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Note 2 - Acquisitions

12 Months Ended

Dec. 31, 2014

Disclosure Text Block Supplement [Abstract]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 2:

ACQUISITIONS

Delta Trust & Banking Corporation

On August 31, 2014, the Simmons First National Corporation completed the acquisition of Delta Trust & Banking Corporation (“Delta Trust”), headquartered in Little Rock, Arkansas, including its wholly-owned bank subsidiary Delta Trust & Bank (“DTB”). Simmons issued 1,629,515 shares of its common stock valued at approximately $65.0 million as of August 29, 2014, plus $2.4 million in cash in exchange for all outstanding shares of Delta Trust common stock.

Prior to the acquisition, Delta Trust conducted banking business from 9 branches located in central, south and northwest Arkansas. Including the effects of the purchase accounting adjustments, the Company acquired approximately $417 million in assets, approximately $312 million in loans including loan discounts and approximately $355 million in deposits. The Company completed the systems conversion and merged DTB into Simmons Bank on October 24, 2014.

A summary, at fair value, of the assets acquired and liabilities assumed in the Delta Trust transaction, as of the acquisition date, is as follows:

(In thousands)	Acquired from Delta Trust			Fair Value Adjustments			Fair Value

Assets Acquired
Cash and due from banks	$	13,739		$	-		$	13,739
Investment securities		62,410			(37	)		62,373
Loans acquired, not covered by FDIC loss share		326,829			(15,149	)		311,680
Allowance for loan losses		(6,008	)		6,008			-
Foreclosed assets not covered by FDIC loss share		3,262			(1,471	)		1,791
Premises and equipment		4,405			(433	)		3,972
Bank owned life insurance		7,530			-			7,530
Goodwill		822			(822	)		-
Core deposit intangible		-			4,318			4,318
Other intangibles		137			5,003			5,140
Deferred tax asset		1,859			558			2,417
Other assets		5,807			(1,381	)		4,426
Total assets acquired	$	420,792		$	(3,406	)	$	417,386

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	63,259		$	-		$	63,259
Interest bearing transaction accounts and savings deposits		200,596			-			200,596
Time deposits		91,507			-			91,507
Total deposits		355,362			-			355,362
Fed funds purchased		11,100			-			11,100
Other borrowings		11,106			(129	)		10,977
Accrued interest and other liabilities		1,528			-			1,528
Total liabilities assumed		379,096			(129	)		378,967
Equity		41,696			(41,696	)		-
Total equity assumed		41,696			(41,696	)		-
Total liabilities and equity assumed	$	420,792		$	(41,825	)	$	378,967
Net assets acquired								38,419
Purchase price								67,441
Goodwill							$	29,022

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the Delta Trust acquisition above.

Cash and due from banks and interest bearing balances due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices. This adjustment is primarily the result of marking the held-to-maturity securities to fair value.

Loans acquired – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques.

Foreclosed assets held for sale – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

Premises and equipment – Bank premises and equipment were acquired with an adjustment to fair value, which represents the difference between the Company’s current analysis of property values completed in connection with the acquisition and book value acquired.

Bank owned life insurance – Bank owned life insurance is carried at its current cash surrender value, which is the most reasonable estimate of fair value.

Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill, of $29.0 million.

Core deposit intangible – This intangible asset represents the value of the relationships that Delta Trust had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Other intangibles – These intangible assets represent the value of the relationships that Delta Trust’s investment subsidiary, insurance subsidiary and trust department had with their customers. The fair value of these intangible assets was estimated based on a combination of discounted cash flow methodology and a market valuation approach.

Other assets – The fair value adjustment results from certain assets whose value was estimated to be less than book value, such as certain prepaid assets, receivables and other miscellaneous assets.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of Delta Trust’s certificates of deposits compared to the current market rates. Based on the results of the analysis, the estimated fair value adjustment was immaterial.

Federal funds purchased – The carrying amount of federal funds purchased is a reasonable estimate of fair value based on the short-term nature of these liabilities.

Other borrowings – The fair value of Federal Home Loan Bank borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition and due to the number of assets acquired and liabilities assumed. Management will continue to review the estimated fair values of loans, foreclosed assets, property and equipment, intangible assets, and other assets and liabilities, and to evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired loans along with the other acquired assets and assumed liabilities in this transaction over the next few months, within one year of the acquisition. Therefore, adjustments to the estimated amounts and carrying values may occur. See Note 5, Loans Acquired, for discussion regarding subsequent evaluation of future cash flows.

The Company’s operating results for 2014 include the operating results of the acquired assets and assumed liabilities of Delta Trust subsequent to the acquisition date. This acquisition is not considered significant to the Company’s financial statements, and thus no proforma information is presented.

Metropolitan National Bank

On November 25, 2013, Simmons First National Corporation completed the acquisition of Metropolitan National Bank (“Metropolitan” or “MNB”), with its principal office located in Little Rock, Arkansas, pursuant to a Stock Purchase Agreement between the Company and Rogers Bancshares, Inc. (“RBI”), in which the Company purchased all the stock of Metropolitan for $53.6 million in cash. The acquisition was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code. As part of the acquisition, Metropolitan was merged into the Company’s wholly-owned subsidiary, Simmons First National Bank (“Simmons Bank” or “lead bank”). The Company recorded $6.6 million of pre-tax merger costs related to the acquisition.

Prior to the acquisition, Metropolitan conducted banking business from 45 branches located in central and northwest Arkansas. Including the effects of the purchase accounting adjustments, the Company acquired approximately $884 million in assets, approximately $457 million in loans, net of discounts, and $838 million of deposits.

A summary, at fair value, of the assets acquired and liabilities assumed in the Metropolitan transaction, as of the acquisition date, is as follows:

(In thousands)	Acquired from RBI			Fair Value Adjustments			Fair Value

Assets Acquired
Cash and due from banks	$	12,026		$	-		$	12,026
Interest bearing balances due from banks		77,059			-			77,059
Investment securities		235,160			(2,259	)		232,901
Loans acquired, not covered by FDIC loss share		494,839			(37,467	)		457,372
Allowance for loan losses		(19,025	)		19,025			-
Foreclosed assets not covered by FDIC loss share		64,397			(21,455	)		42,942
Premises and equipment		74,753			(22,575	)		52,178
Core deposit intangible		-			9,844			9,844
Deferred tax asset		-			30,699			30,699
Other assets		5,646			(1,327	)		4,319
Total assets acquired		944,855			(25,515	)		919,340

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts		150,259			-			150,259
Interest bearing transaction accounts and savings deposits		341,410			-			341,410
Time deposits		345,326			512			345,838
Total deposits		836,995			512			837,507
Fed funds purchased and other borrowings		36,637			-			36,637
Accrued interest and other liabilities		9,443			77			9,520
Total liabilities assumed		883,075			589			883,664
Equity		61,780			(61,780	)		-
Total equity assumed		61,780			(61,780	)		-
Total liabilities and equity assumed	$	944,855		$	(61,191	)	$	883,664
Net assets acquired								35,676
Purchase price								53,600
Goodwill							$	17,924

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the Metropolitan acquisition above.

Cash and due from banks and interest bearing balances due from banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired with a $2.3 million adjustment to fair value based upon quoted market prices. This adjustment is primarily the result of marking the held-to-maturity securities to fair value.

Foreclosed assets held for sale – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

Premises and equipment – Bank premises and equipment were acquired with a $22.6 million adjustment to fair value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.

Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill, of $17.9 million.

Core deposit intangible – This intangible asset represents the value of the relationships that Metropolitan had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Deferred tax asset – The deferred tax asset is based on 39.225% of fair value adjustments related to the acquired assets and assumed liabilities and on a calculation of future tax benefits. Metropolitan had a full valuation allowance against its deferred tax asset on the acquisition date, since it was more-likely-than-not that it would not be realized based on negative evidence which included substantial historical operating losses and a lack of future taxable income projections. Metropolitan had approximately $72.8 million in net operating loss carryforward of which approximately $34.0 is expected to be utilized by the Company under Internal Revenue Code (IRC) Section 382 limitation calculations. The Company also recorded Metropolitan’s remaining deferred tax assets and liabilities along with the deferred taxes associated with the purchase price adjustments offset by any IRC Section 382 limitations related to built-in losses.

Other assets – The fair value adjustment results from certain assets whose value was estimated to be less than book value, such a certain prepaid assets, receivables and intangible assets.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $512,000 fair value adjustment applied to time deposits results from the estimated weighted average interest rate of Metropolitan’s certificates of deposits being slightly above the current market rates.

Federal funds purchased and other borrowings – The carrying amount of these liabilities is a reasonable estimate of fair value based on the short-term nature of these liabilities.

Accrued interest and other liabilities – The fair value used represents the adjustment of certain estimated liabilities from Metropolitan.

During 2014 the Company finalized its analysis of the acquired loans along with the other acquired assets and assumed liabilities in this transaction.

The Company’s operating results for 2014 and 2013 include the operating results of the acquired assets and assumed liabilities of Metropolitan subsequent to the acquisition date. Due to the significant fair value adjustments recorded and the fact Metropolitan was acquired under bankruptcy proceedings, historical results are not believed to be relevant to the Company’s results, and thus no pro forma information is presented.

FDIC-Assisted Transactions

Truman Bank

On September 14, 2012, the Company, through its wholly-owned subsidiary, Simmons First National Bank (“Simmons Bank” or “lead bank”), entered into a purchase and assumption agreement with loss share arrangements and a separate loan sale agreement with the FDIC to purchase substantially all of the assets and to assume substantially all of the deposits and certain other liabilities of Truman Bank of St. Louis, Missouri (“Truman”), with four branches in the St. Louis metro area. The Company recognized a pre-tax gain of $1.1 million on this transaction and incurred pre-tax merger related costs of $815,000.

A summary, at fair value, of the assets acquired and liabilities assumed in the Truman transaction, as of the acquisition date, is as follows:

(In thousands)	Acquired from the FDIC		Fair Value Adjustments			Fair Value

Assets Acquired
Cash and due from banks	$	22,467	$	-		$	22,467
Cash received from FDIC		10,495		-			10,495
Federal funds sold		12,338		-			12,338
Investment securities		23,540		-			23,540
Loans acquired, covered by FDIC loss share		87,620		(30,479	)		57,141
Loans acquired, not covered by FDIC loss share		89,360		(15,965	)		73,395
Foreclosed assets covered by FDIC loss share		20,723		(5,607	)		15,116
Foreclosed assets not covered by FDIC loss share		10,314		(2,563	)		7,751
FDIC indemnification asset		-		26,723			26,723
Premises and equipment		1,390		-			1,390
Core deposit intangible		-		1,191			1,191
Other assets		1,478		149			1,627
Total assets acquired		279,725		(26,551	)		253,174

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts		22,275		-			22,275
Interest bearing transaction accounts and savings deposits		70,705		-			70,705
Time deposits		135,573		-			135,573
Total deposits		228,553		-			228,553
Fed funds purchased and other borrowings		21,456		-			21,456
Payable to FDIC		1,285		-			1,285
Accrued interest and other liabilities		403		357			760
Total liabilities assumed	$	251,697	$	357			252,054

Pre-tax gain on FDIC-assisted transaction						$	1,120

Excel Bank

On October 19, 2012, the Company, through the lead bank, entered into a purchase and assumption agreement with loss share arrangements with the FDIC to purchase certain assets and to assume substantially all of the deposits and certain other liabilities of Excel Bank of Sedalia, Missouri (“Excel”), with three branches in the Kansas City metro area and one branch in the St. Louis metro area. The Company recognized a pre-tax gain of $2.3 million on this transaction and incurred pre-tax merger related costs of $1.1 million.

A summary, at fair value, of the assets acquired and liabilities assumed in the Excel transaction, as of the acquisition date, is as follows:

(In thousands)	Acquired from the FDIC		Fair Value Adjustments			Fair Value

Assets Acquired
Cash and due from banks	$	18,622	$	-		$	18,622
Cash received from FDIC		13,845		-			13,845
Federal funds sold		104		-			104
Investment securities		8,583		-			8,583
Loans acquired, covered by FDIC loss share		111,807		(33,660	)		78,147
Loans acquired, not covered by FDIC loss share		26,528		(5,376	)		21,152
Foreclosed assets covered by FDIC loss share		6,671		(3,558	)		3,113
Foreclosed assets not covered by FDIC loss share		8,265		(2,404	)		5,861
FDIC indemnification asset		-		26,218			26,218
Premises and equipment		2,582		-			2,582
Core deposit intangible		-		1,337			1,337
Other assets		972		-			972
Total assets acquired		197,979		(17,443	)		180,536

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts		19,372		-			19,372
Interest bearing transaction accounts and savings deposits		55,082		-			55,082
Time deposits		94,138		-			94,138
Total deposits		168,592		-			168,592
FHLB borrowings		8,010		183			8,193
FDIC true-up provision		-		328			328
Accrued interest and other liabilities		426		706			1,132
Total liabilities assumed	$	177,028	$	1,217			178,245

Pre-tax gain on FDIC-assisted transaction						$	2,291

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented in the FDIC-assisted transactions above.

Cash and due from banks, cash received from FDIC and Federal funds sold – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets. The $10.5 million cash received from the FDIC for Truman and $13.8 million for Excel is the first pro-forma cash settlement received from the FDIC on Monday following the closing weekend. The $1.3 million payable to the FDIC for Truman is the excess amount received from the settlement.

Investment securities – Investment securities were acquired from the FDIC at fair market value. The fair values provided by the FDIC were reviewed and considered reasonable based on Simmons Bank’s understanding of the market conditions, based on actual balances transferred compared to pro-forma balances.

Foreclosed assets held for sale – These assets are presented at the estimated present values that management expects to receive when the properties are sold, net of related costs of disposal.

FDIC indemnification asset – This loss sharing asset is measured separately from the related covered assets as it is not contractually embedded in the covered assets and is not transferable with the covered assets should Simmons Bank choose to dispose of them. Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss-sharing reimbursement from the FDIC.

Core deposit intangible – This intangible asset represents the value of the relationships that Truman and Excel had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. Even though deposit rates were above market, because Simmons Bank reset deposit rates to current market rates, there was no fair value adjustment recorded for time deposits.

Federal funds purchased and other borrowings, and payable to the FDIC – The carrying amount of these liabilities is a reasonable estimate of fair value based on the short-term nature of these liabilities. The $1.3 million payable to the FDIC for Truman is the excess amount from the first pro-forma cash settlement received from the FDIC on Monday following the closing weekend.

FHLB borrowings – The fair value of Federal Home Loan Bank (“FHLB”) borrowings is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities. Included in the Excel acquisition were FHLB borrowed funds with a fair value totaling $8.2 million. The Company did not need these advances to meet its liquidity needs, and redeemed the advances during the fourth quarter of 2012.

FDIC true-up provision – The purchase and assumption agreements for Truman and Excel allow for the FDIC to recover a portion of the funds previously paid out under the indemnification agreement in the event losses fail to reach the expected loss level under a claw back provision (“true-up provision”). A true-up is scheduled to occur in the calendar month in which the tenth anniversary of the respective closing occurs. If the threshold is not met, the assuming institution is required to pay the FDIC 50 percent of the excess, if any, within 45 days following the true-up.

The value of the true-up provision liability is calculated as the present value of the estimated payment to the FDIC in the tenth year using the formula provided in the agreements. The result of the calculation is based on the net present value of expected future cash payments to be made by Simmons Bank to the FDIC at the conclusion of the loss share agreements. The discount rate used was based on current market rates. The expected cash flows were calculated in accordance with the loss share agreements and are based primarily on the expected losses on the covered assets. The value of the true-up provision is included in accrued interest and other liabilities on the balance sheet. Calculations in accordance with the agreement resulted in no true-up provision to be recorded for Truman as of the acquisition date.

In connection with the Truman and Excel acquisitions, Simmons Bank and the FDIC share in the losses on assets covered under the loss share agreements. The FDIC will reimburse Simmons Bank for 80% of all losses on covered assets. The loss sharing agreements entered into by Simmons Bank and the FDIC in conjunction with the purchase and assumption agreements require that Simmons Bank follow certain servicing procedures as specified in the loss share agreements or risk losing FDIC reimbursement of covered asset losses. Additionally, to the extent that actual losses incurred by Simmons Bank under the loss share agreements are less than expected, Simmons Bank may be required to reimburse the FDIC under the clawback provisions of the loss share agreements. At December 31, 2013 and 2012, the covered loans and covered other real estate owned and the related FDIC indemnification asset (collectively, the “covered assets”) were reported at the net present value of expected future amounts to be paid or received.

Purchased loans acquired in a business combination, including loans purchased in the Truman and Excel acquisitions (both covered and not covered), are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. Purchased loans are accounted for in accordance with ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, accounting guidance for certain loans or debt securities acquired in a transfer, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges and an adjustment in accretable yield, recognized on a prospective basis over the loan’s or pool’s remaining life, which will have a positive impact on interest income.

The Bank acquired approximately $1.4 million and $2.6 million of the real estate, banking facilities, furniture and equipment of Truman and Excel, respectively, as part of the purchase and assumption agreements, and assumed existing leases on the other banking facilities.