What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-27 compared with 2023-02-27 · 256 added, 340 removed, 2028 unchanged (23% of the section changed)

27 unchanged sentences

Federal funds are available on a daily basis and are used to meet the normal fluctuations of a dynamic balance sheet.

The Bank has approximat ely $520.0 million in f ederal funds lines of credit from upstream correspondent banks that can be accessed, when needed.

As of December 31, 2023, the Bank had approximat ely $510.0 million in f ederal funds lines of credit from upstream correspondent banks that can be accessed, when needed.

In order to ensure availability of these upstream funds we test these borrowing lines at least annually.

8 unchanged sentences

These funds can be used to meet seasonal loan patterns and other intermediate term balance sheet fluctuations.

Approximately 50.6% of the investment portfolio is classified as available-for-sale.

Approximately 45.8% of the investment portfolio is classified as available-for-sale, and we may generate additional liquidity through opportunistic sales of investment securities.

We also use securities held in the securities portfolio to pledge when obtaining public funds.

17 unchanged sentences

Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors.

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

As of December 31, 2023, the model simulations projected that 100 and 200 basis point increases in interest rates would result in negative variances in net interest income of 2.72% and 5.57%, respectively, relative to the base case over the next 12 months.

Interest rate decreases of 100 and 200 basis points would result in positive variances in net interest income of 2.18% and 5.36%, respectively, relative to the base case over the next 12 months.

These results reflect a liability-sensitive balance sheet and are consistent with the Company’s shift toward short-term funding combined with relatively little change in the mix of interest-earning assets.

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

8 unchanged sentences

Up 100 basis points (2.72) %

Up 100 basis points 1.59 %

Down 100 basis points 2.18 %

Down 200 basis points 5.36 %

Down 300 basis points (5.39) %

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

17 unchanged sentences

Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2023 is effective based on the specified criteria.

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

FORVIS, LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, immediately follows.

8 unchanged sentences

(2013) issued by COSO.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023, and our report dated February 27, 2024, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

15 unchanged sentences

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

(Formerly, BKD, LLP)

/s/ FORVIS, LLP

35 unchanged sentences

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

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

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

probability of default (PD), exposure-at-default (EAD) or loss given default (LGD).

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

2 unchanged sentences

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

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

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

Management’s identification and measurement of the qualitative factor adjustments is highly judgmental.

The primary procedures we performed as of December 31, 2023 to address this critical audit matter included:

18 unchanged sentences

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

Acquisition Accounting

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

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

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

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

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

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

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

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

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

• Testing the design and operating effectiveness of controls including:

◦ Proper approval of the acquisition

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

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

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

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

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

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

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

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

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

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

(Formerly, BKD, LLP)

As reflected in the Company’s consolidated financial statements at December 31, 2023, the Company’s goodwill was $1.32 billion.

As disclosed in Note 8 to the consolidated financial statements, goodwill is tested for impairment at least annually or more frequently if indicators of impairment require the performance of an interim impairment assessment.

Auditing management’s impairment tests of goodwill was complex and highly judgmental due to the calculation relying on several assumptions that have a level of subjectivity and judgment.

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 the Company’s 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.

We obtained an understanding, evaluated the design and operating effectiveness of controls over the Company’s goodwill assessment process.

For example, we tested the controls over the Company’s review of the significant assumptions utilized in estimating the fair value of the reporting unit.

To test the fair values of the reporting unit, our audit procedures included, among others, assessing methodologies, testing the significant assumptions described above, and testing the completeness and accuracy of the underlying data used by the Company.

Our testing procedures over the significant assumptions included, among others, comparing forecasted revenue to current industry and economic trends.

We assessed the historical accuracy of management’s estimates by comparing past projections to actual performance and assessed the sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit resulting from changes in the assumptions.

We also involved an internal valuation professional to assist in evaluating the Company’s models, valuation methodology, and significant assumptions used in the fair value estimates.

/s/ FORVIS, LLP

18 unchanged sentences

Mortgage loans held for sale 9,373 3,486

Other loans held for sale

Loans 16,845,670 16,142,124

22 unchanged sentences

Common stock, Class A, $ 0.01 par value;

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

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

125,184,119 and 127,046,654 shares issued and outstanding at December 31, 2023 and 2022, respectively

33 unchanged sentences

Other service charges and fees 9,122 7,616 7,696

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

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

Gain on insurance settlement — 4,074 —

25 unchanged sentences

Unrealized holding gains (losses) arising during the period on available-for-sale securities 108,612 ( 593,010 ) ( 91,434 )

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

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

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

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

Reclassification adjustment for realized (losses) gains included in net income

( 20,609 ) ( 278 ) 15,498

Realized gains (losses) on available-for-sale securities interest rate hedges 1,960 ( 98,374 ) ( 10,588 )

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

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity ( 25,971 ) ( 14,632 ) ( 104 )

Other comprehensive income (loss), before tax effect 153,232 ( 686,408 ) ( 95,134 )

13 unchanged sentences

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

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

Net amortization (accretion) of investment securities and assets 14,982 ( 39,031 ) ( 52,781 )

Net amortization on borrowings 152 313 1,257

3 unchanged sentences

Gain on sale of mortgage loans held for sale ( 7,379 ) ( 7,945 ) ( 36,434 )

Gain on sale of other intangibles — — ( 301 )

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

Gain on sale of loans — ( 282 ) —

Fair value write-down of closed branches — — 434

Deferred income taxes ( 2,460 ) 14,933 10,937

25 unchanged sentences

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

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

Net cash used in investing activities ( 183,593 ) ( 946,233 ) ( 2,537,736 )

FINANCING ACTIVITIES

10 unchanged sentences

Net cash (used in) provided by financing activities ( 425,416 ) ( 344,496 ) 438,457

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

DECREASE IN CASH AND CASH EQUIVALENTS ( 68,030 ) ( 968,531 ) ( 1,821,499 )

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 682,122 1,650,653 3,472,152

10 unchanged sentences

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

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

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

3 unchanged sentences

— 4 16,154 — — 16,158

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

— 45 138,146 — — 138,191

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

— 42 127,857 — — 127,899

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

Stock repurchases - 4,562,469 shares

9 unchanged sentences

— 3 10,281 — — 10,284

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

— 45 138,146 — — 138,191

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

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

— 183 464,735 — — 464,918

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

Stock repurchases - 4,432,762 shares

— ( 44 ) ( 111,089 ) — — ( 111,133 )

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

Dividends on common stock - $ 0.76 per share

6 unchanged sentences

— 5 9,330 — — 9,335

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

— 183 464,735 — — 464,918

Stock repurchases - 2,257,049 shares

21 unchanged sentences

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

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

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

The Company is organized with community and commercial banking groups.

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

time deposits, checking and savings accounts;

2 unchanged sentences

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

The individual bank groups have similar operating and economic characteristics.

The individual banking groups have similar operating and economic characteristics.

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

6 unchanged sentences

Such estimates include, but are not limited to, the Company’s allowance for credit losses.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the valuation of acquired loans.

Management obtains independent appraisals for significant properties in connection with the determination of the allowance for credit losses and the valuation of foreclosed assets.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of acquired loans, valuation of goodwill and subsequent impairment analysis, stock-based compensation plans and income taxes.

Management obtains third party valuations to assist in valuing certain aspects of these material estimates, as appropriate, including independent appraisals for significant properties in connection with the determination of the allowance for credit losses and the fair value of acquired loans.

Assumptions used in the goodwill impairment analysis involve internally projected forecasts, coupled with market and third-party data.

These material estimates could change as a result of the uncertainty in current macroeconomic conditions and other factors that are beyond the Company’s control and could cause actual results to differ materially from those projected.

Reclassifications

53 unchanged sentences

Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Further information regarding accounting policies related to past due loans, non-accrual loans, and troubled-debt restructurings is presented in Note 5, Loans and Allowance for Credit Losses.

Further information regarding accounting policies related to past due loans, non-accrual loans, and modifications to borrowers experiencing financial difficulty is presented in Note 5, Loans and Allowance for Credit Losses.

Additionally, for discussion of the Company’s accounting for acquired loans, see Acquisition Accounting, Loans later in this section.

Allowance for Credit Losses

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

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

The Company’s allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses .

Accordingly, the methodology is based on the Company’s reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.

Management’s evaluation of the allowance for credit losses is inherently subjective as it requires material estimates.

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.

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

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

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

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

The 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.

The Company uses 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.

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

Qualitative adjustments include, but are not limited to:

• Changes in asset quality - Adjustments related to trending credit quality metrics including delinquency, 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 the Company’s reasonable and supportable forecast.

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

Collateral Dependent Loans

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

For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit loss is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.

When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral.

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell.

The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate.

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.

If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

Reserve for Unfunded Commitments

58 unchanged sentences

Also, the Company does not use Topic 606 to account for gains or losses on its investments in securities, loans, and derivatives due to the scope exceptions.

Certain revenue streams, such as service charges on deposit accounts, gains or losses on the sale of OREO, and trust income, fall under the scope of Topic 606 and the Company must recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer.

Certain revenue streams, such as service charges on deposit accounts, gains or losses on the sale of Other Real Estate Owned (“OREO”), and trust income, fall under the scope of Topic 606 and the Company must recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer.

Topic 606 is applied using five steps:

41 unchanged sentences

Diluted earnings per share $ 1.38 $ 2.06 $ 2.46

There were no stock options excluded from earnings per share calculations due to the related stock option exercise price exceeding the average market price for the years ended December 31, 2022 and 2021.

There were approximately 653,718 stock options excluded from the year ended December 31, 2020 earnings per share calculation due to the related stock option exercise price exceeding the average market price.

There were 410,490 stock options excluded from the year ended December 31, 2023 earnings per share calculation due to the related stock option exercise price exceeding the average market price of the Company’s stock.

There were no stock options excluded from the earnings per share calculations for the years ended December 31, 2022 and 2021 due to the average market price of the Company’s stock exceeding the related stock option exercise price.

Stock-Based Compensation

42 unchanged sentences

Goodwill $ 174,146

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger.

Management will continue to review the estimated fair values and evaluate the assumed tax positions.

The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the completion of the merger.

Therefore, adjustments to the estimated amounts and carrying values may occur.

During 2023, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities related to the Spirit acquisition.

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

125 unchanged sentences

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

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

As of 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, the Company transferred, at fair value, $ 1.99 billion and $ 500.8 million, respectively, of securities from the AFS portfolio to the HTM portfolio.

As of 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.

21 unchanged sentences

As of December 31, 2023, HTM MBS consisted of $ 141.6 million and $ 1.02 billion of commercial MBS and residential MBS, respectively.

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

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

The amortized cost, fair value and allowance for credit losses of investment securities that are classified as AFS are as follows:

20 unchanged sentences

government agencies or corporations.

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

As of December 31, 2023, AFS MBS consisted of $ 710.1 million and $ 1.23 billion of commercial MBS and residential MBS, respectively.

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

19 unchanged sentences

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

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

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

Allowance for Credit Losses

4 unchanged sentences

Accordingly, no allowance for credit losses has been recorded for these securities.

Regarding securities issued by state and political subdivisions and other HTM securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts, (v) whether or not such securities provide insurance or other credit enhancement or are pre-refunded by the issuers.

Regarding securities issued by state and political subdivisions and other HTM securities, the adequacy of the reserve for credit loss is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses on loans.

The methodology considers, but is not limited to:

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

The following table details activity in the allowance for credit losses by investment security type for the years ended December 31, 2023 and 2022 on the Company’s HTM and AFS securities held.

5 unchanged sentences

Net increase (decrease) in allowance on previously impaired securities 1,072 ( 1,072 ) —

Recoveries 93 16 109

Ending balance, December 31, 2023 $ 2,006 $ 1,208 $ 3,214

December 31, 2021

Held-to-maturity

Available-for-sale

Beginning balance, January 1, 2023 $ — $ — $ —

Provision for credit loss expense — 12,800 12,800

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

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

Recoveries — 147 147

Net decrease in allowance on previously impaired securities — ( 3,722 ) ( 3,722 )

Ending balance, December 31, 2023 $ — $ — $ —

Available-for-sale

December 31, 2022

Held-to-maturity

Beginning balance, January 1, 2022 $ 1,197 $ 82 $ 1,279

Reduction due to sales — ( 11 ) ( 11 )

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

Provision for credit loss expense — — —

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

Recoveries 93 16 109

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

Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, there was no provision for credit losses related to AFS securities recorded during the twelve months ended December 31, 2022.

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

Based upon the Company’s analysis of the underlying risk characteristics of its AFS portfolio, including credit ratings and other qualitative factors, as previously discussed, the provision for credit losses related to AFS securities recorded during the twelve months ended December 31, 2023 was $ 9.1 million.

During the year ended December 31, 2023, the Company charged-off $ 7.0 million directly related to one corporate bond which was deemed uncollectible during the period.

There was no provision for credit losses related to AFS securities recorded during the year ended December 31, 2022.

The following table summarizes bond ratings for the Company’s HTM portfolio issued by state and political subdivisions and other securities as of December 31, 2023:

33 unchanged sentences

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $ 3.32 billion at December 31, 2023 and $ 3.96 billion at December 31, 2022.

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

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

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

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

The Company sold approximately $ 247.9 million of investment securities during 2023 and approximately $ 342.6 million of investment securities during 2021.

No securities were sold during 2022.

Securities sold in 2023 were in large part related to a strategic decision by the Company to sell low yield securities and use the proceeds to pay off higher rate wholesale fundings, including both brokered deposits and Federal Home Loan Bank (“FHLB”) advances, while the securities sold during 2021 were part of a strategic plan to realize gains on securities with projected calls within the short-term period.

The net losses on the sale and call of securities in 2023 and 2022 as compared to 2021 reflect the rising interest rate environment experienced over the comparative period.

There were no gross realized gains and approximately $ 20.6 million of gross realized losses from the sale of securities during the year ended December 31, 2023.

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

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

There were approximately $ 54.8 million of gross realized gains and $ 15,000 of gross realized losses from the sale of securities during the year ended December 31, 2020.

The income tax expense/benefit related to security gains/losses was 26.135 % of the gross amounts in 2023, 2022 and 2021.

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OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE

Texas Branch Sale

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

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

Pursuant to the terms of the Spirit Branch Agreement, Spirit Bank assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, personal property and other fixed assets associated with the Texas Branches.

The loan and deposit balances of the Texas Branches were $ 260.3 million and $ 139.5 million, respectively.

Colorado Branch Sale

On February 10, 2020, Simmons Bank entered into a Branch Purchase and Assumption Agreement (the “First Western Agreement”) with First Western Trust Bank (“First Western”), a wholly-owned subsidiary of First Western Financial, Inc.

On May 18, 2020, First Western completed its purchase of certain assets and assumption of certain liabilities (“Colorado Branch Sale”) associated with four Simmons Bank locations in Denver, Englewood, Highlands Ranch, and Lone Tree, Colorado (collectively, the “Colorado Branches”).

Pursuant to the terms of the First Western Agreement, First Western assumed certain deposit liabilities and acquired certain loans, as well as cash, personal property and other fixed assets associated with the Colorado Branches.

The loan and deposit balances of the Colorado Branches were $ 120.4 million and $ 63.1 million, respectively.

During 2020, the Company recognized a combined gain on sale of $ 8.1 million related to the Texas Branch Sale and Colorado Branch Sale.

Illinois Branch Sale

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The above table presents total loans at amortized cost.

The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as net deferred origination fees totaling $ 26.4 million and $ 21.5 million at December 31, 2022 and 2021, respectively.

The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as deferred origination costs and fees totaling $ 6.7 million and $ 26.4 million at December 31, 2023 and 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $ 77.1 million and $ 65.4 million at December 31, 2023 and 2022, respectively, and is included in interest receivable on the consolidated balance sheets.

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Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio.

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

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

Other consumer loans include direct installment loans and account overdrafts.

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

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

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

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

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Total $ 38,416 $ 26,886 $ 65,302 $ 16,076,822 $ 16,142,124 $ 507

When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) results and the Company classifies the loan as a TDR.

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

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

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

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

TDRs are individually evaluated for expected credit losses.

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

The following table presents a summary of TDRs segregated by class of loans.

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans

(Dollars in thousands) Number Balance Number Balance Number Balance

December 31, 2022

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company has 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.

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

The following table presents a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty, segregated by class of loans and type of loan modification, for the year ended December 31, 2023.

Percent of Percent of

Total Class Total Class

(Dollars in thousands) Rate Reduction of Loans Term Extension of Loans

Single family residential $ 79 — % $ — — %

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Total $ 79 $ 31,239

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 the Company’s determination of the allowance for credit losses on loans during the year.

During the year ended December 31, 2023, the Company modified one loan for a borrower experiencing financial difficulty related to the CRE portfolio, whereby 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 this CRE loan modified during the year ended December 31, 2023 being collateral-dependent, the impact to the Company’s allowance for credit losses on loans was the difference between the fair value of the underlying collateral, adjusted for selling costs, and the remaining outstanding principal balance of the loan.

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

Loans modified during the year ended December 31, 2023 were all current at December 31, 2023, with no loans in past due status.

Additionally, there were no modified loans for which a payment default occurred during the year ended December 31, 2023 and were modified within twelve months prior to default.

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

At December 31, 2023 and 2022, the Company had $ 2.5 million and $ 3.0 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At December 31, 2023 and 2022, the Company had $ 506,000 and $ 853,000 , respectively, of OREO secured by residential real estate properties.

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

When the Company restructured a loan to a borrower that was experiencing financial difficulty and granted a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) resulted, and the Company classified the loan as a TDR.

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

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

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

The Company returned TDRs to accrual status only if (1) all contractual amounts due were reasonably expected to be repaid within a prudent period and (2) repayment was in accordance with the contract for a sustained period, typically at least six months.

TDRs were individually evaluated for expected credit losses.

The Company assessed the exposure for each modification, either by the fair value of the underlying collateral or the present value of expected cash flows, and determined if a specific allowance for credit losses was needed.

The following table presents a summary of TDRs segregated by class of loans as of December 31, 2022.

Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans

(Dollars in thousands) Number Balance Number Balance Number Balance

December 31, 2022

Single-family residential 24 $ 1,849 12 $ 1,589 36 $ 3,438

Other commercial 1 766 2 48 3 814

Total real estate 24 1,849 12 1,589 36 3,438

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

The following table presents loans that were restructured as TDRs during the years ended December 31, 2022 and 2021 segregated by class of loans.

The following table presents loans that were restructured as TDRs during the year ended December 31, 2022.

Modification Type

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Single-family residential 4 $ 760 $ 730 $ — $ 730 $ —

Other commercial — — — — — —

Total real estate 4 $ 760 $ 730 $ — $ 730 $ —

Year Ended December 31, 2021

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

Other commercial 1 784 766 — 766 —

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

During the year ended December 31, 2022, the Company modified four loans with a recorded investment of $ 760,000 prior to modification which were deemed troubled debt restructuring.

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

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

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

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

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

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

Based upon the fair value of the collateral, a specific reserve of $ 5,129 was determined as necessary for these loans as of December 31, 2021.

During the year ended December 31, 2022, the Company modified four loans with a recorded investment of $ 760,000 prior to modification which were deemed TDRs.

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

No specific reserve was recorded with respect to these TDRs.

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

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

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

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

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

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

The Company had no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the years ended December 31, 2022 and 2021.

At December 31, 2022 and 2021, the Company had $ 3,009,000 and $ 1,806,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process.

At December 31, 2022 and 2021, the Company had $ 853,000 and $ 831,000 , respectively, of OREO secured by residential real estate properties.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the year ended December 31, 2022.

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

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Total consumer - credit cards — — — — — — 191,204 — 191,204

Current-period consumer - credit cards gross charge-offs — — — — — — 5,303 — 5,303

Consumer - other

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Total consumer - other 55,526 36,750 12,288 3,891 1,473 1,122 16,412 — 127,462

Current-period consumer - other gross charge-offs 220 826 493 79 29 128 449 — 2,224

Real estate - C&D

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Total real estate - C&D 138,749 144,955 59,413 45,027 10,278 14,275 2,731,019 504 3,144,220

Current-period real estate - C&D gross charge-offs — 1,148 — — — 8 349 — 1,505

Real estate - SF residential

3 unchanged sentences

Total real estate - SF residential 377,861 628,437 358,066 242,072 123,277 517,899 393,379 565 2,641,556

Current-period real estate - SF residential gross charge-offs — 111 12 73 — 677 232 — 1,105

Real estate - other commercial

4 unchanged sentences

Total real estate - other commercial 807,568 1,669,758 1,252,454 646,087 178,887 438,587 2,559,069 — 7,552,410

Current-period real estate - other commercial gross charge-offs — — — 7 2 35 9,731 — 9,775

Term Loans Amortized Cost Basis by Origination Year

(In thousands) 2023 2022 2021 2020 2019 2018 and Prior Lines of Credit (“LOC”) Amortized Cost Basis LOC Converted to Term Loans Amortized Cost Basis Total

Pass 440,872 354,016 200,941 67,320 27,374 42,953 1,271,826 — 2,405,302

3 unchanged sentences

Total commercial 443,027 380,007 207,529 70,621 29,194 47,234 1,312,564 — 2,490,176

Current-period commercial - gross charge-offs 463 2,081 778 197 244 815 1,351 — 5,929

Commercial - agriculture

4 unchanged sentences

Total commercial - agriculture 40,561 30,845 15,079 6,384 2,097 303 137,441 — 232,710

Current-period commercial - agriculture gross charge-offs — 7 — — — 26 — — 33

Current 45,234 144,732 28,413 2,543 3,255 36,719 205,033 — 465,929

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Total other 45,234 144,732 28,413 2,543 3,255 36,722 205,033 — 465,932

Current-period other - gross charge-offs — — — — — — 298 — 298

Total $ 1,908,526 $ 3,035,484 $ 1,933,242 $ 1,016,625 $ 348,461 $ 1,056,142 $ 7,546,121 $ 1,069 $ 16,845,670

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Allowance for Credit Losses

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

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, quantitative factors, and other qualitative considerations.

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

The Company’s allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for the effective interest rate used to discount prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses .

Accordingly, the methodology is based on the Company’s reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.

Accordingly, the methodology is comprised of two components:

individual assessments on loans with unique risk characteristics and collective assessments for loans that share similar risk characteristics.

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

The Company uses 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.

To determine the best estimate of credit losses as of December 31, 2023 , the Company utilized a probability-weighted, multiple-scenario approach consisting of Baseline, Upside (S1), and Downside (S3) scenarios published by Moody’s Analytics in December 2023 that was updated to reflect the U.S.

economic outlook.

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

These factors may include but are not limited to portfolio trends and considerations, other economic considerations, policy actions, concentration risk, or imprecision risk.

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

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

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

Qualitative adjustments include, but are not limited to:

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

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

• Changes in 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.

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

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

These evaluations are typically performed on loans with a deteriorated internal risk rating or are classified as a troubled debt restructuring.

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

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, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate.

1 unchanged sentence

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

If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $ 144.6 million and $ 70.9 million as of December 31, 2023 and 2022, respectively, as further detailed in the table below.

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

Acquisition adjustment for PCD loans 6,433 3,187 — 2 9,622

Provision for credit loss expense 5,934 36,381 5,023 86 47,424

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Ending balance, December 31, 2023 $ 36,470 $ 177,177 $ 5,868 $ 5,716 $ 225,231

(In thousands) Commercial Real

Estate Credit

and Other Total

December 31, 2022

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December 31, 2021

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

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

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

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

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

4 unchanged sentences

As of December 31, 2023, the Company’s allowance for credit losses was considered sufficient based upon expected loan level cash flows that were supported by economic forecasts.

