What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-24 compared with 2022-02-24 · 50 added, 112 removed, 275 unchanged (37% of the section changed)

31 unchanged sentences

Additionally, banks with over $10 billion in total assets are no longer exempt from the requirements of the Federal Reserve’s rules on interchange transaction fees for debit cards.

Since July 1, 2018, our bank subsidiary has been limited to receiving only a “reasonable” interchange transaction fee for any debit card transactions processed using debit cards issued by our bank subsidiary to our customers.

Our bank subsidiary is limited to receiving only a “reasonable” interchange transaction fee for any debit card transactions processed using debit cards issued by our bank subsidiary to our customers.

The Federal Reserve has determined that it is unreasonable for a bank with more than $10 billion in total assets to receive more than $0.21 plus 5 basis points of the transaction plus a $0.01 fraud adjustment for an interchange transaction fee for debit card transactions.

17 unchanged sentences

Any such negative events may have an adverse effect on our business, financial condition, results of operations and stock price.

The ongoing impacts of the COVID-19 pandemic could materially and adversely affect our future business, financial condition and results of operations.

The ultimate impacts of the pandemic on our business will depend on factors that remain uncertain such as, among other things, the long-term scope and duration of the pandemic, the success of ongoing vaccination, treatment and other mitigation efforts, and actions taken by governmental authorities in response to the economic effects of the pandemic.

Since the first quarter of 2020, the COVID-19 pandemic has disrupted U.S.

The impacts of the COVID-19 pandemic could materially and adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic disrupted U.S.

and global supply chains and altered business and economic conditions throughout the U.S.

and globally.

Following the initial outbreak of the pandemic, its economic impacts lowered equity market valuations;

Its economic impacts lowered equity market valuations;

created significant volatility and disruption in financial markets;

3 unchanged sentences

increased demands on capital and liquidity;

and increased unemployment levels and decreased consumer confidence.

In addition, the pandemic has resulted in temporary or permanent closures of many businesses, the institution of social distancing, face covering requirements and other health directives, and in some cases, self-isolation requirements.

The pandemic has caused us, and could cause us in the future, to recognize credit losses in our loan portfolios and increases in our allowance for credit losses and could cause further volatility in the valuation of real estate and other collateral supporting loans.

Furthermore, the pandemic could cause us to recognize impairment of our goodwill and our financial assets.

Sustained adverse effects could also increase our cost of capital, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, or result in downgrades in our credit ratings.

The extent to which the continuation of the COVID-19 pandemic may impact our business, financial condition, liquidity, and results of operations will depend on future developments, which remain uncertain and cannot be predicted, including the long-term scope and duration of the pandemic, the success of ongoing vaccination, treatment and other mitigation efforts, any further actions taken by governmental authorities in response to the economic and health effects of the pandemic, and the long-term financial impact of the pandemic on our customers, employees, counterparties and service providers.

Governmental authorities in the past two years have taken significant measures to provide economic assistance to individual households and businesses, stabilize the markets, and support economic growth, and it is possible that further such measures will be enacted or implemented.

The long-term success of these measures remains uncertain, and they may not be sufficient to fully mitigate the negative impact of the pandemic or could cause unintended adverse economic consequences.

Additionally, governmental programs and policies could impact our ability to resolve credit delinquencies as well as create heightened litigation risk and risk of holding loans at unfavorable interest rates.

We also face an increased risk of governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

The potential global and economic impacts of the coronavirus continue to evolve, and the length of the pandemic and the effectiveness of the measures being put in place to address it remain uncertain.

Until the effects of the pandemic subside, we could experience reduced revenues in our businesses and increased customer defaults.

Furthermore, any future volatility in the economy or prolonged recession could further materially and adversely affect our business, financial condition, liquidity, or results of operations.

increased unemployment levels and decreased consumer confidence.

In addition, the pandemic resulted in temporary or permanent closures of many businesses, the institution of social distancing, face covering requirements and other health directives, and in some cases, self-isolation requirements.

The pandemic also caused us to recognize credit losses in our loan portfolios and increases in our allowance for credit losses.

Given the nature of COVID-19 variants, it is difficult to predict whether or when any future outbreaks of the virus may occur or the impacts that any such outbreak may have on our business.

Any impact will depend on future developments, including the long-term scope, severity and duration of the outbreak, the success of vaccination, treatment and other mitigation efforts, any further actions taken by governmental authorities in response to the economic and health effects of the pandemic, and the long-term financial impact of the pandemic on our customers, employees, counterparties and service providers.

