What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-04 · 248 added, 211 removed, 1436 unchanged (24% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2023 and December 31, 2022

June 30, December 31,

September 30, 2023 and December 31, 2022

September 30, December 31,

(In thousands, except share data) 2023 2022

4 unchanged sentences

Investment securities:

Held-to-maturity, net of allowance for credit losses of $ 3,214 and $ 1,388 at June 30, 2023 and December 31, 2022, respectively

Held-to-maturity, net of allowance for credit losses of $ 3,214 and $ 1,388 at September 30, 2023 and December 31, 2022, respectively

3,742,292 3,759,706

Available-for-sale, net of allowance for credit losses of $ 2,396 at June 30, 2023 (amortized cost of $ 4,012,265 and $ 4,331,413 at June 30, 2023 and December 31, 2022, respectively)

Available-for-sale, net of allowance for credit losses of $ 1,196 at September 30, 2023 (amortized cost of $ 3,890,910 and $ 4,331,413 at September 30, 2023 and December 31, 2022, respectively)

3,358,421 3,852,854

24 unchanged sentences

Common stock, Class A, $ 0.01 par value;

350,000,000 shares authorized at June 30, 2023 and December 31, 2022;

126,224,707 and 127,046,654 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

350,000,000 shares authorized at September 30, 2023 and December 31, 2022;

125,133,281 and 127,046,654 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Surplus 2,497,874 2,530,066

6 unchanged sentences

Consolidated Statements of Income

Three and Six Months Ended June 30, 2023 and 2022

Three and Nine Months Ended September 30, 2023 and 2022

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2023 2022 2023 2022

43 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three and Six Months Ended June 30, 2023 and 2022

Three and Nine Months Ended September 30, 2023 and 2022

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

2 unchanged sentences

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized holding (losses) gains arising during the period on available-for-sale securities ( 34,464 ) 11,763 35,499 ( 453,777 )

Unrealized holding losses arising during the period on available-for-sale securities ( 131,603 ) ( 204,940 ) ( 96,104 ) ( 658,717 )

Reclassification adjustment for realized losses included in net income — ( 22 ) ( 391 ) ( 226 )

2 unchanged sentences

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity ( 6,233 ) ( 4,700 ) ( 19,786 ) ( 9,401 )

Other comprehensive income (loss), before tax effect 938 ( 167,152 ) 64,404 ( 595,523 )

Tax effect of other comprehensive income (loss) 245 ( 43,685 ) 16,832 ( 155,640 )

Other comprehensive loss, before tax effect ( 100,713 ) ( 158,806 ) ( 36,309 ) ( 754,329 )

Tax effect of other comprehensive loss ( 26,321 ) ( 41,504 ) ( 9,489 ) ( 197,144 )

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) ( 74,392 ) ( 117,302 ) ( 26,820 ) ( 557,185 )

3 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 and 2022

(In thousands) June 30, 2023 June 30, 2022

Nine Months Ended September 30, 2023 and 2022

(In thousands) September 30, 2023 September 30, 2022

OPERATING ACTIVITIES

12 unchanged sentences

Income from bank owned life insurance ( 9,811 ) ( 8,189 )

Loss from early retirement of TruPS — 365

Originations of mortgage loans held for sale ( 207,822 ) ( 436,477 )

21 unchanged sentences

Net change in deposits ( 316,514 ) 63,128

Repayments of TruPS — ( 56,189 )

Dividends paid on common stock ( 75,926 ) ( 69,963 )

4 unchanged sentences

Repurchases of common stock ( 39,999 ) ( 111,133 )

Net cash provided by (used in) financing activities 324,694 ( 510,475 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 63,790 ( 685,806 )

Net cash used in financing activities ( 31,630 ) ( 605,251 )

DECREASE IN CASH AND CASH EQUIVALENTS ( 76,474 ) ( 971,243 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 682,122 1,650,653

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

(In thousands, except share data) Common

3 unchanged sentences

Profits Total

Three Months Ended June 30, 2023

Balance, March 31, 2023 (Unaudited) $ 1,273 $ 2,533,589 $ ( 470,681 ) $ 1,275,720 $ 3,339,901

Comprehensive income — — 693 58,314 59,007

Three Months Ended September 30, 2023

Balance, June 30, 2023 (Unaudited) $ 1,262 $ 2,516,398 $ ( 469,988 ) $ 1,308,654 $ 3,356,326

Comprehensive (loss) income — — ( 74,392 ) 47,247 ( 27,145 )

Stock-based compensation plans, net – 37,536 shares

4 unchanged sentences

— — — ( 25,091 ) ( 25,091 )

Balance, September 30, 2023 (Unaudited) $ 1,251 $ 2,497,874 $ ( 544,380 ) $ 1,330,810 $ 3,285,555

Three Months Ended September 30, 2022

Balance, June 30, 2022 (Unaudited) $ 1,288 $ 2,569,060 $ ( 450,428 ) $ 1,139,975 $ 3,259,895

Three Months Ended June 30, 2022

Balance, March 31, 2022 (Unaudited) $ 1,125 $ 2,150,453 $ ( 326,961 ) $ 1,136,990 $ 2,961,607

Comprehensive (loss) income — — ( 117,302 ) 80,603 ( 36,699 )

1 unchanged sentence

— 3,111 — — 3,111

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

183 464,735 — — 464,918

Stock repurchases – 1,883,713 shares

2 unchanged sentences

— — — ( 24,119 ) ( 24,119 )

Balance, June 30, 2022 (Unaudited) $ 1,288 $ 2,569,060 $ ( 450,428 ) $ 1,139,975 $ 3,259,895

Balance, September 30, 2022 (Unaudited) $ 1,269 $ 2,527,153 $ ( 567,730 ) $ 1,196,459 $ 3,157,151

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2023 and 2022

Nine Months Ended September 30, 2023 and 2022

(In thousands, except share data) Common

3 unchanged sentences

Profits Total

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Balance, December 31, 2022 $ 1,270 $ 2,530,066 $ ( 517,560 ) $ 1,255,586 $ 3,269,362

Comprehensive income — — 47,572 103,903 151,475

Comprehensive (loss) income — — ( 26,820 ) 151,150 124,330

Stock issued for employee stock purchase plan – 42,510 shares

6 unchanged sentences

— — — ( 75,926 ) ( 75,926 )

Balance, June 30, 2023 (Unaudited) $ 1,262 $ 2,516,398 $ ( 469,988 ) $ 1,308,654 $ 3,356,326

Six Months Ended June 30, 2022

Balance, September 30, 2023 (Unaudited) $ 1,251 $ 2,497,874 $ ( 544,380 ) $ 1,330,810 $ 3,285,555

Nine Months Ended September 30, 2022

Balance, December 31, 2021 $ 1,127 $ 2,164,989 $ ( 10,545 ) $ 1,093,270 $ 3,248,841

10 unchanged sentences

— — — ( 69,963 ) ( 69,963 )

Balance, June 30, 2022 (Unaudited) $ 1,288 $ 2,569,060 $ ( 450,428 ) $ 1,139,975 $ 3,259,895

Balance, September 30, 2022 (Unaudited) $ 1,269 $ 2,527,153 $ ( 567,730 ) $ 1,196,459 $ 3,157,151

See Condensed Notes to Consolidated Financial Statements.

8 unchanged sentences

checking, savings and time deposits;

and specialized products and services (such as credit cards, trust and fiduciary services, investments, agricultural finance lending, equipment lending, insurance and Small Business Administration (“SBA”) lending) from approximately 231 financial centers as of June 30, 2023, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

and specialized products and services (such as credit cards, trust and fiduciary services, investments, agricultural finance lending, equipment lending, insurance and Small Business Administration (“SBA”) lending) from approximately 232 financial centers as of September 30, 2023, located throughout market areas in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Basis of Presentation

43 unchanged sentences

Financial Conduct Authority (“FCA”) announced that the majority of LIBOR rates will no longer be published after December 31, 2021.

Effective January 1, 2022, the ICE Benchmark Administration Limited, the administrator of the LIBOR, ceased the publication of one-week and two-month USD LIBOR and will cease the publications of the remaining tenors of USD LIBOR (one, three, six and 12-month) immediately after June 30, 2023.

Effective January 1, 2022, the ICE Benchmark Administration Limited, the administrator of the LIBOR, ceased the publication of one-week and two-month USD LIBOR and as of June 30, 2023, ceased the publications of the remaining tenors of USD LIBOR (one, three, six and 12-month).

Other interest rates used globally could also be discontinued for similar reasons.

107 unchanged sentences

INVESTMENT SECURITIES

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

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.

1 unchanged sentence

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

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

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

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

3 unchanged sentences

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

During the quarters ended June 30, 2022 and September 30, 2021, the Company transferred, at fair value, $ 1.99 billion and $ 500.8 million, respectively, of securities from the available-for-sale portfolio to the held-to-maturity portfolio.

As of June 30, 2023, the related remaining combined net unrealized losses of $ 136.0 million in accumulated other comprehensive income (loss) 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 AFS portfolio to the HTM portfolio.

As of September 30, 2023, the related remaining combined net unrealized losses of $ 131.2 million 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.

5 unchanged sentences

Held-to-maturity

June 30, 2023

September 30, 2023

Government agencies $ 452,428 $ — $ 452,428 $ — $ ( 117,530 ) $ 334,898

14 unchanged sentences

government agencies or corporations.

As of June 30, 2023, HTM MBS consists of $ 144.9 million and $ 1.05 billion of commercial MBS and residential MBS, respectively.

As of September 30, 2023, HTM MBS consists of $ 143.1 million and $ 1.04 billion of commercial MBS and residential MBS, respectively.

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

6 unchanged sentences

Available-for-sale

June 30, 2023

September 30, 2023

Treasury $ 2,278 $ — $ — $ ( 54 ) $ 2,224

11 unchanged sentences

Total AFS $ 4,331,413 $ — $ 373 $ ( 478,932 ) $ 3,852,854

As of June 30, 2023, AFS MBS consists of $ 898.2 million and $ 1.38 billion of commercial MBS and residential MBS, respectively.

As of September 30, 2023, AFS MBS consists of $ 859.9 million and $ 1.30 billion of commercial MBS and residential MBS, respectively.

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

Accrued interest receivable on HTM and AFS securities at June 30, 2023 was $ 20.7 million and $ 16.6 million, respectively, and is included in interest receivable on the consolidated balance sheets.

Accrued interest receivable on HTM and AFS securities at September 30, 2023 was $ 17.5 million and $ 18.6 million, respectively, and is included in interest receivable on the consolidated balance sheets.

The Company has made the election to exclude all accrued interest receivable from securities from the estimate of credit losses.

The following table summarizes the Company’s AFS investments in an unrealized loss position for which an allowance for credit loss has not been recorded as of June 30, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

The following table summarizes the Company’s AFS investments in an unrealized loss position for which an allowance for credit loss has not been recorded as of September 30, 2023, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

Less Than 12 Months 12 Months or More Total

9 unchanged sentences

Total AFS $ 45,424 $ ( 4,168 ) $ 3,282,758 $ ( 526,085 ) $ 3,328,182 $ ( 530,253 )

As of June 30, 2023, the Company’s investment portfolio included $ 3.58 billion of AFS securities, of which $ 3.53 billion, or 98.7 %, were in an unrealized loss position that were not deemed to have credit losses.

As of September 30, 2023, the Company’s investment portfolio included $ 3.36 billion of AFS securities, of which $ 3.33 billion, or 99.1 %, were in an unrealized loss position that were not deemed to have credit losses.

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

3 unchanged sentences

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 immediate intent to sell the securities, and management believes the accounting standard of “more likely than not” has not been met regarding whether the Company would be required to sell any of the AFS securities before recovery of amortized cost.

Allowance for Credit Losses

7 unchanged sentences

(i) issuer bond ratings, (ii) issuer geography, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) probability-weighted multiple scenario forecasts, and (v) the issuers’ size.

The following table details activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2023 on the Company’s HTM and AFS securities portfolios.

The following table details activity in the allowance for credit losses by investment security type for the three and nine months ended September 30, 2023 on the Company’s HTM and AFS securities portfolios.

(In thousands) State and Political Subdivisions Other

Securities Total

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Held-to-maturity

Beginning balance, April 1, 2023 $ 362 $ 1,526 $ 1,888

Beginning balance, July 1, 2023 $ 934 $ 2,280 $ 3,214

Provision for credit loss expense — — —

Ending balance, June 30, 2023 $ 934 $ 2,280 $ 3,214

Net increase (decrease) in allowance on previously impaired securities 586 ( 586 ) —

Ending balance, September 30, 2023 $ 1,520 $ 1,694 $ 3,214

Available-for-sale

Beginning balance, April 1, 2023 $ — $ 5,800 $ 5,800

Beginning balance, July 1, 2023 $ — $ 2,396 $ 2,396

Provision for credit loss expense — — —

Reduction due to sales — ( 2,078 ) ( 2,078 )

Net increase (decrease) in allowance on previously impaired securities — ( 1,326 ) ( 1,326 )

Securities charged-off — — —

Ending balance, June 30, 2023 $ — $ 2,396 $ 2,396

Six Months Ended June 30, 2023

Net decrease in allowance on previously impaired securities — ( 1,200 ) ( 1,200 )

Ending balance, September 30, 2023 $ — $ 1,196 $ 1,196

Nine Months Ended September 30, 2023

Held-to-maturity

1 unchanged sentence

Provision for credit loss expense 824 1,002 1,826

Ending balance, June 30, 2023 $ 934 $ 2,280 $ 3,214

Net increase (decrease) in allowance on previously impaired securities 586 ( 586 ) —

Ending balance, September 30, 2023 $ 1,520 $ 1,694 $ 3,214

Available-for-sale

2 unchanged sentences

Reduction due to sales — ( 2,078 ) ( 2,078 )

Net increase (decrease) in allowance on previously impaired securities — ( 1,326 ) ( 1,326 )

Net decrease in allowance on previously impaired securities — ( 2,526 ) ( 2,526 )

Securities charged-off — ( 7,000 ) ( 7,000 )

Ending balance, June 30, 2023 $ — $ 2,396 $ 2,396

Activity in the allowance for credit losses by investment security type for the three and six months ended June 30, 2022 on the Company’s HTM securities portfolio was as follows:

Ending balance, September 30, 2023 $ — $ 1,196 $ 1,196

Activity in the allowance for credit losses by investment security type for the three and nine months ended September 30, 2022 on the Company’s HTM securities portfolio was as follows:

(In thousands) State and Political Subdivisions Other

Securities Total

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Held-to-maturity

Beginning balance, April 1, 2022 $ 1,285 $ 92 $ 1,377

Beginning balance, July 1, 2022 $ 103 $ 1,278 $ 1,381

Provision for credit loss expense — — —

1 unchanged sentence

Recoveries 1 2 3

Ending balance, June 30, 2022 $ 103 $ 1,278 $ 1,381

Six Months Ended June 30, 2022

Ending balance, September 30, 2022 $ 107 $ 1,277 $ 1,384

Nine Months Ended September 30, 2022

Held-to-maturity

3 unchanged sentences

Recoveries 90 15 105

Ending balance, June 30, 2022 $ 103 $ 1,278 $ 1,381

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, the provision for credit losses related to AFS securities recorded for the six months ended June 30, 2023 was $ 11.5 million, while the provision for credit losses related to AFS securities was reduced by $ 1.3 million during the three months ended June 30, 2023.

During the six months ended June 30, 2023, the Company charged-off $ 7.0 million directly related to one corporate bond which was deemed uncollectible in the period.

The remaining allowance for credit loss on the AFS portfolio of $ 2.4 million at June 30, 2023 is related to outstanding exposure for two nonperforming corporate bonds.

The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2023:

Ending balance, September 30, 2022 $ 107 $ 1,277 $ 1,384

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, the provision for credit losses related to AFS securities recorded for the nine months ended September 30, 2023 was $ 10.3 million, while the provision for credit losses related to AFS securities was reduced by $ 1.2 million during the three months ended September 30, 2023.

During the nine months ended September 30, 2023, the Company charged-off $ 7.0 million directly related to one corporate bond which was deemed uncollectible in the period.

The remaining allowance for credit loss on the AFS portfolio of $ 1.2 million at September 30, 2023 is related to outstanding exposure for two nonperforming corporate bonds.

The following table summarizes bond ratings for the Company’s HTM portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of September 30, 2023:

State and Political Subdivisions

9 unchanged sentences

Treasury securities held in escrow for payment to holders when the underlying call dates of the securities are reached.

Income earned on securities for the three and six months ended June 30, 2023 and 2022, is as follows:

Income earned on securities for the three and nine months ended September 30, 2023 and 2022, is as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

4 unchanged sentences

Total $ 50,638 $ 40,954 $ 148,163 $ 112,514

The amortized cost and estimated fair value by maturity of securities as of June 30, 2023 are shown in the following table.

The amortized cost and estimated fair value by maturity of securities as of September 30, 2023 are shown in the following table.

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

10 unchanged sentences

Total $ 3,745,506 $ 2,848,211 $ 3,890,910 $ 3,358,421

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.75 billion at June 30, 2023 and $ 3.96 billion at December 31, 2022.

There were no gross realized gains and $ 391,000 gross realized losses recorded from the sale of securities during both the three and six months ended June 30, 2023.

There were no gross realized gains and approximately $ 150,000 of gross realized losses from the sale and calls of securities during the three months ended June 30, 2022, and approximately $ 37,000 of gross realized gains and $ 240,000 of gross realized losses from the sale and call of securities during the six months ended June 30, 2022.

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.38 billion at September 30, 2023 and $ 3.96 billion at December 31, 2022.

There were no gross realized gains and no gross realized losses from the call or sale of securities during the three months ended September 30, 2023.

There were no gross realized gains and $ 391,000 of gross realized losses recorded from the sale of securities during the nine months ended September 30, 2023.

There were approximately $ 8,000 of gross realized gains and $ 30,000 of gross realized losses from the sale and call of securities during the three months ended September 30, 2022, and approximately $ 45,000 of gross realized gains and $ 271,000 of gross realized losses from the sale and call of securities during the nine months ended September 30, 2022.

The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2023 and 2022.

4 unchanged sentences

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 June 30, 2023.

As of June 30, 2023, there were no outstanding other liabilities held for sale.

These loans were valued at $ 35.2 million, net of fair value discounts, at the date of acquisition with no remaining balance as of September 30, 2023.

As of September 30, 2023, there were no outstanding other liabilities held for sale.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

At June 30, 2023, the Company’s loan portfolio was $ 16.83 billion, compared to $ 16.14 billion at December 31, 2022.

At September 30, 2023, the Company’s loan portfolio was $ 16.77 billion, compared to $ 16.14 billion at December 31, 2022.

The various categories of loans are summarized as follows:

June 30, December 31,

September 30, December 31,

(In thousands) 2023 2022

12 unchanged sentences

The above table presents total loans at amortized cost.

The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as deferred origination costs and fees totaling $ 13.6 million and $ 26.4 million at June 30, 2023 and December 31, 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 66.2 million and $ 65.4 million at June 30, 2023 and December 31, 2022, respectively, and is included in interest receivable on the consolidated balance sheets.

The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as deferred origination costs and fees totaling $ 7.7 million and $ 26.4 million at September 30, 2023 and December 31, 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 74.3 million and $ 65.4 million at September 30, 2023 and December 31, 2022, respectively, and is included in interest receivable on the consolidated balance sheets.

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral;

7 unchanged sentences

Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to economic downturns that result in increased unemployment.

Other consumer loans include direct and indirect installment loans and account overdrafts.

Other consumer loans include direct installment loans and account overdrafts.

Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

20 unchanged sentences

PPP loans have a zero percent risk-weight for regulatory capital ratios.

As of June 30, 2023 and December 31, 2022, the total outstanding balance of PPP loans was $ 6.8 million and $ 8.9 million, respectively.

As of September 30, 2023 and December 31, 2022, the total outstanding balance of PPP loans was $ 5.6 million and $ 8.9 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.

7 unchanged sentences

The amortized cost basis of nonaccrual loans segregated by category of loans are as follows:

June 30, December 31,

September 30, December 31,

(In thousands) 2023 2022

10 unchanged sentences

Total $ 81,135 $ 58,434

As of June 30, 2023 and December 31, 2022, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 13.0 million and $ 16.9 million, respectively.

As of September 30, 2023 and December 31, 2022, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $ 9.2 million and $ 16.9 million, respectively.

These loans are individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method.

5 unchanged sentences

Loans 90 Days

June 30, 2023

September 30, 2023

Credit cards $ 1,973 $ 672 $ 2,645 $ 188,905 $ 191,550 $ 588

27 unchanged sentences

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

The following table presents the period-end balance of loan modifications, segregated by type of modification, to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.

Interest Rate Percent of

Modification and Total Class

The following table presents a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty, segregated by class of loans and type of loan modification, for the three and nine month periods ended September 30, 2023.

(Dollars in thousands) Term Extension of Loans

Three months ended September 30, 2023

Other commercial $ 30,617 0.40 %

Total real estate 30,617

Commercial 85 — %

Total commercial 85

The financial effects of the loan modification made to a borrower experiencing financial difficulty was not significant during the three and six month periods ended June 30, 2023.

The loan modification reported in the table above did not significantly impact the Company’s determination of the allowance for credit losses on loans during the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2023, the Company modified one loan, whereby the borrower was experiencing financial difficulty at the time of modification, that was current as of June 30, 2023 with a recorded investment of $ 655,000 .

Additionally, there were no modified loans for which a payment default occurred during the three and six month periods ended June 30, 2023 and were modified in the 12 months prior to default.

At June 30, 2023 and December 31, 2022, the Company had $ 1.3 million and $ 3.0 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At June 30, 2023 and December 31, 2022, the Company had $ 423,000 and $ 853,000 , respectively, of Other Real Estate Owned (“OREO”) secured by residential real estate properties.

Total $ 30,702

Nine months ended September 30, 2023

Other commercial $ 30,617 0.40 %

Total real estate 30,617

Commercial 736 0.03 %

Total commercial 736

Total $ 31,353

The financial effects of the modified loans made to borrowers experiencing financial difficulty in the commercial portfolio were not significant during the three and nine month periods ended September 30, 2023 and did not significantly impact the Company’s determination of the allowance for credit losses on loans during the periods.

During the three and nine months ended September 30, 2023, the Company modified one loan related to the other CRE portfolio, whereby the borrower was experiencing financial difficulty at the time of modification.

The modification allowed for two months of interest only payments with the remaining balance due at maturity.

Upon modification, a charge-off of $ 9.6 million was recorded in relation to this modified loan during the third quarter of 2023.

As a result of the other CRE loan modified during the three and nine months ended September 30, 2023 being collateral-dependent, the impact to the Company’s allowance for credit losses on loans was the difference between the fair value of the underlying collateral, adjusted for selling costs, and the remaining outstanding principal balance of the loan.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty.

Loans modified during the three and nine month periods ended September 30, 2023 were all current at September 30, 2023, with no loans in past due status.

Additionally, there were no modified loans for which a payment default occurred during the three and nine month periods ended September 30, 2023 and were modified within twelve months prior to default.

In relation to loans modified to borrowers experiencing financial difficulty, the Company defines a payment default as a payment received more than 90 days after its due date.

At September 30, 2023 and December 31, 2022, the Company had $ 1.4 million and $ 3.0 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At September 30, 2023 and December 31, 2022, the Company had $ 312,000 and $ 853,000 , respectively, of Other Real Estate Owned (“OREO”) secured by residential real estate properties.

Troubled Debt Restructurings (Prior to the adoption of ASU 2022-02)

15 unchanged sentences

Total 24 $ 1,849 13 $ 1,622 37 $ 3,471

The following table presents loans that were restructured as TDRs during the three and six month periods ended June 30, 2022.

(Dollars in thousands) Number of loans Balance Prior to TDR Balance at June 30, Change in Maturity Date Change in Rate Financial Impact on Date of Restructure

Three and Six Months Ended June 30, 2022

The following table presents loans that were restructured as TDRs during the three and nine month periods ended September 30, 2022.

(Dollars in thousands) Number of loans Balance Prior to TDR Balance at September 30, Change in Maturity Date Change in Rate Financial Impact on Date of Restructure

Three Months Ended September 30, 2022

Other commercial 3 $ 747 $ 727 $ — $ 727 $ —

Total real estate 3 $ 747 $ 727 $ — $ 727 $ —

During the three and six months ended June 30, 2022, the Company modified one loan with a recorded investment of $ 13,000 prior to modification, which was deemed a TDR.

The restructured loan was modified by reducing the interest rate on the loan.

No specific reserve was recorded with respect to this TDR.

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

Additionally, there were no loans considered TDRs for which a payment default occurred during the six months ended June 30, 2022.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three and six month period ended June 30, 2022.

Nine Months Ended September 30, 2022

Other commercial 4 $ 760 $ 740 $ — $ 740 $ —

Total real estate 4 $ 760 $ 740 $ — $ 740 $ —

During the three months ended September 30, 2022, the Company modified three loans with a recorded investment of $ 747,000 prior to modification, which were deemed TDRs.

The restructured loans were modified by reducing the interest rate on the loan.

No specific reserve was recorded with respect to these TDRs.

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 nine months ended September 30, 2022, the Company modified four loans with a recorded investment of $ 760,000 prior to modification, which were deemed TDRs.

The restructured loans were modified by reducing the interest rate on the loan.

No specific reserve was recorded with respect to these TDRs.

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.

Additionally, there were no loans considered TDRs for which a payment default occurred during the nine months ended September 30, 2022.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three and nine month period ended September 30, 2022.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions of the Company’s local markets.

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

The following table presents a summary of loans by credit quality indicator, as of June 30, 2023, segregated by class of loans.

The following table presents a summary of loans by credit quality indicator, as of September 30, 2023, segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year

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Beyond the reasonable and supportable periods, the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenarios.

To determine the best estimate of credit losses as of June 30, 2023, the Company utilized a probability-weighted, multiple-scenario approach consisting of Baseline, Upside (S1), and Downside (S3) scenarios published by Moody’s Analytics in June 2023 that was updated to reflect the U.S.

To determine the best estimate of credit losses as of September 30, 2023, the Company utilized a probability-weighted, multiple-scenario approach consisting of Baseline, Upside (S1), and Downside (S3) scenarios published by Moody’s Analytics in September 2023 that was updated to reflect the U.S.

economic outlook.

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

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 $ 99.7 million and $ 70.9 million as of June 30, 2023 and December 31, 2022, respectively, as further detailed in the table below.

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 $ 129.5 million and $ 70.9 million as of September 30, 2023 and December 31, 2022, respectively, as further detailed in the table below.

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

(In thousands) Real Estate Collateral Other Collateral Total

June 30, 2023

September 30, 2023

Construction and development $ 3,502 $ — $ 3,502

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Total $ 67,606 $ 3,320 $ 70,926

The following table details activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2023.

The following table details activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2023.

Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

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Allowance for credit losses:

Three Months Ended June 30, 2023

Beginning balance, April 1, 2023 $ 30,256 $ 163,906 $ 6,446 $ 5,949 $ 206,557

Three Months Ended September 30, 2023

Beginning balance, July 1, 2023 $ 30,985 $ 165,813 $ 6,330 $ 6,838 $ 209,966

Provision for credit loss expense 4,095 16,528 704 ( 1,105 ) 20,222

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Net (charge-offs) recoveries ( 974 ) ( 9,294 ) ( 1,084 ) ( 289 ) ( 11,641 )

Ending balance, June 30, 2023 $ 30,985 $ 165,813 $ 6,330 $ 6,838 $ 209,966

Six Months Ended June 30, 2023

Ending balance, September 30, 2023 $ 34,106 $ 173,047 $ 5,950 $ 5,444 $ 218,547

Nine Months Ended September 30, 2023

Beginning balance, January 1, 2023 $ 34,406 $ 150,795 $ 5,140 $ 6,614 $ 196,955

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Net charge-offs ( 1,074 ) ( 9,761 ) ( 3,037 ) ( 735 ) ( 14,607 )

Ending balance, June 30, 2023 $ 30,985 $ 165,813 $ 6,330 $ 6,838 $ 209,966

Activity in the allowance for credit losses for the three and six months ended June 30, 2022 was as follows:

Ending balance, September 30, 2023 $ 34,106 $ 173,047 $ 5,950 $ 5,444 $ 218,547

Activity in the allowance for credit losses for the three and nine months ended September 30, 2022 was as follows:

(In thousands) Commercial Real

2 unchanged sentences

Allowance for credit losses:

Three Months Ended June 30, 2022

Beginning balance, April 1, 2022 $ 9,177 $ 161,389 $ 2,894 $ 5,464 $ 178,924

Three Months Ended September 30, 2022

Beginning balance, July 1, 2022 $ 32,817 $ 166,481 $ 6,609 $ 6,704 $ 212,611

Acquisition adjustment for PCD loans 1,057 — — — 1,057

3 unchanged sentences

Net (charge-offs) recoveries ( 1,153 ) 1,852 ( 653 ) ( 228 ) ( 182 )

Ending balance, June 30, 2022 $ 32,817 $ 166,481 $ 6,609 $ 6,704 $ 212,611

Six Months Ended June 30, 2022

Ending balance, September 30, 2022 $ 32,108 $ 151,090 $ 7,075 $ 7,316 $ 197,589

Nine Months Ended September 30, 2022

Beginning balance, January 1, 2022 $ 17,458 $ 179,270 $ 3,987 $ 4,617 $ 205,332

4 unchanged sentences

Net (charge-offs) recoveries ( 6,982 ) 2,069 ( 2,054 ) ( 471 ) ( 7,438 )

Ending balance, June 30, 2022 $ 32,817 $ 166,481 $ 6,609 $ 6,704 $ 212,611

As of June 30, 2023, the Company’s allowance for credit losses was considered sufficient based upon expected losses that were supported by scenario-weighted economic forecasts.

The provision expense for the three and six months ended June 30, 2023 was primarily due to the loan growth experienced during the periods, as well as the impact of updated economic assumptions.

Ending balance, September 30, 2022 $ 32,108 $ 151,090 $ 7,075 $ 7,316 $ 197,589

As of September 30, 2023, the Company’s allowance for credit losses was considered sufficient based upon expected losses that were supported by scenario-weighted economic forecasts.

The provision expense for the three and nine months ended September 30, 2023 was primarily due to the loan growth experienced during the periods, as well as the impact of updated economic assumptions.

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 $ 36.9 million and $ 41.9 million as of June 30, 2023 and December 31, 2022, respectively.

The reserve for unfunded commitments was $ 25.6 million and $ 41.9 million as of September 30, 2023 and December 31, 2022, 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 the three and six month periods ended June 30, 2023, $ 5.0 million was released from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the period.

For the three and six month periods ended June 30, 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $ 3.5 million associated with the Day 2 CECL provision related to the Spirit acquisition and was included in the provision for credit losses in the statement of income.

During the three and nine month periods ended September 30, 2023, $ 11.3 million and $ 16.3 million, respectively, was released from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the periods.

For the three month period ended September 30, 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.

For the nine month period ended September 30, 2022 an adjustment to the reserve for unfunded commitments resulted in an expense of $ 19.5 million, made up of the increase previously discussed combined with the Day 2 provision related to the Spirit acquisition.

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

Provision for Credit Losses

Provision for credit losses is determined by the Company as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.

The components of the provision for credit losses for the three and six month periods ended June 30, 2023 and 2022 were as follows:

The components of the provision for credit losses for the three and nine month periods ended September 30, 2023 and 2022 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

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

The following table presents information as of June 30, 2023 and December 31, 2022 related to the Company’s right-of-use lease assets, included in premises and equipment, and lease liabilities, included in accrued interest and other liabilities.

June 30, December 31,

The following table presents information as of September 30, 2023 and December 31, 2022 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.

September 30, December 31,

(Dollars in thousands) 2023 2022

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Weighted average discount rate 3.39 % 2.41 %

Operating lease cost for the three and six month periods ended June 30, 2023 was $ 3.7 million and $ 7.6 million, respectively, as compared to $ 3.7 million and $ 6.9 million for the same periods in 2022.

Operating lease cost for the three and nine month periods ended September 30, 2023 was $ 4.2 million and $ 11.7 million, respectively, as compared to $ 3.6 million and $ 10.5 million for the same periods in 2022.

PREMISES AND EQUIPMENT

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

Total premises and equipment, net at June 30, 2023 and December 31, 2022 were as follows:

June 30, December 31,

Total premises and equipment, net at September 30, 2023 and December 31, 2022 were as follows:

September 30, December 31,

(In thousands) 2023 2022

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

Goodwill totaled $ 1.32 billion at June 30, 2023 and December 31, 2022.

Goodwill impairment was neither indicated nor recorded during the six months ended June 30, 2023 or the year ended December 31, 2022.

Goodwill totaled $ 1.32 billion at September 30, 2023 and December 31, 2022.

Goodwill impairment was neither indicated nor recorded during the nine months ended September 30, 2023 or the year ended December 31, 2022.

During March of 2023, the Company’s share price began to decline as markets in the United States (“US”) responded to the sudden collapse of two US banks.

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During the second quarter of 2023, the Company performed the annual goodwill impairment analysis and concluded that it is more likely-than-not that the fair value of goodwill continues to exceed its carrying value and therefore, goodwill is not impaired.

During the third quarter of 2023, the Company once again performed an interim goodwill impairment assessment and concluded no impairment existed.

While the goodwill impairment analysis indicated no impairment at September 30, 2023, 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.

Core deposit premiums represent the value of the relationships that acquired banks had with their deposit customers and are amortized over periods ranging from 10 years to 15 years and are periodically evaluated, at least annually, as to the recoverability of their carrying value.

Other intangible assets represent the value of other acquired relationships, including relationships with trust and wealth management customers, and are being amortized over various periods ranging from 8 years to 15 years.

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at June 30, 2023 and December 31, 2022 were as follows:

June 30, December 31,

Changes in the carrying amount and accumulated amortization of the Company’s core deposit premiums and other intangible assets at September 30, 2023 and December 31, 2022 were as follows:

September 30, December 31,

(In thousands) 2023 2022

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(1) A core deposit premium of $ 36.5 million was recorded during 2022 as part of the Spirit acquisition.

See Note 2, Acquisitions, for additional information on acquisitions.

See Note 2, Acquisitions, for additional information.

(2) 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 June 30, 2023 and December 31, 2022 were as follows:

June 30, December 31,

See Note 2, Acquisitions, for additional information.

The carrying basis and accumulated amortization of the Company’s other intangible assets at September 30, 2023 and December 31, 2022 were as follows:

September 30, December 31,

(In thousands) 2023 2022

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Total other intangible assets, net $ 116,660 $ 128,951

The Company’s estimated remaining amortization expense on other intangible assets as of June 30, 2023 is as follows:

The Company’s estimated remaining amortization expense on other intangible assets as of September 30, 2023 is as follows:

(In thousands) Year Amortization

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TIME DEPOSITS

Time deposits included approximately $ 1.60 billion and $ 1.08 billion of certificates of deposit over $250,000 at June 30, 2023 and December 31, 2022, respectively.

Brokered time deposits were $ 3.24 billion and $ 2.75 billion at June 30, 2023 and December 31, 2022, respectively.

Time deposits included approximately $ 1.67 billion and $ 1.08 billion of certificates of deposit over $250,000 at September 30, 2023 and December 31, 2022, respectively.

Brokered time deposits were $ 3.26 billion and $ 2.75 billion at September 30, 2023 and December 31, 2022, respectively.

The provision for income taxes is comprised of the following components for the periods indicated below:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

3 unchanged sentences

The tax effects of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:

June 30, December 31,

September 30, December 31,

(In thousands) 2023 2022

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

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Securities pledged as collateral under repurchase agreements are maintained with the Company’s safekeeping agents.

The gross amount of recognized liabilities for repurchase agreements was $ 102.2 million and $ 152.4 million at June 30, 2023 and December 31, 2022, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of June 30, 2023 and December 31, 2022 is presented in the following tables.

The gross amount of recognized liabilities for repurchase agreements was $ 74.1 million and $ 152.4 million at September 30, 2023 and December 31, 2022, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2023 and December 31, 2022 is presented in the following tables.

Remaining Contractual Maturity of the Agreements

2 unchanged sentences

90 Days Total

June 30, 2023

September 30, 2023

Repurchase agreements:

4 unchanged sentences

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES

Debt at June 30, 2023 and December 31, 2022 consisted of the following components:

June 30, December 31,

Debt at September 30, 2023 and December 31, 2022 consisted of the following components:

September 30, December 31,

(In thousands) 2023 2022

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_________________________

(1) The Company will transition from the three month LIBOR rate to the three month Secured Overnight Financing Rate (“SOFR”), plus a comparable spread adjustment of 26.161 basis points, beginning with interest accrued on the notes from and after October 1, 2023.

(1) The Company transitioned from the three month LIBOR rate to the three month Secured Overnight Financing Rate (“SOFR”), plus a comparable spread adjustment of 26.161 basis points, beginning with interest accrued on the notes from and after October 1, 2023.

In March 2018, the Company issued $ 330.0 million in aggregate principal amount, of 5.00 % Fixed-to-Floating Rate Subordinated Notes (“Notes”) at a public offering price equal to 100 % of the aggregate principal amount of the Notes.

The Company incurred $ 3.6 million in debt issuance costs related to the offering during March 2018.

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

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the “then-current three month LIBOR rate” plus 215 basis points, payable quarterly in arrears (provided that the Company will transition from the “then-current three month LIBOR rate” to the “three month SOFR, plus a comparable spread adjustment of 26.161 basis points,” beginning with interest accrued on the Notes from and after October 1, 2023).

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

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate resets quarterly to an annual interest rate equal to the “then-current three month LIBOR rate” plus 215 basis points, payable quarterly in arrears, and the Company transitioned from the “then-current three month LIBOR rate” to the “three month SOFR, plus a comparable spread adjustment of 26.161 basis points,” beginning with interest accrued on the Notes from and after October 1, 2023.

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

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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 SOFR rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears.

The Company had total FHLB advances of $ 1.35 billion and $ 838.5 million at June 30, 2023 and December 31, 2022, respectively, which are primarily fixed rate, fixed term advances, which are due less than one year from origination and therefore are classified as short-term advances by the Company.

At June 30, 2023, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 6.95 billion and the Company had approximately $ 5.35 billion of additional advances available from the FHLB.

The Company had total FHLB advances of $ 1.33 billion and $ 838.5 million at September 30, 2023 and December 31, 2022, respectively, which are primarily fixed rate, fixed term advances, which are due less than one year from origination and therefore are classified as short-term advances by the Company.

At September 30, 2023, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 7.05 billion and the Company had approximately $ 5.37 billion of additional advances available from the FHLB.

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

Aggregate annual maturities of long-term debt at June 30, 2023, are as follows:

Aggregate annual maturities of long-term debt at September 30, 2023, are as follows:

Year (In thousands)

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The October Amended Articles classified and designated Series D Preferred Stock, Par Value $ 0.01 Per Share (“Series D Preferred Stock”), out of the Company’s authorized preferred stock.

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

On April 27, 2022, the Company’s shareholders approved an amendment to the Company’s Articles of Incorporation to remove the classification and designation for the Series D Preferred Stock.

As of June 30, 2023, there were no shares of preferred stock issued or outstanding.

As of September 30, 2023, there were no shares of preferred stock issued or outstanding.

Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the Company’s stock repurchase program originally established in October 2019 (“2019 Program”) that increased the amount of the Company’s Class A common stock that may be repurchased under the 2019 Program from a maximum of $ 180.0 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.

As a result, the Company’s Board of Directors authorized a new stock repurchase program in January 2022 (“2022 Program”) under which the Company may repurchase up to $ 175.0 million of its Class A common stock currently issued and outstanding.

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

During the three and six month periods ended June 30, 2023, the Company repurchased 1,128,087 shares at an average price of $ 17.75 per share under the 2022 Program.

During the three and nine month periods ended September 30, 2023, the Company repurchased 1,128,962 shares at an average price of $ 17.69 per share and 2,257,049 shares at an average price of $ 17.72 per share, respectively, under the 2022 Program.

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

During the six month period ended June 30, 2022, the Company repurchased 513,725 shares at an average price of $ 31.25 per share under the 2019 Program and 2,035,324 shares at an average price of $ 24.59 per share under the 2022 Program.

The 2022 Program repurchases during the six months ended June 30, 2022 were all completed during the second quarter of 2022.

During the three month period ended September 30, 2022, the Company repurchased 1,883,713 shares at an average price of $ 23.91 per share under the 2022 Program.

During the nine month period ended September 30, 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.

The 2022 Program repurchases during the nine months ended September 30, 2022 were all completed during the second and third quarters of 2022.

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.

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

At June 30, 2023, Simmons Bank had approximately $ 285.9 million available for payment of dividends to the Company, without prior regulatory approval.

At September 30, 2023, Simmons Bank had approximately $ 238.0 million available for payment of dividends to the Company, without prior regulatory approval.

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

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Failure to meet this capital conservation buffer would result in additional limits on dividends, other distributions and discretionary bonuses.

As of June 30, 2023, the Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules.

The Company’s CET1 ratio was 11.92 % at June 30, 2023.

As of September 30, 2023, the Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules.

The Company’s CET1 ratio was 12.02 % at September 30, 2023.

STOCK-BASED COMPENSATION

2 unchanged sentences

Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awards of restricted stock, restricted stock units, performance stock units or stock awards granted to directors, officers and other key employees.

The table below summarizes the transactions under the Company’s active stock-based compensation plans for the six months ended June 30, 2023:

The table below summarizes the transactions under the Company’s active stock-based compensation plans for the nine months ended September 30, 2023:

Stock Options

10 unchanged sentences

Forfeited/expired — — — — ( 177 ) 24.87

Balance, June 30, 2023 469 $ 22.58 — $ — 1,408 $ 24.41

Exercisable, June 30, 2023 469 $ 22.58

The following table summarizes information about stock options under the plans outstanding at June 30, 2023:

Balance, September 30, 2023 469 $ 22.58 — $ — 1,328 $ 24.51

Exercisable, September 30, 2023 469 $ 22.58

The following table summarizes information about stock options under the plans outstanding at September 30, 2023:

Options Outstanding Options Exercisable

9 unchanged sentences

$ 20.29 — $ 24.07 469 1.61 $ 22.58 469 $ 22.58

The table below summarizes the Company’s performance stock unit activity for the six months ended June 30, 2023:

The table below summarizes the Company’s performance stock unit activity for the nine months ended September 30, 2023:

(In thousands) Performance Stock Units

2 unchanged sentences

Forfeited ( 71 )

Non-vested, June 30, 2023 529

Stock-based compensation expense was $ 8.0 million and $ 8.2 million during the six month periods ended June 30, 2023 and 2022, respectively.

Non-vested, September 30, 2023 511

Stock-based compensation expense was $ 9.6 million and $ 11.5 million during the nine month periods ended September 30, 2023 and 2022, respectively.

Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards.

There was no unrecognized stock-based compensation expense related to stock options at June 30, 2023.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 21.3 million at June 30, 2023.

There was no unrecognized stock-based compensation expense related to stock options at September 30, 2023.

Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $ 18.5 million at September 30, 2023.

At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 1.4 years.

There was no intrinsic value of stock options outstanding and stock options exercisable at June 30, 2023.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 17.25 as of June 30, 2023, and the exercise price multiplied by the number of options outstanding.

Total intrinsic value of stock options exercised during the six months ended June 30, 2023 was $ 6,000 , while there was no intrinsic value of stock options exercised during the six months ended June 30, 2022.

There was no intrinsic value of stock options outstanding and stock options exercisable at September 30, 2023.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 16.96 as of September 30, 2023, and the exercise price multiplied by the number of options outstanding.

Total intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $ 6,000 , while there was no intrinsic value of stock options exercised during the nine months ended September 30, 2022.

The fair value of the Company’s employee stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model.

This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate.

There were no stock options granted during the six months ended June 30, 2023 and 2022.

There were no stock options granted during the nine months ended September 30, 2023 and 2022.

EARNINGS PER SHARE (“EPS”)

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2023 2022 2023 2022

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Diluted earnings per share $ 0.37 $ 0.63 $ 1.19 $ 1.40

There were 469,280 stock options excluded from the three and six months ended June 30, 2023 earnings per share calculation due to the related stock option exercise price exceeding the average market price of the Company’s stock during the periods.

There were 6,610 stock options excluded from the earnings per share calculation for the three months ended June 30, 2022 due to the related stock option exercise price exceeding the average market price of the Company’s stock during the period.

There were no stock options excluded from the earnings per share calculation for the six months ended June 30, 2022 due to the average market price of the Company’s stock exceeding the related stock option exercise price during the period.

There were 469,280 stock options excluded from the three and nine months ended September 30, 2023 earnings per share calculations due to the related stock option exercise price exceeding the average market price of the Company’s stock during the periods.

There were 99,837 stock options excluded from the earnings per share calculation for the three months ended September 30, 2022 due to the related stock option exercise price exceeding the average market price of the Company’s stock during the period.

There were no stock options excluded from the earnings per share calculation for the nine months ended September 30, 2022 due to the average market price of the Company’s stock exceeding the related stock option exercise price during the period.

ADDITIONAL CASH FLOW INFORMATION

The following is a summary of the Company’s additional cash flow information:

Six Months Ended

Nine Months Ended

September 30,

(In thousands) 2023 2022

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Transfers of assets held for sale to other assets — 100

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

OTHER INCOME AND OTHER OPERATING EXPENSES

Other income for the three and six months ended June 30, 2023 was $ 9.8 million and $ 21.1 million, respectively.

Other income for the three and nine months ended September 30, 2023 was $ 7.4 million and $ 28.5 million, respectively.

Other income for the same periods in 2022 was $ 6.7 million and $ 20.8 million, respectively.

Included in other income during the six month period ended June 30, 2023 was a $ 4.0 million legal reserve recapture associated with previously disclosed legal matters.

Included in other income during the nine month period ended September 30, 2023 was a $ 4.0 million legal reserve recapture associated with previously disclosed legal matters.

Additionally, other income increased on a year-over-year basis, primarily as a result of fair value adjustments associated with certain equity investments and death benefits from bank owned life insurance.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

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

At June 30, 2023, the Company had outstanding commitments to extend credit aggregating approximately $ 717.1 million and $ 4.71 billion for credit card commitments and other loan commitments, respectively.

At September 30, 2023, the Company had outstanding commitments to extend credit aggregating approximately $ 744.3 million and $ 4.32 billion for credit card commitments and other loan commitments, respectively.

At December 31, 2022, the Company had outstanding commitments to extend credit aggregating approximately $ 696.7 million and $ 5.64 billion for credit card commitments and other loan commitments, respectively.

As of June 30, 2023, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 30.4 million.

As of September 30, 2023, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 24.6 million.

At December 31, 2022, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 21.1 million.

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The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The Company had total outstanding letters of credit amounting to $ 52.0 million and $ 44.4 million at June 30, 2023, and December 31, 2022, respectively, with terms ranging from 9 months to 15 years.

At June 30, 2023 and December 31, 2022, the Company had no deferred revenue under standby letter of credit agreements.

The Company had total outstanding letters of credit amounting to $ 55.5 million and $ 44.4 million at September 30, 2023, and December 31, 2022, respectively, with terms ranging from 9 months to 15 years.

At September 30, 2023 and December 31, 2022, the Company had no deferred revenue under standby letter of credit agreements.

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

The amount of the letters of credit was $ 245.2 million and $ 265.7 million at June 30, 2023 and December 31, 2022, respectively, and they expire in less than one year from issuance.

The amount of the letters of credit was $ 339.5 million and $ 265.7 million at September 30, 2023 and December 31, 2022, respectively, and they expire in less than one year from issuance.

FAIR VALUE MEASUREMENTS

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The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

Topic 820 describes three levels of inputs that may be used to measure fair value:

ASC Topic 820 describes three levels of inputs that may be used to measure fair value:

• Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.

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Where assumptions are made using significant unobservable inputs, such loans held for sale are classified as Level 3.

At June 30, 2023 and December 31, 2022, the aggregate fair value of mortgage loans held for sale exceeded their cost.

At September 30, 2023 and December 31, 2022, the aggregate fair value of mortgage loans held for sale exceeded their cost.

Derivative instruments – The Company’s derivative instruments are reported at fair value utilizing Level 2 inputs.

The Company obtains fair value measurements from dealer quotes.

The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022.

Fair Value Measurements Using

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Unobservable Inputs

June 30, 2023

September 30, 2023

Available-for-sale securities

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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 assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022.

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 September 30, 2023 and December 31, 2022.

Fair Value Measurements Using

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Unobservable Inputs

June 30, 2023

September 30, 2023

Individually assessed loans (1) (2) (collateral-dependent)

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(1) These amounts represent the resulting carrying amounts on the consolidated balance sheets for collateral-dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period.

(2) Identified reserves of $ 12.8 million and $ 5.2 million were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended June 30, 2023 and December 31, 2022, respectively.

(2) Identified reserves of $ 16.4 million and $ 5.2 million were related to collateral-dependent loans for which fair value re-measurements took place during the periods ended September 30, 2023 and December 31, 2022, respectively.

ASC Topic 825, Financial Instruments , requires disclosure in annual and interim financial statements of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis.

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(In thousands) Amount Level 1 Level 2 Level 3 Total

June 30, 2023

September 30, 2023

Financial assets:

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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 occurs during 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 two year forward start date for these swaps occurred during late third quarter of 2023 and involves 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.

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

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

Line Item on the Balance Sheet (In thousands) June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Line Item on the Balance Sheet (In thousands) September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

Investment securities - Available-for-sale $ 901,066 $ 944,115 $ 144,979 $ 106,321

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The following table summarizes the fair values of loan derivative contracts recorded in the accompanying consolidated balance sheets.

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In thousands) Notional Fair Value Notional Fair Value

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The interest rate swap mark to market only impacts the Company if the swap is in a liability position to the counterparty and the customer defaults on payments to the counterparty.

The notional amount of these contingent agreements is $ 20.1 million as of June 30, 2023.

The notional amount of these contingent agreements is $ 19.9 million as of September 30, 2023.

Energy Hedging

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

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

The Company, from time-to-time, has provided energy derivative services to qualifying, high quality oil and gas borrowers for hedging purposes.

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

The Company will only enter into back-to-back trades, thus maintaining a balanced book between the dealer and the borrower.

Energy hedging risk exposure to the Company’s customer increases as energy prices for crude oil and natural gas rise.

As prices decrease, exposure to the exchange increases.

The energy hedging risk exposure to the Company’s customer would increase as energy prices for crude oil and natural gas rise.

As prices decrease, exposure to the exchange would increase.

These risks are mitigated by customer credit underwriting policies and establishing a predetermined hedge line for each borrower and by monitoring the exchange margin.

During the second quarter of 2023, the Company’s remaining energy hedge swap contracts expired and there were no outstanding notional values related to these contracts as of June 30, 2023.

During the second quarter of 2023, the Company’s remaining energy hedge swap contracts expired and there were no outstanding notional values related to these contracts as of September 30, 2023.

Currently, the Company generally does not intend to offer hedging services to any remaining energy related customers.

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Results of Review of Interim Financial Statements

We have reviewed the consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of June 30, 2023, and the related consolidated statements of income, comprehensive income (loss) and stockholders’ equity for the three and six month periods ended June 30, 2023 and 2022, and cash flows for the six month periods ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information or statements”).

We have reviewed the consolidated balance sheet of Simmons First National Corporation and subsidiaries (“the Company”) as of September 30, 2023, and the related consolidated statements of income, comprehensive income (loss) and stockholders’ equity for the three-month and nine-month periods ended September 30, 2023 and 2022, and cash flows for the nine-month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information or statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

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Little Rock, Arkansas

August 4, 2023

November 6, 2023

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

What changed 10-Q

Item 1. Financial Statements