What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-02-27 compared with 2022-02-25 · 341 added, 410 removed, 2027 unchanged (27% of the section changed)

3 unchanged sentences

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

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

At December 31, 2022, undivided profits of Simmons Bank were approximately $648.1 million, of which approximately $114.0 million was available for the payment of dividends to the Company without regulatory approval.

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

53 unchanged sentences

As of December 31, 2022, the model simulations projected that 100 and 200 basis point increases in interest rates would result in a positive variance in net interest income of 1.59% and 3.14%, respectively, relative to the base case over the next 12 months, while decreases in interest rates of 100 basis points would result in a negative variance in net interest income of 1.13% relative to the base case over the next 12 months.

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

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

8 unchanged sentences

Up 200 basis points 3.14 %

Up 100 basis points 1.59 %

Down 100 basis points (1.13) %

Down 200 basis points (3.50) %

Down 300 basis points (5.39) %

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

17 unchanged sentences

Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2022 is effective based on the specified criteria.

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

FORVIS, LLP (formerly BKD, LLP), the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, immediately follows.

8 unchanged sentences

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated February 25, 2022, expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2022 and 2021, and for each of the three years ended in the period ended December 31, 2022, and our report dated February 27, 2023, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

3 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

(Formerly, BKD, LLP)

/s/ FORVIS, LLP

Little Rock, Arkansas

4 unchanged sentences

Pine Bluff, Arkansas

Opinion on the Financial Statements

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Simmons First National Corporation (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013 edition) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 25, 2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Adoption of New Accounting Standard

As discussed in Notes 1, 3 and 5 to the consolidated financial statements, the Company has changed its method of accounting for the allowance for credit losses in 2020 due to the adoption of Accounting Standards Update No.

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

Measurement of Credit Losses on Financial Instruments .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 27, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

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Critical Audit Matters

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

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

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

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

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

1 unchanged sentence

The Company’s loan portfolio totaled $16.14 billion as of December 31, 2022 and the allowance for credit losses on loans was $197.0 million.

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

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

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

The Company’s unfunded loan commitments totaled $5.6 billion, with an allowance for credit losses of $41.9 million.

The Company’s available-for-sale and held-to-maturity securities portfolios totaled $7.61 billion as of December 31, 2022, and the allowance for credit losses on securities was $1.4 million.

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

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

As more fully described in Notes 1, 3 and 5 to the Company’s consolidated financial statements:

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

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

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

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

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

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

Loans with similar risk characteristics are aggregated into homogenous segments for assessment.

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

The estimates include 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.

Management qualitatively adjusted model results for risk factors that were not considered within the modeling processes but were still relevant in assessing the expected credit losses within the loan pools.

In some cases, management determined that an individual loan exhibited unique risk characteristics which differentiated the loan from other loans with the identified loan pools.

Reserve factors are based on estimated probability of default (PD) and loss given default (LGD) for substantially all segments.

The estimates include economic forecasts over the reasonable and supportable forecast period based on projected performance of economic variables that have a statistical relationship.

Management qualitatively adjusts its model results for risk factors that were not considered within the modeling processes but were still relevant in assessing the expected credit losses within the loan pools.

In some cases, management determined that an individual loan exhibited unique characteristics which differentiated the loan from other loans with the identified loan pools.

In such cases the loans were evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

Auditing management’s estimate of the ACL involved a high degree of subjectivity due to the nature of the qualitative factor adjustments included in the ACL and complexities due to the implementation of probability of default and loss given default models.

Auditing management’s estimate of the ACL involved a high degree of subjectivity due to the nature of the qualitative factor adjustments included in the ACL and complexities due to the implementation of the probability of default and loss given default models.

Management’s identification and measurement of the qualitative factor adjustments is highly judgmental and had a significant effect on the ACL.

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

The primary procedures we performed as of December 31, 2022 to address this critical audit matter included:

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

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

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

◦ Loan data completeness and accuracy

6 unchanged sentences

• Performed reviews of individual credit files to evaluate the reasonableness of loan credit risk ratings

• Tested internally prepared loan reviews to evaluate the reasonableness of loan credit risk ratings

• Tested internally prepared loan reviews to evaluate the reasonableness of the loan credit risk ratings

• Tested the completeness and accuracy of inputs utilized in the calculation of the ACL

• Evaluated the qualitative adjustments to the ACL including assessing the basis for adjustments and the reasonableness of the significant assumptions including consideration of impact of COVID-19

• Evaluated the qualitative adjustments to the ACL including assessing the basis for adjustments and the reasonableness of the significant assumptions

• Tested the reasonableness of specific reserves on individually reviewed loans

• Evaluated credit quality trends in delinquencies, non-accruals, charge-offs and loan risk ratings

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

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

• Tested estimated utilization rate of unfunded loan commitments

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

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

• Evaluated the accuracy and completeness of Accounting Standards Update 2016-13 , Financial Instruments - Credit Losses (Topic 326) disclosures in the consolidated financial statements.

Acquisition Accounting

As described in Note 2 to the consolidated financial statements, the Company completed its merger with Spirit of Texas Bancshares, Inc., on April 8, 2022.

The Company issued 18,275,074 shares of its common stock valued at approximately $464.9 million, plus $1.4 million in cash.

As part of the acquisition, management assessed that the acquisition qualified as a business combination and all identifiable assets and liabilities acquired were valued at fair value, resulting in additional goodwill of approximately $172.9 million being recognized on the Company’s consolidated balance sheet.

The identification and valuation of such acquired assets and assumed liabilities requires management to exercise significant judgment.

Management utilized outside vendors to assist with estimating the fair value.

We identified the consummated acquisition and the valuation of acquired assets and assumed liabilities as a critical audit matter.

Auditing the acquired assets and assumed liabilities and other acquisition-related considerations involved a high degree of subjectivity in evaluating management’s fair value estimates and purchase price allocations, including the use of our internal valuation specialists.

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

• Obtained and read the executed Agreement and Plan of Merger documents to gain an understanding of the underlying terms of the consummated acquisition.

• Testing the design and operating effectiveness of controls including:

◦ Proper approval of the acquisition

◦ Accuracy of the valuations of significant assets acquired and liabilities assumed

◦ Completeness and accuracy of the purchase price allocation, including tax impact

◦ Completeness and accuracy of day 1 journal entries and general ledger mapping

• Assessed management’s application of accounting guidance related to the business combination and management’s determination of whether the transaction was an acquisition of a business as defined within the ASC 805, Business Combinations , framework.

• Assessed the completeness and accuracy of management’s purchase accounting model, including the balance sheet acquired and related fair value purchase price allocations made to identified assets acquired and liabilities assumed.

• Obtained and evaluated significant outside vendor valuation estimates, and challenging management’s review of the appropriateness of the valuations including but not limited to, testing critical inputs, assumptions applied, and valuation models utilized by the outside vendors.

• Tested the completeness and accuracy of management’s calculation of total consideration paid.

• Tested the accuracy of the goodwill calculation resulting from the acquisition, which was the difference between the total consideration paid and the fair value of the net assets acquired.

• Utilized internal valuation specialists to assist with testing the related fair value valuations and purchase price allocations made to identified assets acquired and liabilities assumed.

• Read and evaluated the adequacy of the disclosures made in the notes to the Company’s consolidated financial statements.

(Formerly, BKD, LLP)

/s/ FORVIS, LLP

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

5 unchanged sentences

(In thousands, except share data) 2022 2021

Cash and non-interest bearing balances due from banks $ 209,190 $ 217,499

Cash and noninterest bearing balances due from banks

$ 200,616 $ 209,190

Interest bearing balances due from banks and federal funds sold 481,506 1,441,463

4 unchanged sentences

3,759,706 1,529,221

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

Available-for-sale, at estimated fair value (amortized cost of $ 4,331,413 and $ 7,130,861 at December 31, 2022 and 2021, respectively)

3,852,854 7,113,545

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Mortgage loans held for sale 3,486 36,356

Other assets held for sale 100 100

Other loans held for sale

Loans 16,142,124 12,012,503

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Premises and equipment 548,741 483,469

Premises held for sale — 15,008

Foreclosed assets and other real estate owned 2,887 6,032

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LIABILITIES AND STOCKHOLDERS’ EQUITY

Non-interest bearing transaction accounts $ 5,325,318 $ 4,482,091

Noninterest bearing transaction accounts $ 6,016,651 $ 5,325,318

Interest bearing transaction accounts and savings deposits 11,762,885 11,588,770

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Other borrowings 859,296 1,337,973

Subordinated debentures 384,131 382,874

Other liabilities held for sale — 154,620

Subordinated notes and debentures

365,989 384,131

Accrued interest and other liabilities 257,917 201,863

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Stockholders’ equity:

Preferred stock, 40,040,000 shares authorized;

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

767 shares issued and outstanding at December 31, 2020

Common stock, Class A, $ 0.01 par value;

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

350,000,000 and 175,000,000 shares authorized at December 31, 2022 and 2021, respectively;

127,046,654 and 112,715,444 shares issued and outstanding at December 31, 2022 and 2021, respectively

1 unchanged sentence

Undivided profits 1,255,586 1,093,270

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

( 517,560 ) ( 10,545 )

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Mortgage loans held for sale 720 1,565 3,031

Other loans held for sale 3,120 — —

TOTAL INTEREST INCOME 861,735 671,061 759,718

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NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 703,242 624,236 564,761

NON-INTEREST INCOME

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

NONINTEREST INCOME

Service charges on deposit accounts 46,527 43,231 43,082

Other service charges and fees 7,696 6,624 5,824

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

Debit and credit card fees 31,203 28,245 24,711

Wealth management fees 31,895 31,172 30,386

Mortgage lending income 10,522 21,798 34,469

Bank owned life insurance income 11,146 8,902 5,815

Gain on sale of securities, net 15,498 54,806 13,314

Other service charges and fees 7,616 7,696 6,624

Gain (loss) on sale of securities, net ( 278 ) 15,498 54,806

Gain on insurance settlement 4,074 — —

Other income 27,361 35,273 39,876

TOTAL NON-INTEREST INCOME 191,815 239,769 197,879

NON-INTEREST EXPENSE

TOTAL NONINTEREST INCOME 170,066 191,815 239,769

NONINTEREST EXPENSE

Salaries and employee benefits 286,982 246,335 242,474

5 unchanged sentences

Other operating expenses 179,693 153,562 165,201

TOTAL NON-INTEREST EXPENSE 483,589 484,736 453,960

TOTAL NONINTEREST EXPENSE 566,748 483,589 484,736

INCOME BEFORE INCOME TAXES 306,560 332,462 319,794

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Unrealized holding gains (losses) arising during the period on available-for-sale securities ( 593,010 ) ( 91,434 ) 107,382

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

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

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

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

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

Reclassification adjustment for realized gains (losses) included in net income ( 278 ) 15,498 54,806

Realized losses on available-for-sale securities interest rate hedges ( 98,374 ) ( 10,588 ) —

Net unrealized gains (losses) on securities transferred from available-for-sale to held-to-maturity during the period ( 206,682 ) 1,106 —

Amortization of net unrealized gains (losses) on securities transferred from available-for-sale to held-to-maturity ( 14,632 ) ( 104 ) —

Other comprehensive income (loss), before tax effect ( 686,408 ) ( 95,134 ) 52,576

1 unchanged sentence

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) ( 507,015 ) ( 70,271 ) 38,835

COMPREHENSIVE INCOME $ 200,885 $ 293,739 $ 286,432

COMPREHENSIVE INCOME (LOSS) $ ( 250,603 ) $ 200,885 $ 293,739

See Notes to Consolidated Financial Statements.

8 unchanged sentences

Provision for credit losses 14,074 ( 32,704 ) 74,973

Gain on sale of investments ( 15,498 ) ( 54,806 ) ( 13,314 )

Loss (gain) on sale of investments 278 ( 15,498 ) ( 54,806 )

Net accretion of investment securities and assets ( 39,031 ) ( 52,781 ) ( 56,771 )

6 unchanged sentences

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

Loss on sale of loans — — 4,451

Gain on sale of Visa, Inc.

class B common stock — — ( 42,860 )

Gain on sale of loans ( 282 ) — —

Fair value write-down of closed branches — — 434

1 unchanged sentence

Income from bank owned life insurance ( 11,164 ) ( 9,477 ) ( 7,206 )

Loss from early retirement of TruPS 365 — —

Originations of mortgage loans held for sale ( 497,815 ) ( 1,034,716 ) ( 1,206,818 )

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INVESTING ACTIVITIES

Net collections (originations) of loans 2,333,893 1,327,248 23,806

Net change in loans ( 1,900,325 ) 2,333,893 1,327,248

Proceeds from sale of loans 73,746 28,033 49,736

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

Net cash provided by (used in) investing activities ( 2,537,736 ) 1,189,869 604,477

Net cash (used in) provided by investing activities ( 946,233 ) ( 2,537,736 ) 1,189,869

FINANCING ACTIVITIES

Net change in deposits 462,530 847,494 1,086,713

Proceeds from issuance of other borrowings — — 25,500

Repayments of subordinated debentures ( 56,189 ) ( 1,563 ) ( 7,442 )

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Net change in federal funds purchased and securities sold under agreements to repurchase ( 25,000 ) ( 116,562 ) 148,966

( 116,562 ) 148,966 40,207

Net shares (cancelled) issued under stock compensation plans ( 5,033 ) 290 ( 4,087 )

2 unchanged sentences

Retirement of preferred stock — ( 767 ) —

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

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

Net cash (used in) provided by financing activities ( 344,496 ) 438,457 1,083,117

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 968,531 ) ( 1,821,499 ) 2,475,529

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,650,653 3,472,152 996,623

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

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

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

3 unchanged sentences

— 3 9,107 — — 9,110

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

42,000 40 102,790 — — 144,830

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

767 173 414,832 — — 415,772

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

Stock repurchases - 5,956,700 shares

4 unchanged sentences

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

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

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

3 unchanged sentences

— 4 16,154 — — 16,158

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

— 45 138,146 — — 138,191

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

— 42 127,857 — — 127,899

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

Stock repurchases - 4,562,469 shares

9 unchanged sentences

— 3 10,281 — — 10,284

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

— 45 138,146 — — 138,191

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

Stock issued for Spirit acquisition - 18,275,074 shares

— 183 464,735 — — 464,918

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

Stock repurchases - 4,432,762 shares

— ( 44 ) ( 111,089 ) — — ( 111,133 )

Dividends on preferred stock — — — — ( 47 ) ( 47 )

Dividends on common stock – $ 0.76 per share

19 unchanged sentences

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

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

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

The Company is organized with community, metro and corporate banking groups.

Each of the groups provide one or more similar banking services, including such products and services as loans;

time deposits, checking and savings accounts;

treasury management, personal and corporate trust services;

credit cards;

investment management;

and securities and investment services.

treasury management;

and credit cards.

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

The individual bank divisions have similar operating and economic characteristics.

The individual bank groups have similar operating and economic characteristics.

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

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

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

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

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Reclassifications

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

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

These changes and reclassifications did not impact previously reported net income or comprehensive income and were not material to the consolidated financial statements.

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

The change had no impact on net income.

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

2 unchanged sentences

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.

For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include cash and non-interest bearing balances due from banks, interest bearing balances due from banks and federal funds sold and securities purchased under agreements to resell.

At December 31, 2021, nearly all of the interest-bearing and non-interest bearing deposits were uninsured with nearly all of these balances held at the Federal Reserve Bank.

For purposes of the consolidated statements of cash flows, cash and cash equivalents are considered to include cash and noninterest bearing balances due from banks, interest bearing balances due from banks and federal funds sold and securities purchased under agreements to resell.

At December 31, 2022, nearly all of the interest-bearing and noninterest bearing deposits were uninsured with nearly all of these balances held at the Federal Reserve Bank.

Investment Securities

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

Losses are charged against the allowance when management

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

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

Mortgage Loans Held For Sale

69 unchanged sentences

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

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

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

Trust assets (other than cash deposits) held by the Company in fiduciary or agency capacities for its customers are not included in the accompanying consolidated balance sheets since such items are not assets of the Company.

9 unchanged sentences

The Company maintains bank-owned life insurance policies on certain current and former employees and directors, which are recorded at their cash surrender values as determined by the insurance carriers.

The appreciation in the cash surrender value of the policies is recognized as a component of non-interest income in the Company’s consolidated statements of income.

The appreciation in the cash surrender value of the policies is recognized as a component of noninterest income in the Company’s consolidated statements of income.

Goodwill and Intangible Assets

7 unchanged sentences

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

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

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

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

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

32 unchanged sentences

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

The transaction price is fixed, and on

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

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

These properties are generally sold without recourse or warranty.

37 unchanged sentences

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

Landmark Community Bank

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

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

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

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

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 18, 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 $ 3.11 billion in assets, including approximately $ 2.29 billion in loans (inclusive of loan discounts), and approximately $ 2.72 billion in deposits.

Goodwill of $ 172.9 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 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 Landmark acquisition, as of the acquisition date, is as follows:

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

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

Due from banks - time 100 — 100

Investment securities 362,088 ( 13,401 ) 348,687

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Bank owned life insurance 36,890 — 36,890

Core deposit intangible 88 4,071 4,159

Goodwill 77,681 ( 77,681 ) —

Core deposit and other intangible assets 6,245 32,386 38,631

Other assets 58,403 ( 2,448 ) 55,955

Total assets acquired $ 3,200,312 $ ( 92,761 ) $ 3,107,551

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

Liabilities Assumed

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

Noninterest bearing transaction accounts $ 825,228 $ ( 165 ) $ 825,063

Interest bearing transaction accounts and savings deposits 1,383,663 — 1,383,663

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Other borrowings 37,547 503 38,050

Subordinated debentures 36,491 879 37,370

Accrued interest and other liabilities 23,667 ( 3,918 ) 19,749

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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.

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

Summary of Unaudited Pro forma Information

The unaudited pro forma information below for the years ended December 31, 2022 and 2021 gives effect to the Spirit acquisition as if the acquisition had occurred on January 1, 2021.

Pro forma earnings for the year ended December 31, 2022 were adjusted to exclude $ 18.7 million of acquisition-related costs, net of tax, incurred by the Company during 2022.

The pro forma financial information is not necessarily indicative of the results of operations if the acquisition had been effective as of this date.

(In thousands, except per share data) 2022 2021

$ 912,631 $ 927,061

Net income $ 264,522 $ 307,752

Diluted earnings per share $ 2.04 $ 2.40

_________________________

(1) Net interest income plus non-interest income.

As previously discussed, the Company’s acquisition of Spirit was completed on April 8, 2022, at which time Spirit was fully integrated into the Company’s operations.

As a result, it is impracticable for the Company to provide certain post-closing information, such as revenue and earnings, as it relates to the Spirit acquisition.

Landmark Community Bank

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.

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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

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

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

Goodwill 1,550 ( 1,550 ) —

Bank owned life insurance 21,287 — 21,287

Core deposit intangible 88 4,071 4,159

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Liabilities Assumed

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

Noninterest bearing transaction accounts $ 110,393 $ — $ 110,393

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

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Other borrowings 47,023 — 47,023

Subordinated debentures 30,700 — 30,700

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

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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 Triumph subsequent to the acquisition date.

The Landrum Company

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

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

The Company issued 17,349,722 shares of its common stock and 767 shares of its series D preferred stock, par value $ 0.01 per share, in exchange for all outstanding shares of Landrum capital stock to effect the merger.

Prior to the acquisition, Landrum, headquartered in Columbia, Missouri, conducted banking business through its subsidiary bank, Landmark Bank, from 39 branches located in Missouri, Oklahoma and Texas.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 3.4 billion in assets, including approximately $ 2.0 billion in loans (inclusive of loan discounts), and approximately $ 3.0 billion in deposits.

The systems conversion occurred on February 14, 2020, at which time Landmark Bank merged into Simmons Bank, with Simmons Bank as the surviving institution.

During 2022, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities related to Landmark.

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.

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.

Goodwill of $ 39.9 million was recorded as a result of the transaction.

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The goodwill will not be deductible for tax purposes.

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

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

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

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Loans acquired 702,460 ( 3,674 ) 698,786

Allowance for loan losses ( 22,736 ) 22,736 —

Foreclosed assets 373 ( 183 ) 190

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

Premises and equipment 2,774 484 3,258

Bank owned life insurance 19,206 — 19,206

Goodwill 1,550 ( 1,550 ) —

Core deposit intangible — 5,136 5,136

Other intangibles 412 4,704 5,116

Other assets 12,806 897 13,703

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Liabilities Assumed

Non-interest bearing transaction accounts $ 716,675 $ — $ 716,675

Noninterest bearing transaction accounts $ 115,729 $ — $ 115,729

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

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Goodwill $ 39,944

During 2020, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities.

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

Reliance Bancshares, Inc.

On April 12, 2019, the Company completed its merger with Reliance Bancshares, Inc.

(“Reliance”), headquartered in the St.

Louis, Missouri, metropolitan area, pursuant to the terms of the Agreement and Plan of Merger (“Reliance Agreement”), dated November 13, 2018, as amended February 11, 2019.

In the merger, each outstanding share of Reliance common stock, as well as each Reliance common stock equivalent, was canceled and converted into the right to receive shares of the Company’s common stock and/or cash in accordance with the terms of the Reliance Agreement.

In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each share of Reliance’s Series C Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series C Preferred Stock (unless the holder of such Series C Preferred Stock elected to receive alternate consideration in accordance with the Reliance Agreement).

The Company issued 3,999,623 shares of its common stock and paid $ 62.7 million in cash to effect the merger.

The Company also issued $ 42.0 million of its Series A Preferred Stock and Series B Preferred Stock.

On May 13, 2019, the Company redeemed all of the preferred stock issued in connection with the merger, and paid all accrued and unpaid dividends up to the date of redemption.

On October 29, 2019, the Company amended its Amended and Restated Articles of Incorporation to cancel the Series C Preferred Stock, having 140 authorized shares, of which no shares were ever issued or outstanding.

Prior to the acquisition, Reliance conducted banking business through its subsidiary bank, Reliance Bank, from 22 branches located in Missouri and Illinois.

Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $ 1.5 billion in assets, including approximately $ 1.1 billion in loans (inclusive of loan discounts), and approximately $ 1.2 billion in deposits.

Contemporaneously with the completion of the Reliance merger, Reliance Bank was merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $ 78.5 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 St.

Louis metropolitan area 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 Reliance transaction, as of the acquisition date, is as follows:

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

Assets Acquired

Cash and due from banks $ 25,693 $ — $ 25,693

Due from banks - time 502 — 502

Investment securities 287,983 ( 1,873 ) 286,110

Loans acquired 1,138,527 ( 41,657 ) 1,096,870

Allowance for loan losses ( 10,808 ) 10,808 —

Foreclosed assets 11,092 ( 5,180 ) 5,912

Premises and equipment 32,452 ( 3,001 ) 29,451

Bank owned life insurance 39,348 — 39,348

Core deposit intangible — 18,350 18,350

Other assets 25,165 6,911 32,076

Total assets acquired $ 1,549,954 $ ( 15,642 ) $ 1,534,312

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

Liabilities Assumed

Non-interest bearing transaction accounts $ 108,845 $ ( 33 ) $ 108,812

Interest bearing transaction accounts and savings deposits 639,798 — 639,798

Time deposits 478,415 ( 1,758 ) 476,657

Total deposits 1,227,058 ( 1,791 ) 1,225,267

Securities sold under agreement to repurchase 14,146 — 14,146

Other borrowings 162,900 ( 5,500 ) 157,400

Accrued interest and other liabilities 8,185 268 8,453

Total liabilities assumed 1,412,289 ( 7,023 ) 1,405,266

Equity 137,665 ( 137,665 ) —

Total equity assumed 137,665 ( 137,665 ) —

Total liabilities and equity assumed $ 1,549,954 $ ( 144,688 ) $ 1,405,266

Net assets acquired 129,046

Purchase price 207,539

Goodwill $ 78,493

During 2020, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities.

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

During 2022, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities related to Triumph.

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

Total acquisition-related costs of $ 22.5 million, $ 15.9 million, and $ 4.5 million were recorded during the years ended 2022, 2021 and 2020, respectively.

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above.

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

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

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.

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Any core deposit intangible established prior to the acquisitions, if applicable, was written off.

Other intangibles – These intangible assets represent the value of the relationship that Landrum had with their trust and wealth management customers.

The fair value of these intangible assets was estimated based on a combination of discounted cash flow methodology and a market valuation approach.

Intangible assets for Landrum also included mortgage servicing rights.

Other intangibles established prior to the acquisitions, if applicable, were 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.

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

Spirit of Texas Bancshares, Inc.

(Pending Acquisition)

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

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

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

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

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

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

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

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

INVESTMENT SECURITIES

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

Held-to-maturity (“HTM”) securities, 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.

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

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

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

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.

As of December 31, 2022, the related remaining net unrealized losses of $ 147.0 million and net unrealized gains of $ 690,000 , 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.

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December 31, 2021

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

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

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government agencies or corporations.

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

As of December 31, 2022, HTM MBS consisted of $ 149.2 million and $ 1.04 billion of commercial MBS and residential MBS, respectively.

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

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December 31, 2021

Treasury $ 300 $ — $ — $ — $ 300

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

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As of December 31, 2022, AFS MBS consisted of $ 1.07 billion and $ 1.47 billion of commercial MBS and residential MBS, respectively.

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

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

Accrued interest receivable on HTM and AFS securities at December 31, 2022 was $ 20.7 million and $ 16.7 million, respectively, and is included in interest receivable on the consolidated balance sheets.

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Available-for-sale

Treasury $ 2,197 $ ( 60 ) $ — $ — $ 2,197 $ ( 60 )

Government agencies 101,138 ( 3,263 ) 66,970 ( 4,059 ) 168,108 ( 7,322 )

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As of December 31, 2022, the Company’s investment portfolio included $ 3.85 billion of AFS securities, of which $ 3.80 billion, or 98.5 %, were in an unrealized loss position that are not deemed to have credit losses.

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

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

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

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

Furthermore, the decline in fair value for each of the above AFS securities is attributable to the rates for those investments yielding less than current market rates.

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

Management does not have the intent to

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

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

Allowance for Credit Losses

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Provision for credit loss expense — — —

Securities charged-off — ( 600 ) ( 600 )

Net increase (decrease) in allowance on previously impaired securities ( 1,180 ) 1,180 —

Recoveries 93 16 109

Ending balance, December 31, 2022 $ 110 $ 1,278 $ 1,388

Available-for-sale

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

Reduction due to sales — ( 11 ) ( 11 )

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

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

December 31, 2021

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

Impact of ASU 2016-13 adoption 58 311 369

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

Securities charged-off — ( 600 ) ( 600 )

Recoveries — 147 147

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

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

Impact of ASU 2016-13 adoption 373 — 373

Credit losses on securities not previously recorded 199 113 312

Reduction due to sales — ( 11 ) ( 11 )

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Ending balance, December 31, 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 in the last half of 2021.

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

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

The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of December 31, 2022:

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The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.96 billion at December 31, 2022 and $ 3.88 billion at December 31, 2021.

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

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

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

No securities were sold during 2022, while the Company sold approximately $ 342.6 million of investment securities during 2021 and approximately $ 1.70 billion of investment securities during 2020.

Securities sold in 2020 were in large part related to efforts by the Company to increase liquidity in response to the early stages of the COVID-19 pandemic, while the securities sold during 2021 were part of a strategic plan to realize gains on securities with projected calls within the short-term period.

The decrease in net gains on the sale and call of securities in 2022 as compared to 2021 and 2020 reflect the rising interest rate environment

experienced during the current year as compared to 2021 and 2020.

There were approximately $ 46,000 of gross realized gains and $ 324,000 of gross realized losses from the call of securities during the year ended December 31, 2022.

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

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

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

See Note 21, Derivative Instruments, for disclosure of the gains and losses recognized on derivative instruments and the cumulative fair value hedging adjustments to the carrying amount of the hedged securities.

OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Texas Branch Sale

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

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

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

Spirit Acquisition

In connection with the acquisition of Spirit, 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 $ 35.2 million, net of fair value discounts, at the date of acquisition with no remaining balance as of December 31, 2022.

As of December 31, 2022, there were no outstanding other assets and other liabilities held for sale.

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obtaining and monitoring collateral;

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

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

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

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It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities.

Paycheck Protection Program Loans - The Company originated loans pursuant to multiple PPP appropriations of the CARES Act which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assist with mortgage interest, rent and utilities.

Paycheck Protection Program Loans - The Company originated loans pursuant to multiple PPP appropriations of the Coronavirus Aid, Relief and Economic Security Act which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assist with mortgage interest, rent and utilities.

Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions.

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As of December 31, 2022 and 2021, the total outstanding balance of PPP loans was $ 8.9 million and $ 116.7 million, respectively.

Other – The other loan portfolio includes mortgage warehouse loans, representing warehouse lines of credit to mortgage originators for the disbursement of newly originated 1-4 family residential loans.

Also included in the other loan portfolio are loans to public sector customers, including state and local governments.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.

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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.

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

In March 2020, the federal financial institution regulatory agencies issued an interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and provided information regarding loan modifications.

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

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

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

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

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

TDRs are individually evaluated for expected credit losses.

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Single-family residential 3 $ 274 $ 197 $ — $ 197 $ —

Other commercial 1 784 766 — 766 —

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

1 unchanged sentence

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

A specific reserve of $ 5,129 was determined necessary for these loans as of December 31, 2021.

No specific reserve was determined necessary for these loans as of December 31, 2022.

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

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

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

During the year ended December 31, 2022, fifteen of the previously restructured loans with prior balances of $ 3,169,776 were paid off.

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

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

1 unchanged sentence

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

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

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

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

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

There was one loan with an outstanding balance of $ 7,800 considered a TDR for which a payment default occurred during the year ended December 31, 2022.

During the year ended December 31, 2021, there were no loans considered TDRs for which a payment default occurred.

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

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

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

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

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

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

The 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.

123 unchanged sentences

Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $ 70.9 million and $ 47.1 million as of December 31, 2022 and 2021, respectively, as further detailed in the table below.

The collateral securing these loans consist of commercial real estate properties, residential properties, other business assets, and secured energy production assets.

(In thousands) Real Estate Collateral Energy Other Collateral Total

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

December 31, 2022

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Ending balance, December 31, 2022 $ 34,406 $ 150,795 $ 5,140 $ 6,614 $ 196,955

(In thousands) Commercial Real

Estate Credit

and Other Total

December 31, 2021

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

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

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

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

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

4 unchanged sentences

December 31, 2020

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

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

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

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

4 unchanged sentences

As of December 31, 2022, the Company’s allowance for credit losses was considered sufficient based upon expected loan level cash flows that were supported by economic forecasts.

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

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

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

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

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

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

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

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

Provision expense related to loans was recaptured during the year for a variety of factors including a release of $ 16.0 million driven by improvements in certain industry specific qualitative factors for the restaurant, hospitality, student housing and office space industries due to lower pandemic related stresses.

The remaining recapture during 2022 was driven by the planned exit of several large oil and gas relationships during the year, along with the Company’s improved asset credit quality metrics, which combined with improved Moody’s economic modeling scenarios, more than offset the $ 30.3 million Day 2 provision expense required for loans acquired by the Company in the Spirit acquisition.

For the year ended December 31, 2021, provision expense was recaptured as the economy emerged from the pandemic.

During 2021, the Company experienced improved asset credit quality metrics coupled with improved Moody’s economic modeling scenarios, as compared to the previous year’s concern over the economic stresses related to COVID-19.

Reserve for Unfunded Commitments

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

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

The reserve for unfunded commitments was $ 41.9 million and $ 22.4 million, as of December 31, 2022 and 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.

During 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $ 16.0 million due to the overall increase in unfunded commitments, primarily made up of commercial construction loans, which receive a higher reserve allocation than other loans.

Additionally, an adjustment to the reserve for unfunded commitments resulted in an expense of $ 3.5 million which was due to the Day 2 provision expense required for unfunded commitments related to the Spirit acquisition.

These adjustments were included in the provision for credit losses in the statement of income.

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

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Total $ 14,074 $ ( 32,704 ) $ 74,973

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

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

Purchased Credit Deteriorated Loans

1 unchanged sentence

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

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

(In thousands) Commercial Real

Estate Credit

and Other Total

Unpaid principal balance $ 8,258 $ 66,534 $ — $ 59 $ 74,851

PCD allowance for credit loss at acquisition ( 6,433 ) ( 3,187 ) — ( 2 ) ( 9,622 )

Non-credit related discount ( 378 ) ( 998 ) — ( 1 ) ( 1,377 )

Fair value of PCD loans $ 1,447 $ 62,349 $ — $ 56 $ 63,852

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

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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 FHLB advance rates for borrowings of similar term.

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.

2 unchanged sentences

The Company’s leases are classified as operating leases with a term, including expected renewal or termination options, greater than one year, and are related to certain office facilities and office equipment.

The following table presents information related to the Company’s right-of-use lease assets, included in premises and equipment, and lease liabilities, included in other liabilities, at December 31, 2021 and 2020.

The following table presents information as of December 31, 2022 and 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.

(Dollars in thousands) 2022 2021

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

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

Total premises and equipment, net at December 31, 2022 and 2021 were as follows:

(In thousands) 2022 2021

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

Goodwill totaled $ 1.15 billion at December 31, 2021 and $ 1.08 billion at December 31, 2020.

During 2019, the Company recorded $ 131.3 million and $ 78.5 million of goodwill as a result of its acquisitions of Landrum and Reliance, respectively.

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

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

Goodwill totaled $ 1.32 billion and $ 1.15 billion at December 31, 2022 and 2021, respectively.

Goodwill increased $ 173.6 million during the year ended December 31, 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 in 2022, 2021 or 2020.

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

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

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

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

During the second quarter of 2022, the Company performed an annual goodwill impairment analysis and concluded no impairment existed.

Also during 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 interim goodwill impairment assessments during the second, third and fourth quarters and concluded no impairment existed during the periods.

While the goodwill impairment analysis indicated no impairment at December 31, 2022, the Company’s assessment depends on several assumptions which are dependent on market and economic conditions, and future changes in those conditions could impact the Company’s assessment in the future.

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Disposition of intangible asset (2)

( 674 ) ( 2,324 )

Amortization ( 14,346 ) ( 12,122 )

2 unchanged sentences

Balance, beginning of year 12,373 13,747

Disposition of intangible asset — ( 413 )

Acquisitions (3)

Amortization ( 1,569 ) ( 1,374 )

2 unchanged sentences

_________________________

(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 completed in 2021.

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.

The carrying basis and accumulated amortization of the Company’s other intangible assets at December 31, 2022 and 2021 were as follows:

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TIME DEPOSITS

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

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

Time deposits included approximately $ 1.08 billion and $ 784.9 million of certificates of deposit over $250,000 at December 31, 2022 and 2021, respectively.

Brokered time deposits were $ 2.75 billion and $ 466.0 million at December 31, 2022 and 2021, respectively.

Maturities of all time deposits at December 31, 2022 are as follows:

21 unchanged sentences

Right-of-use lease liability 11,641 11,984

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

Unrealized loss on AFS securities 177,839 8,164

Allowance for unfunded commitments 10,200 5,442

5 unchanged sentences

Right-of-use lease asset ( 11,396 ) ( 11,871 )

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

Unrealized gain on swaps ( 25,836 ) ( 2,767 )

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

The Company has no history of expiring net

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

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

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

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net operating losses to reduce its tax liability.

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

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

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

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

In total, approximately $ 49.5 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.

32 unchanged sentences

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)

Trust preferred securities, net of discount, due 9/15/2037, floating rate of 1.37 % above the three month LIBOR rate, reset quarterly

10,310 10,310

Trust preferred securities, net of discount, 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

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

25,329 25,172

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

11 unchanged sentences

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 the relevant LIBOR rate is discontinued.

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

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 the end of the year have original maturity dates of ten years to fifteen years with lockout periods that have expired.

During the fourth quarter of 2020, the Company reclassified the FOTO advances as long-term advances due to the current low interest rate environment and the expectation that FHLB will not exercise the option to terminate the FOTO advances prior to its stated maturity date.

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

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

additional advances available from the FHLB.

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

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

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

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’s long-term debt primarily includes subordinated debt and long-term FHLB advances with an original maturity of greater than one year.

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

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 31, 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 (“SOFR”), 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.

The Company had total FHLB advances of $ 838.5 million at December 31, 2022, of which $ 835.0 million are FHLB Owns the Option (“FOTO”) advances.

FOTO advances are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date and therefore are classified as short-term advances by the Company.

At December 31, 2022, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 6.6 billion and the Company had approximately $ 5.4 billion of additional advances available from the FHLB.

At December 31, 2022, the Company had $ 785.0 million of FHLB advances outstanding with original or expected maturities of one year or less.

During the third quarter of 2022, the Company redeemed the five issuances of trust preferred securities which had an outstanding aggregate principal amount of $ 56.2 million.

The Company recorded a loss of $ 365,000 related to the early retirement of debt, which represented the unamortized purchase discounts associated with the previously acquired trust preferred securities.

Each of the trusts was 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 represented preferred beneficial interests in the assets of the respective trusts and were subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust.

The common securities of each trust were wholly-owned by the Company.

The trust preferred securities were tax-advantaged issues that qualified for inclusion as Tier 2 capital.

The Company’s long-term debt primarily includes subordinated debt and other notes payable.

Aggregate annual maturities of long-term debt at December 31, 2022, are as follows:

4 unchanged sentences

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

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

On April 27, 2022, the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation to remove an $ 80.0 million cap on the aggregate liquidation preference associated with the preferred stock.

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

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Specific terms and prices are determined at the time of any offering under a separate prospectus supplement that the Company is required to file with the SEC at the time of the specific offering.

On April 19, 2018, shareholders of the Company approved an increase in the number of authorized shares from 120,000,000 to 175,000,000 .

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 .

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

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

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

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

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

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

Effective July 23, 2021, the Company’s Board of Directors approved another amendment to the 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 $ 180.0 million to a maximum of $ 276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022.

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 2022, the Company repurchased 513,725 shares at an average price of $ 31.25 per share under the 2019 Program and 3,919,037 shares at an average price of $ 24.26 per share under the 2022 Program, respectively.

The 2022 Program repurchases were all completed during the second and third quarters of 2022.

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

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

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

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

69 unchanged sentences

Exercisable, December 31, 2022 470 $ 22.56

_________________________

(1) All stock units (including performance stock units).

The following table summarizes information about stock options under the plans outstanding at December 31, 2022:

11 unchanged sentences

$ 10.65 — $ 24.07 470 2.45 $ 22.56 470 $ 22.56

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

The table below summarizes the Company’s performance stock unit activity for the years ended December 31, 2022, 2021 and 2020:

15 unchanged sentences

At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.6 years.

The intrinsic value of stock options outstanding and stock options exercisable at December 31, 2021 was $ 3.3 million.

The intrinsic value of stock options outstanding and stock options exercisable at December 31, 2022 was $ 71,000 .

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 21.58 at December 31, 2022, and the exercise price multiplied by the number of options outstanding.

There were 2,750 stock options exercised in 2022 with no intrinsic value.

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

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

There were 3,050 stock options exercised in 2019 with an intrinsic value of $ 43,000 .

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.

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

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

Transfers of assets held for sale to other assets 100 — —

Transfers of available-for-sale to held-to-maturity securities 1,992,542 500,809 —

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

Transfers of loans to other assets held for sale

— 114,925 259,939

Transfers of deposits to other liabilities held for sale

— 213,025 159,853

OTHER INCOME AND OTHER OPERATING EXPENSES

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

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

class B common stock of $ 42.9 million.

Other income for the year ended December 31, 2022 was $ 27.4 million.

Other income for the year ended December 31, 2021 was $ 35.3 million and included the gain on sale related to the Illinois Branch Sale of $ 5.3 million and other income for the year ended December 31, 2020 was $ 39.9 million, which included the gain on sales related to the Texas Branch Sale and Colorado Branch Sale of $ 8.1 million.

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

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

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

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.

10 unchanged sentences

The Company obtains fair value measurements from dealer quotes.

Other assets and other liabilities held for sale – The Company’s other assets and other liabilities held for sale are reported at fair value utilizing Level 3 inputs.

See Note 4, Other Assets and Other Liabilities Held for Sale.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of December 31, 2022 and 2021.

19 unchanged sentences

Available-for-sale securities

Treasury $ 300 $ 300 $ — $ —

Government agencies 364,641 — 364,641 —

4 unchanged sentences

Derivative asset 25,852 — 25,852 —

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

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

Certain financial assets and liabilities are measured at fair value on a nonrecurring basis;

Certain 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:

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.

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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 December 31, 2021 and 2020.

The following table sets forth the Company’s assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of December 31, 2022 and 2021.

Fair Value Measurements Using

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

Loans – 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.

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.

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Financial liabilities:

Non-interest bearing transaction accounts 5,325,318 — 5,325,318 — 5,325,318

Noninterest bearing transaction accounts 6,016,651 — 6,016,651 — 6,016,651

Interest bearing transaction accounts and savings deposits

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

Loans, net 12,662,847 — — 12,736,991 12,736,991

Loans and other loans held for sale, net 11,807,171 — — 11,922,735 11,922,735

Financial liabilities:

Non-interest bearing transaction accounts 4,482,091 — 4,482,091 — 4,482,091

Noninterest bearing transaction accounts 5,325,318 — 5,325,318 — 5,325,318

Interest bearing transaction accounts and savings deposits

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Other borrowings 1,337,973 — 1,393,711 — 1,393,711

Subordinated debentures 382,874 — 398,827 — 398,827

Subordinated notes and debentures 384,131 — 394,464 — 394,464

Interest payable 6,759 — 6,759 — 6,759

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As of December 31, 2022 and 2021, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 21.1 million and $ 108.5 million respectively.

The decrease as compared to the prior year is due to the rising interest rate environment and softening market conditions throughout the current year.

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

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The Company has purchased letters of credit from the FHLB as security for certain public deposits.

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

The amount of the letters of credit was $ 265.7 million and $ 59.1 million at December 31, 2022 and 2021, respectively, and they expire in less than one year from issuance.

At December 31, 2022, the Company did not have concentrations of 5% or more of the investment portfolio in bonds issued by a single municipality.

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

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

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

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’s policy, as of January 1, 2022, is not to enter into any new LIBOR-based credit agreements and not extend, renew, or modify 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.

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

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”).

ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

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.

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

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

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

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

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

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

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The Company elected to apply the 2020 CECL Transition Provision.

Derivatives and Hedging:

Targeted Improvements - In August 2017, the FASB issued ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), that changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in order to better align a company’s risk management activities and financial reporting for hedging relationships.

In summary, this amendment 1) expands the types of transactions eligible for hedge accounting;

2) eliminates the separate measurement and presentation of hedge ineffectiveness;

3) simplifies the requirements around the assessment of hedge effectiveness;

4) provides companies more time to finalize hedge documentation;

and 5) enhances presentation and disclosure requirements.

The effective date was for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted.

All transition requirements and elections should be applied to existing hedging relationships on the date of adoption and the effects should be reflected as of the beginning of the fiscal year of adoption.

As part of this new guidance, entities are allowed to designate as the hedged item, an amount that is not expected to be affected by prepayments, defaults or other events affecting the timing and amount of cash flows in a closed portfolio of prepayable financial instruments (this is referred to as the “last-of-layer” method).

Under the last-of-layer method, entities are able to reclassify, only at the time of adoption, eligible callable debt securities from held-to-maturity to available-for-sale without tainting its intentions to hold future debt securities to maturity.

The available-for-sale security must be reported at fair value and any unrealized gain or loss must be recorded as an adjustment to other comprehensive income upon adoption.

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

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

2016-02, Leases (Topic 842) (“ASU 2016-02”), that establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases.

The new guidance results in a more consistent representation of the rights and obligations arising from leases by requiring lessees to recognize the lease asset and lease liabilities that arise from leases in the consolidated balance sheet and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases.

The effective date was for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

ASU 2016-02 requires entities to adopt the new lease standard using a modified retrospective transition method, meaning an entity initially applies the new lease standard at the beginning of the earliest period presented in the financial statements.

Due to complexities associated with using this method, in July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements , to relieve entities of the requirement to present prior comparative years’ results when they adopt the new lease standard and giving entities the option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings.

Adoption of ASU 2016-02 resulted in the recognition of right-of-use assets of $ 32.8 million and right-of-use liabilities of $ 32.8 million on the consolidated balance sheet with no material impact to the results of operations.

The Company has elected to adopt the guidance using the optional transition method, which allows for a modified retrospective method of adoption with a cumulative effect adjustment to retained earnings without restating comparable periods.

The Company also elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs as well as an exemption for short-term leases with a term of less than one year, whereby the Company did not recognize a lease liability or right-of-use asset on the consolidated balance sheet but instead will recognize lease payments as an expense over the lease term as appropriate.

See Note 6, Right-of-Use Lease Assets and Lease Liabilities, for additional information related to the Company’s right-of-use lease obligations.

Recently Issued Accounting Standards

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

2021-05, Leases (Topic 842):

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

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

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 interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

The Company is currently completing its evaluation of the impact this standard will have on its results of operations, financial position and disclosures.

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

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

The two year forward start date for these swaps will be effective beginning in the third quarter of 2023 and involve the payment of fixed interest rates with a weighted average of 1.21 % in exchange for variable interest rates based on federal funds rates.

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

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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.

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings incidental to the conduct of the Company’s 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.

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Plaintiffs seek unspecified damages, costs, attorneys’ fees, pre- and post-judgment interest, and other relief as the Court deems proper for themselves and the putative class.

Simmons Bank denies the allegations but has reached a settlement in principle with the plaintiffs to resolve this matter, subject to the preparation and execution of a mutually acceptable settlement agreement and release, as well as the court’s approval.

The settlement is not expected to have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

Simmons Bank denies the allegations but entered into a settlement agreement and release with the plaintiffs on behalf of themselves and the proposed class to resolve this matter, which settlement received the court’s final approval in November 2022.

The settlement did not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

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

3 unchanged sentences

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.

The settlement did not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

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.

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Simmons Bank denies the allegations, and on January 11, 2022, the Court granted Simmons Bank’s motion to compel arbitration.

The matter was resolved in September 2022 and did not 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 February 9, 2023, the district court denied plaintiffs’ motion for class certification, granted Simmons Bank’s motion for summary judgment in part, and granted Simmons Bank’s motion to exclude testimony of plaintiffs’ expert.

The lawsuit remains pending.

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.

While the ultimate resolution (including amounts thereof) of any legal proceedings, including the Wilkins matter 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 the Company’s 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 the Company’s results of operations for a given fiscal period.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

The approval of the Commissioner of the Arkansas State Bank Department is required if the total of all dividends declared by an Arkansas state bank in any calendar year exceeds seventy-five percent ( 75 %) of the total of its net profits, as defined, for that year combined with seventy-five percent ( 75 %) of its retained net profits of the preceding year.

Under the foregoing dividend restrictions, and while maintaining its “well capitalized” status, at December 31, 2021, Simmons Bank had paid to the Company all available dividends.

While past dividends are not necessarily indicative of amounts that may be paid, or available to be paid in future periods, net profits of Simmons Bank and cash balances at the Company are projected to be sufficient to pay quarterly dividends on the Company’s common stock at current levels and interest and principal on the Company’s debt as well as meet other liquidity needs.

At December 31, 2022, Simmons Bank had approximately $ 114.0 million available for payment of dividends to the Company, without prior regulatory approval.

Past dividends are not necessarily indicative of amounts that may be paid, or available to be paid, in future periods.

The Company’s bank subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies.

3 unchanged sentences

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

Under the Basel III Rules effective January 1.

2015, the criteria for a well-capitalized institution are:

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

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

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As of December 31, 2022, the Company and its subsidiary bank met all capital adequacy requirements under the Basel III Capital Rules and exceeded the fully phased in capital conservation buffer.

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

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

To be categorized as well capitalized, the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table.

There are no conditions or events since that notification that management believes have changed these categories.

The Company’s and the subsidiary bank’ actual capital amounts and ratios are presented in the following table.

The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table.

Actual Minimum

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Undivided profits 1,255,586 1,093,270

Accumulated other comprehensive gain (loss):

Unrealized appreciation on available-for-sale securities, net of income taxes of $( 3,731 ) and $ 21,132 at December 31, 2020 and 2019 respectively

Accumulated other comprehensive loss:

Unrealized depreciation on available-for-sale securities, net of income taxes of $( 183,124 ) and $( 3,731 ) at December 31, 2022 and 2021 respectively

( 517,560 ) ( 10,545 )

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Income before equity in undistributed net income of subsidiaries 183,634 194,857 284,249

Equity in undistributed net income of subsidiaries 76,299 ( 29,345 ) 191,530

Equity in undistributed net income (loss) of subsidiaries 72,778 76,299 ( 29,345 )

NET INCOME 256,412 271,156 254,904

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Equity in other comprehensive income (loss) of subsidiaries ( 507,015 ) ( 70,271 ) 38,835

COMPREHENSIVE INCOME $ 200,885 $ 293,739 $ 286,432

COMPREHENSIVE INCOME (LOSS) $ ( 250,603 ) $ 200,885 $ 293,739

Condensed Statements of Cash Flows

7 unchanged sentences

Deferred income taxes ( 652 ) 3,347 1,583

Equity in undistributed net income of bank subsidiaries ( 76,299 ) 29,345 ( 191,530 )

Equity in undistributed net income (loss) of bank subsidiaries ( 72,778 ) ( 76,299 ) 29,345

Other assets ( 26,775 ) ( 2,099 ) ( 27,056 )

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Net collections of loans ( 2,139 ) 186 117

Net collections (originations) of loans 1,198 ( 2,139 ) 186

Net (purchases of) proceeds from premises and equipment ( 21 ) ( 83 ) ( 7 )

(Advances to) repayment for subsidiaries — — ( 15,363 )

Proceeds from maturities of available-for-sale securities — — 2,544

Purchases of available-for-sale securities — — ( 439 )

Cash paid in business combinations ( 6,818 ) — ( 36,811 )

Cash acquired (paid) in business combinations 60,126 ( 6,818 ) —

Other, net 1,688 2 185

Net cash used in investing activities ( 9,038 ) ( 14,999 ) ( 57,744 )

Net cash provided by (used in) investing activities 62,991 ( 9,038 ) ( 14,999 )

CASH FLOWS FROM FINANCING ACTIVITIES

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk