What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-09 · 438 added, 262 removed, 1426 unchanged (33% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

(In thousands, except share data) March 31, 2022 December 31, 2021

(In thousands, except share data) June 30, 2022 December 31, 2021

Cash and due from banks $ 287,451 $ 119,908

39 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Interest on deposits 10,729 6,434 15,623 14,139

Federal funds purchased 2 — 2 —

FHLB and other borrowed funds 1,896 1,896 3,771 3,771

3 unchanged sentences

Net interest income 198,758 141,252 329,906 289,340

Provision for credit losses — —

Provision for credit losses - unfunded commitments — —

Total credit loss (benefit) expense — —

Net interest income after provision for credit losses 131,148 148,088

Provision for credit losses on acquired loans 45,170 — 45,170 —

Provision for credit losses on acquired unfunded commitments 11,410 — 11,410 —

Provision for credit losses on unfunded commitments — ( 4,752 ) — ( 4,752 )

Provision for credit losses on acquired held-to-maturity investment securities 2,005 — 2,005 —

Total credit loss expense (benefit) 58,585 ( 4,752 ) 58,585 ( 4,752 )

Net interest income after credit loss expense (benefit) 140,173 146,004 271,321 294,092

Non-interest income:

29 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In thousands) 2022 2021 2022 2021

Net income $ 15,978 $ 79,070 $ 80,870 $ 170,672

Net unrealized loss on available-for-sale securities ( 155,715 ) ( 33,400 )

Other comprehensive loss before tax effect ( 155,715 ) ( 33,400 )

Tax effect on other comprehensive loss 40,696 8,729

Other comprehensive loss ( 115,019 ) ( 24,671 )

Net unrealized (loss) gain on available-for-sale securities ( 146,888 ) 13,091 ( 302,603 ) ( 20,309 )

Other comprehensive (loss) income before tax effect ( 146,888 ) 13,091 ( 302,603 ) ( 20,309 )

Tax effect on other comprehensive loss (income) 35,540 ( 3,421 ) 76,236 5,308

Other comprehensive (loss) income ( 111,348 ) 9,670 ( 226,367 ) ( 15,001 )

Comprehensive (loss) income $ ( 95,370 ) $ 88,740 $ ( 145,497 ) $ 155,671

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2022

Three and Six Months Ended June 30, 2022

(In thousands, except share data) Common

14 unchanged sentences

Balances at March 31, 2022 (unaudited) $ 1,638 $ 1,485,524 $ 1,304,098 $ ( 104,557 ) $ 2,686,703

Comprehensive income:

Net Income — — 15,978 — 15,978

Other comprehensive loss — — — ( 111,348 ) ( 111,348 )

Net issuance of 1,500 shares of common stock from exercise of stock options

Issuance of 42,425,352 shares of common stock including approximately $ 2.5 million in certain stock award settlements and stock issuance costs -

Happy Bancshares acquisition

424 960,866 — — 961,290

Repurchase of 1,032,732 shares of common stock

( 10 ) ( 22,482 ) — — ( 22,492 )

Share-based compensation net issuance of 138,499 shares of restricted common stock

1 2,337 — — 2,338

Cash dividends – Common Stock, $ 0.165 per share

— — ( 33,930 ) — ( 33,930 )

Balances at June 30, 2022 (unaudited) $ 2,053 $ 2,426,271 $ 1,286,146 $ ( 215,905 ) $ 3,498,565

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2021

For the Three and Six Months Ended June 30, 2021

(In thousands, except share data) Common

14 unchanged sentences

Balances at March 31, 2021 (unaudited) $ 1,651 $ 1,516,286 $ 1,107,818 $ 19,449 $ 2,645,204

Comprehensive income:

Net income — — 79,070 — 79,070

Other comprehensive income — — — 9,670 9,670

Net issuance of 3,628 shares of common stock from exercise of stock options

Repurchase of 635,000 shares of common stock

( 6 ) ( 16,947 ) — — ( 16,953 )

Share-based compensation net issuance of 21,500 shares of restricted common stock

— 2,276 — — 2,276

Cash dividends – Common Stock, $ 0.14 per share

— — ( 23,078 ) — ( 23,078 )

Balances at June 30, 2021 (unaudited) $ 1,645 $ 1,501,615 $ 1,163,810 $ 29,119 $ 2,696,189

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended June 30, 2022

(In thousands) 2022 2021

8 unchanged sentences

Gain on assets ( 600 ) ( 2,336 )

Provision for credit losses — —

Provision for credit losses - acquired loans 45,170 —

Provision for credit losses - acquired unfunded commitments 11,410 —

Provision for credit losses - unfunded commitments — ( 4,752 )

Provision for credit losses - acquired held-to-maturity investment securities 2,005 —

Deferred income tax effect ( 18,645 ) 3,311

8 unchanged sentences

Investing Activities

Net decrease in loans, excluding purchased loans 25,579 441,905

Net (increase) decrease in loans, excluding purchased loans ( 126,794 ) 989,477

Purchases of investment securities – available-for-sale ( 655,393 ) ( 968,660 )

1 unchanged sentence

Proceeds from maturities of investment securities – available-for-sale 333,315 336,834

Proceeds from maturities of investment securities – held-to-maturity 250,020 —

Proceeds from sales of investment securities – available-for-sale — 18,112

7 unchanged sentences

Purchase of marine loan portfolio ( 242,617 ) —

Net cash received - market acquisition 858,898 —

Net cash (used in) provided by investing activities ( 130,380 ) 387,522

Financing Activities

Net increase in deposits 320,364 786,804

Net increase (decrease) in securities sold under agreements to repurchase 10,265 ( 6,002 )

Net (decrease) increase in deposits ( 535,708 ) 1,165,551

Net decrease in securities sold under agreements to repurchase ( 22,313 ) ( 18,391 )

Net decrease in FHLB and other borrowed funds ( 78,330 ) —

Retirement of subordinated debentures ( 300,000 ) —

Proceeds from issuance of subordinated debentures 296,444 —

Redemption of trust preferred securities ( 78,869 ) —

Proceeds from exercise of stock options 156 2,322

1 unchanged sentence

Dividends paid on common stock ( 60,973 ) ( 46,232 )

Net cash provided by financing activities 596,071 751,200

Net cash (used in) provided by financing activities ( 806,174 ) 1,077,527

Net change in cash and cash equivalents ( 833,939 ) 1,677,465

9 unchanged sentences

The Company is primarily engaged in providing a full range of banking services to individual and corporate customers through its wholly-owned community bank subsidiary – Centennial Bank (sometimes referred to as “Centennial” or the “Bank”).

The Bank has branch locations in Arkansas, Florida, South Alabama and New York City.

The Bank has branch locations in Arkansas, Florida, South Alabama, Texas and New York City.

The Company is subject to competition from other financial institutions.

20 unchanged sentences

Interim financial information

The accompanying unaudited consolidated financial statements as of March 31, 2022 and 2021 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The accompanying unaudited consolidated financial statements as of June 30, 2022 and 2021 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented.

33 unchanged sentences

Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools.

These qualitative factors ("Q-Factor") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk.

These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk.

The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies;

5 unchanged sentences

(vii) external factors such as competition, legal and regulatory environment;

(viii) changes in the quality of the loan review system and (ix) economic conditions.

(viii) changes in the quality of the loan review system;

and (ix) economic conditions.

Loans considered impaired, according to ASC 326, are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.

13 unchanged sentences

All identifiable assets acquired, including loans, are recorded at fair value.

In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans.

In accordance with ASC 326, the Company records both a discount or premium and an allowance for credit losses on acquired loans.

All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements .

2 unchanged sentences

An allowance for credit losses is determined using the same methodology as other loans.

The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment.

These models utilize a peer group benchmark in order to determine the probability of default and loss given default to be used in the calculation.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

23 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In thousands)

7 unchanged sentences

Acquisition of Happy Bancshares, Inc.

Effective April 1, 2022, pursuant to an Agreement and Plan of Merger, dated as of September 15, 2021, as amended on October 18, 2021 and further amended on November 8, 2021 (the “Merger Agreement”) among the Company, Centennial, the Company’s acquisition subsidiary, HOMB Acquisition Sub III, Inc.

(“Acquisition Sub”), Happy Bancshares, Inc.

(“Happy”), and its wholly-owned bank subsidiary, Happy State Bank (“HSB”), Acquisition Sub merged with and into Happy and Happy merged with and into the Company, with the Company as the surviving entity (collectively, the “Merger”).

HSB also merged with and into Centennial, with Centennial as the surviving entity.

Under the terms of the Merger Agreement, the Company issued approximately 42.4 million shares of its common stock valued at approximately $ 958.8 million as of April 1, 2022.

In addition, the holders of stock appreciation rights of Happy received approximately $ 3.1 million in cash in cancellation of their stock appreciation rights immediately before the merger, for a total transaction value of approximately $ 961.9 million.

For further discussion of the acquisition, see Note 22 to the Condensed Notes to Consolidated Financial Statements.

On April 1, 2022, the Company completed the acquisition of Happy Bancshares, Inc.

(“Happy”), and merged Happy State Bank into Centennial Bank.

The Company issued approximately 42.4 million shares of its common stock valued at approximately $ 958.8 million as of April 1, 2022.

In addition, the holders of certain Happy stock-based awards received approximately $ 3.7 million in cash in cancellation of such awards, for a total transaction value of approximately $ 962.5 million.

The acquisition added new markets for expansion and brings complementary businesses together to drive synergies and growth.

Including the effects of the known purchase accounting adjustments, as of the acquisition date, Happy had approximately $ 6.68 billion in total assets, $ 3.65 billion in loans and $ 5.86 billion in customer deposits.

Happy formerly operated its banking business from 62 locations in Texas.

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition.

The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.

The Company has determined that the acquisition of the net assets of Happy constitutes a business combination as defined by the ASC Topic 805.

Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required.

Fair values were determined based on the requirements of ASC Topic 820.

In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change.

The following schedule is a preliminary breakdown of the assets acquired and liabilities assumed as of the acquisition date:

Happy Bancshares, Inc.

from Happy Fair Value Adjustments As Recorded

(Dollars in thousands)

Cash and due from banks $ 112,999 $ ( 132 ) $ 112,867

Interest-bearing deposits with other banks 746,031 — 746,031

Cash and cash equivalents 859,030 ( 132 ) 858,898

Investment securities - available-for-sale, net of allowance for credit losses 1,773,540 8,485 1,782,025

Total investment securities 1,773,540 8,485 1,782,025

Loans receivable 3,657,009 ( 4,303 ) 3,652,706

Allowance for credit losses ( 42,224 ) 25,408 ( 16,816 )

Loans receivable, net 3,614,785 21,105 3,635,890

Bank premises and equipment, net 153,642 ( 11,575 ) 142,067

Foreclosed assets held for sale 193 ( 77 ) 116

Cash value of life insurance 105,049 3 105,052

Accrued interest receivable 31,575 — 31,575

Deferred tax asset, net 32,908 2,506 35,414

Goodwill 130,428 ( 130,428 ) —

Core deposit and other intangibles 10,672 31,591 42,263

Other assets 43,330 6,422 49,752

Total assets acquired $ 6,755,152 $ ( 72,100 ) $ 6,683,052

Demand and non-interest-bearing $ 1,932,756 $ — $ 1,932,756

Savings and interest-bearing transaction accounts 3,519,652 — 3,519,652

Time deposits 401,899 903 402,802

Total deposits 5,854,307 903 5,855,210

FHLB and other borrowed funds 74,212 4,118 78,330

Accrued interest payable and other liabilities 50,889 ( 6,130 ) 44,759

Subordinated debentures 159,965 7,625 167,590

Total liabilities assumed $ 6,139,373 $ 6,516 $ 6,145,889

Total equity assumed 615,779 ( 615,779 ) —

Total liabilities and equity assumed $ 6,755,152 $ ( 609,263 ) $ 6,145,889

Net assets acquired 537,163

Purchase price 962,538

Goodwill $ 425,375

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

Cash and due from banks, interest-bearing deposits with other banks and federal funds sold – The carrying amount of these assets was deemed a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired from Happy with an approximately $ 8.5 million adjustment to fair value based upon quoted market prices.

Otherwise the book value was deemed to approximate fair value.

Loans – 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, 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.

See Note 5 to the Condensed Notes to Consolidated Financial Statements, for additional information related to purchased financial assets with credit deterioration.

Bank premises and equipment – Bank premises and equipment were acquired from Happy with a $ 11.6 million adjustment to fair value.

This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.

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

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

Accrued interest receivable – The carrying amount of these assets was deemed a reasonable estimate of the fair value.

Core deposit intangible and other intangibles – This core deposit intangible asset represents the value of the relationships that Happy 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.

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 $ 903,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of Happy’s certificates of deposits were estimated to be below the current market rates.

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

Accrued interest payable and other liabilities – The fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities.

The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value.

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.

The unaudited pro-forma combined consolidated financial information presents how the combined financial information of HBI and Happy might have appeared had the businesses actually been combined.

The following schedule represents the unaudited pro forma combined financial information as of the three and six-month periods ended June 30, 2022 and 2021, assuming the acquisition was completed as of January 1, 2021:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In thousands, except per share data)

Total interest income $ 217,013 $ 211,279 $ 419,318 $ 418,143

Total non-interest income 44,581 44,427 88,151 101,485

Net income available to all shareholders 96,923 34,536 182,557 129,653

Basic earnings per common share $ 0.47 $ 0.17 $ 0.89 $ 0.63

Diluted earnings per common share $ 0.47 $ 0.17 $ 0.88 $ 0.62

The unaudited pro-forma consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue enhancements and expense efficiencies from in-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results.

Pro-forma results include Happy merger expenses of $ 48.7 million and $ 49.6 million, provision for credit losses on acquired loans of $ 45.2 million, provision for credit losses on acquired unfunded commitments of $ 11.4 million and provision for credit losses on acquired investment securities of $ 2.0 million for the three and six months ended June 30, 2022 and 2021, respectively.

The pro-forma financial information also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD.

For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on the date of acquisition using the same methodology as other loans and leases held-for-investment.

The following table provides a summary of loans purchased as part of the Happy acquisition with credit deterioration at acquisition:

April 1, 2022

(In thousands)

Purchased Loans with Credit Deterioration:

Par value $ 165,028

Allowance for credit losses at acquisition ( 16,816 )

Premium on acquired loans 684

Purchase price $ 148,896

Investment Securities

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

March 31, 2022

June 30, 2022

Available-for-Sale

Allowance for Credit Losses Estimated

Allowance for Credit Losses Net Carrying Amount Gross

(In thousands)

5 unchanged sentences

Total $ 4,080,861 $ ( 842 ) $ 4,080,019 $ 4,735 $ ( 293,245 ) $ 3,791,509

March 31, 2022

June 30, 2022

Held-to-Maturity

Allowance for Credit Losses Estimated

Allowance for Credit Losses Net Carrying Amount Gross

(In thousands)

government-sponsored enterprises $ 499,265 $ 18 $ ( 145 ) $ — $ 499,138

Residential mortgage-backed securities — — — — —

Commercial mortgage-backed securities — — — — —

Treasuries $ 277,688 $ — $ 277,688 $ — $ ( 1,659 ) $ 276,029

State and political subdivisions 1,091,098 ( 2,005 ) 1,089,093 26 ( 91,868 ) 997,251

Other securities — — — — —

Total $ 1,368,786 $ ( 2,005 ) $ 1,366,781 $ 26 $ ( 93,527 ) $ 1,273,280

1 unchanged sentence

Available-for-Sale

Allowance for Credit Losses Estimated

Allowance for Credit Losses Net Carrying Amount Gross

(In thousands)

5 unchanged sentences

Total $ 3,106,483 $ ( 842 ) $ 3,105,641 $ 41,058 $ ( 26,892 ) $ 3,119,807

During the three months ended March 31, 2022, the Company purchased $ 500.0 million of U.S.

Treasury Securities with an initial book value of $ 498.9 million.

These investments are classified as held-to-maturity and mature within one year.

As of March 31, 2022, the amortized cost of these securities was $ 499.3 million.

Assets, principally investment securities, having a carrying value of approximately $ 1.20 billion and $ 1.15 billion at March 31, 2022 and December 31, 2021, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law.

Investment securities pledged as collateral for repurchase agreements totaled approximately $ 151.2 million and $ 140.9 million at March 31, 2022 and December 31, 2021, respectively.

The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at March 31, 2022, by contractual maturity, are shown below.

On April 1, 2022, the Company completed the acquisition of Happy.

Including the effects of the known purchase accounting adjustments, as of the acquisition date, Happy had approximately $ 1.78 billion in investments, net of purchase accounting adjustments.

The Company classified approximately $ 1.12 billion of investments acquired from Happy as held-to-maturity at the acquisition date.

Assets, principally investment securities, having a carrying value of approximately $ 2.77 billion and $ 1.15 billion at June 30, 2022 and December 31, 2021, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law.

Investment securities pledged as collateral for repurchase agreements totaled approximately $ 118.6 million and $ 140.9 million at June 30, 2022 and December 31, 2021, respectively.

The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at June 30, 2022, by contractual maturity, are shown below.

Expected maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

12 unchanged sentences

Total $ 4,080,861 $ 3,791,509 $ 1,368,786 $ 1,273,280

During the three months ended March 31, 2022, no available-for-sale securities were sold.

During the three months ended March 31, 2021, $ 17.9 million available-for-sale securities were sold.

The gross realized gains on the sales totaled $ 219,000 for the three months ended March 31, 2021.

The following table shows gross unrealized losses and estimated fair value of investment securities classified as available-for-sale and held-to-maturity, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of March 31, 2022 and December 31, 2021.

March 31, 2022

During the three and six months ended June 30, 2022, no available-for-sale securities were sold.

During the three months ended June 30, 2021, no available-for-sale securities were sold.

There were no realized gains or losses recorded on sales for the three months ended June 30, 2021.

During the six months ended June 30, 2021, $ 17.9 million in available-for-sale securities were sold.

The gross realized gains on the sales totaled $ 219,000 for the six months ended June 30, 2021.

June 30, 2022

Less Than 12 Months 12 Months or More Total

8 unchanged sentences

Held-to-maturity:

government-sponsored enterprises $ 499,138 $ ( 145 ) $ — $ — $ 499,138 $ ( 145 )

Treasuries 276,029 ( 1,659 ) — — 276,029 ( 1,659 )

State and political subdivisions 998,550 ( 91,868 ) — — 998,550 ( 91,868 )

Total $ 1,274,579 $ ( 93,527 ) $ — $ — $ 1,274,579 $ ( 93,527 )

December 31, 2021

8 unchanged sentences

The Company evaluates all securities quarterly to determine if any debt securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments .

The Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.

The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

6 unchanged sentences

Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Management has determined that recording a provision for credit losses on the Company's held-to-maturity investments was not necessary due to the inherent low risk of the U.S.

Treasury Securities, which comprise the entire balance of the held-to-maturity U.S.

Government-sponsored enterprises investments, as well as the short-term maturities of these investments.

At March 31, 2022, the Company determined that the allowance for credit losses of $ 842,000 , resulting from economic uncertainty, was adequate for the available-for-sale investment portfolio.

The Company recorded a $ 2.0 million provision for credit losses on the held-to-maturity investment securities during the second quarter of 2022 as a result of the investment securities acquired as part of the Happy acquisition.

Of the Company's held-to-maturity securities, $ 1.09 billion, or 79.7 % are municipal securities.

To estimate the necessary loss provision, the Company utilized historical default and recovery rates of the municipal bond sector and applied these rates using a pooling method.

The remainder of investments classified as held-to-maturity are U.S.

Treasury securities.

Due to the inherent low risk in U.S.

Treasury securities, no provision for credit loss was established on that portion of the portfolio.

At June 30, 2022, the Company determined that the allowance for credit losses of $ 842,000 , resulting from economic uncertainty, was adequate for the available-for-sale investment portfolio, and the allowance for credit losses for the held-to-maturity portfolio resulting from the Happy acquisition was considered adequate.

No additional provision for credit losses was considered necessary for the portfolio.

March 31, 2022 December 31, 2021

Available-for-Sale Investment Securities

June 30, 2022 December 31, 2021

(In thousands)

1 unchanged sentence

Beginning balance $ 842 $ 842

Provision for credit loss - investment securities — —

Balance, March 31

Provision for credit loss - investment securities —

Provision for credit loss — —

Balance, June 30

Provision for credit loss —

Balance, December 31, 2021

For the three months ended March 31, 2022, the Company had investment securities with approximately $ 31.1 million in unrealized losses, which have been in continuous loss positions for more than twelve months.

Held-to-Maturity Investment Securities

June 30, 2022 December 31, 2021

State and Political Subdivisions U.S.

Treasuries State and Political Subdivisions U.S.

Allowance for credit losses:

(In thousands)

Beginning balance $ — $ — $ — $ —

Provision for credit loss - acquired securities ( 2,005 ) — — —

Securities charged-off — — — —

Recoveries — — — —

Balance, June 30, 2022 $ ( 2,005 ) $ — $ — $ —

For the six months ended June 30, 2022, the Company had investment securities with approximately $ 63.2 million in unrealized losses, which have been in continuous loss positions for more than twelve months.

The Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition or downgrades by rating agencies.

1 unchanged sentence

As a result, the Company has the ability and intent to hold such securities until maturity.

As of March 31, 2022, the Company's available-for-sale securities portfolio consisted of 1,330 investment securities, 892 of which were in an unrealized loss position.

As of June 30, 2022, the Company's available-for-sale securities portfolio consisted of 1,644 investment securities, 1,333 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 293.2 million.

5 unchanged sentences

The Company expects to recover the amortized cost basis over the term of the securities.

The unrealized losses on the Company's investments were a result of interest rate changes.

The Company expects to recover the amortized cost basis over the term of the securities.

Because the decline in market value was attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company has determined that an additional provision for credit losses is not necessary as of March 31, 2022.

As of March 31, 2022, the Company's held-to-maturity securities portfolio consisted of 2 investment securities, one of which was in an unrealized loss position.

As noted in the table above, U.S.

government-sponsored enterprises portfolio contained unrealized losses of $ 145,000 .

Income earned on securities for the three months ended March 31, 2022 and 2021, is as follows:

For the Three Months Ended

As of June 30, 2022, the Company's held-to-maturity securities portfolio consisted of 482 investment securities, 480 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 93.5 million.

The U.S Treasury portfolio contained unrealized losses of $ 1.7 million on 5 securities, and the state and political subdivisions portfolio contained $ 91.9 million of unrealized losses on 475 securities.

The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2022:

State and Political Subdivisions U.S.

Treasuries Total

(In thousands)

Aaa/AAA $ 217,912 $ 277,688 $ 495,600

Aa/AA 837,675 — 837,675

A 33,677 — 33,677

Baa/BBB — — —

Not rated 1,834 — 1,834

Total $ 1,091,098 $ 277,688 $ 1,368,786

Income earned on securities for the three and six months ended June 30, 2022 and 2021, is as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

(In thousands)

Available-for-sale $ 14,493 $ 7,185 $ 23,238 $ 13,438

5 unchanged sentences

The various categories of loans receivable are summarized as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In thousands)

14 unchanged sentences

Loans receivable, net $ 13,629,606 $ 9,599,375

During the three months ended March 31, 2022, the Company sold $ 2.8 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 95,000 .

During the three months ended March 31, 2021, the Company did not sell any guaranteed portions of certain SBA loans.

Mortgage loans held for sale of approximately $ 74.4 million and $ 72.7 million at March 31, 2022 and December 31, 2021, respectively, are included in residential 1-4 family loans.

On April 1, 2022, the Company completed the acquisition of Happy.

Including the effects of the known purchase accounting adjustments, as of the acquisition date, Happy had approximately $ 3.65 billion in loans.

During the three months ended June 30, 2022, the Company did no t sell any guaranteed portions of certain SBA loans.

During the six months ended June 30, 2022, the Company sold $ 2.8 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 95,000 .

During the three months ended June 30, 2021, the Company did not sell any guaranteed portions of certain SBA loans.

During the six months ended June 30, 2021, the Company sold $ 11.1 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 1.1 million.

Mortgage loans held for sale of approximately $ 137.8 million and $ 72.7 million at June 30, 2022 and December 31, 2021, respectively, are included in residential 1-4 family loans.

Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis.

4 unchanged sentences

Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund.

These commitments are derivative instruments and their fair values at March 31, 2022 and December 31, 2021 were not material.

These commitments are derivative instruments and their fair values at June 30, 2022 and December 31, 2021 were not material.

Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans.

An allowance for credit losses is determined using the same methodology as other loans.

The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

2 unchanged sentences

Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.

The Company held approximately $ 439,000 and $ 448,000 in PCD loans, as of March 31, 2022 and December 31, 2021, respectively.

The Company held approximately $ 152.3 million and $ 448,000 in PCD loans, as of June 30, 2022 and December 31, 2021, respectively.

The balance consisted of $ 151.8 million resulting from the acquisition of Happy and $ 432,000 from the acquisition of LH-Finance.

A description of our accounting policies for loans, impaired loans and non-accrual loans are set forth in our 2021 Form 10-K filed with the SEC on February 24, 2022.

Allowance for Credit Losses, Credit Quality and Other

The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of Company’s loan pools.

The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of the Company’s loan pools.

These pools are as follows:

18 unchanged sentences

(vii) external factors such as competition, legal and regulatory environment;

(viii) changes in the quality of the loan review system and (ix) economic conditions.

(viii) changes in the quality of the loan review system;

and (ix) economic conditions.

Each year management evaluates the performance of the selected models used in the CECL calculation through backtesting.

2 unchanged sentences

The Company continues to use regression analysis to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default for the changes in the economic factors for the loss driver segments.

Based on this analysis during the first quarter of 2022, management determined that no changes to several of the economic factors for the various loss driver segments were necessary.

The identified loss drivers by segment are included below as of both March 31, 2022 and December 31, 2021.

Based on this analysis during the second quarter of 2022, management determined the previously selected economic factors for the various loss driver segments were appropriate and no changes were necessary.

The identified loss drivers by segment are included below as of both June 30, 2022 and December 31, 2021.

Loss Driver Segment Call Report Segment(s) Modeled Economic Factors

19 unchanged sentences

We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas.

Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30 year period with balloon payments due at the end of one to five years These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral.

These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral.

Generally, we will loan up to 85 % of the value of improved property, 65 % of the value of raw land and 75 % of the value of land to be acquired and developed.

19 unchanged sentences

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The Company uses the DCF method to estimate expected losses for all of Company’s off-balance sheet credit exposures through the use of the existing DCF models for the Company’s loan portfolio pools.

The Company uses the DCF method to estimate expected losses for all of the Company’s off-balance sheet credit exposures through the use of the existing DCF models for the Company’s loan portfolio pools.

The off-balance sheet credit exposures exhibit similar risk characteristics as loans currently in the Company’s loan portfolio.

The following table presents the activity in the allowance for credit losses for the three months ended March 31, 2022:

Three Months Ended March 31, 2022

ASC 326 requires that both a discount and allowance for credit losses be recorded on loans during an acquisition.

The Company completed the acquisition of Happy on April 1, 2022.

As a result, the Company recorded $ 4.3 million in net loan discounts and a $ 16.8 million increase in the allowance for credit losses related to PCD loans.

In addition, the Company recorded a $ 45.2 million provision for credit losses on acquired loans for the CECL "double count" and an $ 11.4 million provision for credit losses on acquired unfunded commitments.

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2022:

Three Months Ended June 30, 2022

Construction/

7 unchanged sentences

Beginning balance $ 26,349 $ 95,876 $ 37,111 $ 52,492 $ 22,940 $ 234,768

Allowance for credit losses on PCD loans - Happy acquisition 950 9,283 980 5,596 7 16,816

Loans charged off — — ( 39 ) — ( 3,226 ) ( 3,265 )

Recoveries of loans previously

Recoveries of loans previously charged off

302 52 23 221 180 778

1 unchanged sentence

302 52 ( 16 ) 221 ( 3,046 ) ( 2,487 )

Provision for credit losses - acquired loans 7,205 18,711 7,380 11,303 571 45,170

Provision for credit losses 1,883 ( 8,727 ) 5,691 ( 1,303 ) 2,456 —

Balance, March 31

Balance, June 30

$ 36,689 $ 115,195 $ 51,146 $ 68,309 $ 22,928 $ 294,267

The following table presents the balances in the allowance for credit losses for the three-month period ended March 31, 2021 and the year ended December 31, 2021:

Three Months Ended March 31, 2021 and Year Ended December 31, 2021

Six Months Ended June 30, 2022

Construction/

(In thousands)

Allowance for credit losses:

Beginning balance $ 28,415 $ 87,218 $ 48,458 $ 53,062 $ 19,561 $ 236,714

Allowance for credit losses on PCD loans - Happy acquisition 950 9,283 980 5,596 7 16,816

Loans charged off — — ( 289 ) ( 1,416 ) ( 3,870 ) ( 5,575 )

Recoveries of loans previously charged off

317 78 49 330 368 1,142

Net loans recovered (charged off)

317 78 ( 240 ) ( 1,086 ) ( 3,502 ) ( 4,433 )

Provision for credit losses - acquired loans 7,205 18,711 7,380 11,303 571 45,170

Provision for credit losses ( 198 ) ( 95 ) ( 5,432 ) ( 566 ) 6,291 —

Balance, June 30 $ 36,689 $ 115,195 $ 51,146 $ 68,309 $ 22,928 $ 294,267

The following table presents the balances in the allowance for credit losses for the six-month period ended June 30, 2021 and the year ended December 31, 2021:

Six Months Ended June 30, 2021 and Year Ended December 31, 2021

Construction/

Development Other

6 unchanged sentences

Loans charged off — ( 637 ) ( 323 ) ( 4,210 ) ( 900 ) ( 6,070 )

Recoveries of loans previously

Recoveries of loans previously charged

39 68 166 302 473 1,048

2 unchanged sentences

Provision for credit loss - loans ( 10,755 ) 5,243 ( 1,877 ) 9,660 ( 2,271 ) —

Balance, March 31

Balance, June 30

22,145 93,127 51,182 52,282 21,715 240,451

Loans charged off — ( 9 ) ( 222 ) ( 4,032 ) ( 1,328 ) ( 5,591 )

Recoveries of loans previously

Recoveries of loans previously charged

19 717 517 289 312 1,854

4 unchanged sentences

$ 28,415 $ 87,218 $ 48,458 $ 53,062 $ 19,561 $ 236,714

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of March 31, 2022 and December 31, 2021:

March 31, 2022

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of June 30, 2022 and December 31, 2021:

June 30, 2022

Nonaccrual Nonaccrual

31 unchanged sentences

Total $ 47,158 $ 9,230 $ 3,035

The Company had $ 44.6 million and $ 47.2 million in nonaccrual loans for the periods ended March 31, 2022 and December 31, 2021, respectively.

In addition, the Company had $ 46,000 and $ 3.0 million in loans past due 90 days or more and still accruing for the periods ended March 31, 2022 and December 31, 2021, respectively.

The Company had $ 14.5 million and $ 9.2 million in nonaccrual loans with a specific reserve as of March 31, 2022 and December 31, 2021, respectively.

The Company did not recognize any interest income on nonaccrual loans during the period ended March 31, 2022 or March 31, 2021.

The following table presents the amortized cost basis of collateral-dependent impaired loans by class of loans as of March 31, 2022 and December 31, 2021:

March 31, 2022

The Company had $ 44.2 million and $ 47.2 million in nonaccrual loans for the periods ended June 30, 2022 and December 31, 2021, respectively.

In addition, the Company had $ 16.4 million and $ 3.0 million in loans past due 90 days or more and still accruing for the periods ended June 30, 2022 and December 31, 2021, respectively.

The Company had $ 4.4 million and $ 9.2 million in nonaccrual loans with a specific reserve as of June 30, 2022 and December 31, 2021, respectively.

The Company did not recognize any interest income on nonaccrual loans during the period ended June 30, 2022 or June 30, 2021.

The following table presents the amortized cost basis of collateral-dependent impaired loans by class of loans as of June 30, 2022 and December 31, 2021:

June 30, 2022

Real Estate Residential

29 unchanged sentences

Total $ 289,591 $ 21,075 $ 20,872

The Company had $ 321.5 million and $ 331.5 million in collateral-dependent impaired loans for the periods ended March 31, 2022 and December 31, 2021, respectively.

The Company had $ 385.1 million and $ 331.5 million in collateral-dependent impaired loans for the periods ended June 30, 2022 and December 31, 2021, respectively.

Loans that do not share risk characteristics are evaluated on an individual basis.

1 unchanged sentence

When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral.

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying

collateral less estimated costs to sell.

The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The following is an aging analysis for loans receivable as of March 31, 2022 and December 31, 2021:

March 31, 2022

The following is an aging analysis for loans receivable as of June 30, 2022 and December 31, 2021:

June 30, 2022

30-59 Days Loans

7 unchanged sentences

Construction/land development 3,553 2,145 1,296 6,994 2,588,390 2,595,384 246

135 385 1,042 1,562 1,854,534 1,856,096 —

Agricultural 4,106 337 905 5,348 323,758 329,106 711

17 unchanged sentences

Construction/land development 92 22 1,445 1,559 1,848,491 1,850,050 —

92 22 1,445 $ 1,559 1,848,491 1,850,050 —

Agricultural — 472 897 1,369 129,305 130,674 —

7 unchanged sentences

Total $ 4,764 $ 5,153 $ 50,193 $ 60,110 $ 9,775,979 $ 9,836,089 $ 3,035

Non-accruing loans at March 31, 2022 and December 31, 2021 were $ 44.6 million and $ 47.2 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three months ended March 31, 2022 was approximately $ 3.5 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three months ended March 31, 2021 was approximately $ 3.9 million, respectively.

Non-accruing loans at June 30, 2022 and December 31, 2021 were $ 44.2 million and $ 47.2 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three and six months ended June 30, 2022 was approximately $ 4.8 million and $ 9.5 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three and six months ended June 30, 2021 was approximately $ 3.6 million and $ 7.1 million, respectively.

The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.

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 risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in Arkansas, Florida, Alabama and New York.

The Company utilizes a risk rating matrix to assign a risk rating to each of its loans.

43 unchanged sentences

(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.

Based on the most recent analysis performed, the risk category of loans by class of loans as of March 31, 2022 and December 31, 2021 is as follows:

March 31, 2022

Based on the most recent analysis performed, the risk category of loans by class of loans as of June 30, 2022 and December 31, 2021 is as follows:

June 30, 2022

Term Loans Amortized Cost Basis by Origination Year

43 unchanged sentences

Total residential 1-4 family 256,998 298,532 252,124 141,114 127,126 452,406 179,921 1,708,221

March 31, 2022

June 30, 2022

Term Loans Amortized Cost Basis by Origination Year

135 unchanged sentences

The Company also evaluates credit quality based on the aging status of the loan, which was previously presented and by payment activity.

The following tables present the amortized cost of performing and nonperforming loans as of March 31, 2022 and December 31, 2021.

March 31, 2022

The following tables present the amortized cost of performing and nonperforming loans as of June 30, 2022 and December 31, 2021.

June 30, 2022

Term Loans Amortized Cost Basis by Origination Year

85 unchanged sentences

Total $ 1,953,847 $ 1,302,389 $ 1,541,112 $ 1,193,396 $ 681,871 $ 2,276,794 $ 886,680 $ 9,836,089

The Company had approximately $ 7.2 million or 39 total revolving loans convert to term loans for the three months ended March 31, 2022 compared to $ 8.6 million or 72 total revolving loans convert to term loans for the three months ended March 31, 2021.

The Company had approximately $ 13.8 million or 83 total revolving loans convert to term loans for the six months ended June 30, 2022 compared to $ 21.7 million or 140 total revolving loans convert to term loans for the six months ended June 30, 2021.

These loans were considered immaterial for vintage disclosure inclusion.

The following is a presentation of troubled debt restructurings (“TDRs”) by class as of March 31, 2022 and December 31, 2021:

March 31, 2022

The following is a presentation of troubled debt restructurings (“TDRs”) by class as of June 30, 2022 and December 31, 2021:

June 30, 2022

of Loans Pre-

6 unchanged sentences

Construction/land development 1 216 199 — — 199

2 240 204 1 — 205

Agricultural — — — — — —

14 unchanged sentences

Non-farm/non-residential 12 $ 6,119 $ 3,581 $ 623 $ 85 $ 4,289

Construction/land

development 2 240 210 1 — 211

Construction/land development 2 240 210 1 — 211

Agricultural 1 282 262 — — 262

6 unchanged sentences

Total 44 $ 12,474 $ 6,226 $ 806 $ 494 $ 7,526

The following is a presentation of TDRs on non-accrual status as of March 31, 2022 and December 31, 2021 because they are not in compliance with the modified terms:

March 31, 2022 December 31, 2021

The following is a presentation of TDRs on non-accrual status as of June 30, 2022 and December 31, 2021 because they are not in compliance with the modified terms:

June 30, 2022 December 31, 2021

Loans Recorded

12 unchanged sentences

Total 18 $ 735 18 $ 1,076

The following is a presentation of total foreclosed assets as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

The following is a presentation of total foreclosed assets as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

(In thousands)

6 unchanged sentences

The Company has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination.

As of March 31, 2022 and December 31, 2021, the balance of purchase credit deteriorated loans was approximately $ 439,000 and $ 448,000 , respectively.

As of June 30, 2022 and December 31, 2021, the balance of purchase credit deteriorated loans was approximately $ 152.3 million and $ 448,000 , respectively.

This balance, as of June 30, 2022, consisted of $ 151.8 million resulting from the acquisition of Happy and $ 432,000 from the acquisition of LH-Finance .

Goodwill and Core Deposits and Other Intangibles

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022 December 31, 2021

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at June 30, 2022 and December 31, 2021, were as follows:

June 30, 2022 December 31, 2021

(In thousands)

Balance, beginning of period $ 973,025 $ 973,025

Acquisitions — —

Acquisition of Happy Bancshares 425,375 —

Balance, end of period $ 1,398,400 $ 973,025

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(In thousands)

1 unchanged sentence

Balance, beginning of period $ 25,045 $ 30,728

Acquisition of Happy Bancshares 42,263 —

Amortization expense ( 3,898 ) ( 2,842 )

Balance, March 31

Balance, June 30

63,410 27,886

1 unchanged sentence

Balance, end of year $ 25,045

The carrying basis and accumulated amortization of core deposits and other intangibles at March 31, 2022 and December 31, 2021 were :

March 31, 2022 December 31, 2021

The carrying basis and accumulated amortization of core deposits and other intangibles at June 30, 2022 and December 31, 2021 were :

June 30, 2022 December 31, 2021

(In thousands)

2 unchanged sentences

Net carrying amount $ 63,410 $ 25,045

Core deposit and other intangible amortization expense was approximately $ 1.4 million for the three months ended March 31, 2022 and 2021.

Core deposit and other intangible amortization expense was approximately $ 2.5 million and $ 1.4 million for the three months ended June 30, 2022 and 2021, respectively.

Core deposit and other intangible amortization expense was approximately $ 3.9 million and $ 2.8 million for the six months ended June 30, 2022 and 2021, respectively.

The Company’s estimated amortization expense of core deposits and other intangibles for each of the years 2022 through 2026 is approximately:

4 unchanged sentences

2026 – $ 7.8 million.

The carrying amount of the Company’s goodwill was $ 973.0 million at each of March 31, 2022 and December 31, 2021.

The carrying amount of the Company’s goodwill was $ 1.40 billion and $ 973.0 million at June 30, 2022 and December 31, 2021, respectively.

Goodwill is tested annually for impairment during the fourth quarter or more often if events and circumstances indicate there may be an impairment.

2 unchanged sentences

Other assets consist primarily of equity securities without a readily determinable fair value and other miscellaneous assets.

As of March 31, 2022 and December 31, 2021, other assets were $ 182.5 million and $ 177.0 million, respectively.

As of June 30, 2022 and December 31, 2021, other assets were $ 271.0 million and $ 177.0 million, respectively.

The Company has equity securities without readily determinable fair values such as stock holdings in the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“Federal Reserve”) which are outside the scope of ASC Topic 321, Investments – Equity Securities (“ASC Topic 321”).

These equity securities without a readily determinable fair value were $ 88.3 million and $ 88.2 million at March 31, 2022 and December 31, 2021, and are accounted for at cost.

These equity securities without a readily determinable fair value were $ 112.1 million and $ 88.2 million at June 30, 2022 and December 31, 2021, and are accounted for at cost.

The Company has equity securities such as stock holdings in First National Bankers’ Bank and other miscellaneous holdings which are accounted for under ASC Topic 321.

These equity securities without a readily determinable fair value were $ 48.3 million and $ 36.4 million at March 31, 2022 and December 31, 2021.

These equity securities without a readily determinable fair value were $ 70.3 million and $ 36.4 million at June 30, 2022 and December 31, 2021.

There were no observable transactions during the period that would indicate a material change in fair value.

Therefore, these investments were accounted for at cost, less impairment .

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 277.8 million and $ 321.6 million at March 31, 2022 and December 31, 2021.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 482.5 million and $ 537.4 million at March 31, 2022 and December 31, 2021, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 764,000 and $ 2.4 million for the three months ended March 31, 2022 and 2021.

As of March 31, 2022 and December 31, 2021, brokered deposits were $ 625.7 million.

Deposits totaling approximately $ 1.83 billion and $ 1.91 billion at March 31, 2022 and December 31, 2021, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 353.2 million and $ 321.6 million at June 30, 2022 and December 31, 2021.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 688.2 million and $ 537.4 million at June 30, 2022 and December 31, 2021, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 661,000 and $ 2.0 million for the three months ended June 30, 2022 and 2021.

Interest expense applicable to certificates in excess of $100,000 totaled $ 1.4 million and $ 4.4 million for the six months ended June 30, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, brokered deposits were $ 626.9 million and $ 625.7 million, respectively.

Deposits totaling approximately $ 2.69 billion and $ 1.91 billion at June 30, 2022 and December 31, 2021, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

Securities Sold Under Agreements to Repurchase

At March 31, 2022 and December 31, 2021, securities sold under agreements to repurchase totaled $ 151.2 million and $ 140.9 million, respectively.

For the three-month periods ended March 31, 2022 and 2021, securities sold under agreements to repurchase daily weighted-average totaled $ 137.6 million and $ 159.7 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2022 and December 31, 2021 is presented in the following tables:

March 31, 2022

At June 30, 2022 and December 31, 2021, securities sold under agreements to repurchase totaled $ 118.6 million and $ 140.9 million, respectively.

For the three-month periods ended June 30, 2022 and 2021, securities sold under agreements to repurchase daily weighted-average totaled $ 123.1 million and $ 157.6 million, respectively.

For the six-month periods ended June 30, 2022 and 2021, securities sold under agreements to repurchase daily weighted-average totaled $ 130.2 million and $ 158.6 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of June 30, 2022 and December 31, 2021 is presented in the following tables:

June 30, 2022

Overnight and

22 unchanged sentences

FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 400.0 million at both March 31, 2022 and December 31, 2021.

The Company had no other borrowed funds as of March 31, 2022 or December 31, 2021.

At March 31, 2022 and December 31, 2021, all of the outstanding balances were classified as long-term advances.

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 400.0 million at both June 30, 2022 and December 31, 2021.

The Company had no other borrowed funds as of June 30, 2022 or December 31, 2021.

At June 30, 2022 and December 31, 2021, all of the outstanding balances were classified as long-term advances.

The FHLB advances mature in 2033 with fixed interest rates ranging from 1.76 % to 2.26 %.

Expected maturities could differ from contractual maturities because FHLB may have the right to call or the Company may have the right to prepay certain obligations.

Additionally, the Company had $ 891.3 million and $ 1.07 billion at March 31, 2022 and December 31, 2021, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at March 31, 2022 and December 31, 2021, respectively.

Additionally, the Company had $ 1.09 billion and $ 1.07 billion at June 30, 2022 and December 31, 2021, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at June 30, 2022 and December 31, 2021, respectively.

The parent company took out a $ 20.0 million line of credit for general corporate purposes during 2015.

The balance on this line of credit at March 31, 2022 and December 31, 2021 was zero .

The balance on this line of credit at June 30, 2022 and December 31, 2021 was zero .

Subordinated Debentures

Subordinated debentures at March 31, 2022 and December 31, 2021 consisted of subordinated debt securities and guaranteed payments on trust preferred securities with the following components:

As of March 31, 2022

Subordinated debentures at June 30, 2022 and December 31, 2021 consisted of subordinated debt securities and guaranteed payments on trust preferred securities with the following components:

As of June 30, 2022

December 31, 2021

1 unchanged sentence

Trust preferred securities

Subordinated debentures, issued in 2004, due 2034, floating rate of 4.00 % above the three-month LIBOR rate, reset quarterly, currently callable without penalty

Subordinated debentures, issued in 2003, due 2034, floating rate of 2.95 % above the three-month LIBOR rate, reset quarterly, currently callable without penalty

Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15 % above the three-month LIBOR rate, reset quarterly, currently callable without penalty

Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75 % during the first five years and at a floating rate of 1.85 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty

$ 3,093 $ 3,093

Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00 % during the first five years and at a floating rate of 2.00 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty

15,464 15,464

Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84 % during the first five years and at a floating rate of 1.45 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty

25,774 25,774

Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29 % during the first five years and at a floating rate of 2.50 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty

16,495 16,495

Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15 % above the three-month LIBOR rate, reset quarterly, currently callable without penalty

Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38 % during the first five years and at a floating rate of 1.62 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty

1 unchanged sentence

Subordinated notes, net of issuance costs, issued in 2020, due 2030, fixed rate of 5.50 % during the first five years and at a floating rate of 534.5 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2025 without penalty

Subordinated notes, net of issuance costs, issued in 2022, due 2032, fixed rate of 3.125 % during the first five years and at a floating rate of 182 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2027 without penalty

Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625 % during the first five years and at a floating rate of 3.575 % above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty

299,978 299,824

Total $ 458,455 $ 371,093

1 unchanged sentence

The Company holds trust preferred securities with a face amount of $ 17.6 million which are currently callable without penalty based on the terms of the specific agreements.

The trust preferred securities are tax-advantaged issues that qualify for Tier 1 capital treatment subject to certain limitations.

However, now that the Company has exceeded $ 15 billion in assets, the Tier 1 treatment of the Company’s outstanding trust preferred securities will be eliminated because of the completion of the acquisition of Happy Bancshares, but these securities will still be treated as Tier 2 capital.

The trust preferred securities are tax-advantaged issues that previously qualified for Tier 1 capital treatment subject to certain limitations.

However, now that the Company has exceeded $15 billion in assets and has completed the acquisition of Happy Bancshares, the Tier 1 treatment of the Company’s outstanding trust preferred securities has been eliminated, and these securities are now treated as Tier 2 capital.

Distributions on these securities are included in interest expense.

4 unchanged sentences

The Company’s obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.

The Company has received approval from the Federal Reserve to redeem the trust preferred securities.

The Company has received approval from the Federal Reserve to redeem the trust preferred securities, and is in the process of redeeming all of its trust preferred securities.

On April 1, 2022, the Company acquired $ 23.2 million in trust preferred securities from Happy which were currently callable without penalty based on the terms of the specific agreements.

During the quarter, $ 10.7 million of these trust preferred securities were paid off without penalty.

As of June 30, 2022, the Company held a face amount of $ 12.5 million in trust preferred securities acquired from Happy.

During the second quarter of 2022, the Company chose to redeem an additional $ 68.1 million in trust preferred securities held prior to the acquisition of Happy.

As of June 30, 2022, the Company's remaining balance of trust preferred securities which were held prior to the acquisition of Happy was $ 5.1 million.

Subordinated Debt Securities .

On April 1, 2022, the Company acquired $ 140.0 million of subordinated notes from Happy.

These notes have a maturity date of July 31, 2030 and carry a fixed rate of 5.500 % for the first five years.

Thereafter, the notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345 % resetting quarterly.

Interest payments are due semi-annually and the notes include a right of prepayment without penalty on or after July 31, 2025.

On January 18, 2022, the Company completed an underwritten public offering of $ 300.0 million in aggregate principal amount of its 3.125 % Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs of approximately $ 296.4 million.

11 unchanged sentences

provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be deemed to be zero.

The Company may, beginning with the interest payment date of April 15, 2022, and on any interest payment date thereafter, redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the 2027 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

The Company may also redeem the 2027 Notes at any time, including prior to April 15, 2022, at its option, in whole but not in part, if:

(i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the 2027 Notes for U.S.

federal income tax purposes;

(ii) a subsequent event occurs that could preclude the 2027 Notes from being recognized as Tier 2 capital for regulatory capital purposes;

or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended;

in each case, at a redemption price equal to 100% of the principal amount of the 2027 Notes plus any accrued and unpaid interest to but excluding the redemption date.

The 2027 Notes provided the Company with additional Tier 2 regulatory capital to support expected future growth.

On April 15, 2022, the Company completed the payoff of its $ 300.0 million in aggregate principal amount of the 2027 Notes.

The Company, beginning with the interest payment date of April 15, 2022, and on any interest payment date thereafter, was permitted to redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the 2027 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

On April 15, 2022, the Company completed the payoff of the 2027 Notes in aggregate principal amount of $ 300.0 million.

Each 2027 Note was redeemed pursuant to the terms of the Subordinated Indenture, as supplemented by the First Supplemental Indenture, each dated as of April 3, 2017, between the Company and U.S.

Bank Trust Company, National Association, the Trustee for the 2027 Notes, at the redemption price of 100% of its principal amount, plus accrued and unpaid interest to, but excluding, the Redemption Date.

The following is a summary of the components of the provision (benefit) for income taxes for the three months ended March 31, 2022 and 2021:

For the Three Months Ended March 31,

The following is a summary of the components of the provision for income taxes for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

6 unchanged sentences

Income tax expense $ 3,294 $ 25,072 $ 23,323 $ 53,968

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Statutory federal income tax rate 21.00 % 21.00 % 21.00 % 21.00 %

17 unchanged sentences

Investments 34,527 263

Deposits 207 —

Other 17,392 5,283

4 unchanged sentences

Core deposit intangibles 15,360 5,736

Deposits 67 65

FHLB dividends 2,782 2,820

3 unchanged sentences

The Company and its subsidiaries file income tax returns in the U.S.

federal jurisdiction and the states of Alabama, Arizona, Arkansas, California, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Tennessee, Texas and Wisconsin.

federal jurisdiction and the states of Alabama, Arizona, Arkansas, California, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Mississippi, Missouri, New Hampshire, New Jersey, New York, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Wisconsin.

The Company is no longer subject to U.S.

5 unchanged sentences

On January 22, 2021, the Company’s Board of Directors authorized the repurchase of up to an additional 20,000,000 shares of its common stock under the previously approved stock repurchase program.

During the first three months of 2022, the Company repurchased a total of 180,000 shares with a weighted-average stock price of $ 22.69 per share.

Shares repurchased under the program as of March 31, 2022 since its inception total 17,841,335 shares.

The remaining balance available for repurchase is 21,910,665 shares at March 31, 2022.

During the first six months of 2022, the Company repurchased a total of 1,212,732 shares with a weighted-average stock price of $ 21.89 per share.

Shares repurchased under the program as of June 30, 2022 since its inception total 18,874,067 shares.

The remaining balance available for repurchase is 20,877,933 shares at June 30, 2022.

Stock Compensation Plans

3 unchanged sentences

The purpose of the Plans is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results.

As of March 31, 2022, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan, subject to shareholder approval of the Plan, was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan).

At March 31, 2022, the Company had approximately 2,891,510 shares of common stock available for future grants under 2022 Plan, subject to shareholder approval of the 2022 Plan, including approximately 1,391,510 shares of common stock that remained available for future grants under the 2006 Plan at the time of its expiration.

In addition, at March 31, 2021, approximately 3,010,016 shares of common stock were reserved for issuance pursuant to outstanding stock options under the 2006 Plan, which could become available for issuance under the 2022 Plan to the extent any such stock option is forfeited, terminates, expires or lapses without shares of common stock being issued, or to the extent that any such award is settled for cash, for a total of approximately 5,901,526 shares of common stock reserved for issuance pursuant to the Plans.

As of March 31, 2022, no awards were outstanding under the 2022 Plan.

No further awards may be granted under the 2006 Plan as of February 27, 2022.

The intrinsic value of the stock options outstanding and stock options vested at March 31, 2022 was $ 8.6 million and $ 7.9 million, respectively.

The intrinsic value of stock options exercised during the three months ended March 31, 2022 was approximately $ 254,000 .

Total unrecognized compensation cost, net of income tax benefit, related to non-vested stock option awards, which are expected to be recognized over the vesting periods, was approximately $ 6.3 million as of March 31, 2022.

The table below summarizes the stock option transactions under the 2006 Plan at March 31, 2022 and December 31, 2021 and changes during the three-month period and year then ended :

For the Three Months Ended March 31, 2022

For the Year Ended

As of June 30, 2022, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan, subject to shareholder approval of the Plan, was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan).

At June 30, 2022, the Company had 2,617,211 shares of common stock available for future grants under 2022 Plan, subject to shareholder approval of the 2022 Plan.

As of June 30, 2022, a total of 5,761,527 shares of common stock were reserved for issuance pursuant to the Plans.

The intrinsic value of the stock options outstanding and stock options vested at June 30, 2022 was $ 5.7 million and $ 5.4 million, respectively.

The intrinsic value of stock options exercised during the six months ended June 30, 2022 was approximately $ 259,000 .

The table below summarizes the stock option transactions under the 2022 Plan at June 30, 2022 and December 31, 2021 and changes during the three-month period and year then ended :

For the Six Months Ended June 30, 2022 For the Year Ended

December 31, 2021

12 unchanged sentences

Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Company's employee stock options.

The weighted-average fair value of options granted during the three months ended March 31, 2022 was $ 5.83 per share.

There were 18,000 options granted during the three months ended March 31, 2022.

The weighted-average fair value of options granted during the six months ended June 30, 2022 was $ 5.17 per share.

There were 178,000 options granted during the six months ended June 30, 2022.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate, and expected life of options granted.

The assumptions used in determining the fair value of the 2022 and 2021 stock option grants were as follows:

For the Three Months Ended March 31, 2022

For the Six Months Ended June 30, 2022

For the Year Ended December 31, 2021

3 unchanged sentences

Expected life of options 6.5 years 6.5 years

The following is a summary of currently outstanding and exercisable options at March 31, 2022:

Options Outstanding

The following is a summary of currently outstanding and exercisable options at June 30, 2022:

Options Outstanding Options Exercisable

Exercise Prices Options

23 unchanged sentences

99 5.81 25.39 73 25.85

The table below summarized the activity for the Company’s restricted stock issued and outstanding at March 31, 2022 and December 31, 2021 and changes during the period and year then ended:

March 31, 2022

The table below summarized the activity for the Company’s restricted stock issued and outstanding at June 30, 2022 and December 31, 2021 and changes during the period and year then ended:

June 30, 2022

December 31, 2021

5 unchanged sentences

End of period 1,414 1,231

Amount of expense for three months and twelve months ended, respectively

Amount of expense for six months and twelve months ended, respectively

$ 3,664 $ 7,112

Total unrecognized compensation cost, net of income tax benefit, related to non-vested restricted stock awards, which are expected to be recognized over the vesting periods, was approximately $ 18.2 million as of March 31, 2022.

Non-Interest Expense

The table below shows the components of non-interest expense for the three months ended March 31, 2022 and 2021:

Three Months Ended

The table below shows the components of non-interest expense for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

(In thousands)

28 unchanged sentences

In addition, equipment leases were determined to be immaterial and a related ROU asset and liability for such leases is not recorded.

As of March 31, 2022, the balances of the right-of-use asset and lease liability was $ 39.7 million and $ 42.5 million, respectively.

As of June 30, 2022, the balances of the right-of-use asset and lease liability was $ 45.6 million and $ 48.7 million, respectively.

As of December 31, 2021, the balances of the right-of-use asset and lease liability was $ 39.6 million and $ 42.4 million, respectively The right-of-use asset is included in bank premises and equipment, net , and the lease liability is included in accrued interest payable and other liabilities .

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

2022 $ 4,547 $ 7,714

8 unchanged sentences

Additional information (dollar amounts in thousands):

For the Three Months Ended

For the Three Months Ended Six Months Ended

Lease expense:

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Operating lease expense $ 2,116 $ 1,981 $ 3,939 $ 3,990

6 unchanged sentences

Weighted-average remaining lease term (in years)

9.33 9.75 9.42 9.84

Weighted-average discount rate 3.38 % 3.53 % 3.39 % 3.53 %

The Company currently leases three properties from three related parties.

Total rent expense from the leases was $ 35,000 or 1.78 % of total lease expense and $ 35,000 or 1.54 % of total lease expense for the three months ended March 31, 2022 and 2021, respectively.

Total rent expense from the leases was $ 36,000 or 1.56 % of total lease expense and $ 73,000 or 1.66 % of total lease expense for the three and six months ended June 30, 2022.

Significant Estimates and Concentrations of Credit Risks

1 unchanged sentence

Estimates related to the allowance for credit losses and certain concentrations of credit risk are reflected in Note 5, while deposit concentrations are reflected in Note 8.

The Company’s primary market areas are in Arkansas, Florida, South Alabama and New York.

The Company’s primary market areas are in Arkansas, Florida, Texas, South Alabama and New York.

The Company primarily grants loans to customers located within these markets unless the borrower has an established relationship with the Company.

1 unchanged sentence

Although the Company has a loan portfolio that is diversified in both industry and geographic area, a substantial portion of its debtors’ ability to honor their contracts is dependent upon real estate values, tourism demand and the economic conditions prevailing in its market areas.

Although the Company has a diversified loan portfolio, at March 31, 2022 and December 31, 2021, commercial real estate loans represented 57.8 % and 59.7 % of total loans receivable, respectively, and 216.2 % and 212.2 % of total stockholders’ equity at March 31, 2022 and December 31, 2021, respectively.

Residential real estate loans represented 14.6 % and 15.8 % of total loans receivable and 54.8 % and 56.3 % of total stockholders’ equity at March 31, 2022 and December 31, 2021, respectively.

Approximately 69.9 % of the Company’s total loans and 75.8 % of the Company’s real estate loans as of March 31, 2022, are to borrowers whose collateral is located in Alabama, Arkansas, Florida and New York, the states in which the Company has its branch locations.

As of March 31, 2022 , the markets in which we operate have begun to experience significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest.

However, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of March 31, 2022 .

In addition, the Company determined no additional provision for unfunded commitments was necessary as of March 31, 2022.

Although the Company has a diversified loan portfolio, at June 30, 2022 and December 31, 2021, commercial real estate loans represented 57.6 % and 59.7 % of total loans receivable, respectively, and 229.2 % and 212.2 % of total stockholders’ equity at June 30, 2022 and December 31, 2021, respectively.

Residential real estate loans represented 15.1 % and 15.8 % of total loans receivable and 60.0 % and 56.3 % of total stockholders’ equity at June 30, 2022 and December 31, 2021, respectively.

Approximately 78.0 % of the Company’s total loans and 82.1 % of the Company’s real estate loans as of June 30, 2022, are to borrowers whose collateral is located in Alabama, Arkansas, Florida, Texas and New York, the states in which the Company has its branch locations.

As of June 30, 2022, the markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest.

However, excluding the impact of the acquisition of Happy Bancshares, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022.

In addition, excluding the impact of the acquisition of Happy Bancshares, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022.

Any future volatility in the economy could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for credit losses and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.

Commitments and Contingencies

In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of their customers.

In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of its customers.

These commitments and contingent liabilities include lines of credit and commitments to extend credit and issue standby letters of credit.

1 unchanged sentence

The collateral obtained is based on the assessed creditworthiness of the borrower.

At March 31, 2022 and December 31, 2021, commitments to extend credit of $ 3.19 billion and $ 3.05 billion, respectively, were outstanding.

At June 30, 2022 and December 31, 2021, commitments to extend credit of $ 4.47 billion and $ 3.05 billion, respectively, were outstanding.

A percentage of these balances are participated out to other banks;

6 unchanged sentences

Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

The maximum amount of future payments the Company could be required to make under these guarantees at March 31, 2022 and December 31, 2021, was $ 110.2 million and $ 110.8 million, respectively.

The maximum amount of future payments the Company could be required to make under these guarantees at June 30, 2022 and December 31, 2021, was $ 164.9 million and $ 110.8 million, respectively.

The Company and/or its bank subsidiary have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position or results of operations or cash flows of the Company and its subsidiary.

3 unchanged sentences

Since the Bank is also under supervision of the Federal Reserve, it is further limited if the total of all dividends declared in any calendar year by the Bank exceeds the Bank’s net profits to date for that year combined with its retained net profits for the preceding two years.

During the first three months of 2022, the Company requested approximately $ 53.1 million in regular dividends from its banking subsidiary.

During the first six months of 2022, the Company requested approximately $ 53.1 million in regular dividends from its banking subsidiary.

The Company’s banking subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies.

4 unchanged sentences

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, common Tier 1 equity and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).

Management believes that, as of March 31, 2022, the Company meets all capital adequacy requirements to which it is subject.

Management believes that, as of June 30, 2022, the Company meets all capital adequacy requirements to which it is subject.

On December 31, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years.

10 unchanged sentences

The rule phases out of Tier 1 capital these non-qualifying capital instruments issued before May 19, 2010 by all other bank holding companies.

Because our total consolidated assets were less than $15 billion as of December 31, 2009, our outstanding trust preferred securities continue to be treated as Tier 1 capital.

However, now that the Company has exceeded $ 15 billion in assets, the Tier 1 treatment of the Company’s outstanding trust preferred securities will be phased out upon completion of the acquisition of Happy Bancshares, but these securities will still be treated as Tier 2 capital.

Basel III also amended the prompt corrective action rules to incorporate a “common equity Tier 1 capital” requirement and to raise the capital requirements for certain capital categories.

3 unchanged sentences

a 6.5 % “common equity Tier 1 risk-based capital” ratio, a 5 % “Tier 1 leverage capital” ratio, an 8 % “Tier 1 risk-based capital” ratio, and a 10 % “total risk-based capital” ratio.

As of March 31, 2022, the Bank met the capital standards for a well-capitalized institution.

The Company’s “common equity Tier 1 risk-based capital” ratio, “Tier 1 leverage capital” ratio, “Tier 1 risk-based capital” ratio, and “total risk-based capital” ratio were 14.87 %, 10.84 %, 15.45 %, and 21.58 %, respectively, as of March 31, 2022.

As of June 30, 2022, the Bank met the capital standards for a well-capitalized institution.

The Company’s “common equity Tier 1 risk-based capital” ratio, “Tier 1 leverage capital” ratio, “Tier 1 risk-based capital” ratio, and “total risk-based capital” ratio were 12.78 %, 9.77 %, 12.88 %, and 16.61 %, respectively, as of June 30, 2022.

Additional Cash Flow Information

The following is a summary of the Company’s additional cash flow information during the three-month periods ended:

In connection with the Happy acquisition, accounted for under ASC Topic 805, the Company acquired approximately $ 6.68 billion in assets, including $ 858.9 million in cash and cash equivalents, assumed $ 6.15 billion in liabilities, issued approximately 42.4 million shares of its common stock valued at approximately $ 958.8 million as of April 1, 2022.

The following is a summary of the Company’s additional cash flow information during the six-month periods ended:

(In thousands)

13 unchanged sentences

Financial Assets and Liabilities Measured on a Recurring Basis

Available-for-sale securities are the only material instruments valued on a recurring basis which are held by the Company at fair value.

The Company does not have any Level 1 securities.

Primarily all of the Company's securities are considered to be Level 2 securities.

These Level 2 securities consist primarily of U.S.

Available-for-sale securities and marketable equity securities are the only material instruments valued on a recurring basis which are held by the Company at fair value.

Primarily all of the Company's securities are considered to be Level 2 securities, with the exception of the marketable equity securities, which are considered to be Level 1 securities.

The Level 2 securities consist primarily of U.S.

government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions.

2 unchanged sentences

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

As of March 31, 2022 and December 31, 2021, Level 3 securities were immaterial.

As of June 30, 2022 and December 31, 2021, Level 3 securities were immaterial.

In addition, there were no material transfers between hierarchy levels during 2022 and 2021.

See Note 3 for additional detail related to investment securities.

See Note 3 to the Condensed Notes to Consolidated Financial Statements for additional detail related to investment securities.

The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices.

3 unchanged sentences

Financial Assets and Liabilities Measured on a Nonrecurring Basis

Impaired loans that are collateral dependent are the only material financial assets valued on a non-recurring basis which are held by the Company at fair value.

Held-to-maturity investment securities and impaired loans that are collateral dependent are the only material financial assets valued on a non-recurring basis which are held by the Company at fair value.

The held-to-maturity investment securities consist primarily of state and political subdivisions plus U.S.

Treasury securities.

For these securities, the Company obtains fair value measurements from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Loan impairment is reported when full payment under the loan terms is not expected.

2 unchanged sentences

If these allocations cause the allowance for credit losses to require an increase, such increase is reported as a component of the provision for credit losses.

The fair value of loans with specific allocated losses was $ 271.3 million and $ 280.0 million as of March 31, 2022 and December 31, 2021, respectively.

The fair value of loans with specific allocated losses was $ 323.1 million and $ 280.0 million as of June 30, 2022 and December 31, 2021, respectively.

This valuation is considered Level 3, consisting of appraisals of underlying collateral.

The Company reversed approximately $ 73,000 and $ 58,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended March 31, 2022 and 2021, respectively.

The Company reversed approximately $ 77,000 and $ 126,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended June 30, 2022 and 2021, respectively.

The Company reversed approximately $ 149,000 and $ 184,000 of accrued interest receivable when impaired loans were put on non-accrual status during the six months ended June 30, 2022 and 2021, respectively.

Nonfinancial Assets and Liabilities Measured on a Nonrecurring Basis

3 unchanged sentences

The fair value of foreclosed assets held for sale is estimated using Level 3 inputs based on appraisals of underlying collateral.

As of March 31, 2022 and December 31, 2021, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 1.1 million and $ 1.6 million, respectively.

No foreclosed assets held for sale were remeasured during the three months ended March 31, 2022.

As of June 30, 2022 and December 31, 2021, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 373,000 and $ 1.6 million, respectively.

No foreclosed assets held for sale were remeasured during the six months ended June 30, 2022.

Regulatory guidelines require the Company to reevaluate the fair value of foreclosed assets held for sale on at least an annual basis.

7 unchanged sentences

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date .

March 31, 2022

June 30, 2022

Amount Fair Value Level

2 unchanged sentences

Cash and cash equivalents $ 2,816,376 $ 2,816,376 1

Investment securities - held-to-maturity 499,265 499,138 2

Investment securities - available for sale 3,791,509 3,791,509 2

Investment securities - held-to-maturity (U.S.

Treasuries) 277,688 276,029 1

Investment securities - held-to-maturity (state and political subdivisions) 1,089,093 997,251 2

Loans receivable, net of impaired loans and allowance 13,302,682 13,695,308 3

3 unchanged sentences

182,399 182,399 3

Marketable equity securities 33,631 33,631 1

Financial liabilities:

11 unchanged sentences

Cash and cash equivalents $ 3,650,315 $ 3,650,315 1

Investment securities - available for sale 3,119,807 3,119,807 2

Loans receivable, net of impaired loans and allowance 9,319,421 9,503,261 3

3 unchanged sentences

124,638 124,638 3

Marketable equity securities 17,110 17,110 1

Financial liabilities:

25 unchanged sentences

In March 2022, the FASB issued ASU 2022-02, " Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures." The amendments eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represent a new loan or a continuation of an existing loan.

The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

9 unchanged sentences

The Company is currently evaluating the potential impacts related to the adoption of the ASU.

Subsequent Events

Effective April 1, 2022, pursuant to the Merger Agreement, dated as of September 15, 2021, as amended on October 18, 2021 and November 8, 2021, among the Company, Centennial, HOMB Acquisition Sub III, Inc.

(“Acquisition Sub”), Happy and HSB, Acquisition Sub merged with and into Happy and Happy merged with and into the Company, with the Company as the surviving entity (collectively, the “Merger”).

HSB also merged with and into Centennial, with Centennial as the surviving entity.

Under the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock of Happy was converted into the right to receive, without interest, 2.17 shares of Company common stock (the “Merger Consideration”).

Each unvested restricted share of Happy common stock outstanding at the Effective Time became fully vested and converted into the right to receive the Merger Consideration.

In addition, at the Effective Time, each outstanding option to purchase Happy common stock was cancelled and converted into the right to receive the number of whole shares of Company common stock, together with any cash in lieu of fractional shares, equal to the product of (i) the number of shares of Happy common stock subject to the option, multiplied by (ii) the excess, if any, of $ 49.3675 (the Merger Consideration value) over the exercise price of the option, less applicable tax withholdings, divided by (iii) $ 22.75 .

Similarly, each stock appreciation right of Happy outstanding at the Effective Time was cancelled and converted into the right to receive a cash payment, without interest, equal to the product of (i) the number of shares of Happy common stock subject to the stock appreciation right, multiplied by (ii) the excess, if any, of $ 49.3675 over the grant price of the stock appreciation right, less applicable tax withholdings.

For purposes of these calculations, the Merger Consideration value was determined using a volume-weighted average closing price of the Company’s common stock as reported on the New York Stock Exchange over the 20 consecutive trading day period ending on the third business day prior to the closing of the Merger, multiplied by 2.17 .

Under the terms of the Merger Agreement, the Company issued approximately 42.4 million shares of its common stock valued at approximately $ 958.8 million as of April 1, 2022.

No cash consideration was paid in connection with the Merger, except that holders of outstanding shares of Happy common stock or “in-the-money” stock options of Happy at the time of the Merger received cash payments equal to $ 22.75 , multiplied by any resulting fractional shares of Company common stock to which they were otherwise entitled in connection with the Merger.

In addition, the holders of stock appreciation rights of Happy received approximately $ 3.1 million in cash in cancellation of their stock appreciation rights immediately before the Merger, for a total transaction value of approximately $ 961.9 million.

Prior to the acquisition, Happy conducted business from 62 branches in communities across the Texas Panhandle, South Plains, Austin, Central Texas and the Dallas/Fort Worth Metroplex.

As of March 31, 2022, Happy had approximately $ 6.76 billion in assets, $ 3.61 billion in loans and $ 5.85 billion in deposits.

The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the Merger.

Due to the recent closing, management remains in the early stages of reviewing the estimated fair values and evaluating the assumed tax positions of this Merger.

The Company expects to finalize its analysis of the acquired assets and assumed liabilities in this transaction within one year of the Merger.

On April 15, 2022, the Company completed the payoff of its $ 300.0 million in aggregate principal amount of the 2027 Notes.

Each 2027 Note was redeemed pursuant to the terms of the Subordinated Indenture, as supplemented by the First Supplemental Indenture, each dated as of April 3, 2017, between the Company and U.S.

As provided in the notice of redemption, dated March 15, 2022, previously given to the 2027 Note holders, each 2027 Note holder was entitled to receive the Redemption Price upon presentment and surrender of the 2027 Notes to the Trustee, who acted as the Company’s paying agent in connection with the redemption.

Report of Independent Registered Public Accounting Firm

4 unchanged sentences

We have reviewed the condensed consolidated balance sheet of Home BancShares, Inc.

and subsidiaries (the “Company”) as of March 31, 2022, and the related condensed consolidated statements of income, comprehensive (loss) income, stockholders’ equity and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively referred to as the “interim financial information” or “statements”).

and subsidiaries (the “Company”) as of June 30, 2022, and the related condensed consolidated statements of income, comprehensive (loss) income and stockholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021 and cash flows for the six month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the “interim financial information” or “statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

9 unchanged sentences

Accordingly, we do not express such an opinion.

/s/ FORVIS, LLP

(Formerly BKD,LLP)

Little Rock, Arkansas

August 9, 2022

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements