UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SIMMONS FIRST NATIONAL CORPORATION (Exact name of registrant as specified in its charter) Arkansas 71-0407808 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 501 Main Street 71601 Pine Bluff (Zip Code) Arkansas (Address of principal executive offices) For the quarterly period ...

❑ ~$130 million of projected securities principal maturities per quarter3 Cash & Cash Equivalents Variable Rate Securities 0.65% 1.41% 2.10% 2.57% 3.06%3.31% 3.48% 0.47% 1.02% 1.58% 1.96% 2.37% 2.58% 2.75% 2.20% 3.65% 4.52% 4.99% 5.26% 5.33% 5.33% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Interest Bearing Deposits Cost of Deposits Avg Fed Funds Rate 50% deposit beta during this cycle3 | --- | --- | --- | --- | --- | |---------------------|------------------------|-------------|--------------------------- ...

Financial Data and Key Metrics Changes - The company reported loan growth above forecast, primarily driven by construction fundings, with expectations for continued growth in the low single-digit range for the year [11][12][15] - The net interest margin (NIM) is expected to remain range-bound in the first half of the year, with a gradual expansion anticipated in the second half [15][20] - Operating expenses are projected to be around 2% of average assets moving forward, with a long-term goal to improve the efficiency ratio [33] Business Line Data and Key Metrics Changes - Loan growth was notably strong in the construction sector, with a disciplined approach to credit and pricing being emphasized [11][12] - The company has seen success in interest-bearing deposits, particularly in money market and savings accounts, while also managing higher-cost wholesale funding [12][19] Market Data and Key Metrics Changes - The company is experiencing a stable credit environment, with classified loans remaining flat and past due loans decreasing from 24 basis points to 19 basis points [28] - There is a noted increase in the number of customers, although overall account balances are lower due to inflation and a shift towards higher interest rates [19] Company Strategy and Development Direction - The company is focused on maintaining solid principles of asset quality, capital growth, and flexibility in a challenging economic environment [40] - There is an emphasis on self-funding investments across the bank while managing expenses effectively [34] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding loan growth and deposit trends, particularly in light of recent favorable developments in non-interest bearing accounts [18][19] - The company is preparing for a more neutral interest rate environment, which is expected to benefit overall performance [40] Other Important Information - The company did not repurchase any shares in the first quarter, focusing instead on balance sheet optimization and prudent capital allocation [35] Q&A Session Summary Question: What is the outlook for loan growth? - Management indicated that loan growth was strong, particularly in construction, and expects a balanced outlook in the low single-digit range for the year [11][12] Question: How is the company addressing deposit growth? - The company has seen success in interest-bearing deposits and is focused on combating industry trends affecting net interest income [12][19] Question: What are the trends in credit quality? - Classified loans are flat, and past due loans have decreased, indicating a stable credit environment [28] Question: What is the expectation for operating expenses? - Operating expenses are expected to remain around 2% of average assets, with a focus on improving efficiency [33] Question: What is the company's strategy regarding share repurchases? - The company is prioritizing dividends and organic growth, with share repurchases being considered based on market conditions [35]

| FINANCIAL HIGHLIGHTS | 1Q24 | 4Q23 | 1Q23 | 1Q24 Highlights | | --- | --- | --- | --- | --- | | BALANCE SHEET (in millions) | | | | Comparisons reflect 1Q24 vs 4Q23 | | Total loans | $17,002 | $16,846 | $16,555 | • Net income of $38.9 million and | | Total investment securities | 6,735 | 6,878 | 7,521 | | | Total deposits | 22,353 | 22,245 | 22,452 | diluted EPS of $0.31 | | Total assets | 27,372 | 27,346 | 27,583 | • Adjusted earnings 1 of $40.4 million | | Total shareholders' equity | 3,439 | 3,426 | 3, ...

Financial Performance - Net income available to common shareholders for the year ended December 31, 2023, was $175.1 million, or $1.38 diluted earnings per share, compared to $256.4 million, or $2.06 diluted earnings per share for the same period in 2022[214]. - Adjusted earnings for the year ended December 31, 2023, were $207.7 million, or $1.64 adjusted diluted earnings per share, compared to $298.8 million, or $2.40 adjusted diluted earnings per share in 2022[214]. - Included in 2023 results were $32.7 million of certain items, net of tax, primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment, and branch right sizing initiatives[214]. - Included in 2022 results were $42.4 million of certain items, net of tax, primarily related to acquisitions, Day 2 accounting provision, gain on an insurance settlement, merger-related costs, and branch right sizing initiatives[214]. Assets and Liabilities - Total consolidated assets of Simmons First National Corporation reached $27.3 billion as of December 31, 2023[17]. - Total consolidated loans amounted to $16.8 billion, while total consolidated deposits were $22.2 billion[17]. - The company’s reserve balances were zero as of December 31, 2023, due to the Federal Reserve's reduction of reserve requirements during the COVID-19 pandemic[64]. - Simmons Bank's total investment in the Federal Home Loan Bank of Dallas was $58.2 million as of December 31, 2023[104]. Acquisitions and Growth Strategy - The company has completed 21 whole bank acquisitions since 1990, enhancing its market presence[25]. - The acquisition of Reliance Bancshares in April 2019 added approximately $1.5 billion in assets and 22 branches[35]. - The acquisition of Spirit of Texas Bancshares in April 2022 further strengthened the company's position in Texas with approximately $3.1 billion in assets[38]. - The company aims to capitalize on organic growth opportunities in addition to pursuing strategic mergers and acquisitions[39]. - The company's growth strategy includes acquisitions and de novo branching, which carry inherent risks that could affect market value and profitability[141]. Risk Management and Compliance - The company has a robust risk management framework, including an Asset Quality Review Committee that meets quarterly[44]. - The company is subject to federal and state regulations, requiring approval from the Federal Reserve Board for acquisitions and limiting certain non-banking activities[53][54]. - The company is subject to heightened requirements due to exceeding $10 billion in assets, impacting its operations and compliance obligations[107]. - Future regulatory actions and changes in legislation, such as the Dodd-Frank Act, could adversely affect the company's operations and profitability[159]. Employee and Culture - As of December 31, 2023, the company had approximately 3,007 full-time equivalent associates, with no union representation and no labor disputes reported[52]. - The company is committed to maintaining a strong culture with six Culture Cornerstones, including "Build Loyalty," which was added in 2022 to enhance customer experiences[51]. - The company has implemented various programs for professional development, including mentorship opportunities and tuition reimbursement for higher education[50]. - The company has experienced increasing fraud attempts, including deposit and loan fraud, which pose a material operational risk[147]. Financial Health and Capital Management - The company had approximately $54.4 million available for payment of dividends to the Company without prior regulatory approval as of December 31, 2023[60]. - As of December 31, 2023, Simmons Bank was classified as "well capitalized" with a total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 8%, and a CET1 risk-based capital ratio of at least 6.5%[79]. - The Company accrued $10.5 million related to a special assessment by the FDIC in the fourth quarter of 2023, based on estimated uninsured deposits as of December 31, 2022[92]. - The ability to pay dividends on common stock is contingent on the subsidiary bank's financial health and regulatory restrictions[170]. Market and Economic Conditions - Changes in interest rates and monetary policy could adversely affect the company's profitability and cash flows[116]. - Continued inflationary pressures could increase operating costs and negatively impact borrowers' ability to repay loans, leading to higher default rates[134]. - Economic downturns could lead to increased credit default swap spreads and lower credit ratings, impacting liquidity and lending practices[131]. - The company is vulnerable to adverse conditions in local markets, particularly in Arkansas, Kansas, Missouri, Oklahoma, Tennessee, and Texas, where most loans are secured[135]. Competition and Industry Challenges - The company faces strong competition from various financial institutions, which could lead to loss of market share and reduced profitability[138]. - Changes in service delivery channels and emerging technologies pose competitive risks, potentially leading to loss of fee income and customer deposits[139]. - The company is heavily reliant on third-party service providers for essential operations, exposing it to risks related to vendor performance and service disruptions[154]. Regulatory Environment - The Economic Growth, Regulatory Reform, and Consumer Protection Act (EGRRCPA) provides regulatory relief to bank holding companies with less than $100 billion in assets, such as the Company[86]. - The Dodd-Frank Act established the Bureau of Consumer Financial Protection (CFPB) to oversee consumer protection regulations applicable to financial institutions[85]. - The company and Simmons Bank are no longer required to conduct annual stress tests under the Dodd-Frank Act due to regulatory reforms[110]. - The CFPB proposed rules in January 2024 that would subject overdraft services provided by financial institutions with more than $10 billion in assets to the Truth in Lending Act[111]. Shareholder Information - The company had approximately $39.9 million of remaining funds available for share repurchases under the 2022 Program as of December 31, 2023[199]. - The 2024 stock repurchase program allows for the repurchase of up to $175.0 million of Class A Common Stock[197]. - The company made no purchases of its common stock during the three months ended December 31, 2023[199]. - The company’s common stock is listed on the Nasdaq Global Select Market under the symbol "SFNC" with approximately 2,379 shareholders of record as of February 23, 2024[194]. Recognition and Awards - Simmons Bank was named to Forbes magazine's 2023 list of "World's Best Banks" for the fourth consecutive year[216]. - The bank was recognized by Forbes as one of "America's Best Midsize Employers" for 2023[216]. - The Better Bank Initiative was completed in 2023, focusing on enhancing operational processes and increasing capacity for organic growth[216]. - The bank achieved $18 million of annualized cost savings, exceeding the original estimate of $15 million[216].

Financial Data and Key Metrics Changes - The net interest margin (NIM) improved by 7 basis points from 2.61% to 2.68% linked quarter, with approximately 1 basis point attributed to a recent trade [84] - Non-interest bearing deposits (NIBs) decreased in the fourth quarter but at a slower pace, indicating a potential stabilization [9] Business Line Data and Key Metrics Changes - The company experienced growth in interest-bearing accounts, particularly in savings and money market accounts, which performed strongly in the fourth quarter [9] - Loan growth was moderated, but the company still saw some expansion in the loan pipeline despite a slowing demand [22][59] Market Data and Key Metrics Changes - The company is modeling three rate cuts for the year, with the third cut expected late in the year, which may not significantly impact 2024 results [20][35] - The company remains cautious about the macroeconomic environment and its impact on loan demand and pricing [76] Company Strategy and Development Direction - The company is focused on balance sheet optimization and maintaining a disciplined approach to underwriting and pricing [22][26] - A stock buyback plan of $175 million has been re-initiated, emphasizing the importance of organic growth and prudent capital management [26][40] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding net interest income and margin expansion, contingent on asset repricing and market conditions [6][76] - The company aims to achieve a return on assets (ROA) of 1.25% to 1.50% in the long term, despite current industry pressures [82] Other Important Information - The company has successfully reduced reliance on wholesale funding through core deposit growth and strategic securities sales [101] - The Better Bank Initiative has led to a reduction in non-interest expenses, with expectations of continued savings in the future [39] Q&A Session Summary Question: What are the expectations for margin trajectory? - Management is optimistic about margin expansion, expecting benefits from asset repricing and balance sheet optimization [5][6] Question: How is the company managing loan growth and pricing? - The company is maintaining discipline in underwriting and pricing, with a focus on profitability despite a slowing demand [22][59] Question: What is the outlook for deposits and funding? - Management noted stable consumer deposits and good growth in commercial deposits, with a focus on reducing wholesale funding reliance [60][101] Question: How does the company view future rate cuts? - The company is modeling three rate cuts for the year, with a conservative approach to forecasting [20][35] Question: What are the expectations for expenses in 2024? - The company anticipates a slight increase in expenses, aiming to hold the line despite inflationary pressures [80] Question: How does the company plan to utilize capital? - Capital will be used for organic growth, stock buybacks, and balance sheet optimization, with a focus on prudent management [81]

Contents 3 Company Profile 4 4Q23 Financial Highlights 12 Deposits, Securities, Liquidity, Interest Rate Sensitivity and Capital 18 Loan Portfolio 22 Credit Quality 26 Appendix Forward-Looking Statements. Certain statements by Simmons First National Corporation (the "Company", which where appropriate includes the Company's wholly-owned banking subsidiary, Simmons Bank) contained in this presentation may not be based on historical facts and should be considered "forward-looking statements" within the meaning ...

[Part I: Financial Information](index=3&type=section&id=Part%20I%3A%20Financial%20Information) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The unaudited consolidated financial statements for the period ended September 30, 2023, show a slight increase in total assets to **$27.56 billion**, with net income for the third quarter decreasing to **$47.2 million** from **$80.6 million** in the prior year, primarily due to increased interest expense [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets were **$27.56 billion**, a slight increase from **$27.46 billion** at year-end 2022, driven by a **$608 million** increase in net loans, while total deposits decreased slightly to **$22.23 billion** from **$22.55 billion** Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $605,648 | $682,122 | ($76,474) | | Total investments | $7,100,713 | $7,612,560 | ($511,847) | | Net loans | $16,553,341 | $15,945,169 | $608,172 | | Goodwill | $1,320,799 | $1,319,598 | $1,201 | | **Total assets** | **$27,564,325** | **$27,461,061** | **$103,264** | | **Liabilities & Equity** | | | | | Total deposits | $22,231,211 | $22,548,094 | ($316,883) | | Other borrowings | $1,347,855 | $859,296 | $488,559) | | Total liabilities | $24,278,770 | $24,191,699 | $87,071 | | Total stockholders' equity | $3,285,555 | $3,269,362 | $16,193 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the third quarter of 2023, net income was **$47.2 million** (**$0.37** per diluted share), down from **$80.6 million** (**$0.63** per diluted share) in Q3 2022, primarily due to a significant rise in interest expense that compressed net interest income Income Statement Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $153,433 | $193,585 | $494,498 | $524,290 | | Provision for credit losses | $7,722 | $103 | $31,999 | $14,048 | | Noninterest Income | $42,777 | $43,023 | $133,592 | $125,419 | | Noninterest Expense | $131,998 | $138,943 | $414,922 | $424,173 | | **Net Income** | **$47,247** | **$80,603** | **$151,150** | **$173,152** | | **Diluted EPS** | **$0.37** | **$0.63** | **$1.19** | **$1.40** | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported a comprehensive loss of **$27.1 million** for Q3 2023, primarily due to unrealized holding losses on available-for-sale securities, but achieved comprehensive income of **$124.3 million** for the nine-month period, a significant improvement from a **$384.0 million** loss in the prior year Comprehensive Income (Loss) Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $47,247 | $80,603 | $151,150 | $173,152 | | Other Comprehensive Income (Loss) | ($74,392) | ($117,302) | ($26,820) | ($557,185) | | **Comprehensive Income (Loss)** | **($27,145)** | **($36,699)** | **$124,330** | **($384,033)** | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash provided by operating activities decreased to **$120.4 million** from **$226.2 million** in the prior year, while net cash used in investing and financing activities also saw significant changes, resulting in a **$76.5 million** decrease in cash and cash equivalents Cash Flow Summary (Nine Months Ended, in thousands) | Activity | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $120,436 | $226,208 | | Net cash used in investing activities | ($165,280) | ($592,200) | | Net cash used in financing activities | ($31,630) | ($605,251) | | **Decrease in Cash and Cash Equivalents** | **($76,474)** | **($971,243)** | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased from **$3.27 billion** at December 31, 2022, to **$3.29 billion** at September 30, 2023, primarily driven by net income, partially offset by other comprehensive loss, common stock dividends, and stock repurchases - For the nine months ended September 30, 2023, the company paid dividends of **$0.60 per share**, totaling **$75.9 million**[21](index=21&type=chunk) - The company repurchased **2,257,049 shares** for a total cost of **$40.0 million** during the first nine months of 2023[21](index=21&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=9&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies, acquisitions, financial instruments, and other key aspects of the company's operations, including the 2022 acquisition of Spirit of Texas Bancshares, investment securities portfolio analysis, loan portfolio details, and capital adequacy [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial turmoil in the banking industry during early 2023 and highlights the company's solid liquidity, strong capital, and stable deposit base, noting a decline in net income due to net interest margin compression and the early achievement of the 'Better Bank Initiative' cost savings goal - Net income for Q3 2023 was **$47.2 million** (**$0.37 diluted EPS**), compared to **$58.3 million** (**$0.46 diluted EPS**) for Q2 2023[234](index=234&type=chunk) - The company's 'Better Bank Initiative' successfully achieved its original **$15 million** annual cost savings target by the end of Q3 2023, one quarter ahead of schedule[237](index=237&type=chunk) - As of September 30, 2023, uninsured deposits (excluding collateralized and intercompany deposits) were approximately **$4.63 billion**, representing **21%** of total deposits[236](index=236&type=chunk) Key Metrics as of September 30, 2023 | Metric | Value | | :--- | :--- | | Total Assets | ~$27.6 billion | | Loan to Deposit Ratio | 75% | | Nonperforming Assets to Total Assets | 0.32% | | Tangible Book Value per Share | $14.77 | | Uninsured, non-collateralized deposit coverage ratio | 2.5x | [Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risk, primarily interest rate risk, through asset and liability management policies, with simulations indicating a liability-sensitive balance sheet where a 100 basis point increase in rates is projected to decrease net interest income by **0.87%** over the next 12 months Net Interest Income Sensitivity (as of Sep 30, 2023) | Interest Rate Scenario | % Change from