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OFFON

SIMMONS FIRST NATIONAL CORPORATION

(SFNC)
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SIMMONS FIRST NATIONAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/06/2021 | 11:32am EST

OVERVIEW


Our net income for the three months ended June 30, 2021 was $74.9 million, or
$0.69 diluted earnings per share, increases of $16.1 million and $0.15,
respectively, compared to the second quarter of 2020. Included in both second
quarter 2021 and 2020 results were non-core items related to our acquisitions
and branch right sizing initiatives. Also included in 2020 results were non-core
items related to early retirement programs. Included in both period results are
gains associated with the sale of branch operations. Excluding all non-core
items, core earnings for the three months ended June 30, 2021 were $75.4
million, or $0.69 core diluted earnings per share, compared to $60.1 million, or
$0.55 core diluted earnings per share for the three months ended June 30, 2020.

Net income for the first six months of 2021 was $142.3 million, or $1.31 diluted
earnings per share, compared to $136.0 million, or $1.22 diluted earnings per
share, for the same period in 2020. Excluding the same non-core items referenced
above, year-to-date core earnings were $139.4 million, an increase of $5.4
million compared to the same period in the prior year. Core diluted earnings per
share for the first half of 2021 were $1.28 compared to $1.21 for the same
period in 2020.

In June 2021, we announced the acquisitions of Landmark, based in Collierville,
TN, and Triumph, based in Memphis, TN. Completion of the Landmark and Triumph
transactions is expected during the fourth quarter of 2021 and is subject to
certain closing conditions, including approval by the shareholders of Landmark
and Triumph, as well as customary regulatory approvals.

We continuously evaluate our branch network to ensure it reflects our core
footprint and changes in customer behavior which allows us to efficiently serve
our customers' evolving needs. As part of our ongoing branch right sizing
initiative, during the second quarter of 2021, we announced plans to close 12
branches during the third quarter of 2021.

Simmons Bank was named to Forbes magazine's list of "World's Best Banks" for the
second consecutive year and ranked among the top 30 banks in Forbes' list of
"America's Best Banks" for 2021. We continue to introduce new and innovative
products and services using digital channels to provide an enhanced customer
experience to "bank when you want, where you want".

On March 12, 2021, we completed the sale of four Simmons Bank locations in the
Metro East area of Southern Illinois, near St. Louis. We recognized a gain of
$5.3 million on the sale of the Illinois branches.

We delivered solid performance in multiple areas while continuing to navigate
the challenging environment. We are still feeling the effects of the COVID-19
pandemic in the economy and some industries are still struggling to return to
pre-COVID levels of performance; however, our asset quality continued to show
marked improvement during the second quarter of 2021.

Stockholders' equity as of June 30, 2021 was $3.0 billion, book value per share
was $28.03 and tangible book value per share was $17.16. Our ratio of common
stockholders' equity to total assets was 12.97% and the ratio of tangible common
stockholders' equity to tangible assets was 8.36% at June 30, 2021. The
Company's Tier 1 leverage ratio of 8.99%, as well as our other regulatory
capital ratios, remain significantly above the "well capitalized" guidelines
(see Table 12 in the Capital section of this Item).

Total deposits were $18.3 billion at June 30, 2021, compared to $17.0 billion at
December 31, 2020 and $16.6 billion at June 30, 2020. The increase in total
deposits is, in significant part, a reflection of the multiple rounds of
economic stimulus legislation in response to the COVID-19 pandemic that have
created a rapid rise in liquidity and have led to changes in customer spending
habits. Trends affected by the increase in customer cash balances are pay downs
on loans, decreased loan demand, reduced credit card balances and fewer
overdraft activities.

Total loans were $11.4 billion at June 30, 2021, compared to $12.9 billion at
December 31, 2020 and $14.6 billion at June 30, 2020. Total loan production
(loan originations and advances) during the first half of 2021 totaled $1.8
billion, which positions us to exceed loan production volume reported for the
full year of 2020. While loan originations and advances are outpacing prior year
production, the decline in loan balances reflects, in significant part, the
substantial government stimulus to support the economy during the COVID-19
pandemic which contributed to an increase in the level of loan paydowns, payoffs
and corresponding sluggish loan demand throughout the financial services
industry.


                                       48
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As of June 30, 2021, we had $441.4 million in loans outstanding under the PPP.
The change in total PPP loan balances during the second quarter of 2021 was as
follows:

                                           PPP            PPP           Total
(Dollars in thousands)                   Round 1        Round 2       PPP Loans

Beginning balance, January 1, 2021 $ 904,673 $ - $ 904,673 PPP loan originations

                          -        318,906        

318,906

PPP loan forgiveness and repayments (763,902) (18,324) (782,226) Ending balance, June 30, 2021 $ 140,771 $ 300,582 $ 441,353




PPP loans are 100% federally guaranteed and have a zero percent risk-weight for
regulatory capital ratios. As a result, excluding PPP loans from total assets,
common equity to total assets was 13.22% and tangible common equity to tangible
assets was 8.53% as of June 30, 2021.

We continue to closely monitor the COVID-19 pandemic and expect to make future
changes to respond as this situation continues to evolve. Further economic
downturns accompanying this pandemic, or a delayed economic recovery from this
pandemic, could result in increased deterioration in credit quality, past due
loans, loans charge offs and collateral value declines, which could cause our
results of operations and financial condition to be negatively impacted.

In our discussion and analysis of our financial condition and results of
operation in this Item 2, "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.

Simmons First National Corporation is a Mid-South based financial holding company that, as of June 30, 2021, has approximately $23.4 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

CRITICAL ACCOUNTING POLICIES

Overview


We follow accounting and reporting policies that conform, in all material
respects, to US GAAP and to general practices within the financial services
industry. The preparation of financial statements in conformity with US GAAP
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 used for 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 credit 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 Credit Losses


The allowance for credit losses is a reserve established through a provision for
credit losses charged to expense, which represents management's best estimate of
lifetime expected losses based on reasonable and supportable forecasts,
historical loss experience, and other qualitative considerations. The allowance,
in the judgment of management, is necessary to reserve for expected credit
losses and risks inherent in the loan portfolio. Our allowance for credit loss
methodology includes reserve factors calculated to estimate current expected
credit losses to amortized cost balances over the remaining contractual life of
the portfolio, adjusted for prepayments, in accordance with ASC Topic 326-20,
Financial Instruments - Credit Losses. Accordingly, the methodology is
                                       49

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based on our reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments. For further information see the section Allowance for Credit Losses below.


Our evaluation of the allowance for credit losses is inherently subjective as it
requires material estimates. The actual amounts of credit losses realized in the
near term could differ from the amounts estimated in arriving at the allowance
for credit losses reported in the financial statements. On January 1, 2020, the
Company adopted the new CECL methodology. See Note 1, Preparation of Interim
Financial Statements, in the accompanying Condensed Notes to Consolidated
Financial Statements for additional information.

Acquisition Accounting, Loans


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. In accordance with
ASC 326, we record both a discount and an allowance for credit losses on
acquired loans. 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 included 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.

Goodwill and Intangible Assets


Goodwill 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 for Impairment and ASU 2017-04 - Intangibles - Goodwill and Other. 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 Plans


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

In accordance with ASC Topic 718, Compensation - Stock Compensation, the fair
value of each option award is estimated on the date of grant using the
Black-Scholes option-pricing model that uses various assumptions. This model
requires the input of highly subjective assumptions, changes to which can
materially affect the fair value estimate. For additional information, see Note
16, Stock-Based Compensation, in the accompanying Condensed Notes to
Consolidated Financial Statements included elsewhere in this report.

Income Taxes


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

                                       50

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NET INTEREST INCOME

Overview

Net 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%.

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 74% of our time deposits have
repriced in one year or less. Our current interest rate sensitivity shows that
approximately 44% of our loans and 86% of our time deposits will reprice in the
next year.

Net Interest Income Quarter-to-Date Analysis


For the three month period ended June 30, 2021, net interest income on a fully
taxable equivalent basis was $151.1 million, a decrease of $15.0 million, or
9.0%, over the same period in 2020. The decrease in net interest income was
primarily the result of a $22.5 million decrease in fully tax equivalent
interest income partially offset by a $7.5 million decrease in interest expense.

The reduction in interest income primarily resulted from a $38.2 million
decrease in interest income on loans partially offset by an increase of $15.9
million in interest income on investment securities. The decrease in interest
income on loans during the second quarter of 2021, reflects a lower average loan
balance combined with an 11 basis point decline in loan yield. The loan yield
for the second quarter of 2021 was 4.73% compared to 4.84% from the same period
in 2020. We generated additional interest income on investment securities by
redeploying a portion of excess cash to purchase $2.5 billion of investment
securities during the second quarter of 2021, which included $1.1 billion of
short-term, variable rate securities.

