Acquisitions

3 Months Ended

Mar. 31, 2020

ACQUISITIONS

The Landrum Company

On October 31, 2019, the Company completed its merger with The Landrum Company (“Landrum”), pursuant to the terms of the Agreement and Plan of Merger dated as of July 30, 2019 (“Landrum Agreement”), at which time Landrum was merged with and into the Company, with the Company continuing as the surviving corporation. Pursuant to the terms of the Landrum Agreement, the shares of Landrum Class A Common Voting Stock, par value $0.01 per share, and Landrum Class B Common Nonvoting Stock, par value $0.01 per share, were converted into the right to receive, in the aggregate, approximately 17,350,000 shares of the Company’s common stock and each share of Landrum’s series E preferred stock was converted into the right to receive one share of the Company’s comparable series D preferred stock. The Company issued 17,349,722 shares of its common stock and 767 shares of its series D preferred stock, par value $0.01 per share, in exchange for all outstanding shares of Landrum capital stock to effect the merger.

Prior to the acquisition, Landrum, headquartered in Columbia, Missouri, conducted banking business through its subsidiary bank, Landmark Bank, from 39 branches located in Missouri, Oklahoma and Texas. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $3.4 billion in assets, including approximately $2.0 billion in loans (inclusive of loan discounts), and approximately $3.0 billion in deposits. The systems conversion occurred on February 14, 2020, at which time Landmark Bank merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $140.8 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s current footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.

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



(In thousands)	Acquired from Landrum			Fair Value Adjustments			Fair Value
Assets Acquired
Cash and due from banks	$	215,285		$	—		$	215,285
Due from banks - time	248			—			248
Investment securities	1,021,755			4,228			1,025,983
Loans acquired	2,049,137			(43,651		)	2,005,486
Allowance for loan losses	(22,736		)	22,736			—
Foreclosed assets	373			(183		)	190
Premises and equipment	63,878			18,867			82,745
Bank owned life insurance	19,206			—			19,206
Goodwill	407			(407		)	—
Core deposit intangible	—			24,345			24,345
Other intangibles	412			4,704			5,116
Other assets	33,924			(13,401		)	20,523
Total assets acquired	$	3,381,889		$	17,238		$	3,399,127

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	716,675		$	—		$	716,675
Interest bearing transaction accounts and savings deposits	1,465,429			—			1,465,429
Time deposits	867,197			299			867,496
Total deposits	3,049,301			299			3,049,600
Other borrowings	10,055			—			10,055
Subordinated debentures	34,794			(877		)	33,917
Accrued interest and other liabilities	31,057			(484		)	30,573
Total liabilities assumed	3,125,207			(1,062		)	3,124,145
Equity	256,682			(256,682		)	—
Total equity assumed	256,682			(256,682		)	—
Total liabilities and equity assumed	$	3,381,889		$	(257,744	)	$	3,124,145
Net assets acquired							274,982
Purchase price							415,779
Goodwill							$	140,797

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the merger. Management will continue to review the estimated fair values and evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction over the next few months, within one year of the merger. Therefore, adjustments to the estimated amounts and carrying values may occur.

The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Landrum subsequent to the acquisition date.

Reliance Bancshares, Inc.

On April 12, 2019, the Company completed its merger with Reliance Bancshares, Inc. (“Reliance”), headquartered in the St. Louis, Missouri, metropolitan area, pursuant to the terms of the Agreement and Plan of Merger (“Reliance Agreement”), dated November 13, 2018, as amended February 11, 2019. In the merger, each outstanding share of Reliance common stock, as well as each Reliance common stock equivalent was canceled and converted into the right to receive shares of the Company’s common stock and/or cash in accordance with the terms of the Reliance Agreement. In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each share of Reliance’s Series C Preferred Stock was converted into the right to receive one share of Simmons’ comparable Series C Preferred Stock (unless the holder of such Series C Preferred Stock elected to receive alternate consideration in accordance with the Reliance Agreement). The Company issued 3,999,623 shares of its common stock and paid $62.7 million in cash to effect the merger. The Company also issued $42.0 million of its Series A Preferred Stock and Series B Preferred Stock. On May 13, 2019, the Company redeemed all of the preferred stock issued in connection with the merger, and paid all accrued and unpaid dividends up to the date of redemption. On October 29, 2019, the Company amended its Amended and Restated Articles of Incorporation to cancel the Series C Preferred Stock, having 140 authorized shares, of which no shares were ever issued or outstanding.

