Edgar Filing: SIMMONS FIRST NATIONAL CORP

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended September 30, 2015

Commission File Number 000-06253

SIMMONS FIRST NATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Arkansas	71-0407808
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

501 Main Street, Pine Bluff, Arkansas	71601
(Address of principal executive offices)	(Zip Code)

870-541-1000

(Registrant's telephone number, including area code)

Not Applicable

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. S Yes £ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

S Yes £ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). £ Yes S No

The number of shares outstanding of the Registrant’s Common Stock as of October 26, 2015, was 29,939,652.

Simmons First National Corporation

Quarterly Report on Form 10-Q

September 30, 2015

Table of Contents

		Page
Part I:	Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders' Equity	7
	Condensed Notes to Consolidated Financial Statements	8-51
	Report of Independent Registered Public Accounting Firm	52
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	53-77
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	77-79
Item 4.	Controls and Procedures	79

Part II:	Other Information
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 6.	Exhibits	80-85

Signatures		86

Part I: Financial Information

Item 1. Financial Statements (Unaudited)

Simmons First National Corporation

Consolidated Balance Sheets

September 30, 2015 and December 31, 2014

(In thousands, except share data)	September 30, 2015			December 31, 2014
	(Unaudited)
ASSETS
Cash and non-interest bearing balances due from banks	$	106,678		$	54,347
Interest bearing balances due from banks		284,645			281,562
Federal funds sold		9,675			-
Cash and cash equivalents		400,998			335,909
Interest bearing balances due from banks - time		16,504			-
Investment securities:
Held-to-maturity		776,294			777,587
Available-for-sale		703,347			305,283
Total investments		1,479,641			1,082,870
Mortgage loans held for sale		15,556			21,265
Assets held in trading accounts		6,292			6,987
Loans:
Legacy loans		2,839,278			2,053,721
Allowance for loan losses		(30,380	)		(29,028	)
Loans acquired, not covered by FDIC loss share (net of discount and allowance)		2,013,816			575,980
Loans acquired, covered by FDIC loss share (net of discount and allowance)		-			106,933
Net loans		4,822,714			2,707,606
FDIC indemnification asset		-			22,663
Premises and equipment		190,182			122,246
Premises held for sale		923			6,846
Foreclosed assets not covered by FDIC loss share		48,073			44,856
Foreclosed assets covered by FDIC loss share		-			11,793
Interest receivable		26,873			16,774
Bank owned life insurance		118,922			77,592
Goodwill		314,282			108,095
Other intangible assets		44,904			22,526
Other assets		73,830			55,326
Total assets	$	7,559,694		$	4,643,354
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing transaction accounts	$	1,212,724		$	889,260
Interest bearing transaction accounts and savings deposits		3,521,840			2,006,271
Time deposits		1,355,236			965,187
Total deposits		6,089,800			3,860,718
Federal funds purchased and securities sold under agreements to repurchase		110,437			110,586
Other borrowings		173,426			114,682
Subordinated debentures		61,906			20,620
Accrued interest and other liabilities		78,684			42,429
Total liabilities		6,514,253			4,149,035
Stockholders’ equity:
Preferred stock, 40,040,000 shares authorized; Series A, $0.01 par value, $1,000 liquidation value per share; 30,852 shares issued and outstanding at September 30, 2015		30,852			-
Common stock, Class A, $0.01 par value; 120,000,000 shares authorized; 29,939,252 and 18,052,488 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		299			181
Surplus		642,400			156,568
Undivided profits		369,172			338,906
Accumulated other comprehensive income (loss)		2,718			(1,336	)
Total stockholders’ equity		1,045,441			494,319
Total liabilities and stockholders’ equity	$	7,559,694		$	4,643,354

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Income

Three and Nine Months Ended September 30, 2015 and 2014

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2015			2014			2015			2014
	(Unaudited)						(Unaudited)
INTEREST INCOME
Loans	$	76,432		$	40,082		$	197,857		$	118,834
Federal funds sold		15			12			118			16
Investment securities		8,335			4,717			22,264			14,032
Mortgage loans held for sale		291			269			813			506
Assets held in trading accounts		4			3			11			13
Interest bearing balances due from banks		122			132			561			691
TOTAL INTEREST INCOME		85,199			45,215			221,624			134,092

INTEREST EXPENSE
Deposits		4,158			2,232			11,297			6,737
Federal funds purchased and securities sold under agreements to repurchase		55			55			177			194
Other borrowings		1,812			996			4,014			2,995
Subordinated debentures		498			160			1,292			477
TOTAL INTEREST EXPENSE		6,523			3,443			16,780			10,403

NET INTEREST INCOME		78,676			41,772			204,844			123,689
Provision for loan losses		1,615			1,128			5,792			3,638

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		77,061			40,644			199,052			120,051

NON-INTEREST INCOME
Trust income		2,215			1,838			6,536			4,929
Service charges on deposit accounts		8,488			6,238			22,881			19,098
Other service charges and fees		3,089			808			8,044			2,490
Mortgage lending income		3,446			1,812			9,156			3,885
Investment banking income		663			284			1,808			620
Debit and credit card fees		6,879			5,769			19,013			17,213
Bank owned life insurance income		748			411			2,066			1,117
Gain (loss) on sale of securities		40			(18	)		2			20
Net (loss) on assets covered by FDIC loss share agreements		(9,085	)		(3,744	)		(14,812	)		(17,303	)
Other income		7,006			2,637			12,262			8,619
TOTAL NON-INTEREST INCOME		23,489			16,035			66,956			40,688

NON-INTEREST EXPENSE
Salaries and employee benefits		37,417			20,892			99,662			64,338
Occupancy expense, net		4,812			3,204			13,440			10,338
Furniture and equipment expense		4,202			2,363			10,621			6,592
Other real estate and foreclosure expense		2,297			1,864			3,694			3,112
Deposit insurance		1,013			877			2,979			2,630
Merger related costs		857			3,628			12,523			6,255
Other operating expenses		17,314			11,526			47,189			35,492
TOTAL NON-INTEREST EXPENSE		67,912			44,354			190,108			128,757

INCOME BEFORE INCOME TAXES		32,638			12,325			75,900			31,982
Provision for income taxes		10,963			3,537			25,395			8,933

NET INCOME		21,675			8,788			50,505			23,049
Preferred stock dividends		77			-			180			-
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	21,598		$	8,788		$	50,325		$	23,049
BASIC EARNINGS PER SHARE	$	0.72		$	0.52		$	1.84		$	1.40
DILUTED EARNINGS PER SHARE	$	0.72		$	0.52		$	1.83		$	1.39

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Comprehensive Income

Three and Nine Months Ended September 30, 2015 and 2014

	Three Months Ended September 30,					Nine Months Ended September 30,
(In thousands, except per share data)	2015		2014			2015		2014
	(Unaudited)					(Unaudited)
NET INCOME	$	21,675	$	8,788		$	50,505	$	23,049

OTHER COMPREHENSIVE INCOME
Unrealized holding gains (losses) arising during the period on available-for-sale securities		6,816		(911	)		6,673		1,748
Less: Reclassification adjustment for realized gains (losses) included in net income		40		(18	)		2		20
Other comprehensive gain (loss), before tax effect		6,776		(893	)		6,671		1,728
Less: Tax effect of other comprehensive gain (loss)		2,658		(350	)		2,617		678

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		4,118		(543	)		4,054		1,050

COMPREHENSIVE INCOME	$	25,793	$	8,245		$	54,559	$	24,099

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2015 and 2014

(In thousands)	September 30, 2015			September 30, 2014
OPERATING ACTIVITIES	(Unaudited)
Net income	$	50,505		$	23,049
Items not requiring (providing) cash:
Depreciation and amortization		10,884			5,221
Provision for loan losses		5,792			3,638
Net (accretion) of investment securities and assets not covered by FDIC loss share		(26,760	)		(2,768	)
Net amortization on borrowings		262			-
Stock-based compensation expense		2,011			962
Net accretion on assets covered by FDIC loss share		(2,709	)		(1,541	)
Deferred income taxes		(3,881	)		(4,456	)
FDIC loss share indemnification loss		7,476			-
(Gain) loss on sale of available-for-sale securities		(2	)		(20	)
Gain on sale of banking operation		(2,110	)		-
Gain on sale of premises and equipment		-			-
Loss (gain) on sale of premises and equipment, net of impairment		1,958			(3,156	)
Bank owned life insurance income		(2,066	)		(1,117	)
Changes in:
Interest receivable		(367	)		(873	)
Mortgage loans held for sale		5,709			(12,509	)
Assets held in trading accounts		695			2,159
Other assets		(2,528	)		(4,893	)
Accrued interest and other liabilities		15,598			11,706
Income taxes payable		14,993			(3,328	)
Net cash provided by operating activities		75,460			12,074
INVESTING ACTIVITIES
Net originations of loans not covered by FDIC loss share		(230,589	)		(96,670	)
Net collections of loans covered by FDIC loss share		23,646			41,649
Decrease in due from banks - time		7,685			-
Proceeds from sale of student loans		-			22,136
(Purchases) proceeds from sale of premises and equipment, net		(5,388	)		10,288
Proceeds from sale of foreclosed assets held for sale		31,182			19,733
Proceeds from sale of foreclosed assets held for sale, covered by FDIC loss share		2,858			10,853
Proceeds from sale of short-term investment securities		-			1,504
Proceeds from sale of available-for-sale securities		31,702			13,159
Proceeds from maturities of available-for-sale securities		372,511			122,041
Purchases of available-for-sale securities		(264,636	)		(200,284	)
Proceeds from maturities of held-to-maturity securities		206,894			325,895
Purchases of held-to-maturity securities		(56,073	)		(381,175	)
Purchase of bank owned life insurance		(140	)		(6,326	)
Settlement of FDIC loss share agreements		2,368			-
Cash received on FDIC loss share		3,980			13,325
Cash paid on sale of banking operations, net of cash received		(68,273	)		-
Cash received in business combinations, net of cash paid		201,029			11,343
Net cash provided by (used in) investing activities		258,756			(92,529	)
FINANCING ACTIVITIES
Net change in deposits		(103,929	)		(144,014	)
Dividends paid on preferred stock		(180	)		-
Dividends paid on common stock		(20,059	)		(11,441	)
Net change in other borrowed funds		(132,001	)		(4,671	)
Net change in federal funds purchased and securities sold under agreements to repurchase		(16,379	)		(6,010	)
Net shares issued under stock compensation plans		3,421			1,507
Net cash used in financing activities		(269,127	)		(164,629	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		65,089			(245,084	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		335,909			539,380
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	400,998		$	294,296

See Condensed Notes to Consolidated Financial Statements.

Simmons First National Corporation

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2015 and 2014

(In thousands, except share data)	Preferred Stock		Common Stock		Surplus			Accumulated Other Comprehensive Income (Loss)			Undivided Profits			Total

Balance, December 31, 2013	$	-	$	162	$	88,095		$	(3,002	)	$	318,577		$	403,832
Comprehensive income:
Net income		-		-		-			-			23,049			23,049
Change in unrealized depreciation on available-for-sale securities, net of income taxes of $678		-		-		-			1,050			-			1,050
Comprehensive income															24,099
Stock issued as bonus shares – 92,630 shares		-		1		441			-			-			442
Vesting bonus shares, net of forfeitures – (1,560 shares)		-		-		962			-			-			962
Stock issued for employee stock purchase plan – 4,897 shares		-		-		118			-			-			118
Exercise of stock options – 45,160 shares		-		1		1,131			-			-			1,132
Securities exchanged under stock option plan – (4,546 shares)		-		-		(185	)		-			-			(185	)
Stock issued for Delta Trust & Bank acquisition – 1,629,515 shares		-		16		65,030			-			-			65,046
Cash dividends – $0.66 per share		-		-		-			-			(11,441	)		(11,441	)

Balance, September 30, 2014 (Unaudited)		-		180		155,592			(1,952	)		330,185			484,005
Comprehensive income:
Net income		-		-		-			-			12,639			12,639
Change in unrealized depreciation on available-for-sale securities, net of income taxes of $397		-		-		-			616			-			616
Comprehensive income		-		-		-			-			-			13,255
Stock issued as bonus shares – 41,250 shares		-		-		-			-			-			-
Vesting bonus shares, net of forfeitures – (1,560 shares)		-		-		461			-			-			461
Exercise of stock options – 19,560 shares		-		1		543			-			-			544
Securities exchanged under stock option plan – (674 shares)		-		-		(28	)		-			-			(28	)
Cash dividends – $0.22 per share		-		-		-			-			(3,918	)		(3,918	)

Balance, December 31, 2014		-		181		156,568			(1,336	)		338,906			494,319
Comprehensive income:
Net income		-		-		-			-			50,505			50,505
Change in unrealized depreciation on available-for-sale securities, net of income taxes of $2,617		-		-		-			4,054			-			4,054
Comprehensive income															54,559
Stock issued as bonus shares – 56,600 shares		-		1		1,872			-			-			1,873
Vesting bonus shares, net of forfeitures – (9,500 shares)		-		-		1,225			-			-			1,225
Stock issued for employee stock purchase plan – 6,528 shares		-		-		226			-			-			226
Exercise of stock options – 65,418 shares		-		-		1,464			-			-			1,464
Stock granted under stock-based compensation plans		-		-		786			-			-			786
Securities exchanged under stock option plan – (3,290 shares)		-		-		(142	)		-			-			(142	)
Stock issued for Community First acquisition – 30,852 preferred shares; 6,552,916 common shares		30,852		65		268,277			-			-			299,194
Stock issued for Liberty Bank acquisition – 5,181,337 shares		-		52		212,124			-			-			212,176
Dividends on preferred stock		-		-		-			-			(180	)		(180	)
Dividends on common stock – $0.69 per share		-		-		-			-			(20,059	)		(20,059	)

Balance, September 30, 2015 (Unaudited)	$	30,852	$	299	$	642,400		$	2,718		$	369,172		$	1,045,441

See Condensed Notes to Consolidated Financial Statements.

SIMMONS FIRST NATIONAL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Simmons First National Corporation (the “Company”) and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

All adjustments made to the unaudited financial statements were of a normal recurring nature. In the opinion of management, all adjustments necessary for a fair presentation of the results of interim periods have been made. Certain prior year amounts are reclassified to conform to current year classification. The consolidated balance sheet of the Company as of December 31, 2014, has been derived from the audited consolidated balance sheet of the Company as of that date. The results of operations for the period are not necessarily indicative of the results to be expected for the full year.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K Annual Report for 2014 filed with the U.S. Securities and Exchange Commission (the “SEC”).

Recently Issued Accounting Pronouncements

ASU 2015-14 – Revenue from Contracts with Customers: Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 is an update to the effective date in ASU 2014-09 – Revenue from Contracts with Customers (“ASU 2014-09”). ASU2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position or disclosures.

ASU 2014-17 – Business Combinations: Pushdown Accounting (“ASU 2014-17”). ASU 2014-17 amends existing guidance related to the accounting by an acquired entity upon a change-in-control event. The standard provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. ASU 2014-17 was effective on November 18, 2014. The adoption of this standard has not had a material effect on the Company’s operating results or financial condition.

ASU 2014-14 – Receivables – Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure (“ASU 2014-14”). ASU 2014-14 amends existing guidance related to the classification of certain government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA, upon foreclosure. It requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if three conditions are met. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. ASU 2014-14 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, and early adoption is permitted. It can be applied using a prospective transition method or a modified retrospective transition using a cumulative-effect adjustment. The adoption of this standard has not had a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2014-12 – Compensation – Stock Compensation – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (“ASU 2014-12”). ASU 2014-12 amends existing guidance related to the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period should be treated as a performance condition. ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, and early adoption is permitted. It can be applied either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

ASU 2014-11 – Transfers and Servicing – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”). ASU 2014-11 aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. ASU 2014-11 requires that these transactions all be accounted for as secured borrowings. The standard requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction and requires expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. ASU 2014-11 is effective for the first interim or annual period beginning after December 15, 2014. An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application for a public business entity is prohibited. The adoption of this standard did not have a material effect on the Company’s results of operations, financial position or disclosures.

ASU 2014-04 – Receivables – Troubled Debt Restructurings by Creditors (“ASU 2014-04”). ASU 2014-04 clarifies when a creditor should reclassify mortgage loans collateralized by residential real estate from loans to other real estate owned. It defines when an in-substance repossession or foreclosure has occurred and when a creditor is considered to have received physical possession of residential real estate collateralizing a mortgage loan. ASU 2014-04 is effective for fiscal years beginning after December 31, 2014, and early adoption is permitted. It can be applied either prospectively or using a modified retrospective transition method. The adoption of this standard has not had a material effect on the Company’s results of operations, financial position or disclosures.

There have been no other significant changes to the Company’s accounting policies from the 2014 Form 10-K. Presently, the Company is not aware of any other changes to the Accounting Standards Codification that will have a material impact on the Company’s present or future financial position or results of operations.

Acquisition Accounting, Acquired Loans

The Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

The Company evaluates loans acquired in accordance with the provisions of ASC Topic 310-20, Nonrefundable Fees and Other Costs. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. These loans are not considered to be impaired loans. The Company evaluates purchased impaired loans in accordance with the provisions of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected.

For impaired loans accounted for under ASC Topic 310-30, we continue to estimate cash flows expected to be collected on those loans. We evaluate at each balance sheet date whether the present value of the loans determined using the effective interest rates has decreased significantly and if so, recognize a provision for loan loss in our consolidated statement of income. For any significant increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the remaining life of the loan.

Covered Loans and Related Indemnification Asset

In September, we entered into an agreement with the FDIC to terminate all loss share agreements which were entered into in 2010 and 2012 in conjunction with the Company’s acquisition of substantially all of the assets (“covered assets”) and assumption of substantially all of the liabilities of four failed banks in FDIC-assisted transactions. Under the early termination, all rights and obligations of the Company and the FDIC under the FDIC loss share agreements, including the clawback provisions and the settlement of loss share and expense reimbursement claims, have been resolved and terminated.

Under the terms of the agreement, the FDIC made a net payment of $2,368,000 to the bank as consideration for the early termination of the loss share agreements. The early termination was recorded in the Company’s financial statements by removing the FDIC Indemnification Asset, receivable from FDIC, the FDIC True-up liability and recording a one-time, pre-tax charge of $7,476,000. As a result, the Company reclassified loans previously covered by FDIC loss share to loans acquired, not covered by FDIC loss share. Foreclosed assets previously covered by FDIC loss share were reclassified to foreclosed assets not covered by FDIC loss share.

For further discussion of the Company’s acquisition and loan accounting, see Note 5, Loans Acquired.

Earnings Per Common Share (“EPS”)

Basic EPS is computed by dividing reported net income available to common shareholders by weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing reported net income available to common shareholders by the weighted average common shares and all potential dilutive common shares outstanding during the period.

Following is the computation of earnings per common share for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2015		2014		2015		2014
Net income available to common shareholders	$	21,598	$	8,788	$	50,325	$	23,049

Average common shares outstanding		29,927		16,873		27,379		16,489
Average potential dilutive common shares		119		44		119		44
Average diluted common shares		30,046		16,917		27,498		16,533

Basic earnings per share	$	0.72	$	0.52	$	1.84	$	1.40
Diluted earnings per share ⁽¹⁾	$	0.72	$	0.52	$	1.83	$	1.39

__________________________________________________

(1)

EPS are computed independently for each quarter and therefore the sum of each quarterly EPS may not equal the year-to-date EPS. As a result of the large stock issuances during 2015 as part of the Company’s acquisitions, the computed independent quarterly average common shares outstanding and the computed year-to-date average common shares differ significantly. For purposes of calculating a roll-forward amount for year-to-date EPS, diluted EPS for the second quarter would require a computed amount of $0.74, producing a difference of $.02 from actual third quarter diluted EPS of $0.72. This difference is based on the direct result of the varying denominator for each period presented.

NOTE 2: ACQUISITIONS

Liberty Bancshares, Inc.

On February 27, 2015, Simmons First National Corporation completed the acquisition of Liberty Bancshares, Inc. (“Liberty”), headquartered in Springfield, Missouri, including its wholly-owned bank subsidiary Liberty Bank (“LB”). The Company issued 5,181,337 shares of its common stock valued at approximately $212.2 million as of February 27, 2015 in exchange for all outstanding shares of Liberty common stock.

Prior to the acquisition, Liberty conducted banking business from 23 branches located in southwest Missouri. Including the effects of the purchase accounting adjustments, the Company acquired approximately $1.1 billion in assets, approximately $780.7 million in loans including loan discounts and approximately $874.7 million in deposits. The Company completed the systems conversion and merged LB into Simmons First National Bank (“Simmons Bank” or the “Bank”) on April 24, 2015.

Goodwill of $95.6 million was recorded as a result of the transaction. The merger strengthened the Company’s position in the southwest Missouri market and the Company believes that it will be able to achieve cost savings by integrating the two companies and combining accounting, data processing, and other administrative functions all of which gave rise to the goodwill recorded. The goodwill will not be deductible for tax purposes.

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

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

Assets Acquired
Cash and due from banks, including time deposits	$	102,637		$	(14	)	$	102,623
Federal funds sold		7,060			-			7,060
Investment securities		99,123			(335	)		98,788
Loans acquired, not covered by FDIC loss share		790,493			(9,835	)		780,658
Allowance for loan losses		(10,422	)		10,422			-
Premises and equipment		34,239			(3,215	)		31,024
Bank owned life insurance		16,972			-			16,972
Core deposit intangible		699			13,857			14,556
Other intangibles		3,063			(3,063	)		-
Other assets		17,703			(3,843	)		13,860
Total assets acquired	$	1,061,567		$	3,974		$	1,065,541

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	146,618		$	-		$	146,618
Interest bearing transaction accounts and savings deposits		543,183			-			543,183
Time deposits		184,913			-			184,913
Total deposits		874,714			-			874,714
FHLB borrowings		46,128			223			46,351
Subordinated debentures		20,620			(840	)		19,780
Accrued interest and other liabilities		7,828			300			8,128
Total liabilities assumed		949,290			(317	)		948,973
Equity		112,277			(112,277	)		-
Total equity assumed		112,277			(112,277	)		-
Total liabilities and equity assumed	$	1,061,567		$	(112,594	)	$	948,973
Net assets acquired								116,568
Purchase price								212,176
Goodwill							$	95,608

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

Cash and due from banks, time deposits due from banks 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. Due from banks – time were acquired with an adjustment to fair value based on rates currently available to the Company for deposits in banks with similar maturities.

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices.

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

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

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 $95.6 million.

Core deposit intangible – This intangible asset represents the value of the relationships that Liberty 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 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. The deferred tax asset, included in other assets, 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. The Company also recorded Liberty’s remaining deferred tax assets and liabilities as of the acquisition date.

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 Liberty’s certificates of deposits compared to the current market rates. Based on the results of the analysis, the estimated fair value adjustment was immaterial.

FHLB 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.

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 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, property and equipment, intangible assets, subordinated debentures, and other assets and liabilities, and to evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired loans and subordinated debentures 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.

The Company’s operating results for 2015 include the operating results of the acquired assets and assumed liabilities of Liberty subsequent to the acquisition date.

Community First Bancshares, Inc.

On February 27, 2015, Simmons First National Corporation completed the acquisition of Community First Bancshares, Inc. (“Community First”), headquartered in Union City, Tennessee, including its wholly-owned bank subsidiary First State Bank (“FSB”). The Company issued 6,552,915 shares of its common stock valued at approximately $268.3 million as of February 27, 2015, plus $9,974 in cash in exchange for all outstanding shares of Community First common stock. The Company also issued $30.9 million of preferred stock in exchange for all outstanding shares of Community First preferred stock.

Prior to the acquisition, Community First conducted banking business from 33 branches located across Tennessee. Including the effects of the purchase accounting adjustments, the Company acquired approximately $1.9 billion in assets, approximately $1.1 billion in loans including loan discounts and approximately $1.5 billion in deposits. The Company completed the systems conversion and merged FSB into Simmons Bank on September 4, 2015.

Goodwill of $111.3 million was recorded as a result of the transaction. The merger allowed the Company’s entrance into the Tennessee market and will serve as a launching platform for possible expansion into adjacent areas. The Company believes that it will be able to achieve cost savings by integrating the two companies and combining accounting, data processing, and other administrative functions. Further the Company believes it can benefit from the addition of Community First's small-business lending platform while cross-selling its trust products in Community First’s market. This combination of factors 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 Community First transaction, as of the acquisition date, is as follows:

(In thousands)	Acquired from Community First			Fair Value Adjustments			Fair Value

Assets Acquired
Cash and due from banks	$	39,848		$	-		$	39,848
Federal funds sold		76,508			-			76,508
Investment securities		570,199			(3,381	)		566,818
Loans acquired, not covered by FDIC loss share		1,163,398			(26,855	)		1,136,543
Allowance for loan losses		(14,635	)		14,635			-
Foreclosed assets not covered by FDIC loss share		747			-			747
Premises and equipment		44,837			(2,794	)		42,043
Bank owned life insurance		22,149			-			22,149
Goodwill		100			(100	)		-
Core deposit intangible		-			11,273			11,273
Other intangibles		-			420			420
Deferred tax asset		3,700			3,667			7,367
Other assets		11,474			-			11,474
Total assets acquired	$	1,918,325		$	(3,135	)	$	1,915,190

Liabilities Assumed
Deposits:
Non-interest bearing transaction accounts	$	103,825		$	-		$	103,825
Interest bearing transaction accounts and savings deposits		995,207			-			995,207
Time deposits		436,181			849			437,030
Total deposits		1,535,213			849			1,536,062
Federal funds purchased and securities sold under agreement to repurchase		16,230			-			16,230
FHLB borrowings		143,047			1,347			144,394
Subordinated debentures		21,754			(510	)		21,244
Accrued interest and other liabilities		8,769			601			9,370
Total liabilities assumed		1,725,013			2,287			1,727,300
Equity		193,312			(193,312	)		-
Total equity assumed		193,312			(193,312	)		-
Total liabilities and equity assumed	$	1,918,325		$	(191,025	)	$	1,727,300
Net assets acquired								187,890
Purchase price								299,204
Goodwill							$	111,314

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

Cash and due from banks 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.

Investment securities – Investment securities were acquired with an adjustment to fair value based upon quoted market prices.

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.

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 $111.3 million. Goodwill established prior to the acquisition was written off.

Core deposit intangible – This intangible asset represents the value of the relationships that Community First 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 – This intangible asset represents the value of the relationships that Community First’s insurance subsidiary had with their customers. The fair value of this intangible asset was estimated based on a combination of discounted cash flow methodology and a market valuation approach.

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. The Company also recorded Community First’s remaining deferred tax assets and liabilities as of the acquisition date.

Other assets – 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 Community First’s certificates of deposits compared to the current market rates and recorded a fair value adjustment for the difference.

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

FHLB 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.

Subordinated debentures – The fair value 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 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, subordinated debentures, and other assets and liabilities, and to evaluate the assumed tax positions. The Company expects to finalize its analysis of the acquired loans and subordinated debentures 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.

The Company’s operating results for 2015 include the operating results of the acquired assets and assumed liabilities of Community First subsequent to the acquisition date.

Summary of Unaudited Pro forma Information

The unaudited pro forma information below for the three and nine months ended September 30, 2015 and 2014 gives effect to the Liberty and Community First acquisitions as if the acquisitions had occurred on January 1, 2014. Pro forma earnings for the nine months ended September 30, 2015 were adjusted to exclude $7.4 million of acquisition-related costs, net of tax, incurred by Simmons during 2015. Supplemental pro-forma earnings for the nine months ended September 30, 2014 were also adjusted to include these charges. The pro forma financial information is not necessarily indicative of the results of operations if the acquisitions had been effective as of this date.

(In thousands, except per share data)	Three Months Ended September 30, 2015		Three Months Ended September 30, 2014
Revenue⁽¹⁾	$	100,997	$	95,176
Net income	$	31,830	$	8,778
Earnings per share	$	1.06	$	0.31

(In thousands, except per share data)	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Revenue⁽¹⁾	$	294,137	$	281,174
Net income	$	62,497	$	45,973
Earnings per share	$	2.01	$	1.63

__________________________________________________

(1) Net interest income plus noninterest income.

Consolidated year-to-date 2015 results included approximately $33.3 million of revenue and $16.3 million of net income attributable to the Liberty acquisition and $58.2 million of revenue and $23.3 million of net income attributable to the Community First acquisition.

Ozark Trust & Investment Corporation

On April 28, 2015, the Company entered into a definitive agreement and plan of merger (the “Agreement”) with Ozark Trust & Investment Corporation (“OTIC”), including its wholly-owned non-deposit trust company, Trust Company of the Ozarks (“TCO”). TCO is headquartered in Springfield, Missouri and has over $1 billion in assets under management. The transaction closed on October 29, 2015 with OTIC merging with and into the Company. Under the terms of the Agreement, each outstanding share of common stock of OTIC held by banks or bank holding companies was converted into the right to receive $701.9268 in cash and each share of common stock or common stock equivalents held by any other type of shareholder was converted into the right to receive 16.7205 shares of the Company’s common stock. The Company owned 1,000 shares of OTIC’s common stock, which it acquired through its acquisition of Liberty Bancshares, Inc. in February 2015. The transaction is valued at $23.6 million (based on the Company’s October 29, 2015 closing price). The purchase price will be allocated among the net assets of OTIC acquired as appropriate, with the remaining balance being reported as goodwill.

NOTE 3: INVESTMENT SECURITIES

The amortized cost and fair value of investment securities that are classified as held-to-maturity and available-for-sale are as follows:

	September 30, 2015									December 31, 2014
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value

Held-to-Maturity
U.S. Government agencies	$	285,071	$	1,189	$	(393	)	$	285,867	$	418,914	$	929	$	(4,055	)	$	415,788
Mortgage-backed securities		25,913		301		(88	)		26,126		29,743		56		(411	)		29,388
State and political subdivisions		464,245		8,153		(427	)		471,971		328,310		7,000		(573	)		334,737
Other securities		1,065		-		-			1,065		620		-		-			620
Total HTM	$	776,294	$	9,643	$	(908	)	$	785,029	$	777,587	$	7,985	$	(5,039	)	$	780,533

Available-for-Sale
U.S. Treasury	$	4,000	$	8	$	-		$	4,008	$	4,000	$	1	$	(9	)	$	3,992
U.S. Government agencies		153,610		225		(259	)		153,576		275,381		15		(2,580	)		272,816
Mortgage-backed securities		497,847		4,756		(259	)		502,344		1,579		-		(7	)		1,572
State and political subdivisions		10,898		78		-			10,976		6,536		7		(3	)		6,540
Other securities		32,520		714		(791	)		32,443		19,985		386		(8	)		20,363
Total AFS	$	698,875	$	5,781	$	(1,309	)	$	703,347	$	307,481	$	409	$	(2,607	)	$	305,283

Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other available-for-sale securities in the table above.

Certain investment securities are valued at less than their historical cost. Total fair value of these investments at September 30, 2015, was $417.7 million, which is approximately 28.2% of the Company’s combined available-for-sale and held-to-maturity investment portfolios.

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2015:

	Less Than 12 Months					12 Months or More					Total
(In thousands)	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses

Held-to-Maturity
U.S. Government agencies	$	184,082	$	(393	)	$	-	$	-		$	184,082	$	(393	)
Mortgage-backed securities		11,281		(88	)		-		-			11,281		(88	)
State and political subdivisions		38,627		(409	)		2,759		(18	)		41,386		(427	)
Total HTM	$	233,990	$	(890	)	$	2,759	$	(18	)	$	236,749	$	(908	)

Available-for-Sale
U.S. Government agencies	$	97,763	$	(259	)	$	-	$	-		$	97,763	$	(259	)
Mortgage-backed securities		81,619		(259	)		-		-			81,619		(259	)
State and political subdivisions		-		-			-		-			-		-
Other		1,573		(791	)		-		-			1,573		(791	)
Total AFS	$	180,955	$	(1,309	)	$	-	$	-		$	180,955	$	(1,309	)

These declines primarily resulted from the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. Management does not have the intent to sell these securities and management believes it is more likely than not the Company will not have to sell these securities before recovery of their amortized cost basis less any current period credit losses.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of September 30, 2015, management also had the ability and intent to hold the securities classified as available-for-sale for a period of time sufficient for a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of September 30, 2015, management believes the impairments detailed in the table above are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The book value of securities sold under agreements to repurchase equaled $104.9 million and $100.8 million for September 30, 2015 and December 31, 2014, respectively.

Income earned on securities for the three and nine months ended September 30, 2015 and 2014, is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2015		2014		2015		2014
Taxable:
Held-to-maturity	$	1,531	$	1,440	$	4,227	$	4,167
Available-for-sale		3,369		603		8,124		1,882
Non-taxable:
Held-to-maturity		2,941		2,647		8,276		7,900
Available-for-sale		493		27		1,637		83
Total	$	8,335	$	4,717	$	22,264	$	14,032

The amortized cost and fair value of available-for-sale securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:

	Held-to-Maturity				Available-for-Sale
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

One year or less	$	43,646	$	43,761	$	18,741	$	18,743
After one through five years		327,252		328,226		115,400		115,194
After five through ten years		157,376		159,808		30,676		30,928
After ten years		222,107		227,108		5,162		5,168
Securities not due on a single maturity date		25,913		26,126		497,847		502,344
Other securities (no maturity)		-		-		31,049		30,970
Total	$	776,294	$	785,029	$	698,875	$	703,347

The carrying value, which approximates the fair value, of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $856.2 million at September 30, 2015 and $520.4 million at December 31, 2014.

There were $43,000 of gross realized gains and $3,000 of realized losses for the three months ended September 30, 2015 and there were $45,000 of gross realized gains and $43,000 of realized losses from the sale of available for sale securities during the nine months ended September 30, 2015. There were $153,000 of realized gains and $171,000 of realized losses on investment securities for the three months ended September 30, 2014. There were $191,000 of realized gains and $171,000 of realized losses for the nine months ended September 30, 2014.

The state and political subdivision debt obligations are primarily non-rated bonds representing small, Arkansas, Kansas, Missouri, Tennessee and Texas issues, which are evaluated on an ongoing basis.

NOTE 4: LOANS AND ALLOWANCE FOR LOAN LOSSES

At September 30, 2015, the Company’s loan portfolio was $4.85 billion, compared to $2.74 billion at December 31, 2014. The various categories of loans are summarized as follows:

(In thousands)	September 30, 2015		December 31, 2014
Consumer:
Credit cards	$	171,701	$	185,380
Other consumer		182,472		103,402
Total consumer		354,173		288,782
Real Estate:
Construction		253,761		181,968
Single family residential		623,089		455,563
Other commercial		1,037,559		714,797
Total real estate		1,914,409		1,352,328
Commercial:
Commercial		394,422		291,820
Agricultural		170,257		115,658
Total commercial		564,679		407,478
Other		6,017		5,133
Legacy loans		2,839,278		2,053,721
Loans acquired, not covered by FDIC loss share (net of discount and allowance) ⁽¹⁾		2,013,816		575,980
Loans acquired, covered by FDIC loss share (net of discount and allowance) ⁽¹⁾		-		106,933
Total loans	$	4,853,094	$	2,736,634

__________________________________________________

(1)

See Note 5, Loans Acquired, for segregation of loans acquired by loan class. In September 2015 the Company entered into an agreement with the FDIC to terminate all loss sharing agreements.

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for loans losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. Furthermore, factors that influenced the Company’s judgment regarding the allowance for loan losses consists of a five-year historical loss average segregated by each primary loan sector. On an annual basis, historical loss rates are calculated for each sector.

Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. The Company no longer originates or services student loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate – The real estate loan portfolio consists of construction loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely.

Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchase or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with a one or three year balloon, and the Company has recently instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on all commercial loans, particularly as they relate to closely-held or limited liability entities.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Nonaccrual loans, excluding loans acquired, segregated by class of loans, are as follows:

(In thousands)	September 30, 2015		December 31, 2014
Consumer:
Credit cards	$	231	$	197
Other consumer		334		405
Total consumer		565		602
Real estate:
Construction		4,625		4,863
Single family residential		4,912		4,010
Other commercial		3,349		1,522
Total real estate		12,886		10,395
Commercial:
Commercial		1,766		585
Agricultural		88		456
Total commercial		1,854		1,041
Total	$	15,305	$	12,038

An age analysis of past due loans, excluding loans acquired, segregated by class of loans, is as follows:

(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing

September 30, 2015
Consumer:
Credit cards	$	765	$	231	$	996	$	170,705	$	171,701	$	-
Other consumer		1,411		699		2,110		180,362		182,472		327
Total consumer		2,176		930		3,106		351,067		354,173		327
Real estate:
Construction		3,772		1,979		5,751		248,010		253,761		239
Single family residential		3,922		3,066		6,988		616,101		623,089		388
Other commercial		3,162		2,085		5,247		1,032,312		1,037,559		-
Total real estate		10,856		7,130		17,986		1,896,423		1,914,409		627
Commercial:
Commercial		3,106		652		3,758		390,664		394,422		202
Agricultural		204		191		395		169,862		170,257		119
Total commercial		3,310		843		4,153		560,526		564,679		321
Other		-		-		-		6,017		6,017		-
Total	$	16,342	$	8,903	$	25,245	$	2,814,033	$	2,839,278	$	1,275

December 31, 2014
Consumer:
Credit cards	$	687	$	457	$	1,144	$	184,236	$	185,380	$	-
Other consumer		1,349		447		1,796		101,606		103,402		223
Total consumer		2,036		904		2,940		285,842		288,782		223
Real estate:
Construction		760		570		1,330		180,638		181,968		177
Single family residential		4,913		2,213		7,126		448,437		455,563		248
Other commercial		1,987		847		2,834		711,963		714,797		-
Total real estate		7,660		3,630		11,290		1,341,038		1,352,328		425
Commercial:
Commercial		381		354		735		291,085		291,820		-
Agricultural		119		109		228		115,430		115,658		40
Total commercial		500		463		963		406,515		407,478		40
Other		-		-		-		5,133		5,133		-
Total	$	10,196	$	4,997	$	15,193	$	2,038,528	$	2,053,721	$	688

Impaired Loans – A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loans, including scheduled principal and interest payments. This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent.

Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.

Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows:

(In thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
September 30, 2015											Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
Consumer:
Credit cards	$	461	$	461	$	-	$	461	$	7	$	450	$	8	$	394	$	20
Other consumer		701		652		20		672		124		612		13		592		33
Total consumer		1,162		1,113		20		1,133		131		1,062		21		986		53
Real estate:
Construction		5,683		2,196		2,781		4,977		378		6,230		109		5,532		306
Single family residential		6,068		4,710		557		5,267		963		4,945		108		5,023		278
Other commercial		4,859		3,541		90		3,631		699		3,175		68		2,830		157
Total real estate		16,610		10,447		3,428		13,875		2,040		14,350		285		13,385		741
Commercial:
Commercial		2,883		1,145		873		2,018		588		1,488		39		1,673		93
Agricultural		207		218		-		218		38		180		5		252		14
Total commercial		3,090		1,363		873		2,236		626		1,668		44		1,925		107
Total	$	20,862	$	12,923	$	4,321	$	17,244	$	2,797	$	17,080	$	350	$	16,296	$	901

December 31, 2014											Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
Consumer:
Credit cards	$	197	$	197	$	-	$	197	$	6	$	471	$	-	$	482	$	9
Other consumer		604		610		9		619		118		781		14		821		30
Total consumer		801		807		9		816		124		1,252		14		1,303		39
Real estate:
Construction		7,400		7,020		-		7,020		599		4,323		49		3,662		114
Single family residential		4,442		3,948		377		4,325		899		4,583		52		4,282		133
Other commercial		1,955		1,446		36		1,482		268		6,663		75		8,115		252
Total real estate		13,797		12,414		413		12,827		1,766		15,569		176		16,059		499
Commercial:
Commercial		1,227		566		-		566		102		654		7		646		20
Agricultural		501		460		-		466		83		274		3		178		6
Total commercial		1,728		1,026		-		1,026		185		928		10		824		26
Total	$	16,326	$	14,247	$	422	$	14,669	$	2,075	$	17,749	$	200	$	18,186	$	564

At September 30, 2015, and December 31, 2014, impaired loans, net of government guarantees and excluding loans acquired, totaled $17.2 million and $14.7 million, respectively. Allocations of the allowance for loan losses relative to impaired loans were $2.8 million at September 30, 2015 and $2.1 million at December 31, 2014. Approximately $350,000 and $900,000 of interest income was recognized on average impaired loans of $17.1 million and $16.3 million for the three and nine months ended September 30, 2015. Interest income recognized on impaired loans on a cash basis during the three and nine months ended September 30, 2015 and 2014 was not material.

Included in certain impaired loan categories are troubled debt restructurings (“TDRs”). When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” results and the Company classifies the loan as a TDR. The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Under ASC Topic 310-10-35 – Subsequent Measurement, a TDR is considered to be impaired, and an impairment analysis must be performed. The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is needed.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. The Company returns TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.

The following table presents a summary of troubled debt restructurings, excluding loans acquired, segregated by class of loans.

	Accruing TDR Loans				Nonaccrual TDR Loans				Total TDR Loans
(Dollars in thousands)	Number		Balance		Number		Balance		Number		Balance

September 30, 2015
Consumer:
Other consumer		-	$	-		1	$	13		1	$	13
Total consumer		-		-		1		13		1		13
Real estate:
Construction		-	$	-		1	$	256		1	$	256
Single-family residential		2		137		9		1,155		11		1,292
Other commercial		3		1,818		6		937		9		2,755
Total real estate		5		1,955		16		2,348		21		4,303
Total		5	$	1,955		17	$	2,361		22	$	4,316

December 31, 2014
Real estate:
Construction		-	$	-		1	$	391		1	$	391
Single-family residential		2		393		1		3		3		396
Other commercial		3		1,840		1		614		4		2,454
Total real estate		5		2,233		3		1,008		8		3,241
Total		5	$	2,233		3	$	1,008		8	$	3,241

The following table presents loans that were restructured as TDRs during the three and nine months ended September 30, 2015 and 2014, excluding loans acquired, segregated by class of loans.

							Modification Type
(Dollars in thousands)	Number of Loans		Balance Prior to TDR		Balance at September 30		Change in Maturity Date		Change in Rate		Financial Impact on Date of Restructure

Three Months Ended September 30, 2015
Consumer:
Other consumer		1	$	14	$	14	$	14	$	-	$	-
Total consumer		1		14		14		14		-		-
Real Estate:
Single-family residential		2		249		207		207	$	-	$	-
Other commercial		5		347		339		339		-		-
Total real estate		7		596		546		546		-		-
Total		8	$	610	$	560	$	560	$	-	$	-

Three Months Ended September 30, 2014
Commercial:
Commercial		-	$	-	$	-	$	-	$	-	$	-
Total commercial		-		-		-		-		-		-
Total		-	$	-	$	-	$	-	$	-	$	-

Nine Months Ended September 30, 2015
Consumer:
Other consumer		1	$	14	$	14	$	14	$	-	$	-
Total consumer		1		14		14		14		-		-
Real estate:
Single-family residential		8	$	958	$	914	$	914	$	-	$	-
Other commercial		6		366		339		339
Total real estate		14		1,324		1,253		1,253		-		-
Total		15	$	1,338	$	1,267	$	1,267	$	-	$	-

Nine Months Ended September 30, 2014
Real estate:
Single-family residential		1	$	1,031	$	1,031	$	-	$	1,031	$	-
Total real estate		1		1,031		1,031		-		1,031		-
Commercial:
Commercial		1		599		-		-		-		-
Total commercial		1		599		-		-		-		-
Total		2	$	1,630	$	1,031	$	-	$	1,031	$	-

During the three months ended September 30, 2015, the Company modified eight loans with a recorded investment of $610,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by various terms, including changing the maturity date, deferring amortized principal payments and requiring interest only payments for a period of 12 months. Based on the fair value of the collateral, a $113,000 specific reserve was determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.

During the nine months ended September 30, 2015, the Company modified fifteen loans with a total recorded investment of $1,338,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by various terms, including changing the maturity date and deferring amortized principal payments. Based on the fair value of the collateral, a $113,000 specific reserve was determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.

During the three months ended September 30, 2014, the Company did not modify any loans and during the nine months ended September 30, 2014, the Company modified two loans with a total recorded investment of $1,630,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by changing various terms, including changing the maturity date and deferring amortized principal payments. Based on the fair value of the collateral, no specific reserve was determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.

There were no loans for which a payment default occurred during the nine months ended September 30, 2015 and 2014, and that had been modified as a TDR within 12 months or less of the payment default, excluding loans acquired. We define a payment default as a payment received more than 90 days after its due date.

In addition to the TDRs that occurred during the period provided in the preceding tables, the Company had TDRs with pre-modification loan balances of $167,000 and $5,719,000 at September 30, 2015 and 2014, respectively, for which other real estate owned (“OREO”) was received in full or partial satisfaction of the loans. The majority of such TDRs were in commercial real estate and residential real estate. At September 30, 2015, the Company had $1,481,000 of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At September 30, 2015, the Company had $5,092,000 of OREO secured by residential real estate properties.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions in the States of Arkansas, Kansas, Missouri and Tennessee.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8. A description of the general characteristics of the 8 risk ratings is as follows:

Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.

Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated "excellent”).

Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent "red flags". These "red flags" require a higher level of supervision or monitoring than the normal "Pass" rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a harsher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date. Special Mention loans are not adversely classified (although they are "criticized") and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.

Risk Rate 7 – Doubtful – A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.

Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.

Loans acquired are evaluated using this internal grading system. Loans acquired are evaluated individually and include purchased credit impaired loans of $39.9 million and $22.3 million that are accounted for under ASC Topic 310-30 and are classified as substandard (Risk Rating 6) as of September 30, 2015 and December 31, 2014, respectively. Of the remaining loans acquired and accounted for under ASC Topic 310-20, $53.3 million and $16.6 million were classified (Risk Ratings 6, 7 and 8 – see classified loans discussion below) at September 30, 2015 and December 31, 2014, respectively.

Loans acquired, covered by loss share agreements, had additional protection provided by the FDIC prior to the termination of the loss share agreements. During the 2014 quarterly impairment testing on the estimated cash flows of the credit impaired loans, the Company established that some of the loans covered by loss share from our FDIC-assisted transactions had experienced material projected credit deterioration. As a result, the Company established a $954,000 allowance for loan losses on covered loans by recording a provision for loan losses of $0.4 million (net of FDIC-loss share adjustments) during the period ended December 31, 2014. There was no further projected credit deterioration and no addition to the allowance for covered loans during 2015. The $954,000 allowance was reclassified to allowance on acquired non-covered loans subsequent to the agreement with the FDIC to terminate the loss share agreements. See Note 5, Loans Acquired, for further discussion of the acquired loans and loss sharing agreements.

Purchased credit impaired loans are loans that showed evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their fair value was initially based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates of interest. The difference between the undiscounted cash flows expected at acquisition and the fair value at acquisition is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition are not recognized as a yield adjustment. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment.

Classified loans for the Company include loans in Risk Ratings 6, 7 and 8. Loans may be classified, but not considered impaired, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for loan impairment testing. Loans rated 6 – 8 that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans. (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans. Total classified loans, excluding loans accounted for under ASC Topic 310-30, were $116.4 million and $82.1 million, as of September 30, 2015 and December 31, 2014, respectively.

The following table presents a summary of loans by credit risk rating as of September 30, 2015 and December 31, 2014, segregated by class of loans. Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table.

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total

September 30, 2015
Consumer:
Credit cards	$	171,239	$	-	$	462	$	-	$	-	$	171,701
Other consumer		181,551		-		883		38		-		182,472
Total consumer		352,790		-		1,345		38		-		354,173
Real estate:
Construction		247,457		476		5,812		16		-		253,761
Single family residential		610,347		2,064		10,505		173		-		623,089
Other commercial		996,692		4,869		34,815		1,183		-		1,037,559
Total real estate		1,854,496		7,409		51,132		1,372		-		1,914,409
Commercial:
Commercial		384,393		1,483		8,538		8		-		394,422
Agricultural		169,615		-		642		-		-		170,257
Total commercial		554,008		2,074		9,180		8		-		564,679
Other		6,017		-		-		-		-		6,017
Loans acquired, not covered by FDIC loss share		1,952,157		8,372		51,175		2,108		4		2,013,816
Loans acquired, covered by FDIC loss share		-		-		-		-		-		-
Total	$	4,719,468	$	17,264	$	112,832	$	3,526	$	4	$	4,853,094

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total

December 31, 2014
Consumer:
Credit cards	$	184,923	$	-	$	457	$	-	$	-	$	185,380
Other consumer		102,515		5		839		43		-		103,402
Total consumer		287,438		5		1,296		43		-		288,782
Real estate:
Construction		176,825		84		5,059		-		-		181,968
Single family residential		446,040		1,776		7,665		82		-		455,563
Other commercial		698,329		7,074		9,394		-		-		714,797
Total real estate		1,321,194		8,934		22,118		82		-		1,352,328
Commercial:
Commercial		271,017		1,544		19,248		11		-		291,820
Agricultural		115,106		20		532		-		-		115,658
Total commercial		386,123		1,564		19,780		11		-		407,478
Other		5,133		-		-		-		-		5,133
Loans acquired, not covered by FDIC loss share		535,728		1,435		36,958		1,854		5		575,980
Loans acquired, covered by FDIC loss share		106,933		-		-		-		-		106,933
Total	$	2,642,549	$	11,938	$	80,152	$	1,990	$	5	$	2,736,634

Net (charge-offs)/recoveries for the three and nine months ended September 30, 2015 and 2014, excluding loans acquired, segregated by class of loans, were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2015			2014			2015			2014
Consumer:
Credit cards	$	(550	)	$	(598	)	$	(1,683	)	$	(1,653	)
Student loans		-			(9	)		-			(38	)
Other consumer		(519	)		(517	)		(785	)		(806	)
Total consumer		(1,069	)		(1,124	)		(2,468	)		(2,497	)
Real estate:
Construction		(15	)		30			(44	)		(424	)
Single-family residential		(43	)		(31	)		(368	)		(389	)
Other commercial		(26	)		(154	)		(240	)		(161	)
Total real estate		(84	)		(155	)		(652	)		(974	)
Commercial:
Commercial		(466	)		(308	)		(542	)		(520	)
Agriculture		(50	)		5			(41	)		(13	)
Total commercial		(516	)		(303	)		(583	)		(533	)
Total	$	(1,669	)	$	(1,582	)	$	(3,703	)	$	(4,004	)

Allowance for Loan Losses

Allowance for Loan Losses – The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310-10, Receivables, and allowance allocations calculated in accordance with ASC Topic 450-20, Loss Contingencies. Accordingly, the methodology is based on the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factors.

As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations.

A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for loan losses as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

The general allocation is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) concentrations of credit within the loan portfolio, (6) the experience, ability and depth of lending management and staff and (7) other factors and trends that will affect specific loans and categories of loans. The Company establishes general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans.

The following table details activity in the allowance for loan losses, excluding loans acquired, by portfolio segment for the three and nine months ended September 30, 2015. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Total

Three Months Ended September 30, 2015
Balance, beginning of period ⁽²⁾	$	5,310		$	18,577		$	5,318		$	1,362		$	30,567
Provision for loan losses ⁽¹⁾		725			794			(835	)		798			1,482
Charge-offs		(516	)		(109	)		(763	)		(597	)		(1,985	)
Recoveries		-			25			213			78			316
Net recoveries (charge-offs)		(516	)		(84	)		(550	)		(519	)		(1,669	)
Balance, September 30, 2015 ⁽²⁾	$	5,519		$	19,287		$	3,933		$	1,641		$	30,380

Nine Months Ended September 30, 2015
Balance, beginning of period ⁽²⁾	$	6,962		$	15,161		$	5,445		$	1,460		$	29,028
Provision for loan losses ⁽¹⁾		(860	)		4,778			171			966			5,055
Charge-offs		(761	)		(735	)		(2,350	)		(1,183	)		(5,029	)
Recoveries		178			83			667			398			1,326
Net charge-offs		(583	)		(652	)		(1,683	)		(785	)		(3,703	)
Balance, September 30, 2015 ⁽²⁾	$	5,519		$	19,287		$	3,933		$	1,641		$	30,380

Period-end amount allocated to:
Loans individually evaluated for impairment	$	626		$	2,040		$	7		$	124		$	2,797
Loans collectively evaluated for impairment		4,893			17,247			3,926			1,517			27,583
Balance, September 30, 2015 ⁽²⁾	$	5,519		$	19,287		$	3,933		$	1,641		$	30,380

__________________________________________________

(1)

Provision for loan losses of $133,000 and $737,000 attributable to loans acquired was excluded from this table for the three and nine months ended September 30, 2015 (total provision for loan losses for the three and nine months ended September 30, 2015 was $1,615,000 and $5,792,000). The $133,000 and $737,000 were subsequently charged-off, resulting in no increase to the ending balance in the allowance related to loans acquired.

(2)

Allowance for loan losses at September 30, 2015, June 30, 2015 and December 31, 2014 includes $954,000 allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2015, June 30, 2015 and December 31, 2014 was $31,334,000, $31,521,000 and $29,982,000, respectively.

Activity in the allowance for loan losses, excluding allowance on loans acquired, for the three and nine months ended September 30, 2014 was as follows:

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Total

Three Months Ended September 30, 2014
Balance, beginning of period	$	3,951		$	16,169		$	5,510		$	1,900		$	27,530
Provision for loan losses		994			(419	)		576			(23	)		1,128
Charge-offs		(474	)		(534	)		(788	)		(648	)		(2,444	)
Recoveries		171			379			190			122			862
Net charge-offs		(303	)		(155	)		(598	)		(526	)		(1,582	)
Balance, September 30, 2014	$	4,642		$	15,595		$	5,488		$	1,351		$	27,076

Nine Months Ended September 30, 2014
Balance, beginning of period	$	3,205		$	16,885		$	5,430		$	1,922		$	27,442
Provision for loan losses		1,970			(316	)		1,711			273			3,638
Charge-offs		(734	)		(2,484	)		(2,329	)		(1,220	)		(6,767	)
Recoveries		201			1,510			676			376			2,763
Net charge-offs		(533	)		(974	)		(1,653	)		(844	)		(4,004	)
Balance, September 30, 2014	$	4,642		$	15,595		$	5,488		$	1,351		$	27,076

Period-end amount allocated to:
Loans individually evaluated for impairment	$	-		$	478		$	-		$	28		$	506
Loans collectively evaluated for impairment		4,642			15,117			5,488			1,323			26,570
Balance, September 30, 2014	$	4,462		$	15,595		$	5,488		$	1,351		$	27,076

Period-end amount allocated to:
Loans individually evaluated for impairment	$	185		$	1,766		$	6		$	118		$	2,075
Loans collectively evaluated for impairment		6,777			13,395			5,439			1,342			26,953
Balance, December 31, 2014 ⁽¹⁾	$	6,962		$	15,161		$	5,445		$	1,460		$	29,028

__________________________________________________

(1)

Allowance for loan losses at December 31, 2014 includes $954,000 allowance for loans acquired, covered by loss share (not shown in the table above). The total allowance for loan losses at December 31, 2014 was $29,982,000.

The Company’s recorded investment in loans, excluding loans acquired, related to each balance in the allowance for loan losses by portfolio segment on the basis of the Company’s impairment methodology was as follows:

(In thousands)

Commercial

Real
Estate

Credit
Card

Other
Consumer
and Other

Total