The $7.5 million decrease in interest expense is mostly due to the decline in
our deposit account rates. Interest expense decreased $7.7 million due to the
decrease in yield of 27 basis points on interest-bearing deposit accounts.

Net Interest Income Year-to-Date Analysis


For the six month period ended June 30, 2021, net interest income on a fully
taxable equivalent basis was $301.9 million, a decrease of $33.9 million, or
10.1%, over the same period in 2020. The decrease in net interest income was the
result of a $60.4 million decrease in fully tax equivalent interest income
partially offset by a $26.5 million decrease in interest expense.

The decrease in interest income during the first half of 2021 primarily resulted
from a $79.3 million decrease in interest income on loans, that reflects a
decrease in loan volume of $59.4 million coupled with a 27 basis point decline
in yield that resulted in a $19.9 million decrease, partially offset by an
increase in interest income on investment securities of $20.4 million. The
decrease in our loan volume during the first six months of 2021 was primarily
due to weak loan demand throughout 2020 and into the first half of 2021 as a
result of the COVID-19 pandemic. Furthermore, the decline in loan volume also
reflects the substantial governmental stimulus to support the economy during the
COVID-19 pandemic which contributed to an increase in the level of loan paydowns
and payoffs.

We sold approximately $249.5 million of investment securities during the first
half of 2021 compared to $1.2 billion of investment securities during the same
period in 2020. During the second quarter of 2020, in response to the unfolding
events of the COVID-19 pandemic, we focused on the creation of additional
liquidity and strengthening our balance sheet. We began to re-invest in our
investment security portfolio during the fourth quarter of 2020 and continued
into the first half of 2021.

The $26.5 million decrease in interest expense is mostly due to the decrease in
our deposit account rates. Interest expense decreased $27.4 million due to the
decrease in yield of 44 basis points on interest-bearing deposit accounts,
partially offset by an increase of $2.0 million related to approximately $1.1
billion in average deposit growth.

                                       51

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Net Interest Margin


Our net interest margin on a fully tax equivalent basis decreased 53 basis
points to 2.89% for the three month period ended June 30, 2021, when compared to
3.42% for the same period in 2020. Normalized for all accretion, our core net
interest margin for the three months ended June 30, 2021 and 2020 was 2.78% and
3.18%, respectively. For the six month period ended June 30, 2021, our net
interest margin decreased 61 basis points to 2.94% when compared to 3.55% for
the same period in 2020.

The decreases in the net interest margin during the three and six months ended
June 30, 2021 compared to the same periods in 2020, were primarily due to the
aforementioned decline in net interest income coupled with a $1.6 billion
increase in average cash and equivalents driven by the lower interest rate
environment and additional liquidity created in response to the COVID-19
pandemic. We purchased investment securities which added approximately $2.5
billion to our average investment securities portfolio during the first half of
2021. The impact of these items on net interest margin for the six months ended
June 30, 2021 was 27 basis points, bringing the net interest margin adjusted for
PPP loans and additional liquidity to 3.21%.

During March 2020, the Federal Open Market Committee, or FOMC, of the Federal
Reserve substantially reduced interest rates in response to the economic crisis
brought on by the COVID-19 pandemic and rates have continued to remain at
historically low levels through the second quarter of 2021. As such, our
variable rate loan portfolio has repriced to a lower yield and, in response to
offset the decline, we have worked to lower our cost of deposits. In addition,
our decreased net interest margin is being driven by the decrease in our non-PPP
loan portfolio as a result of COVID-19 but our loan pipeline has started to
rebuild and we expect modest organic loan growth during the second half of 2021.

Net Interest Income Tables

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and six months ended June 30, 2021 and 2020, respectively.


Table 1: Analysis of Net Interest Margin
(FTE = Fully Taxable Equivalent using an effective tax rate of 26.135%)

                                            Three Months Ended               Six Months Ended
                                                 June 30,                        June 30,
(In thousands)                             2021            2020            2021            2020
Interest income                        $ 166,969       $ 191,654       $ 336,403       $ 400,885
FTE adjustment                             4,548           2,350           8,711           4,655
Interest income - FTE                    171,517         194,004         345,114         405,540
Interest expense                          20,436          27,973          43,189          69,721
Net interest income - FTE              $ 151,081       $ 166,031       $ 301,925       $ 335,819

Yield on earning assets - FTE               3.28  %         4.00  %         3.36  %         4.28  %
Cost of interest bearing liabilities        0.54  %         0.78  %         0.57  %         0.98  %
Net interest spread - FTE                   2.74  %         3.22  %         2.79  %         3.30  %
Net interest margin - FTE                   2.89  %         3.42  %         2.94  %         3.55  %


Table 2: Changes in Fully Taxable Equivalent Net Interest Margin

                                                           Three Months Ended           Six Months Ended
                                                                June 30,                    June 30,
(In thousands)                                                2021 vs. 2020              2021 vs. 2020
Decrease due to change in earning assets                  $          (15,336)         $         (27,555)
Decrease due to change in earning asset yields                        (7,151)                   (32,871)
Decrease due to change in interest bearing liabilities                   (89)                    (1,566)

Increase due to change in interest rates paid on interest bearing liabilities

                                                    7,626                     28,098
Decrease in net interest income                           $          (14,950)         $         (33,894)




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Table 3 shows, for each major category of earning assets and interest bearing
liabilities, the average (computed on a daily basis) amount outstanding, the
interest earned or expensed on such amount and the average rate earned or
expensed for the three and six months ended June 30, 2021 and 2020. 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.

Table 3: Average Balance Sheets and Net Interest Income Analysis (FTE = Fully Taxable Equivalent using an effective tax rate of 26.135%)


                                                                                 Three Months Ended June 30,
                                                              2021                                                         2020
                                         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         $  2,703,920          $     651               0.10           $  2,190,878          $     603               0.11
Investment securities - taxable         4,265,545             14,594               1.37              1,642,083              7,131               1.75
Investment securities - non-taxable     2,157,076             16,899               3.14                866,944              8,434               3.91
Mortgage loans held for sale               49,262                386               3.14                 86,264                668               3.11
Loans                                  11,783,839            138,987               4.73             14,731,306            177,168               4.84
Total interest earning assets          20,959,642            171,517               3.28             19,517,475            194,004               4.00
Non-earning assets                      2,298,279                                                    2,304,798
Total assets                         $ 23,257,921                                                 $ 21,822,273

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Interest bearing liabilities:
Interest bearing transaction and
savings deposits                     $ 10,403,932          $   4,721               0.18           $  9,138,563          $   7,203               0.32
Time deposits                           2,930,025              6,061               0.83              3,057,153             10,803               1.42
Total interest bearing deposits        13,333,957             10,782               0.32             12,195,716             18,006               0.59
Federal funds purchased and
securities sold under agreements to
repurchase                                240,876                192               0.32                392,633                337               0.35
Other borrowings                        1,340,008              4,897               1.47              1,395,109              4,963               1.43
Subordinated debt and debentures          383,078              4,565               4.78                387,422              4,667               4.84
Total interest bearing liabilities     15,297,919             20,436               0.54             14,370,880             27,973               0.78

Non-interest bearing liabilities:
Non-interest bearing deposits           4,826,927                                                    4,354,781
Other liabilities                         151,699                                                      216,508
Total liabilities                      20,276,545                                                   18,942,169
Stockholders' equity                    2,981,376                                                    2,880,104
Total liabilities and stockholders'
equity                               $ 23,257,921                                                 $ 21,822,273
Net interest spread - FTE                                                          2.74                                                         3.22
Net interest margin - FTE                                  $ 151,081               2.89                                 $ 166,031               3.42


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                                                                                  Six Months Ended June 30,
                                                              2021                                                         2020
                                         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         $  3,088,816          $   1,449               0.09           $  1,477,759          $   3,044               0.41
Investment securities - taxable         3,373,375             24,714               1.48              1,983,134             19,883               2.02
Investment securities - non-taxable     2,039,153             32,338               3.20                883,585             16,749               3.81
Mortgage loans held for sale               73,202              1,025               2.82                 64,927                949               2.94
Loans                                  12,149,041            285,588               4.74             14,640,082            364,915               5.01
Total interest earning assets          20,723,587            345,114               3.36             19,049,487            405,540               4.28
Non-earning assets                      2,276,218                                                    2,321,761
Total assets                         $ 22,999,805                                                 $ 21,371,248

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Interest bearing liabilities:
Interest bearing transaction and
savings deposits                     $ 10,249,756          $  10,809               0.21           $  9,072,133          $  25,157               0.56
Time deposits                           2,986,201             13,152               0.89              3,104,030             24,126               1.56
Total interest bearing deposits        13,235,957             23,961               0.37             12,176,163             49,283               0.81
Federal funds purchased and
securities sold under agreements to
repurchase                                274,024                437               0.32                361,768              1,096               0.61
Other borrowings                        1,340,531              9,699               1.46              1,357,677              9,840               1.46
Subordinated debt and debentures          383,011              9,092               4.79                387,876              9,502               4.93
Total interest bearing liabilities     15,233,523             43,189               0.57             14,283,484             69,721               0.98

Non-interest bearing liabilities:
Non-interest bearing deposits           4,624,158                                                    3,978,728
Other liabilities                         164,686                                                      213,918
Total liabilities                      20,022,367                                                   18,476,130
Stockholders' equity                    2,977,438                                                    2,895,118
Total liabilities and stockholders'
equity                               $ 22,999,805                                                 $ 21,371,248
Net interest spread - FTE                                                          2.79                                                         3.30
Net interest margin - FTE                                  $ 301,925               2.94                                 $ 335,819               3.55



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Table 4 shows changes in interest income and interest expense resulting from
changes in both volume and interest rates for the three and six month periods
ended June 30, 2021, as compared to the same periods 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                                       Six Months Ended
                                                        June 30,                                                June 30,
                                                      2021 vs. 2020                                           2021 vs. 2020
(In thousands, on a fully taxable                        Yield/                                                  Yield/
equivalent basis)                      Volume             Rate              Total              Volume             Rate              Total
Increase (decrease) in:
Interest income:
Interest bearing balances due from
banks and federal funds sold        $     129          $    (81)         $  

48 $ 1,819 $ (3,414) $ (1,595) Investment securities - taxable 9,259

            (1,796)             7,463             11,228            (6,397)             4,831
Investment securities - non-taxable    10,390            (1,925)             8,465             18,724            (3,135)            15,589
Mortgage loans held for sale             (290)                8               (282)               117               (41)                76
Loans                                 (34,824)           (3,357)           (38,181)           (59,443)          (19,884)           (79,327)
Total                                 (15,336)           (7,151)           (22,487)           (27,555)          (32,871)           (60,426)

Interest expense:
Interest bearing transaction and
savings accounts                          893            (3,375)            (2,482)             2,915           (17,263)           (14,348)
Time deposits                            (432)           (4,310)            (4,742)              (884)          (10,090)           (10,974)
Federal funds purchased and
securities sold under agreements to
repurchase                               (122)              (23)              (145)              (223)             (436)              (659)
Other borrowings                         (199)              133                (66)              (124)              (17)              (141)
Subordinated notes and debentures         (51)              (51)              (102)              (118)             (292)              (410)
Total                                      89            (7,626)            (7,537)             1,566           (28,098)           (26,532)

Decrease in net interest income $ (15,425) $ 475 $ (14,950) $ (29,121) $ (4,773) $ (33,894)




PROVISION FOR CREDIT LOSSES

The provision for credit losses represents management's determination of the
amount necessary to be charged against the current period's earnings in order to
maintain the allowance for credit losses at a level considered appropriate in
relation to the estimated lifetime 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, assessment of current economic conditions,
reasonable and supportable forecasts, past due and non-performing loans and
historical net credit 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 credit losses for the three and six months ended June 30, 2021
was a recapture of $13.0 million and $11.5 million, respectively, compared to an
expense of $21.9 million and $45.0 million for the same periods ended June 30,
2020. The recapture of credit losses was driven by improved credit quality
metrics and improved macroeconomic factors. Two energy credits that experienced
further deterioration and were negatively impacted by the sharp decline in
commodity pricing during the first quarter of 2020, resulting in incremental
provision expense of $22.0 million during that quarter and combined with
uncertain economic forecasts during the first six months of 2020 to drive higher
provisions for credit losses during that period.

                                       55

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NON-INTEREST INCOME


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.

Total non-interest income was $47.9 million for the three month period June 30,
2021, a decrease of approximately $882,000, or 1.8%, compared to the same period
in 2020, primarily driven by decreases in mortgage lending income and the
difference in gains on sale of branches recognized during the periods.
Conversely, we had increases in total service charges on deposit accounts and
fees of $2.0 million, or 20.3%, primarily attributable to additional customer
transactions related to changes in customer spending habits and incremental
gains on the sale of securities during the second quarter of 2021.

For the six month period ended June 30, 2021, total non-interest income was
$98.3 million, a decrease of approximately $31.6 million, or 24.3%, compared to
the same period in 2020, primarily due to decreases in the gains on sale of
securities and mortgage lending income. During the first six months of 2021, we
sold approximately $249.5 million of investment securities resulting in a net
gain of $10.6 million, compared to $1.2 billion of investment securities sold
for a net gain of $32.5 million in the first six months of 2020. Additionally,
the gain on sale of branches decreased approximately $2.2 million, which we
consider a non-core item, compared to the same period in 2020. An increase of
$2.1 million in debit and credit fees partially offset the overall decrease in
non-interest income during the first six months of 2021 as a result of
additional transactions due to the changes in customer spending habits.

Decreases of $8.0 million and $6.6 million in mortgage lending income for the
three and six month periods ended June 30, 2021 were largely a result of
decreases in the value of derivative contracts related to the mortgage banking
operations partially offset by gains on the sale of mortgage loans that were
driven by an increase in volume of loans sold during the first half of 2021
compared to the same period in 2020. Beginning in 2020 and continuing into 2021,
we experienced an increase in mortgage lending transactions as a result of the
low mortgage interest rate environment due to the COVID-19 pandemic. However, we
expect mortgage lending volume to continue to decline throughout 2021 given the
current environment.

Table 5 shows non-interest income for the three and six month periods ended June 30, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

Table 5: Non-Interest Income

                                  Three Months Ended                            2021                            Six Months Ended                            2021
                                       June 30,                             Change from                             June 30,                             Change from
(Dollars in thousands)          2021               2020                         2020                        2021               2020                         2020
Trust income                $    7,238          $  7,253          $        (15)           (0.2)%         $ 13,904          $  14,404          $       (500)           (3.5)%
Service charges on deposit
accounts                        10,050             8,570                 1,480             17.3            19,765             21,898                (2,133)            (9.7)
Other service charges and
fees                             2,048             1,489                   559             37.5             3,970              3,077                   893             29.0
Mortgage lending income          4,490            12,459                (7,969)           (64.0)           10,937             17,505                (6,568)           (37.5)
SBA lending income                 287               245                    42             17.1               527                541                   (14)            (2.6)
Investment banking income          654               571                    83             14.5             1,349              1,448                   (99)            (6.8)
Debit and credit card fees
(1)                              7,882             6,575                 1,307             19.9            15,283             13,140                 2,143             16.3
Bank owned life insurance
income                           2,038             1,445                   593             41.0             3,561              2,743                   818             29.8
Gain on sale of securities,
net                              5,127               390                 4,737              *              10,598             32,485               (21,887)           (67.4)
Gain on sale of branches           445             2,204                (1,759)           (79.8)            5,922              8,093                (2,171)           (26.8)
Other income                     7,665             7,605                    60             0.8             12,448             14,517                (2,069)           (14.3)

Total non-interest income $ 47,924 $ 48,806 $ (882)

           (1.8)%         $ 98,264          $ 129,851          $    (31,587)           (24.3)%


_________________________

(1) During the second quarter of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income. Prior periods have been adjusted to reflect this reclassification. * Not meaningful


Recurring fee income (total service charges, trust fees, debit and credit card
fees) for the three month period ended June 30, 2021 was $27.2 million, an
increase of $3.3 million from the same period in 2020. Recurring fee income for
the six month period ended June 30, 2021, was $52.9 million, an increase of
$403,000 from the six month period ended June 30, 2020. The increases in the
periods presented are primarily the result of changes in total service charges
and debit and credit card fees, previously discussed.
                                       56

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NON-INTEREST EXPENSE


Non-interest expense consists of salaries and employee benefits, occupancy,
equipment, foreclosure losses and other expenses necessary for our operations.
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.

For the three month period ended June 30, 2021, non-interest expense was $115.5
million, a decrease of $711,000, or 0.6%, from the three month period ended June
30, 2020. Salaries and employee benefits expense increased $3.1 million during
the three month period of 2021 due to associates being hired in lending, wealth
and mortgage as we continue to actively recruit new producers.

Non-interest expense for the six months ended June 30, 2021 was $229.3 million,
a decrease of $14.4 million, or 5.9%, from the same period in 2020. Normalizing
for the non-core costs, core non-interest expense for the six months ended
June 30, 2021 decreased $11.0 million, or 4.6%, from the same period in 2020.

The decreases in non-interest expense were primarily related to the realization
of expected synergies from the continuous evaluation of our branch network and
the branch sales and closures that began in 2020 and have continued in 2021.
Additionally, salaries and employee benefits expense during the six month period
June 30, 2021 was impacted by savings resulting from the early retirement
program offered in the prior year.

Table 6 below shows non-interest expense for the three and six month periods ended June 30, 2021 and 2020, respectively, as well as changes in 2021 from 2020.

Table 6: Non-Interest Expense

                                  Three Months Ended                            2021                             Six Months Ended                             2021
                                       June 30,                              Change from                             June 30,                              Change from
(Dollars in thousands)          2021               2020                         2020                          2021               2020                         2020
Salaries and employee
benefits                    $  60,261          $  57,151          $      3,110             5.4%           $ 120,601          $ 125,075          $     (4,474)           (3.6)%
Early retirement expense            -                493                  (493)           (100.0)                 -                493                  (493)           (100.0)
Occupancy expense, net          9,103              9,217                  (114)            (1.2)             18,403             18,727                  (324)            (1.7)
Furniture and equipment
expense                         4,859              6,144                (1,285)           (20.9)             10,274             11,867                (1,593)           (13.4)
Other real estate and
foreclosure expense               863                274                   589               *                1,206                599                   607             101.3
Deposit insurance               1,687              2,838                (1,151)           (41.0)              2,995              5,313                (2,318)           (43.6)
Merger related costs              686              1,830                (1,144)           (62.5)                919              2,898                (1,979)           (68.3)
Other operating expenses:
Professional services           4,561              3,921                   640             16.3               9,808              9,750                    58              0.6
Postage                         1,943              1,769                   174              9.8               4,313              4,005                   308              7.7
Telephone                       1,610              2,450                  (840)           (34.3)              3,242              4,635                (1,393)           (30.1)
Credit card (1)                 3,339              3,161                   178              5.6               6,461              6,194                   267              4.3
Marketing                       4,740              3,528                 1,212             34.4               7,893              7,913                   (20)            (0.3)
Software and technology         9,857             10,024                  (167)            (1.7)             20,108             19,469                   639              3.3
Operating supplies                838                828                    10              1.2               1,408              1,764                  (356)           (20.2)
Amortization of intangibles     3,332              3,369                   (37)            (1.1)              6,676              6,782                  (106)            (1.6)
Branch right sizing               468              1,721                (1,253)           (72.8)              1,093              1,959                  (866)           (44.2)
Other                           7,319              7,459                  (140)            (1.9)             13,859             16,198                (2,339)           (14.4)

Total non-interest expense $ 115,466 $ 116,177 $ (711)

           (0.6)%          $ 229,259          $ 243,641          $    (14,382)           (5.9)%


_________________________

(1) During the second quarter of 2021, certain debit and credit card transaction fees were reclassified from non-interest expense to non-interest income. Prior periods have been adjusted to reflect this reclassification. * Not meaningful

                                       57

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INVESTMENTS AND SECURITIES


Our securities portfolio is the second largest component of earning assets and
provides a significant source of revenue. Securities within the portfolio are
classified as either HTM or AFS. Our philosophy regarding investments is
conservative based on investment type and maturity. Investments in the portfolio
primarily include U.S. Treasury securities, U.S. Government agencies, MBS and
municipal securities. Our general policy is not to invest in derivative type
investments or high-risk securities, except for collateralized MBS for which
collection of principal and interest is not subordinated to significant superior
rights held by others.

HTM and AFS investment securities were $931.4 million and $6.6 billion,
respectively, at June 30, 2021, compared to the HTM amount of $333.0 million and
AFS amount of $3.5 billion at December 31, 2020. As anticipated, our security
portfolio increased during the first six months of 2021 as we reinvested PPP
loan repayments and utilized additional liquidity held in cash and cash
equivalents. During the second quarter of 2021, we purchased $2.5 billion of
investment securities, including strategically redeploying $1.1 billion of
excess cash into short-term, variable rate securities, as previously discussed.
We will continue to look for opportunities to maximize the value of the
investment portfolio.

Management has the ability and intent to hold the securities classified as HTM
until they mature, at which time we expect to receive full value for the
securities. The contractual terms of those investments do not permit the issuer
to settle the securities at a price less than the amortized cost bases of the
investments. Furthermore, as of June 30, 2021, 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.

LOAN PORTFOLIO


Our loan portfolio averaged $12.15 billion and $14.64 billion during the first
six months of 2021 and 2020, respectively. As of June 30, 2021, total loans were
$11.39 billion, a decrease of $1.5 billion from December 31, 2020. The decline
in the average loan balance during the first half of 2021 when compared to the
same period in 2020 was due to the tepid loan demand that began in late first
quarter of 2020 and has continued through 2021 largely as a result of the
economic uncertainty stemming from the COVID-19 pandemic. 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).

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 credit losses and regularly reviewing
loans through the internal loan review process. The loan portfolio is
diversified by borrower, purpose, industry and 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 credit 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.


                                       58

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The balances of loans outstanding at the indicated dates are reflected in Table
7, according to type of loan.

Table 7: Loan Portfolio
                                                      June 30,        December 31,
(In thousands)                                          2021              2020
Consumer:
Credit cards                                       $    177,634      $    188,845
Other consumer                                          181,712           202,379
Total consumer                                          359,346           391,224
Real estate:
Construction and development                          1,428,165         1,596,255
Single family residential                             1,608,028         1,880,673
Other commercial                                      5,332,655         5,746,863
Total real estate                                     8,368,848         9,223,791
Commercial:
Commercial                                            2,074,729         2,574,386
Agricultural                                            193,462           175,905
Total commercial                                      2,268,191         2,750,291
Other                                                   389,967           535,591

Total loans before allowance for credit losses $ 11,386,352 $ 12,900,897




Consumer loans consist of credit card loans and other consumer loans. Consumer
loans were $359.3 million at June 30, 2021, or 3.2% of total loans, compared to
$391.2 million, or 3.0% of total loans at December 31, 2020. The decrease in
consumer loans from December 31, 2020, to June 30, 2021, was primarily due to
the expected seasonal decline in our credit card portfolio as well as loan
payoffs and pay downs due to additional customer liquidity driven by the
government economic stimulus programs in response to the COVID-19 pandemic.

Real estate loans consist of C&D loans, single-family residential loans and CRE
loans. Real estate loans were $8.37 billion at June 30, 2021, or 73.5% of total
loans, compared to $9.22 billion, or 71.5%, of total loans at December 31, 2020,
a decrease of $854.9 million, or 9.3%. Our C&D loans decreased by $168.1
million, or 10.5%, single family residential loans decreased by $272.6 million,
or 14.5%, and CRE loans decreased by $414.2 million, or 7.2%. The decreases were
largely due to less activity as a result of the pandemic and our effort to
manage our real estate portfolio concentration. In the near term, we expect to
continue to manage our C&D and CRE portfolio concentration by developing deeper
relationships with our customers.

Commercial loans consist of non-real estate loans related to business and
agricultural loans. Total commercial loans were $2.27 billion at June 30, 2021,
or 19.9% of total loans, compared to $2.75 billion, or 21.3% of total loans at
December 31, 2020, a decrease of $482.1 million, or 17.5%. PPP loan balances
declined by $782.2 million during the first six months of 2021 as a result of
expected reimbursements from the SBA related to PPP loan forgiveness, partially
offset by PPP Round 2 loan originations of $318.9 million during 2021. We expect
PPP balances to continue to decline through the remainder of the year.
Agricultural loans increased $17.6 million, or 10.0%, primarily due to
seasonality of the portfolio, which normally peaks in the third quarter. In
addition, we are continuing with our planned exit of the energy portfolio.

Other loans mainly consists of mortgage warehouse lending. Mortgage volume,
while still strong, declined during the first six months of 2021 when compared
to 2020, leading to a decrease of $145.6 million in other loans primarily from
mortgage warehouse lines of credit.

Loan demand appears to be returning to more normalized levels. For the third
consecutive quarter, we have experienced an increase in commercial loan demand.
Our loan pipeline consisting of all loan opportunities was $1.3 billion at
June 30, 2021 compared to $673.7 million at December 31, 2020. Loans approved
and ready to close at the end of the quarter totaled $467.1 million.

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ASSET QUALITY


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. Simmons Bank
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 credit losses.

When credit card loans 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 decreased $46.6 million from December 31, 2020 to
June 30, 2021. Nonaccrual loans decreased by $42.6 million during the period and
foreclosed assets held for sale and other real estate owned decreased by $3.2
million. The decrease in nonaccrual loans was primarily due to an overall
improvement in economic conditions while the decrease in foreclosed assets held
for sale and other real estate owned is mainly the result of the disposition of
one commercial building in the St. Louis area partially offset by $4.4 million
in closed bank branch facilities that were reclassified from premises held for
sale during the second quarter of 2021.

Non-performing assets, including troubled debt restructurings ("TDRs") and
acquired foreclosed assets, as a percent of total assets were 0.43% at June 30,
2021, compared to 0.66% at December 31, 2020. From time to time, certain
borrowers experience declines in income and cash flow. As a result, these
borrowers seek 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 for a borrower experiencing financial difficulty and
grant a concession we would not otherwise consider, a "troubled debt
restructuring" occurs and the loan is classified as a TDR. The Company grants
various types of concessions, primarily interest rate reduction and/or payment
modifications or extensions, with an occasional forgiveness of principal.

Once an obligation has been restructured due to 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 remained relatively flat at $7.1 million as of June 30, 2021, decreasing
$417,000 from December 31, 2020.

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


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

The provisions in the CARES Act included an election to not apply the guidance
on accounting for TDRs to loan modifications, such as extensions or deferrals,
related to COVID-19 made between March 1, 2020 and the earlier of (i) December
31, 2020 or (ii) 60 days after the President terminates the COVID-19 national
emergency declaration. The relief can only be applied to modifications for
borrowers that were not more than 30 days past due as of December 31, 2019. The
Company elected to adopt these provisions of the CARES Act and is following the
Interagency Statement on Loan Modifications and Reporting for Financial
Institutions Working with Customers Affected by the Coronavirus (Revised) issued
by regulatory agencies. In response to the concerns related to the expiration of
the applicable period for which the election to not apply the guidance on
accounting for TDRs to loan modifications, the CARES Act was amended late in the
fourth quarter of 2020 to extend COVID-19 relief related to loan modifications
to the earlier of (i) January 1, 2022 or (ii) 60 days after the President
terminates the COVID-19 national emergency declaration.


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During 2020 and the first half of 2021, we processed over 3,700 COVID-19 loan
modifications in excess of $3.0 billion. At June 30, 2021, the Company had 43
COVID-19 loan modifications outstanding in the amount of $134.5 million. The
COVID-19 pandemic has had an unprecedented impact on the hotel, restaurant and
retail industries, causing our borrowers in those industries to require loan
modifications. At June 30, 2021, the majority of these balances have returned to
regular payments and we expect most of the remaining COVID-19 loan modifications
to return to regular payments with no credit downgrade or long-term restructure.

We continue to maintain good asset quality compared to the industry and strong
asset quality remains a primary focus of our strategy. The allowance for credit
losses as a percent of total loans was 2.00% as of June 30, 2021. Non-performing
loans equaled 0.71% of total loans. Non-performing assets were 0.42% of total
assets, a 22 basis point decrease from December 31, 2020. The allowance for
credit losses was 281% of non-performing loans. Our annualized net charge-offs
to average total loans for the first six months of 2021 was (0.07)%. Excluding
credit cards, the annualized net charge-offs to average total loans for the same
period was (0.10)%. Annualized net credit card charge-offs to average total
credit card loans were 1.78%, compared to 1.60% during the full year 2020, and
117 basis points better than the most recently published industry average
charge-off ratio as reported by the Federal Reserve for all banks.

Table 9 presents information concerning non-performing assets, including nonaccrual loans at amortized cost and foreclosed assets held for sale.

Table 9: Non-performing Assets

                                                                     June 30,          December 31,
(Dollars in thousands)                                                 2021                2020
Nonaccrual loans (1)                                               $ 

80,282 $ 122,879 Loans past due 90 days or more (principal or interest payments) 653

                   578
Total non-performing loans                                            80,935               123,457

Other non-performing assets: Foreclosed assets held for sale and other real estate owned 15,239

                18,393
Other non-performing assets                                            1,062                 2,016
Total other non-performing assets                                     16,301                20,409
Total non-performing assets                                        $  97,236          $    143,866

Performing TDRs                                                    $   4,436          $      3,138
Allowance for credit losses to non-performing loans                      281  %                193  %
Non-performing loans to total loans                                     0.71  %               0.96  %

Non-performing assets (including performing TDRs) to total assets 0.43 %

               0.66  %
Non-performing assets to total assets                                   0.42  %               0.64  %


_______________________________________

(1)Includes nonaccrual TDRs of approximately $2,660,000 at June 30, 2021 and $4,375,000 at December 31, 2020.

The interest income on nonaccrual loans is not considered material for the three and six month periods ended June 30, 2021 and 2020.

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ALLOWANCE FOR CREDIT LOSSES


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

Loans with similar risk characteristics such as loan type, collateral type, and
internal risk ratings are aggregated into homogeneous segments for assessment.
Reserve factors are based on estimated probability of default and loss given
default for each segment. The estimates are determined based on economic
forecasts over the reasonable and supportable forecast period based on projected
performance of economic variables that have a statistical correlation with the
historical loss experience of the segments. For contractual periods that extend
beyond the one-year forecast period, the estimates revert to average historical
loss experiences over a one-year period on a straight-line basis.

We also include qualitative adjustments to the allowance based on factors and
considerations that have not otherwise been fully accounted for. Qualitative
adjustments include, but are not limited to:

•Changes in asset quality - Adjustments related to trending credit quality
metrics including delinquency, non-performing loans, charge-offs, and risk
ratings that may not be fully accounted for in the reserve factor.
•Changes in the nature and volume of the portfolio - Adjustments related to
current changes in the loan portfolio that are not fully represented or
accounted for in the reserve factors.
•Changes in lending and loan monitoring policies and procedures - Adjustments
related to current changes in lending and loan monitoring procedures as well as
review of specific internal policy compliance metrics.
•Changes in the experience, ability, and depth of lending management and other
relevant staff - Adjustments to measure increasing or decreasing credit risk
related to lending and loan monitoring management.
•Changes in the value of underlying collateral of collateralized loans -
Adjustments related to improving or deterioration of the value of underlying
collateral that are not fully captured in the reserve factors.
•Changes in and the existence and effect of any concentrations of credit -
Adjustments related to credit risk of specific industries that are not fully
captured in the reserve factors.
•Changes in regional and local economic and business conditions and developments
- Adjustments related to expected and current economic conditions at a regional
or local-level that are not fully captured within our reasonable and supportable
forecast.
•Data imprecision due to limited historical loss data - Adjustments related to
limited historical loss data that is representative of the collective loan
portfolio.

Loans that do not share similar risk characteristics are evaluated on an
individual basis. These evaluations are typically performed on loans with a
deteriorated internal risk rating or that are classified as a TDR. The allowance
for credit loss is determined based on several methods including estimating the
fair value of the underlying collateral or the present value of expected cash
flows.


                                       62
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An analysis of the allowance for credit losses on loans is shown in Table 10.


Table 10: Allowance for Credit Losses
(In thousands)                                     2021           2020
Balance, beginning of year                      $ 238,050      $  68,244

Impact of CECL adoption                                 -        151,377
Loans charged off:
Credit card                                         2,049          2,494
Other consumer                                      1,113          1,971
Real estate                                         2,126          2,220
Commercial                                          1,168         36,210
Total loans charged off                             6,456         42,895
Recoveries of loans previously charged off:
Credit card                                           534            497
Other consumer                                        729            746
Real estate                                         1,926            354
Commercial                                          2,467            445
Total recoveries                                    5,656          2,042
Net loans charged off                                 800         40,853
Provision for credit losses                       (10,011)        52,875
Balance, June 30,                               $ 227,239      $ 231,643

Loans charged off:
Credit card                                                        1,619
Other consumer                                                     2,051
Real estate                                                       11,568
Commercial                                                        12,526
Total loans charged off                                           27,764
Recoveries of loans previously charged off:
Credit card                                                          517
Other consumer                                                       719
Real estate                                                          551
Commercial                                                         2,771
Total recoveries                                                   4,558
Net loans charged off                                             23,206
Provision for credit losses                                       29,613
Balance, end of year                                           $ 238,050



Provision for Credit Losses

The amount of provision added to or released from the allowance during the three
and six months ended June 30, 2021 and 2020, and for the year ended December 31,
2020, was based on management's judgment, with consideration given to the
composition of the portfolio, historical loan loss experience, assessment of
current economic forecasts and 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.

