~September 30,~~December 31, 2022 also include adjustments for the ~~loss from early retirement of trust preferred securities and the~~ gain on sale of intellectual property, and results for the three months ended June 30, 2022 also include Day 2 accounting provision required for loans and unfunded commitments acquired in connection with the Spirit acquisition.insurance settlement related to a weather event. Excluding these certain items and the tax effect, adjusted earnings for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$82.3~~$47.3 million, or $0.37 adjusted diluted earnings per share, compared to $81.1 million, or $0.64 adjusted diluted earnings per share ~~compared to $66.8~~and $67.2 million, or ~~$0.52~~$0.59 adjusted diluted earnings per share for the three months ended ~~June 30, 2022.~~

~~Net income for the first nine months of~~December 31, 2022 was $173.2 million, or $1.40 diluted earnings per share, compared to $222.9 million, or $2.05 diluted earnings per share, for the same period in 2021. In addition to the certain items referenced above, gains associated with the sale of branch operations were included in the results for the first nine months of 2021. Excluding these certain items, year-to-date adjusted earnings were $216.3 million, a decrease of $2.5 million compared to the same period in the prior year. Adjusted diluted earnings per share for the first nine months ofand March 31, 2022, ~~were $1.75 compared to $2.01 for the same period in 2021.~~

Third quarter results were strong and demonstrate our ability to navigate the current economic environment and volatile market conditions. Highlights for the quarter include an increase in revenue, well contained operating expense growth, improved asset quality, strong organic loan growth, marked improvement in the efficiency ratio, expansion of the net interest margin, and excellent capital ratios.

On April 8, 2022 we completed our acquisition of Spirit, headquartered in Conroe, Texas, including its wholly-owned bank subsidiary, Spirit of Texas Bank SSB. We were able to obtain all necessary approvals, consummate the transaction and successfully complete the systems conversion less than five months after the announcement, which we believe speaks to the outstanding team we have developed. See Note 2, Acquisitions, in the accompanying Notes to Consolidated Financial Statements for additional information related to this acquisition.respectively.

Simmons Bank was named to Forbes magazine’s 2023 list of “World’s Best Banks” for the ~~third~~fourth consecutive year and ~~ranked among the top 45 banks in~~recognized by Forbes’ ~~list~~as one of “America’s Best ~~Banks”~~Midsize Employers” for ~~2022 and our Chief Digital Officer was recently recognized by~~ ~~American Banker~~ ~~as a 2022 Digital Banker of the Year.~~2023. We continue to work to ~~develop new and innovative products and services using~~expand our suite of digital ~~channels~~solutions to provide an enhanced customer experience to “bank when you want, where you want”.

Through our Better Bank Initiative, we have identified an estimated $15 million in annual noninterest expense cost savings that we expect to be fully incorporated by the end of 2023. The programs under this initiative are designed to optimize operational processes, further improve the customer experience and increase our capacity to capitalize on organic growth opportunities, while at the same time improving our long-term growth profile.

Asset quality metrics remain at historically low-levels and reflect our conservative credit culture, as well as the impact of our strategic decision in 2019 designed to de-risk certain elements of loan portfolios that were acquired in connection with our geographic diversification and expansion. As a result of this strategic decision, over the past two years we have prudently and systematically exited certain non-relationship credits and non-core industries while also significantly reducing its exposure to commercial real estate to more acceptable levels. Total nonperforming loans as of ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021,~~2022, and ~~September 30, 2021~~March 31, 2022 were ~~$57.8~~$63.7 million, ~~$68.6~~$58.9 million, and ~~$59.4~~$64.3 million, respectively. Non-performing ~~assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed~~ assets as a percent of total assets were ~~0.24%~~0.26% at ~~September 30, 2022,~~March 31, 2023, compared to ~~0.33%~~0.23% at December 31, ~~2021~~2022 and ~~0.33%~~0.29% at ~~September 30, 2021.~~March 31, 2022.

Stockholders’ equity as of ~~September 30, 2022~~March 31, 2023 was ~~$3.16~~$3.34 billion, book value per share was ~~$24.87~~$26.24 and tangible book value per share was $13.51. Our ratio of common stockholders’ equity to total assets was 11.66% and the ratio of tangible common stockholders’ equity to tangible assets was 6.69% at September 30, 2022. The Company’s Tier 1 leverage ratio of 9.24%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” guidelines (see Table 12 in the Capital section of this Item). In January 2022, our Board of Directors authorized the 2022 Program, which replaced the 2019 Program and under which we may repurchase up to $175.0 million of its Class A common stock currently issued and outstanding. We repurchased approximately 1.9 million shares of our common stock under the 2022 Program during the third quarter of 2022.$14.88.

5448

Total loans were ~~$15.61~~$16.56 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$12.01~~$16.14 billion at December 31, ~~2021.The~~2022. The increase in total loans during ~~these periods primarily reflects~~ the ~~acquisition~~period was supported by diverse growth in terms of ~~Spirit during the second quarter~~type and by geographic market. Our unfunded commitments were $5.01 billion and $5.64 billion as of ~~2022. Net~~March 31, 2023 and December 31, 2022, respectively. While unfunded commitments are considered a key indicator of future loan growth, ~~has also been driven by increased activity throughout our geographic footprint.~~

~~While~~higher interest rates, softening economic conditions and forecasts of a potential recession in the U.S. have resulted in lower activity in our commercial pipeline slowed to $1.55 billion due to, in large part, the impact of the rapidly rising interest rates and our emphasis on maintaining prudent underwriting standards and pricing discipline, our unfunded commitments increased for the sixth consecutive quarter to $5.14 billion, and were up 15% from the prior quarter end. Our strategy of restructuring our loan portfolio over the past two years not only diversified the risk profile but also established capacity which should provide the foundation for additional loan and revenue growth, and which is evident in our loan pipeline ~~and unfunded commitments. Our liquidity is solid, and our capital is strong.~~which was $1.05 billion as of March 31, 2023, compared to $1.12 billion at December 31, 2022.

In our discussion and analysis of our financial condition and results of operation in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we provide certain financial information determined by methods other than in accordance with US GAAP. We believe the presentation of non-GAAP financial measures provides a meaningful basis for period-to-period and company-to-company comparisons, which we believe will assist investors and analysts in analyzing the adjusted financial measures of the Company and predicting future performance. See the GAAP Reconciliation of Non-GAAP Financial Measures section below for additional discussion and reconciliations of non-GAAP measures.

Simmons First National Corporation is a Mid-South based financial holding company that, as of ~~September 30, 2022,~~March 31, 2023, has approximately ~~$27.1~~$27.6 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

CRITICAL ACCOUNTING ESTIMATES

Overview

We follow accounting and reporting policies that conform, in all material respects, to US GAAP and to general practices within the financial services industry. The preparation of financial statements in conformity with US GAAP 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 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 Credit Losses

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,~~quantitative factors, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected credit losses and risks inherent in the loan portfolio. Our allowance for 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 based on our reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.~~ For further information see the section Allowance for Credit Losses below.

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

In the first quarter of 2023, we refined the estimation process by improving systems, models, processes, methodology, and assumptions used within the calculation. After multiple parallel runs with the former process, it was determined that the changes did not and are not expected to result in material differences of results.

Acquisition Accounting, Loans

We account for our acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. The fair value for acquired loans at the time of acquisition is based on a variety of factors including discounted expected cash flows, adjusted for estimated prepayments and credit losses. In accordance with ASC 326, the fair value adjustment is recorded as a premium or discount to the unpaid principal balance of each acquired loan. Loans that have been identified as having experienced a more-than-insignificant deterioration in credit quality since origination are purchased credit deteriorated (“PCD”) loans. The net premium or discount on PCD loans is adjusted by our allowance for credit losses recorded at the time of acquisition. The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. The net premium or discount on loans that are not classified as PCD (“non-PCD”), that includes credit and non-credit components, is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. We then record the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense.

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 and ASU 2017-04 - Intangibles – Goodwill and Other. 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. Our assessment depends on several assumptions which are dependent on market and economic conditions. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

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 restricted stock, restricted stock units or performance stock units 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 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.

5650

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 noninterest 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%.

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. In the last several years, on average, approximately ~~43%~~42% of our loan portfolio and approximately ~~78%~~80% of our time deposits have repriced in one year or less. As of ~~September 30, 2022,~~March 31, 2023, our interest rate sensitivity shows that approximately ~~41%~~39% of our loans and ~~85%~~91% of our time deposits will reprice in the next year.

Net Interest Income - Sequential Quarter Analysis

For the three month period ended ~~September 30, 2022,~~March 31, 2023, net interest income on a fully taxable equivalent basis was ~~$199.8~~$184.1 million, ~~an increase~~a decrease of ~~$8.6~~$15.7 million, or ~~4.5%~~7.8%, compared to the three months ended ~~June 30,~~December 31, 2022. The ~~increase~~decrease in net interest income was primarily the result of a ~~$25.9~~$14.1 million increase in fully tax equivalent interest income, ~~partially~~more than offset by a ~~$17.3~~$29.7 million increase in interest expense.

The increase in interest income primarily resulted from ~~a $23.9~~an $11.5 million increase in interest income on loans, coupled with an increase of ~~$3.1~~$2.6 million in interest income on investment securities. Regarding the increase in interest income on loans during the ~~third~~first quarter of ~~2022,~~2023, the increase in loan volume resulted in an increase of ~~$9.9~~$5.5 million, in addition to an increase of ~~$14.0~~$6.0 million of interest income from a 3227 basis point increase in loan yield. The loan yield for the ~~third~~first quarter of ~~2022~~2023 was ~~4.86%~~5.67% compared to ~~4.54%~~5.40% from the preceding sequential quarter. The additional loan volume was due to strong organic loan growth which was widespread across our geographic markets. The increase in interest income on investment securities was primarily due to a 39 basis point increase in our taxable security portfolio. The increase in both loan and investment yield was due to the continued rising rate ~~environment and was also positively impacted by a significant decrease in the level of variable rate loans and securities at or below their interest rate floors during the quarter.~~environment.

The ~~$17.3~~$29.7 million increase in interest expense is mostly due to the increase in deposit account rates and change in deposit mix as ~~we continue to manage~~consumers migrate toward higher rate deposits, principally certificates of deposits, in the ~~challenging rising~~current higher rate environment. Interest expense increased ~~$15.0~~$25.1 million due to the increase in rate of 4069 basis points on interest-bearing deposit ~~accounts. Additionally, interest expense~~accounts and increased ~~$1.7~~$5.4 million due to the increase in deposit volume over the period. We continually monitor and look for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate ~~of 58 basis points on other borrowings.~~environment.

Net Interest Income - Year-over-Year Analysis

~~For the nine month period ended September 30, 2022, net~~Net interest income on a fully taxable equivalent basis ~~was $542.2 million, an increase of $90.1~~for the three month period ended March 31, 2023 increased $32.9 million, or ~~19.9%~~21.8%, over the same period in ~~2021.~~2022. The increase in net interest income was the result of a ~~$101.1~~$118.1 million increase in fully tax equivalent interest income, partially offset by an ~~$11.0~~$85.2 million increase in interest expense.

The increase in interest income during the ~~nine~~three month period ended ~~September 30, 2022~~March 31, 2023 resulted from increases in interest income on loans and investments. The increase in interest income on loans of ~~$61.3~~$100.9 million reflects an increase in loan volume of ~~$74.0~~$55.5 million ~~partially offset by~~coupled with a 14133 basis point ~~decline~~rise in loan yield that resulted in a ~~$12.7~~$45.4 million ~~decrease.~~increase. The increase in our loan volume during the first ~~nine~~three months of ~~2022~~2023 was primarily due to the Spirit acquisition in the second quarter of 2022, ~~along~~combined with ~~the acquisition of Landmark and Triumph in the fourth quarter of 2021, as well as~~solid organic loan ~~growth. Forgiveness of PPP loans partially offset~~growth over the additional loan volume provided by these acquisitions. The decline in loan yield for the nine month period ended September 30, 2022 compared to the same period in 2021 is primarily due to an 8 basis point positive impact of PPP loan accretion on loan yield in 2021.comparative period. The increase ~~in interest income on investment securities~~ of $29.9 million was due to our investment portfolio average balances which increased by $2.1 billion or 32.8%, as we re-invested excess liquidity in our investment security portfolio throughout 2021. Additionally, an aggregated increase of $6.9$15.2 million in interest income on investment securities ~~was~~reflects an increase of $19.6 million in interest income on investment securities due to yield increases over the ~~nine month~~ period of 18141 basis points and 535 basis points for our taxable and non-taxable investment security portfolios, respectively. The increase in interest income on investment securities due to yield increases was mitigated by a $4.4 million decrease due to the decline in our investment portfolio average balances which decreased by $977.5 million or 11.5%, as our portfolio experienced pay downs and maturities over the period, which was reinvested into our loan portfolio.

The ~~$11.0~~$85.2 million increase in interest expense is mainly due to the increase in our deposit account ~~rates. Interest expense increased $2.4 million due to the increase in deposit volume~~rates over the period, ~~and increased $6.5 million due to~~combined with the ~~increase in rate of 4 basis points on interest-bearing~~additional deposit ~~accounts. Impacts to our balance sheet that affected interest expense during the nine~~

~~month period ended September 30, 2022, as compared to the same period ended September 30, 2021, include~~base from the Spirit ~~Landmark~~acquisition and ~~Triumph acquisitions noted above, as well as a rising interest rate environment throughout 2022,~~change in deposit mix as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment. Interest expense increased $74.1 million due to the increase in rate of 191 basis points on interest-bearing deposit accounts and increased $6.6 million due to the increase in deposit volume over the period. Further, an increase of $4.1 million to interest expense was related to other borrowings. The rate increase of 311 basis points in other borrowings resulted in an increase of $6.7 million, that was partially offset by a $2.6 million decrease in volume over the period. We continually monitor and look for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Net Interest Margin

Our net interest margin on a fully tax equivalent basis ~~increased 10 basis points to 3.34%~~was 3.09% for the three month period ended ~~September 30, 2022, when~~March 31, 2023, as compared to ~~3.24%~~3.31% and 2.76% for the three months ended ~~June 30, 2022. For the nine month period ended September 30,~~December 31, 2022 ~~our net interest margin increased 21~~and March 31, 2022, respectively. The decrease of 22 basis points ~~to 3.12% when compared to 2.91% for the same period in 2021.~~

~~The increase~~ in the net interest margin during the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30,~~December 31, 2022 was primarily due to the rising deposit rate ~~environment~~pressure from increased market competition and ~~driven by increases in our loan and investment rates.~~consumer migration toward higher rate deposits. The increase of 33 basis points in the net interest margin ~~on a year-over-year basis is primarily~~during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was due to the overall increase in our earning assets average balances over the comparative periods which has improved interest income, ~~coupled with the effective management of our interest bearing liabilities,~~ as we continued ~~our effort~~ to ~~improve the mix of deposits into lower cost deposits and~~ manage rates ~~effectively.~~effectively in the rapidly increasing rate environment experienced over the past year.

Net Interest Income Tables

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended ~~September 30,~~March 31, 2023, December 31, 2022 and ~~June 30,~~March 31, 2022, ~~and the nine months ended September 30, 2022 and 2021,~~ respectively.

Table 1: Analysis of Net Interest Margin

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

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
(In thousands) 2022 2022 2022 2021
Interest income $ 230,618 $ 204,806 $ 597,151 $ 500,329
FTE adjustment 6,203 6,096 17,901 13,652
Interest income – FTE 236,821 210,902 615,052 513,981
Interest expense 37,033 19,707 72,861 61,878
Net interest income – FTE $ 199,788 $ 191,195 $ 542,191 $ 452,103
Yield on earning assets – FTE 3.96 % 3.57 % 3.54 % 3.31 %
Cost of interest bearing liabilities 0.85 % 0.46 % 0.57 % 0.54 %
Net interest spread – FTE 3.11 % 3.11 % 2.97 % 2.77 %
Net interest margin – FTE 3.34 % 3.24 % 3.12 % 2.91 %


	Three Months Ended March 31,
		March 31,			December 31,			March 31,
(In thousands)		2023			2022			2022
Interest income		$	279,137		$	264,584		$	161,727
FTE adjustment		6,311			6,770			5,602
Interest income – FTE		285,448			271,354			167,329
Interest expense		101,302			71,558			16,121
Net interest income – FTE		$	184,146		$	199,796		$	151,208

Yield on earning assets – FTE		4.78		%	4.49		%	3.06		%
Cost of interest bearing liabilities		2.26		%	1.62		%	0.40		%
Net interest spread – FTE		2.52		%	2.87		%	2.66		%
Net interest margin – FTE		3.09		%	3.31		%	2.76		%

Table 2: Changes in Fully Taxable Equivalent Net Interest Margin


		Three Months Ended		Nine Months Ended			Three Months Ended
(In thousands)	(In thousands)	September 30, 2022 compared to June 30, 2022		September 30, 2022 compared to September 30, 2021		(In thousands)	March 31, 2023 compared to December 31, 2022		March 31, 2023 compared to March 31, 2022
Increase due to change in earning assets	Increase due to change in earning assets	$	6,054	$	101,305	Increase due to change in earning assets	$	4,505	$	49,883
Increase (decrease) due to change in earning asset yields		19,865		(234)
Increase due to change in earning asset yields						Increase due to change in earning asset yields	9,589		68,236
Decrease due to change in interest bearing liabilities	Decrease due to change in interest bearing liabilities	(101)		(1,900)		Decrease due to change in interest bearing liabilities	(3,845)		(3,695)
Decrease due to change in interest rates paid on interest bearing liabilities	Decrease due to change in interest rates paid on interest bearing liabilities	(17,225)		(9,083)		Decrease due to change in interest rates paid on interest bearing liabilities	(25,899)		(81,486)
Increase in net interest income		$	8,593	$	90,088
(Decrease) increase in net interest income						(Decrease) increase in net interest income	$	(15,650)	$	32,938

5852

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 months ended ~~September 30,~~March 31, 2023, December 31, 2022 and ~~June 30,~~March 31, 2022, ~~and the nine months ended September 30, 2022 and 2021,~~ respectively. 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											Three Months Ended
		September 30, 2022					June 30, 2022						March 31, 2023					December 31, 2022					March 31, 2022
		Average		Income/		Yield/	Average		Income/		Yield/		Average		Income/		Yield/	Average		Income/		Yield/	Average		Income/		Yield/
(In thousands)	(In thousands)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)	(In thousands)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)	Balance		Expense		Rate (%)
ASSETS	ASSETS											ASSETS
Earning assets:	Earning assets:											Earning assets:
Interest bearing balances due from banks and federal funds sold	Interest bearing balances due from banks and federal funds sold	$	327,841	$	1,141	1.38	$	777,098	$	1,117	0.58	Interest bearing balances due from banks and federal funds sold	$	315,307	$	2,783	3.58	$	361,856	$	2,593	2.84	$	1,728,694	$	649	0.15
Investment securities - taxable	Investment securities - taxable	5,408,189		24,848		1.82	5,674,470		21,794		1.54	Investment securities - taxable	4,930,945		32,804		2.70	5,085,960		29,645		2.31	5,688,306		18,148		1.29
Investment securities - non-taxable	Investment securities - non-taxable	2,665,515		21,805		3.25	2,725,610		21,733		3.20	Investment securities - non-taxable	2,624,642		21,522		3.33	2,582,050		22,123		3.40	2,844,777		20,937		2.98
Mortgage loans held for sale	Mortgage loans held for sale	13,280		178		5.32	17,173		200		4.67	Mortgage loans held for sale	5,470		82		6.08	8,601		152		7.01	27,633		190		2.79
Other loans held for sale	Other loans held for sale	9,439		998		41.95	22,114		2,063		37.42	Other loans held for sale	—		—		—	1,704		59		13.74	—		—		—
Loans - including fees	Loans - including fees	15,320,833		187,851		4.86	14,478,183		163,995		4.54	Loans - including fees	16,329,761		228,257		5.67	15,929,957		216,782		5.40	11,895,805		127,405		4.34
Total interest earning assets	Total interest earning assets	23,745,097		236,821		3.96	23,694,648		210,902		3.57	Total interest earning assets	24,206,125		285,448		4.78	23,970,128		271,354		4.49	22,185,215		167,329		3.06
Non-earning assets	Non-earning assets	3,123,634					3,074,384					Non-earning assets	3,282,607					3,210,447					2,640,984
Total assets	Total assets	$	26,868,731				$	26,769,032				Total assets	$	27,488,732				$	27,180,575				$	24,826,199

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

Liabilities:	Liabilities:											Liabilities:
Interest bearing liabilities:	Interest bearing liabilities:											Interest bearing liabilities:
Interest bearing transaction and savings deposits	Interest bearing transaction and savings deposits	$	12,264,655	$	17,225	0.56	$	12,807,502	$	6,879	0.22	Interest bearing transaction and savings deposits	$	11,722,591	$	47,990	1.66	$	11,859,322	$	34,615	1.16	$	12,083,516	$	4,314	0.14
Time deposits	Time deposits	3,314,948		8,204		0.98	2,586,567		2,875		0.45	Time deposits	5,155,055		39,538		3.11	4,212,271		22,434		2.11	2,241,123		2,503		0.45
Total interest bearing deposits	Total interest bearing deposits	15,579,603		25,429		0.65	15,394,069		9,754		0.25	Total interest bearing deposits	16,877,646		87,528		2.10	16,071,593		57,049		1.41	14,324,639		6,817		0.19
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	196,047		305		0.62	210,280		119		0.23	Federal funds purchased and securities sold under agreements to repurchase	148,673		323		0.88	178,948		449		1.00	218,186		68		0.13
Other borrowings	Other borrowings	1,123,797		6,048		2.14	1,241,501		4,844		1.56	Other borrowings	787,783		8,848		4.56	923,189		9,263		3.98	1,337,654		4,779		1.45
Subordinated debt and debentures	Subordinated debt and debentures	411,018		5,251		5.07	418,327		4,990		4.78	Subordinated debt and debentures	366,009		4,603		5.10	365,971		4,797		5.20	384,187		4,457		4.70
Total interest bearing liabilities	Total interest bearing liabilities	17,310,465		37,033		0.85	17,264,177		19,707		0.46	Total interest bearing liabilities	18,180,111		101,302		2.26	17,539,701		71,558		1.62	16,264,666		16,121		0.40

Noninterest bearing liabilities:	Noninterest bearing liabilities:											Noninterest bearing liabilities:
Noninterest bearing deposits	Noninterest bearing deposits	6,022,899					5,926,304					Noninterest bearing deposits	5,642,779					6,161,732					5,184,828
Other liabilities	Other liabilities	243,296					216,848					Other liabilities	295,191					264,230					207,597
Total liabilities	Total liabilities	23,576,660					23,407,329					Total liabilities	24,118,081					23,965,663					21,657,091
Stockholders’ equity	Stockholders’ equity	3,292,071					3,361,703					Stockholders’ equity	3,370,651					3,214,912					3,169,108
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	26,868,731				$	26,769,032				Total liabilities and stockholders’ equity	$	27,488,732				$	27,180,575				$	24,826,199
Net interest spread – FTE	Net interest spread – FTE					3.11					3.11	Net interest spread – FTE					2.52					2.87					2.66
Net interest margin – FTE	Net interest margin – FTE			$	199,788	3.34			$	191,195	3.24	Net interest margin – FTE			$	184,146	3.09			$	199,796	3.31			$	151,208	2.76

Nine Months Ended
September 30, 2022 September 30, 2021
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 $ 939,411 $ 2,907 0.41 $ 2,676,911 $ 2,212 0.11
Investment securities - taxable 5,589,298 64,791 1.55 4,081,927 41,790 1.37
Investment securities - non-taxable 2,744,644 64,474 3.14 2,193,431 50,737 3.09
Mortgage loans held for sale 19,309 568 3.93 59,362 1,255 2.83
Other loans held for sale 10,552 3,061 38.78 — — —
Loans - including fees 13,910,831 479,251 4.61 11,772,077 417,987 4.75
Total interest earning assets 23,214,045 615,052 3.54 20,783,708 513,981 3.31
Non-earning assets 2,948,091 2,302,279
Total assets $ 26,162,136 $ 23,085,987
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Interest bearing liabilities:
Interest bearing transaction and savings deposits $ 12,385,888 $ 28,418 0.31 $ 10,377,609 $ 15,178 0.20
Time deposits 2,718,145 13,582 0.67 2,871,519 17,899 0.83
Total interest bearing deposits 15,104,033 42,000 0.37 13,249,128 33,077 0.33
Federal funds purchased and securities sold under agreements to repurchase 208,090 492 0.32 255,684 507 0.27
Other borrowings 1,233,534 15,671 1.70 1,339,970 14,592 1.46
Subordinated debt and debentures 404,609 14,698 4.86 383,078 13,702 4.78
Total interest bearing liabilities 16,950,266 72,861 0.57 15,227,860 61,878 0.54
Noninterest bearing liabilities:
Noninterest bearing deposits 5,714,412 4,684,485
Other liabilities 222,715 165,694
Total liabilities 22,887,393 20,078,039
Stockholders’ equity 3,274,743 3,007,948
Total liabilities and stockholders’ equity $ 26,162,136 $ 23,085,987
Net interest spread – FTE 2.97 2.77
Net interest margin – FTE $ 542,191 3.12 $ 452,103 2.91

6053

Table 4 shows changes in interest income and interest expense resulting from changes in both volume and interest rates for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the three months ended ~~June 30,~~December 31, 2022 and ~~the nine months ended September 30,~~March 31, 2022, ~~and 2021,~~ respectively. 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 September 30,						Nine Months Ended September 30,							Three Months Ended
		September 30, 2022 compared to June 30, 2022						September 30, 2022 compared to September 30, 2021							March 31, 2023 compared to December 31, 2022						March 31, 2023 compared to March 31, 2022
(In thousands, on a fully taxable equivalent basis)	(In thousands, on a fully taxable equivalent basis)	Volume		Yield/ Rate		Total		Volume		Yield/ Rate		Total		(In thousands, on a fully taxable equivalent basis)	Volume		Yield/ Rate		Total		Volume		Yield/ Rate		Total
Increase (decrease) in:	Increase (decrease) in:													Increase (decrease) in:
Interest income:	Interest income:													Interest income:
Interest bearing balances due from banks and federal funds sold	Interest bearing balances due from banks and federal funds sold	$	(911)	$	935	$	24	$	(2,190)	$	2,885	$	695	Interest bearing balances due from banks and federal funds sold	$	(362)	$	552	$	190	$	(950)	$	3,084	$	2,134
Investment securities - taxable	Investment securities - taxable	(1,062)		4,116		3,054		16,935		6,066		23,001		Investment securities - taxable	(927)		4,086		3,159		(2,703)		17,359		14,656
Investment securities - non-taxable	Investment securities - non-taxable	(485)		557		72		12,936		801		13,737		Investment securities - non-taxable	361		(962)		(601)		(1,695)		2,280		585
Mortgage loans held for sale	Mortgage loans held for sale	(49)		27		(22)		(1,057)		370		(687)		Mortgage loans held for sale	(49)		(21)		(70)		(225)		117		(108)
Other loans held for sale	Other loans held for sale	(1,310)		245		(1,065)		680		2,381		3,061		Other loans held for sale	(30)		(29)		(59)		—		—		—
Loans - including fees	Loans - including fees	9,871		13,985		23,856		74,001		(12,737)		61,264		Loans - including fees	5,512		5,963		11,475		55,456		45,396		100,852
Total	Total	6,054		19,865		25,919		101,305		(234)		101,071		Total	4,505		9,589		14,094		49,883		68,236		118,119

Interest expense:	Interest expense:													Interest expense:
Interest bearing transaction and savings accounts	Interest bearing transaction and savings accounts	(304)		10,650		10,346		3,361		9,879		13,240		Interest bearing transaction and savings accounts	(403)		13,778		13,375		(133)		43,809		43,676
Time deposits	Time deposits	996		4,333		5,329		(916)		(3,401)		(4,317)		Time deposits	5,766		11,338		17,104		6,717		30,318		37,035
Federal funds purchased and securities sold under agreements to repurchase	Federal funds purchased and securities sold under agreements to repurchase	(9)		195		186		(103)		88		(15)		Federal funds purchased and securities sold under agreements to repurchase	(70)		(56)		(126)		(29)		284		255
Other borrowings	Other borrowings	(494)		1,698		1,204		(1,221)		2,300		1,079		Other borrowings	(1,448)		1,033		(415)		(2,643)		6,712		4,069
Subordinated notes and debentures	Subordinated notes and debentures	(88)		349		261		779		217		996		Subordinated notes and debentures	—		(194)		(194)		(217)		363		146
Total	Total	101		17,225		17,326		1,900		9,083		10,983		Total	3,845		25,899		29,744		3,695		81,486		85,181
Increase (decrease) in net interest income	Increase (decrease) in net interest income	$	5,953	$	2,640	$	8,593	$	99,405	$	(9,317)	$	90,088	Increase (decrease) in net interest income	$	660	$	(16,310)	$	(15,650)	$	46,188	$	(13,250)	$	32,938

PROVISION FOR CREDIT LOSSES

The provision for 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 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, reasonable and supportable forecasts, past due and non-performing loans and historical net 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 credit losses for~~For the three months ended ~~September 30, 2022 was an expense of $103,000 as compared to an expense of $33.9 million for the three months ended June 30, 2022. For the nine months ended September 30, 2022, the Company’s~~March 31, 2023, our provision for credit losses was ~~$14.0~~$24.2 million as compared to a recapture of ~~$31.4~~$19.9 million for the same period ended ~~September 30, 2021.~~

~~During the three month period ended September 30, 2022,~~March 31, 2022. The provision expense ~~included~~during the ~~recapture~~first three months of ~~credit losses primarily driven by a reduction~~2023 consisted of $10.9 million expense related to loans and reflected loan growth in ~~qualitative factors for~~ the ~~restaurant, hospitality, student housing and office space industries due to the improvement from pandemic related stresses~~quarter, as well as ~~improved credit quality metrics. This recapture was offset by~~ the ~~additional reserve for unfunded commitments~~impact of updated economic assumptions, combined with a $13.3 million expense related to ~~an overall increase in unfunded commitments, primarily made up of~~

commercial construction loans, which receive a higher reserve allocation than other loans. The change for the three month period ended September 30, 2022 as compared to the preceding quarter is primarilysecurities and was due to decreases in the ~~Spirit acquisition and~~value of corporate bonds in the ~~related Day 2 provision expense for the acquired loans and additional unfunded commitments added to the Company’s portfolio~~investment securities portfolio. The recapture during the first three ~~month period ended June 30, 2022.~~

~~The provision for credit losses for the nine month period ended September 30,~~months of 2022 reflected the adjustments due to the Spirit Day 2 provision discussed above, offset by improved credit quality metrics and improved macroeconomic factors. The recapture of credit losses for the nine month period ended September 30, 2021 was driven by improved credit quality metrics and improved macroeconomic ~~factors.~~factors, coupled with the planned exit of several large oil and gas relationships during the quarter.

NONINTEREST INCOME

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

~~Total noninterest income was $43.0 million for~~For the three month period ended ~~September 30, 2022,~~March 31, 2023, total noninterest income was $45.8 million, an increase of approximately ~~$2.8~~$1.2 million or ~~7.1%~~2.7%, as compared to the three month period ended ~~June 30,~~December 31, 2022 and was primarily driven by the incremental increases in service charges on deposit accounts due to increased consumer activity and ~~wealth management fees.~~a slight rebound in mortgage lending income as compared to the prior quarter.

~~For~~Noninterest income for the ~~nine~~three months ended March 31, 2023 increased by approximately $3.6 million or 8.6% as compared to the three months ended March 31, 2022 and was primarily due to the Spirit acquisition and attributable increased consumer base. The increase was partially offset by a $3.0 million decrease in mortgage lending income due to the rising interest rate environment and softening market conditions over the period, which slowed the demand for mortgage loans compared to the demand associated with the previous lower interest rate environment.

Other income for the three month period ended ~~September 30, 2022, total noninterest income was $125.4~~March 31, 2023 increased by $4.7 million ~~a decrease of approximately $19.8~~as compared to the preceding sequential quarter, and increased by $4.0 million ~~or 13.6%,~~when compared to the same period in ~~2021,~~the prior year. The increases were primarily due to ~~decreases in~~ the ~~gains on sale~~recapture of ~~securities, gains on sale of branches and mortgage lending income. During the first nine months of 2021, we sold approximately $342.6~~a $4.0 million ~~of investment securities resulting in a net gain of $15.8 million. Additionally, the Company recognized $5.3 million on the gain on sale of branches, which we exclude from adjusted earnings,~~legal reserve during the first ~~nine~~three months of ~~2021, primarily~~2023, related to the sale of Illinois branches. A decrease of $7.4 million in mortgage lending income for the nine month period ended September 30, 2022 was due to the higher interest rate environment and softening market conditions.

An increase of $3.3 million in service charges on deposit accounts and an increase of $2.6 million in debit and credit card fees partially offset the overall decrease in noninterest income during the first nine months of 2022 as a result of the additional customer base from the Landmark, Triumph and Spirit acquisitions and additional transactions due to the changes in customer spending habits, respectively.legal matters previously disclosed.

Table 5 shows noninterest income for the three month ~~period~~periods ended ~~September 30, 2022 as compared to the three month period ended June 30,~~March 31, 2023, December 31, 2022 and ~~the nine month periods ended September 30,~~March 31, 2022, ~~and 2021, respectively.~~respectively, as well as changes between periods.

Table 5: Noninterest Income

Three Months Ended
September 30, Nine Months Ended
September 30,
Sept. 30, June 30, Change Sept. 30, Sept. 30, Change
(Dollars in thousands) 2022 2022 $ % 2022 2021 $ %
Service charges on deposit accounts $ 12,560 $ 11,379 $ 1,181 10.4% $ 34,635 $ 31,322 $ 3,313 10.6%
Debit and credit card fees 7,685 8,224 (539) (6.6) 23,358 20,785 2,573 12.4
Wealth management fees 8,562 7,214 1,348 18.7 23,744 23,130 614 2.7
Mortgage lending income 2,593 2,240 353 15.8 9,383 16,755 (7,372) (44.0)
Bank owned life insurance income 2,902 2,563 339 13.2 8,171 6,134 2,037 33.2
Other service charges and fees 2,085 1,871 214 11.4 5,593 5,934 (341) (5.8)
Gain (loss) on sale of securities, net (22) (150) 128 * (226) 15,846 (16,072) *
Gain on sale of branches — — — — — 5,316 (5,316) *
Other income 6,658 6,837 (179) (2.6) 20,761 19,992 769 3.9
Total noninterest income $ 43,023 $ 40,178 $ 2,845 7.1% $ 125,419 $ 145,214 $ (19,795) (13.6)%


	Three Months Ended March 31,
		March 31,	December 31,		March 31,		Change from Quarter - Sequential					Change from Quarter - Year-over-Year
(Dollars in thousands)			2023		2022						2022
Service charges on deposit accounts			$	12,437	$	11,892	$	10,696	$	545		4.6%	$	1,741	16.3%
Debit and credit card fees			7,952		7,845		7,449		107			1.4	503		6.8
Wealth management fees			7,365		8,151		7,968		(786)			(9.6)	(603)		(7.6)
Mortgage lending income			1,570		1,139		4,550		431			37.8	(2,980)		(65.5)
Bank owned life insurance income			2,973		2,975		2,706		(2)			(0.1)	267		9.9
Other service charges and fees			2,282		2,023		1,637		259			12.8	645		39.4
Gain (loss) on sale of securities, net			—		(52)		(54)		52			(100.0)	54		(100.0)
Gain on insurance settlement			—		4,074		—		(4,074)			(100.0)	—		—
Other income			11,256		6,600		7,266		4,656			70.6	3,990		54.9
Total noninterest income			$	45,835	$	44,647	$	42,218	$	1,188		2.7%	$	3,617	8.6%

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) was $30.0 million, $29.9 million and $27.8 million for the three month periods ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively. Recurring fee income was relatively flat as compared to the three month period ended ~~September 30,~~December 31, 2022 ~~was $30.9 million, an increase of $2.2~~and increased $2.3 million as compared to the three month period ended ~~June 30, 2022. Recurring fee income for~~March 31, 2022 primarily due to the ~~nine month period ended September 30, 2022, was $87.3 million, an increase of $6.2 million from~~increased consumer base provided by the nine month period ended September 30, 2021. The increases in the periods presented are primarily the result of changes in total service charges and debit and credit card fees, previously discussed as well as the recent acquisitions.Spirit acquisition.

6255

NONINTEREST EXPENSE

Noninterest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for our operations. Management remains committed to controlling the level of noninterest 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.

~~For~~Noninterest expense was $143.2 million for the three month period ended ~~September 30, 2022,~~March 31, 2023, and was relatively flat as compared to noninterest expense ~~was $138.9~~of $142.6 million ~~a decrease of $17.9 million, or 11.4%, from~~for the three month period ended ~~June 30, 2022. Noninterest expense for the nine months ended September 30,~~December 31, 2022, ~~was $424.2 million,~~representing an increase of ~~$82.2 million,~~$653,000, or ~~24.0%~~0.5%, ~~from the same period in 2021.~~

~~Salaries and employee benefits expense decreased $2.2 million during the three month period ended September 30, 2022~~ as compared to the preceding sequential quarter and increased $31.5 million during the nine month period September 30, 2022 as compared to same period in 2021. The decrease for the three month period reflects incentive accrual adjustments, while the increase for the nine month period includes impacts from the Landmark, Triumph and Spirit acquisitions. In addition, the Bank has added associates in our lending, wealth and mortgage programs.

Merger related costs for the three and nine month periods ended September 30, 2022 as compared to the three months ended June 30, 2022 and nine months ended September 30, 2021, decreased by $17.7 million and increased by $20.1 million, respectively, and is primarily related to the timing of the Spirit acquisition which was completed during the three months ended June 30, 2022. See Note 2, Acquisitions, in the accompanying Notes to Consolidated Financial Statements for additional information related to this acquisition.quarter. Adjusted noninterest expense, which excludes branch right sizing and merger related costs, for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, decreased ~~$1.0 million,~~$583,000, or ~~0.8%~~0.4%, ~~and increased $57.5 million, or 16.8%, respectively,~~ as compared to the three months ended ~~June 30, 2022 and nine months ended September 30, 2021.~~December 31, 2022.

~~Marketing~~Noninterest expense ~~decreased~~for the three months ended March 31, 2023 increased by ~~$2.1~~approximately $14.8 million or 11.5% as compared to the three months ended March 31, 2022. Adjusted noninterest expense, which excludes branch right sizing and merger related costs, for the three months ended March 31, 2023, increased $15.2 million, or 12.1%, as compared to the three months ended March 31, 2022.

Salaries and employee benefits expense increased $4.0 million during the three month period ended ~~September 30,~~March 31, 2023 as compared to the preceding sequential quarter and increased $9.1 million when compared to the same period in the prior year. The increase as compared to the preceding sequential quarter reflected seasonal payroll taxes incurred during the quarter, 401(k) profit sharing contribution and equity awards compensation, while the increase from the same period in the prior year is primarily due to the impact from the Spirit acquisition.

Deposit insurance expense for the three months ended March 31, 2023 increased by $1.2 million and $3.1 million compared to the three month periods ended December 31, 2022 and March 31, 2022, respectively. Both comparative increases were largely due to an increased base rate related to changes in the mix of deposits, while the increase as compared to the same period in the prior year is also due to the increase in deposits from the Spirit acquisition.

Other operating expenses decreased by $3.5 million during the three months ended March 31, 2023 as compared to the three months ended ~~June 30,~~December 31, 2022 and increased by ~~$8.6 million during the nine month period ended September 30, 2022~~$757,000 as compared to the ~~same period in 2021. The~~three months ended March 31, 2022. Sequentially, the decrease was primarily due to a focus on expense management of controllable expenses during the quarter, coupled with the impact of $1.2 million of accelerated amortization of certain tax credits recognized during the three month period ended ~~September 30,~~December 31, 2022, ~~was primarily related~~the offset of which is recorded in provision for income taxes. The increase when compared to ~~a nonrecurrent $1.6 million contribution to the Simmons First Foundation Conservation Fund during~~ the three months ended ~~June 30,~~March 31, 2022 reflecting a portion of paper statement fees collected as part of a promotion to encourage customers to enroll in eStatements. The increase during the nine month period ended September 30, 2022 includes the previously mentioned contributionis primarily related to ~~paper statement fees, in addition to increased advertising~~the Spirit acquisition and ~~public relations expenses, including a multi-university corporate sponsorship program designed to support female student athletes and serve as a program for developing women leaders in~~inflationary pressures over the ~~corporate world.~~period.

6356

Table 6 below shows noninterest expense for the three month ~~period~~periods ended ~~September 30, 2022 as compared to the three month period ended June 30,~~March 31, 2023, December 31, 2022 and ~~the nine month periods ended September 30,~~March 31, 2022, ~~and 2021, respectively.~~respectively, as well as changes between periods.

Table 6: Noninterest Expense


		Three Months Ended September 30,							Nine Months Ended September 30,								Three Months Ended March 31,
		Sept. 30,		June 30,		Change			Sept. 30,		Sept. 30,		Change					March 31,	December 31,		March 31,		Change from Quarter - Sequential					Change from Quarter - Year-over-Year
(Dollars in thousands)	(Dollars in thousands)	2022		2022		$		%	2022		2021		$		%	(Dollars in thousands)			2023		2022						2022
Salaries and employee benefits	Salaries and employee benefits	$	71,923	$	74,135	$	(2,212)	(3.0)%	$	213,964	$	182,503	$	31,461	17.2%	Salaries and employee benefits			$	77,038	$	73,018	$	67,906	$	4,020		5.5%	$	9,132	13.5%
Occupancy expense, net	Occupancy expense, net	11,674		11,004		670		6.1	32,701		27,764		4,937		17.8	Occupancy expense, net			11,578		11,620		10,023		(42)			(0.4)	1,555		15.5
Furniture and equipment expense	Furniture and equipment expense	5,394		5,104		290		5.7	15,273		15,169		104		0.7	Furniture and equipment expense			5,051		5,392		4,775		(341)			(6.3)	276		5.8
Other real estate and foreclosure expense	Other real estate and foreclosure expense	168		142		26		18.3	653		1,545		(892)		(57.7)	Other real estate and foreclosure expense			186		350		343		(164)			(46.9)	(157)		(45.8)
Deposit insurance	Deposit insurance	3,278		2,812		466		16.6	7,928		4,865		3,063		63.0	Deposit insurance			4,893		3,680		1,838		1,213			33.0	3,055		166.2
Merger related costs	Merger related costs	1,422		19,133		(17,711)		*	22,441		2,320		20,121		*	Merger related costs			1,396		35		1,886		1,361			*	(490)		(26.0)
Other operating expenses:	Other operating expenses:															Other operating expenses:
Professional services	Professional services	4,339		4,202		137		3.3	13,987		14,207		(220)		(1.6)	Professional services			4,409		5,151		5,446		(742)			(14.4)	(1,037)		(19.0)
Postage	Postage	2,385		2,217		168		7.6	6,728		6,277		451		7.2	Postage			2,324		2,227		2,126		97			4.4	198		9.3
Telephone	Telephone	1,668		1,695		(27)		(1.6)	4,921		4,758		163		3.4	Telephone			1,731		1,473		1,558		258			17.5	173		11.1
Debit and credit card	Debit and credit card	3,149		3,037		112		3.7	8,892		7,588		1,304		17.2	Debit and credit card			3,189		3,351		2,706		(162)			(4.8)	483		17.9
Marketing	Marketing	6,662		8,754		(2,092)		(23.9)	21,556		12,912		8,644		67.0	Marketing			6,210		7,314		6,140		(1,104)			(15.1)	70		1.1
Software and technology	Software and technology	10,340		10,078		262		2.6	30,565		30,242		323		1.1	Software and technology			10,356		10,341		10,147		15			0.2	209		2.1
Operating supplies	Operating supplies	441		713		(272)		(38.2)	1,852		2,013		(161)		(8.0)	Operating supplies			605		704		698		(99)			(14.1)	(93)		(13.3)
Amortization of intangibles	Amortization of intangibles	4,225		4,096		129		3.2	11,807		10,008		1,799		18.0	Amortization of intangibles			4,096		4,108		3,486		(12)			(0.3)	610		17.5
Branch right sizing	Branch right sizing	1,170		292		878		*	2,371		(2,187)		4,558		*	Branch right sizing			979		1,104		909		(125)			(11.3)	70		7.7
Other	Other	10,705		9,399		1,306		13.9	28,534		22,008		6,526		29.6	Other			9,187		12,707		8,430		(3,520)			(27.7)	757		9.0
Total noninterest expense	Total noninterest expense	$	138,943	$	156,813	$	(17,870)	(11.4)%	$	424,173	$	341,992	$	82,181	24.0%	Total noninterest expense			$	143,228	$	142,575	$	128,417	$	653		0.5%	$	14,811	11.5%

* Not meaningful

INVESTMENTS AND SECURITIES

Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as either HTM or AFS. Our philosophy regarding investments is conservative based on investment type and maturity. Investments in the portfolio primarily include U.S. Treasury securities, U.S. Government agencies, MBS and municipal securities. Our general policy is not to invest in derivative type investments or high-risk securities, except for collateralized MBS for which collection of principal and interest is not subordinated to significant superior rights held by others.

HTM and AFS investment securities were ~~$3.8~~$3.77 billion and ~~$3.9~~$3.76 billion, respectively, at ~~September 30, 2022,~~March 31, 2023, compared to the HTM amount of ~~$1.5~~$3.76 billion and AFS amount of ~~$7.1~~$3.85 billion at December 31, ~~2021.~~2022. We will continue to look for opportunities to maximize the value of the investment portfolio.

During ~~our second quarter review of~~ the Company’s balance sheet composition, liquidity and capital levels, along with our analysis of the macroeconomic factors influencing interest rates, we determined the need to reclassify certain securities from the AFS portfolio to the HTM portfolio. During the quarterquarters ended June 30, 2022 ~~the Company~~and September 30, 2021, we transferred, at fair value, $1.99 billion and $500.8 million, respectively, of securities from the AFS portfolio to the HTM portfolio. ~~Previously, during the quarter ended September 30, 2021, the Company transferred, at fair value, $500.8 million of securities from AFS to HTM.~~ The related remaining combined net unrealized losses of ~~$148.3~~$141.0 million ~~and net unrealized gains of $738,000, respectively,~~ in accumulated other comprehensive income (loss) ~~are being~~as of March 31, 2023 will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer.

Management has the ability and intent to hold the securities classified as HTM until they mature, at which time we expect to receive full value for the securities. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. We expect the cash flows from principal maturities of securities to provide flexibility to fund future loan growth or reduce wholesale funding.

Furthermore, as of ~~September 30, 2022, management~~March 31, 2023, we 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 time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. ~~Management~~During the first quarter of 2023, management recorded a $12.8 million provision for credit loss related to isolated corporate bonds within the AFS investment securities portfolio. As of March 31, 2023, two nonperforming corporate bonds remained in the portfolio, and with the exception of these two bonds, management does not believe any of the securities are impaired due to reasons of credit quality.

During the third quarter of 2021, ~~the Company~~we began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of $1.0 billion of fixed rate callable municipal securities held in the AFS portfolio. These swap agreements consist of a two year forward start date and involve the payment of fixed interest rates with a weighted average of 1.21% in exchange for variable interest rates based on federal funds rates ~~and consist~~beginning in the third quarter of ~~a two year forward start date and~~2023. Securities within these swap agreements have maturity dates varying between 2028 and 2029.

~~Table 7:Maturity Distribution of Investment Securities~~

Table 7 reflects the amortized cost and estimated fair value of securities at September 30, 2022, by contractual maturity and the weighted average yields (for tax-exempt obligations on a fully taxable equivalent basis, assuming a 26.135% tax rate) of such securities and is presented due to the reclassification of certain securities during the quarter. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.

September 30, 2022
Over Over
1 year 5 years Total
1 year through through Over No fixed Amortized Par Fair
(In thousands) or less 5 years 10 years 10 years maturity Cost Value Value
Held-to-Maturity
U.S. Government agencies $ — $ — $ 57,027 $ 390,373 $ — $ 447,400 $ 480,246 $ 349,529
Mortgage-backed securities — — — — 1,214,882 1,214,882 1,281,190 1,084,514
State and political subdivisions 4,519 6,545 16,404 1,837,842 — 1,865,310 1,877,163 1,324,283
Other securities — 1,126 254,030 5,712 — 260,868 274,878 225,714
Total $ 4,519 $ 7,671 $ 327,461 $ 2,233,927 $ 1,214,882 $ 3,788,460 $ 3,913,477 $ 2,984,040
Percentage of total 0.1 % 0.2 % 8.6 % 59.0 % 32.1 % 100.0 %
Weighted average yield 3.0 % 3.4 % 3.4 % 2.5 % 3.1 % 2.7 %
Available-for-Sale
U.S. Treasury $ — $ 2,250 $ — $ — $ — $ 2,250 $ 2,300 $ 2,191
U.S. Government agencies 22 93,833 50,687 50,827 — 195,369 193,309 188,060
Mortgage-backed securities — — — — 2,959,882 2,959,882 2,900,916 2,670,348
State and political subdivisions 3,143 14,486 19,883 1,016,844 — 1,054,356 1,109,749 822,509
Other securities — 73,624 198,162 — 488 272,274 271,855 254,435
Total $ 3,165 $ 184,193 $ 268,732 $ 1,067,671 $ 2,960,370 $ 4,484,131 $ 4,478,129 $ 3,937,543
Percentage of total 0.1 % 4.1 % 6.0 % 23.8 % 66.0 % 100.0 %
Weighted average yield 2.2 % 2.2 % 3.7 % 2.2 % 1.8 % 2.0 %

LOAN PORTFOLIO

Our loan portfolio averaged ~~$13.91~~$16.33 billion and ~~$11.77~~$11.90 billion during the first ~~nine~~three months of ~~2022~~2023 and ~~2021,~~2022, respectively. As of ~~September 30, 2022,~~March 31, 2023, total loans were ~~$15.61~~$16.56 billion, an increase of ~~$3.6 billion~~$413.0 million from December 31, ~~2021.~~2022. The increase in the average loan balance during the first ~~nine~~three months of ~~2022~~2023 when compared to the same period in ~~2021 was~~2022 is primarily due to the ~~acquisitions~~acquisition of Spirit ~~Landmark and Triumph. See Note 2, Acquisitions,~~which provided $2.29 billion in total loans after purchase accounting discounts, coupled with continued widespread organic loan growth throughout our geographic markets over the accompanying Notes to Consolidated Financial Statements for additional information related to these acquisitions. This period-to-period increase was partially offset by the decline in average PPP loan balance, which totaled $56.6 million for the nine months ended September 30, 2022 as compared to $675.8 million for the same period ended September 30, 2021.comparative period. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

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

The balances of loans outstanding at the indicated dates are reflected in Table 8,7, according to type of loan.

Table 8:7: Loan Portfolio


		September 30,		December 31,			March 31,		December 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Consumer:	Consumer:					Consumer:
Credit cards	Credit cards	$	192,559	$	187,052	Credit cards	$	188,590	$	196,928
Other consumer	Other consumer	180,604		168,318		Other consumer	142,817		152,882
Total consumer	Total consumer	373,163		355,370		Total consumer	331,407		349,810
Real estate:	Real estate:					Real estate:
Construction and development	Construction and development	2,372,294		1,326,371		Construction and development	2,777,122		2,566,649
Single family residential	Single family residential	2,467,008		2,101,975		Single family residential	2,589,831		2,546,115
Other commercial	Other commercial	7,249,891		5,738,904		Other commercial	7,520,964		7,468,498
Total real estate	Total real estate	12,089,193		9,167,250		Total real estate	12,887,917		12,581,262
Commercial:	Commercial:					Commercial:
Commercial	Commercial	2,525,218		1,992,043		Commercial	2,669,731		2,632,290
Agricultural	Agricultural	263,539		168,717		Agricultural	220,641		205,623
Total commercial	Total commercial	2,788,757		2,160,760		Total commercial	2,890,372		2,837,913
Other	Other	356,022		329,123		Other	445,402		373,139
Total loans before allowance for credit losses	Total loans before allowance for credit losses	$	15,607,135	$	12,012,503	Total loans before allowance for credit losses	$	16,555,098	$	16,142,124

Consumer loans consist of credit card loans and other consumer loans. Consumer loans were ~~$373.2~~$331.4 million at ~~September 30, 2022,~~March 31, 2023, or ~~2.4%~~2.0% of total loans, compared to ~~$355.4~~$349.8 million, or ~~3.0%~~2.2% of total loans at December 31, ~~2021.~~2022. The ~~increase~~decrease in consumer loans from December 31, ~~2021,~~2022, to ~~September 30, 2022,~~March 31, 2023, was primarily due to the ~~combined acquired~~expected seasonal decline in our credit card portfolio and ~~organic growth~~loan payoffs and pay downs in direct consumer loans.

Real estate loans consist of construction and development loans (“C&D&D”) loans, single-family residential loans and ~~CRE~~commercial real estate (“CRE”) loans. Real estate loans were ~~$12.09~~$12.89 billion at ~~September 30, 2022,~~March 31, 2023, or ~~77.5%~~77.8% of total loans, compared to ~~$9.17~~$12.58 billion, or ~~76.3%~~77.9%, of total loans at December 31, ~~2021,~~2022, an increase of ~~$2.92 billion,~~$306.7 million, or ~~31.9%~~2.4%. Our C&D loans increased by ~~$1.05 billion,~~$210.5 million, or ~~78.9%~~8.2%, single family residential loans increased by ~~$365.0~~$43.7 million, or ~~17.4%~~1.7%, and CRE loans increased by ~~$1.51 billion,~~$52.5 million, or ~~26.3%~~0.7%. The increases were ~~largely~~ due to diversified organic growth by type and geographic market during the ~~Spirit acquisition noted above, coupled with strong organic loan growth, particularly in the third quarter of 2022. In the near term, we~~quarter. We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

Commercial loans consist of non-real estate loans related to business and agricultural loans. Total commercial loans were ~~$2.79~~$2.89 billion at ~~September 30, 2022,~~March 31, 2023, or ~~17.9%~~17.5% of total loans, compared to ~~$2.16~~$2.84 billion, or ~~18.0%~~17.6% of total loans at December 31, ~~2021,~~2022, an increase of ~~$628.0~~$52.5 million, or ~~29.1%~~1.8%, which was ~~primarily~~ due to ~~the combined acquired and~~ organic loan growth. Agricultural loans increased ~~$94.8~~$15.0 million, or ~~56.2%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter.~~7.3%.

Other loans mainly consist of mortgage warehouse lending and municipal loans. Mortgage volume experienced a ~~market driven decline~~slight increase in demand during the first ~~nine~~three months of ~~2022 when~~2023 as compared to ~~2021, but~~December 31, 2022, and was ~~more than offset by~~coupled with continued organic growth in our municipal loans during the ~~Spirit acquisition combined with organic growth,~~quarter, leading to an increase of ~~$26.9~~$72.3 million in other loans.

Loan growth was widespread throughout our geographic markets and was generally broad-based by loan ~~type and more than offset continued market-driven weakness in mortgage warehouse lending.~~type. We are seeing loan growth in our metro, community and corporate banking groups and continue to add new producers in these areas. Additionally, loan growth was weighted toward the latter half of the quarter as period-end loans exceeded average total loans of $15.32 billion for the third quarter of 2022.groups. Our commercial loan pipeline consisting of all commercial loan opportunities was ~~$1.55~~$1.05 billion at ~~September 30, 2022~~March 31, 2023 compared to ~~$2.31~~$1.12 billion at December 31, ~~2021.~~2022. Loans approved and ready to close at the end of the quarter totaled ~~$551.8~~$503.0 million.

ASSET QUALITY

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

When credit card loans reach 90 days past due and there are attachable assets, the accounts are considered for litigation. Credit card loans are generally charged off when payment of interest or principal exceeds 150 days past due. The credit card recovery group pursues account holders until it is determined, on a case-by-case basis, to be uncollectible.

Total non-performing assets ~~decreased $13.7~~increased $8.9 million from December 31, ~~2021~~2022 to ~~September 30, 2022.~~March 31, 2023. Nonaccrual loans ~~decreased~~increased by ~~$10.7~~$4.8 million during the period and foreclosed assets held for sale and other real estate owned ~~decreased by $2.4 million.~~were relatively flat with a decrease of $166,000 as compared to December 31, 2022. The ~~decrease~~increase in nonaccrual ~~loans~~assets was ~~primarily~~in part due to ~~an improvement~~two isolated nonperforming corporate bonds in ~~economic conditions from pandemic related stresses.~~the investment securities portfolio totaling approximately $4.0 million.

Non-performing assets, including modifications to borrowers experiencing financial difficulty (“FDMs”, formerly known as troubled debt restructurings, ~~(“TDRs”)~~or TDRs) and acquired foreclosed assets, as a percent of total assets were ~~0.24%~~0.27% at ~~September 30, 2022,~~March 31, 2023, compared to ~~0.33%~~0.23% at December 31, ~~2021.~~2022. From time to time, certain borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays, the most prominent being debt payments. In an effort to preserve our net interest margin and earning assets, we are open to working with existing customers in order to maximize the collectability of the debt.

~~When we restructure a~~We have internal loan modification programs for ~~a borrower~~borrowers experiencing financial ~~difficulty and grant a concession we would not otherwise consider, a “troubled debt restructuring” occurs and the loan is classified as a TDR. The Company grants various types of concessions,~~difficulties. Modifications to borrowers experiencing financial difficulties may include interest rate reductions, principal or interest forgiveness and/or term extensions. We primarily use interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

~~Once an obligation has been restructured due to such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and~~ There were no ~~longer has any concession regarding payment amount or amortization, then it is not considered a TDR at~~loans modified for borrowers experiencing financial difficulties during the ~~beginning of the calendar year after the year in which the improvement takes place. Our TDR balance decreased to $4.9 million as of September 30, 2022, compared to $6.9 million as of December~~three month period ending March 31, ~~2021.~~

TDRs are individually evaluated for expected credit losses. We assess the exposure for each modification, using either the fair value of the underlying collateral or the present value of expected cash flows, and determine if a specific allowance for credit losses is needed.

We return 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.

2023.

6759

We continue to maintain good asset quality compared to the industry and strong asset quality remains a primary focus of our strategy. The allowance for credit losses as a percent of total loans was ~~1.27%~~1.25% as of ~~September 30, 2022.~~March 31, 2023. Non-performing loans equaled ~~0.37%~~0.38% of total loans. Non-performing assets were ~~0.23%~~0.26% of total assets, ~~an 8~~a 3 basis point ~~decrease~~increase from December 31, ~~2021.~~2022. The allowance for credit losses was ~~342%~~324% of non-performing loans. Our annualized net charge-offs to average total loans for the first ~~nine~~three months of ~~2022~~2023 was ~~0.07%~~0.03%. Annualized net credit card charge-offs to average total credit card loans were ~~1.41%~~1.69% for the first ~~nine~~three months of ~~2022,~~2023, compared to ~~1.40%~~1.49% during the full year ~~2021,~~2022, and 5675 basis points better than the most recently published industry average charge-off ratio as reported by the Federal Reserve for all banks.

Table 98 presents information concerning non-performing assets, including nonaccrual loans at amortized cost and foreclosed assets held for sale.

Table 9:8: Non-performing Assets


		September 30,			December 31,				March 31,			December 31,			March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			(Dollars in thousands)	2023			2022			2022
Nonaccrual loans (1)	Nonaccrual loans (1)	$	57,534		$	68,204		Nonaccrual loans (1)	$	63,218		$	58,434		$	64,096
Loans past due 90 days or more (principal or interest payments)	Loans past due 90 days or more (principal or interest payments)	242			349			Loans past due 90 days or more (principal or interest payments)	437			507			240
Total non-performing loans	Total non-performing loans	57,776			68,553			Total non-performing loans	63,655			58,941			64,336
Other non-performing assets:	Other non-performing assets:							Other non-performing assets:
Foreclosed assets held for sale and other real estate owned	Foreclosed assets held for sale and other real estate owned	3,612			6,032			Foreclosed assets held for sale and other real estate owned	2,721			2,887			5,118
Other non-performing assets	Other non-performing assets	1,146			1,667			Other non-performing assets	5,012			644			1,479
Total other non-performing assets	Total other non-performing assets	4,758			7,699			Total other non-performing assets	7,733			3,531			6,597
Total non-performing assets	Total non-performing assets	$	62,534		$	76,252		Total non-performing assets	$	71,388		$	62,472		$	70,933

Performing TDRs		$	1,869		$	4,289
Performing FDMs (formerly TDRs)								Performing FDMs (formerly TDRs)	$	2,183		$	1,849		$	3,424
Allowance for credit losses to non-performing loans	Allowance for credit losses to non-performing loans	342		%	300		%	Allowance for credit losses to non-performing loans	324		%	334		%	278		%
Non-performing loans to total loans	Non-performing loans to total loans	0.37		%	0.57		%	Non-performing loans to total loans	0.38		%	0.37		%	0.53		%
Non-performing assets (including performing TDRs) to total assets		0.24		%	0.33		%
Non-performing assets (including performing FDMs (formerly TDRs)) to total assets								Non-performing assets (including performing FDMs (formerly TDRs)) to total assets	0.27		%	0.23		%	0.30		%
Non-performing assets to total assets	Non-performing assets to total assets	0.23		%	0.31		%	Non-performing assets to total assets	0.26		%	0.23		%	0.29		%

(1)Includes nonaccrual ~~TDRs~~FDMs (formerly known as TDRs) of approximately ~~$3,027,000~~$481,000 at ~~September 30, 2022~~March 31, 2023 and ~~$2,650,000~~$1,622,000 at December 31, ~~2021.~~2022. For additional information about our implementation of accounting for FDMs, which replaced the accounting for TDRs, see Note 5, Loans and Allowance for Credit Losses.

The interest income on nonaccrual loans is not considered material for the three ~~and nine~~ month periods ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

ALLOWANCE FOR CREDIT LOSSES

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,~~quantitative factors, and other qualitative considerations.

Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated ~~into homogeneous segments~~ for collective assessment. ~~Reserve factors~~We use statistically-based models that leverage assumptions about current and future economic conditions throughout the contractual life of the loan. Expected credit losses are estimated by either lifetime loss rates or expected loss cash flows based on ~~estimated probability of default~~three key parameters: probability-of-default (“PD”), exposure-at-default (“EAD”), and ~~loss given default for each segment. The estimates~~loss-given-default (“LGD”). Future economic conditions are ~~determined based on economic forecasts over~~incorporated to the extent that they are reasonable and supportable. Beyond the reasonable and supportable ~~forecast period based on projected performance of~~periods, the economic variables ~~that have~~revert to a ~~statistical correlation with~~historical equilibrium at a pace dependent on the ~~historical loss experience~~state of the ~~segments. For contractual periods that extend beyond~~economy reflected within the ~~one-year forecast period, the estimates revert to average historical loss experiences over a one-year period on a straight-line basis.~~

economic scenarios. We also include 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 the 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 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.~~

•~~Data imprecision 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~~have unique risk characteristics are evaluated on an individual basis. These evaluations are typically performed on loans with a deteriorated internal risk ~~rating~~rating. For a collateral-dependent loan, our evaluation process includes a valuation by appraisal or ~~that are classified as~~other collateral analysis adjusted for selling costs, when appropriate. This valuation is compared to the remaining outstanding principal balance of the loan. If a ~~TDR. The~~loss is determined to be probable, the loss is included in the allowance for credit ~~loss is determined based on several methods including estimating the fair value of the underlying collateral or the present value of expected cash flows.~~losses as a specific allocation.

An analysis of the allowance for credit losses on loans is shown in Table ~~10.~~9.

Table ~~10:~~9: Allowance for Credit Losses


(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022
Balance, beginning of year	Balance, beginning of year	$	205,332	$	238,050	Balance, beginning of year	$	196,955	$	205,332

Loans charged off:	Loans charged off:					Loans charged off:
Credit card	Credit card	2,827		2,759		Credit card	1,076		920
Other consumer	Other consumer	1,438		1,577		Other consumer	456		414
Real estate	Real estate	730		8,068		Real estate	1,204		485
Commercial	Commercial	8,880		2,099		Commercial	413		6,319
Total loans charged off	Total loans charged off	13,875		14,503		Total loans charged off	3,149		8,138
Recoveries of loans previously charged off:	Recoveries of loans previously charged off:					Recoveries of loans previously charged off:
Credit card	Credit card	773		801		Credit card	234		274
Other consumer	Other consumer	967		1,136		Other consumer	240		387
Real estate	Real estate	2,799		3,995		Real estate	294		426
Commercial	Commercial	1,898		2,930		Commercial	1,067		557
Total recoveries	Total recoveries	6,437		8,862		Total recoveries	1,835		1,644
Net loans charged off	Net loans charged off	7,438		5,641		Net loans charged off	1,314		6,494
Provision for credit losses	Provision for credit losses	(5,405)		(29,901)		Provision for credit losses	10,916		(19,914)
Acquisition adjustment for PCD loans		5,100		—
Balance, September 30,		$	197,589	$	202,508
Balance, March 31,						Balance, March 31,	$	206,557	$	178,924

Loans charged off:	Loans charged off:					Loans charged off:
Credit card	Credit card			866		Credit card			2,942
Other consumer	Other consumer			476		Other consumer			1,462
Real estate	Real estate			2,623		Real estate			3,637
Commercial	Commercial			8,514		Commercial			7,951
Total loans charged off	Total loans charged off			12,479		Total loans charged off			15,992
Recoveries of loans previously charged off:	Recoveries of loans previously charged off:					Recoveries of loans previously charged off:
Credit card	Credit card			247		Credit card			750
Other consumer	Other consumer			268		Other consumer			810
Real estate	Real estate			915		Real estate			6,490
Commercial	Commercial			1,730		Commercial			1,816
Total recoveries	Total recoveries			3,160		Total recoveries			9,866
Net loans charged off	Net loans charged off			9,319		Net loans charged off			6,126
Provision for credit losses	Provision for credit losses			(1,308)		Provision for credit losses			14,535
Acquisition adjustment for PCD loans	Acquisition adjustment for PCD loans			13,451		Acquisition adjustment for PCD loans			9,622
Balance, end of year	Balance, end of year			$	205,332	Balance, end of year			$	196,955

Provision for Credit Losses

The amount of provision added to or released from the allowance during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and for the year ended December 31, ~~2021,~~2022, was based on management’s judgment, with consideration given to the composition and asset quality of the portfolio, historical loan loss experience, and assessment of current and expected economic forecasts and ~~conditions, past due and non-performing loans and net loss experience.~~conditions. 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.

Allowance for Credit Losses Allocation

As of ~~September 30, 2022,~~March 31, 2023, the allowance for credit losses reflected ~~a decrease~~an increase of approximately ~~$7.7~~$9.6 million from December 31, ~~2021~~2022 while total loans increased by ~~$3.59 billion~~$413.0 million over the same ~~nine~~three month period. The allocation in each category within the allowance generally reflects the overall changes in the loan portfolio mix.

The ~~decrease~~increase in the allowance for credit losses during the first ~~nine~~three months of ~~2022~~2023 was primarily due to ~~improved credit quality metrics and improved macroeconomic factors, coupled with~~ the ~~planned exit of several large oil and gas relationships~~loan growth experienced during the year. Additionally, there was a reduction of pandemic-era qualitative factors that were established based on unidentifiable risks with borrowers in at-risk industries. The decrease was partially offset due to the Spirit acquisition, which provided $2.29 billion in total loans after purchase accounting discounts.quarter, as well as refreshed economic forecasts. Our allowance for credit losses at ~~September 30, 2022~~March 31, 2023 was considered appropriate given the current economic environment and other related factors.

The following table sets forth the sum of the amounts of the allowance for credit losses attributable to individual loans within each category, or loan categories in general. The table also reflects the percentage of loans in each category to the total loan portfolio for each of the periods indicated. The allowance for credit losses by loan category is determined by i) our estimated reserve factors by category including applicable qualitative adjustments and ii) any specific allowance allocations that are identified on individually evaluated loans. The amounts shown are not necessarily indicative of the actual future losses that may occur within individual categories.

Table ~~11:~~10: Allocation of Allowance for Credit Losses


		September 30, 2022					December 31, 2021						March 31, 2023					December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Allowance Amount			% of loans (1)		Allowance Amount			% of loans (1)		(Dollars in thousands)	Allowance Amount			% of loans (1)		Allowance Amount			% of loans (1)
Credit cards	Credit cards	$	7,075		1.2	%	$	3,987		1.6	%	Credit cards	$	6,446		1.1	%	$	5,140		1.2	%
Other consumer	Other consumer	3,360			1.2	%	2,676			1.4	%	Other consumer	5,949			3.6	%	6,614			3.2	%
Real estate	Real estate	151,090			77.5	%	179,270			76.3	%	Real estate	163,906			77.8	%	150,795			78.0	%
Commercial	Commercial	32,108			17.8	%	17,458			18.0	%	Commercial	30,256			17.5	%	34,406			17.6	%
Other		3,956			2.3	%	1,941			2.7	%
Total	Total	$	197,589		100.0	%	$	205,332		100.0	%	Total	$	206,557		100.0	%	$	196,955		100.0	%

Allowance for credit losses to period-end loans	Allowance for credit losses to period-end loans	1.27		%			1.71		%			Allowance for credit losses to period-end loans	1.25		%			1.22		%

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

DEPOSITS

Deposits are our primary source of funding for earning assets and are primarily developed through our network of ~~230~~231 financial centers as of ~~September 30, 2022.~~March 31, 2023. We offer a variety of products designed to attract and retain customers with a continuing focus on developing core deposits. Our core deposits consist of all deposits excluding time deposits of $250,000 or more and brokered deposits. As of ~~September 30, 2022,~~March 31, 2023, core deposits comprised ~~86.1%~~80.3% of our total deposits.

We continually monitor the funding requirements along with competitive interest rates in the markets we serve. Because of our community banking philosophy, our executives in the local markets, with oversight by the Chief Deposit Officer, Asset Liability Committee and the Bank’s Treasury Department, establish the interest rates offered on both core and non-core deposits. This approach ensures that the interest rates being paid are competitively priced for each particular deposit product and structured to meet the funding requirements. We believe we are paying a competitive rate when compared with pricing in those markets.

We manage our interest expense through deposit pricing. We believe that additional funds can be attracted and deposit growth can be accelerated through deposit pricing if we experience increased loan demand or other liquidity needs. We can also utilize brokered deposits as an additional source of funding to meet liquidity needs. We are continually monitoring and looking for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Our total deposits as of ~~September 30, 2022,~~March 31, 2023, were ~~$22.15~~$22.45 billion, ~~an increase~~compared to $22.55 billion as of ~~$2.78 billion from~~ December 31, ~~2021, primarily driven by the acquisition of Spirit, which contributed $2.72 billion, net of fair value adjustments.~~2022. Noninterest bearing transaction

accounts, interest bearing transaction accounts and savings accounts totaled ~~$18.32~~$16.77 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$16.91~~$17.78 billion at December 31, ~~2021, an increase~~2022, a decrease of ~~$1.41~~$1.01 billion. Total time deposits increased ~~$1.37 billion~~$910.2 million to ~~$3.83~~$5.68 billion at ~~September 30, 2022,~~March 31, 2023, from ~~$2.45~~$4.77 billion at December 31, ~~2021.~~2022. We had ~~$1.82~~$2.95 billion and ~~$466.0 million~~$2.75 billion of brokered deposits at ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively. ~~These category increases were primarily related~~The change in the mix of deposits at March 31, 2023 as compared to December 31, 2022 reflects increased market competition and consumer migration toward higher rate deposits, principally certificates of deposits, given the ~~Spirit acquisition.~~ rapid increase in interest rates that has occurred over the past year.

We ~~are managing~~made the strategic decision during the fourth quarter of 2022 to extend the duration of select wholesale deposits to complement our ~~balance sheet~~core deposit base and, ~~our net interest margin by~~due to advantageous rates, added brokered certificates of deposit with maturities of 6-12 months. Additionally, we are continuing to ~~eliminate several high-cost deposits related to public funds and brokered deposits as well as~~ hone our product offerings to give customers flexibility of choice while maintaining the ability to adjust interest rates timely in the current rate environment.

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

Our total debt was ~~$1.33~~$1.39 billion and ~~$1.72~~$1.23 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The outstanding balance for ~~September 30, 2022~~March 31, 2023 includes ~~$934.1 million~~$1.00 billion in FHLB short-term advances; $366.0 million in subordinated notes and unamortized debt issuance costs; and ~~$30.6~~$20.4 million of other long-term debt.

All of the FHLB short-term advances outstanding at the end of the ~~third~~first quarter ~~2022~~2023 are ~~FOTO~~fixed rate, fixed term advances, which are ~~a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier~~due less than ~~the maturity date. We continually analyze the possibility of the FHLB exercising the options along with the market expected rate outcome.~~one year from origination and therefore are classified as short-term advances.

In March 2018, we issued ~~$330~~$330.0 million in aggregate principal amount of 5.00% Fixed-to-Floating Rate Subordinated Notes (“Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. ~~The Company~~We incurred $3.6 million in debt issuance costs related to the offering. The Notes will mature on April 1, 2028 and are subordinated in right of payment to the payment of our other existing and future senior indebtedness, including all our general creditors. The Notes are obligations of the Company only and are not obligations of, and are not guaranteed by, any of its subsidiaries.

~~The Company~~We assumed Fixed-to-Floating Rate Subordinated Notes in an aggregate principal amount, net of premium adjustments, of $37.4 million in connection with the Spirit acquisition in April ~~2022.~~2022 (the “Spirit Notes”). The Spirit Notes will mature on July 31, 2030, and initially bear interest at a fixed annual rate of 6.00%, payable quarterly, in arrears, to, but excluding, July 31, 2025. From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears.

CAPITAL

Overview

At ~~September 30, 2022,~~March 31, 2023, total capital was ~~$3.16~~$3.34 billion. Capital represents shareholder ownership in the Company – the book value of assets in excess of liabilities. At ~~September 30, 2022,~~March 31, 2023, our common equity to asset ratio was ~~11.66%~~12.11% compared to ~~13.14%~~11.91% at year-end ~~2021.~~2022.

Capital Stock

On February 27, 2009, at a special meeting, our shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $0.01 par value. ~~The~~On April 27, 2022, our shareholders approved amendments to our Articles of Incorporation to remove an $80.0 million cap on the aggregate liquidation preference associated with the preferred stock and increase the number of ~~all~~authorized shares of ~~preferred~~our Class A common stock ~~cannot exceed $80,000,000.~~from 175,000,000 to 350,000,000.

On October 29, 2019, we filed 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 (“Series D Preferred Stock”), out of our authorized preferred stock. On ~~November 30, 2021,~~April 27, 2022, our shareholders approved an amendment to our Articles of Incorporation to remove the ~~Company redeemed all of~~classification and designation for the Series D Preferred ~~Stock, including accrued and unpaid dividends.~~Stock. As of March 31, 2023, there were no shares of preferred stock issued or outstanding.

~~On April 27, 2022, shareholders of the Company approved an increase in the number of authorized shares of its Class A common stock from 175,000,000 to 350,000,000.~~

Stock Repurchase Program

Effective July 23, 2021, our Board of Directors approved an amendment to ~~the Company’s~~our stock repurchase program originally approved in October 2019 (“2019 Program”) that increased the amount of our common stock that could be repurchased under the 2019 Program from a maximum of ~~$180~~$180.0 million to a maximum of $276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022.

During January 2022, ~~the Company~~we substantially exhausted the remaining capacity under the 2019 ~~Program. As a result, in January 2022, the Company’s~~Program, and our Board of Directors authorized a new stock repurchase program (the “2022 Program”) under which ~~the Company~~we may repurchase up to $175.0 million of ~~its~~our Class A common stock currently issued and outstanding. The 2022 Program replaced the 2019 Program and will terminate on January 31, 2024 (unless terminated sooner).

No shares were repurchased during the three month period ended March 31, 2023. During the three month period ended ~~September 30,~~March 31, 2022, ~~the Company~~we repurchased ~~1,883,713 shares at an average price of $23.91 per share under the 2022 Program. During the nine month period ended September 30, 2022, the Company repurchased~~ 513,725 shares at an average price of $31.25 per share under the 2019 Program and 3,919,037 shares at an average price of $24.26 per share under the 2022 Program, respectively. The 2022 Program repurchases were all completed during the second and third quarters of 2022. During the three and nine month periods ended September 30, 2021, the Company repurchased 1,806,205 shares at an average price of ~~$28.48~~$31.25 per share ~~and 1,937,121 shares at an average price of $28.14 per share, respectively,~~ under the 2019 Program.

Under the 2022 Program, ~~which replaced the 2019 Program, the Company~~we may repurchase shares of ~~its~~our common stock through open market and privately negotiated transactions or otherwise. The timing, pricing, and amount of any repurchases under the 2022 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~~our common stock, corporate considerations, ~~the Company’s~~our working capital and investment requirements, general market and economic conditions, and legal requirements. The 2022 Program does not obligate ~~the Company~~us to repurchase any common stock and may be modified, discontinued, or suspended at any time without prior notice. ~~The Company anticipates~~We anticipate funding for this 2022 Program to come from available sources of liquidity, including cash on hand and future cash flow.

Cash Dividends

We declared cash dividends on our common stock of ~~$0.57~~$0.20 per share for the first ~~nine~~three months of ~~2022~~2023 compared to ~~$0.54~~$0.19 per share for the first ~~nine~~three months of ~~2021,~~2022, an increase of ~~$0.03,~~$0.01, or 6%5%. The timing and amount of future dividends are at the discretion of our Board of Directors and will depend upon our consolidated earnings, financial condition, liquidity and capital requirements, the amount of cash dividends paid to us by our subsidiaries, applicable government regulations and policies and other factors considered relevant by our Board of Directors. Our Board of Directors anticipates that we will continue to pay quarterly dividends in amounts determined based on the factors discussed above. However, there can be no assurance that we will continue to pay dividends on our common stock at the current levels or at all.

Parent Company Liquidity

The primary liquidity needs of the Parent Company are the payment of dividends to shareholders, the funding of debt obligations and cash needs for acquisitions. The primary sources for meeting these liquidity needs are the current cash on hand at the parent company and the future dividends received from Simmons Bank. Payment of dividends by Simmons Bank is subject to various regulatory limitations. See the Liquidity and Market Risk Management discussions of Item 3 – Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10Q for additional information regarding the parent company’s liquidity. ~~The redemption of our trust preferred securities during the third quarter of 2022 did not have a meaningful impact on the Parent Company’s liquidity.~~ We continually assess our capital and liquidity needs and the best way to meet them, including, without limitation, through capital raising in the market via stock or debt offerings.

Risk Based Capital

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

common equity Tier 1 capital above its minimum risk-based capital requirements. Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses.

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of ~~September 30, 2022,~~March 31, 2023, we meet all capital adequacy requirements to which we are subject. As of the most recent notification from regulatory agencies, Simmons Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and Simmons Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution’s categories.

Our risk-based capital ratios at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are presented in Table 1211 below:

Table ~~12:~~11: Risk-Based Capital


		September 30,			December 31,				March 31,			December 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			(Dollars in thousands)	2023			2022
Tier 1 capital:	Tier 1 capital:							Tier 1 capital:
Stockholders’ equity	Stockholders’ equity	$	3,157,151		$	3,248,841		Stockholders’ equity	$	3,339,901		$	3,269,362
CECL transition provision	CECL transition provision	92,619			114,458			CECL transition provision	61,746			92,619
Goodwill and other intangible assets	Goodwill and other intangible assets	(1,416,453)			(1,226,686)			Goodwill and other intangible assets	(1,410,141)			(1,412,667)
Unrealized loss (gain) on available-for-sale securities, net of income taxes		567,730			10,545
Unrealized loss on available-for-sale securities, net of income taxes								Unrealized loss on available-for-sale securities, net of income taxes	470,681			517,560
Total Tier 1 capital	Total Tier 1 capital	2,401,047			2,147,158			Total Tier 1 capital	2,462,187			2,466,874
Tier 2 capital:	Tier 2 capital:							Tier 2 capital:
Trust preferred securities and subordinated debt		365,951			384,131
Subordinated notes and debentures								Subordinated notes and debentures	366,027			365,989
Qualifying allowance for credit losses and reserve for unfunded commitments	Qualifying allowance for credit losses and reserve for unfunded commitments	116,257			71,853			Qualifying allowance for credit losses and reserve for unfunded commitments	173,077			115,627
Total Tier 2 capital	Total Tier 2 capital	482,208			455,984			Total Tier 2 capital	539,104			481,616
Total risk-based capital	Total risk-based capital	$	2,883,255		$	2,603,142		Total risk-based capital	$	3,001,291		$	2,948,490

Risk weighted assets	Risk weighted assets	$	20,470,918		$	15,538,967		Risk weighted assets	$	20,748,605		$	20,738,727

Assets for leverage ratio	Assets for leverage ratio	$	25,986,938		$	23,647,901		Assets for leverage ratio	$	26,632,691		$	26,407,061

Ratios at end of period:	Ratios at end of period:							Ratios at end of period:
Common equity Tier 1 ratio (CET1)	Common equity Tier 1 ratio (CET1)	11.73		%	13.82		%	Common equity Tier 1 ratio (CET1)	11.87		%	11.90		%
Tier 1 leverage ratio	Tier 1 leverage ratio	9.24		%	9.08		%	Tier 1 leverage ratio	9.24		%	9.34		%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	11.73		%	13.82		%	Tier 1 risk-based capital ratio	11.87		%	11.90		%
Total risk-based capital ratio	Total risk-based capital ratio	14.08		%	16.75		%	Total risk-based capital ratio	14.47		%	14.22		%
Minimum guidelines:	Minimum guidelines:							Minimum guidelines:
Common equity Tier 1 ratio (CET1)	Common equity Tier 1 ratio (CET1)	4.50		%	4.50		%	Common equity Tier 1 ratio (CET1)	4.50		%	4.50		%
Tier 1 leverage ratio	Tier 1 leverage ratio	4.00		%	4.00		%	Tier 1 leverage ratio	4.00		%	4.00		%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	6.00		%	6.00		%	Tier 1 risk-based capital ratio	6.00		%	6.00		%
Total risk-based capital ratio	Total risk-based capital ratio	8.00		%	8.00		%	Total risk-based capital ratio	8.00		%	8.00		%

Regulatory Capital Changes

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 provided an option to phase in over a three year period on a straight line basis the day-one impact of the adoption on earnings and Tier 1 capital (the “CECL Transition Provision”).

In March 2020 and in response to 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 capital, followed by a three-year transition period (the “2020 CECL Transition Provision”). The Company elected to apply the 2020 CECL Transition Provision.

The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios ~~and replace the existing risk-weighting approach~~ with a more risk-sensitive approach. The Basel III Capital Rules established risk-weighting categories depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures.

The final rules included a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets to 6.0% and require a minimum leverage ratio of 4.0%.

Prior to December 31, 2017, Tier 1 capital included common equity Tier 1 capital and certain additional Tier 1 items as provided under the Basel III Capital Rules. The Tier 1 capital for the Company consisted of common equity Tier 1 capital and trust preferred securities. The Basel III Capital Rules include certain provisions that require trust preferred securities to be phased out of qualifying Tier 1 capital when assets surpass $15 billion. 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 were no longer included as Tier 1 capital. All of the Company’s trust preferred securities were redeemed during the third quarter ~~ended September 30,~~ 2022. Qualifying subordinated debt of $366.0 million is included as Tier 2 and total capital as of ~~September 30, 2022.~~March 31, 2023.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See the Recently Issued Accounting Standards section in Note 1, Preparation of Interim Financial Statements, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on the Company’s ongoing financial position and results of operation.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this quarterly report may not be based on historical facts and should be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “believe,” “budget,” “contemplate,” “continue,” “estimate,” “expect,” “foresee,” “intend,” “indicate,” “target,” “plan,” positions,” “prospects,” “project,” “predict,” or “potential,” by future conditional verbs such as “could,” “may,” “might,” “should,” “will,” or “would,” or by variations of such words or by similar expressions. These forward-looking statements include, without limitation, those relating to the Company’s future growth, completed acquisitions, revenue, expenses, assets, asset quality, profitability, earnings, accretion, dividends, customer service, lending capacity and lending activity, investment in digital channels, critical accounting policies and estimates, net interest margin, noninterest revenue, noninterest expense, market conditions related to and the impact of the Company’s stock repurchase program, consumer behavior and liquidity, the adequacy of the allowance for credit losses, the impacts of the COVID-19 pandemic and the ability of the Company to manage the impacts of the COVID-19 pandemic, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, repricing of loans and time deposits, loan loss experience, liquidity, the Company’s expectations regarding actions by the FHLB including with respect to the FHLB’s option to terminate FOTO advances, capital resources, market risk, plans for investments in securities, effect of pending and future litigation, including the results of the overdraft fee litigation against the Company that is described in this quarterly report, staffing initiatives, estimated cost savings associated with the Company’s Better Bank Initiative, acquisition strategy and activity, legal and regulatory limitations and compliance and competition.

These forward-looking statements are based on various assumptions and involve inherent risks and uncertainties, and may not be realized due to a variety of factors, including, without limitation: changes in the Company’s operating, acquisition, or expansion strategy; the effects of future economic conditions (including unemployment levels and slowdowns in economic growth), governmental monetary and fiscal policies, including policies of the Federal Reserve, as well as legislative and regulatory changes, including in response to the COVID-19 pandemic; the impacts of the COVID-19 pandemic on the Company’s operations and performance; the ultimate effect of measures the Company takes or has taken in response to the COVID-19 pandemic; the pace of recovery when the COVID-19 pandemic subsides and the heightened impact it has on many of the risks described herein;changes; changes in real estate values; changes in interest ~~rates;~~rates and related governmental policies; inflation; changes in the level and composition of deposits, loan demand, deposit flows, credit quality and the values of loan collateral, securities and interest sensitive assets and liabilities; changes in the securities markets generally or the price of the Company’s common stock specifically; developments in information technology affecting the financial industry; changes in customer behaviors, including consumer spending, borrowing and saving habits; residual effects of the COVID-19 pandemic; cyber threats, attacks or events; reliance on third parties for the provision of key services; further changes in accounting principles relating to loan loss recognition; uncertainty and disruption associated with the discontinued use of the London Inter-Bank Offered Rate; the costs of evaluating possible acquisitions and the risks inherent in integrating acquisitions; possible adverse rulings, judgements, settlements, fines and other outcomes of pending or future ~~litigation;~~litigation or government actions; market disruptions, including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts (including the ongoing military conflict between Russia and Ukraine) or other major events, or the prospect of these events; soundness of other financial institutions and indirect exposure related to the closings of Silicon Valley Bank (SVB), Signature Bank, First Republic Bank and Silvergate Bank and their impact on the broader market through other customers, suppliers and partners (or that the conditions which resulted in the liquidity concerns with SVB, First Republic Bank, Signature Bank and Silvergate Bank may also adversely impact, directly or indirectly, other financial institutions and market participants with which the Company has commercial or deposit relationships); the loss of key employees; increased unemployment; labor shortages; claims, damages; changes in accounting principles relating to loan loss recognition (current expected credit losses); the Company’s ability to manage and successfully integrate its mergers and acquisitions and to fully realize cost savings and other benefits associated with those transactions; government legislation; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet; the failure of assumptions underlying the establishment of reserves for possible credit losses, fair value for loans, other real estate owned, and other cautionary statements set forth elsewhere in this report. ~~Please also refer to~~Additional information on factors that might affect the Company’s financial results is included in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this quarterly report and the Company’s annual report on Form 10-K for the year ended December 31, ~~2021,~~2022, and related disclosures in other filings, which have been filed with the SEC and are available on the SEC’s website at www.sec.gov. Many of these factors are beyond our ability to predict or control, and actual results could differ materially from those in the forward-looking statements due to these factors and others. In addition, as a result of these and other factors, our past financial performance should not be relied upon as an indication of future performance.

We believe the assumptions and expectations that underlie or are reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations or whether our future performance will differ materially from the performance reflected in or implied by our forward-looking statements, and you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date hereof, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and all written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this section.

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GAAP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

The tables below present computations of adjusted earnings (net income excluding certain items {gain on ~~sale of branches, loss from early retirement of TruPS, gain on sale of intellectual property,~~insurance settlement, merger related costs, and net branch right sizing ~~costs, and the Day 2 CECL Provision}~~costs}) (non-GAAP), and adjusted diluted earnings per share (non-GAAP) as well as a computation of tangible book value per share (non-GAAP), tangible common equity to tangible assets (non-GAAP), adjusted ~~other~~noninterest income (non-GAAP) and adjusted noninterest expense (non-GAAP). Adjusted items are included in financial results presented in accordance with generally accepted accounting principles (US GAAP).

We believe the exclusion of these certain items in expressing earnings and certain other financial measures, including “adjusted earnings,” provides a meaningful basis for period-to-period and company-to-company comparisons, which management believes will assist investors and analysts in analyzing the adjusted financial measures of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of the Company’s business because management does not consider these certain items to be relevant to ongoing financial performance. Management and the Board of Directors utilize “adjusted earnings” (non-GAAP) for the following purposes:

• Preparation of the Company’s operating budgets

• Monthly financial performance reporting

• Monthly “flash” reporting of consolidated results (management only)

• Investor presentations of Company performance

We believe the presentation of “adjusted earnings” on a diluted per share basis (non-GAAP) provides a meaningful basis for period-to-period and company-to-company comparisons, which management believes will assist investors and analysts in analyzing the adjusted financial measures of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of the Company’s business, because management does not consider these certain items to be relevant to ongoing financial performance on a per share basis. Management and the Board of Directors utilize “adjusted diluted earnings per share” (non-GAAP) for the following purposes:

• Calculation of annual performance-based incentives for certain executives

• Calculation of long-term performance-based incentives for certain executives

• Investor presentations of Company performance

We have ~~$1.442~~$1.446 billion and ~~$1.252~~$1.449 billion total goodwill and other intangible assets for the periods ended ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Because our acquisition strategy has resulted in a high level of intangible assets, management believes useful calculations include tangible book value per share (non-GAAP) and tangible common equity to tangible assets (non-GAAP).

We believe that presenting these non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that is applied by management and the Board of Directors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, we have procedures in place to identify and approve each item that qualifies as adjusted to ensure that the Company’s “adjusted” results are properly reflected for period-to-period comparisons. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes certain items does not represent the amount that effectively accrues directly to stockholders (i.e., certain items are included in earnings and stockholders’ equity). Additionally, similarly titled non-GAAP financial measures used by other companies may not be computed in the same or similar fashion.

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See Table 1312 below for the reconciliation of non-GAAP financial measures, which exclude certain items for the periods presented.

Table ~~13:~~12: Reconciliation of Adjusted Earnings (non-GAAP)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		September 30,		June 30,		September 30,		September 30,				March 31,		December 31,		March 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2022		2022		2021		(In thousands, except per share data)		2023		2022		2022
Net income available to common stockholders	Net income available to common stockholders	$	80,603	$	27,454	$	173,152	$	222,879	Net income available to common stockholders		$	45,589	$	83,260	$	65,095
Certain items:	Certain items:									Certain items:
Gain on sale of branches		—		—		—		(5,316)
Loss from early retirement of TruPS		365		—		365		—
Gain on sale of intellectual property		(750)		—		(750)		—
Gain on insurance settlement										Gain on insurance settlement		—		(4,074)		—
Merger related costs	Merger related costs	1,422		19,133		22,441		2,320		Merger related costs		1,396		35		1,886
Branch right sizing (net)	Branch right sizing (net)	1,235		380		2,524		(2,554)		Branch right sizing (net)		979		1,104		909
Day 2 CECL Provision		—		33,779		33,779		—
Tax effect (1)	Tax effect (1)	(594)		(13,928)		(15,253)		1,451		Tax effect (1)		(621)		768		(731)
Certain items, net of tax	Certain items, net of tax	1,678		39,364		43,106		(4,099)		Certain items, net of tax		1,754		(2,167)		2,064
Adjusted earnings (non-GAAP)	Adjusted earnings (non-GAAP)	$	82,281	$	66,818	$	216,258	$	218,780	Adjusted earnings (non-GAAP)		$	47,343	$	81,093	$	67,159

Diluted earnings per share(2)	Diluted earnings per share(2)	$	0.63	$	0.21	$	1.40	$	2.05	Diluted earnings per share(2)		$	0.36	$	0.65	$	0.58
Certain items:	Certain items:									Certain items:
Gain on sale of branches		—		—		—		(0.05)
Loss from early retirement of TruPS		—		—		—		—
Gain on sale of intellectual property		(0.01)		—		(0.01)		—
Gain on insurance settlement										Gain on insurance settlement		—		(0.03)		—
Merger related costs	Merger related costs	0.01		0.15		0.18		0.02		Merger related costs		0.01		—		0.01
Branch right sizing (net)	Branch right sizing (net)	0.01		—		0.02		(0.02)		Branch right sizing (net)		0.01		0.01		0.01
Day 2 CECL Provision		—		0.27		0.28		—
Tax effect (1)	Tax effect (1)	—		(0.11)		(0.12)		0.01		Tax effect (1)		(0.01)		0.01		(0.01)
Certain items, net of tax	Certain items, net of tax	0.01		0.31		0.35		(0.04)		Certain items, net of tax		0.01		(0.01)		0.01
Adjusted diluted earnings per share (non-GAAP)	Adjusted diluted earnings per share (non-GAAP)	$	0.64	$	0.52	$	1.75	$	2.01	Adjusted diluted earnings per share (non-GAAP)		$	0.37	$	0.64	$	0.59

(1)Effective tax rate of 26.135%.

(2)See Note 17, Earnings Per Share (“EPS”), for number of shares used to determine EPS.

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See Table 1413 below for the reconciliation of adjusted ~~other~~noninterest income and adjusted noninterest expense for the periods presented.

Table ~~14:~~13: Reconciliation of Adjusted ~~Other~~Noninterest Income and Adjusted Noninterest Expense (non-GAAP)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		September 30,		June 30,		September 30,		September 30,				March 31,		December 31,		March 31,
(In thousands)	(In thousands)	2022		2022		2022		2021		(In thousands)		2023		2022		2022
Other income		$	6,658	$	6,837	$	20,761	$	25,308
Noninterest income										Noninterest income		$	45,835	$	44,647	$	42,218
Certain items:	Certain items:									Certain items:
Gain on sale of branches		—		—		—		(5,316)
Loss from early retirement of TruPS		365		—		365		—
Gain on sale of intellectual property		(750)		—		(750)		—
Branch right sizing		65		88		153		(367)
Gain on insurance settlement										Gain on insurance settlement		—		(4,074)		—
Total certain items	Total certain items	(320)		88		(232)		(5,683)		Total certain items		—		(4,074)		—
Adjusted other income (non-GAAP)		$	6,338	$	6,925	$	20,529	$	19,625
Adjusted noninterest income (non-GAAP)										Adjusted noninterest income (non-GAAP)		$	45,835	$	40,573	$	42,218

Noninterest expense	Noninterest expense	$	138,943	$	156,813	$	424,173	$	341,992	Noninterest expense		$	143,228	$	142,575	$	128,417
Certain items:	Certain items:									Certain items:
Merger related costs	Merger related costs	(1,422)		(19,133)		(22,441)		(2,320)		Merger related costs		(1,396)		(35)		(1,886)
Branch right sizing	Branch right sizing	(1,170)		(292)		(2,371)		2,187		Branch right sizing		(979)		(1,104)		(909)
Total certain items	Total certain items	(2,592)		(19,425)		(24,812)		(133)		Total certain items		(2,375)		(1,139)		(2,795)
Adjusted noninterest expense (non-GAAP)	Adjusted noninterest expense (non-GAAP)	$	136,351	$	137,388	$	399,361	$	341,859	Adjusted noninterest expense (non-GAAP)		$	140,853	$	141,436	$	125,622

See Table 1514 below for the reconciliation of tangible book value per common share.

Table ~~15:~~14: Reconciliation of Tangible Book Value per Common Share (non-GAAP)


		September 30,		December 31,			March 31,		December 31,
(In thousands, except per share data)	(In thousands, except per share data)	2022		2021		(In thousands, except per share data)	2023		2022
Total common stockholders’ equity	Total common stockholders’ equity	$	3,157,151	$	3,248,841	Total common stockholders’ equity	$	3,339,901	$	3,269,362
Intangible assets:	Intangible assets:					Intangible assets:
Goodwill	Goodwill	(1,309,000)		(1,146,007)		Goodwill	(1,320,799)		(1,319,598)
Other intangible assets	Other intangible assets	(133,059)		(106,235)		Other intangible assets	(124,854)		(128,951)
Total intangibles	Total intangibles	(1,442,059)		(1,252,242)		Total intangibles	(1,445,653)		(1,448,549)
Tangible common stockholders’ equity	Tangible common stockholders’ equity	$	1,715,092	$	1,996,599	Tangible common stockholders’ equity	$	1,894,248	$	1,820,813
Shares of common stock outstanding	Shares of common stock outstanding	126,943,467		112,715,444		Shares of common stock outstanding	127,282,192		127,046,654

Book value per common share	Book value per common share	$	24.87	$	28.82	Book value per common share	$	26.24	$	25.73

Tangible book value per common share (non-GAAP)	Tangible book value per common share (non-GAAP)	$	13.51	$	17.71	Tangible book value per common share (non-GAAP)	$	14.88	$	14.33

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See Table 1615 below for the calculation of tangible common equity and the reconciliation of tangible common equity to tangible assets.

Table ~~16:~~15: Reconciliation of Tangible Common Equity and the Ratio of Tangible Common Equity to Tangible Assets (non-GAAP)

September 30, December 31,
(Dollars in thousands) 2022 2021
Total common stockholders’ equity $ 3,157,151 $ 3,248,841
Intangible assets:
Goodwill (1,309,000) (1,146,007)
Other intangible assets (133,059) (106,235)
Total intangibles (1,442,059) (1,252,242)
Tangible common stockholders’ equity $ 1,715,092 $ 1,996,599
Total assets $ 27,076,074 $ 24,724,759
Intangible assets:
Goodwill (1,309,000) (1,146,007)
Other intangible assets (133,059) (106,235)
Total intangibles (1,442,059) (1,252,242)
Tangible assets $ 25,634,015 $ 23,472,517
Ratio of common equity to assets 11.66 % 13.14 %
Ratio of tangible common equity to tangible assets (non-GAAP) 6.69 % 8.51 %


	March 31,			December 31,
(Dollars in thousands)	2023			2022
Total common stockholders’ equity	$	3,339,901		$	3,269,362
Intangible assets:
Goodwill	(1,320,799)			(1,319,598)
Other intangible assets	(124,854)			(128,951)
Total intangibles	(1,445,653)			(1,448,549)
Tangible common stockholders’ equity	$	1,894,248		$	1,820,813

Total assets	$	27,583,446		$	27,461,061
Intangible assets:
Goodwill	(1,320,799)			(1,319,598)
Other intangible assets	(124,854)			(128,951)
Total intangibles	(1,445,653)			(1,448,549)
Tangible assets	$	26,137,793		$	26,012,512

Ratio of common equity to assets	12.11		%	11.91		%
Ratio of tangible common equity to tangible assets (non-GAAP)	7.25		%	7.00		%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company has leveraged its investment in its subsidiary bank and depends upon the dividends paid to it, as the sole shareholder of the subsidiary bank, as a principal source of funds for dividends to shareholders, stock repurchases and debt service requirements. At ~~September 30, 2022,~~March 31, 2023, undivided profits of Simmons Bank were approximately ~~$604.9~~$613.1 million, of which approximately ~~$175.1~~$330.1 million was available for the payment of dividends to the Company without regulatory approval. In addition to dividends, other sources of liquidity for the Company are the sale of equity securities and the borrowing of funds.

Subsidiary Bank

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

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors and borrowers by either converting assets into cash or accessing new or existing sources of incremental funds. A major responsibility of management is to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to constantly measure liquid assets as well as relevant ratios concerning earning asset levels and purchased funds. The management and Board of Directors of the subsidiary bank monitors these same indicators and makes adjustments as needed.

Liquidity Management

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

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

The first source of liquidity available to the Company is federal funds. Federal funds are available on a daily basis and are used to meet the normal fluctuations of a dynamic balance sheet. The Bank has ~~approximat~~e~~ly $415~~approximately $540 million in federal funds lines of credit from upstream correspondent banks that can be accessed, when needed. In order to ensure availability of these upstream funds we test these borrowing lines at least annually. Historical monitoring of these funds has made it possible for us to project seasonal fluctuations and structure our funding requirements on a month-to-month basis.

Second, Simmons Bank has lines of credit available with the Federal Home Loan Bank. While we use portions of those lines to match off longer-term mortgage loans, we also use those lines to meet liquidity needs. Approximately ~~$5.0~~$5.6 billion of these lines of credit are currently available, if needed, for liquidity.

A third source of liquidity is that we have the ability to access large wholesale deposits from both the public and private sector to fund short-term liquidity needs.

A fourth source of liquidity is the retail deposits available through our network of financial centers throughout Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas. Although this method can be a somewhat more expensive alternative to supplying liquidity, this source can be used to meet intermediate term liquidity needs.

Fifth, we use a laddered investment portfolio that ensures there is a steady source of intermediate term liquidity. These funds can be used to meet seasonal loan patterns and other intermediate term balance sheet fluctuations. Approximately ~~51.0%~~49.9% of the investment portfolio is classified as available-for-sale. We also use securities held in the securities portfolio to pledge when obtaining public funds.

Sixth, we have a network of downstream correspondent banks from which we can access debt to meet liquidity needs.

Finally, we have the ability to access funds through the Federal Reserve Bank Discount Window.

We believe the various sources available are ample liquidity for short-term, intermediate-term and long-term liquidity.

Market Risk Management

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

Interest Rate Sensitivity

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

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

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As of ~~September 30, 2022,~~March 31, 2023, the model simulations projected that 100 and 200 basis point increases in interest rates would result in a ~~positive~~negative variance in net interest income of ~~1.14%~~0.08% and ~~2.25%~~0.18%, respectively, relative to the base case over the next 12 months due to our current liability sensitive balance sheet driven by the change in deposit mix in exposure to higher rate scenarios and increase in FHLB short-term advances, while decreases in interest rates of 100 basis points would result in a ~~negative~~positive variance in net interest income of ~~0.52%~~0.50% relative to the base case over the next 12 months. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each period-end will remain constant over the relevant twelve month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics of specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material.

The table below presents our sensitivity to net interest income at ~~September 30, 2022:~~March 31, 2023:

Table ~~17:~~16: Net Interest Income Sensitivity


Interest Rate Scenario			% Change from Base
Up ~~300 basis points~~			~~3.22%~~
Up 200 basis points			~~2.25%~~(0.18)%
Up 100 basis points			~~1.14%~~(0.08)%
Down 100 basis points			~~(0.52)%~~0.50%
Down 200 basis points			~~(5.79)%~~
~~Down 300 basis points~~			~~(10.90)~~(0.54)%

Item 4. Controls and Procedures

Management, under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, has reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer have concluded that the Company’s current disclosure controls and procedures were effective at the reasonable assurance levels as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company or its subsidiary to disclose material information required to be set forth in the Company’s periodic reports.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~September 30, 2022,~~March 31, 2023, which materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II: Other Information

Item 1. Legal Proceedings

The information contained in Note 13, Contingent Liabilities, of the Condensed Notes to Consolidated Financial Statements in Part I, Item 1 of this report is incorporated herein by reference.

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Item 1A. Risk Factors

There have been no material changes in the risk factors faced by the Company from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, except as set forth below.

Our business, financial condition, and results of operations could be adversely affected by developments impacting the financial services industry, such as recent bank failures or concerns involving liquidity.

Recent events in the financial services industry (including the closures of Silicon Valley Bank, Signature Bank and First Republic Bank) have caused general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally. While we rely on different sources of funding to meet potential liquidity needs, our business strategies are largely based on access to funding from customer deposits and supplemental funding provided by wholesale or other secondary liquidity sources. Deposit levels may be affected by various industry factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, conditions in the financial services industry specifically and general economic conditions that impact the amount of liquidity in the economy and savings levels, and also by factors that impact customers’ perception of our financial condition and capital and liquidity levels. In response to the closures of Silicon Valley Bank and Signature Bank, the Secretary of the U.S. Department of the Treasury approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank and Signature Bank in a manner that fully protected depositors by utilizing the Deposit Insurance Fund, and the Federal Reserve announced it would make available additional funding for eligible depository institutions to help assure banks have the ability to meet the needs of their depositors. It is uncertain whether these steps by the banking regulators will be sufficient to calm the financial markets and financial services industry generally, prevent further bank closures, or reduce the risk of deposit outflows, and particularly sudden deposit outflows, from banks. This uncertainty may drive deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our financial performance or financial condition.

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

Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the 2019 Program that increased the amount of the Company’s Class A common stock that may be repurchased under the 2019 Program from a maximum of $180 million to a maximum of $276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022 (unless terminated sooner). The 2019 Program was originally approved on October 17, 2019 and first amended in March 2020. During January 2022, the Company substantially exhausted the remaining capacity under the 2019 Program, and as a result, the Company’s Board of Directors authorized a new stock repurchase program (the “2022 Program”), which replaced the 2019 Program and under which the Company may repurchase up to $175.0 million of its Class A common stock currently issued and outstanding. The timing, pricing, and amount of any repurchases under the 2022 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.

~~Information concerning our~~We made no purchases of our common stock during the quarter ended ~~September 30,~~March 31, 2023. Under the 2022 ~~is as follows:~~Program, we have approximately $79.9 million of remaining funds that may be used to repurchase shares of our Class A Common Stock.

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
July 1, 2022 - July 31, 2022 345,900 $ 23.09 345,900 $ 116,971,000
August 1, 2022 - August 31, 2022 1,248,100 24.28 1,248,100 $ 86,669,000
September 1, 2022 - September 30, 2022 289,713 23.29 289,713 $ 79,922,000
Total 1,883,713 $ 23.91 1,883,713


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
January 1, 2023 - January 31, 2023	—	$	—	—	$	79,922,000
February 1, 2023 - February 28, 2023	—	—		—	$	79,922,000
March 1, 2023 - March 31, 2023	—	—		—	$	79,922,000
Total	—	$	—	—

(1)No shares of restricted stock were purchased in connection with employee tax withholding obligations under employee compensation plans, which are not purchases under any publicly announced plan.

Item 6. Exhibits


Exhibit No.			Description
2.1			Agreement and Plan of Merger, dated as of June 4, 2021, by and among Simmons First National Corporation, Simmons Bank and Landmark Community Bank (incorporated by reference to Annex A to the Registration Statement on Form S-4 filed under the Securities Act of 1933 by Simmons First National Corporation on July 21, 2021 (File No. 333-258059)).
~~2.2~~			Agreement and Plan of Merger, dated as of June 4, 2021, by and among Simmons First National Corporation and Triumph Bancshares, Inc. (incorporated by reference to Annex B to the Registration Statement on Form S-4 filed under the Securities Act of 1933 by Simmons First National Corporation on July 21, 2021 (File No. 333-258059)).
~~2.3~~			Agreement and Plan of Merger, dated as of November 18, 2021, by and among Simmons First National Corporation and Spirit of Texas Bancshares, Inc. (incorporated by reference to Annex A to the Registration Statement on Form S-4 filed under the Securities Act of 1933 by Simmons First National Corporation on January 18, 2022 (File No. 333-261842)).
3.1			Amended and Restated Articles of Incorporation of Simmons First National Corporation, as amended on July 14, 2021 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-4 filed under the Securities Act of 1933 by Simmons First National Corporation on July 21, 2021 (File No. 333-258059)).
3.2			Articles of Amendment to the Amended and Restated Articles of Incorporation of Simmons First National Corporation, dated August 3, 2022.*2022 (incorporated by reference to Exhibit 3.2 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (File No. 000-06253)).
3.3			Amended and Restated By-Laws of Simmons First National Corporation (incorporated by reference to Exhibit 3.1 to Simmons First National Corporation’s Current Report on Form 8-K filed February 18, 2022 (File No. 000-06253)).
4.1			Instruments defining the rights of security holders, including indentures. Simmons First National Corporation hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of the Corporation and its consolidated subsidiaries to the U.S. Securities and Exchange Commission upon request. No issuance of debt exceeds ten percent of the total assets of the Corporation and its subsidiaries on a consolidated basis.
10.1			~~First~~Second Amendment to Deferred Compensation Agreement for ~~Jennifer Compton~~George A Makris Jr. dated ~~July 27, 2022.*^~~January 25, 2023 (incorporated by reference to Exhibit 10.1 to Simmons First National Corporation’s Current Report on Form 8-K filed on January 25, 2023 (File No. 000-06253)).
10.2			~~First Amendment to Deferred Compensation Agreement for George Makris, III dated July 27, 2022.~~Form of Associate Restricted Stock Unit Award Certificate and Terms and Conditions (2015 Plan - 2023).*^
10.3			~~First Amendment to Deferred Compensation~~Form of Associate Performance Share Unit Award Certificate and Terms and Conditions (2015 Plan - 2023).*
10.4			Form of Associate Cash Award Certificate and Terms and Conditions (2015 Plan - 2023).*
10.5			Executive Change in Control Severance Agreement for ~~Matthew Reddin~~Ann Madea dated ~~August~~November 12, 2021.*
10.6			Indemnification Agreement for Ann Madea dated November 12, 2021.*
10.7			First Amended and Restated Executive Change in Control Agreement for Chad Rawls dated November 8, 2022.*
10.8			Indemnification Agreement for Chad Rawls dated November 8, 2022.*
10.9			Executive Change in Control Agreement for Brad Yaney dated November 4, 2022.*^
10.1 0			Indemnification Agreement for Brad Yaney dated November 4, 2022.*
14.1			Amended and Restated Simmons First National Corporation Code of Ethics (as amended and restated on July 23, 2020) (incorporated by reference to Exhibit 14.1 to Simmons First National Corporation’s Current Report on Form 8-K filed July 28, 2020 (File No. 000-06253)).
15.1			Awareness Letter of FORVIS, LLP.*
31.1			Rule 13a-15(e) and 15d-15(e) Certification – ~~George~~Robert A. ~~Makris, Jr., Chairman and~~Fehlman, Chief Executive Officer.*
31.2			Rule 13a-15(e) and 15d-15(e) Certification – James M. Brogdon, ~~Executive Vice~~ President and Chief Financial ~~Officer, and Treasurer.~~Officer.*
31.3			Rule 13a-15(e) and 15d-15(e) Certification – David W. Garner, Executive Vice President ~~Executive Director of Finance and Accounting~~ and Chief Accounting Officer.*
32.1			Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – ~~George~~Robert A. ~~Makris, Jr., Chairman and~~Fehlman, Chief Executive Officer.*
32.2			Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – James M. Brogdon, ~~Executive Vice~~ President and Chief Financial ~~Officer, and Treasurer.~~Officer.*
32.3			Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – David W. Garner, Executive Vice President ~~Executive Director of Finance and Accounting~~ and Chief Accounting Officer.*
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH			Inline XBRL Taxonomy Extension Schema.


~~Exhibit No.~~			~~Description~~*
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase.*
101.LAB			Inline XBRL Taxonomy Extension Labels Linkbase.*
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase.*
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

~~^ Management contract or a compensatory plan or arrangement~~

8575

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIMMONS FIRST NATIONAL CORPORATION

(Registrant)


Date:	~~November 4, 2022~~May 5, 2023	/s/ ~~George~~Robert A. ~~Makris, Jr.~~Fehlman
		~~George~~Robert A. ~~Makris, Jr.~~Fehlman
		~~Chairman and~~ Chief Executive Officer
		(Principal Executive Officer)


Date:	~~November 4, 2022~~May 5, 2023	/s/ James M. Brogdon
		James M. Brogdon
		~~Executive Vice~~ President and Chief Financial Officer ~~and Treasurer~~
		(Principal Financial Officer)


Date:	~~November 4, 2022~~May 5, 2023	/s/ David W. Garner
		David W. Garner
		Executive Vice President ~~Executive Director of Finance and~~
		~~Accounting~~ and Chief Accounting Officer
		(Principal Accounting Officer)

8676


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
	(Unaudited)				(Unaudited)
NET INCOME	$	80,603	$	80,574	$	173,152	$	222,918

OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding losses arising during the period on available-for-sale securities	(195,540)		(41,398)		(639,915)		(95,313)
Less: Reclassification adjustment for realized (losses) gains included in net income	(22)		5,248		(226)		15,846
Less: Realized losses on available-for-sale securities interest rate hedges	(41,412)		(13,722)		(101,443)		(13,722)
Net unrealized gains (losses) on securities transferred from available for sale to held to maturity during the period	—		1,106		(206,682)		1,106
Less: Accretion of net unrealized losses on securities transferred from available-for-sale to held-to-maturity	4,700		—		9,401		—
Other comprehensive loss, before tax effect	(158,806)		(31,818)		(754,329)		(96,331)
Less: Tax effect of other comprehensive loss	(41,504)		(8,316)		(197,144)		(25,176)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(117,302)		(23,502)		(557,185)		(71,155)

COMPREHENSIVE INCOME (LOSS)	$	(36,699)	$	57,072	$	(384,033)	$	151,763


(In thousands, except share data)	Preferred Stock		Common Stock		Surplus		Accumulated Other Comprehensive (Loss) Income		Undivided Profits		Total
Three Months Ended September 30, 2022
Balance, June 30, 2022 (Unaudited)	$	—	$	1,288	$	2,569,060	$	(450,428)	$	1,139,975	$	3,259,895

Comprehensive (loss) income	—		—		—		(117,302)		80,603		(36,699)
Stock-based compensation plans, net – 39,416 shares	—		—		3,111		—		—		3,111
Stock repurchases – 1,883,713 shares	—		(19)		(45,018)		—		—		(45,037)
Dividends on common stock – $0.19 per share	—		—		—		—		(24,119)		(24,119)

Balance, September 30, 2022 (Unaudited)	$	—	$	1,269	$	2,527,153	$	(567,730)	$	1,196,459	$	3,157,151

Three Months Ended September 30, 2021
Balance, June 30, 2021 (Unaudited)	$	767	$	1,084	$	2,021,128	$	12,073	$	1,004,314	$	3,039,366

Comprehensive (loss) income	—		—		—		(23,502)		80,574		57,072
Stock-based compensation plans, net – 22,767 shares	—		—		4,848		—		—		4,848
Stock repurchases – 1,806,205 shares	—		(18)		(51,415)		—		—		(51,433)
Dividends on preferred stock	—		—		—		—		(13)		(13)
Dividends on common stock – $0.18 per share	—		—		—		—		(19,309)		(19,309)

Balance, September 30, 2021 (Unaudited)	$	767	$	1,066	$	1,974,561	$	(11,429)	$	1,065,566	$	3,030,531


(In thousands)	Acquired from Landmark		Fair Value Adjustments		Fair Value
Assets Acquired
Cash and due from banks	$	27,591	$	—	$	27,591
Due from banks - time	100		—		100
Investment securities	114,793		(125)		114,668
Loans acquired	785,551		3,953		789,504
Allowance for credit losses on loans	(5,980)		3,621		(2,359)
Premises and equipment	9,540		(4,099)		5,441
Bank owned life insurance	21,287		—		21,287
Core deposit intangible	88		4,071		4,159
Other assets	13,036		(4,605)		8,431
Total assets acquired	$	966,006	$	2,816	$	968,822

Liabilities Assumed
Deposits:
Noninterest bearing transaction accounts	$	110,393	$	—	$	110,393
Interest bearing transaction accounts and savings deposits	425,777		—		425,777
Time deposits	266,835		(334)		266,501
Total deposits	803,005		(334)		802,671
Other borrowings	47,023		—		47,023
Accrued interest and other liabilities	8,459		(3,122)		5,337
Total liabilities assumed	858,487		(3,456)		855,031
Equity	107,519		(107,519)		—
Total equity assumed	107,519		(107,519)		—
Total liabilities and equity assumed	$	966,006	$	(110,975)	$	855,031
Net assets acquired					113,791
Purchase price					145,195
Goodwill					$	31,404


(In thousands)	Acquired from Triumph		Fair Value Adjustments		Fair Value
Assets Acquired
Cash and due from banks	$	7,484	$	—	$	7,484
Due from banks - time	495		—		495
Investment securities	130,571		(1,116)		129,455
Loans acquired	702,460		(3,674)		698,786
Allowance for credit losses on loans	(12,617)		1,525		(11,092)
Premises and equipment	2,774		484		3,258
Goodwill	1,550		(1,550)		—
Core deposit intangible	—		5,136		5,136
Other assets	12,806		897		13,703
Total assets acquired	$	845,523	$	1,702	$	847,225

Liabilities Assumed
Deposits:
Noninterest bearing transaction accounts	$	115,729	$	—	$	115,729
Interest bearing transaction accounts and savings deposits	383,434		—		383,434
Time deposits	219,477		1,094		220,571
Total deposits	718,640		1,094		719,734
Securities sold under agreement to repurchase	2,854		—		2,854
Other borrowings	30,700		—		30,700
Accrued interest and other liabilities	2,882		455		3,337
Total liabilities assumed	755,076		1,549		756,625
Equity	90,446		(90,446)		—
Total equity assumed	90,446		(90,446)		—
Total liabilities and equity assumed	$	845,522	$	(88,897)	$	756,625
Net assets acquired					90,600
Purchase price					130,544
Goodwill					$	39,944



(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 Months Ended September 30, 2022
Real estate:
Other commercial	3	$	747	$	727	$	—	$	727	$	—
Total real estate	3	$	747	$	727	$	—	$	727	$	—

Nine Months Ended September 30, 2022
Real estate:
Other commercial	4	$	760	$	740	$	—	$	740	$	—
Total real estate	4	$	760	$	740	$	—	$	740	$	—

Nine Months Ended September 30, 2021
Real estate:
Other commercial	1	$	784	$	778	$	—	$	778	$	—
Total real estate	1	$	784	$	778	$	—	$	778	$	—


	September 30, 2022
				Over			Over
				1 year			5 years									Total
	1 year			through			through			Over			No fixed			Amortized			Par		Fair
(In thousands)	or less			5 years			10 years			10 years			maturity			Cost			Value		Value
Held-to-Maturity
U.S. Government agencies	$	—		$	—		$	57,027		$	390,373		$	—		$	447,400		$	480,246	$	349,529
Mortgage-backed securities	—			—			—			—			1,214,882			1,214,882			1,281,190		1,084,514
State and political subdivisions	4,519			6,545			16,404			1,837,842			—			1,865,310			1,877,163		1,324,283
Other securities	—			1,126			254,030			5,712			—			260,868			274,878		225,714
Total	$	4,519		$	7,671		$	327,461		$	2,233,927		$	1,214,882		$	3,788,460		$	3,913,477	$	2,984,040

Percentage of total	0.1		%	0.2		%	8.6		%	59.0		%	32.1		%	100.0		%

Weighted average yield	3.0		%	3.4		%	3.4		%	2.5		%	3.1		%	2.7		%

Available-for-Sale
U.S. Treasury	$	—		$	2,250		$	—		$	—		$	—		$	2,250		$	2,300	$	2,191
U.S. Government agencies	22			93,833			50,687			50,827			—			195,369			193,309		188,060
Mortgage-backed securities	—			—			—			—			2,959,882			2,959,882			2,900,916		2,670,348
State and political subdivisions	3,143			14,486			19,883			1,016,844			—			1,054,356			1,109,749		822,509
Other securities	—			73,624			198,162			—			488			272,274			271,855		254,435
Total	$	3,165		$	184,193		$	268,732		$	1,067,671		$	2,960,370		$	4,484,131		$	4,478,129	$	3,937,543

Percentage of total	0.1		%	4.1		%	6.0		%	23.8		%	66.0		%	100.0		%

Weighted average yield	2.2		%	2.2		%	3.7		%	2.2		%	1.8		%	2.0		%