What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-06 · 235 added, 221 removed, 1465 unchanged (24% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2020 and December 31, 2019

June 30, December 31,

September 30, 2020 and December 31, 2019

September 30, December 31,

(In thousands, except share data) 2020 2019

5 unchanged sentences

Investment securities:

Held-to-maturity, net of allowance for credit losses of $ 307 at June 30, 2020

Held-to-maturity, net of allowance for credit losses of $ 373 at September 30, 2020

47,102 40,927

Available-for-sale, net of allowance for credit losses of $ 609 at June 30, 2020 (amortized cost of $ 2,428,548 and $ 3,263,151 at June 30, 2020 and December 31, 2019, respectively)

Available-for-sale, net of allowance for credit losses of $ 1,208 at September 30, 2020 (amortized cost of $ 2,556,808 and $ 3,263,151 at September 30, 2020 and December 31, 2019, respectively)

2,607,288 3,288,343

31 unchanged sentences

Series D, $ 0.01 par value, $ 1,000 liquidation value per share;

767 shares issued and outstanding at June 30, 2020 and December 31, 2019

767 shares issued and outstanding at September 30, 2020 and December 31, 2019

Common stock, Class A, $ 0.01 par value;

175,000,000 shares authorized at June 30, 2020 and December 31, 2019;

108,994,389 and 113,628,601 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

175,000,000 shares authorized at September 30, 2020 and December 31, 2019;

109,023,781 and 113,628,601 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Surplus 2,032,372 2,117,282

8 unchanged sentences

Consolidated Statements of Income

Three and Six Months Ended June 30, 2020 and 2019

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

(In thousands, except per share data) 2020 2019 2020 2019

46 unchanged sentences

Consolidated Statements of Comprehensive Income

Three and Six Months Ended June 30, 2020 and 2019

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended

June 30, Six Months Ended June 30,

September 30, Nine Months Ended September 30,

(In thousands) 2020 2019 2020 2019

1 unchanged sentence

NET INCOME $ 65,898 $ 81,826 $ 201,936 $ 185,445

OTHER COMPREHENSIVE INCOME

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized holding gains arising during the period on available-for-sale securities

3 unchanged sentences

22,305 7,374 54,790 12,937

Other comprehensive income, before tax effect 21,769 28,858 45,243 57,795

Tax effect of other comprehensive income 5,689 7,542 11,824 15,105

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

Other comprehensive (loss) income, before tax effect ( 17,330 ) 11,362 27,913 69,157

Tax effect of other comprehensive (loss) income ( 4,529 ) 2,969 7,295 18,074

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME ( 12,801 ) 8,393 20,618 51,083

COMPREHENSIVE INCOME $ 53,097 $ 90,219 $ 222,554 $ 236,528

2 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2020 and 2019

(In thousands) June 30, 2020 June 30, 2019

Nine Months Ended September 30, 2020 and 2019

(In thousands) September 30, 2020 September 30, 2019

OPERATING ACTIVITIES

3 unchanged sentences

Provision for credit losses 68,030 38,337

(Benefit) provision for credit losses on unfunded commitments ( 8,000 ) 950

Gain on sale of investments ( 54,790 ) ( 12,937 )

2 unchanged sentences

Stock-based compensation expense 10,750 9,316

Gain on sale of premises and equipment, net of impairment ( 33 ) —

Gain on sale of foreclosed assets held for sale ( 475 ) ( 16 )

Gain on sale of mortgage loans held for sale ( 28,994 ) ( 14,196 )

Loss on sale of loans — 4,451

Gain on sale of Visa, Inc.

class B common stock — ( 42,860 )

Gain on sale of other intangibles ( 301 ) —

13 unchanged sentences

INVESTING ACTIVITIES

Net originations of loans ( 318,795 ) ( 302,151 )

Net collections (originations) of loans 243,826 ( 299,013 )

Proceeds from sale of loans 32,742 104,587

(Increase) decrease in due from banks - time ( 7 ) 395

Decrease in due from banks - time 493 395

Purchases of premises and equipment, net ( 22,697 ) ( 37,523 )

Proceeds from sale of premises and equipment 123 —

Proceeds from sale of foreclosed assets held for sale 9,705 16,139

26 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2020 and 2019

Three Months Ended September 30, 2020 and 2019

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

Three Months Ended June 30, 2020

Balance, March 31, 2020 (Unaudited) $ 767 $ 1,090 $ 2,026,420 $ 38,230 $ 778,893 $ 2,845,400

Three Months Ended September 30, 2020

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

Comprehensive income — — — ( 12,801 ) 65,898 53,097

4 unchanged sentences

— — — — ( 18,535 ) ( 18,535 )

Balance, September 30, 2020 (Unaudited) $ 767 $ 1,090 $ 2,032,372 $ 41,509 $ 866,503 $ 2,942,241

Three Months Ended September 30, 2019

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

Three Months Ended June 30, 2019

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

Comprehensive income — — — 8,393 81,826 90,219

1 unchanged sentence

— — 2,796 — — 2,796

Stock issued for Reliance acquisition – 3,999,623 shares

42,000 40 102,790 — — 144,830

Retirement of preferred stock ( 42,000 ) — — — — ( 42,000 )

Dividends on preferred stock — — — — ( 326 ) ( 326 )

Dividends on common stock – $ 0.16 per share

— — — — ( 15,457 ) ( 15,457 )

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

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

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2020 and 2019

Nine Months Ended September 30, 2020 and 2019

(In thousands, except share data) Preferred Stock Common

3 unchanged sentences

Profits Total

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Balance, December 31, 2019 $ 767 $ 1,136 $ 2,117,282 $ 20,891 $ 848,848 $ 2,988,924

12 unchanged sentences

— — — — ( 56,141 ) ( 56,141 )

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

Six Months Ended June 30, 2019

Balance, September 30, 2020 (Unaudited) $ 767 $ 1,090 $ 2,032,372 $ 41,509 $ 866,503 $ 2,942,241

Nine Months Ended September 30, 2019

Balance, December 31, 2018 $ — $ 923 $ 1,597,944 $ ( 27,374 ) $ 674,941 $ 2,246,434

10 unchanged sentences

— — — — ( 45,722 ) ( 45,722 )

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

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

See Condensed Notes to Consolidated Financial Statements.

3 unchanged sentences

Description of Business and Organizational Structure

Simmons First National Corporation (“Company”) is a 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 First Insurance Services, Inc.

2 unchanged sentences

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 226 financial centers located throughout market areas in Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

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 226 financial centers as of September 30, 2020, located throughout market areas in Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Basis of Presentation

94 unchanged sentences

however, the guidance will only be available for a limited time (generally through December 31, 2022).

As of June 30, 2020, the Company has not made any modifications to hedges or other instruments that reference an interest rate that is expected to be discontinued.

As of September 30, 2020, the Company has not made any modifications to hedges or other instruments that reference an interest rate that is expected to be discontinued.

Income Taxes – In December 2019, the FASB issued ASU No.

6 unchanged sentences

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating all of the amendments in ASU 2019-12 and has not yet determined the impact of this new standard.

ASU 2019-12 is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

There have been no other significant changes to the Company’s accounting policies from the 2019 Form 10-K.

41 unchanged sentences

Goodwill $ 151,125

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger.

Management will continue to review the estimated fair values and evaluate the assumed tax positions.

The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction over the next few months, within one year of the merger.

Therefore, adjustments to the estimated amounts and carrying values may occur.

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

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

90 unchanged sentences

Held-to-Maturity

June 30, 2020

September 30, 2020

Mortgage-backed securities

4 unchanged sentences

Total HTM $ 47,475 $ ( 373 ) $ 47,102 $ 1,964 $ ( 2 ) $ 49,064

(In thousands) Amortized Cost Allowance

for Credit Losses Net Carrying Amount Gross Unrealized

Gains Gross Unrealized

(Losses) Estimated Fair

December 31, 2019

11 unchanged sentences

Available-for-sale

June 30, 2020

September 30, 2020

Government agencies $ 472,078 $ — $ 1,257 $ ( 1,362 ) $ 471,973

10 unchanged sentences

Total AFS $ 3,263,151 $ — $ 31,740 $ ( 6,548 ) $ 3,288,343

Accrued interest receivable on HTM and AFS securities at June 30, 2020 was $ 247,000 and $ 12.7 million, respectively, and is included in interest receivable on the consolidated balance sheets.

Accrued interest receivable on HTM and AFS securities at September 30, 2020 was $ 291,000 and $ 12.1 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 June 30, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

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, 2020, 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

7 unchanged sentences

Total AFS $ 416,380 $ ( 2,912 ) $ 58,753 $ ( 929 ) $ 475,133 $ ( 3,841 )

As of June 30, 2020, the Company’s investment portfolio included $ 2.5 billion of AFS securities, of which $ 141.7 million, or 5.7 %, were in an unrealized loss position that are not deemed to have credit losses.

As of September 30, 2020, the Company’s investment portfolio included $ 2.6 billion of AFS securities, of which $ 475.1 million, or 18.2 %, were in an unrealized loss position that are not deemed to have credit losses.

A portion of the unrealized losses were related to the Company’s mortgage-backed securities, which are issued and guaranteed by U.S.

11 unchanged sentences

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

The following table details activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2020 on the Company’s HTM and AFS securities held.

The following table details activity in the allowance for credit losses by investment security type for the three and nine months ended September 30, 2020 on the Company’s HTM and AFS securities held.

(In thousands) State and Political Subdivisions Other Securities Total

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Held-to-Maturity

Beginning balance, April 1, 2020 $ 97 $ 312 $ 409

Beginning balance, July 1, 2020 $ 95 $ 212 $ 307

Provision for credit loss expense

( 2 ) ( 100 ) ( 102 )

Ending balance, June 30, 2020 $ 95 $ 212 $ 307

Ending balance, September 30, 2020 $ 73 $ 300 $ 373

Available-for-sale

Beginning balance, April 1, 2020 $ 95 $ 174 $ 269

Beginning balance, July 1, 2020 $ 371 $ 238 $ 609

Credit losses on securities not previously recorded

Net increase (decrease) in allowance on previously impaired securities

1,137 23 1,160

Ending balance, June 30, 2020 $ 371 $ 238 $ 609

Six Months Ended June 30, 2020

Reduction due to sales ( 294 ) — ( 294 )

Net decrease in allowance on previously impaired securities ( 66 ) ( 201 ) ( 267 )

Ending balance, September 30, 2020 $ 1,148 $ 60 $ 1,208

Nine Months Ended September 30, 2020

Held-to-Maturity

2 unchanged sentences

Provision for credit loss expense

37 ( 99 ) ( 62 )

Ending balance, June 30, 2020 $ 95 $ 212 $ 307

Ending balance, September 30, 2020 $ 73 $ 300 $ 373

Available-for-sale

2 unchanged sentences

Credit losses on securities not previously recorded

1,130 78 1,208

Reduction due to sales ( 244 ) — ( 244 )

Net increase (decrease) in allowance on previously impaired securities

Ending balance, June 30, 2020 $ 371 $ 238 $ 609

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

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

Net decrease in allowance on previously impaired securities ( 111 ) ( 18 ) ( 129 )

Ending balance, September 30, 2020 $ 1,148 $ 60 $ 1,208

During the three and nine months ended September 30, 2020, the provision for credit losses was $ 599,000 and $ 835,000 , respectively, related to AFS securities.

The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of September 30, 2020:

State and Political Subdivisions

3 unchanged sentences

A 960 1,058 — 2,018 —

Baa — 426 — 426 —

Not Rated 1,611 368 — 1,979 1,175

5 unchanged sentences

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 six months ended June 30, 2020 and 2019, is as follows:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

17 unchanged sentences

Total $ 47,475 $ 49,064 $ 2,556,808 $ 2,607,288

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

There were approximately $ 391,000 of gross realized gains and $ 1,000 of gross realized losses from the sale of securities during the three months ended June 30, 2020, and approximately $ 32.5 million of gross realized gains and $ 2,600 of gross realized losses from the sale of securities during the six months ended June 30, 2020.

During the first half of 2020, the Company sold approximately $ 1.2 billion of investment securities to create additional liquidity.

There were approximately $ 2.8 million of gross realized gains and no gross realized losses from the sale of securities during the three months ended June 30, 2019, and approximately $ 5.6 million of gross realized gains and no gross realized losses from the sale of securities during the six months ended June 30, 2019.

The income tax expense/benefit related to security gain/losses was 26.135 % of the gross amounts in 2020 and 2019.

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 1.41 billion at September 30, 2020 and $ 1.73 billion at December 31, 2019.

There were approximately $ 22.3 million of gross realized gains and $ 1,700 of gross realized losses from the sale of securities during the three months ended September 30, 2020, and approximately $ 54.8 million of gross realized gains and $ 4,400 of gross realized losses from the sale of securities during the nine months ended September 30, 2020.

During the first nine months of 2020, the Company sold approximately $ 1.7 billion of investment securities to create additional liquidity.

There were approximately $ 7.6 million of gross realized gains and $ 3,000 of gross realized losses from the sale of securities during the three months ended September 30, 2019, and approximately $ 12.9 million of gross realized gains and $ 3,000 of gross realized losses from the sale of securities during the nine months ended September 30, 2019.

The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2020 and 2019.

OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

7 unchanged sentences

Pursuant to the terms of the Spirit Agreement, Spirit assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, personal property and other fixed assets associated with the Texas Branches.

The Company recognized a combined gain on sale of $ 8.1 million related to the Texas Branches and Colorado Branches in the six month period ended June 30, 2020.

The Company recognized a combined gain on sale of $ 8.1 million related to the Texas Branches and Colorado Branches in the nine month period ended September 30, 2020.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

At June 30, 2020, the Company’s loan portfolio was $ 14.61 billion, compared to $ 14.43 billion at December 31, 2019.

At September 30, 2020, the Company’s loan portfolio was $ 14.02 billion, compared to $ 14.43 billion at December 31, 2019.

The various categories of loans are summarized as follows:

June 30, December 31,

September 30, December 31,

(In thousands) 2020 2019

12 unchanged sentences

The above table presents total loans at amortized cost.

The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as net deferred origination fees totaling $ 82.2 million and $ 91.6 million at June 30, 2020 and December 31, 2019, respectively.

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

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 $ 69.9 million and $ 91.6 million at September 30, 2020 and December 31, 2019, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 65.0 million and $ 48.9 million at September 30, 2020 and December 31, 2019, respectively, and is included in interest receivable on the consolidated balance sheets.

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral;

17 unchanged sentences

thereby making predictions for one market based on the other difficult.

Additionally, submarkets within commercial real

estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans.

Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans.

Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length.

12 unchanged sentences

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

June 30, December 31,

September 30, December 31,

(In thousands) 2020 2019

10 unchanged sentences

Total $ 167,713 $ 93,330

Nonaccrual loans for which there is no related allowance for credit losses as of June 30, 2020 had an amortized cost of $ 18.0 million.

Nonaccrual loans for which there is no related allowance for credit losses as of September 30, 2020 had an amortized cost of $ 17.8 million.

These loans are individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method.

5 unchanged sentences

Loans 90 Days

June 30, 2020

September 30, 2020

Credit cards $ 672 $ 262 $ 934 $ 171,946 $ 172,880 $ 95

10 unchanged sentences

Total $ 28,701 $ 35,738 $ 64,439 $ 13,953,003 $ 14,017,442 $ 174

(In thousands) Gross

Past Due 90 Days

Past Due Total

Past Due Current Total

Loans 90 Days

December 31, 2019

19 unchanged sentences

December 31, 2019 Three Months Ended

June 30, 2019 Six Months Ended

June 30, 2019

September 30, 2019 Nine Months Ended

September 30, 2019

Credit cards $ 382 $ 382 $ — $ 382 $ — $ 423 $ 40 $ 370 $ 110

17 unchanged sentences

The Company elected to adopt these provisions of the CARES Act.

See discussion of the loans modified under the CARES Act in Note 24, Recent Events.

As of September 30, 2020, the Company has modified 3,956 loans totaling approximately $ 3.21 billion to loan customers affected by COVID-19.

The following table summarizes these modified loans due to COVID-19 by industry.

(Dollars in thousands) Number Balance

Real Estate Rental and Leasing 1,162 $ 1,263,884

Accommodation and Food Services 386 845,803

Health Care and Social Assistance 226 278,200

Construction 186 190,337

Retail Trade 145 130,498

Other Services (Except Public Administration) 131 58,169

Other 1,720 444,053

Total 3,956 $ 3,210,944

Deferred interest on the above loans totaled $ 27.6 million as of September 30, 2020.

The interest will be collected at the end of the note or once regular payments are resumed.

As of September 30, 2020, over 2,900 loans totaling $ 1.9 billion that had previously been modified under the CARES Act had returned to regular payment terms in addition to those that have paid off.

TDRs are individually evaluated for expected credit losses.

3 unchanged sentences

(Dollars in thousands) Number Balance Number Balance Number Balance

June 30, 2020

September 30, 2020

Single-family residential 31 $ 2,700 18 $ 3,008 49 $ 5,708

4 unchanged sentences

Total 35 $ 3,379 22 $ 5,177 57 $ 8,556

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans

(Dollars in thousands) Number Balance Number Balance Number Balance

December 31, 2019

6 unchanged sentences

Total 30 $ 5,887 26 $ 1,561 56 $ 7,448

The following table presents loans that were restructured as TDRs during the three and six months ended June 30, 2020.

There were no loans restructured as TDRs during the three and six month periods ended June 30, 2019.

(Dollars in thousands) Number of loans Balance Prior to TDR Balance at June 30, Change in Maturity Date Change in Rate Financial Impact on Date of Restructure

Three and Six Months Ended June 30, 2020

The following table presents loans that were restructured as TDRs during the nine months ended September 30, 2020 and the three and nine months ended September 30, 2019 segregated by class of loans.

There were no loans restructured as TDRs during the three months ended September 30, 2020.

(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

Nine Months Ended September 30, 2020

Single-family residential 5 $ 1,948 $ 1,896 $ 1,896 $ — $ —

Total real estate 5 $ 1,948 $ 1,896 $ 1,896 $ — $ —

During the three and six months ended June 30, 2020, the Company modified one loan with a recorded investment of $ 147,000 prior to modification which was deemed troubled debt restructuring.

Three and Nine Months Ended September 30, 2019

Single-family residential 1 $ 330 $ 330 $ 330 $ — $ —

Total real estate 1 $ 330 $ 330 $ 330 $ — $ —

During the nine months ended September 30, 2020, the Company modified five loans with a recorded investment of $ 1.9 million prior to modification which was deemed troubled debt restructuring.

The restructured loans were modified by deferring amortized principal payments, changing the maturity dates and requiring interest only payments for a period of up to 12 months.

A specific reserve of $ 16,600 was determined necessary for these loans as of September 30, 2020.

Additionally, 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 three and nine months ended September 30, 2019, the Company modified one loan with a recorded investment of $ 330,000 prior to modification which was deemed troubled debt restructuring.

The restructured loan was modified by deferring amortized principal payments, changing the maturity date and requiring interest only payments for a period of up to 12 months.

A specific reserve of $ 7,200 was determined necessary for this loan.

There were no loans considered TDRs for which a payment default occurred during the six months ended June 30, 2020.

There was one commercial loan considered a TDR for which a payment default occurred during the six months ended June 30, 2019.

A charge-off of approximately $ 138,000 was recorded for this loan.

A specific reserve was not considered necessary for this loan and 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.

There was one commercial loan considered a TDR for which a payment default occurred during the nine months ended September 30, 2020.

There were four loans consisting of commercial and real estate construction loans, considered TDRs for which a payment default occurred during the nine months ended September 30, 2019.

The Company charged-off approximately $ 552,000 for these loans.

The Company defines a payment default as a payment received more than 90 days after its due date.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three or six month periods ended June 30, 2020 or 2019.

At June 30, 2020 and December 31, 2019, the Company had $ 4,395,000 and $ 5,789,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At June 30, 2020 and December 31, 2019, the Company had $ 2,321,000 and $ 4,458,000 , respectively, of OREO secured by residential real estate properties.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three or nine month periods ended September 30, 2020 or 2019.

At September 30, 2020 and December 31, 2019, the Company had $ 6,876,000 and $ 5,789,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At September 30, 2020 and December 31, 2019, the Company had $ 3,184,000 and $ 4,458,000 , respectively, of OREO secured by residential real estate properties.

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

54 unchanged sentences

These loans have been subject to the Company’s loss mitigation process and foreclosure and/or charge-off proceedings have commenced.

The following table presents a summary of loans by credit quality indicator, other than pass or current, as of June 30, 2020 segregated by class of loans.

The following table presents a summary of loans by credit quality indicator, other than pass or current, as of September 30, 2020 segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year

74 unchanged sentences

If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $ 55.0 million as further detailed in the table below.

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 $ 71.7 million as of September 30, 2020, as further detailed in the table below.

The collateral securing these loans consist of commercial real estate properties, residential properties, other business assets, and secured energy production assets.

5 unchanged sentences

Total $ 48,618 $ 19,100 $ 4,009 $ 71,727

The following table details activity in the allowance for credit losses by portfolio segment for loans for the three and six months ended June 30, 2020.

The following table details activity in the allowance for credit losses by portfolio segment for loans for the three and nine months ended September 30, 2020.

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

3 unchanged sentences

Allowance for credit losses:

Three Months Ended June 30, 2020

Beginning balance, April 1, 2020 $ 76,327 $ 141,022 $ 7,817 $ 18,029 $ 243,195

Three Months Ended September 30, 2020

Beginning balance, July 1, 2020 $ 59,138 $ 149,471 $ 10,979 $ 12,055 $ 231,643

Provision for credit loss expense ( 6,499 ) 33,479 ( 1,823 ) ( 2,844 ) 22,313

2 unchanged sentences

Net charge-offs ( 3,391 ) ( 1,033 ) ( 556 ) ( 725 ) ( 5,705 )

Ending balance, June 30, 2020 $ 59,138 $ 149,471 $ 10,979 $ 12,055 $ 231,643

Ending balance, September 30, 2020 $ 49,248 $ 181,917 $ 8,600 $ 8,486 $ 248,251

(In thousands) Commercial Real

1 unchanged sentence

and Other Total

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Beginning balance, January 1, 2020 - prior to adoption of CECL

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Net charge-offs ( 39,156 ) ( 2,899 ) ( 2,553 ) ( 1,952 ) ( 46,560 )

Ending balance, June 30, 2020 $ 59,138 $ 149,471 $ 10,979 $ 12,055 $ 231,643

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

Ending balance, September 30, 2020 $ 49,248 $ 181,917 $ 8,600 $ 8,486 $ 248,251

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

(In thousands) Commercial Real

2 unchanged sentences

Allowance for credit losses:

Three Months Ended June 30, 2019

Beginning balance, April 1, 2019 $ 19,394 $ 34,870 $ 3,919 $ 2,372 $ 60,555

Three Months Ended September 30, 2019

Beginning balance, July 1, 2019 $ 21,354 $ 36,493 $ 3,951 $ 2,381 $ 64,179

Provision for credit losses 19,150 2,405 946 ( 528 ) 21,973

1 unchanged sentence

Recoveries 65 55 223 1,422 1,765

Net charge-offs ( 996 ) ( 1,058 ) ( 768 ) ( 633 ) ( 3,455 )

Ending balance, June 30, 2019 $ 21,354 $ 36,493 $ 3,951 $ 2,381 $ 64,179

Six Months Ended June 30, 2019

Net (charge-offs) recoveries ( 17,713 ) ( 1,312 ) ( 894 ) 357 ( 19,562 )

Ending balance, September 30, 2019 $ 22,791 $ 37,586 $ 4,003 $ 2,210 $ 66,590

Nine Months Ended September 30, 2019

Beginning balance, January 1, 2019 $ 20,514 $ 29,838 $ 3,923 $ 2,419 $ 56,694

3 unchanged sentences

Net charge-offs ( 21,703 ) ( 2,645 ) ( 2,564 ) ( 1,529 ) ( 28,441 )

Ending balance, June 30, 2019 $ 21,354 $ 36,493 $ 3,951 $ 2,381 $ 64,179

Four energy credits within the Commercial segment were charged off during the second quarter of 2020 for a total of $ 32.6 million, of which $ 27.1 million was specifically reserved for at March 31, 2020.

The primary driver for the change in the provision for credit losses was related to updated credit loss forecasts using multiple Moody’s economic scenarios.

The baseline economic forecast was weighted 68 % by the Company, while the downside scenarios of S-2 and S-3 were weighted 22 % and 10 %, respectively, to capture the possibility of a longer, more prolonged recovery to the economies that affect the loan portfolio.

Ending balance, September 30, 2019 $ 22,791 $ 37,586 $ 4,003 $ 2,210 $ 66,590

The primary driver for the provision for credit losses for the quarter ended September 30, 2020 was the continued uncertainty of a more prolonged recovery than initially anticipated to the economies that affect the loan portfolio as certain industries are being more adversely impacted by the COVID-19 pandemic, such as the restaurant, retail and hotel industries.

The provision for credit losses was partially offset due to a reduction in loan growth.

The Company updated credit loss forecasts using multiple Moody’s economic scenarios published in September 2020.

The baseline economic forecast was weighted 66 % by the Company, while the downside scenario of S-2 was weighted 18 % and the upside scenario of S-1 was weighted 16 %.

The weighting of the forecasts is characterized by, among others, market rates remaining low, the substantial decline of CRE prices, and the current national unemployment rate.

The provision for credit losses for the nine months ended September 30, 2020 was primarily related to concern over the economic stresses related to COVID-19 as well as specific provisions for two energy credits that were previously identified as problem loans that were impacted by the sharp decline in commodity pricing.

Four energy credits within the Commercial segment were charged off during the second quarter of 2020 for a total of $ 32.6 million.

Reserve for Unfunded Commitments

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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 as of June 30, 2020 and December 31, 2019 was $ 24.4 million and $ 8.4 million, respectively.

The reserve for unfunded commitments as of September 30, 2020 and December 31, 2019 was $ 24.4 million and $ 8.4 million, respectively.

The increase from year end was due to the adoption of CECL.

The adequacy of the reserve for unfunded commitments is determined monthly based on methodology similar to the methodology for determining the allowance for credit losses.

For the six months ended June 30, 2020 and 2019, net adjustments to the reserve for unfunded commitments were a benefit of $ 8.0 million and an expense of $ 950,000 , respectively, and were included in other non-interest expense.

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 nine months ended September 30, 2020, net adjustments to the reserve for unfunded commitments resulted in a benefit of $ 8.0 million and was included in provision for credit losses in the statement of income.

RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES

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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.

Right-of-use lease assets included in premises and equipment were $ 34.7 million and $ 40.7 million at June 30, 2020 and December 31, 2019, respectively.

Lease liabilities included in other liabilities were $ 34.8 million and $ 40.9 million at June 30, 2020 and December 31, 2019, respectively.

Other information related to the Company’s operating leases is presented in the table below:

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Operating lease cost $ 3,443,100 $ 2,613,600 $ 6,643,600 $ 6,048,500

The following table presents information related to the Company’s right-of-use lease assets, included in premises and equipment, and lease liabilities, included in other liabilities.

September 30, December 31,

(Dollars in thousands) 2020 2019

Right-of-use lease assets $ 32,528 $ 40,675

Lease liabilities $ 32,804 $ 40,854

Weighted average remaining lease term 8.60 years 8.37 years

Weighted average discount rate 3.26 % 3.27 %

Operating lease cost for the three and nine month periods ended September 30, 2020 was $ 3,453,600 and $ 10,097,200 , respectively, as compared to $ 3,736,000 and $ 9,784,500 for the same periods in 2019.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation and amortization.

Total premises and equipment, net at June 30, 2020 and December 31, 2019 were as follows:

June 30, December 31,

Total premises and equipment, net at September 30, 2020 and December 31, 2019 were as follows:

September 30, December 31,

(In thousands) 2020 2019

12 unchanged sentences

Subsequent increases in goodwill value are not recognized in the financial statements.

Goodwill totaled $ 1.065 billion at June 30, 2020 and $ 1.056 billion at December 31, 2019.

Goodwill totaled $ 1.075 billion at September 30, 2020 and $ 1.056 billion at December 31, 2019.

During 2019, the Company recorded $ 131.3 million and $ 78.5 million of goodwill as a result of its acquisitions of Landrum and Reliance, respectively.

During the first half of 2020, goodwill increased $ 9.2 million related to the continued assessment of the fair value and assumed tax position of the Landrum acquisition.

Goodwill impairment was neither indicated nor recorded during the six months ended June 30, 2020 or the year ended December 31, 2019.

During the first nine months of 2020, goodwill increased $ 19.8 million related to the continued assessment of the fair value and assumed tax position of the Landrum acquisition which was finalized during the third quarter.

Goodwill impairment was neither indicated nor recorded during the nine months ended September 30, 2020 or the year ended December 31, 2019.

During the first quarter of 2020, the Company’s share price began to decline as the markets in the United States responded to the global COVID-19 pandemic.

1 unchanged sentence

During the second quarter of 2020, the Company performed the annual goodwill impairment analysis and concluded that it is more likely-than-not that the fair value of goodwill continues to exceed its carrying value and therefore, goodwill is not impaired.

During the third quarter of 2020, the Company once again performed an interim goodwill impairment assessment and concluded no impairment existed.

While the goodwill impairment analysis indicated no impairment at September 30, 2020, the Company’s assessment depends on several assumptions which are dependent on market and economic conditions, and future changes in those conditions could impact the Company’s assessment in the future.

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 10 years to 15 years.

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at June 30, 2020 and December 31, 2019 were as follows:

June 30, December 31,

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at September 30, 2020 and December 31, 2019 were as follows:

September 30, December 31,

(In thousands) 2020 2019

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See Note 2, Acquisitions, for additional information on acquisitions completed in 2019.

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

June 30, December 31,

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

September 30, December 31,

(In thousands) 2020 2019

8 unchanged sentences

Total other intangible assets, net $ 114,460 $ 127,340

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

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

(In thousands) Year Amortization

3 unchanged sentences

TIME DEPOSITS

Time deposits included approximately $ 2.09 billion and $ 2.15 billion of certificates of deposit of $100,000 or more, at June 30, 2020, and December 31, 2019, respectively.

Of this total approximately $ 1.1 billion and $ 837.3 million of certificates of deposit were over $250,000 at June 30, 2020 and December 31, 2019, respectively.

Time deposits included approximately $ 1.93 billion and $ 2.15 billion of certificates of deposit of $100,000 or more, at September 30, 2020, and December 31, 2019, respectively.

Of this total approximately $ 849.1 million and $ 837.3 million of certificates of deposit were over $250,000 at September 30, 2020 and December 31, 2019, respectively.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

3 unchanged sentences

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:

June 30, December 31,

September 30, December 31,

(In thousands) 2020 2019

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

3 unchanged sentences

State income taxes, net of federal tax benefit 1,143 2,956 5,502 5,721

Discrete items related to ASU 2016-09 43 ( 81 ) 69 ( 107 )

Tax exempt interest income ( 1,752 ) ( 1,105 ) ( 4,594 ) ( 3,090 )

15 unchanged sentences

The Company has engaged in two tax-free reorganization transactions in which acquired net operating losses are limited pursuant to Section 382.

In total, approximately $ 77.8 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company, of which $ 46.8 million is related to the Reliance acquisition that closed during second quarter 2019.

In total, approximately $ 74.7 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company, of which $ 44.2 million is related to the Reliance acquisition that closed during the second quarter of 2019.

All of the acquired Reliance net operating losses are expected to be fully utilized by 2027, with the remaining acquired net operating loss carryforwards expected to be fully utilized by 2036.

10 unchanged sentences

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 $ 335.2 million and $ 133.2 million at June 30, 2020 and December 31, 2019, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 is presented in the following tables.

The gross amount of recognized liabilities for repurchase agreements was $ 263.4 million and $ 133.2 million at September 30, 2020 and December 31, 2019, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2020 and December 31, 2019 is presented in the following tables.

Remaining Contractual Maturity of the Agreements

2 unchanged sentences

90 Days Total

June 30, 2020

September 30, 2020

Repurchase agreements:

4 unchanged sentences

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

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

June 30, December 31,

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

September 30, December 31,

(In thousands) 2020 2019

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The Notes qualify for Tier 2 capital treatment.

The Company assumed subordinated debt of $ 33.9 million in connection with the Landrum acquisition in October 2019, of which $ 5.9 million was repaid during second quarter of 2020.

At June 30, 2020, the Company had $ 1.35 billion of FHLB advances outstanding with original or expected maturities of one year or less, of which $ 1.30 billion are FHLB Owns the Option (“FOTO”) advances.

The Company assumed subordinated debt of $ 33.9 million in connection with the Landrum acquisition in October 2019, of which $ 5.9 million was repaid during the second quarter of 2020.

At September 30, 2020, the Company had $ 1.30 billion of FHLB advances outstanding with original or expected maturities of one year or less, all of which are FHLB Owns the Option (“FOTO”) advances.

FOTO advances are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date.

1 unchanged sentence

If FHLB exercises its option to terminate the FOTO advance at one of the specified option exercise dates, there is no termination or prepayment fee, and replacement funding will be available at then-prevailing market rates, subject to FHLB’s credit and collateral requirements.

The Company’s FOTO advances outstanding at June 30, 2020 have maturity dates of ten years to fifteen years with lockout periods that have expired and, as a result, are considered and monitored by the Company as short-term advances.

The Company’s FOTO advances outstanding at September 30, 2020 have maturity dates of ten years to fifteen years with lockout periods that have expired and, as a result, are considered and monitored by the Company as short-term advances.

The possibility of the FHLB exercising the options is analyzed by the Company along with the market expected rate outcome.

The Company had total FHLB advances of $ 1.36 billion at June 30, 2020, with approximately $ 2.8 billion of additional advances available from the FHLB.

The FHLB advances are secured by mortgage loans and investment securities totaling approximately $ 6.1 billion at June 30, 2020.

The Company had total FHLB advances outstanding of $ 1.31 billion at September 30, 2020, with approximately $ 2.5 billion of additional advances available from the FHLB.

The FHLB advances are secured by mortgage loans and investment securities totaling approximately $ 5.9 billion at September 30, 2020.

The trust preferred securities are tax-advantaged issues that qualified for Tier 1 capital treatment until December 31, 2017, when the Company reached $ 15 billion in assets.

They still qualify for inclusion as Tier 2 capital at June 30, 2020.

They still qualify for inclusion as Tier 2 capital at September 30, 2020.

Distributions on these securities are included in interest expense on long-term debt.

5 unchanged sentences

The Company’s long-term debt primarily includes subordinated debt and long-term FHLB advances with an original maturity of greater than one year.

Aggregate annual maturities of long-term debt at June 30, 2020, are as follows:

Aggregate annual maturities of long-term debt at September 30, 2020, are as follows:

Year (In thousands)

3 unchanged sentences

CONTINGENT LIABILITIES

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

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings.

Based on information presently available, and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect on the financial position or results of the operations of the Company and its subsidiaries.

CAPITAL STOCK

17 unchanged sentences

The Company anticipates funding for this Program to come from available sources of liquidity, including cash on hand and future cash flow.

During the six months ended June 30, 2020, the Company repurchased 4,922,336 shares at an average price of $ 18.96 under the Program.

No shares have been repurchased under the Program since March 31, 2020.

During the three months ended March 31, 2020, the Company repurchased 4,922,336 shares at an average price of $ 18.96 under the Program.

Subsequent to March 31, 2020, the Company did not repurchase any additional shares under the Program in the nine months ended September 30, 2020.

Market conditions and the Company’s capital needs will drive decisions regarding additional, future stock repurchases.

The Company had no repurchases of its common stock during the three and six month periods ended June 30, 2019.

The Company had no repurchases of its common stock during the three and nine month periods ended September 30, 2019.

On October 22, 2020, the Company announced the resumption of stock repurchases under the Program.

UNDIVIDED PROFITS

1 unchanged sentence

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 June 30, 2020, Simmons Bank had approximately $ 165.1 million available for payment of dividends to the Company, without prior regulatory approval.

At September 30, 2020, Simmons Bank had approximately $ 105.0 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.

5 unchanged sentences

Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses.

As of June 30, 2020, 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 11.85 % at June 30, 2020.

As of September 30, 2020, 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 12.55 % at September 30, 2020.

STOCK-BASED COMPENSATION

2 unchanged sentences

Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awards of stock appreciation rights, stock awards or units, or performance shares 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 six months ended June 30, 2020:

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

Stock Options

11 unchanged sentences

Forfeited/expired ( 33 ) 22.49 — — ( 116 ) 26.49

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

Exercisable, June 30, 2020 658 $ 22.48

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

Balance, September 30, 2020 658 $ 22.48 10 $ 23.87 1,128 $ 24.90

Exercisable, September 30, 2020 658 $ 22.48

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

Options Outstanding Options Exercisable

12 unchanged sentences

$ 9.46 — $ 24.07 658 4.03 $ 22.48 658 $ 22.48

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

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

(In thousands) Performance Stock Units

2 unchanged sentences

Forfeited ( 19 )

Non-vested, June 30, 2020 217

Stock-based compensation expense was $ 7,577,000 and $ 6,249,000 during the six months ended June 30, 2020 and 2019, respectively.

Non-vested, September 30, 2020 222

Stock-based compensation expense was $ 10,750,000 and $ 9,316,000 during the nine months ended September 30, 2020 and 2019, 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 June 30, 2020.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 21,925,000 at June 30, 2020.

There was no unrecognized stock-based compensation expense related to stock options at September 30, 2020.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 18,142,000 at September 30, 2020.

At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.7 years.

The intrinsic value of stock options outstanding and stock options exercisable at June 30, 2020 was $ 28,000 .

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 17.11 as of June 30, 2020, and the exercise price multiplied by the number of options outstanding.

The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and June 30, 2019, was $ 6,000 and $ 5,000 , respectively.

The intrinsic value of stock options outstanding and stock options exercisable at September 30, 2020 was $ 23,000 .

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 15.86 as of September 30, 2020, and the exercise price multiplied by the number of options outstanding.

The total intrinsic value of stock options exercised during the nine months ended September 30, 2020 and September 30, 2019, was $ 5,000 and $ 6,000 , respectively.

The fair value of the Company’s employee stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model.

This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate.

There were no stock options granted during the six months ended June 30, 2020 and 2019.

There were no stock options granted during the nine months ended September 30, 2020 and 2019.

EARNINGS PER SHARE (“EPS”)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2020 2019 2020 2019

5 unchanged sentences

Diluted earnings per share $ 0.60 $ 0.84 $ 1.83 $ 1.94

There were approximately 653,718 stock options excluded from the three and six months ended June 30, 2020 earnings per share calculations due to the average market prices of the Company’s common stock exceeding the related stock option exercise prices.

There were 6,610 stock options excluded from the three months ended June 30, 2019 earnings per share calculation due to the average market price of the Company’s stock exceeding the related stock option exercise price.

There were no stock options excluded from the earnings per share calculation for the six months ended June 30, 2019 due to the related exercise price exceeding the average market price.

There were approximately 653,718 stock options excluded from the three and nine months ended September 30, 2020 earnings per share calculations due to the related stock option exercise price exceeding the average market price.

There were no stock options excluded from earnings per share calculations due to the related stock option exercise price exceeding the average market price for the three and nine months ended September 30, 2019.

ADDITIONAL CASH FLOW INFORMATION

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

Six Months Ended

Nine Months Ended

September 30,

(In thousands) 2020 2019

Interest paid $ 95,040 $ 130,904

Income taxes paid (refunded) 3,196 28,253

Income taxes paid 30,708 34,028

Transfers of loans to foreclosed assets held for sale 3,083 3,666

6 unchanged sentences

OTHER INCOME AND OTHER OPERATING EXPENSES

Other income for the three and six months ended June 30, 2020 was $ 9.8 million and $ 22.6 million, respectively, which included the $ 8.1 million gains on sale of the Texas Branch Sale and Colorado Branch Sale.

Other income for the three and six months ended June 30, 2019 was $ 6.1 million and $ 10.2 million, respectively.

Other income for the three and nine months ended September 30, 2020 was $ 5.4 million and $ 28.0 million, respectively.

The nine month period included the gains on sale related to the Texas Branch Sale and Colorado Branch Sale of $ 8.1 million.

Other income for the three and nine months ended September 30, 2019 was $ 44.7 million and $ 54.9 million, respectively, and primarily consisted of the gain on sale of Visa Inc.

class B common stock of $ 42.9 million.

Other operating expenses consisted of the following:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2020 2019 2020 2019

23 unchanged sentences

Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At June 30, 2020, the Company had outstanding commitments to extend credit aggregating approximately $ 670,546,000 and $ 2,933,075,000 for credit card commitments and other loan commitments, respectively.

At September 30, 2020, the Company had outstanding commitments to extend credit aggregating approximately $ 676,028,000 and $ 2,674,548,000 for credit card commitments and other loan commitments, respectively.

At December 31, 2019, the Company had outstanding commitments to extend credit aggregating approximately $ 634,788,000 and $ 3,991,931,000 for credit card commitments and other loan commitments, respectively.

2 unchanged sentences

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 $ 63,279,000 and $ 71,074,000 at June 30, 2020, and December 31, 2019, respectively, with terms ranging from 9 months to 15 years.

At June 30, 2020 and December 31, 2019, the Company had no deferred revenue under standby letter of credit agreements.

The Company had total outstanding letters of credit amounting to $ 63,604,000 and $ 71,074,000 at September 30, 2020, and December 31, 2019, respectively, with terms ranging from 9 months to 15 years.

At September 30, 2020 and December 31, 2019, the Company had no deferred revenue under standby letter of credit agreements.

FAIR VALUE MEASUREMENTS

35 unchanged sentences

See Note 4, Other Assets and Other Liabilities Held for Sale.

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

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, 2020 and December 31, 2019.

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

June 30, 2020

September 30, 2020

Available-for-sale securities

39 unchanged sentences

Where assumptions are made using significant unobservable inputs, such loans held for sale are classified as Level 3.

At June 30, 2020 and December 31, 2019, the aggregate fair value of mortgage loans held for sale exceeded their cost.

At September 30, 2020 and December 31, 2019, the aggregate fair value of mortgage loans held for sale exceeded their cost.

Accordingly, no mortgage loans held for sale were marked down and reported at fair value.

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

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

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

June 30, 2020

September 30, 2020

Individually assessed loans (1) (2) (collateral-dependent)

9 unchanged sentences

(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 $ 8,283,000 and $ 1,297,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended June 30, 2020 and December 31, 2019, respectively.

(2) Identified reserves of $ 12,586,000 and $ 1,297,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended September 30, 2020 and December 31, 2019, respectively.

ASC Topic 825, Financial Instruments , requires disclosure in annual and interim financial statements of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis.

33 unchanged sentences

(In thousands) Amount Level 1 Level 2 Level 3 Total

June 30, 2020

September 30, 2020

Financial assets:

78 unchanged sentences

The Company has a limited number of swaps that are standalone without a similar agreement with the loan customer.

The Company has entered into interest rate swap agreements that effectively convert the loan interest rate from floating rate based on LIBOR or Prime rate to a fixed rate for the customer.

The Company has entered into offsetting agreements with dealer counterparties.

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In thousands) Notional Fair Value Notional Fair Value

4 unchanged sentences

The interest rate swap mark to market only impacts the Company if the swap is in a liability position to the counterparty and the customer defaults on payments to the counterparty.

The notional amount of these contingent agreements is $ 52.2 million as of June 30, 2020.

The notional amount of these contingent agreements is $ 51.7 million as of September 30, 2020.

Energy Hedging

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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 June 30, 2020 for energy hedging Customer Sell to Company swaps were $ 12.6 million and the corresponding Company Sell to Dealer swaps were $ 12.6 million and the corresponding net fair value of the derivative asset and derivative liability was $ 514,800 .

RECENT EVENTS

The coronavirus (COVID-19) pandemic has placed significant health, economic and other major pressure on the communities the Company serves, the United States and the entire world.

In March 2020, Congress passed the CARES Act, which is designed to provide comprehensive relief to individuals and businesses following the unprecedented impact of the COVID-19 pandemic.

The Company has implemented a number of procedures in response to the pandemic to support the safety and well being of its employees, customers and shareholders that continue through the date of filing this report.

Some of the implemented procedures include:

• Addressing the safety of the Company’s 226 branches, following local, state, and federal guidelines.

In March, the Company announced the temporary closure of 52 branches and increased its focus on the enhanced digital banking experience.

Many of the branches have now been reopened, however we will continue to review our branch network;

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

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

• Providing extensions and deferrals to loan customers affected by COVID-19 provided such customers were not 30 days or more past due at December 31, 2019.

Through June 30, 2020, the Company has modified more than 4,600 loans totaling approximately $ 3.3 billion;

• Participating in both appropriations of the CARES Act Paycheck Protection Program (“PPP”) that provides 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assist with mortgage interest, rent and utilities.

Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions during this crisis.

The Company originated over 7,800 PPP loans with a balance of $ 963.7 million at June 30, 2020.

The Company continues to closely monitor this pandemic and expects to make future changes to respond to the pandemic as this situation continues to evolve.

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

The outstanding notional value as of September 30, 2020 for energy hedging Customer Sell to Company swaps were $ 17.8 million and the corresponding Company Sell to Dealer swaps were $ 17.8 million and the corresponding net fair value of the derivative asset and derivative liability was $ 792,085 .

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Results of Review of Interim Financial Statements

We have reviewed the condensed consolidated balance sheet of Simmons First National Corporation (“the Company”) as of June 30, 2020, and the related condensed consolidated statements of income, comprehensive income and stockholders’ equity for the three-month and six-month periods ended June 30, 2020 and 2019, and cash flows for the six-month periods ended June 30, 2020 and 2019, and the related notes (collectively referred to as the “interim financial information or statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have reviewed the consolidated balance sheet of Simmons First National Corporation (“the Company”) as of September 30, 2020, and the related consolidated statements of income, comprehensive income and stockholders’ equity for the three-month and nine-month periods ended September 30, 2020 and 2019, and cash flows for the nine-month periods ended September 30, 2020 and 2019, and the related notes (collectively referred to as the “interim financial information or statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 27, 2020, we expressed an unqualified opinion on those consolidated financial statements.

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Little Rock, Arkansas

August 6, 2020

November 6, 2020

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements