What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-25 compared with 2021-02-25 · 546 added, 364 removed, 1891 unchanged (32% of the section changed)

3 unchanged sentences

The Company has leveraged its investment in its subsidiary bank and depends upon the dividends paid to it, as the sole shareholder of the subsidiary bank, as a principal source of funds for dividends to shareholders, stock repurchases and debt service requirements.

At December 31, 2020, undivided profits of Simmons Bank were approximately $423.5 million, of which approximately $45.6 million was available for the payment of dividends to the Company without regulatory approval.

At December 31, 2021, undivided profits of Simmons Bank were approximately $498.7 million, none of which were available for the payment of dividends to the Company without regulatory approval.

In addition to dividends, other sources of liquidity for the Company are the sale of equity securities and the borrowing of funds.

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As of December 31, 2021, the model simulations projected that 100 and 200 basis point increases in interest rates would result in a positive variance in net interest income of 1.86% and 5.20%, respectively, relative to the base case over the next 12 months, while decreases in interest rates of 25 basis points would result in a negative variance in net interest income of 1.53% relative to the base case over the next 12 months.

The likelihood of a decrease in interest rates in excess of 25 basis points as of December 31, 2020, is considered remote given current interest rate levels.

The likelihood of a decrease in interest rates in excess of 25 basis points as of December 31, 2021, is considered remote given current interest rate levels and indications that the Federal Reserve will raise rates in 2022.

These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics of specific assets or liabilities.

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Management’s Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 686 )

Report on Internal Control Over Financial Reporting

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Notes to Consolidated Financial Statements, December 31, 202 1 , 20 20 and 201 9

Supplementary Data may be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quarterly Results” on page 72 hereof.

Management’s Report on Internal Control Over Financial Reporting

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Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2021 is effective based on the specified criteria.

BKD, LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020.

BKD, LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, immediately follows.

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Adoption of New Accounting Standard

As discussed in Notes 1, 3 and 5 to the consolidated financial statements, the Company has changed its method of accounting for the allowance for credit losses in 2020 due to the adoption of Topic 326.

As discussed below, auditing the Company’s allowance for credit losses, including adoption of the new accounting guidance related to the estimate of allowance for credit losses, was a critical audit matter.

2016-13, Financial Instruments, Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

Basis for Opinion

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments.

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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The Company’s unfunded loan commitments totaled $2.94 billion, with an allowance for credit loss of $22.4 million.

The Company’s available-for-sale and held-to-maturity securities portfolios totaled $3.8 billion as of December 31, 2020, and the allowance for credit losses on securities was $3.2 million.

The Company’s available-for-sale and held-to-maturity securities portfolios totaled $8.64 billion as of December 31,

2021, and the allowance for credit losses on securities was $1.3 million.

Together these amounts represent the allowance for credit losses (“ACL”).

As more fully described in the notes to the consolidated financial statements:

• For loans receivable, the ACL is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected.

• For unfunded loan commitments, the ACL is a liability account calculated in accordance with ASC 326, reported as a component of accrued interest and other liabilities.

• For loans receivable, the ACL is a contra-asset valuation account, calculated in accordance with Topic 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected.

• For unfunded loan commitments, the ACL is a liability account calculated in accordance with Topic 326, reported as a component of accrued interest and other liabilities.

• For securities, the ACL is a contra-valuation account that is deducted from the recorded basis of securities.

The Company adopted ASC 326 effective January 1, 2020.

The amount of each allowance account represented management’s best estimate of current expected credit losses on those financial instruments considering all available information from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument.

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The primary procedures we performed related to this critical audit matter included:

• Obtained an understanding of the Company’s process for establishing the ACL, including the implementation of models and the qualitative factor adjustments of the ACL

• Obtained an understanding of the Company’s process for establishing the ACL

• Evaluated and tested the design and operating effectiveness of related controls over the reliability and accuracy of data used to calculate and estimate the various components of the ACL including:

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• Considered the overall reasonableness of the ACL and compared to trends identified within peer groups

• Involved a specialist to review the appropriateness of the design and operation of the model

• Tested estimated utilization rate of unfunded loan commitments

• Reviewed documentation prepared to assess the methodology utilized by a third party performing the ACL calculation for securities for reasonableness

Goodwill Impairment Analysis

The Company’s goodwill totaled $1.08 billion at December 31, 2020.

As discussed in Notes 1 and 8 to the consolidated financial statements, goodwill is tested for impairment on the basis of one reporting unit at least annually, or more frequently as events occur or circumstances change.

In the second, third and fourth quarter of fiscal year 2020, the Company assessed relevant events and circumstances and determined it was appropriate to perform an impairment test.

In performing the test, management used both a market capitalization approach and discounted cash flow approach to determine the estimated fair value of the reporting unit.

As a result of the analysis, management determined the fair value of the reporting unit exceeded the carrying value resulting in the recognition of no goodwill impairment charge.

Auditing management's goodwill impairment test was complex due to the significant estimation and judgement required to determine the estimated fair value of the reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the Company's financial forecast, the discount rate and terminal value, which are affected by expectations about future market or economic conditions, including uncertainty resulting from the COVID-19 pandemic.

We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company's goodwill impairment process, including controls over management's review of the significant assumptions described above.

To test the estimated fair value of the Company's reporting unit, with the support of our valuation specialists, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to current industry and economic trends.

We assessed the historical accuracy of management's estimates and performed sensitivity analyses of significant assumptions to evaluate changes in the fair value estimate of the reporting unit resulting from changes in the assumptions.

In addition, we tested management's reconciliation of the fair value of the reporting unit to the market capitalization of the Company.

• Evaluated the accuracy and completeness of Topic 326 disclosures in the consolidated financial statements.

We have served as the Company’s auditor since 1972.

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Investment securities:

Held-to-maturity, net of allowance for credit losses of $ 2,915 at December 31, 2020

Held-to-maturity, net of allowance for credit losses of $ 1,279 and $ 2,915 at December 31, 2021 and 2020, respectively

1,529,221 333,031

Available-for-sale, net of allowance for credit losses of $ 312 at December 31, 2020 (amortized cost of $ 3,397,043 and $ 3,263,151 at December 31, 2020 and 2019, respectively)

Available-for-sale, net of allowance for credit losses of $ 0 and $ 312 at December 31, 2021 and 2020, respectively (amortized cost of $ 7,130,861 and $ 3,397,043 at December 31, 2021 and 2020, respectively)

7,113,545 3,473,598

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

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

767 shares issued and outstanding at December 31, 2020

Common stock, Class A, $ 0.01 par value;

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Undivided profits 1,093,270 901,006

Accumulated other comprehensive income 59,726 20,891

Accumulated other comprehensive income (loss)

( 10,545 ) 59,726

Total stockholders’ equity 3,248,841 2,976,656

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INTEREST INCOME

Loans $ 687,771 $ 710,935 $ 616,037

Loans, including fees $ 555,008 $ 687,771 $ 710,935

Interest bearing balances due from banks and federal funds sold 2,795 4,383 7,486

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NON-INTEREST INCOME

Trust income 27,705 25,040 23,128

Wealth management fees 31,172 30,386 27,353

Service charges on deposit accounts 43,231 43,082 44,782

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Mortgage lending income 21,798 34,469 15,017

SBA lending income 1,329 2,669 1,813

Investment banking income 2,681 2,313 3,141

Debit and credit card fees 28,245 24,711 22,137

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Unrealized holding gains (losses) arising during the period on available-for-sale securities ( 91,226 ) 107,382 76,109

107,382 76,109 ( 13,626 )

Unrealized holding gain on the transfer of held-to-maturity securities to available-for-sale per ASU 2017-12 — — 2,547

Reclassification adjustment for realized gains included in net income 15,498 54,806 13,314

Realized loss on available-for-sale securities interest rate hedges ( 10,588 ) — —

Net unrealized gains on securities transferred from available-for-sale to held-to-maturity during the period 1,106 — —

Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity ( 104 ) — —

Other comprehensive income (loss), before tax effect ( 95,134 ) 52,576 65,342

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Net income $ 271,156 $ 254,904 $ 238,167

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 47,220 49,038 36,257

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Net accretion of investment securities and assets ( 52,781 ) ( 56,771 ) ( 53,619 )

Net amortization (accretion) on borrowings 541 394 ( 380 )

Net amortization on borrowings 1,257 541 394

Stock-based compensation expense 15,868 13,197 12,921

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Gain on sale of branches ( 5,316 ) ( 8,094 ) —

Loss (gain) on sale of loans — 4,451 ( 10 )

Loss on sale of loans — — 4,451

Gain on sale of Visa, Inc.

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Proceeds from sale of loans 28,033 49,736 104,587

Decrease (increase) in due from banks - time 2,975 1,130 ( 1,620 )

Decrease in due from banks - time 292 2,975 1,130

Purchases of premises and equipment, net ( 47,861 ) ( 13,272 ) ( 67,831 )

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

Cash received in business combinations — 178,260 —

Cash received in business combinations, net 25,425 — 178,260

Disposition of assets and liabilities held for sale ( 134,166 ) 181,560 1,235

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Net change in deposits 847,494 1,086,713 ( 404,826 )

Proceeds from issuance of subordinated notes and other borrowings — 25,500 326,355

Repayments of subordinated debentures and subordinated debt ( 7,442 ) — ( 113,990 )

Proceeds from issuance of other borrowings — — 25,500

Repayments of subordinated debentures ( 1,563 ) ( 7,442 ) —

Dividends paid on preferred stock ( 47 ) ( 52 ) ( 339 )

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Net cash provided by (used in) financing activities 438,457 1,083,117 ( 697,390 )

INCREASE IN CASH EQUIVALENTS 2,475,529 163,165 235,416

INCREASE (DECREASE) IN CASH EQUIVALENTS ( 1,821,499 ) 2,475,529 163,165

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,472,152 996,623 833,458

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— 3 10,529 — — 10,532

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

42,000 40 102,790 — — 144,830

Stock issued for Landrum acquisition - 17,349,722 shares

767 173 414,832 — — 415,772

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

Stock repurchases - 390,000 shares

— ( 4 ) ( 10,124 ) — — ( 10,128 )

Dividends on preferred stock — — — — ( 339 ) ( 339 )

Dividends on common stock – $ 0.64 per share

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

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

Comprehensive income — — — 38,835 254,904 293,739

3 unchanged sentences

— 3 9,107 — — 9,110

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

42,000 40 102,790 — — 144,830

Stock issued for Landrum acquisition - 17,349,722 shares

767 173 414,832 — — 415,772

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

Stock repurchases - 5,956,700 shares

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

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

Comprehensive income — — — ( 70,271 ) 271,156 200,885

3 unchanged sentences

— 4 16,154 — — 16,158

Stock issued for Landmark acquisition - 4,499,872 shares

— 45 138,146 — — 138,191

Stock issued for Triumph acquisition - 4,164,712 shares

— 42 127,857 — — 127,899

Preferred stock retirement ( 767 ) — — — — ( 767 )

Stock repurchases - 4,562,469 shares

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Nature of Operations and Principles of Consolidation

Simmons First National Corporation (“Company”) is a financial holding company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank, an Arkansas state-chartered bank that has been in operation since 1903 (“Simmons Bank” or the “Bank”).

Simmons First National Corporation (“Company”) is a Mid-South financial holding company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank, an Arkansas state-chartered bank that has been in operation since 1903 (“Simmons Bank” or the “Bank”).

Simmons First Insurance Services, Inc.

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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 204 financial centers as of December 31, 2020, located throughout market areas in Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas.

and specialized products and services (such as credit cards, trust and fiduciary services, investments, agricultural finance lending, equipment lending, insurance and Small Business Administration (“SBA”) lending) from approximately 199 financial centers as of December 31, 2021, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

The consolidated financial statements include the accounts of the Company and its subsidiaries.

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Operating segments are components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company is organized on a divisional basis.

Each of the divisions provide a group of similar community banking services, including such products and services as loans;

The Company is organized on a divisional basis, with divisions grouped based on community and metro markets located within the Company’s footprint.

Each of the divisions, as well as their respective groups, provide a group of similar community banking services, including such products and services as loans;

time deposits, checking and savings accounts;

personal and corporate trust services;

treasury management, personal and corporate trust services;

credit cards;

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and securities and investment services.

Loan products include consumer, real estate, commercial, agricultural, equipment and SBA lending.

Loan products include consumer, real estate, commercial, agricultural, equipment, warehouse lending and SBA lending.

The individual bank divisions have similar operating and economic characteristics.

While the chief operating decision maker monitors the revenue streams of the various products, services, branch locations and divisions, operations are managed, financial performance is evaluated, and management makes decisions on how to allocate resources, on a Company-wide basis.

Accordingly, the divisions are considered by management to be aggregated into one reportable operating segment.

While the chief operating decision maker monitors the revenue streams of the various products, services, branch locations, divisions and groups, operations are managed, financial performance is evaluated, and management makes decisions on how to allocate resources, on a Company-wide basis.

Accordingly, the divisions and their respective groups are considered by management to be aggregated into one reportable operating segment.

The Company also considers its trust, investment and insurance services to be operating segments.

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Reclassifications

During 2020, the Company moved “equity securities” from the “available-for-sale investment securities” into “other assets.” The change had no impact on net income.

During 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 certain 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 and were not material to the consolidated financial statements.

During 2020, the Company moved equity securities from the available-for-sale investment securities into other assets as well as the related income which moved from interest income to non-interest income.

The change had no impact on net income.

Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative information.

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Investment Securities

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

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

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

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

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

Prepayments are anticipated for mortgage-backed and SBA securities.

Premiums on callable securities are amortized to their earliest call date.

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

Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income.

Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity.

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

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

Prepayments are anticipated for mortgage-backed and SBA securities.

Premiums on callable securities are amortized to their earliest call date.

Trading securities, if any, which include any security held primarily for near-term sale, are carried at fair value.

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Allowance for Credit Losses - Investment Securities

On January 1, 2020, the Company was required to adopt a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology.

See Note 20, New Accounting Standards, for additional information regarding adoption.

Allowance for Credit Losses - HTM Securities - The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics.

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

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

Losses are charged against the allowance when management

believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Mortgage Loans Held For Sale

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Allowance for Credit Losses

On January 1, 2020, the Company was required to adopt a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology.

See Note 20, New Accounting Standards, for additional information regarding adoption.

The allowance for credit losses is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical loss experience, and other qualitative considerations.

The allowance, in the judgment of management, is necessary to reserve for expected loan losses and risks inherent in the loan portfolio.

The allowance, in the judgment of management, is necessary to reserve for expected credit losses and risks inherent in the loan portfolio.

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

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Adjustments to the allowance are reported in the income statement as a component of the provision for credit losses.

Allowance for Credit Losses Prior to the Adoption of CECL

Prior to 2020, management categorized the allowance for credit losses by either general reserves or specific reserves.

The allowance for credit losses was based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for credit losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that affected specific loans and categories of loans.

The Company established general allocations for each major loan category.

This category also included allocations to loans which were collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans.

General reserves were established, based upon the aforementioned factors and allocated to the individual loan categories.

Specific reserves were provided on loans that were considered impaired when it was probable that the Company would not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments.

This included loans that were delinquent 90 days or more, nonaccrual loans and certain other loans identified by management.

Specific reserves were accrued for probable losses on specific loans evaluated for impairment for which the basis of each loan, including accrued interest, exceeded the discounted amount of expected future collections of interest and principal or, alternatively, the fair value of loan collateral.

Acquisition Accounting, Loans

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All identifiable assets acquired, including loans, are recorded at fair value.

The Company’s historical acquisitions all occurred under previous US GAAP prior to the Company’s adoption of CECL.

No allowance for loan losses related to the acquired loans was recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk.

Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820.

The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

The Company evaluates loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs .

The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method.

The fair value for acquired loans at the time of acquisition is based on a variety of factors including discounted expected cash flows, adjusted for estimated prepayments and credit losses.

In accordance with ASC 326, the fair value adjustment is recorded as premium or discount to the unpaid principal balance of each acquired loan.

Loans that have been identified as having experienced a more-than-insignificant deterioration in credit quality since origination is a purchased credit deteriorated (“PCD”) loan.

The net premium or discount on PCD loans is adjusted by the Company’s allowance for credit losses recorded at the time of acquisition.

The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using a constant yield method.

The net premium or discount on loans that are not classified as PCD (“non-PCD”), that includes credit and non-credit components, is accreted or amortized into interest income over the remaining life of the loan using a constant yield method.

The Company then records the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense.

For further discussion of our acquisition and loan accounting, see Note 2, Acquisitions, and Note 5, Loans and Allowance for Credit Losses.

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Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

The Company performs an annual goodwill impairment test, and more frequently if circumstances warrant, in accordance with ASC Topic 350, Intangibles – Goodwill and Other, as amended by Accounting Standards Update (“ASU”) 2011-08 - Testing Goodwill for Impairment .

The Company performs an annual goodwill impairment test, and more than annually if circumstances warrant, in accordance with ASC Topic 350, Intangibles – Goodwill and Other, as amended by Accounting Standards Update (“ASU”) 2011-08 - Testing Goodwill for Impairment .

ASC Topic 350 requires that goodwill and intangible assets that have indefinite lives be reviewed for impairment annually, or more frequently if certain conditions occur.

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The Company may enter into derivative contracts for the purposes of managing exposure to interest rate risk to meet the financing needs of its customers.

A derivative instrument is a financial tool which derives its value from the value of some other financial instrument, variable index, including certain hedging instruments embedded in other contracts.

A derivative instrument is a financial tool which derives its value from the value of some other financial

instrument, variable index, including certain hedging instruments embedded in other contracts.

These products are primarily designed to reduce interest rate risk for either the Company or its customers who proactively manage these risks.

The Company records all derivatives on the balance sheet at fair value.

In an effort to meet the financing needs of its customers, the Company has entered into fair value hedges.

Fair value hedges include interest rate swap agreements on fixed rate loans.

In an effort to meet the financing needs of its customers and mitigate the impact of changing interest rates on the fair value of AFS securities, the Company has entered into fair value hedges.

Fair value hedges include interest rate swap agreements on fixed rate loans and fixed rate callable AFS securities.

To qualify for hedge accounting, derivatives must be highly effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the point of inception of the derivative contract.

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The Company generally satisfies its performance obligation upon conveyance of property from the Company to the customer, generally by way of an executed agreement.

The transaction price is fixed, and on occasion the Company will finance a portion of the proceeds the customers uses to purchase the property.

The transaction price is fixed, and on

occasion the Company will finance a portion of the proceeds the customers uses to purchase the property.

These properties are generally sold without recourse or warranty.

Trust Income – The Company enters into contracts with its customers to manage assets for investment, and/or transact on their accounts.

Wealth Management Fees – The Company enters into contracts with its customers to manage assets for investment, and/or transact on their accounts.

The Company generally satisfies its performance obligations as services are rendered.

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Diluted earnings per share are computed using the weighted average common shares and all potential dilutive common shares outstanding during the period.

All share and per share amounts have been restated to reflect the effect of the two -for-one stock split during February 2018.

The computation of per share earnings is as follows:

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Diluted earnings per share $ 2.46 $ 2.31 $ 2.41

There were approximately 653,718 stock options excluded from the year ended December 31, 2020 earnings per share calculation due to the related stock option exercise price exceeding the average market price.

There were no stock options excluded from earnings per share calculations due to the related stock option exercise price exceeding the average market price for the years ended December 31, 2021 and 2019.

Stock-Based Compensation

5 unchanged sentences

For additional information, see Note 15, Employee Benefit Plans.

Landmark Community Bank

On October 8, 2021, the Company completed its acquisition of Landmark Community Bank (“Landmark”) pursuant to the terms of the Agreement and Plan of Merger dated as of June 4, 2021 (“Landmark Agreement”), at which time Landmark merged with and into Simmons Bank, with Simmons Bank continuing as the surviving entity.

The Company issued 4,499,872 shares of its common stock valued at approximately $ 138.2 million as of October 8, 2021, plus $ 6,451,727.43 in cash, in exchange for all outstanding shares of Landmark capital stock (and common stock equivalents) to effect the merger.

Prior to the acquisition, Landmark, headquartered in Collierville, Tennessee, conducted banking business from 8 branches located in the Memphis and Nashville, Tennessee, metropolitan areas.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 968.5 million in assets, including approximately $ 789.3 million in loans (inclusive of loan discounts), and approximately $ 802.7 million in deposits.

Goodwill of $ 31.7 million was recorded as a result of the transaction.

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

The goodwill will not be deductible for tax purposes.

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

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

Assets Acquired

Cash and due from banks $ 27,591 $ — $ 27,591

Due from banks - time 100 — 100

Investment securities 114,793 ( 265 ) 114,528

Loans acquired 785,551 3,767 789,318

Allowance for credit losses on loans ( 5,980 ) 3,621 ( 2,359 )

Premises and equipment 9,540 ( 4,099 ) 5,441

Bank owned life insurance 21,287 — 21,287

Core deposit intangible 88 4,071 4,159

Other assets 13,036 ( 4,608 ) 8,428

Total assets acquired $ 966,006 $ 2,487 $ 968,493

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

Liabilities Assumed

Non-interest bearing transaction accounts $ 110,393 $ — $ 110,393

Interest bearing transaction accounts and savings deposits 425,777 — 425,777

Time deposits 266,835 ( 334 ) 266,501

Total deposits 803,005 ( 334 ) 802,671

Other borrowings 47,023 — 47,023

Accrued interest and other liabilities 8,459 ( 3,122 ) 5,337

Total liabilities assumed 858,487 ( 3,456 ) 855,031

Equity 107,519 ( 107,519 ) —

Total equity assumed 107,519 ( 107,519 ) —

Total liabilities and equity assumed $ 966,006 $ ( 110,975 ) $ 855,031

Net assets acquired 113,462

Purchase price 145,195

Goodwill $ 31,733

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

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

The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger.

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

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

Triumph Bancshares, Inc.

On October 8, 2021, the Company completed its merger with Triumph Bancshares, Inc.

(“Triumph”) pursuant to the terms of the Agreement and Plan of Merger dated as of June 4, 2021 (“Triumph Agreement”), at which time Triumph merged with and into the Company, with the Company continuing as the surviving corporation.

The Company issued 4,164,712 shares of its common stock valued at approximately $ 127.9 million as of October 8, 2021, plus $ 1,693,402.93 in cash, in exchange for all outstanding shares of Triumph capital stock (and common stock equivalents) to effect the merger.

Prior to the acquisition, Triumph, headquartered in Memphis, Tennessee, conducted banking business through its subsidiary bank, Triumph Bank, from 6 branches located in the Memphis and Nashville, Tennessee, metropolitan areas.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 848.2 million in assets, including approximately $ 700.4 million in loans (inclusive of loan discounts), and approximately $ 719.7 million in deposits.

Goodwill of $ 39.0 million was recorded as a result of the transaction.

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

The goodwill will not be deductible for tax purposes.

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

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

Assets Acquired

Cash and due from banks $ 7,484 $ — $ 7,484

Due from banks - time 495 — 495

Investment securities 130,571 ( 1,106 ) 129,465

Loans acquired 702,460 ( 2,020 ) 700,440

Allowance for credit losses on loans ( 12,617 ) 1,525 ( 11,092 )

Premises and equipment 2,774 484 3,258

Goodwill 1,550 ( 1,550 ) —

Core deposit intangible — 5,136 5,136

Other assets 12,806 209 13,015

Total assets acquired $ 845,523 $ 2,678 $ 848,201

Liabilities Assumed

Non-interest bearing transaction accounts $ 115,729 $ — $ 115,729

Interest bearing transaction accounts and savings deposits 383,434 — 383,434

Time deposits 219,477 1,094 220,571

Total deposits 718,640 1,094 719,734

Other borrowings 2,854 — 2,854

Subordinated debentures 30,700 — 30,700

Accrued interest and other liabilities 2,882 455 3,337

Total liabilities assumed 755,076 1,549 756,625

Equity 90,446 ( 90,446 ) —

Total equity assumed 90,446 ( 90,446 ) —

Total liabilities and equity assumed $ 845,522 $ ( 88,897 ) $ 756,625

Net assets acquired 91,576

Purchase price 130,544

Goodwill $ 38,968

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

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

The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger.

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

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

The Landrum Company

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

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

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

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

See Note 5, Loans and Allowance for Credit Losses, in the accompanying Notes to Consolidated Financial Statements for additional information related to purchased financial assets with credit deterioration.

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

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Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Accrued interest and other liabilities – The adjustment establishes a liability for unfunded commitments equal to the fair value of that liability at the date of acquisition.

Accrued interest and other liabilities – The fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities.

The adjustment also establishes a liability for unfunded commitments equal to the fair value of that liability at the date of acquisition.

The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value.

Spirit of Texas Bancshares, Inc.

(Pending Acquisition)

On November 19, 2021, the Company announced that it had entered into an Agreement and Plan of Merger (“Spirit Agreement”) with Spirit of Texas Bancshares, Inc.

(“Spirit”), headquartered in Conroe, Texas, to acquire Spirit, including its wholly-owned bank subsidiary, Spirit of Texas Bank SSB.

According to the terms and subject to the conditions of the Spirit Agreement, upon consummation of the transaction, holders of Spirit’s common stock and common stock equivalents will receive, in the aggregate, 18,325,000 shares of the Company’s common stock, subject to certain conditions and potential adjustments under the Agreement, including substituting cash for the Company’s common stock to the extent necessary to cash out Spirit’s stock options and warrants (the “Merger Consideration”).

Based on the closing price of $ 31.73 for Simmons common stock on November 17, 2021, the Merger Consideration would have an implied aggregate value of approximately $ 581 million.

Spirit conducts banking business from 37 locations primarily in the Texas Triangle – consisting of the Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas – with additional locations in the Bryan-College Station, Corpus Christi and Tyler metropolitan areas, along with offices in North Central and South Texas.

As of December 31, 2021, Spirit had approximately $ 3.3 billion in assets, $ 2.3 billion in loans and $ 2.8 billion in deposits.

Completion of the transaction is expected during the second quarter of 2022 and is subject to certain closing conditions, including approval by the shareholders of Spirit, as well as customary regulatory approvals.

Simultaneously with the closing of the transaction, Spirit Bank is expected to be merged with and into Simmons Bank.

INVESTMENT SECURITIES

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

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

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

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

Prepayments are anticipated for mortgage-backed and SBA securities.

Premiums on callable securities are amortized to their earliest call date.

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

Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income.

Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity, further discussed below.

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

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

Prepayments are anticipated for mortgage-backed and SBA securities.

Premiums on callable securities are amortized to their earliest call date.

During the third quarter of 2021, the Company transferred, at fair value, $ 500.8 million of securities from the AFS portfolio to the HTM portfolio.

The related net unrealized gains of $ 1.0 million remained in accumulated other comprehensive income (loss) at December 31, 2021 and will be amortized over the remaining life of the securities.

No gains or losses on these securities were recognized at the time of transfer.

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

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December 31, 2021

Government agencies 232,609 — 232,609 — ( 7,914 ) 224,695

Mortgage-backed securities $ 70,342 $ — $ 70,342 $ 232 $ ( 1,425 ) $ 69,149

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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.

All mortgage-backed securities included in the table above were issued by U.S.

government agencies or corporations.

As of December 31, 2021, HTM MBS consisted of $ 4.9 million and $ 65.5 million of commercial MBS and residential MBS, respectively.

As of December 31, 2020, HTM MBS consisted 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:

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December 31, 2021

Treasury 300 — — — 300

Government agencies $ 374,754 $ — $ 495 $ ( 10,608 ) $ 364,641

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December 31, 2020

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

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

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

All mortgage-backed securities included in the table above were issued by U.S.

government agencies or corporations.

As of December 31, 2021, AFS MBS consisted of $ 1.53 billion and $ 2.92 billion of commercial MBS and residential MBS, respectively.

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

Accrued interest receivable on HTM and AFS securities at December 31, 2021 was $ 9.7 million and $ 23.4 million, respectively, and is included in interest receivable on the consolidated balance sheets.

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State and political subdivisions 530,647 ( 709 ) 29,565 ( 1,286 ) 560,212 ( 1,995 )

Other securities 228,182 ( 5,240 ) 6,984 ( 239 ) 235,166 ( 5,479 )

Total AFS $ 4,544,559 $ ( 42,797 ) $ 521,145 $ ( 18,524 ) $ 5,065,704 $ ( 61,321 )

As of December 31, 2020, the Company’s investment portfolio included $ 3.5 billion of AFS securities, of which $ 559.3 million, or 16.1 %, were in an unrealized loss position that are not deemed to have credit losses.

As of December 31, 2021, the Company’s investment portfolio included $ 7.11 billion of AFS securities, of which $ 5.07 billion, or 71.2 %, were in an unrealized loss position that are not deemed to have credit losses.

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

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Management believes the declines in fair value for the securities are temporary.

Management does not have the intent to sell the securities, and management believes it is more likely than not the Company will not have to sell the securities before recovery of their amortized cost basis.

Management does not have the intent to

sell the securities, and management believes it is more likely than not the Company will not have to sell the securities before recovery of their amortized cost basis.

Allowance for Credit Losses

All of the 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.

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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 year ended December 31, 2020 on the Company’s HTM and AFS securities held.

The following table details activity in the allowance for credit losses by investment security type for the years ended December 31, 2021 and 2020 on the Company’s HTM and AFS securities held.

(In thousands) State and Political Subdivisions Other Securities Total

December 31, 2021

Held-to-maturity

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

Provision for credit loss expense ( 1,110 ) ( 73 ) ( 1,183 )

Securities charged-off — ( 600 ) ( 600 )

Recoveries — 147 147

Ending balance, December 31, 2021 $ 1,197 $ 82 $ 1,279

Available-for-sale

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

Reduction due to sales — ( 11 ) ( 11 )

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

Ending balance, December 31, 2021 $ — $ — $ —

December 31, 2020

Held-to-maturity

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

Impact of ASU 2016-13 adoption 58 311 369

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Ending balance, December 31, 2020 $ 217 $ 95 $ 312

During the year ended December 31, 2020, the provision for credit losses was reduced by $ 61,000 related to AFS securities.

Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, there was no provision for credit losses related to AFS securities recorded in the last half of 2021.

During the year ended December 31, 2021 and 2020, the provision for credit losses was reduced by $ 312,000 and $ 61,000 , respectively, related to AFS securities.

The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of December 31, 2021:

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A 42,727 89,643 — 132,370 —

Baa/BBB — 13,539 13,539

Not Rated 6,207 27,715 — 33,922 17,301

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Total $ 111,693 $ 64,533 $ 63,376

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 are shown in the following table as of December 31, 2021.

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

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The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.9 billion at December 31, 2021 and $ 2.0 billion at December 31, 2020.

The Company sold approximately $ 342.6 million of investment securities compared to approximately $ 1.7 billion of investment securities during 2021 and 2020, respectively.

The increase in securities sold in 2020 was in large part related to efforts by the Company to increase liquidity in response to the early stages of the COVID-19 pandemic.

There were approximately $ 15.9 million of gross realized gains and $ 422,000 of gross realized losses from the sale of securities during the year ended December 31, 2021.

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

There were approximately $ 54.8 million of gross realized gains and $ 15,000 of gross realized losses from the sale of securities during the year ended December 31, 2020.

There were approximately $ 65,000 of gross realized gains and $ 4,000 of gross realized losses from the sale of securities during the year ended December 31, 2018.

There were approximately $ 13.3 million of gross realized gains and $ 4,000 of gross realized losses from the sale of securities during the year ended December 31, 2019.

The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2021, 2020 and 2019.

The Company has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair value of AFS securities.

Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Texas Branch Sale

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

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

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

The loan and deposit balances of the Texas Branches were $ 260.3 million and $ 139.5 million, respectively.

Colorado Branch Sale

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

Texas Branch Sale

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

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

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

The loan and deposit balances of the Colorado Branches were $ 120.4 million and $ 63.1 million, respectively.

During 2020, the Company recognized a combined gain on sale of $ 8.1 million related to the Texas Branch Sale and Colorado Branch Sale.

Pending Branch Sale

On November 30, 2020, Simmons Bank entered into a Branch Purchase and Assumption Agreement (the “Citizens Equity Agreement”) with Citizens Equity First Credit Union (“CEFCU”) pursuant to which CEFCU will purchase certain assets and assume certain liabilities (the “Illinois Branch Sale”) associated with four Simmons Bank locations in the Metro East area of Southern Illinois, near St.

Illinois Branch Sale

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

On March 12, 2021, CEFCU completed its purchase of certain assets and assumption of certain liabilities (the “Illinois Branch Sale”) associated with four Simmons Bank locations in the Metro East area of Southern Illinois, near St.

Louis (collectively, the “Illinois Branches”).

Pursuant to the terms of the Citizens Equity Agreement, CEFCU has agreed to assume certain deposit liabilities and to acquire certain loans, as well as cash, personal property and other fixed assets associated with the Illinois Branches.

The combined loan and deposit balances of the Illinois Branches (excluding certain loans and deposits not subject to the Illinois Branch Sale) as of December 31, 2020, were approximately $ 340,000 and $ 155 million, respectively.

The completion of the Illinois Branch Sale is subject to customary closing conditions and the approval of the purchase by the appropriate state and federal regulatory agencies.

Subject to the satisfaction of such conditions and approvals, CEFCU and Simmons Bank expect to close the Illinois Branch Sale in the first quarter of 2021.

Pursuant to the terms of the Citizens Equity Agreement, CEFCU assumed certain deposit liabilities and acquired certain loans, as well as cash, personal property and other fixed assets associated with the Illinois Branches.

The loan and deposit balances of the Illinois Branches were $ 354,000 and $ 137.9 million, respectively.

During 2021, the Company recognized a gain on sale of $ 5.3 million related to the Illinois Branches.

As of December 31, 2021, there were no outstanding other assets and other liabilities held for sale.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

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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 resulting in increasing 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.

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 length.

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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 participated in both PPP appropriations of the Coronavirus Aid, Relief, and Economic Security Act (“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.

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.

During 2020, we originated 8,208 PPP loans with original balances totaling $ 975.6 million.

As of December 31, 2020, the total outstanding balance of PPP loans was $ 904.7 million.

As of December 31, 2021 and 2020, the total outstanding balance of PPP loans was $ 116.7 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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Total $ 68,204 $ 122,879

Nonaccrual loans for which there is no related allowance for credit losses as of December 31, 2020 had an amortized cost of $ 16.8 million.

As of December 31, 2021 and 2020, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 14.5 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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Total $ 20,722 $ 32,907 $ 53,629 $ 11,958,874 $ 12,012,503 $ 349

(In thousands) Gross

Past Due 90 Days

Past Due Total

Past Due Current Total

Loans 90 Days

December 31, 2020

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

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

(In thousands) Unpaid

Balance Recorded

Allowance Recorded

Allowance Total

Investment Related

Allowance Average

Investment in

Loans Interest

December 31, 2019

Credit cards $ 382 $ 382 $ — $ 382 $ — $ 373 $ 50

Other consumer 1,537 1,378 — 1,378 — 1,659 41

Total consumer 1,919 1,760 — 1,760 — 2,032 91

Construction and development 4,648 4,466 72 4,538 4 2,464 61

Single family residential 19,466 15,139 2,963 18,102 42 15,470 382

Other commercial 10,645 4,713 3,740 8,453 694 9,983 247

Total real estate 34,759 24,318 6,775 31,093 740 27,917 690

Commercial 53,436 6,582 28,998 35,580 5,007 28,219 697

Agricultural 525 383 116 499 — 908 22

Total commercial 53,961 6,965 29,114 36,079 5,007 29,127 719

Total $ 90,639 $ 33,043 $ 35,889 $ 68,932 $ 5,747 $ 59,076 $ 1,500

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

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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 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.

As of December 31, 2020, the Company has modified 3,729 loans totaling approximately $ 2.99 billion to loan customers affected by COVID-19.

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

(Dollars in thousands) Number Balance

Real Estate Rental and Leasing 1,038 $ 1,160,537

Accommodation and Food Services 374 859,006

Health Care and Social Assistance 206 285,690

Construction 164 118,964

Retail Trade 143 131,311

Other Services (Except Public Administration) 128 56,283

Other 1,676 379,054

Total 3,729 $ 2,990,845

Deferred interest on the above loans totaled $ 20.2 million as of December 31, 2020.

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

As of December 31, 2020, over 3,600 loans totaling $ 2.9 billion that had previously been modified under the CARES Act had returned to regular payment terms in addition to those that have paid off.

As of December 31, 2021, the Company had 51 COVID-19 loan modifications outstanding in the amount of $ 8.6 million, compared to 3,729 modifications outstanding in the amount of $ 2.99 billion as of December 31, 2020.

The majority of COVID-19 loan modifications have returned to performing status or paid off.

TDRs are individually evaluated for expected credit losses.

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Total 31 $ 4,289 18 $ 2,650 49 $ 6,939

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans

(Dollars in thousands) Number Balance Number Balance Number Balance

December 31, 2020

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

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

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Single-family residential 3 274 197 — 197 —

Other commercial 1 784 766 — 766 —

Total real estate 4 $ 1,058 $ 963 $ — $ 963 $ —

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

During the year ended December 31, 2020, the Company modified five loans with a recorded investment of $ 1,948,000 prior to modification which were deemed troubled debt restructuring.

During the year ended December 31, 2021, the Company modified four loans with a recorded investment of $ 1,058,000 prior to modification which were deemed troubled debt restructuring.

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

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

During the year ended December 31, 2020, six of the previously restructured loans with prior balances of $ 837,265 were paid off.

During the year ended December 31, 2019, the Company modified four loans with a recorded investment of $ 997,000 prior to modification which were deemed troubled debt restructuring.

During the year ended December 31, 2021, nine of the previously restructured loans with prior balances of $ 1,002,874 were paid off.

During the year ended December 31, 2020, the Company modified five loans with a recorded investment of $ 1,948,000 prior to modification which were deemed troubled debt restructuring.

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

Based upon the fair value of the collateral, a specific reserve was no t determined necessary for these loans.

Based upon the fair value of the collateral, a specific reserve of $ 51,300 was determined as necessary for these loans as of December 31, 2020.

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

During the year ended December 31, 2019, three of the previously restructured loans with prior balances of $ 81,600 were paid off.

There was one commercial loan with an outstanding balance of $ 2.1 million considered a TDR for which a payment default occurred during the year ended December 31, 2020.

During the year ended December 31, 2019, there were four loans with an outstanding balance of $ 690,000 , consisting of commercial and real estate construction loans, considered TDRs for which a payment default occurred.

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

During the year ended December 31, 2020, six of the previously restructured loans with prior balances of $ 837,265 were paid off.

There was no loans considered TDRs for which a payment default occurred during the year ended December 31, 2021.

During the year ended December 31, 2020, there was one commercial loan with an outstanding balance of $ 2.1 million considered a TDR for which a payment default occurred.

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

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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 table presents a summary of loans by credit quality indicator, other than pass or current, as of 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 is a reconciliation between the expanded risk rating scale and the Company’s traditional risk rating segments utilized within the commercial loan classes presented in the credit quality indicator tables.

• Pass - Includes loans with an expanded risk rating of 1 through 11.

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

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

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

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

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

Term Loans Amortized Cost Basis by Origination Year

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Consumer - credit cards

Current $ — $ — $ — $ — $ — $ — $ 185,792 $ — $ 185,792

30-89 days past due — — — — — — 847 — 847

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Consumer - other

Current 97,830 21,885 11,712 6,756 5,416 3,833 19,607 — $ 167,039

30-89 days past due 265 121 164 49 219 156 175 — 1,149

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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 — — — — — — — — —

Pass 74,813 83,729 28,803 17,349 8,505 9,319 1,074,617 20,285 $ 1,317,420

Special mention — — 270 — — 47 — — 317

Substandard 191 77 16 54 324 423 5,598 1,951 8,634

Doubtful and loss — — — — — — — — —

Total real estate - C&D 75,004 83,806 29,089 17,403 8,829 9,789 1,080,215 22,236 1,326,371

Real estate - SF residential

Current 419,605 335,788 185,190 260,037 193,110 421,957 256,155 9,422 $ 2,081,264

30-89 days past due 1,061 883 1,662 791 1,077 4,360 1,479 — 11,313

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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 — — — — — — — — —

Pass 1,349,746 807,701 375,824 267,696 476,029 537,493 1,409,099 164,856 5,388,444

Special mention 28,151 30,981 2,799 6,650 39,361 4,801 38,638 1,608 152,989

Substandard 28,137 10,186 5,243 10,806 30,060 27,107 53,860 32,072 197,471

Doubtful and loss — — — — — — — — —

Total real estate - other commercial 1,406,034 848,868 383,866 285,152 545,450 569,401 1,501,597 198,536 5,738,904

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 — — — — — — — — —

Pass 455,499 187,517 80,486 57,437 36,529 57,099 1,004,971 41,885 1,921,423

Special mention 670 2,482 1,066 189 261 2,770 8,500 10,499 26,437

Substandard 3,436 18,381 4,397 1,196 578 850 8,242 7,103 44,183

Doubtful and loss — — — — — — — — —

Total commercial 459,605 208,380 85,949 58,822 37,368 60,719 1,021,713 59,487 1,992,043

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 — — — — — — — — —

Pass 32,780 20,230 10,253 3,646 2,364 459 98,245 327 168,304

Special mention — — — — — — — — —

Substandard 191 25 27 53 22 3 23 69 413

Doubtful and loss — — — — — — — — —

Total commercial - agriculture 32,971 20,255 10,280 3,699 2,386 462 98,268 396 168,717

Current 24,247 4,740 1,236 22,438 6,692 5,578 264,189 — 329,120

30-89 days past due — — — — — — — — —

90+ days past due — — — — — 3 — — 3

Total other 24,247 4,740 1,236 22,438 6,692 5,581 264,189 — 329,123

Total $ 2,516,672 $ 1,525,310 $ 709,683 $ 656,367 $ 801,918 $ 1,081,384 $ 4,431,020 $ 290,149 $ 12,012,503

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

(In thousands) Risk Rate

1-4 Risk Rate

December 31, 2019

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

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

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

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

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

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

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

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

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

The following table presents a summary of loans by credit quality indicator, as of December 31, 2020 segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year

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

Consumer - credit cards

Current $ — $ — $ — $ — $ — $ — $ 187,881 $ — $ 187,881

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

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

Total consumer - credit cards — — — — — — 188,845 — 188,845

Consumer - other

Current 69,334 44,215 27,525 21,995 19,023 2,530 14,684 — $ 199,306

30-89 days past due 234 441 327 658 689 84 338 — 2,771

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

Total consumer - other 69,647 44,714 27,877 22,733 19,752 2,626 15,030 — 202,379

Real estate - C&D

Pass 165,990 35,989 31,279 15,960 9,233 4,807 1,272,870 23,251 $ 1,559,379

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 169,012 38,402 31,942 18,516 9,594 5,127 1,300,397 23,265 1,596,255

Real estate - SF residential

Current 473,340 209,810 297,308 235,429 183,229 236,395 196,505 10,592 $ 1,842,608

30-89 days past due 6,300 2,258 2,593 2,610 2,058 6,050 1,781 76 23,726

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

Total real estate - SF residential 480,197 213,921 302,636 240,621 186,119 246,297 200,214 10,668 1,880,673

Real estate - other commercial

Pass 1,563,245 525,750 375,303 518,534 372,679 284,098 1,445,428 181,949 5,266,986

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 1,730,067 539,514 410,421 552,544 402,668 305,864 1,560,915 244,870 5,746,863

Pass 1,168,085 154,740 110,383 65,757 35,198 45,568 803,751 56,648 2,440,130

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 1,197,019 159,577 112,434 67,459 35,528 45,902 869,751 86,716 2,574,386

Other 275,714 — — — — 275,714

Commercial - agriculture

Pass 36,128 19,144 10,014 4,671 1,916 340 101,238 1,560 175,011

Special mention — 79 13 299 — 6 34 — 431

Substandard 86 101 64 47 12 10 68 75 463

Doubtful and loss — — — — — — — — —

Total commercial - agriculture 36,214 19,324 10,091 5,017 1,928 356 101,340 1,635 175,905

Current 125 4,260 27,256 6,489 2,628 6,065 488,676 — 535,499

30-89 days past due 59 — — — 33 — — — 92

90+ days past due — — — — — — — — —

Total other 184 4,260 27,256 6,489 2,661 6,065 488,676 — 535,591

Total $ 3,682,340 $ 1,019,712 $ 922,657 $ 913,379 $ 658,250 $ 612,237 $ 4,725,168 $ 367,154 $ 12,900,897

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

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 $ 70.0 million as of December 31, 2020, as further detailed in the table below.

Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated into homogeneous segments for assessment.

Reserve factors are based on estimated probability of default and loss given default for each segment.

The estimates are determined based on economic forecasts over the reasonable and supportable forecast period based on projected performance of economic variables that have a statistical relationship with the historical loss experience of the segments.

For contractual periods that extend beyond the one-year forecast period, the estimates revert to average historical loss experiences over a one-year period on a straight-line basis.

The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for.

Qualitative adjustments include, but are not limited to:

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

• Changes in the nature and volume of the portfolio - Adjustments related to current changes in the loan portfolio that are not fully represented or accounted for in the reserve factors.

• Changes in lending and loan monitoring policies and procedures - Adjustments related to current changes in lending and loan monitoring procedures as well as review of specific internal policy compliance metrics.

• Changes in the experience, ability, and depth of lending management and other relevant staff - Adjustments to measure increasing or decreasing credit risk related to lending and loan monitoring management.

• Changes in the value of underlying collateral of collateralized loans - Adjustments related to improving or deterioration of the value of underlying collateral that are not fully captured in the reserve factors.

• Changes in and the existence and effect of any concentrations of credit - Adjustments related to credit risk of specific industries that are not fully captured in the reserve factors.

• Changes in regional and local economic and business conditions and developments - Adjustments related to expected and current economic conditions at a regional or local-level that are not fully captured within the Company’s reasonable and supportable forecast.

• Data imprecisions due to limited historical loss data - Adjustments related to limited historical loss data that is representative of the collective loan portfolio.

Loans that do not share similar risk characteristics are evaluated on an individual basis.

These evaluations are typically performed on loans with a deteriorated internal risk rating or are classified as a troubled debt restructuring.

The allowance for credit loss is determined based on several methods including estimating the fair value of the underlying collateral or the present value of expected cash flows.

For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate.

This valuation is compared to the remaining outstanding principal balance of the loan.

If a loss is determined to be probable, the loss is included in the allowance for credit losses as a specific allocation.

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

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 $ 47.1 million and $ 70.0 million as of December 31, 2021 and 2020, respectively, 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.

(In thousands) Real Estate Collateral Energy Other Collateral Total

December 31, 2021

Construction and development $ 2,489 $ — $ — $ 2,489

3 unchanged sentences

Total $ 37,176 $ — $ 9,913 $ 47,089

December 31, 2020

Construction and development $ 1,539 $ — $ — $ 1,539

Single family residential 6,950 — — 6,950

Other commercial real estate — 40,703 5,741 46,444

Commercial 15,065 — — 15,065

Total $ 23,554 $ 40,703 $ 5,741 $ 69,998

The following table details activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2021, 2020 and 2019.

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December 31, 2021

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

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

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

Acquisition adjustment for PCD loans 3,349 10,101 — 1 13,451

Provision for credit loss expense ( 22,031 ) ( 7,918 ) ( 908 ) ( 352 ) ( 31,209 )

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December 31, 2020

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

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

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

Provision for credit loss expense 42,017 42,276 4,288 ( 6,093 ) 82,488

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Ending balance, December 31, 2019 $ 22,863 $ 39,161 $ 4,051 $ 2,169 $ 68,244

The primary driver for the provision for credit losses for the year ended December 31, 2020 was the continued uncertainty of a more prolonged recovery than initially anticipated to the economies that affect the loan portfolio as certain industries are being more adversely impacted by the COVID-19 pandemic, such as the restaurant, retail and hotel industries.

Additionally, specific provisions were made for two energy credits that were previously identified as problem loans that were impacted by the sharp decline in commodity pricing.

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

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

As of December 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.

Provision expense was recaptured during the year based upon improved asset credit quality metrics combined with improved Moody’s economic modeling scenarios.

The Company updated credit loss forecasts using multiple Moody’s economic scenarios published in December 2021.

The baseline economic forecast was weighted 65 % by the Company, while the downside scenario of S-2 was weighted 17 % and the upside scenario of S-1 was weighted 18 %.

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

The weighting of the forecasts is characterized by, among others, continual increase of CRE prices, increasing market rates and declining national unemployment rates.

While forecasts in various sectors have improved as of December 31, 2021 when compared with the prior year, the Company continues to closely monitor the scenarios as the economy emerges from the pandemic.

The primary driver for the provision for credit losses for the year ended December 31, 2020 was related to concern over the economic stresses related to COVID-19.

Additionally, specific provisions were made for two energy credits that were previously identified as problem loans that were impacted by the sharp decline in commodity pricing.

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

Reserve for Unfunded Commitments

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

The reserve for unfunded commitments as of December 31, 2020 and December 31, 2019 was $ 22.4 million and $ 8.4 million, respectively.

The increase from December 31, 2019 was due to the adoption of CECL.

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

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

For the year ended December 31, 2020, net adjustments to the reserve for unfunded commitments resulted in a benefit of $ 10.0 million and was included in provision for credit losses in the statement of income.

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

Provision for Credit Losses

8 unchanged sentences

Total $ ( 32,704 ) $ 74,973 $ 43,240

Provision for credit losses in 2019 and 2018 was calculated under the prior incurred loss accounting methodology.

Provision for credit losses in 2019 was calculated under the prior incurred loss accounting methodology.

Furthermore, provision for credit losses related to unfunded commitments was previously reported as a component of other non-interest expense.

Purchased Credit Deteriorated Loans

Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD.

For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit loss on the date of acquisition using the same methodology as discussed in the Allowance for Credit Losses section included above.

The following table provides a summary of loans purchased as part of the Landmark acquisition with credit deterioration at acquisition:

(In thousands) Commercial Real

Estate Credit

and Other Total

Unpaid principal balance 11,046 55,549 — 67 66,662

PCD allowance for credit loss at acquisition ( 350 ) ( 2,008 ) — ( 1 ) ( 2,359 )

Non-credit related discount ( 160 ) ( 2,415 ) — ( 2 ) ( 2,577 )

Fair value of PCD loans 10,536 51,126 — 64 61,726

The following table provides a summary of loans purchased as part of the Triumph acquisition with credit deterioration at acquisition:

(In thousands) Commercial Real

Estate Credit

and Other Total

Unpaid principal balance 40,466 80,803 — 15 121,284

PCD allowance for credit loss at acquisition ( 2,999 ) ( 8,093 ) — — ( 11,092 )

Non-credit related discount ( 279 ) ( 1,314 ) — ( 1 ) ( 1,594 )

Fair value of PCD loans 37,188 71,396 — 14 108,598

RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES

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Year (In thousands)

2022 $ 11,441

Thereafter 16,773

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Goodwill increased $ 19.8 million during 2020 due to the continued assessment of the fair value and assumed tax position of the Landrum acquisition that was finalized during the third quarter of 2020.

The Company recorded $ 39.0 million and $ 31.7 million of goodwill related to its acquisitions of Triumph and Landmark during 2021, respectively.

Goodwill impairment was neither indicated nor recorded in 2021, 2020 or 2019.

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

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

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

During the third and fourth quarters of 2020, the Company again performed a quantitative interim goodwill impairment assessment and concluded no impairment existed.

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

Due to the improved market and economic conditions during 2021, and the related effects on the Company’s share price, the Company did not perform any interim goodwill impairment assessments in addition to the annual impairment test.

An interim goodwill impairment analysis will be performed by the Company if the stock price falls below the book value per share for a full quarter.

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

While the goodwill impairment analysis indicated no impairment at December 31, 2021, the Company’s assessment depends on several assumptions which are dependent on market and economic conditions, and future changes in those conditions could impact the Company’s assessment in the future.

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Disposition of intangible asset (2)

( 674 ) ( 2,324 )

Amortization ( 12,122 ) ( 12,121 )

2 unchanged sentences

Balance, beginning of year 13,747 15,532

Acquisitions (3)

Disposition of intangible asset — ( 413 )

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_________________________

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

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

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

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

(1) Core deposit premiums of $ 5.1 million and $ 4.2 million were recorded during 2021 as part of the Triumph and Landmark acquisitions, respectively.

See Note 2, Acquisitions, for additional information on acquisitions completed in 2021.

(2) 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 December 31, 2021 and 2020 were as follows:

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TIME DEPOSITS

Time deposits included approximately $ 2.03 billion and $ 2.15 billion of certificates of deposit of $100,000 or more, at December 31, 2020 and 2019, respectively.

Of this total approximately $ 889.8 million and $ 837.3 million of certificates of deposit were over $250,000 at December 31, 2020 and 2019, respectively.

Brokered time deposits were $ 512.3 million and $ 1.06 billion at December 31, 2020 and 2019, respectively.

Time deposits included approximately $ 784.9 million and $ 889.8 million of certificates of deposit over $250,000 at December 31, 2021 and 2020, respectively.

Brokered time deposits were $ 466.0 million and $ 512.3 million at December 31, 2021 and 2020, respectively.

Maturities of all time deposits at December 31, 2021 are as follows:

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Right-of-use lease liability 11,984 7,835

Unrealized loss on available-for-sale securities 8,164 —

Allowance for unfunded commitments 5,442 5,583

6 unchanged sentences

Unrealized gain on available-for-sale securities — ( 17,521 )

Unrealized gain on swaps ( 2,767 ) —

Other ( 3,718 ) ( 4,021 )

Gross deferred tax liabilities ( 83,032 ) ( 102,904 )

Net deferred tax asset (liability) $ 13,495 $ ( 10,136 )

Net deferred tax asset $ 26,644 $ 13,495

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below for the years ended December 31:

3 unchanged sentences

State income taxes, net of federal tax benefit 4,452 6,402 5,860

Discrete items related to ASU 2016-09 375 ( 38 ) ( 2,439 )

Discrete items related to share-based compensation ( 17 ) 375 ( 38 )

Tax exempt interest income ( 11,510 ) ( 6,726 ) ( 4,390 )

Tax exempt earnings on BOLI ( 1,214 ) ( 852 ) ( 869 )

Tax exempt earnings on bank owned life insurance ( 1,212 ) ( 1,214 ) ( 852 )

Federal tax credits ( 2,260 ) ( 2,177 ) ( 939 )

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ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.

The Company has no history of expiring net operating loss carryforwards and is projecting significant pre-tax and financial taxable income in future years.

The Company has no history of expiring net

operating loss carryforwards and is projecting significant pre-tax and financial taxable income in future years.

The Company expects to fully realize its deferred tax assets in the future.

Income tax expense was lower during 2018 largely due to discrete tax benefits related to tax accounting for a cost segregation study, excess tax benefits related to restricted stock and a state tax deferred tax asset (“DTA”) adjustment.

The purpose of the cost segregation study was to analyze the costs included in various projects and recognize the benefit of recording tax depreciation in the previous year when the federal rate was higher.

The purpose of the state DTA adjustment was due to an analysis of projected state apportionment after certain acquisitions were merged into Simmons Bank.

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.

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net operating losses to reduce its tax liability.

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

In total, approximately $ 71.4 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company, of which $ 41.4 million is related to the Reliance acquisition that closed during second quarter of 2019.

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

In total, approximately $ 60.9 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company, of which $ 30.9 million is related to the Reliance acquisition that closed during 2019 and $ 1.9 million is related to the Landmark acquisition that closed during the fourth quarter of 2021.

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

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Trust preferred securities, net of discount, due 12/15/2036, floating rate of 1.85 % above the three month LIBOR rate, reset quarterly, callable without penalty

Other subordinated debentures, due 12/31/36, floating rate of prime rate minus 1.1 %, reset quarterly

Unamortized debt issuance costs ( 1,561 ) ( 2,643 )

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The Notes will mature on April 1, 2028 and will bear interest at an initial fixed rate of 5.00 % per annum, payable semi-annually in arrears.

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month LIBOR rate plus 215 basis points, payable quarterly in arrears.

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month London Interbank Offered Rate (“LIBOR”) rate plus 215 basis points, payable quarterly in arrears.

The Notes will be subordinated in right of payment to the payment of the Company’s other existing and future senior indebtedness, including all of its general creditors.

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The Notes qualify for Tier 2 capital treatment.

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

The terms of the Company’s Notes and trust preferred securities utilize the three month LIBOR rate to determine the interest rate and expense due each quarter.

The Company is currently reviewing all applicable documents and working with the debt holders and all relevant parties to determine the alternate interest rate index to be utilized, or other impacts, when the relevant LIBOR rate is discontinued.

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

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

At December 31, 2020, the FHLB advances outstanding were secured by

mortgage loans and investment securities totaling approximately $ 5.6 billion and the Company had approximately $ 2.7 billion of additional advances available from the FHLB.

At December 31, 2020, the Company had no FHLB advances outstanding with original or expected maturities of one year or less.

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

They still qualify for inclusion as Tier 2 capital at December 31, 2020.

At December 31, 2021, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 4.3 billion and the Company had approximately $ 2.9 billion of

additional advances available from the FHLB.

At December 31, 2021, the Company had $ 98,000 of FHLB advances outstanding with original or expected maturities of one year or less.

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

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

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On February 27, 2009, at a special meeting, the Company’s shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $ 0.01 par value.

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.

The aggregate liquidation preference of all shares of preferred stock cannot exceed $ 80.0 million.

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 January 18, 2018, the Board of Directors of the Company approved a two-for-one stock split of the Company’s outstanding Class A common stock (“Common Stock”) in the form of a 100% stock dividend for shareholders of record as of the close of business on January 30, 2018.

The new shares were distributed by the Company’s transfer agent, Computershare, and the Company’s common stock began trading on a split-adjusted basis on the Nasdaq Global Select Market on February 9, 2018.

All previously reported share and per share data included in filings subsequent to February 8, 2018 are restated to reflect the retroactive effect of this two -for-one stock split.

On November 30, 2021, the Company redeemed all of the Series D Preferred Stock, including accrued and unpaid dividends.

On March 31, 2021, the Company filed a shelf registration with the SEC.

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

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

On 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).

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

The timing, pricing, and amount of any repurchases under the Program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of the Company’s common stock, corporate considerations, the Company’s working capital and investment requirements, general market and economic conditions, and legal requirements.

The Program does not obligate the Company to repurchase any common stock and may be modified, discontinued, or suspended at any time without prior notice.

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

On October 22, 2019, the Company announced a new stock repurchase program (“2019 Program”) that replaced the stock repurchase program approved on July 23, 2012, under which the Company may repurchase up to $ 60.0 million of its Class A Common Stock currently issued and outstanding.

On March 5, 2020, the Company announced an amendment to the 2019 Program that increased the maximum amount that may be repurchased under the 2019 Program from $ 60.0 million to $ 180.0 million.

Effective July 23, 2021, the Company approved a second amendment that increased the maximum amount that may be repurchased under the 2019 Program to $ 276.5 million.

During 2021, the Company repurchased 4,562,469 shares at an average price of $ 29.03 per share under the 2019 Program.

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The Company repurchased 5,956,700 shares at an average price of $ 19.03 per share during 2020.

During January 2022, the Company substantially exhausted the remaining capacity under the 2019 Program and authorized a new stock repurchase program (the “2022 Program”) under which the Company may repurchase up to $ 175.0 million of its Class A common stock currently issued and outstanding.

Under the 2022 Program, which replaced the 2019 Program, the Company may repurchase shares of its common stock through open market and privately negotiated transactions or otherwise.

The timing, pricing, and amount of any repurchases under the 2022 Program will be determined by the Company’s management at its discretion based on a variety of factors, including, but not limited to, trading volume and market price of the Company’s common stock, corporate considerations, the Company’s working capital and investment requirements, general market and economic conditions, and legal requirements.

The 2022 Program does not obligate the Company to repurchase any common stock and may be modified, discontinued, or suspended at any time without prior notice.

The Company anticipates funding for this 2022 Program to come from available sources of liquidity, including cash on hand and future cash flow.

TRANSACTIONS WITH RELATED PARTIES

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Additionally, the Company may make profit-sharing contributions to the 401(k) Plan which are allocated among participants based upon 401(k) Plan compensation without regard to participant contributions.

Contribution expense to the plan totaled $ 10,280,000 , $ 13,021,000 and $ 10,769,000 in 2020, 2019 and 2018, respectively.

Contribution expense to the plan totaled $ 13.9 million, $ 10.3 million and $ 13.0 million in 2021, 2020 and 2019, respectively.

The Company also provides deferred compensation agreements with certain active and retired officers.

The agreements provide monthly payments of retirement compensation for either stated periods or for the life of the participant.

The charges to income for the plans were $ 2,716,000 for 2020, $ 2,294,000 for 2019 and $ 2,309,000 for 2018.

The charges to income for the plans were $ 2.7 million for 2021, $ 2.7 million for 2020 and $ 2.3 million for 2019.

Such charges reflect the straight-line accrual over the employment period of the present value of benefits due each participant, as of their full eligibility date, using an appropriate discount factor.

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Forfeitures are estimated at the time of grant, and are based partially on historical experience.

Share and per share information regarding stock-based compensation plans has been adjusted to reflect the effects of the Company’s two -for-one stock split which became effective on February 8, 2018.

The table below summarizes the transactions under the Company’s active stock compensation plans at December 31, 2021, 2020 and 2019, and changes during the years then ended:

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$ 10.65 — $ 24.07 473 3.56 $ 22.50 473 $ 22.50

$ 9.46 — $ 24.07 658 3.62 $ 22.48 658 $ 22.48

The table below summarizes the Company’s performance stock unit activity for the years ended December 31, 2021, 2020 and 2019:

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Non-vested, December 31, 2021 257

Stock-based compensation expense was $ 13,197,000 in 2020, $ 12,921,000 in 2019 and $ 11,227,000 in 2018.

Stock-based compensation expense was $ 15.9 million in 2021, $ 13.2 million in 2020 and $ 12.9 million in 2019.

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 December 31, 2021.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 15,524,000 at December 31, 2020.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 16.1 million at December 31, 2021.

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

The intrinsic value of stock options outstanding and stock options exercisable at December 31, 2020 was $ 134,000 .

The intrinsic value of stock options outstanding and stock options exercisable at December 31, 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 $ 29.58 at December 31, 2021, and the exercise price multiplied by the number of options outstanding.

There were 900 stock options exercised in 2020 with an intrinsic value of $ 10,000 .

There were 184,888 stock options exercised in 2021 with an intrinsic value of $ 1.3 million.

There were 900 stock options exercised in 2020 with an intrinsic value of $ 10,000 .

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Transfers of other real estate owned to premises held for sale — 4,163 —

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

Transfer of premises held for sale to premises 5,610 — —

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

Transfers of available-for-sale to held-to-maturity securities 500,809 — —

Transfers of held-to-maturity to available-for-sale securities

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OTHER INCOME AND OTHER OPERATING EXPENSES

Other income for the year ended December 31, 2020 was $ 38.5 million and included the gain on sales related to the Texas Branch Sale and Colorado Branch Sale of $ 8.1 million.

Other income for the years ended December 31, 2019 and 2018 was $ 62.0 million, that primarily consisted of the gain on sale of Visa Inc.

class B common stock of $ 42.9 million, and $ 23.7 million, respectively.

Other income for the year ended December 31, 2021 was $ 35.3 million and included the gain on sale related to the Illinois Branch Sale of $ 5.3 million.

Other income for the year ended December 31, 2020 was $ 39.9 million, which included the gain on sales related to the Texas Branch Sale and Colorado Branch Sale of $ 8.1 million, and other income for the year ended December 31, 2019 was $ 64.7 million, that primarily consisted of the gain on sale of Visa Inc.

class B common stock of $ 42.9 million.

Other operating expenses consisted of the following during the years ended December 31:

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Available-for-sale securities – Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities.

Level 1 securities would include highly liquid government bonds, mortgage products and certain other financial products.

Other securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs.

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

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

The third-party pricing service is subject to an annual review of internal controls (AT-C 320), which is made available for the Company’s review.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

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Available-for-sale securities

Treasury $ 300 $ 300 $ — $ —

Government agencies 364,641 — 364,641 —

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Derivative asset 25,852 — 25,852 —

Other liabilities held for sale ( 154,620 ) — — ( 154,620 )

Derivative liability ( 15,443 ) — ( 15,443 ) —

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Available-for-sale securities

Treasury $ 449,729 $ 449,729 $ — $ —

Government agencies 477,237 — 477,237 —

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

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

Derivative asset 35,846 — 35,846 —

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Discounts can be made by the Company based upon the overall evaluation of the independent appraisal.

Collateral-dependent loans are classified within Level 3 of the fair value hierarchy.

Collateral-dependent loans are classified within Level 3 of the fair value hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition.

Collateral values supporting the individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations.

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Interest bearing balances due from banks - time 1,882 — 1,882 — 1,882

Held-to-maturity securities 333,031 — 341,925 — 341,925

Held-to-maturity securities, net 1,529,221 — 1,517,378 — 1,517,378

Interest receivable 72,990 — 72,990 — 72,990

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

Held-to-maturity securities 40,927 — 41,855 — 41,855

Held-to-maturity securities, net 333,031 — 341,925 — 341,925

Interest receivable 72,597 — 72,597 — 72,597

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COMMITMENTS AND CREDIT RISK

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

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

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

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

At December 31, 2020, the Company had outstanding commitments to extend credit aggregating approximately $ 671,488,000 and $ 2,355,953,000 for credit card commitments and other loan commitments, respectively.

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

As of December 31, 2020 and 2019, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 213,998,000 and $ 51,136,000 respectively.

At December 31, 2021, the Company had outstanding commitments to extend credit aggregating approximately $ 685.3 million and $ 3.41 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 December 31, 2021 and 2020, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 108.5 million and $ 214.0 million respectively.

The commitments extend over varying periods of time with the majority being disbursed within a thirty-day period.

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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 $ 49,029,000 and $ 71,074,000 at December 31, 2020 and 2019, respectively, with terms ranging from 9 months to 15 years.

The Company had total outstanding letters of credit amounting to $ 37.7 million and $ 49.0 million at December 31, 2021 and 2020, respectively, with terms ranging from 9 months to 15 years.

At December 31, 2021 and 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 $ 1,549,214,000 and $ 1,496,367,000 at December 31, 2020 and 2019, respectively, and they expire in less than one year from issuance.

The amount of the letters of credit was $ 59.1 million and $ 1.55 billion at December 31, 2021 and 2020, respectively, and they expire in less than one year from issuance.

At December 31, 2021, the Company did not have concentrations of 5% or more of the investment portfolio in bonds issued by a single municipality.

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

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

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

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

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

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

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.

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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.

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2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”), which clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the “discounting transition”).

ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

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ASU 2021-01 did not have a material impact on the Company’s financial position or results of operations.

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

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

2019-12, Income Taxes (Topic 740):

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

ASU 2019-12 introduces the following new guidance:

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

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

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

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

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

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

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

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;

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Among other modifications, the amended disclosure requirements remove the term “at a minimum” from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities and clarifies that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

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

Under the new disclosure requirements, entities must disclose the changes in

unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

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

ASU 2018-13 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.

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The Company elected to apply the 2020 CECL Transition Provision.

Cloud Computing Arrangements – In August 2018, the FASB issued ASU No.

2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”), that amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project.

The internal-use software guidance states that only qualifying costs incurred during the application development stage can be capitalized.

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

Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with the applicable guidance.

At the time of adoption, entities will be required to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class.

The Company early adopted ASU 2018-15 in the first quarter 2019 and elected to apply the guidance prospectively to all software implementation costs incurred after the date of adoption.

The applicable software implementation costs that have been capitalized subsequent to the adoption of ASU No.

2018-15 have not had a material impact on our financial position or results of operations.

Derivatives and Hedging:

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The Company evaluated its held-to-maturity portfolio during the first quarter 2019 and identified certain municipal bonds with a fair value of $ 216.4 million that met the last-of-layer criteria under ASU 2017-12 and as a result, reclassified those to available-for-sale and recorded an unrealized gain of $ 2.5 million in accumulated other comprehensive income during the first quarter of 2019.

Goodwill Impairment – In January 2017, the FASB issued ASU No.

2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), that eliminates Step 2 from the goodwill impairment test which required entities to compare the implied fair value of goodwill to its carrying amount.

Under the amendments, the goodwill impairment will be measured as the excess of the reporting unit’s carrying amount over its fair value.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The effective date is for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual impairment tests beginning in 2017.

The Company early adopted ASU 2017-04 during the second quarter of 2019 to coincide with the Company’s formal impairment analysis.

See Note 8, Goodwill and Other Intangible Assets, for additional information.

Leases - In February 2016, the FASB issued ASU No.

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Recently Issued Accounting Standards

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

2019-12, Income Taxes (Topic 740):

ASU 2019-12 introduces the following new guidance:

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

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

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

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 has evaluated the impact this standard will have on its results of operations, financial position or disclosures, and it is not expected to have a material impact.

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

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The Company has set a maximum outstanding notional contract amount at 10 % of the Company’s assets.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings.

The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item.

During the third quarter of 2021, the Company began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable AFS securities.

The hedging strategy converts the fixed interest rates to variable interest rates based on federal funds rates.

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

December 31, 2021 December 31, 2020

(In thousands) Balance Sheet Location Weighted Average Pay Rate Receive Rate Notional Fair Value Notional Fair Value

Derivative assets Other assets 1.21 % Federal Funds $ 1,001,715 $ 10,524 $ — $ —

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

Carrying Amount of Hedged Assets Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets

Line Item on the Balance Sheet (In thousands) 2021 2020 2021 2020

Investment securities - Available-for-sale $ 1,063,173 $ — $ 10,524 $ —

Customer Risk Management Interest Rate Swaps

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Energy Hedging

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

The Company provides energy derivative services to qualifying, high quality oil and gas borrowers for hedging purposes.

The Company serves as an intermediary on energy derivative products between the Company’s borrowers and dealers.

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The outstanding notional value as of December 31, 2021 for energy hedging Customer Sell to Company swaps were $ 12.1 million and the corresponding Company Sell to Dealer swaps were $ 12.1 million and the corresponding net fair value of the derivative asset and derivative liability was $ 199,000 .

The outstanding notional value as of December 31, 2020 for energy hedging Customer Sell to Company swaps were $ 14.8 million and the corresponding Company Sell to Dealer swaps were $ 14.8 million and the corresponding net fair value of the derivative asset and derivative liability was $ 536,000 .

CONTINGENT LIABILITIES

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Plaintiffs seek unspecified damages, costs, attorneys’ fees, pre- and post-judgment interest, and other relief as the Court deems proper for themselves and the putative class.

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

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.

Simmons Bank denies the allegations but has reached a settlement in principle with the plaintiffs to resolve this matter, subject to the preparation and execution of a mutually acceptable settlement agreement and release, as well as the court’s approval.

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

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

The complaint alleges that Landmark Bank improperly charged overdraft fees where a transaction was initially authorized on sufficient funds but later settled negative due to intervening transactions.

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Plaintiff seeks to represent a proposed class of all Landmark Bank checking account customers from Missouri who were allegedly charged overdraft fees on transactions that did not overdraw their checking account.

Plaintiff seeks unspecified actual, statutory, and punitive damages as well as costs, attorneys’ fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for herself and the putative class.

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

Plaintiff seeks unspecified actual, statutory, and punitive damages as well as costs, attorneys’ fees, prejudgment interest, an injunction, and other relief as the Court deems proper for herself and the putative class.

Simmons Bank denies the allegations but has reached a settlement in principle with the plaintiff to resolve this matter, subject to the preparation and execution of a mutually acceptable settlement agreement and release, as well as the court’s approval.

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

On June 29, 2020, Shunda Wilkins, Diann Graham, and David Watson filed a putative class action complaint against Simmons Bank in the United States District Court for the Eastern District of Arkansas.

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

Plaintiffs seek unspecified damages, costs, attorney’s fees, prejudgment interest, an injunction, and other relief as the Court deems proper for themselves and the purported class.

Plaintiffs seek unspecified damages, costs, attorney’s fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for themselves and the purported class.

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

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

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

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

Plaintiff sought 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 sought 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 on January 11, 2022, the Court granted Simmons Bank’s motion to compel arbitration.

We establish reserves for legal proceedings when potential losses become probable and can be reasonably estimated.

While the ultimate resolution of any legal proceedings, including the matters described above, cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on our consolidated results of operations, financial condition, or cash flows.

While the ultimate resolution (including amounts thereof) of any legal proceedings, including the matters described above, cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, consolidated results of operations, financial condition, or cash flows.

It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to our results of operations for a given fiscal period.

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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 December 31, 2020, Simmons Bank had approximately $ 45.6 million available for payment of dividends to the Company, without prior regulatory approval.

Under the foregoing dividend restrictions, and while maintaining its “well capitalized” status, at December 31, 2021, Simmons Bank had paid to the Company all available dividends.

While past dividends are not necessarily indicative of amounts that may be paid, or available to be paid in future periods, net profits of Simmons Bank and cash balances at the Company are projected to be sufficient to pay quarterly dividends on the Company’s common stock at current levels and interest and principal on the Company’s debt as well as meet other liquidity needs.

The Company’s bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies.

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The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The risk-based capital guidelines of the Federal Reserve Board 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 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:

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

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all subject to applicable regulatory adjustments and deductions.

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

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

The Company and Simmons Bank, must hold a capital conservation buffer of 2.5% composed of CET1 capital above its minimum risk-based capital requirements.

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

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There are no conditions or events since that notification that management believes have changed these categories.

The Company’s and the subsidiary banks’ actual capital amounts and ratios are presented in the following table.

The Company’s and the subsidiary bank’ actual capital amounts and ratios are presented in the following table.

Actual Minimum

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Simmons Bank 2,136,253 15.3 1,116,995 8.0 1,396,244 10.0

Landmark Bank (1)

291,378 13.9 167,700 8.0 209,624 10.0

Tier 1 Risk-Based Capital Ratio

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Simmons Bank 2,046,711 14.6 841,114 6.0 1,121,485 8.0

Landmark Bank (1)

290,016 13.8 126,094 6.0 168,125 8.0

Common Equity Tier 1 Capital Ratio

1 unchanged sentence

Simmons Bank 2,046,711 14.6 630,836 4.5 911,207 6.5

Landmark Bank (1)

270,016 12.9 94,192 4.5 136,055 6.5

Tier 1 Leverage Ratio

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Simmons Bank 2,046,711 9.9 826,954 4.0 1,033,692 5.0

Landmark Bank (1)

290,016 8.8 131,825 4.0 164,782 5.0

______________________

(1) Landmark Bank was merged into Simmons Bank on February 14, 2020.

CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

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Other, net 2 185 29

Net cash (used in) provided by investing activities ( 14,999 ) ( 57,744 ) 4,266

Net cash used in investing activities ( 9,038 ) ( 14,999 ) ( 57,744 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of subordinated notes — — 326,355

(Repayment) issuance of long-term debt, net ( 1,563 ) ( 7,442 ) 2,000

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Preferred stock retirement ( 767 ) — ( 42,000 )

Net cash (used in) provided by financing activities ( 198,545 ) ( 115,465 ) 41,545

Net cash used in financing activities ( 212,221 ) ( 198,545 ) ( 115,465 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,628 68,015 ( 114,995 )

3 unchanged sentences

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-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk