What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-05-06 · 238 added, 154 removed, 623 unchanged (39% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net income for the three months ended March 31, 2021 was $67.4 million, or $0.62 diluted earnings per share, compared to $77.2 million, or $0.68 diluted earnings per share, for the same period in 2020.

Included in both first quarter 2021 and 2020 results were non-core items related to merger-related costs, branch right sizing initiatives, and gains associated with the sale of banking operations.

Excluding all non-core items, core earnings for the three months ended March 31, 2021 were $64.0 million, a decrease of $9.8 million compared to the same period in the prior year.

Core diluted earnings per share for the first three months of 2021 were $0.59 compared to $0.65 for the three months ended March 31, 2020.

The decrease was due in significant part to the difference in the gains on sales of securities recognized during the periods.

Simmons Bank was recently named to Forbes magazine’s list of “World’s Best Banks” for the second consecutive year and ranked among the top 30 banks in Forbes’ list of “America’s Best Banks” for 2021.

On March 12, 2021, we completed the Illinois Branch Sale of four Simmons Bank locations in the Metro East area of Southern Illinois, near St.

Our net income for the three months ended June 30, 2021 was $74.9 million, or $0.69 diluted earnings per share, increases of $16.1 million and $0.15, respectively, compared to the second quarter of 2020.

Included in both second quarter 2021 and 2020 results were non-core items related to our acquisitions and branch right sizing initiatives.

Also included in 2020 results were non-core items related to early retirement programs.

Included in both period results are gains associated with the sale of branch operations.

Excluding all non-core items, core earnings for the three months ended June 30, 2021 were $75.4 million, or $0.69 core diluted earnings per share, compared to $60.1 million, or $0.55 core diluted earnings per share for the three months ended June 30, 2020.

Net income for the first six months of 2021 was $142.3 million, or $1.31 diluted earnings per share, compared to $136.0 million, or $1.22 diluted earnings per share, for the same period in 2020.

Excluding the same non-core items referenced above, year-to-date core earnings were $139.4 million, an increase of $5.4 million compared to the same period in the prior year.

Core diluted earnings per share for the first half of 2021 were $1.28 compared to $1.21 for the same period in 2020.

In June 2021, we announced the acquisitions of Landmark, based in Collierville, TN, and Triumph, based in Memphis, TN.

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

We continuously evaluate our branch network to ensure it reflects our core footprint and changes in customer behavior which allows us to efficiently serve our customers’ evolving needs.

As part of our ongoing branch right sizing initiative, during the second quarter of 2021, we announced plans to close 12 branches during the third quarter of 2021.

Simmons Bank was named to Forbes magazine’s list of “World’s Best Banks” for the second consecutive year and ranked among the top 30 banks in Forbes’ list of “America’s Best Banks” for 2021.

We continue to introduce new and innovative products and services using digital channels to provide an enhanced customer experience to “bank when you want, where you want”.

On March 12, 2021, we completed the sale of four Simmons Bank locations in the Metro East area of Southern Illinois, near St.

We recognized a gain of $5.3 million on the sale of the Illinois branches.

We recorded solid operating results in the first quarter which reflects the benefit of our diverse operating model.

We delivered solid performance in multiple areas while continuing to navigate the challenging environment.

We are still feeling the effects of the COVID-19 pandemic in the economy and some industries are still struggling to return to pre-COVID levels of performance;

however, our asset quality has improved compared to 2020 and we are optimistic that trend will continue.

Stockholders’ equity as of March 31, 2021 was $2.9 billion, book value per share was $27.04 and tangible book value per share was $16.13.

Our ratio of common stockholders’ equity to total assets was 12.55% and the ratio of tangible common stockholders’ equity to tangible assets was 7.88% at March 31, 2021.

however, our asset quality continued to show marked improvement during the second quarter of 2021.

Stockholders’ equity as of June 30, 2021 was $3.0 billion, book value per share was $28.03 and tangible book value per share was $17.16.

Our ratio of common stockholders’ equity to total assets was 12.97% and the ratio of tangible common stockholders’ equity to tangible assets was 8.36% at June 30, 2021.

The Company’s Tier 1 leverage ratio of 8.99%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” guidelines (see Table 12 in the Capital section of this Item).

Total deposits were $18.2 billion at March 31, 2021, compared to $17.0 billion at December 31, 2020 and $15.6 billion at March 31, 2020.

The increase from the prior year is a direct reflection of the multiple rounds of economic stimulus legislation in response to the COVID-19 pandemic that have created a rapid rise in liquidity and have led to changes in customer spending habits.

Trends affected by the increasing customer cash balances are pay downs on loans, decreased loan demand, reduced credit card balances and fewer overdraft activities.

Total loans were $12.2 billion at March 31, 2021, compared to $12.9 billion at December 31, 2020 and $14.4 billion at March 31, 2020.

The decrease from the prior year was related in significant part to planned payoffs, normal pay downs and weakened loan demand as a result of the economic uncertainty stemming from the COVID-19 pandemic.

Sequentially, total loans decreased $705.0 million from the fourth quarter of 2020 due, in part to seasonal decreases in the credit card and agricultural portfolios as well as fluctuations in the mortgage warehouse line of credit.

While loan demand has been well below historical levels, the demand appears to be recovering going into the second quarter of 2021.

Our total loan pipeline consisting of all loan opportunities was $1.2 billion at March 31, 2021, compared to $673.7 million at December 31, 2020.

Loans approved and ready to close were $284.5 million as of March 31, 2021.

As of March 31, 2021, we had $797.6 million in loans outstanding under the PPP.

The change in total PPP loan balance during the first quarter of 2021 was as follows:

Total deposits were $18.3 billion at June 30, 2021, compared to $17.0 billion at December 31, 2020 and $16.6 billion at June 30, 2020.

The increase in total deposits is, in significant part, a reflection of the multiple rounds of economic stimulus legislation in response to the COVID-19 pandemic that have created a rapid rise in liquidity and have led to changes in customer spending habits.

Trends affected by the increase in customer cash balances are pay downs on loans, decreased loan demand, reduced credit card balances and fewer overdraft activities.

Total loans were $11.4 billion at June 30, 2021, compared to $12.9 billion at December 31, 2020 and $14.6 billion at June 30, 2020.

Total loan production (loan originations and advances) during the first half of 2021 totaled $1.8 billion, which positions us to exceed loan production volume reported for the full year of 2020.

While loan originations and advances are outpacing prior year production, the decline in loan balances reflects, in significant part, the substantial government stimulus to support the economy during the COVID-19 pandemic which contributed to an increase in the level of loan paydowns, payoffs and corresponding sluggish loan demand throughout the financial services industry.

As of June 30, 2021, we had $441.4 million in loans outstanding under the PPP.

The change in total PPP loan balances during the second quarter of 2021 was as follows:

PPP PPP Total

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PPP loan forgiveness and repayments (763,902) (18,324) (782,226)

Ending balance, March 31, 2021 $ 569,727 $ 227,902 $ 797,629

Ending balance, June 30, 2021 $ 140,771 $ 300,582 $ 441,353

PPP loans are 100% federally guaranteed and have a zero percent risk-weight for regulatory capital ratios.

As a result, excluding PPP loans from total assets, common equity to total assets was 13.00% and tangible common equity to tangible assets was 8.18% as of March 31, 2021.

As a result, excluding PPP loans from total assets, common equity to total assets was 13.22% and tangible common equity to tangible assets was 8.53% as of June 30, 2021.

We continue to closely monitor the COVID-19 pandemic and expect to make future changes to respond as this situation continues to evolve.

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See the GAAP Reconciliation of Non-GAAP Measures section below for additional discussion and reconciliations of non-GAAP measures.

Simmons First National Corporation is a Mid-South based financial holding company that, as of March 31, 2021, has approximately $23.3 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Simmons First National Corporation is a Mid-South based financial holding company that, as of June 30, 2021, has approximately $23.4 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

CRITICAL ACCOUNTING POLICIES

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Our allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses .

Accordingly, the methodology is based on our reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.

Accordingly, the methodology is

based on our reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.

For further information see the section Allowance for Credit Losses below.

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Our current interest rate sensitivity shows that approximately 44% of our loans and 86% of our time deposits will reprice in the next year.

Net Interest Income

For the three month period ended March 31, 2021, net interest income on a fully taxable equivalent basis was $150.8 million, a decrease of $18.9 million, or 11.2%, over the same period in 2020.

Net Interest Income Quarter-to-Date Analysis

For the three month period ended June 30, 2021, net interest income on a fully taxable equivalent basis was $151.1 million, a decrease of $15.0 million, or 9.0%, over the same period in 2020.

The decrease in net interest income was primarily the result of a $22.5 million decrease in fully tax equivalent interest income partially offset by a $7.5 million decrease in interest expense.

The reduction in interest income primarily resulted from a $38.2 million decrease in interest income on loans partially offset by an increase of $15.9 million in interest income on investment securities.

The decrease in interest income on loans during the second quarter of 2021, reflects a lower average loan balance combined with an 11 basis point decline in loan yield.

The loan yield for the second quarter of 2021 was 4.73% compared to 4.84% from the same period in 2020.

We generated additional interest income on investment securities by redeploying a portion of excess cash to purchase $2.5 billion of investment securities during the second quarter of 2021, which included $1.1 billion of short-term, variable rate securities.

The $7.5 million decrease in interest expense is mostly due to the decline in our deposit account rates.

Interest expense decreased $7.7 million due to the decrease in yield of 27 basis points on interest-bearing deposit accounts.

Net Interest Income Year-to-Date Analysis

For the six month period ended June 30, 2021, net interest income on a fully taxable equivalent basis was $301.9 million, a decrease of $33.9 million, or 10.1%, over the same period in 2020.

The decrease in net interest income was the result of a $60.4 million decrease in fully tax equivalent interest income partially offset by a $26.5 million decrease in interest expense.

The decrease in interest income primarily resulted from a $41.1 million decrease in interest income on loans, that consisted of a decrease in loan volume of $24.7 million coupled with a 44 basis point decline in yield that resulted in a $16.4 million decrease in interest income.

The decrease in our loan volume during the first three months of 2021 was primarily due to weak loan demand throughout 2020 and into the first quarter of 2021 as a result of the COVID-19 pandemic.

Furthermore, during the first quarter of 2020, we sold approximately $1.1 billion of investment securities in response to the unfolding events of the COVID-19 pandemic, as we focused on the creation of additional liquidity and strengthening our balance sheet.

We began to re-invest in our investment security portfolio during the fourth quarter of 2020 and the first quarter of 2021.

The decrease in interest income during the first half of 2021 primarily resulted from a $79.3 million decrease in interest income on loans, that reflects a decrease in loan volume of $59.4 million coupled with a 27 basis point decline in yield that resulted in a $19.9 million decrease, partially offset by an increase in interest income on investment securities of $20.4 million.

The decrease in our loan volume during the first six months of 2021 was primarily due to weak loan demand throughout 2020 and into the first half of 2021 as a result of the COVID-19 pandemic.

Furthermore, the decline in loan volume also reflects the substantial governmental stimulus to support the economy during the COVID-19 pandemic which contributed to an increase in the level of loan paydowns and payoffs.

We sold approximately $249.5 million of investment securities during the first half of 2021 compared to $1.2 billion of investment securities during the same period in 2020.

During the second quarter of 2020, in response to the unfolding events of the COVID-19 pandemic, we focused on the creation of additional liquidity and strengthening our balance sheet.

We began to re-invest in our investment security portfolio during the fourth quarter of 2020 and continued into the first half of 2021.

The $26.5 million decrease in interest expense is mostly due to the decrease in our deposit account rates.

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Net Interest Margin

Our net interest margin on a fully tax equivalent basis decreased 69 basis points to 2.99% for the three month period ended March 31, 2021, when compared to 3.68% for the same period in 2020.

Normalized for all accretion, our core net interest margin at March 31, 2021 and 2020 was 2.86% and 3.42%, respectively.

The decreases in the net interest margin during the three months ended March 31, 2021 compared to the same period in 2020, were primarily due to the aforementioned decline in net interest income coupled with a $2.7 billion increase in average cash and equivalents driven by the lower interest rate environment and additional liquidity created in response to the COVID-19 pandemic.

We purchased investment securities which added approximately $1.2 billion to our average investment securities portfolio.

The impact of these items on net interest margin for the first quarter of 2021 was 35 basis points, bringing the net interest margin adjusted for PPP loans and additional liquidity to 3.33%.

During March 2020, the Federal Open Market Committee, or FOMC, of the Federal Reserve substantially reduced interest rates in response to the economic crisis brought on by the COVID-19 pandemic and rates have continued to remain at historically low levels through the first quarter of 2021.

Our net interest margin on a fully tax equivalent basis decreased 53 basis points to 2.89% for the three month period ended June 30, 2021, when compared to 3.42% for the same period in 2020.

Normalized for all accretion, our core net interest margin for the three months ended June 30, 2021 and 2020 was 2.78% and 3.18%, respectively.

For the six month period ended June 30, 2021, our net interest margin decreased 61 basis points to 2.94% when compared to 3.55% for the same period in 2020.

The decreases in the net interest margin during the three and six months ended June 30, 2021 compared to the same periods in 2020, were primarily due to the aforementioned decline in net interest income coupled with a $1.6 billion increase in average cash and equivalents driven by the lower interest rate environment and additional liquidity created in response to the COVID-19 pandemic.

We purchased investment securities which added approximately $2.5 billion to our average investment securities portfolio during the first half of 2021.

The impact of these items on net interest margin for the six months ended June 30, 2021 was 27 basis points, bringing the net interest margin adjusted for PPP loans and additional liquidity to 3.21%.

As such, our variable rate loan portfolio has repriced to a lower yield and, in response to offset the decline, we have worked to lower our cost of deposits.

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Net Interest Income Tables

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended March 31, 2021 and 2020, respectively.

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and six months ended June 30, 2021 and 2020, respectively.

Analysis of Net Interest Margin

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Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

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Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 vs.

2020 2021 vs.

Decrease due to change in earning assets $ (15,336) $ (27,555)

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Decrease in net interest income $ (14,950) $ (33,894)

Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the three months ended March 31, 2021 and 2020.

The table also shows the average rate earned on all earning assets, the average rate expensed on all interest bearing liabilities, the net interest spread and the net interest margin for the same periods.

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

Three Months Ended March 31,

Three Months Ended June 30,

Average Income/ Yield/ Average Income/ Yield/

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Net interest margin – FTE $ 151,081 2.89 $ 166,031 3.42

Table 4 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three month period ended March 31, 2021, as compared to the same period of the prior year.

Six Months Ended June 30,

Average Income/ Yield/ Average Income/ Yield/

(In thousands) Balance Expense Rate (%) Balance Expense Rate (%)

Earning assets:

Interest bearing balances due from banks and federal funds sold

$ 3,088,816 $ 1,449 0.09 $ 1,477,759 $ 3,044 0.41

Investment securities - taxable

3,373,375 24,714 1.48 1,983,134 19,883 2.02

Investment securities - non-taxable

2,039,153 32,338 3.20 883,585 16,749 3.81

Mortgage loans held for sale

73,202 1,025 2.82 64,927 949 2.94

12,149,041 285,588 4.74 14,640,082 364,915 5.01

Total interest earning assets 20,723,587 345,114 3.36 19,049,487 405,540 4.28

Non-earning assets 2,276,218 2,321,761

Total assets $ 22,999,805 $ 21,371,248

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:

Interest bearing transaction and savings deposits

$ 10,249,756 $ 10,809 0.21 $ 9,072,133 $ 25,157 0.56

Time deposits 2,986,201 13,152 0.89 3,104,030 24,126 1.56

Total interest bearing deposits 13,235,957 23,961 0.37 12,176,163 49,283 0.81

Federal funds purchased and securities sold under agreements to repurchase

274,024 437 0.32 361,768 1,096 0.61

Other borrowings 1,340,531 9,699 1.46 1,357,677 9,840 1.46

Subordinated debt and debentures 383,011 9,092 4.79 387,876 9,502 4.93

Total interest bearing liabilities 15,233,523 43,189 0.57 14,283,484 69,721 0.98

Non-interest bearing liabilities:

Non-interest bearing deposits 4,624,158 3,978,728

Other liabilities 164,686 213,918

Total liabilities 20,022,367 18,476,130

Stockholders’ equity 2,977,438 2,895,118

Total liabilities and stockholders’ equity

$ 22,999,805 $ 21,371,248

Net interest spread – FTE 2.79 3.30

Net interest margin – FTE $ 301,925 2.94 $ 335,819 3.55

Table 4 shows changes in interest income and interest expense resulting from changes in both volume and interest rates for the three and six month periods ended June 30, 2021, as compared to the same periods of the prior year.

The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.

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Three Months Ended

June 30, Six Months Ended

2020 2021 vs.

(In thousands, on a fully taxable equivalent basis) Volume Yield/

Rate Total Volume Yield/

Increase (decrease) in:

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Interest bearing balances due from banks and federal funds sold $ 129 $ (81) $ 48 $ 1,819 $ (3,414) $ (1,595)

$ 2,290 $ (3,933) $ (1,643)

Investment securities - taxable 9,259 (1,796) 7,463 11,228 (6,397) 4,831

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Federal funds purchased and securities sold under agreements to repurchase (122) (23) (145) (223) (436) (659)

(51) (463) (514)

Other borrowings (199) 133 (66) (124) (17) (141)

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It is management’s practice to review the allowance on a monthly basis and, after considering the factors previously noted, to determine the level of provision made to the allowance.

The provision for credit losses for the three months ended March 31, 2021 was $1.4 million, and was entirely related to activity in the investment securities portfolio during the first quarter of 2021, compared to $23.1 million for the same period ended March 31, 2020, a decrease of $21.7 million.

The decrease was primarily due to two energy credits that experienced further deterioration and were negatively impacted by the sharp decline in commodity pricing during the first quarter of 2020, resulting in incremental provision expense of $22.0 million during that quarter.

The provision for credit losses for the three and six months ended June 30, 2021 was a recapture of $13.0 million and $11.5 million, respectively, compared to an expense of $21.9 million and $45.0 million for the same periods ended June 30, 2020.

The recapture of credit losses was driven by improved credit quality metrics and improved macroeconomic factors.

Two energy credits that experienced further deterioration and were negatively impacted by the sharp decline in commodity pricing during the first quarter of 2020, resulting in incremental provision expense of $22.0 million during that quarter and combined with uncertain economic forecasts during the first six months of 2020 to drive higher provisions for credit losses during that period.

NON-INTEREST INCOME

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Non-interest income also includes income on the sale of mortgage and SBA loans, investment banking income, income from the increase in cash surrender values of bank owned life insurance and gains (losses) from sales of securities.

For the three month period ended March 31, 2021, total non-interest income was $51.9 million, a decrease of approximately $30.5 million, or 37.0%, compared to the same period in 2020.

During the first three months of 2021, we sold approximately $135.7 million of investment securities resulting in a net gain of $5.5 million, compared to $1.1 billion of investment securities sold for a net gain of $32.1 million in the first quarter of 2020.

Additionally, the gain on sale from the Illinois Branch Sale of $5.3 million, which we consider a non-core item, is included in non-interest income for the first quarter of 2021.

Increases of $1.4 million in mortgage lending income and $1.1 million in debit and credit card fees in the three month period ended March 31, 2021, largely was a result of the current low mortgage interest rate environment and changes in consumer spending habits along with the effects of the government stimulus payments in response to the COVID-19 pandemic, respectively.

Table 5 shows non-interest income for the three month periods ended March 31, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

Total non-interest income was $47.9 million for the three month period June 30, 2021, a decrease of approximately $882,000, or 1.8%, compared to the same period in 2020, primarily driven by decreases in mortgage lending income and the difference in gains on sale of branches recognized during the periods.

Conversely, we had increases in total service charges on deposit accounts and fees of $2.0 million, or 20.3%, primarily attributable to additional customer transactions related to changes in customer spending habits and incremental gains on the sale of securities during the second quarter of 2021.

For the six month period ended June 30, 2021, total non-interest income was $98.3 million, a decrease of approximately $31.6 million, or 24.3%, compared to the same period in 2020, primarily due to decreases in the gains on sale of securities and mortgage lending income.

During the first six months of 2021, we sold approximately $249.5 million of investment securities resulting in a net gain of $10.6 million, compared to $1.2 billion of investment securities sold for a net gain of $32.5 million in the first six months of 2020.

Additionally, the gain on sale of branches decreased approximately $2.2 million, which we consider a non-core item, compared to the same period in 2020.

An increase of $2.1 million in debit and credit fees partially offset the overall decrease in non-interest income during the first six months of 2021 as a result of additional transactions due to the changes in customer spending habits.

Decreases of $8.0 million and $6.6 million in mortgage lending income for the three and six month periods ended June 30, 2021 were largely a result of decreases in the value of derivative contracts related to the mortgage banking operations partially offset by gains on the sale of mortgage loans that were driven by an increase in volume of loans sold during the first half of 2021 compared to the same period in 2020.

Beginning in 2020 and continuing into 2021, we experienced an increase in mortgage lending transactions as a result of the low mortgage interest rate environment due to the COVID-19 pandemic.

However, we expect mortgage lending volume to continue to decline throughout 2021 given the current environment.

Table 5 shows non-interest income for the three and six month periods ended June 30, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

Non-Interest Income

Three Months Ended

March 31, 2021

June 30, 2021

Change from Six Months Ended

June 30, 2021

(Dollars in thousands) 2021 2020 2020 2021 2020 2020

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Debit and credit card fees (1)

7,882 6,575 1,307 19.9 15,283 13,140 2,143 16.3

Bank owned life insurance income 2,038 1,445 593 41.0 3,561 2,743 818 29.8

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Total non-interest income $ 47,924 $ 48,806 $ (882) (1.8)% $ 98,264 $ 129,851 $ (31,587) (24.3)%

Recurring fee income (total service charges, trust fees, debit and credit card fees) for the three month period ended March 31, 2021, was $27.3 million, a decrease of $2.7 million from the three month period ended March 31, 2020, primarily the result of fewer service charges on deposit accounts, reflecting the additional liquidity currently held by our customers.

_________________________

(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.

* Not meaningful

Recurring fee income (total service charges, trust fees, debit and credit card fees) for the three month period ended June 30, 2021 was $27.2 million, an increase of $3.3 million from the same period in 2020.

Recurring fee income for the six month period ended June 30, 2021, was $52.9 million, an increase of $403,000 from the six month period ended June 30, 2020.

The increases in the periods presented are primarily the result of changes in total service charges and debit and credit card fees, previously discussed.

NON-INTEREST EXPENSE

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We also regularly monitor staffing levels at each subsidiary to ensure productivity and overhead are in line with existing workload requirements.

Non-interest expense for the three months ended March 31, 2021 was $115.4 million, a decrease of $13.5 million, or 10.5%, from the same period in 2020.

Normalizing for the non-core costs, core non-interest expense for the three months ended March 31, 2021 decreased $13.0 million, or 10.2%, from the same period in 2020.

The decrease in non-interest expense was primarily related to the realization of expected synergies from the continuous evaluation of our branch network and the branch sales and closures that began in 2020 and have continued in 2021.

Additionally, salaries and employee benefits expense was impacted by savings resulting from the early retirement program offered in the prior year.

Table 6 below shows non-interest expense for the three month periods ended March 31, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

For the three month period ended June 30, 2021, non-interest expense was $115.5 million, a decrease of $711,000, or 0.6%, from the three month period ended June 30, 2020.

Salaries and employee benefits expense increased $3.1 million during the three month period of 2021 due to associates being hired in lending, wealth and mortgage as we continue to actively recruit new producers.

Non-interest expense for the six months ended June 30, 2021 was $229.3 million, a decrease of $14.4 million, or 5.9%, from the same period in 2020.

Normalizing for the non-core costs, core non-interest expense for the six months ended June 30, 2021 decreased $11.0 million, or 4.6%, from the same period in 2020.

The decreases in non-interest expense were primarily related to the realization of expected synergies from the continuous evaluation of our branch network and the branch sales and closures that began in 2020 and have continued in 2021.

Additionally, salaries and employee benefits expense during the six month period June 30, 2021 was impacted by savings resulting from the early retirement program offered in the prior year.

Table 6 below shows non-interest expense for the three and six month periods ended June 30, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

Non-Interest Expense

Three Months Ended

March 31, 2021

June 30, 2021

Change from Six Months Ended

June 30, 2021

(Dollars in thousands) 2021 2020 2020 2021 2020 2020

Salaries and employee benefits $ 60,261 $ 57,151 $ 3,110 5.4% $ 120,601 $ 125,075 $ (4,474) (3.6)%

Early retirement expense — 493 (493) (100.0) — 493 (493) (100.0)

Occupancy expense, net 9,103 9,217 (114) (1.2) 18,403 18,727 (324) (1.7)

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Other real estate and foreclosure expense 863 274 589 * 1,206 599 607 101.3

343 325 18 5.5

Deposit insurance 1,687 2,838 (1,151) (41.0) 2,995 5,313 (2,318) (43.6)

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Credit card (1)

3,339 3,161 178 5.6 6,461 6,194 267 4.3

Marketing 4,740 3,528 1,212 34.4 7,893 7,913 (20) (0.3)

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Total non-interest expense $ 115,466 $ 116,177 $ (711) (0.6)% $ 229,259 $ 243,641 $ (14,382) (5.9)%

_________________________

(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.

* Not meaningful

INVESTMENTS AND SECURITIES

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Treasury securities, U.S.

Government agencies, mortgage-backed securities and municipal securities.

Our general policy is not to invest in derivative type investments or high-risk securities, except for collateralized mortgage-backed securities for which collection of principal and interest is not subordinated to significant superior rights held by others.

HTM and AFS investment securities were $609.5 million and $4.5 billion, respectively, at March 31, 2021, compared to the HTM amount of $333.0 million and AFS amount of $3.5 billion at December 31, 2020.

As anticipated, our security portfolio increased during the first quarter of 2021 as we reinvested PPP loan repayments and utilized additional liquidity held in Cash and Cash Equivalents.

Government agencies, MBS and municipal securities.

Our general policy is not to invest in derivative type investments or high-risk securities, except for collateralized MBS for which collection of principal and interest is not subordinated to significant superior rights held by others.

HTM and AFS investment securities were $931.4 million and $6.6 billion, respectively, at June 30, 2021, compared to the HTM amount of $333.0 million and AFS amount of $3.5 billion at December 31, 2020.

As anticipated, our security portfolio increased during the first six months of 2021 as we reinvested PPP loan repayments and utilized additional liquidity held in cash and cash equivalents.

During the second quarter of 2021, we purchased $2.5 billion of investment securities, including strategically redeploying $1.1 billion of excess cash into short-term, variable rate securities, as previously discussed.

We will continue to look for opportunities to maximize the value of the investment portfolio.

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The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.

Furthermore, as of March 31, 2021, management also had the ability and intent to hold the securities classified as AFS for a period of time sufficient for a recovery of cost.

Furthermore, as of June 30, 2021, management also had the ability and intent to hold the securities classified as AFS for a period of time sufficient for a recovery of cost.

The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased.

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LOAN PORTFOLIO

Our loan portfolio averaged $12.52 billion and $14.55 billion during the first three months of 2021 and 2020, respectively.

As of March 31, 2021, total loans were $12.20 billion, a decrease of $705.0 million from December 31, 2020.

The decline in the average loan balance during the first quarter of 2021 when compared to the same period in 2020 was due to the tepid loan demand that began in late first quarter of 2020 as a result of the economic uncertainty stemming from the COVID-19 pandemic.

Our loan portfolio averaged $12.15 billion and $14.64 billion during the first six months of 2021 and 2020, respectively.

As of June 30, 2021, total loans were $11.39 billion, a decrease of $1.5 billion from December 31, 2020.

The decline in the average loan balance during the first half of 2021 when compared to the same period in 2020 was due to the tepid loan demand that began in late first quarter of 2020 and has continued through 2021 largely as a result of the economic uncertainty stemming from the COVID-19 pandemic.

The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

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Loan Portfolio

March 31, December 31,

June 30, December 31,

(In thousands) 2021 2020

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Consumer loans consist of credit card loans and other consumer loans.

Consumer loans were $348.4 million at March 31, 2021, or 2.9% of total loans, compared to $391.2 million, or 3.0% of total loans at December 31, 2020.

The decrease in consumer loans from December 31, 2020, to March 31, 2021, was primarily due to the expected seasonal decline in our credit card portfolio as well as loan payoffs and pay downs due to additional customer liquidity driven by the government economic stimulus programs in response to the COVID-19 pandemic.

Real estate loans consist of construction and development (“C&D”) loans, single-family residential loans and commercial real estate (“CRE”) loans.

Real estate loans were $8.82 billion at March 31, 2021, or 72.3% of total loans, compared to $9.22 billion, or 71.5%, of total loans at December 31, 2020, a decrease of $403.9 million, or 4.4%.

Consumer loans were $359.3 million at June 30, 2021, or 3.2% of total loans, compared to $391.2 million, or 3.0% of total loans at December 31, 2020.

The decrease in consumer loans from December 31, 2020, to June 30, 2021, was primarily due to the expected seasonal decline in our credit card portfolio as well as loan payoffs and pay downs due to additional customer liquidity driven by the government economic stimulus programs in response to the COVID-19 pandemic.

Real estate loans consist of C&D loans, single-family residential loans and CRE loans.

Real estate loans were $8.37 billion at June 30, 2021, or 73.5% of total loans, compared to $9.22 billion, or 71.5%, of total loans at December 31, 2020, a decrease of $854.9 million, or 9.3%.

Our C&D loans decreased by $168.1 million, or 10.5%, single family residential loans decreased by $272.6 million, or 14.5%, and CRE loans decreased by $414.2 million, or 7.2%.

The decreases were due to less activity as a result of the pandemic and our effort to manage our real estate portfolio concentration.

The decreases were largely due to less activity as a result of the pandemic and our effort to manage our real estate portfolio concentration.

In the near term, we expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

Commercial loans consist of non-real estate loans related to business and agricultural loans.

Total commercial loans were $2.60 billion at March 31, 2021, or 21.3% of total loans, compared to $2.75 billion, or 21.3% of total loans at December 31, 2020, a decrease of $149.7 million, or 5.4%.

PPP loan balances declined by $334.9 million during the first three months of 2021 as a result of expected reimbursements from the SBA related to PPP loan forgiveness, partially offset by PPP Round 2 loan originations of $227.9 million during the first quarter of 2021.

Agricultural loans decreased $20.0 million, or 11.4%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter and is at its lowest point at the end of the first quarter.

Total commercial loans were $2.27 billion at June 30, 2021, or 19.9% of total loans, compared to $2.75 billion, or 21.3% of total loans at December 31, 2020, a decrease of $482.1 million, or 17.5%.

PPP loan balances declined by $782.2 million during the first six months of 2021 as a result of expected reimbursements from the SBA related to PPP loan forgiveness, partially offset by PPP Round 2 loan originations of $318.9 million during 2021.

We expect PPP balances to continue to decline through the remainder of the year.

Agricultural loans increased $17.6 million, or 10.0%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter.

In addition, we are continuing with our planned exit of the energy portfolio.

Other loans mainly consists of mortgage warehouse lending.

Mortgage volume, while still strong, declined during the first quarter of 2021 when compared to 2020, leading to a decrease of $108.7 million in other loans primarily from mortgage warehouse lines of credit.

Mortgage volume, while still strong, declined during the first six months of 2021 when compared to 2020, leading to a decrease of $145.6 million in other loans primarily from mortgage warehouse lines of credit.

Loan demand appears to be returning to more normalized levels.

For the third consecutive quarter, we have experienced an increase in commercial loan demand.

Our loan pipeline consisting of all loan opportunities was $1.3 billion at June 30, 2021 compared to $673.7 million at December 31, 2020.

Loans approved and ready to close at the end of the quarter totaled $467.1 million.

ASSET QUALITY

Non-performing loans are comprised of (a) nonaccrual loans, (b) loans that are contractually past due 90 days and (c) other loans for which terms have been restructured to provide a reduction or deferral of interest or principal, because of deterioration in the financial position of the borrower.

The subsidiary bank recognizes income principally on the accrual basis of accounting.

Simmons Bank recognizes income principally on the accrual basis of accounting.

When loans are classified as nonaccrual, generally, the accrued interest is charged off and no further interest is accrued.

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The credit card recovery group pursues account holders until it is determined, on a case-by-case basis, to be uncollectible.

Total non-performing assets decreased $16.0 million from December 31, 2020 to March 31, 2021.

Total non-performing assets decreased $46.6 million from December 31, 2020 to June 30, 2021.

Nonaccrual loans decreased by $42.6 million during the period and foreclosed assets held for sale and other real estate owned decreased by $3.2 million.

The decrease in nonaccrual loans was primarily due to an overall improvement in economic conditions while the decrease in foreclosed assets held for sale and other real estate owned is mainly the result of the disposition of one commercial building in the St.

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.56% at March 31, 2021, compared to 0.66% at December 31, 2020.

From time to time, certain borrowers are experiencing declines in income and cash flow.

As a result, these borrowers are seeking to reduce contractual cash outlays, the most prominent being debt payments.

Louis area partially offset by $4.4 million in closed bank branch facilities that were reclassified from premises held for sale during the second quarter of 2021.

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.43% at June 30, 2021, compared to 0.66% at December 31, 2020.

From time to time, certain borrowers experience declines in income and cash flow.

As a result, these borrowers seek to reduce contractual cash outlays, the most prominent being debt payments.

In an effort to preserve our net interest margin and earning assets, we are open to working with existing customers in order to maximize the collectability of the debt.

When we restructure a loan to a borrower that is experiencing financial difficulty and grant a concession that we would not otherwise consider, a “troubled debt restructuring” results and the Company classifies the loan as a TDR.

When we restructure a loan for a borrower experiencing financial difficulty and grant a concession we would not otherwise consider, a “troubled debt restructuring” occurs and the loan is classified as a TDR.

The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full;

Once an obligation has been restructured due to such credit problems, it continues to be considered a TDR until paid in full;

or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place.

Our TDR balance remained relatively flat at $7.3 million as of March 31, 2021, decreasing $230,000 from December 31, 2020.

Our TDR balance remained relatively flat at $7.1 million as of June 30, 2021, decreasing $417,000 from December 31, 2020.

TDRs are individually evaluated for expected credit losses.

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

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

We return TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.

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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 late in the 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.

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

At March 31, 2021, the majority of these balances have returned to regular payments.

The table below presents COVID-19 loan modifications outstanding at March 31, 2021 by industry.

COVID-19 Loan Modifications Outstanding at March 31, 2021 by Industry

(Dollars in thousands) Number Loan Balance % of Balance

Assisted living 1 $ 17,310 8.3 %

Transportation 5 783 0.4

Consumer 37 3,776 1.8

Hotel 17 152,864 73.3

Food service 3 2,683 1.3

All other 16 31,029 14.9

Total 79 $ 208,445 100.0 %

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

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

The COVID-19 pandemic has had an unprecedented impact on the hotel, restaurant and retail industries, causing our borrowers in those industries to require loan modifications.

We expect most of the COVID-19 loan modifications listed above to return to regular payments with no credit downgrade or long-term restructure.

We continue to maintain good asset quality, compared to the industry.

Strong asset quality remains a primary focus of our strategy.

The allowance for credit losses as a percent of total loans was 1.93% as of March 31, 2021.

At June 30, 2021, the majority of these balances have returned to regular payments and we expect most of the remaining COVID-19 loan modifications to return to regular payments with no credit downgrade or long-term restructure.

We continue to maintain good asset quality compared to the industry and strong asset quality remains a primary focus of our strategy.

The allowance for credit losses as a percent of total loans was 2.00% as of June 30, 2021.

Non-performing loans equaled 0.71% of total loans.

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The allowance for credit losses was 281% of non-performing loans.

Our annualized net charge-offs to average total loans for the first three months of 2021 was 0.10%.

Our annualized net charge-offs to average total loans for the first six months of 2021 was (0.07)%.

Excluding credit cards, the annualized net charge-offs to average total loans for the same period was (0.10)%.

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Non-performing Assets

March 31, December 31,

June 30, December 31,

(Dollars in thousands) 2021 2020

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_______________________________________

(1) Includes nonaccrual TDRs of approximately $3,478,000 at March 31, 2021 and $4,375,000 at December 31, 2020.

The interest income on nonaccrual loans is not considered material for the three month periods ended March 31, 2021 and 2020.

(1) Includes nonaccrual TDRs of approximately $2,660,000 at June 30, 2021 and $4,375,000 at December 31, 2020.

The interest income on nonaccrual loans is not considered material for the three and six month periods ended June 30, 2021 and 2020.

ALLOWANCE FOR CREDIT LOSSES

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Provision for credit losses (10,011) 52,875

Balance, March 31, $ 235,116 $ 243,195

Balance, June 30, $ 227,239 $ 231,643

Loans charged off:

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Provision for Credit Losses

The amount of provision added to the allowance during the three months ended March 31, 2021 and 2020, and for the year ended December 31, 2020, was based on management’s judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic forecasts and conditions, past due and non-performing loans and net loss experience.

The amount of provision added to or released from the allowance during the three and six months ended June 30, 2021 and 2020, and for the year ended December 31, 2020, was based on management’s judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic forecasts and conditions, past due and non-performing loans and net loss experience.

It is management’s practice to review the allowance on a monthly basis, and after considering the factors previously noted, to determine the level of provision made to the allowance.

Allowance for Credit Losses Allocation

As of March 31, 2021, the allowance for credit losses reflected a decrease of approximately $2.9 million from December 31, 2020 while total loans decreased $705.0 million over the same three month period.

As of June 30, 2021, the allowance for credit losses reflected a decrease of approximately $10.8 million from December 31, 2020 while total loans decreased $1.5 billion over the same six month period.

The allocation in each category within the allowance generally reflects the overall changes in the loan portfolio mix.

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

The decrease in the allowance for credit losses during the first three months of 2021 was predominately related to economic recovery from the effects of the COVID-19 pandemic and the decline in our loan portfolio.

The decrease in the allowance for credit losses during the first six months of 2021 was predominately related to economic recovery from the effects of the COVID-19 pandemic and the decline in our loan portfolio.

While the economic conditions appear to be improving, certain industries continue to be more adversely impacted than others by this pandemic, such as the restaurant, retail and hotel industries, and there remains uncertainty regarding how borrowers in these industries will recover.

Our allowance for credit losses at March 31, 2021 was considered appropriate given the considerable amount of uncertainty as to the structure and timing of potential economic recovery, future of government assistance related to COVID-19 recovery efforts, the effects of the recent change in Presidential administrations, and other related factors.

Our allowance for credit losses at June 30, 2021 was considered appropriate given the considerable amount of uncertainty as to the structure and timing of potential economic recovery, the impact of new COVID-19 variants, future of government assistance related to COVID-19 recovery efforts and other related factors.

The following table sets forth the sum of the amounts of the allowance for credit losses attributable to individual loans within each category, or loan categories in general.

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Allocation of Allowance for Credit Losses

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(Dollars in thousands) Allowance

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

Deposits are our primary source of funding for earning assets and are primarily developed through our network of approximately 198 financial centers as of March 31, 2021.

Deposits are our primary source of funding for earning assets and are primarily developed through our network of approximately 198 financial centers as of June 30, 2021.

We offer a variety of products designed to attract and retain customers with a continuing focus on developing core deposits.

Our core deposits consist of all deposits excluding time deposits of $100,000 or more and brokered deposits.

As of March 31, 2021, core deposits comprised 85.1% of our total deposits.

As of June 30, 2021, core deposits comprised 86.4% of our total deposits.

We continually monitor the funding requirements along with competitive interest rates in the markets we serve.

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We are continually monitoring and looking for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Our total deposits as of March 31, 2021, were $18.19 billion, an increase of $1.20 billion from December 31, 2020, primarily driven by the government economic stimulus programs and changes in customer spending resulting from the COVID-19 pandemic.

Non-interest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $15.16 billion at March 31, 2021, compared to $14.15 billion at December 31, 2020, an increase of $1.01 billion.

Total time deposits increased $192.4 million to $3.02 billion at March 31, 2021, from $2.83 billion at December 31, 2020.

We had $448.6 million and $512.3 million of brokered deposits at March 31, 2021, and December 31, 2020, respectively.

Our total deposits as of June 30, 2021, were $18.30 billion, an increase of $1.32 billion from December 31, 2020, primarily driven by the government economic stimulus programs and changes in customer spending resulting from the COVID-19 pandemic.

Non-interest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $15.46 billion at June 30, 2021, compared to $14.15 billion at December 31, 2020, an increase of $1.31 billion.

Total time deposits increased $8.7 million to $2.84 billion at June 30, 2021, from $2.83 billion at December 31, 2020.

We had $388.5 million and $512.3 million of brokered deposits at June 30, 2021, and December 31, 2020, respectively.

Both consumer and commercial deposit balances have grown since the COVID-19 related economic stimulus legislation, including legislation that established the PPP program, was implemented in mid-2020.

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OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

Our total debt was $1.72 billion at March 31, 2021 and December 31, 2020.

The outstanding balance for March 31, 2021 includes $1.3 billion in FHLB long-term advances;

Our total debt was $1.72 billion at June 30, 2021 and December 31, 2020.

The outstanding balance for June 30, 2021 includes $1.3 billion in FHLB long-term advances;

$330.0 million in subordinated notes;

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and $32.6 million of other long-term debt.

The FHLB long-term advances outstanding at the end of the first quarter 2021 are primarily FHLB Owns the Option (“FOTO”) advances which are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date.

Our FOTO advances outstanding at March 31, 2021 had original maturity dates of 10 years to 15 years with lockout periods that have expired.

The FHLB long-term advances outstanding at the end of the second quarter 2021 are primarily FOTO advances which are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date.

Our FOTO advances outstanding at June 30, 2021 had original maturity dates of 10 years to 15 years with lockout periods that have expired.

We expect the FHLB to not exercise the options to terminate the FOTO advances prior to their stated maturity dates due to the current low interest rate environment.

We continually analyze the possibility of the FHLB exercising the options along with the market expected rate outcome.

As of March 31, 2021, there were no FHLB short-term advances outstanding.

As of June 30, 2021, there were no FHLB short-term advances outstanding.

In March 2018, we issued $330 million in aggregate principal amount of 5.00% Fixed-to-Floating Rate Subordinated Notes (“Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes.

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The Notes are obligations of the Company only and are not obligations of, and are not guaranteed by, any of its subsidiaries.

At March 31, 2021, total capital was $2.93 billion.

At June 30, 2021, total capital was $3.04 billion.

Capital represents shareholder ownership in the Company – the book value of assets in excess of liabilities.

At March 31, 2021, our common equity to asset ratio was 12.55% compared to 13.31% at year-end 2020.

At June 30, 2021, our common equity to asset ratio was 12.97% compared to 13.31% at year-end 2020.

Capital Stock

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

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

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

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

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

Stock Repurchase

On July 23, 2012, our Board of Directors approved a stock repurchase program which authorized the repurchase of up to 1,700,000 shares of common stock (“2012 Program”).

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

On March 5, 2020, we 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).

Stock Repurchase Program

Effective July 23, 2021, our Board of Directors approved an amendment to the Company’s current stock repurchase program (“Program”) that increases the amount of our 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.

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

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

During the three month periods ended March 31, 2021 and 2020, we repurchased 130,916 shares at an average price per share of $23.53 and 4,922,336 shares at an average price per share of $18.96, respectively, under the Program.

During the six month periods ended June 30, 2021 and 2020, we repurchased 130,916 shares at an average price per share of $23.53 and 4,922,336 shares at an average price per share of $18.96, respectively, under the Program.

No shares were repurchased under the Program during the three months ended June 30, 2021 and 2020.

Cash Dividends

We declared cash dividends on our common stock of $0.18 per share for the first three months of 2021 compared to $0.17 per share for the first three months of 2020, an increase of $0.01, or 6%.

We declared cash dividends on our common stock of $0.36 per share for the first six months of 2021 compared to $0.34 per share for the first six months of 2020, an increase of $0.02, or 6%.

The timing and amount of future dividends are at the discretion of our Board of Directors and will depend upon our consolidated earnings, financial condition, liquidity and capital requirements, the amount of cash dividends paid to us by our subsidiaries, applicable government regulations and policies and other factors considered relevant by our Board of Directors.

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Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).

Management believes that, as of March 31, 2021, we meet all capital adequacy requirements to which we are subject.

Management believes that, as of June 30, 2021, we meet all capital adequacy requirements to which we are subject.

As of the most recent notification from regulatory agencies, Simmons Bank was well capitalized under the regulatory framework for prompt corrective action.

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There are no conditions or events since that notification that management believes have changed the institution’s categories.

Our risk-based capital ratios at March 31, 2021 and December 31, 2020 are presented in Table 12 below:

Our risk-based capital ratios at June 30, 2021 and December 31, 2020 are presented in Table 12 below:

Risk-Based Capital

March 31, December 31,

June 30, December 31,

(Dollars in thousands) 2021 2020

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

Trust preferred securities and qualifying subordinated debt of $383.0 million is included as Tier 2 and total capital as of March 31, 2021.

Trust preferred securities and qualifying subordinated debt of $383.1 million is included as Tier 2 and total capital as of June 30, 2021.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,” “believe,” “budget,” “contemplate,” “continue,” “estimate,” “expect,” “foresee,” “intend,” “indicate,” “target,” “plan,” positions,” “prospects,” “project,” “predict,” or “potential,” by future conditional verbs such as “could,” “may,” “might,” “should,” “will,” or “would,” or by variations of such words or by similar expressions.

These forward-looking statements include, without limitation, those relating to the Company’s future growth, revenue, expenses, assets, asset quality, profitability, earnings, accretion, customer service, investment in digital channels, critical accounting policies, net interest margin, non-interest revenue, market conditions related to and the impact of the Company’s stock repurchase program, consumer behavior and liquidity, the adequacy of the allowance for credit losses, the impacts of the COVID-19 pandemic and the ability of the Company to manage the impacts of the COVID-19 pandemic, the impacts of the Company’s and its customers’ participation in the Paycheck Protection Program, the expected performance of COVID-19 loan modifications, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, the Company’s expectations regarding actions by the FHLB including with respect to the FHLB’s option to terminate FOTO advances, capital resources, market risk, plans for investments in securities, effect of future litigation, including the results of the overdraft fee litigation against the Company that is described in this quarterly report, acquisition strategy, legal and regulatory limitations and compliance and competition.

