What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-06 · 348 added, 572 removed, 1128 unchanged (45% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30, 2020 and December 31, 2019

September 30, December 31,

March 31, 2021 and December 31, 2020

March 31, December 31,

(In thousands, except share data) 2021 2020

2 unchanged sentences

Cash and cash equivalents 3,905,463 3,472,152

2,522,131 996,623

Interest bearing balances due from banks - time 1,334 1,579

Investment securities:

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

Held-to-maturity, net of allowance for credit losses of $ 1,618 and $ 2,915 at March 31, 2021 and December 31, 2020, respectively

609,500 333,031

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)

Available-for-sale, net of allowance for credit losses of $ 2,454 and $ 312 at March 31, 2021 and December 31, 2020, respectively (amortized cost of $ 4,582,052 and $ 3,397,043 at March 31, 2021 and December 31, 2020, respectively)

4,528,348 3,473,598

Total investments 5,137,848 3,806,629

2,654,390 3,329,270

Mortgage loans held for sale 63,655 137,378

Other assets held for sale 389 260,332

Loans 12,195,873 12,900,897

Allowance for credit losses on loans ( 235,116 ) ( 238,050 )

13,769,191 14,357,460

Net loans 11,960,757 12,662,847

Premises and equipment 427,540 441,692

6 unchanged sentences

Other assets 315,832 289,432

$ 21,437,395 $ 21,259,143

Total assets $ 23,348,117 $ 22,359,752

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Total deposits 18,189,388 16,987,026

16,246,647 16,108,940

Federal funds purchased and securities sold under agreements to repurchase 323,053 299,111

4 unchanged sentences

Total liabilities 20,417,342 19,383,096

18,495,154 18,270,219

Stockholders’ equity:

1 unchanged sentence

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

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

767 shares issued and outstanding at March 31, 2021 and December 31, 2020

Common stock, Class A, $ 0.01 par value;

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

175,000,000 shares authorized at March 31, 2021 and December 31, 2020;

108,345,732 and 108,077,662 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Surplus 2,017,188 2,014,076

Undivided profits 948,913 901,006

Accumulated other comprehensive income 41,509 20,891

Accumulated other comprehensive (loss) income ( 37,176 ) 59,726

Total stockholders’ equity 2,930,775 2,976,656

2,942,241 2,988,924

Total liabilities and stockholders’ equity $ 23,348,117 $ 22,359,752

$ 21,437,395 $ 21,259,143

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Income

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended

September 30, Nine Months Ended September 30,

Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

(In thousands, except per share data) 2021 2020

(Unaudited) (Unaudited)

INTEREST INCOME

Loans $ 163,180 $ 179,971 $ 527,656 $ 517,533

Loans, including fees $ 146,424 $ 187,566

Interest bearing balances due from banks and federal funds sold 798 2,441

41 unchanged sentences

Simmons First National Corporation

Consolidated Statements of Comprehensive Income

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended

September 30, Nine Months Ended September 30,

Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

(In thousands) 2021 2020

(Unaudited) (Unaudited)

NET INCOME $ 67,420 $ 77,236

OTHER COMPREHENSIVE (LOSS) INCOME

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

4,975 18,736 82,703 79,547

Unrealized holding gain on the transfer of held-to-maturity securities to available-for-sale per ASU 2017-12

Unrealized holding (losses) gains arising during the period on available-for-sale securities ( 125,717 ) 55,569

Reclassification adjustment for realized gains included in net income

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

Other comprehensive (loss) income, before tax effect ( 131,188 ) 23,474

1 unchanged sentence

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME ( 96,902 ) 17,339

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

COMPREHENSIVE (LOSS) INCOME $ ( 29,482 ) $ 94,575

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2020 and 2019

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

Three Months Ended March 31, 2021 and 2020

(In thousands) March 31, 2021 March 31, 2020

OPERATING ACTIVITIES

7 unchanged sentences

Stock-based compensation expense 3,852 4,506

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

Gain on sale of premises held for sale ( 177 ) —

Gain on sale of foreclosed assets held for sale ( 134 ) ( 520 )

Gain on sale of mortgage loans held for sale ( 11,409 ) ( 5,843 )

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 )

Gain on sale of branches ( 8,094 ) —

Fair value write-down of closed branches 1,465 —

Gain on sale of banking operations ( 5,300 ) ( 5,889 )

Deferred income taxes 3,227 ( 1,586 )

4 unchanged sentences

Interest receivable 1,237 5,058

Lease right-of-use assets 8,147 ( 1,370 )

Other assets ( 30,187 ) 1,325

3 unchanged sentences

INVESTING ACTIVITIES

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

Net change in loans 705,540 ( 49,104 )

Proceeds from sale of loans 1,847 —

1 unchanged sentence

Purchases of premises and equipment, net ( 2,514 ) ( 10,570 )

Proceeds from sale of premises and equipment 123 —

Proceeds from sale of premises held for sale 1,572 —

Proceeds from sale of foreclosed assets held for sale 8,338 2,464

6 unchanged sentences

Disposition of assets and liabilities held for sale ( 134,166 ) 123,610

Purchase of Reliance Bancshares, Inc.

Net cash provided by investing activities 1,206,500 142,543

Net cash (used in) provided by investing activities ( 837,272 ) 928,091

FINANCING ACTIVITIES

Net change in deposits 1,192,740 ( 503,567 )

Repayments of subordinated debentures ( 5,927 ) —

Dividends paid on preferred stock ( 13 ) ( 13 )

2 unchanged sentences

Net change in federal funds purchased and securities sold under agreements to repurchase 23,942 227,714

Net shares cancelled under stock compensation plans ( 3,355 ) ( 3,301 )

Net shares issued (cancelled) under stock compensation plans 1,172 ( 3,063 )

Shares issued under employee stock purchase plan 1,170 956

Retirement of preferred stock — ( 42,000 )

Repurchases of common stock ( 3,080 ) ( 93,307 )

Net cash provided by (used in) financing activities 1,194,831 ( 291,127 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,525,508 ( 303,488 )

INCREASE IN CASH AND CASH EQUIVALENTS 433,311 740,576

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,472,152 996,623

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity

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 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

Stock-based compensation plans, net – 29,392 shares

— — 2,989 — — 2,989

Dividends on preferred stock — — — — ( 13 ) ( 13 )

Dividends on common stock – $ 0.17 per share

— — — — ( 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

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

Stock-based compensation plans, net – 23,199 shares

— — 2,796 — — 2,796

Dividends on common stock – $ 0.16 per share

— — — — ( 15,457 ) ( 15,457 )

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

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

(In thousands, except share data) Preferred Stock Common

1 unchanged sentence

Comprehensive

Income (Loss) Undivided

(Loss) Income Undivided

Profits Total

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Balance, December 31, 2020 $ 767 $ 1,081 $ 2,014,076 $ 59,726 $ 901,006 $ 2,976,656

Impact of ASU 2016-13 adoption

— — — — ( 128,101 ) ( 128,101 )

Comprehensive income — — — 20,618 201,936 222,554

Comprehensive (loss) income — — — ( 96,902 ) 67,420 ( 29,482 )

Stock issued for employee stock purchase plan – 60,697 shares

8 unchanged sentences

— — — — ( 19,500 ) ( 19,500 )

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, March 31, 2021 (Unaudited) $ 767 $ 1,083 $ 2,017,188 $ ( 37,176 ) $ 948,913 $ 2,930,775

Three Months Ended March 31, 2020

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

Impact of ASU 2016-13 adoption — — — — ( 128,101 ) ( 128,101 )

Comprehensive income — — — 17,339 77,236 94,575

3 unchanged sentences

— 2 1,441 — — 1,443

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

Stock repurchases – 4,922,336 shares

— ( 49 ) ( 93,258 ) — — ( 93,307 )

Preferred stock retirement ( 42,000 ) — — — — ( 42,000 )

Dividends on preferred stock — — — — ( 13 ) ( 13 )

1 unchanged sentence

— — — — ( 19,077 ) ( 19,077 )

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

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

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 Bank” or the “Bank”).

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.

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 as of September 30, 2020, 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 198 financial centers as of March 31, 2021, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Basis of Presentation

9 unchanged sentences

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.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation.

1 unchanged sentence

Recently Adopted Accounting Standards

Fair Value Measurement Disclosures – In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

Reference Rate Reform – In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides relief for companies preparing for discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”).

LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities.

After 2021, it is likely that banks will no longer be required to report information that is used to determine LIBOR, and certain LIBOR rates will no longer be published.

As a result, LIBOR could be discontinued as a reference rate.

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 and has created standard LIBOR replacement language for new and modified loan notes and is not offering discontinued rates on new loans.

The Company monitors the remaining loans with LIBOR rates monthly to ensure progress.

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”) 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.

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

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), that removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes.

ASU 2019-12 introduces the following new guidance:

i) guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction and ii) a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax.

Additionally, ASU 2019-12 changes the following current guidance:

i) making an intraperiod allocation, if there is a loss in continuing operations and gains outside of continuing operations, ii) determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting, iii) accounting for tax law changes and year-to-date losses in interim periods, and iv) determining how to apply the income tax guidance to franchise taxes that are partially based on income.

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

The adoption of ASU 2019-12 did not have a material impact on the Company’s operations, financial position or disclosures.

Fair Value Measurement Disclosures – In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

6 unchanged sentences

Under the new disclosure requirements, entities must disclose the changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 is

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

ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.

ASU 2018-13 did not have a material impact on the Company’s fair value disclosures.

14 unchanged sentences

During the deferral, a registrant would continue to use the incurred loss model for the allowance for loan and lease losses and would be in accordance with US GAAP.

The Company has not elected to temporarily defer the adoption of ASU 2016-13 and adopted the new standard as of January 1, 2020.

The Company did not elect to temporarily defer the adoption of ASU 2016-13 and adopted the new standard as of January 1, 2020.

Upon adoption, the Company recorded an additional allowance for credit losses on loans of approximately $ 151.4 million and an adjustment to the reserve for unfunded commitments recorded in other liabilities of $ 24.0 million.

3 unchanged sentences

The Company had approximately one third of total loans categorized as acquired at the adoption date with very little reserve allocated to them due to the previous incurred loss impairment methodology.

As such, the amount of the CECL adoption impact was greater on the Company when compared to a non-acquisitive bank.

As such, the amount of the CECL adoption impact was greater on the Company when compared to a non-acquisitive bank of a similar size.

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 on earnings and Tier 1 capital (the “CECL Transition Provision”).

2 unchanged sentences

The Company elected to apply the 2020 CECL Transition Provision.

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

The revised accounting policies are described below:

Allowance for Credit Losses - Held-to-Maturity (“HTM”) Securities - The Company measures expected credit losses on HTM securities on a collective basis by major security type with each type sharing similar risk characteristics.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

See Note 3, Investment Securities, for additional information related to the Company’s allowance for credit losses on HTM securities.

Allowance for Credit Losses - Available-for-Sale (“AFS”) Securities - For AFS securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or whether it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis.

If either of these criteria regarding intent or requirement to sell is met, the AFS security amortized cost basis is written down to fair value through income.

If the criteria is not met, the Company is required to assess whether the decline in fair value has resulted from credit losses or noncredit-related factors.

If the assessment indicates a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit loss is recorded through income as a component of provision for credit loss expense.

If the assessment indicates that a credit loss does not exist, the Company records the decline in fair value through other comprehensive income, net of related income tax effects.

The Company has made the election to exclude accrued interest receivable on AFS securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

See Note 3, Investment Securities, for additional information related to the Company’s allowance for credit losses on AFS securities.

Loans - Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their amortized cost basis, which is the unpaid principal balance outstanding, net of unearned income, deferred loan fees and costs, premiums and discounts associated with acquisition date fair value adjustments on acquired loans, and any direct principal charge-offs.

The Company has made a policy election to exclude accrued interest from the amortized cost basis of loans and report accrued interest separately from the related loan balance on the consolidated balance sheets.

Further information regarding accounting policies related to past due loans, non-accrual loans, and troubled-debt restructurings is presented in Note 5, Loans and Allowance for Credit Losses.

The Company used the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality .

The Company used the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality .

The Company increased the allowance for credit losses by approximately $ 5.4 million at adoption for the assets previously identified as PCI.

In accordance with ASU 2016-13, the Company did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption.

Collateral Dependent Loans - Loans that do not share risk characteristics are evaluated on an individual basis.

For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit loss is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.

When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral.

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell.

The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures - The allowance for credit losses on off-balance-sheet credit exposures is a liability account representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit.

No allowance for credit loss is recognized if the Company has the unconditional right to cancel the obligation.

The allowance for credit loss is reported as a component of accrued interest and other liabilities in the consolidated balance sheets.

Adjustments to the allowance are reported in the income statement as a component of other operating expenses.

Recently Issued Accounting Standards

Reference Rate Reform – In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities.

After 2021, banks will no longer be required to report information that is used to determine LIBOR.

As a result, LIBOR could be discontinued.

Other interest rates used globally could also be discontinued for similar reasons.

ASU 2020-04 provides optional expedients and exceptions to contracts, hedging relationships and other transactions affected by reference rate reform.

The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features.

Companies are able to apply ASU 2020-04 immediately;

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

As of 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.

2019-12, Income Taxes (Topic 740):

ASU 2019-12 introduces the following new guidance:

Additionally, ASU 2019-12 changes the following current guidance:

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

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 2020 Form 10-K.

Presently, the Company is not aware of any other changes to the Accounting Standards Codification that will have a material impact on its present or future financial position or results of operations.

The Landrum Company

On October 31, 2019, the Company completed its merger with The Landrum Company (“Landrum”), pursuant to the terms of the Agreement and Plan of Merger dated as of July 30, 2019 (“Landrum Agreement”), at which time Landrum was merged with and into the Company, with the Company continuing as the surviving corporation.

Pursuant to the terms of the Landrum Agreement, the shares of Landrum Class A Common Voting Stock, par value $ 0.01 per share, and Landrum Class B Common Nonvoting Stock, par value $ 0.01 per share, were converted into the right to receive, in the aggregate, approximately 17,350,000 shares of the Company’s common stock, and each share of Landrum’s series E preferred stock was converted into the right to receive one share of the Company’s comparable series D preferred stock.

The Company issued 17,349,722 shares of its common stock and 767 shares of its series D preferred stock, par value $ 0.01 per share, in exchange for all outstanding shares of Landrum capital stock to effect the merger.

Prior to the acquisition, Landrum, headquartered in Columbia, Missouri, conducted banking business through its subsidiary bank, Landmark Bank, from 39 branches located in Missouri, Oklahoma and Texas.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 3.4 billion in assets, including approximately $ 2.0 billion in loans (inclusive of loan discounts), and approximately $ 3.0 billion in deposits.

The systems conversion occurred on February 14, 2020, at which time Landmark Bank merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $ 151.1 million was recorded as a result of the transaction.

The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded.

The goodwill will not be deductible for tax purposes.

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

(In thousands) Acquired from Landrum Fair Value Adjustments Fair Value

Assets Acquired

Cash and due from banks $ 215,285 $ — $ 215,285

Due from banks - time 248 — 248

INVESTMENT SECURITIES

Loans acquired 2,049,137 ( 43,651 ) 2,005,486

Allowance for loan losses ( 22,736 ) 22,736 —

Foreclosed assets 373 ( 183 ) 190

Premises and equipment 63,878 18,781 82,659

Bank owned life insurance 19,206 — 19,206

Goodwill 407 ( 407 ) —

Core deposit intangible — 24,345 24,345

Other intangibles 412 4,704 5,116

Other assets 33,924 ( 13,290 ) 20,634

Total assets acquired $ 3,381,889 $ 17,263 $ 3,399,152

Liabilities Assumed

Non-interest bearing transaction accounts $ 716,675 $ — $ 716,675

Interest bearing transaction accounts and savings deposits 1,465,429 — 1,465,429

Time deposits 867,197 299 867,496

Total deposits 3,049,301 299 3,049,600

Other borrowings 10,055 — 10,055

Subordinated debentures 34,794 ( 877 ) 33,917

Accrued interest and other liabilities 31,057 9,869 40,926

Total liabilities assumed 3,125,207 9,291 3,134,498

Equity 256,682 ( 256,682 ) —

Total equity assumed 256,682 ( 256,682 ) —

Total liabilities and equity assumed $ 3,381,889 $ ( 247,391 ) $ 3,134,498

Net assets acquired 264,654

Purchase price 415,779

Goodwill $ 151,125

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.

Reliance Bancshares, Inc.

On April 12, 2019, the Company completed its merger with Reliance Bancshares, Inc.

(“Reliance”), headquartered in the St.

Louis, Missouri, metropolitan area, pursuant to the terms of the Agreement and Plan of Merger (“Reliance Agreement”), dated November 13, 2018, as amended February 11, 2019.

In the merger, each outstanding share of Reliance common stock, as well as each Reliance common stock equivalent was canceled and converted into the right to receive shares of the Company’s common stock and/or cash in accordance with the terms of the Reliance Agreement.

In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each share of Reliance’s Series C Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series C Preferred Stock (unless the holder of such Series C Preferred Stock elected to receive alternate consideration in accordance with the Reliance Agreement).

The Company issued 3,999,623 shares of its common stock and paid $ 62.7 million in cash to effect the merger.

The Company also issued $ 42.0 million of its Series A Preferred Stock and Series B Preferred Stock.

On May 13, 2019, the Company redeemed all of the preferred stock issued in connection with the merger, and paid all accrued and unpaid dividends up to the date of redemption.

On October 29, 2019, the Company amended its Amended and Restated Articles of Incorporation to cancel the Series C Preferred Stock, having 140 authorized shares, of which no shares were ever issued or outstanding.

Prior to the acquisition, Reliance conducted banking business through its subsidiary bank, Reliance Bank, from 22 branches located in Missouri and Illinois.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 1.5 billion in assets, including approximately $ 1.1 billion in loans (inclusive of loan discounts), and approximately $ 1.2 billion in deposits.

Contemporaneously with the completion of the Reliance merger, Reliance Bank was merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $ 78.5 million was recorded as a result of the transaction.

The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s St.

Louis metropolitan area footprint, which gave rise to the goodwill recorded.

The goodwill will not be deductible for tax purposes.

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

(In thousands) Acquired from Reliance Fair Value Adjustments Fair Value

Assets Acquired

Cash and due from banks $ 25,693 $ — $ 25,693

Due from banks - time 502 — 502

Investment securities 287,983 ( 1,873 ) 286,110

Loans acquired 1,138,527 ( 41,657 ) 1,096,870

Allowance for loan losses ( 10,808 ) 10,808 —

Foreclosed assets 11,092 ( 5,180 ) 5,912

Premises and equipment 32,452 ( 3,001 ) 29,451

Bank owned life insurance 39,348 — 39,348

Core deposit intangible — 18,350 18,350

Other assets 25,165 6,911 32,076

Total assets acquired $ 1,549,954 $ ( 15,642 ) $ 1,534,312

(In thousands) Acquired from Reliance Fair Value Adjustments Fair Value

Liabilities Assumed

Non-interest bearing transaction accounts $ 108,845 $ ( 33 ) $ 108,812

Interest bearing transaction accounts and savings deposits 639,798 — 639,798

Time deposits 478,415 ( 1,758 ) 476,657

Total deposits 1,227,058 ( 1,791 ) 1,225,267

Securities sold under agreement to repurchase 14,146 — 14,146

Other borrowings 162,900 ( 5,500 ) 157,400

Accrued interest and other liabilities 8,185 268 8,453

Total liabilities assumed 1,412,289 ( 7,023 ) 1,405,266

Equity 137,665 ( 137,665 ) —

Total equity assumed 137,665 ( 137,665 ) —

Total liabilities and equity assumed $ 1,549,954 $ ( 144,688 ) $ 1,405,266

Net assets acquired 129,046

Purchase price 207,539

Goodwill $ 78,493

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

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

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

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

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material.

Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

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

The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.

The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.

Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

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

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

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

Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill.

Goodwill established prior to the acquisitions, if applicable, was written off.

Core deposit intangible – This intangible asset represents the value of the relationships that the acquired banks had with their deposit customers.

The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Any core deposit intangible established prior to the acquisitions, if applicable, was written off.

Other intangibles – These intangible assets represent the value of the relationship that Landrum had with their trust and wealth management customers.

The fair value of these intangible assets was estimated based on a combination of discounted cash flow methodology and a market valuation approach.

Intangible assets for Landrum also included mortgage servicing rights.

Other intangibles established prior to the acquisitions, if applicable, were written off.

Other assets – The fair value adjustment results from certain assets whose value was estimated to be more or less than book value, such as certain prepaid assets, receivables and other miscellaneous assets.

Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date.

The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference 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 adjustment 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.

INVESTMENT SECURITIES

Held-to-maturity securities, which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts.

Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity.

Available-for-sale securities, which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value.

Held-to-maturity securities (“HTM”), which include any security for which the Company has the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts.

Premiums and discounts are amortized and accreted, respectively, to interest income using the constant 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.

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 yield method over the period to maturity.

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.

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

4 unchanged sentences

Held-to-Maturity

September 30, 2020

March 31, 2021

Government agencies $ 77,396 $ — $ 77,396 $ — $ ( 3,757 ) $ 73,639

Mortgage-backed securities

13 unchanged sentences

(In thousands) Amortized

Cost Allowance for Credit Losses Gross Unrealized

Cost Allowance

for Credit Losses Gross Unrealized

Gains Gross Unrealized

1 unchanged sentence

Available-for-sale

September 30, 2020

March 31, 2021

Treasury $ 600 $ — $ — $ — $ 600

Government agencies 511,973 — 369 ( 24,663 ) 487,679

4 unchanged sentences

December 31, 2020

Treasury $ 449,729 $ — $ 112 $ ( 112 ) $ 449,729

Government agencies $ 477,693 $ — $ 844 $ ( 1,300 ) $ 477,237

3 unchanged sentences

Total AFS $ 3,397,043 $ ( 312 ) $ 79,663 $ ( 2,796 ) $ 3,473,598

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.

Accrued interest receivable on HTM and AFS securities at March 31, 2021 was $ 3.4 million and $ 20.2 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, 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 March 31, 2021, 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

6 unchanged sentences

State and political subdivisions 299,613 ( 24,624 ) 90 ( 1 ) 299,703 ( 24,625 )

Other securities 49,421 ( 6,101 ) — — 49,421 ( 6,101 )

Total AFS $ 2,373,301 $ ( 90,561 ) $ 49,536 $ ( 780 ) $ 2,422,837 $ ( 91,341 )

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.

As of March 31, 2021, the Company’s investment portfolio included $ 4.5 billion of AFS securities, of which $ 2.4 billion, or 53.5 %, 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 mortgage-backed securities, which are issued and guaranteed by U.S.

government-sponsored entities and agencies, and the Company’s state and political securities, specifically investments in insured fixed rate municipal bonds meaning issuers continue to make timely principal and interest payments under the contractual terms of the securities.

government-sponsored entities and agencies, and the Company’s state and political 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.

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.

3 unchanged sentences

Allowance for Credit Losses

All of the mortgage-backed securities held by the Company are issued by U.S.

All mortgage-backed securities held by the Company are issued by U.S.

government-sponsored entities and agencies.

2 unchanged sentences

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 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 nine months ended September 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 months ended March 31, 2021 and 2020 on the Company’s HTM and AFS securities portfolios.

(In thousands) State and Political Subdivisions Other Securities Total

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Held-to-Maturity

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

Beginning balance, January 1, 2021 $ 2,307 $ 608 $ 2,915

Provision for credit loss expense ( 1,265 ) 568 ( 697 )

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

Securities charged-off — ( 600 ) ( 600 )

Ending balance, March 31, 2021 $ 1,042 $ 576 $ 1,618

Available-for-sale

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

Beginning balance, January 1, 2021 $ 217 $ 95 $ 312

Credit losses on securities not previously recorded 61 2,237 2,298

1,137 23 1,160

Reduction due to sales — ( 11 ) ( 11 )

Net decrease in allowance on previously impaired securities ( 214 ) 69 ( 145 )

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

Nine Months Ended September 30, 2020

Ending balance, March 31, 2021 $ 64 $ 2,390 $ 2,454

Three Months Ended March 31, 2020

Held-to-Maturity

2 unchanged sentences

Provision for credit loss expense 39 1 40

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

Ending balance, March 31, 2020 $ 97 $ 312 $ 409

Available-for-sale

2 unchanged sentences

Credit losses on securities not previously recorded 44 174 218

1,130 78 1,208

Reduction due to sales ( 244 ) — ( 244 )

Net decrease in allowance on previously impaired securities ( 322 ) — ( 322 )

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:

Ending balance, March 31, 2020 $ 95 $ 174 $ 269

The provision for credit losses related to AFS securities was $ 2,142,000 during the three months ended March 31, 2021.

During the three months ended March 31, 2020, the provision for credit losses related to AFS securities was a benefit to expense of $ 104,000 .

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 March 31, 2021:

State and Political Subdivisions

3 unchanged sentences

A 19,516 6,445 — 25,961 —

Baa — 426 — 426 —

Not Rated 95,729 45,072 — 140,801 576

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 nine months ended September 30, 2020 and 2019, is as follows:

Income earned on securities for the three months ended March 31, 2021 and 2020, is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2021 2020

17 unchanged sentences

Total $ 611,118 $ 597,694 $ 4,582,052 $ 4,528,348

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 carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 2.81 billion at March 31, 2021 and $ 2.01 billion at December 31, 2020.

There were approximately $ 5.5 million of gross realized gains and $ 13,000 of gross realized losses from the sale of securities during the three months ended March 31, 2021.

The Company sold approximately $ 135.7 million of investment securities during the three months ended March 31, 2021.

There were approximately $ 32.1 million of gross realized gains and $ 2,080 of gross realized losses from the sale of securities during the three months ended March 31, 2020.

During the first quarter of 2020, the Company sold approximately $ 1.1 billion of investment securities to create additional liquidity.

The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2021 and 2020.

OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Colorado Branch Sale

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

On May 18, 2020, First Western completed its purchase of certain assets and assumption of certain liabilities (“Colorado Branch Sale”) associated with four Simmons Bank locations in Denver, Englewood, Highlands Ranch, and Lone Tree, Colorado (collectively, the “Colorado Branches”).

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

Texas Branch Sale

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

On February 28, 2020, Spirit completed its purchase of certain assets and assumption of certain liabilities (“Texas Branch Sale”) associated with five Simmons Bank locations in Austin, San Antonio, and Tilden, Texas (collectively, the “Texas Branches”).

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

The 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.

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 Company recognized a gain on sale of $ 5.3 million related to the Illinois Branches in the three month period ended March 31, 2021.

As of March 31, 2021, there were no outstanding other liabilities held for sale.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

At March 31, 2021, the Company’s loan portfolio was $ 12.20 billion, compared to $ 12.90 billion at December 31, 2020.

The various categories of loans are summarized as follows:

September 30, December 31,

March 31, December 31,

(In thousands) 2021 2020

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 $ 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.

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 $ 51.4 million and $ 57.3 million at March 31, 2021 and December 31, 2020, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 47.8 million and $ 54.4 million at March 31, 2021 and December 31, 2020, 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;

21 unchanged sentences

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.

2 unchanged sentences

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 CARES Act which provided 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.

PPP loans have a zero percent risk-weight for regulatory capital ratios.

As of March 31, 2021 and December 31, 2020, the total outstanding balance of PPP loans was $ 797.6 million and $ 904.7 million, respectively.

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.

5 unchanged sentences

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

September 30, December 31,

March 31, December 31,

(In thousands) 2021 2020

10 unchanged sentences

Total $ 114,856 $ 122,879

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.

As of March 31, 2021 and December 31, 2020, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 18.8 million and $ 16.8 million, respectively.

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

September 30, 2020

March 31, 2021

Credit cards $ 786 $ 453 $ 1,239 $ 174,219 $ 175,458 $ 336

10 unchanged sentences

Total $ 49,687 $ 28,616 $ 78,303 $ 12,117,570 $ 12,195,873 $ 635

(In thousands) Gross

Past Due 90 Days

Past Due Total

Past Due Current Total

Loans 90 Days

December 31, 2020

11 unchanged sentences

Total $ 39,072 $ 35,188 $ 74,260 $ 12,826,637 $ 12,900,897 $ 578

The following table presents information pertaining to impaired loans as of December 31, 2019, in accordance with previous US GAAP prior to the adoption of ASU 2016-13.

(In thousands) Unpaid

Balance Recorded Investment

Allowance Recorded

With Allowance Total

Investment Related

Allowance Average Investment in Impaired Loans Interest Income Recognized Average Investment in Impaired Loans Interest

December 31, 2019 Three Months Ended

September 30, 2019 Nine Months Ended

September 30, 2019

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

Other consumer 1,537 1,378 — 1,378 — 1,603 9 1,730 33

Total consumer 1,919 1,760 — 1,760 — 2,026 49 2,100 143

Construction and development 4,648 4,466 72 4,538 4 1,972 10 1,946 38

Single family residential 19,466 15,139 2,963 18,102 42 15,920 85 14,812 287

Other commercial 10,645 4,713 3,740 8,453 694 11,739 77 10,365 201

Total real estate 34,759 24,318 6,775 31,093 740 29,631 172 27,123 526

Commercial 53,436 6,582 28,998 35,580 5,007 32,020 176 26,379 511

Agricultural 525 383 116 499 — 873 3 1,010 20

Total commercial 53,961 6,965 29,114 36,079 5,007 32,893 179 27,389 531

Total $ 90,639 $ 33,043 $ 35,889 $ 68,932 $ 5,747 $ 64,550 $ 400 $ 56,612 $ 1,200

When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) results and the Company classifies the loan as a TDR.

4 unchanged sentences

The provisions in the CARES Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration.

In March 2020, the federal financial institution regulatory agencies issued an interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and provided information regarding loan modifications.

The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

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

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.

In response to the concerns related to the expiration of the applicable period for which the election to not apply the guidance on accounting for TDRs to loan modifications, the CARES Act was amended in late fourth quarter of 2020 to extend COVID-19 relief related to loan modifications from the earlier of (i) January 1, 2022 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration.

During 2020 and the first quarter of 2021, the Company processed over 3,700 COVID-19 loan modifications in excess of $ 3.0 billion.

As of March 31, 2021, the Company had the following loan modifications due to COVID-19 outstanding categorized 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

Assisted living 1 $ 17,310

Transportation 5 783

Consumer 37 3,776

Hotel 17 152,864

Food service 3 2,683

All other 16 31,029

Total 79 $ 208,445

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

Deferred interest on the above loans totaled $ 5.9 million as of March 31, 2021.

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.

As of March 31, 2021, over 3,300 loans totaling approximately $ 2.6 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

September 30, 2020

March 31, 2021

Single-family residential 31 $ 3,133 15 $ 1,991 46 $ 5,124

7 unchanged sentences

December 31, 2020

Construction and development — $ — 1 $ 72 1 $ 72

Single-family residential 28 $ 2,463 18 $ 2,736 46 $ 5,199

4 unchanged sentences

Total 32 $ 3,138 22 $ 4,375 54 $ 7,513

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 $ — $ —

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 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.

There were no loans restructured as TDRs during the three month periods ended March 31, 2021 or 2020.

Additionally, there were no loans considered TDRs for which a payment default occurred during the three months ended March 31, 2021 or 2020.

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 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.

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 month periods ended March 31, 2021 or 2020.

At March 31, 2021 and December 31, 2020, the Company had $ 5,838,000 and $ 7,182,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At March 31, 2021 and December 31, 2020, the Company had $ 1,995,000 and $ 3,172,000 , 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 September 30, 2020 segregated by class of loans.

The following tables present a summary of loans by credit quality indicator, other than pass or current, as of March 31, 2021 and December 31, 2020 segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2021 (YTD) 2020 2019 2018 2017 2016 and Prior Lines of Credit (“LOC”) Amortized Cost Basis LOC Converted to Term Loans Amortized Cost Basis Total

March 31, 2021

Consumer - credit cards

29 unchanged sentences

Total commercial - agriculture 93 57 85 291 85 17 168 73 869

30-89 days past due — — — — — 23 — — 23

90+ days past due — — — — — — — — —

Total other — — — — — 23 — — 23

Total $ 75,466 $ 252,462 $ 12,624 $ 12,674 $ 23,815 $ 55,379 $ 239,565 $ 68,060 $ 740,045

The following table presents a summary of loans by credit risk rating as of December 31, 2019 segregated by class of loans.

(In thousands) Risk Rate

1-4 Risk Rate

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2020 2019 2018 2017 2016 2015 and Prior Lines of Credit (“LOC”) Amortized Cost Basis LOC Converted to Term Loans Amortized Cost Basis Total

December 31, 2020

Credit cards $ 204,161 $ — $ 641 $ — $ — $ 204,802

Other consumer 247,668 — 2,026 — — 249,694

Total consumer 451,829 — 2,667 — — 454,496

Construction and development 2,229,019 70 7,735 — 37 2,236,861

Single family residential 2,394,284 6,049 41,601 130 — 2,442,064

Other commercial 6,068,425 69,745 67,429 — — 6,205,599

Total real estate 10,691,728 75,864 116,765 130 37 10,884,524

Commercial 2,384,263 26,713 84,317 43 180 2,495,516

Agricultural 309,741 41 5,672 — — 315,454

Consumer - credit cards

30-89 days past due $ — $ — $ — $ — $ — $ — $ 708 $ — $ 708

90+ days past due — — — — — — 256 — 256

Total consumer - credit cards — — — — — — 964 — 964

Consumer - other

30-89 days past due 234 441 327 658 689 84 339 — 2,772

90+ days past due 79 58 25 80 40 12 8 — 302

Total consumer - other 313 499 352 738 729 96 347 — 3,074

Real estate - C&D

5 internal grade 2,728 344 259 2,107 19 — 9,613 — 15,070

6 internal grade 294 2,069 404 449 342 320 17,914 14 21,806

7 internal grade — — — — — — — — —

Total real estate - C&D 3,022 2,413 663 2,556 361 320 27,527 14 36,876

Real estate - SF residential

30-89 days past due 6,300 2,258 2,593 2,610 2,058 6,050 1,782 76 23,727

90+ days past due 557 1,853 2,735 2,582 832 3,852 1,928 — 14,339

Total real estate - SF residential 6,857 4,111 5,328 5,192 2,890 9,902 3,710 76 38,066

Real estate - other commercial

5 internal grade 100,085 4,346 10,738 19,943 26,245 10,608 63,305 23,435 258,705

6 internal grade 66,737 9,418 24,380 14,067 3,744 11,158 52,182 39,486 221,172

7 internal grade — — — — — — — — —

Total real estate - other commercial 166,822 13,764 35,118 34,010 29,989 21,766 115,487 62,921 479,877

5 internal grade 5,707 342 465 972 54 — 12,318 22,546 42,404

6 internal grade 23,227 4,495 1,586 730 276 334 53,682 7,522 91,852

7 internal grade — — — — — — — — —

Total commercial 28,934 4,837 2,051 1,702 330 334 66,000 30,068 134,256

Other 275,714 — — — — 275,714

Commercial - agriculture

5 internal grade — 79 13 299 — 6 34 — 431

6 internal grade 86 101 64 47 12 10 68 75 463

7 internal grade — — — — — — — — —

Total commercial - agriculture 86 180 77 346 12 16 102 75 894

Total $ 206,034 $ 25,804 $ 43,589 $ 44,544 $ 34,311 $ 32,434 $ 214,137 $ 93,154 $ 694,007

10 unchanged sentences

Qualitative adjustments include, but are not limited to:

• Changes in asset quality - Adjustments related to trending credit quality metrics including delinquency, nonperforming loans, charge-offs, and risk ratings that may not be fully accounted for in the reserve factor.

• 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.

12 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 $ 71.7 million as of September 30, 2020, 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 $ 68.8 million as of March 31, 2021, 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 $ 25,337 $ 39,827 $ 3,624 $ 68,788

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.

The following table details activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2021.

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 September 30, 2020

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

Three Months Ended March 31, 2021

Beginning balance, January 1, 2021 $ 42,093 $ 182,868 $ 7,472 $ 5,617 $ 238,050

Provision for credit loss expense ( 6,940 ) 14,242 ( 4,587 ) ( 2,715 ) —

2 unchanged sentences

Net charge-offs ( 520 ) ( 1,284 ) ( 713 ) ( 417 ) ( 2,934 )

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

Ending balance, March 31, 2021 $ 34,633 $ 195,826 $ 2,172 $ 2,485 $ 235,116

Activity in the allowance for credit losses for the three months ended March 31, 2020 was as follows:

(In thousands) Commercial Real

1 unchanged sentence

and Other Total

Nine Months Ended September 30, 2020

Allowance for credit losses:

Three Months Ended March 31, 2020

Beginning balance, January 1, 2020 - prior to adoption of CECL $ 22,863 $ 39,161 $ 4,051 $ 2,169 $ 68,244

$ 22,863 $ 39,161 $ 4,051 $ 2,169 $ 68,244

Impact of CECL adoption 22,733 114,314 2,232 12,098 151,377

3 unchanged sentences

Net charge-offs ( 176 ) ( 295 ) ( 1,216 ) ( 936 ) ( 2,623 )

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

Estate Credit

and Other Total

Allowance for credit losses:

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

Charge-offs ( 17,778 ) ( 1,367 ) ( 1,117 ) ( 1,065 ) ( 21,327 )

Recoveries 65 55 223 1,422 1,765

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

Provision for credit losses 23,980 10,393 2,644 1,320 38,337

Charge-offs ( 22,893 ) ( 3,000 ) ( 3,298 ) ( 3,582 ) ( 32,773 )

Recoveries 1,190 355 734 2,053 4,332

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

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.

Ending balance, March 31, 2020 $ 76,327 $ 141,022 $ 7,817 $ 18,029 $ 243,195

As of March 31, 2021, the Company’s allowance for credit losses was considered sufficient based upon expected loan level cash flows that were supported by economic forecasts.

As a result, additional provision expense was not recorded for the three months ended March 31, 2021, however the Company reallocated certain amounts of the allowance for credit losses among loan categories for the same period.

A change in forecast methodology, as well as the composition of the loans, resulted in a negative provision in the real estate C&D loan segment during the first quarter of 2020.

Under the economic conditions during that time, the Company’s forecast of expected losses in the C&D segment no longer produced a forecast that was considered reasonable and supportable.

As such, management adjusted the forecast methodology of this segment to better align with management’s expectation of loss under the modeled economic conditions.

The other categories saw increases in the provision related to increased concern over the economic stresses related to COVID-19, as well as increased specific provisions of $22.0 million for two energy credits, that were previously identified as problem loans, both of which experienced further deterioration during the first quarter of 2020 and were negatively impacted by the sharp decline in commodity pricing.

Reserve for Unfunded Commitments

1 unchanged sentence

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 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 reserve for unfunded commitments as of March 31, 2021 and December 31, 2020 was $ 22.4 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 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.

No adjustment was made to the reserve for unfunded commitments during the first quarter of 2021 as it was considered sufficient to cover any loss expectations.

For the three month period ended March 31, 2020, net adjustments to the reserve for unfunded commitments resulted in a benefit of $ 3.0 million and was included in the provision for credit losses in the statement of income.

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 month periods ended March 31, 2021 and 2020 were as follows:

Three Months Ended

(In thousands) 2021 2020

Provision for credit losses related to:

Loans $ — $ 26,198

Unfunded commitments — ( 3,000 )

Securities - HTM ( 697 ) 40

Securities - AFS 2,142 ( 104 )

Total $ 1,445 $ 23,134

RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES

As of the first quarter 2019, the Company accounts for its leases in accordance with ASC Topic 842, Leases , which requires recognition of most leases, including operating leases, with a term greater than 12 months on the balance sheet.

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;

2 unchanged sentences

The Company accounts for lease and non-lease components (such as taxes, insurance and common area maintenance costs) separately as such amounts are generally readily determinable under the lease contracts.

Lease payments over the expected term are discounted using the Company’s FHLB advance rates for borrowings of similar term.

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.

2 unchanged sentences

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 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,

The following table presents information as of March 31, 2021 and December 31, 2020 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.

March 31, December 31,

(Dollars in thousands) 2021 2020

3 unchanged sentences

Weighted average discount rate 2.89 % 3.09 %

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.

Operating lease cost for the three month periods ended March 31, 2021 and 2020 was $ 2.8 million and $ 3.2 million, respectively.

PREMISES AND EQUIPMENT

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

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

September 30, December 31,

Total premises and equipment, net at March 31, 2021 and December 31, 2020 were as follows:

March 31, December 31,

(In thousands) 2021 2020

12 unchanged sentences

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

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 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.

Goodwill totaled $ 1.1 billion at March 31, 2021 and December 31, 2020.

Goodwill impairment was neither indicated nor recorded during the three months ended March 31, 2021 or the year ended December 31, 2020.

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

As a result of that economic decline, the effect on share price and other factors, the Company performed an interim goodwill impairment qualitative assessment during the first quarter and concluded no impairment existed.

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

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.

As a result of that economic decline, the effect on share price and other factors, the Company performed an interim goodwill impairment assessment during each quarter of 2020 and concluded no impairment existed during each period.

While the goodwill impairment analyses indicated no impairment during 2020, the Company’s assessment depended on several assumptions which were dependent on market and economic conditions, and future changes in those conditions could impact the Company’s assessment in the future.

Due to the improved market and economic conditions, and the related effects on the Company’s share price, the Company did not perform an interim goodwill impairment assessment during the first quarter of 2021.

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 September 30, 2020 and December 31, 2019 were as follows:

September 30, December 31,

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at March 31, 2021 and December 31, 2020 were as follows:

March 31, December 31,

(In thousands) 2021 2020

1 unchanged sentence

Balance, beginning of year $ 97,363 $ 111,808

Acquisitions (1)

Disposition of intangible asset (1)

( 674 ) ( 2,324 )

Amortization ( 3,001 ) ( 12,121 )

2 unchanged sentences

Balance, beginning of year 13,747 15,532

Acquisitions (3)

Disposition of intangible asset — ( 413 )

3 unchanged sentences

_________________________

(1) Core deposit premiums of $ 24.3 million and $ 18.4 million were recorded during 2019 as part of the Landrum and Reliance acquisitions, respectively.

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

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

(3) The Company recorded $ 5.1 million during 2019 primarily related to the wealth management operations acquired from Landrum.

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

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

September 30, December 31,

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

The carrying basis and accumulated amortization of the Company’s other intangible assets at March 31, 2021 and December 31, 2020 were as follows:

March 31, December 31,

(In thousands) 2021 2020

8 unchanged sentences

Total other intangible assets, net $ 107,091 $ 111,110

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

The Company’s estimated remaining amortization expense on other intangible assets as of March 31, 2021 is as follows:

(In thousands) Year Amortization

3 unchanged sentences

TIME DEPOSITS

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.

Time deposits included approximately $ 2.26 billion and $ 2.03 billion of certificates of deposit of $100,000 or more, at March 31, 2021, and December 31, 2020, respectively.

Of this total approximately $ 1.1 billion and $ 889.8 million of certificates of deposit were over $250,000 at March 31, 2021 and December 31, 2020, respectively.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2021 2020

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:

September 30, December 31,

March 31, December 31,

(In thousands) 2021 2020

8 unchanged sentences

Right-of-use lease liability 6,953 7,835

Unrealized loss on AFS securities 13,694 —

Allowance for unfunded commitments 5,583 5,583

5 unchanged sentences

Right-of-use lease asset ( 6,938 ) ( 7,813 )

Unrealized gain on available-for-sale securities ( 12,321 ) ( 3,720 )

Deferred loan fees and costs ( 2,696 ) ( 3,018 )

Acquired securities ( 870 ) —

Unrealized gain on AFS securities — ( 17,521 )

Other ( 4,458 ) ( 4,021 )

Gross deferred tax liabilities ( 83,874 ) ( 102,904 )

Net deferred tax asset (liability) $ 15,950 $ ( 10,136 )

Net deferred tax asset $ 41,484 $ 13,495

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,

(In thousands) 2021 2020

Computed at the statutory rate (21%) $ 17,172 $ 20,560

$ 17,539 $ 22,071 $ 53,719 $ 49,646

Increase (decrease) in taxes resulting from:

State income taxes, net of federal tax benefit 1,890 2,063

Stock-based compensation 103 26

Tax exempt interest income ( 2,510 ) ( 1,421 )

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 $ 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.

In total, approximately $ 68.3 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.

9 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 $ 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.

The gross amount of recognized liabilities for repurchase agreements was $ 257.8 million and $ 248.9 million at March 31, 2021 and December 31, 2020, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2021 and December 31, 2020 is presented in the following tables.

Remaining Contractual Maturity of the Agreements

2 unchanged sentences

90 Days Total

September 30, 2020

March 31, 2021

Repurchase agreements:

4 unchanged sentences

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

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

September 30, December 31,

Debt at March 31, 2021 and December 31, 2020 consisted of the following components:

March 31, December 31,

(In thousands) 2021 2020

8 unchanged sentences

330,000 330,000

Trust preferred securities, net of discount, due 9/15/2037, floating rate of 1.37 % above the three month LIBOR rate, reset quarterly

Trust preferred securities, due 9/15/2037, floating rate of 1.37 % above the three month LIBOR rate, reset quarterly

10,310 10,310

Trust preferred securities, net of discount, due 6/6/2037, floating rate of 1.57 % above the three month LIBOR rate, reset quarterly, callable without penalty

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 10,310

3 unchanged sentences

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

Other subordinated debentures, due 12/31/2036, floating rate of prime rate minus 1.1 %, reset quarterly

Unamortized debt issuance costs ( 2,552 ) ( 2,643 )

9 unchanged sentences

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 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.

The Company had total FHLB advances of $ 1.31 billion at March 31, 2021, of which $ 1.30 billion are FHLB Owns the Option (“FOTO”) advances.

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

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 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 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 September 30, 2020.

The Company’s FOTO advances outstanding at March 31, 2021 have original maturity dates of ten years to fifteen years with lockout periods that have expired.

The Company expects the FHLB’s option to terminate the FOTO advances prior to stated maturity dates will not be exercised due to the current low interest rate environment.

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

At March 31, 2021, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 5.3 billion and the Company had approximately $ 2.8 billion of additional advances available from the FHLB.

The trust preferred securities are tax-advantaged issues that qualify for inclusion as Tier 2 capital at March 31, 2021.

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 September 30, 2020, are as follows:

Aggregate annual maturities of long-term debt at March 31, 2021, are as follows:

Year (In thousands)

3 unchanged sentences

CONTINGENT LIABILITIES

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.

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 reached a settlement in principle with the plaintiffs to resolve this matter, subject to the preparation and execution of a mutually acceptable settlement agreement and release, as well as the court’s 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 against Landmark Bank, to which Simmons Bank is a successor by merger, in the Circuit Court of Boone County, Missouri.

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 and is vigorously defending the matter.

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.

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 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 results of operations for a given fiscal period.

CAPITAL STOCK

9 unchanged sentences

The October Amended Articles also canceled the Company’s 7 % Perpetual Convertible Preferred Stock, Par Value $ 0.01 Per Share, Series C Preferred Stock, of which no shares were ever issued or outstanding.

On July 23, 2012, the Company approved a stock repurchase program which authorized the repurchase of up to 1,700,000 shares of common stock.

On October 22, 2019, the Company announced a new stock repurchase program (“Program”) that replaced the stock repurchase program approved on July 23, 2012, under which the Company may repurchase up to $ 60,000,000 of its Class A common stock currently issued and outstanding.

On October 22, 2019, the Company announced a new stock repurchase program (“Program”) that replaced the prior stock repurchase program approved on July 23, 2012, under which the Company may repurchase up to $ 60,000,000 of its Class A common stock currently issued and outstanding.

On March 5, 2020, the Company announced an amendment to the Program that increased the maximum amount that may be repurchased under the Program from $ 60,000,000 to $ 180,000,000 .

4 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 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.

During the three months ended March 31, 2021, the Company repurchased 130,916 shares at an average price of $ 23.53 per share under the Program.

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 nine month periods ended September 30, 2019.

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

The Company repurchased 4,922,336 shares at an average price of $ 18.96 per share during the same period in 2020.

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 September 30, 2020, Simmons Bank had approximately $ 105.0 million available for payment of dividends to the Company, without prior regulatory approval.

At March 31, 2021, Simmons Bank had approximately $ 153.5 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.

2 unchanged sentences

and a 6.5 % “common equity Tier 1 (CET1)” ratio.

The Company and Simmons Bank, must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

The implementation of the capital conservation buffer began on January 1, 2016, at the 0.625 % level and was phased in over a four year period (increasing by that amount on each subsequent January 1 until it reached 2.5 % on January 1, 2019).

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, 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.

As of March 31, 2021, 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 14.08 % at March 31, 2021.

STOCK-BASED COMPENSATION

1 unchanged sentence

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 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 nine months ended September 30, 2020:

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 three months ended March 31, 2021:

Stock Options

Outstanding Non-vested

Outstanding Non-vested Stock Awards Outstanding Non-vested Stock Units Outstanding

(Shares in thousands) Number

3 unchanged sentences

of Shares Weighted

Balance, January 1, 2020 692 $ 22.46 21 $ 23.19 1,152 $ 26.79

Beginning balance, January 1, 2021 658 $ 22.48 5 $ 22.35 1,032 $ 24.53

Granted — — — — 202 29.65

2 unchanged sentences

Forfeited/expired — — — — ( 27 ) 25.56

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:

Balance, March 31, 2021 492 $ 22.48 3 $ 22.48 935 $ 25.21

Exercisable, March 31, 2021 492 $ 22.48

The following table summarizes information about stock options under the plans outstanding at March 31, 2021:

Options Outstanding Options Exercisable

Exercise Prices Number

Range of Exercise Prices Number

(In thousands) Weighted

10 unchanged sentences

$ 9.46 — $ 24.07 492 4.31 $ 22.48 492 $ 22.48

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

The table below summarizes the Company’s performance stock unit activity for the three months ended March 31, 2021:

(In thousands) Performance Stock Units

2 unchanged sentences

Forfeited ( 1 )

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.

Non-vested, March 31, 2021 164

Stock-based compensation expense was $ 3.9 million and $ 4.5 million during the three months ended March 31, 2021 and 2020, 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, 2020.

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

There was no unrecognized stock-based compensation expense related to stock options at March 31, 2021.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 16.6 million at March 31, 2021.

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 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 intrinsic value of stock options outstanding and stock options exercisable at March 31, 2021 was $ 3.5 million.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 29.67 as of March 31, 2021, and the exercise price multiplied by the number of options outstanding.

The total intrinsic value of stock options exercised during the three months ended March 31, 2021 and 2020, was $ 1.2 million and $ 8,000 , 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 nine months ended September 30, 2020 and 2019.

There were no stock options granted during the three months ended March 31, 2021 and 2020.

EARNINGS PER SHARE (“EPS”)

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2021 2020

5 unchanged sentences

Diluted earnings per share $ 0.62 $ 0.68

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.

There were no stock options excluded from the earnings per share calculation for the three months ended March 31, 2021 due to the average market price exceeding the related stock option exercise price.

There were 614,100 stock options excluded from the earnings per share calculation due to the related stock option exercise price exceeding the average market price for the three months ended March 31, 2020.

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

(In thousands) 2021 2020

3 unchanged sentences

Transfers of premises to foreclosed assets and other real estate owned

Transfers of premises to premises held for sale

Transfers of other real estate owned to premises held for sale

Right-of-use lease assets obtained in exchange for lessee operating lease liabilities (adoption of ASU 2016-02)

Transfers of loans to other assets held for sale

1 unchanged sentence

OTHER INCOME AND OTHER OPERATING EXPENSES

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 income for the three months ended March 31, 2021 and 2020 was $ 10.3 million and $ 12.8 million, respectively, which included gains of $ 5.3 million and $ 5.9 million related the sale of banking operations for the same periods in 2021 and 2020, respectively.

Other operating expenses consisted of the following:

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2021 2020

16 unchanged sentences

COMMITMENTS AND CREDIT RISK

The Company grants agri-business, commercial and residential loans to customers primarily throughout Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas, along with credit card loans to customers throughout the United States.

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.

4 unchanged sentences

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

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.

At March 31, 2021, the Company had outstanding commitments to extend credit aggregating approximately $ 682.7 million and $ 2.4 billion for credit card commitments and other loan commitments, respectively.

At December 31, 2020, the Company had outstanding commitments to extend credit aggregating approximately $ 671.5 million and $ 2.4 billion for credit card commitments and other loan commitments, respectively.

As of March 31, 2021, the Company had outstanding commitments to originate fixed rate-rate mortgage loans of approximately $ 165.9 million.

At December 31, 2020, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 214.0 million.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

1 unchanged sentence

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 $ 63,604,000 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.

The Company had total outstanding letters of credit amounting to $ 44.6 million and $ 49.0 million at March 31, 2021, and December 31, 2020, respectively, with terms ranging from 9 months to 15 years.

At March 31, 2021 and December 31, 2020, 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 $ 1.2 billion and $ 1.5 billion at March 31, 2021 and December 31, 2020, respectively, and they expire in less than one year from issuance.

FAIR VALUE MEASUREMENTS

26 unchanged sentences

The availability of pricing confirms Level 2 classification in the fair value hierarchy.

The third-party pricing service is subject to an annual review of internal controls (SSAE 16), which is made available for the Company’s review.

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.

2 unchanged sentences

The remainder of the Company’s available-for-sale securities are reported at fair value utilizing Level 2 inputs.

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 March 31, 2021 and December 31, 2020, 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.

Other assets and other liabilities held for sale – The Company’s other assets and other liabilities held for sale are reported at fair value utilizing Level 3 inputs.

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

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

Other liabilities held for sale – The Company’s other liabilities held for sale are reported at fair value utilizing Level 3 inputs.

See Note 3, 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 March 31, 2021 and December 31, 2020.

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

September 30, 2020

March 31, 2021

Available-for-sale securities

Treasury $ 600 $ 600 $ — $ —

Government agencies 487,679 — 487,679 —

2 unchanged sentences

Other securities 335,073 — 335,073 —

Other assets held for sale 389 — — 389

Mortgage loans held for sale 63,655 — — 63,655

Derivative asset 18,597 — 18,597 —

2 unchanged sentences

Available-for-sale securities

Treasury $ 449,729 $ 449,729 $ — $ —

Government agencies $ 477,237 $ — $ 477,237 $ —

2 unchanged sentences

Other securities 130,702 — 130,702 —

Other assets held for sale 260,332 — — 260,332

Mortgage loans held for sale 137,378 — — 137,378

Derivative asset 35,846 — 35,846 —

19 unchanged sentences

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.

Mortgage loans held for sale – Mortgage loans held for sale are reported at fair value if, on an aggregate basis, the fair value of the loans is less than cost.

In determining whether the fair value of loans held for sale is less than cost when quoted market prices are not available, the Company may consider outstanding investor commitments, discounted cash flow analyses with market assumptions or the fair value of the collateral if the loan is collateral dependent.

Such loans are classified within either Level 2 or Level 3 of the fair value hierarchy.

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

At September 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 September 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 March 31, 2021 and December 31, 2020.

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

September 30, 2020

March 31, 2021

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

1 unchanged sentence

Foreclosed assets and other real estate owned (1)

3,581 — — 3,581

December 31, 2020

5 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 $ 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.

(2) Identified reserves of zero and $ 13,725,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended March 31, 2021 and December 31, 2020, 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

September 30, 2020

March 31, 2021

Financial assets:

5 unchanged sentences

609,500 — 597,694 — 597,694

Mortgage loans held for sale

192,729 — — 192,729 192,729

Interest receivable

24 unchanged sentences

333,031 — 341,925 — 341,925

Mortgage loans held for sale

58,102 — — 58,102 58,102

Interest receivable

12 unchanged sentences

1,342,067 — 1,448,625 — 1,448,625

Subordinated debentures

388,260 — 397,088 — 397,088

Subordinated notes and debentures 382,874 — 398,827 — 398,827

Interest payable

26 unchanged sentences

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(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 $ 51.7 million as of September 30, 2020.

The notional amount of these contingent agreements is $ 32.2 million as of March 31, 2021.

Energy Hedging

During 2019, the Company began providing energy derivative services to qualifying, high quality oil and gas borrowers for hedging purposes.

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.

3 unchanged sentences

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, 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 .

The outstanding notional value as of March 31, 2021 for energy hedging Customer Sell to Company swaps were $ 13.4 million and the corresponding Company Sell to Dealer swaps were $ 13.4 million and the corresponding net fair value of the derivative asset and derivative liability was $ 306,000 .

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit Committee, Board of Directors and Stockholders

To the Stockholders, Board of Directors and Audit Committee

Simmons First National Corporation

1 unchanged sentence

Results of Review of Interim Financial Statements

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.

We have reviewed the condensed consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of March 31, 2021, and the related condensed consolidated statements of income, comprehensive income (loss), stockholders’ equity and cash flows for the three-month periods ended March 31, 2021 and 2020, 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, 2020, 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, 2021, 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, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

7 unchanged sentences

Accordingly, we do not express such an opinion.

Emphasis of Matter

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

Little Rock, Arkansas

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