As part of these uncertainties, we could be subject to a number of risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, and ability to execute our growth strategy.

These risks include, but are not limited to, increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses;

further volatility in the valuation of real estate and other collateral supporting loans ;

impairment of our goodwill and our financial assets;

increased cost of capital;

inability to satisfy our minimum regulatory capital ratios and other supervisory requirements;

or a downgrade in our credit ratings.

We could also face an increased risk of governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

Even as the economic and health impacts of the coronavirus subside, we could experience future volatility in the economy or a prolonged recession that could materially and adversely affect our business, financial condition, liquidity, or results of operations.

Our FDIC insurance premiums and assessments could increase and result in higher noninterest expense.

10 unchanged sentences

Consequently, our results of operations can be significantly affected by changes in interest rates and our ability to manage interest rate risk.

Changes in market interest rates, or changes in the relationships between short-term and long-term market interest rates, or changes in the relationship between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest paid on interest-bearing liabilities.

Changes in market interest rates, changes in the relationships between short-term and long-term market interest rates, or changes in the relationship between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest paid on interest-bearing liabilities.

This difference could result in an increase in interest expense relative to interest income or a decrease in interest rate spread.

2 unchanged sentences

For example, increases in interest rates can have a negative impact on our results of operations by reducing loan demand and the ability of borrowers to repay their current obligations, while decreases in interest rates may affect loan prepayments.

In response to rising inflation and its affects on U.S.

business and consumers in recent months, it is widely anticipated that the Federal Reserve will implement multiple interest rate increases during 2022.

Any such actions by the Federal Reserve Board involving monetary policies could cause any of the adverse effects described above on our deposit levels, loan demand or business and earnings.

In response to recent inflation and its affects on U.S.

business and consumers, the Federal Reserve Board has implemented eight interest rate increases since March 2022.

It is widely anticipated that the Federal Reserve will implement multiple additional interest rate increases during 2023.

While we experienced loan growth during 2022 through acquisitions and organically sufficient to more than offset our increased interest expense and overall loan demand has remained relatively strong, there can be no assurance that any such future actions by the Federal Reserve Board involving monetary policies will not cause any of the adverse effects described above on our deposit levels, loan demand or business and earnings.

We may be adversely impacted by the transition from the use of the LIBOR interest rate index in the future.

13 unchanged sentences

Failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

We have participated as a lender in the Paycheck Protection Program and accordingly are subject to certain risks applicable to lenders under such program.

The PPP loans we have made under the federal CARES Act are guaranteed by the SBA.

If the loan funds are used by the borrower for specific purposes as provided under the PPP, these loans may be fully or partially forgiven by the SBA, at which time our bank subsidiary will receive funds related to the PPP loan forgiveness directly from the SBA.

If the borrower fails to qualify for loan forgiveness, we are at heightened risk of holding these loans at unfavorable interest rates as compared to the loans to customers that we would have otherwise extended credit.

Because of the brief time between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to the PPP evolved or were issued after lenders, including our bank subsidiary, began processing PPP loan applications.

There has been uncertainty regarding some of the laws, rules and guidance relating to the PPP.

If the SBA or other regulators determine that we have not complied with all PPP laws, rules and guidance, we could be required to refund some or all of the fees related to PPP loans that we have earned or be subject to other regulatory enforcement action.

Furthermore, in the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded or serviced by our bank subsidiary, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if it has already made payment under the guaranty, seek recovery from us of any loss related to the deficiency.

In addition, since the commencement of the PPP, we and certain other banks have been subject to litigation, which was subsequently dismissed, regarding the processing of PPP loan applications and payment of processing fees to third party agents.

We could be exposed to the risk of other litigation from both customers and non-customers who sought PPP loans from us or in connection with other aspects of the PPP, including but not limited to borrowers seeking forgiveness of their loans.

Any financial liability, litigation costs, or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition, and results of operations.

Risks Related to Our Business

8 unchanged sentences

Any increase in our allowance for credit losses or loan charge-offs could have a negative effect on our operating results.

On January 1, 2020, we adopted new accounting rules affecting the calculation of the allowance for credit losses (formerly the allowance for loan losses) known as ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This guidance replaces the incurred loss methodology for determining the former allowance for loan losses with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.

This standard requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses.

In connection with the adoption of this guidance, we recorded a one-time cumulative-effect adjustment to the allowance for credit losses of $44.0 million which was recognized through a $32.5 million adjustment to retained earnings, net of tax.

This adjustment brought the beginning balance of the allowance for credit losses to $146.1 million as of January 1, 2020.

In addition, the Company recorded a $15.5 million reserve on unfunded commitments which was recognized through an $11.5 million adjustment to retained earnings, net of tax.

The adoption of the standard has required significant changes to the processes and procedures required to calculate the allowance for credit losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model.

For additional information on the allowance for credit losses, see Notes 1 and 5 in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.

Our high concentration of real estate loans and especially commercial real estate loans exposes us to increased lending risk.

As of December 31, 2021, 70.8% of our total loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral.

As of December 31, 2022, approximately 72.5% of our total loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral.

This includes commercial real estate loans (excluding construction/land development) of $5.98 billion, or 41.5% of total loans, construction/land development loans of $2.14 billion, or 14.8% of total loans, and residential real estate loans of $2.33 billion, or 16.1% of total loans.

10 unchanged sentences

Our geographic concentration of banking activities and loan portfolio makes us more vulnerable to adverse conditions in our local markets.

Our bank subsidiary operates through branch locations in Arkansas, Florida, Alabama and New York City and loan production offices in Los Angeles, California, Dallas, Texas, Miami, Florida, Chesapeake, Virginia and Baltimore, Maryland.

However, approximately 70.8% of our total loans and 74.6% of our real estate loans as of December 31, 2021, are to borrowers whose collateral is located in Arkansas, Florida, Alabama and New York, the states in which the Company has its branch locations.

Our bank subsidiary operates through branch locations in Arkansas, Florida, Texas, Alabama and New York City and loan production offices in Los Angeles, California, Dallas, Texas, Miami, Florida, Chesapeake, Virginia and Baltimore, Maryland.

However, approximately 79.7% of our total loans and 84.6% of our real estate loans as of December 31, 2022, are to borrowers whose collateral is located in Arkansas, Florida, Texas, Alabama and New York, the states in which the Company has its branch locations.

An adverse development with respect to the market conditions of any of these specific market areas or a decrease in real estate values in those market areas could expose us to a greater risk of loss than a portfolio that is spread among a larger geographic base.

8 unchanged sentences

As of December 31, 2022, the legal lending limit of our bank subsidiary for secured loans was approximately $539.7 million.

Our board of directors has established an in-house lending limit of $20.0 million to any one borrowing relationship without obtaining the approval of both our Chairman, John W.

Allison, and our director Richard H.

Our board of directors has established an in-house lending limit of $40.0 million to any one borrowing relationship without obtaining the approval of two of the following:

our Chairman, John W.

Allison, our Vice Chairman, Jack E.

Engelkes, or our director Richard H.

As of December 31, 2022, we had a total of $6.46 billion, or 44.8% of our total loans, committed to the aggregate group of borrowers whose total debt exceeds the established in-house lending limit of $40.0 million.

14 unchanged sentences

The value of securities in our investment portfolio may decline in the future.

As of December 31, 2021, we owned $3.12 billion of investment securities.

The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio.

As of December 31, 2022, we owned $4.04 billion of available-for-sale investment securities.

The fair value of our available-for-sale investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio.

We evaluate all securities quarterly to determine if any securities in a loss position requires a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments .

9 unchanged sentences

Because of changing economic and market conditions affecting issuers, we may be required to record provisions for credit losses in future periods, which could have a material adverse effect on our business, financial condition or results of operations.

As of December 31, 2022, we owned $1.29 billion of held-to-maturity investment securities.

Securities held-to-maturity ("HTM"), which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts.

Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security.

The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

Our recent results do not indicate our future results and may not provide guidance to assess the risk of an investment in our common stock.

41 unchanged sentences

We have acquired 23 banks since we started our first subsidiary bank in 1999, including a total of 18 banks since 2010.

We currently anticipate completing our proposed acquisition of Happy Bancshares, headquartered in Amarillo, Texas, during the first quarter of 2022.

We completed the acquisition of Happy Bancshares, headquartered in Amarillo, Texas, during the second quarter of 2022.

We will continue to consider future strategic acquisitions, with a primary focus on Texas, Arkansas, Florida, Alabama and other nearby markets.

1 unchanged sentence

There may be instances when we, under our normal operating procedures, may find after the acquisition that there may be additional losses or undisclosed liabilities with respect to the assets and liabilities of the target bank, and, with respect to its loan portfolio, that the ability of a borrower to repay a loan may have become impaired, the quality of the value of the collateral securing a loan may fall below our standards, or our determination of the fair value of any such loan may be inadequate.

One or more of these factors might cause us to have additional losses or liabilities, additional loan charge-offs, or increases in allowances for loan losses, which would have a negative impact upon our financial condition and results of operations.

If the goodwill that we record in connection with a business acquisition becomes impaired, it could require charges to earnings.

One or more of these factors might cause us to have additional losses or liabilities, additional loan charge-offs, or increases in our allowance for credit losses, which would have a negative impact upon our financial condition and results of operations.

If the goodwill that we may record or have recorded in connection with a business acquisition becomes impaired, it could require charges to earnings.

When we acquire a business, a portion of the purchase price of the acquisition is generally allocated to goodwill and other identifiable intangible assets.

The amount of the purchase price that is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired.

At December 31, 2021, our goodwill and other identifiable intangible assets were $998.1 million .

At December 31, 2022, our goodwill and other identifiable intangible assets were $1.46 billion.

Under current accounting standards, if we determine goodwill or intangible assets are impaired because, for example, the acquired business does not meet projected revenue targets or certain key employees leave, we are required to write down the carrying value of these assets.

11 unchanged sentences

If we are unable to offer competitive products and services, our business may be negatively affected.

Many of our competitors are not subject to the same degree of regulation that we are as an FDIC-insured

institution, which gives them greater operating flexibility and reduces their expenses relative to ours.

Many of our competitors are not subject to the same degree of regulation that we are as an FDIC-insured institution, which gives them greater operating flexibility and reduces their expenses relative to ours.

As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services.

4 unchanged sentences

We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements and innovations.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services, including innovative ways that customers can make payments or manage their accounts, such as through the use of digital wallets or digital currencies.

The financial services industry continues to undergo rapid technological changes, with frequent introductions of new technology-driven products and services, including innovative ways that customers can make payments or manage their accounts, such as through the use of digital wallets or digital currencies.

In addition to better serving customers, effective use of technology increases efficiency and enables financial institutions to reduce costs.

6 unchanged sentences

The security and integrity of our systems could be threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber-attacks, electronic fraudulent activity or attempted theft of financial assets.

We cannot assure you that any such failures, interruption or security breaches will not occur, or if they do occur that they will be adequately addressed.

Our information systems have from time to time experienced such interruptions or breaches despite our best efforts to prevent them.

We cannot assure you that any future failures, interruption or security breaches will not occur, or if they do occur that they will be adequately addressed.

While we have certain protective policies and procedures in place, the nature and sophistication of the threats continue to evolve.

4 unchanged sentences

Future hurricanes or other adverse weather events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on us.

As illustrated in recent years by the impact of Hurricanes Irma and Michael, our markets in Alabama and Florida, like other coastal areas, are susceptible to hurricanes and tropical storms.

As illustrated in recent years by the impact of Hurricanes Irma, Michael and Ian, our markets in Alabama and Florida, like other coastal areas, are susceptible to hurricanes and tropical storms.

Such weather events can disrupt our operations, result in damage to our properties and negatively affect the local economies in which we operate.

24 unchanged sentences

Repeated incidences of fraud or compliance failures would adversely impact the performance of our loan portfolio.

Our banking relationships with the Cuban Embassy and Banco Internacional de Comercia, S.A.

(“BICSA”) may increase our compliance risk and compliance costs.

persons, including U.S.

banks, are restricted in their ability to establish relationships and engage in transactions with Cuba and Cuban persons pursuant to the existing U.S.

embargo and the Cuban Assets Control Regulations.

However, as a result of our acquisition of Stonegate Bank in 2017, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C.

This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S.

Treasury Department’s Office of Foreign Assets Control (“OFAC”) in connection with the reestablishment of diplomatic relations between the U.S.

In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A.

(“BICSA”) in Havana, Cuba.

Cross-border correspondent banking relationships pose unique risks because they create situations in which a U.S.

financial institution will be handling funds from a foreign financial institution whose customers may not be transparent to the U.S.

financial institution.

Moreover, Cuban financial institutions are not subject to the same or similar regulatory guidelines as U.S.

therefore, these foreign institutions may pose a higher money laundering risk to their respective U.S.

bank correspondent(s).

Investigations have determined that, in the past, foreign correspondent accounts have been used by drug traffickers and other criminal elements to launder funds.

Shell companies are sometimes used in the layering process to hide the true ownership of accounts at foreign correspondent financial institutions.

Because of the large amount of funds, multiple transactions, and the U.S.

bank’s potential lack of familiarity with a foreign correspondent financial

institution’s customer, criminals and terrorists can more easily conceal the source and use of illicit funds.

Consequently, we may have a higher risk of noncompliance with the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) rules due to our correspondent banking relationship with BICSA and will likely need to more closely monitor transactions related to correspondent accounts in Cuba, potentially resulting in increased compliance costs.

Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our correspondent banking relationship with BICSA could result in regulatory or other actions being taken against us, which could significantly increase our compliance costs and materially and adversely affect our results of operations.

Risks Related to the Proposed Acquisition of Happy Bancshares, Inc.

We may fail to realize all of the anticipated benefits of the merger.

The success of the merger of Happy with and into us will depend, in part, on our ability to successfully combine our and Happy organizations.

If we are not able to achieve this objective, the anticipated benefits of the merger may not be realized fully or at all or may take longer than expected to be realized.

We and Happy have operated and, until the completion of the merger, will continue to operate, independently.

It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of Happy or inconsistencies in standards, controls, procedures and policies.

It is also possible that clients, customers, depositors and counterparties of Happy could choose to discontinue their relationships with the combined company post-merger because they prefer doing business with Happy or for any other reason, which would adversely affect the future performance of the combined company.

These transition matters could have an adverse effect on each of us and Happy during the pre-merger period and for an undetermined time after the completion of the merger.

The completion of the merger is subject to the consent and approval of the Federal Reserve Board, which may impose conditions that could have an adverse effect on the combined company following the merger.

On December 16, 2021, we received approval from the Arkansas State Banking Board and the Arkansas State Bank Commissioner of its applications for the merger.

Before the merger may be completed, however, we and Happy must also obtain approval of the merger from the Federal Reserve Board.

The Federal Reserve Board may impose conditions on its granting of such approval.

Although we and Happy do not currently expect that any such material conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs or limiting the revenues of the combined company following the merger, any of which might have an adverse effect on the combined company following the merger.

In addition, if there is an adverse development in either company’s regulatory standing, we may be required to withdraw our application for approval of the proposed merger and, if possible, resubmit it after the applicable supervisory concerns have been resolved.

Finally, we and Happy have each agreed to use its commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the merger.

Such actions may entail costs and may adversely affect us, Happy, or the combined company following the merger.

The combined company expects to incur substantial expenses related to the merger.

The combined company expects to incur substantial expenses in connection with completing the merger and combining the business, operations, networks, systems, technologies, policies and procedures of the two companies.

Although we and Happy have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses.

Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time.

Due to these factors, the transaction and combination expenses associated with the merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the merger.

In addition, many of these expenses will be incurred regardless of whether the merger is completed.

As a result of these expenses, both we and Happy expect to take charges against our respective earnings before and after the completion of the merger.

The charges taken in connection with the merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

Risks Related to Owning Our Stock

The rights of our common shareholders are subordinate to the holders of any debt securities that we may issue from time to time and may be subordinate to the holders of any series of preferred stock that may issue in the future.

On April 3, 2017, we issued $300.0 million of 5.625% fixed-to-floating rate subordinated notes, which mature in 2027, and on January 18, 2022, we issued $300.0 million of 3.125% fixed-to-floating rate subordinated notes, which mature in 2032.

On January 18, 2022, we issued $300.0 million of 3.125% fixed-to-floating rate subordinated notes, which mature in 2032, and o n April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy, which mature in 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.

Because these subordinated notes are senior to our shares of common stock, in the event of our bankruptcy, dissolution or liquidation, the holders of any such subordinated notes then outstanding must be satisfied before any distributions can be made to the holders of our common stock.

As of December 31, 2021, we also have $73.3 million of outstanding subordinated debentures issued in connection with trust preferred securities.

Payments of the principal and interest on the trust preferred securities are unconditionally guaranteed by us.

The subordinated debentures are senior to our shares of common stock.

As a result, we must make payments on the subordinated debentures (and the related trust preferred securities) before any dividends can be paid on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the debentures must be satisfied before any distributions can be made to the holders of our common stock.

We have the right to defer distributions on the subordinated debentures (and the related trust preferred securities) for up to five years, during which time no dividends may be paid to holders of our capital stock.

If we elect to defer or if we default with respect to our obligations to make payments on these subordinated debentures, this would likely have a material adverse effect on the market value of our common stock.

Our board of directors has the authority to issue in the aggregate up to 5,500,000 shares of preferred stock, and to incur senior or subordinated indebtedness, generally without shareholder approval.

15 unchanged sentences

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-K

Item 1A. Risk Factors