What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 330 added, 467 removed, 1426 unchanged (36% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

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

(In thousands, except share data) March 31, 2023 December 31, 2022

Cash and due from banks $ 250,841 $ 263,893

1 unchanged sentence

Cash and cash equivalents 688,054 724,790

Fed funds sold 2,700 —

Investment securities – available-for-sale, net of allowance for credit losses 4,085,102 3,119,807

Investment securities — held-to-maturity, net of allowance for credit losses 1,251,007 —

Investment securities — available-for-sale, at estimated fair value (amortized cost of $ 4,111,197 and $ 4,445,620 at March 31, 2023 and December 31, 2022, respectively)

3,772,138 4,041,590

Investment securities — held-to-maturity, net of allowance for credit losses of $ 2,005 at both March 31, 2023 and December 31, 2022

1,286,373 1,287,705

Total investment securities 5,058,511 5,329,295

27 unchanged sentences

Retained earnings 1,509,400 1,443,087

Accumulated other comprehensive (loss) income ( 307,455 ) 10,462

Accumulated other comprehensive loss ( 256,301 ) ( 305,458 )

Total stockholders’ equity 3,630,885 3,526,362

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2023 2022

9 unchanged sentences

Interest on deposits 59,162 4,894

Federal funds purchased — — 2 —

FHLB and other borrowed funds 6,190 1,875

3 unchanged sentences

Net interest income 214,595 131,148

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

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

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

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

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

Net interest income after credit loss expense (benefit) 213,104 144,611 484,425 438,703

Provision for credit losses on loans 1,200 —

Total credit loss expense 1,200 —

Net interest income after credit loss expense 213,395 131,148

Non-interest income:

7 unchanged sentences

Gain on sale of SBA loans 139 95

(Loss) gain on sale of branches, equipment and other assets, net ( 13 ) ( 34 ) 5 ( 86 )

Gain on sale of branches, equipment and other assets, net 7 16

Gain on OREO, net — 478

Gain on securities, net — — — 219

Fair value adjustment for marketable securities ( 11,408 ) 2,125

15 unchanged sentences

Home BancShares, Inc.

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022

Net income $ 102,962 $ 64,892

Net unrealized loss on available-for-sale securities ( 122,307 ) ( 4,218 ) ( 424,910 ) ( 24,527 )

Other comprehensive loss before tax effect ( 122,307 ) ( 4,218 ) ( 424,910 ) ( 24,527 )

Tax effect on other comprehensive loss 30,757 1,102 106,993 6,410

Other comprehensive loss ( 91,550 ) ( 3,116 ) ( 317,917 ) ( 18,117 )

Net unrealized gain (loss) on available-for-sale securities 64,968 ( 155,715 )

Other comprehensive gain (loss) before tax effect 64,968 ( 155,715 )

Tax effect on other comprehensive income (loss) ( 15,811 ) 40,696

Other comprehensive income (loss) 49,157 ( 115,019 )

Comprehensive income (loss) $ 152,119 $ ( 50,127 )

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three and Nine Months Ended September 30, 2022

Three months ended March 31, 2023

(In thousands, except share data) Common

Comprehensive

Income (Loss)

Comprehensive Income (Loss)

Balances at January 1, 2023 $ 2,034 $ 2,386,699 $ 1,443,087 $ ( 305,458 ) $ 3,526,362

1 unchanged sentence

Net income — — 102,962 — 102,962

Other comprehensive loss — — — ( 115,019 ) ( 115,019 )

Other comprehensive income — — — 49,157 49,157

Net issuance of 66,451 shares of common stock from exercise of stock options

1 129 — — 130

Repurchase of 590,000 shares of common stock

5 unchanged sentences

Balances at March 31, 2023 (unaudited) $ 2,032 $ 2,375,754 $ 1,509,400 $ ( 256,301 ) $ 3,630,885

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

Comprehensive income:

Net Income — — 108,705 — 108,705

Other comprehensive loss — — — ( 91,550 ) ( 91,550 )

Net issuance of 1,574 shares of common stock from exercise of stock options

Repurchase of 1,045,799 shares of common stock

( 10 ) ( 24,278 ) — — ( 24,288 )

Share-based compensation net forfeiture of 27,250 shares of restricted stock

( 1 ) 2,395 — — 2,394

Cash dividends – Common Stock, $ 0.165 per share

— — ( 33,811 ) — ( 33,811 )

Balances at September 30, 2022 (unaudited) $ 2,042 $ 2,404,388 $ 1,361,040 $ ( 307,455 ) $ 3,460,015

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 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 — — 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

Comprehensive income:

Net income — — 74,992 — 74,992

Other comprehensive loss — — — ( 3,116 ) ( 3,116 )

Repurchase of 476,500 shares of common stock

( 5 ) ( 11,274 ) — — ( 11,279 )

Share-based compensation net forfeiture of 4,000 shares of restricted stock

— 2,247 — — 2,247

Cash dividends – Common Stock, $ 0.14 per share

— — ( 22,971 ) — ( 22,971 )

Balances at September 30, 2021 (unaudited) $ 1,640 $ 1,492,588 $ 1,215,831 $ 26,003 $ 2,736,062

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2023 2022

8 unchanged sentences

Gain on assets ( 146 ) ( 589 )

Provision for credit losses - acquired loans & unfunded commitments 56,580 —

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

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

Provision for credit losses - loans 1,200 —

Deferred income tax effect 176 2,380

8 unchanged sentences

Investing Activities

Net increase in federal funds sold ( 2,700 ) —

Net (increase) decrease in loans, excluding purchased loans ( 84,995 ) 1,278,846

Net decrease in loans, excluding purchased loans 43,894 25,579

Purchases of investment securities – available-for-sale — ( 137,261 )

2 unchanged sentences

Proceeds from maturities of investment securities – held-to-maturity 1,378 —

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

Purchases of equity securities — ( 3,717 )

Proceeds from sales of equity securities — 13,778

Purchase of other investments ( 38,224 ) ( 7,970 )

Purchase (redemption) of other investments 5,239 ( 11,940 )

Proceeds from foreclosed assets held for sale 157 964

1 unchanged sentence

Purchases of premises and equipment, net ( 2,404 ) ( 2,067 )

Return of investment on cash value of life insurance 277 418

Purchase of marine loan portfolio — ( 242,617 )

Net cash received - market acquisition 858,943 —

Net cash (used in) provided by investing activities ( 422,211 ) 569,264

Net cash provided by (used in) investing activities 381,140 ( 716,414 )

Financing Activities

1 unchanged sentence

Net decrease in securities sold under agreements to repurchase 7,596 10,265

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 ( 96,499 ) —

Proceeds from exercise of stock options 86 130

36 unchanged sentences

Interim financial information

The accompanying unaudited consolidated financial statements as of September 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 accompanying unaudited consolidated financial statements as of March 31, 2023 and 2022 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.

24 unchanged sentences

• Other consumer - SPF

The allowance for credit losses for each segment is measured through the use of the discounted cash flow method.

Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation.

For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.

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

For these loans, excluding assisted living loans which are evaluated using a market price valuation methodology, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date.

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.

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, net of estimated costs to sell.

For loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty (which we define as "impaired" loans), an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.

For loans that are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.

14 unchanged sentences

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.

The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto.

Losses on impaired loans are charged against the allowance for credit losses when in the process of collection, it appears likely that such losses will be realized.

The accrual of interest on impaired loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more past due.

When accrual of interest is discontinued, all unpaid accrued interest is reversed.

Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due.

4 unchanged sentences

Acquisition Accounting and Acquired Loans

The Company accounts for its acquisitions under FASB ASC Topic 805, Business Combinations , which requires the use of the purchase method of accounting.

The Company accounts for its acquisitions under FASB Accounting Standards Codification ("ASC") Topic 805, Business Combinations , which requires the use of the purchase method of accounting.

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

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

In accordance with FASB 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.

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

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.

The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis.

7 unchanged sentences

Revenue Recognition

Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

16 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In thousands)

5 unchanged sentences

Diluted earnings per share $ 0.51 $ 0.40

The impact of anti-dilutive shares to the diluted earnings per share calculation was considered immaterial for the periods ended March 31, 2023 and 2022.

Business Combinations

7 unchanged sentences

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.

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

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 as adjusted during the measurement period:

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

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

Happy Bancshares, Inc.

53 unchanged sentences

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.

During the third quarter of 2022, we continued to analyze the valuations assigned to the acquired assets and assumed liabilities and received updated information resulting in the revised fair values displayed below.

We updated our estimated fair values of these items within our Consolidated Balance Sheet with a corresponding adjustment to goodwill.

The changes are gross of taxes and reflected in the following table:

Acquired Asset or Liability Balance Sheet Line Item Provisional Estimate Revised Estimate Increase (Decrease)

(In thousands)

Cash and due from banks Cash and due from banks 112,867 112,912 45

Loans receivable Loans receivable 3,652,706 3,652,620 ( 86 )

Bank premises and equipment, net Bank premises and equipment, net 142,067 146,665 4,598

Deferred tax asset, net Deferred tax asset, net 35,414 34,025 ( 1,389 )

Equity method investments & other receivables Other assets 49,752 50,563 811

Goodwill Goodwill 425,375 421,328 ( 4,047 )

Demand and non-interest bearing deposits Demand and non-interest bearing deposits 1,932,756 1,932,816 60

Accrued expense Accrued interest payable and other liabilities 44,759 44,631 ( 128 )

All measurement period adjustments made during third quarter of 2022 have been deemed insignificant individually and in the aggregate.

The Company will finalize its valuation of the Happy acquisition within the measurement period (no later than April 1, 2023).

The impact to the income statement resulting from the changes to the estimated fair values was insignificant.

We continue to analyze the assumptions and related valuation results associated with the acquired assets and assumed liabilities, and accordingly, the valuations of these assets and liabilities are not final as of September 30, 2022.

However, the valuations will be finalized no later than April 1, 2023.

As the valuations remain provision and subject to updates, the purchase accounting accretion/amortization are also subject to adjustments.

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 nine-month periods ended September 30, 2022 and 2021, assuming the acquisition was completed as of January 1, 2021:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

The following schedule represents the unaudited pro forma combined financial information as of the three month period ended March 31, 2022, assuming the acquisition was completed as of January 1, 2021:

Three Months Ended March 31, 2022

(In thousands, except per share data)

5 unchanged sentences

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 $ 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 nine months ended September 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.

11 unchanged sentences

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:

September 30, 2022

March 31, 2023

Available-for-Sale

7 unchanged sentences

Total $ 4,111,197 $ ( 842 ) $ 4,110,355 $ 5,528 $ ( 343,745 ) $ 3,772,138

September 30, 2022

March 31, 2023

Held-to-Maturity

16 unchanged sentences

Total $ 4,445,620 $ ( 842 ) $ 4,444,778 $ 4,779 $ ( 407,967 ) $ 4,041,590

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 $ 2.27 billion and $ 1.15 billion at September 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 $ 121.6 million and $ 140.9 million at September 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 September 30, 2022, by contractual maturity, are shown below.

December 31, 2022

Held-to-Maturity

Cost Allowance for Credit Losses Net Carrying Amount Gross

(Losses) Estimated

(In thousands)

government-sponsored enterprises $ 43,017 $ — $ 43,017 $ — $ ( 3,349 ) $ 39,668

Residential mortgage-backed securities 49,088 — 49,088 24 ( 1,205 ) 47,907

Commercial mortgage-backed securities 85,912 — 85,912 107 ( 2,551 ) 83,468

State and political subdivisions 1,111,693 ( 2,005 ) 1,109,688 65 ( 154,650 ) 955,103

Total $ 1,289,710 $ ( 2,005 ) $ 1,287,705 $ 196 $ ( 161,755 ) $ 1,126,146

The Company's available-for-sale portfolio includes investments in Pacific Western Bank with a par value of $ 7.5 million and Western Alliance Bancorporation with a par value of $ 12.0 million, as of March 31, 2023.

These investments are included within the other securities classification.

Assets, principally investment securities, having a carrying value of approximately $ 2.79 billion and $ 2.35 billion at March 31, 2023 and December 31, 2022, 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 $ 138.7 million and $ 131.1 million at March 31, 2023 and December 31, 2022, respectively.

The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at March 31, 2023, 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 $ 4,111,197 $ 3,772,138 $ 1,288,378 $ 1,169,915

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

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

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

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

The gross realized gains on the sales totaled $ 219,000 for the nine months ended September 30, 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 September 30, 2022 and December 31, 2021.

September 30, 2022

During the three months ended March 31, 2023 and 2022, no available-for-sale securities were sold.

March 31, 2023

Less Than 12 Months 12 Months or More Total

9 unchanged sentences

government-sponsored enterprises $ 14,668 $ ( 332 ) $ 26,334 $ ( 1,748 ) $ 41,002 $ ( 2,080 )

State and political subdivisions 957,918 ( 145,241 ) — — 957,918 ( 145,241 )

Residential mortgage-backed securities 17,136 ( 435 ) — — 17,136 ( 435 )

Commercial mortgage-backed securities 51,579 ( 1,000 ) — — 51,579 ( 1,000 )

State and political subdivisions 33,899 ( 1,355 ) 953,987 ( 112,604 ) 987,886 ( 113,959 )

Total $ 117,282 $ ( 3,122 ) $ 980,321 $ ( 114,352 ) $ 1,097,603 $ ( 117,474 )

2 unchanged sentences

(In thousands)

Available-for-sale:

government-sponsored enterprises $ 315,531 $ ( 3,056 ) $ 128,527 $ ( 20,153 ) $ 444,058 $ ( 23,209 )

4 unchanged sentences

Total $ 2,255,449 $ ( 143,387 ) $ 1,348,287 $ ( 264,580 ) $ 3,603,736 $ ( 407,967 )

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

Held to maturity:

government-sponsored enterprises $ 39,668 $ ( 3,349 ) $ — $ — $ 39,668 $ ( 3,349 )

Residential mortgage-backed securities 40,892 ( 1,205 ) — — 40,892 ( 1,205 )

Commercial mortgage-backed securities 65,948 ( 2,551 ) — — 65,948 ( 2,551 )

State and political subdivisions 955,563 ( 154,650 ) — — 955,563 ( 154,650 )

Total $ 1,102,071 $ ( 161,755 ) $ — $ — $ 1,102,071 $ ( 161,755 )

Debt securities available-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity and other comprehensive income (loss), net of taxes.

Securities that are held as available-for-sale are used as a part of our asset/liability management strategy.

Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale.

The Company evaluates all securities quarterly to determine if any 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.

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.

For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

For securities that do not meet these criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

1 unchanged sentence

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

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

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

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.

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, $ 1.11 billion, or 88.7 % 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 government-sponsored enterprises and mortgage-backed securities all of which are guaranteed by the U.S.

Due to the inherent low risk in these U.S.

government guaranteed securities, no provision for credit loss was established on this portion of the portfolio.

At September 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 was considered adequate.

Debt 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.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.

At March 31, 2023, the Company determined that the allowance for credit losses of $ 842,000 was adequate for the available-for-sale investment portfolio, and the $ 2.0 million allowance for credit losses for the held-to-maturity portfolio was also considered adequate.

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

Available-for-Sale Investment Securities

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

Provision for credit loss — —

Balance, September 30

Balance, March 31

Provision for credit loss —

1 unchanged sentence

Held-to-Maturity Investment Securities

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

State and Political Subdivisions Other Securities State and Political Subdivisions Other Securities

5 unchanged sentences

Recoveries — — — —

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

For the nine months ended September 30, 2022, the Company had available-for-sale investment securities with approximately $ 207.4 million in unrealized losses, which have been in continuous loss positions for more than twelve months.

Ending balance, March 31 $ ( 2,005 ) $ — $ — $ —

Provision for credit loss ( 2,005 ) —

Balance, December 31, 2022

$ ( 2,005 ) $ —

For the three months ended March 31, 2023, the Company had available-for-sale investment securities with approximately $ 316.9 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 September 30, 2022, the Company's available-for-sale securities portfolio consisted of 1,659 investment securities, 1,439 of which were in an unrealized loss position.

As of March 31, 2023, the Company's available-for-sale securities portfolio consisted of 1,621 investment securities, 1,353 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 343.7 million.

5 unchanged sentences

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 September 30, 2022.

As of September 30, 2022, the Company's held-to-maturity securities portfolio consisted of 501 investment securities, 487 of which were in an unrealized loss position.

As of March 31, 2023, the Company's held-to-maturity securities portfolio consisted of 506 investment securities, 490 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 117.5 million.

1 unchanged sentence

The state and political subdivisions portfolio contained $ 114.0 million of unrealized losses on 474 securities.

The residential mortgage-backed securities portfolio contained 612,000 of unrealized losses on 3 securities, and the commercial mortgage-backed securities portfolio contained 923,000 of unrealized losses on 2 securities.

The residential mortgage-backed securities portfolio contained 435,000 of unrealized losses on 4 securities, and the commercial mortgage-backed securities portfolio contained $ 1.0 million of unrealized losses on 7 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, the Company has determined that an additional provision for credit losses is not necessary as of September 30, 2022.

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 September 30, 2022:

State and Political Subdivisions Other Securities Total

3 unchanged sentences

A 27,611 — 27,611

Baa/BBB — — —

Not rated 1,529 — 1,529

1 unchanged sentence

Total $ 1,111,415 $ 176,963 $ 1,288,378

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

Income earned on securities for the three months ended March 31, 2023 and 2022, is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In thousands)

6 unchanged sentences

The various categories of loans receivable are summarized as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

14 unchanged sentences

Loans receivable, net $ 14,099,465 $ 14,119,811

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 September 30, 2022, the Company sold $ 826,524 of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 58,000 .

During the nine months ended September 30, 2022, the Company sold $ 3.6 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 153,000 .

During the three months ended September 30, 2021, the Company sold $ 3.9 million guaranteed portions of certain SBA loans, which resulted in a gain of $ 439,000 .

During the nine months ended September 30, 2021, the Company sold $ 15.0 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 1.6 million.

Mortgage loans held for sale of approximately $ 86.7 million and $ 72.7 million at September 30, 2022 and December 31, 2021, respectively, are included in residential 1-4 family loans.

During the three months ended March 31, 2023, the Company sold $ 2.2 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 139,000 .

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

Mortgage loans held for sale of approximately $ 103.7 million and $ 79.9 million at March 31, 2023 and December 31, 2022, 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 September 30, 2022 and December 31, 2021 were not material.

These commitments are derivative instruments and their fair values at March 31, 2023 and December 31, 2022 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 Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses.

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 $ 146.0 million and $ 448,000 in PCD loans, as of September 30, 2022 and December 31, 2021, respectively.

This balance, as of September 30, 2022, consisted of $ 145.5 million resulting from the acquisition of Happy and $ 422,000 from the acquisition of LH-Finance.

The Company held approximately $ 136.2 million and $ 142.5 million in PCD loans, as of March 31, 2023 and December 31, 2022, respectively.

This balance, as of March 31, 2023, consisted of $ 135.8 million resulting from the acquisition of Happy and $ 404,000 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 2022 Form 10-K filed with the SEC on February 24, 2023.

27 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 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 September 30, 2022 and December 31, 2021.

The identified loss drivers by segment are included below as of both March 31, 2023 and December 31, 2022.

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

44 unchanged sentences

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

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

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

During the period ended March 31, 2023, the Company recorded a $ 1.2 million provision for credit losses on loans.

However, the Company determined that no additional provision was necessary for unfunded commitments as the current level of the reserve was considered adequate.

During the year ended December 31, 2022, the Company completed the acquisition of Happy.

As a result, the Company recorded $ 4.4 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 nine months ended September 30, 2022:

Three Months Ended September 30, 2022

In addition, the Company recorded a $ 5.0 million provision for credit losses on loans due to increased loan growth.

However, the Company determined that no additional provision was necessary for unfunded commitments as the current level of the reserve was considered adequate.

The following table presents the activity in the allowance for credit losses for the three months ended March 31, 2023:

Three Months Ended March 31, 2023

Construction/

13 unchanged sentences

Provision for credit losses ( 1,053 ) ( 6,816 ) 403 5,939 2,727 1,200

Balance, September 30

$ 34,687 $ 92,413 $ 49,821 $ 89,421 $ 22,861 $ 289,203

Nine Months Ended September 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 ( 11 ) — ( 337 ) ( 5,952 ) ( 5,588 ) ( 11,888 )

Recoveries of loans previously charged

325 856 94 519 597 2,391

Net loans recovered (charged off)

314 856 ( 243 ) ( 5,433 ) ( 4,991 ) ( 9,497 )

Provision for credit losses - acquired loans

7,205 18,711 7,380 11,303 571 45,170

Provision for credit losses ( 2,197 ) ( 23,655 ) ( 6,754 ) 24,893 7,713 —

Balance, September 30 $ 34,687 $ 92,413 $ 49,821 $ 89,421 $ 22,861 $ 289,203

The following table presents the activity in the allowance for credit losses for the three and nine-months ended September 30, 2021 and the year ended December 31, 2021:

Three Months Ended September 30, 2021

Construction/

(In thousands)

Allowance for credit losses:

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

Loans charged off — ( 9 ) ( 220 ) ( 1,682 ) ( 558 ) ( 2,469 )

Recoveries of loans previously charged

8 44 388 80 171 691

Net loans recovered (charged off)

Balance, March 31

$ 31,172 $ 86,978 $ 51,433 $ 92,396 $ 25,190 $ 287,169

Provision for credit losses 3,830 ( 4,664 ) ( 447 ) 1,922 ( 641 ) —

Balance, September 30 $ 25,983 $ 88,498 $ 50,903 $ 52,602 $ 20,687 $ 238,673

Nine Months Ended September 30, 2021 and Year Ended December 31, 2021

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

Three Months Ended March 31, 2022 and Year Ended December 31, 2022

Construction/

12 unchanged sentences

Provision for credit loss - loans ( 2,081 ) 8,632 ( 11,123 ) 737 3,835 —

Balance, September 30

Balance, March 31

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

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

Loans charged off ( 1 ) — ( 196 ) ( 8,357 ) ( 6,403 ) ( 14,957 )

Recoveries of loans previously charged

Recoveries of loans previously charged off

390 941 93 671 777 2,872

1 unchanged sentence

389 941 ( 103 ) ( 7,686 ) ( 5,626 ) ( 12,085 )

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

Provision for credit loss - loans ( 2,650 ) ( 30,963 ) 5,595 27,649 5,369 5,000

1 unchanged sentence

$ 32,243 $ 93,848 $ 50,963 $ 89,354 $ 23,261 $ 289,669

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

September 30, 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 March 31, 2023 and December 31, 2022:

March 31, 2023

Nonaccrual Nonaccrual

31 unchanged sentences

Total $ 51,011 $ 8,383 $ 9,845

The Company had $ 56.8 million and $ 47.2 million in nonaccrual loans for the periods ended September 30, 2022 and December 31, 2021, respectively.

In addition, the Company had $ 4.9 million and $ 3.0 million in loans past due 90 days or more and still accruing for the periods ended September 30, 2022 and December 31, 2021, respectively.

The Company had $ 8.3 million and $ 9.2 million in nonaccrual loans with a specific reserve as of September 30, 2022 and December 31, 2021, respectively.

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

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

September 30, 2022

The Company had $ 65.4 million and $ 51.0 million in nonaccrual loans for the periods ended March 31, 2023 and December 31, 2022, respectively.

In addition, the Company had $ 8.6 million and $ 9.8 million in loans past due 90 days or more and still accruing for the periods ended March 31, 2023 and December 31, 2022, respectively.

The Company had $ 8.4 million in nonaccrual loans with a specific reserve as of both March 31, 2023 and December 31, 2022.

The Company did not recognize any interest income on nonaccrual loans during the period ended March 31, 2023 or March 31, 2022.

The following table presents the amortized cost basis of impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) by class of loans as of March 31, 2023 and December 31, 2022:

March 31, 2023

Real Estate Residential

29 unchanged sentences

Total $ 164,554 $ 21,801 $ 34,749

The Company had $ 229.3 million and $ 331.5 million in collateral-dependent impaired loans for the periods ended September 30, 2022 and December 31, 2021, respectively.

The Company had $ 195.6 million and $ 221.1 million in impaired loans for the periods ended March 31, 2023 and December 31, 2022, respectively.

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

For collateral-dependent impaired loans, excluding assisted living loans which are evaluated using a market price valuation methodology, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

For these loans, excluding assisted living loans which are evaluated using a market price valuation methodology, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date.

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 September 30, 2022 and December 31, 2021:

September 30, 2022

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, net of estimated costs to sell.

The following is an aging analysis for loans receivable as of March 31, 2023 and December 31, 2022:

March 31, 2023

30-59 Days Loans

35 unchanged sentences

Total $ 21,490 $ 6,478 $ 60,856 $ 88,824 $ 14,320,656 $ 14,409,480 $ 9,845

Non-accruing loans at September 30, 2022 and December 31, 2021 were $ 56.8 million and $ 47.2 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three and nine months ended September 30, 2022 was approximately $ 2.8 million and $ 8.2 million, respectively.

Interest recognized on impaired loans, including those loans with a specific reserve, during the three and nine months ended September 30, 2021 was approximately $ 3.3 million and $ 9.8 million, respectively.

Non-accruing loans at March 31, 2023 and December 31, 2022 were $ 65.4 million and $ 51.0 million, respectively.

Interest recognized on impaired loans during the three months ended March 31, 2023 was approximately $ 1.8 million.

Interest recognized on impaired loans during the three months ended March 31, 2022 was approximately $ 3.5 million.

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

41 unchanged sentences

The Company’s classified loans include loans in risk ratings 6, 7 and 8.

Loans may be classified, but not considered impaired, due to one of the following reasons:

(1) The Company has established minimum dollar amount thresholds for loan impairment testing.

All loans over $ 2.0 million that are rated 5 – 8 are individually assessed for impairment on a quarterly basis.

Loans rated 5 – 8 that fall under the threshold amount are not individually tested for impairment and therefore are not included in impaired loans;

(2) of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans.

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

September 30, 2022

Loans may be classified, but not considered collateral dependent, due to one of the following reasons:

(1) The Company has established minimum dollar amount thresholds for credit loss testing.

All loans over $ 2.0 million that are rated 5 – 8 are individually assessed for credit losses on a quarterly basis.

Loans rated 5 – 8 that fall under the threshold amount are not individually tested for credit losses and therefore are not included in collateral dependent loans;

(2) of the loans that are above the threshold amount and tested for credit losses after testing, some are considered to not be collateral dependent and are not included in collateral dependent loans.

Based on the most recent analysis performed, the risk category of loans by class of loans as of March 31, 2023 and December 31, 2022 is as follows:

March 31, 2023

Term Loans Amortized Cost Basis by Origination Year

43 unchanged sentences

Total residential 1-4 family 84,650 382,269 294,116 191,814 124,186 478,547 192,649 1,748,231

September 30, 2022

March 31, 2023

Term Loans Amortized Cost Basis by Origination Year

133 unchanged sentences

Total $ 3,262,317 $ 2,757,885 $ 1,525,752 $ 1,139,754 $ 1,172,612 $ 2,565,074 $ 1,986,086 $ 14,409,480

The following table presents gross write-offs by origination date as of March 31, 2023.

March 31, 2023

Gross Loan Write-Offs by Origination Year

2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

(In thousands)

Commercial real estate loans

Non-farm/non-residential $ — $ — $ — $ — $ 14 $ 56 $ — $ 70

Construction/land development — 2 19 5 — — — 26

Agricultural — — — — 1 1 — 2

Residential real estate loans

Residential 1-4 family — 5 6 5 5 33 5 59

Multifamily residential — — — — — — — —

Total real estate — 7 25 10 20 90 5 157

Consumer — 12 16 14 2 154 23 221

Commercial and industrial — 5 574 391 3 2,026 1 3,000

Agricultural & other 901 * 1 5 1 — 1 1 910

Total $ 901 $ 25 $ 620 $ 416 $ 25 $ 2,271 $ 30 $ 4,288

*The 2023 write-off consists entirely of overdrafts.

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses.

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 September 30, 2022 and December 31, 2021.

September 30, 2022

The following tables present the amortized cost of performing and nonperforming loans as of March 31, 2023 and December 31, 2022.

March 31, 2023

Term Loans Amortized Cost Basis by Origination Year

85 unchanged sentences

Total $ 3,262,317 $ 2,757,885 $ 1,525,752 $ 1,139,754 $ 1,172,612 $ 2,565,074 $ 1,986,086 $ 14,409,480

The Company had approximately $ 17.6 million or 136 total revolving loans convert to term loans for the nine months ended September 30, 2022 compared to $ 27.8 million or 201 total revolving loans convert to term loans for the nine months ended September 30, 2021.

The Company had approximately $ 6.2 million or 64 total revolving loans convert to term loans for the three months ended March 31, 2023 compared to $ 7.2 million or 39 total revolving loans convert to term loans for the three months ended March 31, 2022.

These loans were considered immaterial for vintage disclosure inclusion.

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

September 30, 2022

of Loans Pre-

Modification Term

Modification Rate

Modification Post-

(Dollars in thousands)

Commercial real estate loans

Non-farm/non-residential 12 $ 6,444 $ 3,203 $ 601 $ 438 $ 4,242

Construction/land development 1 216 193 — — 193

Residential real estate loans

Residential 1-4 family 14 2,307 814 111 282 1,207

Multifamily residential 1 1,130 957 — — 957

Total real estate 28 10,097 5,167 712 720 6,599

Consumer 2 18 12 — 1 13

Commercial and industrial 13 3,183 841 60 79 980

Total 43 $ 13,298 $ 6,020 $ 772 $ 800 $ 7,592

December 31, 2021

of Loans Pre-

Modification Term

Modification Rate

Modification Post-

(Dollars in thousands)

The following table presents the amortized cost basis of modified loans by class and modification type at March 31, 2023.

The percentage of modifications of loans that were modified to borrowers experiencing financial difficulty relative to the total period-end amortized cost basis of loans in each class of financing receivable is also presented below.

Term Extension Interest Rate Reduction Principal Reduction Interest Only Combination Interest Rate Reduction and Term Extension Combination Principal Reduction and Interest Rate Reduction Post-

Balance Total Class of Loans Receivable

Commercial real estate loans

8 unchanged sentences

Commercial and industrial 36 60 69 668 74 2 909 0.04 %

Agricultural & other — — — — — 3 3 — %

Total $ 809 $ 577 $ 70 $ 3,187 $ 686 $ 12 $ 5,341 0.04 %

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

September 30, 2022 December 31, 2021

Loans Recorded

Balance Number of

Loans Recorded

During the three-months ended March 31, 2023, the Company restructured approximately $ 52,000 in loans to three borrowers.

The ending balance of these loans as of March 31, 2023, was $ 48,000 .

The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the three-months ended March 31, 2023 immaterial for tabular disclosure inclusion.

The following table presents the amortized cost basis of loans that had a payment default during the three-months ended March 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

March 31, 2023

Term Extension Interest Rate Reduction Principal Reduction Interest Only Combination Interest Rate Reduction and Term Extension Combination Principal Reduction and Interest Rate Reduction

(Dollars in thousands)

8 unchanged sentences

Commercial and industrial 28 — 69 668 — 2

Agricultural & other — — — — — 3

Total $ 104 $ — $ 70 $ 668 $ — $ 12

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

September 30, 2022 December 31, 2021

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The Company has modified 11 loans over the past 12 months to borrowers experiencing financial difficulty.

The pre-modification balance of the loans was $ 1.3 million, and the ending balance as of March 31, 2023 was $ 854,000 .

The $ 854,000 balance consists of $ 810,000 of current loans, $ 7,000 of loans 30-89 days past due and $ 37,000 of loans past due 90 days or more.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses on loans is adjusted by the same amount.

The defaults impact the loss rate by applicable loan pool for the quarterly CECL calculation.

For loans for which a specific reserve is not recorded, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.

The following is a presentation of total foreclosed assets as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

(In thousands)

4 unchanged sentences

Residential 1-4 family 260 260

Multifamily residential — 121

Total foreclosed assets held for sale $ 425 $ 546

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

As of September 30, 2022 and December 31, 2021, the balance of purchase credit deteriorated loans was approximately $ 146.0 million and $ 448,000 , respectively.

This balance, as of September 30, 2022, consisted of $ 145.5 million resulting from the acquisition of Happy and $ 422,000 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 September 30, 2022 and December 31, 2021, were as follows:

September 30, 2022 December 31, 2021

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at March 31, 2023 and December 31, 2022, were as follows:

March 31, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

Balance, end of period $ 1,398,253 $ 1,398,253

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands)

1 unchanged sentence

Balance, beginning of period $ 58,455 $ 25,045

Acquisition of Happy Bancshares 42,263 —

Amortization expense ( 2,477 ) ( 1,421 )

Balance, September 30

60,932 26,466

Balance, March 31 $ 55,978 23,624

Acquisition of Happy Bancshares 42,263

Amortization expense ( 7,432 )

Balance, end of year $ 58,455

The carrying basis and accumulated amortization of core deposit intangibles at September 30, 2022 and December 31, 2021 were :

September 30, 2022 December 31, 2021

The carrying basis and accumulated amortization of core deposit intangibles at March 31, 2023 and December 31, 2022 were :

March 31, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

Net carrying amount $ 55,978 $ 58,455

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

Core deposit intangible amortization expense was approximately $ 6.4 million and $ 4.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Core deposit intangible amortization expense was approximately $ 2.5 million and $ 1.4 million for the three months ended March 31, 2023 and 2022, respectively.

The Company’s estimated amortization expense of core deposits intangibles for each of the years 2023 through 2027 is approximately:

4 unchanged sentences

2027 – $ 6.6 million.

The carrying amount of the Company’s goodwill was $ 1.39 billion and $ 973.0 million at September 30, 2022 and December 31, 2021, respectively.

The carrying amount of the Company’s goodwill was $ 1.40 billion at both March 31, 2023 and December 31, 2022.

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

During the 2022 review, no impairment was found.

If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value.

1 unchanged sentence

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

As of September 30, 2022 and December 31, 2021, other assets were $ 300.6 million and $ 177.0 million, respectively.

As of March 31, 2023 and December 31, 2022, other assets were $ 304.6 million and $ 321.2 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 $ 120.7 million and $ 88.2 million at September 30, 2022 and December 31, 2021, and are accounted for at cost.

These equity securities without a readily determinable fair value were $ 135.8 million and $ 135.3 million at March 31, 2023 and December 31, 2022, 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 $ 72.6 million and $ 36.4 million at September 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 $ 303.2 million and $ 321.6 million at September 30, 2022 and December 31, 2021, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 615.1 million and $ 537.4 million at September 30, 2022 and December 31, 2021, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 615,000 and $ 1.7 million for the three months ended September 30, 2022 and 2021, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 2.0 million and $ 6.1 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, brokered deposits were $ 546.6 million and $ 625.7 million, respectively.

Deposits totaling approximately $ 2.56 billion and $ 1.91 billion at September 30, 2022 and December 31, 2021, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

These equity securities without a readily determinable fair value were $ 74.9 million and $ 80.6 million at March 31, 2023 and December 31, 2022, respectively.

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

Included in other assets are marketable equity securities held at the Holding Company which are accounted for under ASC Topic 321.

These marketable equity securities were $ 40.6 million and $ 52.0 million at March 31, 2023 and December 31, 2022, respectively.

The March 31, 2023 balance consisted primarily of investments in Pacific Western Bank and PNC Financial Services Group, Inc.

The fair value of these investments were $ 15.5 million and $ 18.9 million, respectively, at March 31, 2023.

The Company recorded $ 11.4 million in expense for the fair value adjustment for these marketable securities during the three months ended March 31, 2023.

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 366.2 million and $ 333.2 million at March 31, 2023 and December 31, 2022, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 680.4 million and $ 639.3 million at March 31, 2023 and December 31, 2022, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 2.9 million and $ 764,000 for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, brokered deposits were $ 484.5 million and $ 476.6 million, respectively.

Deposits totaling approximately $ 2.87 billion and $ 2.65 billion at March 31, 2023 and December 31, 2022, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

Securities Sold Under Agreements to Repurchase

At September 30, 2022 and December 31, 2021, securities sold under agreements to repurchase totaled $ 121.6 million and $ 140.9 million, respectively.

For the three-month periods ended September 30, 2022 and 2021, securities sold under agreements to repurchase daily weighted-average totaled $ 126.8 million and $ 143.9 million, respectively.

For the nine-month periods ended September 30, 2022 and 2021, securities sold under agreements to repurchase daily weighted-average totaled $ 129.1 million and $ 153.7 million, respectively.

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

September 30, 2022 December 31, 2021

At March 31, 2023 and December 31, 2022, securities sold under agreements to repurchase totaled $ 138.7 million and $ 131.1 million, respectively.

For the three-month periods ended March 31, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $ 134.9 million and $ 137.6 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of March 31, 2023 and December 31, 2022 is presented in the following table:

March 31, 2023 December 31, 2022

Overnight and

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FHLB and Other Borrowed Funds

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

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

At September 30, 2022 all of the outstanding balances were classified as short-term advances as the FHLB has provided notice of their intention to call all of the Company's FHLB borrowed funds within a year due to the low interest rates on the advances.

At 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 %.

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 650.0 million at both March 31, 2023 and December 31, 2022.

The Company had no other borrowed funds as of March 31, 2023 or December 31, 2022.

At March 31, 2023, $ 50.0 million and $ 600.0 million of the outstanding balances were classified as short-term and long-term advances, respectively.

At December 31, 2022, $ 50.0 million and $ 600.0 million of the outstanding balances were classified as short-term and long-term advances, respectively.

The FHLB advances mature from 2023 to 2037 with fixed interest rates ranging from 2.26 % to 4.84 %.

As noted above, 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 $ 1.09 billion and $ 1.07 billion at September 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 September 30, 2022 and December 31, 2021, respectively.

Additionally, the Company had $ 1.15 billion and $ 1.14 billion at March 31, 2023 and December 31, 2022, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at March 31, 2023 and December 31, 2022, 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 September 30, 2022 and December 31, 2021 was zero .

The balance on this line of credit at March 31, 2023 and December 31, 2022 was zero .

The Company had access to approximately $ 677.7 million in liquidity with the Federal Reserve Bank as of March 31, 2023.

This consisted of $ 71.8 million available from the Discount Window and $ 605.9 million available through the Bank Term Funding Program ("BTFP").

As of March 31, 2023, the primary and secondary credit rates available through the Discount Window were 5.00 % and 5.50 %, respectively, and the BTFP rate was 4.85 %.

As of March 31, 2023, the balance on these available sources was zero.

Subordinated Debentures

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

As of September 30, 2022

Subordinated debentures at March 31, 2023 and December 31, 2022 consisted of the following components:

As of March 31, 2023

December 31, 2022

(In thousands)

Trust preferred securities

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

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

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

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

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

Subordinated debt securities

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

$ 143,075 $ 143,400

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

297,200 297,020

Total $ 440,275 $ 440,420

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 second and third quarters of 2022, the Company redeemed, without penalty, the $ 23.2 million of the trust preferred securities acquired from Happy.

In addition, during the second and third quarters, the Company also redeemed, without penalty, the $ 73.3 million of trust preferred securities held prior to the Happy acquisition.

As a result, the Company no longer holds any trust preferred securities.

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 April 1, 2022, the Company acquired $ 140.0 million in aggregate principal amount of 5.500 % Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”) from Happy, and the Company recorded approximately $ 144.4 million which included fair value adjustments.

The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030.

From and including the date of issuance to, but excluding July 31, 2025 or the date of earlier redemption, the 2030 Notes will bear interest at an initial rate of 5.50 % per annum, payable in arrears on January 31 and July 31 of each year.

From and including July 31, 2025 to, but excluding, the maturity date or earlier redemption, the 2030 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be 3-month Secured Overnight Funding Rate (SOFR)), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2030 Notes, plus 5.345 %, payable quarterly in arrears on January 31, April 30, July 31, and October 31 of each year, commencing on October 31, 2025.

The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100 % of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S.

federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended.

In each case, the redemption would be at a redemption price equal to 100 % of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

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.

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In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

On April 3, 2017, the Company completed an underwritten public offering of $ 300.0 million in aggregate principal amount of its 5.625 % Fixed-to-Floating Rate Subordinated Notes due 2027 (the “2027 Notes”) for net proceeds, after underwriting discounts and issuance costs, of approximately $ 297.0 million.

The 2027 Notes were unsecured, subordinated debt obligations and would have matured on April 15, 2027.

From and including the date of issuance to, but excluding April 15, 2022, the 2027 Notes bore interest at an initial rate of 5.625 % per annum.

From and including April 15, 2022 to, but excluding, the maturity date or earlier redemption, the 2027 Notes were to bear interest at a floating rate equal to three-month LIBOR as calculated on each applicable date of determination plus a spread of 3.575 %;

provided, however, that in the event three-month LIBOR was less than zero, then three-month LIBOR would have been deemed to be zero.

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 for income taxes for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2022 2021 2022 2021

The following is a summary of the components of the provision for income taxes for the three months ended March 31, 2023 and 2022:

For the Three Months Ended March 31,

(In thousands)

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Federal 146 1,788

State 1,874 908 ( 2,019 ) 1,725

Total deferred 176 2,380

Income tax expense $ 29,953 $ 20,029

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Statutory federal income tax rate 21.00 % 21.00 %

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The types of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:

September 30,

2023 December 31,

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Accelerated depreciation on premises and equipment 3,393 4,252

Unrealized gain on securities — 4,220

Core deposit intangibles 14,676 14,755

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Net deferred tax assets $ 193,334 $ 209,321

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, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and Wisconsin.

The Company is no longer subject to U.S.

federal and state tax examinations by tax authorities for years before 2018.

The Company files income tax returns in the U.S.

federal jurisdiction.

The Company's income tax returns are open and subject to examinations from the 2019 tax year and forward.

The Company's various state income tax returns are generally open from the 2019 and later tax return years based on individual state statute of limitations.

Common Stock, Compensation Plans and Other

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Stock Repurchases

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 nine months of 2022, the Company repurchased a total of 2,258,531 shares with a weighted-average stock price of $ 22.50 per share.

Shares repurchased under the program as of September 30, 2022 since its inception total 19,919,866 shares.

The remaining balance available for repurchase is 19,832,134 shares at September 30, 2022.

During the first three months of 2023, the Company repurchased a total of 590,000 shares with a weighted-average stock price of $ 22.92 per share.

Shares repurchased under the program as of March 31, 2023 since its inception total 21,349,866 shares.

The remaining balance available for repurchase is 18,402,134 shares at March 31, 2023.

Stock Compensation Plans

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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 September 30, 2022, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 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 September 30, 2022, the Company had 2,685,187 shares of common stock available for future grants under 2022 Plan.

As of September 30, 2022, a total of 5,787,203 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 September 30, 2022 was $ 8.6 million and $ 8.3 million, respectively.

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

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 $ 5.3 million as of September 30, 2022.

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

For the Nine Months Ended September 30, 2022 For the Year Ended

As of March 31, 2023, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 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, 2023, the Company had 2,524,598 shares of common stock available for future grants and 5,408,114 shares of common stock reserved for issuance pursuant to the Plans.

The intrinsic value of the stock options outstanding and stock options vested at March 31, 2023 was $ 4.8 million and $ 4.6 million, respectively.

The intrinsic value of stock options exercised during the three months ended March 31, 2023 was approximately $ 1.4 million.

The table below summarizes the stock option transactions under the 2022 Plan at March 31, 2023 and December 31, 2022 and changes during the three-month period and year then ended :

For the Three Months Ended March 31, 2023 For the Year Ended

December 31, 2022

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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 nine months ended September 30, 2022 was $ 5.19 per share.

There were 180,500 options granted during the nine months ended September 30, 2022.

The weighted-average fair value of options granted during the three months ended March 31, 2023 was $ 5.37 per share.

There were 25,000 options granted during the three months ended March 31, 2023.

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 2023 and 2022 stock option grants were as follows:

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

For the Year Ended December 31, 2022

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Expected life of options 6.5 years 6.5 years

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

The following is a summary of currently outstanding and exercisable options at March 31, 2023:

Options Outstanding Options Exercisable

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91 5.15 25.59 70 25.96

$ 20.46 to $ 21.25

263 5.95 20.83 149 21.10

$ 21.31 to $ 22.22

132 6.43 22.18 82 22.21

$ 22.70 to $ 23.32

1,198 5.81 23.32 245 23.32

$ 23.51 to $ 25.96

101 5.67 25.37 77 25.74

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

September 30, 2022

The table below summarized the activity for the Company’s restricted stock issued and outstanding at March 31, 2023 and December 31, 2022 and changes during the period and year then ended:

March 31, 2023

December 31, 2022

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End of period 1,502 1,381

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

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

$ 2,158 $ 7,646

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 $ 16.7 million as of September 30, 2022.

Non-Interest Expense

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The table below shows the components of non-interest expense for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In thousands)

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Short-term leases are leases having a term of twelve months or less.

In accordance with ASU 2018-11, the Company does not separate nonlease components from the associated lease component of our operating leases.

As a result, the Company accounts for these components as a single component under Topic 842 since (i) the timing and pattern of transfer of the nonlease components and the associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

The Company does not separate nonlease components from the associated lease component of our operating leases.

As a result, the Company accounts for these components as a single component since (i) the timing and pattern of transfer of the nonlease components and the associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

The Company recognizes short term leases on a straight-line basis and does not record a related ROU asset and liability for such leases.

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

As of September 30, 2022, the balances of the right-of-use asset and lease liability were $ 44.0 million and $ 47.0 million, respectively.

As of March 31, 2023, the balances of the right-of-use asset and lease liability were $ 43.2 million and $ 46.2 million, respectively.

As of December 31, 2022, the balances of the right-of-use asset and lease liability were $ 42.9 million and $ 46.0 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 September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

2023 $ 6,695 $ 8,332

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Additional information (dollar amounts in thousands):

For the Three Months Ended Nine Months Ended

For the Three Months Ended

Lease expense:

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

Operating lease expense $ 1,955 $ 1,822

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Weighted-average remaining lease term (in years)

9.21 9.67 9.35 9.78

Weighted-average discount rate 3.48 % 3.41 %

The Company currently leases three properties from three related parties.

Total rent expense from the leases was $ 36,000 or 1.78 % of total lease expense and $ 103,000 or 1.54 % of total lease expense for the three and nine months ended September 30, 2022.

Total rent expense from the leases was $ 35,000 , or 1.56 %, of total lease expense and $ 35,000 , or 1.78 %, of total lease expense for the three months ended March 31, 2023 and 2022, respectively.

Significant Estimates and Concentrations of Credit Risks

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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 September 30, 2022 and December 31, 2021, commercial real estate loans represented 55.8 % and 59.7 % of total loans receivable, respectively, and 223.1 % and 212.2 % of total stockholders’ equity at September 30, 2022 and December 31, 2021, respectively.

Residential real estate loans represented 16.1 % and 15.8 % of total loans receivable and 64.4 % and 56.3 % of total stockholders’ equity at September 30, 2022 and December 31, 2021, respectively.

Approximately 79.4 % of the Company’s total loans and 84.1 % of the Company’s real estate loans as of September 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 September 30, 2022, 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 September 30, 2022.

In addition, the Company determined no additional provision for unfunded commitments was necessary as of September 30, 2022.

Although the Company has a diversified loan portfolio, at March 31, 2023 and December 31, 2022, commercial real estate loans represented 55.8 % and 56.3 % of total loans receivable, respectively, and 221.1 % and 230.1 % of total stockholders’ equity at March 31, 2023 and December 31, 2022, respectively.

Residential real estate loans represented 16.6 % and 16.1 % of total loans receivable and 65.7 % and 66.0 % of total stockholders’ equity at March 31, 2023 and December 31, 2022, respectively.

Approximately 79.9 % of the Company’s total loans and 85.1 % of the Company’s real estate loans as of March 31, 2023, 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.

During the period ended March 31, 2023, the Company recorded a $ 1.2 million provision for credit losses on loans.

However, the Company determined that no additional provision was necessary for unfunded commitments as the current level of the reserve was considered adequate.

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.

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

At September 30, 2022 and December 31, 2021, commitments to extend credit of $ 4.67 billion and $ 3.05 billion, respectively, were outstanding.

At March 31, 2023 and December 31, 2022, commitments to extend credit of $ 4.93 billion and $ 4.83 billion, respectively, were outstanding.

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

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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 September 30, 2022 and December 31, 2021, was $ 192.0 million and $ 110.8 million, respectively.

The maximum amount of future payments the Company could be required to make under these guarantees at March 31, 2023 and December 31, 2022, was $ 184.9 million and $ 184.6 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.

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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 nine months of 2022, the Company requested approximately $ 129.8 million in regular dividends from its banking subsidiary.

During the first three months of 2023, the Company requested approximately $ 89.6 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.

3 unchanged sentences

Furthermore, the Company’s regulators could require adjustments to regulatory capital not reflected in the consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, Tier 1 common 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 September 30, 2022, the Company meets all capital adequacy requirements to which it is subject.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, Tier 1 common equity Tier 1 ("CET1") 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, 2023, 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.

2 unchanged sentences

The Company elected to adopt the interim final rule, which is reflected in the Company's risk-based capital ratios.

In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III:

A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”).

Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $ 500 million or more, and savings and loan holding companies.

Basel III became effective for the Company and its bank subsidiary on January 1, 2015.

Basel III limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5 % of common equity Tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements.

The capital conservation buffer requirement began being phased in beginning January 1, 2016 at the 0.625 % level and increased by 0.625 % on each subsequent January 1, until it reached 2.5 % on January 1, 2019 when the phase-in period ended, and the full capital conservation buffer requirement became effective.

Basel III 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.

In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization is required to have at least a 4.5 % “common equity Tier 1 risk-based capital” ratio, a 4 % “Tier 1 leverage capital” ratio, a 6 % “Tier 1 risk-based capital” ratio and an 8 % “total risk-based capital” ratio .

Basel III amended the prompt corrective action rules to incorporate a CET1 requirement and to raise the capital requirements for certain capital categories.

In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization is required to have at least a 4.5 % CET1 risk-based capital ratio, a 4 % Tier 1 leverage capital ratio, a 6 % Tier 1 risk-based capital ratio and an 8 % total risk-based capital ratio .

The Federal Reserve Board’s risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution.

Under Basel III, the criteria for a well-capitalized institution are:

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 September 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 13.03 %, 10.36 %, 13.03 %, and 16.75 %, respectively, as of September 30, 2022.

a 6.5 % CET1 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, 2023, the Bank met the capital standards for a well-capitalized institution.

The Company’s CET1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 13.21 %, 11.37 %, 13.21 %, and 16.84 %, respectively, as of March 31, 2023.

Additional Cash Flow Information

In connection with the Happy acquisition, accounted for under ASC Topic 805, the Company acquired approximately $ 6.69 billion in assets, including $ 858.9 million in cash and cash equivalents, assumed $ 6.15 billion in liabilities, and 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 following is a summary of the Company’s additional cash flow information during the nine-month periods ended:

September 30,

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

(In thousands)

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Financial Instruments

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.

Fair value is the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.

There is a hierarchy of three levels of inputs that may be used to measure fair values:

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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.

Impaired loans - Impaired loans are carried at the net realizable value of the collateral if the loan is collateral dependent.

A portion of the allowance for credit losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.

Impaired loans – Impaired loans are carried at the net realizable value of the collateral or observable market price if the loan is collateral dependent.

A portion of the allowance for credit losses is allocated to collateral dependent loans if the value of such loans is deemed to be less than the unpaid balance.

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 $ 169.7 million and $ 280.0 million as of September 30, 2022 and December 31, 2021, respectively.

The fair value of loans with specific allocated losses was $ 126.5 million and $ 168.6 million as of March 31, 2023 and December 31, 2022, respectively.

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

The Company reversed approximately $ 693,000 and $ 92,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended September 30, 2022 and 2021, respectively.

The Company reversed approximately $ 842,000 and $ 276,000 of accrued interest receivable when impaired loans were put on non-accrual status during the nine months ended September 30, 2022 and 2021, respectively.

The Company reversed approximately $ 236,000 and $ 73,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended March 31, 2023 and 2022, respectively.

Foreclosed assets held for sale – Foreclosed assets held for sale are held by the Company at fair value, less estimated costs to sell.

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

As of September 30, 2022 and December 31, 2021, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 365,000 and $ 1.6 million, respectively.

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

As of March 31, 2023 and December 31, 2022, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 425,000 and $ 546,000 , respectively.

No foreclosed assets held for sale were remeasured during the three months ended March 31, 2023.

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

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The following table presents the estimated fair values of the Company’s financial instruments.

September 30, 2022

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

March 31, 2023

Amount Fair Value Level

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Cash and cash equivalents $ 688,054 $ 688,054 1

Federal funds sold 2,700 2,700 1

Investment securities - available for sale 3,772,138 3,772,138 2

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Investment securities - available for sale 4,041,590 4,041,590 2

Investment securities - held-to-maturity 1,287,705 1,126,146 2

Loans receivable, net of impaired loans and allowance 13,929,892 13,723,865 3

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Recent Accounting Pronouncements

In December 31, 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in the update simplify the accounting for income taxes by removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments in the update also simplify the accounting for income taxes by requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements;

however, an entity may elect to do so on an entity-by-entity basis for a legal entity that is both not subject to tax and disregarded by the taxing authority.

The amendments require that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

The Company adopted the guidance effective January 1, 2021, and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ( "ASU 2020-04") .

ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 ( ASU 2022-06) defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope.” The amendments in the update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Scope ("ASU 2022-01").

The amendments in the update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

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ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

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 represents a new loan or a continuation of an existing loan.

Troubled Debt Restructurings ("TDR") and Vintage Disclosures ("ASU 2022-02") .

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 represents 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.

The amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.

Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with Subtopic 326-20, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

ASU 2022-02 is effective for entities that have adopted ASU No.

2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases.

Gross write-off information must be included in the vintage disclosures required for public business entities, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

ASU 2022-02 is effective for entities that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

These amendments should be applied prospectively.

However, for the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

Early adoption is permitted if an entity has adopted ASU 2016-13.

If an entity elects to early adopt ASU 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period.

An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

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

The Company adopted the guidance effective January 1, 2023 and elected to apply the amendments prospectively.

The adoption did not have a significant impact on our financial position.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.

These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848.

The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

ASU 2022-06 was effective upon issuance.

Report of Independent Registered Public Accounting Firm

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

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

(“the Company”) and subsidiaries as of March 31, 2023, and the related condensed consolidated statements of income, comprehensive income (loss), stockholder’s equity, and cash flows for the three-month periods ended March 31, 2023 and 2022, 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.

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Basis for Review Results

These financial statements are the responsibility of the Company’s management.

These interim financial statements are the responsibility of the Company’s management.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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/s/ FORVIS, LLP

(Formerly BKD, LLP)

Little Rock, Arkansas

November 4, 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