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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-27 · 221 added, 220 removed, 728 unchanged (38% of the section changed)

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The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2023 and 2022 and results of operations for each of the years then ended.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on February 25, 2022 (the “ 2021 Form 10-K ”) for a discussion and analysis of the more significant factors that affected periods prior to 2021, which are incorporated herein by reference.

Certain reclassifications have been made to make prior periods comparable.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on February 27, 2023 (the “ 2022 Form 10-K ”) for a discussion and analysis of the more significant factors that affected the 2021 period, which are incorporated herein by reference.

Certain immaterial reclassifications have been made to make prior periods comparable.

This discussion and analysis should be read in conjunction with our financial statements, notes thereto and other financial information appearing elsewhere in this report, as well as the cautionary note regarding forward-looking statements and the risks discussed in Item 1A of Part I of this Form 10-K.

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Allowance for Credit Losses

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

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

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

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

On January 1, 2020, the Company adopted the new Current Expected Credit Losses, or “CECL”, methodology.

See Note 20, New Accounting Standards, in the accompanying Notes to Consolidated Financial Statements for additional information.

Prior to the adoption of the CECL methodology in 2020, the allowance for credit losses was calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for credit losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that affected specific loans and categories of loans.

We established general allocations for each major loan category.

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

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

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

In the first quarter of 2023, we refined the estimation process by improving systems, models, processes, methodology, and assumptions used within the calculation.

After multiple parallel runs with the former process, it was determined that the changes did not and are not expected to result in material differences of results.

Acquisition Accounting, Loans

We account for our acquisitions under ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting.

We account for our acquisitions under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , which requires the use of the acquisition method of accounting.

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

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

To quantitatively test goodwill for impairment, a present value of discounted cash flows calculation is completed and relies on several assumptions that have a level of subjectivity and judgement.

These assumptions are dependent on market and economic conditions.

Key inputs to estimate terminal fair value of the Company include projected forecasts, noninterest expense savings and a pricing multiple based on a group of peer banks with similar characteristics.

These inputs are discounted by the cost of equity, which includes assumptions involving our beta;

equity risk, size and company premiums;

and the 20-year treasury rate.

Assumptions used in calculating the cost of equity are obtained from market and third-party data.

Results are compared to book value and no impairment was indicated as of December 31, 2023.

Judgement is inherent in assessing goodwill for impairment.

The various assumptions used in assessing goodwill for impairment involve uncertainties that are beyond our control and could cause actual results to differ materially from those projected.

Stock-Based Compensation Plans

We have adopted various stock-based compensation plans.

The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance stock units.

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

In accordance with ASC Topic 718, Compensation – Stock Compensation , the fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses various assumptions.

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

For additional information, see Note 15, Employee Benefit Plans, in the accompanying Notes to Consolidated Financial Statements included elsewhere in this report.

The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units, and stock awards.

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

We are subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where we conduct business.

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Our net income available to common shareholders for the year ended December 31, 2023 was $175.1 million, or $1.38 diluted earnings per share, compared to $256.4 million, or $2.06 diluted earnings per share, for the same period in 2022.

Included in 2022 results were $42.2 million of certain items, net of tax, that were primarily related to our acquisitions, Day 2 accounting provision in connection with acquisitions, gain on an insurance settlement related to a weather event, and branch right sizing initiatives.

Included in 2021 results were $23.9 million of certain items, net of tax, that were primarily related to our acquisitions, Day 2 accounting provision in connection with acquisitions and gains associated with the sale of branches.

Included in 2023 results were $32.7 million of certain items, net of tax, that were primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment and branch right sizing initiatives.

Included in 2022 results were $42.4 million of certain items, net of tax, that were primarily related to our acquisitions, Day 2 accounting provision in connection with acquisitions, gain on an insurance settlement related to a weather event, merger related costs and branch right sizing initiatives.

Adjusting for these certain items, adjusted earnings for the year ended December 31, 2023 were $207.7 million, or $1.64 adjusted diluted earnings per share, compared to $298.8 million, or $2.40 adjusted diluted earnings per share, in 2022.

See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures.

Results during 2022 were strong and demonstrate our ability to navigate the current economic environment and volatile market conditions.

Highlights for the year include an increase in revenue, well contained operating expense growth, improved asset quality, strong organic loan growth, expansion of the net interest margin, and excellent capital ratios.

On April 8, 2022 we completed our acquisition of Spirit, headquartered in Conroe, Texas, including its wholly-owned bank subsidiary, Spirit Bank.

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

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

Simmons Bank was named to Forbes magazine’s list of “World’s Best Banks” for the third consecutive year and ranked among the top 45 banks in Forbes’ list of “America’s Best Banks” for 2022 and our Chief Digital Officer was recently recognized by A merican Banker as a 2022 Digital Banker of the Year.

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

Asset quality metrics remain at historically low levels and reflect our conservative credit culture, as well as the impact of our strategic decision in 2019 designed to de-risk certain elements of loan portfolios that were acquired in connection with our geographic diversification and expansion.

As a result of this strategic decision, over the past two years we have prudently and systematically exited certain non-relationship credits and non-core industries while also significantly reducing our exposure to commercial real estate to more acceptable levels.

Throughout 2023, significant turmoil within the financial services industry, which was fueled by the failure of certain regional banks that utilized specialized business models as well as continued inflationary pressures and recessionary fears, resulted in industry concerns around the level of uninsured, non-collateralized deposits, liquidity, capital and operations.

Despite these challenges, which have seemed to abate slightly in the latter half of the year, we remain resolute in serving our customers’ financial needs while diligently focusing on maintaining strong asset quality, capital and liquidity positions, and on strategies to improve our financial performance and maximize the value of our shareholders’ investment in the current rate environment.

We believe that our liquidity is solid and that our capital is strong:

• Deposits were relatively stable over the year, which highlights the granularity of our deposit base, as well as the long-term relationships we have with many of our customers.

Total deposits as of December 31, 2023 were $22.24 billion, compared to $22.55 billion as of December 31, 2022.

Uninsured deposits (excluding collateralized deposits and intercompany deposits) as of December 31, 2023 were approximately $4.75 billion, or 21% of total deposits.

• Capital levels were steady during the year, with all regulatory capital ratios remaining significantly above “well-capitalized” guidelines as of December 31, 2023 (see Table 18 in the Risk Based Capital section below).

As of December 31, 2023, our ratio of common equity to total assets was 12.53%, the ratio of tangible common equity to tangible assets was 7.69% and our Tier 1 leverage ratio was 9.39%.

• Key credit quality metrics as of December 31, 2023 also remained solid, with our nonperforming loan coverage ratio at 267% and our allowance for credit losses as a percent of total loans ratio was 1.34%.

• Significant liquidity position with a loan to deposit ratio of 76% as of December 31, 2023, compared to 72% as of December 31, 2022.

Additional liquidity sources available to us as of December 31, 2023 totaled $11.22 billion and our uninsured, non-collateralized deposit coverage ratio was 2.4x.

Simmons Bank was named to Forbes magazine’s 2023 list of “World’s Best Banks” for the fourth consecutive year and recognized by Forbes’ as one of “America’s Best Midsize Employers” for 2023.

We continue to work to expand our suite of digital solutions to provide an enhanced customer experience to “bank when you want, where you want.”

During 2023, we completed our Better Bank Initiative, which focused on programs designed to enhance operational processes and increase capacity to capitalize on organic growth opportunities, and achieved success across multiple fronts.

We completed our early retirement program and extensive progress was completed on other identified opportunities related to process improvements and streamlining or upgrading systems.

As a result, we were able to achieve $18 million of annualized cost savings, compared to the original $15 million of annual cost savings we previously estimated.

Asset quality metrics remain strong and reflect our conservative credit culture, as well as our focus on maintaining disciplined pricing and conservative underwriting standards given the current economic environment.

Total nonperforming loans as of December 31, 2023 were $84.5 million, as compared to $58.9 million at December 31, 2022.

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.23%, compared to 0.33% at December 31, 2022 and 2021, respectively.

Non-performing assets as a percent of total assets were 0.33%, compared to 0.23% at December 31, 2023 and 2022, respectively.

Stockholders’ equity as of December 31, 2023 was $3.43 billion, book value per share was $27.37 and tangible book value per common share was $15.92.

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See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures.

The Company’s Tier I leverage ratio of 9.3%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” minimum requirements.

See Table 18 – Risk-Based Capital for regulatory capital ratios.

In January 2022, our Board of Directors authorized the 2022 Program under which we may repurchase up to $175.0 million of our Class A common stock currently issued and outstanding.

The 2022 Program replaced the 2019 Program, which was substantially exhausted during the first quarter of 2022.

In total, under the 2019 Program and the 2022 Program, we repurchased approximately 4.4 million shares of our common stock during 2022.

Total loans were $16.1 billion at December 31, 2022, an increase of $4.1 billion, or 34.4%, from the same time in 2021.

The increase in total loans during the period primarily reflects the acquisition of Spirit during the second quarter of 2022, which provided $2.29 billion in total loans after purchase accounting adjustments, coupled with net loan growth driven by increased activity throughout our geographic footprint.

While activity in our commercial pipeline slowed to $1.1 billion as of December 31, 2022 due to, in large part, the impact of the rapidly rising interest rates and our emphasis on maintaining prudent underwriting standards and pricing discipline, our unfunded commitments increased to $5.6 billion at December 31, 2022, as compared to $3.4 billion at December 31, 2021.

Our strategy of restructuring our loan portfolio over the past two years not only diversified the risk profile but also established capacity which should provide the foundation for additional loan and revenue growth, and which is evident in our loan pipeline and unfunded commitments.

As of December 31, 2022, our liquidity is solid, and our capital is strong.

We repurchased approximately 2.3 million shares of our common stock during 2023.

Total loans were $16.85 billion at December 31, 2023, an increase of $703.5 million, or 4.4%, from the same time in 2022.

The increase in total loans during the period primarily reflects diverse loan growth driven by increased activity throughout our geographic footprint.

Our unfunded commitments decreased to $4.17 billion at December 31, 2023, as compared to $5.64 billion at December 31, 2022.

While unfunded commitments are considered a key indicator of future loan growth, the rapid increase in interest rates, coupled with softer economic conditions, have resulted in lower activity in our commercial loan pipeline, which was $948.2 million as of December 31, 2023, compared to $1.12 billion at December 31, 2022.

In our discussion and analysis of our financial condition and results of operation in this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we provide certain financial information determined by methods other than in accordance with US GAAP.

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During March 2022, the FOMC began a series of rate increases in an effort to curb rising inflation.

Overall in 2022, the federal funds rate range was increased on seven occasions and ended 2022 with a range set at 4.25% - 4.50%.

As of early 2023, the FOMC had made one more rate increase, although the 25 basis point increase represents a more gradual increase than seen throughout 2022.

From early 2022 through 2023, the federal funds rate range was increased on eleven occasions and ended 2023 with a range set at 5.25% - 5.50%.

To date in 2024, rates have been held steady by the FOMC.

Our loan portfolio is significantly affected by changes in the prime interest rate.

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Similarly to the reduction in the federal funds rate, the prime rate was cut to 3.25% in mid-March of 2020 in response to the COVID-19 pandemic and remained unchanged throughout 2021 and into early 2022.

Paralleling the federal funds rate, multiple increases by the Federal Reserve during 2022 increased the prime rate to 7.50% as of the end of 2022.

Markets continue to anticipate more gradual rate increases by the Federal Reserve during 2023.

Paralleling the federal funds rate, multiple increases by the Federal Reserve during 2022 and 2023 increased the prime rate to 8.50% as of the end of 2023.

Markets anticipate potential rate cuts by the Federal Reserve during 2024.

Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing.

In the last several years, on average, approximately 41% of our loan portfolio and approximately 89% of our time deposits have repriced in one year or less.

Our current interest rate sensitivity shows that approximately 40% of our loans and 87% of our time deposits will reprice in the next year.

For the year ended December 31, 2022, net interest income on a fully taxable equivalent basis was $742.0 million, an increase of $131.2 million, or 21.5%, over the same period in 2021.

The increase in net interest income was primarily the result of a $196.1 million increase in interest income, partially offset by a $64.9 million increase in interest expense.

Our current interest rate sensitivity shows that approximately 42% of our loans and 94% of our time deposits will reprice in the next year, largely contributing to our liability-sensitive position at December 31, 2023.

For the year ended December 31, 2023, net interest income on a fully taxable equivalent basis was $675.6 million, a decrease of $66.4 million, or 9.0%, over the same period in 2022.

The decrease in net interest income was primarily the result of a $349.2 million increase in interest income, more than offset by a $415.6 million increase in interest expense.

The increase in interest income primarily resulted from a $296.5 million increase in interest income on loans, coupled with an increase of $48.0 million in interest income on investment securities.

Regarding the increase in interest income on loans during 2022, the increase in loan volume resulted in an increase of $125.6 million in interest income, while a 12 basis point increase in yield resulted in a $14.7 million increase in interest income during the year ended December 31, 2022.

Regarding the increase in interest income on loans during 2023, the increase in loan volume resulted in an increase of $117.6 million in interest income, while a 113 basis point increase in yield due to rising market rates resulted in a $178.9 million increase in interest income during the year ended December 31, 2023.

The loan yield for 2023 was 5.96%, compared to 4.83% for 2022.

The increase in our loan volume during 2022 was primarily due to the Spirit acquisition in the second quarter of 2022, along with the acquisitions of Landmark Community Bank (“Landmark”) and Triumph Bancshares, Inc.

(“Triumph”) in the fourth quarter of 2021, as well as organic loan growth which was widespread across our geographic markets.

Forgiveness of PPP loans partially offset the additional loan volume provided by these acquisitions.

The increase in interest income on investment securities was due to our investment portfolio average balances, which increased by $1.31 billion, or 19.1%, during 2022 as we re-invested excess liquidity in our investment security portfolio.

Additionally, an aggregated increase of $25.5 million during 2022 in interest income on investment securities was due to yield increases over the period of 42 basis points and 16 basis points for our taxable and non-taxable investment security portfolios, respectively.

The increase in both loan and investment yield was due to the rising rate environment and was also positively impacted by a significant decrease in the level of variable rate loans and securities at or below their interest rate floors during the year.

The increase in our loan volume during 2023 was due to the Spirit acquisition in the second quarter of 2022, combined with solid organic loan growth over the comparative period.

The increase in interest income on investment securities reflects an increase of $66.0 million due to yield increases over the period of 132 basis points and 9 basis points for our taxable and non-taxable investment security portfolios, respectively, which were a result of rising market interest rates.

The increase in interest income on investment securities due to yield increases was mitigated by a $17.9 million decrease due to the decline in our investment portfolio average balances which decreased by $861.5 million or 10.5%, as our portfolio experienced pay downs and maturities over the period, which was reinvested into our loan portfolio.

Also contributing to the decrease in the average portfolio balance was a targeted sale of $241.1 million of lower-yielding AFS securities late in the fourth quarter of 2023, the proceeds of which we used to pay off higher-rate wholesale fundings.

Included in interest income is the additional yield accretion recognized as a result of updated estimates of the cash flows of our loans acquired.

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For the years ended December 31, 2023, 2022 and 2021, interest income included $8.8 million, $23.9 million and $22.1 million, respectively, for the yield accretion recognized on loans acquired.

The $64.9 million increase in interest expense is mostly due to the increase in our deposit account rates.

The $415.6 million increase in interest expense is mostly due to the increase in our deposit account rates over the period, combined with the additional deposit base from the Spirit acquisition and change in deposit mix as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment.

Interest expense increased $323.4 million due to the increase in rate of 212 basis points on interest-bearing deposit accounts and increased $50.5 million due to the increase in deposit volume over the period.

Additionally, interest expense increased $35.3 million due to the increase in rate of 302 basis points on other borrowings.

Impacts to our balance sheet that affected interest expense during 2022 as compared to 2021 include the Spirit, Landmark and Triumph acquisitions noted above, as well as a rising interest rate environment throughout 2022, as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment.

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

Our net interest margin on a fully tax equivalent basis was 3.17% for the year ended December 31, 2022, up 28 basis points from 2021.

The increase in the net interest margin was primarily due to the rising rate environment and driven by increases in our loan and investment rates.

Further, the overall increase in our earning assets average balances over the comparative period has improved interest income, coupled with the effective management of our interest bearing liabilities, as we continued our effort to improve the mix of deposits into lower cost deposits and manage rates effectively.

Over the course of 2023, we anticipate pressure on our margin due to several factors.

We saw strong organic loan growth during 2022, but our loan pipeline experienced decreased volume throughout the year.

We expect modest organic loan growth during 2023 in the higher interest rate environment.

Additionally, while we increased reliance on wholesale funding towards the end of 2022, we plan to reinvest cash flows from our investment portfolio and other sources back into the loan portfolio to offset reliance on wholesale funding going forward.

Further, we have $1.0 billion of fixed rate callable municipal securities held in the AFS portfolio under swap agreements.

These swap agreements consist of a two year forward start date 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 beginning in the third quarter of 2023.

Our net interest margin on a fully tax equivalent basis was 2.78% for the year ended December 31, 2023, down 39 basis points from 2022.

The decrease in the net interest margin was due to the rising deposit rate pressure and change in deposit mix previously discussed, mitigated by the overall increase in our earning assets average balances over the comparative periods which has improved interest income in the rising rate environment.

Over the course of 2024, we anticipate moderating pressure on our margin due to several factors.

We saw moderate organic loan growth during 2023, but our loan pipeline experienced decreased volume throughout the year.

We expect further modest organic loan growth during 2024, subject to macroeconomic uncertainties that may reduce or otherwise impact loan demand, with continued focus on maintaining prudent underwriting standards and pricing discipline given projects surrounding near term future economic growth.

We sold $241.1 million of low yield AFS securities late in the fourth quarter of 2023, and used sale proceeds to pay off higher rate wholesale fundings and we will continue to evaluate opportunities to optimize our balance sheet based on changing market conditions.

Further, we have $1.0 billion of fixed rate callable municipal securities held in the AFS portfolio under swap agreements, which 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 that began in the third quarter of 2023.

Additionally, while our most likely forecast embeds several rate cuts during 2024, there is still much uncertainty as to decisions that will be made by the FOMC and the risks present in the economy.

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the years ended December 31, 2023, 2022 and 2021, respectively, as well as changes in fully taxable equivalent net interest margin for the years 2023 versus 2022 and 2022 versus 2021.

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2022 2022 vs.

Increase (decrease) due to change in earning assets $ 147,423 $ (40,169)

Increase (decrease) due to change in earning asset yields 48,691 (40,258)

Increase due to change in earning assets $ 93,320 $ 147,423

Increase due to change in earning asset yields 255,878 48,691

Decrease due to change in interest bearing liabilities (48,716) (3,274)

Increase (decrease) due to change in interest rates paid on interest bearing liabilities (61,616) 42,646

Increase (decrease) in net interest income $ 131,224 $ (39,972)

Decrease due to change in interest rates paid on interest bearing liabilities (366,900) (61,616)

(Decrease) increase in net interest income $ (66,418) $ 131,224

Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for each of the years in the three-year period ended December 31, 2023.

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

Management updates credit loss forecasts using multiple Moody’s economic scenarios, the most recent of which were published in December 2022.

The baseline economic forecast was weighted 62%, while the downside scenario of S-2 was weighted 30% and the upside scenario of S-1 was weighted 8%.

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

The baseline economic forecast as of December 2021 was weighted 65%, while the downside scenario of S-2 was weighted 17% and the upside scenario of S-1 was weighted 18%.

The weightings reflect management’s sentiment around the published forecasted scenarios by Moody’s at that specific time.

During 2022, our provision for credit loss expense was $14.1 million, as compared to a recapture of $32.7 million during 2021 and an expense of $75.0 million during 2020.

During 2023, our provision for credit loss expense was $42.0 million, as compared to an expense of $14.1 million during 2022 and a recapture of $32.7 million during 2021.

The provision for credit loss expense during 2023 was impacted by several factors throughout the year, including a $47.4 million expense related to loans and reflected loan growth, as well as the impact of updated economic assumptions, which was partially offset by a $16.3 million release from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the year.

Additionally, provision expense related to AFS and HTM securities recorded during the twelve months ended December 31, 2023 was $9.1 million and $1.8 million, respectively, primarily due to decreases in the value of select corporate bonds in the investment securities portfolio.

The provision for credit loss expense during 2022 was impacted by several factors throughout the year, including a $33.8 million Day 2 provision expense required for loans and unfunded commitments related to the Spirit acquisition, and an expense of $16.0 million related to the overall increase in unfunded commitments during the year, primarily made up of commercial construction loans, which receive a higher reserve allocation than other loans.

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This recapture was partially offset by $22.7 million in provision for credit loss expense for estimated lifetime credit losses for non-purchase credit deteriorated loans acquired through the acquisitions of Landmark and Triumph during the fourth quarter.

The increase during 2020 was primarily driven by the adoption of CECL and the related change in methodology which is based on qualitative adjustments, intended to account for potential problem credits that have not materialized into any identifiable metrics or delinquencies.

During 2020, certain industries were more adversely impacted by the current and expected economic scenarios, such as the restaurant, retail, and hotel industries.

Also, 2020 included an additional provision related to problem energy credits, ultimately charged-off during the second quarter of 2020 for a total of $32.6 million, that experienced further deterioration beginning in first quarter of 2020 and were negatively impacted by the sharp decline in commodity pricing.

The remainder of the increase was related to the economic impact of the COVID-19 pandemic that is incorporated in our allowance for credit losses.

Noninterest Income

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Noninterest income for 2023 decreased $14.5 million, or 8.5%, from 2022.

Included in 2023 results was $20.6 million of a certain item related to the loss on the sale of securities during the period.

Included in 2022 results were $4.0 million of certain items, primarily made up of a $4.1 million gain on an insurance settlement related to a weather event that caused severe damage to one of our branch locations.

Included in 2021 results were $5.7 million of certain items, primarily related to a $5.3 million gain on sale related to the Illinois Branch Sale in 2021.

Adjusting for these certain items, adjusted noninterest income for the year ended December 31, 2022 decreased $20.4 million, or 10.9%, from the prior year.

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

The majority of the decrease during 2022 was related to the decline in the gains on sale of securities and mortgage lending income compared to 2021.

During 2021, we sold approximately $342.6 million of investment securities resulting in a net gain of $15.5 million, while we realized a net loss of $278,000 related to the call of securities during 2022.

Mortgage lending income decreased $11.3 million during 2022 due to the rising interest rate environment and softening market conditions throughout the year, which slowed the demand for mortgage loans compared to the demand associated with the lower interest rate environment in 2021.

We originated $751.0 million and $1.13 billion in mortgage loans during 2022 and 2021, respectively.

These decreases in noninterest income during 2022 were partially offset by an increase of $3.3 million in service charges on deposit accounts and an increase of $3.0 million in debit and credit fees as a result of additional transactions due to the incremental customer base from the Landmark, Triumph and Spirit acquisitions and additional transactions due to the changes in customer spending habits.

