What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-05 · 201 added, 309 removed, 569 unchanged (47% of the section changed)

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

Our net income for the three months ended September 30, 2021 was $80.6 million, or $0.74 diluted earnings per share, increases of $14.7 million and $0.14, respectively, compared to the third quarter of 2020.

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

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

Excluding all non-core items, core earnings for the three months ended September 30, 2021 were $79.4 million, or $0.73 core diluted earnings per share, compared to $68.3 million, or $0.63 core diluted earnings per share for the three months ended September 30, 2020.

Net income for the first nine months of 2021 was $222.9 million, or $2.05 diluted earnings per share, compared to $201.9 million, or $1.83 diluted earnings per share, for the same period in 2020.

In addition to the non-core items referenced above, gains associated with the sale of branch operations were included in the results for the first nine months of both 2021 and 2020.

Excluding these non-core items, year-to-date core earnings were $218.8 million, an increase of $16.5 million compared to the same period in the prior year.

Core diluted earnings per share for the first half of 2021 were $2.01 compared to $1.83 for the same period in 2020.

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

These acquisitions were completed on October 8, 2021.

We were able to obtain all necessary approvals, close and simultaneously complete the systems conversions of the two banks within approximately four months of the announcement, which we believe speaks to the outstanding team we have developed.

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

We closed 13 branches during July 2021 as part of our ongoing branch right sizing initiative.

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

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

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

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

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

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

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

Nonperforming loans declined for the fourth consecutive quarter and are now at their lowest levels since December of 2018.

Stockholders’ equity as of September 30, 2021 was $3.0 billion, book value per share was $28.42 and tangible book value per share was $17.39.

Our ratio of common stockholders’ equity to total assets was 13.04% and the ratio of tangible common stockholders’ equity to tangible assets was 8.41% at September 30, 2021.

In November 2020, the SEC issued Final Rule 33-10890, Management’s Discussion and Analysis, Selected Financial Data and Supplementary Financial Information, which modernizes and simplifies certain disclosure requirements of Regulation S-K.

An update to Item 303(c) of Regulation S-K allows registrants to compare the results of the most recently completed quarter to the results of either the immediately preceding quarter or the corresponding quarter of the preceding fiscal year.

The final rule became effective on February 10, 2021 and must be applied in a registrant’s first fiscal year ending on or after August 9, 2021.

Management has elected to present sequential quarterly analysis as we believe that comparing current quarter results to those of the immediately preceding fiscal quarter is more useful in identifying current business trends and provides a more relevant analysis of our business results.

Additionally, in the first filing after the adoption of these rule changes, we are required to present results in both the historic presentation and the new revised presentation formats.

Accordingly, we have compared our results of operations for the three months ended March 31, 2022 to our results of operations for the three months ended December 31, 2021 and March 31, 2021, as applicable, throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations..

Net income for the first three months of 2022 was $65.1 million, or $0.58 diluted earnings per share, compared to net income of $48.2 million, or $0.42 diluted earnings per share and $67.4 million, or $0.62 diluted earnings per share, for the three months ended December 31, 2021 and March 31, 2021, respectively.

Included in each comparative quarter’s results were non-core items related to our acquisitions and branch right sizing initiatives.

In addition, gains associated with the sale of branch operations were included in the results for the first three months of 2021.

Excluding these non-core items, core earnings for the three months ended March 31, 2022 were $67.2 million, an increase of $7.7 million as compared to the preceding sequential fiscal quarter, and an increase of $3.2 million compared to the same period in the prior year.

Core diluted earnings per share for the first three months of 2022 were $0.59 compared to $0.52 and $0.59 for the three months ended December 31, 2021, and March 31, 2021, respectively.

In November 2021, we announced the Company had entered into the Spirit Agreement with Spirit, headquartered in Conroe, Texas, including its wholly-owned bank subsidiary, Spirit of Texas Bank SSB.

This acquisition was completed on April 8, 2022.

We were able to obtain all necessary approvals, consummate the transaction and successfully complete the systems conversion less than five months after the announcement, which we believe speaks to the outstanding team we have developed.

See Note 2, Acquisitions, in the accompanying Notes to Consolidated Financial Statements for additional information related to this acquisition.

Simmons Bank was named to Forbes magazine’s list of “World’s Best Banks” for the third consecutive year and ranked among the top 45 banks in Forbes’ list of “America’s Best Banks” for 2022.

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

Our asset quality continued to show marked improvement during the first quarter of 2022.

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.30% at March 31, 2022, compared to 0.33% at December 31, 2021 and 0.56% at March 31, 2021.

Stockholders’ equity as of March 31, 2022 was $2.96 billion, book value per share was $26.32 and tangible book value per share was $15.22.

Our ratio of common stockholders’ equity to total assets was 12.10% and the ratio of tangible common stockholders’ equity to tangible assets was 7.37% at March 31, 2022.

The Company’s Tier 1 leverage ratio of 9.00%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” guidelines (see Table 12 in the Capital section of this Item).

We repurchased approximately 1.8 million shares of our common stock during the third quarter of 2021.

Total deposits were $18.1 billion at September 30, 2021, compared to $17.0 billion at December 31, 2020 and $16.2 billion at September 30, 2020.

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

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

Total loans were $10.8 billion at September 30, 2021, compared to $12.9 billion at December 31, 2020 and $14.0 billion at September 30, 2020.

Total loan production (loan originations and advances) during the third quarter of 2021 totaled $1.5 billion, which along with the production during the first half of the year positions us to exceed loan production volume reported for the full year of 2020.

While loan originations and advances are outpacing prior year production, the decline in loan balances reflects, in significant part, the substantial government stimulus to support the economy during the COVID-19 pandemic which contributed to an increase in the level of loan paydowns, payoffs and corresponding sluggish loan demand throughout the financial services industry during the majority of 2021.

In addition, the decline in balances has also been due to our strategic right-sizing of our commercial real estate construction portfolio as several large projects were completed.

Our commercial pipeline rose for the fourth consecutive quarter to $1.5 billion and was up 15% from the prior quarter end and we are seeing activity from repeat customers across most of our business lines.

We repurchased 513,725 shares of our common stock during the first quarter of 2022, which substantially exhausted the remaining capacity under the 2019 Program.

As a result, in January 2022, our Board of Directors authorized the 2022 Program, which replaced the 2019 Program and under which the Company may repurchase up to $175.0 million of its Class A common stock currently issued and outstanding.

Total deposits were $19.39 billion at March 31, 2022, compared to $19.37 billion at December 31, 2021 and $18.19 billion at March 31, 2021.

The increase in total deposits from the same period end of 2021 primarily reflects the acquisition of Landmark and Triumph which were completed in the fourth quarter of 2021.

Total loans were $12.03 billion at March 31, 2022, compared to $12.01 billion at December 31, 2021 and $12.20 billion at March 31, 2021.

Total loan production (loan originations and advances) during the first quarter of 2022 totaled $2.51 billion, which outpaced loan paydowns and payoffs.

Our commercial loan pipeline rose for the sixth consecutive quarter to $2.36 billion at March 31, 2022, while our unfunded commitments rose for the fourth consecutive quarter to $3.43 billion at March 31, 2022, a 68% year-over-over increase.

We are seeing activity from repeat customers across most of our business lines.

For these reasons, amongst others, we are continuing to actively recruit loan producers across all of our business units.

As of September 30, 2021, we had $212.1 million in loans outstanding under the PPP.

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

PPP PPP Total

(Dollars in thousands) Round 1 Round 2 PPP Loans

Beginning balance, January 1, 2021 $ 904,673 $ — $ 904,673

PPP loan originations — 318,919 318,919

PPP loan forgiveness and repayments (882,295) (129,210) (1,011,505)

Ending balance, September 30, 2021 $ 22,378 $ 189,709 $ 212,087

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

As a result, excluding PPP loans from total assets, common equity to total assets was 13.16% and tangible common equity to tangible assets was 8.49% as of September 30, 2021.

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

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

We continue to have good asset quality and positive credit performance during the quarter.

In our discussion and analysis of our financial condition and results of operation in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we provide certain financial information determined by methods other than in accordance with US GAAP.

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

Simmons First National Corporation is a Mid-South based financial holding company that, as of September 30, 2021, has approximately $23.2 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

CRITICAL ACCOUNTING POLICIES

Simmons First National Corporation is a Mid-South based financial holding company that, as of March 31, 2022, has approximately $24.5 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

CRITICAL ACCOUNTING ESTIMATES

We follow accounting and reporting policies that conform, in all material respects, to US GAAP and to general practices within the financial services industry.

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The actual amounts of credit losses realized in the near term could differ from the amounts estimated in arriving at the allowance for credit losses reported in the financial statements.

On January 1, 2020, the Company adopted the new CECL methodology.

See Note 1, Preparation of Interim Financial Statements , in the accompanying Condensed Notes to Consolidated Financial Statements for additional information.

Acquisition Accounting, Loans

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

In accordance with ASC 326, we record both a discount and an allowance for credit losses on acquired loans.

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 included estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

We evaluate 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 are purchased credit deteriorated (“PCD”) loans.

The net premium or discount on PCD loans is adjusted by our 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.

We then record the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense.

Goodwill and Intangible Assets

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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.

Our assessment depends on several assumptions which are dependent on market and economic conditions.

Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

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Management must make conclusions and estimates about the application of these innately intricate laws, related regulations, and case law.

When preparing the Company’s income tax returns, management attempts to make reasonable

interpretations of the tax laws.

When preparing the Company’s income tax returns, management attempts to make reasonable interpretations of the tax laws.

Taxing authorities have the ability to challenge management’s analysis of the tax law or any reinterpretation management makes in its ongoing assessment of facts and the developing case law.

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Factors that determine the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and the amount of non-interest bearing liabilities supporting earning assets.

Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis.

Net interest income is analyzed in

the discussion and tables below on a fully taxable equivalent basis.

The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate of 26.135%.

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Our current interest rate sensitivity shows that approximately 43% of our loans and 81% of our time deposits will reprice in the next year.

Net Interest Income Quarter-to-Date Analysis

For the three month period ended September 30, 2021, net interest income on a fully taxable equivalent basis was $150.2 million, a decrease of $6.3 million, or 4.0%, over the same period in 2020.

The decrease in net interest income was primarily the result of a $13.7 million decrease in fully tax equivalent interest income partially offset by a $7.4 million decrease in interest expense.

The reduction in interest income primarily resulted from a $31.0 million decrease in interest income on loans partially offset by an increase of $17.9 million in interest income on investment securities.

Regarding the decrease in interest income on loans during the third quarter of 2021, the decline in loan volume resulted in a decrease $39.1 million, partially offset by $8.1 million of interest income from a 22 basis point increase in loan yield.

The loan yield for the third quarter of 2021 was 4.76% compared to 4.54% from the same period in 2020.

We generated additional interest income on investment securities by redeploying a portion of excess cash to purchase $1.2 billion of investment securities during the third quarter of 2021, which included $226.3 million of short-term, variable rate securities.

The $7.4 million decrease in interest expense is mostly due to the decline in our deposit account rates.

Interest expense decreased $7.2 million due to the decrease in yield of 27 basis points on interest-bearing deposit accounts.

Net Interest Income Year-to-Date Analysis

For the nine month period ended September 30, 2021, net interest income on a fully taxable equivalent basis was $452.1 million, a decrease of $40.2 million, or 8.2%, over the same period in 2020.

Net Interest Income - Sequential Quarter Analysis

For the three month period ended March 31, 2022, net interest income on a fully taxable equivalent basis was $151.2 million, a decrease of $7.5 million, or 4.7%, compared to the three months ended December 31, 2021.

The decrease in net interest income was the result of a $9.0 million decrease in fully tax equivalent interest income, partially offset by a $1.5 million decrease in interest expense.

The decrease in interest income during the nine month period ended September 30, 2021 primarily resulted from a $110.3 million decrease in interest income on loans, that reflects a decrease in loan volume of $98.2 million coupled with an 11 basis point decline in yield that resulted in a $12.1 million decrease, partially offset by an increase in interest income on investment securities of $38.3 million.

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

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

We sold approximately $342.6 million of investment securities during the first nine months of 2021 compared to $1.7 billion of investment securities during the same period in 2020.

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

We began to re-invest in our investment security portfolio during the fourth quarter of 2020 and continued throughout the nine month period ended September 30, 2021.

The decrease in interest income primarily resulted from a $10.4 million decrease in interest income on loans, that reflects a decrease in loan volume of $330,000 coupled with a 24 basis point decline in yield that resulted in a $10.0 million decrease, partially offset by an increase in interest income on investment securities of $1.4 million.

The $1.5 million decrease in interest expense is mostly due to the decrease in our deposit account rates.

Interest expense decreased $34.5 million due to the decrease in rate of 39 basis points on interest-bearing deposit accounts, partially offset by an increase of $2.1 million related to approximately $1.1 billion in average deposit growth.

Interest expense decreased $1.1 million due to the decrease in rate of 4 basis points on interest-bearing deposit accounts.

Net Interest Income - Year-over-Year Analysis

Net interest income on a fully taxable equivalent basis was relatively flat on a year-over-year basis, with a slight increase of $364,000, or 0.2%, when comparing the three months ended March 31, 2022 to the same period in the prior year.

While the overall change was relatively flat, the components of net interest income fluctuated between periods.

Net interest income for the three months ended March 31, 2022 experienced a $6.3 million decrease in fully tax equivalent interest income offset by a $6.6 million decrease in interest expense, on a year-over-year basis.

The decrease in interest income compared to the three months ended March 31, 2021 primarily resulted from a $19.2 million decrease in interest income on loans, that reflects a decrease in loan volume of $7.1 million coupled with a 41 basis point decline in yield that resulted in a $12.1 million decrease, significantly offset by an increase in interest income on investment securities of $13.5 million.

The decrease in loan volume during the first three months of 2022 was primarily due to the forgiveness of PPP loan balances, which averaged $89.8 million and $891.1 million for the three months ended March 31, 2022 and 2021, respectively.

Forgiveness of PPP loans was partially offset by the acquired loan portfolios of Landmark and Triumph.

The increase in interest income on investment securities was due to the growth in our investment portfolio average balances which increased by $4.1 billion or 94.3%, as we re-invested excess liquidity in our investment security portfolio throughout 2021.

The $6.6 million decrease in interest expense is mostly due to the decrease in our deposit account rates.

Interest expense decreased $5.9 million due to the decrease in rate of 22 basis points on interest-bearing deposit accounts.

Additionally, while our overall average interest bearing deposit portfolio grew by approximately $1.2 billion, a decrease of $502,000 in interest expense was related to a $801.9 million decrease in time deposit accounts due to the maturing of existing time deposits, coupled with a continued effort to improve our mix of deposits into lower cost deposits.

Net Interest Margin

Our net interest margin on a fully tax equivalent basis decreased 36 basis points to 2.85% for the three month period ended September 30, 2021, when compared to 3.21% for the same period in 2020.

Normalized for all accretion, our core net interest margin for the three months ended September 30, 2021 and 2020 was 2.77% and 3.02%, respectively.

For the nine month period ended September 30, 2021, our net interest margin decreased 52 basis points to 2.91% when compared to 3.43% for the same period in 2020.

The decreases in the net interest margin during the three and nine months ended September 30, 2021 compared to the same periods in 2020, were primarily due to the aforementioned decline in net interest income coupled with a $934.7 million increase in average cash and equivalents driven by the lower interest rate environment and additional liquidity created in response to the COVID-19 pandemic.

We purchased investment securities which added approximately $3.5 billion to our average investment securities portfolio during the first nine months of 2021.

The impact of these items on net interest margin for the nine months ended September 30, 2021 was 18 basis points, bringing the net interest margin adjusted for PPP loans and additional liquidity to 3.09%.

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

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

In addition, our decreased net interest margin is being driven by the decrease in our non-PPP loan portfolio as a result of COVID-19 but our loan pipeline has started to rebuild and we expect modest organic loan growth during the last quarter of 2021.

Our net interest margin on a fully tax equivalent basis was 2.76% for the three month period ended March 31, 2022, as compared to 2.86% and 2.99% for the three months ended December 31, 2021 and March 31, 2021, respectively.

The decreases of 10 basis points and 23 basis points for the three month period ended March 31, 2022, as compared to the three month period ended December 31, 2021 and March 31, 2021, respectively, were primarily due to lower loan yields compared to previous periods, offset by the lower cost of deposits, as we continue to manage our interest expense through deposit pricing.

Normalized for all accretion, our core net interest margin for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, was 2.70%, 2.75% and 2.86%, respectively.

Net Interest Income Tables

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

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

Analysis of Net Interest Margin

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Three Months Ended

September 30, Nine Months Ended

September 30,

March 31, December 31, March 31,

(In thousands) 2022 2021 2021

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Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2021 vs.

2020 2021 vs.

Decrease due to change in earning assets $ (16,818) $ (43,521)

Increase (decrease) due to change in earning asset yields 3,096 (30,627)

Increase (decrease) due to change in interest bearing liabilities 93 (1,472)

(In thousands) March 31, 2022 compared to December 31, 2021 March 31, 2022 compared to March 31, 2021

Increase (decrease) due to change in earning assets $ (227) $ 9,046

Decrease due to change in earning asset yields (8,755) (15,314)

Increase due to change in interest bearing liabilities 233 556

Increase due to change in interest rates paid on interest bearing liabilities 1,297 6,076

Decrease in net interest income $ (6,296) $ (40,190)

Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the three and nine months ended September 30, 2021 and 2020.

Increase (decrease) in net interest income $ (7,452) $ 364

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

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

Three Months Ended September 30,

Average Income/ Yield/ Average Income/ Yield/

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

Earning assets:

Interest bearing balances due from banks and federal funds sold

$ 1,866,530 $ 763 0.16 $ 2,265,233 $ 623 0.11

Investment securities - taxable

5,475,932 17,076 1.24 1,534,742 7,193 1.86

Investment securities - non-taxable

2,496,958 18,399 2.92 1,155,099 10,382 3.58

Mortgage loans held for sale

32,134 230 2.84 145,226 1,012 2.77

Loans - including fees 11,030,438 132,399 4.76 14,315,014 163,379 4.54

Total interest earning assets 20,901,992 168,867 3.21 19,415,314 182,589 3.74

Non-earning assets 2,353,549 2,350,007

Total assets $ 23,255,541 $ 21,765,321

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:

Interest bearing transaction and savings deposits

$ 10,629,142 $ 4,369 0.16 $ 8,977,886 $ 6,769 0.30

Time deposits 2,645,896 4,747 0.71 2,998,091 9,437 1.25

Total interest bearing deposits 13,275,038 9,116 0.27 11,975,977 16,206 0.54

Federal funds purchased and securities sold under agreements to repurchase

219,604 70 0.13 386,631 335 0.34

Other borrowings 1,338,866 4,893 1.45 1,357,278 4,943 1.45

Subordinated debt and debentures 383,213 4,610 4.77 382,672 4,631 4.81

Total interest bearing liabilities 15,216,721 18,689 0.49 14,102,558 26,115 0.74

Non-interest bearing liabilities:

Non-interest bearing deposits 4,803,171 4,529,782

Other liabilities 167,677 190,169

Total liabilities 20,187,569 18,822,509

Stockholders’ equity 3,067,972 2,942,812

Total liabilities and stockholders’ equity

$ 23,255,541 $ 21,765,321

Net interest spread – FTE 2.72 3.00

Net interest margin – FTE $ 150,178 2.85 $ 156,474 3.21

Nine Months Ended September 30,

Average Income/ Yield/ Average Income/ Yield/

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

Three Months Ended

March 31, 2022 December 31, 2021 March 31, 2021

Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/

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

Earning assets:

Interest bearing balances due from banks and federal funds sold $ 1,728,694 $ 649 0.15 $ 1,484,752 $ 583 0.16 $ 3,477,989 $ 798 0.09

$ 2,676,911 $ 2,212 0.11 $ 1,742,166 $ 3,667 0.28

Investment securities - taxable 5,688,306 18,148 1.29 5,790,429 17,186 1.18 2,334,078 10,120 1.76

4,081,927 41,790 1.37 1,832,577 27,319 1.99

Investment securities - non-taxable 2,844,777 20,937 2.98 2,787,301 20,470 2.91 2,057,132 15,439 3.04

2,193,431 50,737 3.09 974,748 26,888 3.68

Mortgage loans held for sale 27,633 190 2.79 42,866 310 2.87 97,409 639 2.66

59,362 1,255 2.83 91,889 1,961 2.85

Loans - including fees 11,895,805 127,405 4.34 11,924,444 137,762 4.58 12,518,300 146,601 4.75

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Interest bearing transaction and savings deposits $ 12,083,516 $ 4,314 0.14 $ 11,413,325 $ 4,390 0.15 $ 10,093,868 $ 6,088 0.24

$ 10,377,609 $ 15,178 0.20 $ 9,040,053 $ 31,926 0.47

Time deposits 2,241,123 2,503 0.45 2,607,011 3,705 0.56 3,043,000 7,091 0.95

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Federal funds purchased and securities sold under agreements to repurchase 218,186 68 0.13 223,008 72 0.13 307,540 245 0.32

255,684 507 0.27 370,116 1,431 0.52

Other borrowings 1,337,654 4,779 1.45 1,340,825 4,903 1.45 1,341,059 4,802 1.45

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Total liabilities and stockholders’ equity $ 24,826,199 $ 24,698,022 $ 22,738,821

$ 23,085,987 $ 21,503,564

Net interest spread – FTE 2.66 2.74 2.83

Net interest margin – FTE $ 151,208 2.76 $ 158,660 2.86 $ 150,844 2.99

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

Table 4 shows changes in interest income and interest expense resulting from changes in both volume and interest rates for the three month period ended March 31, 2022, as compared to the three months ended December 31, 2021 and March 31, 2021, respectively.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 vs.

March 31, 2022 compared to December 31, 2021 March 31, 2022 compared to March 31, 2021

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

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

The provision for credit losses for the three and nine months ended September 30, 2021 was a recapture of $19.9 million and $31.4 million, respectively, compared to an expense of $23.0 million and $68.0 million for the same periods ended September 30, 2020.

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

The increase during the nine month period ended September 30, 2020 included provision related to problem energy credits which were negatively impacted by the sharp decline in commodity pricing, and ultimately charged-off during the second quarter of 2020 for a total of $32.6 million.

In addition, uncertain economic forecasts during the first nine months of 2020 due to the impact of the COVID-19 pandemic drove higher provisions for credit losses during that period, a portion of which has been subsequently released.

We had a recapture of $19.9 million of provision for credit losses for the three months ended March 31, 2022, as compared to a recapture of $1.3 million for the three months ended December 31, 2021 and a provision for credit losses of $1.4 million for the same period ended March 31, 2021.

The recapture of credit losses was driven by improved credit quality metrics and improved macroeconomic factors, coupled with the planned exit of several large oil and gas relationships during the quarter.

NON-INTEREST INCOME

Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and debit and credit card fees.

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

Total non-interest income was $48.6 million for the three month period September 30, 2021, a decrease of approximately $20.9 million, or 30.1%, compared to the same period in 2020, primarily driven by decreases in mortgage lending income and the difference in gains on sale of securities recognized during the periods.

Conversely, we had increases in total service charges on deposit accounts and fees of $1.4 million, or 11.3%, primarily attributable to additional customer transactions related to changes in customer spending habits during the third quarter of 2021.

For the nine month period ended September 30, 2021, total non-interest income was $145.2 million, a decrease of approximately $52.8 million, or 26.7%, compared to the same period in 2020, primarily due to decreases in the gains on sale of securities and mortgage lending income.

During the first nine months of 2021, we sold approximately $342.6 million of investment securities resulting in a net gain of $15.8 million, compared to $1.7 billion of investment securities sold for a net gain of $54.8 million in the first nine months of 2020.

Additionally, the gain on sale of branches, which we consider a non-core item, decreased approximately $2.8 million, compared to the same period in 2020.

An increase of $2.5 million in debit and credit fees partially offset the overall decrease in non-interest income during the first nine months of 2021 as a result of additional transactions due to the changes in customer spending habits.

Decreases of $8.2 million and $14.7 million in mortgage lending income for the three and nine month periods ended September 30, 2021 were largely a result of decreases in the value of derivative contracts related to the mortgage banking operations partially offset by gains on the sale of mortgage loans that were driven by an increase in volume of loans sold during the first nine months of 2021 compared to the same period in 2020.

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

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

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

Non-interest income is principally derived from recurring fee income, which includes service charges, wealth management fees and debit and credit card fees.

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

For the three month period ended March 31, 2022, total non-interest income was $42.2 million, a decrease of $4.4 million or 9.4% and $7.3 million or 14.8%, compared to the three months ended December 31, 2021 and March 31, 2021, respectively.

The decrease reflects the normal seasonality of service charges.

Mortgage lending income decreased by $493,000 and $1.9 million for the three month period ended March 31, 2022, as compared to the three months ended December 31, 2021 and March 31, 2021, respectively.

The decrease was due to a decline in refinancing demand and mortgage loan volume driven by the current rising rate environment.

Other income for the three month period ended March 31, 2022 decreased by $2.7 million as compared to the preceding sequential fiscal quarter, and increased by $2.1 million, when compared to the same period in the prior year.

The changes in other income are primarily driven by the $1.4 million and $3.1 million settlement awards received by the Company during the three months ended March 31, 2022 and December 31, 2021, respectively.

The additional year-over-year decreases are due to the recognizing a net gain of $5.5 million on the sale of investment securities and a $5.3 million gain on the sale of Illinois branches during the three months ended March 31, 2021.

Table 5 shows non-interest income for the three month periods ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively, as well as changes between periods.

Non-Interest Income

Three Months Ended

September 30, 2021

Change from Nine Months Ended

September 30, 2021

March 31, December 31, March 31, Change from Quarter - Sequential Change from Quarter - Year-over-Year

(Dollars in thousands) 2022 2021 2021

Trust income $ 7,145 $ 6,744 $ 401 6.0% $ 21,049 $ 21,148 $ (99) (0.5)%

Wealth management fees $ 7,968 $ 8,042 $ 7,361 $ (74) (0.9) % $ 607 8.2 %

Service charges on deposit accounts 10,696 11,909 9,715 (1,213) (10.2) % 981 10.1

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Mortgage lending income 4,550 5,043 6,447 (493) (9.8) % (1,897) (29.4)

SBA lending income 191 304 (113) (37.2) 718 845 (127) (15.0)

Investment banking income 732 557 175 31.4 2,081 2,005 76 3.8

Debit and credit card fees (1)

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Bank owned life insurance income 2,706 2,768 1,523 (62) (2.2) % 1,183 77.7

Gain on sale of securities, net 5,248 22,305 (17,057) (76.5) 15,846 54,790 (38,944) (71.1)

Gain (loss) on sale of securities, net (54) (348) 5,471 294 * (5,525) *

Gain on sale of branches — — 5,300 — * (5,300) *

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Prior periods have been adjusted to reflect this reclassification.

Recurring fee income (total service charges, trust fees, debit and credit card fees) for the three month period ended September 30, 2021 was $27.8 million, an increase of $2.4 million from the same period in 2020.

Recurring fee income for the nine month period ended September 30, 2021, was $79.1 million, an increase of $2.5 million from the nine month period ended September 30, 2020.

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

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) for the three month period ended March 31, 2022, was $27.8 million, a decrease of $1.4 million and an increase of $2.1 million from the three month periods ended December 31, 2021 and March 31, 2021, respectively.

The decrease as compared to the preceding sequential fiscal quarter is due to the seasonal changes in customer spending habits, whereas the increase as compared to the same period in the prior year are primarily the result of the strengthened economic activity and increase in customer base from the Landmark and Triumph acquisitions.

NON-INTEREST EXPENSE

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

For the three month period ended September 30, 2021, non-interest expense was $114.3 million, a decrease of $2.2 million, or 1.9%, from the three month period ended September 30, 2020.

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

Non-interest expense for the nine months ended September 30, 2021 was $342.0 million, a decrease of $16.9 million, or 4.7%, from the same period in 2020.

Normalizing for the non-core costs, core non-interest expense for the nine months ended September 30, 2021 decreased $8.0 million, or 2.3%, from the same period in 2020.

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

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

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

For the three month period ended March 31, 2022, total non-interest expense was $128.4 million, a decrease of $13.2 million, or 9.3% and an increase of $15.4 million, or 13.6% compared to the three months ended December 31, 2021 and March 31, 2021, respectively.

Salaries and employee benefits expense increased by $4.1 million and $7.6 million as compared to the three months ended December 31, 2021 and March 31, 2021, respectively.

The increases reflects normal seasonality with respect to payroll taxes at the beginning of the year, as well as a profit-sharing contribution associated with the Company’s 401(k) plan and costs associated with equity compensation.

Additionally, our results of operations for the three month period ended March 31, 2022 compared to the three month period ended March 31, 2021 includes the impacts of the Landmark and Triumph acquisitions.

Merger related costs for the three month period ended March 31, 2022 decreased by $11.7 million as compared to the preceding sequential quarter, and increased by $1.7 million, when compared to the same period in the prior year.

The decrease as compared to the preceeding sequential quarter is due to the Landmark and Triumph acquisitions, whereas the increase as compared to the same period in the prior year is primarily due to the Spirit acquisition completed April 8, 2022.

See Note 2, Acquisitions, in the accompanying Notes to Consolidated Financial Statements for additional information related to these acquisitions.

Core non-interest expense for the three month period ended March 31, 2022, which excludes branch right sizing and merger related costs, decreased by $734,000 or 0.6% and increased by $13.5 million or 12.0% from the three month periods ended December 31, 2021 and March 31, 2021, respectively.

Marketing expense decreased by $3.2 million for the three month period ended March 31, 2022 as compared to the sequential quarter, primarily due to a $2.5 million donation to the Simmons First Foundation during the three months ended December 31, 2021.

Marketing expense increased by $3.0 million when compared to the same period in the prior year due to increased advertising and public relations expenses, including a multi-university corporate sponsorship program designed to support female student athletes and serve as a program for developing women leaders in the corporate world.

Table 6 below shows non-interest expense for the three month periods ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively, as well as changes between periods.

Non-Interest Expense

Three Months Ended

September 30, 2021

Change from Nine Months Ended

September 30, 2021

March 31, December 31, March 31, Change from Quarter - Sequential Change from Quarter - Year-over-Year

(Dollars in thousands) 2022 2021 2021

Salaries and employee benefits $ 67,906 63,832 $ 60,340 $ 4,074 6.4 % $ 7,566 12.5 %

Early retirement expense — 2,346 (2,346) (100.0) — 2,839 (2,839) (100.0)

Occupancy expense, net 10,023 11,033 9,300 (1,010) (9.2) % 723 7.8 %

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

HTM and AFS investment securities were $1.5 billion and $6.8 billion, respectively, at September 30, 2021, compared to the HTM amount of $333.0 million and AFS amount of $3.5 billion at December 31, 2020.

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

During the third quarter of 2021, we purchased $1.2 billion of investment securities, including strategically redeploying $226.3 million of excess cash into short-term, variable rate securities.

HTM and AFS investment securities were $1.6 billion and $6.6 billion, respectively, at March 31, 2022, compared to the HTM amount of $1.5 billion and AFS amount of $7.1 billion at December 31, 2021.

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

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

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

Furthermore, as of March 31, 2022, management also had the ability and intent to hold the securities classified as AFS for a period of time sufficient for a recovery of cost.

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

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LOAN PORTFOLIO

Our loan portfolio averaged $11.77 billion and $14.53 billion during the first nine months of 2021 and 2020, respectively.

As of September 30, 2021, total loans were $10.83 billion, a decrease of $2.1 billion from December 31, 2020.

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

Our loan portfolio averaged $11.90 billion and $12.52 billion during the first three months of 2022 and 2021, respectively.

As of March 31, 2022, total loans were $12.03 billion, a slight increase of $16.1 million from December 31, 2021.

The average loan balance for the first three months of 2021 included $891.1 million of PPP loans compared to an average PPP loan balance of $89.8 million for the first three months of 2022.

This period-to-period decline in average PPP loan balance was partially offset by the 2021 acquisitions of Landmark and Triumph.

See Note 2, Acquisitions, in the accompanying Notes to Consolidated Financial Statements for additional information related to these acquisitions.

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

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Loan Portfolio

September 30, December 31,

March 31, December 31,

(In thousands) 2022 2021

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

Consumer loans were $358.4 million at September 30, 2021, or 3.3% of total loans, compared to $391.2 million, or 3.0% of total loans at December 31, 2020.

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

Consumer loans were $365.0 million at March 31, 2022, or 3.0% of total loans, compared to $355.4 million, or 3.0% of total loans at December 31, 2021.

The increase in consumer loans from December 31, 2021, to March 31, 2022, was primarily due to growth in direct consumer loans partially offset by the expected seasonal decline in our credit card portfolio.

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

Real estate loans were $8.08 billion at September 30, 2021, or 74.6% of total loans, compared to $9.22 billion, or 71.5%, of total loans at December 31, 2020, a decrease of $1.1 billion, or 12.4%.

Our C&D loans decreased by $366.5 million, or 23.0%, single family residential loans decreased by $340.0 million, or 18.1%, and CRE loans decreased by $438.0 million, or 7.6%.

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

Real estate loans were $9.23 billion at March 31, 2022, or 76.7% of total loans, compared to $9.17 billion, or 76.3%, of total loans at December 31, 2021, a slight increase of $61.7 million, or 0.7%.

Our C&D loans increased by $97.1 million, or 7.3%, single family residential loans decreased by $59.0 million, or 2.8%, and CRE loans experienced a marginal increase of $23.7 million, or 0.4%.

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

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

Total commercial loans were $2.04 billion at September 30, 2021, or 18.8% of total loans, compared to $2.75 billion, or 21.3% of total loans at December 31, 2020, a decrease of $711.7 million, or 25.9%.

During the first nine months of 2021, we originated $318.9 million under the PPP Round 2 program.

As a result of expected reimbursements from the SBA related to PPP loan forgiveness of both PPP Round 1 and Round 2 loans, PPP loan balances declined by $1.0 billion during the same period.

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

Agricultural loans increased $40.8 million, or 23.2%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter.

Total commercial loans were relatively flat between periods with a balance of $2.17 billion at March 31, 2022, or 18.0% of total loans, compared to $2.16 billion, or 18.0% of total loans at December 31, 2021, an increase of $6.1 million, or 0.3%.

New commercial fundings and advances outpaced the planned run-off of $54.5 million in our energy portfolio and the $54.8 million of PPP loan payoffs during the quarter.

Agricultural loans decreased $18.3 million, or 10.8%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter.

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

Other loans mainly consists of mortgage warehouse lending.

Mortgage volume, while still strong, declined during the first nine months of 2021 when compared to 2020, leading to a decrease of $186.7 million in other loans primarily from mortgage warehouse lines of credit.

Mortgage volume experienced a market driven decline during the first three months of 2022 when compared to 2021, leading to a decrease of $61.4 million in other loans primarily from mortgage warehouse lines of credit.

Loan demand appears to be returning to more normalized levels.

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

Our loan pipeline consisting of all loan opportunities was $1.5 billion at September 30, 2021 compared to $673.7 million at December 31, 2020.

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

We are seeing loan growth in our metro, community and corporate banking groups and continue to add new producers in these areas.

Our loan pipeline consisting of all loan opportunities was $2.36 billion at March 31, 2022, compared to $2.31 billion at December 31, 2021.

Loans approved and ready to close at the end of the quarter totaled $775.7 million.

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

Total non-performing assets decreased $71.0 million from December 31, 2020 to September 30, 2021.

Nonaccrual loans decreased by $63.8 million during the period and foreclosed assets held for sale and other real estate owned decreased by $6.6 million.

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

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.33% at September 30, 2021, compared to 0.66% at December 31, 2020.

Total non-performing assets decreased $5.3 million from December 31, 2021 to March 31, 2022.

Nonaccrual loans decreased by $4.1 million during the period and foreclosed assets held for sale and other real estate owned decreased by $914,000.

The decrease in nonaccrual loans was primarily due to an overall improvement in economic conditions.

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

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

Our TDR balance remained relatively flat at $6.8 million as of September 30, 2021, decreasing $712,000 from December 31, 2020.

Our TDR balance remained relatively flat at $6.0 million as of March 31, 2022, decreasing $897,000 from December 31, 2021.

TDRs are individually evaluated for expected credit losses.

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

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

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

The Company elected to adopt these provisions of the CARES Act and is following the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by regulatory agencies.

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

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

At September 30, 2021, the Company had 35 COVID-19 loan modifications outstanding in the amount of $82.0 million.

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

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

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

The allowance for credit losses as a percent of total loans was 1.87% as of September 30, 2021.

The allowance for credit losses as a percent of total loans was 1.49% as of March 31, 2022.

Non-performing loans equaled 0.53% of total loans.

Non-performing assets were 0.29% of total assets, a 2 basis point decrease from December 31, 2021.

The allowance for credit losses was 341% of non-performing loans.

Our annualized net charge-offs to average total loans for the first nine months of 2021 was 0.06%.

The allowance for credit losses was 278% of non-performing loans as of March 31, 2022.

Our annualized net charge-offs to average total loans for the first three months of 2022 was 0.22%.

Excluding credit cards, the annualized net charge-offs to average total loans for the same period was 0.20%.

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Non-performing Assets

September 30, December 31,

March 31, December 31,

(Dollars in thousands) 2022 2021

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_______________________________________

(1) Includes nonaccrual TDRs of approximately $2,550,000 at September 30, 2021 and $4,375,000 at December 31, 2020.

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

(1) Includes nonaccrual TDRs of approximately $2,618,000 at March 31, 2022 and $2,650,000 at December 31, 2021.

The interest income on nonaccrual loans is not considered material for the three month periods ended March 31, 2022 and 2021.

ALLOWANCE FOR CREDIT LOSSES

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Balance, beginning of year $ 205,332 $ 238,050

Impact of CECL adoption — 151,377

Loans charged off:

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Provision for credit losses (19,914) —

Balance, September 30, $ 202,508 $ 248,251

Balance, March 31, $ 178,924 $ 235,116

Loans charged off:

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Provision for credit losses (31,209)

Acquisition adjustment for PCD loans 13,451

Balance, end of year $ 205,332

Provision for Credit Losses

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

The amount of provision added to or released from the allowance during the three months ended March 31, 2022 and 2021, and for the year ended December 31, 2021, was based on management’s judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic forecasts and conditions, past due and non-performing loans and net loss experience.

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

Allowance for Credit Losses Allocation

As of September 30, 2021, the allowance for credit losses reflected a decrease of approximately $35.5 million from December 31, 2020 while total loans decreased $2.1 billion over the same nine month period.

As of March 31, 2022, the allowance for credit losses reflected a decrease of approximately $26.4 million from December 31, 2021 while total loans were relatively flat with a slight increase of $16.1 million over the same three month period.

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

During the first quarter of 2020, we recorded an additional allowance for credit losses for loans of approximately $151.4 million due to the adoption of CECL.

The significant impact to the allowance for credit losses at the date of CECL adoption was driven by the substantial amount of loans acquired held by the Company.

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

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

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

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

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

The decrease in the allowance for credit losses during the first three months of 2022 was predominately related to improved credit quality metrics and improved macroeconomic factors, coupled with the planned exit of several large oil and gas relationships during the quarter.

Additionally, there was a reduction of pandemic-era qualitative factors that were established based on unidentifiable risks with borrowers in at-risk industries.

We considered our allowance for credit losses at March 31, 2022 appropriate given the considerable amount of uncertainty as to the structure and timing of potential economic recovery, the impact of new COVID-19 variants, future of government assistance related to COVID-19 recovery efforts and other related factors.

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

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Allocation of Allowance for Credit Losses

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(Dollars in thousands) Allowance

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

Deposits are our primary source of funding for earning assets and are primarily developed through our network of approximately 185 financial centers as of September 30, 2021.

Deposits are our primary source of funding for earning assets and are primarily developed through our network of approximately 197 financial centers as of March 31, 2022.

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

Our core deposits consist of all deposits excluding time deposits of $250,000 or more and brokered deposits.

As of September 30, 2021, core deposits comprised 88.1% of our total deposits.

As of March 31, 2022, core deposits comprised 92.6% of our total deposits.

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

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

Our total deposits as of September 30, 2021, were $18.07 billion, an increase of $1.09 billion from December 31, 2020, primarily driven by the government economic stimulus programs and changes in customer spending resulting from the COVID-19 pandemic.

Non-interest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $15.62 billion at September 30, 2021, compared to $14.15 billion at December 31, 2020, an increase of $1.46 billion.

Total time deposits decreased $376.6 million to $2.46 billion at September 30, 2021, from $2.83 billion at December 31, 2020.

We had $388.6 million and $512.3 million of brokered deposits at September 30, 2021, and December 31, 2020, respectively.

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

We are managing our balance sheet and our net interest margin by continuing to eliminate several high-cost deposits related to public funds and brokered deposits.

Our total deposits as of March 31, 2022, were $19.39 billion, an slight increase of $25.9 million from December 31, 2021.

Non-interest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $17.33 billion at March 31, 2022, compared to $16.91 billion at December 31, 2021, an increase of $415.7 million.

Total time deposits decreased $389.8 million to $2.06 billion at March 31, 2022, from $2.45 billion at December 31, 2021.

The decrease in time deposits is attributable to maturing time deposits, coupled with a continued effort to improve our mix of deposits into lower costs funds.

We had $890.9 million and $466.0 million of brokered deposits at March 31, 2022, and December 31, 2021, respectively.

We are managing our balance sheet and our net interest margin by continuing to eliminate several high-cost deposits related to public funds and brokered deposits as well as hone our product offerings to give customers flexibility of choice while maintaining the ability to adjust interest rates timely in the current rate environment.

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

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

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

Our total debt was $1.72 billion at March 31, 2022 and December 31, 2021.

The outstanding balance for March 31, 2022 includes $1.31 billion in FHLB long-term advances;

$330.0 million in subordinated notes;

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and $31.4 million of other long-term debt.

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

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

The FHLB long-term advances outstanding at the end of the first quarter 2022 are primarily FOTO advances which are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date.

Our FOTO advances outstanding at March 31, 2022 had original maturity dates of 10 years to 15 years with lockout periods that have expired.

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

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

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

As of March 31, 2022, there were no FHLB short-term advances outstanding.

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

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

At September 30, 2021, total capital was $3.03 billion.

At March 31, 2022, total capital was $2.96 billion.

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

At September 30, 2021, our common equity to asset ratio was 13.04% compared to 13.31% at year-end 2020.

At March 31, 2022, our common equity to asset ratio was 12.10% compared to 13.14% at year-end 2021.

Capital Stock

On February 27, 2009, at a special meeting, our 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.

As of March 31, 2022, the aggregate liquidation preference of all shares of preferred stock cannot exceed $80,000,000.

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

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

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

On April 27, 2022, shareholders of the Company approved an increase in the number of authorized shares of its Class A common stock from 175,000,000 to 350,000,000.

Stock Repurchase Program

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

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

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

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

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

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

During the three and nine month periods ended September 30, 2021, we repurchased 1,806,205 shares at an average price per share of $28.48 and 1,937,121 shares at an average price per share of $28.14, respectively, under the Program.

During the nine month period ended September 30, 2020, 4,922,336 shares at an average price per share of $18.96 were repurchased under the Program.

No shares were repurchased under the Program during the three months ended September 30, 2020.

Effective July 23, 2021, our Board of Directors approved an amendment to the Company’s stock repurchase program originally approved in October 2019 (“2019 Program”) that increased the amount of our common stock that could be repurchased under the 2019 Program from a maximum of $180 million to a maximum of $276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022 (unless terminated sooner).

During the three month period ended March 31, 2022, we repurchased 513,725 shares at an average price per share of $31.25 under the 2019 Program.

During the three month period ended March 31, 2021, 130,916 shares at an average price per share of $23.53 were repurchased under the 2019 Program.

During January 2022, the Company substantially exhausted the remaining capacity under the 2019 Program.

As a result, in January 2022, the Company’s Board of Directors 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.

The 2022 Program will terminate on January 31, 2024 (unless terminated sooner).

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.

As of March 31, 2022, the Company had not repurchased any shares under the 2022 Program.

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

Cash Dividends

We declared cash dividends on our common stock of $0.54 per share for the first nine months of 2021 compared to $0.51 per share for the first nine months of 2020, an increase of $0.03, or 6%.

We declared cash dividends on our common stock of $0.19 per share for the first three months of 2022, compared to $0.18 per share for the first three months of 2021, an increase of $0.01, or 6%.

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

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

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

Management believes that, as of March 31, 2022, we meet all capital adequacy requirements to which we are subject.

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

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

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

Our risk-based capital ratios at March 31, 2022 and December 31, 2021 are presented in Table 11 below:

Risk-Based Capital

September 30, December 31,

March 31, December 31,

(Dollars in thousands) 2022 2021

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The Company elected to apply the 2020 CECL Transition Provision.

In July 2013, the Company’s primary federal regulator, the Federal Reserve, published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S.

The rules implement the Basel Committee’s December 2010 framework known as “Basel III” for strengthening international capital standards.

The Basel III Capital Rules introduced substantial revisions to the risk-based capital requirements applicable to bank holding companies and depository institutions.

The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios.

The rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing risk-weighting approach with a more risk-sensitive approach.

The Basel III Capital Rules expanded the risk-weighting categories from four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S.

government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories, including many residential mortgages and certain commercial real estate.

The Basel III Capital Rules established risk-weighting categories depending on the nature of the assets, generally ranging from 0% for U.S.

government and agency securities, to 600% for certain equity exposures.

The final rules included a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets.

The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%.

The Basel III Capital Rules became effective for the Company and its subsidiary bank on January 1, 2015, with full compliance with all of the final rule’s requirements on January 1, 2019.

The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets to 6.0% and require a minimum leverage ratio of 4.0%.

Prior to December 31, 2017, Tier 1 capital included common equity Tier 1 capital and certain additional Tier 1 items as provided under the Basel III Capital Rules.

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

Trust preferred securities and qualifying subordinated debt of $383.3 million is included as Tier 2 and total capital as of September 30, 2021.

Trust preferred securities and qualifying subordinated debt of $384.2 million is included as Tier 2 and total capital as of March 31, 2022.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

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

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

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

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reliance on third parties for the provision of key services;

further changes in accounting principles relating to loan loss recognition;

changes in accounting principles, including changes related to loan loss recognition;

uncertainty and disruption associated with the discontinued use of the London Inter-Bank Offered Rate;

the costs of evaluating possible acquisitions and the risks inherent in integrating acquisitions;

possible adverse rulings, judgements, settlements, and other outcomes of pending or future litigation, including litigation or actions arising from the Company’s participation in and administration of programs related to the COVID-19 pandemic (including, among others, the PPP);

possible adverse rulings, judgements, settlements, and other outcomes of pending or future litigation;

market disruptions including pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts (including the ongoing military conflict between Russia and Ukraine) or other major events, or the prospect of these events;

the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the internet;

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GAAP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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

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

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

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

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

Tier 1 leverage ratio excluding average PPP loans (non-GAAP) and net interest income and net interest margin, each adjusted for PPP loans (each non-GAAP).

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

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• Investor presentations of Company performance

We have $1.176 billion and $1.186 billion total goodwill and other intangible assets for the periods ended September 30, 2021 and December 31, 2020, respectively.

We have $1.250 billion and $1.252 billion total goodwill and other intangible assets for the periods ended March 31, 2022 and December 31, 2021, respectively.

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

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

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

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

The Company’s non-GAAP financial measures that exclude PPP loans or their impact include the ratios of “Tier 1 leverage ratio excluding average PPP loans” (non-GAAP) and “net interest margin,” adjusted for PPP loans (non-GAAP).

Management believes these non-GAAP presentations will assist investors and analysts in analyzing the core financial measures of the Company, including the performance of the Company’s loan portfolio and the Company’s regulatory capital position, and predicting future performance.

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Three Months Ended

September 30, Nine Months Ended

September 30,

March 31, December 31, March 31,

(In thousands, except per share data) 2022 2021 2021

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Merger related costs 1,886 13,591 233

Early retirement program — 2,346 — 2,839

Branch right sizing (net) 909 1,648 448

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Merger related costs 0.01 0.12 —

Early retirement program — 0.02 — 0.02

Branch right sizing (net) 0.01 0.01 0.01

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Three Months Ended

September 30, Nine Months Ended

September 30,

March 31, December 31, March 31,

(In thousands) 2022 2021 2021

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Merger related costs (1,886) (13,591) (233)

Early retirement program — (2,346) — (2,839)

Branch right sizing (909) (1,650) (625)

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

September 30, December 31,

March 31, December 31,

(In thousands, except per share data) 2022 2021

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

September 30, December 31,

March 31, December 31,

(Dollars in thousands) 2022 2021

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Tangible assets $ 23,232,513 $ 23,472,517

Paycheck Protection Program (“PPP”) loans (212,087) (904,673)

Total assets excluding PPP loans $ 23,013,843 $ 21,455,079

Tangible assets excluding PPP loans $ 21,838,110 $ 20,268,664

Ratio of common equity to assets 12.10 % 13.14 %

Ratio of tangible common equity to tangible assets (non-GAAP) 7.37 % 8.51 %

Ratio of common equity to assets excluding PPP loans (non-GAAP) 13.16 % 13.87 %

Ratio of tangible common equity to tangible assets excluding PPP loans (non-GAAP) 8.49 % 8.83 %

See Table 16 below for the calculation of Tier 1 leverage ratio excluding average PPP loans for the period presented.

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(Dollars in thousands) Three Months Ended

September 30, 2021

March 31, 2022 Three Months Ended

March 31, 2021

Total Tier 1 capital $ 2,156,496 $ 1,939,868

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Tier 1 leverage ratio excluding average PPP loans (non-GAAP) 9.03 % 9.34 %

See Table 18 below for the calculation of core net interest margin and net interest margin adjusted for PPP loans and additional liquidity for the periods presented.

See Table 17 below for the calculation of core net interest margin and net interest margin adjusted for PPP loans for the periods presented.

Reconciliation of Core Net Interest Margin (non-GAAP)

Three Months Ended

September 30, Nine Months Ended

September 30,

March 31, December 31, March 31,

(Dollars in thousands) 2022 2021 2021

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Core net interest income $ 147,505 $ 152,902 $ 144,214

PPP loan and additional liquidity (1) interest income

(10,064) (6,131) (32,013)

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

$ 140,114 $ 150,343 $ 420,090

PPP loan interest income (2,113) (5,107) (11,652)

Net interest income adjusted for PPP loans $ 149,095 $ 153,553 $ 139,192

Average earning assets $ 22,185,215 $ 22,029,792 $ 20,484,908

Average PPP loan balance and additional liquidity (1)

(1,475,098) (2,359,928) (2,601,327)

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

$ 19,426,894 $ 17,055,386 $ 18,182,381

Average PPP loan balance (89,757) (172,130) (891,070)

Average earning assets adjusted for PPP loans $ 22,095,458 $ 21,857,662 $ 19,593,838

Net interest margin 2.76 % 2.86 % 2.99 %

Core net interest margin (non-GAAP) 2.70 % 2.75 % 2.86 %

Net interest margin adjusted for PPP loans and additional liquidity (1) (non-GAAP)

2.86 % 3.51 % 3.09 %

_______________________________________

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

Net interest margin adjusted for PPP loans (non-GAAP) 2.74 % 2.79 % 2.88 %

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis