SIMMONS FIRST NATIONAL CORP

Previous wording

We account for our acquisitions under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. The fair value for acquired loans at the time of acquisition is based on a variety of factors including discounted expected cash flows, adjusted for estimated prepayments and credit losses. In accordance with ASC 326, the fair value adjustment is recorded as premium or discount to the unpaid principal balance of each acquired loan. Loans that have been identified as having experienced a more-than-insignificant deterioration in credit quality since origination are purchased credit deteriorated (“PCD”) loans. The net premium or discount on PCD loans is adjusted by our allowance for credit losses recorded at the time of acquisition. The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. The net premium or discount on loans that are not classified as PCD (“non-PCD”), that includes credit and non-credit components, is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. We then record the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense.

Current wording

We account for our 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. The fair value for acquired loans at the time of acquisition is based on a variety of factors including discounted expected cash flows, adjusted for estimated prepayments and credit losses. In accordance with ASC 326, the fair value adjustment is recorded as premium or discount to the unpaid principal balance of each acquired loan. Loans that have been identified as having experienced a more-than-insignificant deterioration in credit quality since origination are purchased credit deteriorated (“PCD”) loans. The net premium or discount on PCD loans is adjusted by our allowance for credit losses recorded at the time of acquisition. The remaining net premium or discount is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. The net premium or discount on loans that are not classified as PCD (“non-PCD”), that includes credit and non-credit components, is accreted or amortized into interest income over the remaining life of the loan using a constant yield method. We then record the necessary allowance for credit losses on the non-PCD loans through provision for credit losses expense.

Previous wording

To quantitatively test goodwill for impairment, a present value of discounted cash flows calculation is completed and relies on several assumptions that have a level of subjectivity and judgement. These assumptions are dependent on market and economic conditions. Key inputs to estimate terminal fair value of the Company include projected forecasts, noninterest expense savings and a pricing multiple based on a group of peer banks with similar characteristics. These inputs are discounted by the cost of equity, which includes assumptions involving our beta; equity risk, size and company premiums; and the 20-year treasury rate. Assumptions used in calculating the cost of equity are obtained from market and third-party data. Results are compared to book value and no impairment was indicated as of December 31, 2023. Judgement is inherent in assessing goodwill for impairment. The various assumptions used in assessing goodwill for impairment involve uncertainties that are beyond our control and could cause actual results to differ materially from those projected.

Current wording

To quantitatively test goodwill for impairment, a present value of discounted cash flows calculation is completed and relies on several assumptions that have a level of subjectivity and judgement. These assumptions are dependent on market and economic conditions. Key inputs to estimate terminal fair value of the Company include projected forecasts, noninterest expense savings and a pricing multiple based on a group of peer banks with similar characteristics. These inputs are discounted by the cost of equity, which includes assumptions involving our beta; equity risk, size and company premiums; and the 20-year treasury rate. Assumptions used in calculating the cost of equity are obtained from market and third-party data. Results are compared to book value; no impairment was indicated as of December 31, 2024. Judgement is inherent in assessing goodwill for impairment. The various assumptions used in assessing goodwill for impairment involve uncertainties that are beyond our control and could cause actual results to differ materially from those projected.

Previous wording

We have adopted various stock-based compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units, and stock awards. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awarding of restricted stock, restricted stock units, performance stock units or stock awards granted to directors, officers and other key employees.

Current wording

We have adopted various stock-based compensation plans. The plans provide for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units, and stock awards. Pursuant to the plans, shares are reserved for future issuance by the Company upon exercise of stock options or awarding of restricted stock, restricted stock units or performance stock units granted to directors, officers and other key employees.

Previous wording

Our net income available to common shareholders for the year ended December 31, 2023 was $175.1 million, or $1.38 diluted earnings per share, compared to $256.4 million, or $2.06 diluted earnings per share, for the same period in 2022. Included in 2023 results were $32.7 million of certain items, net of tax, that were primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment and branch right sizing initiatives. Included in 2022 results were $42.4 million of certain items, net of tax, that were primarily related to our acquisitions, Day 2 accounting provision in connection with acquisitions, gain on an insurance settlement related to a weather event, merger related costs and branch right sizing initiatives. Adjusting for these certain items, adjusted earnings for the year ended December 31, 2023 were $207.7 million, or $1.64 adjusted diluted earnings per share, compared to $298.8 million, or $2.40 adjusted diluted earnings per share, in 2022. See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures.

Current wording

Our net income available to common shareholders for the year ended December 31, 2024 was $152.7 million, or $1.21 diluted earnings per share, compared to $175.1 million, or $1.38 diluted earnings per share, for the same period in 2023. Included in 2024 results were $25.2 million of certain items, net of tax, that were primarily related to the loss on sale of securities, a FDIC special assessment and branch right sizing initiatives. Included in 2023 results were $32.7 million of certain items, net of tax, that were primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment and branch right sizing initiatives. Adjusting for these certain items, adjusted earnings for the year ended December 31, 2024 were $177.9 million, or $1.41 adjusted diluted earnings per share, compared to $207.7 million, or $1.64 adjusted diluted earnings per share, in 2023. See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures.

Previous wording

•Deposits were relatively stable over the year, which highlights the granularity of our deposit base, as well as the long-term relationships we have with many of our customers. Total deposits as of December 31, 2023 were $22.24 billion, compared to $22.55 billion as of December 31, 2022. Uninsured deposits (excluding collateralized deposits and intercompany deposits) as of December 31, 2023 were approximately $4.75 billion, or 21% of total deposits.

Current wording

•Deposits were relatively stable over the year, which highlights the granularity of our deposit base, as well as the long-term relationships we have with many of our customers. Total deposits as of December 31, 2024 were $21.89 billion, compared to $22.24 billion as of December 31, 2023. Uninsured deposits (excluding collateralized deposits and intercompany deposits) as of December 31, 2024 were approximately $4.63 billion, or 21% of total deposits.

Previous wording

•Capital levels were steady during the year, with all regulatory capital ratios remaining significantly above “well-capitalized” guidelines as of December 31, 2023 (see Table 18 in the Risk Based Capital section below). As of December 31, 2023, our ratio of common equity to total assets was 12.53%, the ratio of tangible common equity to tangible assets was 7.69% and our Tier 1 leverage ratio was 9.39%.

Current wording

•Capital levels were steady during the year, with all regulatory capital ratios remaining significantly above “well-capitalized” guidelines as of December 31, 2024 (see Table 18 in the Risk-Based Capital section below). As of December 31, 2024, our ratio of common equity to total assets was 13.13%, the ratio of tangible common equity to tangible assets was 8.29% and our Tier 1 leverage ratio was 9.74%.

Previous wording

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

Current wording

•Key credit quality metrics as of December 31, 2024 also remained solid, with our nonperforming loan coverage ratio at 212% and our allowance for credit losses as a percent of total loans ratio was 1.38%.

Previous wording

•Significant liquidity position with a loan to deposit ratio of 76% as of December 31, 2023, compared to 72% as of December 31, 2022. Additional liquidity sources available to us as of December 31, 2023 totaled $11.22 billion and our uninsured, non-collateralized deposit coverage ratio was 2.4x.

Current wording

•We maintained a significant liquidity position with a loan to deposit ratio of 78% as of December 31, 2024, compared to 76% as of December 31, 2023. Additional liquidity sources available to us as of December 31, 2024 totaled $10.90 billion and our uninsured, non-collateralized deposit coverage ratio was 2.4x.

Previous wording

Asset quality metrics remain strong and reflect our conservative credit culture, as well as our focus on maintaining disciplined pricing and conservative underwriting standards given the current economic environment. Total nonperforming loans as of December 31, 2023 were $84.5 million, as compared to $58.9 million at December 31, 2022. Non-performing assets as a percent of total assets were 0.33%, compared to 0.23% at December 31, 2023 and 2022, respectively.

Current wording

We believe credit trends throughout the industry are beginning to normalize after an extended period at historically low levels. Our asset quality metrics remain strong and reflect our conservative credit culture, as well as our focus on maintaining disciplined pricing and conservative underwriting standards given the current economic environment. Total nonperforming loans as of December 31, 2024 were $110.8 million, as compared to $84.5 million at December 31, 2023. Non-performing assets as a percent of total assets were 0.45%, compared to 0.33% at December 31, 2024 and 2023, respectively.

Previous wording

Stockholders’ equity as of December 31, 2023 was $3.43 billion, book value per share was $27.37 and tangible book value per common share was $15.92. Our ratio of common stockholders’ equity to total assets was 12.5% and the ratio of tangible common stockholders’ equity to tangible assets was 7.7% at December 31, 2023. See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures. We repurchased approximately 2.3 million shares of our common stock during 2023.

Current wording

Stockholders’ equity as of December 31, 2024 was $3.53 billion, book value per share was $28.08 and tangible book value per common share was $16.80.

Previous wording

In our discussion and analysis of our financial condition and results of operation in this Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we provide certain financial information determined by methods other than in accordance with US GAAP. We believe the presentation of non-GAAP financial measures provides a meaningful basis for period-to-period and company-to-company comparisons, which we believe will assist investors and analysts in analyzing the core financial measures of the Company and predicting future performance. See the GAAP Reconciliation of Non-GAAP Measures section below for additional discussion and reconciliations of non-GAAP measures.

Current wording

In our discussion and analysis of our financial condition and results of operation in this Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we provide certain financial information determined by methods other than in accordance with US GAAP. We believe the presentation of non-GAAP financial measures provides a meaningful basis for period-to-period and company-to-company comparisons, which we believe will assist investors and analysts in analyzing the core financial measures of the Company and predicting future performance. See the GAAP Reconciliation of Non-GAAP Financial Measures section below for additional discussion and reconciliations of non-GAAP measures.

Previous wording

Simmons First National Corporation is an Arkansas-based financial holding company that, as of December 31, 2023, has approximately $27.35 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Current wording

Simmons First National Corporation is an Arkansas-based financial holding company that, as of December 31, 2024, has approximately $26.88 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

Previous wording

The FRB sets various benchmark interest rates which influence the general market rates of interest, including the deposit and loan rates offered by financial institutions. Between December 2015 and December 2018, the FRB had been gradually raising benchmark interest rates. The FRB target for the federal funds rate, which is the cost to banks of immediately available overnight funds, increased gradually from 0% - 0.50% in December 2015 to 2.25% - 2.50% over a three year period. The federal funds rate was flat until the FRB began to lower the rate in August 2019 and ultimately reduced it to 1.50% - 1.75% in October 2019. During March 2020, the Federal Open Market Committee (“FOMC”) of the FRB substantially reduced interest rates in response to the economic crisis brought on by the COVID-19 pandemic. The federal funds rate was cut to a range of 0% - 0.25%, where it remained throughout 2021 and into early 2022. During March 2022, the FOMC began a series of rate increases in an effort to curb rising inflation. From early 2022 through 2023, the federal funds rate range was increased on eleven occasions and ended 2023 with a range set at 5.25% - 5.50%. To date in 2024, rates have been held steady by the FOMC.

Current wording

The FRB sets various benchmark interest rates which influence the general market rates of interest, including the deposit and loan rates offered by financial institutions. Between December 2015 and December 2018, the FRB had been gradually raising benchmark interest rates. The FRB target for the federal funds rate, which is the cost to banks of immediately available overnight funds, increased gradually from 0% - 0.50% in December 2015 to 2.25% - 2.50% over a three year period. The federal funds rate was flat until the FRB began to lower the rate in August 2019 and ultimately reduced it to 1.50% - 1.75% in October 2019. During March 2020, the Federal Open Market Committee (“FOMC”) of the FRB substantially reduced interest rates in response to the economic crisis brought on by the COVID-19 pandemic. The federal funds rate was cut to a range of 0% - 0.25%, where it remained throughout 2021 and into early 2022. During March 2022, the FOMC began a series of rate increases in an effort to curb rising inflation. From early 2022 through 2023, the federal funds rate range was increased on eleven occasions and ended 2023 with a range set at 5.25% - 5.50%. During 2024, as inflation declined, the FOMC cut rates on three occasions to a period end range of 4.25% - 4.50%. To date in 2025, rates have been held steady by the FOMC.

Previous wording

Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, also increased from 3.25% to 5.50% during the years 2015 through 2018. The prime interest rate remained flat until it began to decrease in July 2019 and was eventually reduced to 4.75% in October 2019. Similarly to the reduction in the federal funds rate, the prime rate was cut to 3.25% in mid-March of 2020 in response to the COVID-19 pandemic and remained unchanged throughout 2021 and into early 2022. Paralleling the federal funds rate, multiple increases by the Federal Reserve during 2022 and 2023 increased the prime rate to 8.50% as of the end of 2023. Markets anticipate potential rate cuts by the Federal Reserve during 2024.

Current wording

Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, also increased from 3.25% to 5.50% during the years 2015 through 2018. The prime interest rate remained flat until it began to decrease in July 2019 and was eventually reduced to 4.75% in October 2019. Similarly to the reduction in the federal funds rate, the prime rate was cut to 3.25% in mid-March of 2020 in response to the COVID-19 pandemic and remained unchanged throughout 2021 and into early 2022. Paralleling the federal funds rate, multiple increases by the Federal Reserve during 2022 and 2023 increased the prime rate to 8.50% as of the end of 2023 and a series of rate cuts during 2024 decreased the prime rate to 7.50% at the end of 2024. To date in 2025, the prime interest rate has also been held steady.

Previous wording

Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. In the last several years, on average, approximately 41% of our loan portfolio and approximately 89% of our time deposits have repriced in one year or less. Our current interest rate sensitivity shows that approximately 42% of our loans and 94% of our time deposits will reprice in the next year, largely contributing to our liability-sensitive position at December 31, 2023.

Current wording

Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. In the last several years, on average, approximately 44% of our loan portfolio and approximately 92% of our time deposits have repriced in one year or less. Our current interest rate sensitivity shows that approximately 49% of our loans and 97% of our time deposits will reprice in the next year, largely contributing to our liability-sensitive position at December 31, 2024.

Previous wording

For the year ended December 31, 2023, net interest income on a fully taxable equivalent basis was $675.6 million, a decrease of $66.4 million, or 9.0%, over the same period in 2022. The decrease in net interest income was primarily the result of a $349.2 million increase in interest income, more than offset by a $415.6 million increase in interest expense.

Current wording

For the year ended December 31, 2024, net interest income on a fully taxable equivalent basis was $654.3 million, a decrease of $21.3 million, or 3.2%, over the same period in 2023. The decrease in net interest income was primarily the result of a $102.3 million increase in interest income, more than offset by a $123.6 million increase in interest expense.

Previous wording

The increase in interest income primarily resulted from a $296.5 million increase in interest income on loans, coupled with an increase of $48.0 million in interest income on investment securities. Regarding the increase in interest income on loans during 2023, the increase in loan volume resulted in an increase of $117.6 million in interest income, while a 113 basis point increase in yield due to rising market rates resulted in a $178.9 million increase in interest income during the year ended December 31, 2023. The loan yield for 2023 was 5.96%, compared to 4.83% for 2022. The increase in our loan volume during 2023 was due to the Spirit acquisition in the second quarter of 2022, combined with solid organic loan growth over the comparative period. The increase in interest income on investment securities reflects an increase of $66.0 million due to yield increases over the period of 132 basis points and 9 basis points for our taxable and non-taxable investment security portfolios, respectively, which were a result of rising market interest rates. The increase in interest income on investment securities due to yield increases was mitigated by a $17.9 million decrease due to the decline in our investment portfolio average balances which decreased by $861.5 million or 10.5%, as our portfolio experienced pay downs and maturities over the period, which was reinvested into our loan portfolio. Also contributing to the decrease in the average portfolio balance was a targeted sale of $241.1 million of lower-yielding AFS securities late in the fourth quarter of 2023, the proceeds of which we used to pay off higher-rate wholesale fundings.

Current wording

The increase in interest income primarily resulted from a $94.1 million increase in interest income on loans, coupled with an increase of $9.7 million in interest income on investment securities. Regarding the increase in interest income on loans during 2024, the increase in loan volume resulted in an increase of $27.9 million in interest income, while a 39 basis point increase in yield due to higher market interest rates resulted in a $66.2 million increase in interest income during the year ended December 31, 2024. The loan yield for 2024 was 6.35%, compared to 5.96% for 2023. The increase in our loan volume during 2024 was due to solid organic loan growth over the comparative period. The increase in interest income on investment securities is primarily related to our taxable investment securities and reflects an increase of $36.7 million due to yield increases over the period of 87 basis points which were a result of higher market interest rates. The increase in interest income on taxable investment securities due to yield increases was mitigated by a $26.5 million decrease due to the decline in our taxable investment portfolio average balances which decreased by $785.2 million, or 16.7%, as our portfolio experienced pay downs, maturities and a strategic sale of $251.5 million of lower-yielding available-for-sale (“AFS”) securities to pay off higher rate wholesale fundings consisting of FHLB advances during the third quarter of 2024.

Previous wording

Included in interest income is the additional yield accretion recognized as a result of updated estimates of the cash flows of our loans acquired. 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 may increase or decrease based on payment histories and loss expectations of the loans. The resulting adjustment to interest income is spread on a level-yield basis over the remaining expected lives of the loans. For the years ended December 31, 2023, 2022 and 2021, interest income included $8.8 million, $23.9 million and $22.1 million, respectively, for the yield accretion recognized on loans acquired.

Current wording

Included in interest income is the additional yield accretion recognized as a result of updated estimates of the cash flows of our loans acquired. 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 may increase or decrease based on payment histories and loss expectations of the loans. The resulting adjustment to interest income is spread on a level-yield basis over the remaining expected lives of the loans. For the years ended December 31, 2024, 2023 and 2022, interest income included $6.1 million, $8.8 million and $23.9 million, respectively, for the yield accretion recognized on loans acquired.

Previous wording

The $415.6 million increase in interest expense is mostly due to the increase in our deposit account rates over the period, combined with the additional deposit base from the Spirit acquisition and change in deposit mix as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment. Interest expense increased $323.4 million due to the increase in rate of 212 basis points on interest-bearing deposit accounts and increased $50.5 million due to the increase in deposit volume over the period. Additionally, interest expense increased $35.3 million due to the increase in rate of 302 basis points on other borrowings. We continually monitor and look for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Current wording

The $123.6 million increase in interest expense is mostly due to the increase in our deposit account rates over the period, combined with the change in deposit mix as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment. Interest expense increased $113.5 million due to the increase in rates of 68 basis points on interest-bearing deposit accounts and increased $13.8 million due to the increase in deposit volume over the period. The increase in interest expense was partially offset by a decrease of $5.4 million related to a decreased reliance on other borrowings over the period. We continually monitor and look for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Previous wording

Our net interest margin on a fully tax equivalent basis was 2.78% for the year ended December 31, 2023, down 39 basis points from 2022. The decrease in the net interest margin was due to the rising deposit rate pressure and change in deposit mix previously discussed, mitigated by the overall increase in our earning assets average balances over the comparative periods which has improved interest income in the rising rate environment.

Current wording

Our net interest margin on a fully tax equivalent basis was 2.74% for the year ended December 31, 2024, down 4 basis points from 2023. The marginal decrease in the net interest margin was primarily due to the rising deposit rate pressure from increased market competition and consumer migration toward higher rate deposits, mitigated by the increased yields on our earning assets average balances over the comparative periods.

Previous wording

Over the course of 2024, we anticipate moderating pressure on our margin due to several factors. We saw moderate organic loan growth during 2023, but our loan pipeline experienced decreased volume throughout the year. We expect further modest organic loan growth during 2024, subject to macroeconomic uncertainties that may reduce or otherwise impact loan demand, with continued focus on maintaining prudent underwriting standards and pricing discipline given projects surrounding near term future economic growth. We sold $241.1 million of low yield AFS securities late in the fourth quarter of 2023, and used sale proceeds to pay off higher rate wholesale fundings and we will continue to evaluate opportunities to optimize our balance sheet based on changing market conditions. Further, we have $1.0 billion of fixed rate callable municipal securities held in the AFS portfolio under swap agreements, which involve the payment of fixed interest rates with a weighted average of 1.21% in exchange for variable interest rates based on federal funds rates that began in the third quarter of 2023. Additionally, while our most likely forecast embeds several rate cuts during 2024, there is still much uncertainty as to decisions that will be made by the FOMC and the risks present in the economy.

Current wording

Over the course of 2025, we anticipate moderating pressure on our margin due to several factors. We saw moderate organic loan growth during 2024 and we are cautiously optimistic regarding further modest organic loan growth during 2025, subject to the underlying economy and growth opportunities, with continued focus on maintaining prudent underwriting standards and profitability discipline. We sold $251.5 million of low yield AFS securities in the third quarter of 2024, and used sale proceeds to pay off higher rate wholesale fundings and we will continue to evaluate opportunities to optimize our balance sheet based on changing market conditions. We also expect modest increases in noninterest income related to fee based services and noninterest expenses related to continuous improvement initiatives and utilizing cost savings to partially fund targeted investments in technology and talent. Additionally, while our balance sheet is in a favorable position for the repricing of assets and liabilities, there is still much uncertainty as to decisions that will be made by the FOMC and the risks present in the economy.

Previous wording

During 2023, our provision for credit loss expense was $42.0 million, as compared to an expense of $14.1 million during 2022 and a recapture of $32.7 million during 2021. The provision for credit loss expense during 2023 was impacted by several factors throughout the year, including a $47.4 million expense related to loans and reflected loan growth, as well as the impact of updated economic assumptions, which was partially offset by a $16.3 million release from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the year. Additionally, provision expense related to AFS and HTM securities recorded during the twelve months ended December 31, 2023 was $9.1 million and $1.8 million, respectively, primarily due to decreases in the value of select corporate bonds in the investment securities portfolio.

Current wording

The provision for credit loss expense during 2023 was impacted by several factors throughout the year, including a $47.4 million expense related to loans and reflected loan growth, as well as the impact of updated economic assumptions, which was partially offset by a $16.3 million release from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the year. Additionally, provision expense related to AFS and HTM securities recorded during the twelve months ended December 31, 2023 was $9.1 million and $1.8 million, respectively, primarily due to decreases in the value of select corporate bonds in the investment securities portfolio.

Previous wording

Total noninterest income was $155.6 million in 2023, compared to $170.1 million in 2022 and $191.8 million in 2021. Noninterest income for 2023 decreased $14.5 million, or 8.5%, from 2022. Included in 2023 results was $20.6 million of a certain item related to the loss on the sale of securities during the period. Included in 2022 results were $4.0 million of certain items, primarily made up of a $4.1 million gain on an insurance settlement related to a weather event that caused severe damage to one of our branch locations. Adjusting for these certain items, adjusted noninterest income for the year ended December 31, 2023 increased $10.1 million, or 6.1%, from the prior year. See the GAAP Reconciliation of Non-GAAP Measures section for additional discussion and reconciliations of non-GAAP measures.

Current wording

Total noninterest income was $147.2 million in 2024, compared to $155.6 million in 2023 and $170.1 million in 2022. Noninterest income for 2024 decreased $8.4 million, or 5.4%, from 2023. Included in both 2024 and 2023 results were $28.4 million and $20.6 million, respectively, of certain items related to the loss on the sale of securities during the period. Adjusting for these certain items, adjusted noninterest income for the year ended December 31, 2024 decreased $611,000, or 0.3%, from the prior year. See the GAAP Reconciliation of Non-GAAP Financial Measures section for additional discussion and reconciliations of non-GAAP measures.

Previous wording

The majority of the decrease in noninterest income during 2023 was related to the loss on sale of securities as compared to 2022. During 2023, we sold approximately $247.9 million of investment securities resulting in a net loss of $20.6 million, while we realized a net loss of $278,000 related to the call of securities during 2022. The sale of securities during 2023 was primarily related to a strategic decision to sell low yield securities and use the proceeds to pay off higher rate wholesale fundings, including both brokered deposits and FHLB advances.

Current wording

During 2024, we sold approximately $251.5 million of investment securities resulting in a net loss of $28.4 million, while we realized a net loss of $20.6 million related to the sale of $247.9 million of investment securities during 2023. The sale of securities during both 2024 and 2023 was primarily related to strategic decisions to sell low yield securities and use the proceeds to pay off higher rate wholesale fundings.

Previous wording

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) for 2023 was $121.3 million, an increase of $4.1 million, or 3.5%, when compared to the 2022 amounts. The increase is primarily due to the increased consumer base provided by the Spirit acquisition. We expect service charges to continue to moderate in early 2024 due to the elimination of returned item fees for consumer deposit accounts with insufficient funds implemented during the third quarter of 2023. Overall, we expect flat to modest growth in noninterest income during 2024.

Current wording

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) for 2024 was $124.8 million, an increase of $3.4 million, or 2.8%, when compared to the 2023 amounts and was primarily related to the increases discussed above.

Previous wording

Noninterest expense for 2023 was $563.1 million, as compared to noninterest expense for 2022 of $566.7 million, a decrease of $3.7 million, or 0.7%, compared to the prior period. Adjusted noninterest expense, which excludes branch right sizing, merger related costs, FDIC special assessment (for 2023 only), donation to Simmons First Foundation (for 2022 only) and early retirement program costs (for 2023 only), for the year ended December 31, 2023 increased $396,000, or 0.1%, from the prior year. See the GAAP Reconciliation of Non-GAAP Measures section for additional discussion and reconciliations of non-GAAP measures.

Current wording

Noninterest expense for 2024 was $557.5 million, as compared to noninterest expense for 2023 of $563.1 million, a decrease of $5.5 million, or 1.0%, compared to the prior period. Adjusted noninterest expense, which excludes branch right sizing, FDIC special assessment, early retirement program costs, termination of vendor and software services (for 2024 only), and merger related costs (for 2023 only), for the year ended December 31, 2024 increased $12.4 million, or 2.3%, from the prior year. See the GAAP Reconciliation of Non-GAAP Financial Measures section for additional discussion and reconciliations of non-GAAP measures.

Previous wording

Salaries and employee benefits expense decreased slightly by $865,000 as compared to 2022, while adjusted salaries and employee benefits expense decreased by $7.1 million as compared to 2022. The decrease in adjusted salaries and employee benefits expense reflects the successful execution of programs as part of our Better Bank Initiative. Early retirement program costs during 2023 were $6.2 million.

Current wording

Salaries and employee benefits expense decreased by $2.0 million as compared to 2023, while adjusted salaries and employee benefits expense, which excludes early retirement program costs, increased by $3.7 million as compared to 2023. The increase in adjusted salaries and employee benefits expense reflects incentive compensation accrual adjustments during the periods, in addition to annual merit increases. Early retirement program costs during 2024 and 2023 were $536,000 and $6.2 million, respectively.

Previous wording

Deposit insurance increased by $18.4 million as compared to 2022. Excluding the FDIC special assessment of $10.5 million levied to support the Deposit Insurance Fund following the failure of certain banks in 2023, deposit insurance increased by $7.9 million primarily due to an increased base rate related to changes in the mix of deposits, coupled with the increase in deposits from the Spirit acquisition.

Current wording

Deposit insurance expense decreased by $6.0 million as compared to 2023. Excluding the FDIC special assessment of $1.8 million recorded during the year ended December 31, 2024 and $10.5 million recorded during the year ended December 31, 2023, both of which were levied to support the Deposit Insurance Fund following the failure of certain banks in 2023, adjusted deposit insurance expense increased by $2.6 million primarily due to an increased base assessment rate related to changes in the mix of deposits.

Previous wording

Amortization of intangibles recorded for the years ended December 31, 2023, and 2022 was $16.3 million and $15.9 million, respectively. See Note 8, Goodwill and Other Intangible Assets, in the accompanying Notes to Consolidated Financial Statements for additional information regarding our intangibles.

Current wording

Amortization of intangibles recorded for the years ended December 31, 2024, and 2023 was $15.4 million and $16.3 million, respectively. See Note 7, Goodwill and Other Intangible Assets, in the accompanying Notes to Consolidated Financial Statements for additional information regarding our intangibles.

Previous wording

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

Current wording

Due to our Better Bank Initiative and continuous efficiency improvements, offset by expected increases related to merit-based compensation adjustments and targeted investments during the upcoming period, we expect marginal growth in noninterest expense during 2025.

Previous wording

The provision for income taxes for 2023 was $25.5 million, compared to $50.1 million in 2022 and $61.3 million in 2021. The effective income tax rates for the years ended 2023, 2022 and 2021 were 12.7%, 16.4% and 18.4%, respectively. The decrease in the provision for income taxes during 2023 was primarily due to tax exempt income having a larger favorable impact on the rate and lower state taxes in 2023, both driven by the one time charges to income from the loss on sale of securities and the FDIC special assessment.

Current wording

The provision for income taxes for 2024 was $18.6 million, compared to $25.5 million in 2023 and $50.1 million in 2022. The effective income tax rates for the years ended 2024, 2023 and 2022 were 10.9%, 12.7% and 16.4%, respectively. The decrease in the provision for income taxes during 2024 as compared to 2023 and 2023 as compared to 2022 was primarily due to tax exempt income having a larger favorable impact on the rate and lower state taxes during the periods, both driven by the one time charges to income from the loss on sale of securities during each respective period, in addition to the FDIC special assessment largely recognized during 2023.

Previous wording

Our loan portfolio averaged $16.65 billion during 2023 and $14.42 billion during 2022. As of December 31, 2023, total loans were $16.85 billion, compared to $16.14 billion on December 31, 2022, an increase of $703.5 million, or 4.4%. The increase in the overall loan balance during 2023 is primarily due to widespread loan growth throughout our geographic markets during the year. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

Current wording

Our loan portfolio averaged $17.11 billion during 2024 and $16.65 billion during 2023. As of December 31, 2024, total loans were $17.01 billion, compared to $16.85 billion on December 31, 2023, an increase of $160.3 million, or 1.0%. The increase in the overall loan balance during 2024 was primarily due to widespread loan growth throughout our geographic markets during the year. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single family residential real estate loans).

Previous wording

Consumer loans consist of credit card loans and other consumer loans. Consumer loans were $318.7 million at December 31, 2023, or 1.9% of total loans, compared to $349.8 million, or 2.2% of total loans at December 31, 2022. The decrease in consumer loans was primarily due to loan payoffs and pay downs within the other consumer portfolio during the year. Our credit card portfolio has remained a stable source of lending.

Current wording

Consumer loans consist of credit card loans and other consumer loans. Consumer loans were $309.0 million at December 31, 2024, or 1.8% of total loans, compared to $318.7 million, or 1.9% of total loans at December 31, 2023. The decrease in consumer loans was primarily due to loan payoffs and pay downs within the credit card portfolio during the year.

Previous wording

Real estate loans consist of construction and development (“C&D”) loans, single family residential loans and other commercial real estate (“CRE”) loans. Real estate loans were $13.34 billion at December 31, 2023, or 79.2% of total loans, compared to $12.58 billion, or 77.9% of total loans at December 31, 2022, an increase of $756.9 million, or 6.0%. Our C&D loans increased by $577.6 million, or 22.5%, single family residential loans increased by $95.4 million, or 3.7%, and CRE loans increased by $83.9 million, or 1.1%. The increases were due to diversified organic growth by type and geographic market during the period. We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

Current wording

Real estate loans consist of construction and development (“C&D”) loans, single family residential loans and other commercial real estate (“CRE”) loans. Real estate loans were $13.39 billion at December 31, 2024, or 78.7% of total loans, compared to $13.34 billion, or 79.2% of total loans at December 31, 2023, a modest increase of $53.3 million, or 0.4%. Our C&D loans decreased by $355.0 million, or 11.3%, single family residential loans increased by $48.4 million, or 1.8%, and CRE loans increased by $359.9 million, or 4.8%. The changes among our real estate portfolio reflected our focus on maintaining conservative underwriting standards and structure guidelines while emphasizing prudent pricing discipline during the period. We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

Previous wording

Commercial loans consist of non-real estate loans related to business and agricultural loans. Total commercial loans were $2.72 billion at December 31, 2023, or 16.2% of total loans, compared to $2.84 billion, or 17.6% of total loans at December 31, 2022, a decrease of $115.0 million, or 4.1%. The decrease in non-real estate loans related to business of $142.1 million, or 5.4%, was partially offset by the increase in agricultural loans of $27.1 million, or 13.2%.

Current wording

Commercial loans consist of non-real estate loans related to business and agricultural loans. Total commercial loans were $2.70 billion at December 31, 2024, or 15.8% of total loans, compared to $2.72 billion, or 16.2% of total loans at December 31, 2023, an incremental decrease of $27.6 million, or 1.0%. The decrease in non-real estate loans related to business of $56.0 million, or 2.2%, was partially offset by the increase in agricultural loans of $28.4 million, or 12.2%.

Previous wording

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

Current wording

Other loans mainly consists of mortgage warehouse lending and municipal loans. Mortgage volume experienced an increase in demand during 2024 as compared to 2023, and was coupled with continued organic growth in our municipal loans during the period, leading to an increase of $144.2 million in other loans.

Previous wording

While loan growth was widespread throughout our geographic markets and was generally broad-based by loan type during the period, loan growth during the latter half of 2023 reflected moderating demand and increased payoff activity, as we focus on maintaining disciplined pricing and conservative underwriting standards given the current uncertain economic environment. Our commercial loan pipeline consisting of all commercial loan opportunities was $948.2 million at December 31, 2023, compared to $1.12 billion at December 31, 2022. The pipeline includes $416.0 million in loans approved and ready to close at the end of the year.

Current wording

While loan growth was widespread throughout our geographic markets and was generally broad-based by loan type during the period, loan growth during the year reflected moderating demand and increased payoff activity, as we focus on maintaining disciplined pricing and conservative underwriting standards given the current uncertain economic environment. Our commercial loan pipeline consisting of all commercial loan opportunities was $1.26 billion at December 31, 2024, compared to $948.2 million at December 31, 2023. The pipeline includes $551.8 million in loans approved and ready to close at the end of the year.

Previous wording

Total non-performing assets increased $27.8 million from December 31, 2022 to December 31, 2023. Nonaccrual loans increased by $24.9 million during 2023, in addition to an increase in foreclosed assets held for sale of $1.2 million. The increase in nonaccrual assets was primarily due to an increase in nonaccrual loans within our commercial loan portfolio.

Current wording

Total non-performing assets increased by $27.8 million from December 31, 2022 to December 31, 2023. Nonaccrual loans increased by $24.9 million during 2023, in addition to an increase in foreclosed assets held for sale of $1.2 million. The increase in nonaccrual loans was primarily due to an increase in nonaccrual loans within our commercial loan portfolio.

Previous wording

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

Current wording

The financial effects of the modified loans made to borrowers experiencing financial difficulty in the single family residential real estate portfolio were not significant during the year ended December 31, 2024 and did not significantly impact the Company’s determination of the allowance for credit losses on loans during the year.

Previous wording

During the year ended December 31, 2023, we modified one loan related to the other CRE portfolio, whereby the borrower was experiencing financial difficulty at the time of modification. The modification allowed for two months of interest only payments with the remaining balance due at maturity. Upon modification, a charge-off of $9.6 million was recorded in relation to this modified loan during 2023. As a result of the other CRE loan modified during the year ended December 31, 2023 being collateral-dependent, the impact to our allowance for credit losses on loans was the difference between the fair value of the underlying collateral, adjusted for selling costs, and the remaining outstanding principal balance of the loan.

Current wording

During the year ended December 31, 2024, the Company modified one loan for a borrower experiencing financial difficulty related to the CRE portfolio, whereby the modification extended the term of the loan 1.5 years. As a result of the CRE loan modified during the year ended December 31, 2024 being collateral-dependent, the impact to the Company’s allowance for credit losses on loans was the difference between the fair value of the underlying collateral, adjusted for selling costs, and the remaining outstanding principal balance of the loan.