Prior to the acquisition, Reliance conducted banking business through its subsidiary bank, Reliance Bank, from 22 branches located in Missouri and Illinois. Including the effects of the acquisition method accounting adjustments, the Company acquired approximately $1.5 billion in assets, including approximately $1.1 billion in loans (inclusive of loan discounts), and approximately $1.2 billion in deposits. Contemporaneously with the completion of the Reliance merger, Reliance Bank was merged into Simmons Bank, with Simmons Bank as the surviving institution.

Goodwill of $78.5 million was recorded as a result of the transaction. The merger strengthened the Company’s market share and brought forth additional opportunities in the Company’s St. Louis metropolitan area footprint, which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.

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



(In thousands)	Acquired from Reliance			Fair Value Adjustments			Fair Value
Assets Acquired
Cash and due from banks	$	25,693		$	—		$	25,693
Due from banks - time	502			—			502
Investment securities	287,983			(1,873		)	286,110
Loans acquired	1,138,527			(41,657		)	1,096,870
Allowance for loan losses	(10,808		)	10,808			—
Foreclosed assets	11,092			(5,180		)	5,912
Premises and equipment	32,452			(3,001		)	29,451
Bank owned life insurance	39,348			—			39,348
Core deposit intangible	—			18,350			18,350
Other assets	25,165			6,911			32,076
Total assets acquired	$	1,549,954		$	(15,642	)	$	1,534,312



(In thousands)	Acquired from Reliance		Fair Value Adjustments			Fair Value
Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	108,845	$	(33	)	$	108,812
Interest bearing transaction accounts and savings deposits	639,798		—			639,798
Time deposits	478,415		(1,758		)	476,657
Total deposits	1,227,058		(1,791		)	1,225,267
Securities sold under agreement to repurchase	14,146		—			14,146
Other borrowings	162,900		(5,500		)	157,400
Accrued interest and other liabilities	8,185		268			8,453
Total liabilities assumed	1,412,289		(7,023		)	1,405,266
Equity	137,665		(137,665		)	—
Total equity assumed	137,665		(137,665		)	—
Total liabilities and equity assumed	$	1,549,954	$	(144,688	)	$	1,405,266
Net assets acquired						129,046
Purchase price						207,539
Goodwill						$	78,493

During 2020, the Company finalized its analysis of the loans acquired along with other acquired assets and assumed liabilities.

The Company’s operating results include the operating results of the acquired assets and assumed liabilities of Reliance subsequent to the acquisition date.

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

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

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices if material. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

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

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

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

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

Goodwill – The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired, resulting in an intangible asset, goodwill. Goodwill established prior to the acquisitions, if applicable, was written off.

Core deposit intangible – This intangible asset represents the value of the relationships that the acquired banks had with their deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits. Any core deposit intangible established prior to the acquisitions, if applicable, was written off.

Other intangibles – These intangible assets represent the value of the relationship that Landrum had with their trust and wealth management customers. The fair value of these intangible assets was estimated based on a combination of discounted cash flow methodology and a market valuation approach. Intangible assets for Landrum also included mortgage servicing rights. Other intangibles established prior to the acquisitions, if applicable, were written off.

Other assets – The fair value adjustment results from certain assets whose value was estimated to be more or less than book value, such as certain prepaid assets, receivables and other miscellaneous assets. Otherwise, the carrying amount of these assets was deemed to be a reasonable estimate of fair value.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The Company performed a fair value analysis of the estimated weighted average interest rate of the certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference when material.

Securities sold under agreement to repurchase – The carrying amount of securities sold under agreement to repurchase is a reasonable estimate of fair value based on the short-term nature of these liabilities.

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

Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Accrued interest and other liabilities – The adjustment establishes a liability for unfunded commitments equal to the fair value of that liability at the date of acquisition. The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value.