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Allowance for Credit Losses Allocation


As of June 30, 2021, the allowance for credit losses reflected a decrease of
approximately $10.8 million from December 31, 2020 while total loans decreased
$1.5 billion over the same six month period. The allocation in each category
within the allowance generally reflects the overall changes in the loan
portfolio mix. During the first quarter of 2020, we recorded an additional
allowance for credit losses for loans of approximately $151.4 million due to the
adoption of CECL.

The significant impact to the allowance for credit losses at the date of CECL
adoption was driven by the substantial amount of loans acquired held by the
Company. We had approximately one third of total loans categorized as acquired
at the adoption date with very little reserve allocated to them due to the
previous incurred loss impairment methodology. As such, the amount of the CECL
adoption impact was greater on the Company when compared to a non-acquisitive
bank.

The decrease in the allowance for credit losses during the first six months of
2021 was predominately related to economic recovery from the effects of the
COVID-19 pandemic and the decline in our loan portfolio. While the economic
conditions appear to be improving, certain industries continue to be more
adversely impacted than others by this pandemic, such as the restaurant, retail
and hotel industries, and there remains uncertainty regarding how borrowers in
these industries will recover. Our allowance for credit losses at June 30, 2021
was considered appropriate given the considerable amount of uncertainty as to
the structure and timing of potential economic recovery, the impact of new
COVID-19 variants, future of government assistance related to COVID-19 recovery
efforts and other related factors.

The following table sets forth the sum of the amounts of the allowance for
credit 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 for each of the periods indicated. The
allowance for credit losses by loan category is determined by i) our estimated
reserve factors by category including applicable qualitative adjustments and ii)
any specific allowance allocations that are identified on individually evaluated
loans. The amounts shown are not necessarily indicative of the actual future
losses that may occur within individual categories.

Table 11: Allocation of Allowance for Credit Losses

                                 June 30, 2021                     December 31, 2020
                            Allowance          % of            Allowance            % of
(Dollars in thousands)       Amount          loans (1)           Amount           loans (1)
Credit cards             $       5,442           1.7  %    $          7,472           1.4  %
Other consumer                   1,160           1.6  %               4,100           1.6  %
Real estate                    188,388          73.5  %             182,868          71.5  %
Commercial                      29,793          19.9  %              42,093          21.3  %
Other                            2,456           3.4  %               1,517           4.2  %
Total                    $     227,239         100.0  %    $        238,050         100.0  %

_______________________________________

(1)Percentage of loans in each category to total loans.

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DEPOSITS


Deposits are our primary source of funding for earning assets and are primarily
developed through our network of approximately 198 financial centers as of
June 30, 2021. 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 June 30, 2021, core deposits comprised 86.4% 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 Chief Deposit Officer,
Asset Liability Committee and the Bank's Treasury Department, 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 are continually monitoring and looking for opportunities to
fairly reprice our deposits while remaining competitive in this current
challenging rate environment.

Our total deposits as of June 30, 2021, were $18.30 billion, an increase of
$1.32 billion from December 31, 2020, primarily driven by the government
economic stimulus programs and changes in customer spending resulting from the
COVID-19 pandemic. Non-interest bearing transaction accounts, interest bearing
transaction accounts and savings accounts totaled $15.46 billion at June 30,
2021, compared to $14.15 billion at December 31, 2020, an increase of $1.31
billion. Total time deposits increased $8.7 million to $2.84 billion at June 30,
2021, from $2.83 billion at December 31, 2020. We had $388.5 million and $512.3
million of brokered deposits at June 30, 2021, and December 31, 2020,
respectively. Both consumer and commercial deposit balances have grown since the
COVID-19 related economic stimulus legislation, including legislation that
established the PPP program, was implemented in mid-2020. We are managing our
balance sheet and our net interest margin by continuing to eliminate several
high-cost deposits related to public funds and brokered deposits.

OTHER BORROWINGS AND SUBORDINATED NOTES AND DEBENTURES


Our total debt was $1.72 billion at June 30, 2021 and December 31, 2020. The
outstanding balance for June 30, 2021 includes $1.3 billion in FHLB long-term
advances; $330.0 million in subordinated notes; $53.1 million of trust preferred
securities and unamortized debt issuance costs; and $32.6 million of other
long-term debt.

The FHLB long-term advances outstanding at the end of the second quarter 2021
are primarily FOTO advances which are a low cost, fixed-rate source of funding
in return for granting to FHLB the flexibility to choose a termination date
earlier than the maturity date. Our FOTO advances outstanding at June 30, 2021
had original maturity dates of 10 years to 15 years with lockout periods that
have expired. We expect the FHLB to not exercise the options to terminate the
FOTO advances prior to their stated maturity dates due to the current low
interest rate environment. We continually analyze the possibility of the FHLB
exercising the options along with the market expected rate outcome. As of
June 30, 2021, there were no FHLB short-term advances outstanding.

In March 2018, we issued $330 million in aggregate principal amount of 5.00%
Fixed-to-Floating Rate Subordinated Notes ("Notes") at a public offering price
equal to 100% of the aggregate principal amount of the Notes. The Company
incurred $3.6 million in debt issuance costs related to the offering. The Notes
will mature on April 1, 2028 and are subordinated in right of payment to the
payment of our other existing and future senior indebtedness, including all our
general creditors. The Notes are obligations of the Company only and are not
obligations of, and are not guaranteed by, any of its subsidiaries.

                                       65

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CAPITAL

Overview

At June 30, 2021, total capital was $3.04 billion. Capital represents shareholder ownership in the Company - the book value of assets in excess of liabilities. At June 30, 2021, our common equity to asset ratio was 12.97% compared to 13.31% at year-end 2020.

Capital Stock


On February 27, 2009, at a special meeting, our shareholders approved an
amendment to the Articles of Incorporation to establish 40,040,000 authorized
shares of preferred stock, $0.01 par value. The aggregate liquidation preference
of all shares of preferred stock cannot exceed $80,000,000.

On October 29, 2019, we filed Amended and Restated Articles of Incorporation
("October Amended Articles") with the Arkansas Secretary of State. The October
Amended Articles classified and designated Series D Preferred Stock, Par Value
$0.01 Per Share, out of our authorized preferred stock.

Stock Repurchase Program


Effective July 23, 2021, our Board of Directors approved an amendment to the
Company's current stock repurchase program ("Program") that increases the amount
of our common stock that may be repurchased under the Program from a maximum of
$180 million to a maximum of $276.5 million and extends the term of the Program
from October 31, 2021, to October 31, 2022 (unless terminated sooner). The
Program was originally approved on October 17, 2019 and first amended in March
2020.

Under the Program, we may repurchase shares of our common stock through open
market and privately negotiated transactions or otherwise. The timing, pricing,
and amount of any repurchases under the Program will be determined by management
at its discretion based on a variety of factors, including, but not limited to,
trading volume and market price of our common stock, corporate considerations,
our working capital and investment requirements, general market and economic
conditions, and legal requirements. The Program does not obligate us to
repurchase any common stock and may be modified, discontinued, or suspended at
any time without prior notice. We anticipate funding for this Program to come
from available sources of liquidity, including cash on hand and future cash
flow.

During the six month periods ended June 30, 2021 and 2020, we repurchased
130,916 shares at an average price per share of $23.53 and 4,922,336 shares at
an average price per share of $18.96, respectively, under the Program. No shares
were repurchased under the Program during the three months ended June 30, 2021
and 2020.

Cash Dividends

We declared cash dividends on our common stock of $0.36 per share for the first
six months of 2021 compared to $0.34 per share for the first six months of 2020,
an increase of $0.02, or 6%. 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 Liquidity


The primary liquidity needs of the Parent Company are the payment of dividends
to shareholders, the funding of debt obligations and cash needs for
acquisitions. 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 Simmons Bank is subject to various
regulatory limitations. See the Liquidity and Market Risk Management discussions
of Item 3 - Quantitative and Qualitative Disclosures About Market Risk for
additional information regarding the parent company's liquidity. The Company
continually assesses its capital and liquidity needs and the best way to meet
them, including, without limitation, through capital raising in the market via
stock or debt offerings.

                                       66
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Risk Based Capital


The Company and Simmons Bank are 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. The Company and Simmons Bank, must hold a capital
conservation buffer composed of common equity Tier 1 capital above its minimum
risk-based capital requirements. Failure to meet this capital conservation
buffer would result in additional limits on dividends, other distributions and
discretionary bonuses.

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
June 30, 2021, we meet all capital adequacy requirements to which we are
subject. As of the most recent notification from regulatory agencies, Simmons
Bank was well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Company and Simmons Bank must
maintain minimum total risk-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 institution's categories.

Our risk-based capital ratios at June 30, 2021 and December 31, 2020 are presented in Table 12 below:

Table 12: Risk-Based Capital

                                                                         June 30,            December 31,
(Dollars in thousands)                                                     2021                  2020
Tier 1 capital:
Stockholders' equity                                                  $  3,039,366          $  2,976,656
CECL transition provision                                                  128,933               131,430
Goodwill and other intangible assets                                    (1,156,203)           (1,163,797)
Unrealized loss (gain) on available-for-sale securities, net of
income taxes                                                               (12,073)              (59,726)
Total Tier 1 capital                                                     2,000,023             1,884,563
Tier 2 capital:
Trust preferred securities and subordinated debt                           383,143               382,874
Qualifying allowance for credit losses and reserve for unfunded
commitments                                                                 79,138                89,546
Total Tier 2 capital                                                       462,281               472,420
Total risk-based capital                                              $ 

2,462,304 $ 2,356,983


Risk weighted assets                                                  $ 

14,076,975 $ 14,048,608


Assets for leverage ratio                                             $ 

22,244,118 $ 20,765,127


Ratios at end of period:
Common equity Tier 1 ratio (CET1)                                            14.20  %              13.41  %
Tier 1 leverage ratio                                                         8.99  %               9.08  %
Tier 1 leverage ratio, excluding average PPP loans (non-GAAP)(1)              9.29  %               9.50  %
Tier 1 risk-based capital ratio                                              14.21  %              13.41  %
Total risk-based capital ratio                                               17.49  %              16.78  %
Minimum guidelines:
Common equity Tier 1 ratio (CET1)                                             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  %


_______________________________________

(1)PPP loans are 100% federally guaranteed and have a zero percent risk-weight for regulatory capital ratios. Tier 1 leverage ratio, excluding average PPP loans is a non-GAAP measurement.

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Regulatory Capital Changes


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

In March 2020 and in response to the COVID-19 pandemic, the agencies issued a
new regulatory capital rule revising the CECL Transition Provision to delay the
estimated impact on regulatory capital stemming from the implementation of ASU
2016-13. The rule provides banking organizations that implement CECL before the
end of 2020 the option to delay for two years an estimate of CECL's effect on
regulatory capital, followed by a three-year transition period (the "2020 CECL
Transition Provision"). The Company elected to apply the 2020 CECL Transition
Provision.

In 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 introduced
substantial revisions to the risk-based capital requirements applicable to bank
holding companies and depository institutions.

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.

The 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 on January 1, 2019.

Prior to December 31, 2017, Tier 1 capital included common equity Tier 1 capital
and certain additional Tier 1 items as provided under the Basel III Capital
Rules. The Tier 1 capital for the Company consisted of common equity Tier 1
capital and trust preferred securities. The Basel III Capital Rules include
certain provisions that require trust preferred securities to be phased out of
qualifying Tier 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 Tier 1 capital. Trust
preferred securities and qualifying subordinated debt of $383.1 million is
included as Tier 2 and total capital as of June 30, 2021.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


See the Recently Issued Accounting Standards section 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.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


Certain statements contained in this quarterly report may not be based on
historical facts and should be considered "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. 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,"
"budget," "contemplate," "continue," "estimate," "expect," "foresee," "intend,"
"indicate," "target," "plan," positions," "prospects," "project," "predict," or
"potential," by future conditional verbs such as "could," "may," "might,"
"should," "will," or "would," or by variations of such words or by similar
expressions. These forward-looking statements include, without limitation, those
relating to the Company's future growth, pending acquisitions, revenue,
expenses, assets, asset quality, profitability, earnings, accretion, customer
service, lending capacity and lending activity, investment in digital channels,
critical accounting policies, net interest margin, non-interest revenue, market
conditions related to and the impact of the Company's stock repurchase program,
consumer behavior and liquidity, the adequacy of the allowance for credit
losses, the impacts of the COVID-19 pandemic and the ability of the Company to
manage the impacts of the COVID-19 pandemic, the impacts of the Company's and
its customers' participation in the Paycheck Protection Program, the expected
performance of COVID-19 loan modifications, income tax deductions, credit
quality, the level of credit losses from lending commitments, net interest
revenue, interest rate sensitivity, loan loss experience, liquidity, the
Company's expectations regarding actions by the FHLB including with respect to
the FHLB's option to terminate FOTO advances, capital resources, market risk,
plans for investments in securities, effect of future litigation, including the
results of the overdraft fee litigation against the Company that is described in
this quarterly report, acquisition strategy and activity, 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, acquisition, or expansion strategy; the effects of
future economic conditions (including unemployment levels and slowdowns in
economic growth), governmental monetary and fiscal policies, as well as
legislative and regulatory changes, including in response to the COVID-19
pandemic; the impacts of the COVID-19 pandemic on the Company's operations and
performance; the ultimate effect of measures the Company takes or has taken in
response to the COVID-19 pandemic; the severity and duration of the COVID-19
pandemic, including the effectiveness of vaccination efforts and developments
with respect to COVID-19 variants; the pace of recovery when the COVID-19
pandemic subsides and the heightened impact it has on many of the risks
described herein; changes in real estate values; changes in interest rates;
changes in the level and composition of deposits, loan demand, and the values of
loan collateral, securities and interest sensitive assets and liabilities;
changes in the securities markets generally or the price of the Company's common
stock specifically; developments in information technology affecting the
financial industry; cyber threats, attacks or events; reliance on third parties
for the provision of key services; further changes in accounting principles
relating to loan loss recognition; uncertainty and disruption associated with
the discontinued use of the London Inter-Bank Offered Rate; the costs of
evaluating possible acquisitions and the risks inherent in integrating
acquisitions; possible adverse rulings, judgements, settlements, and other
outcomes of pending or future litigation, including litigation or actions
arising from the Company's participation in and administration of programs
related to the COVID-19 pandemic (including, among others, the PPP); 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 credit losses, fair value for loans, other real estate owned, and
other cautionary statements set forth elsewhere in this report. Please also
refer to the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of this quarterly report
and the Company's annual report on Form 10-K for the year ended December 31,
2020, and related disclosures in other filings, which have been filed with the
SEC and are available on the SEC's website at www.sec.gov. Many of these factors
are beyond our ability to predict or control, and actual results could differ
materially from those in the forward-looking statements due to these factors and
others. 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 assumptions and expectations that underlie or are 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 or whether our
future performance will differ materially from the performance reflected in or
implied by our forward-looking statements, 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.

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GAAP RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


The tables below present computations of core earnings (net income excluding
non-core items {gain on sale of branches, merger related costs, early retirement
program costs and the net branch right sizing costs}) (non-GAAP) and core
diluted earnings per share (non-GAAP) as well as a computation of tangible book
value per share (non-GAAP), tangible common equity to tangible assets
(non-GAAP), the core net interest margin (non-GAAP), core other income
(non-GAAP) and core non-interest expense (non-GAAP). Non-core items are included
in financial results presented in accordance with generally accepted accounting
principles (US GAAP). The tables below also present computations of certain
figures that are exclusive of the impact of PPP loans: the ratios of common
equity to total assets and tangible common equity to tangible assets, each
adjusted for PPP loans (each non-GAAP), Tier 1 leverage ratio excluding average
PPP loans (non-GAAP), and net interest income and net interest margin, each
adjusted for PPP loans and additional liquidity (each non-GAAP).

We believe the exclusion of these non-core items in expressing earnings and
certain other financial measures, including "core earnings," provides a
meaningful basis for period-to-period and company-to-company comparisons, which
management believes will assist investors and analysts in analyzing the 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 performance

We believe the presentation of "core earnings" on a diluted per share basis,
"core diluted earnings per share" (non-GAAP) and core net interest margin
(non-GAAP), provides a meaningful basis 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 "core diluted 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 performance

We have $1.179 billion and $1.186 billion total goodwill and other intangible
assets for the periods ended June 30, 2021 and December 31, 2020, respectively.
Because our acquisition strategy has resulted in a high level of intangible
assets, management believes useful calculations include tangible book value per
share (non-GAAP) and tangible common equity to tangible assets (non-GAAP).

We believe the exclusion of PPP loans or their impact, as applicable, in
expressing earnings and certain other financial measures provides a meaningful
basis for period-to-period and company-to-company comparisons because PPP loans
are 100% federally guaranteed and have very low interest rates. The Company's
non-GAAP financial measures that exclude PPP loans or their impact include the
ratios of "common equity to total assets" and "tangible common equity to
tangible assets," each adjusted for PPP loans (each non-GAAP), "Tier 1 leverage
ratio excluding average PPP loans" (non-GAAP), and "net interest margin,"
adjusted for PPP loans and additional liquidity (non-GAAP). Additional liquidity
is defined as average interest-bearing balances due from banks greater than
normal liquidity levels. Management believes these non-GAAP presentations will
assist investors and analysts in analyzing the core financial measures of the
Company, including the performance of the Company's loan portfolio and the
Company's regulatory capital position, and predicting future performance.
Management and the Board of Directors utilize these non-GAAP financial measures
for financial performance reporting and investor presentations of Company
performance.

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.

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

See 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        

Six Months Ended

                                                       June 30,                      June 30,
(In thousands, except per share data)             2021           2020          2021           2020
Net income available to common stockholders   $   74,911      $ 58,789      $ 142,318      $ 136,012
Non-core items:
Gain on sale of branches                            (445)       (2,204)        (5,922)        (8,093)
Merger related costs                                 686         1,830            919          2,898
Early retirement program                               -           493              -            493
Branch right sizing                                  468         1,721          1,093          1,959
Tax effect (1)                                      (185)         (482)         1,022            716
Net non-core items                                   524         1,358         (2,888)        (2,027)
Core earnings (non-GAAP)                      $   75,435      $ 60,147      $ 139,430      $ 133,985

Diluted earnings per share(2)                 $     0.69      $   0.54      $    1.31      $    1.22
Non-core items:
Gain on sale of branches                           (0.01)        (0.02)         (0.06)         (0.07)
Merger related costs                                0.01          0.02           0.01           0.03
Branch right sizing                                    -          0.02           0.01           0.02
Tax effect (1)                                         -         (0.01)          0.01           0.01
Net non-core items                                     -          0.01     

(0.03) (0.01) Core diluted earnings per share (non-GAAP) $ 0.69 $ 0.55 $ 1.28 $ 1.21

_______________________________________

(1)Effective tax rate of 26.135%. (2)See Note 17, Earnings Per Share, for number of shares used to determine EPS.



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See Table 14 below for the reconciliation of core other income and core non-interest expense for the periods presented.


Table 14: Reconciliation of Core Other Income and Core Non-Interest Expense
(non-GAAP)

                                           Three Months Ended             Six Months Ended
                                                June 30,                      June 30,
(In thousands)                            2021           2020           2021           2020
Other income                           $   8,110      $   9,809      $  18,370      $  22,610
Gain on sale of branches                    (445)        (2,204)        (5,922)        (8,093)
Core other income (non-GAAP)           $   7,665      $   7,605      $  12,448      $  14,517

Non-interest expense                   $ 115,466      $ 116,177      $ 229,259      $ 243,641
Non-core items:
Merger related costs                        (686)        (1,830)          (919)        (2,898)
Early retirement program                       -           (493)             -           (493)
Branch right sizing                         (468)        (1,721)        (1,093)        (1,959)
Total non-core items                      (1,154)        (4,044)       

(2,012) (5,350) Core non-interest expense (non-GAAP) $ 114,312 $ 112,133 $ 227,247 $ 238,291

See Table 15 below for the reconciliation of tangible book value per common share.

Table 15: Reconciliation of Tangible Book Value per Common Share (non-GAAP)

                                                      June 30,        December 31,
(In thousands, except per share data)                   2021              2020
Total stockholders' equity                         $  3,039,366      $  2,976,656
Preferred stock                                            (767)             (767)
Total common stockholders' equity                     3,038,599         2,975,889
Intangible assets:
Goodwill                                             (1,075,305)       (1,075,305)
Other intangible assets                                (103,759)         (111,110)
Total intangibles                                    (1,179,064)       (1,186,415)
Tangible common stockholders' equity               $  1,859,535      $  

1,789,474

Shares of common stock outstanding                  108,386,669       108,077,662

Book value per common share                        $      28.03      $      27.53

Tangible book value per common share (non-GAAP) $ 17.16 $ 16.56




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See Table 16 below for the calculation of tangible common equity and the reconciliation of tangible common equity to tangible assets.

Table 16: Reconciliation of Tangible Common Equity and the Ratio of Tangible Common Equity to Tangible Assets (non-GAAP)


                                                                     June 30,            December 31,
(Dollars in thousands)                                                 2021                  2020
Total common stockholders' equity                                 $  3,038,599          $  2,975,889
Intangible assets:
Goodwill                                                            (1,075,305)           (1,075,305)
Other intangible assets                                               (103,759)             (111,110)
Total intangibles                                                   (1,179,064)           (1,186,415)
Tangible common stockholders' equity                              $  

1,859,535 $ 1,789,474


Total assets                                                      $ 23,423,159          $ 22,359,752
Intangible assets:
Goodwill                                                            (1,075,305)           (1,075,305)
Other intangible assets                                               (103,759)             (111,110)
Total intangibles                                                   (1,179,064)           (1,186,415)
Tangible assets                                                   $ 22,244,095          $ 21,173,337

Paycheck Protection Program ("PPP") loans                             (441,353)             (904,673)
Total assets excluding PPP loans                                  $ 22,981,806          $ 21,455,079
Tangible assets excluding PPP loans                               $ 

21,802,742 $ 20,268,664


Ratio of common equity to assets                                         12.97  %              13.31  %
Ratio of tangible common equity to tangible assets (non-GAAP)             8.36  %               8.45  %

Ratio of common equity to assets excluding PPP loans (non-GAAP) 13.22 %

              13.87  %
Ratio of tangible common equity to tangible assets excluding PPP
loans (non-GAAP)                                                          8.53  %               8.83  %



See Table 17 below for the calculation of Tier 1 leverage ratio excluding average PPP loans for the period presented.


Table 17: Reconciliation of Tier 1 Leverage Ratio Excluding Average PPP Loans
(non-GAAP)

                                                                Three Months Ended
(Dollars in thousands)                                             June 30, 2021
Total Tier 1 capital                                           $        2,000,023

Adjusted average assets for leverage ratio                     $       

22,244,118

Average PPP loans                                                        

(707,296)

Adjusted average assets excluding average PPP loans            $       

21,536,822


Tier 1 leverage ratio                                                        8.99  %
Tier 1 leverage ratio excluding average PPP loans (non-GAAP)                 9.29  %




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See Table 18 below for the calculation of core net interest margin and net interest margin adjusted for PPP loans and additional liquidity for the periods presented.

Table 18: Reconciliation of Core Net Interest Margin (non-GAAP)


                                                    Three Months Ended                           Six Months Ended
                                                         June 30,                                    June 30,
(Dollars in thousands)                          2021                  2020                  2021                  2020
Net interest income                        $    146,533          $   

163,681 $ 293,214 $ 331,164 FTE adjustment

                                    4,548                 2,350                 8,711                 4,655
Fully tax equivalent net interest income        151,081               166,031               301,925               335,819
Total accretable yield                           (5,619)              (11,723)              (12,249)              (23,560)
Core net interest income                   $    145,462          $    

154,308 $ 289,676 $ 312,259


PPP loan and additional liquidity (1)
interest income                                  (9,445)               (5,623)              (21,694)
Net interest income adjusted for PPP loans
and additional liquidity (1)               $    141,636          $    

160,408 $ 280,231


Average earning assets                     $ 20,959,642          $ 

19,517,475 $ 20,723,587 $ 19,049,487 Average PPP loan balance and additional liquidity (1)

                                (2,659,831)           (2,071,411)            3,139,749

Average earning assets adjusted for PPP loans and additional liquidity (1) $ 18,299,811 $ 17,446,064 $ 23,863,336


Net interest margin                                2.89  %               3.42  %               2.94  %               3.55  %
Core net interest margin (non-GAAP)                2.78  %               3.18  %               2.82  %               3.30  %
Net interest margin adjusted for PPP loans
and additional liquidity (1) (non-GAAP)            3.10  %               3.70  %               3.21  %


_______________________________________

(1)Additional liquidity is estimated as the average interest bearing balances due from banks and federal funds sold greater than $750.0 million.






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