Also included in 2022 results is the $4.1 million gain on an insurance settlement previously discussed and an increase of $2.2 million in bank owned life insurance income due to our increased investment in bank owned life insurance.

Adjusting for these certain items, adjusted noninterest income for the year ended December 31, 2023 increased $10.1 million, or 6.1%, from the prior year.

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

The majority of the decrease in noninterest income during 2023 was related to the loss on sale of securities as compared to 2022.

During 2023, we sold approximately $247.9 million of investment securities resulting in a net loss of $20.6 million, while we realized a net loss of $278,000 related to the call of securities during 2022.

The sale of securities during 2023 was primarily related to a strategic decision to sell low yield securities and use the proceeds to pay off higher rate wholesale fundings, including both brokered deposits and FHLB advances.

Mortgage lending income decreased $2.8 million during 2023 due to the rising interest rate environment and softening market conditions throughout the year, which continued to slow the demand for mortgage loans.

We originated $428.0 million and $751.0 million in mortgage loans during 2023 and 2022, respectively.

These decreases in noninterest income during 2023 were partially offset by an increase of $4.0 million in service charges on deposit accounts primarily attributable to a full period including the customer base from the Spirit acquisition and additional transactions due to the changes in customer spending habits.

Also included in 2023 results is a $4.0 million legal reserve recapture associated with litigation.

Table 5 shows noninterest income for the years ended December 31, 2023, 2022 and 2021, respectively, as well as changes in 2023 from 2022 and in 2022 from 2021.

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Recurring fee income (total service charges, wealth management fees, debit and credit card fees) for 2023 was $121.3 million, an increase of $4.1 million, or 3.5%, when compared to the 2022 amounts.

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

The increase is primarily due to the increased consumer base provided by the Spirit acquisition.

We expect service charges to continue to moderate in early 2024 due to the elimination of returned item fees for consumer deposit accounts with insufficient funds implemented during the third quarter of 2023.

Overall, we expect flat to modest growth in noninterest income during 2024.

Noninterest Expense

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

Noninterest expense for 2022 was $566.7 million, an increase of $83.2 million, or 17.2%, from 2021.

Included in 2022 were $27.7 million of certain items, primarily made up of $22.5 million of merger-related costs due to the Landmark, Triumph and Spirit acquisitions and $3.5 million from branch-right sizing costs.

Included in 2021 were $15.4 million of certain items, made up of $15.9 million of merger-related costs due to the Landmark and Triumph acquisitions and a $537,000 benefit from branch-right sizing costs.

Adjusting for these certain items, adjusted noninterest expense for the year ended December 31, 2022 increased $70.8 million, or 15.1%, from the prior year.

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

Salaries and employee benefits expense and occupancy expense increased by $40.6 million and $5.5 million, respectively, as compared to 2021, primarily due to impacts from the Landmark, Triumph and Spirit acquisitions.

In addition, we have added associates in our lending, wealth and mortgage programs, as well as in other key functions.

Deposit insurance increased by $4.6 million as compared to 2021 due to assessment rate increases from FDIC insurance and the Arkansas State Bank Department.

Other expense increased by $10.8 million as compared to 2021, primarily due to the impacts from the Landmark, Triumph and Spirit acquisitions, in addition to $1.2 million of accelerated amortization of certain tax credits, the offset of which is recorded in provision for income taxes.

Marketing expense increased by $6.6 million as compared to 2021 due to increased advertising and public relations expenses, including a multi-university corporate sponsorship program designed to support female student athletes and serve as a program for developing women leaders in the corporate world.

Additionally, a nonrecurrent $1.6 million contribution was made during the year to the Simmons First Foundation Conservation Fund reflecting a portion of paper statement fees collected as part of a promotion to encourage customers to enroll in electronic statements.

Noninterest expense for 2023 was $563.1 million, as compared to noninterest expense for 2022 of $566.7 million, a decrease of $3.7 million, or 0.7%, compared to the prior period.

Adjusted noninterest expense, which excludes branch right sizing, merger related costs, FDIC special assessment (for 2023 only), donation to Simmons First Foundation (for 2022 only) and early retirement program costs (for 2023 only), for the year ended December 31, 2023 increased $396,000, or 0.1%, from the prior year.

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

Merger related costs for 2023 and 2022 were $1.4 million and $22.5 million, respectively, and were primarily related to the Spirit acquisition.

Salaries and employee benefits expense decreased slightly by $865,000 as compared to 2022, while adjusted salaries and employee benefits expense decreased by $7.1 million as compared to 2022.

The decrease in adjusted salaries and employee benefits expense reflects the successful execution of programs as part of our Better Bank Initiative.

Early retirement program costs during 2023 were $6.2 million.

Deposit insurance increased by $18.4 million as compared to 2022.

Excluding the FDIC special assessment of $10.5 million levied to support the Deposit Insurance Fund following the failure of certain banks in 2023, deposit insurance increased by $7.9 million primarily due to an increased base rate related to changes in the mix of deposits, coupled with the increase in deposits from the Spirit acquisition.

Amortization of intangibles recorded for the years ended December 31, 2023, and 2022 was $16.3 million and $15.9 million, respectively.

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Deposit insurance 19,465 11,608 6,973 7,857 67.7 4,635 66.5

FDIC special assessment 10,521 — — 10,521 * — —

Merger related costs 1,420 22,476 15,911 (21,056) (93.7) 6,565 41.3

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*Not meaningful

Due to our Better Bank Initiative and continuous efficiency improvements, we expect marginal growth in noninterest expense during 2024.

The provision for income taxes for 2023 was $25.5 million, compared to $50.1 million in 2022 and $61.3 million in 2021.

The effective income tax rates for the years ended 2023, 2022 and 2021 were 12.7%, 16.4% and 18.4%, respectively.

The decrease in the provision for income taxes during 2022 was the result of benefits related to tax credits that were recorded during the fourth quarter.

The decrease in the provision for income taxes during 2023 was primarily due to tax exempt income having a larger favorable impact on the rate and lower state taxes in 2023, both driven by the one time charges to income from the loss on sale of securities and the FDIC special assessment.

Loan Portfolio

Our loan portfolio averaged $16.65 billion during 2023 and $14.42 billion during 2022.

As of December 31, 2022, total loans were $16.14 billion, compared to $12.01 billion on December 31, 2021, an increase of $4.13 billion, or 34.4%.

The increase in the overall loan balance during 2022 is primarily due to the acquisition of Spirit which provided $2.29 billion in total loans after purchase accounting discounts, coupled with widespread loan growth throughout our geographic markets during the year.

The increase in total loans more than offset declines in PPP loans, mortgage warehouse lending and planned declines in our energy portfolio.

As of December 31, 2023, total loans were $16.85 billion, compared to $16.14 billion on December 31, 2022, an increase of $703.5 million, or 4.4%.

The increase in the overall loan balance during 2023 is primarily due to widespread loan growth throughout our geographic markets during the year.

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

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Consumer loans were $318.7 million at December 31, 2023, or 1.9% of total loans, compared to $349.8 million, or 2.2% of total loans at December 31, 2022.

The decrease in consumer loans was primarily due to loan payoffs and pay downs during the year.

The decline in the overall consumer loan balance was partially offset by the $9.9 million increase in our credit card portfolio at December 31, 2022 when compared to the same period in 2021.

Our credit card portfolio has remained a stable source of lending for several years.

Real estate loans consist of construction and development (“C&D”) loans, single family residential loans and other CRE loans.

Real estate loans were $12.58 billion at December 31, 2022, or 77.9% of total loans, compared to $9.17 billion, or 76.3% of total loans at December 31, 2021, an increase of $3.41 billion, or 37.2%.

Our C&D loans increased by $1.24 billion, or 93.5%, single family residential loans increased by $444.1 million, or 21.1%, and CRE loans increased by $1.73 billion, or 30.1%.

The increases were largely due to the Spirit acquisition noted above, coupled with strong organic loan growth, particularly in the latter half of 2022.

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

The decrease in consumer loans was primarily due to loan payoffs and pay downs within the other consumer portfolio during the year.

Our credit card portfolio has remained a stable source of lending.

Real estate loans consist of construction and development (“C&D”) loans, single family residential loans and other commercial real estate (“CRE”) loans.

Real estate loans were $13.34 billion at December 31, 2023, or 79.2% of total loans, compared to $12.58 billion, or 77.9% of total loans at December 31, 2022, an increase of $756.9 million, or 6.0%.

Our C&D loans increased by $577.6 million, or 22.5%, single family residential loans increased by $95.4 million, or 3.7%, and CRE loans increased by $83.9 million, or 1.1%.

The increases were due to diversified organic growth by type and geographic market during the period.

We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

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

Total commercial loans were $2.84 billion at December 31, 2022, or 17.6% of total loans, compared to $2.16 billion, or 18.0% of total loans at December 31, 2021, an increase of $677.2 million, or 31.3%, which was primarily due to the combined acquired and organic loan growth.

The balance in our PPP loan portfolio was $8.9 million as of December 31, 2022, as compared to $116.7 million at December 31, 2021, with the decline due to the expected reimbursements from the SBA related to PPP loan forgiveness of both PPP Round 1 and Round 2 loans.

Total commercial loans were $2.72 billion at December 31, 2023, or 16.2% of total loans, compared to $2.84 billion, or 17.6% of total loans at December 31, 2022, a decrease of $115.0 million, or 4.1%.

The decrease in non-real estate loans related to business of $142.1 million, or 5.4%, was partially offset by the increase in agricultural loans of $27.1 million, or 13.2%.

Other loans mainly consists of mortgage warehouse lending and municipal loans.

Mortgage volume experienced a market driven decline throughout 2022 when compared to 2021, but was more than offset by the Spirit acquisition combined with organic growth, leading to an increase of $44.0 million in other loans.

Loan growth was widespread throughout our geographic markets and was generally broad-based by loan type and more than offset continued market-driven weakness in mortgage warehouse lending.

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

Our loan pipeline consisting of all loan opportunities was $1.12 billion at December 31, 2022, compared to $2.31 billion at December 31, 2021.

Mortgage volume experienced an increase in demand during 2023 as compared to 2022, and was coupled with continued organic growth in our municipal loans during the period, leading to an increase of $92.8 million in other loans.

While loan growth was widespread throughout our geographic markets and was generally broad-based by loan type during the period, loan growth during the latter half of 2023 reflected moderating demand and increased payoff activity, as we focus on maintaining disciplined pricing and conservative underwriting standards given the current uncertain economic environment.

Our commercial loan pipeline consisting of all commercial loan opportunities was $948.2 million at December 31, 2023, compared to $1.12 billion at December 31, 2022.

The pipeline includes $416.0 million in loans approved and ready to close at the end of the year.

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

Total non-performing assets decreased $13.8 million from December 31, 2021 to December 31, 2022.

Total non-performing assets increased $27.8 million from December 31, 2022 to December 31, 2023.

Nonaccrual loans increased by $24.9 million during 2023, in addition to an increase in foreclosed assets held for sale of $1.2 million.

The increase in nonaccrual assets was primarily due to an increase in nonaccrual loans within our commercial loan portfolio.

Non-performing assets, including modifications to borrowers experiencing financial difficulty (“FDMs”, formerly known as troubled debt restructurings, or TDRs) and acquired foreclosed assets, as a percent of total assets were 0.45% at December 31, 2023 compared to 0.23% at December 31, 2022.

Total non-performing assets decreased by $13.8 million from December 31, 2021 to December 31, 2022.

Nonaccrual loans decreased by $9.8 million during 2022, in addition to a decrease in foreclosed assets held for sale of $3.1 million.

The decrease in nonaccrual loans was primarily due to an overall improvement in economic conditions from pandemic related stresses.

Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired foreclosed assets, as a percent of total assets were 0.23% at December 31, 2022 compared to 0.33% at December 31, 2021.

Total non-performing assets decreased by $67.6 million from December 31, 2020 to December 31, 2021.

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The remaining increase was related to various other CRE loans and commercial loan relationships.

Total non-performing assets increased by $33.1 million from December 31, 2018 to December 31, 2019.

Nonaccrual loans increased by $37.5 million during 2019, primarily commercial loans, partially offset by a decrease in foreclosed assets held for sale of $6.4 million.

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

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In an effort to preserve our net interest margin and earning assets, we are open to working with existing customers in order to maximize the collectibility of the debt.

When we restructure a loan to a borrower that is experiencing financial difficulty and grant a concession that we would not otherwise consider, a “troubled debt restructuring,” or “TDR,” results and we classify the loan as a TDR.

We grant various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full;

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

Our TDR balance decreased to $3.5 million at December 31, 2022 compared to $6.9 million at December 31, 2021, and compared to $7.5 million at December 31, 2020.

TDRs are individually evaluated for expected credit losses.

We assess the exposure for each modification, either by the fair value of the underlying collateral or the present value of expected cash flows, and determine if a specific allowance for credit losses is needed.

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

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

We have internal loan modification programs for borrowers experiencing financial difficulties.

Modifications to borrowers experiencing financial difficulties may include interest rate reductions, principal or interest forgiveness and/or term extensions.

We primarily use interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

The financial effects of the modified loans made to borrowers experiencing financial difficulty in the single family residential real estate and commercial portfolio were not significant during the year ended December 31, 2023 and did not significantly impact our determination of the allowance for credit losses on loans during the year.

During the year ended December 31, 2023, we 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 2023.

As a result of the other CRE loan modified during the year ended December 31, 2023 being collateral-dependent, the impact to our 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.

We continue to maintain good asset quality, compared to the industry, and strong asset quality remains a primary focus for us.

The allowance for credit losses as a percent of total loans was 1.34% as of December 31, 2023.

Non-performing loans equaled 0.50% of total loans.

Non-performing assets were 0.23% of total assets, an 8 basis point decrease from December 31, 2021.

Non-performing assets were 0.33% of total assets, a 10 basis point increase from December 31, 2022.

The allowance for credit losses was 267% of non-performing loans.

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Total non-performing assets $ 90,271 $ 62,472 $ 76,252 $ 143,866 $ 115,271

Performing TDRs $1,849 $4,289 $3,138 $5,887 $7,436

Performing FDMs (formerly TDRs) $33,577 $1,849 $4,289 $3,138 $5,887

Allowance for credit losses to non-performing loans 267 % 334 % 300 % 193 % 72 %

Non-performing loans to total loans 0.50 % 0.37 % 0.57 % 0.96 % 0.65 %

Non-performing assets (including performing TDRs) to total assets 0.23 % 0.33 % 0.66 % 0.57 % 0.54 %

Non-performing assets (including performing FDMs (formerly TDRs)) to total assets 0.45 % 0.23 % 0.33 % 0.66 % 0.57 %

Non-performing assets to total assets 0.33 % 0.23 % 0.31 % 0.64 % 0.54 %

_________________________

(1) Includes nonaccrual TDRs of approximately $1.6 million, $2.7 million, $4.4 million, $1.6 million and $6.3 million at December 31, 2022, 2021, 2020, 2019 and 2018, respectively.

(1) Includes nonaccrual FDMs (formerly known as TDRs) of approximately $282,000, $1.6 million, $2.7 million, $4.4 million and $1.6 million at December 31, 2023, 2022, 2021, 2020 and 2019, respectively.

There was no interest income on nonaccrual loans recorded for the years ended December 31, 2023, 2022 and 2021.

Allowance for Credit Losses

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

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

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

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

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

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

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

We use statistically-based models that leverage assumptions about current and future economic conditions throughout the contractual life of the loan.

Expected credit losses are estimated by either lifetime loss rates or expected loss cash flows based on three key parameters:

probability-of-default (“PD”), exposure-at-default (“EAD”), and loss-given-default (“LGD”).

Future economic conditions are incorporated to the extent that they are reasonable and supportable.

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.

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

Qualitative adjustments include, but are not limited to:

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

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

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

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

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

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

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

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

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

These evaluations are typically performed on loans with a deteriorated internal risk rating or that are classified as a TDR.

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

Loans that have unique risk characteristics are evaluated on an individual basis.

These evaluations are typically performed on loans with a deteriorated internal risk rating.

For a collateral-dependent loan, our evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate.

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

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

Additional information related to net charge-offs is shown in Table 10.

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Allowance for Credit Losses Allocation

As of December 31, 2022, the allowance for credit losses reflected a decrease of approximately $8.4 million from December 31, 2021, while loans increased $4.13 billion over the same period.

As of December 31, 2023, the allowance for credit losses reflected an increase of approximately $28.3 million from December 31, 2022, while loans increased $703.5 million over the same period.

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

The decrease in the allowance for credit losses during 2022 was predominantly due to improved credit quality metrics and improved macroeconomic factors, coupled with the planned exit of several large oil and gas relationships during the year, which historically required higher allowance levels than most other categories of the loan portfolio.

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

The decrease was partially offset due to the Spirit acquisition, which provided $2.29 billion in total loans after purchase accounting discounts.

The increase in the allowance for credit losses during 2023 was predominantly due to the loan growth experienced during the year, as well as refreshed economic forecasts.

Our allowance for credit losses at December 31, 2023 was considered appropriate given the current economic environment and other related factors.

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The amounts shown are not necessarily indicative of the actual future losses that may occur within individual categories.

Allocation of Allowance for Credit Losses

Allocation of Allowance for Credit Losses on Loans

2023 2022 2021

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Allowance Amount % of loans (1)

Credit cards $ 5,868 1.1% $ 5,140 1.2% $ 3,987 1.6%

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Commercial 36,470 16.2% 34,406 17.6% 17,458 18.0%

Other 4,427 2.3% 1,941 2.7% 1,517 4.2% 171 1.9% 39 1.2%

Total $ 225,231 100.0% $ 196,955 100.0% $ 205,332 100.0%

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

Premiums and discounts are amortized and accreted, respectively, to interest income using the constant effective yield

method over the estimated life of the security.

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

Prepayments are anticipated for mortgage-backed and SBA securities.

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government agencies and U.S.

Treasury securities, 0.1% of which will mature in one year or less.

Treasury securities.

Our investment portfolio as of December 31, 2023 also included $2.65 billion, or 38.5%, of tax-exempt obligations of state and political subdivisions.

A portion of the state and political subdivision debt obligations are rated bonds, primarily issued in states in which we are located, and are evaluated on an ongoing basis.

In an effort to balance our interest risk profile, we have continued to increase our asset allocation in the tax-exempt securities portfolio due to the acceleration of pre-payment speeds for mortgage-backed securities.

We continue to invest in high credit tax-exempt securities with a weighted average rating of AA.

There are no securities of any one state or political subdivision issuer exceeding ten percent of our stockholders’ equity at December 31, 2023.

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These mortgage-backed securities were issued by agencies of the U.S.

During the quarters ended June 30, 2022 and September 30, 2021, we 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.

During the quarters ended June 30, 2022 and September 30, 2021, we transferred, at fair value, $1.99 billion and $500.8 million, respectively, of securities from the AFS portfolio to the HTM portfolio.

As of December 31, 2023, the related remaining combined net unrealized losses of $126.4 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.

Additionally, during the third quarter of 2021, we began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of $1.0 billion of fixed rate callable municipal securities held in the AFS portfolio.

Securities within these swap agreements have maturity dates varying between 2028 and 2029.

For the year ended December 31, 2023, the net amount included in interest income on investment securities in the consolidated statements of income related to these swap agreements was $11.9 million.

The adoption of ASU 2016-13 at the beginning of 2020 required us to replace the existing impairment models for financial assets, which includes investment securities.

Under this model, an estimate of expected credit losses that represents all contractual cash flows that is deemed uncollectible over the contractual life of the financial asset must be recorded.

During 2023, we recorded $9.1 million of provision for credit losses related to AFS securities due to isolated corporate bonds within the portfolio.

We charged-off $7.0 million directly related to one corporate bond, which was deemed uncollectible in the period, while the remaining isolated bonds were sold or experienced price recovery on previous impairments prior to the end of the period.

Based upon our analysis of the underlying risk characteristics of the AFS portfolio, including credit ratings and other qualitative factors, no allowance for credit losses related to AFS securities was deemed necessary at December 31, 2023 and 2022.

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See Note 3, Investment Securities, in the accompanying Notes to Consolidated Financial Statements for additional information related to our allowance for credit losses on investment securities held.

We had $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, compared to $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 we sold approximately $342.6 million of investment securities during 2021.

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 call of securities in 2022 as compared to 2021 reflects the rising interest rate environment experienced during the current year as compared to 2021.

We had no gross realized gains and $20.6 million of gross realized losses from the sale of securities during the year ended December 31, 2023, compared to $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.

We sold approximately $247.9 million of investment securities during 2023, while no securities were sold during 2022.

Securities sold during 2023 were in large part related to a strategic decision to sell low yield securities and use the proceeds to pay off higher rate wholesale fundings, including both brokered deposits and FHLB advances.

We have the ability and intent to hold the securities classified as HTM until they mature, at which time we expect to receive full value for the securities.

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

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

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

We expect the cash flows from principal maturities of securities to provide flexibility to fund future loan growth or reduce wholesale funding.

Furthermore, as of December 31, 2023, we also have the ability to hold the securities classified as AFS for a period of time sufficient for a recovery of amortized cost, we do not have an immediate intent to sell the securities classified as AFS, and we believe the accounting standard of “more likely than not” has not been met regarding whether we would be required to sell any of the AFS securities before recovery of amortized cost.

During 2024, we will continue to evaluate targeted sales of AFS securities based on prevailing market conditions and our funding and liquidity positions.

The unrealized losses during 2023 are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased.

The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline.

We do not believe any of the securities are impaired due to reasons of credit quality.

Accordingly, as of December 31, 2022, we believe the declines in fair value detailed in the table below are temporary.

Accordingly, as of December 31, 2023, we believe the declines in fair value detailed in the table below are temporary and we do not believe any of the securities are impaired due to reasons of credit quality.

Table 12 presents the amortized cost, fair value and allowance for credit losses on investment securities for each of the years indicated.

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Weighted average yield 3.9 % 5.6 % 4.0 % 2.9 % 2.7 % 3.0 %

Deposits are our primary source of funding for earning assets and are primarily developed through our network of approximately 230 financial centers.

Deposits are our primary source of funding for earning assets and are primarily developed through our network of 234 financial centers as of December 31, 2023.

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

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

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

As of December 31, 2023, core deposits comprised 79.2% of our total deposits.

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

Our total deposits as of December 31, 2022, were $22.55 billion, an increase of $3.18 billion from December 31, 2021, primarily driven by the acquisition of Spirit, which contributed $2.72 billion, net of fair value adjustments, to this increase.

Noninterest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $17.78 billion at December 31, 2022, compared to $16.91 billion at December 31, 2021, an $865.4 million increase.

Our total deposits as of December 31, 2023, were $22.24 billion, a decrease of $303.1 million from December 31, 2022.

Noninterest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $15.80 billion at December 31, 2023, compared to $17.78 billion at December 31, 2022, a decrease of $1.98 billion.

Total time deposits increased $1.68 billion to $6.45 billion at December 31, 2023, from $4.77 billion at December 31, 2022.

We had $2.75 billion and $466.0 million of brokered deposits at December 31, 2022, and December 31, 2021, respectively.

We had $2.90 billion and $2.75 billion of brokered deposits at December 31, 2023, and December 31, 2022, respectively.

Our uninsured deposits as of December 31, 2023 and 2022 were $4.75 billion and $5.63 billion, respectively.

We made the strategic decision during the fourth quarter 2022 to extend the duration of select wholesale deposits to complement our core deposit base and, due to advantageous rates, added brokered certificates of deposit with maturities of 6-12 months.

Additionally, we are continuing to hone our product offerings to give customers flexibility of choice while maintaining the ability to adjust interest rates timely in the current rate environment.

The change in the mix of deposits at December 31, 2023 as compared to December 31, 2022 reflects increased market competition and consumer migration toward higher rate deposits, principally certificates of deposit, given the rapid increase in interest rates that has occurred over the past year.

We are continuing to refine our product offerings to give customers flexibility of choice while maintaining the ability to adjust interest rates timely in the current rate environment.

Table 14 reflects the classification of the average deposits and the average rate paid on each deposit category which is in excess of 10 percent of average total deposits for the three years ended December 31, 2023.

18 unchanged sentences

Federal funds purchased and securities sold under agreements to repurchase were $68.0 million at December 31, 2023, as compared to $160.4 million at December 31, 2022.

We have historically funded our growth in earning assets through the use of core deposits, large certificates of deposits from local markets, reciprocal brokered deposits, FHLB borrowings and Federal funds purchased.

We have historically funded our growth in earning assets through the use of core deposits, large certificates of deposits from local markets, brokered deposits, FHLB borrowings and Federal funds purchased.

Management anticipates that these sources will provide necessary funding in the foreseeable future.

1 unchanged sentence

Our total debt was $1.34 billion and $1.23 billion at December 31, 2023 and 2022, respectively.

The outstanding balance for December 31, 2022 includes $835.0 million in FHLB short-term advances;

The outstanding balance for December 31, 2023 includes $953.2 million in FHLB advances;

$366.1 million in subordinated notes and unamortized debt issuance costs;

and $19.1 million of other long-term debt.

All of the FHLB short-term advances outstanding at December 31, 2022 are FHLB Owns the Option (“FOTO”) advances which are a low cost, fixed-rate source of funding in return for granting to FHLB the flexibility to choose a termination date earlier than the maturity date.

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

We classified the FOTO advances as long-term throughout 2021, during the continued low interest rate environment.

As interest rates increased during 2022, we began classifying the outstanding FOTO advances as short-term with the expectation that the FHLB could terminate the FOTO advances prior to maturity, as current market rates exceeded the outstanding FOTO advance rates.

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

We also held typical FHLB short-term advances, with original maturities of less than one year, at various times during 2022, as well as in previous years.

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

A summary of information related to our FHLB short-term advances, including FOTO advances, is presented in Table 16.

FHLB advances outstanding at December 31, 2023, which increased as compared to December 31, 2022 due to a strategic decision to utilize short-term borrowings to elevate our liquidity position given the macroeconomic environment during the year, are primarily fixed rate, fixed term advances, which are due less than one year from origination and therefore are classified as short-term advances.

A summary of information related to our FHLB short-term advances, consisting of fixed rate, fixed term advances, is presented in Table 16.

Short-Term Borrowings

9 unchanged sentences

We incurred $3.6 million in debt issuance costs related to the offering.

The Notes will mature on April 1, 2028 and will be subordinated in right of payment to the payment of our other existing and future senior indebtedness, including all our general creditors.

The Notes will mature on April 1, 2028 and are subordinated in right of payment to the payment of our other existing and future senior indebtedness, including all our general creditors.

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

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

Aggregate annual maturities of debt at December 31, 2022 are presented in Table 17.

Maturities of Debt

Aggregate annual maturities of long-term debt at December 31, 2023 are presented in Table 17.

Maturities of Long-Term Debt

Annual Maturities

7 unchanged sentences

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

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

On April 27, 2022, our shareholders approved an amendment to our Articles of Incorporation to remove an $80.0 million cap on the aggregate liquidation preference associated with the preferred stock and increase the number of authorized shares of our Class A common stock from 175,000,000 to 350,000,000.

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

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

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

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

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

As of December 31, 2023, there were no shares of preferred stock issued or outstanding.

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

1 unchanged sentence

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

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

Stock Repurchase Program

1 unchanged sentence

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

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 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, we substantially exhausted the remaining capacity under the 2019 Program, and our Board of Directors authorized a new stock repurchase program (the “2022 Program”) under which we may repurchase up to $175.0 million of our Class A Common Stock currently issued and outstanding.

The 2022 Program replaced the 2019 Program.

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

Effective July 23, 2021, our Board of Directors approved another amendment to the 2019 Program that increased the amount of our Class A common stock that may be repurchased 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, we substantially exhausted the repurchase capacity under the 2019 Program.

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

Because the 2022 Program was set to terminate on January 31, 2024, our Board of Directors authorized a new stock repurchase program in January 2024 (“2024 Program”) under which we may repurchase up to $175.0 million of our Class A common stock currently issued and outstanding.

During 2023, we repurchased 2,257,049 shares at an average price of $17.72 per share under the 2022 Program.

During 2022, we 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.

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

Under the 2024 Program, we may repurchase shares of our common stock through open market and privately negotiated transactions or otherwise.

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Goodwill and other intangible assets (1,398,810) (1,412,667)

Unrealized gain on available-for-sale securities, net of income taxes 517,560 10,545

Unrealized loss on available-for-sale securities, net of income taxes 404,375 517,560

Total Tier 1 capital 2,493,799 2,466,874

Tier 2 capital:

Trust preferred securities and subordinated debt 365,989 384,131

Subordinated notes and debentures 366,141 365,989

Subordinated debt phase out (66,000) —

Qualifying allowance for credit losses and reserve for unfunded commitments 170,977 115,627

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All of the Company’s trust preferred securities were redeemed during the third quarter of 2022.

Qualifying subordinated debt of $366.0 million is included as Tier 2 and total capital as of December 31, 2022.

Qualifying subordinated debt of $300.1 million is included as Tier 2 and total capital of the Company as of December 31, 2023.

In the normal course of business we have entered into a number of contractual obligations and have made commitments to make future payments.

2 unchanged sentences

GAAP Reconciliation of Non-GAAP Financial Measures

The tables below present computations of adjusted earnings (net income excluding certain items {gain on sale of branches, early retirement program costs, loss from early retirement of TruPS, gain on sale of intellectual property, gain on insurance settlement, donation to Simmons First Foundation, merger related costs, net branch right sizing costs, and the Day 2 CECL Provision}) (non-GAAP) and adjusted diluted earnings per share (non-GAAP) as well as a computation of tangible book value per common share (non-GAAP), tangible common equity to tangible assets (non-GAAP), adjusted noninterest income (non-GAAP), and adjusted noninterest expense (non-GAAP).

The tables below present computations of adjusted earnings (net income excluding certain items {gain on sale of branches, early retirement program costs, loss from early retirement of TruPS, gain on sale of intellectual property, gain on insurance settlement, donation to Simmons First Foundation, merger related costs, FDIC special assessment, loss (gain) on sale of securities, net branch right sizing costs, and the Day 2 CECL Provision}) (non-GAAP) and adjusted diluted earnings per share (non-GAAP) as well as a computation of tangible book value per common share (non-GAAP), tangible common equity to tangible assets (non-GAAP), adjusted noninterest income (non-GAAP), adjusted noninterest expense (non-GAAP), adjusted salaries and employee benefits expense (non-GAAP) and the coverage ratio of uninsured, non-collateralized deposits (non-GAAP).

