SIMMONS FIRST NATIONAL CORP 10-Q

Item 1. Financial Statements (Unaudited) Simmons First National Corporation Consolidated Balance Sheets June 30, 2022 and December 31, 2021 June 30, December 31, (In thousands, except share data) 2022 2021 (Unaudited) ASSETS Cash and non-interest bearing balances due from banks $ 193,473 $ 209,190 Interest bearing balances due from banks and federal funds sold 771,374 1,441,463 Cash and cash equivalents 964,847 1,650,653 Interest bearing balances due from banks - time 1,535 1,882 Investment securities: Held-to-maturity, net of allowance for credit losses of $ 1,381 and $ 1,279 at June 30, 2022 and December 31, 2021, respectively 3,819,682 1,529,221 Available-for-sale, at estimated fair value (amortized cost of $ 4,730,178 and $ 7,130,861 at June 30, 2022 and December 31, 2021, respectively) 4,341,647 7,113,545 Total investments 8,161,329 8,642,766 Mortgage loans held for sale 14,437 36,356 Other loans held for sale 16,375 100 Loans 15,110,344 12,012,503 Allowance for credit losses on loans ( 212,611 ) ( 205,332 ) Net loans 14,897,733 11,807,171 Premises and equipment 553,062 483,469 Foreclosed assets and other real estate owned 4,084 6,032 Interest receivable 82,332 72,990 Bank owned life insurance 486,355 445,305 Goodwill 1,310,528 1,146,007 Other intangible assets 137,285 106,235 Other assets 588,707 325,793 Total assets $ 27,218,609 $ 24,724,759 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Non-interest bearing transaction accounts $ 6,057,186 $ 5,325,318 Interest bearing transaction accounts and savings deposits 12,816,198 11,588,770 Time deposits 3,162,479 2,452,460 Total deposits 22,035,863 19,366,548 Federal funds purchased and securities sold under agreements to repurchase 155,101 185,403 Other borrowings 1,060,244 1,337,973 Subordinated notes and debentures 421,693 384,131 Accrued interest and other liabilities 285,813 201,863 Total liabilities 23,958,714 21,475,918 Stockholders’ equity: Common stock, Class A, $ 0.01 par value; 350,000,000 and 175,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively; 128,787,764 and 112,715,444 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 1,288 1,127 Surplus 2,569,060 2,164,989 Undivided profits 1,139,975 1,093,270 Accumulated other comprehensive loss ( 450,428 ) ( 10,545 ) Total stockholders’ equity 3,259,895 3,248,841 Total liabilities and stockholders’ equity $ 27,218,609 $ 24,724,759 See Condensed Notes to Consolidated Financial Statements. 3 Simmons First National Corporation Consolidated Statements of Income Three and Six Months Ended June 30, 2022 and 2021 Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2022 2021 2022 2021 (Unaudited) (Unaudited) INTEREST INCOME Loans, including fees $ 165,641 $ 138,804 $ 292,817 $ 285,228 Interest bearing balances due from banks and federal funds sold 1,117 651 1,766 1,449 Investment securities 37,848 27,128 71,560 48,701 Mortgage loans held for sale 200 386 390 1,025 TOTAL INTEREST INCOME 204,806 166,969 366,533 336,403 INTEREST EXPENSE Deposits 9,754 10,782 16,571 23,961 Federal funds purchased and securities sold under agreements to repurchase 119 192 187 437 Other borrowings 4,844 4,897 9,623 9,699 Subordinated notes and debentures 4,990 4,565 9,447 9,092 TOTAL INTEREST EXPENSE 19,707 20,436 35,828 43,189 NET INTEREST INCOME 185,099 146,533 330,705 293,214 Provision for credit losses 33,859 ( 12,951 ) 13,945 ( 11,506 ) NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 151,240 159,484 316,760 304,720 NON-INTEREST INCOME Wealth management fees 7,214 7,892 15,182 15,253 Service charges on deposit accounts 11,379 10,050 22,075 19,765 Other service charges and fees 1,871 2,048 3,508 3,970 Mortgage lending income 2,240 4,490 6,790 10,937 Debit and credit card fees 8,224 7,073 15,673 13,683 Bank owned life insurance income 2,563 2,038 5,269 3,561 Gain (loss) on sale of securities, net ( 150 ) 5,127 ( 204 ) 10,598 Other income 6,837 8,397 14,103 18,897 TOTAL NON-INTEREST INCOME 40,178 47,115 82,396 96,664 NON-INTEREST EXPENSE Salaries and employee benefits 74,135 60,261 142,041 120,601 Occupancy expense, net 11,004 9,103 21,027 18,403 Furniture and equipment expense 5,104 4,859 9,879 10,274 Other real estate and foreclosure expense 142 863 485 1,206 Deposit insurance 2,812 1,687 4,650 2,995 Merger related costs 19,133 686 21,019 919 Other operating expenses 44,483 37,198 86,129 73,261 TOTAL NON-INTEREST EXPENSE 156,813 114,657 285,230 227,659 INCOME BEFORE INCOME TAXES 34,605 91,942 113,926 173,725 Provision for income taxes 7,151 17,018 21,377 31,381 NET INCOME 27,454 74,924 92,549 142,344 Preferred stock dividends — 13 — 26 NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 27,454 $ 74,911 $ 92,549 $ 142,318 BASIC EARNINGS PER SHARE $ 0.21 $ 0.69 $ 0.77 $ 1.31 DILUTED EARNINGS PER SHARE $ 0.21 $ 0.69 $ 0.77 $ 1.31 See Condensed Notes to Consolidated Financial Statements. 4 Simmons First National Corporation Consolidated Statements of Comprehensive Income (Loss) Three and Six Months Ended June 30, 2022 and 2021 Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 (Unaudited) (Unaudited) NET INCOME $ 27,454 $ 74,924 $ 92,549 $ 142,344 OTHER COMPREHENSIVE INCOME (LOSS) Unrealized holding gains (losses) arising during the period on available-for-sale securities 21,333 71,801 ( 444,375 ) ( 53,916 ) Less: Reclassification adjustment for realized (loss) gains included in net income ( 150 ) 5,127 ( 204 ) 10,598 Less: Realized loss on available-for-sale securities interest rate hedges ( 22,832 ) — ( 60,031 ) — Net unrealized losses on securities transferred from available for sale to held to maturity during the period ( 206,682 ) — ( 206,682 ) — Less: Accretion of net unrealized losses on securities transferred from available-for-sale to held-to-maturity 4,785 — 4,701 — Other comprehensive income (loss), before tax effect ( 167,152 ) 66,674 ( 595,523 ) ( 64,514 ) Less: Tax effect of other comprehensive income (loss) ( 43,685 ) 17,425 ( 155,640 ) ( 16,861 ) TOTAL OTHER COMPREHENSIVE INCOME (LOSS) ( 123,467 ) 49,249 ( 439,883 ) ( 47,653 ) COMPREHENSIVE INCOME (LOSS) $ ( 96,013 ) $ 124,173 $ ( 347,334 ) $ 94,691 See Condensed Notes to Consolidated Financial Statements. 5 Simmons First National Corporation Consolidated Statements of Cash Flows Six Months Ended June 30, 2022 and 2021 (In thousands) June 30, 2022 June 30, 2021 (Unaudited) OPERATING ACTIVITIES Net income $ 92,549 $ 142,344 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 24,230 23,837 Provision for credit losses 13,945 ( 11,506 ) (Gain) loss on sale of investments 204 ( 10,598 ) Net accretion of investment securities and assets ( 24,494 ) ( 24,377 ) Net amortization on borrowings 192 269 Stock-based compensation expense 8,164 7,592 Gain on sale of premises and equipment, net of impairment — ( 606 ) Gain on sale of foreclosed assets and other real estate owned ( 290 ) ( 177 ) Gain on sale of mortgage loans held for sale ( 4,333 ) ( 20,006 ) Gain on sale of loans ( 228 ) — Gain on sale of branches — ( 5,300 ) Deferred income taxes 917 6,315 Income from bank owned life insurance ( 5,269 ) ( 3,630 ) Originations of mortgage loans held for sale ( 329,833 ) ( 534,124 ) Proceeds from sale of mortgage loans held for sale 356,085 655,497 Changes in assets and liabilities: Interest receivable ( 1,547 ) 4,680 Other assets ( 10,064 ) ( 2,402 ) Accrued interest and other liabilities 57,874 ( 58,284 ) Income taxes payable ( 245 ) 6,786 Net cash provided by operating activities 177,857 176,310 INVESTING ACTIVITIES Net change in loans ( 835,002 ) 1,520,504 Proceeds from sale of loans 15,556 1,847 Net change in due from banks - time 347 244 Purchases of premises and equipment, net ( 17,000 ) ( 5,829 ) Proceeds from sale of premises and equipment — 5,156 Proceeds from sale of foreclosed assets and other real estate owned 2,819 10,988 Proceeds from sale of available-for-sale securities — 249,454 Proceeds from maturities of available-for-sale securities 762,094 314,547 Purchases of available-for-sale securities ( 259,586 ) ( 3,672,029 ) Proceeds from maturities of held-to-maturity securities 30,848 9,479 Purchases of held-to-maturity securities ( 329,660 ) ( 606,187 ) Purchases of bank owned life insurance death benefits — ( 160,000 ) Proceeds from bank owned life insurance death benefits — 3,032 Disposition of assets and liabilities held for sale — ( 134,166 ) Purchase of Spirit of Texas Bancshares, Inc. 276,396 — Net cash used in investing activities ( 353,188 ) ( 2,462,960 ) FINANCING ACTIVITIES Net change in deposits ( 49,701 ) 1,307,965 Dividends paid on preferred stock — ( 26 ) Dividends paid on common stock ( 45,844 ) ( 39,010 ) Net change in other borrowed funds ( 315,778 ) ( 2,874 ) Net change in federal funds purchased and securities sold under agreements to repurchase ( 30,302 ) ( 111,896 ) Net shares issued (cancelled) under stock compensation plans ( 3,905 ) 1,373 Shares issued under employee stock purchase plan 1,151 1,170 Repurchases of common stock ( 66,096 ) ( 3,080 ) Net cash (used in) provided by financing activities ( 510,475 ) 1,153,622 DECREASE IN CASH AND CASH EQUIVALENTS ( 685,806 ) ( 1,133,028 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,650,653 3,472,152 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 964,847 $ 2,339,124 See Condensed Notes to Consolidated Financial Statements. 6 Simmons First National Corporation Consolidated Statements of Stockholders’ Equity Three Months Ended June 30, 2022 and 2021 (In thousands, except share data) Preferred Stock Common Stock Surplus Accumulated Other Comprehensive (Loss) Income Undivided Profits Total Three Months Ended June 30, 2022 Balance, March 31, 2022 (Unaudited) $ — $ 1,125 $ 2,150,453 $ ( 326,961 ) $ 1,136,990 $ 2,961,607 Comprehensive (loss) income — — — ( 123,467 ) 27,454 ( 96,013 ) Stock-based compensation plans, net – 42,459 shares — — 3,893 — — 3,893 Stock issued for Spirit acquisition - 18,275,074 shares — 183 464,735 — — 464,918 Stock repurchases – 2,035,324 shares — ( 20 ) ( 50,021 ) — — ( 50,041 ) Dividends on common stock – $ 0.19 per share — — — — ( 24,469 ) ( 24,469 ) Balance, June 30, 2022 (Unaudited) $ — $ 1,288 $ 2,569,060 $ ( 450,428 ) $ 1,139,975 $ 3,259,895 Three Months Ended June 30, 2021 Balance, March 31, 2021 (Unaudited) $ 767 $ 1,083 $ 2,017,188 $ ( 37,176 ) $ 948,913 $ 2,930,775 Comprehensive income — — — 49,249 74,924 124,173 Stock-based compensation plans, net – 40,937 shares — 1 3,940 — — 3,941 Dividends on preferred stock — — — — ( 13 ) ( 13 ) Dividends on common stock – $ 0.18 per share — — — — ( 19,510 ) ( 19,510 ) Balance, June 30, 2021 (Unaudited) $ 767 $ 1,084 $ 2,021,128 $ 12,073 $ 1,004,314 $ 3,039,366 See Condensed Notes to Consolidated Financial Statements. 7 Simmons First National Corporation Consolidated Statements of Stockholders’ Equity Six Months Ended June 30, 2022 and 2021 (In thousands, except share data) Preferred Stock Common Stock Surplus Accumulated Other Comprehensive (Loss) Income Undivided Profits Total Six Months Ended June 30, 2022 Balance, December 31, 2021 $ — $ 1,127 $ 2,164,989 $ ( 10,545 ) $ 1,093,270 $ 3,248,841 Comprehensive (loss) income — — — ( 439,883 ) 92,549 ( 347,334 ) Stock issued for employee stock purchase plan – 59,475 shares — 1 1,150 — — 1,151 Stock-based compensation plans, net – 286,820 shares — 2 4,257 — — 4,259 Stock issued for Spirit acquisition - 18,275,074 shares — 183 464,735 — — 464,918 Stock repurchases – 2,549,049 shares — ( 25 ) ( 66,071 ) — — ( 66,096 ) Dividends on common stock – $ 0.38 per share — — — — ( 45,844 ) ( 45,844 ) Balance, June 30, 2022 (Unaudited) $ — $ 1,288 $ 2,569,060 $ ( 450,428 ) $ 1,139,975 $ 3,259,895 Six Months Ended June 30, 2021 Balance, December 31, 2020 $ 767 $ 1,081 $ 2,014,076 $ 59,726 $ 901,006 $ 2,976,656 Comprehensive (loss) income — — — ( 47,653 ) 142,344 94,691 Stock issued for employee stock purchase plan – 60,697 shares — 1 1,169 — — 1,170 Stock-based compensation plans, net – 379,226 shares — 3 8,962 — — 8,965 Stock repurchases – 130,916 shares — ( 1 ) ( 3,079 ) — — ( 3,080 ) Dividends on preferred stock — — — — ( 26 ) ( 26 ) Dividends on common stock – $ 0.36 per share — — — — ( 39,010 ) ( 39,010 ) Balance, June 30, 2021 (Unaudited) $ 767 $ 1,084 $ 2,021,128 $ 12,073 $ 1,004,314 $ 3,039,366 See Condensed Notes to Consolidated Financial Statements. 8 SIMMONS FIRST NATIONAL CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS Description of Business and Organizational Structure Simmons First National Corporation (“Company”) is a Mid-South financial holding company headquartered in Pine Bluff, Arkansas, and the parent company of Simmons Bank, an Arkansas state-chartered bank that has been in operation since 1903 (“Simmons Bank” or the “Bank”). Simmons First Insurance Services, Inc. and Simmons First Insurance Services of TN, LLC are wholly-owned subsidiaries of Simmons Bank and are insurance agencies that offer various lines of personal and corporate insurance coverage to individual and commercial customers. The Company, through its subsidiaries, offers, among other things, consumer, real estate and commercial loans; checking, savings and time deposits; and specialized products and services (such as credit cards, trust and fiduciary services, investments, agricultural finance lending, equipment lending, insurance and Small Business Administration (“SBA”) lending) from 233 financial centers as of June 30, 2022, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosures for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2021, was derived from audited financial statements. In the opinion of management, these financial statements reflect all adjustments that are necessary for a fair presentation of interim results of operations, including normal recurring accruals. Significant intercompany accounts and transactions have been eliminated in consolidation. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022. The preparation of financial statements, in accordance with accounting principles generally accepted in the United States (“US GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income items and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements and actual results may differ from these estimates. Such estimates include, but are not limited to, the Company’s allowance for credit losses. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the valuation of acquired loans. Management obtains independent appraisals for significant properties in connection with the determination of the allowance for credit losses and the valuation of foreclosed assets. During the second and third quarters of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income. These transaction fees, as well as additional certain prior year amounts, have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income and were not material to the consolidated financial statements. Recently Adopted Accounting Standards Reference Rate Reform – In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides relief for companies preparing for discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”). LIBOR is a benchmark interest rate referenced in a variety of agreements that are used by numerous entities. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) announced that the majority of 9 LIBOR rates will no longer be published after December 31, 2021, although a number of key settings will continue until June 2023, to support the rundown of legacy contracts only. As a result, LIBOR should be discontinued as a reference rate. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides optional expedients and exceptions to contracts, hedging relationships and other transactions affected by reference rate reform. The main provisions for contract modifications include optional relief by allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features. Optional expedients for hedge accounting permits changes to critical terms of hedging relationships and to the designated benchmark interest rate in a fair value hedge and also provides relief for assessing hedge effectiveness for cash flow hedges. Companies are able to apply ASU 2020-04 immediately; however, the guidance will only be available for a limited time (generally through December 31, 2022). The Company formed a LIBOR Transition Team in 2020, has created standard LIBOR replacement language for new and modified loan notes, and is monitoring the remaining loans with LIBOR rates monthly to ensure progress in updating these loans with acceptable LIBOR replacement language or converting them to other interest rates. During 2021, the Company did not offer LIBOR-indexed rates on loans which it originated, although it did participate in some shared credit agreements originated by other banks subject to the Company’s determination that the LIBOR replacement language in the loan documents met the Company’s standards. Pursuant to the Joint Regulatory Statement on LIBOR transition issued in October 2021, the Company, as of January 1, 2022, is not entering into any new LIBOR-based credit agreements and is not extending, renewing, or modifying any prior LIBOR credit agreements without requiring conversion of the agreements to other interest rates. The adoption of ASU 2020-04 has not had a material impact on the Company’s financial position or results of operations. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which clarifies that certain optional expedients and exceptions in Accounting Standard Codification (“ASC”) 848 for contract modifications and hedge accounting apply to derivatives that are affected by the changes in the interest rates used for margining, discounting, or contract price alignment for derivative instruments that are being implemented as part of the market-wide transition to new reference rates (commonly referred to as the “discounting transition”). ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU 2021-01 did not have a material impact on the Company’s financial position or results of operations. Leases - In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (“ASU 2021-05”), that amends lease classification requirements for lessors. In accordance with ASU 2021-05, lessors should classify and account for a lease that have variable lease payments that do not depend on a reference index rate as an operating lease if both of the following criteria are met: i) the lease would have been classified as a sales-type lease or a direct financing lease under the previous lease classification criteria and ii) sales-type or direct financing lease classification would result in a Day 1 loss. ASU 2021-05 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of ASU No. 2021-05 did not have a material impact on the Company’s results of operations, financial position or disclosures. Recently Issued Accounting Standards Fair Value Hedging - In March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. This ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. ASU 2022-01 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures. Credit Losses on Financial Instruments - In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings made to borrowers experiencing financial difficulty. ASU 2022-02 is effective for public business entities for fiscal years, and 10 interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures. There have been no other significant changes to the Company’s accounting policies from the 2021 Form 10-K. Presently, the Company is not aware of any other changes to the Accounting Standards Codification that will have a material impact on its present or future financial position or results of operations. NOTE 2: ACQUISITIONS Spirit of Texas Bancshares, Inc. On April 8, 2022, the Company completed its merger with Spirit of Texas Bancshares, Inc. (“Spirit”) pursuant to the terms of the Agreement and Plan of Merger dated as of November 19, 2021 (“Spirit Agreement”), at which time Spirit merged with and into the Company, with the Company continuing as the surviving corporation. The Company issued 18,275,074 shares of its common stock valued at approximately $ 464.9 million as of April 8, 2022, plus $ 1,393,508.90 in cash, in exchange for all outstanding shares of Spirit capital stock (and common stock equivalents) to effect the merger. Prior to the acquisition, Spirit, headquartered in Conroe, Texas, conducted banking business through its subsidiary bank, Spirit of Texas Bank SSB, from 35 branches located primarily in the Texas Triangle - consisting of Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas - with additional locations in the Bryan-College Station, Corpus Christi and Tyler metropolitan areas, along with offices in North Central and South Texas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 3.12 billion in assets, including approximately $ 2.29 billion in loans (inclusive of loan discounts), and approximately $ 2.72 billion in deposits. Goodwill of $ 163.9 million was recorded as a result of the transaction. The merger strengthened the Company’s position in the Texas market and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes. A summary, at fair value, of the assets acquired and liabilities assumed in the Spirit acquisition, as of the acquisition date, is as follows: (In thousands) Acquired from Spirit Fair Value Adjustments Fair Value Assets Acquired Cash and due from banks $ 277,790 $ — $ 277,790 Investment securities 362,088 ( 13,401 ) 348,687 Loans acquired 2,314,085 ( 23,839 ) 2,290,246 Allowance for credit losses on loans ( 17,005 ) 12,962 ( 4,043 ) Premises and equipment 84,135 ( 17,918 ) 66,217 Bank owned life insurance 36,890 — 36,890 Goodwill 77,681 ( 77,681 ) — Core deposit and other intangible assets 6,245 32,386 38,631 Other assets 58,403 3,895 62,298 Total assets acquired $ 3,200,312 $ ( 83,596 ) $ 3,116,716 11 (In thousands) Acquired from Spirit Fair Value Adjustments Fair Value Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 825,228 $ ( 165 ) $ 825,063 Interest bearing transaction accounts and savings deposits 1,383,663 — 1,383,663 Time deposits 509,209 1,081 510,290 Total deposits 2,718,100 916 2,719,016 Other borrowings 37,547 503 38,050 Subordinated debentures 36,491 879 37,370 Accrued interest and other liabilities 23,667 ( 3,823 ) 19,844 Total liabilities assumed 2,815,805 ( 1,525 ) 2,814,280 Equity 384,507 ( 384,507 ) — Total equity assumed 384,507 ( 384,507 ) — Total liabilities and equity assumed $ 3,200,312 $ ( 386,032 ) $ 2,814,280 Net assets acquired 302,436 Purchase price 466,311 Goodwill $ 163,875 The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger. Therefore, adjustments to the estimated amounts and carrying values may occur. The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Spirit subsequent to the acquisition date. Landmark Community Bank On October 8, 2021, the Company completed its acquisition of Landmark Community Bank (“Landmark”) pursuant to the terms of the Agreement and Plan of Merger dated as of June 4, 2021 (“Landmark Agreement”), at which time Landmark merged with and into Simmons Bank, with Simmons Bank continuing as the surviving entity. The Company issued 4,499,872 shares of its common stock valued at approximately $ 138.2 million as of October 8, 2021, plus $ 6,451,727.43 in cash, in exchange for all outstanding shares of Landmark capital stock (and common stock equivalents) to effect the merger. Prior to the acquisition, Landmark, headquartered in Collierville, Tennessee, conducted banking business from 8 branches located in the Memphis and Nashville, Tennessee, metropolitan areas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 968.8 million in assets, including approximately $ 789.5 million in loans (inclusive of loan discounts), and approximately $ 802.7 million in deposits. Goodwill of $ 31.4 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes. 12 A summary, at fair value, of the assets acquired and liabilities assumed in the Landmark acquisition, as of the acquisition date, is as follows: (In thousands) Acquired from Landmark Fair Value Adjustments Fair Value Assets Acquired Cash and due from banks $ 27,591 $ — $ 27,591 Due from banks - time 100 — 100 Investment securities 114,793 ( 125 ) 114,668 Loans acquired 785,551 3,953 789,504 Allowance for credit losses on loans ( 5,980 ) 3,621 ( 2,359 ) Premises and equipment 9,540 ( 4,099 ) 5,441 Bank owned life insurance 21,287 — 21,287 Core deposit intangible 88 4,071 4,159 Other assets 13,036 ( 4,605 ) 8,431 Total assets acquired $ 966,006 $ 2,816 $ 968,822 Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 110,393 $ — $ 110,393 Interest bearing transaction accounts and savings deposits 425,777 — 425,777 Time deposits 266,835 ( 334 ) 266,501 Total deposits 803,005 ( 334 ) 802,671 Other borrowings 47,023 — 47,023 Accrued interest and other liabilities 8,459 ( 3,122 ) 5,337 Total liabilities assumed 858,487 ( 3,456 ) 855,031 Equity 107,519 ( 107,519 ) — Total equity assumed 107,519 ( 107,519 ) — Total liabilities and equity assumed $ 966,006 $ ( 110,975 ) $ 855,031 Net assets acquired 113,791 Purchase price 145,195 Goodwill $ 31,404 The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger. Therefore, adjustments to the estimated amounts and carrying values may occur. The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Landmark subsequent to the acquisition date. Triumph Bancshares, Inc. On October 8, 2021, the Company completed its merger with Triumph Bancshares, Inc. (“Triumph”) pursuant to the terms of the Agreement and Plan of Merger dated as of June 4, 2021 (“Triumph Agreement”), at which time Triumph merged with and into the Company, with the Company continuing as the surviving corporation. The Company issued 4,164,712 shares of its common stock valued at approximately $ 127.9 million as of October 8, 2021, plus $ 1,693,402.93 in cash, in exchange for all outstanding shares of Triumph capital stock (and common stock equivalents) to effect the merger. Prior to the acquisition, Triumph, headquartered in Memphis, Tennessee, conducted banking business through its subsidiary bank, Triumph Bank, from 6 branches located in the Memphis and Nashville, Tennessee, metropolitan areas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 847.2 million in assets, including approximately $ 698.8 million in loans (inclusive of loan discounts), and approximately $ 719.7 million in deposits. 13 Goodwill of $ 39.9 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes. A summary, at fair value, of the assets acquired and liabilities assumed in the Triumph acquisition, as of the acquisition date, is as follows: (In thousands) Acquired from Triumph Fair Value Adjustments Fair Value Assets Acquired Cash and due from banks $ 7,484 $ — $ 7,484 Due from banks - time 495 — 495 Investment securities 130,571 ( 1,116 ) 129,455 Loans acquired 702,460 ( 3,674 ) 698,786 Allowance for credit losses on loans ( 12,617 ) 1,525 ( 11,092 ) Premises and equipment 2,774 484 3,258 Goodwill 1,550 ( 1,550 ) — Core deposit intangible — 5,136 5,136 Other assets 12,806 897 13,703 Total assets acquired $ 845,523 $ 1,702 $ 847,225 Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 115,729 $ — $ 115,729 Interest bearing transaction accounts and savings deposits 383,434 — 383,434 Time deposits 219,477 1,094 220,571 Total deposits 718,640 1,094 719,734 Securities sold under agreement to repurchase 2,854 — 2,854 Other borrowings 30,700 — 30,700 Accrued interest and other liabilities 2,882 455 3,337 Total liabilities assumed 755,076 1,549 756,625 Equity 90,446 ( 90,446 ) — Total equity assumed 90,446 ( 90,446 ) — Total liabilities and equity assumed $ 845,522 $ ( 88,897 ) $ 756,625 Net assets acquired 90,600 Purchase price 130,544 Goodwill $ 39,944 The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger. Therefore, adjustments to the estimated amounts and carrying values may occur. The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Triumph subsequent to the acquisition date. The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above. Cash and due from banks and time deposits due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets. 14 Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value. Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. See Note 5, Loans and Allowance for Credit Losses, in the accompanying Notes to Consolidated Financial Statements for additional information related to purchased financial assets with credit deterioration. Premises and equipment – Bank premises and equipment were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired. Bank owned life insurance – Bank owned life insurance is carried at its current cash surrender value, which is the most reasonable estimate of fair value. Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill. Goodwill established prior to the acquisitions, if applicable, was written off. Core deposit intangible – This intangible asset represents the value of the relationships that the acquired banks had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits. Any core deposit intangible established prior to the acquisitions, if applicable, was written off. Other assets – The fair value adjustment results from certain assets whose value was estimated to be more or less than book value, such as certain prepaid assets, receivables and other miscellaneous assets. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value. Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference when material. Securities sold under agreement to repurchase – The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities. Other borrowings – The fair value of other borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities. Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities. Accrued interest and other liabilities – The fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities. The adjustment also establishes a liability for unfunded commitments equal to the fair value of that liability at the date of acquisition. The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value. 15 NOTE 3: INVESTMENT SECURITIES Held-to-maturity securities (“HTM”), which include any security for which the Company has both the positive intent and ability to hold until maturity, are carried at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the security’s estimated life. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date. Available-for-sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Realized gains and losses, based on specifically identified amortized cost of the individual security, are included in other income. Unrealized gains and losses are recorded, net of related income tax effects, in stockholders’ equity, further discussed below. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield method over the estimated life of the security. Prepayments are anticipated for mortgage-backed and SBA securities. Premiums on callable securities are amortized to their earliest call date. During the quarters ended June 30, 2022 and September 30, 2021, the Company transferred, at fair value, $ 1.99 billion and $ 500.8 million, respectively, of securities from the available-for-sale portfolio to the held-to-maturity portfolio. The related remaining net unrealized losses of $ 151.9 million and net unrealized gains of $ 791,000 , respectively, in accumulated other comprehensive income (loss) will be amortized over the remaining life of the securities. No gains or losses on these securities were recognized at the time of transfer. The amortized cost, fair value and allowance for credit losses of investment securities that are classified as HTM are as follows: (In thousands) Amortized Cost Allowance for Credit Losses Net Carrying Amount Gross Unrealized Gains Gross Unrealized (Losses) Estimated Fair Value Held-to-maturity June 30, 2022 U.S. Government agencies $ 446,789 $ — $ 446,789 $ — $ ( 67,286 ) $ 379,503 Mortgage-backed securities 1,244,713 — 1,244,713 3,951 ( 61,982 ) 1,186,682 State and political subdivisions 1,869,027 ( 103 ) 1,868,924 240 ( 397,081 ) 1,472,083 Other securities 260,534 ( 1,278 ) 259,256 85 ( 18,647 ) 240,694 Total HTM $ 3,821,063 $ ( 1,381 ) $ 3,819,682 $ 4,276 $ ( 544,996 ) $ 3,278,962 December 31, 2021 U.S. Government agencies $ 232,609 $ — $ 232,609 $ — $ ( 7,914 ) $ 224,695 Mortgage-backed securities 70,342 — 70,342 232 ( 1,425 ) 69,149 State and political subdivisions 1,210,248 ( 1,197 ) 1,209,051 6,166 ( 8,462 ) 1,206,755 Other securities 17,301 ( 82 ) 17,219 — ( 440 ) 16,779 Total HTM $ 1,530,500 $ ( 1,279 ) $ 1,529,221 $ 6,398 $ ( 18,241 ) $ 1,517,378 Mortgage-backed securities (“MBS”) are commercial MBS, secured by commercial properties, and residential MBS, generally secured by single-family residential properties. All mortgage-backed securities included in the table above were issued by U.S. government agencies or corporations. As of June 30, 2022, HTM MBS consists of $ 152.2 million and $ 1.09 billion of commercial MBS and residential MBS, respectively. As of December 31, 2021, HTM MBS consists of $ 4.9 million and $ 65.5 million of commercial MBS and residential MBS, respectively. 16 The amortized cost, fair value and allowance for credit losses of investment securities that are classified as AFS are as follows: (In thousands) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized (Losses) Estimated Fair Value Available-for-sale June 30, 2022 U.S. Treasury $ 1,447 $ — $ — $ ( 6 ) $ 1,441 U.S. Government agencies 202,528 — 339 ( 4,534 ) 198,333 Mortgage-backed securities 3,150,519 — 4 ( 186,589 ) 2,963,934 State and political subdivisions 1,103,260 — 518 ( 188,523 ) 915,255 Other securities 272,424 — 645 ( 10,385 ) 262,684 Total AFS $ 4,730,178 $ — $ 1,506 $ ( 390,037 ) $ 4,341,647 December 31, 2021 U.S. Treasury $ 300 $ — $ — $ — $ 300 U.S. Government agencies 374,754 — 495 ( 10,608 ) 364,641 Mortgage-backed securities 4,485,548 — 6,307 ( 43,239 ) 4,448,616 State and political subdivisions 1,791,097 — 30,556 ( 1,995 ) 1,819,658 Other securities 479,162 — 6,647 ( 5,479 ) 480,330 Total AFS $ 7,130,861 $ — $ 44,005 $ ( 61,321 ) $ 7,113,545 As of June 30, 2022, AFS MBS consists of $ 1.31 billion and $ 1.66 billion of commercial MBS and residential MBS, respectively. As of December 31, 2021, AFS MBS consists of $ 1.53 billion and $ 2.92 billion of commercial MBS and residential MBS, respectively. Accrued interest receivable on HTM and AFS securities at June 30, 2022 was $ 15.4 million and $ 20.5 million, respectively, and is included in interest receivable on the consolidated balance sheets. The Company has made the election to exclude all accrued interest receivable from securities from the estimate of credit losses. The following table summarizes the Company’s AFS investments in an unrealized loss position for which an allowance for credit loss has not been recorded as of June 30, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: Less Than 12 Months 12 Months or More Total (In thousands) Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Available-for-sale U.S. Treasury $ 1,441 $ ( 6 ) $ — $ — $ 1,441 $ ( 6 ) U.S. Government agencies 110,444 ( 3,226 ) 50,341 ( 1,308 ) 160,785 ( 4,534 ) Mortgage-backed securities 2,082,115 ( 125,904 ) 880,256 ( 60,685 ) 2,962,371 ( 186,589 ) State and political subdivisions 714,786 ( 117,930 ) 150,324 ( 70,593 ) 865,110 ( 188,523 ) Other securities 195,830 ( 8,320 ) 14,237 ( 2,065 ) 210,067 ( 10,385 ) Total AFS $ 3,104,616 $ ( 255,386 ) $ 1,095,158 $ ( 134,651 ) $ 4,199,774 $ ( 390,037 ) As of June 30, 2022, the Company’s investment portfolio included $ 4.34 billion of AFS securities, of which $ 4.20 billion, or 96.7 %, were in an unrealized loss position that were not deemed to have credit losses. A portion of the unrealized losses were related to the Company’s MBS, which are issued and guaranteed by U.S. government-sponsored entities and agencies, and the Company’s state and political subdivision securities, specifically investments in insured fixed rate municipal bonds for which the issuers continue to make timely principal and interest payments under the contractual terms of the securities. 17 Furthermore, the decline in fair value for each of the above AFS securities is attributable to the rates for those investments yielding less than current market rates. Management does not believe any of the securities are impaired due to reasons of credit quality. Management believes the declines in fair value for the securities are temporary. Management does not have the intent to sell the securities, and management believes it is more likely than not the Company will not have to sell the securities before recovery of their amortized cost basis. Allowance for Credit Losses All MBS held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, highly rated by major rating agencies and have a long history of no credit losses. Accordingly, no allowance for credit losses has been recorded for these securities. Regarding securities issued by state and political subdivisions and other HTM securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts, and (v) whether or not such securities provide insurance or other credit enhancement or are pre-refunded by the issuers. The following table details activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2022 on the Company’s HTM securities portfolio. (In thousands) State and Political Subdivisions Other Securities Total Three Months Ended June 30, 2022 Held-to-maturity Beginning balance, April 1, 2022 $ 1,285 $ 92 $ 1,377 Provision for credit loss expense — — — Net increase (decrease) in allowance on previously impaired securities ( 1,183 ) 1,183 — Recoveries 1 3 4 Ending balance, June 30, 2022 $ 103 $ 1,278 $ 1,381 Six Months Ended June 30, 2022 Held-to-maturity Beginning balance, January 1, 2022 $ 1,197 $ 82 $ 1,279 Provision for credit loss expense — — — Net increase (decrease) in allowance on previously impaired securities ( 1,183 ) 1,183 — Recoveries 89 13 102 Ending balance, June 30, 2022 $ 103 $ 1,278 $ 1,381 18 Activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2021 on the Company’s HTM and AFS securities portfolio was as follows: (In thousands) State and Political Subdivisions Other Securities Total Three Months Ended June 30, 2021 Held-to-maturity Beginning balance, April 1, 2021 $ 1,042 $ 576 $ 1,618 Provision for credit loss expense ( 171 ) ( 315 ) ( 486 ) Ending balance, June 30, 2021 $ 871 $ 261 $ 1,132 Available-for-sale Beginning balance, April 1, 2021 $ 64 $ 2,390 $ 2,454 Net decrease in allowance on previously impaired securities ( 64 ) ( 2,390 ) ( 2,454 ) Ending balance, June 30, 2021 $ — $ — $ — Six Months Ended June 30, 2021 Held-to-maturity Beginning balance, January 1, 2021 $ 2,307 $ 608 $ 2,915 Provision for credit loss expense ( 1,436 ) 253 ( 1,183 ) Securities charged-off — ( 600 ) ( 600 ) Ending balance, June 30, 2021 $ 871 $ 261 $ 1,132 Available-for-sale Beginning balance, January 1, 2021 $ 217 $ 95 $ 312 Reduction due to sales — ( 11 ) ( 11 ) Net decrease in allowance on previously impaired securities ( 217 ) ( 84 ) ( 301 ) Ending balance, June 30, 2021 $ — $ — $ — Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, there was no provision for credit losses related to AFS securities recorded for the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, the provision for credit losses was reduced by $ 2,454,000 and $ 312,000 , respectively, related to AFS securities. The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2022: State and Political Subdivisions (In thousands) Not Guaranteed or Pre-Refunded Other Credit Enhancement or Insurance Pre-Refunded Total Other Securities Aaa/AAA $ 194,105 $ 275,834 $ — $ 469,939 $ — Aa/AA 667,088 505,305 — 1,172,393 — A 47,636 157,423 — 205,059 172,341 Baa/BBB — 5,935 — 5,935 53,364 Not Rated 8,829 6,872 — 15,701 34,829 Total $ 917,658 $ 951,369 $ — $ 1,869,027 $ 260,534 Historical loss rates associated with securities having similar grades as those in the Company’s portfolio have generally not been significant. Pre-refunded securities, if any, have been defeased by the issuer and are fully secured by cash and/or U.S. Treasury securities held in escrow for payment to holders when the underlying call dates of the securities are reached. Securities with other credit enhancement or insurance continue to make timely principal and interest payments under the contractual terms of the securities. Accordingly, no allowance for credit losses has been recorded for these securities as there is no current expectation of credit losses related to these securities. 19 Income earned on securities for the three and six months ended June 30, 2022 and 2021, is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Taxable: Held-to-maturity $ 10,578 $ 837 $ 12,490 $ 1,350 Available-for-sale 11,217 13,757 27,453 23,364 Non-taxable: Held-to-maturity 10,088 3,030 16,190 5,034 Available-for-sale 5,965 9,504 15,427 18,953 Total $ 37,848 $ 27,128 $ 71,560 $ 48,701 The amortized cost and estimated fair value by maturity of securities as of June 30, 2022 are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Held-to-Maturity Available-for-Sale (In thousands) Amortized Cost Fair Value Amortized Cost Fair Value One year or less $ 3,794 $ 3,813 $ 4,084 $ 4,077 After one through five years 7,513 7,556 171,681 167,509 After five through ten years 313,724 290,805 278,500 269,311 After ten years 2,251,319 1,790,105 1,124,785 936,207 Securities not due on a single maturity date 1,244,713 1,186,683 3,150,519 2,963,934 Other securities (no maturity) — — 609 609 Total $ 3,821,063 $ 3,278,962 $ 4,730,178 $ 4,341,647 The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 4.16 billion at June 30, 2022 and $ 3.88 billion at December 31, 2021. There were no gross realized gains and approximately $ 150,000 of gross realized losses from the sale and calls of securities during the three months ended June 30, 2022, and approximately $ 37,000 of gross realized gains and $ 240,000 of gross realized losses from the sale and call of securities during the six months ended June 30, 2022. There were approximately $ 5.2 million of gross realized gains and $ 26,000 of gross realized losses from the sale of securities during the three months ended June 30, 2021, and approximately $ 10.6 million of gross realized gains and $ 39,000 of gross realized losses from the sale of securities during the six months ended June 30, 2021. The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2022 and 2021. The Company has entered into various fair value hedging transactions to mitigate the impact of changing interest rates on the fair value of AFS securities. See Note 23: Derivative Instruments for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities. 20 NOTE 4: OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE Spirit Acquisition In connection with the Spirit acquisition, the Company acquired a portfolio of loans which were identified as held for sale by the acquired bank prior to the completion of the acquisition. These loans were valued at $ 31.3 million, net of fair value discounts, at the date of acquisition. As of June 30, 2022, the remaining balance of loans held for sale, net of fair value discounts, was $ 16.4 million. As of June 30, 2022, there were no outstanding other liabilities held for sale. Illinois Branch Sale On November 30, 2020, the Company’s subsidiary bank, Simmons Bank, entered into a Branch Purchase and Assumption Agreement (the “Citizens Equity Agreement”) with Citizens Equity First Credit Union (“CEFCU”). On March 12, 2021, CEFCU completed its purchase of certain assets and assumption of certain liabilities (“Illinois Branch Sale”) associated with four Simmons Bank locations in the Metro East area of Southern Illinois, near St. Louis (collectively, the “Illinois Branches”). Pursuant to the terms of the Citizens Equity Agreement, CEFCU assumed certain deposit liabilities and acquired certain loans, as well as cash, personal property and other fixed assets associated with the Illinois Branches. The loan and deposit balances of the Illinois Branches were $ 354,000 and $ 137.9 million, respectively. The Company recognized a gain on sale of $ 5.3 million related to the Illinois Branches in the six month period ended June 30, 2021. NOTE 5: LOANS AND ALLOWANCE FOR CREDIT LOSSES At June 30, 2022, the Company’s loan portfolio was $ 15.11 billion, compared to $ 12.01 billion at December 31, 2021. The various categories of loans are summarized as follows: June 30, December 31, (In thousands) 2022 2021 Consumer: Credit cards $ 189,684 $ 187,052 Other consumer 204,692 168,318 Total consumer 394,376 355,370 Real Estate: Construction and development 2,082,688 1,326,371 Single family residential 2,357,942 2,101,975 Other commercial 7,082,055 5,738,904 Total real estate 11,522,685 9,167,250 Commercial: Commercial 2,612,256 1,992,043 Agricultural 218,743 168,717 Total commercial 2,830,999 2,160,760 Other 362,284 329,123 Total loans $ 15,110,344 $ 12,012,503 The above table presents total loans at amortized cost. The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as net deferred origination fees totaling $ 31.8 million and $ 21.5 million at June 30, 2022 and December 31, 2021, respectively. 21 Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 46.5 million and $ 39.8 million at June 30, 2022 and December 31, 2021, respectively, and is included in interest receivable on the consolidated balance sheets. Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; and providing an adequate allowance for credit losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to economic downturns that result in increased unemployment. Other consumer loans include direct and indirect installment loans and account overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures. Real estate – The real estate loan portfolio consists of construction and development loans (“C&D”), single family residential loans and commercial loans. C&D and commercial real estate (“CRE”) loans can be particularly sensitive to valuation of real estate. CRE cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within CRE – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and duration. The Company monitors these loans closely. Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Paycheck Protection Program (“PPP”) loans are also included in the commercial loan portfolio. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities. Paycheck Protection Program Loans – The Company originated loans pursuant to multiple PPP appropriations of the CARES Act which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assistance with mortgage interest, rent and utilities. Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions. PPP loans have a zero percent risk-weight for regulatory capital ratios. As of June 30, 2022 and December 31, 2021, the total outstanding balance of PPP loans was $ 19.5 million and $ 116.7 million, respectively. Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. 22 The amortized cost basis of nonaccrual loans segregated by category of loans are as follows: June 30, December 31, (In thousands) 2022 2021 Consumer: Credit cards $ 325 $ 377 Other consumer 334 381 Total consumer 659 758 Real estate: Construction and development 3,292 2,296 Single family residential 21,046 19,268 Other commercial 20,281 26,953 Total real estate 44,619 48,517 Commercial: Commercial 17,237 18,774 Agricultural 142 152 Total commercial 17,379 18,926 Other 13 3 Total $ 62,670 $ 68,204 As of June 30, 2022 and December 31, 2021, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 11.8 million and $ 14.5 million, respectively. These loans are individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method. An age analysis of the amortized cost basis of past due loans, including nonaccrual loans, segregated by class of loans is as follows: (In thousands) Gross 30-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans 90 Days Past Due & Accruing June 30, 2022 Consumer: Credit cards $ 823 $ 282 $ 1,105 $ 188,579 $ 189,684 $ 180 Other consumer 786 81 867 203,825 204,692 — Total consumer 1,609 363 1,972 392,404 394,376 180 Real estate: Construction and development 578 1,610 2,188 2,080,500 2,082,688 — Single family residential 12,399 10,590 22,989 2,334,953 2,357,942 552 Other commercial 3,788 14,682 18,470 7,063,585 7,082,055 — Total real estate 16,765 26,882 43,647 11,479,038 11,522,685 552 Commercial: Commercial 5,202 8,148 13,350 2,598,906 2,612,256 172 Agricultural 141 44 185 218,558 218,743 — Total commercial 5,343 8,192 13,535 2,817,464 2,830,999 172 Other — 13 13 362,271 362,284 — Total $ 23,717 $ 35,450 $ 59,167 $ 15,051,177 $ 15,110,344 $ 904 23 (In thousands) Gross 30-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans 90 Days Past Due & Accruing December 31, 2021 Consumer: Credit cards $ 847 $ 413 $ 1,260 $ 185,792 $ 187,052 $ 247 Other consumer 1,149 130 1,279 167,039 168,318 — Total consumer 1,996 543 2,539 352,831 355,370 247 Real estate: Construction and development 114 504 618 1,325,753 1,326,371 — Single family residential 11,313 9,398 20,711 2,081,264 2,101,975 102 Other commercial 2,474 12,268 14,742 5,724,162 5,738,904 — Total real estate 13,901 22,170 36,071 9,131,179 9,167,250 102 Commercial: Commercial 4,812 10,074 14,886 1,977,157 1,992,043 — Agricultural 13 117 130 168,587 168,717 — Total commercial 4,825 10,191 15,016 2,145,744 2,160,760 — Other — 3 3 329,120 329,123 — Total $ 20,722 $ 32,907 $ 53,629 $ 11,958,874 $ 12,012,503 $ 349 When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) results and the Company classifies the loan as a TDR. The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal. Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; 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. The Company returns 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. TDRs are individually evaluated for expected credit losses. The Company assesses the exposure for each modification, either by the fair value of the underlying collateral or the present value of expected cash flows, and determines if a specific allowance for credit losses is needed. The following table presents a summary of TDRs segregated by class of loans. Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans (Dollars in thousands) Number Balance Number Balance Number Balance June 30, 2022 Real estate: Single-family residential 24 $ 1,902 13 $ 1,122 37 $ 3,024 Other commercial 1 753 — — 1 753 Total real estate 25 2,655 13 1,122 38 3,777 Commercial: Commercial — — 3 1,401 3 1,401 Total commercial — — 3 1,401 3 1,401 Total 25 $ 2,655 16 $ 2,523 41 $ 5,178 24 Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans (Dollars in thousands) Number Balance Number Balance Number Balance December 31, 2021 Real estate: Single-family residential 28 $ 3,087 14 $ 1,196 42 $ 4,283 Other commercial 1 766 2 48 3 814 Total real estate 29 3,853 16 1,244 45 5,097 Commercial: Commercial 2 436 2 1,406 4 1,842 Total commercial 2 436 2 1,406 4 1,842 Total 31 $ 4,289 18 $ 2,650 49 $ 6,939 The following table presents loans that were restructured as TDRs during the three and six month periods ended June 30, 2022 and 2021. (Dollars in thousands) Number of loans Balance Prior to TDR Balance at June 30, Change in Maturity Date Change in Rate Financial Impact on Date of Restructure Three and Six Months Ended June 30, 2022 Real estate: Other commercial 1 $ 13 $ 13 $ — $ 13 $ — Total real estate 1 $ 13 $ 13 $ — $ 13 $ — Three and Six Months Ended June 30, 2021 Real estate: Other commercial 1 $ 784 $ 778 $ — $ 778 $ — Total real estate 1 $ 784 $ 778 $ — $ 778 $ — During the three and six months ended June 30, 2022, the Company modified one loan with a recorded investment of $ 13,000 prior to modification, which was deemed a TDR. The restructured loan was modified by reducing the interest rate on the loan. No specific reserve was recorded with respect to this TDR. Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure. During the three and six months ended June 30, 2021, the Company modified one loan with a recorded investment of $ 784,000 prior to modification, which was deemed a TDR. The restructured loan was modified by deferring amortized principal payments and requiring interest only payments for a period of up to 12 months. A specific reserve of approximately $ 5,100 was recorded with respect to this TDR. Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure. Additionally, there were no loans considered TDRs for which a payment default occurred during the six months ended June 30, 2022 or 2021. The Company defines a payment default as a payment received more than 90 days after its due date. There were no TDRs with pre-modification loan balances for which Other Real Estate Owned (“OREO”) was received in full or partial satisfaction of the loans during the three and six month periods ended June 30, 2022 or 2021. At June 30, 2022 and December 31, 2021, the Company had $ 2,420,000 and $ 1,806,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At June 30, 2022 and December 31, 2021, the Company had $ 524,000 and $ 831,000 , respectively, of OREO secured by residential real estate properties. Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions of the Company’s local markets. 25 The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review. A description of the general characteristics of the risk ratings is as follows: • Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength. • Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”). • Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters. • Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability. • Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices. • Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan. • Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status. • Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible. The Company monitors credit quality in the consumer portfolio by delinquency status. The delinquency status of loans is updated daily. A description of the delinquency credit quality indicators is as follows: • Current - Loans in this category are either current in payments or are under 30 days past due. These loans are considered to have a normal level of risk. • 30-89 Days Past Due - Loans in this category are between 30 and 89 days past due and are subject to the Company’s loss mitigation process. These loans are considered to have a moderate level of risk. 26 • 90+ Days Past Due - Loans in this category are 90 days or more past due and are placed on nonaccrual status. These loans have been subject to the Company’s loss mitigation process and foreclosure and/or charge-off proceedings have commenced. The Company uses a dual risk rating scale that utilizes quantitative models and qualitative factors (“score cards”) to assist in determining the appropriate risk rating for its commercial loans. This dual risk rating methodology incorporates a “probability of default” analysis which utilizes quantified metrics such as loan terms and financial performance, as well as a “loss given default” analysis which utilizes collateral values and economics of the market, among other attributes. Model outputs are reviewed and analyzed to ensure the projected risk levels are commensurate with underwriting and credit leader expectations. The risk rating scale includes Probability of Default levels of 1 – 16 and Loss Given Default levels of A – I. The scale allows for more granular recognition of risk and diversification of grading among traditional Pass grades. The following is a reconciliation between the expanded risk rating scale and the Company’s traditional risk rating segments utilized within the commercial loan classes presented in the credit quality indicator tables. • Pass - Includes loans with an expanded risk rating of 1 through 11. Loans with a risk rating of 10 and 11 equate to loans included on management’s “watch list” and is intended to be utilized on a temporary basis for pass grade borrowers where a significant risk-modifying action is anticipated in the near term. • Special Mention - Includes loans with an expanded risk rating of 12. • Substandard - Includes loans with an expanded risk rating of 13 and 14. • Doubtful and loss - Includes loans with an expanded risk rating of 15 and 16. 27 The following table presents a summary of loans by credit quality indicator, as of June 30, 2022, segregated by class of loans. Term Loans Amortized Cost Basis by Origination Year (In thousands) 2022 (YTD) 2021 2020 2019 2018 2017 and Prior Lines of Credit (“LOC”) Amortized Cost Basis LOC Converted to Term Loans Amortized Cost Basis Total Consumer - credit cards Delinquency: Current $ — $ — $ — $ — $ — $ — $ 188,579 $ — $ 188,579 30-89 days past due — — — — — — 823 — 823 90+ days past due — — — — — — 282 — 282 Total consumer - credit cards — — — — — — 189,684 — 189,684 Consumer - other Delinquency: Current 113,647 37,547 15,582 7,499 4,689 4,961 19,897 3 203,825 30-89 days past due 121 308 85 59 21 173 19 — 786 90+ days past due — 17 8 5 4 39 8 — 81 Total consumer - other 113,768 37,872 15,675 7,563 4,714 5,173 19,924 3 204,692 Real estate - C&D Risk rating: Pass 141,408 112,131 82,372 28,611 21,030 21,377 1,669,088 346 2,076,363 Special mention — — — 257 — 45 — — 302 Substandard 1,955 91 12 14 32 151 3,768 — 6,023 Doubtful and loss — — — — — — — — — Total real estate - C&D 143,363 112,222 82,384 28,882 21,062 21,573 1,672,856 346 2,082,688 Real estate - SF residential Delinquency: Current 345,078 444,223 281,134 173,339 234,911 554,820 296,238 5,210 2,334,953 30-89 days past due 357 1,492 434 2,311 1,533 5,348 924 — 12,399 90+ days past due — 419 475 607 1,213 6,693 1,183 — 10,590 Total real estate - SF residential 345,435 446,134 282,043 176,257 237,657 566,861 298,345 5,210 2,357,942 Real estate - other commercial Risk rating: Pass 1,122,003 1,607,077 704,790 389,165 270,028 870,569 1,726,593 19,805 6,710,030 Special mention 32,585 13,784 34,233 2,815 6,836 30,804 61,082 — 182,139 Substandard 37,988 19,126 15,535 4,606 15,386 47,629 49,616 — 189,886 Doubtful and loss — — — — — — — — — Total real estate - other commercial 1,192,576 1,639,987 754,558 396,586 292,250 949,002 1,837,291 19,805 7,082,055 Commercial Risk rating: Pass 390,270 403,212 193,069 87,732 49,283 75,417 1,336,375 38,411 2,573,769 Special mention 88 1,266 120 70 11 1,022 3,596 — 6,173 Substandard 2,541 4,792 796 1,389 2,334 5,432 14,098 931 32,313 Doubtful and loss — — — — — — — 1 1 Total commercial 392,899 409,270 193,985 89,191 51,628 81,871 1,354,069 39,343 2,612,256 Commercial - agriculture Risk rating: Pass 25,266 27,616 13,144 7,172 1,832 1,942 140,470 558 218,000 Special mention — — — — — — — — — Substandard — 58 — 99 55 1 530 — 743 Doubtful and loss — — — — — — — — — Total commercial - agriculture 25,266 27,674 13,144 7,271 1,887 1,943 141,000 558 218,743 Other Delinquency: Current 44,083 31,049 9,005 5,973 23,119 28,484 219,605 953 362,271 30-89 days past due — — — — — — — — — 90+ days past due — — — — — 13 — — 13 Total other 44,083 31,049 9,005 5,973 23,119 28,497 219,605 953 362,284 Total $ 2,257,390 $ 2,704,208 $ 1,350,794 $ 711,723 $ 632,317 $ 1,654,920 $ 5,732,774 $ 66,218 $ 15,110,344 28 The following table presents a summary of loans by credit quality indicator, as of December 31, 2021, segregated by class of loans. Term Loans Amortized Cost Basis by Origination Year (In thousands) 2021 2020 2019 2018 2017 2016 and Prior Lines of Credit (“LOC”) Amortized Cost Basis LOC Converted to Term Loans Amortized Cost Basis Total Consumer - credit cards Delinquency: Current $ — $ — $ — $ — $ — $ — $ 185,792 $ — $ 185,792 30-89 days past due — — — — — — 847 — 847 90+ days past due — — — — — — 413 — 413 Total consumer - credit cards — — — — — — 187,052 — 187,052 Consumer - other Delinquency: Current 97,830 21,885 11,712 6,756 5,416 3,833 19,607 — 167,039 30-89 days past due 265 121 164 49 219 156 175 — 1,149 90+ days past due 23 23 28 21 13 22 — — 130 Total consumer - other 98,118 22,029 11,904 6,826 5,648 4,011 19,782 — 168,318 Real estate - C&D Risk rating: Pass 74,813 83,729 28,803 17,349 8,505 9,319 1,074,617 20,285 1,317,420 Special mention — — 270 — — 47 — — 317 Substandard 191 77 16 54 324 423 5,598 1,951 8,634 Doubtful and loss — — — — — — — — — Total real estate - C&D 75,004 83,806 29,089 17,403 8,829 9,789 1,080,215 22,236 1,326,371 Real estate - SF residential Delinquency: Current 419,605 335,788 185,190 260,037 193,110 421,957 256,155 9,422 2,081,264 30-89 days past due 1,061 883 1,662 791 1,077 4,360 1,479 — 11,313 90+ days past due 27 561 507 1,199 1,358 5,104 570 72 9,398 Total real estate - SF residential 420,693 337,232 187,359 262,027 195,545 431,421 258,204 9,494 2,101,975 Real estate - other commercial Risk rating: Pass 1,349,746 807,701 375,824 267,696 476,029 537,493 1,409,099 164,856 5,388,444 Special mention 28,151 30,981 2,799 6,650 39,361 4,801 38,638 1,608 152,989 Substandard 28,137 10,186 5,243 10,806 30,060 27,107 53,860 32,072 197,471 Doubtful and loss — — — — — — — — — Total real estate - other commercial 1,406,034 848,868 383,866 285,152 545,450 569,401 1,501,597 198,536 5,738,904 Commercial Risk rating: Pass 455,499 187,517 80,486 57,437 36,529 57,099 1,004,971 41,885 1,921,423 Special mention 670 2,482 1,066 189 261 2,770 8,500 10,499 26,437 Substandard 3,436 18,381 4,397 1,196 578 850 8,242 7,103 44,183 Doubtful and loss — — — — — — — — — Total commercial 459,605 208,380 85,949 58,822 37,368 60,719 1,021,713 59,487 1,992,043 Commercial - agriculture Risk rating: Pass 32,780 20,230 10,253 3,646 2,364 459 98,245 327 168,304 Special mention — — — — — — — — — Substandard 191 25 27 53 22 3 23 69 413 Doubtful and loss — — — — — — — — — Total commercial - agriculture 32,971 20,255 10,280 3,699 2,386 462 98,268 396 168,717 Other Delinquency: Current 24,247 4,740 1,236 22,438 6,692 5,578 264,189 — 329,120 30-89 days past due — — — — — — — — — 90+ days past due — — — — — 3 — — 3 Total other 24,247 4,740 1,236 22,438 6,692 5,581 264,189 — 329,123 Total $ 2,516,672 $ 1,525,310 $ 709,683 $ 656,367 $ 801,918 $ 1,081,384 $ 4,431,020 $ 290,149 $ 12,012,503 29 Allowance for Credit Losses Allowance for Credit Losses – The allowance for credit losses is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical loss experience, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected loan losses and risks inherent in the loan portfolio. The Company’s allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for the effective interest rate used to discount prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses . Accordingly, the methodology is based on the Company’s reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments. Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated into homogeneous segments for assessment. Reserve factors are based on estimated probability of default and loss given default for each segment. The estimates are determined based on economic forecasts over the reasonable and supportable forecast period based on projected performance of economic variables that have a statistical relationship with the historical loss experience of the segments. For contractual periods that extend beyond the one-year forecast period, the estimates revert to average historical loss experiences over a one-year period on a straight-line basis. The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for. Qualitative adjustments include, but are not limited to: • Changes in asset quality - Adjustments related to trending credit quality metrics including delinquency, non-performing loans, charge-offs, and risk ratings that may not be fully accounted for in the reserve factor. • Changes in the nature and volume of the portfolio - Adjustments related to current changes in the loan portfolio that are not fully represented or accounted for in the reserve factors. • Changes in lending and loan monitoring policies and procedures - Adjustments related to current changes in lending and loan monitoring procedures as well as review of specific internal policy compliance metrics. • Changes in the experience, ability, and depth of lending management and other relevant staff - Adjustments to measure increasing or decreasing credit risk related to lending and loan monitoring management. • Changes in the value of underlying collateral of collateralized loans - Adjustments related to improving or deterioration of the value of underlying collateral that are not fully captured in the reserve factors. • Changes in and the existence and effect of any concentrations of credit - Adjustments related to credit risk of specific industries that are not fully captured in the reserve factors. • Changes in regional and local economic and business conditions and developments - Adjustments related to expected and current economic conditions at a regional or local-level that are not fully captured within the Company’s reasonable and supportable forecast. • Data imprecisions due to limited historical loss data - Adjustments related to limited historical loss data that is representative of the collective loan portfolio. Loans that do not share similar risk characteristics are evaluated on an individual basis. These evaluations are typically performed on loans with a deteriorated internal risk rating or are classified as a troubled debt restructuring. The allowance for credit loss is determined based on several methods including estimating the fair value of the underlying collateral or the present value of expected cash flows. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for credit losses as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan. 30 Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $ 97.5 million and $ 47.1 million as of June 30, 2022 and December 31, 2021, respectively, as further detailed in the table below. The collateral securing these loans consist of commercial real estate properties, residential properties, and other business assets. (In thousands) Real Estate Collateral Other Collateral Total June 30, 2022 Construction and development $ 2,682 $ — $ 2,682 Single family residential 1,944 — 1,944 Other commercial real estate 84,094 — 84,094 Commercial — 8,773 8,773 Total $ 88,720 $ 8,773 $ 97,493 December 31, 2021 Construction and development $ 2,489 $ — $ 2,489 Single family residential 1,838 — 1,838 Other commercial real estate 32,849 — 32,849 Commercial — 9,913 9,913 Total $ 37,176 $ 9,913 $ 47,089 The following table details activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2022. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Allowance for credit losses: Three Months Ended June 30, 2022 Beginning balance, April 1, 2022 $ 9,177 $ 161,389 $ 2,894 $ 5,464 $ 178,924 Acquisition adjustment for PCD loans 854 3,187 — 2 4,043 Provision for credit loss expense 22,853 1,629 4,470 1,454 30,406 Charge-offs ( 688 ) ( 124 ) ( 1,004 ) ( 518 ) ( 2,334 ) Recoveries 621 400 249 302 1,572 Net charge-offs ( 67 ) 276 ( 755 ) ( 216 ) ( 762 ) Ending balance, June 30, 2022 $ 32,817 $ 166,481 $ 6,609 $ 6,704 $ 212,611 Six Months Ended June 30, 2022 Beginning balance, January 1, 2022 $ 17,458 $ 179,270 $ 3,987 $ 4,617 $ 205,332 Acquisition adjustment for PCD loans 854 3,187 — 2 4,043 Provision for credit loss expense 20,334 ( 16,193 ) 4,023 2,328 10,492 Charge-offs ( 7,007 ) ( 600 ) ( 1,924 ) ( 932 ) ( 10,463 ) Recoveries 1,178 817 523 689 3,207 Net charge-offs ( 5,829 ) 217 ( 1,401 ) ( 243 ) ( 7,256 ) Ending balance, June 30, 2022 $ 32,817 $ 166,481 $ 6,609 $ 6,704 $ 212,611 31 Activity in the allowance for credit losses for the three and six months ended June 30, 2021 was as follows: (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Allowance for credit losses: Three Months Ended June 30, 2021 Beginning balance, April 1, 2021 $ 34,633 $ 195,826 $ 2,172 $ 2,485 $ 235,116 Provision for credit losses ( 6,678 ) ( 8,522 ) 4,072 1,117 ( 10,011 ) Charge-offs ( 309 ) ( 439 ) ( 1,046 ) ( 411 ) ( 2,205 ) Recoveries 2,147 1,523 244 425 4,339 Net (charge-offs) recoveries 1,838 1,084 ( 802 ) 14 2,134 Ending balance, June 30, 2021 $ 29,793 $ 188,388 $ 5,442 $ 3,616 $ 227,239 Six Months Ended June 30, 2021 Beginning balance, January 1, 2021 $ 42,093 $ 182,868 $ 7,472 $ 5,617 $ 238,050 Provision for credit loss expense ( 13,599 ) 5,720 ( 515 ) ( 1,617 ) ( 10,011 ) Charge-offs ( 1,168 ) ( 2,126 ) ( 2,049 ) ( 1,113 ) ( 6,456 ) Recoveries 2,467 1,926 534 729 5,656 Net (charge-offs) recoveries 1,299 ( 200 ) ( 1,515 ) ( 384 ) ( 800 ) Ending balance, June 30, 2021 $ 29,793 $ 188,388 $ 5,442 $ 3,616 $ 227,239 As of June 30, 2022, the Company’s allowance for credit losses was considered sufficient based upon expected loan level cash flows that were supported by economic forecasts. The provision for credit losses for the three and six months ended June 30, 2022 was primarily due to the Day 2 provision expense related to the Spirit acquisition, partially offset by the provision recapture based upon improved asset credit quality metrics combined with improved Moody’s economic modeling scenarios. Reserve for Unfunded Commitments In addition to the allowance for credit losses, the Company has established a reserve for unfunded commitments, classified in other liabilities. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The reserve for unfunded commitments was $ 25.9 million and $ 22.4 million as of June 30, 2022 and December 31, 2021, respectively. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses. For the three and six month periods ended June 30, 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $ 3.5 million associated with the Day 2 provision related to the Spirit acquisition and was included in the provision for credit losses in the statement of income. No adjustment was made to the reserve for unfunded commitments during the three and six months ended June 30, 2021 as it was considered sufficient to cover any loss expectations. Provision for Credit Losses Provision for credit losses is determined by the Company as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments. 32 The components of the provision for credit losses for the three and six month periods ended June 30, 2022 and 2021 were as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Provision for credit losses related to: Loans $ 30,406 $ ( 10,011 ) $ 10,492 $ ( 10,011 ) Unfunded commitments 3,453 — 3,453 — Securities - HTM — ( 486 ) — ( 1,183 ) Securities - AFS — ( 2,454 ) — ( 312 ) Total $ 33,859 $ ( 12,951 ) $ 13,945 $ ( 11,506 ) Purchased Credit Deteriorated (“PCD”) Loans Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit loss on the date of acquisition using the same methodology as discussed in the Allowance for Credit Losses section included above. The following table provides a summary of loans purchased during the fourth quarter of 2021 as part of the Landmark acquisition with credit deterioration at acquisition: (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Unpaid principal balance $ 11,046 $ 55,549 $ — $ 67 $ 66,662 PCD allowance for credit loss at acquisition ( 350 ) ( 2,008 ) — ( 1 ) ( 2,359 ) Non-credit related discount ( 160 ) ( 2,415 ) — ( 2 ) ( 2,577 ) Fair value of PCD loans $ 10,536 $ 51,126 $ — $ 64 $ 61,726 The following table provides a summary of loans purchased during the fourth quarter of 2021 as part of the Triumph acquisition with credit deterioration at acquisition: (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Unpaid principal balance $ 40,466 $ 80,803 $ — $ 15 $ 121,284 PCD allowance for credit loss at acquisition ( 2,999 ) ( 8,093 ) — — ( 11,092 ) Non-credit related discount ( 279 ) ( 1,314 ) — ( 1 ) ( 1,594 ) Fair value of PCD loans $ 37,188 $ 71,396 $ — $ 14 $ 108,598 The following table provides a summary of loans purchased during the second quarter of 2022 as part of the Spirit acquisition with credit deterioration at acquisition: (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Unpaid principal balance $ 8,258 $ 66,534 $ — $ 59 $ 74,851 PCD allowance for credit loss at acquisition ( 854 ) ( 3,187 ) — ( 2 ) ( 4,043 ) Non-credit related discount ( 378 ) ( 998 ) — ( 1 ) ( 1,377 ) Fair value of PCD loans $ 7,026 $ 62,349 $ — $ 56 $ 69,431 33 NOTE 6: RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES The Company accounts for its leases in accordance with ASC Topic 842, Leases , which requires recognition of most leases, including operating leases, with a term greater than 12 months on the balance sheet. At lease commencement, the lease contract is reviewed to determine whether the contract is a finance lease or an operating lease; a lease liability is recognized on a discounted basis, related to the Company’s obligation to make lease payments; and a right-of-use asset is also recognized related to the Company’s right to use, or control the use of, a specified asset for the lease term. The Company accounts for lease and non-lease components (such as taxes, insurance and common area maintenance costs) separately as such amounts are generally readily determinable under the lease contracts. Lease payments over the expected term are discounted using the Company’s Federal Home Loan Bank (“FHLB”) advance rates for borrowings of similar term. If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company’s leases are classified as operating leases with a term, including expected renewal or termination options, greater than one year, and are related to certain office facilities and office equipment. The following table presents information as of June 30, 2022 and December 31, 2021 related to the Company’s right-of-use lease assets, included in premises and equipment, and lease liabilities, included in accrued interest and other liabilities. June 30, December 31, (Dollars in thousands) 2022 2021 Right-of-use lease assets $ 51,879 $ 48,855 Lease liabilities 52,696 49,321 Weighted average remaining lease term 8.00 years 7.96 years Weighted average discount rate 2.02 % 2.00 % Operating lease cost for the three and six month periods ended June 30, 2022 was $ 3.7 million and $ 6.9 million, respectively, as compared to $ 2.9 million and $ 5.7 million for the same periods in 2021. NOTE 7: PREMISES AND EQUIPMENT Premises and equipment are stated at cost less accumulated depreciation and amortization. Total premises and equipment, net at June 30, 2022 and December 31, 2021 were as follows: June 30, December 31, (In thousands) 2022 2021 Right-of-use lease assets $ 51,879 $ 48,855 Premises and equipment: Land 122,827 101,728 Buildings and improvements 364,076 320,844 Furniture, fixtures and equipment 112,688 107,122 Software 67,215 66,947 Construction in progress 21,206 9,117 Accumulated depreciation and amortization ( 186,829 ) ( 171,144 ) Total premises and equipment, net $ 553,062 $ 483,469 34 NOTE 8: GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is tested annually, or more often than annually, if circumstances warrant, for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. Goodwill totaled $ 1.31 billion and $ 1.15 billion at June 30, 2022 and December 31, 2021, respectively. Goodwill increased $ 164.5 million during the six months ended June 30, 2022 primarily due to the Spirit acquisition, along with adjustments related to the continued assessment of the fair value and assumed tax position of the Landmark and Triumph acquisitions. Goodwill impairment was neither indicated nor recorded during the six months ended June 30, 2022 or the year ended December 31, 2021. During the second quarter of 2022, the Company performed an annual goodwill impairment analysis and concluded no impairment existed. Also during the second quarter of 2022, the Company’s share price began to decline as markets in the United States responded to record inflation and other economic pressures. As a result of the effect on share price, the Company performed an interim goodwill impairment assessment and concluded no impairment existed during the period. Core deposit premiums represent the value of the relationships that acquired banks had with their deposit customers and are amortized over periods ranging from 10 years to 15 years and are periodically evaluated, at least annually, as to the recoverability of their carrying value. Other intangible assets represent the value of other acquired relationships, including relationships with trust and wealth management customers, and are being amortized over various periods ranging from 10 years to 15 years. Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at June 30, 2022 and December 31, 2021 were as follows: June 30, December 31, (In thousands) 2022 2021 Core deposit premiums: Balance, beginning of year $ 93,862 $ 97,363 Acquisitions (1) 36,500 9,295 Disposition of intangible asset (2) — ( 674 ) Amortization ( 6,895 ) ( 12,122 ) Balance, end of period 123,467 93,862 Books of business and other intangibles: Balance, beginning of year 12,373 13,747 Acquisitions (3) 2,131 — Amortization ( 686 ) ( 1,374 ) Balance, end of period 13,818 12,373 Total other intangible assets, net $ 137,285 $ 106,235 _________________________ (1) A core deposit premium of $ 36.5 million was recorded during 2022 as part of the Spirit acquisition. Core deposit premiums of $ 5.1 million and $ 4.2 million were recorded during 2021 as part of the Triumph and Landmark acquisitions, respectively. See Note 2, Acquisitions, for additional information on acquisitions. (2) Adjustments recorded for the premiums on certain deposit liabilities associated with the sale of banking operations. (3) The Company recorded $ 2.1 million during 2022 related to servicing assets acquired as part of the Spirit acquisition. See Note 2, Acquisitions, for additional information on acquisitions. 35 The carrying basis and accumulated amortization of the Company’s other intangible assets at June 30, 2022 and December 31, 2021 were as follows: June 30, December 31, (In thousands) 2022 2021 Core deposit premiums: Gross carrying amount $ 189,996 $ 153,496 Accumulated amortization ( 66,529 ) ( 59,634 ) Core deposit premiums, net 123,467 93,862 Books of business and other intangibles: Gross carrying amount 22,068 19,937 Accumulated amortization ( 8,250 ) ( 7,564 ) Books of business and other intangibles, net 13,818 12,373 Total other intangible assets, net $ 137,285 $ 106,235 The Company’s estimated remaining amortization expense on other intangible assets as of June 30, 2022 is as follows: (In thousands) Year Amortization Expense Remainder of 2022 $ 8,209 2023 16,187 2024 15,285 2025 12,700 2026 12,227 Thereafter 72,677 Total $ 137,285 NOTE 9: TIME DEPOSITS Time deposits included approximately $ 1.01 billion and $ 784.9 million of certificates of deposit over $250,000 at June 30, 2022 and December 31, 2021, respectively. Brokered time deposits were $ 1.35 billion and $ 466.0 million at June 30, 2022 and December 31, 2021, respectively. NOTE 10: INCOME TAXES The provision for income taxes is comprised of the following components for the periods indicated below: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Income taxes currently payable $ 15,341 $ 13,930 $ 20,460 $ 25,066 Deferred income taxes ( 8,190 ) 3,088 917 6,315 Provision for income taxes $ 7,151 $ 17,018 $ 21,377 $ 31,381 36 The tax effects of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows: June 30, December 31, (In thousands) 2022 2021 Deferred tax assets: Loans acquired $ 7,656 $ 4,832 Allowance for credit losses 50,577 48,462 Valuation of foreclosed assets 628 628 Tax NOLs from acquisition 13,949 13,537 Deferred compensation payable 3,545 3,426 Accrued equity and other compensation 5,202 5,776 Acquired securities 19,795 223 Right-of-use lease liability 12,804 11,984 Unrealized loss on AFS securities 139,084 8,164 Allowance for unfunded commitments 6,300 5,442 Other 6,059 7,202 Gross deferred tax assets 265,599 109,676 Deferred tax liabilities: Goodwill and other intangible amortization ( 45,670 ) ( 38,329 ) Accumulated depreciation ( 25,183 ) ( 26,347 ) Right-of-use lease asset ( 12,605 ) ( 11,871 ) Unrealized gain on swaps — ( 2,767 ) Other ( 4,271 ) ( 3,718 ) Gross deferred tax liabilities ( 87,729 ) ( 83,032 ) Net deferred tax asset $ 177,870 $ 26,644 A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown for the periods indicated below: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Computed at the statutory rate (21%) $ 7,267 $ 19,305 $ 23,924 $ 36,477 Increase (decrease) in taxes resulting from: State income taxes, net of federal tax benefit ( 560 ) 1,488 565 3,378 Stock-based compensation 97 ( 66 ) ( 105 ) 37 Tax exempt interest income ( 3,619 ) ( 2,741 ) ( 7,022 ) ( 5,251 ) Tax exempt earnings on BOLI ( 465 ) ( 319 ) ( 890 ) ( 560 ) Federal tax credits ( 949 ) ( 589 ) ( 1,537 ) ( 1,179 ) Other differences, net 5,380 ( 60 ) 6,442 ( 1,521 ) Actual tax provision $ 7,151 $ 17,018 $ 21,377 $ 31,381 37 The Company follows ASC Topic 740, Income Taxes , which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company has no history of expiring net operating loss carryforwards and is projecting significant pre-tax and financial taxable income in future years. The Company expects to fully realize its deferred tax assets in the future. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions. Section 382 of the Internal Revenue Code imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its U.S. net operating losses to reduce its tax liability. The Company has engaged in two tax-free reorganization transactions in which acquired net operating losses are limited pursuant to Section 382. In total, approximately $ 54.6 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company. All of the acquired net operating loss carryforwards are expected to be fully utilized by 2036. The Company files income tax returns in the U.S. federal jurisdiction. The Company’s U.S. federal income tax returns are open and subject to examinations from the 2018 tax year and forward. The Company’s various state income tax returns are generally open from the 2018 and later tax return years based on individual state statute of limitations. NOTE 11: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The Company utilizes securities sold under agreements to repurchase to facilitate the needs of its customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis. The Company may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents. The gross amount of recognized liabilities for repurchase agreements was $ 146.1 million and $ 170.4 million at June 30, 2022 and December 31, 2021, respectively. The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of June 30, 2022 and December 31, 2021 is presented in the following tables. Remaining Contractual Maturity of the Agreements (In thousands) Overnight and Continuous Up to 30 Days 30-90 Days Greater than 90 Days Total June 30, 2022 Repurchase agreements: U.S. Government agencies $ 146,101 $ — $ — $ — $ 146,101 December 31, 2021 Repurchase agreements: U.S. Government agencies $ 170,403 $ — $ — $ — $ 170,403 38 NOTE 12: OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES Debt at June 30, 2022 and December 31, 2021 consisted of the following components: June 30, December 31, (In thousands) 2022 2021 Other Borrowings FHLB advances, net of discount, due 2028 to 2034, 1.06 % to 5.53 % secured by real estate loans $ 1,029,215 $ 1,306,143 Other long-term debt 31,029 31,830 Total other borrowings 1,060,244 1,337,973 Subordinated Notes and Debentures Subordinated notes payable, due 4/1/2028, fixed-to-floating rate (fixed rate of 5.00 % through 3/31/2023, floating rate of 2.15 % above the three month LIBOR rate, reset quarterly) 330,000 330,000 Subordinated notes payable, net of premium adjustments, due 7/31/2030, fixed-to-floating rate (fixed rate of 6.00 % through 7/30/2025, floating rate of 5.92 % above the three month SOFR rate, reset quarterly) 37,341 — Trust preferred securities, due 9/15/2037, floating rate of 1.37 % above the three month LIBOR rate, reset quarterly 10,310 10,310 Trust preferred securities, due 6/6/2037, floating rate of 1.57 % above the three month LIBOR rate, reset quarterly, callable without penalty 10,310 10,310 Trust preferred securities, due 12/15/2035, floating rate of 1.45 % above the three month LIBOR rate, reset quarterly, callable without penalty 6,702 6,702 Trust preferred securities, net of discount, due 6/15/2037, floating rate of 1.85 % above the three month LIBOR rate, reset quarterly, callable without penalty 25,408 25,329 Trust preferred securities, net of discount, due 12/15/2036, floating rate of 1.85 % above the three month LIBOR rate, reset quarterly, callable without penalty 3,050 3,041 Unamortized debt issuance costs ( 1,428 ) ( 1,561 ) Total subordinated notes and debentures 421,693 384,131 Total other borrowings and subordinated debt $ 1,481,937 $ 1,722,104 In March 2018, the Company issued $ 330.0 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. The Company incurred $ 3.6 million in debt issuance costs related to the offering during March 2018. The Notes will mature on April 1, 2028 and will bear interest at an initial fixed rate of 5.00 % per annum, payable semi-annually in arrears. From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month LIBOR rate plus 215 basis points, payable quarterly in arrears. The Notes will be subordinated in right of payment to the payment of the Company’s other existing and future senior indebtedness, including all of its general creditors. The Notes are obligations of the Company only and are not obligations of, and are not guaranteed by, any of its subsidiaries. The Company used a portion of the net proceeds from the sale of the Notes to repay certain outstanding indebtedness. The Notes qualify for Tier 2 capital treatment. The terms of the Company’s Notes and trust preferred securities utilize the three month LIBOR rate to determine the interest rate and expense due each quarter. The Company is currently reviewing all applicable documents and working with the debt holders and all relevant parties to determine the alternate interest rate index to be utilized, or other impacts, when LIBOR is discontinued. The Company assumed subordinated debt in an aggregate principal amount, net of premium adjustments, of $ 37.4 million in connection with the Spirit acquisition in April 2022 (the “Spirit Notes”). The Spirit Notes will mature on July 24, 2030, and initially bear interest at a fixed annual rate of 6.00 %, payable quarterly, in arrears, to, but excluding, July 31, 2025. From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears. 39 The Company had total FHLB advances of $ 1.03 billion and $ 1.31 billion at June 30, 2022 and December 31, 2021, respectively, which are primarily FHLB Owns the Option (“FOTO”) advances. FOTO advances are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date. Typically, FOTO exercise dates follow a specified lockout period at the beginning of the term when FHLB cannot terminate the FOTO advance. If FHLB exercises its option to terminate the FOTO advance at one of the specified option exercise dates, there is no termination or prepayment fee, and replacement funding will be available at then-prevailing market rates, subject to FHLB’s credit and collateral requirements. The Company’s FOTO advances outstanding at June 30, 2022 have original maturity dates of ten years to fifteen years with lockout periods that have expired and, as a result, are considered and monitored by the Company as short-term advances. The possibility of the FHLB exercising the options is continually analyzed by the Company along with the market expected rate outcome. At June 30, 2022, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 4.9 billion and the Company had approximately $ 3.7 billion of additional advances available from the FHLB. The trust preferred securities are tax-advantaged issues that qualify for inclusion as Tier 2 capital at June 30, 2022. Distributions on these securities are included in interest expense on long-term debt. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole asset of each trust. The preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust are wholly-owned by the Company. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payments on the related junior subordinated debentures. The Company’s obligations under the junior subordinated securities and other relevant trust agreements, in the aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust. The Company has received approval from the Federal Reserve to redeem the five issuances of trust preferred securities and expects to complete the redemptions during the third quarter of 2022. The Company’s long-term debt primarily includes subordinated debt and long-term FHLB advances with an original maturity of greater than one year. Aggregate annual maturities of long-term debt at June 30, 2022, are as follows: Year (In thousands) Remainder of 2022 $ 777 2023 1,608 2024 1,693 2025 4,841 2026 1,844 Thereafter 446,175 Total $ 456,938 NOTE 13: CONTINGENT LIABILITIES In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings incidental to the conduct of our business, including proceedings based on breach of contract claims, lender liability claims, and other ordinary-course claims, some of which seek substantial relief or damages. On May 22, 2019, Danny Walkingstick and Whitnye Fort filed a putative class action complaint against Simmons Bank in the United States District Court for the Western District of Missouri. The operative complaint alleges that Simmons Bank improperly charges overdraft fees on transactions that did not actually overdraw customers’ accounts by utilizing the checking account’s “available balance” to assess overdraft fees instead of the “ledger balance.” Plaintiffs’ claims include breach of contract and unjust enrichment, and they seek to represent a proposed class of all Simmons Bank checking account customers who were assessed an overdraft fee on a transaction that purportedly did not overdraw the account. Plaintiffs seek unspecified damages, costs, attorneys’ fees, pre- and post-judgment interest, and other relief as the Court deems proper for themselves and the putative class. Simmons Bank denies the allegations but has entered into a settlement agreement and release with the plaintiffs on behalf of themselves and the proposed class to resolve this matter, subject to the court’s final approval. The settlement is not expected to have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows. 40 On January 14, 2020, Susanne Pace filed a putative class action complaint in the Circuit Court of Boone County, Missouri against Landmark Bank, formerly a wholly-owned subsidiary of The Landrum Company, to which Simmons Bank is a successor by merger in connection with the Company’s acquisition of The Landrum Company, which closed in October 2019. The complaint alleges that Landmark Bank improperly charged overdraft fees where a transaction was initially authorized on sufficient funds but later settled negative due to intervening transactions. The complaint asserts a claim for breach of contract, which incorporates the implied duty of good faith and fair dealing. Plaintiff seeks to represent a proposed class of all Landmark Bank checking account customers from Missouri who were allegedly charged overdraft fees on transactions that did not overdraw their checking account. Plaintiff seeks unspecified actual, statutory, and punitive damages as well as costs, attorneys’ fees, prejudgment interest, an injunction, and other relief as the Court deems proper for herself and the putative class. Simmons Bank denies the allegations but has reached a settlement in principle with the plaintiff to resolve this matter, subject to the preparation and execution of a mutually acceptable settlement agreement and release, as well as the court’s approval. The settlement is not expected to have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows. On June 29, 2020, Shunda Wilkins, Diann Graham, and David Watson filed a putative class action complaint against Simmons Bank in the United States District Court for the Eastern District of Arkansas. The complaint alleges that Simmons Bank improperly charges multiple insufficient funds or overdraft fees when a merchant resubmits a rejected payment request. The complaint asserts claims for breach of contract and unjust enrichment. Plaintiffs seek to represent a proposed class of all Simmons Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests. Plaintiffs seek unspecified damages, costs, attorney’s fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for themselves and the purported class. Simmons Bank denies the allegations and is vigorously defending the matter. On May 13, 2021, Susanne Pace filed a second putative class action complaint in the circuit court of Boone County, Missouri against Landmark Bank, to which Simmons Bank is a successor by merger, which was removed to the United States District Court for the Western District of Missouri, Central Division. The complaint alleged that Landmark Bank improperly charged multiple insufficient funds or overdraft fees when a merchant or other originator resubmits a rejected payment request. The complaint asserted claims for breach of contract, including breach of the covenant of good faith and fair dealing. Plaintiff sought to represent a proposed class of all Landmark Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests. Plaintiff sought unspecified damages, costs, attorney’s fees, pre- and post-judgment interest, an injunction, and other relief as the Court deems proper for herself and the purported class. Simmons Bank denies the allegations, and on January 11, 2022, the Court granted Simmons Bank’s motion to compel arbitration. We establish reserves for legal proceedings when potential losses become probable and can be reasonably estimated. While the ultimate resolution (including amounts thereof) of any legal proceedings, including the matters described above, cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, consolidated results of operations, financial condition, or cash flows. It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to our results of operations for a given fiscal period. NOTE 14: CAPITAL STOCK On February 27, 2009, at a special meeting, the Company’s shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $ 0.01 par value. As of June 30, 2022, the aggregate liquidation preference of all shares of preferred stock cannot exceed $ 80,000,000 . On October 29, 2019, the Company filed Amended and Restated Articles of Incorporation (“October Amended Articles”) with the Arkansas Secretary of State. The October Amended Articles classified and designated Series D Preferred Stock, Par Value $ 0.01 Per Share, out of the Company’s authorized preferred stock. 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 . Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the Company’s stock repurchase program originally established in October 2019 (“2019 Program”) that increased the amount of the Company’s Class A common stock that may 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). 41 During January 2022, the Company substantially exhausted the repurchase capacity under the 2019 Program. As a result, the Company’s Board of Directors authorized a new stock repurchase program in January 2022 (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). During the six month period ended June 30, 2022, the Company repurchased 513,725 shares at an average price of $ 31.25 per share under the 2019 Program and 2,035,324 shares at an average price of $ 24.59 per share under the 2022 Program, respectively. The 2022 Program repurchases were all completed during the three months ended June 30, 2022. Market conditions and the Company’s capital needs will drive decisions regarding additional, future stock repurchases. The Company repurchased 130,916 shares at an average price of $ 23.53 per share under the 2019 Program during the six months ended June 30, 2021. No shares were repurchased during the three months ended June 30, 2021. 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. NOTE 15: UNDIVIDED PROFITS Simmons Bank, the Company’s subsidiary bank, is subject to legal limitations on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. The approval of the Commissioner of the Arkansas State Bank Department is required if the total of all dividends declared by an Arkansas state bank in any calendar year exceeds seventy-five percent ( 75 %) of the total of its net profits, as defined, for that year combined with seventy-five percent ( 75 %) of its retained net profits of the preceding year. At June 30, 2022, Simmons Bank had approximately $ 232.5 million available for payment of dividends to the Company, without prior regulatory approval. The risk-based capital guidelines of the Federal Reserve Board and the Arkansas State Bank Department include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. The criteria for a well-capitalized institution are: a 5 % “Tier l leverage capital” ratio, an 8 % “Tier 1 risk-based capital” ratio, 10 % “total risk-based capital” ratio; and a 6.5 % “common equity Tier 1 (CET1)” ratio. The Company and Simmons Bank, must hold a capital conservation buffer of 2.5 % composed of CET1 capital above its minimum risk-based capital requirements. Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses. As of June 30, 2022, the Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules. The Company’s CET1 ratio was 12.10 % at June 30, 2022. NOTE 16: STOCK-BASED COMPENSATION The Company’s Board of Directors has adopted various stock-based compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance stock units. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awards of restricted stock, restricted stock units, or performance stock units granted to directors, officers and other key employees. 42 The table below summarizes the transactions under the Company’s active stock-based compensation plans for the six months ended June 30, 2022: Stock Options Outstanding Non-vested Stock Awards Outstanding Non-vested Stock Units Outstanding (Shares in thousands) Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Grant-Date Fair Value Number of Shares Weighted Average Grant-Date Fair Value Beginning balance, January 1, 2022 473 $ 22.50 2 $ 22.20 1,111 $ 26.49 Granted — — — — 645 26.86 Stock options exercised ( 2 ) 13.89 — — — — Stock awards/units vested (earned) — — ( 2 ) 22.20 ( 348 ) 26.70 Forfeited/expired — — — — ( 50 ) 25.21 Balance, June 30, 2022 471 $ 22.54 — $ — 1,358 $ 26.67 Exercisable, June 30, 2022 471 $ 22.54 The following table summarizes information about stock options under the plans outstanding at June 30, 2022: Options Outstanding Options Exercisable Range of Exercise Prices Number of Shares (In thousands) Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares (In thousands) Weighted Average Exercise Price $ 10.65 — $ 10.65 1 0.54 $ 10.65 1 $ 10.65 20.29 — 20.29 47 2.50 20.29 47 20.29 22.20 — 22.20 51 2.73 22.20 51 22.20 22.75 — 22.75 293 3.11 22.75 293 22.75 23.51 — 23.51 72 3.56 23.51 72 23.51 24.07 — 24.07 7 3.21 24.07 7 24.07 $ 10.65 — $ 24.07 471 3.07 $ 22.54 471 $ 22.54 The table below summarizes the Company’s performance stock unit activity for the six months ended June 30, 2022: (In thousands) Performance Stock Units Non-vested, January 1, 2022 257 Granted 181 Vested (earned) ( 75 ) Forfeited ( 10 ) Non-vested, June 30, 2022 353 Stock-based compensation expense was $ 8.2 million and $ 7.6 million during the six month periods ended June 30, 2022 and 2021, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. There was no unrecognized stock-based compensation expense related to stock options at June 30, 2022. Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 24.1 million at June 30, 2022. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.8 years. The intrinsic value of stock options outstanding and stock options exercisable at June 30, 2022 was $ 61,000 . Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 21.26 as of June 30, 2022, and the exercise price multiplied by the number of options outstanding. There was no intrinsic value of stock options exercised during the six months ended June 30, 2022, while the total intrinsic value of stock options exercised during the six months ended June 30, 2021 was $ 1.3 million. 43 The fair value of the Company’s employee stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. There were no stock options granted during the six months ended June 30, 2022 and 2021. NOTE 17: EARNINGS PER SHARE (“EPS”) Basic EPS is computed by dividing reported net income available to common stockholders by weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing reported net income available to common stockholders by the weighted average common shares and all potential dilutive common shares outstanding during the period. The computation of earnings per share is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2022 2021 2022 2021 Net income available to common stockholders $ 27,454 $ 74,911 $ 92,549 $ 142,318 Average common shares outstanding 128,313 108,362 120,420 108,286 Average potential dilutive common shares 407 460 407 460 Average diluted common shares 128,720 108,822 120,827 108,746 Basic earnings per share $ 0.21 $ 0.69 $ 0.77 $ 1.31 Diluted earnings per share $ 0.21 $ 0.69 $ 0.77 $ 1.31 There were 6,610 stock options excluded from the three months ended June 30, 2022 earnings per share calculation due to the related stock option exercise price exceeding the average market price of the Company’s stock during the period. There were no stock options excluded from the earnings per share calculation for the six months ended June 30, 2022 due to the related exercise price exceeding the average market price. There were no stock options excluded from the earnings per share calculation for the three and six months ended June 30, 2021 due to the related stock option exercise price exceeding the average market price. NOTE 18: ADDITIONAL CASH FLOW INFORMATION The following is a summary of the Company’s additional cash flow information: Six Months Ended June 30, (In thousands) 2022 2021 Interest paid $ 36,049 $ 44,281 Income taxes (refunded) paid 4,881 ( 32,980 ) Transfers of loans to foreclosed assets held for sale 581 3,289 Transfers of premises held for sale to other real estate owned — 4,368 Transfers of assets held for sale to other assets 100 — 44 NOTE 19: OTHER INCOME AND OTHER OPERATING EXPENSES Other income for the three and six months ended June 30, 2022 was $ 6.8 million and $ 14.1 million, respectively. Other income for the same periods in 2021 was $ 8.4 million and $ 18.9 million, respectively. During the six month period ended June 30, 2021, the Company recognized a gain on sale of $ 5.9 million related to the sale of banking operations and bank branches. Other operating expenses consisted of the following: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Professional services $ 4,202 $ 4,561 $ 9,648 $ 9,808 Postage 2,217 1,943 4,343 4,313 Telephone 1,695 1,610 3,253 3,242 Credit card expense (1) 3,037 2,530 5,743 4,861 Marketing 8,754 4,740 14,894 7,893 Software and technology 10,078 9,857 20,225 20,108 Operating supplies 713 838 1,411 1,408 Amortization of intangibles 4,096 3,332 7,582 6,676 Branch right sizing expense 292 468 1,201 1,093 Other expense 9,399 7,319 17,829 13,859 Total other operating expenses $ 44,483 $ 37,198 $ 86,129 $ 73,261 _________________________ (1) During the second and third quarters of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income. Prior periods have been adjusted to reflect this reclassification. NOTE 20: CERTAIN TRANSACTIONS From time to time, the Company and its subsidiaries have made loans, other extensions of credit, and vendor contracts to directors, officers, their associates and members of their immediate families. Additionally, some directors, officers and their associates and members of their immediate families have placed deposits with the Company’s subsidiary bank, Simmons Bank. Such loans and other extensions of credit, deposits and vendor contracts (which were not material) were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with unrelated persons or through a competitive bid process. Further, in management’s opinion, these extensions of credit did not involve more than normal risk of collectability or present other unfavorable features. NOTE 21: COMMITMENTS AND CREDIT RISK The Company grants agribusiness, commercial and residential loans to customers primarily throughout Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, along with credit card loans to customers throughout the United States. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. At June 30, 2022, the Company had outstanding commitments to extend credit aggregating approximately $ 691.6 million and $ 4.94 billion for credit card commitments and other loan commitments, respectively. At December 31, 2021, the Company had outstanding commitments to extend credit aggregating approximately $ 685.3 million and $ 3.41 billion for credit card commitments and other loan commitments, respectively. As of June 30, 2022, the Company had outstanding commitments to originate fixed rate-rate mortgage loans of approximately $ 59.1 million. At December 31, 2021, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 108.5 million. 45 Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $ 41.3 million and $ 37.7 million at June 30, 2022, and December 31, 2021, respectively, with terms ranging from 9 months to 15 years. At June 30, 2022 and December 31, 2021, the Company had no deferred revenue under standby letter of credit agreements. The Company has purchased letters of credit from the FHLB as security for certain public deposits. The amount of the letters of credit was $ 142.8 million and $ 59.1 million at June 30, 2022 and December 31, 2021, respectively, and they expire in less than one year from issuance. NOTE 22: FAIR VALUE MEASUREMENTS ASC Topic 820, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Topic 820 describes three levels of inputs that may be used to measure fair value: • Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities. • Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. Available-for-sale securities – Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and certain other financial products. Other securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. In order to ensure the fair values are consistent with ASC Topic 820, the Company periodically checks the fair values by comparing them to another pricing source, such as Bloomberg. The availability of pricing confirms Level 2 classification in the fair value hierarchy. The third-party pricing service is subject to an annual review of internal controls. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company’s investment in U.S. Treasury securities, if any, is reported at fair value utilizing Level 1 inputs. The remainder of the Company’s available-for-sale securities are reported at fair value utilizing Level 2 inputs. 46 Mortgage loans held for sale – Mortgage loans held for sale are reported at fair value on an aggregate basis. Adjustments to fair value are recognized monthly and reflected in earnings. In determining the fair value of loans held for sale, the Company may consider outstanding investor commitments, discounted cash flow analyses with market assumptions or the fair value of the collateral if the loan is collateral dependent. Such loans are classified within either Level 2 or Level 3 of the fair value hierarchy. Where assumptions are made using significant unobservable inputs, such loans held for sale are classified as Level 3. At June 30, 2022 and December 31, 2021, the aggregate fair value of mortgage loans held for sale exceeded their cost. Derivative instruments – The Company’s derivative instruments are reported at fair value utilizing Level 2 inputs. The Company obtains fair value measurements from dealer quotes. The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. Fair Value Measurements Using (In thousands) Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) June 30, 2022 Available-for-sale securities U.S. Treasury $ 1,441 $ 1,441 $ — $ — U.S. Government agencies 198,333 — 198,333 — Mortgage-backed securities 2,963,934 — 2,963,934 — State and political subdivisions 915,255 — 915,255 — Other securities 262,684 — 262,684 — Mortgage loans held for sale 14,437 — — 14,437 Derivative asset 95,113 — 95,113 — Derivative liability ( 25,384 ) — ( 25,384 ) — December 31, 2021 Available-for-sale securities U.S. Treasury $ 300 $ 300 $ — $ — U.S. Government agencies 364,641 — 364,641 — Mortgage-backed securities 4,448,616 — 4,448,616 — States and political subdivisions 1,819,658 — 1,819,658 — Other securities 480,330 — 480,330 — Mortgage loans held for sale 36,356 — — 36,356 Derivative asset 25,852 — 25,852 — Derivative liability ( 15,443 ) — ( 15,443 ) — 47 Certain financial assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Financial assets and liabilities measured at fair value on a nonrecurring basis include the following: Individually assessed loans (collateral-dependent) – When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is expected to be substantially dependent on the liquidation of underlying collateral, the relationship is deemed collateral-dependent. Fair value of the loan is determined by establishing an allowance for credit loss for any exposure based on the valuation of the underlying collateral. The valuation of the collateral is determined by either an independent third-party appraisal or other collateral analysis. Discounts can be made by the Company based upon the overall evaluation of the independent appraisal. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition. Collateral values supporting the individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations. Foreclosed assets and other real estate owned – Foreclosed assets and other real estate owned are reported at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for credit losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets and other real estate owned is estimated using Level 3 inputs based on unobservable market data. The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral-dependent loans and foreclosed assets primarily relate to the specialized discounting criteria applied to the borrower’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the collateral, as well as other factors which may affect the collectability of the loan. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for instruments measured using Level 3 inputs could occur in the future. As the Company’s primary objective in the event of default would be to liquidate the collateral to settle the outstanding balance of the loan, collateral that is less marketable would receive a larger discount. The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of June 30, 2022 and December 31, 2021. Fair Value Measurements Using (In thousands) Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) June 30, 2022 Individually assessed loans (1) (2) (collateral-dependent) $ 96,053 $ — $ — $ 96,053 Foreclosed assets and other real estate owned (1) 880 — — 880 December 31, 2021 Individually assessed loans (1) (2) (collateral-dependent) $ 47,089 $ — $ — $ 47,089 Foreclosed assets and other real estate owned (1) 4,875 — — 4,875 ________________________ (1) These amounts represent the resulting carrying amounts on the consolidated balance sheets for collateral-dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period. (2) Identified reserves of $ 10,641,000 and $ 4,214,000 were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended June 30, 2022 and December 31, 2021, respectively. 48 ASC Topic 825, Financial Instruments , requires disclosure in annual and interim financial statements of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The following methods and assumptions were used to estimate the fair value of each class of financial instruments not previously disclosed. Cash and cash equivalents – The carrying amount for cash and cash equivalents approximates fair value (Level 1). Interest bearing balances due from banks – The fair value of interest bearing balances due from banks – time is estimated using a discounted cash flow calculation that applies the rates currently offered on deposits of similar remaining maturities (Level 2). Held-to-maturity securities – Fair values for held-to-maturity securities equal quoted market prices, if available, such as for highly liquid government bonds (Level 1). If quoted market prices are not available, fair values are estimated based on quoted market prices of similar securities. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things (Level 2). In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Loans and other loans held for sale – The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Additional factors considered include the type of loan and related collateral, variable or fixed rate, classification status, remaining term, interest rate, historical delinquencies, loan to value ratios, current market rates and remaining loan balance. The loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of similar loans. Estimated credit losses were also factored into the projected cash flows of the loans. The fair value of loans is estimated on an exit price basis incorporating the above factors (Level 3). Deposits – The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date (i.e., their carrying amount) (Level 2). The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities (Level 3). Federal Funds purchased, securities sold under agreement to repurchase and short-term debt – The carrying amount for Federal funds purchased, securities sold under agreement to repurchase and short-term debt are a reasonable estimate of fair value (Level 2). Other borrowings – For short-term instruments, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value (Level 2). Subordinated debentures – The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities (Level 2). Accrued interest receivable/payable – The carrying amounts of accrued interest approximated fair value (Level 2). Commitments to extend credit, letters of credit and lines of credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. 49 The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: Carrying Fair Value Measurements (In thousands) Amount Level 1 Level 2 Level 3 Total June 30, 2022 Financial assets: Cash and cash equivalents $ 964,847 $ 964,847 $ — $ — $ 964,847 Interest bearing balances due from banks - time 1,535 — 1,535 — 1,535 Held-to-maturity securities, net 3,819,682 — 3,278,962 — 3,278,962 Interest receivable 82,332 — 82,332 — 82,332 Loans and other loans held for sale, net 14,914,108 — — 14,772,593 14,772,593 Financial liabilities: Non-interest bearing transaction accounts 6,057,186 — 6,057,186 — 6,057,186 Interest bearing transaction accounts and savings deposits 12,816,198 — 12,816,198 — 12,816,198 Time deposits 3,162,479 — — 3,119,356 3,119,356 Federal funds purchased and securities sold under agreements to repurchase 155,101 — 155,101 — 155,101 Other borrowings 1,060,244 — 1,063,073 — 1,063,073 Subordinated notes and debentures 421,693 — 420,817 — 420,817 Interest payable 6,739 — 6,739 — 6,739 December 31, 2021 Financial assets: Cash and cash equivalents $ 1,650,653 $ 1,650,653 $ — $ — $ 1,650,653 Interest bearing balances due from banks - time 1,882 — 1,882 — 1,882 Held-to-maturity securities, net 1,529,221 — 1,517,378 — 1,517,378 Interest receivable 72,990 — 72,990 — 72,990 Loans and other loans held for sale, net 11,807,171 — — 11,922,735 11,922,735 Financial liabilities: Non-interest bearing transaction accounts 5,325,318 — 5,325,318 — 5,325,318 Interest bearing transaction accounts and savings deposits 11,588,770 — 11,588,770 — 11,588,770 Time deposits 2,452,460 — — 2,451,055 2,451,055 Federal funds purchased and securities sold under agreements to repurchase 185,403 — 185,403 — 185,403 Other borrowings 1,337,973 — 1,393,711 — 1,393,711 Subordinated notes and debentures 384,131 — 394,464 — 394,464 Interest payable 6,759 — 6,759 — 6,759 The fair value of commitments to extend credit, letters of credit and lines of credit is not presented since management believes the fair value to be insignificant. 50 NOTE 23: DERIVATIVE INSTRUMENTS The Company utilizes derivative instruments to manage exposure to various types of interest rate risk for itself and its customers within policy guidelines. Transactions should only be entered into with an associated underlying exposure. All derivative instruments are carried at fair value. Derivative contracts involve the risk of dealing with institutional derivative counterparties and their ability to meet contractual terms. Institutional counterparties must have an investment grade credit rating and be approved by the Company’s asset/liability management committee. In arranging these products for its customers, the Company assumes additional credit risk from the customer and from the dealer counterparty with whom the transaction is undertaken. Credit risk exists due to the default credit risk created in the exchange of the payments over a period of time. Credit exposure on interest rate swaps is limited to the net favorable value and interest payments of all swaps with each counterparty. Access to collateral in the event of default is reasonably assured. Therefore, credit exposure may be reduced by the amount of collateral pledged by the counterparty. Hedge Structures The Company will seek to enter derivative structures that most effectively address the risk exposure and structural terms of the underlying position being hedged. The term and notional principal amount of a hedge transaction will not exceed the term or principal amount of the underlying exposure. In addition, the Company will use hedge indices which are the same as, or highly correlated to, the index or rate on the underlying exposure. Derivative credit exposure is monitored on an ongoing basis for each customer transaction and aggregate exposure to each counterparty is tracked. The Company has set a maximum outstanding notional contract amount at 10 % of the Company’s assets. Fair Value Hedges For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. During the third quarter of 2021, the Company began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate callable AFS securities. The hedging strategy converts the fixed interest rates to variable interest rates based on federal funds rates. The following table summarizes the fair value hedges recorded in the accompanying consolidated balance sheets. June 30, 2022 December 31, 2021 (In thousands) Balance Sheet Location Weighted Average Pay Rate Receive Rate Notional Fair Value Notional Fair Value Derivative assets Other assets 1.21 % Federal Funds $ 999,565 $ 69,744 $ 1,001,715 $ 10,524 The following amounts were recorded on the balance sheet related to carrying amounts and cumulative basis adjustments for fair value hedges. Carrying Amount of Hedged Assets Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets Line Item on the Balance Sheet (In thousands) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021 Investment securities - Available-for-sale $ 821,820 $ 1,063,173 $ 69,744 $ 10,524 Customer Risk Management Interest Rate Swaps The Company’s qualified loan customers have the opportunity to participate in its interest rate swap program for the purpose of managing interest rate risk on their variable rate loans with the Company. The Company enters into such agreements with customers, then offsetting agreements are executed between the Company and an approved dealer counterparty to minimize market risk from changes in interest rates. The counterparty contracts are identical to customer contracts in terms of notional amounts, interest rates, and maturity dates, except for a fixed pricing spread or fee paid to the Company by the dealer counterparty. These interest rate swaps carry varying degrees of credit, interest rate and market or liquidity risks. The fair value of these derivative instruments is recognized as either derivative assets or liabilities in the accompanying consolidated balance sheets. The Company has a limited number of swaps that are standalone without a similar agreement with the loan customer. 51 The following table summarizes the fair values of loan derivative contracts recorded in the accompanying consolidated balance sheets. June 30, 2022 December 31, 2021 (In thousands) Notional Fair Value Notional Fair Value Derivative assets $ 504,626 $ 25,368 $ 318,428 $ 15,328 Derivative liabilities 505,626 25,384 321,985 15,443 Risk Participation Agreements The Company has a limited number of Risk Participation Agreement swaps, that are associated with loan participations, where the Company is not the counterparty to the interest rate swaps that are associated with the risk participation sold. The interest rate swap mark to market only impacts the Company if the swap is in a liability position to the counterparty and the customer defaults on payments to the counterparty. The notional amount of these contingent agreements is $ 31.5 million as of June 30, 2022. Energy Hedging The Company provides energy derivative services to qualifying, high quality oil and gas borrowers for hedging purposes. The Company serves as an intermediary on energy derivative products between the Company’s borrowers and dealers. The Company will only enter into back-to-back trades, thus maintaining a balanced book between the dealer and the borrower. Energy hedging risk exposure to the Company’s customer increases as energy prices for crude oil and natural gas rise. As prices decrease, exposure to the exchange increases. These risks are mitigated by customer credit underwriting policies and establishing a predetermined hedge line for each borrower and by monitoring the exchange margin. The outstanding notional value as of June 30, 2022 for energy hedging Customer Sell to Company swaps were $ 9.6 million and the corresponding Company Sell to Dealer swaps were $ 9.6 million and the corresponding net fair value of the derivative asset and derivative liability was $ 116,000 . 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders, Board of Directors and Audit Committee Simmons First National Corporation Pine Bluff, Arkansas Results of Review of Interim Financial Statements We have reviewed the condensed consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of June 30, 2022, and the related condensed consolidated statements of income, comprehensive income (loss) and stockholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021, and cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company and subsidiaries as of December 31, 2021, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 25, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Basis for Review Results These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. /s/ FORVIS, LLP (formerly BKD, LLP) Little Rock, Arkansas August 5, 2022 53