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

The provision expense for the period ended December 31, 2023 was primarily due to the loan growth experienced during the period, as well as the impact of updated economic assumptions.

For the year ended December 31, 2022, provision expense related to loans was recaptured during the year for a variety of factors including a release of $ 16.0 million driven by improvements in certain industry specific qualitative factors for the restaurant, hospitality, student housing and office space industries due to lower pandemic related stresses.

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

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

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

Reserve for Unfunded Commitments

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The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses.

During 2023, $ 16.3 million was released from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the year.

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

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The Company accounts for lease and non-lease components (such as taxes, insurance and common area maintenance costs) separately as such amounts are generally readily determinable under the lease contracts.

Lease payments over the expected term are discounted using the Company’s Federal Home Loan Bank (“FHLB”) advance rates for borrowings of similar term.

Lease payments over the expected term are discounted using the Company’s FHLB advance rates for borrowings of similar term.

If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination of the expected lease term.

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Weighted average discount rate 3.52 % 2.41 %

Operating lease cost for the years ended December 31, 2022, 2021 and 2020 was $ 14,162,000 , $ 11,530,000 , and $ 13,103,000 , respectively.

Operating lease cost for the years ended December 31, 2023, 2022 and 2021 was $ 15.7 million, $ 14.2 million, and $ 11.5 million, respectively.

The Company’s remaining undiscounted minimum lease payments on operating leases as of December 31, 2023 are as follows:

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

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

Goodwill increased $ 173.6 million during the year ended December 31, 2022 primarily due to the Spirit acquisition, along with adjustments related to the continued assessment of the fair value and assumed tax position of the Landmark and Triumph acquisitions.

Goodwill impairment was neither indicated nor recorded in 2022, 2021 or 2020.

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

Also during 2022, the Company’s share price began to decline as markets in the United States responded to record inflation and other economic pressures.

As a result of the effect on share price, the Company performed interim goodwill impairment assessments during the second, third and fourth quarters and concluded no impairment existed during the periods.

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

Goodwill increased $ 1.2 million during the year ended December 31, 2023 primarily due to the continued assessment of the fair value and assumed tax position of the Spirit acquisition.

Goodwill impairment was neither indicated no r recorded in 2023, 2022 or 2021.

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

As a result of the decrease in the Company’s market capitalization, the Company performed an interim goodwill impairment qualitative assessment during the first quarter of 2023 and concluded that it was more likely-than-not that the fair value of goodwill continued to exceed its carrying value and therefore, goodwill was not impaired.

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

Additionally, the Company performed interim goodwill impairment assessments during the third and fourth quarters of 2023 and concluded no impairment existed during the periods.

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

Additionally during 2022, the Company’s share price declined as markets in the United States responded to record inflation and other economic pressures.

As a result of the effect on share price, the Company performed interim goodwill impairment assessments during the second, third and fourth quarters of 2022 and concluded no impairment existed during the periods.

While the goodwill impairment analysis indicated no impairment at December 31, 2023, the Company’s assessment depends on several assumptions which are dependent on market and economic conditions, and future changes in those conditions could impact the Company’s assessment in the future.

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Acquisitions (1)

Disposition of intangible asset (2)

Amortization ( 14,672 ) ( 14,346 )

8 unchanged sentences

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

Core deposit premiums of $ 5.1 million and $ 4.2 million were recorded during 2021 as part of the Triumph and Landmark acquisitions, respectively.

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

(2) Adjustments recorded for the premiums on certain deposit liabilities associated with the sale of banking operations.

(2) The Company recorded $ 2.1 million during 2022 related to servicing assets acquired as part of the Spirit acquisition.

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TIME DEPOSITS

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

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

Time deposits included approximately $ 1.73 billion and $ 1.08 billion of certificates of deposit over $250,000 at December 31, 2023 and 2022, respectively.

Brokered time deposits were $ 2.90 billion and $ 2.75 billion at December 31, 2023 and 2022, respectively.

Maturities of all time deposits at December 31, 2023 are as follows:

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Subordinated notes payable, net of premium adjustments, due 7/31/2030, fixed-to-floating rate (fixed rate of 6.00 % through 7/30/2025, floating rate of 5.92 % above the three month SOFR rate, reset quarterly)

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

Trust preferred securities, net of discount, due 6/6/2037, floating rate of 1.57 % above the three month LIBOR rate, reset quarterly, callable without penalty

Trust preferred securities, due 12/15/2035, floating rate of 1.45 % above the three month LIBOR rate, reset quarterly, callable without penalty

Trust preferred securities, net of discount, due 6/15/2037, floating rate of 1.85 % above the three month LIBOR rate, reset quarterly, callable without penalty

Trust preferred securities, net of discount, due 12/15/2036, floating rate of 1.85 % above the three month LIBOR rate, reset quarterly, callable without penalty

37,171 37,285

Unamortized debt issuance costs ( 1,030 ) ( 1,296 )

2 unchanged sentences

$ 1,338,507 $ 1,225,285

_________________________

(1) The Company transitioned from the three month London Interbank Offered Rate (“LIBOR”) to the three month Secured Overnight Financing Rate (“SOFR”), plus a comparable spread adjustment of 26.16 basis points, beginning with interest accrued on the notes from and after October 1, 2023.

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

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

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

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month London Interbank Offered Rate (“LIBOR”) rate plus 215 basis points, payable quarterly in arrears.

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

From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate resets quarterly to an annual interest rate equal to the “then-current three month LIBOR rate” plus 215 basis points, payable quarterly in arrears, and the Company transitioned from the “then-current three month LIBOR rate” to the “three month SOFR, plus a comparable spread adjustment of 26.16 basis points,” beginning with interest accrued on the Notes from and after October 1, 2023.

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

2 unchanged sentences

The Notes qualify for Tier 2 capital treatment.

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

The Company is currently reviewing all applicable documents and working with the debt holders and all relevant parties to determine the alternate interest rate index to be utilized, or other impacts, when LIBOR is discontinued.

The Company assumed subordinated debt in an aggregate principal amount, net of premium adjustments, of $ 37.4 million in connection with the Spirit acquisition in April 2022 (the “Spirit Notes”).

The Spirit Notes will mature on July 31, 2030, and initially bear interest at a fixed annual rate of 6.00 %, payable quarterly, in arrears, to, but excluding, July 31, 2025.

From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears.

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

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

From and including July 31, 2025, to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the then-current three-month SOFR rate, as published by the Federal Reserve Bank of New York (provided, that in the event the benchmark rate is less than zero, the benchmark rate will be deemed to be zero) plus 592 basis points, payable quarterly, in arrears.

The Company had total FHLB advances of $ 953.2 million and $ 838.5 million at December 31, 2023 and 2022, respectively, which are primarily fixed rate, fixed term advances, which are due less than one year from origination and therefore are classified as short-term advances by the Company.

At December 31, 2023, the FHLB advances outstanding were secured by mortgage loans and investment securities totaling approximately $ 6.94 billion and the Company had approximately $ 5.40 billion of additional advances available from the FHLB.

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

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

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

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

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

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

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

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

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

As of December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding.

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

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

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

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

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

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

Effective July 23, 2021, the Company’s Board of Directors approved another amendment to the 2019 Program that increased the amount of the Company’s Class A common stock that may be repurchased under the 2019 Program from a maximum of $ 180.0 million to a maximum of $ 276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022.

Effective July 23, 2021, the Company’s Board of Directors approved an amendment to the Company’s stock repurchase program originally established in October 2019 (“2019 Program”) that increased the amount of the Company’s Class A common stock that may be repurchased under the 2019 Program from a maximum of $ 180.0 million to a maximum of $ 276.5 million and extended the term of the 2019 Program from October 31, 2021, to October 31, 2022.

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

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

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

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

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

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

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

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

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

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

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

Under the 2024 Program, which replaced the 2022 Program, the Company may repurchase shares of its common stock through open market and privately negotiated transactions or otherwise.

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The agreements provide monthly payments of retirement compensation for either stated periods or for the life of the participant.

The charges to income for the plans were $ 2.2 million for 2022, $ 2.7 million for 2021 and $ 2.7 million for 2020.

There was a $ 316,000 benefit to income related to the plans for 2023.

This benefit was primarily due to a reduction in the present value of the liability resulting from a significant increase in the discount factor used, as compared to previous years.

The Company also reversed the accrued unvested liability during 2023 related to a former participant.

The charges to income for the plans were $ 2.2 million for 2022 and $ 2.7 million for 2021.

Such charges reflect the straight-line accrual over the employment period of the present value of benefits due each participant, as of their full eligibility date, using an appropriate discount factor.

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$ 20.29 — $ 24.07 447 1.45 $ 22.56 447 $ 22.56

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

The table below summarizes the Company’s performance stock unit activity for the years ended December 31, 2023, 2022 and 2021:

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

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

There was no intrinsic value of stock options outstanding and stock options exercisable at December 31, 2023.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $ 19.84 at December 31, 2023, and the exercise price multiplied by the number of options outstanding.

There were 900 stock options exercised in 2023 with an intrinsic value of $ 8,000 .

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

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

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

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

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Transfers of loans to foreclosed assets held for sale 3,075 1,219 4,322

Transfers of premises to foreclosed assets and other real estate owned — — 3,120

Transfers of premises to premises held for sale — — 11,200

Transfers of other real estate owned to premises held for sale — — 4,163

Transfer of premises held for sale to other real estate owned — — 4,368

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

Transfers of loans to other assets held for sale

Transfers of deposits to other liabilities held for sale

OTHER INCOME AND OTHER OPERATING EXPENSES

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

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

Other income for the years ended December 31, 2023 and 2022 was $ 35.4 million and $ 27.4 million, respectively.

Other income for the year ended December 31, 2023 included a $ 4.0 million legal reserve recapture associated with previously disclosed legal matters.

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

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

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

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

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

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

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

(2) Identified reserves of $ 5,214,000 and $ 4,214,000 were related to collateral-dependent loans for which fair value re-measurements took place during the years ended December 31, 2022 and 2021, respectively.

(2) Identified reserves of $ 18.7 million and $ 5.2 million were related to collateral-dependent loans for which fair value re-measurements took place during the years ended December 31, 2023 and 2022, respectively.

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

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

Loans and other loans held for sale – The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Loans – The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Additional factors considered include the type of loan and related collateral, variable or fixed rate, classification status, remaining term, interest rate, historical delinquencies, loan to value ratios, current market rates and remaining loan balance.

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Interest receivable 102,892 — 102,892 — 102,892

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

Loans, net 15,945,169 — — 15,573,555 15,573,555

Financial liabilities:

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COMMITMENTS AND CREDIT RISK

The Company grants agri-business, commercial and residential loans to customers primarily throughout Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, along with credit card loans to customers throughout the United States.

The Company grants agribusiness, commercial and residential loans to customers primarily throughout Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, along with credit card loans to customers throughout the United States.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

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As of December 31, 2023 and 2022, the Company had outstanding commitments to originate fixed-rate mortgage loans of approximately $ 16.6 million and $ 21.1 million respectively.

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

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

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Recently Adopted Accounting Standards

Investment-Income Taxes - In March 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-02, Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”), that introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met.

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit).

ASU 2023-02 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2023, with early adoption permitted.

The Company elected to early adopt ASU 2023-02 and apply the proportional amortization method for all income tax credits during the first quarter of 2023 by utilizing the modified retrospective method.

The adoption of ASU 2023-02 did not have a material impact on the Company’s results of operations, financial position or disclosures.

Credit Losses on Financial Instruments - In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination.

The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings made to borrowers experiencing financial difficulty.

ASU 2022-02 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis.

As a result, comparative disclosures to prior periods will not be available until such time as both periods disclosed are subject to the new guidance.

The adoption of ASU 2022-02 did not have a material impact on the Company’s results of operations or financial position.

See Note 5, Loans and Allowance for Credit Losses, for additional information.

Fair Value Hedging - In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets.

This ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible.

ASU 2022-01 renames that method the “portfolio layer” method and expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets.

This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies.

ASU 2022-01 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

The adoption of 2022-01 did not have a material impact on the Company’s results of operations, financial position or disclosures.

Reference Rate Reform – In March 2020, the FASB issued ASU No.

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On March 5, 2021, the U.K.

Financial Conduct Authority (“FCA”) announced that the majority of LIBOR rates will no longer be published after December 31, 2021, although a number of key settings will continue until June 2023, to support the rundown of legacy contracts only.

As a result, LIBOR should be discontinued as a reference rate.

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

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

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

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

During 2021, the Company did not offer LIBOR-indexed rates on loans which it originated, although it did participate in some shared credit agreements originated by other banks subject to the

Company’s determination that the LIBOR replacement language in the loan documents met the Company’s standards.

During 2021, the Company did not offer LIBOR-indexed rates on loans which it originated, although it did participate in some shared credit agreements originated by other banks subject to the Company’s determination that the LIBOR replacement language in the loan documents met the Company’s standards.

Pursuant to the Joint Regulatory Statement on LIBOR transition issued in October 2021, the Company’s policy, as of January 1, 2022, is not to enter into any new LIBOR-based credit agreements and not extend, renew, or modify prior LIBOR credit agreements without requiring conversion of the agreements to other interest rates.

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i) the lease would have been classified as a sales-type lease or a direct financing lease under the previous lease classification criteria and ii) sales-type or direct financing lease classification would result in a Day 1 loss.

ASU 2021-05 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted.

The adoption of ASU No.

2021-05 did not have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2021-05 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted.

The adoption of ASU 2021-05 did not have a material impact on the Company’s results of operations, financial position or disclosures.

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

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The adoption of ASU 2019-12 did not have a material impact on the Company’s operations, financial position or disclosures.

Fair Value Measurement Disclosures – In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), that eliminates, amends and adds disclosure requirements for fair value measurements.

These amendments are part of FASB’s disclosure review project and are expected to reduce costs for preparers while providing more decision-useful information for financial statement users.

The eliminated disclosure requirements include the 1) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy;

2) the policy of timing of transfers between levels of the fair value hierarchy;

and 3) the valuation processes for Level 3 fair value measurements.

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

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

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

The adoption of ASU 2018-13 did not have a material impact on the Company’s fair value disclosures.

Credit Losses on Financial Instruments – In June 2016, the FASB issued ASU No.

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

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires earlier measurement of credit losses, expands the range of information considered in determining expected credit losses and enhances disclosures.

The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

The amendments replace the incurred loss impairment methodology in current US GAAP with a methodology (the current expected credit losses, or “CECL”, methodology) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables measured at amortized cost at the time the financial asset is originated or acquired.

The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses.

This methodology replaces the multiple existing impairment methods in current guidance, which generally require that a loss be incurred before it is recognized.

Within the life cycle of a loan or other financial asset, this new guidance will generally result in the earlier recognition of the provision for credit losses and the related allowance for credit losses than current practice.

For available-for-sale debt securities that the Company intends to hold and where fair value is less than cost, credit-related impairment, if any, will be recognized through an allowance for credit losses and adjusted each period for changes in credit risk.

The effective date for these amendments is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

In preparation for implementation of ASU 2016-13, the Company formed a cross functional team that assessed its data and system needs and evaluated the potential impact of adopting the new guidance.

The Company anticipated a significant change in the processes and procedures to calculate the loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the prior accounting practice that utilized the incurred loss model.

On March 27, 2020, the CARES Act was signed in to law by the President of the United States and allowed the option to temporarily defer or suspend the adoption of ASU 2016-13.

During the deferral, a registrant would continue to use the incurred loss model for the allowance for loan and lease losses and would be in accordance with US GAAP.

The Company has not elected to temporarily defer the adoption of ASU 2016-13 and adopted the new standard as of January 1, 2020.

Upon adoption, the Company recorded an additional allowance for credit losses on loans of approximately $ 151.4 million and an adjustment to the reserve for unfunded commitments recorded in other liabilities of $ 24.0 million.

The Company also recorded an additional allowance for credit losses on investment securities of $ 742,000 .

The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $ 128.1 million.

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

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

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

In December 2018, the Federal Reserve, Office of the Comptroller of the Currency and FDIC (collectively, the “agencies”) issued a final rule revising regulatory capital rules in anticipation of the adoption of ASU 2016-13 that provided an option to phase in over a three year period on a straight line basis the day-one impact on earnings and Tier 1 capital (the “CECL Transition Provision”).

In March 2020 and in response to the COVID-19 pandemic, the agencies issued a new regulatory capital rule revising the CECL Transition Provision to delay the estimated impact on regulatory capital stemming from the implementation of ASU 2016-13.

The rule provides banking organizations that implement CECL before the end of 2020 the option to delay for two years an estimate of CECL’s effect on regulatory capital, followed by a three-year transition period (the “2020 CECL Transition Provision”).

The Company elected to apply the 2020 CECL Transition Provision.

Recently Issued Accounting Standards

Fair Value Hedging - In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method (“ASU 2022-01”), which clarifies the guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets.

This ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible.

This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies.

ASU 2022-01 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

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

Credit Losses on Financial Instruments - In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-40 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination.

ASU 2022-02 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

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

Income Taxes - In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), primarily focused on income tax disclosures regarding effective tax rates and cash income taxes paid.

ASU 2023-09 requires public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income by the applicable statutory income tax rate).

ASU 2023-09 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company will complete an evaluation of the impact this standard will have on its results of operations, financial position or disclosures.