Base | | :--- | :--- | | Up 200 basis points | (1.76)% | | Up 100 basis points | (0.87)% | | Down 100 basis points | 0.80% | | Down 200 basis points | 1.28% | - The company has seven primary and secondary sources of liquidity, including approximately **$510 million** in federal funds lines and **$5.37 billion** in available FHLB lines of credit as of September 30, 2023[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk) [Controls and Procedures](index=82&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on management's evaluation, including the CEO, CFO, and Chief Accounting Officer, the company's disclosure controls and procedures were deemed effective as of September 30, 2023, with no material changes to internal controls over financial reporting during the quarter - The CEO, CFO, and Chief Accounting Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[387](index=387&type=chunk) - No material changes were made to the company's internal control over financial reporting during the third quarter of 2023[388](index=388&type=chunk) [Part II: Other Information](index=82&type=section&id=Part%20II%3A%20Other%20Information) [Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to its business, including a putative class action complaint regarding insufficient funds/overdraft fees that was resolved in the company's favor in July 2023, with management believing the ultimate outcome of all proceedings will not have a material adverse effect on financial condition - A putative class action lawsuit alleging improper overdraft fees, filed in June 2020, was resolved in the bank's favor on July 14, 2023, when the district court ruled in favor of Simmons Bank on the outstanding issues[157](index=157&type=chunk) [Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors faced by the company from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 - No material changes in risk factors were reported since the company's 2022 Form 10-K and Q1 2023 Form 10-Q[390](index=390&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Under its 2022 stock repurchase program, the company purchased **1,128,962 shares** of its common stock during the third quarter of 2023 for an average price of **$17.69 per share**, with approximately **$39.9 million** remaining available for repurchase as of September 30, 2023 Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | July 2023 | 0 | $— | $59,899,000 | | August 2023 | 567,100 | $18.26 | $49,541,000 | | September 2023 | 561,862 | $17.12 | $39,922,000 | | **Total Q3** | **1,128,962** | **$17.69** | **$39,922,000** | [Other Information](index=83&type=section&id=Item%205.%20Other%20Information) During the third quarter of 2023, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q3 2023[394](index=394&type=chunk) [Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements, articles of incorporation, bylaws, certifications from executive officers (CEO, CFO, Chief Accounting Officer), and XBRL data files

Simmons First National Corporation (NASDAQ:SFNC) Q3 2023 Earnings Conference Call October 24, 2023 10:00 AM ET Company Participants Ed Bilek - Executive Vice President, Director of Investor and Media Relations Bob Fehlman - Chief Executive Officer Jay Brogdon - President and Chief Financial Officer George Makris - Executive Chairman Conference Call Participants Brady Gailey - KBW David Feaster - Raymond James Matt Olney - Stephens Graham Dick - Piper Sandler Gary Tenner - D.A. Davidson Operator Good day and ...

[Part I: Financial Information](index=3&type=section&id=Part%20I%3A%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's discussion and analysis of the Company's financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies and financial instruments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show increased total assets and stockholders' equity, with a shift from noninterest-bearing to time deposits | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $27,959,123 | $27,461,061 | +$498,062 | | Net Loans | $16,623,687 | $15,945,169 | +$678,518 | | Total Deposits | $22,488,722 | $22,548,094 | -$59,372 | | Noninterest bearing transaction accounts | $5,264,962 | $6,016,651 | -$751,689 | | Interest bearing transaction and savings deposits | $10,866,078 | $11,762,885 | -$896,807 | | Time deposits | $6,357,682 | $4,768,558 | +$1,589,124 | | Total Liabilities | $24,602,797 | $24,191,699 | +$411,098 | | Total Stockholders' Equity | $3,356,326 | $3,269,362 | +$86,964 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income significantly increased for both three and six months ended June 30, 2023, driven by higher interest income despite rising interest expense | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total Interest Income | $297,220 | $204,806 | $576,357 | $366,533 | | Total Interest Expense | $133,990 | $19,707 | $235,292 | $35,828 | | Net Interest Income | $163,230 | $185,099 | $341,065 | $330,705 | | Provision for credit losses | $61 | $33,859 | $24,277 | $13,945 | | Total Noninterest Income | $44,980 | $40,178 | $90,815 | $82,396 | | Total Noninterest Expense | $139,696 | $156,813 | $282,924 | $285,230 | | Net Income | $58,314 | $27,454 | $103,903 | $92,549 | | Basic Earnings Per Share | $0.46 | $0.21 | $0.82 | $0.77 | | Diluted Earnings Per Share | $0.46 | $0.21 | $0.82 | $0.77 | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Comprehensive income improved significantly due to positive unrealized holding gains on available-for-sale securities for the periods ended June 30, 2023 | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net Income | $58,314 | $27,454 | $103,903 | $92,549 | | Other comprehensive income (loss), before tax effect | $938 | $(167,152) | $64,404 | $(595,523) | | Total Other Comprehensive Income (Loss) | $693 | $(123,467) | $47,572 | $(439,883) | | Comprehensive Income (Loss) | $59,007 | $(96,013) | $151,475 | $(347,334) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Overall cash and cash equivalents increased for the six months ended June 30, 2023, primarily from financing activities, reversing a prior year decrease | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $158,932 | $177,857 | | Net cash used in investing activities | $(419,836) | $(353,188) | | Net cash provided by (used in) financing activities | $324,694 | $(510,475) | | Increase (decrease) in cash and cash equivalents | $63,790 | $(685,806) | | Cash and cash equivalents, end of period | $745,912 | $964,847 | [Consolidated Statements of Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total equity increased at June 30, 2023, driven by comprehensive income and stock-based compensation, partially offset by repurchases and dividends | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Balance, beginning of period | $3,269,362 | $3,248,841 | | Comprehensive income (loss) | $151,475 | $(347,334) | | Stock issued for employee stock purchase plan | $833 | $1,151 | | Stock-based compensation plans, net | $5,513 | $4,259 | | Stock issued for Spirit acquisition | — | $464,918 | | Stock repurchases | $(20,022) | $(66,096) | | Dividends on common stock | $(50,835) | $(45,844) | | Balance, end of period | $3,356,326 | $3,259,895 | [Condensed Notes to Consolidated Financial Statements](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures for interim financial statements, covering accounting policies, acquisitions, investment securities, loans, and other financial instruments [NOTE 1: PREPARATION OF INTERIM FINANCIAL STATEMENTS](index=12&type=section&id=NOTE%201%3A%20PREPARATION%20OF%20INTERIM%20FINANCIAL%20STATEMENTS) This note outlines the basis for interim financial statements, detailing SEC compliance, management estimates, and the adoption of new accounting standards with no material impact - The Company early adopted ASU 2023-02 (Investments-Equity Method and Joint Ventures) in Q1 2023, applying the proportional amortization method for tax credits, with **no material impact** on financial results[27](index=27&type=chunk) - ASU 2022-02 (Credit Losses on Financial Instruments) was adopted effective January 1, 2023, eliminating troubled debt restructuring (TDR) guidance and amending vintage disclosures, also with **no material impact**[28](index=28&type=chunk) - ASU 2022-01 (Fair Value Hedging) was adopted, clarifying guidance on fair value hedge accounting for interest rate risk, with **no material impact** on financial results[29](index=29&type=chunk) - The Company refined its current expected credit losses calculation process in Q1 2023, determining that the changes did not and are not expected to result in **material differences**[36](index=36&type=chunk) [NOTE 2: ACQUISITIONS](index=14&type=section&id=NOTE%202%3A%20ACQUISITIONS) This note details the merger with Spirit of Texas Bancshares, Inc., including consideration, acquired assets and liabilities, and recorded goodwill, along with pro forma financial information - The Company completed its merger with Spirit of Texas Bancshares, Inc. on April 8, 2022, issuing **18,275,074 shares of common stock** (valued at approximately **$464.9 million**) and **$1.4 million in cash**[38](index=38&type=chunk) - The acquisition brought approximately **$3.11 billion in assets**, including **$2.29 billion in loans**, and **$2.72 billion in deposits**[39](index=39&type=chunk) - Goodwill of **$174.1 million** was recorded as a result of the transaction, strengthening the Company's position in the Texas market[40](index=40&type=chunk) | (In thousands, except per share data) | 2022 | 2021 | | :----------------------------------- | :----- | :----- | | Revenue | $912,631 | $927,061 | | Net income | $264,522 | $307,752 | | Diluted earnings per share | $2.04 | $2.40 | [NOTE 3: INVESTMENT SECURITIES](index=17&type=section&id=NOTE%203%3A%20INVESTMENT%20SECURITIES) This note details HTM and AFS investment securities, highlighting significant unrealized losses due to rising interest rates, which management deems temporary and not credit-related | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Held-to-maturity (HTM) Amortized Cost | $3,759,968 | $3,761,094 | | Held-to-maturity (HTM) Estimated Fair Value | $3,094,858 | $3,063,233 | | Available-for-sale (AFS) Amortized Cost | $4,012,265 | $4,331,413 | | Available-for-sale (AFS) Estimated Fair Value | $3,579,758 | $3,852,854 | - As of June 30, 2023, **98.7% of AFS securities** were in an unrealized loss position, primarily due to increases in market interest rates, which management believes are temporary and not credit-related[61](index=61&type=chunk)[62](index=62&type=chunk) | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Total Investment Income | $97,525 | $71,560 | | HTM Allowance for Credit Losses (Ending Balance) | $3,214 | $1,381 | | AFS Allowance for Credit Losses (Ending Balance) | $2,396 | $0 | - The provision for credit losses related to AFS securities for the six months ended June 30, 2023, was **$11.5 million**, including a **$7.0 million charge-off** for one corporate bond[67](index=67&type=chunk) [NOTE 4: OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALE](index=21&type=section&id=NOTE%204%3A%20OTHER%20ASSETS%20AND%20OTHER%20LIABILITIES%20HELD%20FOR%20SALE) This note reports no remaining balance for loans previously held for sale from the Spirit acquisition and no other outstanding liabilities held for sale as of June 30, 2023 - Loans acquired as part of the Spirit acquisition, valued at **$35.2 million** at the acquisition date, had **no remaining balance** as of June 30, 2023[73](index=73&type=chunk) - There were **no outstanding other liabilities held for sale** as of June 30, 2023[74](index=74&type=chunk) [NOTE 5: LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=22&type=section&id=NOTE%205%3A%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note details the loan portfolio, credit risk, nonaccrual loans, and ACL methodology, showing increased total loans and ACL due to growth and updated economic assumptions | Loan Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Consumer | $357,785 | $349,810 | +$7,975 | | Real Estate | $13,110,081 | $12,581,262 | +$528,819 | | Commercial | $2,849,871 | $2,837,913 | +$11,958 | | Other | $515,916 | $373,139 | +$142,777 | | **Total Loans** | **$16,833,653** | **$16,142,124** | **+$691,529** | | Loan Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Consumer | $897 | $782 | +$115 | | Real Estate | $38,969 | $40,116 | -$1,147 | | Commercial | $31,410 | $17,533 | +$13,877 | | Other | $3 | $3 | $0 | | **Total Nonaccrual Loans** | **$71,279** | **$58,434** | **+$12,845** | | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance, January 1 | $196,955 | $205,332 | | Provision for credit loss expense | $15,977 | $10,492 | | Net charge-offs | $(2,966) | $(7,256) | | Acquisition adjustment for PCD loans | — | $4,043 | | **Ending balance, June 30** | **$209,966** | **$212,611** | | Component (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Loans | $5,061 | $30,406 | $15,977 | $10,492 | | Unfunded commitments | $(5,000) | $3,453 | $(5,000) | $3,453 | | Securities - HTM | $1,326 | — | $1,826 | — | | Securities - AFS | $(1,326) | — | $11,474 | — | | **Total Provision for Credit Losses** | **$61** | **$33,859** | **$24,277** | **$13,945** | [NOTE 6: RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIES](index=37&type=section&id=NOTE%206%3A%20RIGHT-OF-USE%20LEASE%20ASSETS%20AND%20LEASE%20LIABILITIES) This note details the recognition of right-of-use lease assets and lease liabilities on the balance sheet for operating leases under ASC Topic 842 | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :---------------- | | Right-of-use lease assets | $57,171 | $46,845 | | Lease liabilities | $58,379 | $47,850 | | Weighted average remaining lease term | 8.26 years | 6.69 years | | Weighted average discount rate | 3.33 % | 2.41 % | - Operating lease cost for the six months ended June 30, 2023, was **$7.6 million**, compared to **$6.9 million** for the same period in 2022[131](index=131&type=chunk) [NOTE 7: PREMISES AND EQUIPMENT](index=37&type=section&id=NOTE%207%3A%20PREMISES%20AND%20EQUIPMENT) This note provides a breakdown of the Company's premises and equipment, net of accumulated depreciation and amortization, as of June 30, 2023, and December 31, 2022 | Component (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Right-of-use lease assets | $57,171 | $46,845 | | Land | $124,491 | $122,841 | | Buildings and improvements | $377,108 | $370,530 | | Furniture, fixtures and equipment | $108,106 | $122,029 | | Software | $59,841 | $70,984 | | Construction in progress | $16,023 | $15,488 | | Accumulated depreciation and amortization | $(180,715) | $(199,976) | | **Total premises and equipment, net** | **$562,025** | **$548,741** | [NOTE 8: GOODWILL AND OTHER INTANGIBLE ASSETS](index=38&type=section&id=NOTE%208%3A%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill remained stable at $1.32 billion with no impairment, while other intangible assets decreased due to amortization, as detailed in this note - Goodwill totaled **$1.32 billion** at June 30, 2023, and December 31, 2022, with **no impairment** indicated or recorded during the six months ended June 30, 2023[133](index=133&type=chunk)[134](index=134&type=chunk) | Component (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Core deposit premiums, net | $108,639 | $116,016 | | Books of business and other intangibles, net | $12,119 | $12,935 | | **Total other intangible assets, net** | **$120,758** | **$128,951** | - Estimated remaining amortization expense on other intangible assets is **$8.1 million** for the remainder of 2023 and **$15.4 million** for 2024[139](index=139&type=chunk) [NOTE 9: TIME DEPOSITS](index=39&type=section&id=NOTE%209%3A%20TIME%20DEPOSITS) This note details the composition of time deposits, highlighting a significant increase in certificates of deposit over $250,000 and brokered time deposits - Certificates of deposit over **$250,000** increased to approximately **$1.60 billion** at June 30, 2023, from **$1.08 billion** at December 31, 2022[140](index=140&type=chunk) - Brokered time deposits increased to **$3.24 billion** at June 30, 2023, from **$2.75 billion** at December 31, 2022[140](index=140&type=chunk) [NOTE 10: INCOME TAXES](index=39&type=section&id=NOTE%2010%3A%20INCOME%20TAXES) This note presents the provision for income taxes, deferred tax assets and liabilities, and reconciliation of tax expense, including expected utilization of federal net operating losses | Component (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Income taxes currently payable | $10,295 | $15,341 | $21,111 | $20,460 | | Deferred income taxes | $(156) | $(8,190) | $(335) | $917 | | **Provision for income taxes** | **$10,139** | **$7,151** | **$20,776** | **$21,377** | - Net deferred tax asset decreased to **$159.3 million** at June 30, 2023, from **$173.1 million** at December 31, 2022[142](index=142&type=chunk) - The Company expects to fully realize its deferred tax assets and anticipates utilizing approximately **$44.4 million** of federal net operating losses, subject to IRC Section 382 limitations, by 2036[143](index=143&type=chunk)[145](index=145&type=chunk) [NOTE 11: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE](index=41&type=section&id=NOTE%2011%3A%20SECURITIES%20SOLD%20UNDER%20AGREEMENTS%20TO%20REPURCHASE) This note details the Company's use of repurchase agreements for short-term funding, noting a decrease in recognized liabilities and that all agreements were overnight and continuous - The gross amount of recognized liabilities for repurchase agreements was **$102.2 million** at June 30, 2023, a decrease from **$152.4 million** at December 31, 2022[148](index=148&type=chunk) - All repurchase agreements at both June 30, 2023, and December 31, 2022, were overnight and continuous, secured by U.S. Government agencies[149](index=149&type=chunk) [NOTE 12: OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES](index=42&type=section&id=NOTE%2012%3A%20OTHER%20BORROWINGS%20AND%20SUBORDINATED%20NOTES%20AND%20DEBENTURES) This note details the Company's debt, including a significant increase in FHLB advances for liquidity and the transition of subordinated debt from fixed to floating rates | Component (in thousands) | June 30, 2023 | December 31, 2022 | Change | | :----------------------------------- | :-------------- | :---------------- | :------- | | FHLB advances | $1,353,356 | $838,487 | +$514,869 | | Other long-term debt | $19,983 | $20,809 | -$826 | | Subordinated notes and debentures | $366,065 | $365,989 | +$76 | | **Total Other Borrowings and Subordinated Debt** | **$1,739,404** | **$1,225,285** | **+$514,119** | - Approximately **$330.0 million** of subordinated notes transitioned from a fixed rate of **5.00%** to a floating rate (LIBOR + 2.15%, transitioning to SOFR + 26.161 basis points from October 1, 2023) on April 1, 2023[150](index=150&type=chunk)[151](index=151&type=chunk) - FHLB advances increased significantly due to a strategic decision to elevate the Company's liquidity position amidst the macroeconomic environment and debt ceiling debate[153](index=153&type=chunk) [NOTE 13: CONTINGENT LIABILITIES](index=43&type=section&id=NOTE%2013%3A%20CONTINGENT%20LIABILITIES) This note addresses the Company's legal proceedings, including a class action regarding overdraft fees, with management believing no material adverse effect on financial condition - The Company is a party to various legal proceedings, including a putative class action complaint alleging improper charges of multiple insufficient funds or overdraft fees[155](index=155&type=chunk)[156](index=156&type=chunk) - On July 14, 2023, the district court denied plaintiffs' motion to reconsider and ruled in favor of Simmons Bank on the outstanding issues in the overdraft fee litigation[156](index=156&type=chunk) - Management believes that the ultimate outcome of legal proceedings, individually or in aggregate, will not have a **material adverse effect** on the Company's business, consolidated results of operations, financial condition, or cash flows[157](index=157&type=chunk) [NOTE 14: CAPITAL STOCK](index=43&type=section&id=NOTE%2014%3A%20CAPITAL%20STOCK) This note details changes in authorized capital stock, including an increase in Class A common stock and removal of Series D Preferred Stock, and outlines stock repurchase programs - The number of authorized shares of Class A common stock was increased from **175,000,000 to 350,000,000** on April 27, 2022[158](index=158&type=chunk) - The classification and designation for Series D Preferred Stock were removed, and **no shares of preferred stock** were issued or outstanding as of June 30, 2023[159](index=159&type=chunk) - The 2022 stock repurchase program, authorizing up to **$175.0 million** of Class A common stock repurchases, replaced the 2019 Program[161](index=161&type=chunk) - During the three and six months ended June 30, 2023, the Company repurchased **1,128,087 shares** at an average price of **$17.75 per share** under the 2022 Program[162](index=162&type=chunk) [NOTE 15: UNDIVIDED PROFITS](index=44&type=section&id=NOTE%2015%3A%20UNDIVIDED%20PROFITS) This note addresses dividend limitations for Simmons Bank and confirms that both the Company and Simmons Bank met all Basel III capital adequacy requirements as of June 30, 2023 - As of June 30, 2023, Simmons Bank had approximately **$285.9 million** available for dividend payments to the Company without prior regulatory approval[164](index=164&type=chunk) - The Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, under the Basel III Capital Rules as of June 30, 2023[166](index=166&type=chunk) - The Company's Common Equity Tier 1 (CET1) ratio was **11.92%** at June 30, 2023[166](index=166&type=chunk) [NOTE 16: STOCK-BASED COMPENSATION](index=45&type=section&id=NOTE%2016%3A%20STOCK-BASED%20COMPENSATION) This note summarizes stock-based compensation plans, reporting expense and unrecognized expense for future periods, including stock options, non-vested stock awards, and performance stock units - Stock-based compensation expense was **$8.0 million** for the six months ended June 30, 2023, compared to **$8.2 million** for the same period in 2022[170](index=170&type=chunk) - Unrecognized stock-based compensation expense related to non-vested stock awards and units was **$21.3 million** at June 30, 2023, with a weighted-average recognition period of **1.7 years**[170](index=170&type=chunk) - **No stock options** were granted during the six months ended June 30, 2023, or 2022[172](index=172&type=chunk) | (Shares in thousands) | Stock Options Outstanding | Non-vested Stock Units Outstanding | | :----------------------------------- | :------------------------ | :--------------------------------- | | Beginning balance, January 1, 2023 | 470 | 1,197 | | Granted | — | 730 | | Vested (earned) | — | (381) | | Forfeited/expired | — | (138) | | **Balance, June 30, 2023** | **469** | **1,408** | [NOTE 17: EARNINGS PER SHARE ("EPS")](index=46&type=section&id=NOTE%2017%3A%20EARNINGS%20PER%20SHARE%20%28%22EPS%22%29) This note provides the computation of basic and diluted earnings per share for the three and six months ended June 30, 2023, and 2022 | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $58,314 | $27,454 | $103,903 | $92,549 | | Basic earnings per share | $0.46 | $0.21 | $0.82 | $0.77 | | Diluted earnings per share | $0.46 | $0.21 | $0.82 | $0.77 | - **469,280 stock options** were excluded from the EPS calculation for the three and six months ended June 30, 2023, because their exercise price exceeded the average market price of the Company's stock[173](index=173&type=chunk) [NOTE 18: ADDITIONAL CASH FLOW INFORMATION](index=46&type=section&id=NOTE%2018%3A%20ADDITIONAL%20CASH%20FLOW%20INFORMATION) This note presents supplementary cash flow information for the six months ended June 30, 2023, and 2022, including interest paid, income taxes paid, and transfers of loans to foreclosed assets | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Interest paid | $224,345 | $36,049 | | Income taxes paid | $1,425 | $4,881 | | Transfers of loans to foreclosed assets held for sale | $2,274 | $581 | [NOTE 19: OTHER INCOME AND OTHER OPERATING EXPENSES](index=47&type=section&id=NOTE%2019%3A%20OTHER%20INCOME%20AND%20OTHER%20OPERATING%20EXPENSES) This note breaks down other income and operating expenses, highlighting drivers of changes such as legal reserve recapture, fair value adjustments, and various operational costs - Other income for the six months ended June 30, 2023, was **$21.1 million**, an increase from **$14.1 million** in 2022, primarily due to a **$4.0 million legal reserve recapture** and **$3.5 million in fair value adjustments**[175](index=175&type=chunk) | Component (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Professional services | $9,642 | $9,648 | | Marketing | $12,254 | $14,894 | | Software and technology | $20,592 | $20,225 | | Amortization of intangibles | $8,194 | $7,582 | | Other expense | $18,213 | $17,829 | | **Total other operating expenses** | **$86,012** | **$86,129** | [NOTE 20: CERTAIN TRANSACTIONS](index=47&type=section&id=NOTE%2020%3A%20CERTAIN%20TRANSACTIONS) This note states that transactions with directors, officers, and their associates are conducted in the ordinary course of business on comparable terms and do not involve more than normal risk - Loans, credit extensions, deposits, and vendor contracts with directors, officers, and their associates are made in the ordinary course of business, on substantially the same terms as with unrelated persons, and do not involve more than normal risk[177](index=177&type=chunk) [NOTE 21: COMMITMENTS AND CREDIT RISK](index=47&type=section&id=NOTE%2021%3A%20COMMITMENTS%20AND%20CREDIT%20RISK) This note outlines outstanding commitments to extend credit, including credit card and loan commitments, and standby letters of credit, along with associated credit risk management practices | Commitment Type (in millions) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Credit card commitments | $717.1 | $696.7 | | Other loan commitments | $4,710.0 | $5,640.0 | | Fixed-rate mortgage loan originations | $30.4 | $21.1 | | Standby letters of credit | $52.0 | $44.4 | - The credit risk involved in issuing letters of credit is similar to extending loans, with collateral requirements based on credit assessments[178](index=178&type=chunk)[181](index=181&type=chunk) [NOTE 22: FAIR VALUE MEASUREMENTS](index=48&type=section&id=NOTE%2022%3A%20FAIR%20VALUE%20MEASUREMENTS) This note explains fair value measurement methodologies, categorizing financial instruments into Level 1, 2, or 3 inputs, and provides tables for assets measured at fair value - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[186](index=186&type=chunk) | Asset Type (in thousands) | Fair Value (June 30, 2023) | Level 1 | Level 2 | Level 3 | | :----------------------------------- | :--------------------------- | :-------- | :-------- | :-------- | | Available-for-sale securities | $3,579,758 | $2,209 | $3,577,549 | — | | Mortgage loans held for sale | $10,342 | — | — | $10,342 | | Derivative asset | $152,697 | — | $152,697 | — | | Derivative liability | $(33,543) | — | $(33,543) | — | | Asset Type (in thousands) | Fair Value (June 30, 2023) | Level 1 | Level 2 | Level 3 | | :----------------------------------- | :--------------------------- | :-------- | :-------- | :-------- | | Individually assessed loans (collateral-dependent) | $99,721 | — | — | $99,721 | | Foreclosed assets and other real estate owned | $3,052 | — | — | $3,052 | - Individually assessed loans (collateral-dependent) and foreclosed assets are classified within Level 3 due to the use of significant unobservable inputs in determining their fair value[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [NOTE 23: DERIVATIVE INSTRUMENTS](index=53&type=section&id=NOTE%2023%3A%20DERIVATIVE%20INSTRUMENTS) This note describes the Company's use of derivative instruments, primarily interest rate swaps, to manage interest rate risk for itself and its customers, and notes the expiration of energy hedge contracts - The Company utilizes derivative instruments, mainly interest rate swaps, to manage interest rate risk for itself and its customers, ensuring transactions have an associated underlying exposure[208](index=208&type=chunk) - Fair value hedges, specifically interest rate swaps, are used to mitigate the effect of changing interest rates on **$1.0 billion** of fixed-rate callable AFS securities, converting fixed rates to variable rates[211](index=211&type=chunk)[213](index=213&type=chunk) - Customer risk management interest rate swaps involve offsetting agreements with dealer counterparties to minimize market risk, with derivative assets valued at **$33.6 million** (notional **$486.4 million**) at June 30, 2023[215](index=215&type=chunk)[217](index=217&type=chunk) - All energy hedge swap contracts expired during the second quarter of 2023, and the Company generally does not intend to offer these services to energy-related customers going forward[221](index=221&type=chunk) [Report of Independent Registered Public Accounting Firm](index=55&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) FORVIS, LLP reviewed the interim financial statements for June 30, 2023, finding no material modifications needed for US GAAP conformity, and confirmed an unqualified opinion for 2022 - FORVIS, LLP reviewed the consolidated interim financial statements for June 30, 2023, and found **no material modifications** necessary for conformity with US GAAP[223](index=223&type=chunk) - An **unqualified opinion** was expressed on the Company's audited consolidated financial statements for the year ended December 31, 2022[224](index=224&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition and results, including quarterly and year-over-year comparisons, strategic initiatives, asset quality, and capital management [OVERVIEW](index=56&type=section&id=OVERVIEW) This overview summarizes the Company's H1 2023 performance, highlighting resilience, solid liquidity, strong capital, stable deposits, and progress on the 'Better Bank Initiative' | Metric | Q2 2023 | Q1 2023 | | :----------------------------------- | :------ | :------ | | Net income (in millions) | $58.3 | $45.6 | | Diluted earnings per share | $0.46 | $0.36 | | Adjusted earnings (non-GAAP, in millions) | $61.1 | $47.3 | | Adjusted diluted earnings per share (non-GAAP) | $0.48 | $0.37 | - Total deposits were relatively stable at **$22.49 billion** at June 30, 2023, compared to **$22.55 billion** at December 31, 2022, with uninsured deposits (excluding collateralized and intercompany) at approximately **$4.82 billion** (**21% of total deposits**)[232](index=232&type=chunk) - Capital levels remained strong, with a common equity to total assets ratio of **12.00%**, tangible common equity to tangible assets of **7.22%**, and Tier 1 leverage ratio of **9.23%** at June 30, 2023[232](index=232&type=chunk) - The 'Better Bank Initiative' is on track to achieve or exceed **$15 million in annual cost savings** by the end of 2023, with an early retirement program expected to result in **$5.1 million in annual cost savings**[233](index=233&type=chunk) - Total nonperforming loans were **$72.0 million** at June 30, 2023, and non-performing assets as a percent of total assets were **0.28%**[234](index=234&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=57&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section identifies critical accounting estimates requiring significant management judgment, including allowance for credit losses, acquisition accounting, goodwill valuation, stock-based compensation, and income taxes - Critical accounting estimates include the determination of the adequacy of the allowance for credit losses, acquisition accounting and valuation of loans, valuation of goodwill and intangible assets, stock-based compensation plans, and income taxes[241](index=241&type=chunk) - The allowance for credit losses is inherently subjective, requiring material estimates based on reasonable and supportable forecasts, quantitative factors, and qualitative considerations[242](index=242&type=chunk)[243](index=243&type=chunk) - Goodwill impairment testing relies on subjective assumptions about discounted cash flows, market and economic conditions, and peer bank pricing multiples[247](index=247&type=chunk) [NET INTEREST INCOME](index=59&type=section&id=NET%20INTEREST%20INCOME) This section analyzes net interest income (FTE), detailing sequential and year-over-year changes, highlighting the impact of rising interest rates on income and expense, and the resulting decrease in net interest margin | Metric (FTE, in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended March 31, 2023 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | | Net interest income – FTE | $169,336 | $184,146 | $353,482 | $342,403 | | Net interest margin – FTE | 2.76 % | 3.09 % | 2.92 % | 3.01 % | - Sequentially, net interest income (FTE) decreased by **$14.8 million** (**8.0%**) from Q1 2023 to Q2 2023, primarily due to a **$32.7 million increase in interest expense**, largely from rising deposit rates and a shift in deposit mix[254](index=254&type=chunk)[256](index=256&type=chunk) - Year-over-year, net interest income (FTE) increased by **$11.1 million** (**3.2%**) for the six months ended June 30, 2023, driven by a **$210.5 million increase in interest income**, partially offset by a **$199.5 million increase in interest expense**[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - The net interest margin (FTE) decreased by **33 basis points** sequentially to **2.76%** in Q2 2023 and by **9 basis points** year-over-year to **2.92%** for 6M 2023, reflecting increased market competition and consumer migration to higher-rate deposits[260](index=260&type=chunk) [PROVISION FOR CREDIT LOSSES](index=64&type=section&id=PROVISION%20FOR%20CREDIT%20LOSSES) This section explains the provision for credit losses, analyzing changes for the three and six months ended June 30, 2023, attributed to loan growth, economic assumptions, and security value decreases - The provision for credit losses for the three months ended June 30, 2023, was **$61,000**, a significant decrease from **$24.2 million** in the preceding quarter (Q1 2023)[272](index=272&type=chunk) - The Q1 2023 provision included a **$10.9 million expense** related to loan growth and economic assumptions, and a **$13.3 million expense** for securities due to decreases in corporate bond values[272](index=272&type=chunk) - For the six months ended June 30, 2023, the provision for credit losses was **$24.3 million**, an increase from **$13.9 million** in the same period of 2022, reflecting the impacts described above, partially offset by a recapture of credit losses in 2022[273](index=273&type=chunk) [NONINTEREST INCOME](index=65&type=section&id=NONINTEREST%20INCOME) This section reviews noninterest income components, noting a sequential quarterly decrease due to a legal reserve recapture, but a year-over-year increase driven by the Spirit acquisition and fair value adjustments - Total noninterest income for Q2 2023 was **$45.0 million**, a decrease of **$855,000** (**1.9%**) from Q1 2023[275](index=275&type=chunk) - The sequential decrease was primarily due to a **$4.0 million legal reserve recapture** in Q1 2023, partially offset by **$3.5 million in fair value adjustments** (SBIC investments and BOLI death benefits) in Q2 2023[275](index=275&type=chunk) - Noninterest income for the six months ended June 30, 2023, increased by **$8.4 million** (**10.2%**) year-over-year, primarily due to the Spirit acquisition's increased consumer base, the legal reserve recapture, and fair value adjustments[276](index=276&type=chunk) - Mortgage lending income decreased by **$2.8 million** year-over-year due to the rising interest rate environment and softening market conditions[276](index=276&type=chunk) [NONINTEREST EXPENSE](index=66&type=section&id=NONINTEREST%20EXPENSE) This section discusses noninterest expense, reporting a sequential quarterly decrease due to incentive accrual adjustments and seasonal payroll, partially offset by early retirement costs, with a slight year-over-year decrease in total expense - Noninterest expense for Q2 2023 was **$139.7 million**, a decrease of **$3.5 million** (**2.5%**) from Q1 2023, with adjusted noninterest expense decreasing by **$4.9 million** (**3.5%**)[282](index=282&type=chunk) - The decrease in salaries and employee benefits was due to a **$3.0 million incentive accrual adjustment** and seasonal payroll expenses, partially offset by **$3.6 million in early retirement program costs**[284](index=284&type=chunk) - Total noninterest expense for the six months ended June 30, 2023, decreased by **$2.3 million** (**0.8%**) year-over-year, while adjusted noninterest expense increased by **$15.6 million** (**6.0%**)[283](index=283&type=chunk) - Deposit insurance expense increased by **$5.4 million** year-over-year due to an increased base rate and deposits from the Spirit acquisition[285](index=285&type=chunk) [INVESTMENTS AND SECURITIES](index=67&type=section&id=INVESTMENTS%20AND%20SECURITIES) This section updates on the securities portfolio, including HTM and AFS classifications, unrealized losses, and hedging strategies, with management intending to hold securities for maturity or cost recovery - HTM investment securities were **$3.76 billion** and AFS were **$3.58 billion** at June 30, 2023[290](index=290&type=chunk) - Unrealized losses of **$136.0 million** in accumulated other comprehensive income (loss) from securities transferred from AFS to HTM will be amortized over their remaining life[291](index=291&type=chunk) - Management intends to hold HTM securities to maturity and AFS securities for a period sufficient for cost recovery, believing unrealized losses are temporary and not credit-related (except for two nonperforming corporate bonds)[292](index=292&type=chunk)[293](index=293&type=chunk) - Interest rate swaps are utilized as fair value hedges for **$1.0 billion** of fixed-rate callable municipal AFS securities, converting fixed rates to variable rates starting in Q3 2023[294](index=294&type=chunk) [LOAN PORTFOLIO](index=69&type=section&id=LOAN%20PORTFOLIO) This section details the growth and diversification of the loan portfolio, emphasizing credit risk management through diversification, collateral monitoring, and regular reviews, and provides a breakdown of loan types - Total loans increased to **$16.83 billion** at June 30, 2023, up **$691.5 million** from December 31, 2022, driven by the Spirit acquisition and widespread organic growth[295](index=295&type=chunk) - Real estate loans (**77.9% of total**) increased by **$528.8 million**, with C&D loans up **14.2%**, single-family residential up **3.4%**, and CRE loans up **1.0%**[299](index=299&type=chunk) - Commercial loans (**16.9% of total**) increased by **$12.0 million**, with agricultural loans up **36.4%** due to seasonality, offsetting a decrease in non-real estate business loans[300](index=300&type=chunk) - The commercial loan pipeline was **$689.1 million** at June 30, 2023, down from **$1.12 billion** at December 31, 2022[302](index=302&type=chunk) [ASSET QUALITY](index=70&type=section&id=ASSET%20QUALITY) This section assesses asset quality, focusing on non-performing loans, past due loans, and foreclosed assets, noting an increase in non-performing assets but emphasizing strong metrics and a conservative credit culture - Total non-performing assets increased by **$14.5 million** from December 31, 2022, to June 30, 2023, primarily due to a **$12.8 million increase in nonaccrual loans**[305](index=305&type=chunk) | Metric (in thousands) | June 30, 2023 | December 31, 2022 | June 30, 2022 | | :----------------------------------- | :-------------- | :---------------- | :-------------- | | Nonaccrual loans | $71,279 | $58,434 | $62,670 | | Loans past due 90 days or more | $738 | $507 | $904 | | **Total non-performing loans** | **$72,017** | **$58,941** | **$63,574** | | Foreclosed assets and other real estate owned | $3,909 | $2,887 | $4,084 | | **Total non-performing assets** | **$76,939** | **$62,472** | **$69,972** | | Non-performing assets to total assets | 0.28 % | 0.23 % | 0.26 % | - The allowance for credit losses was **292% of non-performing loans** at June 30, 2023, and non-performing loans equaled **0.43% of total loans**[308](index=308&type=chunk) - Annualized net credit card charge-offs to average total credit card loans were **1.97%** for the first six months of 2023, compared to **1.49%** during the full year 2022[308](index=308&type=chunk) [ALLOWANCE FOR CREDIT LOSSES](index=71&type=section&id=ALLOWANCE%20FOR%20CREDIT%20LOSSES) This section explains the ACL methodology, based on lifetime expected losses, quantitative factors, and qualitative considerations, noting an increase due to loan growth and refreshed economic forecasts - The ACL is management's best estimate of lifetime expected losses, utilizing statistically-based models with probability-of-default, exposure-at-default, and loss-given-default parameters, adjusted for economic forecasts and qualitative factors[313](index=313&type=chunk) - The ACL increased by approximately **$13.0 million** from December 31, 2022, to June 30, 2023, primarily due to loan growth and refreshed economic forecasts[318](index=318&type=chunk)[319](index=319&type=chunk) | Loan Category (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Credit cards | $6,330 | $5,140 | | Other consumer | $6,838 | $6,614 | | Real estate | $165,813 | $150,795 | | Commercial | $30,985 | $34,406 | | **Total Allowance for Credit Losses** | **$209,966** | **$196,955** | - The allowance for credit losses to period-end loans was **1.25%** as of June 30, 2023, up from **1.22%** at December 31, 2022[321](index=321&type=chunk) [DEPOSITS](index=73&type=section&id=DEPOSITS) This section discusses the deposit base, strategies for customer retention, and the impact of rising interest rates, noting a slight decrease in total deposits but a significant shift to higher-yielding time deposits - Total deposits were **$22.49 billion** at June 30, 2023, a slight decrease from **$22.55 billion** at December 31, 2022[325](index=325&type=chunk) - Noninterest-bearing and interest-bearing transaction/savings accounts decreased by **$1.65 billion**, while total time deposits increased by **$1.59 billion**, reflecting consumer migration to higher-rate deposits[325](index=325&type=chunk) - Brokered deposits increased to **$3.24 billion** at June 30, 2023, from **$2.75 billion** at December 31, 2022, as a strategic decision to extend duration and complement the core deposit base[325](index=325&type=chunk)[326](index=326&type=chunk) - Core deposits comprised **78.5%** of total deposits as of June 30, 2023[322](index=322&type=chunk) [OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES](index=74&type=section&id=OTHER%20BORROWINGS%20AND%20SUBORDINATED%20NOTES%20AND%20DEBENTURES) This section overviews total debt, including a significant increase in FHLB advances to boost liquidity and details the terms of subordinated debt - Total debt was **$1.74 billion** at June 30, 2023, an increase from **$1.23 billion** at December 31, 2022[327](index=327&type=chunk) - FHLB advances increased to **$1.35 billion** at June 30, 2023, from **$838.5 million** at December 31, 2022, a strategic decision to elevate the Company's liquidity position[327](index=327&type=chunk) - Subordinated notes include **$330.0 million** issued in March 2018 (**5.00% fixed-to-floating**, maturing April 2028) and **$37.4 million** assumed from the Spirit acquisition (**6.00% fixed-to-floating**, maturing July 2030)[328](index=328&type=chunk)[329](index=329&type=chunk) [CAPITAL](index=74&type=section&id=CAPITAL) This section discusses the Company's capital position, including total capital, common equity to asset ratio, capital stock, stock repurchase programs, and cash dividends declared - Total capital was **$3.36 billion** at June 30, 2023, with a common equity to asset ratio of **12.00%**, up from **11.91%** at year-end 2022[330](index=330&type=chunk) - The number of authorized Class A common stock shares was increased to **350,000,000** in April 2022[331](index=331&type=chunk) - The 2022 stock repurchase program authorized up to **$175.0 million** of Class A common stock repurchases[334](index=334&type=chunk) - The Company repurchased **1,128,087 shares** at an average price of **$17.75 per share** during the three and six months ended June 30, 2023[335](index=335&type=chunk) - Cash dividends on common stock were **$0.40 per share** for the first six months of 2023, an increase of **$0.02** (**5%**) from **$0.38 per share** in the same period of 2022[337](index=337&type=chunk) [Regulatory Capital Changes](index=76&type=section&id=Regulatory%20Capital%20Changes) This section explains Basel III Capital Rules and CECL Transition Provision, confirming the Company's and Simmons Bank's compliance with all capital adequacy requirements as 'well capitalized' - The Company and Simmons Bank are subject to Basel III Capital Rules, which establish minimum capital ratios for total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets[339](index=339&type=chunk)[345](index=345&type=chunk) - The Company elected to apply the 2020 CECL Transition Provision, delaying the estimated impact of CECL on regulatory capital[343](index=343&type=chunk) - As of June 30, 2023, the Company and Simmons Bank met all capital adequacy requirements, including the capital conservation buffer, and Simmons Bank was categorized as '**well capitalized**'[340](index=340&type=chunk) | Ratio | June 30, 2023 | December 31, 2022 | Minimum Guidelines | | :----------------------------------- | :-------------- | :---------------- | :----------------- | | Common equity Tier 1 ratio (CET1) | 11.92 % | 11.90 % | 4.50 % | | Tier 1 leverage ratio | 9.23 % | 9.34 % | 4.00 % | | Tier 1 risk-based capital ratio | 11.92 % | 11.90 % | 6.00 % | | Total risk-based capital ratio | 14.17 % | 14.22 % | 8.00 % | [RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS](index=77&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to Note 1 for detailed information regarding recently issued accounting pronouncements and their expected impact on the Company's financial position and results of operations - Details on recently issued accounting pronouncements and their expected impact are provided in Note 1, 'Preparation of Interim Financial Statements'[347](index=347&type=chunk) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=77&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a standard cautionary statement about forward-looking statements, identifying inherent risks and uncertainties that could cause actual results to differ materially from projections - Statements using terms like 'anticipate,' 'expect,' 'will,' or 'would' are forward-looking and involve inherent risks and uncertainties[348](index=348&type=chunk) - Factors that might affect financial results include changes in economic conditions, governmental policies, interest rates, real estate values, deposit and loan demand, cyber threats, acquisitions, litigation, and competition[349](index=349&type=chunk) - Past financial performance should not be relied upon as an indication of future performance, and the Company undertakes no obligation to update forward-looking statements[349](index=349&type=chunk)[350](index=350&type=chunk) [GAAP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES](index=79&type=section&id=GAAP%20RECONCILIATION%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) This section reconciles non-GAAP financial measures, including adjusted earnings, adjusted diluted EPS, tangible book value, and uninsured deposit coverage, used by management to assess performance | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2023 | 3 Months Ended March 31, 2023 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $58,314 | $45,589 | $103,903 | $92,549 | | Certain items, net of tax | $2,751 | $1,754 | $4,505 | $42,712 | | **Adjusted earnings (non-GAAP)** | **$61,065** | **$47,343** | **$108,408** | **$135,261** | | Diluted earnings per share | $0.46 | $0.36 | $0.82 | $0.77 | | **Adjusted diluted earnings per share (non-GAAP)** | **$0.48** | **$0.37** | **$0.85** | **$1.12** | | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Book value per common share | $26.59 | $25.73 | | **Tangible book value per common share (non-GAAP)** | **$15.17** | **$14.33** | | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Ratio of common equity to assets | 12.00 % | 11.91 % | | **Ratio of tangible common equity to tangible assets (non-GAAP)** | **7.22 %** | **7.00 %** | | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Total uninsured deposits | $4,816,510 | $6,739,678 | | Additional liquidity sources | $11,096,000 | $10,604,000 | | **Uninsured deposit coverage ratio** | **2.3** | **1.6** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's management of market risk, primarily interest rate risk, through various liquidity sources and asset/liability management policies, including sensitivity projections [Subsidiary Bank](index=83&type=section&id=Subsidiary%20Bank) This subsection explains that the Company's subsidiary bank relies on net cash inflows from financing and operating activities to fund investing activities, and notes undivided profits available for dividends - Simmons Bank's undivided profits were approximately **$652.1 million** at June 30, 2023, with **$285.9 million** available for dividend payments to the parent company without regulatory approval[365](index=365&type=chunk) - The subsidiary bank's primary financing activities include deposit gathering, use of short-term borrowing facilities, and issuance of long-term debt, while primary investing activities include loan originations and purchases of investment securities[366](index=366&type=chunk) [Liquidity Management](index=83&type=section&id=Liquidity%20Management) This subsection outlines the Company's objective of maintaining adequate liquidity through diversified funding sources, prioritizing availability and activation time, listing seven primary and secondary liquidity sources - The Company's objective is to access adequate funding sources to satisfy demands from depositors and borrowers, managing liquidity to minimize reliance on any single source[368](index=368&type=chunk) - Primary liquidity sources include **$540 million** in federal funds lines of credit and approximately **$5.35 billion** in FHLB lines of credit[370](index=370&type=chunk)[371](index=371&type=chunk) - Additional liquidity sources include large wholesale deposits, retail deposits, a laddered investment portfolio (**48.8% AFS**), downstream correspondent banks, and the Federal Reserve Bank Discount Window[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) [Market Risk Management](index=85&type=section&id=Market%20Risk%20Management) This subsection describes the Company's approach to managing market risk, primarily interest rate risk, through policies that monitor and limit exposure, utilizing simulation models and interest sensitivity gap analysis - Market risk arises from changes in interest rates, and the Company employs risk management policies to monitor and limit this exposure, aiming to minimize structural interest rate risk[377](index=377&type=chunk) - Simulation models are used to estimate the effects of changing interest rates and balance sheet strategies on net income and capital, incorporating assumptions about balance changes and pricing behavior[378](index=378&type=chunk)[379](index=379&type=chunk) [Interest Rate Sensitivity](index=85&type=section&id=Interest%20Rate%20Sensitivity) This subsection presents interest rate sensitivity projections, indicating potential negative impacts on net interest income from rate increases and positive impacts from decreases, reflecting a liability-sensitive balance sheet | Interest Rate Scenario | % Change from Base (over next 12 months) | | :----------------------------------- | :--------------------------------------- | | Up 200 basis points | (1.05)% | | Up 100 basis points | (0.29)% | | Down 100 basis points | 1.34% | | Down 200 basis points | 1.89% | - The model simulations project a negative variance in net interest income for interest rate increases (**0.29% for 100 bps**, **1.05% for 200 bps**) and a positive variance for decreases (**1.34% for 100 bps**, **1.89% for 200 bps**) over the next 12 months[380](index=380&type=chunk) - The Company's balance sheet is currently liability-sensitive, driven by changes in deposit mix and an increase in FHLB short-term advances[380](index=380&type=chunk) [Item 4. Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on management's review and evaluation of the effectiveness of the Company's disclosure controls and procedures, concluding they were effective at reasonable assurance levels as of June 30, 2023 [Changes in Internal Control over Financial Reporting](index=86&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This subsection states that there were no material changes in the Company's internal controls over financial reporting during the quarter ended June 30, 2023 - There were **no changes** in the Company's internal controls over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[383](index=383&type=chunk) [Part II: Other Information](index=86&type=section&id=Part%20II%3A%20Other%20Information) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=86&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference information on contingent liabilities from Note 13 of the Condensed Notes to Consolidated Financial Statements, detailing legal proceedings - Information regarding legal proceedings is incorporated by reference from Note 13, Contingent Liabilities, in Part I, Item 1 of this report[384](index=384&type=chunk) [Item 1A. Risk Factors](index=86&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes in the Company's risk factors from those disclosed in its Annual Report on Form 10-K for 2022 and Q1 2023 10-Q - There have been **no material changes** in the Company's risk factors from those disclosed in the Annual Report on Form 10-K for 2022 and the Quarterly Report on Form 10-Q for Q1 2023[385](index=385&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the Company's stock repurchase program, including the authorization of the 2022 Program and shares repurchased during the quarter ended June 30, 2023 - The Company's Board of Directors authorized a new stock repurchase program (the '2022 Program') to repurchase up to **$175.0 million** of Class A common stock, replacing the prior program[387](index=387&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------------------- | :----------------------------- | :----------------------------- | | April 1, 2023 - April 30, 2023 | — | $— | | May 1, 2023 - May 31, 2023 | 200,000 | $16.66 | | June 1, 2023 - June 30, 2023 | 928,087 | $17.98 | | **Total (Q2 2023)** | **1,128,087** | **$17.75** | [Item 3. Defaults Upon Senior Securities](index=80&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No reportable information is provided under this item - No reportable information under this item[7](index=7&type=chunk) [Item 4. Mine Safety Disclosures](index=80&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No reportable information is provided under this item - No reportable information under this item[7](index=7&type=chunk) [Item 5. Other Information](index=87&type=section&id=Item%205.%20Other%20Information) This section states that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2023 - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[389](index=389&type=chunk) [Item 6. Exhibits](index=88&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various legal and financial documents such as merger agreements, articles of incorporation, stock plans, and certifications - The exhibits include the Agreement and Plan of Merger with Spirit of Texas Bancshares, Inc., Amended and Restated Articles of Incorporation, the 2023 Stock and Incentive Plan, and various certifications[393](index=393&type=chunk) [Signatures](index=89&type=section&id=Signatures) This section contains the signatures of the Company's principal executive, financial, and accounting officers, certifying the accuracy and completeness of the report - The report was signed on August 4, 2023, by Robert A. Fehlman (Chief Executive Officer), James M. Brogdon (President and Chief Financial Officer), and David W. Garner (Executive Vice President and Chief Accounting Officer)[397](index=397&type=chunk)