| For Quarter Ended | March 31, | Commission File Number 000-06253 |
| For Quarter Ended | March 31, | Commission File Number 000-06253 |
| Arkansas | 71-0407808 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| 501 Main Street, Pine Bluff, Arkansas | 71601 |
| (Zip Code) | |
☒
Large accelerated filer | Accelerated filer | Non-accelerated filer | |||
Smaller reporting company | Emerging Growth company | ¨ | |||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common stock, par value $0.01 per share | SFNC | The NASDAQ Global Select Market | ||
2019
| Page | |||
| Item 1. | Legal Proceedings | * | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
| Item 3. | Defaults Upon Senior Securities | * | |
| Item 4. | Mine Safety Disclosures | * | |
| Item 5. | Other Information | * | |
| Part I: | Financial Information |
| Item 1. | Financial Statements |
| (In thousands, except share data) | March 31, 2018 | December 31, 2017 | ||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and non-interest bearing balances due from banks | $ | 170,811 | $ | 205,025 | ||||
| Interest bearing balances due from banks and federal funds sold | 688,853 | 393,017 | ||||||
| Cash and cash equivalents | 859,664 | 598,042 | ||||||
| Interest bearing balances due from banks - time | 3,069 | 3,314 | ||||||
| Investment securities: | ||||||||
| Held-to-maturity | 352,756 | 368,058 | ||||||
| Available-for-sale | 1,830,113 | 1,589,517 | ||||||
| Total investments | 2,182,869 | 1,957,575 | ||||||
| Mortgage loans held for sale | 17,708 | 24,038 | ||||||
| Other assets held for sale | 24,784 | 165,780 | ||||||
| Loans: | ||||||||
| Legacy loans | 6,290,383 | 5,705,609 | ||||||
| Allowance for loan losses | (47,207 | ) | (41,668 | ) | ||||
| Loans acquired, net of discount and allowance | 4,696,945 | 5,074,076 | ||||||
| Net loans | 10,940,121 | 10,738,017 | ||||||
| Premises and equipment | 289,355 | 287,249 | ||||||
| Foreclosed assets and other real estate owned | 29,140 | 32,118 | ||||||
| Interest receivable | 42,129 | 43,528 | ||||||
| Bank owned life insurance | 186,473 | 185,984 | ||||||
| Goodwill | 845,687 | 842,651 | ||||||
| Other intangible assets | 99,504 | 106,071 | ||||||
| Other assets | 76,806 | 71,439 | ||||||
| Total assets | $ | 15,597,309 | $ | 15,055,806 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Deposits: | ||||||||
| Non-interest bearing transaction accounts | $ | 2,734,287 | $ | 2,665,249 | ||||
| Interest bearing transaction accounts and savings deposits | 6,720,754 | 6,494,896 | ||||||
| Time deposits | 2,201,874 | 1,932,730 | ||||||
| Total deposits | 11,656,915 | 11,092,875 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase | 120,909 | 122,444 | ||||||
| Other borrowings | 1,140,986 | 1,380,024 | ||||||
| Subordinated notes and debentures | 468,465 | 140,565 | ||||||
| Other liabilities held for sale | 2,781 | 157,366 | ||||||
| Accrued interest and other liabilities | 98,202 | 77,968 | ||||||
| Total liabilities | 13,488,258 | 12,971,242 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, Class A, $0.01 par value; 120,000,000 shares authorized (1); 92,242,389 and 92,029,118 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 922 | 920 | ||||||
| Surplus | 1,590,086 | 1,586,034 | ||||||
| Undivided profits | 552,105 | 514,874 | ||||||
| Accumulated other comprehensive loss | (34,062 | ) | (17,264 | ) | ||||
| Total stockholders’ equity | 2,109,051 | 2,084,564 | ||||||
| Total liabilities and stockholders’ equity | $ | 15,597,309 | $ | 15,055,806 | ||||
| March 31, | December 31, | ||||||
| (In thousands, except share data) | 2019 | 2018 | |||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Cash and non-interest bearing balances due from banks | $ | 151,112 | $ | 171,792 | |||
| Interest bearing balances due from banks and federal funds sold | 340,049 | 661,666 | |||||
| Cash and cash equivalents | 491,161 | 833,458 | |||||
| Interest bearing balances due from banks - time | 4,684 | 4,934 | |||||
| Investment securities: | |||||||
| Held-to-maturity | 61,435 | 289,194 | |||||
| Available-for-sale | 2,240,111 | 2,151,752 | |||||
| Total investments | 2,301,546 | 2,440,946 | |||||
| Mortgage loans held for sale | 18,480 | 26,799 | |||||
| Loans: | |||||||
| Legacy loans | 8,684,550 | 8,430,388 | |||||
| Allowance for loan losses | (59,243 | ) | (56,599 | ) | |||
| Loans acquired, net of discount and allowance | 3,056,187 | 3,292,783 | |||||
| Net loans | 11,681,494 | 11,666,572 | |||||
| Premises and equipment | 333,740 | 295,060 | |||||
| Foreclosed assets and other real estate owned | 18,952 | 25,565 | |||||
| Interest receivable | 51,796 | 49,938 | |||||
| Bank owned life insurance | 192,736 | 193,170 | |||||
| Goodwill | 845,687 | 845,687 | |||||
| Other intangible assets | 88,694 | 91,334 | |||||
| Other assets | 62,669 | 69,874 | |||||
| Total assets | $ | 16,091,639 | $ | 16,543,337 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Deposits: | |||||||
| Non-interest bearing transaction accounts | $ | 2,674,034 | $ | 2,672,405 | |||
| Interest bearing transaction accounts and savings deposits | 6,666,823 | 6,830,191 | |||||
| Time deposits | 2,648,674 | 2,896,156 | |||||
| Total deposits | 11,989,531 | 12,398,752 | |||||
| Federal funds purchased and securities sold under agreements to repurchase | 120,213 | 95,792 | |||||
| Other borrowings | 1,169,989 | 1,345,450 | |||||
| Subordinated debentures | 354,041 | 353,950 | |||||
| Accrued interest and other liabilities | 155,544 | 102,959 | |||||
| Total liabilities | 13,789,318 | 14,296,903 | |||||
| Stockholders’ equity: | |||||||
| Common stock, Class A, $0.01 par value; 175,000,000 shares authorized at March 31, 2019 and December 31, 2018; 92,568,361 and 92,347,643 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 926 | 923 | |||||
| Surplus | 1,599,566 | 1,597,944 | |||||
| Undivided profits | 707,829 | 674,941 | |||||
| Accumulated other comprehensive loss | (6,000 | ) | (27,374 | ) | |||
| Total stockholders’ equity | 2,302,321 | 2,246,434 | |||||
| Total liabilities and stockholders’ equity | $ | 16,091,639 | $ | 16,543,337 | |||
| Three Months Ended March 31, | ||||||||
| (In thousands, except per share data (1)) | 2018 | 2017 | ||||||
| (Unaudited) | ||||||||
| INTEREST INCOME | ||||||||
| Loans | $ | 143,350 | $ | 68,728 | ||||
| Interest bearing balances due from banks and federal funds sold | 1,009 | 122 | ||||||
| Investment securities | 12,622 | 9,451 | ||||||
| Mortgage loans held for sale | 158 | 126 | ||||||
| TOTAL INTEREST INCOME | 157,139 | 78,427 | ||||||
| INTEREST EXPENSE | ||||||||
| Deposits | 15,597 | 4,204 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase | 110 | 75 | ||||||
| Other borrowings | 5,139 | 1,194 | ||||||
| Subordinated notes and debentures | 1,327 | 574 | ||||||
| TOTAL INTEREST EXPENSE | 22,173 | 6,047 | ||||||
| NET INTEREST INCOME | 134,966 | 72,380 | ||||||
| Provision for loan losses | 9,150 | 4,307 | ||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 125,816 | 68,073 | ||||||
| NON-INTEREST INCOME | ||||||||
| Trust income | 5,249 | 4,212 | ||||||
| Service charges on deposit accounts | 10,345 | 8,102 | ||||||
| Other service charges and fees | 2,750 | 2,197 | ||||||
| Mortgage and SBA lending income | 4,445 | 2,423 | ||||||
| Investment banking income | 834 | 690 | ||||||
| Debit and credit card fees | 8,796 | 7,934 | ||||||
| Bank owned life insurance income | 1,103 | 818 | ||||||
| Gain on sale of securities, net | 6 | 63 | ||||||
| Other income | 4,007 | 3,621 | ||||||
| TOTAL NON-INTEREST INCOME | 37,535 | 30,060 | ||||||
| NON-INTEREST EXPENSE | ||||||||
| Salaries and employee benefits | 56,357 | 35,536 | ||||||
| Occupancy expense, net | 6,960 | 4,663 | ||||||
| Furniture and equipment expense | 4,403 | 4,443 | ||||||
| Other real estate and foreclosure expense | 1,020 | 589 | ||||||
| Deposit insurance | 2,128 | 680 | ||||||
| Merger related costs | 1,711 | 524 | ||||||
| Other operating expenses | 25,494 | 19,887 | ||||||
| TOTAL NON-INTEREST EXPENSE | 98,073 | 66,322 | ||||||
| INCOME BEFORE INCOME TAXES | 65,278 | 31,811 | ||||||
| Provision for income taxes | 13,966 | 9,691 | ||||||
| NET INCOME | $ | 51,312 | $ | 22,120 | ||||
| BASIC EARNINGS PER SHARE | $ | 0.56 | $ | 0.35 | ||||
| DILUTED EARNINGS PER SHARE | $ | 0.55 | $ | 0.35 | ||||
| Three Months Ended March 31, | |||||||||||
| (In thousands, except per share data) | 2019 | 2018 | |||||||||
| (Unaudited) | |||||||||||
| INTEREST INCOME | |||||||||||
| Loans | $ | 159,440 | $ | 143,350 | |||||||
| Interest bearing balances due from banks and federal funds sold | 2,154 | 1,009 | |||||||||
| Investment securities | 17,312 | 12,622 | |||||||||
| Mortgage loans held for sale | 210 | 158 | |||||||||
| TOTAL INTEREST INCOME | 179,116 | 157,139 | |||||||||
| INTEREST EXPENSE | |||||||||||
| Deposits | 30,750 | 15,597 | |||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 136 | 110 | |||||||||
| Other borrowings | 6,793 | 5,139 | |||||||||
| Subordinated notes and debentures | 4,411 | 1,327 | |||||||||
| TOTAL INTEREST EXPENSE | 42,090 | 22,173 | |||||||||
| NET INTEREST INCOME | 137,026 | 134,966 | |||||||||
| Provision for loan losses | 9,285 | 9,150 | |||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 127,741 | 125,816 | |||||||||
| NON-INTEREST INCOME | |||||||||||
| Trust income | 5,708 | 5,249 | |||||||||
| Service charges on deposit accounts | 10,068 | 10,345 | |||||||||
| Other service charges and fees | 1,289 | 2,750 | |||||||||
| Mortgage lending income | 2,823 | 3,472 | |||||||||
| SBA lending income | 497 | 973 | |||||||||
| Investment banking income | 618 | 834 | |||||||||
| Debit and credit card fees | 6,098 | 8,796 | |||||||||
| Bank owned life insurance income | 795 | 1,103 | |||||||||
| Gain on sale of securities, net | 2,740 | 6 | |||||||||
| Other income | 3,125 | 4,007 | |||||||||
| TOTAL NON-INTEREST INCOME | 33,761 | 37,535 | |||||||||
| NON-INTEREST EXPENSE | |||||||||||
| Salaries and employee benefits | 56,367 | 56,357 | |||||||||
| Occupancy expense, net | 7,475 | 6,960 | |||||||||
| Furniture and equipment expense | 3,358 | 4,403 | |||||||||
| Other real estate and foreclosure expense | 637 | 1,020 | |||||||||
| Deposit insurance | 2,040 | 2,128 | |||||||||
| Merger related costs | 1,470 | 1,711 | |||||||||
| Other operating expenses | 30,062 | 25,494 | |||||||||
| TOTAL NON-INTEREST EXPENSE | 101,409 | 98,073 | |||||||||
| INCOME BEFORE INCOME TAXES | 60,093 | 65,278 | |||||||||
| Provision for income taxes | 12,398 | 13,966 | |||||||||
| NET INCOME | $ | 47,695 | $ | 51,312 | |||||||
| BASIC EARNINGS PER SHARE | $ | 0.52 | $ | 0.56 | |||||||
| DILUTED EARNINGS PER SHARE | $ | 0.51 | $ | 0.55 | |||||||
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2018 | 2017 | ||||||
| (Unaudited) | ||||||||
| NET INCOME | $ | 51,312 | $ | 22,120 | ||||
| OTHER COMPREHENSIVE (LOSS) INCOME | ||||||||
| Unrealized holding (losses) gains arising during the period on available-for-sale securities | (22,735 | ) | 1,567 | |||||
| Less: Reclassification adjustment for realized gains included in net income | 6 | 63 | ||||||
| Other comprehensive (loss) gain, before tax effect | (22,741 | ) | 1,504 | |||||
| Less: Tax effect of other comprehensive (loss) income | (5,943 | ) | 590 | |||||
| TOTAL OTHER COMPREHENSIVE (LOSS) INCOME | (16,798 | ) | 914 | |||||
| COMPREHENSIVE INCOME | $ | 34,514 | $ | 23,034 | ||||
| Three Months Ended March 31, | |||||||||||
| (In thousands) | 2019 | 2018 | |||||||||
| (Unaudited) | |||||||||||
| NET INCOME | $ | 47,695 | $ | 51,312 | |||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||
| Unrealized holding gains (losses) arising during the period on available-for-sale securities | 29,130 | (22,735 | ) | ||||||||
| Unrealized holding gain on the transfer of held-to-maturity securities to available-for-sale per ASU 2017-12 | 2,547 | — | |||||||||
| Less: Reclassification adjustment for realized gains included in net income | 2,740 | 6 | |||||||||
| Other comprehensive gain (loss), before tax effect | 28,937 | (22,741 | ) | ||||||||
| Less: Tax effect of other comprehensive income (loss) | 7,563 | (5,943 | ) | ||||||||
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | 21,374 | (16,798 | ) | ||||||||
| COMPREHENSIVE INCOME | $ | 69,069 | $ | 34,514 | |||||||
| (In thousands) | March 31, 2018 | March 31, 2017 | ||||||
| (Unaudited) | ||||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 51,312 | $ | 22,120 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 6,677 | 4,953 | ||||||
| Provision for loan losses | 9,150 | 4,307 | ||||||
| Gain on sale of investments | (6 | ) | (63 | ) | ||||
| Net accretion of investment securities and assets | (14,368 | ) | (6,766 | ) | ||||
| Net (accretion) amortization on borrowings | (211 | ) | 106 | |||||
| Stock-based compensation expense | 2,585 | 2,329 | ||||||
| Loss on sale of premises and equipment, net of impairment | -- | 43 | ||||||
| Loss (gain) on sale of foreclosed assets held for sale | 41 | (326 | ) | |||||
| Gain on sale of mortgage loans held for sale | (2,610 | ) | (2,360 | ) | ||||
| Deferred income taxes | 3,921 | 3,090 | ||||||
| Increase in cash surrender value of bank owned life insurance | (1,103 | ) | (818 | ) | ||||
| Originations of mortgage loans held for sale | (113,012 | ) | (88,870 | ) | ||||
| Proceeds from sale of mortgage loans held for sale | 121,952 | 109,264 | ||||||
| Changes in assets and liabilities: | ||||||||
| Interest receivable | 1,582 | 1,699 | ||||||
| Assets held in trading accounts | -- | (14 | ) | |||||
| Other assets | (5,648 | ) | 3,901 | |||||
| Accrued interest and other liabilities | 33,983 | (16,913 | ) | |||||
| Income taxes payable | (13,955 | ) | 6,123 | |||||
| Net cash provided by operating activities | 80,290 | 41,805 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Net originations of loans | (140,804 | ) | (144,651 | ) | ||||
| Decrease in due from banks - time | 245 | -- | ||||||
| Purchases of premises and equipment, net | (6,052 | ) | (25,924 | ) | ||||
| Proceeds from sale of premises and equipment | -- | 1,394 | ||||||
| Proceeds from sale of foreclosed assets held for sale | 4,359 | 2,844 | ||||||
| Proceeds from sale of available-for-sale securities | 7,726 | -- | ||||||
| Proceeds from maturities of available-for-sale securities | 58,548 | 26,373 | ||||||
| Purchases of available-for-sale securities | (320,798 | ) | (123,787 | ) | ||||
| Proceeds from maturities of held-to-maturity securities | 15,512 | 32,051 | ||||||
| Purchases of held-to-maturity securities | -- | (860 | ) | |||||
| Proceeds from bank owned life insurance death benefits | 616 | -- | ||||||
| Disposition of assets and liabilities held for sale | (75,586 | ) | -- | |||||
| Net cash used in investing activities | (456,234 | ) | (232,560 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net change in deposits | 564,040 | 53,069 | ||||||
| Proceeds from issuance of subordinated notes | 326,711 | -- | ||||||
| Dividends paid on common stock | (14,081 | ) | (7,845 | ) | ||||
| Net change in other borrowed funds | (239,038 | ) | 167,915 | |||||
| Net change in federal funds purchased and securities sold under agreements to repurchase | (1,535 | ) | (5,022 | ) | ||||
| Net shares issued under stock compensation plans | 1,469 | 2,260 | ||||||
| Net cash provided by financing activities | 637,566 | 210,377 | ||||||
| INCREASE IN CASH AND CASH EQUIVALENTS | 261,622 | 19,622 | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 598,042 | 285,659 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 859,664 | $ | 305,281 | ||||
| (In thousands) | March 31, 2019 | March 31, 2018 | |||||
| (Unaudited) | |||||||
| OPERATING ACTIVITIES | |||||||
| Net income | $ | 47,695 | $ | 51,312 | |||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||
| Depreciation and amortization | 7,451 | 6,677 | |||||
| Provision for loan losses | 9,285 | 9,150 | |||||
| Gain on sale of investments | (2,740 | ) | (6 | ) | |||
| Net accretion of investment securities and assets | (9,559 | ) | (14,368 | ) | |||
| Net amortization (accretion) on borrowings | 91 | (211 | ) | ||||
| Stock-based compensation expense | 3,084 | 2,585 | |||||
| (Gain) loss on sale of foreclosed assets held for sale | (32 | ) | 41 | ||||
| Gain on sale of mortgage loans held for sale | (3,342 | ) | (2,610 | ) | |||
| Deferred income taxes | 2,081 | 3,921 | |||||
| Income from bank owned life insurance | (876 | ) | (1,103 | ) | |||
| Originations of mortgage loans held for sale | (98,255 | ) | (113,012 | ) | |||
| Proceeds from sale of mortgage loans held for sale | 109,916 | 121,952 | |||||
| Changes in assets and liabilities: | |||||||
| Interest receivable | (1,858 | ) | 1,582 | ||||
| Lease right-of-use assets | 2,294 | — | |||||
| Other assets | 3,730 | (5,648 | ) | ||||
| Accrued interest and other liabilities | 30,805 | 33,983 | |||||
| Income taxes payable | (10,977 | ) | (13,955 | ) | |||
| Net cash provided by operating activities | 88,793 | 80,290 | |||||
| INVESTING ACTIVITIES | |||||||
| Net originations of loans | (18,116 | ) | (140,804 | ) | |||
| Decrease in due from banks - time | 250 | 245 | |||||
| Purchases of premises and equipment, net | (13,027 | ) | (6,052 | ) | |||
| Proceeds from sale of foreclosed assets held for sale | 7,214 | 4,359 | |||||
| Proceeds from sale of available-for-sale securities | 209,968 | 7,726 | |||||
| Proceeds from maturities of available-for-sale securities | 55,804 | 58,548 | |||||
| Purchases of available-for-sale securities | (110,767 | ) | (320,798 | ) | |||
| Proceeds from maturities of held-to-maturity securities | 11,408 | 15,512 | |||||
| Proceeds from bank owned life insurance death benefits | 1,310 | 616 | |||||
| Disposition of assets and liabilities held for sale | 1,393 | (75,586 | ) | ||||
| Net cash provided by (used in) investing activities | 145,437 | (456,234 | ) | ||||
| FINANCING ACTIVITIES | |||||||
| Net change in deposits | (409,221 | ) | 564,040 | ||||
| Proceeds from issuance of subordinated notes | — | 326,711 | |||||
| Dividends paid on common stock | (14,807 | ) | (14,081 | ) | |||
| Net change in other borrowed funds | (175,461 | ) | (239,038 | ) | |||
| Net change in federal funds purchased and securities sold under agreements to repurchase | 24,421 | (1,535 | ) | ||||
| Net shares issued under stock compensation plans | (2,771 | ) | 443 | ||||
| Shares issued under employee stock purchase plan | 1,312 | 1,026 | |||||
| Net cash (used in) provided by financing activities | (576,527 | ) | 637,566 | ||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (342,297 | ) | 261,622 | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 833,458 | 598,042 | |||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 491,161 | $ | 859,664 | |||
| (In thousands, except share data (1)) | Common Stock | Surplus | Accumulated Other Comprehensive Income (Loss) | Undivided Profits | Total | |||||||||||||||
| Balance, December 31, 2016 | $ | 626 | $ | 711,663 | $ | (15,212 | ) | $ | 454,034 | $ | 1,151,111 | |||||||||
| Comprehensive income | -- | -- | 914 | 22,120 | 23,034 | |||||||||||||||
| Stock issued for employee stock purchase plan – 26,002 shares | -- | 618 | -- | -- | 618 | |||||||||||||||
| Stock-based compensation plans, net – 195,266 | 2 | 3,969 | -- | -- | 3,971 | |||||||||||||||
| Dividends on common stock – $0.125 per share | -- | -- | -- | (7,845 | ) | (7,845 | ) | |||||||||||||
| Balance, March 31, 2017 (Unaudited) | 628 | 716,250 | (14,298 | ) | 468,309 | 1,170,889 | ||||||||||||||
| Comprehensive income | -- | -- | 50 | 70,820 | 70,870 | |||||||||||||||
| Reclassify stranded tax effects due to 2017 tax law changes | -- | -- | (3,016 | ) | 3,016 | -- | ||||||||||||||
| Stock-based compensation plans, net – 164,020 | 1 | 8,969 | -- | -- | 8,970 | |||||||||||||||
| Stock issued for Hardeman acquisition – 1,599,940 common shares | 16 | 42,622 | -- | -- | 42,638 | |||||||||||||||
| Stock issued for OKSB acquisition – 14,488,604 common shares | 145 | 431,253 | -- | -- | 431,398 | |||||||||||||||
| Stock issued for First Texas acquisition – 12,999,840 common shares | 130 | 386,940 | -- | -- | 387,070 | |||||||||||||||
| Cash dividends – $0.375 per share | -- | -- | -- | (27,271 | ) | (27,271 | ) | |||||||||||||
| Balance, December 31, 2017 | 920 | 1,586,034 | (17,264 | ) | 514,874 | 2,084,564 | ||||||||||||||
| Comprehensive income | -- | -- | (16,798 | ) | 51,312 | 34,514 | ||||||||||||||
| Stock issued for employee stock purchase plan – 39,782 shares | -- | 1,026 | -- | -- | 1,026 | |||||||||||||||
| Stock-based compensation plans, net – 173,489 | 2 | 3,026 | -- | -- | 3,028 | |||||||||||||||
| Dividends on common stock – $0.15 per share | -- | -- | -- | (14,081 | ) | (14,081 | ) | |||||||||||||
| Balance, March 31, 2018 (Unaudited) | $ | 922 | $ | 1,590,086 | $ | (34,062 | ) | $ | 552,105 | $ | 2,109,051 | |||||||||
| (In thousands, except share data) | Common Stock | Surplus | Accumulated Other Comprehensive Income (Loss) | Undivided Profits | Total | |||||||||||||||
| Balance at, December 31, 2017 | $ | 920 | $ | 1,586,034 | $ | (17,264 | ) | $ | 514,874 | $ | 2,084,564 | |||||||||
| Comprehensive income | — | — | (16,798 | ) | 51,312 | 34,514 | ||||||||||||||
| Stock issued for employee stock purchase plan – 39,782 shares | — | 1,026 | — | — | 1,026 | |||||||||||||||
| Stock-based compensation plans, net – 173,489 | 2 | 3,026 | — | — | 3,028 | |||||||||||||||
| Dividends on common stock – $0.15 per share | — | — | — | (14,081 | ) | (14,081 | ) | |||||||||||||
| Balance, March 31, 2018 (Unaudited) | 922 | 1,590,086 | (34,062 | ) | 552,105 | 2,109,051 | ||||||||||||||
| Comprehensive income | — | — | 6,688 | 164,401 | 171,089 | |||||||||||||||
| Stock-based compensation plans, net – 105,254 | 1 | 7,858 | — | — | 7,859 | |||||||||||||||
| Dividends on common stock – $0.45 per share | — | — | — | (41,565 | ) | (41,565 | ) | |||||||||||||
| Balance, December 31, 2018 | 923 | 1,597,944 | (27,374 | ) | 674,941 | 2,246,434 | ||||||||||||||
| Comprehensive income | — | — | 21,374 | 47,695 | 69,069 | |||||||||||||||
| Stock issued for employee stock purchase plan – 60,413 shares | 1 | 1,311 | — | — | 1,312 | |||||||||||||||
| Stock-based compensation plans, net – 160,305 | 2 | 311 | — | — | 313 | |||||||||||||||
| Dividends on common stock – $0.16 per share | — | — | — | (14,807 | ) | (14,807 | ) | |||||||||||||
| Balance, March 31, 2019 (Unaudited) | $ | 926 | $ | 1,599,566 | $ | (6,000 | ) | $ | 707,829 | $ | 2,302,321 | |||||||||
27, 2019.
Reporting Comprehensive Income
Stock Compensation: Scope of Modification Accounting – In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”), that provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, to a change to the terms or conditions of a share-based payment award. An entity may change the terms or conditions of a share-based payment award for many different reasons, and the nature and effect of the change can vary significantly. The guidance clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting and the guidance should be applied prospectively to an award modified on or after the adoption date. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017,years, with early adoption permitted. Currently,Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with the applicable guidance. At the time of adoption, entities will be required to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if
Premium Amortization on Purchased Callable Debt Securities – In March 2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”), that amends the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments shorten the amortization period by requiring that the premium be amortized to the earliest call date. Under previous US GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The effective date is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As permitted, the Company elected to early adopt the provisions of ASU 2017-08 during2018-15 in the first quarter 2017. The adoption2019 and elected to apply the guidance prospectively to all software implementation costs incurred after the date of this standard did notadoption. As of March 31, 2019, no applicable software implementation costs have a material effect on the Company’s results of operations, financial position or disclosures.
Statement of Cash Flows – In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), designed to address the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The amendments also provide guidance on when an entity should separate or aggregate cash flows based on the predominance principle. The effective date is for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new standard is required to be applied retrospectively, but may be applied prospectively if retrospective application would be impracticable. The adoption of 2016-15 did not have a material impact on the Company’s results of operations, financial position or disclosures since the amendment applies to the classification of cash flows. The adoption did not have a material impact on the consolidated statement of cash flows.
Financial Assets and Financial Liabilities – In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), that makes changes primarily affecting the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. In February 2018, the FASB issued 2018-03 that clarified certain guidance and contained narrow scope amendments. The effective date is for fiscal periods beginning after December 15, 2017, including interim periods within those fiscal years. ASU 2016-01 did not have a material impact on the Company’s results of operations or financial position. However, this new guidance requires the disclosed estimated fair value of the Company’s loan portfolio to be based on an exit price calculation, which considers liquidity, credit and nonperformance risk of its loans. The adoption of 2016-01 did not have a material impact on the Company’s fair value disclosures.
Revenue Recognition – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), that outlines a single comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers. The core principle of this revenue model is that an entity should recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive for those goods or services. In July 2015, the FASB issued ASU No. 2015-14, deferring the effective date to annual and interim periods beginning after December 15, 2017. The guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other US GAAP, which comprises a significant portion of the Company’s revenue stream. However, the updated guidance affects the revenue recognition pattern for certain revenue streams, including service charges on deposit accounts, gains/losses on sale of other real estate owned (“OREO”), and trust income. The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or disclosures. See below “Revenue from Contracts with Customers” for additional information.
Recently Issued Accounting Standards
fair value disclosures. 2018. 2018. this loan. There was one commercial real estate loan for which a payment default occurred during the three months ended March 31, 2018. A charge-off of $66,300 was recorded for this loan and $294,300 was transferred to OREO. These adjustments will be recognized over the remaining lives of the purchased credit impaired loans. The accretable yield adjustments recorded in future periods will change as the Company continues to evaluate expected cash flows from the purchased credit impaired loans. 2018. The balance due under the Credit Agreement at March 31, 2019 was zero. less, of which $775.0 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. Typically, FOTO exercise dates follow a specified lockout period at the beginning of the term when FHLB cannot terminate the FOTO advance. If FHLB exercises its option to terminate the FOTO advance at one of the specified option exercise dates, there is no termination or prepayment fee, and replacement funding will be available at then-prevailing market rates, subject to FHLB’s credit and collateral requirements. The Company’s FOTO advances outstanding at the end of the first quarter have ten to fifteen year maturity dates with lockout periods that vary but do not exceed one year. These FOTO advances are considered and monitored by the Company as short-term advances due to the likelihood of FHLB exercising the options within a year of the settlement dates based upon the rising rate environment and the short lockout periods. 2019. Range of Exercise Prices Number of Shares (000) Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares (000) Weighted Average Exercise Price 2018. this acquisition. our customers across all channels, including digital. portfolios. debit card fees for the first quarter of 2019 when compared to the first quarter of 2018. Bank. 2019. For the and increased FHLB borrowings. rising rate environment. 2018. (FTE = Fully Taxable Equivalent) 2018. 2018. incorporating a comprehensive community banking marketing philosophy over our expanded footprint. 2018. 2019. $196.2 million, or 3.3%. Our construction and development (“C&D”) loans increased by $75.4 million, or 5.8%, single family residential loans decreased by $9.0 million, or 0.6%, and commercial real estate (“CRE”) loans increased by acquired to legacy loans. 2018. 2018. 2018. FHLB short-term advances mostly consist of FHLB Owns the Option (“FOTO”) advances that 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. The Company’s FOTO advances outstanding at the end of the first quarter have ten to fifteen year maturity dates with lockout periods that vary but do not exceed one year. These FOTO advances are considered and monitored by the Company as short-term advances due to the likelihood of FHLB exercising the options within a year of the settlement dates based upon the rising rate environment and the short lockout periods. $19.1 million in subordinated debt. 2018. 175,000,000. institutions. 2019. Bank 2019: Derivatives and Hedging: Targeted Improvements – - In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), that changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in order to better align a company’s risk management activities and financial reporting for hedging relationships. In summary, this amendment 1) expands the types of transactions eligible for hedge accounting; 2) eliminates the separate measurement and presentation of hedge ineffectiveness; 3) simplifies the requirements around the assessment of hedge effectiveness; 4) provides companies more time to finalize hedge documentation; and 5) enhances presentation and disclosure requirements. The effective date is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. All transition requirements and elections should be applied to existing hedging relationships on the date of adoption and the effects should be reflected as of the beginning of the fiscal year of adoption. As part of this new guidance, entities are allowed to designate as the hedged item, an amount that is not expected to be affected by prepayments, defaults or other events affecting the timing and amount of cash flows in a closed portfolio of prepayable financial instruments (this is referred to as the “last-of-layer” method). Under the last-of-layer method, entities are able to reclassify, only at the time of adoption, eligible callable debt securities from held-to-maturity to available-for-sale without tainting its intentions to hold future debt securities to maturity. The available-for-sale security must be reported at fair value and any unrealized gain or loss must be recorded as an adjustment to other comprehensive income upon adoption. The Company evaluated its held-to-maturity portfolio during the first quarter 2019 and identified certain municipal bonds with a fair value of $216.4 million that met the last-of-layer criteria under ASU 2017-12 and as a result, reclassified those to available-for-sale and recorded an unrealized gain of $2.5 million during the first quarter 2019.Leases - In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), that establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance results in a more consistent representation of the rights and obligations arising from leases by requiring lessees to recognize the lease asset and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. The effective date is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 requires entities to adopt the new lease standard using a modified retrospective transition method, meaning an entity initially applies the new lease standard at the beginning of the earliest period presented in the financial statements. Due to complexities associated with using this method, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, to relieve entities of the requirement to present prior comparative years’ results when they adopt the new lease standard and giving entities the option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings. Adoption of ASU 2016-02 resulted in the recognition of right-of-use assets of $32.8 million and right-of-use liabilities of $32.8 million on the statement of financial position with no material impact to the results of operations. The Company has elected to adopt the guidance using the optional transition method, which allows for a modified retrospective method of adoption with a cumulative effect adjustment to retained earnings without restating comparable periods. The Company also elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs as well as an exemption for short-term leases with a term of less than one year, whereby the Company did not recognize a lease liability or right-of-use asset on the statement of financial position but instead will recognize lease payments as an expense over the lease term as appropriate. See Note 6 for additional information related to the Company’s right-of-use lease obligations.Recently Issued Accounting StandardsFair 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 they 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 value9measurements. 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 Company is currently evaluating the impact this standard will have on its results of operations, financial position or disclosures, but it is not expected to have a material impact.Goodwill Impairment – In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), that eliminates Step 2 from the goodwill impairment test which required entities to compare the implied fair value of goodwill to its carrying amount. Under the amendments, the goodwill impairment will be measured as the excess of the reporting unit’s carrying amount over its fair value. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The effective date is for fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual impairment tests beginning in 2017. The Company will early adopt ASU 2017-04 during the second quarter 2019 to coincide with the Company’s formal impairment analysis and it is not expected to have a material effect on the Company’s results of operations, financial position or 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 that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The effective date for these amendments is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has formed a cross functional team that is assessingcontinues to assess its data and system needs and evaluatingevaluate the potential impact of adopting the new guidance. The Company anticipates 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 current accounting practice that utilizes the incurred loss model. In December 2018, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation issued a final rule revising regulatory capital rules in anticipation of the adoption of ASU 2016-13 that provides an option to phase in the day-one impact on earnings and tier one capital. Due to this final rule from the regulatory agencies, the Company is continuing to research and study options for recording a one-time adjustment or structuring any capital impact over an allowable period of time. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannothas not yet determinedetermined the magnitude of any such one-time adjustment or the overall impact on its results of operations, financial position or disclosures. However, the Company has begunis continuing its efforts in developing processes and procedures to ensure it is fully compliant at the required adoption date. Among other things, the Company has initiatedcontinues to gather data gathering and assessment to support forecasting ofdevelop forecast models for asset quality, loan balances, and portfolio net charge-offs and developing asset quality forecast models in preparation foris working with the implementation of this standard.Leases – In February 2016,selected model vendor to produce parallel calculations through the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), that establishes the principlesyear leading up to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance results in a more consistent representation of the rights and obligations arising from leases by requiring lessees to recognize the lease asset and lease liabilities that arise from leasesimplementation. Model inputs began in the statementfourth quarter 2018 with additional inputs and scenarios to be modeled throughout 2019 with focus on calculating a potential range of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. The effective date is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Based upon leases that were outstanding as of March 31, 2018, the Company does not expect the new standard to have a material impact on its results of operations, but anticipates increases in its assets and liabilities. Decisions to repurchase, modify or renew leases prior to the implementation date will impact the level of materiality.
impact.10There have been no other significant changes to the Company’s accounting policies from the 20172018 Form 10-K. Presently, the Company is not aware of any other changes to the Accounting Standards Codification that will have a material impact on its present or future financial position or results of operations.Revenue from ContractsNOTE 2: SUBSEQUENT ACQUISITIONOn April 12, 2019, the Company completed its merger with CustomersAccounting Standards CodificationReliance Bancshares, Inc. (“ASC”Reliance”) Topic 606, Revenue from Contracts with Customerspursuant to the terms of the Agreement and Plan of Merger (“Reliance Agreement”), applies to all contracts with customers to provide goods or servicesdated November 13, 2018, as amended February 11, 2019. The Company was the surviving corporation in the ordinary coursemerger. The merger was described in the Company’s Registration Statement on Form S-4 filed with the SEC on January 25, 2019, and amended on February 12, 2019. As a result of business. However, Topic 606 specifically does not apply to revenue related to financial instruments, guarantees, insurance contracts, leases, or nonmonetary exchanges. Given these scope exceptions, interest income recognitionthe merger, the Company expanded its presence in the St. Louis banking market and measurement related tonow has approximately $17.6 billion in assets and approximately $12.9 billion and $13.1 billion in loans and investments securities,deposits, respectively.In the merger, each outstanding share of Reliance common stock and common stock equivalents was canceled and converted into the right to receive shares of the Company’s two largest sources of revenue, are not accounted for under Topic 606. 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. Topic 606 is applied using five steps: 1) identify the contract with the customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation.The Company has evaluated the nature of all contracts with customers that fall under the scope of Topic 606 and determined that further disaggregation of revenue from contracts with customers into categories was not necessary. There has not been significant revenue recognized in the current reporting period resulting from performance obligations satisfied in previous periods. In addition, there has not been a significant change in timing of revenues received from customers.A description of performance obligations for each type of contract with customers is as follows:Service charges on deposit accounts – The Company’s primary source of funding comes from deposit accounts with its customers. Customers pay certain fees to access their cash on deposit including, but not limited to, non-transactional fees such as account maintenance, dormancy or statement rendering fees, and certain transaction-based fees such as ATM, wire transfer, overdraft or returned check fees. The Company generally satisfies its performance obligations as services are rendered. The transaction prices are fixed, and are charged either on a periodic basis or based on activity.Sale of OREO – In the normal course of business, the Company will enter into contracts with customers to sell OREO, which has generally been foreclosed upon by the Company. The Company generally satisfies its performance obligation upon conveyance of property from the Company to the customer, generally by way of an executed agreement. The transaction price is fixed, and on occasion the Company will finance a portion of the proceeds the customers uses to purchase the property. These properties are generally sold without recourse or warranty.Trust Income – The Company enters into contracts with its customers to manage assets for investment,common stock and/or transact on their accounts. The Company generally satisfies its performance obligations as services are rendered. The management fee is a fixed percentage-based fee calculated upon the average balance of assets under management and is charged to customers on a monthly basis.Acquisition Accounting, Loans AcquiredThe Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the loans acquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair valuecash in accordance with the fair value methodology prescribed in ASC Topic 820, Fair Value Measurement. The fair value estimates associated withterms of the loans include estimates relatedReliance Agreement. In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock was converted into the right to expected prepaymentsreceive one share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each share of Reliance’s Series C Preferred Stock was converted into the amount and timingright to receive one share of undiscounted expected principal, interest and other cash flows.11The Company evaluates non-impaired loans acquiredSimmons’ comparable Series C Preferred Stock (unless the holder of such Series C Preferred Stock elected to receive alternate consideration in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other CostsReliance Agreement). The fair value discount on these loansCompany is accreted into interest income over the weighted average life of the loans using a constant yield method. The Company evaluates purchased impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.For impaired loans accounted for under ASC Topic 310-30, the Company continues to estimate cash flows expected to be collected on purchased credit impaired loans. The Company evaluates, at each balance sheet date, whether the present value of the purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in the consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining life of the purchased credit impaired loan.For further discussion of acquisition and loan accounting, see Note 2, Acquisitions, and Note 6, Loans Acquired.NOTE 2: ACQUISITIONSSouthwest Bancorp, Inc.On October 19, 2017, the Company completed the acquisition of Southwest Bancorp, Inc. (“OKSB”) headquartered in Stillwater, Oklahoma, including its wholly-owned bank subsidiary, Bank SNB. The Company issued 14,488,604issuing 3,999,623 shares of its common stock valued at approximately $431.4 million as of October 19, 2017, plus $94.9and paid $62.7 million in cash in exchange for all outstanding sharesto effect the merger. The merger was approved by stockholders of OKSB common stock.PriorReliance on April 8, 2019.10Due to the acquisition, OKSB conducted banking business from 29 branches located in Texas, Oklahoma, Kansastiming of the merger and Colorado. In addition, OKSB owned a loan production office in Denver, Colorado. Including the effectsamount of assets and liabilities assumed, the Company is continuing to determine their preliminary fair values and the purchase price allocation. The Company expects to finalize the analysis of the acquired assets and liabilities over the next few months and within one year of the merger. The Company will record the merger using the acquisition method of accounting adjustments, the Company acquired approximately $2.7 billion in assets, including approximately $2.0 billion in loans (inclusive of loan discounts) and approximately $2.0 billion in deposits. The systems conversion is planned to occur late May 2018, at which time the subsidiary bank will be merged into Simmons Bank.Goodwill of $229.1 million was recorded as a result of the transaction. The acquisition allowed the Company to enter the Texas, Oklahoma, and Colorado banking markets and it also strengthened the Company’s Kansas franchise and its product offerings in the healthcare and real estate industries, all of which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.A summary, at fair value, ofrecognize the assets acquired and liabilities assumed in the OKSB transaction, as of the acquisition date, is as follows:(In thousands) Acquired from
OKSB Fair Value
Adjustments Fair
Value Assets Acquired Cash and due from banks $ 79,517 $ -- $ 79,517 Investment securities 485,468 (1,295 ) 484,173 Loans acquired 2,039,524 (43,071 ) 1,996,453 Allowance for loan losses (26,957 ) 26,957 -- Foreclosed assets 6,284 (1,127 ) 5,157 Premises and equipment 21,210 5,457 26,667 Bank owned life insurance 28,704 -- 28,704 Goodwill 13,545 (13,545 ) -- Core deposit intangible 1,933 40,191 42,124 Other intangibles 3,806 -- 3,806 Other assets 33,455 (9,141 ) 24,314 Total assets acquired $ 2,686,489 $ 4,426 $ 2,690,915 12Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 485,971 $ -- $ 485,971 Interest bearing transaction accounts and savings deposits 869,252 -- 869,252 Time deposits 613,345 (2,213 ) 611,132 Total deposits 1,968,568 (2,213 ) 1,966,355 Securities sold under agreement to repurchase 11,256 -- 11,256 Other borrowings 347,000 -- 347,000 Subordinated debentures 46,393 -- 46,393 Accrued interest and other liabilities 17,440 5,364 22,804 Total liabilities assumed 2,390,657 3,151 2,393,808 Equity 295,832 (295,832 ) -- Total equity assumed 295,832 (295,832 ) -- Total liabilities and equity assumed $ 2,686,489 $ (292,681 ) $ 2,393,808 Net assets acquired 297,107 Purchase price 526,251 Goodwill $ 229,144 The purchase price allocation and certainat their fair value measurements remain preliminary due to the timing of the acquisition. 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 over the next few months, within one year of the acquisition. Therefore, adjustments to the estimated amounts and carrying values may occur.The Company’s operating results for all periods presented include the operating results of the acquired assets and assumed liabilities of OKSB subsequent to the acquisition date.First Texas BHC, Inc.On October 19, 2017, the Company completed the acquisition of First Texas BHC, Inc. (“First Texas”) headquartered in Fort Worth, Texas, including its wholly-owned bank subsidiary, Southwest Bank. The Company issued 12,999,840 shares of its common stock valued at approximately $387.1 million as of October 19, 2017, plus $70.0 million in cash in exchange for all outstanding shares of First Texas common stock.Prior to the acquisition, First Texas operated 15 banking centers, a trust office and a limited service branch in north Texas and a loan production office in Austin, Texas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $2.4 billion in assets, including approximately $2.2 billion in loans (inclusive of loan discounts) and approximately $1.9 billion in deposits. The Company completed the systems conversion and merged First Texas into Simmons Bank in February 2018.Goodwill of $240.8 million was recorded as a result of the transaction. The acquisition allowed the Company to enter the Texas banking markets and it also strengthened the Company’s specialty product offerings in the area of SBA lending and trust services, all of which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.13A summary, at fair value, of the assets acquired and liabilities assumed in the First Texas transaction, as of the acquisition date, is as follows:(In thousands) Acquired from
First Texas Fair Value
Adjustments Fair
Value Assets Acquired Cash and due from banks $ 59,277 $ -- $ 59,277 Investment securities 81,114 (596 ) 80,518 Loans acquired 2,246,212 (37,834 ) 2,208,378 Allowance for loan losses (20,864 ) 20,664 (200 ) Premises and equipment 24,864 10,123 34,987 Bank owned life insurance 7,190 -- 7,190 Goodwill 37,227 (37,227 ) -- Core deposit intangible -- 7,328 7,328 Other assets 18,263 11,485 29,748 Total assets acquired $ 2,453,283 $ (26,057 ) $ 2,427,226 Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 74,410 $ -- $ 74,410 Interest bearing transaction accounts and savings deposits 1,683,298 -- 1,683,298 Time deposits 124,233 (283 ) 123,950 Total deposits 1,881,941 (283 ) 1,881,658 Securities sold under agreement to repurchase 50,000 -- 50,000 Other borrowings 235,000 -- 235,000 Subordinated debentures 30,323 589 30,912 Accrued interest and other liabilities 11,727 1,669 13,396 Total liabilities assumed 2,208,991 1,975 2,210,966 Equity 244,292 (244,292 ) -- Total equity assumed 244,292 (244,292 ) -- Total liabilities and equity assumed $ 2,453,283 $ (242,317 ) $ 2,210,966 Net assets acquired 216,260 Purchase price 457,103 Goodwill $ 240,843 The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. 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 over the next few months, within one year of the acquisition. Therefore, adjustments to the estimated amounts and carrying values may occur. The Company’s operating results for all periods presented include the operating results of the acquired assets and assumed liabilities of First Texas subsequent to the acquisition date.14Summary of Unaudited Pro forma InformationThe unaudited pro forma information below for the years ended December 31, 2017 and 2016 gives effect to the OKSB and First Texas acquisitions as if the acquisitions had occurred on January 1, 2016. Pro forma earnings for the year ended December 31, 2017 were adjusted to exclude $9.4 million of acquisition-related costs, net of tax, incurred by Simmons during 2017. The pro forma financial information is not necessarily indicative of the results of operations if the acquisitions had been effective as of this date.(In thousands, except per share data) 2017 2016 Revenue (1) $ 654,358 $ 620,461 Net income $ 130,947 $ 136,199 Diluted earnings per share $ 1.43 $ 1.52 (1) Net interest income plus noninterest income.Consolidated year-to-date 2017 results included approximately $29.2 million of revenue and $10.5 million of net income attributable to the OKSB acquisition and $27.6 million of revenue and $5.7 million of net income attributable to the First Texas acquisition.Hardeman County Investment Company, Inc.On May 15, 2017, the Company completed the acquisition of Hardeman County Investment Company, Inc. (“Hardeman”), headquartered in Jackson, Tennessee, including its wholly-owned bank subsidiary, First South Bank. The Company issued 1,599,940 shares of its common stock valued at approximately $42.6 million as of May 15, 2017, plus $30.0 million in cash in exchange for all outstanding shares of Hardeman common stock.Prior to the acquisition, Hardeman conducted banking business from 10 branches located in western Tennessee. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $462.9 million in assets, including approximately $251.6 million in loans (inclusive of loan discounts) and approximately $389.0 million in deposits. The Company completed the systems conversion and merged Hardeman into Simmons Bank in September 2017. As part of the systems conversion, five existing Simmons Bank and First South Bank branches were consolidated or closed.Goodwill of $29.4 million was recorded as a result of the transaction. The merger strengthened the Company’s position in the western Tennessee market, and the Company will be able to achieve cost savings by integrating the two companies and combining accounting, data processing, and other administrative functions, all of which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.A summary, at fair value, of the assets acquired and liabilities assumed in the Hardeman transaction, as of the acquisition date, is as follows:(In thousands) Acquired from
Hardeman Fair Value
Adjustments Fair
Value Assets Acquired Cash and due from banks $ 8,001 $ -- $ 8,001 Interest bearing balances due from banks - time 1,984 -- 1,984 Investment securities 170,654 (285 ) 170,369 Loans acquired 257,641 (5,992 ) 251,649 Allowance for loan losses (2,382 ) 2,382 -- Foreclosed assets 1,083 (452 ) 631 Premises and equipment 9,905 1,258 11,163 Bank owned life insurance 7,819 -- 7,819 Goodwill 11,485 (11,485 ) -- Core deposit intangible -- 7,840 7,840 Other intangibles -- 830 830 Other assets 2,639 (1 ) 2,638 Total assets acquired $ 468,829 $ (5,905 ) $ 462,924 15Liabilities Assumed Deposits: Non-interest bearing transaction accounts $ 76,555 $ -- $ 76,555 Interest bearing transaction accounts and savings deposits 214,872 -- 214,872 Time deposits 97,917 (368 ) 97,549 Total deposits 389,344 (368 ) 388,976 Securities sold under agreement to repurchase 17,163 -- 17,163 Other borrowings 3,000 -- 3,000 Subordinated debentures 6,702 -- 6,702 Accrued interest and other liabilities 1,891 1,924 3,815 Total liabilities assumed 418,100 1,556 419,656 Equity 50,729 (50,729 ) -- Total equity assumed 50,729 (50,729 ) -- Total liabilities and equity assumed $ 468,829 $ (49,173 ) $ 419,656 Net assets acquired 43,268 Purchase price 72,639 Goodwill $ 29,371 During 2018, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities.The Company’s operating results for all periods presented include the operating results of the acquired assets and assumed liabilities of Hardeman subsequent to the acquisition date.The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the acquisitions above.Cash and due from banks and time deposits due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.Foreclosed assets – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.Premises and equipment – Bank premises and equipment were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired.Bank owned life insurance – Bank owned life insurance is carried at its current cash surrender value, which is the most reasonable estimate of fair value.Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill. Goodwill established prior to the acquisitions, if applicable, was written off.Core deposit intangible – This intangible asset represents the value of the relationships that the acquired banks had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits. Core deposit intangible established prior to the acquisitions, if applicable, was written off.16Other intangibles – Other intangible assets represent the value of the relationships that Hardeman had with its insurance customers and the mortgage servicing rights acquired with OKSB. The fair value of Hardeman’s insurance customer relationships was estimated based on a combination of discounted cash flow methodology and a market valuation approach. Other intangibles established prior to the acquisitions, if applicable, were written off.Other assets – The fair value adjustment results from certain assets whose value was estimated to be less than book value, such as certain prepaid assets, receivables and other miscellaneous assets. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference when material.Securities sold under agreement to repurchase – The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities.FHLB and other borrowings – The fair value of Federal Home Loan Bank and other borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities. Due to the floating rate nature of the debenture, the fair value approximates book value as of the date acquired.Accrued interest and other liabilities –of acquisition. The adjustment establishes a liability for unfunded commitments equal toresults of the fair value of that liability atmerger will be included in the date of acquisition.
Company’s consolidated operating results beginning on the acquisition date.17NOTE 3: INVESTMENT SECURITIESThe amortized cost and fair value of investment securities that are classified as held-to-maturity (“HTM”) and available-for-sale (“AFS”) are as follows: March 31, 2018 December 31, 2017 (In thousands) Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
(Losses) Estimated
Fair
Value Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
(Losses) Estimated
Fair
Value Held-to-Maturity U.S. Government agencies $ 46,961 $ 1 $ (259 ) $ 46,703 $ 46,945 $ 7 $ (228 ) $ 46,724 Mortgage-backed securities 15,404 -- (444 ) 14,960 16,132 8 (287 ) 15,853 State and political subdivisions 286,901 3,701 (1,106 ) 289,496 301,491 5,962 (222 ) 307,231 Other securities 3,490 -- -- 3,490 3,490 -- -- 3,490 Total HTM $ 352,756 $ 3,702 $ (1,809 ) $ 354,649 $ 368,058 $ 5,977 $ (737 ) $ 373,298 Available-for-Sale U.S. Government agencies $ 152,855 $ 15 $ (3,066 ) $ 149,804 $ 141,559 $ 116 $ (1,951 ) $ 139,724 Mortgage-backed securities 1,394,138 155 (38,114 ) 1,356,179 1,208,017 246 (20,946 ) 1,187,317 State and political subdivisions 191,018 100 (5,230 ) 185,888 144,642 532 (2,009 ) 143,165 Other securities 136,911 1,332 (1 ) 138,242 118,106 1,206 (1 ) 119,311 Total AFS $ 1,874,922 $ 1,602 $ (46,411 ) $ 1,830,113 $ 1,612,324 $ 2,100 $ (24,907 ) $ 1,589,517 March 31, 2019 December 31, 2018 (In thousands) AmortizedCost GrossUnrealizedGains Gross Unrealized(Losses) EstimatedFairValue AmortizedCost GrossUnrealizedGains Gross Unrealized(Losses) EstimatedFairValueHeld-to-Maturity U.S. Government agencies $ 12,996 $ — $ (9 ) $ 12,987 $ 16,990 $ — $ (49 ) $ 16,941 Mortgage-backed securities 12,847 10 (240 ) 12,617 13,346 5 (412 ) 12,939 State and political subdivisions 33,597 751 (27 ) 34,321 256,863 3,029 (954 ) 258,938 Other securities 1,995 36 — 2,031 1,995 17 — 2,012 Total HTM $ 61,435 $ 797 $ (276 ) $ 61,956 $ 289,194 $ 3,051 $ (1,415 ) $ 290,830 Available-for-Sale U.S. Government agencies $ 163,730 $ 596 $ (2,749 ) $ 161,577 $ 157,523 $ 518 $ (3,740 ) $ 154,301 Mortgage-backed securities 1,362,950 2,569 (19,842 ) 1,345,677 1,552,487 3,097 (32,684 ) 1,522,900 State and political subdivisions 571,716 10,307 (1,233 ) 580,790 320,142 171 (5,470 ) 314,843 Other securities 151,707 437 (77 ) 152,067 157,471 2,251 (14 ) 159,708 Total AFS $ 2,250,103 $ 13,909 $ (23,901 ) $ 2,240,111 $ 2,187,623 $ 6,037 $ (41,908 ) $ 2,151,752 Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other AFS securities in the table above.Certain investment securities are valued at less than their historical cost. Total fair value of these investments at March 31, 20182019 and December 31, 2017,2018, was $1.8$1.4 billion and $1.4$1.7 billion, which is approximately 82.1%60.1% and 73.5%70.3%, respectively, of the Company’s combined AFS and HTM investment portfolios.1811The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2018:2019: Less Than 12 Months 12 Months or More Total (In thousands) Estimated
Fair
Value Gross
Unrealized
Losses Estimated
Fair
Value Gross
Unrealized
Losses Estimated
Fair
Value Gross
Unrealized
Losses Held-to-Maturity U.S. Government agencies $ 12,957 $ (17 ) $ 32,758 $ (242 ) $ 45,715 $ (259 ) Mortgage-backed securities 5,897 (110 ) 8,479 (334 ) 14,376 (444 ) State and political subdivisions 100,221 (1,070 ) 1,595 (36 ) 101,816 (1,106 ) Total HTM $ 119,075 $ (1,197 ) $ 42,832 $ (612 ) $ 161,907 $ (1,809 ) Available-for-Sale U.S. Government agencies $ 120,100 $ (1,617 ) $ 25,326 $ (1,449 ) $ 145,426 $ (3,066 ) Mortgage-backed securities 725,518 (12,950 ) 589,543 (25,164 ) 1,315,061 (38,114 ) State and political subdivisions 95,659 (1,603 ) 73,293 (3,627 ) 168,952 (5,230 ) Other securities -- -- 99 (1 ) 99 (1 ) Total AFS $ 941,277 $ (16,170 ) $ 688,261 $ (30,241 ) $ 1,629,538 $ (46,411 ) Less Than 12 Months 12 Months or More Total (In thousands) EstimatedFairValue GrossUnrealizedLosses EstimatedFairValue GrossUnrealizedLosses EstimatedFairValue GrossUnrealizedLossesHeld-to-Maturity U.S. Government agencies $ — $ — $ 12,987 $ (9 ) $ 12,987 $ (9 ) Mortgage-backed securities 487 (1 ) 9,994 (239 ) 10,481 (240 ) State and political subdivisions 80 (1 ) 4,881 (26 ) 4,961 (27 ) Total HTM $ 567 $ (2 ) $ 27,862 $ (274 ) $ 28,429 $ (276 ) Available-for-Sale U.S. Government agencies $ 5,583 $ (30 ) $ 124,129 $ (2,719 ) $ 129,712 $ (2,749 ) Mortgage-backed securities 40,444 (248 ) 1,086,169 (19,594 ) 1,126,613 (19,842 ) State and political subdivisions 1,016 (4 ) 92,894 (1,229 ) 93,910 (1,233 ) Other securities 5,029 (76 ) 100 (1 ) 5,129 (77 ) Total AFS $ 52,072 $ (358 ) $ 1,303,292 $ (23,543 ) $ 1,355,364 $ (23,901 ) These declines reflected in the preceding table primarily resulted from the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. Management does not have the intent to sell these securities and management believes it is more likely than not the Company will not have to sell these securities before recovery of their amortized cost basis less any current period credit losses.Declines in the fair value of HTM and AFS securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.Management has the ability and intent to hold the securities classified as HTM until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of March 31, 2018,2019, management also had the ability and intent to hold the securities classified as AFS for a period of time sufficient for a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of March 31, 2018,2019, management believes the impairments detailed in the table above are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.12Income earned on securities for the three months ended March 31, 20182019 and 2017,2018, is as follows:(In thousands) 2018 2017 Taxable: Held-to-maturity $ 567 $ 661 Available-for-sale 9,032 5,816 Non-taxable: Held-to-maturity 1,936 2,283 Available-for-sale 1,087 691 Total $ 12,622 $ 9,451 19(In thousands) 2019 2018 Taxable: Held-to-maturity $ 438 $ 567 Available-for-sale 12,551 9,032 Non-taxable: Held-to-maturity 1,162 1,936 Available-for-sale 3,161 1,087 Total $ 17,312 $ 12,622 The amortized cost and estimated fair value by maturity of securities are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Held-to-Maturity Available-for-Sale (In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value One year or less $ 48,493 $ 48,335 $ 370 $ 370 After one through five years 75,993 75,842 35,843 35,100 After five through ten years 92,585 92,633 22,926 22,342 After ten years 120,281 122,879 284,834 277,981 Securities not due on a single maturity date 15,404 14,960 1,394,138 1,356,179 Other securities (no maturity) -- -- 136,811 138,141 Total $ 352,756 $ 354,649 $ 1,874,922 $ 1,830,113 Held-to-Maturity Available-for-Sale (In thousands) AmortizedCost FairValue AmortizedCost FairValueOne year or less $ 18,407 $ 18,397 $ 7,375 $ 7,372 After one through five years 20,419 20,624 74,428 74,208 After five through ten years 5,564 5,691 123,088 124,101 After ten years 4,198 4,627 535,761 541,815 Securities not due on a single maturity date 12,847 12,617 1,362,950 1,345,677 Other securities (no maturity) — — 146,501 146,938 Total $ 61,435 $ 61,956 $ 2,250,103 $ 2,240,111 The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $1.4$1.06 billion at March 31, 20182019 and $1.2$1.02 billion at December 31, 2017.There were approximately $6,000$2.7 million of gross realized gains and no gross realized losses from the sale of securities during the three months ended March 31, 2018.2019. During the quarter, the Company made adjustments to the bond portfolio based upon projected cash flow changes due to the present low rate environment. There were approximately $63,000$6,000 of gross realized gains and no gross realized losses from the sale of securities during the three months ended March 31, 2017.The state and political subdivision debt obligations are predominately non-rated bonds representing small issuances, primarily in Arkansas, Missouri, Oklahoma, Tennessee and Texas issues, which are evaluated on an ongoing basis.NOTE 4: OTHER ASSETS AND OTHER LIABILITIES HELD FOR SALEIn August 2017, the Company, through its bank subsidiary, Simmons Bank, acquired the stock of Heartland Bank (“Heartland”) at a public auction held to satisfy certain indebtedness of Heartland’s former holding company, Rock Bancshares, Inc.In March 2018, Heartland sold $141.0 million of branches and loans, as well as $154.6 million of deposits and other liabilities. At the end of the first quarter 2018, other assets held for sale of $24.8 million and other liabilities held for sale of $2.8 million related to Heartland, both recorded at fair value, remained at the Company. The Company will continue to work through the disposition of Heartland’s few remaining assets and expects to be complete within one year of the acquisition.The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the Heartland transaction.Cash and due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.Investment securities – The carrying amount of these assets was deemed to be a reasonable estimate of fair value, as there were no material differences to fair value based upon quoted market prices.Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.Premises and equipment – Bank premises and equipment were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property and equipment values completed in connection with the acquisition and book value acquired.2013NOTE 5:4: LOANS AND ALLOWANCE FOR LOAN LOSSESAt March 31, 2018,2019, the Company’s loan portfolio was $10.99$11.74 billion, compared to $10.78$11.72 billion at December 31, 2017.2018. The various categories of loans are summarized as follows:(In thousands) March 31,
2018 December 31,
2017 Consumer: Credit cards $ 176,602 $ 185,422 Other consumer 284,285 280,094 Total consumer 460,887 465,516 Real Estate: Construction 786,077 614,155 Single family residential 1,193,464 1,094,633 Other commercial 2,611,358 2,530,824 Total real estate 4,590,899 4,239,612 Commercial: Commercial 971,704 825,217 Agricultural 128,247 148,302 Total commercial 1,099,951 973,519 Other 138,646 26,962 Loans 6,290,383 5,705,609 Loans acquired, net of discount and allowance (1) 4,696,945 5,074,076 Total loans $ 10,987,328 $ 10,779,685 ______________________ (1)See Note 6, Loans Acquired, for segregation of loans acquired by loan class._____________________________(In thousands) March 31, 2019 December 31, 2018 Consumer: Credit cards $ 181,549 $ 204,173 Other consumer 213,659 201,297 Total consumer 395,208 405,470 Real Estate: Construction 1,376,162 1,300,723 Single family residential 1,431,407 1,440,443 Other commercial 3,355,109 3,225,287 Total real estate 6,162,678 5,966,453 Commercial: Commercial 1,801,422 1,774,909 Agricultural 147,216 164,514 Total commercial 1,948,638 1,939,423 Other 178,026 119,042 Loans 8,684,550 8,430,388 Loans acquired, net of discount and allowance (1)3,056,187 3,292,783 Total loans $ 11,740,737 $ 11,723,171 (1) See Note 5, Loans Acquired, for segregation of loans acquired by loan class.Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for loans losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. Furthermore, a factor that influenced the Company’s judgment regarding the allowance for loan losses consists of an eight-yeara nine-year historical loss average segregated by each primary loan sector. On an annual basis, historical loss rates are calculated for each sector.Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. 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 be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.Real estate – The real estate loan portfolio consists of construction loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the14overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely.21Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on all commercial loans for closely-held or limited liability entities.Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless ifof whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.Nonaccrual loans, excluding loans acquired, segregated by class of loans, are as follows:(In thousands) March 31,
2018 December 31,
2017 Consumer: Credit cards $ 298 $ 170 Other consumer 4,711 4,605 Total consumer 5,009 4,775 Real estate: Construction 1,923 2,242 Single family residential 13,616 13,431 Other commercial 16,707 16,054 Total real estate 32,246 31,727 Commercial: Commercial 8,003 6,980 Agricultural 2,137 2,160 Total commercial 10,140 9,140 Total $ 47,395 $ 45,642 22(In thousands) March 31, 2019 December 31, 2018 Consumer: Credit cards $ 338 $ 296 Other consumer 1,555 2,159 Total consumer 1,893 2,455 Real estate: Construction 2,570 1,269 Single family residential 15,324 11,939 Other commercial 8,612 7,205 Total real estate 26,506 20,413 Commercial: Commercial 31,409 10,049 Agricultural 1,117 1,284 Total commercial 32,526 11,333 Total $ 60,925 $ 34,201 15An age analysis of past due loans, excluding loans acquired, segregated by class of loans, is as follows:(In thousands) Gross
30-89 Days
Past Due 90 Days
or More
Past Due Total
Past Due Current Total
Loans 90 Days
Past Due &
Accruing March 31, 2018 Consumer: Credit cards $ 707 $ 672 $ 1,379 $ 175,223 $ 176,602 $ 233 Other consumer 3,407 3,176 6,583 277,702 284,285 33 Total consumer 4,114 3,848 7,962 452,925 460,887 266 Real estate: Construction 640 703 1,343 784,734 786,077 -- Single family residential 6,937 6,163 13,100 1,180,364 1,193,464 71 Other commercial 4,796 9,488 14,284 2,597,074 2,611,358 -- Total real estate 12,373 16,354 28,727 4,562,172 4,590,899 71 Commercial: Commercial 3,674 4,134 7,808 963,896 971,704 -- Agricultural 107 2,075 2,182 126,065 128,247 -- Total commercial 3,781 6,209 9,990 1,089,961 1,099,951 -- Other -- -- -- 138,646 138,646 -- Total $ 20,268 $ 26,411 $ 46,679 $ 6,243,704 $ 6,290,383 $ 337 December 31, 2017 Consumer: Credit cards $ 707 $ 672 $ 1,379 $ 184,043 $ 185,422 $ 332 Other consumer 5,009 3,298 8,307 271,787 280,094 10 Total consumer 5,716 3,970 9,686 455,830 465,516 342 Real estate: Construction 411 1,210 1,621 612,534 614,155 -- Single family residential 8,071 6,460 14,531 1,080,102 1,094,633 1 Other commercial 2,388 8,031 10,419 2,520,405 2,530,824 -- Total real estate 10,870 15,701 26,571 4,213,041 4,239,612 1 Commercial: Commercial 1,523 6,125 7,648 817,569 825,217 -- Agricultural 50 2,120 2,170 146,132 148,302 -- Total commercial 1,573 8,245 9,818 963,701 973,519 -- Other -- -- -- 26,962 26,962 -- Total $ 18,159 $ 27,916 $ 46,075 $ 5,659,534 $ 5,705,609 $ 343 (In thousands) Gross30-89 DaysPast Due 90 Daysor MorePast Due TotalPast Due Current TotalLoans 90 DaysPast Due &AccruingMarch 31, 2019 Consumer: Credit cards $ 733 $ 561 $ 1,294 $ 180,255 $ 181,549 $ 222 Other consumer 3,018 489 3,507 210,152 213,659 52 Total consumer 3,751 1,050 4,801 390,407 395,208 274 Real estate: Construction 961 909 1,870 1,374,292 1,376,162 — Single family residential 10,226 5,491 15,717 1,415,690 1,431,407 7 Other commercial 4,384 4,652 9,036 3,346,073 3,355,109 — Total real estate 15,571 11,052 26,623 6,136,055 6,162,678 7 Commercial: Commercial 6,845 8,611 15,456 1,785,966 1,801,422 — Agricultural 202 954 1,156 146,060 147,216 — Total commercial 7,047 9,565 16,612 1,932,026 1,948,638 — Other — — — 178,026 178,026 — Total $ 26,369 $ 21,667 $ 48,036 $ 8,636,514 $ 8,684,550 $ 281 December 31, 2018 Consumer: Credit cards $ 1,033 $ 506 $ 1,539 $ 202,634 $ 204,173 $ 209 Other consumer 4,264 896 5,160 196,137 201,297 4 Total consumer 5,297 1,402 6,699 398,771 405,470 213 Real estate: Construction 533 308 841 1,299,882 1,300,723 — Single family residential 7,769 4,127 11,896 1,428,547 1,440,443 — Other commercial 3,379 2,773 6,152 3,219,135 3,225,287 — Total real estate 11,681 7,208 18,889 5,947,564 5,966,453 — Commercial: Commercial 4,472 5,105 9,577 1,765,332 1,774,909 11 Agricultural 467 1,055 1,522 162,992 164,514 — Total commercial 4,939 6,160 11,099 1,928,324 1,939,423 11 Other — — — 119,042 119,042 — Total $ 21,917 $ 14,770 $ 36,687 $ 8,393,701 $ 8,430,388 $ 224 Impaired Loans – A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loans, including scheduled principal and interest payments. This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent.Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.2316Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows:(In thousands) Unpaid
Contractual
Principal
Balance Recorded Investment
With No
Allowance Recorded
Investment
With Allowance Total
Recorded
Investment Related
Allowance Average
Investment in
Impaired
Loans Interest
Income
Recognized March 31, 2018 Three Months Ended
March 31, 2018Consumer: Credit cards $ 298 $ 298 $ -- $ 298 $ -- $ 234 $ 15 Other consumer 4,849 4,711 -- 4,711 -- 4,658 34 Total consumer 5,147 5,009 -- 5,009 -- 4,892 49 Real estate: Construction 2,392 1,220 702 1,922 249 2,082 16 Single family residential 14,605 13,057 559 13,616 32 13,523 100 Other commercial 22,500 8,135 8,573 16,708 145 16,287 120 Total real estate 39,497 22,412 9,834 32,246 426 31,892 236 Commercial: Commercial 8,480 7,119 758 7,877 18 7,226 53 Agricultural 3,256 2,137 -- 2,137 -- 1,586 12 Total commercial 11,736 9,256 758 10,014 18 8,812 65 Total $ 56,380 $ 36,677 $ 10,592 $ 47,269 $ 444 $ 45,596 $ 350 December 31, 2017 Three Months Ended
March 31, 2017Consumer: Credit cards $ 170 $ 170 $ -- $ 170 $ -- $ 302 $ 5 Other consumer 4,755 4,605 -- 4,605 -- 2,107 13 Total consumer 4,925 4,775 -- 4,775 -- 2,409 18 Real estate: Construction 2,522 1,347 895 2,242 249 3,074 20 Single family residential 14,347 12,725 706 13,431 53 12,667 81 Other commercial 22,308 6,732 9,133 15,865 36 19,321 123 Total real estate 39,177 20,804 10,734 31,538 338 35,062 224 Commercial: Commercial 9,954 4,306 2,269 6,575 -- 11,344 72 Agricultural 3,278 1,035 -- 1,035 -- 1,726 11 Total commercial 13,232 5,341 2,269 7,610 -- 13,070 83 Total $ 57,334 $ 30,920 $ 13,003 $ 43,923 $ 338 $ 50,541 $ 325 (In thousands) UnpaidContractualPrincipalBalance Recorded InvestmentWith NoAllowance RecordedInvestmentWith Allowance TotalRecordedInvestment RelatedAllowance AverageInvestment inImpairedLoans InterestIncomeRecognizedMarch 31, 2019 Three Months Ended
March 31, 2019Consumer: Credit cards $ 338 $ 338 $ — $ 338 $ — $ 317 $ 30 Other consumer 1,699 1,555 — 1,555 — 1,857 13 Total consumer 2,037 1,893 — 1,893 — 2,174 43 Real estate: Construction 2,648 2,090 480 2,570 237 1,920 14 Single family residential 16,379 11,891 3,432 15,323 38 13,703 98 Other commercial 14,279 3,882 3,201 7,083 137 8,992 64 Total real estate 33,306 17,863 7,113 24,976 412 24,615 176 Commercial: Commercial 38,420 6,268 23,327 29,595 108 20,739 148 Agricultural 2,215 583 532 1,115 1 1,147 8 Total commercial 40,635 6,851 23,859 30,710 109 21,886 156 Total $ 75,978 $ 26,607 $ 30,972 $ 57,579 $ 521 $ 48,675 $ 375 December 31, 2018 Three Months Ended
March 31, 2018Consumer: Credit cards $ 296 $ 296 $ — $ 296 $ — $ 234 $ 15 Other consumer 2,311 2,159 — 2,159 — 4,658 34 Total consumer 2,607 2,455 — 2,455 — 4,892 49 Real estate: Construction 1,344 784 485 1,269 211 2,082 16 Single family residential 12,906 11,468 616 12,084 36 13,523 100 Other commercial 8,434 5,442 5,458 10,900 — 16,287 120 Total real estate 22,684 17,694 6,559 24,253 247 31,892 236 Commercial: Commercial 10,361 7,254 4,628 11,882 437 7,226 53 Agricultural 2,419 1,180 — 1,180 — 1,586 12 Total commercial 12,780 8,434 4,628 13,062 437 8,812 65 Total $ 38,071 $ 28,583 $ 11,187 $ 39,770 $ 684 $ 45,596 $ 350 At March 31, 2018,2019 and December 31, 2017,2018, impaired loans, net of government guarantees and excluding loans acquired, totaled $47.3$57.6 million and $43.9$39.8 million, respectively. Allocations of the allowance for loan losses relative to impaired loans were $444,000$521,000 and $338,000$684,000 at March 31, 20182019 and December 31, 2017,2018, respectively. Approximately $350,000$375,000 of interest income was recognized on average impaired loans of $45.6$48.7 million for the three months ended March 31, 2018.2019. Interest income recognized on impaired loans on a cash basis during the three months ended March 31, 20182019 and 20172018 was not material.Included in certain impaired loan categories are troubled debt restructurings (“TDRs”). 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” 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.Under ASC Topic 310-10-35 – Subsequent Measurement, a TDR is considered to be impaired, and an impairment analysis must be performed. The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is needed.17Once 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.24The following table presents a summary of troubled debt restructurings, excluding loans acquired, segregated by class of loans. Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans (Dollars in thousands) Number Balance Number Balance Number Balance March 31, 2018 Consumer: Other consumer 1 $ 91 -- $ -- 1 $ 91 Total consumer 1 91 -- -- 1 91 Real estate: Construction -- -- 1 408 1 408 Single-family residential 5 201 13 802 18 1,003 Other commercial 4 4,270 4 3,350 8 7,620 Total real estate 9 4,471 18 4,560 27 9,031 Commercial: Commercial 4 1,897 6 738 10 2,635 Total commercial 4 1,897 6 738 10 2,635 Total 14 $ 6,459 24 $ 5,298 38 $ 11,757 December 31, 2017 Real estate: Construction -- $ -- 1 $ 420 1 $ 420 Single-family residential 4 141 15 954 19 1,095 Other commercial 4 4,322 5 3,712 9 8,034 Total real estate 8 4,463 21 5,086 29 9,549 Commercial: Commercial 5 2,644 6 745 11 3,389 Total commercial 5 2,644 6 745 11 3,389 Total 13 $ 7,107 27 $ 5,831 40 $ 12,938 25 Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans (Dollars in thousands) Number Balance Number Balance Number Balance March 31, 2019 Real estate: Construction — $ — 3 $ 480 3 $ 480 Single-family residential 6 227 9 593 15 820 Other commercial 2 3,250 2 1,003 4 4,253 Total real estate 8 3,477 14 2,076 22 5,553 Commercial: Commercial 4 2,820 5 427 9 3,247 Total commercial 4 2,820 5 427 9 3,247 Total 12 $ 6,297 19 $ 2,503 31 $ 8,800 December 31, 2018 Real estate: Construction — $ — 3 $ 485 3 $ 485 Single-family residential 6 230 10 616 16 846 Other commercial 2 3,306 2 1,027 4 4,333 Total real estate 8 3,536 15 2,128 23 5,664 Commercial: Commercial 4 2,833 6 718 10 3,551 Total commercial 4 2,833 6 718 10 3,551 Total 12 $ 6,369 21 $ 2,846 33 $ 9,215 There were no loans restructured as TDRs during the three months ended March 31, 2019. The following table presents loans that were restructured as TDRs during the three months ended March 31, 2018, and 2017, excluding loans acquired, segregated by class of loans. Modification Type (Dollars in thousands) Number of
Loans Balance Prior
to TDR Balance at
March 31 Change in
Maturity
Date Change in
Rate Financial Impact
on Date of
Restructure Three Months Ended March 31, 2018 Consumer: Other consumer 1 $ 91 $ 91 $ 91 $ -- $ -- Total consumer 1 91 91 91 -- -- Real estate: Single-family residential 1 61 62 62 -- -- Total real estate 1 61 62 62 -- -- Total 2 $ 152 $ 153 $ 153 $ -- $ -- Three Months Ended March 31, 2017 Real estate: Construction 1 $ 456 $ 456 $ 456 $ -- $ -- Other commercial 2 7,362 7,362 7,362 -- 33 Total real estate 3 7,818 7,818 7,818 -- 33 Commercial: Commercial 5 770 760 760 -- -- Total commercial 5 770 760 760 -- -- Total 8 $ 8,588 $ 8,578 $ 8,578 $ -- $ 33 Modification Type (Dollars in thousands) Number ofLoans Balance Priorto TDR Balance at March 31, Change inMaturityDate Change inRate Financial Impacton Date ofRestructureThree Months Ended March 31, 2018 Consumer: Other consumer 1 $ 91 $ 91 $ 91 $ — $ — Total consumer 1 91 91 91 — — Real estate: Single-family residential 1 61 62 62 — — Total real estate 1 61 62 62 — — Total 2 $ 152 $ 153 $ 153 $ — $ — 18During the three months ended March 31, 2018, the Company modified 2 loans with a recorded investment of $152,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments, changing the maturity date and requiring interest only payments for a period of up to 12 months. A specific reserve was not considered necessary for these loans based upon the fair value of the collateral. 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.DuringThere was one commercial loan considered a TDR for which a payment default occurred during the three months ended March 31, 2017, the Company modified 8 loans with a2019. A charge-off of approximately $138,000 was recorded investment of $8.6 million prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments and requiring interest only payments for a period of up to 12 months. Based on the fair value of the collateral, a specific reserve of $26,000 was determined necessary for these loans. Also, the financial impact from the restructuring of these loans was $33,000 from the charge-off interest on the date of restructure.There was one commercial real estate loan for which a payment default occurred during the three months ended March 31, 2017. The Company defines a payment default as a payment received more than 90 days after its due date.In addition to the TDRs that occurred during the periodperiods provided in the preceding tables, the Company had TDRs with pre-modification loan balances, specifically in commercial real estate, of $294,300 and $242,300 at March 31, 2018, and 2017, respectively, for which OREO was received in full or partial satisfaction of the loans. The majorityThere were no TDRs with pre-modification loan balance for which OREO was received in full or partial satisfaction of such TDRs were in commercial real estate and residential real estate.the loans during the three month period ended March 31, 2019. At March 31, 20182019 and December 31, 2017,2018, the Company had $6,809,000$3,498,000 and $5,057,000,$3,899,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At March 31, 20182019 and December 31, 2017,2018, the Company had $3,767,000$4,716,000 and $3,828,000,$3,530,000, respectively, of OREO secured by residential real estate properties.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 in the States of Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas.26The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8. A description of the general characteristics of the 8 risk ratings is as follows:·Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.·Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).·Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.·Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.·Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.·Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.·Risk Rate 7 – Doubtful – A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.·Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.27Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.19Risk Rate 7 – Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.Loans acquired are evaluated using this internal grading system. Loans acquired are evaluated individually and include purchased credit impaired loans of $17.6$3.7 million and $17.1$4.1 million that are accounted for under ASC Topic 310-30 and are classified as substandard (Risk Rating 6) as of March 31, 20182019 and December 31, 2017,2018, respectively. Of the remaining loans acquired and accounted for under ASC Topic 310-20, $78.7$77.2 million and $76.3$50.4 million were classified (Risk Ratings 6, 7 and 8 – see classified loans discussion below) at March 31, 20182019 and December 31, 2017,2018, respectively.Purchased credit impaired loans are loans that showed evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their fair value was initially based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates of interest. The difference between the undiscounted cash flows expected at acquisition and the fair value at acquisition is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition are not recognized as a yield adjustment. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment.Classified loans for the Company include loans in Risk Ratings 6, 7 and 8. Loans may be classified, but not considered impaired, due to one of the following reasons: (1)The Company has established minimum dollar amount thresholds for loan impairment testing. Loans rated 6 – 8 that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans. (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans. Total classified loans, excluding loans accounted for under ASC Topic 310-30, were $177.8$177.4 million and $175.6$119.0 million, as of March 31, 20182019 and December 31, 2017,2018, respectively.20The following table presents a summary of loans by credit risk rating as of March 31, 20182019 and December 31, 2017,2018, segregated by class of loans. Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.(In thousands) Risk Rate
1-4 Risk Rate
5 Risk Rate
6 Risk Rate
7 Risk Rate
8 Total March 31, 2018 Consumer: Credit cards $ 176,071 $ -- $ 531 $ -- $ -- $ 176,602 Other consumer 279,414 -- 4,871 -- -- 284,285 Total consumer 455,485 -- 5,402 -- -- 460,887 Real estate: Construction 778,757 2,344 4,960 16 -- 786,077 Single family residential 1,168,255 1,790 23,197 222 -- 1,193,464 Other commercial 2,572,032 7,076 32,250 -- -- 2,611,358 Total real estate 4,519,044 11,210 60,407 238 -- 4,590,899 Commercial: Commercial 953,138 6,140 12,426 -- -- 971,704 Agricultural 124,938 325 2,961 23 -- 128,247 Total commercial 1,078,076 6,465 15,387 23 -- 1,099,951 Other 138,646 -- -- -- -- 138,646 Loans acquired 4,545,941 54,664 95,842 498 -- 4,696,945 Total $ 10,737,192 $ 72,339 $ 177,038 $ 759 $ -- $ 10,987,328 28(In thousands) Risk Rate
1-4 Risk Rate
5 Risk Rate
6 Risk Rate
7 Risk Rate
8 Total December 31, 2017 Consumer: Credit cards $ 184,920 $ -- $ 502 $ -- $ -- $ 185,422 Other consumer 275,160 -- 4,934 -- -- 280,094 Total consumer 460,080 -- 5,436 -- -- 465,516 Real estate: Construction 603,126 5,795 5,218 16 -- 614,155 Single family residential 1,066,902 3,954 23,490 287 -- 1,094,633 Other commercial 2,480,293 19,581 30,950 -- -- 2,530,824 Total real estate 4,150,321 29,330 59,658 303 -- 4,239,612 Commercial: Commercial 736,377 74,254 14,402 50 134 825,217 Agricultural 146,065 24 2,190 23 -- 148,302 Total commercial 882,442 74,278 16,592 73 134 973,519 Other 26,962 -- -- -- -- 26,962 Loans acquired 4,782,384 198,314 93,378 -- -- 5,074,076 Total $ 10,302,189 $ 301,922 $ 175,064 $ 376 $ 134 $ 10,779,685 (In thousands) Risk Rate1-4 Risk Rate5 Risk Rate6 Risk Rate7 Risk Rate8 Total March 31, 2019 Consumer: Credit cards $ 180,988 $ — $ 561 $ — $ — $ 181,549 Other consumer 211,642 — 2,017 — — 213,659 Total consumer 392,630 — 2,578 — — 395,208 Real estate: Construction 1,372,113 443 3,606 — — 1,376,162 Single family residential 1,407,554 1,784 21,839 230 — 1,431,407 Other commercial 3,313,139 21,629 20,341 — — 3,355,109 Total real estate 6,092,806 23,856 45,786 230 — 6,162,678 Commercial: Commercial 1,745,162 9,671 46,589 — — 1,801,422 Agricultural 145,828 67 1,321 — — 147,216 Total commercial 1,890,990 9,738 47,910 — — 1,948,638 Other 178,026 — — — — 178,026 Loans acquired 2,930,179 45,157 80,515 336 — 3,056,187 Total $ 11,484,631 $ 78,751 $ 176,789 $ 566 $ — $ 11,740,737 (In thousands) Risk Rate1-4 Risk Rate5 Risk Rate6 Risk Rate7 Risk Rate8 Total December 31, 2018 Consumer: Credit cards $ 203,667 $ — $ 506 $ — $ — $ 204,173 Other consumer 198,840 — 2,457 — — 201,297 Total consumer 402,507 — 2,963 — — 405,470 Real estate: Construction 1,296,988 1,910 1,825 — — 1,300,723 Single family residential 1,420,052 1,628 18,528 235 — 1,440,443 Other commercial 3,193,289 17,169 14,829 — — 3,225,287 Total real estate 5,910,329 20,707 35,182 235 — 5,966,453 Commercial: Commercial 1,742,002 8,357 24,550 — — 1,774,909 Agricultural 162,824 75 1,615 — — 164,514 Total commercial 1,904,826 8,432 26,165 — — 1,939,423 Other 119,042 — — — — 119,042 Loans acquired 3,187,083 51,255 54,097 348 — 3,292,783 Total $ 11,523,787 $ 80,394 $ 118,407 $ 583 $ — $ 11,723,171 21Allowance for Loan LossesAllowance for Loan Losses – The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310-10, Receivables, and allowance allocations calculated in accordance with ASC Topic 450-20, Loss Contingencies. Accordingly, the methodology is based on the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factors.As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations.A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis. 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 loan 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.The general allocation is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. The Company establishes general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans.29The following table details activity in the allowance for loan losses by portfolio segment for legacy loans for the three months ended March 31, 2018.2019. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total Three Months Ended March 31, 2018 Balance, beginning of period $ 7,007 $ 27,281 $ 3,784 $ 3,596 $ 41,668 Provision for loan losses (1) 4,286 3,286 751 759 9,082 Charge-offs (1,761 ) (455 ) (999 ) (1,056 ) (4,271 ) Recoveries 69 302 263 94 728 Net charge-offs (1,692 ) (153 ) (736 ) (962 ) (3,543 ) Balance, March 31, 2018(2) $ 9,601 $ 30,414 $ 3,799 $ 3,393 $ 47,207 Period-end amount allocated to: Loans individually evaluated for impairment $ 18 $ 426 $ -- $ -- $ 444 Loans collectively evaluated for impairment 9,583 29,988 3,799 3,393 46,763 Balance, March 31, 2018 (2) $ 9,601 $ 30,414 $ 3,799 $ 3,393 $ 47,207 (In thousands) Commercial RealEstate CreditCard OtherConsumerand Other Total Three Months Ended March 31, 2019 Balance, beginning of period (2)$ 20,514 $ 29,743 $ 3,923 $ 2,419 $ 56,599 Provision for loan losses (1)1,874 2,843 898 1,206 6,821 Charge-offs (1,968 ) (374 ) (1,142 ) (1,533 ) (5,017 ) Recoveries 158 142 240 300 840 Net charge-offs (1,810 ) (232 ) (902 ) (1,233 ) (4,177 ) Balance, March 31, 2019 (2)$ 20,578 $ 32,354 $ 3,919 $ 2,392 $ 59,243 Period-end amount allocated to: Loans individually evaluated for impairment $ 109 $ 412 $ — $ — $ 521 Loans collectively evaluated for impairment 20,469 31,942 3,919 2,392 58,722 Balance, March 31, 2019 (2)$ 20,578 $ 32,354 $ 3,919 $ 2,392 $ 59,243 22Activity in the allowance for loan losses for the three months ended March 31, 20172018 was as follows:(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total Three Months Ended March 31, 2017 Balance, beginning of period $ 7,739 $ 21,817 $ 3,779 $ 2,951 $ 36,286 Provision for loan losses (1) 696 860 758 1,243 3,557 Charge-offs (292 ) (656 ) (1,044 ) (1,174 ) (3,166 ) Recoveries 30 232 236 690 1,188 Net charge-offs (262 ) (424 ) (808 ) (484 ) (1,978 ) Balance, March 31, 2017 (2) $ 8,173 $ 22,253 $ 3,729 $ 3,710 $ 37,865 Period-end amount allocated to: Loans individually evaluated for impairment $ 708 $ 837 $ -- $ 1 $ 1,546 Loans collectively evaluated for impairment 7,465 21,416 3,729 3,709 36,319 Balance, March 31, 2017 (2) $ 8,173 $ 22,253 $ 3,729 $ 3,710 $ 37,865 Period-end amount allocated to: Loans individually evaluated for impairment $ -- $ 338 $ -- $ -- $ 338 Loans collectively evaluated for impairment 7,007 26,943 3,784 3,596 41,330 Balance, December 31, 2017 (2) $ 7,007 $ 27,281 $ 3,784 $ 3,596 $ 41,668 (1)Provision for loan losses of $68,000 attributable to loans acquired was excluded from this table for the three months ended March 31, 2018 (total provision for loan losses for the three months ended March 31, 2018 was $9,150,000). There were $79,000 in charge-offs for loans acquired during the three months ended March 31, 2018, resulting in an ending balance in the allowance related to loans acquired of $407,000. Provision for loan losses of $750,000 attributable to loans acquired was excluded from this table for the three months ended March 31, 2017 (total provision for loan losses for the three months ended March 31, 2017 was $4,307,000). There were $1.3 million in charge-offs for loans acquired during the first three months of 2017, resulting in an ending balance in the allowance related to loans acquired of $435,000.(2)Allowance for loan losses at March 31, 2018 includes $407,000 allowance for loans acquired (not shown in the table above). Allowance for loan losses at December 31, 2017 and March 31, 2017 includes $418,000 and $435,000, respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at March 31, 2018 was $47,614,000 and total allowance for loan losses at December 31, 2017 and March 31, 2017 was $42,086,000 and $38,300,000, respectively.30(In thousands) Commercial RealEstate CreditCard OtherConsumerand Other Total Three Months Ended March 31, 2018 Balance, beginning of period (3)$ 7,007 $ 27,281 $ 3,784 $ 3,596 $ 41,668 Provision for loan losses (1)4,286 3,286 751 759 9,082 Charge-offs (1,761 ) (455 ) (999 ) (1,056 ) (4,271 ) Recoveries 69 302 263 94 728 Net charge-offs (1,692 ) (153 ) (736 ) (962 ) (3,543 ) Balance, March 31, 2018 (2)$ 9,601 $ 30,414 $ 3,799 $ 3,393 $ 47,207 Period-end amount allocated to: Loans individually evaluated for impairment $ 18 $ 426 $ — $ — $ 444 Loans collectively evaluated for impairment 9,583 29,988 3,799 3,393 46,763 Balance, March 31, 2018 (2)$ 9,601 $ 30,414 $ 3,799 $ 3,393 $ 47,207 Period-end amount allocated to: Loans individually evaluated for impairment $ 437 $ 247 $ — $ — $ 684 Loans collectively evaluated for impairment 20,077 29,496 3,923 2,419 55,915 Balance, December 31, 2018 (2)$ 20,514 $ 29,743 $ 3,923 $ 2,419 $ 56,599 ______________________(1) Provision for loan losses of $2,464,000 attributable to loans acquired was excluded from this table for the three months ended March 31, 2019 (total provision for loan losses for the three months ended March 31, 2019 was $9,285,000). There were $1,247,000 in charge-offs for loans acquired during the three months ended March 31, 2019, resulting in an ending balance in the allowance related to loans acquired of $1,312,000. Provision for loan losses of $68,000 attributable to loans acquired was excluded from this table for the three months ended March 31, 2018 (total provision for loan losses for the three months ended March 31, 2018 was $9,150,000). There were $79,000 in charge-offs for loans acquired during the three months ended March 31, 2018, resulting in an ending balance in the allowance related to loans acquired of $407,000.(2) Allowance for loan losses at March 31, 2019 includes $1,312,000 allowance for loans acquired (not shown in the table above). Allowance for loan losses at December 31, 2018 and March 31, 2018 includes $95,000 and $407,000, respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at March 31, 2019 was $60,555,000 and total allowance for loan losses at December 31, 2018 and March 31, 2018 was $56,694,000 and $47,614,000, respectively.(3) Allowance for loan losses at December 31, 2017 includes $418,000 allowance for loans acquired (not shown in the table above). The total allowance for loan losses at December 31, 2017 was $42,086,000.The Company’s recorded investment in loans, excluding loans acquired, related to each balance in the allowance for loan losses by portfolio segment on the basis of the Company’s impairment methodology was as follows:(In thousands) Commercial Real
Estate Credit
Card Other
Consumer
and Other Total March 31, 2018 Loans individually evaluated for impairment $ 10,014 $ 32,246 $ 298 $ 4,711 $ 47,269 Loans collectively evaluated for impairment 1,089,937 4,558,653 176,304 418,220 6,243,114 Balance, end of period $ 1,099,951 $ 4,590,899 $ 176,602 $ 422,931 $ 6,290,383 December 31, 2017 Loans individually evaluated for impairment $ 7,610 $ 31,538 $ 170 $ 4,605 $ 43,923 Loans collectively evaluated for impairment 965,909 4,208,074 185,252 302,451 5,661,686 Balance, end of period $ 973,519 $ 4,239,612 $ 185,422 $ 307,056 $ 5,705,609 (In thousands) Commercial RealEstate CreditCard OtherConsumerand Other Total March 31, 2019 Loans individually evaluated for impairment $ 30,710 $ 24,976 $ 338 $ 1,555 $ 57,579 Loans collectively evaluated for impairment 1,917,928 6,137,702 181,211 390,130 8,626,971 Balance, end of period $ 1,948,638 $ 6,162,678 $ 181,549 $ 391,685 $ 8,684,550 December 31, 2018 Loans individually evaluated for impairment $ 13,062 $ 24,253 $ 296 $ 2,159 $ 39,770 Loans collectively evaluated for impairment 1,926,361 5,942,200 203,877 318,180 8,390,618 Balance, end of period $ 1,939,423 $ 5,966,453 $ 204,173 $ 320,339 $ 8,430,388 23NOTE 6:5: LOANS ACQUIREDDuringThe Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the fourth quarteruse of 2017, the Company evaluated $1.985 billionacquisition method of netaccounting. All identifiable assets acquired, including loans, ($2.021 billion grossare recorded at fair value. No allowance for loan losses related to the loans less $36.3 million discount) purchasedacquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in conjunctionaccordance with the acquisitionfair value methodology prescribed in ASC Topic 820, Fair Value Measurement. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of OKSB, described in Note 2, Acquisitions,undiscounted expected principal, interest and other cash flows.The Company evaluates non-impaired loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans. The Company evaluated the remaining $11.4 million of netevaluates purchased impaired loans ($18.1 million gross loans less $6.7 million discount) purchased in conjunction with the acquisition of OKSB for impairment in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.Also during the fourth quarter of 2017,For impaired loans accounted for under ASC Topic 310-30, the Company evaluated $2.208 billion of net loans ($2.246 billion gross loans less $37.8 million discount) purchased in conjunction with the acquisition of First Texas, described in Note 2, Acquisitions, in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount is being accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not consideredcontinues to estimate cash flows expected to be impaired loans.During the second quarter of 2017, the Company evaluated $249.2 million of net loans ($254.2 million gross loans less $5.0 million discount)collected on purchased in conjunction with the acquisition of Hardeman, described in Note 2, Acquisitions, in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount is being accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to becredit impaired loans. The Company evaluatedevaluates, at each balance sheet date, whether the present value of the purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in the consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining $2.4 millionlife of net loans ($3.4 million gross loans less $990,000 discount)the purchased in conjunction with the acquisition of Hardeman for impairment in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.See Note 2, Acquisitions, for further discussion of loans acquired.
credit impaired loan.31The following table reflects the carrying value of all loans acquired as of March 31, 20182019 and December 31, 2017:2018: Loans Acquired (In thousands) March 31,
2018 December 31,
2017 Consumer: Other consumer $ 43,090 $ 51,467 Real estate: Construction 591,533 637,032 Single family residential 747,597 793,228 Other commercial 2,420,121 2,387,777 Total real estate 3,759,251 3,818,037 Commercial: Commercial 891,261 995,587 Agricultural 3,343 66,576 Total commercial 894,604 1,062,163 Other -- 142,409 Total loans acquired (1) $ 4,696,945 $ 5,074,076 (1)Loans acquired are reported net of a $407,000 and $418,000 allowance at March 31, 2018 and December 31, 2017, respectively. Loans Acquired (In thousands) March 31, 2019 December 31, 2018 Consumer: Other consumer $ 11,979 $ 15,658 Real estate: Construction 404,512 429,605 Single family residential 533,917 566,188 Other commercial 1,730,472 1,848,679 Total real estate 2,668,901 2,844,472 Commercial: Commercial 374,033 430,914 Agricultural 1,274 1,739 Total commercial 375,307 432,653 Total loans acquired (1)$ 3,056,187 $ 3,292,783 ________________________(1) Loans acquired are reported net of a $1,312,000 and $95,000 allowance at March 31, 2019 and December 31, 2018, respectively.24Nonaccrual loans acquired, excluding purchased credit impaired loans accounted for under ASC Topic 310-30, segregated by class of loans, are as follows (see Note 5,4, Loans and Allowance for Loan Losses, for discussion of nonaccrual loans):(In thousands) March 31,
2018 December 31,
2017 Consumer: Other consumer $ 570 $ 334 Real estate: Construction 241 1,767 Single family residential 8,072 12,151 Other commercial 19,626 7,401 Total real estate 27,939 21,319 Commercial: Commercial 1,518 1,748 Agricultural 152 84 Total commercial 1,670 1,832 Total $ 30,179 $ 23,485 32(In thousands) March 31, 2019 December 31, 2018 Consumer: Other consumer $ 149 $ 140 Real estate: Construction 130 114 Single family residential 6,342 6,603 Other commercial 8,973 1,167 Total real estate 15,445 7,884 Commercial: Commercial 3,117 13,578 Agricultural 20 38 Total commercial 3,137 13,616 Total $ 18,731 $ 21,640 An age analysis of past due loans acquired segregated by class of loans, is as follows (see Note 5,4, Loans and Allowance for Loan Losses, for discussion of past due loans):(In thousands) Gross
30-89 Days
Past Due 90 Days
or More
Past Due Total
Past Due Current Total
Loans 90 Days
Past Due &
Accruing March 31, 2018 Consumer: Other consumer $ 444 $ 152 $ 596 $ 42,494 $ 43,090 $ -- Real estate: Construction 162 1,504 1,666 589,867 591,533 -- Single family residential 7,938 5,353 13,291 734,306 747,597 -- Other commercial 1,480 3,940 5,420 2,414,701 2,420,121 -- Total real estate 9,580 10,797 20,377 3,738,874 3,759,251 -- Commercial: Commercial 1,697 569 2,266 888,995 891,261 -- Agricultural 43 119 162 3,181 3,343 -- Total commercial 1,740 688 2,428 892,176 894,604 -- Total $ 11,764 $ 11,637 $ 23,401 $ 4,673,544 $ 4,696,945 $ -- December 31, 2017 Consumer: Other consumer $ 889 $ 260 $ 1,149 $ 50,318 $ 51,467 $ 108 Real estate: Construction 2,577 1,448 4,025 633,007 637,032 279 Single family residential 12,936 3,302 16,238 776,990 793,228 126 Other commercial 17,176 5,647 22,823 2,364,954 2,387,777 2,565 Total real estate 32,689 10,397 43,086 3,774,951 3,818,037 2,970 Commercial: Commercial 2,344 1,039 3,383 992,204 995,587 67 Agricultural 51 -- 51 66,525 66,576 -- Total commercial 2,395 1,039 3,434 1,058,729 1,062,163 67 Other 15 -- 15 142,394 142,409 -- Total $ 35,988 $ 11,696 $ 47,684 $ 5,026,392 $ 5,074,076 $ 3,145 33(In thousands) Gross30-89 DaysPast Due 90 Daysor MorePast Due TotalPast Due Current TotalLoans 90 DaysPast Due &Accruing March 31, 2019 Consumer: Other consumer $ 94 $ 77 $ 171 $ 11,808 $ 11,979 $ — Real estate: Construction 5 8,122 8,127 396,385 404,512 — Single family residential 5,058 2,583 7,641 526,276 533,917 24 Other commercial 305 8,267 8,572 1,721,900 1,730,472 — Total real estate 5,368 18,972 24,340 2,644,561 2,668,901 24 Commercial: Commercial 7,265 6,673 13,938 360,095 374,033 — Agricultural — — — 1,274 1,274 — Total commercial 7,265 6,673 13,938 361,369 375,307 — Total $ 12,727 $ 25,722 $ 38,449 $ 3,017,738 $ 3,056,187 $ 24 25(In thousands) Gross30-89 DaysPast Due 90 Daysor MorePast Due TotalPast Due Current TotalLoans 90 DaysPast Due &Accruing December 31, 2018 Consumer: Other consumer $ 337 $ 49 $ 386 $ 15,272 $ 15,658 $ 2 Real estate: Construction 8,283 27 8,310 421,295 429,605 — Single family residential 4,706 3,049 7,755 558,433 566,188 — Other commercial 168 577 745 1,847,934 1,848,679 — Total real estate 13,157 3,653 16,810 2,827,662 2,844,472 — Commercial: Commercial 1,302 9,542 10,844 420,070 430,914 — Agricultural 31 5 36 1,703 1,739 — Total commercial 1,333 9,547 10,880 421,773 432,653 — Total $ 14,827 $ 13,249 $ 28,076 $ 3,264,707 $ 3,292,783 $ 2 The following table presents a summary of loans acquired by credit risk rating, segregated by class of loans (see Note 5,4, Loans and Allowance for Loan Losses, for discussion of loan risk rating). Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.(In thousands) Risk Rate
1-4 Risk Rate
5 Risk Rate
6 Risk Rate
7 Risk Rate
8 Total March 31, 2018 Consumer: Other consumer $ 41,995 $ 14 $ 1,081 $ -- $ -- $ 43,090 Real estate: Construction 570,334 19,624 1,575 -- -- 591,533 Single family residential 726,224 1,917 18,958 498 -- 747,597 Other commercial 2,374,014 12,663 33,444 -- -- 2,420,121 Total real estate 3,670,572 34,204 53,977 498 -- 3,759,251 Commercial: Commercial 830,225 20,446 40,590 -- -- 891,261 Agricultural 3,149 -- 194 -- -- 3,343 Total commercial 833,374 20,446 40,784 -- -- 894,604 Total $ 4,545,941 $ 54,664 $ 95,842 $ 498 $ -- $ 4,696,945 December 31, 2017 Consumer: Other consumer $ 50,625 $ 21 $ 821 $ -- $ -- $ 51,467 Real estate: Construction 604,796 30,524 1,712 -- -- 637,032 Single family residential 770,954 2,618 19,656 -- -- 793,228 Other commercial 2,337,097 15,064 35,616 -- -- 2,387,777 Total real estate 3,712,847 48,206 56,984 -- -- 3,818,037 Commercial: Commercial 946,322 13,901 35,364 -- -- 995,587 Agricultural 66,367 -- 209 -- -- 66,576 Total commercial 1,012,689 13,901 35,573 -- -- 1,062,163 Other 142,409 -- -- -- -- 142,409 Total $ 4,918,570 $ 62,128 $ 93,378 $ -- $ -- $ 5,074,076 (In thousands) Risk Rate1-4 Risk Rate5 Risk Rate6 Risk Rate7 Risk Rate8 Total March 31, 2019 Consumer: Other consumer $ 11,715 $ — $ 264 $ — $ — $ 11,979 Real estate: Construction 369,267 27,475 7,770 — — 404,512 Single family residential 520,159 2,049 11,373 336 — 533,917 Other commercial 1,675,051 11,894 43,527 — — 1,730,472 Total real estate 2,564,477 41,418 62,670 336 — 2,668,901 Commercial: Commercial 352,779 3,739 17,515 — — 374,033 Agricultural 1,208 — 66 — — 1,274 Total commercial 353,987 3,739 17,581 — — 375,307 Total $ 2,930,179 $ 45,157 $ 80,515 $ 336 $ — $ 3,056,187 26(In thousands) Risk Rate1-4 Risk Rate5 Risk Rate6 Risk Rate7 Risk Rate8 Total December 31, 2018 Consumer: Other consumer $ 15,380 $ — $ 278 $ — $ — $ 15,658 Real estate: Construction 393,122 27,621 8,862 — — 429,605 Single family residential 553,460 2,081 10,299 348 — 566,188 Other commercial 1,822,179 9,137 17,363 — — 1,848,679 Total real estate 2,768,761 38,839 36,524 348 — 2,844,472 Commercial: Commercial 401,300 12,416 17,198 — — 430,914 Agricultural 1,642 — 97 — — 1,739 Total commercial 402,942 12,416 17,295 — — 432,653 Total $ 3,187,083 $ 51,255 $ 54,097 $ 348 $ — $ 3,292,783 Loans acquired were individually evaluated and recorded at estimated fair value, including estimated credit losses, at the time of acquisition. These loans are systematically reviewed by the Company to determine the risk of losses that may exceed those identified at the time of the acquisition. Techniques used in determining risk of loss are similar to the Company’s legacy loan portfolio, with most focus being placed on those loans which include the larger loan relationships and those loans which exhibit higher risk characteristics.In addition to the accretable yield on loans acquired not considered to be impaired, the amount of the estimated cash flows expected to be received from the purchased credit impaired loans in excess of the fair values recorded for the purchased credit impaired loans is referred to as the accretable yield. The accretable yield is recognized as interest income over the estimated lives of the loans. Each quarter, the Company estimates the cash flows expected to be collected from the acquired purchased credit impaired loans, and adjustments may or may not be required. This has resulted in an increase in interest income that is spread on a level-yield basis over the remaining expected lives of the loans.34The impact of these adjustments on the Company’s financial results for the three months ended March 31, 2018 and 2017 is shown below: Three Months Ended
March 31,(In thousands) 2018 2017 Impact on net interest income and pre-tax income $ 450 $ 1,184 Impact, net of taxes $ 331 $ 720 Changes in the carrying amount of the accretable yield for all purchased impaired loans were as follows for the three months ended March 31, 20182019 and 2017.2018. Three Months Ended
March 31, 2018 Three Months Ended
March 31, 2017(In thousands) Accretable
Yield Carrying
Amount of
Loans Accretable
Yield Carrying
Amount of
Loans Beginning balance $ 620 $ 17,116 $ 1,655 $ 17,802 Additions -- -- -- -- Accretable yield adjustments 1,134 -- 1,228 -- Accretion (385 ) 385 (1,666 ) 1,666 Payments and other reductions, net -- 104 -- (10,773 ) Balance, ending $ 1,369 $ 17,605 $ 1,217 $ 8,695 Three Months Ended
March 31, 2019 Three Months Ended
March 31, 2018(In thousands) AccretableYield CarryingAmount ofLoans AccretableYield CarryingAmount ofLoansBeginning balance $ 1,460 $ 4,050 $ 620 $ 17,116 Additions — — — — Accretable yield adjustments 17 — 1,134 — Accretion (9 ) 9 (385 ) 385 Payments and other reductions, net — (408 ) — 104 Balance, ending $ 1,468 $ 3,651 $ 1,369 $ 17,605 Purchased impaired loans are evaluated on an individual borrower basis. Because some loans evaluated by the Company were determined to have experienced impairment in the estimated credit quality or cash flows, the Company recorded a provision and established an allowance for loan loss for loans acquired resulting in a total allowance on loans acquired of $407,000$1,312,000 at March 31, 20182019 and $418,000$95,000 at December 31, 2017.2018. The provision on loans acquired for the three months ended March 31, 2019 and 2018 was $2,464,000 and 2017$68,000, respectively.27NOTE 6: RIGHT-OF-USE LEASE ASSETS AND LEASE LIABILITIESAs of the first quarter 2019, the Company accounts for its leases in accordance with ASC Topic 842, Leases, which requires recognition of most leases, including operating leases, with a term greater than 12 months, on the balance sheet. At lease commencement, the lease contract is reviewed to determine whether the contract is a finance lease or an operating lease; a lease liability is recognized on a discounted basis, related to the Company’s obligation to make lease payments; and a right-of-use asset is also recognized related to the Company’s right to use, or control the use of, a specified asset for the lease term. 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 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. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.The Company’s leases are classified as operating leases with a term, including expected renewal or termination options, greater than one year, and are related to certain office facilities and office equipment. As of March 31, 2019, right-of-use lease assets included in premises and equipment are $30.5 million and lease liabilities included in other liabilities are $30.4 million. During the three months ended March 31, 2019, the Company recognized lease expense of $2.6 million and the weighted average discount rate was $68,000 and $750,000, respectively.
3.46%. At March 31, 2019, the weighted average remaining lease term was 9.29 years.35See Note 1, in the Recently Adopted Accounting Standards section, for additional information related to the adoption of ASC Topic 842.NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETSGoodwill is tested annually, or more often than annually, if circumstances warrant, for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. Goodwill totaled $845.7 million at both March 31, 20182019 and $842.7 million at December 31, 2017.The Company recorded $229.1 million, $240.8 million and $29.4 million of goodwill as a result of its acquisitions of OKSB, First Texas and Hardeman, respectively.2018. Goodwill impairment was neither indicated nor recorded during the three months ended March 31, 20182019 or the year ended December 31, 2017.Core deposit premiums are amortized over periods ranging from 10 to 15 years and are periodically evaluated, at least annually, as to the recoverability of their carrying value. Core deposit premiums of $42.1 million, $7.3 million, and $7.8 million were recorded during 2017 as part of the OKSB, First Texas and Hardeman acquisitions, respectively.IntangibleAdditionally, intangible assets are being amortized over various periods ranging from 10 to 15 years. The Company recorded $830,000 of intangible assets during 2017 related to the insurance operations in the Hardeman acquisition. The Company recorded $3.8 million of other intangible assets during 2017 as part of the OKSB acquisition which were subsequently sold in first quarter 2018.The Company’s goodwill and other intangibles (carrying basis and accumulated amortization) at March 31, 20182019 and December 31, 2017,2018, were as follows: (In thousands) March 31,
2018 December 31,
2017 Goodwill $ 845,687 $ 842,651 Core deposit premiums: Gross carrying amount 105,984 105,984 Accumulated amortization (19,009 ) (16,659 ) Core deposit premiums, net 86,975 89,325 Books of business intangible: Gross carrying amount 15,234 15,414 Accumulated amortization (2,912 ) (2,827 ) Books of business intangible, net 12,322 12,587 Other intangibles: Gross carrying amount 2,068 6,037 Accumulated amortization (1,861 ) (1,878 ) Other intangibles, net 207 4,159 Other intangible assets, net 99,504 106,071 Total goodwill and other intangible assets $ 945,191 $ 948,722 (In thousands) March 31, 2019 December 31, 2018 Goodwill $ 845,687 $ 845,687 Core deposit premiums: Gross carrying amount 105,984 105,984 Accumulated amortization (28,552 ) (26,177 ) Core deposit premiums, net 77,432 79,807 Books of business intangible: Gross carrying amount 15,234 15,234 Accumulated amortization (3,972 ) (3,707 ) Books of business intangible, net 11,262 11,527 Other intangible assets, net 88,694 91,334 Total goodwill and other intangible assets $ 934,381 $ 937,021 28The Company’s estimated remaining amortization expense on intangibles as of March 31, 20182019 is as follows:(In thousands) Year Amortization
Expense Remainder of 2018 $ 8,171 2019 10,565 2020 10,552 2021 10,490 2022 10,438 Thereafter 49,288 Total $ 99,504 36(In thousands) Year AmortizationExpense Remainder of 2019 $ 7,924 2020 10,552 2021 10,490 2022 10,438 2023 10,156 Thereafter 39,134 Total $ 88,694 NOTE 8: TIME DEPOSITSTime deposits include approximately $1.035$1.507 billion and $736.0 million$1.443 billion of certificates of deposit of $100,000 or more at March 31, 2018,2019, and December 31, 2017,2018, respectively. Of this total approximately $664,732,000$770.1 million and $396,771,000$753.2 million of certificates of deposit were over $250,000 at March 31, 20182019 and December 31, 2017,2018, respectively.NOTE 9: INCOME TAXESThe provision for income taxes is comprised of the following components:components for the periods indicated below:(In thousands) March 31,
2018 March 31,
2017Income taxes currently payable $ 10,045 $ 6,601 Deferred income taxes 3,921 3,090 Provision for income taxes $ 13,966 $ 9,691 Three Months Ended
March 31,(In thousands) 2019 2018 Income taxes currently payable $ 10,317 $ 10,045 Deferred income taxes 2,081 3,921 Provision for income taxes $ 12,398 $ 13,966 The tax effects of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their appropriate tax effects, are as follows:(In thousands) March 31,
2018 December 31,
2017 Deferred tax assets: Loans acquired $ 18,418 $ 19,885 Allowance for loan losses 12,294 10,773 Valuation of foreclosed assets 2,852 2,852 Tax NOLs from acquisition 7,727 7,821 Deferred compensation payable 2,534 2,433 Accrued equity and other compensation 4,472 5,302 Acquired securities 578 578 Unrealized loss on available-for-sale securities 12,217 6,107 Other 7,279 8,813 Gross deferred tax assets 68,371 64,564 Deferred tax liabilities: Goodwill and other intangible amortization (32,579 ) (32,572 ) Accumulated depreciation (9,317 ) (8,945 ) Other (4,103 ) (4,413 ) Gross deferred tax liabilities (45,999 ) (45,930 ) Net deferred tax asset, included in other assets $ 22,372 $ 18,634 37(In thousands) March 31, 2019 December 31, 2018 Deferred tax assets: Loans acquired $ 11,052 $ 12,536 Allowance for loan losses 14,885 13,947 Valuation of foreclosed assets 1,474 1,474 Tax NOLs from acquisition 6,969 7,242 Deferred compensation payable 2,793 2,707 Accrued equity and other compensation 6,304 8,182 Acquired securities 397 397 Unrealized loss on available-for-sale securities 2,718 9,196 Other 7,130 7,042 Gross deferred tax assets 53,722 62,723 29(In thousands) March 31, 2019 December 31, 2018 Deferred tax liabilities: Goodwill and other intangible amortization $ (30,273 ) $ (30,471 ) Accumulated depreciation (13,361 ) (13,361 ) Other (5,115 ) (5,360 ) Gross deferred tax liabilities (48,749 ) (49,192 ) Net deferred tax asset, included in other assets $ 4,973 $ 13,531 A reconciliation of income tax expense at the statutory rate to the Company'sCompany’s actual income tax expense is shown for the periods indicated below:(In thousands) March 31,
2018 March 31,
2017 Computed at the statutory rate (1) $ 13,708 $ 11,134 Increase (decrease) in taxes resulting from: State income taxes, net of federal tax benefit 1,822 539 Discrete items related to ASU 2016-09 (273 ) (1,082 ) Tax exempt interest income (677 ) (1,071 ) Tax exempt earnings on BOLI (186 ) (218 ) Other differences, net (428 ) 389 Actual tax provision $ 13,966 $ 9,691 ________________________(1)The statutory rate was 21% for the three months ended March 31, 2018, compared to 35% for the three months ended March 31, 2017. Three Months Ended
March 31,(In thousands) 2019 2018 Computed at the statutory rate (21%) $ 12,620 $ 13,708 Increase (decrease) in taxes resulting from: State income taxes, net of federal tax benefit 1,345 1,822 Discrete items related to ASU 2016-09 (26 ) (273 ) Tax exempt interest income (961 ) (677 ) Tax exempt earnings on BOLI (179 ) (186 ) Federal tax credits (729 ) — Other differences, net 328 (428 ) Actual tax provision $ 12,398 $ 13,966 The Company follows ASC Topic 740, Income Taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company has no history of expiring net operating loss carryforwards and is projecting significant pre-tax and financial taxable income in 20182019 and in future years. The Company expects to fully realize its deferred tax assets in the future.On December 22, 2017, the President signed tax reform legislation (the “2017 Act”) which includes a broad range of tax reform proposals affecting businesses, including corporate tax rates, business deductions, and international tax provisions. The 2017 Act reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. Under US GAAP, deferred tax assets and liabilities are required to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled and the effect of a change in tax law is recorded discretely as a component of the income tax provision related to continuing operations in the period of enactment. As a result, the Company was required to remeasure its deferred taxes as of December 22, 2017 based upon the new 21% tax rate and the change was recorded in the 2017 income tax provision.On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the 2017 Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. As such, the company’s 2017 financial results reflect the income tax effects for the 2017 Act for which the accounting under ASC 740 is complete and provisional amounts for those specific income tax effects of the 2017 Act for which the accounting under ASC 740 is incomplete but a reasonable estimate could be determined. The company did not identify items for which the income tax effects of the 2017 Act have not been completed and a reasonable estimate could not be determined as of December 31, 2017. The tax expense recorded in 2017 is a reasonable estimate based on published guidance available at this time and is considered provisional. The ultimate impact of the 2017 Act may differ from these estimates due to changes in interpretations and assumptions made by the Company, as well as additional regulatory guidance. Any adjustments will be reflected in the Company’s financial statements in future periods.The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.Section 382 of the Internal Revenue Code imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its U.S. net operating losses to reduce its tax liability. The Company closed a stock acquisition in a prior year that invoked the Section 382 annual limitation. Approximately $35.6$33.8 million of federal net operating losses subject to the IRC Sec 382 annual limitation are expected to be utilized by the Company. The net operating loss carryforwards expire between 2028 and 2035.38The Company files income tax returns in the U.S. federal jurisdiction. The Company’s U.S. federal income tax returns are open and subject to examinations from the 20142015 tax year and forward. The Company’s various state income tax returns are generally open from the 20142015 and later tax return years based on individual state statute of limitations.30NOTE 10: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASEThe Company utilizes securities sold under agreements to repurchase to facilitate the needs of its customers and to facilitate secured short-term funding needs. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. The Company monitors collateral levels on a continuous basis. The Company may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents.The gross amount of recognized liabilities for repurchase agreements was $114.6$117.0 million and $122.0$95.5 million at March 31, 20182019 and December 31, 2017,2018, respectively. The remaining contractual maturity of the securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 20182019 and December 31, 20172018 is presented in the following tables. Remaining Contractual Maturity of the Agreements (In thousands) Overnight and
Continuous Up to 30 Days 30-90 Days Greater than
90 Days Total March 31, 2018 Repurchase agreements: U.S. Government agencies $ 114,634 $ -- $ -- $ -- $ 114,634 December 31, 2017 Repurchase agreements: U.S. Government agencies $ 122,019 $ -- $ -- $ -- $ 122,019 39 Remaining Contractual Maturity of the Agreements (In thousands) Overnight andContinuous Up to 30 Days 30-90 Days Greater than90 Days Total March 31, 2019 Repurchase agreements: U.S. Government agencies $ 116,963 $ — $ — $ — $ 116,963 December 31, 2018 Repurchase agreements: U.S. Government agencies $ 95,542 $ — $ — $ — $ 95,542 NOTE 11: OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURESDebt at March 31, 20182019 and December 31, 20172018 consisted of the following components:(In thousands) March 31,
2018 December 31,
2017 Other Borrowings FHLB advances, net of discount, due 2018 to 2033, 1.33% to 7.37% secured by residential real estate loans $ 1,140,986 $ 1,261,642 Revolving credit agreement, due 10/5/2018, floating rate of 1.50% above the one month LIBOR rate, unsecured -- 75,000 Notes payable, due 10/15/2020, 3.85%, fixed rate, unsecured -- 43,382 Total other borrowings 1,140,986 1,380,024 Subordinated Notes and Debentures Subordinated notes payable, due 4/1/2028, fixed-to-floating rate (fixed rate of 5.00% through 3/31/2023, floating rate of 2.15% above the three month LIBOR rate, reset quarterly) 330,000 -- Trust preferred securities, due 12/30/2033, floating rate of 2.80% above the three month LIBOR rate, reset quarterly, callable without penalty 20,620 20,620 Trust preferred securities, net of discount, due 6/30/2035, floating rate of 1.75% above the three month LIBOR rate, reset quarterly, callable without penalty 9,344 9,327 Trust preferred securities, net of discount, due 9/15/2037, floating rate of 1.37% above the three month LIBOR rate, reset quarterly 10,310 10,284 Trust preferred securities, net of discount, due 12/5/2033, floating rate of 2.88% above the three month LIBOR rate, reset quarterly, callable without penalty 5,155 5,156 Trust preferred securities, net of discount, due 10/18/2034, floating rate of 2.00% above the three month LIBOR rate, reset quarterly, callable without penalty 5,155 5,148 Trust preferred securities, net of discount, due 6/6/2037, floating rate of 1.57% above the three month LIBOR rate, reset quarterly, callable without penalty 10,310 10,288 Trust preferred securities, due 12/15/2035, floating rate of 1.45% above the three month LIBOR rate, reset quarterly, callable without penalty 6,702 6,702 Trust preferred securities, due 6/26/2033, floating rate of 3.10% above the three month LIBOR rate, reset quarterly, callable without penalty 20,619 20,619 Trust preferred securities, due 10/7/2033, floating rate of 2.85% above the three month LIBOR rate, reset quarterly, callable without penalty 25,774 25,774 Trust preferred securities, due 9/15/2037, floating rate of 2.00% above the three month LIBOR rate, reset quarterly, callable without penalty 8,248 8,248 Other subordinated debentures, net of discount, due 9/30/2023, floating rate equal to daily average of prime rate, reset quarterly 19,517 18,399 Unamortized debt issuance costs (3,289 ) -- Total subordinated notes and debentures 468,465 140,565 Total other borrowings and subordinated debt $ 1,609,451 $ 1,520,589 (In thousands) March 31, 2019 December 31, 2018 Other Borrowings FHLB advances, net of discount, due 2019 to 2033, 1.38% to 7.37% secured by real estate loans $ 1,169,989 $ 1,345,450 Revolving credit agreement, due 10/4/2019, floating rate of 1.50% above the one month LIBOR rate, unsecured — — Total other borrowings 1,169,989 1,345,450 Subordinated Notes and Debentures Subordinated notes payable, due 4/1/2028, fixed-to-floating rate (fixed rate of 5.00% through 3/31/2023, floating rate of 2.15% above the three month LIBOR rate, reset quarterly) 330,000 330,000 Trust preferred securities, net of discount, due 9/15/2037, floating rate of 1.37% above the three month LIBOR rate, reset quarterly 10,310 10,310 Trust preferred securities, net of discount, due 6/6/2037, floating rate of 1.57% above the three month LIBOR rate, reset quarterly, callable without penalty 10,310 10,310 Trust preferred securities, due 12/15/2035, floating rate of 1.45% above the three month LIBOR rate, reset quarterly, callable without penalty 6,702 6,702 Unamortized debt issuance costs (3,281 ) (3,372 ) Total subordinated notes and debentures 354,041 353,950 Total other borrowings and subordinated debt $ 1,524,030 $ 1,699,400 31In March 2018, the Company issued $330.0 million in aggregate principal amount, of 5.00% Fixed-to-Floating Rate Subordinated Notes (“the Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. The Company incurred $3.3$3.6 million in debt issuance costs related to the offering during March. The Notes will mature on April 1, 2028 and will bear interest at an initial fixed rate of 5.00% per annum, payable semi-annually in arrears. From and including April 1, 2023 to, but excluding, the maturity date or the date of earlier redemption, the interest rate will reset quarterly to an annual interest rate equal to the then-current three month LIBOR rate plus 215 basis points, payable quarterly in arrears. 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. The Notes are obligations of Simmons First National Corporation only and are not obligations of, and are not guaranteed by, any of its subsidiaries. During the first quarter of 2018, the Company used a portion of the net proceeds from the sale of the Notes to repay certain outstanding indebtedness, including the amounts borrowed under the Revolving Credit Agreement (the “Credit Agreement”), certain trust preferred securities, both discussed below, and the unsecured debt from correspondent banks. The subordinated notesNotes qualify for Tier 2 capital treatment.40In October 2017, the Company entered into the Credit Agreement with U.S. Bank National Association and executed an unsecured Revolving Credit Note pursuant to which the Company may borrow, prepay and re-borrow up to $75.0 million, the proceeds of which were primarily used to pay off amounts outstanding under a term note assumed with the First Texas acquisition. The Credit Agreement containscontained customary representations, warranties, and covenants of the Company, including, among other things, covenants that impose various financial ratio requirements. The line of credit available toIn October 2018, the Company underand U.S. Bank National Association entered into a First Amendment to the Credit Agreement, expires onwhich extended the expiration date from October 5, 2018 at which timeto October 4, 2019, reduced the $75.0 million to $50.0 million, and increased the commitment fee on the unused portion from an annual rate of 0.25% to 0.30%. In December 2018, the Company entered into a Second Amendment to the Credit Agreement that clarified the financial metrics contained in certain affirmative covenants are evaluated on a consolidated basis. In October 2019, all amounts borrowed, together with applicable interest, fees, and other amounts owed by the Company shall beare due and payable.At March 31, 2018,2019, the Company had $653.0 million$1.2 billion of Federal Home Loan Bank (“FHLB”) advances outstanding with original or expected maturities of one year or less.The Company had total FHLB advances of $1.1$1.2 billion at March 31, 2018,2019, with approximately $2.2 billion of additional advances available from the FHLB. The FHLB advances are secured by mortgage loans and investment securities totaling approximately $3.7$4.7 billion at March 31, 2018.The trust preferred securities are tax-advantaged issues that qualified for Tier 1 capital treatment until December 31, 2017, when the Company reached $15 billion in assets. They still qualify for inclusion as Tier 2 capital at March 31, 2018.2019. Distributions on these securities are included in interest expense on long-term debt. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole asset of each trust. The preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the junior subordinated debentures held by the trust. The common securities of each trust are wholly-owned by the Company. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payments on the related junior subordinated debentures. The Company’s obligations under the junior subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.32The Company’s long-term debt includes subordinated debt, notes payable and long-term FHLB advances with an original maturity of greater than one year. Aggregate annual maturities of long-term debt at March 31, 2018,2019, are as follows:(In thousands) Year Annual
Maturities 2018 $ 102,899 2019 2,577 2020 2,474 2021 2,165 2022 1,314 Thereafter 845,022 Total $ 956,451 (In thousands) Year AnnualMaturities 2019 $ 1,775 2020 2,099 2021 1,801 2022 948 2023 925 Thereafter 361,482 Total $ 369,030 NOTE 12: CONTINGENT LIABILITIESThe Company and/or its subsidiaries have various unrelated legal proceedings, which, in the aggregate, are not expected to have a material adverse effect on the financial position of the Company and its subsidiaries.NOTE 13: COMMON STOCKOn January 18, 2018, the board of directors of the Company approved a two-for-one stock split of the Corporation’s outstanding Class A common stock (“Common Stock”) in the form of a 100% stock dividend for shareholders of record as of the close of business on January 30, 2018 (“Record Date”). The new shares were distributed by the Company’s transfer agent, Computershare, and the Company’s common stock began trading on a split-adjusted basis on the NASDAQ Global Select Market on February 9, 2018. All previously reported share and per share data included in filings subsequent to February 8, 2018 are restated to reflect the retroactive effect of this two-for-one stock split.On March 19, 2018, the Company filed a shelf registration with the SEC. The shelf registration statement provides increased flexibility and more efficient access to raise capital from time to time through the sale of common stock, preferred stock, debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, units or a combination thereof, subject to market conditions. Specific terms and prices are determined at the time of any offering under a separate prospectus supplement that the Company is required to file with the SEC at the time of the specific offering.On April 19, 2018, shareholders of the Company approved an increase in the number of authorized shares from 120,000,000 to 175,000,000.41On July 23, 2012, the Company approved a stock repurchase program which authorized the repurchase of up to 1,700,000 shares (split adjusted) of Class A common stock, or approximately 2% of the shares outstanding. Under the current plan, the Company can repurchase an additional 308,272 shares. The shares are to be purchased from time to time at prevailing market prices, through open market or unsolicited negotiated transactions, depending upon market conditions. Under the repurchase program, there is no time limit for the stock repurchases, nor is there a minimum number of shares that the Company intends to repurchase. The Company may discontinue purchases at any time that management determines additional purchases are not warranted. The Company intends to use the repurchased shares to satisfy stock option exercises, payment of future stock awards and dividends and general corporate purposes.The Company had no repurchases of its common stock during the three month period ended March 31, 2019.33NOTE 14: UNDIVIDED PROFITSThe Company’s subsidiary banks arebank is subject to legal limitations on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. For the lead subsidiary bank, Simmons Bank, theThe approval of the Commissioner of the Arkansas State Bank Department is required if the total of all dividends declared by an Arkansas state bank in any calendar year exceeds seventy-five percent (75%) of the total of its net profits, as defined, for that year combined with seventy-five percent (75%) of its retained net profits of the preceding year. Bank SNB is limited by the regulations of the state of Oklahoma. Under these regulations, the total amount of dividends that may be paid by Bank SNB without regulatory approval is limited to the current year net profits, combined with the retained earnings of the preceding two years. At March 31, 2018,2019, the Company’s subsidiary banksbank had approximately $1.6$57.7 million available for payment of dividends to the Company, without prior regulatory approval.The risk-based capital guidelines of the Federal Reserve Board and the Arkansas State Bank Department include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. Under the Basel III Rules effective January 1, 2015, the criteria for a well-capitalized institution are: a 5% “Tier l leverage capital” ratio, an 8% “Tier 1 risk-based capital” ratio, 10% “total risk-based capital” ratio; and a 6.50% “common equity Tier 1 (CET1)” ratio.The Company and BanksBank must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements. The implementation of the capital conservation buffer began on January 1, 2016, at the 0.625% level and will phasewas phased in over a four-year period (increasing by that amount on each subsequent January 1 until it reachesreached 2.5% on January 1, 2019). As of March 31, 2018,2019, the Company and its subsidiary banksbank met all capital adequacy requirements under the Basel III Capital Rules, and management believes the Company and subsidiary banks would meet all Capital Rules on a fully phased-in basis if such requirements were currently effective.Rules. The Company'sCompany’s CET1 ratio was 9.64%10.46% at March 31, 2018.2019.NOTE 15: STOCK BASED COMPENSATIONThe Company’s Board of Directors has adopted various stock-based compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and performance stock units. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awarding of performance or bonus shares granted to directors, officers and other key employees.42Share and per share information regarding Stock-Based Compensation Plans has been adjusted to reflect the effects of the Company’s two-for-one stock split which became effective on February 8, 2018. The table below summarizes the transactions under the Company’s active stock compensation plans for the three months ended March 31, 2018:2019: Stock Options
Outstanding Non-vested
Stock Awards
Outstanding Non-vested
Stock Units
Outstanding Number
of Shares
(000) Weighted
Average
Exercise
Price Number
of Shares
(000) Weighted
Average
Exercise
Price Number
of Shares
(000) Weighted
Average
Exercise
Price Balance, January 1, 2018 812 $ 21.98 162 $ 20.86 652 $ 27.92 Granted -- -- -- -- 280 29.16 Stock Options Exercised (83 ) 20.67 -- -- -- -- Stock Awards/Units Vested -- -- (40 ) 17.89 (144 ) 27.87 Forfeited/Expired (3 ) 23.51 (9 ) 19.67 (46 ) 28.22 Balance, March 31, 2018 726 $ 22.12 113 $ 22.01 742 $ 28.38 Exercisable, March 31, 2018 693 $ 22.06 Stock OptionsOutstanding Non-vestedStock AwardsOutstanding Non-vestedStock UnitsOutstanding Numberof Shares(000) WeightedAverageExercisePrice Numberof Shares(000) WeightedAverageGrant-DateFair Value Numberof Shares(000) WeightedAverageGrant-DateFair ValueBalance, January 1, 2019 695 $ 22.42 72 $ 21.45 817 $ 27.65 Granted — — — — 399 26.57 Stock options exercised (1 ) 10.65 — — — — Stock awards/units vested (earned) — — (21 ) 18.65 (266 ) 26.55 Forfeited/expired — — (1 ) 18.92 (57 ) 28.45 Balance, March 31, 2019 694 $ 22.43 50 $ 22.68 893 $ 27.49 Exercisable, March 31, 2019 694 $ 22.43 34The following table summarizes information about stock options under the plans outstanding at March 31, 2018:2019: Options Outstanding Options Exercisable $8.78 - $9.46 3 1.97 $ 9.22 3 $ 9.22 10.65 - 10.65 5 3.90 10.65 5 10.65 10.76 - 10.76 2 1.80 10.76 2 10.76 15.16 - 15.16 25 0.16 15.16 25 15.16 20.29 - 20.29 70 6.75 20.29 70 20.29 20.36 - 20.36 3 6.63 20.36 2 20.36 22.20 - 22.20 76 6.98 22.20 76 22.20 22.75 - 22.75 436 7.36 22.75 436 22.75 23.51 - 23.51 99 7.66 23.51 67 23.51 24.07 - 24.07 7 7.46 24.07 7 24.07 $8.78 $24.07 726 6.99 $ 22.12 693 $ 22.06 Options Outstanding Options Exercisable Range ofExercise Prices Numberof Shares(000) WeightedAverageRemainingContractualLife (Years) WeightedAverageExercisePrice Numberof Shares(000) WeightedAverageExercisePrice$ 9.46 — $ 9.46 1 2.80 $9.46 1 $9.46 10.65 — 10.65 3 3.83 10.65 3 10.65 10.76 — 10.76 2 0.80 10.76 2 10.76 20.29 — 20.29 71 5.75 20.29 71 20.29 20.36 — 20.36 3 5.63 20.36 3 20.36 22.20 — 22.20 74 5.98 22.20 74 22.20 22.75 — 22.75 436 6.36 22.75 436 22.75 23.51 — 23.51 97 6.81 23.51 97 23.51 24.07 — 24.07 7 6.46 24.07 7 24.07 $ 9.46 — $ 24.07 694 6.28 $22.43 694 $22.43 The table below summarizes the Company’s restricted performance stock unit activity for the three months ended March 31, 2019:(In thousands) Performance Stock Units Non-vested, January 1, 2019 177 Granted 83 Vested (earned) (54 ) Forfeited (17 ) Non-vested, March 31, 2019 189 Stock-based compensation expense was $2,621,000$3,084,000 and $2,599,000$2,621,000 during the three months ended March 31, 20182019 and 2017,2018, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all stock-based awards. There was $169,000zero of unrecognized stock-based compensation expense related to stock options at March 31, 2018.2019. Unrecognized stock-based compensation expense related to non-vested stock awards and stock units was $24,932,000$20,533,000 at March 31, 2018.2019. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 2.42.0 years.The intrinsic value of stock options outstanding and stock options exercisable at March 31, 20182019 was $4,600,000$1,425,000 and $4,430,000.$1,423,000, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $28.45$24.48 as of March 31, 2018,2019, and the exercise price multiplied by the number of options outstanding. The total intrinsic value of stock options exercised during the three months ended March 31, 20182019 and March 31, 2017,2018, was $6,000 and $646,000, and $414,000, respectively.43The fair value of the Company’s employee stock options granted is estimated on the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. There were no stock options granted during the three months ended March 31, 20182019 and 2017.2018.35NOTE 16: EARNINGS PER SHARE (“EPS”)Basic EPS is computed based on the weighted average number of shares outstanding during each period. Diluted EPS is computed using the weighted average common shares and all potential dilutive common shares outstanding during the period.The share and per share amounts for 2017 have been restated to reflect the effect of the two-for-one stock split during February 2018.Following is the computation of earnings per share for the three months ended March 31, 2018 and 2017:(In thousands, except per share data) 2018 2017 Net income $ 51,312 $ 22,120 Average common shares outstanding 92,182 62,702 Average potential dilutive common shares 457 524 Average diluted common shares 92,639 63,226 Basic earnings per share $ 0.56 $ 0.35 Diluted earnings per share $ 0.55 $ 0.35 Three Months Ended
March 31,(In thousands, except per share data) 2019 2018 Net income $ 47,695 $ 51,312 Average common shares outstanding 92,520 92,182 Average potential dilutive common shares 351 457 Average diluted common shares 92,871 92,639 Basic earnings per share $ 0.52 $ 0.56 Diluted earnings per share $ 0.51 $ 0.55 There were no stock options excluded from the earnings per share calculation due to the related exercise price exceeding the average market price for the three months ended March 31, 20182019 and 2017.2018.NOTE 17: ADDITIONAL CASH FLOW INFORMATIONThe following is a summary of the Company’s additional cash flow information during the three months ended: Three Months Ended
March 31,(In thousands) 2018 2017 Interest paid $ 22,863 $ 6,160 Income taxes (refunded) paid (7,375 ) 23 Transfers of loans to foreclosed assets held for sale 1,316 2,044 Transfers of premises to foreclosed assets and other real estate owned 106 --
information:44 Three Months Ended
March 31,(In thousands) 2019 2018 Interest paid $ 38,047 $ 22,863 Income taxes (refunded) paid (54 ) (7,375 ) Transfers of loans to foreclosed assets held for sale 569 1,316 Transfers of premises to foreclosed assets and other real estate owned — 106 Right-of use lease assets obtained in exchange for lessee operating lease liabilities 32,757 — 36NOTE 18: OTHER OPERATING EXPENSESOther operating expenses consist of the following: Three Months Ended
March 31,(In thousands) 2018 2017 Professional services $ 4,330 $ 5,169 Postage 1,399 1,131 Telephone 1,486 1,078 Credit card expense 3,228 2,837 Marketing 1,660 1,364 Operating supplies 749 355 Amortization of intangibles 2,837 1,550 Branch right sizing expense 61 118 Other expense 9,744 6,285 Total other operating expenses $ 25,494 $ 19,887 Three Months Ended
March 31,(In thousands) 2019 2018 Professional services $ 4,323 $ 4,330 Postage 1,726 1,399 Telephone 1,619 1,486 Credit card expense 3,860 3,228 Marketing 3,057 1,660 Software and technology 4,496 2,648 Operating supplies 618 749 Amortization of intangibles 2,641 2,837 Branch right sizing expense 45 61 Other expense 7,677 7,096 Total other operating expenses $ 30,062 $ 25,494 NOTE 19: CERTAIN TRANSACTIONSFrom time to time, the Company and its subsidiaries have made loans, and other extensions of credit, and vendor contracts to directors, officers, their associates and members of their immediate families. From time to timeAdditionally, some directors, officers and their associates and members of their immediate families have placed deposits with the Company’s subsidiary banks,bank, Simmons Bank and Bank SNB.Bank. Such loans and other extensions of credit, deposits and depositsvendor contracts (which were not material) were made in the ordinary course of business, on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons not related to the lender andor through a competitive bid process. Further, in management’s opinion, these extensions of credit did not involve more than normal risk of collectability or present other unfavorable features.NOTE 20: COMMITMENTS AND CREDIT RISKThe Company grants agri-business, commercial and residential loans to customers primarily throughout Arkansas, Colorado, 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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer'scustomer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management'smanagement’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.At March 31, 2019, the Company had outstanding commitments to extend credit aggregating approximately $573,779,000 and $3,384,471,000 for credit card commitments and other loan commitments. At December 31, 2018, the Company had outstanding commitments to extend credit aggregating approximately $567,620,000$560,863,000 and $3,288,010,000 for credit card commitments and other loan commitments. At December 31, 2017, the Company had outstanding commitments to extend credit aggregating approximately $564,592,000 and $3,086,696,000$3,455,471,000 for credit card commitments and other loan commitments, respectively.Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $39,372,000$36,929,000 and $47,621,000$39,101,000 at March 31, 2018,2019, and December 31, 2017,2018, respectively, with terms ranging from 9 months to 15 years. At March 31, 20182019 and December 31, 2017,2018, the Company had no deferred revenue under standby letter of credit agreements.37NOTE 21: FAIR VALUE MEASUREMENTSASC Topic 820, Fair Value Measurementsdefines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.45ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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:·Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.·Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.·Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.Level 2 Inputs – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3 Inputs – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.Available-for-sale securities– Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. Other securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things. In order to ensure the fair values are consistent with ASC Topic 820, the Company periodically checks the fair values by comparing them to another pricing source, such as Bloomberg. The availability of pricing confirms Level 2 classification in the fair value hierarchy. The third-party pricing service is subject to an annual review of internal controls (SSAE 16), which is made available for the Company’s review. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company’s investment in U.S. Treasury securities, if any, is reported at fair value utilizing Level 1 inputs. The remainder of the Company'sCompany’s available-for-sale securities are reported at fair value utilizing Level 2 inputs.Derivative instruments – The Company’s derivative instruments are reported at fair value utilizing Level 2 inputs. The Company obtains fair value measurements from dealer quotes.4638The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a recurring basis as of March 31, 20182019 and December 31, 2017.2018. Fair Value Measurements Using (In thousands) Fair Value Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3) March 31, 2018 Available-for-sale securities U.S. Government agencies $ 149,804 $ -- $ 149,804 $ -- Mortgage-backed securities 1,356,179 -- 1,356,179 -- State and political subdivisions 185,888 -- 185,888 -- Other securities 138,242 -- 138,242 -- Other assets held for sale 24,784 -- -- 24,784 Derivative asset 6,381 -- 6,381 -- Other liabilities held for sale (2,781 ) -- -- (2,781 ) Derivative liability (6,326 ) -- (6,326 ) -- December 31, 2017 Available-for-sale securities U.S. Government agencies $ 139,724 $ -- $ 139,724 $ -- Mortgage-backed securities 1,187,317 -- 1,187,317 -- States and political subdivisions 143,165 -- 143,165 -- Other securities 119,311 -- 119,311 -- Other assets held for sale 165,780 -- -- 165,780 Derivative asset 3,634 -- 3,634 -- Other liabilities held for sale (157,366 ) -- -- (157,366 ) Derivative liability (3,068 ) -- (3,068 ) -- Fair Value Measurements Using (In thousands) Fair Value Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)March 31, 2019 Available-for-sale securities U.S. Government agencies $ 161,577 $ — $ 161,577 $ — Mortgage-backed securities 1,345,677 — 1,345,677 — State and political subdivisions 580,790 — 580,790 — Other securities 152,067 — 152,067 — Derivative asset 6,306 — 6,306 — Derivative liability (5,861 ) — (5,861 ) — December 31, 2018 Available-for-sale securities U.S. Government agencies $ 154,301 $ — $ 154,301 $ — Mortgage-backed securities 1,522,900 — 1,522,900 — States and political subdivisions 314,843 — 314,843 — Other securities 159,708 — 159,708 — Derivative asset 6,242 — 6,242 — Derivative liability (5,283 ) — (5,283 ) — Certain financial assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and liabilities measured at fair value on a nonrecurring basis include the following:Impaired loans (collateral dependent) – Loan impairment is reported when full payment under the loan terms is not expected. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as a component of the provision for loan losses. Loan losses are charged against the allowance when management believes the uncollectability of a loan is confirmed. Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.Appraisals are updated at renewal, if not more frequently, for all collateral dependent loans that are deemed impaired by way of impairment testing. Impairment testing is performed on all loans over $1.5 million rated Substandard or worse, all existing impaired loans regardless of size and all TDRs. All collateral dependent impaired loans meeting these thresholds have had updated appraisals or internally prepared evaluations within the last one to two years and these updated valuations are considered in the quarterly review and discussion of the corporate Special Asset Committee. On targeted CRE loans, appraisals/internally prepared valuations may be updated before the typical 1-3 year balloon/maturity period. If an updated valuation results in decreased value, a specific (ASC 310) impairment is placed against the loan, or a partial charge-down is initiated, depending on the circumstances and anticipation of the loan’s ability to remain a going concern, possibility of foreclosure, certain market factors, etc.47Foreclosed assets and other real estate owned – Foreclosed assets and other real estate owned are reported at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the39Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for loan losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets and other real estate owned is estimated using Level 3 inputs based on unobservable market data. As of March 31, 20182019 and December 31, 2017,2018, the fair value of foreclosed assets and other real estate owned less estimated costs to sell was $29.1$19.0 million and $32.1$25.6 million, respectively.The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral-dependent impaired loans and foreclosed assets primarily relate to the specialized discounting criteria applied to the borrower’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the collateral, as well as other factors which may affect the collectability of the loan. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for instruments measured using Level 3 inputs could occur in the future. As the Company’s primary objective in the event of default would be to liquidate the collateral to settle the outstanding balance of the loan, collateral that is less marketable would receive a larger discount. During the reported periods, collateral discounts ranged from 10% to 40% for commercial and residential real estate collateral.Mortgage loans held for sale – Mortgage loans held for sale are reported at fair value if, on an aggregate basis, the fair value of the loans is less than cost. In determining whether the fair value of loans held for sale is less than cost when quoted market prices are not available, the Company may consider outstanding investor commitments, discounted cash flow analyses with market assumptions or the fair value of the collateral if the loan is collateral dependent. Such loans are classified within either Level 2 or Level 3 of the fair value hierarchy. Where assumptions are made using significant unobservable inputs, such loans held for sale are classified as Level 3. At March 31, 20182019 and December 31, 2017,2018, the aggregate fair value of mortgage loans held for sale exceeded their cost. Accordingly, no mortgage loans held for sale were marked down and reported at fair value.The following table sets forth the Company’s financial assets by level within the fair value hierarchy that were measured at fair value on a nonrecurring basis as of March 31, 20182019 and December 31, 2017.2018. Fair Value Measurements Using (In thousands) Fair Value Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3) March 31, 2018 Impaired loans (1) (2) (collateral dependent) $ 12,358 $ -- $ -- $ 12,358 Foreclosed assets and other real estate owned (1) 23,983 -- -- 23,983 December 31, 2017 Impaired loans (1) (2) (collateral dependent) $ 11,229 $ -- $ -- $ 11,229 Foreclosed assets and other real estate owned (1) 24,093 -- -- 24,093 Fair Value Measurements Using (In thousands) Fair Value Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)March 31, 2019 Impaired loans (1) (2) (collateral dependent)$ 2,101 $ — $ — $ 2,101 Foreclosed assets and other real estate owned (1)302 — — 302 December 31, 2018 Impaired loans (1) (2) (collateral dependent)$ 17,789 $ — $ — $ 17,789 Foreclosed assets and other real estate owned (1)23,714 — — 23,714 ________________________(1)These amounts represent the resulting carrying amounts on the Consolidated Balance Sheets for impaired collateral dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period.(2)Specific allocations of $243,000 and $2,195,000 were related to the impaired collateral dependent loans for which fair value re-measurements took place during the periods ended March 31, 2018 and December 31, 2017, respectively.(1)These amounts represent the resulting carrying amounts on the Consolidated Balance Sheets for impaired collateral dependent loans and foreclosed assets and other real estate owned for which fair value re-measurements took place during the period.(2)Specific allocations of zero and $2,738,000 were related to the impaired collateral dependent loans for which fair value re-measurements took place during the periods ended March 31, 2019 and December 31, 2018, 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. The following methods and assumptions were used to estimate the fair value of each class of financial instruments not previously disclosed.Cash and cash equivalents – The carrying amount for cash and cash equivalents approximates fair value (Level 1).48Interest bearing balances due from banks – The fair value of interest bearing balances due from banks – time is estimated using a discounted cash flow calculation that applies the rates currently offered on deposits of similar remaining maturities (Level 2).40Held-to-maturity securities – Fair values for held-to-maturity securities equal quoted market prices, if available, such as for highly liquid government bonds (Level 1). If quoted market prices are not available, fair values are estimated based on quoted market prices of similar securities. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things (Level 2). In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.Loans– The fair value of loans is estimated by discounting the future cash flows, using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. 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. The loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of similar loans. Estimated credit losses were also factored into the projected cash flows of the loans. The fair value of loans is estimated on an exit price basis incorporating the above factors (Level 3).Deposits – The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date (i.e., their carrying amount) (Level 2). The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities (Level 3).Federal Funds purchased, securities sold under agreement to repurchase and short-term debt – The carrying amount for Federal funds purchased, securities sold under agreement to repurchase and short-term debt are a reasonable estimate of fair value (Level 2).Other borrowings– For short-term instruments, the carrying amount is a reasonable estimate of fair value. For long-term debt, rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value (Level 2).Subordinated debentures– The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities (Level 2).Accrued interest receivable/payable – The carrying amounts of accrued interest approximated fair value (Level 2).Commitments to extend credit, letters of credit and lines of credit– The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.4941The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows: Carrying Fair Value Measurements (In thousands) Amount Level 1 Level 2 Level 3 Total March 31, 2018 Financial assets: Cash and cash equivalents $ 859,664 $ 859,664 $ -- $ -- $ 859,664 Interest bearing balances due from banks - time 3,069 -- 3,069 -- 3,069 Held-to-maturity securities 352,756 -- 354,649 -- 354,649 Mortgage loans held for sale 17,708 -- -- 17,708 17,708 Interest receivable 42,129 -- 42,129 -- 42,129 Legacy loans, net 6,243,176 -- -- 6,214,776 6,214,776 Loans acquired, net 4,696,945 -- -- 4,675,579 4,675,579 Financial liabilities: Non-interest bearing transaction accounts 2,734,287 -- 2,734,287 -- 2,734,287 Interest bearing transaction accounts and savings deposits 6,720,754 -- 6,720,754 -- 6,720,754 Time deposits 2,201,874 -- -- 2,179,221 2,179,221 Federal funds purchased and securities sold under agreements to repurchase 120,909 -- 120,909 -- 120,909 Other borrowings 1,140,986 -- 1,145,193 -- 1,145,193 Subordinated notes and debentures 468,465 -- 413,968 -- 413,968 Interest payable 3,874 -- 3,874 -- 3,874 December 31, 2017 Financial assets: Cash and cash equivalents $ 598,042 $ 598,042 $ -- $ -- $ 598,042 Interest bearing balances due from banks - time 3,314 -- 3,314 -- 3,314 Held-to-maturity securities 368,058 -- 373,298 -- 373,298 Mortgage loans held for sale 24,038 -- -- 24,038 24,038 Interest receivable 43,528 -- 43,528 -- 43,528 Legacy loans, net 5,663,941 -- -- 5,646,505 5,646,505 Loans acquired, net 5,074,076 -- -- 5,058,455 5,058,455 Financial liabilities: Non-interest bearing transaction accounts 2,665,249 -- 2,665,249 -- 2,665,249 Interest bearing transaction accounts and savings deposits 6,494,896 -- 6,494,896 -- 6,494,896 Time deposits 1,932,730 -- -- 1,915,539 1,915,539 Federal funds purchased and securities sold under agreements to repurchase 122,444 -- 122,444 -- 122,444 Other borrowings 1,380,024 -- 1,381,365 -- 1,381,365 Subordinated debentures 140,565 -- 136,474 -- 136,474 Interest payable 4,564 -- 4,564 -- 4,564 Carrying Fair Value Measurements (In thousands) Amount Level 1 Level 2 Level 3 Total March 31, 2019 Financial assets: Cash and cash equivalents $ 491,161 $ 491,161 $ — $ — $ 491,161 Interest bearing balances due from banks - time 4,684 — 4,684 — 4,684 Held-to-maturity securities 61,435 — 61,956 — 61,956 Mortgage loans held for sale 18,480 — — 18,480 18,480 Interest receivable 51,796 — 51,796 — 51,796 Legacy loans, net 8,625,307 — — 8,539,036 8,539,036 Loans acquired, net 3,056,187 — — 3,025,619 3,025,619 Financial liabilities: Non-interest bearing transaction accounts 2,674,034 — 2,674,034 — 2,674,034 Interest bearing transaction accounts and savings deposits 6,666,823 — 6,666,823 — 6,666,823 Time deposits 2,648,674 — — 2,632,615 2,632,615 Federal funds purchased and securities sold under agreements to repurchase 120,213 — 120,213 — 120,213 Other borrowings 1,169,989 — 1,168,914 — 1,168,914 Subordinated notes and debentures 354,041 — 359,090 — 359,090 Interest payable 13,941 — 13,941 — 13,941 December 31, 2018 Financial assets: Cash and cash equivalents $ 833,458 $ 833,458 $ — $ — $ 833,458 Interest bearing balances due from banks - time 4,934 — 4,934 — 4,934 Held-to-maturity securities 289,194 — 290,830 — 290,830 Mortgage loans held for sale 26,799 — — 26,799 26,799 Interest receivable 49,938 — 49,938 — 49,938 Legacy loans, net 8,373,789 — — 8,280,690 8,280,690 Loans acquired, net 3,292,783 — — 3,256,174 3,256,174 Financial liabilities: Non-interest bearing transaction accounts 2,672,405 — 2,672,405 — 2,672,405 Interest bearing transaction accounts and savings deposits 6,830,191 — 6,830,191 — 6,830,191 Time deposits 2,896,156 — — 2,872,342 2,872,342 Federal funds purchased and securities sold under agreements to repurchase 95,792 — 95,792 — 95,792 Other borrowings 1,345,450 — 1,342,868 — 1,342,868 Subordinated debentures 353,950 — 355,812 — 355,812 Interest payable 9,897 — 9,897 — 9,897 The fair value of commitments to extend credit, letters of credit and lines of credit is not presented since management believes the fair value to be insignificant.5042REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMAudit Committee, Board of Directors and StockholdersSimmons First National CorporationPine Bluff, ArkansasResults of Review of Interim Financial StatementsWe have reviewed the condensed consolidated balance sheet of Simmons First National Corporation (“the Company”) as of March 31, 2018,2019, and the related condensed consolidated statements of income and comprehensive income for the three-month periods ended March 31, 2019 and 2018, and stockholders’ equity and cash flows for the three-month periods ended March 31, 20182019 and 2017,2018, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2017,2018, and the related consolidated statements of income, comprehensive income, stockholders'stockholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 28, 2018,27, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2017,2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.Basis for Review ResultsThese financial statements are the responsibility of the Company'sCompany’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion./s/ BKD, LLP /s/ BKD, LLPLittle Rock, ArkansasMay 8, 2018
20195143Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations OVERVIEWOur netNet income for the three months ended March 31, 20182019 was $51.3$47.7 million and diluted earnings per share were $0.55,$0.51, a decrease of $3.6 million and $0.04, compared to net income of $22.1 million and $0.35 diluted earnings per share (split adjusted) for the same period in 2017.Net income for the first quarterthree months in both 20182019 and 20172018 included non-core items mostly related to our acquisitions.acquisitions and branch right sizing initiatives. Excluding all non-core items, core earnings for the three months ended March 31, 20182019 were $49.1 million, or $0.53 diluted core earnings per share compared to $52.6 million, or $0.57 diluted core earnings per share compared to $22.5 million, or $0.36 diluted core earnings per share (split adjusted) for the same period in 2017.2018. See Reconciliation“Reconciliation of Non-GAAP MeasuresMeasures” below for additional discussion of non-GAAP measures.We had solid operating results during the first quarter 2019. Revenue was affected by three significant items compared to the first quarter 2018. Accretion income was down $4.6 million; debit card interchange income, primarily as a result of the Durbin rate cap, was down $2.8 million; and the gain on sale of securities was up $2.7 million, resulting in a net decrease of $4.7 million from the previous year.In addition to producing record financial results,April, we managed through other significant events.We completed the acquisitionsacquisition of Southwest Bancorp,Reliance Bancshares, Inc., including its wholly-owned bank subsidiary, Bank SNB, (“Reliance”) and First Texas BHC, Inc., including its wholly-owned bank subsidiary, Southwest Bank,performed the associated systems conversion. We are excited about our merger with Reliance and the opportunities we now have in October 2017. The systems conversion of Southwest Bank was completed during February 2018 while the systems conversion for Bank SNB is anticipatedSt. Louis market due to be complete in May 2018.our increased presence. See Note 2, Pending Acquisition, in the accompanying Notes to Consolidated Financial Statements included elsewhere in this report, for additional information related to these acquisitions.In March, we completed an offering of $330 million aggregate principal amount of 5.00% Fixed-to-Floating Rate Subordinated Notes due 2028 (the “Notes”). The Notes will bear a fixed interest rate of 5.00% per year in years one through five, payable semi-annually in arrears, and a floating rate equal to three-month LIBOR plus 215 basis points in years six through ten, payable quarterly in arrears. The Notes were offered to the public at 100% of their face amount. We expect to use approximately $222 million of the net proceeds from the sale of the Notes to repay outstanding indebtedness and the remainder for general corporate purposes. See Note 11 for additional information related to the Notes.Also during the first quarter of 2018, we completedannounced our Next Generation Banking (“NGB”) strategic initiative that we believe positions us to provide competitive banking services well into the sale of certain deposits, loansfuture. Through this program, we will evaluate the primary information technology systems and branch facilities relatedfunctions that support our operations and improve or replace them with updated and/or enhanced banking technologies. This initiative will, among other things, assist us in our efforts to the Heartland Bank heldcreate a differentiated experience for sale assets and liabilities and we continue to explore liquidating options for the few remaining assets.Lastly, we completed a 2-for-1 stock split in the form of a 100% stock dividend effective February 8, 2018.Stockholders’ equity as of March 31, 20182019 was $2.1$2.3 billion, book value per share was $22.86$24.87 and tangible book value per share was $12.62 (split adjusted).$14.78. Our ratio of stockholders’ equity to total assets was 13.5%14.3% and the ratio of tangible stockholders’ equity to tangible assets was 7.9%9.0% at March 31, 2018.2019. See Reconciliation“Reconciliation of Non-GAAP MeasuresMeasures” below for additional discussion of non-GAAP measures. The Company’s Tier I leverage ratio of 8.6%9.1%, as well as our other regulatory capital ratios, remain significantly above the “well capitalized” levels (see Table 12 in the Capital section of this Item).Total loans, including loans acquired, were $11.0$11.741 billion at March 31, 2018,2019, compared to $10.8$11.723 billion at December 31, 20172018 and $5.8$10.987 billion at March 31, 2017.2018. Total loans increased $208approximately $17.6 million during the quarter, which included $126 million net increasequarter. We experienced seasonal decreases in loans at Simmons Bankthe credit card and $82 million net increase in loans at Bank SNB. This increase was partially offset by the seasonal decrease of $24 million in agricultural payoffs and $25 million decrease in our liquidating portfolios of indirect lending and consumer finance. Our markets in Dallas/Ft. Worth, Denver, Nashville, Northwest Arkansas, Oklahoma City and St. Louis are experiencing good loan growth. Due to our increased size and scale we are benefiting from access to new lending opportunities in these growth markets as well as in our historical legacy markets.We continue to have stronggood asset quality. At March 31, 2018,2019, the allowance for loan losses for legacy loans was $47.2$59.2 million. The allowance for loan losses for loans acquired was $407,000$1.3 million and the acquired loan discount credit mark was $79.1$42.4 million. The allowances for loan losses and credit marks provide a total of $126.7$103.0 million of coverage, which equates to a total coverage ratio of 1.1%0.9% of gross loans. The ratio of credit mark and related allowance to loans acquired was 1.7%1.4%.Simmons First National Corporation is a $15.6 billion Arkansas basedan Arkansas-based financial holding company conductingthat, as of March 31, 2019, has approximately $16.1 billion in consolidated assets and conducts financial operations throughout Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas.52CRITICAL ACCOUNTING POLICIESOverviewWe follow accounting and reporting policies that conform, in all material respects, to generally accepted accounting principles and to general practices within the financial services industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used44for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements.The accounting policies that we view as critical to us are those relating to estimates and judgments regarding (a) the determination of the adequacy of the allowance for loan losses, (b) acquisition accounting and valuation of loans, (c) the valuation of goodwill and the useful lives applied to intangible assets, (d) the valuation of stock-based compensation plans and (e) income taxes.Allowance for Loan Losses on Loans Not AcquiredThe allowance for loan losses is management’s estimate of probable losses in the loan portfolio. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.The allowance for loan losses is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. We establish general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans. General reserves have been established, based upon the aforementioned factors and allocated to the individual loan categories. Allowances are accrued for probable losses on specific loans evaluated for impairment for which the basis of each loan, including accrued interest, exceeds the discounted amount of expected future collections of interest and principal or, alternatively, the fair value of loan collateral.Our evaluation of the allowance for loan losses is inherently subjective as it requires material estimates. The actual amounts of loan losses realized in the near term could differ from the amounts estimated in arriving at the allowance for loan losses reported in the financial statements.Acquisition Accounting, Loans AcquiredWe account for our acquisitions under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the loans acquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.We evaluate loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans. We evaluate purchased impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. All loans acquired are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.53For impaired loans accounted for under ASC Topic 310-30, we continue to estimate cash flows expected to be collected on purchased credit impaired loans. We evaluate at each balance sheet date whether the present value of our purchased credit impaired loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in our consolidated statement of income. For any significant increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the remaining life of the purchased credit impaired loan.Goodwill and Intangible AssetsGoodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be separately distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. We perform an annual goodwill impairment test, and more than annually if circumstances warrant, in accordance with ASC Topic 350, Intangibles – Goodwill and Other, as amended by ASU 2011-08 – Testing Goodwill for45Impairment. ASC Topic 350 requires that goodwill and intangible assets that have indefinite lives be reviewed for impairment annually or more frequently if certain conditions occur. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.Stock-based Compensation PlansWe have adopted various stock-based compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance stock units. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awarding of performance or bonus shares granted to directors, officers and other key employees.In accordance with ASC Topic 718, Compensation – Stock Compensation, the fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses various assumptions. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. For additional information, see Note 15, Stock Based Compensation, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report.Income TaxesWe are subject to the federal income tax laws of the United States, and the tax laws of the states and other jurisdictions where we conduct business. Due to the complexity of these laws, taxpayers and the taxing authorities may subject these laws to different interpretations. Management must make conclusions and estimates about the application of these innately intricate laws, related regulations, and case law. When preparing the Company’s income tax returns, management attempts to make reasonable interpretations of the tax laws. Taxing authorities have the ability to challenge management’s analysis of the tax law or any reinterpretation management makes in its ongoing assessment of facts and the developing case law. Management assesses the reasonableness of its effective tax rate quarterly based on its current estimate of net income and the applicable taxes expected for the full year. On a quarterly basis, management also reviews circumstances and developments in tax law affecting the reasonableness of deferred tax assets and liabilities and reserves for contingent tax liabilities.The adoption of ASU 2016-09 – Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting, decreased the effective tax rate during first quarter 2017 and 2018 as the new standard impacted how the income tax effects associated with stock-based compensation are recognized.On December 22, 2017, the President signed tax reform legislation (the “2017 Act”) which includes a broad range of tax reform proposals affecting businesses, including corporate tax rates, business deductions, and international tax provisions. The 2017 Act reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. Under US GAAP, deferred tax assets and liabilities are required to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled and the effect of a change in tax law is recorded discretely as a component of the income tax provision related to continuing operations in the period of enactment. As a result, the Company was required to remeasure its deferred taxes as of December 22, 2017 based upon the new 21% tax rate and the change was recorded in the 2017 income tax provision.54IMPACTS OF GROWTHDuring 2017, through both internal growth and through acquisitions, the assets of the Company exceeded the $10 billion threshold.The Dodd-Frank Act and associated Federal Reserve regulations cap the interchange rate on debit card transactions that can be charged by banks that, together with their affiliates, have at least $10 billion in assets at $0.21 per transaction plus five basis points multiplied by the value of the transaction. The cap goes into effect July 1st1st of the year following the year in which a bank reaches the $10 billion asset threshold. Simmons Bank, when viewed together with its affiliates, had assets in excess of $10 billion at December 31, 2017, and therefore, will bebecame subject to the interchange rate cap effective July 1, 2018. Because of the cap, Simmons Bank estimates that it will receivereceived approximately $7.0$5.9 million less in debit card fees on a pre-tax basis in 2018 and $14.02018. The interchange rate cap resulted in a $2.8 million less on a pre-tax basisreduction in 2019.As of December 31, 2017, the Company exceeded $15 billion in total assets and the grandfather provisions applicable to its trust preferred securities no longer apply, and trust preferred securities are no longer included as tierTier 1 capital. Trust preferred securities and qualifying subordinated debt is included as total Tier 2 capital.The Dodd-Frank Act also requirespreviously required banks and bank holding companies with more than $10 billion in assets to conduct annual stress tests.tests, report the results to regulators and publicly disclose such results. As a result of regulatory reform signed into law during the second quarter of 2018, the Company and Simmons Bank are no longer required to conduct an annual stress test of capital under the Dodd-Frank Act. In anticipation of becoming subject to this requirement, the Company and Simmons Bank havehad begun the necessary preparations, including undertaking a gap analysis, implementing enhancements to the audit and compliance departments, and investing in various information technology systems. However, the Company believes that significant, additional expenditures will be required to fully comply with the stress testing requirements. The Company and Simmons Bank are expected to report the first stress test in July 2019 for the fiscal year 2018.Additionally, the Dodd-Frank Act established the Bureau of Consumer Financial Protection (the “CFPB”) and granted it supervisory authority over banks with total assets of more than $10 billion. Simmons Bank, with assets now exceeding $10 billion, will becomeis subject to CFPB oversight with respect to its compliance with federal consumer financial laws. Simmons Bank will continue to be subject to the oversight of its other regulators with respect to matters outside the scope of the CFPB’s jurisdiction. While theThe CFPB has broad rule-making, supervisory and examination authority, as well as expanded data collecting and enforcement powers, its ultimateall of which is expected to impact on the operations of Simmons Bank remains uncertain.46It is also important to note that the Dodd-Frank Act changed how the FDIC calculates deposit insurance premiums payable by insured depository institutions. The Dodd-Frank Act directed the FDIC to amend its assessment regulations so that assessments are generally based upon a depository institution’s average total consolidated assets less the average tangible equity of the insured depository institution during the assessment period. Assessments were previously based on the amount of an institution’s insured deposits. Now that Simmons Bank exceeds $10 billion in total assets, it will becomeis subject to the assessment rates assigned to larger banks which may result in higher deposit insurance premiums.NET INTEREST INCOMEOverviewNet interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors that determine the level of net interest income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, the level of non-performing loans and the amount of non-interest bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate of 26.135% for periods beginning January 1, 2018 or 39.225% for periods prior to 2018.Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. Historically, approximately 70%65% of our loan portfolio and approximately 80%75% of our time deposits have repriced in one year or less. Through acquisitions our loans acquired tended to have longer maturities. In addition, due to market pressures the duration of our legacy loan portfolio has also extended over the past several years. Our current interest rate sensitivity shows that approximately 63%60% of our loans and 77%80% of our time deposits will reprice in the next year.55Net Interest IncomeFor the three month period ended March 31, 2018,2019, net interest income on a fully taxable equivalent basis was $136.1$138.6 million, an increase of $61.8$2.5 million, or 83.1%1.9%, over the same period in 2017.2018. The increase in net interest income was the result of a $77.9$22.4 million increase in interest income partially offset by a $16.1$19.9 million increase in interest expense.The increase in interest income primarily resulted from an incremental $74.6a $16.1 million ofincrease in interest income on loans consisting of legacy loans and loans acquired, and a netan increase of $2.3$5.1 million ofin interest income on investment securities. An increaseIncreases in loan volume resulting primarily from our acquisitions completed inof $12.1 million due to increased average loan balances during the second and fourth quartersfirst three months of 2017, generated $67.52019 as well as $4.1 million of additional interest income. Furthermore,due to an increase in yield of 4715 basis points also contributed to the increase in interest income on loans during 2018.Included in interest income is the additional yield accretion recognized as a result of updated estimates of the cash flows of our loans acquired, as discussed in Note 6,5, Loans Acquired, in the accompanying Notes to Consolidated Financial Statements included elsewhere in this report. Each quarter, we estimate the cash flows expected to be collected from the loans acquired, and adjustments may or may not be required. The cash flows estimate has increased based on payment histories and reduced loss expectations of the loans. This resulted in increased interest income that is spread on a level-yield basis over the remaining expected lives of the loans.quartersthree months ended March 201831, 2019 and 2017,2018, interest income included $11.3$6.7 million and $4.4$11.3 million, respectively, for the yield accretion recognized on loans acquired. We expect accretion income to gradually decline during 2018.The $16.1$19.9 million increase in interest expense is primarily fromdue to the higher cost of deposits, growth in types of deposit accounts, higher cost of deposits due to the rising-rate environment and the additional subordinated and other debt. Interest expense increased $2.7 million due to deposit growth, $12.5 million due to the increase in yield of 57 basis points on deposit accounts and other$4.7 million due to increases in subordinated debt primarily from the 2017 acquisitions.Net Interest MarginOur net interest margin increased 13decreased 32 basis points to 4.17%3.85% for the three month period ended March 31, 2018,2019, when compared to 4.04%4.17% for the same period in 2017.2018. Normalized for all accretion, our core net interest margin at March 31, 2019 and 2018 was 3.67% and 3.82%, respectively.47Since the first quarter of 2018, loan yield has increased 15 basis points and core loan yield has increased 34 basis points while cost of interest bearing deposits has risen 57 basis points and the cost of borrowed funds has increased 103 basis points. The most significant factordecrease in both the increasingnet interest margin duringand the core net interest margin for the three month period ended March 31, 2018 was2019 is a direct result of the higher accretable yield adjustments on loans acquired discussed above. Normalized for all accretion on loans acquired, our net interest margin at March 31, 2018 and 2017 was 3.82% and 3.80%, respectively.Net Interest Income TablesTables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended March 31, 20182019 and 2017,2018, respectively, as well as changes in fully taxable equivalent net interest margin for the three months ended March 31, 2018,2019, versus March 31, 2017.Table 1: Analysis of Net Interest Margin Three Months Ended
March 31,(In thousands) 2018 2017 Interest income $ 157,139 $ 78,427 FTE adjustment 1,130 1,965 Interest income – FTE 158,269 80,392 Interest expense 22,173 6,047 Net interest income – FTE $ 136,096 $ 74,345 Yield on earning assets – FTE 4.84 % 4.36 % Cost of interest bearing liabilities 0.89 % 0.43 % Net interest spread – FTE 3.95 % 3.93 % Net interest margin – FTE 4.17 % 4.04 % 56(FTE = Fully Taxable Equivalent) Three Months Ended
March 31,(In thousands) 2019 2018 Interest income $ 179,116 $ 157,139 FTE adjustment 1,601 1,130 Interest income – FTE 180,717 158,269 Interest expense 42,090 22,173 Net interest income – FTE $ 138,627 $ 136,096 Yield on earning assets – FTE 5.02 % 4.84 % Cost of interest bearing liabilities 1.52 % 0.89 % Net interest spread – FTE 3.50 % 3.95 % Net interest margin – FTE 3.85 % 4.17 % Table 2: Changes in Fully Taxable Equivalent Net Interest Margin(In thousands) Three Months Ended
March 31,
2018 vs. 2017 Increase due to change in earning assets $ 69,733 Increase due to change in earning asset yields 8,144 Decrease due to change in interest bearing liabilities (8,263 ) Decrease due to change in interest rates paid on interest bearing liabilities (7,863 ) Increase in net interest income $ 61,751 Three Months Ended
March 31,(In thousands) 2019 vs. 2018 Increase due to change in earning assets $ 15,209 Increase due to change in earning asset yields 7,239 Decrease due to change in interest bearing liabilities (4,535 ) Decrease due to change in interest rates paid on interest bearing liabilities (15,382 ) Increase in net interest income $ 2,531 Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed daily)on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the three months ended March 31, 20182019 and 2017.2018. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Nonaccrual loans were included in average loans for the purpose of calculating the rate earned on total loans.48Table 3: Average Balance Sheets and Net Interest Income Analysis Three Months Ended March 31, 2018 2017 Average Income/ Yield/ Average Income/ Yield/ (In thousands) Balance Expense Rate (%) Balance Expense Rate (%) ASSETS Earning assets: Interest bearing balances due from banks and federal funds sold $ 338,505 $ 1,009 1.21 $ 131,328 $ 122 0.38 Investment securities - taxable 1,785,874 9,599 2.18 1,292,441 6,477 2.03 Investment securities - non-taxable 293,071 4,083 5.65 348,834 4,884 5.68 Mortgage loans held for sale 14,775 158 4.34 11,473 126 4.45 Assets held in trading accounts -- -- -- 48 -- -- Loans 10,819,324 143,420 5.38 5,685,585 68,783 4.91 Total interest earning assets 13,251,549 158,269 4.84 7,469,709 80,392 4.36 Non-earning assets 1,836,661 944,761 Total assets $ 15,088,210 $ 8,414,470 57LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Interest bearing liabilities: Interest bearing transaction and savings deposits $ 6,579,295 $ 10,755 0.66 $ 3,950,169 $ 2,189 0.22 Time deposits 2,003,668 4,842 0.98 1,262,430 2,015 0.65 Total interest bearing deposits 8,582,963 15,597 0.74 5,212,599 4,204 0.33 Federal funds purchased and securities sold under agreements to repurchase 120,443 110 0.37 111,474 75 0.27 Other borrowings 1,282,527 5,139 1.63 345,664 1,194 1.40 Subordinated debt and debentures 162,813 1,327 3.31 60,452 574 3.85 Total interest bearing liabilities 10,148,746 22,173 0.89 5,730,189 6,047 0.43 Non-interest bearing liabilities: Non-interest bearing deposits 2,632,182 1,466,501 Other liabilities 204,230 51,307 Total liabilities 12,985,158 7,247,997 Stockholders’ equity 2,103,052 1,166,473 Total liabilities and stockholders’ equity $ 15,088,210 $ 8,414,470 Net interest spread 3.95 3.93 Net interest margin $ 136,096 4.17 $ 74,345 4.04 Three Months Ended March 31, 2019 2018 Average Income/ Yield/ Average Income/ Yield/ (In thousands) Balance Expense Rate (%) Balance Expense Rate (%) ASSETS Earning assets: Interest bearing balances due from banks and federal funds sold $ 394,462 $ 2,154 2.21 $ 338,505 $ 1,009 1.21 Investment securities - taxable 1,880,694 12,989 2.80 1,618,270 9,599 2.41 Investment securities - non-taxable 590,941 5,834 4.00 460,675 4,083 3.59 Mortgage loans held for sale 17,733 210 4.80 14,775 158 4.34 Loans 11,710,075 159,530 5.53 10,819,324 143,420 5.38 Total interest earning assets 14,593,905 180,717 5.02 13,251,549 158,269 4.84 Non-earning assets 1,708,292 1,836,661 Total assets $ 16,302,197 $ 15,088,210 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Interest bearing liabilities: Interest bearing transaction and savings deposits $ 6,749,032 $ 18,430 1.11 $ 6,579,295 $ 10,755 0.66 Time deposits 2,781,592 12,320 1.80 2,003,668 4,842 0.98 Total interest bearing deposits 9,530,624 30,750 1.31 8,582,963 15,597 0.74 Federal funds purchased and securities sold under agreements to repurchase 109,302 136 0.50 120,443 110 0.37 Other borrowings 1,224,255 6,793 2.25 1,282,527 5,139 1.63 Subordinated debt and debentures 353,996 4,411 5.05 162,813 1,327 3.31 Total interest bearing liabilities 11,218,177 42,090 1.52 10,148,746 22,173 0.89 Non-interest bearing liabilities: Non-interest bearing deposits 2,707,715 2,632,182 Other liabilities 127,407 204,230 Total liabilities 14,053,299 12,985,158 Stockholders’ equity 2,248,898 2,103,052 Total liabilities and stockholders’ equity $ 16,302,197 $ 15,088,210 Net interest spread 3.50 3.95 Net interest margin $ 138,627 3.85 $ 136,096 4.17 49Table 4 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three month period ended March 31, 2018,2019, as compared to the same period of the prior year. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.Table 4: Volume/Rate Analysis Three Months Ended
March 31, 2018 over 2017 (In thousands, on a fully Yield/ taxable equivalent basis) Volume Rate Total Increase (decrease) in: Interest income: Interest bearing balances due from banks and federal funds sold $ 369 $ 518 $ 887 Investment securities - taxable 2,623 499 3,122 Investment securities - non-taxable (777 ) (24 ) (801 ) Mortgage loans held for sale 35 (3 ) 32 Loans 67,483 7,154 74,637 Total 69,733 8,144 77,877 Interest expense: Interest bearing transaction and savings accounts 2,180 6,386 8,566 Time deposits 1,507 1,320 2,827 Federal funds purchased and securities sold under agreements to repurchase 6 29 35 Other borrowings 3,725 220 3,945 Subordinated notes and debentures 845 (92 ) 753 Total 8,263 7,863 16,126 Increase in net interest income $ 61,470 $ 281 $ 61,751 58 Three Months Ended
March 31, 2019 vs. 2018 (In thousands, on a fully taxable equivalent basis) Volume Yield/Rate Total Increase (decrease) in: Interest income: Interest bearing balances due from banks and federal funds sold $ 190 $ 955 $ 1,145 Investment securities - taxable 1,684 1,706 3,390 Investment securities - non-taxable 1,248 503 1,751 Mortgage loans held for sale 34 18 52 Loans 12,053 4,057 16,110 Total 15,209 7,239 22,448 Interest expense: Interest bearing transaction and savings accounts 284 7,391 7,675 Time deposits 2,378 5,100 7,478 Federal funds purchased and securities sold under agreements to repurchase (11 ) 37 26 Other borrowings (242 ) 1,896 1,654 Subordinated notes and debentures 2,126 958 3,084 Total 4,535 15,382 19,917 Increase (decrease) in net interest income $ 10,674 $ (8,143 ) $ 2,531 PROVISION FOR LOAN LOSSESThe provision for loan losses represents management'smanagement’s determination of the amount necessary to be charged against the current period’s earnings in order to maintain the allowance for loan losses at a level considered appropriate in relation to the estimated risk inherent in the loan portfolio. The level of provision to the allowance is based on management’s judgment, with consideration given to the composition, maturity and other qualitative characteristics of the portfolio, historical loan loss experience, assessment of current economic conditions, past due and non-performing loans and historical net loan loss experience. 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.The provision for loan losses for the three month period ended March 31, 2018,2019, was $9.2$9.3 million, compared to $4.3$9.2 million for the three month period ended March 31, 2017,2018, an increase of $4.9 million.$135,000. See Allowance for Loan Losses section for additional information.The provision increase was necessary to maintain an appropriate allowance for loan losses for the company’s growing legacy portfolio. Significant loan growth in our markets, both from new loans and from loans acquired migrating to legacy, required an allowance to be established for those loans through a provision.Additionally, a $68,000 and $750,000the provision was recorded on loans acquired duringfor the three months ended March 31, 2019 was $2,464,000 and was primarily the result of identifying certain loans specific to an acquired portfolio in our Dallas market which were poorly structured or were poorly managed post-funding. We have carefully reviewed these loans for potential losses and believe we have adequately identified any risk associated with the loans. The provision on loans acquired for the three month period ended March 31, 2018 was $68,000 and 2017, respectively, as awas the result of a decrease in expected cash flows from our required ongoing evaluation of credit marks on certain purchased credit impaired loans.50NON-INTEREST INCOMETotal non-interest income was $37.5$33.8 million for the three month period ended March 31, 2018, an increase2019, a decrease of approximately $7.5$3.8 million, or 24.9%10.1%, compared to $30.1$37.5 million for the same period in 2017.During the first quarter 2019, we had decreases in total service charges and fees, mortgage and SBA lending income, and debit and credit card fees that were partially offset by additional trust income and gains on the sale of securities. Total service charges and fees decreased $1.7 million, or 13.3%, mortgage and SBA lending income decreased $1.1 million, or 25.3%, and debit and credit card fees decreased $2.7 million, or 30.7%. Service charges and fees decreased due to less NSF revenue and ATM interchange income. Mortgage and SBA lending income decreased due to less mortgage lending transactions as a result of the rising rate environment and remaining selective in our decisions regarding loan sales as premium rates continue to be lower, respectively. The interchange rate cap as established by the Durbin amendment became effective for us July 1, 2018, resulting in a $2.8 million reduction in debit card fees when compared to the first quarter of last year. The additional gains on the sale of securities was a result of selling approximately $197 million of securities during the first quarter, which resulted in a gain of $2.7 million, as part of a bond portfolio analysis of expected cash flow changes.Non-interest income is principally derived from recurring fee income, which includes service charges, trust fees and debit and credit card fees. Non-interest income also includes income on the sale of mortgage and SBA loans, investment banking income, income from the increase in cash surrender values of bank owned life insurance and gains (losses) from sales of securities.Table 5 shows non-interest income for the three month periods ended March 31, 20182019 and 2017,2018, respectively, as well as changes in 20182019 from 2017.Table 5: Non-Interest Income Three Months 2018 Ended March 31 Change from (In thousands) 2018 2017 2017 Trust income $ 5,249 $ 4,212 $ 1,037 24.62 % Service charges on deposit accounts 10,345 8,102 2,243 27.68 Other service charges and fees 2,750 2,197 553 25.17 Mortgage and SBA lending income 4,445 2,423 2,022 83.45 Investment banking income 834 690 144 20.87 Credit card fees 8,796 7,934 862 10.86 Bank owned life insurance income 1,103 818 285 34.84 Gain on sale of securities, net 6 63 (57 ) -90.48 Net gain (loss) on sale of premises held for sale 4 (43 ) 47 -109.30 Other income 4,003 3,664 339 9.25 Total non-interest income $ 37,535 $ 30,060 $ 7,475 24.87 % Three Months Ended
March 31, 2019Change from(In thousands) 2019 2018 2018 Trust income $ 5,708 $ 5,249 $ 459 8.7 % Service charges on deposit accounts 10,068 10,345 (277 ) (2.7 ) Other service charges and fees 1,289 2,750 (1,461 ) (53.1 ) Mortgage lending income 2,823 3,472 (649 ) (18.7 ) SBA lending income 497 973 (476 ) (48.9 ) Investment banking income 618 834 (216 ) (25.9 ) Debit and credit card fees 6,098 8,796 (2,698 ) (30.7 ) Bank owned life insurance income 795 1,103 (308 ) (27.9 ) Gain on sale of securities, net 2,740 6 2,734 * Gain on sale of premises held for sale, net — 4 (4 ) (100.0 ) Other income 3,125 4,003 (878 ) (21.9 ) Total non-interest income $ 33,761 $ 37,535 $ (3,774 ) (10.1 )% _____________________________* Not meaningfulRecurring fee income (service(total service charges, trust fees, debit and credit card fees) for the three month period ended March 31, 2018,2019, was $27.1$23.2 million, an increasea decrease of $4.7$4.0 million from the three month period ended March 31, 2017. Trust income increased by $1.0 million or 24.6%,2018. The majority of the decrease is in total service charges increased by $2.8 million, or 27.1% and debit and credit card fees increased $862,000, or 10.9%. The increases in service charges and debit and credit card fees, were due to additional accounts acquired from OKSB, First Texas and Hardeman. The increase in trust income is from continued positive growth in our existing personal trust and investor management client base as well as from the recent acquisitions.
previously discussed.59Mortgage and SBA lending income increased by $2.0 million for the three months ended March 31, 2018 compared to last year, primarily due to the timing of the 2017 acquisitions.51NON-INTEREST EXPENSENon-interest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for the operation of the Company. Management remains committed to controlling the level of non-interest expense, through the continued use of expense control measures. We utilize an extensive profit planning and reporting system involving all subsidiaries. Based on a needs assessment of the business plan for the upcoming year, monthly and annual profit plans are developed, including manpower and capital expenditure budgets. These profit plans are subject to extensive initial reviews and monitored by management monthly. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. We also regularly monitor staffing levels at each subsidiary to ensure productivity and overhead are in line with existing workload requirements.Non-interest expense for the three months ended March 31, 20182019 was $98.1$101.4 million, an increase of $31.8$3.3 million, or 47.9%3.4%, from the same period in 2017.2018. Normalizing for the non-core costs, such as the early retirement program costs, merger related costs and branch right sizing expenses, non-interest expense for the three months ended March 31, 20182019 increased $30.6$3.2 million, or 46.6%3.4%, from the same period in 2017,2018.As previously mentioned, our NGB technology initiative is well underway and the incremental software and technology expenditures of $1.8 million during the first quarter 2019 were primarily related to this initiative. Marketing costs increased over prior year due to the incremental operating expenses of the acquired franchises, with the largest increase being in salaries and employee benefits expense.Table 6 below shows non-interest expense for the three month periods ended March 31, 20182019 and 2017,2018, respectively, as well as changes in 20182019 from 2017.Table 6: Non-Interest Expense Three Months 2018 Ended March 31 Change from (In thousands) 2018 2017 2017 Salaries and employee benefits $ 56,357 $ 35,536 $ 20,821 58.59 % Occupancy expense, net 6,960 4,663 2,297 49.26 Furniture and equipment expense 4,403 4,443 (40 ) -0.90 Other real estate and foreclosure expense 1,020 589 431 73.17 Deposit insurance 2,128 680 1,448 212.94 Merger related costs 1,711 524 1,187 226.53 Other operating expenses: Professional services 4,330 5,169 (839 ) -16.23 Postage 1,399 1,131 268 23.70 Telephone 1,486 1,078 408 37.85 Credit card expenses 3,228 2,837 391 13.78 Marketing 1,660 1,364 296 21.70 Operating supplies 749 355 394 110.99 Amortization of intangibles 2,837 1,550 1,287 83.03 Branch right sizing expense 61 118 (57 ) -48.31 Other expense 9,744 6,285 3,459 55.04 Total non-interest expense $ 98,073 $ 66,322 $ 31,751 47.87 % Three Months Ended
March 31, 2019Change from(In thousands) 2019 2018 2018 Salaries and employee benefits $ 56,012 $ 56,357 $ (345 ) (0.6 )% Early retirement program 355 — 355 * Occupancy expense, net 7,475 6,960 515 7.4 Furniture and equipment expense 3,358 4,403 (1,045 ) (23.7 ) Other real estate and foreclosure expense 637 1,020 (383 ) (37.6 ) Deposit insurance 2,040 2,128 (88 ) (4.1 ) Merger related costs 1,470 1,711 (241 ) (14.1 ) Other operating expenses: Professional services 4,323 4,330 (7 ) (0.2 ) Postage 1,726 1,399 327 23.3 Telephone 1,619 1,486 133 8.9 Credit card expenses 3,860 3,228 632 19.6 Marketing 3,057 1,660 1,397 84.2 Software and technology 4,496 2,648 1,848 69.8 Operating supplies 618 749 (131 ) (17.5 ) Amortization of intangibles 2,641 2,837 (196 ) (6.9 ) Branch right sizing expense 45 61 (16 ) (26.2 ) Other expense 7,677 7,096 581 8.2 Total non-interest expense $ 101,409 $ 98,073 $ 3,336 3.4 % _____________________________* Not meaningful52LOAN PORTFOLIOOur legacy loan portfolio, excluding loans acquired, averaged $5.934$8.536 billion and $4.461$5.934 billion during the first three months of 20182019 and 2017,2018, respectively. As of March 31, 2018,2019, total loans, excluding loans acquired, were $6.290$8.68 billion, an increase of $584.8$254.2 million from December 31, 2017.2018. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).60When we make a credit decision on an acquired loan as a result of the loan maturing or renewing, the outstanding balance of that loan migrates from loans acquired to legacy loans. Our legacy loan growth from December 31, 20172018 to March 31, 20182019 included $210.8$81.2 million in balances that migrated from loans acquired during the period. These migrated loan balances are included in the legacy loan balances as of March 31, 2018.We seek to manage our credit risk by diversifying our loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral, obtaining and monitoring collateral, providing an appropriate allowance for loan losses and regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose, and industry and in the case of credit card loans, which are unsecured, by geographic region. We seek to use diversification within the loan portfolio to reduce credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. We use the allowance for loan losses as a method to value the loan portfolio at its estimated collectible amount. Loans are regularly reviewed to facilitate the identification and monitoring of deteriorating credits.The balances of loans outstanding, excluding loans acquired, at the indicated dates are reflected in Table 7, according to type of loan.Table 7: Loan Portfolio(In thousands) March 31,
2018 December 31,
2017 Consumer: Credit cards $ 176,602 $ 185,422 Other consumer 284,285 280,094 Total consumer 460,887 465,516 Real estate: Construction 786,077 614,155 Single family residential 1,193,464 1,094,633 Other commercial 2,611,358 2,530,824 Total real estate 4,590,899 4,239,612 Commercial: Commercial 971,704 825,217 Agricultural 128,247 148,302 Total commercial 1,099,951 973,519 Other 138,646 26,962 Total loans, excluding loans acquired, before allowance for loan losses $ 6,290,383 $ 5,705,609 (In thousands) March 31, 2019 December 31, 2018 Consumer: Credit cards $ 181,549 $ 204,173 Other consumer 213,659 201,297 Total consumer 395,208 405,470 Real estate: Construction 1,376,162 1,300,723 Single family residential 1,431,407 1,440,443 Other commercial 3,355,109 3,225,287 Total real estate 6,162,678 5,966,453 Commercial: Commercial 1,801,422 1,774,909 Agricultural 147,216 164,514 Total commercial 1,948,638 1,939,423 Other 178,026 119,042 Total loans, excluding loans acquired, before allowance for loan losses $ 8,684,550 $ 8,430,388 Consumer loans consist of credit card loans and other consumer loans. Consumer loans were $460.9$395.2 million at March 31, 2018,2019, or 7.3%4.6% of total loans, compared to $465.5$405.5 million, or 8.2%4.8% of total loans at December 31, 2017.2018. The decrease in consumer loans from December 31, 2017,2018, to March 31, 2018,2019, was primarily due to the expected seasonal decline in our credit card portfolio partially offset by growth in direct consumer loans.Real estate loans consist of construction loans, single-family residential loans and commercial real estate loans. Real estate loans were $4.591$6.163 billion at March 31, 2018,2019, or 73.0%71.0% of total loans, compared to $4.240$5.966 billion, or 74.3%70.8%, of total loans at December 31, 2017,2018, an increase of $351.3 million.53$129.8 million, or 4.0%. The construction portfolio is continuing to fund loans that were closed in prior quarters, however, the overall commitments have trended down in the first quarter of 2019.Commercial loans consist of non-real estate loans related to business and agricultural loans. CommercialTotal commercial loans were $1.1$1.949 billion at March 31, 2018,2019, or 17.5%22.4% of total loans, compared to $973.5 million,$1.939 billion, or 17.1%23.0% of total loans at December 31, 2017,2018, an increase of $126.4 million.$9.2 million, or 0.5%. Non-agricultural commercial loans increased to $971.7$1.801 billion, a $26.5 million a $146.5 million,increase, or 17.8%1.5%, growth from December 31, 2017.2018. Agricultural loans decreased to $128.2$147.2 million, a $20.1$17.3 million decrease, or 13.5%(10.5)%, decline primarily due to seasonality of the portfolio, which normally peaks in the third quarter and is at its lowest point at the end of the first quarter.61LOANS ACQUIREDOn October 19, 2017,As previously discussed, loans acquired are initially recorded at fair value in accordance with the fair value methodology. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows. When we completed the acquisition of OKSB and issued 14,488,604 sharesmake a credit decision on an acquired loan as a result of the Company’s common stock valued at approximately $431.4 million asloan maturing or renewing, the outstanding balance of October 19, 2017 plus $94.9 million in cash in exchange for all outstanding shares of OKSB common stock. Included in the acquisition werethat loan migrates from loans with a fair value of $2.0 billion.On October 19, 2017, we completed the acquisition of First Texas and issued 12,999,840 shares of the Company’s common stock valued at approximately $387.1 million as of October 19, 2017 plus $70.0 million in cash in exchange for all outstanding shares of First Texas common stock. Included in the acquisition were loans with a fair value of $2.2 billion.On May 15, 2017, we completed the acquisition of Hardeman and issued 1,599,940 shares of the Company’s common stock valued at approximately $42.6 million as of May 15, 2017 plus $30.0 million in cash in exchange for all outstanding shares of Hardeman common stock. Included in the acquisition were loans with a fair value of $251.6 million.Table 8 reflects the carrying value of all loans acquired as of March 31, 20182019 and December 31, 2017.Table 8: Loans Acquired(In thousands) March 31,
2018 December 31,
2017 Consumer: Other consumer $ 43,090 $ 51,467 Real estate: Construction 591,533 637,032 Single family residential 747,597 793,228 Other commercial 2,420,121 2,387,777 Total real estate 3,759,251 3,818,037 Commercial: Commercial 891,261 995,587 Agricultural 3,343 66,576 Total commercial 894,604 1,062,163 Other -- 142,409 Total loans acquired (1) $ 4,696,945 $ 5,074,076 (In thousands) March 31, 2019 December 31, 2018 Consumer: Other consumer $ 11,979 $ 15,658 Real estate: Construction 404,512 429,605 Single family residential 533,917 566,188 Other commercial 1,730,472 1,848,679 Total real estate 2,668,901 2,844,472 Commercial: Commercial 374,033 430,914 Agricultural 1,274 1,739 Total commercial 375,307 432,653 Total loans acquired (1)$ 3,056,187 $ 3,292,783 (1)Loans acquired are reported net of a $407,000 and $418,000 allowance at March 31, 2018 and December 31, 2017, respectively.(1) Loans acquired are reported net of a $1.3 million and $95,000 allowance at March 31, 2019 and December 31, 2018, respectively.The majority of the loans originally acquired in the OKSB, First Texas, and Hardeman acquisitions were evaluated and are being accounted for in accordance with ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount is being accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans.We evaluated the remaining loans purchased in conjunction with the acquisitions of OKSB, First Texas, and Hardeman for impairment in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.Some purchased impaired loans were determined to have experienced additional impairment upon disposition or foreclosurecredit deterioration in the first quarter 2018.three months of 2019. During the three months ended March 31, 2018,2019, we recorded $68,000approximately $2.5 million in a provision for these loans and charge-offs of $79,000,$1,247,000, resulting in an allowance for loan losses for purchased impairedon loans acquired at March 31, 20182019 of $407,000.$1.3 million. The large provision recorded during the first quarter 2019 was due to our credit risk management practices identifying loans specific to an acquired portfolio in our Dallas market which were poorly structured or were poorly managed post-funding. We have carefully reviewed these loans for potential losses and believe we have adequately identified any risk associated with the loans. See Note 2 and Note 6 of5, Loans Acquired, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report for further discussion and analysis of loans acquired.6254ASSET QUALITYA loan is considered impaired when it is probable that we will not receive all amounts due according to the contractual terms of the loans. Impaired loans include non-performing loans (loans past due 90 days or more and nonaccrual loans) and certain other loans identified by management that are still performing.Non-performing loans are comprised of (a) nonaccrual loans, (b) loans that are contractually past due 90 days and (c) other loans for which terms have been restructured to provide a reduction or deferral of interest or principal, because of deterioration in the financial position of the borrower. The subsidiary banks recognizebank recognizes income principally on the accrual basis of accounting. When loans are classified as nonaccrual, generally, the accrued interest is charged off and no further interest is accrued. Loans, excluding credit card loans, are placed on a nonaccrual basis either: (1) when there are serious doubts regarding the collectability of principal or interest, or (2) when payment of interest or principal is 90 days or more past due and either (i) not fully secured or (ii) not in the process of collection. If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the allowance for loan losses.Credit card loans are classified as impaired when payment of interest or principal is 90 days past due. When accounts reach 90 days past due and there are attachable assets, the accounts are considered for litigation. Credit card loans are generally charged off when payment of interest or principal exceeds 150 days past due. The credit card recovery group pursues account holders until it is determined, on a case-by-case basis, to be uncollectible.Total non-performing assets, excluding all loans acquired, decreased by $1.3increased $20.1 million from December 31, 20172018 to March 31, 2018. Foreclosed assets held for sale decreased by $3.0 million.2019. Nonaccrual loans increased by $1.8$26.7 million during the period, primarily commercial loans.loans, partially offset by a decrease in foreclosed assets held for sale of $6.6 million. The nonaccrual loan increase was primarily due to one loan in the Southwest Market. Non-performing assets, including troubled debt restructurings (“TDRs”) and acquired non-covered foreclosed assets, as a percent of total assets were 0.54% at March 31, 2018,2019, compared to 0.57%0.40% at December 31, 2017.In February 2017, we executed a sale of eleven substandard loans, which were primarily loans acquired, with a net principal balance of $11 million. We recognized a loss of $676,000 on this sale.From time to time, certain borrowers are experiencing declines in income and cash flow. As a result, manythese borrowers are seeking to reduce contractual cash outlays, the most prominent being debt payments. In an effort to preserve our net interest margin and earning assets, we are open to working with existing customers in order to maximize the collectability of the debt.When we restructure a loan to a borrower that is experiencing financial difficulty and grant a concession that we would not otherwise consider, a “troubled debt restructuring” 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.Under ASC Topic 310-10-35 – Subsequent Measurement, a TDR is considered to be impaired, and an impairment analysis must be performed. We assess the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determine if a specific allocation to the allowance for loan losses is needed.Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. Our TDR balance decreased to $11.8$8.8 million at March 31, 2018,2019, compared to $12.9$9.2 million at December 31, 2017.2018. The majority of our TDR balances remainbalance remains in the CRE portfolio with the largest balance comprised of fourthree relationships.We return TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.We continue to maintain good asset quality, compared to the industry. Strong asset quality remains a primary focus of our strategy. The allowance for loan losses as a percent of total legacy loans was 0.75%0.68% as of March 31, 2018.2019. Non-performing loans equaled 0.76%0.70% of total loans. Non-performing assets were 0.50% of total assets, a 213 basis point decreaseincrease from December 31, 2017.2018. The allowance for loan losses was 99%97% of non-performing loans. Our annualized net charge-offs to total loans for the first three months of 20182019 was 0.24%0.20%. Excluding credit cards, the annualized net charge-offs to total loans for the same period was 0.20%0.16%. Annualized net credit card charge-offs to total credit card loans were 1.63%1.92%, compared to 1.61%1.64% during the full year 2017,2018, and 200165 basis points better than the most recently published industry average charge-off ratio as reported by the Federal Reserve for all banks.6355Table 9 presents information concerning non-performing assets, including nonaccrual loans and foreclosed assets held for sale (excluding all loans acquired).Table 9: Non-performing Assets(Dollars in thousands) March 31,
2018 December 31,
2017 Nonaccrual loans (1) $ 47,395 $ 45,642 Loans past due 90 days or more (principal or interest payments) 336 520 Total non-performing loans 47,731 46,162 Other non-performing assets: Foreclosed assets held for sale 29,140 32,118 Other non-performing assets 794 675 Total other non-performing assets 29,934 32,793 Total non-performing assets $ 77,665 $ 78,955 Performing TDRs $ 6,459 $ 7,107 Allowance for loan losses to non-performing loans 99 % 90 % Non-performing loans to total loans 0.76 % 0.81 % Non-performing assets to total assets (2) 0.50 % 0.52 % (Dollars in thousands) March 31, 2019 December 31, 2018 Nonaccrual loans (1)$ 60,925 $ 34,201 Loans past due 90 days or more (principal or interest payments) 281 224 Total non-performing loans 61,206 34,425 Other non-performing assets: Foreclosed assets held for sale 18,952 25,565 Other non-performing assets 505 553 Total other non-performing assets 19,457 26,118 Total non-performing assets $ 80,663 $ 60,543 Performing TDRs $ 6,297 $ 6,369 Allowance for loan losses to non-performing loans 97 % 164 % Non-performing loans to total loans 0.70 % 0.41 % Non-performing assets (including performing TDRs) to total assets (2)0.54 % 0.40 % Non-performing assets to total assets (2)0.50 % 0.37 % (1) Includes nonaccrual TDRs of approximately $5.3$2.5 million at March 31, 20182019 and $5.8$2.8 million at December 31, 2017.2018.(2) Excludes all loans acquired, except for their inclusion in total assets. There was no interest income on nonaccrual loans recorded for the three month periods ended March 31, 20182019 and 2017.At March 31, 2018,2019, impaired loans, net of government guarantees and loans acquired, were $47.3$57.6 million compared to $43.9$39.8 million at December 31, 2017.2018. On an ongoing basis, management evaluates the underlying collateral on all impaired loans and allocates specific reserves, where appropriate, in order to absorb potential losses if the collateral were ultimately foreclosed.6456ALLOWANCE FOR LOAN LOSSESOverviewThe allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310-10, Receivables, and allowance allocations calculated in accordance with ASC Topic 450-20, Loss Contingencies. Accordingly, the methodology is based on our internal grading system, specific impairment analysis, qualitative and quantitative factors.As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations.Specific AllocationsA loan is considered impaired when it is probable that we will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments. For a collateral dependent loan, our evaluation process includes a valuation by appraisal or other collateral analysis. 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 loan 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.General AllocationsThe general allocation is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. We established general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans.Reserve for Unfunded CommitmentsIn addition to the allowance for loan losses, we have established a reserve for unfunded commitments, classified in other liabilities. This reserve is maintained at a level sufficient to absorb losses arising from unfunded loan commitments. The adequacy of the reserve for unfunded commitments is determined monthly based on methodology similar to our methodology for determining the allowance for loan losses. Net adjustments to the reserve for unfunded commitments are included in other non-interest expense.6557An analysis of the allowance for loan losses for legacy loans is shown in Table 10.Table 10: Allowance for Loan Losses(In thousands) 2018 2017 Balance, beginning of year $ 41,668 $ 36,286 Loans charged off: Credit card 999 1,044 Other consumer 1,056 1,174 Real estate 455 656 Commercial 1,761 292 Total loans charged off 4,271 3,166 Recoveries of loans previously charged off: Credit card 263 236 Other consumer 94 690 Real estate 302 232 Commercial 69 30 Total recoveries 728 1,188 Net loans charged off 3,543 1,978 Provision for loan losses (1) 9,082 3,557 Balance, March 31(3) $ 47,207 37,865 Loans charged off: Credit card 2,861 Other consumer 2,593 Real estate 7,333 Commercial 7,545 Total loans charged off 20,332 Recoveries of loans previously charged off: Credit card 785 Other consumer 1,549 Real estate 758 Commercial 73 Total recoveries 3,165 Net loans charged off 17,167 Provision for loan losses (2) 20,970 Balance, end of year (3) $ 41,668 (In thousands) 2019 2018 Balance, beginning of year $ 56,599 $ 41,668 Loans charged off: Credit card 1,142 999 Other consumer 1,533 1,056 Real estate 374 455 Commercial 1,968 1,761 Total loans charged off 5,017 4,271 Recoveries of loans previously charged off: Credit card 240 263 Other consumer 300 94 Real estate 142 302 Commercial 158 69 Total recoveries 840 728 Net loans charged off 4,177 3,543 Provision for loan losses (1)6,821 9,082 Balance, March 31 (3)$ 59,243 $ 47,207 Loans charged off: Credit card 3,052 Other consumer 5,581 Real estate 5,450 Commercial 4,862 Total loans charged off 18,945 Recoveries of loans previously charged off: Credit card 742 Other consumer 463 Real estate 689 Commercial 676 Total recoveries 2,570 Net loans charged off 16,375 Provision for loan losses (2) 25,767 Balance, end of year (3) $ 56,599 (1) Provision for loan losses of $2,464,000 attributable to loans acquired, was excluded from this table for 2019 (total year-to-date provision for loan losses was $9,285,000) and $68,000 was excluded from this table for 2018 (total year-to-date 2018 provision for loan losses was $9,150,000). Charge offs of $1,247,000 on loans acquired were excluded from this table for 2019 and $79,000 for 2018. (2) Provision for loan losses of $3,299,000 attributable to loans acquired, was excluded from this table for 2018 (total year-to-date2018 provision for loan losses was $9,150,000) and $750,000 was excluded from this table for 2017 (total 2017 provision for loan losses was $4,307,000)$38,148,000). Charge offs of $79,000 on loans acquired were excluded from this table for 2018 and $1.3 million for 2017.(2)Provision for loan losses of $1,866,000 attributable to loans acquired, was excluded from this table for 2017 (total 2017 provision for loan losses was $26,393,000).(3) Allowance for loan losses at March 31, 20182019 includes $407,000$1,312,000 allowance for loans acquired (not shown in the table above). Allowance for loan losses at December 31, 20172018 and March 31, 20172018 includes $418,000$95,000 and $435,000,$407,000, respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at March 31, 20182019 was $47,614,000$60,555,000 and total allowance for loan losses at December 31, 20172018 and March 31, 20172018 was $42,086,000$56,694,000 and $38,300,000,$47,614,000, respectively.58Provision for Loan LossesThe amount of provision added to the allowance during the three months ended March 31, 20182019 and 2017,2018, and for the year ended December 31, 2017,2018, was based on management’s judgment, with consideration given to the composition of the portfolio, historical loan loss experience, assessment of current economic conditions, past due and non-performing loans and net loss experience. 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.66Allowance for Loan Losses AllocationAs of March 31, 2018,2019, the allowance for loan losses reflects an increase of approximately $5.5$2.6 million from December 31, 2017,2018, while total loans, excluding loans acquired, increased by $584.8$254.2 million over the same three month period. The allocation in each category within the allowance generally reflects the overall changes in the loan portfolio mix.The following table sets forth the sum of the amounts of the allowance for loan losses attributable to individual loans within each category, or loan categories in general. The table also reflects the percentage of loans in each category to the total loan portfolio, excluding loans acquired, for each of the periods indicated. These allowance amounts have been computed using the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factor allocations. The amounts shown are not necessarily indicative of the actual future losses that may occur within individual categories.Table 11: Allocation of Allowance for Loan Losses March 31, 2018 December 31, 2017 Allowance % of Allowance % of (Dollars in thousands) Amount loans (1) Amount loans (1) Credit cards $ 3,799 8.1 % $ 3,784 9.1 % Other consumer 3,191 6.8 % 3,489 8.4 % Real estate 30,414 64.4 % 27,281 65.4 % Commercial 9,601 20.3 % 7,007 16.8 % Other 202 0.4 % 107 0.3 % Total (2) $ 47,207 100 % $ 41,668 100.0 % March 31, 2019 December 31, 2018 (Dollars in thousands) AllowanceAmount % ofloans (1) AllowanceAmount % ofloans (1)Credit cards $ 3,919 2.1 % $ 3,923 2.4 % Other consumer 2,344 2.5 % 2,380 2.4 % Real estate 32,354 71.0 % 29,743 70.8 % Commercial 20,578 22.4 % 20,514 23.0 % Other 48 2.0 % 39 1.4 % Total (2)$ 59,243 100.0 % $ 56,599 100.0 % (1) Percentage of loans in each category to total loans, excluding loans acquired. (2) Allowance for loan losses at March 31, 20182019 and December 31, 20172018 includes $407,000$1,312,000 and $418,000,$95,000, respectively, allowance for loans acquired (not shown in the table above). The total allowance for loan losses at March 31, 20182019 and December 31, 20172018 was $47,614,000$60,555,000 and $42,086,000,$56,694,000, respectively.DEPOSITSDeposits are our primary source of funding for earning assets and are primarily developed through our network of 200191 financial centers. We offer a variety of products designed to attract and retain customers with a continuing focus on developing core deposits. Our core deposits consist of all deposits excluding time deposits of $100,000 or more and brokered deposits. As of March 31, 2018,2019, core deposits comprised 91.1%78.6% of our total deposits.We continually monitor the funding requirements along with competitive interest rates in the markets we serve. Because of our community banking philosophy, our executives in the local markets, with oversight by the Asset Liability Committee and the Bank’s Treasury Management, establish the interest rates offered on both core and non-core deposits. This approach ensures that the interest rates being paid are competitively priced for each particular deposit product and structured to meet the funding requirements. We believe we are paying a competitive rate when compared with pricing in those markets.We manage our interest expense through deposit pricing. We believe that additional funds can be attracted and deposit growth can be accelerated through deposit pricing if we experience increased loan demand or other liquidity needs. We can also utilize brokered deposits as an additional source of funding to meet liquidity needs. We do expect costs of funding with deposits to increase with the continued rise in interest rates and increased competition for deposits across all our markets.59Our total deposits as of March 31, 2018,2019, were $11.7$12.0 billion, an increasea decrease of $564.0$409.2 million from December 31, 2017.2018. We have also continuedare managing our strategybalance sheet and our net interest margin by continuing to move more volatile timeeliminate several high-cost deposits related to less expensive, revenue enhancing transaction accounts.public funds and brokered deposits. We are very pleased with our growth in core deposits during the quarter of $148.0 million as we continue to emphasize relationship banking. Non-interest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $9.5$9.3 billion at March 31, 2018,2019, compared to $9.2$9.5 billion at December 31, 2017,2018, a $294.9$161.7 million increase.decrease. Total time deposits increased $269.1decreased $247.5 million to $2.2$2.6 billion at March 31, 2018,2019, from $1.9$2.9 billion at December 31, 2017.2018. We had $164.8 million$1.1 billion and $159.6 million$1.4 billion of brokered deposits at March 31, 2018,2019, and December 31, 2017,2018, respectively.67OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURESOur total debt was $1.6$1.5 billion and $1.5$1.7 billion at March 31, 20182019 and December 31, 2017,2018, respectively. The decrease from year end was due to the Company using a portion of excess cash to repay FHLB advances. The outstanding balance for March 31, 20182019 includes $653.0 million$1.2 billion in FHLB short-term advances, $488.0$15.0 million in FHLB long-term advances, $330.0 million in subordinated notes and $138.5$24.0 million of trust preferred securities and other subordinated debt.In March 2018, we issued $330.0$330 million in aggregate principal amount of 5.00% Fixed-to-Floating Rate Subordinated Notes (“the Notes”) at a public offering price equal to 100% of the aggregate principal amount of the Notes. The Company incurred $3.3$3.6 million in debt issuance costs related to the offering during March.offering. 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 will reset quarterly to an annual interest rate equal to the then-current three month LIBOR rate plus 125 basis points, payable quarterly in arrears. The notes will be subordinated in right of payment to the payment of our other existing and future senior indebtedness, including all our general creditors. The Notes are obligations of Simmons First National Corporation only and are not obligations of, and are not guaranteed by, any of its subsidiaries.During 2017, we entered into a Revolving Credit Agreement with U.S. Bank National Association and executed an unsecured Revolving Credit Agreement (the “Credit Agreement”) pursuant to which we may borrow, prepay and reborrow up to $75.0 million, the proceeds of which were primarily used to pay off amounts outstanding under a term note assumed in an acquisition. In October 2018, we entered into a First Amendment to the Credit Agreement with U.S. Bank National Association, which primarily extended the First Texas acquisition.Duringexpiration date to October 2019 and reduced the first quarter of$75.0 million to $50.0 million. In December 2018, we entered into a Second Amendment to the Credit Agreement that clarified the financial metrics contained in certain affirmative covenants are evaluated on a consolidated basis. In October 2019, all amounts borrowed, together with applicable interest, fees, and other amounts owed by the Company are due and payable. The balance due under the Credit Agreement at March 31, 2019 was zero.During 2018, the Company used a portion of the net proceeds from the sale of the Notes to repay certain outstanding indebtedness, including the amounts borrowed under$75.0 million outstanding balance on the Credit Agreement, $43.3 million in notes payable, $94.9 million in trust preferred securities and the unsecured debt from correspondent banks.CAPITALOverviewAt March 31, 2018,2019, total capital was $2.109$2.302 billion. Capital represents shareholder ownership in the Company – the book value of assets in excess of liabilities. At March 31, 2018,2019, our common equity to assets ratio was 13.5%14.31% compared to 13.9%13.58% at year-end 2017.Capital StockOn February 27, 2009, at a special meeting, our shareholders approved an amendment to the Articles of Incorporation to establish 40,040,000 authorized shares of preferred stock, $0.01 par value. The aggregate liquidation preference of all shares of preferred stock cannot exceed $80,000,000.On January 18, 2018, the board of directors of the Company approved a two-for-one stock split of the Corporation’s outstanding Class A common stock (“Common Stock”) in the form of a 100% stock dividend for shareholders of record as of the close of business on January 30, 2018 (“Record Date”). The new shares were distributed by the Company’s transfer agent, Computershare,60and the Company’s common stock began trading on a split-adjusted basis on the NASDAQ Global Select Market on February 9, 2018. All previously reported share and per share data included in filings subsequent to February 8, 2018 are restated to reflect the retroactive effect of this two-for-one stock split.On March 19, 2018, the Company filed a shelf registration with the SEC. The shelf registration statement provides increased flexibility and more efficient access to raise capital from time to time through the sale of common stock, preferred stock, debt securities, depository shares, warrants, purchase contracts, purchase units, subscription rights, units or a combination thereof, subject to market conditions. Specific terms and prices are determined at the time of any offering under a separate prospectus supplement that the Company is required to file with the SEC at the time of the specific offering.On April 19, 2018, shareholders of the Company approved an increase in the number of authorized shares from 120,000,000 to 175,000,00Stock RepurchaseOn July 23, 2012, we announced the adoption by our Board of Directors of a stock repurchase program which authorized the repurchase of up to 1,700,000 (split adjusted) of Class A common stock, or approximately 2% of the shares outstanding. The shares are to be purchased from time to time at prevailing market prices, through open market or unsolicited negotiated transactions, depending upon market conditions. Under the repurchase program, there is no time limit for the stock repurchases, nor is there a minimum number of shares that we intend to repurchase. We may discontinue purchases at any time that management determines additional purchases are not warranted. We intend to use the repurchased shares to satisfy stock option exercises, payment of future stock awards and dividends and general corporate purposes. We had no stock repurchases during the first quarterthree months of 20182019 or 2017.
2018.68Cash DividendsWe declared cash dividends on our common stock of $0.16 per share for the first three months of 2019 compared to $0.15 per share for the first calendar quarterthree months of 2018, compared to $0.125 per share (split adjusted) for the first calendar quarter of 2017, an increase of $0.025,$0.01, or 20%7%. The timing and amount of future dividends are at the discretion of our Board of Directors and will depend upon our consolidated earnings, financial condition, liquidity and capital requirements, the amount of cash dividends paid to us by our subsidiaries, applicable government regulations and policies and other factors considered relevant by our Board of Directors. Our Board of Directors anticipates that we will continue to pay quarterly dividends in amounts determined based on the factors discussed above. However, there can be no assurance that we will continue to pay dividends on our common stock at the current levels or at all.Parent Company LiquidityThe primary liquidity needs of the Parent Company are the payment of dividends to shareholders and the funding of debt obligations. The primary sources for meeting these liquidity needs are the current cash on hand at the parent company and the future dividends received from Simmons Bank. Payment of dividends by the bank subsidiary bank is subject to various regulatory limitations. See the Liquidity and Market Risk Management discussions of Item 3 – Quantitative and Qualitative Disclosure About Market Risk for additional information regarding the parent company’s liquidity.Risk Based CapitalOur bank subsidiaries aresubsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of March 31, 2018,2019, we meet all capital adequacy requirements to which we are subject.As of the most recent notification from regulatory agencies, eachthe bank subsidiary was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and the Banks must maintain minimum total61risk-based, Tier 1 risk-based, common equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institutions’institution’s categories.69Our risk-based capital ratios at March 31, 20182019 and December 31, 20172018 are presented in Table 12 below:Table 12: Risk-Based Capital March 31, December 31, (Dollars in thousands) 2018 2017 Tier 1 capital: Stockholders’ equity $ 2,109,051 $ 2,084,564 Goodwill and other intangible assets (918,161 ) (902,371 ) Unrealized loss on available-for-sale securities, net of income taxes 34,062 17,264 Total Tier 1 capital 1,224,952 1,199,457 Tier 2 capital: Qualifying unrealized gain on available-for-sale equity securities 8 1 Trust preferred securities and subordinated debt 468,466 140,565 Qualifying allowance for loan losses 54,436 48,947 Total Tier 2 capital 522,910 189,513 Total risk-based capital $ 1,747,862 $ 1,388,970 Risk weighted assets $ 12,417,233 $ 12,234,160 Assets for leverage ratio $ 14,179,390 $ 13,016,478 Ratios at end of period: Common equity Tier 1 ratio (CET1) 9.86 % 9.80 % Tier 1 leverage ratio 8.64 % 9.21 % Tier 1 risk-based capital ratio 9.86 % 9.80 % Total risk-based capital ratio 14.08 % 11.35 % Minimum guidelines: Common equity Tier 1 ratio 4.50 % 4.50 % Tier 1 leverage ratio 4.00 % 4.00 % Tier 1 risk-based capital ratio 6.00 % 6.00 % Total risk-based capital ratio 8.00 % 8.00 % (Dollars in thousands) March 31, 2019 December 31, 2018 Tier 1 capital: Stockholders’ equity $ 2,302,321 $ 2,246,434 Goodwill and other intangible assets (910,122 ) (912,428 ) Unrealized loss on available-for-sale securities, net of income taxes 6,000 27,374 Total Tier 1 capital 1,398,199 1,361,380 Tier 2 capital: Trust preferred securities and subordinated debt 354,041 353,950 Qualifying allowance for loan losses 67,771 63,608 Total Tier 2 capital 421,812 417,558 Total risk-based capital $ 1,820,011 $ 1,778,938 Risk weighted assets $ 13,364,636 $ 13,326,832 Assets for leverage ratio $ 15,423,961 $ 15,512,042 Ratios at end of period: Common equity Tier 1 ratio (CET1) 10.46 % 10.22 % Tier 1 leverage ratio 9.07 % 8.78 % Tier 1 risk-based capital ratio 10.46 % 10.22 % Total risk-based capital ratio 13.62 % 13.35 % Minimum guidelines: Common equity Tier 1 ratio 4.50 % 4.50 % Tier 1 leverage ratio 4.00 % 4.00 % Tier 1 risk-based capital ratio 6.00 % 6.00 % Total risk-based capital ratio 8.00 % 8.00 % Regulatory Capital ChangesIn July 2013, the Company’s primary federal regulator, the Federal Reserve, published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banks. The rules implement the Basel Committee’s December 2010 framework known as “Basel III” for strengthening international capital standards. The Basel III Capital Rules substantially reviseintroduced substantial revisions to the risk-based capital requirements applicable to bank holding companies and depository institutions compared to the current U.S. risk-based capital rules.The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing risk-weighting approach with a more risk-sensitive approach.The Basel III Capital Rules expanded the risk-weighting categories from four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories, including many residential mortgages and certain commercial real estate.62The final rules included a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%. The Basel III Capital Rules became effective for the Company and its subsidiary bank on January 1, 2015, with full compliance with all of the final rule’s requirements phased in over a multi-year schedule. Management believes that, as of March 31, 2018, the Company and its bank subsidiaries would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis if such requirements were currently effective.
January 1, 2019.70Prior to December 31, 2017, tierTier 1 capital included common equity tierTier 1 capital and certain additional tierTier 1 items as provided under the Basel III Rules. The tierTier 1 capital for the Company consisted of common equity tierTier 1 capital and trust preferred securities. The Basel III Rules include certain provisions that require trust preferred securities to be phased out of qualifying tierTier 1 capital when assets surpass $15 billion. As of December 31, 2017, the Company exceeded $15 billion in total assets and the grandfather provisions applicable to its trust preferred securities no longer apply and trust preferred securities are no longer included as tierTier 1 capital. Trust preferred securities and qualifying subordinated debt of $468.5$354.0 million is included as tierTier 2 and total capital as of March 31, 2018.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSSee the section titled Recently Issued Accounting PronouncementsStandards in Note 1, Preparation of Interim Financial Statements, in the accompanying Condensed Notes to Consolidated Financial Statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on the Company’s ongoing financial position and results of operation.CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSCertain statements contained in this quarterly report may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “anticipate,“believe,” “estimate,“budget,” “expect,” “foresee,” “believe,“anticipate,” “may,“intend,” “might,“indicate,” “target,” “estimate,” “plan,” “project,” “continue,” “contemplate,” “positions,” “prospects,” “predict,” or “potential,” by future conditional verbs such as “will,” “would,” “could”“should,” “could,” “might” or “intend,“may,” future or conditional verb tenses, andby variations or negatives of such terms.words or by similar expressions. These forward-looking statements include, without limitation, those relating to the Company’s future growth, revenue, assets, asset quality, profitability and customer service, critical accounting policies, net interest margin, non-interest revenue, market conditions related to the Company’s stock repurchase program, allowance for loan losses, the effect of certain new accounting standards on the Company’s financial statements, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, capital resources, market risk, earnings, effect of pending litigation, acquisition strategy, legal and regulatory limitations and compliance and competition.These forward-looking statements involve risks and uncertainties, and may not be realized due to a variety of factors, including, without limitation: changes in the Company’s operating or expansion and acquisition strategy, the effects of future economic conditions, governmental monetary and fiscal policies, as well as legislative and regulatory changes; the risks of changes in interest rates and their effects on the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities; the costs of evaluating possible acquisitions and the risks inherent in integrating acquisitions; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; the failure of assumptions underlying the establishment of reserves for possible loan losses, fair value for loans and other real estate owned; and those factors set forth under Item 1A. Risk-Factors of this report and other cautionary statements set forth elsewhere in this report. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied upon as an indication of future performance.We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date hereof, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and all written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this section.7163RECONCILIATION OF NON-GAAP MEASURESThe tables below present computations of core earnings (net income excluding non-core items {merger related costs, early retirement program costs and the one-time costs of branch right sizing}) and diluted core earnings per share (non-GAAP) as well as a reconciliation of tangible book value per share (non-GAAP), tangible common equity to tangible equity (non-GAAP) and the core net interest margin (non-GAAP). Non-core items are included in financial results presented in accordance with generally accepted accounting principles (GAAP).We believe the exclusion of these non-core items in expressing earnings and certain other financial measures, including “core earnings,” provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors and analysts in analyzing the core financial measures of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of the Company’s business because management does not consider these non-core items to be relevant to ongoing financial performance. Management and the Board of Directors utilize “core earnings” (non-GAAP) for the following purposes:• Preparation of the Company’s operating budgets• Monthly financial performance reporting• Monthly “flash” reporting of consolidated results (management only)• Investor presentations of Company performanceWe believe the presentation of “core earnings” on a diluted per share basis, “diluted core earnings per share” (non-GAAP) and core net interest margin (non-GAAP), provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors and analysts in analyzing the core financial measures of the Company and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of the Company’s business, because management does not consider these non-core items to be relevant to ongoing financial performance on a per share basis. Management and the Board of Directors utilize “diluted core earnings per share” (non-GAAP) for the following purposes:• Calculation of annual performance-based incentives for certain executives• Calculation of long-term performance-based incentives for certain executives• Investor presentations of Company performanceWe have $945.2$934.4 million and $948.7$937.0 million total goodwill and other intangible assets for the periods ended March 31, 20182019 and December 31, 2017,2018, respectively. Because of our high level of intangible assets, management believes a useful calculation is return on tangible equity (non-GAAP).We believe that presenting these non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that is applied by management and the Board of Directors.Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, we have procedures in place to identify and approve each item that qualifies as non-core to ensure that the Company’s “core” results are properly reflected for period-to-period comparisons. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. In particular, a measure of earnings that excludes non-core items does not represent the amount that effectively accrues directly to stockholders (i.e., non-core items are included in earnings and stockholders’ equity).All per share data has been restated to reflect the retroactive effect of the two-for-one stock split which occurred during February 2018.7264See Table 13 below for the reconciliation of non-GAAP financial measures, which exclude non-core items for the periods presented.Table 13: Reconciliation of Core Earnings (non-GAAP) Three Months Ended
March 31,(Dollars in thousands) 2018 2017 Net income $ 51,312 $ 22,120 Non-core items: Merger related costs 1,711 524 Branch right sizing 57 154 Tax effect (1) (462 ) (266 ) Net non-core items 1,306 412 Core earnings (non-GAAP) $ 52,618 $ 22,532 Diluted earnings per share $ 0.55 $ 0.35 Non-core items: Merger related costs 0.02 0.01 Branch right sizing -- -- Tax effect (1) -- -- Net non-core items 0.02 0.01 Diluted core earnings per share (non-GAAP) $ 0.57 $ 0.36 Three Months Ended
March 31,(Dollars in thousands) 2019 2018 Net income $ 47,695 $ 51,312 Non-core items: Merger related costs 1,470 1,711 Early retirement program 355 — Branch right sizing 45 57 Tax effect (1) (489 ) (462 ) Net non-core items 1,381 1,306 Core earnings (non-GAAP) $ 49,076 $ 52,618 Diluted earnings per share $ 0.51 $ 0.55 Non-core items: Merger related costs 0.02 0.02 Early retirement program 0.01 — Branch right sizing — — Tax effect (1) (0.01 ) — Net non-core items 0.02 0.02 Diluted core earnings per share (non-GAAP) $ 0.53 $ 0.57 (1) Effective tax rate of 26.135% for 2018 and 39.225% for 2017, adjusted for non-deductible merger-related and branch right sizing costs..See Table 14 below for the reconciliation of tangible book value per share.Table 14: Reconciliation of Tangible Book Value per Share (non-GAAP)(In thousands, except per share data) March 31,
2018 December 31,
2017 Total common stockholders’ equity $ 2,109,051 $ 2,084,564 Intangible assets: Goodwill (845,687 ) (842,651 ) Other intangible assets (99,504 ) (106,071 ) Total intangibles (945,191 ) (948,722 ) Tangible common stockholders’ equity $ 1,163,860 $ 1,135,842 Shares of common stock outstanding 92,242,389 92,029,118 Book value per common share $ 22.86 $ 22.65 Tangible book value per common share (non-GAAP) $ 12.62 $ 12.34 73(In thousands, except per share data) March 31, 2019 December 31, 2018 Total common stockholders’ equity $ 2,302,321 $ 2,246,434 Intangible assets: Goodwill (845,687 ) (845,687 ) Other intangible assets (88,694 ) (91,334 ) Total intangibles (934,381 ) (937,021 ) Tangible common stockholders’ equity $ 1,367,940 $ 1,309,413 Shares of common stock outstanding 92,568,361 92,347,643 Book value per common share $ 24.87 $ 24.33 Tangible book value per common share (non-GAAP) $ 14.78 $ 14.18 65See Table 15 below for the calculation of tangible common equity and the reconciliation of tangible common equity to tangible assets.Table 15: Reconciliation of Tangible Common Equity and the Ratio of Tangible Common Equity to Tangible Assets (non-GAAP)(In thousands, except per share data) March 31,
2018 December 31,
2017 Total common stockholders’ equity $ 2,109,051 $ 2,084,564 Intangible assets: Goodwill (845,687 ) (842,651 ) Other intangible assets (99,504 ) (106,071 ) Total intangibles (945,191 ) (948,722 ) Tangible common stockholders’ equity $ 1,163,860 $ 1,135,842 Total assets $ 15,597,309 $ 15,055,806 Intangible assets: Goodwill (845,687 ) (842,651 ) Other intangible assets (99,504 ) (106,071 ) Total intangibles (945,191 ) (948,722 ) Tangible assets $ 14,652,118 $ 14,107,084 Ratio of equity to assets 13.52 % 13.85 % Ratio of tangible common equity to tangible assets (non-GAAP) 7.94 % 8.05 % (In thousands, except per share data) March 31, 2019 December 31, 2018 Total common stockholders’ equity $ 2,302,321 $ 2,246,434 Intangible assets: Goodwill (845,687 ) (845,687 ) Other intangible assets (88,694 ) (91,334 ) Total intangibles (934,381 ) (937,021 ) Tangible common stockholders’ equity $ 1,367,940 $ 1,309,413 Total assets $ 16,091,639 $ 16,543,337 Intangible assets: Goodwill (845,687 ) (845,687 ) Other intangible assets (88,694 ) (91,334 ) Total intangibles (934,381 ) (937,021 ) Tangible assets $ 15,157,258 $ 15,606,316 Ratio of common equity to assets 14.31 % 13.58 % Ratio of tangible common equity to tangible assets (non-GAAP) 9.02 % 8.39 % See Table 16 below for the calculation of core net interest margin for the periods presented.Table 16: Reconciliation of Core Net Interest Margin (non-GAAP) Three Months Ended March 31, (Dollars in thousands) 2018 2017 Net interest income $ 134,966 $ 72,380 FTE adjustment 1,130 1,965 Fully tax equivalent net interest income 136,096 74,345 Total accretable yield (11,294 ) (4,427 ) Core net interest income $ 124,802 $ 69,918 Average earning assets – quarter-to-date $ 13,251,549 $ 7,469,709 Net interest margin 4.17 4.04 Core net interest margin (non-GAAP) 3.82 3.80 74 Three Months Ended
March 31,(Dollars in thousands) 2019 2018 Net interest income $ 137,026 $ 134,966 FTE adjustment 1,601 1,130 Fully tax equivalent net interest income 138,627 136,096 Total accretable yield (6,660 ) (11,294 ) Core net interest income $ 131,967 $ 124,802 Average earning assets – quarter-to-date $ 14,593,905 $ 13,251,549 Net interest margin 3.85 % 4.17 % Core net interest margin (non-GAAP) 3.67 % 3.82 % 66Item 3. Quantitative and Qualitative Disclosure About Market Risk Parent CompanyThe Company has leveraged its investment in its subsidiary banksbank and depends upon the dividends paid to it, as the sole shareholder of the subsidiary banks,bank, as a principal source of funds for dividends to shareholders, stock repurchases and debt service requirements. At March 31, 2018,2019, undivided profits of Simmons Bank were approximately $298.6approximately $428.6 million, of which approximately $1.6which approximately $57.7 million was available for the payment of dividends to the Company without regulatory approval. In addition to dividends, other sources of liquidity for the Company are the sale of equity securities and the borrowing of funds.Subsidiary BanksGenerally speaking, the Company'sCompany’s subsidiary banks relybank relies upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash used in investing activities. Typical of most banking companies, significant financing activities include: deposit gathering; use of short-term borrowing facilities, such as federal funds purchased and repurchase agreements; and the issuance of long-term debt. The subsidiary banks’bank’s primary investing activities include loan originations and purchases of investment securities, offset by loan payoffs and investment cash flows and maturities.Liquidity represents an institution'sinstitution’s ability to provide funds to satisfy demands from depositors and borrowers by either converting assets into cash or accessing new or existing sources of incremental funds. A major responsibility of management is to maximize net interest income within prudent liquidity constraints. Internal corporate guidelines have been established to constantly measure liquid assets as well as relevant ratios concerning earning asset levels and purchased funds. The management and board of directors of the subsidiary banks monitorbank monitors these same indicators and makemakes adjustments as needed.Liquidity ManagementThe objective of our liquidity management is to access adequate sources of funding to ensure that cash flow requirements of depositors and borrowers are met in an orderly and timely manner. Sources of liquidity are managed so that reliance on any one funding source is kept to a minimum. Our liquidity sources are prioritized for both availability and time to activation.Our liquidity is a primary consideration in determining funding needs and is an integral part of asset/liability management. Pricing of the liability side is a major component of interest margin and spread management. Adequate liquidity is a necessity in addressing this critical task. There are seven primary and secondary sources of liquidity available to the Company. The particular liquidity need and timeframe determine the use of these sources.The first sources of liquidity available to the Company are a $75$50.0 million revolving line of credit with U.S. Bank National Association for purposes of financing distributions, financing certain acquisitions and working capital purposes and Federal funds. Federal funds are available on a daily basis and are used to meet the normal fluctuations of a dynamic balance sheet. The Bank has approximately $395approximately $380 million in Federal 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. Historical monitoring of these funds has made it possible for us to project seasonal fluctuations and structure our funding requirements on a month-to-month basis.Second, the bank subsidiaries havesubsidiary has lines of credit available with the Federal Home Loan Bank. While we use portions of those lines to match off longer-term mortgage loans, we also use those lines to meet liquidity needs. Approximately $2.2 billion of these lines of credit are currently available, if needed, for liquidity.A third source of liquidity is that we have the ability to access large wholesale deposits from both the public and private sector to fund short-term liquidity needs.A fourth source of liquidity is the retail deposits available through our network of financial centers throughout Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas. Although this method can be a somewhat more expensive alternative to supplying liquidity, this source can be used to meet intermediate term liquidity needs.Fifth, we use a laddered investment portfolio that ensures there is a steady source of intermediate term liquidity. These funds can be used to meet seasonal loan patterns and other intermediate term balance sheet fluctuations. Approximately 83.8%97.3% of the investment portfolio is classified as available-for-sale. We also use securities held in the securities portfolio to pledge when obtaining public funds.75Sixth, we have a network of downstream correspondent banks from which we can access debt to meet liquidity needs.67Finally, we have the ability to access funds through the Federal Reserve Bank Discount Window.We believe the various sources available are ample liquidity for short-term, intermediate-term and long-term liquidity.Market Risk ManagementMarket risk arises from changes in interest rates. We have risk management policies to monitor and limit exposure to market risk. In asset and liability management activities, policies designed to minimize structural interest rate risk are in place. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated, and the resulting net positions are identified.Interest Rate SensitivityInterest rate risk represents the potential impact of interest rate changes on net income and capital resulting from mismatches in repricing opportunities of assets and liabilities over a period of time. A number of tools are used to monitor and manage interest rate risk, including simulation models and interest sensitivity gap analysis. Management uses simulation models to estimate the effects of changing interest rates and various balance sheet strategies on the level of the Company’s net income and capital. As a means of limiting interest rate risk to an acceptable level, management may alter the mix of floating and fixed-rate assets and liabilities, change pricing schedules and manage investment maturities during future security purchases.The simulation model incorporates management’s assumptions regarding the level of interest rates or balance changes for indeterminate maturity deposits for a given level of market rate changes. These assumptions have been developed through anticipated pricing behavior. Key assumptions in the simulation models include the relative timing of prepayments, cash flows and maturities. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of a change in interest rates on net income or capital. 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 March 31, 2018,2019, 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 4.23%2.13% and 7.81%4.02%, respectively, relative to the base case over the next 12 months, while decreases in interest rates of 100 basis points and 200 basis points would result in a negative variance in net interest income of -5.14%(2.03)% and (4.81)%, respectively, relative to the base case over the next 12 months. The likelihood of a decrease in interest rates in excess of 100 basis points as of March 31, 2018 is considered remote given current interest rate levels and the recent rate increases by the Federal Reserve. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-endperiod-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. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material.The table below presents our sensitivity to net interest income at March 31, 2018: Table 14:Net Interest Income SensitivityInterest Rate Scenario % Change from Base Up 200 basis points 7.81%4.02%Up 100 basis points 4.23%2.13%Down 100 basis points -5.14%(2.03)%Down 200 basis points 76(4.81)% 68Item 4. Controls and Procedures Evaluation of Disclosure Controls and ProceduresThe Company'sCompany’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company'sCompany’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company'sCompany’s current disclosure controls and procedures were effective for the period.Changes in Internal Control over Financial ReportingThere were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2018,2019, which materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.Part II: Other Information Item 1A. Risk Factors Management is not aware of any material changes to the risk factors discussed in Part 1, Item 1A of our Form 10-K for the year ended December 31, 2017.2018. In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A of our Form 10-K, which could materially and adversely affect the Company’s business, ongoing financial condition and results of operations. The risks described are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management currently believes to be immaterial may also adversely affect our business, ongoing financial condition or results of operations.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds(c) Issuer Purchases of Equity Securities. The Company made no purchases of its common stock during the three months ended March 31, 2018.Item 6. Exhibits Exhibit No. Description Agreement and Plan of Merger, dated as of March 24, 2014, by and between Simmons First National Corporation and Delta Trust & Banking Corporation (incorporated by reference to Annex A to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on July 23, 2014 (File No. 000-06253)).Agreement and Plan of Merger, dated as of May 6, 2014, by and between Simmons First National Corporation and Community First Bancshares, Inc., as amended on September 11, 2014 (incorporated by reference to Annex A to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on October 8, 2014 (File No. 000-06253)).Agreement and Plan of Merger, dated as of May 27, 2014, by and between Simmons First National Corporation and Liberty Bancshares, Inc., as amended on September 11, 2014 (incorporated by reference to Annex B to the Joint Proxy Statement/Prospectus filed by Simmons First National Corporation on October 8, 2014 (File No. 000-06253)).Agreement and Plan of Merger, dated as of April 28, 2015, by and between Simmons First National Corporation and Ozark Trust & Investment Corporation (incorporated by reference to Exhibit 10.1 to Simmons First National Corporation’s Current Report on Form 8-K for April 29, 2015 (File No. 000-06253)).Stock Purchase Agreement by and among Citizens National Bank, Citizens National Bancorp, Inc. and Simmons First National Corporation, dated as of May 18, 2016 (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for May 18, 2016 (File No. 000-06253)).772.6 Agreement and Plan of Merger, dated as of November 17, 2016, by and between Simmons First National Corporation and Hardeman County Investment Company, Inc. (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for November 17, 2016 (File No. 000-06253)).Agreement and Plan of Merger, dated as of December 14, 2016, by and between Simmons First National Corporation and Southwest Bancorp, Inc., as amended on July 19, 2017 (incorporated by reference to Exhibit 2.11 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2017 (File No. 000-06253)).Agreement and Plan of Merger, dated as of January 23, 2017, by and between Simmons First National Corporation and First Texas, BHC, Inc., as amended on July 19, 2017 (incorporated by reference to Exhibit 2.12 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2017 (File No. 000-06253)).69Agreement and Plan of Merger, dated as of November 13, 2018, by and between Simmons First National Corporation and Reliance Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to Simmons First National Corporation’s Current Report on Form 8-K for November 13, 2018 (File No. 000-06253)).Amended and Restated Articles of Incorporation of Simmons First National Corporation, as amended on February 12, 2019 (incorporated by reference to Exhibit 3.1 to Simmons First National Corporation’s Current Report on Form 8-K/A on April 23, 2018.*11, 2019 (File No. 000-06253)).Amended By-Laws of Simmons First National Corporation (incorporated by reference to Exhibit 3.2 to Simmons First National Corporation’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2017 (File No. 000-06253)).3.3Certificate of Designation of Senior Non-Cumulative Perpetual Preferred Stock, Series A of Simmons First National Corporation, dated February 27, 2015 (incorporated by reference to Exhibit 3.1to Simmons First National Corporation’s Current Report on Form 8-K on October 8, 2014 (File No. 000-06253)).4.1 Instruments defining the rights of security holders, including indentures. Simmons First National Corporation hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of the Corporation and its consolidated subsidiaries to the U.S. Securities and Exchange Commission upon request. No issuance of debt exceeds ten percent of the total assets of the Corporation and its subsidiaries on a consolidated basis.10.1Deferred Compensation Agreement for Marty D. Casteel dated January 22, 2018Amended and Restated Simmons First National Corporation Code of Ethics (incorporated by reference to Exhibit 10.314.1 to Simmons First National Corporation’s AnnualCurrent Report on Form 10-K for the Year ended December 31, 20178-K on July 19, 2018 (File No. 000-06253)).10.2Amendment to Deferred Compensation Agreement for George A. Makris dated January 25, 2018 (incorporated by reference to Exhibit 10.4 to Simmons First National Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2017 (File No. 000-06253)).12.1Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividend.*7815.1 Awareness Letter of BKD, LLP.*Rule 13a-15(e) and 15d-15(e) Certification – George A. Makris, Jr., Chairman and Chief Executive Officer.*Rule 13a-15(e) and 15d-15(e) Certification – Robert A. Fehlman, Senior Executive Vice President, Chief Financial Officer and Treasurer.*Rule 13a-15(e) and 15d-15(e) Certification – David W. Garner, Executive Vice President, Controller and Chief Accounting Officer.*Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – George A. Makris, Jr., Chairman and Chief Executive Officer.*Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Robert A. Fehlman, Senior Executive Vice President, Chief Financial Officer and Treasurer.*Certification Pursuant to 18 U.S.C. Sections 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – David W. Garner, Executive Vice President, Controller and Chief Accounting Officer.*101.INS XBRL Instance Document.**101.SCH XBRL Taxonomy Extension Schema.**101.CAL XBRL Taxonomy Extension Calculation Linkbase.**101.DEF XBRL Taxonomy Extension Definition Linkbase.**101.LAB XBRL Taxonomy Extension Labels Linkbase.**101.PRE XBRL Taxonomy Extension Presentation Linkbase.*** Filed herewith** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.7970SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.SIMMONS FIRST NATIONAL CORPORATION(Registrant)Date: May 8, 20182019/s/ George A. Makris, Jr. George A. Makris, Jr. Chairman and Chief Executive Officer Date: May 8, 20182019/s/ Robert A. Fehlman Robert A. Fehlman Senior Executive Vice President, Chief Financial Officer and Treasurer Date: May 8, 20182019/s/ David W. Garner David W. Garner Executive Vice President, Controller and Chief Accounting Officer 71