These forward-looking statements include, without limitation, those relating to the Company’s future growth, pending acquisitions, revenue, expenses, assets, asset quality, profitability, earnings, accretion, customer service, lending capacity and lending activity, investment in digital channels, critical accounting policies, net interest margin, non-interest revenue, market conditions related to and the impact of the Company’s stock repurchase program, consumer behavior and liquidity, the adequacy of the allowance for credit losses, the impacts of the COVID-19 pandemic and the ability of the Company to manage the impacts of the COVID-19 pandemic, the impacts of the Company’s and its customers’ participation in the Paycheck Protection Program, the expected performance of COVID-19 loan modifications, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, the Company’s expectations regarding actions by the FHLB including with respect to the FHLB’s option to terminate FOTO advances, capital resources, market risk, plans for investments in securities, effect of future litigation, including the results of the overdraft fee litigation against the Company that is described in this quarterly report, acquisition strategy and activity, legal and regulatory limitations and compliance and competition.

These forward-looking statements involve risks and uncertainties, and may not be realized due to a variety of factors, including, without limitation:

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the ultimate effect of measures the Company takes or has taken in response to the COVID-19 pandemic;

the severity and duration of the COVID-19 pandemic, including the effectiveness of vaccination efforts;

the severity and duration of the COVID-19 pandemic, including the effectiveness of vaccination efforts and developments with respect to COVID-19 variants;

the pace of recovery when the COVID-19 pandemic subsides and the heightened impact it has on many of the risks described herein;

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GAAP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

The tables below present computations of core earnings (net income excluding non-core items {gain on sale of branches, merger related costs, and the net branch right sizing costs}) (non-GAAP) and core diluted earnings per share (non-GAAP) as well as a computation of tangible book value per share (non-GAAP), tangible common equity to tangible assets (non-GAAP), the core net interest margin (non-GAAP), core other income (non-GAAP) and core non-interest expense (non-GAAP).

The tables below present computations of core earnings (net income excluding non-core items {gain on sale of branches, merger related costs, early retirement program costs and the net branch right sizing costs}) (non-GAAP) and core diluted earnings per share (non-GAAP) as well as a computation of tangible book value per share (non-GAAP), tangible common equity to tangible assets (non-GAAP), the core net interest margin (non-GAAP), core other income (non-GAAP) and core non-interest expense (non-GAAP).

Non-core items are included in financial results presented in accordance with generally accepted accounting principles (US GAAP).

The tables below also present computations of certain figures that are exclusive of the impact of PPP loans:

the ratios of common equity to total assets and tangible common equity to tangible assets, each adjusted for PPP loans (each non-GAAP), Tier 1 leverage ratio excluding average PPP loans (non-GAAP), net interest income and net interest margin, each adjusted for PPP loans and additional liquidity (each non-GAAP), and loan yield excluding PPP loans (non-GAAP).

the ratios of common equity to total assets and tangible common equity to tangible assets, each adjusted for PPP loans (each non-GAAP), Tier 1 leverage ratio excluding average PPP loans (non-GAAP), and net interest income and net interest margin, each adjusted for PPP loans and additional liquidity (each non-GAAP).

We believe the exclusion of these non-core items in expressing earnings and certain other financial measures, including “core earnings,” provides a meaningful basis for period-to-period and company-to-company comparisons, which management believes will assist investors and analysts in analyzing the core financial measures of the Company and predicting future performance.

11 unchanged sentences

• Investor presentations of Company performance

We have $1.182 billion and $1.186 billion total goodwill and other intangible assets for the periods ended March 31, 2021 and December 31, 2020, respectively.

We have $1.179 billion and $1.186 billion total goodwill and other intangible assets for the periods ended June 30, 2021 and December 31, 2020, respectively.

Because our acquisition strategy has resulted in a high level of intangible assets, management believes useful calculations include tangible book value per share (non-GAAP) and tangible common equity to tangible assets (non-GAAP).

We believe the exclusion of PPP loans or their impact, as applicable, in expressing earnings and certain other financial measures provides a meaningful basis for period-to-period and company-to-company comparisons because PPP loans are 100% federally guaranteed and have very low interest rates.

The Company’s non-GAAP financial measures that exclude PPP loans or their impact include the ratios of “common equity to total assets” and “tangible common equity to tangible assets,” each adjusted for PPP loans (each non-GAAP), “Tier 1 leverage ratio excluding average PPP loans” (non-GAAP), and “net interest margin,” adjusted for PPP loans and additional liquidity (non-GAAP), and “loan yield excluding PPP loans” (non-GAAP).

Additional liquidity is defined as average interest-bearing balances due from banks greater than normal liquidity levels.

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

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

3 unchanged sentences

Merger related costs 686 1,830 919 2,898

Early retirement program — 493 — 493

Branch right sizing 468 1,721 1,093 1,959

Tax effect (1)

(185) (482) 1,022 716

Net non-core items 524 1,358 (2,888) (2,027)

7 unchanged sentences

Tax effect (1)

— (0.01) 0.01 0.01

Net non-core items — 0.01 (0.03) (0.01)

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands) 2021 2020 2021 2020

5 unchanged sentences

Merger related costs (686) (1,830) (919) (2,898)

Early retirement program — (493) — (493)

Branch right sizing (468) (1,721) (1,093) (1,959)

3 unchanged sentences

Reconciliation of Tangible Book Value per Common Share (non-GAAP)

March 31, December 31,

June 30, December 31,

(In thousands, except per share data) 2021 2020

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Reconciliation of Tangible Common Equity and the Ratio of Tangible Common Equity to Tangible Assets (non-GAAP)

March 31, December 31,

June 30, December 31,

(Dollars in thousands) 2021 2020

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(Dollars in thousands) Three Months Ended

March 31, 2021

June 30, 2021

Total Tier 1 capital $ 2,000,023

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Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2021 2020 2021 2020

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PPP loan and additional liquidity (1) interest income

(9,445) (5,623) (21,694)

Net interest income adjusted for PPP loans and additional liquidity (1)

Average earning assets – quarter-to-date $ 20,484,908 $ 18,581,491

$ 141,636 $ 160,408 $ 280,231

Average earning assets $ 20,959,642 $ 19,517,475 $ 20,723,587 $ 19,049,487

Average PPP loan balance and additional liquidity (1)

(2,659,831) (2,071,411) 3,139,749

Average earning assets adjusted for PPP loans and additional liquidity (1)

$ 18,299,811 $ 17,446,064 $ 23,863,336

Net interest margin 2.89 % 3.42 % 2.94 % 3.55 %

2 unchanged sentences

3.10 % 3.70 % 3.21 %

_______________________________________

(1) Additional liquidity is estimated as the average interest bearing balances due from banks and federal funds sold greater than $750.0 million.

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 2. Management’s Discussion and Analysis