Exhibit 99.3

 

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

 

The following unaudited pro forma combined condensed consolidated financial statements and explanatory notes show the impact on the historical financial positions and results of operations of Simmons, OKSB and First Texas and have been prepared to illustrate the effects of the OKSB merger and First Texas merger under the acquisition method of accounting with Simmons treated as the acquirer. The following unaudited pro forma combined condensed consolidated financial statements have been prepared using the acquisition method of accounting, giving effect to our completed acquisition of Hardeman County Investment Company, Inc., or HCIC, which closed on May 15, 2017, and our announced acquisitions of OKSB and First Texas. The unaudited pro forma combined condensed consolidated balance sheets combine the historical financial information of Simmons and HCIC, OKSB and First Texas as of June 30, 2017, and assume that the acquisitions were completed on that date. The unaudited pro forma combined condensed consolidated statements of income for the six-month period ended June 30, 2017 and the 12-month period ended December 31, 2016 give effect to the acquisitions as if the transactions had been completed on January 1, 2016.

 

The unaudited pro forma combined condensed consolidated financial statements are presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined on the dates described above, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. The unaudited pro forma combined condensed consolidated financial statements also do not consider any potential impacts of current market conditions on revenues, expense efficiencies, asset dispositions and share repurchases, among other factors.

 

 

Unaudited Pro Forma Combined Condensed

Consolidated Balance Sheets

As of June 30, 2017

 

						Acquisitions
										First				Pro Forma
		Simmons				OKSB				Texas				Acquisition				Pro Forma
(in thousands)		Historical				Historical				Historical				Adjustments				Combined
ASSETS
Cash and non-interest bearing balances due from banks		$	112,567			$	37,898			$	16,138				$(184,426	)(1),(2)		$	(17,823	)
Interest bearing balances due from banks			212,547				41,941				76,906				—				331,394
Cash and cash equivalents			325,114				79,839				93,044				(184,426	)			313,571
Federal funds sold			4,500				—				—				—				4,500
Interest bearing balances due from banks – time			6,057				—				—				—				6,057
Investment securities – held-to-maturity			419,003				10,382				—				—				429,385
Investment securities – available-for-sale			1,190,600				424,031				61,827				—				1,676,458
Total investments			1,609,603				434,413				61,827				—				2,105,843
Mortgage loans held for sale			16,266				6,036				4,072				—				26,374
Assets held in trading accounts			50				—				—				—				50
Loans:
Legacy loans			5,000,572				—				—				—				5,000,572
Allowance for loan losses			(41,379	)			(27,318	)			(19,545	)			46,863	(3)			(41,379	)
Loans acquired, net of discount and allowance			1,224,739				1,965,598				2,138,966				(57,594	)(4)			5,271,709
Net loans			6,183,932				1,938,280				2,119,421				(10,731	)			10,230,902
Premises and equipment			230,641				21,901				25,307				11,751	(5)			289,600
Foreclosed assets			26,012				—				—				—				26,012
Interest receivable			27,337				6,328				5,109				—				38,774
Bank owned life insurance			148,134				28,450				7,042				—				183,626
Goodwill			379,437				13,545				37,227				320,257	(6)			750,466
Other intangible assets			58,528				5,727				371				54,007	(7)			118,633
Other assets			52,697				38,416				25,491				(16,076	)(2),(8)			100,528
Total assets		$	9,068,308			$	2,572,935			$	2,378,911			$	174,782			$	14,194,936
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing transaction accounts		$	1,650,986			$	557,159			$	454,126				—			$	2,662,271
Interest bearing transaction accounts and savings deposits			4,141,426				833,751				1,185,907				—				6,161,084
Time deposits			1,311,123				622,924				139,723				(1,032	)(9)			2,072,738
Total deposits			7,103,535				2,013,834				1,779,756				(1,032	)			10,896,093
Federal funds purchased and securities sold under agreements to repurchase			121,419				11,705				50,000				—				183,124
Other borrowings			474,962				192,000				269,932				(101	)(10)			936,793
Subordinated debentures			67,312				46,393				30,225				(5,325	)(11)			138,605
Accrued interest and other liabilities			67,004				13,457				9,246				1,000	(12)			90,707
Total liabilities			7,834,232				2,277,389				2,139,159				(5,458	)			12,245,322
Stockholders’ equity:
Common stock			322				21,260				7,877				(28,999	)(1),(13)			460
Surplus			761,754				123,772				171,579				420,049	(1),(13)			1,477,154
Undivided profits			483,322				192,961				62,507				(255,468)	(13)			483,322
Accumulated other comprehensive income (loss)			(11,322	)			(292	)			(321	)			613	(13)			(11,322	)
Treasury Stock			—				(42,155	)			(1,890	)			44,045	(13)			—
Total stockholders’ equity			1,234,076				295,546				239,752				180,240				1,949,614
Total liabilities and stockholders’ equity		$	9,068,308			$	2,572,935			$	2,378,911			$	174,782			$	14,194,936

 

The accompanying notes are an integral part of these pro forma combined condensed consolidated financial statements.

 

 

Unaudited Pro Forma Combined Condensed

Consolidated Statements of Income

For the Six Months Ended June 30, 2017

 

						Acquisitions
														Pro Forma
		Simmons				OKSB				First Texas				Acquisition				Pro Forma
(in thousands, except per share data)		Historical				Historical				Historical				Adjustments				Combined
INTEREST INCOME
Loans		$	142,277			$	43,506			$	45,792				$ 4,537	(14)		$	236,112
Federal funds sold			14				—				—				—				14
Investment securities			19,441				4,087				532				—				24,060
Mortgage loans held for sale			271				—				—				—				271
Interest bearing balances due from banks			322				186				331				—				839
Other interest-earning assets			—				—				246				—				246
TOTAL INTEREST INCOME			162,325				47,779				46,901				4,537				261,542
INTEREST EXPENSE
Deposits			9,020				3,964				6,045				—	(15)			19,029
Federal funds purchased and securities
sold under agreements to repurchase			167				—				1,047				—				1,214
Other borrowings			2,753				1,088				888				—				4,729
Subordinated debentures			1,193				1,194				670				—				3,057
TOTAL INTEREST EXPENSE			13,133				6,246				8,650				—				28,029
NET INTEREST INCOME			149,192				41,533				38,251				4,537				233,513
Provision for loan losses			11,330				3,505				2,463				—				17,298
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			137,862				38,028				35,788				4,537				216,215
NON-INTEREST INCOME
Trust income			8,325				—				2,417				—				10,742
Service charges on deposit accounts			16,585				3,741				871				—				21,197
Other service charges and fees (includes insurance income)			4,712				872				142				—				5,726
Mortgage and SBA lending income			6,384				1,247				1,284				—				8,915
Investment banking income			1,327				—				144				—				1,471
Debit and credit card fees			16,593				868				489				—				17,950
Bank owned life insurance income			1,677				632				123				—				2,432
Gain (loss) on sale of securities			2,299				451				—				—				2,750
Other income			7,902				1,590				1,165				—				10,657
TOTAL NON-INTEREST INCOME			65,804				9,401				6,635				—				81,840
NON-INTEREST EXPENSE
Salaries and employee benefits			69,741				19,575				18,301				—				107,617
Occupancy expense, net			9,531				2,795				1,945				—				14,271
Furniture and equipment expense			8,993				1,896				993				—				11,882
Other real estate and foreclosure expense			1,106				53				10				—				1,169
Deposit insurance			1,460				546				645				—				2,651
Merger related costs			7,127				—				—				—				7,127
Other operating expenses			39,772				5,593				6,095				1,800	(16)			53,260
TOTAL NON-INTEREST EXPENSE			137,730				30,458				27,989				1,800				197,977
NET INCOME BEFORE INCOME TAXES			65,936				16,971				14,434				2,736				100,077
Provision for income taxes			20,751				5,874				5,044				1,073	(17)			32,742
NET INCOME			45,185				11,097				9,390				1,663				67,335
Preferred stock dividends			—				—				—				—				—
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	45,185			$	11,097			$	9,390			$	1,663			$	67,335
BASIC EARNINGS PER SHARE		$	1.43			$	0.59			$	1.19							$	1.49
DILUTED EARNINGS PER SHARE		$	1.42			$	0.59			$	1.10							$	1.48
Average common shares outstanding			31,585												13,750	(18)			45,335
Average diluted shares outstanding			31,794												13,750	(18)			45,544

 

The accompanying notes are an integral part of these pro forma combined condensed consolidated financial statements.

 

 

 

Unaudited Pro Forma Combined Condensed

Consolidated Statements of Income

For the Year Ended December 31, 2016

 

						Acquisition
										HCIC
										Pro Forma				Pro Forma
		Simmons				HCIC				Acquisition				Simmons and
(in thousands, except per share data)		Historical				Historical				Adjustments				HCIC Combined
INTEREST INCOME
Loans		$	265,652			$	13,475			$	1,357	(a)		$	280,484
Federal funds sold			57				36				—				93
Investment securities			33,479				3,349				—				36,828
Mortgage loans held for sale			1,102				7				—				1,109
Interest bearing balances due from banks			699				—				—				699
Other interest-earning assets			16				—				—				16
TOTAL INTEREST INCOME			301,005				16,867				1,357				319,229
INTEREST EXPENSE
Deposits			15,217				1,321				—				16,538
Federal funds purchased and securities sold under agreements to repurchase			273				113				—				386
Other borrowings			4,148				24				—				4,172
Subordinated debentures			2,161				145				—				2,306
TOTAL INTEREST EXPENSE			21,799				1,603				—				23,402
NET INTEREST INCOME			279,206				15,264				1,357				295,827
Provision for loan losses			20,065				120				—				20,185
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			259,141				15,144				1,357				275,642
NON-INTEREST INCOME
Trust income			15,442				—				—				15,442
Service charges on deposit accounts			32,414				3,470				—				35,884
Other service charges and fees (includes insurance income)			6,913				3,491				—				10,404
Mortgage and SBA lending income			22,442				338				—				22,780
Investment banking income			3,471				—				—				3,471
Debit and credit card fees			30,740				10				—				30,750
Bank owned life insurance income			3,324				234				—				3,558
Gain (loss) on sale of securities			5,848				70				—				5,918
Other income			18,788				41				—				18,829
TOTAL NON-INTEREST INCOME			139,382				7,654				—				147,036
NON-INTEREST EXPENSE
Salaries and employee benefits			133,457				9,741				—				143,198
Occupancy expense, net			18,667				2,057				—				20,724
Furniture and equipment expense			16,683				—				—				16,683
Other real estate and foreclosure expense			4,461				205				—				4,666
Deposit insurance			3,469				170				—				3,639
Merger related costs			4,835				—				—				4,835
Other operating expenses			73,513				3,990				523	(b)			78,026
TOTAL NON-INTEREST EXPENSE			255,085				16,163				523				271,771
NET INCOME BEFORE INCOME TAXES			143,438				6,635				834				150,907
Provision for income taxes			46,624				405				327	(c)			47,356
NET INCOME			96,814				6,230				507				103,551
Preferred stock dividends			24				—				—				24
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	96,790			$	6,230			$	507			$	103,527
BASIC EARNINGS PER SHARE		$	3.16			$	38.22							$	3.29
DILUTED EARNINGS PER SHARE		$	3.13			$	38.22							$	3.26
Average common shares outstanding			30,646								800	(d)			31,446
Average diluted shares outstanding			30,964								800	(d)			31,764

 

The accompanying notes are an integral part of these pro forma combined condensed consolidated financial statements.

 

 

Unaudited Pro Forma Combined Condensed

Consolidated Statements of Income

For the Year Ended December 31, 2016

 

						Acquisitions
		Pro Forma												Pro Forma
		Simmons and				OKSB				First Texas				Acquisition				Pro Forma
(in thousands, except per share data)		HCIC Combined				Historical				Historical				Adjustments				Combined
INTEREST INCOME
Loans		$	280,484			$	81,527			$	77,971				$17,106	(14)		$	457,088
Federal funds sold			93				—				—				—				93
Investment securities			36,828				7,407				1,134				—				45,369
Mortgage loans held for sale			1,109				—				—				—				1,109
Interest bearing balances due from banks			699				—				251				—				950
Other interest-earning assets			16				206				398				—				620
TOTAL INTEREST INCOME			319,229				89,140				79,754				17,106				505,229
INTEREST EXPENSE
Deposits			16,538				5,968				7,472				1,032	(15)			31,010
Federal funds purchased and securities sold under agreements to repurchase			386				—				2,118				—				2,504
Other borrowings			4,172				1,379				921				—				6,472
Subordinated debentures			2,306				2,350				1,340				—				5,996
TOTAL INTEREST EXPENSE			23,402				9,697				11,851				1,032				45,982
NET INTEREST INCOME			295,827				79,443				67,903				16,074				459,247
Provision for loan losses			20,185				4,769				2,109				—				27,063
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			275,642				74,674				65,794				16,074				432,184
NON-INTEREST INCOME
Trust income			15,442				—				4,925				—				20,367
Service charges on deposit accounts			35,884				7,638				1,688				—				45,210
Other service charges and fees (includes insurance income)			10,404				1,014				232				—				11,650
Mortgage and SBA lending income			22,780				2,672				2,970				—				28,422
Investment banking income			3,471				—				261				—				3,732
Debit and credit card fees			30,750				1,906				938				—				33,594
Bank owned life insurance income			3,558				899				85				—				4,542
Gain (loss) on sale of securities			5,918				294				—				—				6,212
Other income			18,829				1,662				2,627				—				23,118
TOTAL NON-INTEREST INCOME			147,036				16,085				13,726				—				176,847
NON-INTEREST EXPENSE
Salaries and employee benefits			143,198				37,724				33,536				—				214,458
Occupancy expense, net			20,724				6,417				3,828				—				30,969
Furniture and equipment expense			16,683				4,642				2,045				—				23,370
Other real estate and foreclosure expense			4,666				(222	)			117				—				4,561
Deposit insurance			3,639				1,376				832				—				5,847
Merger related costs			4,835				—				—				—				4,835
Other operating expenses			78,026				13,309				10,493				3,600	(16)			105,428
TOTAL NON-INTEREST EXPENSE			271,771				63,246				50,851				3,600				389,468
NET INCOME BEFORE INCOME TAXES			150,907				27,513				28,669				12,474				219,563
Provision for income taxes			47,356				9,809				10,050				4,893	(17)			72,108
NET INCOME			103,551				17,704				18,619				7,581				147,455
Preferred stock dividends			24				—				22				—				46
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	103,527			$	17,704			$	18,597			$	7,581			$	147,409
BASIC EARNINGS PER SHARE		$	3.29			$	0.93			$	2.40							$	3.26
DILUTED EARNINGS PER SHARE		$	3.26			$	0.92			$	2.18							$	3.24
Average common shares outstanding			31,446												13,750	(18)			45,196
Average diluted shares outstanding			31,764												13,750	(18)			45,514

 

The accompanying notes are an integral part of these pro forma combined condensed consolidated financial statements.

 

 

Notes to Pro Forma Combined Condensed Consolidated Financial Statements

 

Note 1.    Basis of Presentation

 

The unaudited pro forma combined condensed consolidated financial statements and explanatory notes show the impact on the historical financial condition and results of operations of Simmons resulting from the HCIC, OKSB and First Texas acquisitions under the acquisition method of accounting. Under the acquisition method of accounting, the assets and liabilities of HCIC, OKSB and First Texas are recorded by Simmons at their respective fair values as of the date the transaction is completed. The unaudited pro forma combined condensed consolidated balance sheets combine the historical financial information of Simmons (which includes HCIC), OKSB and First Texas as of June 30, 2017, and assume that the OKSB and First Texas acquisitions were completed on that date. The unaudited pro forma combined condensed consolidated statements of income for the six-month period ended June 30, 2017, and for the year ended December 31, 2016, give effect to the HCIC, OKSB and First Texas acquisitions as if the transactions had been completed on January 1, 2016.

 

Since the transactions are recorded using the acquisition method of accounting, all loans are recorded at fair value, including adjustments for credit quality, and no allowance for credit losses is carried over to Simmons’ balance sheet. In addition, certain anticipated nonrecurring costs associated with the HCIC, OKSB and First Texas acquisitions such as potential severance, professional fees, legal fees and conversion-related expenditures are not reflected in the pro forma statements of income and will be expensed as incurred.

 

While the recording of the acquired loans at their fair value will impact the prospective determination of the provision for loan losses and the allowance for loan losses, for purposes of the unaudited pro forma combined condensed consolidated statement of income for the six-month period ended June 30, 2017 and for the year ended December 31, 2016, Simmons assumed no adjustments to the historical amount of HCIC’s, OKSB’s, and First Texas’s provision for loan losses. If such adjustments were estimated, there could be a significant change to the historical amounts of provision for loan losses presented.

 

The HCIC transaction closed effective May 15, 2017 and is not a significant acquisition under SEC rules and regulations and, while not required to be presented, is provided for information purposes only. The unaudited pro forma combined condensed consolidated statements of income for the year ended December 31, 2016, are presented in two stages. The first stage presents the results of HCIC as combined with the historical results of Simmons and reflecting pro forma adjustments for the year ended December 31, 2016. The second stage presents the combined results of Simmons with HCIC, with the historical results and pro forma adjustments for OKSB and First Texas for the year ended December 31, 2016. These transactions combined are significant and subject to shareholder approval. The unaudited pro forma combined condensed consolidated statements of income for the six months ended June 30, 2017 include the results of HCIC from May 16, 2017 to June 30, 2017.

 

Note 2.    Merger and Acquisition Integration Costs

 

The retail branch operations, commercial lending activities, mortgage banking operations, trust and investment services, along with all other operations of HCIC, OKSB and First Texas will be integrated into Simmons Bank. The operation integration and the system conversion for HCIC are scheduled for September 2017. The operation integration and the system conversion for First Texas are scheduled for the first quarter of 2018. The operation integration and the system conversion for OKSB are scheduled for the second quarter of 2018.

 

The specific details of the plan to integrate the operations of HCIC, OKSB and First Texas will continue to be refined over the next several months, and will include assessing personnel, benefit plans, premises, equipment and service contracts to determine where we may take advantage of redundancies. Certain decisions arising from these assessments may involve involuntary termination of employees, vacating leased premises, changing information systems, canceling contracts with certain service providers, and selling or otherwise disposing of certain premises, furniture and equipment. Simmons also expects to incur merger-related costs including professional fees, legal fees, system conversion costs and costs related to communications with customers and others. To the extent there are costs associated with these actions, the costs will be recorded based on the nature of the cost and the timing of these integration actions.

 

 

Note 3. Estimated Annual Cost Savings

 

Simmons expects to realize cost savings and to generate revenue enhancements from the OKSB and First Texas acquisitions. Revenue enhancements are expected from an expansion of trust services, SBA lending activities, consumer finance products and credit card services to the larger footprint of Simmons. Cost savings for First Texas are estimated at 32% of non-interest expense for the year ended December 31, 2016, and cost savings for OKSB are estimated at 35% of non-interest expense for the year ended December 31, 2016. These cost savings and revenue enhancements are not reflected in the pro forma combined condensed consolidated financial statements and there can be no assurance they will be achieved in the amount or manner currently contemplated.

 

Note 4. Pro Forma Adjustments

 

The following pro forma adjustments have been reflected in the unaudited pro forma combined condensed consolidated financial statements presented for OKSB and First Texas. All adjustments are based on current assumptions and valuations, which are subject to change. Unless otherwise noted, all adjustments are based on assumptions and valuations as of the merger agreement dates for the respective pending acquisitions and are subject to change.

 

(1)

Adjustment reflects the merger consideration expected to be paid for each acquisition. The merger consideration expected to be paid for OKSB is $478.5 million, consisting of $383.5 million in Simmons common stock and $94.9 million in cash (based on Simmons’ closing common stock price of $52.90 per share on June 30, 2017, OKSB shares of common stock outstanding of 18,686,273 as of June 30, 2017, and the right to receive $5.08 and 0.3880 shares of Simmons common stock for each share of OKSB common stock, pursuant to the OKSB merger agreement). The merger consideration expected to be paid for First Texas is $413.9 million, consisting of $343.9 million in Simmons common stock and $70 million in cash (based on Simmons’ closing common stock price of $52.90 per share on June 30, 2017 and the right to receive 6,500,000 shares of Simmons common stock and $70 million, pursuant to the First Texas merger agreement).

 

(2)

Adjustment represents the estimated seller-incurred merger expenses, which are expected to be paid immediately prior to the merger closing date, and the related tax benefit. Estimated seller-incurred merger expenses are $9.7 million for OKSB and the related tax benefit is $3.8 million. Estimated seller-incurred merger expenses are $9.8 million for First Texas and the related tax benefit is $3.8 million.

 

Estimated Simmons’-incurred merger expenses primarily including severance, professional, legal and conversion related expenditures, are not reflected in the pro forma combined condensed consolidated balance sheet as these integrated costs will be expensed by Simmons as required by U.S. generally accepted accounting principles, or GAAP.

 

(3)

Purchase accounting adjustment to eliminate each target’s allowance for loan losses, which cannot be carried over in accordance with GAAP.

 

(4)

Adjustment reflects the necessary write down of the acquired loan portfolios, allocated to each target as described below, based on Simmons’ evaluation of the loan portfolio during due diligence, which included review of approximately 45% of the portfolios.

 

OKSB: The total adjustment of $33.4 million is comprised of approximately $7.0 million of non-accretable credit adjustments and approximately $26.4 million of accretable yield adjustments.

 

First Texas: The total adjustment of $24.2 million is comprised of approximately $125,000 of non-accretable credit adjustments and approximately $24.1 million of accretable yield adjustments.

 

(5)

Adjustment made to reflect the estimated fair value of acquired premises and equipment, including all branches, based on Simmons’ evaluation during due diligence. Adjustment is ($1.2) million for OKSB and $13 million for First Texas.

 

 

(6)

Adjustment represents the excess of the consideration paid over the fair value of net assets acquired, net of the reversal of OKSB’s and First Texas’ previously recorded goodwill of $13.5 million and $37.2 million, respectively. See Note (1) for additional information regarding how the pro forma purchase price was calculated. The reconciliation of the pro forma purchase price to goodwill recorded can be summarized as follows:

 

						First
		OKSB				Texas
Fair value of common shares issued		$	383,539			$	343,850
Cash consideration			94,926				70,000
Total pro forma purchase price		$	478,465			$	413,850
Fair value of assets acquired:
Cash and cash equivalents		$	79,839			$	93,044
Investment securities			434,413				61,827
Loans held for sale			6,036				4,072
Net loans			1,932,035				2,114,935
Bank premise and equipment			20,652				38,307
OREO, net of valuation allowance			—				—
Interest receivable			6,328				5,109
Bank owned life insurance			28,450				7,042
Core deposit intangible			29,398				30,707
Other assets			31,057				9,125
Total assets			2,568,208				2,364,168
Fair value of liabilities assumed:
Deposits			2,013,034				1,779,524
Fed funds purchased and securities sold under agreements to repurchase			11,705				50,000
Other borrowings			192,592				269,239
Subordinated debentures			41,893				29,400
Other liabilities			13,457				10,246
Total liabilities			2,272,681				2,138,409
Net assets acquired		$	295,527			$	225,759
Preliminary pro forma goodwill		$	182,938			$	188,091

 

(7)

Preliminary purchase accounting adjustment to establish a core deposit intangible in recognition of the fair value of core deposits acquired, which is approximately 1.9% of core deposit liabilities for OKSB and First Texas. This intangible asset represents the value of the relationships that OKSB and First Texas had with their deposit customers as of the date of acquisition. The preliminary fair value was estimated based on a discounted cash flow methodology that gave consideration to expected customers attrition rates, cost of the deposit base and the net maintenance cost attributable to customer deposits. A core deposit intangible asset of $23.7 million was estimated for OKSB and $30.3 million for First Texas.

 

The adjustment includes a credit of $2.1 million to reverse the intangibles recorded by OKSB and First Texas prior to their pending acquisition by Simmons.

 

(8)

Adjustment represents the estimated current and deferred income tax assets and liabilities recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal and state income tax purposes at Simmons’ combined federal and state income tax rate of 39.225%. OKSB is estimated to have a net deferred tax asset adjustment of $3.6 million. First Texas is estimated to have a net deferred tax asset adjustment of $12.5 million.

 

 

 

(9)

Adjustment reflects the estimated fair value discount of OKSB’s and First Texas’ time deposits of $800,000 and $232,000, respectively, based on Simmons’ evaluation during due diligence. The fair value was estimated using a discounted cash flow methodology based on current market rates for similar remaining maturities.

 

(10)

Adjustment made to reflect the Company’s estimate of the fair value of FHLB advances during due diligence, of which $592,000 is attributable to OKSB and ($693,000) is attributable to First Texas.

 

(11)

Adjustment reflects the Company’s estimated fair value discount of the trust preferred securities during due diligence, of which $4.5 million is attributable to OKSB and $825,000 is attributable to First Texas.

 

(12)

Adjustment made to reflect the Company’s estimate of the fair value of a reserve for unfunded commitments not previously recorded by First Texas. No adjustment was necessary for OKSB as the Company determined the existence of an adequate reserve during due diligence.

 

(13)

Purchase accounting adjustment to eliminate OKSB’s and First Texas’ previously existing equity accounts.

 

(14)

Upon completion of the mergers, Simmons will evaluate each acquired loan portfolio to finalize the necessary credit and interest rate fair value adjustments. Subsequently, the accretable portion of the fair value adjustment will be accreted into earnings using the level yield method over the remaining maturity of the underlying loans. This adjustment represents the Company’s best estimate of the expected accretion that would have been recorded in 2016 and the first six months of 2017 assuming the mergers closed on January 1, 2016. Subsequent to the closing of the transactions, the amount and timing of the estimated accretion of this purchase accounting adjustment could be revised significantly.

 

(15)

The pro forma adjustment to reflect the estimated fair value of time deposits of OKSB and First Texas based on current interest rates for comparable deposits will be amortized as an addition to the cost of such time deposits over an estimated life of one year.

 

(16)

The core deposit intangible will be amortized over Fifteen years on a straight-line basis. The annual amortization expense will be approximately $1.6 million and $2.0 million for OKSB and First Texas, respectively.

 

(17)

Reflects the tax impact of the pro forma acquisition adjustments at Simmons’ combined federal and state income tax rate of 39.225%.

 

(18)

Pro forma weighted average common shares outstanding assumes 7,250,274 common shares issued for OKSB and 6,500,000 common shares issued for First Texas.

 

(a)

Simmons has evaluated the acquired portfolio to estimate the necessary credit and interest rate fair value adjustments. Subsequently, the accretable portion of the fair value adjustment will be accreted into earnings using the level yield method over the remaining maturity of the underlying loans. For purposes of the pro forma impact on the year ended December 31, 2016, the net discount accretion was calculated by summing monthly estimates of accretion/amortization on each loan portfolio, which was calculated based on the remaining maturity of each loan pool. The overall weighted average maturity of the loan portfolio is approximately 4.6 years. The 2016 pro forma accretion income projected for Hardeman is $1.4 million. The estimated non-accretable yield portion of the net discount of approximately $956,000 will not be accreted into earnings.

 

(b)

The core deposit intangible will be amortized over 15 years on a straight-line basis. The annual amortization expense will be approximately $523,000.

 

(c)

Reflects the tax impact of the pro forma acquisition adjustments at Simmons’ combined federal and state income tax rate of 39.225%.

 

(d)

Pro forma weighted average common shares outstanding assumes the actual stock issued at the close of the HCIC merger on May 15, 2017 of 799,970 shares of common stock was outstanding for the full period presented.