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

The Company has updated its calculation of certain non-GAAP financial measures to exclude the impact of gains or losses on the sale of AFS investment securities in light of the impact of the Company’s strategic AFS investment securities transactions during the fourth quarter of 2023 and has presented past periods on a comparable basis.

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

19 unchanged sentences

Additionally, similarly titled non-GAAP financial measures used by other companies may not be computed in the same or similar fashion.

During 2022, adjusted items primarily consisted of $33.8 million of Day 2 provision expense required for loans and unfunded commitments related to the Spirit acquisition, merger-related costs of $22.5 million, primarily related to the Spirit acquisitions, and net branch right sizing costs of $3.6 million, mainly due to branch closures across our footprint during the year.

During 2023, adjusted items primarily consisted of net branch right sizing costs of $5.5 million, mainly due to branch closures across our footprint during the year, $6.2 million in early retirement program costs related to our Better Bank Initiative, and a $20.6 million loss on sale of securities due to the strategic sale of AFS securities during the year.

Additionally, we recorded $10.5 million related to a FDIC special assessment levied to support the Deposit Insurance Fund following the failure of certain banks in 2023.

The net after-tax impact of all adjusted items on net income was $32.7 million, or a $0.26 impact on diluted earnings per share.

During 2022, adjusted items primarily consisted of $33.8 million of Day 2 provision expense required for loans and unfunded commitments related to the Spirit acquisition, merger-related costs of $22.5 million, primarily related to the Spirit acquisition, and net branch right sizing costs of $3.6 million, mainly due to branch closures across our footprint during the year.

Additionally, we had a gain on insurance settlement of $4.1 million related to a weather event that caused severe damage to one of our branch locations.

The net after-tax impact of all adjusted items was $42.4 million, or $0.34 per diluted earnings per share.

During 2021, adjusted items consisted of $22.7 million of Day 2 provision expense required for loans related to the Landmark and Triumph acquisitions, $15.9 million of merger-related costs, related to the Landmark and Triumph acquisitions and net branch right sizing gains of $0.9 million, primarily due to branch closures across our footprint during the year.

During 2021, adjusted items primarily consisted of $22.7 million of Day 2 provision expense required for loans related to the Landmark and Triumph acquisitions, $15.9 million of merger-related costs, related to the Landmark and Triumph acquisitions and $15.5 million of gains related to the sale of securities.

Additionally, we had total gains on sale of branches of $5.3 million due to the Illinois Branch Sale.

The net after-tax impact of these items was $12.5 million, or $0.11 per diluted earnings per share.

During 2020, adjusted items consisted of $4.5 million of merger-related costs related to the Landrum and Reliance acquisitions, and $2.9 million in early retirement program expenses.

We also had adjusted net branch right sizing costs of $13.7 million, primarily due to branch closures across our footprint during the year.

Additionally, we had total gains on sale of branches of $8.4 million mostly due to the gains on sale from the Texas Branch Sale and Colorado Branch Sale.

The net after-tax impact of these items was $9.4 million, or $0.09 per diluted earnings per share.

See Table 19 below for the reconciliation of adjusted earnings, which exclude certain items for the periods presented.

7 unchanged sentences

Gain on insurance settlement — (4,074) —

FDIC special assessment 10,521 — —

Donation to Simmons First Foundation — 1,738 —

1 unchanged sentence

Early retirement program 6,198 — —

Loss (gain) on sale of securities 20,609 278 (15,498)

Branch right sizing, net 5,467 3,628 (906)

10 unchanged sentences

Gain on insurance settlement — (0.03) —

FDIC special assessment 0.08 — —

Donation to Simmons First Foundation — 0.01 —

1 unchanged sentence

Early retirement program 0.05 — —

Loss (gain) on sale of securities 0.17 — (0.14)

Branch right sizing, net 0.04 0.03 (0.01)

6 unchanged sentences

(1) Effective tax rate of 26.135%.

See Table 20 below for the reconciliation of adjusted noninterest income and adjusted noninterest expense for the periods presented.

Reconciliation of Adjusted Noninterest Income and Adjusted Noninterest Expense (non-GAAP)

See Table 20 below for the reconciliation of adjusted noninterest income, adjusted noninterest expense and adjusted salaries and employee benefits expense for the periods presented.

Reconciliation of Adjusted Noninterest Income (non-GAAP), Adjusted Noninterest Expense (non-GAAP) and Adjusted Salaries and Employee Benefits Expense (non-GAAP)

(In thousands) 2023 2022 2021

5 unchanged sentences

Gain on sale of intellectual property — (750) —

Loss (gain) on sale of securities 20,609 278 (15,498)

Branch right sizing — 153 (369)

6 unchanged sentences

Early retirement program (6,198) — —

FDIC special assessment (10,521) — —

Branch right sizing (5,467) (3,475) 537

1 unchanged sentence

Adjusted noninterest expense (non-GAAP) $ 539,455 $ 539,059 $ 468,215

Salaries and employee benefits expense $ 286,117 $ 286,982 $ 246,335

Early retirement program costs (6,198) — —

Other 2 — (66)

Adjusted salaries and employee benefits expense (non-GAAP) $ 279,921 $ 286,982 $ 246,269

See Table 21 below for the reconciliation of tangible book value per common share.

1 unchanged sentence

(In thousands, except per share data) 2023 2022 2021

Total equity $ 3,269,362 $ 3,248,841 $ 2,976,656

Preferred stock — — (767)

Total common equity 3,269,362 3,248,841 2,975,889

Total common stockholders’ equity $ 3,426,488 $ 3,269,362 $ 3,248,841

Intangible assets:

2 unchanged sentences

Total intangibles (1,433,444) (1,448,549) (1,252,242)

Tangible common equity $ 1,820,813 $ 1,996,599 $ 1,789,474

Tangible common stockholders’ equity $ 1,993,044 $ 1,820,813 $ 1,996,599

Shares of common stock outstanding 125,184,119 127,046,654 112,715,444

4 unchanged sentences

(Dollars in thousands) 2023 2022 2021

Total common equity $ 3,269,362 $ 3,248,841 $ 2,975,889

Total common stockholders’ equity $ 3,426,488 $ 3,269,362 $ 3,248,841

Intangible assets:

2 unchanged sentences

Total intangibles (1,433,444) (1,448,549) (1,252,242)

Tangible common equity $ 1,820,813 $ 1,996,599 $ 1,789,474

Tangible common stockholders’ equity $ 1,993,044 $ 1,820,813 $ 1,996,599

Total assets $ 27,345,674 $ 27,461,061 $ 24,724,759

7 unchanged sentences

7.69 % 7.00 % 8.51 %

See Table 23 below for the calculation of uninsured, non-collateralized deposit coverage ratio.

Calculation of Uninsured, Non-Collateralized Deposit Coverage Ratio (non-GAAP)

(In thousands) 2023 2022

Uninsured deposits at Simmons Bank $ 8,328,444 $ 8,913,990

Collateralized deposits (excluding portion that is FDIC insured) 2,846,716 2,759,248

Intercompany eliminations 728,480 529,042

Total uninsured, non-collateralized deposits $ 4,753,248 $ 5,625,700

FHLB borrowing availability $ 5,401,000 $ 5,442,000

Unpledged securities 3,817,000 3,180,000

Fed funds lines, Fed discount window and Bank Term Funding Program 1,998,000 1,982,000

Additional liquidity sources $ 11,216,000 $ 10,604,000

Uninsured, non-collateralized deposit coverage ratio 2.4x 1.9x

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 7. Management’s Discussion and Analysis