What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-06 · 377 added, 251 removed, 1225 unchanged (34% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

March 31, 2021 and December 31, 2020

March 31, December 31,

June 30, 2021 and December 31, 2020

June 30, December 31,

(In thousands, except share data) 2021 2020

4 unchanged sentences

Investment securities:

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

Held-to-maturity, net of allowance for credit losses of $ 1,132 and $ 2,915 at June 30, 2021 and December 31, 2020, respectively

931,352 333,031

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)

Available-for-sale, net of allowance for credit losses of $ 0 and $ 312 at June 30, 2021 and December 31, 2020, respectively (amortized cost of $ 6,543,022 and $ 3,397,043 at June 30, 2021 and December 31, 2020, respectively)

6,556,581 3,473,598

20 unchanged sentences

Other borrowings 1,339,193 1,342,067

Subordinated debentures 383,008 382,874

Subordinated notes and debentures 383,143 382,874

Other liabilities held for sale — 154,620

4 unchanged sentences

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

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

767 shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, Class A, $ 0.01 par value;

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

175,000,000 shares authorized at June 30, 2021 and December 31, 2020;

108,386,669 and 108,077,662 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Surplus 2,021,128 2,014,076

Undivided profits 1,004,314 901,006

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

Accumulated other comprehensive income 12,073 59,726

Total stockholders’ equity 3,039,366 2,976,656

3 unchanged sentences

Consolidated Statements of Income

Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

Three and Six Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Six Months Ended

(In thousands, except per share data) 2021 2020 2021 2020

(Unaudited) (Unaudited)

INTEREST INCOME

43 unchanged sentences

Simmons First National Corporation

Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

Consolidated Statements of Comprehensive Income (Loss)

Three and Six Months Ended June 30, 2021 and 2020

Three Months Ended

June 30, Six Months Ended June 30,

(In thousands) 2021 2020 2021 2020

(Unaudited) (Unaudited)

NET INCOME $ 74,924 $ 58,802 $ 142,344 $ 136,038

OTHER COMPREHENSIVE (LOSS) INCOME

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

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized holding gains (losses) arising during the period on available-for-sale securities 71,801 22,159 ( 53,916 ) 77,728

Reclassification adjustment for realized gains included in net income 5,127 390 10,598 32,485

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

Tax effect of other comprehensive (loss) income ( 34,286 ) 6,135

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

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

Other comprehensive income (loss), before tax effect 66,674 21,769 ( 64,514 ) 45,243

Tax effect of other comprehensive income (loss) 17,425 5,689 ( 16,861 ) 11,824

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 49,249 16,080 ( 47,653 ) 33,419

COMPREHENSIVE INCOME $ 124,173 $ 74,882 $ 94,691 $ 169,457

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2021 and 2020

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

Six Months Ended June 30, 2021 and 2020

(In thousands) June 30, 2021 June 30, 2020

OPERATING ACTIVITIES

12 unchanged sentences

Gain on sale of banking operations ( 5,300 ) ( 8,094 )

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

Deferred income taxes 6,315 4,616

11 unchanged sentences

Proceeds from sale of loans 1,847 4,600

Decrease in due from banks - time 245 245

Net change in due from banks - time 244 ( 7 )

Purchases of premises and equipment, net ( 5,829 ) ( 19,784 )

6 unchanged sentences

Purchases of held-to-maturity securities ( 606,187 ) ( 16,997 )

Purchase of bank owned life insurance ( 160,000 ) —

Proceeds from bank owned life insurance death benefits 3,032 763

3 unchanged sentences

Net change in deposits 1,307,965 561,185

Repayments of subordinated debentures — ( 5,927 )

Dividends paid on preferred stock ( 26 ) ( 26 )

5 unchanged sentences

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

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

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

Net cash provided by financing activities 1,153,622 755,074

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 1,133,028 ) 1,548,537

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

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2021 and 2020

Three Months Ended June 30, 2021 and 2020

(In thousands, except share data) Preferred Stock Common

3 unchanged sentences

Profits Total

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

Comprehensive income — — — 49,249 74,924 124,173

Stock-based compensation plans, net – 40,937 shares

— 1 3,940 — — 3,941

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

Dividends on common stock – $ 0.18 per share

— — — — ( 19,510 ) ( 19,510 )

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

Three Months Ended June 30, 2020

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

Comprehensive income — — — 16,080 58,802 74,882

Stock-based compensation plans, net – 28,058 shares

— — 2,963 — — 2,963

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

Dividends on common stock – $ 0.17 per share

— — — — ( 18,529 ) ( 18,529 )

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

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2021 and 2020

(In thousands, except share data) Preferred Stock Common

Stock Surplus Accumulated

Comprehensive

(Loss) Income Undivided

Profits Total

Six Months Ended June 30, 2021

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

10 unchanged sentences

— — — — ( 39,010 ) ( 39,010 )

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

Six Months Ended June 30, 2020

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

10 unchanged sentences

— — — — ( 37,606 ) ( 37,606 )

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

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

See Condensed Notes to Consolidated Financial Statements.

8 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 198 financial centers as of March 31, 2021, located throughout market areas in Arkansas, 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 June 30, 2021, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Basis of Presentation

11 unchanged sentences

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.

During the second quarter of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income.

These transaction fees, as well as additional c ertain prior year amounts, have been reclassified to conform to the current year financial statement presentation.

These changes and reclassifications did not impact previously reported net income or comprehensive income.

4 unchanged sentences

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.

On March 5, 2021, the U.K.

Financial Conduct Authority (“FCA”) announced that the majority of LIBOR rates will no longer be published after December 31, 2021, although a number of key settings will continue until June

2023, to support the rundown of legacy contracts only.

As a result, LIBOR should 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.

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.

1 unchanged sentence

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 Company formed a LIBOR Transition Team in 2020, has created standard LIBOR replacement language for new and modified loan notes, and is monitoring the remaining loans with LIBOR rates monthly to ensure progress in updating these loans with acceptable LIBOR replacement language or converting them to other interest rates.

The Company has not been offering LIBOR-indexed rates originated by other banks, subject to the Company’s determination that the LIBOR replacement language in the loan documents meets the Company’s standards.

Pursuant to the Interagency Statement on LIBOR Transition issued in November 2020, the Company will not enter into any new LIBOR-based credit agreements after December 31, 2021.

The adoption of ASU 2020-04 has not had a material impact on the Company’s financial position or results of operations.

17 unchanged sentences

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), that eliminates, amends and adds disclosure requirements for fair value measurements.

These amendments are part of FASB’s disclosure review project and they are expected to reduce costs for preparers while providing more decision-useful information for financial statement users.

These amendments are part of FASB’s disclosure review project and are expected to reduce costs for preparers while providing more decision-useful information for financial statement users.

The eliminated disclosure requirements include the 1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy;

4 unchanged sentences

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.

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

Credit Losses on Financial Instruments – In June 2016, the FASB issued ASU No.

2 unchanged sentences

The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The amendments replace the incurred loss impairment methodology in current US GAAP with a methodology (the current expected credit losses, or “CECL”, methodology) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments replaced the incurred loss impairment methodology in US GAAP with a methodology (the current expected credit losses, or “CECL”, methodology) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired.

The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses.

This methodology replaces the multiple existing impairment methods in current guidance, which generally require that a loss be incurred before it is recognized.

Within the life cycle of a loan or other financial asset, this new guidance will generally result in the earlier recognition of the provision for credit losses and the related allowance for credit losses than current practice.

This methodology replaced the multiple existing impairment methods in previous guidance, which generally required that a loss be incurred before it is recognized.

For available-for-sale debt securities that the Company intends to hold and where fair value is less than cost, credit-related impairment, if any, will be recognized through an allowance for credit losses and adjusted each period for changes in credit risk.

The effective date for these amendments is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The effective date for these amendments was for fiscal years beginning after December 15, 2019.

In preparation for implementation of ASU 2016-13, the Company formed a cross functional team that assessed its data and system needs and evaluated the potential impact of adopting the new guidance.

The Company anticipated a significant change in the processes and procedures to calculate the loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the prior accounting practice that utilized the incurred loss model.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed in to law by the President of the United States and allows the option to temporarily defer or suspend the adoption of ASU 2016-13.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed in to law by the President of the United States (“President”) and allows the option to temporarily defer or suspend the adoption of ASU 2016-13.

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

14 unchanged sentences

Recently Issued Accounting Standards

Leases - In July 2021, the FASB issued ASU No.

2021-05, Leases (Topic 842):

Lessors-Certain Leases with Variable Lease Payments (“ASU 2021-05”), that amends lease classification requirements for lessors.

In accordance with ASU 2021-05, lessors should classify and account for a lease that have variable lease payments that do not depend on a reference index rate as an operating lease if both of the following criteria are met:

i) the lease would have been classified as a sales-type lease or a direct financing lease under the previous lease classification criteria and ii) sales-type or direct financing lease classification would result in a Day 1 loss.

ASU 2021-05 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted.

The Company is currently evaluating the impact of this standard, but the standard 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.

PROPOSED ACQUISITIONS

Landmark Community Bank

On June 4, 2021, the Company and the Bank entered into an Agreement and Plan of Merger (“Landmark Agreement”) with Landmark Community Bank (“Landmark”), headquartered in Collierville, Tennessee, pursuant to which, upon the terms and subject to the conditions of the Landmark Agreement, Landmark will merge with and into the Bank, with the Bank continuing as the surviving entity.

According to the terms of the Landmark Agreement, upon consummation of the merger, holders of Landmark’s common stock and common stock equivalents will receive, in the aggregate, 4,500,000 shares of the Company’s common stock and $ 7,000,000 , all subject to certain conditions and potential adjustments under the Landmark agreement.

Landmark conducts banking business from 8 branches located in the Memphis and Nashville, Tennessee, metropolitan areas.

As of June 30, 2021, Landmark had approximately $ 986.7 million in assets, $ 783.1 million in loans and $ 823.1 million in deposits.

Completion of the Landmark transaction is expected during the fourth quarter of 2021 and is subject to certain closing conditions, including approval by the shareholders of Landmark and customary regulatory approvals.

Triumph Bancshares, Inc.

On June 4, 2021, the Company entered into an Agreement and Plan of Merger (“Triumph Agreement”) with Triumph Bancshares, Inc.

(“Triumph”), the parent company of Triumph Bank, headquartered in Memphis, Tennessee, pursuant to which, upon the terms and subject to the conditions of the Triumph Agreement, Triumph will merge with and into the Company, with the Company continuing as the surviving corporation.

According to the terms of the Triumph Agreement, upon consummation of the merger, holders of Triumph’s common stock and common stock equivalents will receive, in the aggregate, 4,164,839 shares of the Company’s common stock and $ 2,645,937.83 , all subject to certain conditions and potential adjustments under the Triumph Agreement.

Triumph conducts banking business from 6 branches located in the Memphis and Nashville, Tennessee, metropolitan areas.

As of June 30, 2021, Triumph had approximately $ 886.7 million in assets, $ 715.8 million in loans and $ 712.8 million in deposits.

Completion of the Triumph transaction is expected during the fourth quarter of 2021 and is subject to certain closing conditions, including approval by the shareholders of Triumph and customary regulatory approvals.

INVESTMENT SECURITIES

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.

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

Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the security’s estimated life.

Prepayments are anticipated for mortgage-backed and SBA securities.

12 unchanged sentences

Held-to-maturity

March 31, 2021

June 30, 2021

Government agencies $ 77,396 $ — $ 77,396 $ — $ ( 2,054 ) $ 75,342

Mortgage-backed securities 60,649 — 60,649 474 ( 729 ) 60,394

47,988 — 47,988 476 ( 1,099 ) 47,365

State and political subdivisions

4 unchanged sentences

Mortgage-backed securities $ 22,354 $ — $ 22,354 $ 683 $ — $ 23,037

$ 22,354 $ — $ 22,354 $ 683 $ — $ 23,037

State and political subdivisions

2 unchanged sentences

Total HTM $ 335,946 $ ( 2,915 ) $ 333,031 $ 8,924 $ ( 30 ) $ 341,925

Mortgage-backed securities (“MBS”) are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties.

As of June 30, 2021, HTM MBS consists of $ 6.1 million and $ 54.5 million of commercial MBS and residential MBS, respectively.

As of December 31, 2020, HTM MBS consists of $ 7.7 million and $ 14.7 million of commercial MBS and residential MBS, respectively.

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

5 unchanged sentences

Available-for-sale

March 31, 2021

June 30, 2021

Treasury $ 600 $ — $ — $ — $ 600

4 unchanged sentences

Total AFS $ 6,543,022 $ — $ 59,361 $ ( 45,802 ) $ 6,556,581

(In thousands) Amortized

Cost Allowance

for Credit Losses Gross Unrealized

Gains Gross Unrealized

(Losses) Estimated Fair

December 31, 2020

4 unchanged sentences

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

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.

As of June 30, 2021, AFS MBS consists of $ 1.34 billion and $ 2.65 billion of commercial MBS and residential MBS, respectively.

As of December 31, 2020, AFS MBS consists of $ 406.1 million and $ 988.8 million of commercial MBS and residential MBS, respectively.

Accrued interest receivable on HTM and AFS securities at June 30, 2021 was $ 4.2 million and $ 21.8 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 March 31, 2021, 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 June 30, 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

8 unchanged sentences

Total AFS $ 3,145,328 $ ( 45,300 ) $ 38,637 $ ( 502 ) $ 3,183,965 $ ( 45,802 )

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 for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities.

As of June 30, 2021, the Company’s investment portfolio included $ 6.6 billion of AFS securities, of which $ 3.2 billion, or 48.6 %, were in an unrealized loss position that were not deemed to have credit losses.

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

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

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

All MBS held by the Company are issued by U.S.

government-sponsored entities and agencies.

These securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major rating agencies and have a long history of no credit losses.

government, highly rated by major rating agencies and have a long history of no credit losses.

Accordingly, no allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions and other HTM securities, management 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 are pre-refunded by the issuers.

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 March 31, 2021

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, and (v) whether or not such securities provide insurance or other credit enhancement or are pre-refunded by the issuers.

The following table details activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2021 on the Company’s HTM and AFS securities portfolios.

(In thousands) State and Political Subdivisions Other

Securities Total

Three Months Ended June 30, 2021

Held-to-maturity

Beginning balance, April 1, 2021 $ 1,042 $ 576 $ 1,618

Provision for credit loss expense ( 171 ) ( 315 ) ( 486 )

Ending balance, June 30, 2021 $ 871 $ 261 $ 1,132

Available-for-sale

Beginning balance, April 1, 2021 $ 64 $ 2,390 $ 2,454

Net decrease in allowance on previously impaired securities ( 64 ) ( 2,390 ) ( 2,454 )

Ending balance, June 30, 2021 $ — $ — $ —

Six Months Ended June 30, 2021

Held-to-maturity

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

1 unchanged sentence

Securities charged-off — ( 600 ) ( 600 )

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

Ending balance, June 30, 2021 $ 871 $ 261 $ 1,132

Available-for-sale

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

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

Reduction due to sales — ( 11 ) ( 11 )

Net decrease in allowance on previously impaired securities ( 217 ) ( 84 ) ( 301 )

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

Three Months Ended March 31, 2020

Ending balance, June 30, 2021 $ — $ — $ —

Activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2020 on the Company’s HTM and AFS securities portfolio was as follows:

(In thousands) State and Political Subdivisions Other

Securities Total

Three Months Ended June 30, 2020

Held-to-maturity

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

Provision for credit loss expense ( 2 ) ( 100 ) ( 102 )

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

Available-for-sale

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

Credit losses on securities not previously recorded 370 160 530

Net decrease in allowance on previously impaired securities ( 94 ) ( 96 ) ( 190 )

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

(In thousands) State and Political Subdivisions Other

Securities Total

Six Months Ended June 30, 2020

Held-to-maturity

Beginning balance, January 1, 2020 $ — $ — $ —

1 unchanged sentence

Provision for credit loss expense 37 ( 99 ) ( 62 )

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

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

Available-for-sale

2 unchanged sentences

Credit losses on securities not previously recorded 77 192 269

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

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:

Reduction due to sales ( 142 ) — ( 142 )

Net increase in allowance on previously impaired securities 63 46 109

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

Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, the provision for credit losses related to AFS securities was reduced by $ 2,454,000 and $ 312,000 during the three and six months ended June 30, 2021, respectively.

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

The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2021:

State and Political Subdivisions

10 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 months ended March 31, 2021 and 2020, is as follows:

Income earned on securities for the three and six months ended June 30, 2021 and 2020, is as follows:

Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

4 unchanged sentences

Total $ 27,128 $ 13,473 $ 48,701 $ 32,416

The amortized cost and estimated fair value by maturity of securities are shown in the following table.

The amortized cost and estimated fair value by maturity of securities as of June 30, 2021 are shown in the following table.

Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options.

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Total $ 932,484 $ 935,596 $ 6,543,022 $ 6,556,581

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 carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.89 billion at June 30, 2021 and $ 2.01 billion at December 31, 2020.

There were approximately $ 5.2 million of gross realized gains and $ 26,000 of gross realized losses from the sale of securities during the three months ended June 30, 2021, and approximately $ 10.6 million of gross realized gains and $ 39,000 of gross realized losses from the sale of securities during the six months ended June 30, 2021.

The Company sold approximately $ 249.5 million of investment securities during the six months ended June 30, 2021.

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

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

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

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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.

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

As of June 30, 2021, there were no outstanding other liabilities held for sale.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

At June 30, 2021, the Company’s loan portfolio was $ 11.39 billion, compared to $ 12.90 billion at December 31, 2020.

The various categories of loans are summarized as follows:

March 31, December 31,

June 30, December 31,

(In thousands) 2021 2020

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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 $ 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.

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 $ 43.7 million and $ 57.3 million at June 30, 2021 and December 31, 2020, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 41.9 million and $ 54.4 million at June 30, 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;

obtaining and monitoring collateral;

providing an adequate allowance for credit losses by regularly reviewing loans through the internal loan review process.

and providing an adequate allowance for credit losses by regularly reviewing loans through the internal loan review process.

The loan portfolio is diversified by borrower, purpose and industry.

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Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio.

Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment.

Other consumer loans include direct and indirect installment loans and overdrafts.

Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to economic downturns that result in increased unemployment.

Other consumer loans include direct and indirect installment loans and account overdrafts.

Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate – The real estate loan portfolio consists of construction and development loans, single family residential loans and commercial loans.

Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate.

Commercial real estate cycles are inevitable.

Real estate – The real estate loan portfolio consists of construction and development loans (“C&D”), single family residential loans and commercial loans.

C&D and commercial real estate (“CRE”) loans can be particularly sensitive to valuation of real estate.

CRE cycles are inevitable.

The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties.

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

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

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

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

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

The Company monitors these loans closely.

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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.

As of June 30, 2021 and December 31, 2020, the total outstanding balance of PPP loans was $ 441.4 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.

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Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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

March 31, December 31,

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

June 30, December 31,

(In thousands) 2021 2020

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Total $ 80,282 $ 122,879

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.

As of June 30, 2021 and December 31, 2020, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 15.7 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.

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Loans 90 Days

March 31, 2021

June 30, 2021

Credit cards $ 644 $ 273 $ 917 $ 176,717 $ 177,634 $ 132

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

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

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 $ 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 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.

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 to the earlier of (i) January 1, 2022 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration.

As of June 30, 2021, the Company had 43 COVID-19 loan modifications outstanding in the amount of $ 134.5 million.

Deferred interest on these loan modifications will be collected at the end of the note or once regular payments are resumed.

TDRs are individually evaluated for expected credit losses.

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(Dollars in thousands) Number Balance Number Balance Number Balance

March 31, 2021

June 30, 2021

Single-family residential 29 $ 3,074 13 $ 1,242 42 $ 4,316

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Total 32 $ 4,436 17 $ 2,660 49 $ 7,096

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans

(Dollars in thousands) Number Balance Number Balance Number Balance

December 31, 2020

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

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 following table presents loans that were restructured as TDRs during the three and six month periods ended June 30, 2021 and 2020.

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

Three and Six Months Ended June 30, 2021

Other commercial 1 $ 784 $ 778 $ — $ 778 $ —

Total real estate 1 $ 784 $ 778 $ — $ 778 $ —

Three and Six Months Ended June 30, 2020

Single-family residential 1 $ 147 $ 147 $ 147 $ — $ —

Total real estate 1 $ 147 $ 147 $ 147 $ — $ —

During the three and six months ended June 30, 2021, the Company modified one loan with a recorded investment of $ 784,000 prior to modification which was deemed a TDR.

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

A specific reserve of approximately $ 5,100 was recorded with respect to this TDR.

Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure.

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

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

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

Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure.

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

There were no TDRs with pre-modification loan balances for which Other Real Estate Owned (“OREO”) was received in full or partial satisfaction of the loans during the three and six month periods ended June 30, 2021 or 2020.

At June 30, 2021 and December 31, 2020, the Company had $ 3,364,000 and $ 7,182,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At June 30, 2021 and December 31, 2020, the Company had $ 1,752,000 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.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans.

Loans are rated on a scale of 1 to 8.

Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review.

A description of the general characteristics of the risk ratings is as follows:

• Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk.

• Pass (Excellent) – This category includes loans which are virtually free of credit risk.

Borrowers in this category represent the highest credit quality and greatest financial strength.

• Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default.

• Pass (Good) - Loans under this category possess a nominal risk of default.

This category includes borrowers with strong financial strength and superior financial ratios and trends.

These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).

• Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk.

• Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk.

Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements.

If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

• Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”.

• Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”.

These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit.

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questionable management ability/stability.

• Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention.

• Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.

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Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

• Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.

• Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.

Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.

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This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.

• Risk Rate 7 – Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable.

• Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable.

Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity.

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Loans classified as Doubtful are placed on nonaccrual status.

• Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

• Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future.

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These loans are considered to have a moderate level of risk.

• 90+ Days Past Due - Loans in this category are over 90 days past due and are placed on nonaccrual status.

• 90+ Days Past Due - Loans in this category are 90 days or more past due and are placed on nonaccrual status.

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

The 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.

Effective April 2021, the Company implemented an expanded, dual risk rating scale that utilizes quantitative models and qualitative factors (“score cards”) to assist in determining the appropriate risk rating for its commercial loans.

This dual risk rating methodology incorporates a “probability of default” analysis which utilizes quantified metrics such as loan terms and financial performance, as well as a “loss given default” analysis which utilizes collateral values and economics of the market, among other attributes.

Model outputs are reviewed and analyzed to ensure the projected risk levels are commensurate with underwriting and credit leader expectations.

The expanded risk rating scale includes Probability of Default levels of 1 – 16 and Loss Given Default levels of A – I.

The expanded scale allows for more granular recognition of risk and diversification of grading among traditional Pass grades.

Implementation of the expanded risk rating scale did not have a material impact on the results of the allowance for credit losses calculation.

The following tables present a summary of loans by credit quality indicator, other than pass or current, as of June 30, 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

June 30, 2021

Consumer - credit cards

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Real estate - C&D

5 internal grade — 2,664 1,699 — — 16 13,042 — 17,421

6 internal grade 93 2,449 580 387 244 460 8,386 1,955 14,554

7 internal grade — — — — — — — — —

Special mention — — 292 — 1,360 — — — 1,652

Substandard 1,740 42 547 401 333 733 10,513 1,954 16,263

Doubtful and loss — — — — — — — — —

Total real estate - C&D 1,740 42 839 401 1,693 733 10,513 1,954 17,915

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Real estate - other commercial

5 internal grade 66,468 121,611 1,463 965 13,348 32,957 89,957 7,293 334,062

6 internal grade 5,944 93,796 3,256 3,686 5,059 9,707 59,872 32,859 214,179

7 internal grade — — — — 1 — — 1 2

Special mention 30,225 69,187 1,818 8,584 40,531 34,225 127,273 18,393 330,236

Substandard 25,532 25,865 6,477 15,304 33,640 23,723 50,734 20,480 201,755

Doubtful and loss — — — — — — — — —

Total real estate - other commercial 55,757 95,052 8,295 23,888 74,171 57,948 178,007 38,873 531,991

5 internal grade 124 3,274 202 67 8 29 5,883 18,954 28,541

6 internal grade 2,027 25,259 2,763 1,430 539 535 59,475 6,924 98,952

7 internal grade — 3 — 5 2 — — 1 11

Special mention — 1,247 354 523 392 752 5,380 12,438 21,086

Substandard 3,627 21,024 3,616 2,035 796 799 25,859 6,601 64,357

Doubtful and loss — — — — — — — — —

Total commercial 3,627 22,271 3,970 2,558 1,188 1,551 31,239 19,039 85,443

Commercial - agriculture

5 internal grade 35 — 6 12 17 — 63 — 133

6 internal grade 58 57 79 279 68 17 105 73 736

7 internal grade — — — — — — — — —

Special mention — — 6 10 15 — — — 31

Substandard 105 65 121 294 64 20 229 72 970

Doubtful and loss — — — — — — — — —

Total commercial - agriculture 105 65 127 304 79 20 229 72 1,001

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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 — — — — — — — — —

Special mention 2,728 344 259 2,107 19 — 9,613 — 15,070

Substandard 294 2,069 404 449 342 320 17,914 14 21,806

Doubtful and loss — — — — — — — — —

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

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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 — — — — — — — — —

Special mention 100,085 4,346 10,738 19,943 26,245 10,608 63,305 23,435 258,705

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

Doubtful and loss — — — — — — — — —

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 — — — — — — — — —

Special mention 5,707 342 465 972 54 — 12,318 22,546 42,404

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

Doubtful and loss — — — — — — — — —

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

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 — — — — — — — — —

Special mention — 79 13 299 — 6 34 — 431

Substandard 86 101 64 47 12 10 68 75 463

Doubtful and loss — — — — — — — — —

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

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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 $ 68.8 million as of March 31, 2021, 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 $ 74.8 million as of June 30, 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.

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Total $ 40,159 $ 30,677 $ 3,979 $ 74,815

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

The following table details activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2021.

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

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Allowance for credit losses:

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Beginning balance, April 1, 2021 $ 34,633 $ 195,826 $ 2,172 $ 2,485 $ 235,116

Provision for credit loss expense ( 6,678 ) ( 8,522 ) 4,072 1,117 ( 10,011 )

Charge-offs ( 309 ) ( 439 ) ( 1,046 ) ( 411 ) ( 2,205 )

Recoveries 2,147 1,523 244 425 4,339

Net charge-offs 1,838 1,084 ( 802 ) 14 2,134

Ending balance, June 30, 2021 $ 29,793 $ 188,388 $ 5,442 $ 3,616 $ 227,239

Six Months Ended June 30, 2021

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

3 unchanged sentences

Net charge-offs 1,299 ( 200 ) ( 1,515 ) ( 384 ) ( 800 )

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:

Ending balance, June 30, 2021 $ 29,793 $ 188,388 $ 5,442 $ 3,616 $ 227,239

Activity in the allowance for credit losses for the three and six months ended June 30, 2020 was as follows:

(In thousands) Commercial Real

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Allowance for credit losses:

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

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

Provision for credit losses 18,400 10,020 3,943 ( 5,685 ) 26,678

Charge-offs ( 35,687 ) ( 1,824 ) ( 1,053 ) ( 592 ) ( 39,156 )

Recoveries 98 253 272 303 926

Net (charge-offs) recoveries ( 35,589 ) ( 1,571 ) ( 781 ) ( 289 ) ( 38,230 )

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

Six Months Ended June 30, 2020

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

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Net charge-offs ( 35,765 ) ( 1,866 ) ( 1,997 ) ( 1,225 ) ( 40,853 )

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.

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

As of June 30, 2021, the Company’s allowance for credit losses was considered sufficient based upon expected loan level cash flows that were supported by economic forecasts.

Provision expense was recaptured for the three and six months ended June 30, 2021 based upon improved asset credit quality metrics combined with improved Moody’s economic modeling scenarios.

Four energy credits within the commercial segment were charged off during the second quarter of 2020 for a total of $ 32.6 million, of which $ 27.1 million was specifically reserved in the prior quarter.

Additionally, during the second quarter of 2020, the change in the provision for credit losses was related to updated credit loss forecasts using multiple Moody’s economic scenarios.

The updates were to reflect the possibility of a longer, more prolonged recovery to the economies that affect the loan portfolio.

Reserve for Unfunded Commitments

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This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments.

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

The reserve for unfunded commitments as of June 30, 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.

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.

No adjustment was made to the reserve for unfunded commitments during the three and six months ended June 30, 2021 as it was considered sufficient to cover any loss expectations.

For the three and six month periods ended June 30, 2020, net adjustments to the reserve for unfunded commitments resulted in a benefit of $ 5.0 million and $ 8.0 million, respectively, 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:

The components of the provision for credit losses for the three and six month periods ended June 30, 2021 and 2020 were as follows:

Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

16 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 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,

The following table presents information as of June 30, 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.

June 30, December 31,

(Dollars in thousands) 2021 2020

3 unchanged sentences

Weighted average discount rate 2.79 % 3.09 %

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

Operating lease cost for the three and six month periods ended June 30, 2021 was $ 2.9 million and $ 5.7 million, respectively, as compared to $ 3.4 million and $ 6.6 million for the same periods in 2020.

PREMISES AND EQUIPMENT

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

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

March 31, December 31,

Total premises and equipment, net at June 30, 2021 and December 31, 2020 were as follows:

June 30, December 31,

(In thousands) 2021 2020

12 unchanged sentences

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

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.

Goodwill totaled $ 1.1 billion at June 30, 2021 and December 31, 2020.

Goodwill impairment was neither indicated nor recorded during the six months ended June 30, 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.

2 unchanged sentences

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.

During the second quarter of 2021, the Company performed an annual goodwill impairment analysis and concluded no impairment existed.

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 March 31, 2021 and December 31, 2020 were as follows:

March 31, December 31,

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at June 30, 2021 and December 31, 2020 were as follows:

June 30, December 31,

(In thousands) 2021 2020

13 unchanged sentences

(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,

The carrying basis and accumulated amortization of the Company’s other intangible assets at June 30, 2021 and December 31, 2020 were as follows:

June 30, December 31,

(In thousands) 2021 2020

8 unchanged sentences

Total other intangible assets, net $ 103,759 $ 111,110

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

The Company’s estimated remaining amortization expense on other intangible assets as of June 30, 2021 is as follows:

(In thousands) Year Amortization

3 unchanged sentences

TIME DEPOSITS

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.

Time deposits included approximately $ 2.10 billion and $ 2.03 billion of certificates of deposit of $100,000 or more, at June 30, 2021, and December 31, 2020, respectively.

Of this total approximately $ 1.00 billion and $ 889.8 million of certificates of deposit were over $250,000 at June 30, 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

June 30, Six Months Ended

(In thousands) 2021 2020 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:

March 31, December 31,

June 30, December 31,

(In thousands) 2021 2020

8 unchanged sentences

Right-of-use lease liability 8,742 7,835

Unrealized loss on AFS securities 13,694 —

Allowance for unfunded commitments 5,583 5,583

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

33 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 $ 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.

The gross amount of recognized liabilities for repurchase agreements was $ 172.2 million and $ 248.9 million at June 30, 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 June 30, 2021 and December 31, 2020 is presented in the following tables.

Remaining Contractual Maturity of the Agreements

2 unchanged sentences

90 Days Total

March 31, 2021

June 30, 2021

Repurchase agreements:

4 unchanged sentences

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

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

March 31, December 31,

Debt at June 30, 2021 and December 31, 2020 consisted of the following components:

June 30, December 31,

(In thousands) 2021 2020

27 unchanged sentences

The Notes qualify for Tier 2 capital treatment.

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.

The Company had total FHLB advances of $ 1.31 billion at June 30, 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 March 31, 2021 have original maturity dates of ten years to fifteen years with lockout periods that have expired.

The Company’s FOTO advances outstanding at June 30, 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.

At June 30, 2021, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 4.9 billion and the Company had approximately $ 3.5 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 June 30, 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 March 31, 2021, are as follows:

Aggregate annual maturities of long-term debt at June 30, 2021, are as follows:

Year (In thousands)

9 unchanged sentences

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.

On January 14, 2020, Susanne Pace filed a putative class action complaint against Landmark Bank, formerly a wholly-owned subsidiary of The Landrum Company, to which Simmons Bank is a successor by merger in connection with the Company’s acquisition of The Landrum Company which closed in October 2019 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.

9 unchanged sentences

Simmons Bank denies the allegations and is vigorously defending the matter.

On May 13, 2021, Susanne Pace filed a second putative class action complaint against Landmark Bank, to which Simmons Bank is a successor by merger, in the circuit court of Boone County, Missouri, which has been removed to the United States District Court for the Western District of Missouri, Central Division.

The complaint alleges that Landmark Bank improperly charged multiple insufficient funds or overdraft fees when a merchant or other originator resubmits a rejected payment request.

The complaint asserts claims for breach of contract, including breach of the covenant of good faith and fair dealing.

Plaintiff seeks to represent a proposed class of all Landmark Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests.

Plaintiff seeks unspecified damages, costs, attorney’s fees, pre- and post-judgment interest, an injunction, and other relief as the Court deems proper for herself 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.

4 unchanged sentences

The aggregate liquidation preference of all shares of preferred stock cannot exceed $ 80,000,000 .

On February 12, 2019, the Company filed its Amended and Restated Articles of Incorporation (“February Amended Articles”) with the Arkansas Secretary of State.

The February Amended Articles classified and designated three series of preferred stock out of the Corporation’s authorized preferred stock:

Series A Preferred Stock, Par Value $ 0.01 Per Share (having 40,000 authorized shares);

Series B Preferred Stock, Par Value $ 0.01 Per Share (having 2,000.02 authorized shares);

and 7 % Perpetual Convertible Preferred Stock, Par Value $ 0.01 Per Share, Series C (having 140 authorized shares).

On October 29, 2019, the Company filed its Amended and Restated Articles of Incorporation (“October Amended Articles”) with the Arkansas Secretary of State.

On October 29, 2019, the Company filed Amended and Restated Articles of Incorporation (“October Amended Articles”) with the Arkansas Secretary of State.

The October Amended Articles classified and designated Series D Preferred Stock, Par Value $ 0.01 Per Share, out of the Company’s authorized preferred stock.

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 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 .

The Program will terminate on October 31, 2021 (unless terminated sooner).

Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the Company’s current stock repurchase program (“Program”) that increases the amount of the Company’s common stock that may be repurchased under the Program from a maximum of $ 180 million to a maximum of $ 276.5 million and extends the term of the Program from October 31, 2021, to October 31, 2022 (unless terminated sooner).

The Program was originally approved on October 17, 2019 and first amended in March 2020;

and as of June 30, 2021, the Company has repurchased approximately $ 126.5 million of its common stock under the Program.

Under the Program, the Company may repurchase shares of its common stock through open market and privately negotiated transactions or otherwise.

2 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, 2021, the Company repurchased 130,916 shares at an average price of $ 23.53 per share under the Program.

During the six month period ended June 30, 2021, the Company repurchased 130,916 shares at an average price of $ 23.53 per share under the Program.

No shares were repurchased during the second quarter of 2021 under the Program.

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

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

The Company repurchased 4,922,336 shares at an average price of $ 18.96 per share under the Program during the six months ended June 30, 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 March 31, 2021, Simmons Bank had approximately $ 153.5 million available for payment of dividends to the Company, without prior regulatory approval.

At June 30, 2021, Simmons Bank had approximately $ 99.3 million available for payment of dividends to the Company, without prior regulatory approval.

The risk-based capital guidelines of the Federal Reserve Board and the Arkansas State Bank Department include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution.

Under the Basel III Rules effective January 1, 2015, the criteria for a well-capitalized institution are:

The criteria for a well-capitalized institution are:

a 5 % “Tier l leverage capital” ratio, an 8 % “Tier 1 risk-based capital” ratio, 10 % “total risk-based capital” ratio;

2 unchanged sentences

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

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.

As of June 30, 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 14.20 % at June 30, 2021.

STOCK-BASED COMPENSATION

2 unchanged sentences

Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awards of 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:

The table below summarizes the transactions under the Company’s active stock-based compensation plans for the six months ended June 30, 2021:

Stock Options

10 unchanged sentences

Forfeited/expired — — — — ( 60 ) 26.02

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:

Balance, June 30, 2021 475 $ 22.47 2 $ 22.20 1,144 $ 26.02

Exercisable, June 30, 2021 475 $ 22.47

The following table summarizes information about stock options under the plans outstanding at June 30, 2021:

Options Outstanding Options Exercisable

12 unchanged sentences

$ 9.46 — $ 24.07 475 4.05 $ 22.47 475 $ 22.47

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

The table below summarizes the Company’s performance stock unit activity for the six months ended June 30, 2021:

(In thousands) Performance Stock Units

2 unchanged sentences

Forfeited ( 5 )

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.

Non-vested, June 30, 2021 256

Stock-based compensation expense was $ 7.6 million for both of the six month periods ended June 30, 2021 and 2020.

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 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.

There was no unrecognized stock-based compensation expense related to stock options at June 30, 2021.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 19.6 million at June 30, 2021.

At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.9 years.

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 intrinsic value of stock options outstanding and stock options exercisable at June 30, 2021 was $ 3.3 million.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 29.34 as of June 30, 2021, and the exercise price multiplied by the number of options outstanding.

The total intrinsic value of stock options exercised during the six months ended June 30, 2021 and 2020, was $ 1.3 million and $ 6,000 , respectively.

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

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

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

There were no stock options granted during the six months ended June 30, 2021 and 2020.

EARNINGS PER SHARE (“EPS”)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands, except per share data) 2021 2020 2021 2020

5 unchanged sentences

Diluted earnings per share $ 0.69 $ 0.54 $ 1.31 $ 1.22

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.

There were no stock options excluded from the earnings per share calculation for the three and six months ended June 30, 2021 due to the average market price exceeding the related stock option exercise price.

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

ADDITIONAL CASH FLOW INFORMATION

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

Three Months Ended

Six Months Ended

(In thousands) 2021 2020

Interest paid $ 44,281 $ 72,146

Income taxes paid 366 92

Income taxes (refunded) paid ( 32,980 ) 3,196

Transfers of loans to foreclosed assets held for sale 3,289 1,147

Transfers of premises to foreclosed assets and other real estate owned

Transfers of premises held for sale to other real estate owned 4,368 —

Transfers of loans to other assets held for sale

1 unchanged sentence

OTHER INCOME AND OTHER OPERATING EXPENSES

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 income for the three and six months ended June 30, 2021 was $ 8.1 million and $ 18.4 million, respectively.

Other income for the same periods in 2020 was $ 9.8 million and $ 22.6 million, respectively.

During the six month periods in 2021 and 2020, the Company recognized gains on sale of $ 5.9 million and $ 8.1 million, respectively, related to the sale of banking operations and bank branches.

Other operating expenses consisted of the following:

Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

3 unchanged sentences

Credit card expense (1)

3,339 3,161 6,461 6,194

Marketing 4,740 3,528 7,893 7,913

5 unchanged sentences

Total other operating expenses $ 38,007 $ 38,230 $ 74,861 $ 78,669

_________________________

(1) During the second quarter of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income.

Prior periods have been adjusted to reflect this reclassification.

CERTAIN TRANSACTIONS

11 unchanged sentences

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

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 June 30, 2021, the Company had outstanding commitments to extend credit aggregating approximately $ 682.8 million and $ 2.45 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 $ 2.36 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.

As of June 30, 2021, the Company had outstanding commitments to originate fixed rate-rate mortgage loans of approximately $ 122.0 million.

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

2 unchanged sentences

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The Company had total outstanding letters of credit amounting to $ 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 had total outstanding letters of credit amounting to $ 41.9 million and $ 49.0 million at June 30, 2021, and December 31, 2020, respectively, with terms ranging from 9 months to 15 years.

At June 30, 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.

The amount of the letters of credit was $ 97.6 million and $ 1.5 billion at June 30, 2021 and December 31, 2020, respectively, and they expire in less than one year from issuance.

FAIR VALUE MEASUREMENTS

36 unchanged sentences

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.

At June 30, 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.

2 unchanged sentences

See Note 4, 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.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020.

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

March 31, 2021

June 30, 2021

Available-for-sale securities

35 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.

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.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020.

Fair Value Measurements Using

6 unchanged sentences

Unobservable Inputs

March 31, 2021

June 30, 2021

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

1 unchanged sentence

Foreclosed assets and other real estate owned (1)

1,889 — — 1,889

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 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.

(2) Identified reserves of $ 8,340,000 and $ 13,725,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended June 30, 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

March 31, 2021

June 30, 2021

Financial assets:

74 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 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 $ 32.2 million as of March 31, 2021.

The notional amount of these contingent agreements is $ 31.8 million as of June 30, 2021.

Energy Hedging

5 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 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 .

The outstanding notional value as of June 30, 2021 for energy hedging Customer Sell to Company swaps were $ 18.1 million and the corresponding Company Sell to Dealer swaps were $ 18.1 million and the corresponding net fair value of the derivative asset and derivative liability was $ 346,800 .

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

3 unchanged sentences

Results of Review of Interim 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”).

We have reviewed the condensed consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of June 30, 2021, and the related condensed consolidated statements of income, comprehensive income (loss) and stockholders’ equity for the three-month and six-month periods ended June 30, 2021 and 2020, and cash flows for the six-month periods ended June 30, 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.

10 unchanged sentences

Little Rock, Arkansas

August 6, 2021

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