Segment Reporting - In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The amendments in this update introduce a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker, extend certain annual disclosures to interim periods, clarify that single reportable segment entities must apply Topic 280 in its entirety, permit more than one measure of segment profit or loss to be reported under certain conditions and require disclosure of the title and position of the chief operating decision maker.

ASU 2023-07 is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The adoption of ASU 2023-07 is not expected to have a material impact on the Company’s operations, financial position or disclosures.

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

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

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

The two year forward start date for these swaps occurred during late third quarter of 2023 and involves the payment of fixed interest rates with a weighted average of 1.21 % in exchange for variable interest rates based on federal funds rates.

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 fair value hedges was $ 11.9 million.

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

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Energy Hedging

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

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

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

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

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

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

As prices decrease, exposure to the exchange increases.

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

As prices decrease, exposure to the exchange would increase.

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

The outstanding notional value as of December 31, 2022 for energy hedging Customer Sell to Company swaps were $ 2.6 million and the corresponding Company Sell to Dealer swaps were $ 2.6 million and the corresponding net fair value of the derivative asset and derivative liability was $ 49,000 .

During the second quarter of 2023, the Company’s remaining energy hedge swap contracts expired and there were no outstanding notional values related to these contracts as of December 31, 2023.

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

CONTINGENT LIABILITIES

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings incidental to the conduct of the Company’s business, including proceedings based on breach of contract claims, lender liability claims, and other ordinary-course claims, some of which seek substantial relief or damages.

On May 22, 2019, Danny Walkingstick and Whitnye Fort filed a putative class action complaint against Simmons Bank in the United States District Court for the Western District of Missouri.

The operative complaint alleges that Simmons Bank improperly charges overdraft fees on transactions that did not actually overdraw customers’ accounts by utilizing the checking account’s “available balance” to assess overdraft fees instead of the “ledger balance.” Plaintiffs’ claims include breach of contract and unjust enrichment, and they seek to represent a proposed class of all Simmons Bank checking account customers who were assessed an overdraft fee on a transaction that purportedly did not overdraw the account.

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

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

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

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

The complaint alleges that Landmark Bank improperly charged overdraft fees where a transaction was initially authorized on sufficient funds but later settled negative due to intervening transactions.

The complaint asserts a claim for breach of contract, which incorporates the implied duty of good faith and fair dealing.

Plaintiff seeks to represent a proposed class of all Landmark Bank checking account customers from Missouri who were allegedly charged overdraft fees on transactions that did not overdraw their checking account.

Plaintiff seeks unspecified actual, statutory, and punitive damages as well as costs, attorneys’ fees, prejudgment interest, an injunction, and other relief as the Court deems proper for herself and the putative class.

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

On May 13, 2021, Susanne Pace filed a second putative class action complaint in the circuit court of Boone County, Missouri against Landmark Bank, to which Simmons Bank is a successor by merger, which was removed to the United States District Court for the Western District of Missouri, Central Division.

The complaint alleged that Landmark Bank improperly charged multiple insufficient funds or overdraft fees when a merchant or other originator resubmits a rejected payment request.

The complaint asserted claims for breach of contract, including breach of the covenant of good faith and fair dealing.

Plaintiff sought to represent a proposed class of all Landmark Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests.

Plaintiff sought unspecified damages, costs, attorney’s fees, pre- and post-judgment interest, an injunction, and other relief as the Court deems proper for herself and the purported class.

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

The matter was resolved in September 2022 and did not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

On June 29, 2020, Shunda Wilkins, Diann Graham, and David Watson filed a putative class action complaint against Simmons Bank in the United States District Court for the Eastern District of Arkansas.

The complaint alleges that Simmons Bank improperly charges multiple insufficient funds or overdraft fees when a merchant resubmits a rejected payment request.

The complaint asserts claims for breach of contract and unjust enrichment.

Plaintiffs seek to represent a proposed class of all Simmons Bank checking account customers who were charged multiple insufficient funds or overdraft fees on resubmitted payment requests.

Plaintiffs seek unspecified damages, costs, attorney’s fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for themselves and the purported class.

Simmons Bank denies the allegations and is vigorously defending the matter.

On February 9, 2023, the district court denied plaintiffs’ motion for class certification, granted Simmons Bank’s motion for summary judgment in part, and granted Simmons Bank’s motion to exclude testimony of plaintiffs’ expert.

The lawsuit remains pending.

We establish reserves for legal proceedings when potential losses become probable and can be reasonably estimated.

While the ultimate resolution (including amounts thereof) of any legal proceedings, including the Wilkins matter described above, cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

In the ordinary course of its operations, the Company and its subsidiaries are parties to various legal proceedings incidental to the conduct of its business, including proceedings based on breach of contract claims, lender liability claims, and other ordinary-course claims, some of which seek substantial relief or damages.

The Company establishes reserves for legal proceedings when potential losses become probable and can be reasonably estimated.

While the ultimate resolution (including amounts thereof) of any legal proceedings cannot be determined at this time, based on information presently available and after consultation with legal counsel, management believes that the ultimate outcome in such proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

It is possible, however, that future developments could result in an unfavorable outcome for or resolution of any of these proceedings, which may be material to the Company’s results of operations for a given fiscal period.

61 unchanged sentences

Cash and cash equivalents $ 164,439 $ 116,915

Investment securities 6,109 2,932

Investments in wholly-owned subsidiaries 3,603,066 3,453,961

8 unchanged sentences

STOCKHOLDERS’ EQUITY

Preferred stock — —

Common stock 1,252 1,270

43 unchanged sentences

Net collections (originations) of loans 1,310 1,198 ( 2,139 )

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

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

Net purchases of premises and equipment ( 52 ) ( 21 ) ( 83 )

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

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

(Repayment) issuance of long-term debt, net ( 57,436 ) ( 1,563 ) ( 7,442 )

Repayment of long-term debt, net ( 1,664 ) ( 57,436 ) ( 1,563 )

(Cancellation) issuance of common stock, net ( 2,021 ) ( 3,882 ) 1,460

9 unchanged sentences

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk