4 unchanged sentences
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”).
−Removed: As of September 30, 2022, we had, on a consolidated basis, total assets of $23.16 billion, loans receivable, net of allowance for credit losses of $13.54 billion, total deposits of $18.54 billion, and stockholders’ equity of $3.46 billion.
+Added: As of March 31, 2023, we had, on a consolidated basis, total assets of $22.52 billion, loans receivable, net of allowance for credit losses of $14.10 billion, total deposits of $17.45 billion, and stockholders’ equity of $3.63 billion.
We generate most of our revenue from interest on loans and investments, service charges, and mortgage banking income.
5 unchanged sentences
Key Financial Measures
−Removed: As of or for the Three Months Ended September 30, As of or for the Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: As of or for the Three Months Ended March 31,
(Dollars in thousands, except per share data)
9 unchanged sentences
Tangible book value per share (non-GAAP) (1)
−Removed: 9.82 10.59 9.82 10.59
Annualized net interest margin - FTE 4.37% 3.21%
1 unchanged sentence
Efficiency ratio, as adjusted (non-GAAP) (2)
−Removed: 42.97 42.29 45.13 41.67
Return on average assets 1.84 1.43
2 unchanged sentences
(2) See Table 23 for the non-GAAP tabular reconciliation.
−Removed: Results of Operations for the Three Months Ended September 30, 2022 and 2021
−Removed: Our net income increased $33.7 million, or 45.0%, to $108.7 million for the three-month period ended September 30, 2022, from $75.0 million for the same period in 2021.
−Removed: On a diluted earnings per share basis, our earnings were $0.53 per share for the three-month period ended September 30, 2022 compared to $0.46 per share for the three-month period ended September 30, 2021.
−Removed: The Company determined that a 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.
−Removed: In addition, the Company determined that a provision for unfunded commitments was not necessary as of September 30, 2022.
−Removed: During the three months ended September 30, 2022, the Company recorded $1.1 million in recoveries on historic losses and a $2.6 million loss for the decrease in the fair value of marketable securities .
+Added: Results of Operations for the Three Months Ended March 31, 2023 and 2022
+Added: Our net income increased $38.1 million, or 58.7%, to $103.0 million for the three-month period ended March 31, 2023, from $64.9 million for the same period in 2022.
+Added: On a diluted earnings per share basis, our earnings were $0.51 per share for the three-month period ended March 31, 2023 compared to $0.40 per share for the three-month period ended March 31, 2022.
+Added: The Company recorded a $1.2 million provision for credit losses for the quarter ended March 31, 2023.
+Added: However, the Company determined that a provision for unfunded commitments was not necessary as of March 31, 2023 as the current level was considered adequate.
+Added: During the three months ended March 31, 2023, the Company recorded $3.5 million in recoveries on historic losses and an $11.4 million decrease in the fair value of marketable securities.
Total interest income increased by $140.0 million, or 96.6%, and non-interest income increased by $3.5 million, or 11.4%.
3 unchanged sentences
The increase in interest income resulted from a $107.6 million, or 83.1%, increase in loan interest income, a $29.5 million, or 213.7%, increase in investment income and a $3.0 million, or 180.0%, increase in interest income on deposits at other banks.
−Removed: The increase in non-interest income was primarily due to a $5.9 million, or 73.3%, increase in other services charges and fees, a $5.2 million, or 119.5%, increase in other income, a $4.8 million, or 81.0%, increase in service charges on deposit accounts, and a $3.5 million, or 730.9%, increase in trust fees.
−Removed: These increases were partially offset by a $2.7 million, or 4,408.2%, decrease in the fair value adjustment for marketable securities resulting from a $2.6 million decrease in the fair value of marketable securities, a $1.8 million, or 29.7%, decrease in mortgage lending income and a $920,000, or 34.6%, decrease in dividends from FHLB, FRB, FNBB and other.
+Added: The increase in non-interest income was primarily due to a $4.3 million, or 747.4%, increase in trust fees, a $4.1 million, or 53.6%, increase in other services charges and fees, a $3.9 million, or 49.6%, increase in other income, a $3.7 million, or 60.3%, increase in service charges on deposit accounts, and a $2.1 million, or 300.3%, increase in dividends from FHLB, FRB, FNBB and other.
+Added: These increases were partially offset by a $13.5 million, or 636.8%, decrease in the fair value adjustment for marketable securities resulting from an $11.4 million decrease in the fair value of marketable securities, and a $1.3 million, or 34.3%, decrease in mortgage lending income.
Included within other income was $3.5 million in recoveries on historic losses.
−Removed: The increase in interest expense was primarily due to a $17.7 million, or 313.8%, increase in interest on deposits which was partially offset by a $635,000, or 13.3%, decrease in interest on subordinated debentures.
−Removed: The increase in non-interest expense was due to a $22.8 million, or 53.7%, increase in salaries and employee benefits, an $8.4 million, or 49.7%, increase in other operating expenses, a $5.8 million, or 62.6%, increase in occupancy and equipment and a $2.7 million, or 45.2%, increase in data processing expense, partially offset by a decrease of $1.0 million in merger and acquisition expenses.
+Added: The increase in interest expense was primarily due to a $54.3 million, or 1,108.9%, increase in interest on deposits and a $4.3 million, or 230.1%, increase in interest on FHLB and other borrowed funds which was partially offset by a $2.8 million, or 40.0%, decrease in interest on subordinated debentures.
+Added: The increase in non-interest expense was due to a $20.9 million, or 48.1%, increase in salaries and employee benefits, a $9.9 million, or 61.0%, increase in other operating expenses, a $5.8 million, or 63.5%, increase in occupancy and equipment and a $1.9 million, or 27.4%, increase in data processing expense, partially offset by a decrease of $863,000 in merger and acquisition expenses.
Income tax expense increased by $9.9 million, or 49.5%, during the quarter due to an increase in net income.
−Removed: Our net interest margin increased from 3.60% for the three-month period ended September 30, 2021 to 4.05% for the three-month period ended September 30, 2022.
−Removed: The yield on interest earning assets was 4.62% and 3.91% for the three months ended September 30, 2022 and 2021, respectively, as average interest earning assets increased from $16.11 billion to $21.09 billion.
−Removed: The increase in average interest earning assets is primarily due to a $3.78 billion increase in average loans receivable and a $2.15 billion increase in average investment securities, largely resulting from the acquisition of Happy, partially offset by a $949.6 million decrease in average interest-bearing balances due from banks.
−Removed: For the three months ended September 30, 2022 and 2021, we recognized $4.6 million and $4.9 million, respectively, in total net accretion for acquired loans and deposits.
−Removed: We recognized $943,000 in event interest income for the three months ended September 30, 2022 compared to $3.5 million for the three months ended September 30, 2021 which reduced the net interest margin by five basis points.
−Removed: Our efficiency ratio was 43.24% for the three months ended September 30, 2022, compared to 42.26% for the same period in 2021.
−Removed: For the third quarter of 2022, our efficiency ratio, as adjusted (non-GAAP), was 42.97%, compared to 42.29% reported for the third quarter of 2021.
−Removed: (See Table 23 for the non-GAAP tabular reconciliation).
−Removed: Our annualized return on average assets was 1.81% for the three months ended September 30, 2022, compared to 1.68% for the same period in 2021.
−Removed: Our annualized return on average assets, as adjusted (non-GAAP), was 1.83% for the three months ended September 30, 2022, compared to 1.67% for the same period in 2021.
−Removed: (See Table 20 for the non-GAAP tabular reconciliation).
−Removed: Our annualized return on average common equity was 12.25% and 10.97% for the three months ended September 30, 2022, and 2021, respectively.
−Removed: Our annualized return on average common equity, as adjusted (non-GAAP), was 12.39% for the three months ended September 30, 2022 and 10.87% for the same period in 2021.
−Removed: (See Table 21 for the non-GAAP tabular reconciliation).
−Removed: Results of Operations for the Nine Months Ended September 30, 2022 and 2021
−Removed: Our net income decreased $56.1 million, or 22.8%, to $189.6 million for the nine-month period ended September 30, 2022, from $245.7 million for the same period in 2021.
−Removed: On a diluted earnings per share basis, our earnings were $0.99 per share for the nine-month period ended September 30, 2022 compared to $1.49 per share for the nine-month period ended September 30, 2021.
−Removed: As a result of the acquisition of Happy, which we completed on April 1, 2022, we incurred $49.6 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, and a $2.0 million provision for credit losses on acquired held-to-maturity investment securities.
−Removed: The summation of these items reduced earnings by $108.2 million and earnings per share by $0.42 per share for the nine-month period ended September 30, 2022.
−Removed: Excluding the impact of the acquisition of Happy, 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.
−Removed: In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of September 30, 2022.
−Removed: During the nine months ended September 30, 2022, the Company recorded $6.7 million in recoveries on historic losses and a $1.4 million special dividend from equity investments which were partially offset by a $2.3 million loss for the decrease in fair value of marketable securities and $2.1 million in TRUPS redemption fees.
−Removed: Total interest income increased by $130.7 million, or 27.6%, and non-interest income increased by $12.8 million, or 12.2%.
−Removed: This was more than offset by a $135.3 million, or 61.1%, increase in non-interest expense and a $21.6 million, or 53.7%, increase in interest expense.
−Removed: These fluctuations are primarily due to the acquisition of Happy during the second quarter of 2022 and the rising rate environment.
−Removed: The increase in interest income resulted from a $71.9 million, or 16.5%, increase in loan interest income, a $42.0 million, or 114.4%, increase in investment income and a $16.8 million, or 750.5%, increase in interest income on deposits at other banks.
−Removed: The increase in non-interest income was primarily due to a $10.9 million, or 68.0%, increase in service charges on deposit accounts, a $9.7 million, or 63.3%, increase in other income, an $8.9 million, or 35.2%, increase in other service charges and fees, a $7.4 million, or 514.1%, increase in trust fees and a $1.2 million, or 75.8%, increase in the cash value of life insurance.
−Removed: These increases were partially offset by a $9.4 million, or 132.5%, decrease in income for the fair value adjustment for marketable securities resulting from a $2.3 million decrease in the fair value of marketable securities for the nine months ended September 30, 2022 compared to a $7.0 million increase for the nine months ended September 30, 2021, a $7.5 million, or 54.1%, decrease in dividends from FHLB, FRB, FNBB and other, a $6.2 million, or 30.6%, decrease in mortgage lending income and a $1.4 million, or 90.4%, decrease in the gain on sale of SBA loans.
−Removed: Included within other income was $6.7 million recovery on historic losses, and included within dividends from FHLB, FRB, FNBB and other was $1.4 million in special dividends.
−Removed: The increase in non-interest expense was due to $48.6 million in merger and acquisition expenses, a $47.6 million, or 37.5%, increase in salaries and employee benefits, a $20.0 million, or 41.5%, increase in other operating expenses, a $10.9 million, or 39.7% increase in occupancy and equipment and an $8.1 million, or 45.5%, increase in data processing expense.
−Removed: Included within other operating expense was $2.1 million in TRUPS redemption fees.
−Removed: The increase in interest expense was primarily due to a $19.2 million, or 97.0%, increase in interest on deposits and a $2.1 million, or 14.6%, increase in interest on subordinated debentures as a result of the acquisition of $140.0 million of subordinated debt and $23.2 million in trust preferred securities from Happy during the second quarter.
−Removed: Income tax expense decreased by $20.6 million, or 26.7%, during the quarter due to the decrease in net income.
−Removed: Our net interest margin decreased from 3.74% for the nine-month period ended September 30, 2021 to 3.67% for the nine-month period ended September 30, 2022.
−Removed: The yield on interest earning assets was 4.08% for the nine-month periods ended September 30, 2022 and 2021, as average interest earning assets increased from $15.71 billion to $20.03 billion.
−Removed: The increase in average earning assets is primarily the result of a $2.01 billion increase in average loans receivable, a $1.78 billion increase in average investment securities, and a $527.4 million increase in average interest-bearing balances due from banks.
−Removed: For the nine months ended September 30, 2022 and 2021, we recognized $12.8 million and $16.2 million, respectively, in total net accretion for acquired loans and deposits.
−Removed: The reduction in accretion was dilutive to the net interest margin by 2 basis points.
−Removed: The Company experienced a $26.5 million reduction in interest income from PPP loans due to the forgiveness of the PPP loans and the acceleration of the deferred fees for the loans that were forgiven.
−Removed: This was dilutive to the net interest margin by approximately 8 basis points.
−Removed: Our efficiency ratio was 52.44% for the nine-month period ended September 30, 2022, compared to 39.86% for the same period in 2021.
−Removed: For the first nine months of 2022, our efficiency ratio, as adjusted (non-GAAP), was 45.13%, compared to 41.67% reported for the first nine months of 2021.
+Added: Our net interest margin increased from 3.21% for the three-month period ended March 31, 2022 to 4.37% for the three-month period ended March 31, 2023.
+Added: The yield on interest earning assets was 5.79% and 3.55% for the three months ended March 31, 2023 and 2022, respectively, as average interest earning assets increased from $16.77 billion to $20.06 billion.
+Added: The increase in average interest earning assets is primarily due to a $4.54 billion increase in average loans receivable and a $1.82 billion increase in average investment securities, largely resulting from the acquisition of Happy, partially offset by a $3.07 billion decrease in average interest-bearing balances due from banks.
+Added: For the three months ended March 31, 2023 and 2022, we recognized $3.2 million and $3.1 million, respectively, in total net accretion for acquired loans and deposits.
+Added: We recognized $2.1 million in event interest income for the three months ended March 31, 2023 compared to $1.4 million for the three months ended March 31, 2022 which increased the net interest margin by one basis point.
+Added: The overall increase in the net interest margin was due to an increase in interest income due to an increase in both average earning assets at higher yields, which was partially offset by an increase in interest expense due to an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the Happy acquisition and the current rising interest rate environment.
+Added: Our efficiency ratio was 44.80% for the three months ended March 31, 2023, compared to 46.15% for the same period in 2022.
+Added: For the first quarter of 2023, our efficiency ratio, as adjusted (non-GAAP), was 43.42%, compared to 47.33% reported for the first quarter of 2022.
(See Table 23 for the non-GAAP tabular reconciliation).
−Removed: Our annualized return on average assets was 1.13% for the nine-month period ended September 30, 2022, compared to 1.90% for the same period in 2021.
−Removed: Our annualized return on average assets, as adjusted (non-GAAP), was 1.61% for the nine months ended September 30, 2022, compared to 1.76% for the same period in 2021.
+Added: Our annualized return on average assets was 1.84% for the three months ended March 31, 2023, compared to 1.43% for the same period in 2022.
(See Table 20 for the non-GAAP tabular reconciliation).
−Removed: Our annualized return on average common equity was 7.71% and 12.32% for the nine-month period ended September 30, 2022, and 2021, respectively.
−Removed: Our annualized return on average common equity, as adjusted (non-GAAP), was 10.91% for the nine months ended September 30, 2022 and 11.44% for the same period in 2021.
+Added: Our annualized return on average common equity was 11.70% and 9.58% for the three months ended March 31, 2023, and 2022, respectively.
(See Table 21 for the non-GAAP tabular reconciliation).
−Removed: Financial Condition as of and for the Period Ended September 30, 2022 and December 31, 2021
−Removed: Our total assets as of September 30, 2022 increased $5.11 billion to $23.16 billion from $18.05 billion reported as of December 31, 2021.
−Removed: The increase in total assets is primarily due to the acquisition of $6.69 billion in total assets, net of purchase accounting adjustments, from Happy during the second quarter of 2022.
−Removed: Cash and cash equivalents decreased $2.07 billion, for the nine months ended September 30, 2022.
−Removed: Our loan portfolio balance increased to $13.83 billion as of September 30, 2022 from $9.84 billion at December 31, 2021.
−Removed: The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting adjustments, from Happy in the second quarter of 2022 and $242.2 million in marine loans from LendingClub Bank during the first quarter of 2022, as well as $98.4 million in organic loan growth.
−Removed: Total deposits increased $4.28 billion to $18.54 billion as of September 30, 2022 from $14.26 billion as of December 31, 2021.
−Removed: The increase in deposits was primarily due to the acquisition of $5.86 billion in deposits, net of purchase accounting adjustments, from Happy in the second quarter of 2022.
−Removed: Stockholders’ equity increased $694.3 million to $3.46 billion as of September 30, 2022, compared to $2.77 billion as of December 31, 2021.
−Removed: The $694.3 million increase in stockholders’ equity is primarily associated with the $961.3 million in common stock issued to Happy shareholders for the acquisition of Happy on April 1, 2022 and the $189.6 million in net income for the nine months ended September 30, 2022, partially offset by the $317.9 million in other comprehensive loss, the $94.8 million of shareholder dividends paid and stock repurchases of $50.9 million in 2022.
−Removed: Our non-performing loans were $61.7 million, or 0.45% of total loans as of September 30, 2022, compared to $50.2 million, or 0.51% of total loans as of December 31, 2021.
−Removed: The allowance for credit losses as a percentage of non-performing loans decreased slightly to 468.77% as of September 30, 2022, from 471.61% as of December 31, 2021.
−Removed: Non-performing loans from our Arkansas franchise were $10.2 million at September 30, 2022 compared to $13.9 million as of December 31, 2021.
−Removed: Non-performing loans from our Florida franchise were $24.8 million at September 30, 2022 compared to $26.8 million as of December 31, 2021.
−Removed: Non-performing loans from our Texas franchise were $13.7 million at September 30, 2022 compared to zero as of December 31, 2021.
−Removed: Non-performing loans from our Alabama franchise were $204,000 at September 30, 2022 compared to $470,000 as of December 31, 2021.
−Removed: Non-performing loans from our Shore Premier Finance ("SPF") franchise were $1.4 million at September 30, 2022 compared to $1.5 million as of December 31, 2021.
−Removed: Non-performing loans from our Centennial Commercial Finance Group (“CFG”) franchise were $11.4 million at September 30, 2022 compared to $7.5 million as of December 31, 2021.
−Removed: As of September 30, 2022, our non-performing assets increased to $62.2 million, or 0.27% of total assets, from $51.8 million, or 0.29% of total assets, as of December 31, 2021.
−Removed: Non-performing assets from our Arkansas franchise were $10.2 million at September 30, 2022 compared to $14.4 million as of December 31, 2021.
−Removed: Non-performing assets from our Florida franchise were $25.0 million at September 30, 2022 compared to $27.9 million as of December 31, 2021.
−Removed: Non-performing assets from our Texas franchise were $14.0 million at September 30, 2022 compared to zero as of December 31, 2021.
−Removed: Non-performing assets from our Alabama franchise were $204,000 at September 30, 2022 compared to $470,000 as of December 31, 2021.
−Removed: Non-performing assets from our SPF franchise were $1.4 million at September 30, 2022 compared to $1.5 million as of December 31, 2021.
−Removed: Non-performing assets from our CFG franchise were $11.4 million at September 30, 2022 compared to $7.5 million as of December 31, 2021.
−Removed: The $11.4 million balance of non-accrual loans for our Centennial CFG market consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program.
−Removed: Due to the condition of the two loans, partial charge-offs for a total of $2.2 million were taken on these loans during the third quarter of 2022.
+Added: Financial Condition as of and for the Period Ended March 31, 2023 and December 31, 2022
+Added: Our total assets as of March 31, 2023 decreased $365.3 million to $22.52 billion from $22.88 billion reported as of December 31, 2022.
+Added: The decrease in total assets is primarily due to $270.8 million decrease in investment securities resulting from paydowns and maturities during the first quarter of 2023.
+Added: Cash and cash equivalents decreased $36.7 million, for the three months ended March 31, 2023.
+Added: Our loan portfolio balance decreased to $14.39 billion as of March 31, 2023 from $14.41 billion at December 31, 2022.
+Added: The decrease in loans was primarily due to $94.6 million of organic loan decline from our Centennial Commercial Finance Group franchise and $2.1 million in PPP loan decline, partially offset by $73.9 million organic loan growth in our remaining footprint.
+Added: Total deposits decreased $493.3 million to $17.45 billion as of March 31, 2023 from $17.94 billion as of December 31, 2022.
+Added: The decrease in deposits was primarily due to the runoff of deposits in the normal course of business during the first quarter of 2023 as a result of the current interest rate environment.
+Added: Stockholders’ equity increased $104.5 million to $3.63 billion as of March 31, 2023, compared to $3.53 billion as of December 31, 2022.
+Added: The $104.5 million increase in stockholders’ equity is primarily associated with the $103.0 million in net income for the three months ended March 31, 2023 and the $49.2 million in other comprehensive income, partially offset by the $36.6 million of shareholder dividends paid and stock repurchases of $13.5 million in 2023.
+Added: Our non-performing loans were $74.0 million, or 0.51% of total loans as of March 31, 2023, compared to $60.9 million, or 0.42% of total loans as of December 31, 2022.
+Added: The allowance for credit losses as a percentage of non-performing loans decreased slightly to 388.23% as of March 31, 2023, from 475.99% as of December 31, 2022.
+Added: Non-performing loans from our Arkansas franchise were $11.2 million at March 31, 2023 compared to $8.4 million as of December 31, 2022.
+Added: Non-performing loans from our Florida franchise were $20.0 million at March 31, 2023 compared to $20.5 million as of December 31, 2022.
+Added: Non-performing loans from our Texas franchise were $26.9 million at March 31, 2023 compared to $22.2 million as of December 31, 2022.
+Added: Non-performing loans from our Alabama franchise were $390,000 at March 31, 2023 compared to $404,000 as of December 31, 2022.
+Added: Non-performing loans from our Shore Premier Finance ("SPF") franchise were $2.1 million at March 31, 2023 compared to $2.3 million as of December 31, 2022.
+Added: Non-performing loans from our Centennial Commercial Finance Group (“CFG”) franchise were $13.4 million at March 31, 2023 compared to $7.1 million as of December 31, 2022.
+Added: As of March 31, 2023, our non-performing assets increased to $74.5 million, or 0.33% of total assets, from $61.5 million, or 0.27% of total assets, as of December 31, 2022.
+Added: Non-performing assets from our Arkansas franchise were $11.2 million at March 31, 2023 compared to $8.5 million as of December 31, 2022.
+Added: Non-performing assets from our Florida franchise were $20.2 million at March 31, 2023 compared to $20.8 million as of December 31, 2022.
+Added: Non-performing assets from our Texas franchise were $27.1 million at March 31, 2023 compared to $22.4 million as of December 31, 2022.
+Added: Non-performing assets from our Alabama franchise were $390,000 at March 31, 2023 compared to $404,000 as of December 31, 2022.
+Added: Non-performing assets from our SPF franchise were $2.1 million at March 31, 2023 compared to $2.3 million as of December 31, 2022.
+Added: Non-performing assets from our CFG franchise were $13.4 million at March 31, 2023 compared to $7.1 million as of December 31, 2022.
+Added: The $13.4 million balance of non-accrual loans for our Centennial CFG market consists of four loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program.
+Added: Due to the condition of the four loans, partial charge-offs for a total of $2.0 million were taken on these loans during the three months ended March 31, 2023.
The loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve.
7 unchanged sentences
Using these criteria, we believe that the accounting policies most critical to us are those associated with our lending practices, including revenue recognition and the accounting for the allowance for credit losses, foreclosed assets, investments, intangible assets, income taxes and stock options.
−Removed: Revenue Recognition.
−Removed: 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.
−Removed: 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.
−Removed: The majority of our revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as our loans, letters of credit and investment securities, as these activities are subject to other GAAP discussed elsewhere within our disclosures.
−Removed: Descriptions of our revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our income statements as components of non-interest income are as follows:
−Removed: • Service charges on deposit accounts – These represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.
−Removed: Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer).
−Removed: Payment for such performance obligations are generally received at the time the performance obligations are satisfied.
−Removed: • Other service charges and fees – These represent credit card interchange fees and Centennial CFG loan fees.
−Removed: The interchange fees are recorded in the period the performance obligation is satisfied which is generally the cash basis based on agreed upon contracts.
−Removed: Centennial CFG loan fees are based on loan or other negotiated agreements with customers and are accounted for under ASC Topic 310.
−Removed: Interchange fees were $6.1 million, $16.6 million, $4.2 million and $12.2 million for the three and nine months ended September 30, 2022 and 2021, respectively.
−Removed: Centennial CFG loan fees were $4.6 million, $9.7 million, $1.8 million and $7.1 million for the three and nine months ended September 30, 2022 and 2021, respectively.
−Removed: • Trust fees - The Company enters into contracts with its customers to manage assets for investment, and/or transact on their accounts.
−Removed: The Company generally satisfies its performance obligations as services are rendered.
−Removed: The management fees are percentage based, flat, percentage of income or a fixed percentage calculated upon the average balance of assets depending upon account type.
−Removed: Fees are collected on a monthly or annual basis.
+Added: Credit Losses .
+Added: We account for credit losses in accordance with ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):
+Added: Measurement of Credit Losses on Financial Instruments ("ASC 326").
+Added: The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.
+Added: It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.
Investments – Available-for-sale .
−Removed: 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.
+Added: Securities available-for-sale ("AFS") 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.
−Removed: 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 ("CECL").
−Removed: 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.
+Added: 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.
+Added: 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.
4 unchanged sentences
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
+Added: 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.
1 unchanged sentence
Investments – Held-to-Maturity.
−Removed: 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.
+Added: 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.
+Added: 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 measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics.
1 unchanged sentence
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.
+Added: Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.
+Added: Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.
Loans Receivable and Allowance for Credit Losses .
−Removed: Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, deferred fees or costs on originated loans.
+Added: Except for loans acquired during our acquisitions, substantially all of our loans receivable are reported at their outstanding principal balance adjusted for any charge-offs, as it is management’s intent to hold them for the foreseeable future or until maturity or payoff, except for mortgage loans held for sale.
Interest income on loans is accrued over the term of the loans based on the principal balance outstanding.
−Removed: Loan origination fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.
The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
−Removed: Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.
−Removed: Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
+Added: Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
Historical credit loss experience provides the basis for the estimation of expected credit losses.
−Removed: Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
+Added: Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, rental vacancy rate, housing price indices and rental vacancy rate index.
The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics.
5 unchanged sentences
• Multifamily
−Removed: • Owner occupied commercial real estate
+Added: • Owner occupies commercial real estate
• Non-owner occupied commercial real estate
3 unchanged sentences
• Other consumer - SPF
−Removed: The allowance for credit losses for each segment is measured through the use of the discounted cash flow method.
Loans that do not share risk characteristics are evaluated on an individual basis.
−Removed: Loans evaluated individually are not also included in the collective evaluation.
−Removed: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: 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.
−Removed: The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto.
−Removed: 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.
−Removed: 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.
−Removed: When accrual of interest is discontinued, all unpaid accrued interest is reversed.
−Removed: Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.
−Removed: 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 .
−Removed: We account for our acquisitions under FASB ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting.
−Removed: All identifiable assets acquired, including loans, are recorded at fair value.
+Added: We account for our acquisitions under ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting.
+Added: All identifiable assets acquired, including loans, and liabilities assumed are recorded at fair value.
In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans.
1 unchanged sentence
The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
−Removed: Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans.
+Added: The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination.
+Added: Purchase credit deteriorated (“PCD”) loans are recorded at the amount paid.
An allowance for credit losses is determined using the same methodology as other loans.
−Removed: The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment.
−Removed: 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.
−Removed: The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan.
−Removed: Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
+Added: The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.
+Added: Subsequent changes to the allowance for credit losses are recorded through the provision for credit loss.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures :
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company.
−Removed: The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss.
+Added: The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense.
The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
−Removed: Foreclosed Assets Held for Sale.
−Removed: Real estate and personal properties acquired through or in lieu of loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis.
−Removed: Valuations are periodically performed by management, and the real estate and personal properties are carried at fair value less costs to sell.
−Removed: Gains and losses from the sale of other real estate and personal properties are recorded in non-interest income, and expenses used to maintain the properties are included in non-interest expenses.
Intangible Assets .
2 unchanged sentences
The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists.
−Removed: The core deposit intangibles are being amortized over 48 to 121 months on a straight-line basis.
+Added: The core deposit intangibles are being amortized over 48 months to 121 months on a straight-line basis.
Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis.
19 unchanged sentences
We recognize compensation expense for the grant-date fair value of the option award over the vesting period of the award.
−Removed: Acquisition of Marine Portfolio
−Removed: On February 4, 2022, the Company completed the purchase of the performing marine loan portfolio of Utah-based LendingClub Bank (“LendingClub”).
−Removed: Under the terms of the purchase agreement with LendingClub, the Company acquired approximately $242.2 million of yacht loans.
−Removed: This portfolio of loans is housed within the Company's Shore Premier Finance division, which is responsible for servicing the acquired loan portfolio and originating new loan production.
Acquisition of Happy Bancshares, Inc.
3 unchanged sentences
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.
−Removed: Including the effects of the known purchase accounting adjustments, as of the acquisition date, Happy had approximately $6.69 billion in total assets, $3.65 billion in loans and $5.86 billion in customer deposits.
+Added: Including the purchase accounting adjustments, as of the acquisition date, Happy had approximately $6.69 billion in total assets, $3.65 billion in loans and $5.86 billion in customer deposits.
Happy formerly operated its banking business from 62 locations in Texas.
For further discussion of the acquisition, see Note 2 "Business Combinations" to the Condensed Notes to Consolidated Financial Statements.
+Added: Acquisition of Marine Portfolio
+Added: On February 4, 2022, the Company completed the purchase of the performing marine loan portfolio of Utah-based LendingClub Bank (“LendingClub”).
+Added: Under the terms of the purchase agreement with LendingClub, the Company acquired approximately $242.2 million of yacht loans.
+Added: This portfolio of loans is housed within the Company's Shore Premier Finance division, which is responsible for servicing the acquired loan portfolio and originating new loan production.
We will continue evaluating all types of potential bank acquisitions, which may include FDIC-assisted acquisitions as opportunities arise, to determine what is in the best interest of our Company.
1 unchanged sentence
As opportunities arise, we will continue to open new (commonly referred to as de novo ) branches in our current markets and in other attractive market areas.
−Removed: As of September 30, 2022, we had 222 branch locations.
+Added: As of March 31, 2023, we had 223 branch locations.
There were 76 branches in Arkansas, 78 branches in Florida, 63 branches in Texas, five branches in Alabama and one branch in New York City.
Results of Operations
−Removed: For the three and nine months ended September 30, 2022 and 2021
−Removed: Our net income increased $33.7 million, or 45.0%, to $108.7 million for the three-month period ended September 30, 2022, from $75.0 million for the same period in 2021.
−Removed: On a diluted earnings per share basis, our earnings were $0.53 per share for the three-month period ended September 30, 2022 compared to $0.46 per share for the three-month period ended September 30, 2021.
−Removed: 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.
−Removed: In addition, the Company determined no additional provision for unfunded commitments was necessary as of September 30, 2022.
−Removed: During the three months ended September 30, 2022, the Company recorded $1.1 million in recoveries on historic losses and a $2.6 million loss for the decrease in the fair value of marketable securities .
−Removed: Our net income decreased $56.1 million, or 22.8%, to $189.6 million for the nine-month period ended September 30, 2022, from $245.7 million for the same period in 2021.
−Removed: On a diluted earnings per share basis, our earnings were $0.99 per share for the nine-month period ended September 30, 2022 compared to $1.49 per share for the nine-month period ended September 30, 2021.
−Removed: As a result of the acquisition of Happy, which we completed on April 1, 2022, we incurred $49.6 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, a $2.0 million provision for credit losses on acquired held-to-maturity investment securities.
−Removed: The summation of these items reduced earnings by $108.2 million and earnings per share by $0.42 per share for the nine-month period ended September 30, 2022.
−Removed: Excluding the impact of the acquisition of Happy, 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.
−Removed: In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of September 30, 2022.
−Removed: During the nine months ended September 30, 2022, the Company recorded $6.7 million in recoveries on historic losses and a $1.4 million special dividend from equity investments, which were partially offset by a $2.3 million loss for the decrease in fair value of marketable securities and $2.1 million in TRUPS redemption fees.
+Added: For the three months ended March 31, 2023 and 2022
+Added: Our net income increased $38.1 million, or 58.7%, to $103.0 million for the three-month period ended March 31, 2023, from $64.9 million for the same period in 2022.
+Added: On a diluted earnings per share basis, our earnings were $0.51 per share for the three-month period ended March 31, 2023 compared to $0.40 per share for the three-month period ended March 31, 2022.
+Added: The Company recorded a $1.2 million provision for credit losses on loans for the quarter ended March 31, 2023.
+Added: However, the Company determined that a provision for unfunded commitments was not necessary as of March 31, 2023 as the current level was considered adequate.
+Added: During the three months ended March 31, 2023, the Company recorded $3.5 million in recoveries on historic losses and an $11.4 million decrease in the fair value of marketable securities.
Net Interest Income
4 unchanged sentences
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions.
−Removed: In 2020, the Federal Reserve lowered the target rate to 0.00% to 0.25%.
−Removed: This remained in effect throughout all of 2021.
−Removed: On March 16, 2022, the target rate was increased to 0.25% to 0.50%.
−Removed: On May 4, 2022, the target rate was increased to 0.75% to 1.00%.
−Removed: On June 15, 2022, the target rate was increased to 1.50% to 1.75%.
−Removed: On July 27, 2022, the target rate was increased to 2.25% to 2.50%.
−Removed: On September 21, 2022, the target rate was increased to 3.00% to 3.25%.
−Removed: Presently, the Federal Reserve has indicated they are anticipating further rate increases.
−Removed: Our net interest margin increased from 3.60% for the three-month period ended September 30, 2021 to 4.05% for the three-month period ended September 30, 2022.
−Removed: The yield on interest earning assets was 4.62% and 3.91% for the three months ended September 30, 2022 and 2021, respectively, as average interest earning assets increased from $16.11 billion to $21.09 billion.
−Removed: The increase in average earning assets is primarily due to a $3.78 billion increase in average loans receivable, and a $2.15 billion increase in average investment securities largely resulting from the acquisition of Happy, partially offset by a $949.6 million decrease in average interest-bearing balances due from banks.
−Removed: For the three months ended September 30, 2022 and 2021, we recognized $4.6 million and $4.9 million, respectively, in total net accretion for acquired loans and deposits.
−Removed: We recognized $943,000 in event interest income for the three months ended September 30, 2022 compared to $3.5 million for the three months ended September 30, 2021, which reduced the net interest margin by five basis points.
−Removed: Our net interest margin decreased from 3.74% for the nine-month period ended September 30, 2021 to 3.67% for the nine-month period ended September 30, 2022.
−Removed: The yield on interest earning assets was 4.08% for both of the nine-month periods ended September 30, 2022 and 2021, as average interest earning assets increased from $15.71 billion to $20.03 billion.
−Removed: The increase in average earning assets is primarily the result of a $2.01 billion increase in average loans receivable, a $1.78 billion increase in average investment securities, and a $527.4 million increase in average interest-bearing balances due from banks.
−Removed: For the nine months ended September 30, 2022 and 2021, we recognized $12.8 million and $16.2 million, respectively, in total net accretion for acquired loans and deposits.
−Removed: The reduction in accretion was dilutive to the net interest margin by 2 basis points.
−Removed: The Company experienced a $26.5 million reduction in interest income from PPP loans due to the forgiveness of the PPP loans and the acceleration of the deferred fees for the loans that were forgiven.
−Removed: This was dilutive to the net interest margin by approximately 8 basis points.
−Removed: Net interest income on a fully taxable equivalent basis increased $69.2 million, or 47.3%, to $215.5 million for the three-month period ended September 30, 2022, from $146.4 million for the same period in 2021.
−Removed: This increase in net interest income for the three-month period ended September 30, 2022 was the result of an $86.6 million increase in interest income, partially offset by a $17.4 million increase in interest expense, on a fully taxable equivalent basis.
+Added: The Federal Reserve increased the target rate seven times during 2022.
+Added: First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%.
+Added: Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%.
+Added: Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%.
+Added: Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%.
+Added: Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%.
+Added: Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%.
+Added: Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%.
+Added: The Federal Reserve increased the target rate twice during the first quarter of 2023.
+Added: First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, and second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%.
+Added: Our net interest margin increased from 3.21% for the three-month period ended March 31, 2022 to 4.37% for the three-month period ended March 31, 2023.
+Added: The yield on interest earning assets was 5.79% and 3.55% for the three months ended March 31, 2023 and 2022, respectively, as average interest earning assets increased from $16.77 billion to $20.06 billion.
+Added: The increase in average interest earning assets is primarily due to a $4.54 billion increase in average loans receivable and a $1.82 billion increase in average investment securities, largely resulting from the acquisition of Happy, partially offset by a $3.07 billion decrease in average interest-bearing balances due from banks.
+Added: For the three months ended March 31, 2023 and 2022, we recognized $3.2 million and $3.1 million, respectively, in total net accretion for acquired loans and deposits.
+Added: We recognized $2.1 million in event interest income for the three months ended March 31, 2023 compared to $1.4 million for the three months ended March 31, 2022 which increased the net interest margin by one basis point.
+Added: The overall increase in the net interest margin was due to an increase in interest income due to an increase in both average earning assets at higher yields, which was partially offset by an increase in interest expense due to an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the Happy acquisition and the current rising interest rate environment.
+Added: Net interest income on a fully taxable equivalent basis increased $83.3 million, or 62.7%, to $216.2 million for the three-month period ended March 31, 2023, from $132.9 million for the same period in 2022.
+Added: This increase in net interest income for the three-month period ended March 31, 2023 was the result of a $139.9 million increase in interest income, partially offset by a $56.6 million increase in interest expense, on a fully taxable equivalent basis.
The $139.9 million increase in interest income was primarily the result of the higher level of average interest earning assets due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate environment.
The increase in earning assets resulted in an increase in interest income of approximately $76.5 million, and the higher yield on earning assets resulted in an increase in interest income of approximately $63.5 million.
−Removed: The $17.4 million increase in interest expense is primarily the result of the higher level of average interest bearing liabilities due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate environment.
−Removed: The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $14.7 million, and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $2.7 million.
−Removed: Net interest income on a fully taxable equivalent basis increased $110.4 million, or 25.1%, to $549.7 million for the nine-month period ended September 30, 2022, from $439.3 million for the same period in 2021.
−Removed: This increase in net interest income for the nine-month period ended September 30, 2022 was the result of a $132.0 million increase in interest income, partially offset by a $21.6 million increase in interest expense, on a fully taxable equivalent basis.
−Removed: The $132.0 million increase in interest income was primarily the result of the higher level of average interest earning assets due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate environment.
−Removed: The increase in earning assets resulted in an increase in interest income of approximately $110.8 million, and the higher yield on earning assets resulted in a increase in interest income of approximately $21.2 million.
−Removed: The $21.6 million increase in interest expense is primarily the result of the higher level of average interest bearing liabilities due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate environment.
+Added: The $56.6 million increase in interest expense is primarily the result of the increasing interest rate environment as well as the higher level of average interest bearing liabilities due to the acquisition of Happy during the second quarter of 2022.
The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $55.2 million, and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $1.4 million.
−Removed: Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2022 and 2021, as well as changes in fully taxable equivalent net interest margin for the three and nine months ended September 30, 2022 compared to the same period in 2021.
+Added: Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended March 31, 2023 and 2022, as well as changes in fully taxable equivalent net interest margin for the three months ended March 31, 2023 compared to the same period in 2022.
Analysis of Net Interest Income
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
9 unchanged sentences
Changes in Fully Taxable Equivalent Net Interest Margin
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2021 2022 vs.
+Added: Three Months Ended March 31,
(In thousands)
4 unchanged sentences
Increase in net interest income $ 83,337
−Removed: Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and nine months ended September 30, 2022 and 2021, respectively.
+Added: Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three months ended March 31, 2023 and 2022, respectively.
The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods.
2 unchanged sentences
Average Balance Sheets and Net Interest Income Analysis
−Removed: Three Months Ended September 30,
−Removed: Expense Yield /
−Removed: (Dollars in thousands)
−Removed: Earnings assets
−Removed: Interest-bearing balances due from
−Removed: banks $ 1,965,136 $ 10,763 2.17 % $ 2,914,785 $ 1,117 0.15 %
−Removed: Federal funds sold 1,176 9 3.04 82 — —
−Removed: Investment securities – taxable 4,008,230 28,273 2.80 2,289,680 8,495 1.47
−Removed: Investment securities – non-taxable 1,292,702 10,370 3.18 862,586 6,416 2.95
−Removed: Loans receivable 13,822,459 195,977 5.63 10,043,393 142,780 5.64
−Removed: Total interest-earning assets 21,089,703 245,392 4.62 % 16,110,526 158,808 3.91 %
−Removed: Non-earning assets 2,689,066 1,584,700
−Removed: Total assets $ 23,778,769 $ 17,695,226
−Removed: LIABILITIES AND
−Removed: STOCKHOLDERS’ EQUITY
−Removed: Interest-bearing liabilities
−Removed: Savings and interest-bearing transaction
−Removed: accounts $ 12,233,755 $ 22,388 0.73 % $ 8,794,657 3,613 0.16 %
−Removed: Time deposits 1,078,112 959 0.35 1,063,500 2,029 0.76
−Removed: Total interest-bearing deposits 13,311,867 23,347 0.70 9,858,157 5,642 0.23
−Removed: Federal funds purchased 14 — — — — —
−Removed: Securities sold under agreement to repurchase 126,770 434 1.36 143,937 102 0.28
−Removed: FHLB and other borrowed funds 400,012 1,917 1.90 400,000 1,917 1.90
−Removed: Subordinated debentures 442,312 4,153 3.73 370,805 4,788 5.12
−Removed: Total interest-bearing liabilities 14,280,975 29,851 0.83 % 10,772,899 12,449 0.46 %
−Removed: Non-interest-bearing liabilities
−Removed: Non-interest-bearing deposits 5,779,082 4,091,174
−Removed: Other liabilities 199,416 120,200
−Removed: Total liabilities 20,259,473 14,984,273
−Removed: Stockholders’ equity 3,519,296 2,710,953
−Removed: Total liabilities and stockholders’ equity $ 23,778,769 $ 17,695,226
−Removed: Net interest spread 3.79 % 3.45 %
−Removed: Net interest income and margin $ 215,541 4.05 % $ 146,359 3.60 %
−Removed: Nine Months Ended September 30,
−Removed: Balance Income /
−Removed: Expense Yield /
−Removed: Balance Income /
+Added: Three Months Ended March 31,
Expense Yield /
9 unchanged sentences
Total assets $ 22,695,855 $ 18,393,075
−Removed: LIABILITIES AND SHAREHOLDERS' EQUITY
+Added: LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities
4 unchanged sentences
Securities sold under agreement to repurchase 134,934 868 2.61 137,565 108 0.32
−Removed: FHLB borrowed funds 400,004 5,688 1.90 400,000 5,688 1.90
+Added: FHLB and other borrowed funds 651,111 6,190 3.86 400,000 1,875 1.90
Subordinated debentures 440,346 4,124 3.80 611,888 6,878 4.56
8 unchanged sentences
Net interest income and margin $ 216,223 4.37 % $ 132,886 3.21 %
−Removed: Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and nine months ended September 30, 2022 compared to the same period in 2021, on a fully taxable basis.
+Added: Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three months ended March 31, 2023 compared to the same period in 2022, on a fully taxable basis.
The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Volume/Rate Analysis
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 over 2021 2022 over 2021
+Added: Three Months Ended March 31,
+Added: 2023 over 2022
Volume Yield /
−Removed: Rate Total Volume Yield /
(In thousands)
12 unchanged sentences
Securities sold under agreement to repurchase (2) 762 760
+Added: FHLB borrowed funds 1,636 2,679 4,315
Subordinated debentures (1,727) (1,027) (2,754)
2 unchanged sentences
Provision for Credit Losses
−Removed: The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.
−Removed: It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.
−Removed: ASC 326 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting standards of a company’s portfolio.
−Removed: In addition, ASC 326 requires credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities management does not intend to sell or believes that it is more likely than not, they will be required to sell.
+Added: Credit Loss Expense :
+Added: During the period ended March 31, 2023, the Company recorded a $1.2 million provision for credit losses on loans.
+Added: However, the Company determined that no additional provision was necessary for unfunded commitments as the current level of the reserve was considered adequate.
+Added: Net charge-offs to average total loans was 0.10% for the three months ended March 31, 2023 compared to 0.08% for the three months ended March 31, 2022.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
18 unchanged sentences
The allowance for credit losses for each segment is measured through the use of the discounted cash flow method.
−Removed: Loans that do not share risk characteristics are evaluated on an individual basis.
−Removed: Loans evaluated individually are not also included in the collective evaluation.
−Removed: 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.
−Removed: As a result of the Happy acquisition which was completed on April 1, 2022, 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.
−Removed: 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.
−Removed: In addition, the Company determined no additional provision for unfunded commitments was necessary as of September 30, 2022.
−Removed: Net charge-offs to average total loans was 0.15% for the three months ended September 30, 2022 compared to 0.07% for the three months ended September 30, 2021.
−Removed: Net charge-offs to average total loans was 0.10% for the nine months ended September 30, 2022 compared to 0.09% for the nine months ended September 30, 2021.
+Added: Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation.
+Added: For those loans that are classified as collateral dependent, an allowance is established when the discounted cash flows, collateral value or observable market price of the collateral dependent loan is lower than the carrying value of that loan.
+Added: 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.
Investments – Available-for-sale :
13 unchanged sentences
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.
−Removed: 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.
−Removed: Of the Company's held-to-maturity securities, $1.11 billion, or 88.7% are municipal securities.
−Removed: 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.
−Removed: The remainder of investments classified as held-to-maturity are U.S.
−Removed: government-sponsored enterprises and mortgage-backed securities all of which are guaranteed by the U.S.
−Removed: Due to the inherent low risk in these U.S.
−Removed: government guaranteed securities, no provision for credit loss was established on this portion of the portfolio.
−Removed: 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 HTM portfolio resulting from the Happy acquisition was considered adequate.
+Added: Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.
+Added: Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.
+Added: 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.
Non-Interest Income
−Removed: Total non-interest income was $43.2 million and $118.5 million for the three and nine months ended September 30, 2022, compared to $29.2 million and $105.6 million for the same period in 2021.
+Added: Total non-interest income was $34.2 million for the three months ended March 31, 2023, compared to $30.7 million for the same period in 2022.
Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.
−Removed: Table 6 measures the various components of our non-interest income for the three and nine months ended September 30, 2022 and 2021, respectively, as well as changes for the three and nine months ended September 30, 2022 compared to the same period in 2021.
+Added: Table 6 measures the various components of our non-interest income for the three months ended March 31, 2023 and 2022.
Non-Interest Income
−Removed: Three Months Ended September 30, 2021 Change
−Removed: from 2020 Nine Months Ended September 30, 2021 Change
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31, 2023 Change
(Dollars in thousands)
7 unchanged sentences
Gain on sale of SBA loans 139 95 44 46.3
−Removed: (Loss) gain on sale of branches, equipment and other assets, net (13) (34) 21 61.8 5 (86) 91 105.8
+Added: Gain on sale of branches, equipment and other assets, net 7 16 (9) (56.3)
Gain on OREO, net — 478 (478) (100.0)
3 unchanged sentences
Total non-interest income $ 34,164 $ 30,669 $ 3,495 11.4 %
−Removed: Non-interest income increased $14.0 million, or 47.9%, to $43.2 million for the three months ended September 30, 2022 from $29.2 million for the same period in 2021.
−Removed: The primary factors that resulted in this increase were the increases in other service charges and fees, other income and service charges on deposit accounts.
−Removed: Other factors were changes related to trust fees, mortgage lending income, increase in cash value of life insurance, dividends from FHLB, FRB, FNBB and other and fair value adjustment for marketable securities.
−Removed: Additional details for the three months ended September 30, 2022 on some of the more significant changes are as follows:
−Removed: • The $4.8 million increase in service charges on deposit accounts is primarily related to an increase in overdraft fees service charge fees related to the acquisition of Happy.
+Added: Non-interest income increased $3.5 million, or 11.4%, to $34.2 million for the three months ended March 31, 2023 from $30.7 million for the same period in 2022.
+Added: The primary factors that resulted in this increase were the increases in service charges on deposit accounts, trust fees, other service charges and fees and other income.
+Added: Other factors were changes related to increase in cash value of life insurance and dividends from FHLB, FRB, FNBB & other, partially offset by decreases in mortgage lending income and the fair value adjustment for marketable securities.
+Added: Additional details for the three months ended March 31, 2023 on some of the more significant changes are as follows:
+Added: • The $3.7 million increase in service charges on deposit accounts is primarily related to an increase in overdraft fees and service charge fees related to the acquisition of Happy.
• The $4.1 million increase in other service charges and fees is primarily related to an increase in Centennial CFG property finance loan fees and an increase in interchange fees related to the acquisition of Happy.
• The $4.3 million increase in trust fees is primarily related to an increase in trust fees resulting from the acquisition of Happy.
−Removed: • The $1.8 million decrease in mortgage lending income is primarily related to a decrease in volume of secondary market loans from the high volume of loans during 2021.
+Added: • The $1.3 million decrease in mortgage lending income is primarily related to a decrease in volume of secondary market loans from the higher volume of loans during 2022.
The decrease in volume is due to the increase in interest rates.
• The $612,000 increase in cash value of life insurance is primarily related to the increase in bank owned life insurance resulting from the acquisition of Happy.
−Removed: • The $920,000 decrease for dividends from FHLB, FRB, FNBB & other is primarily due to a decrease in special dividends from equity investments, partially offset by an increase in dividend income from marketable securities and an increase in FRB stock holdings related to the acquisition of Happy.
−Removed: • The $2.7 million decrease in the fair value adjustment for marketable securities is due to a reduction in the fair value of marketable securities held by the Company.
−Removed: • The $5.2 million increase in other income is primarily due to a $3.3 million adjustment for equity method investments.
−Removed: Other factors causing this increase were a $404,000 increase in additional income for items previously charged off, which includes the $1.1 million in recoveries on historic losses;
−Removed: a $618,000 increase in investment brokerage fee income;
−Removed: a $307,000 increase in real estate rental income and a $522,000 increase in building rental income related to the acquisition of Happy.
−Removed: Non-interest income increased $12.8 million, or 12.2%, to $118.5 million for the nine months ended September 30, 2022 from $105.6 million for the same period in 2021.
−Removed: The primary factors that resulted in this increase were the increase in service charges on deposit accounts and the increase in other income.
−Removed: Other factors were changes related to service charges and fees, trust fees, mortgage lending income, increase in cash value of life insurance, dividends from FHLB, FRB, FNBB and other, gain on sale of SBA loans and fair value adjustment for marketable securities.
−Removed: Additional details for the nine months ended September 30, 2022 on some of the more significant changes are as follows:
−Removed: • The $10.9 million increase in service charges on deposit accounts is primarily related to an increase in overdraft fees and service charge fees resulting from the acquisition of Happy.
−Removed: • The $8.9 million increase in other service charges and fees is primarily related to an increase in Centennial CFG property finance loan fees and an increase in interchange acquisition fees resulting from the acquisition of Happy.
−Removed: • The $7.4 million increase in trust fees is primarily related to an increase in trust fees resulting from the acquisition of Happy.
−Removed: • The $6.2 million decrease in mortgage lending income is primarily due to a decrease in volume of secondary market loans from the high volume of loans during 2021.
−Removed: The decrease in volume is due to the increase in interest rates.
−Removed: • The $1.2 million increase in cash value of life insurance is primarily related to BOLI acquired in the acquisition of Happy.
−Removed: • The $7.5 million decrease for dividends from FHLB, FRB, FNBB & other is primarily due to a decrease in special dividends from equity investments, partially offset by an increase in FRB stock holdings related to the acquisition of Happy.
−Removed: • The $1.4 million decrease in gains on sales of SBA loans is primarily due to decrease in the volume of SBA loan sales during 2022.
−Removed: • The $779,000 decrease in gains on OREO resulted from a reduction in the level of sales of OREO during 2022.
+Added: • The $2.1 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in dividend income from marketable securities and an increase in dividends on FHLB and FRB stock holdings related to the acquisition of Happy.
• The $13.5 million decrease in the fair value adjustment for marketable securities is due to a reduction in the fair value of marketable securities held by the Company.
−Removed: • The $9.7 million increase in other income is primarily due to a $3.3 million adjustment for equity method investments and a $3.2 million increase in additional income for items previously charged off, which includes the $6.7 million recoveries on historic losses.
−Removed: Other factors causing this increase were a $2.0 million increase in investment brokerage fee income, a $529,000 increase in real estate rental income and a $1.0 million increase in building rental income related to the acquisition of Happy.
+Added: • The $3.9 million increase in other income is primarily due to $3.8 million of income for equity method investments and a $1.1 million increase in rental income related to the acquisition of Happy partially offset by a $1.2 million decrease in recoveries on historic losses.
Non-Interest Expense
Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.
−Removed: Table 7 below sets forth a summary of non-interest expense for the three and nine months ended September 30, 2022 and 2021, as well as changes for the three and nine months ended September 30, 2022 compared to the same period in 2021.
+Added: Table 7 below sets forth a summary of non-interest expense for the three months ended March 31, 2023 and 2022.
Non-Interest Expense
−Removed: Three Months Ended September 30, 2022 Change
−Removed: from 2021 Nine Months Ended September 30, 2022 Change
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31, 2023 Change
(Dollars in thousands)
18 unchanged sentences
Total non-interest expense $ 114,644 $ 76,896 $ 37,748 49.1 %
−Removed: Non-interest expense increased $38.7 million, or 51.2%, to $114.3 million for the three months ended September 30, 2022 from $75.6 million for the same period in 2021.
−Removed: The primary factors that resulted in this increase were the changes related to salaries and employee benefits.
−Removed: Other factors were changes related to occupancy and equipment, data processing expense, merger and acquisition expenses, advertising expenses, amortization of intangibles, electronic banking expense and other expenses.
−Removed: Additional details for the three months ended September 30, 2022 on some of the more significant changes are as follows:
−Removed: • The $22.8 million increase in salaries and employee benefits expense is primarily due to increased salary expenses and insurance expenses related to the acquisition of Happy.
+Added: Non-interest expense increased $37.7 million, or 49.1%, to $114.6 million for the three months ended March 31, 2023 from $76.9 million for the same period in 2022.
+Added: The primary factor that resulted in this increase was the increase in salaries and employee benefits expense.
+Added: Other factors were changes related to occupancy and equipment, data processing expense, advertising expenses, amortization of intangibles, electronic banking expenses, FDIC and state assessment expense, other professional fees and other expenses partially offset by the change in merger and acquisition expenses.
+Added: Additional details for the three months ended March 31, 2023 on some of the more significant changes are as follows:
+Added: • The $20.9 million increase in salaries and employee benefits expense is primarily due to the acquisition of Happy.
• The $5.8 million increase in occupancy and equipment expenses is primarily due to increases in depreciation on buildings, machinery and equipment;
5 unchanged sentences
• The $1.9 million increase in data processing expense is primarily due to increases in telecommunication fees, depreciation of equipment and software, software maintenance and software licensing subscriptions related to the acquisition of Happy.
−Removed: • The $1.0 million decrease in merger and acquisition expense is related to preliminary costs associated with the acquisition of Happy during 2021, and the merger expenses for the current year being recorded during the first and second quarters of 2022.
+Added: • The $863,000 decrease in merger and acquisition expense is due to the costs associated with the acquisition of Happy being incurred during the first and second quarters of 2022.
• The $965,000 increase in advertising expense is related to the acquisition of Happy.
1 unchanged sentence
• The $792,000 million increase in electronic banking expense is due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy.
+Added: • The $1.8 million increase in FDIC and state assessment expense is primarily due to a two basis-point increase in assessment rate in the first quarter of 2023 implemented on large financial institutions to increase the FDIC reserves and the acquisition of Happy.
+Added: • The $675,000 increase in other professional fees is primarily related to the acquisition of Happy.
• The $3.8 million increase in other expenses is primarily related to the acquisition of Happy.
−Removed: Non-interest expense increased $135.3 million, or 61.1%, to $356.7 million for the three months ended September 30, 2022 from $221.5 million for the same period in 2021.
−Removed: The primary factors that resulted in this increase were the changes related to salaries and employee benefits and merger and acquisition expense.
−Removed: Other factors were changes related to occupancy and equipment expense, data processing expense, advertising, advertising expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment fees, other professional fees, operating supplies and other expenses.
−Removed: Additional details for the nine months ended September 30, 2022 on some of the more significant changes are as follows:
−Removed: • The $47.6 million increase in salaries and employee benefits expense is primarily due to the acquisition of Happy.
−Removed: • The $10.9 million increase in occupancy and equipment expenses is primarily due to increases in depreciation on buildings, machinery and equipment;
−Removed: utility expenses;
−Removed: lease expense;
−Removed: equipment maintenance and repairs;
−Removed: janitorial expenses;
−Removed: property taxes and other occupancy expenses related to the acquisition of Happy.
−Removed: • The $8.1 million increase in data processing expense is primarily due to increases in telecommunication fees, computer software fees, licensing fees, mobile banking, internet banking and cash management expenses related to the acquisition of Happy.
−Removed: • The $48.6 million increase in merger and acquisition expense is related to costs associated with the acquisition of Happy.
−Removed: • The $2.0 million increase in advertising expense is related to the acquisition of Happy.
−Removed: • The $2.1 million increase in amortization of intangibles is due to the acquisition of Happy.
−Removed: • The $2.3 million increase in electronic banking expense is due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy.
−Removed: • The $2.1 million increase in FDIC and state assessment expense is primarily due to FDIC assessment reductions for 2021 and the acquisition of Happy during the second quarter of 2022.
−Removed: • The $1.1 million increase in other professional fees is primarily due to the acquisition of Happy.
−Removed: • The $1.0 million increase in operating supplies is primarily due to the acquisition of Happy.
−Removed: • The $7.6 million increase in other expenses is primarily related to the acquisition of Happy as well as $2.1 million in TRUPS redemption fees.
−Removed: Income tax expense increased $10.0 million, or 43.3%, to $33.3 million for the three-month period ended September 30, 2022, from $23.2 million for the same period in 2021.
−Removed: Income tax expense decreased $20.6 million, or 26.7%, to $56.6 million for the nine-month period ended September 30, 2022, from $77.2 million for the same period in 2021.
−Removed: The effective income tax rate was 23.43% and 22.98% for the three and nine months ended September 30, 2022, compared to 23.63% and 23.91% for the same periods in 2021.
+Added: Income tax expense increased $9.9 million, or 49.5%, to $30.0 million for the three-month period ended March 31, 2023, from $20.0 million for the same period in 2022.
+Added: The effective income tax rate was 22.54% for the three months ended March 31, 2023, compared to 23.59% for the same periods in 2022.
The marginal tax rate was 24.6735% and 26.135% 2023 and 2022, respectively.
−Removed: Financial Condition as of and for the Period Ended September 30, 2022 and December 31, 2021
−Removed: Our total assets as of September 30, 2022 increased $5.11 billion to $23.16 billion from $18.05 billion reported as of December 31, 2021.
−Removed: The increase in total assets is primarily due to the acquisition of $6.69 billion in total assets, net of purchase accounting adjustments, from Happy during the second quarter of 2022.
−Removed: Cash and cash equivalents decreased $2.07 billion for the nine months ended September 30, 2022.
−Removed: Our loan portfolio balance increased to $13.83 billion as of September 30, 2022 from $9.84 billion at December 31, 2021.
−Removed: The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting adjustments, from Happy in the second quarter of 2022 and $242.2 million in marine loans from LendingClub Bank during the first quarter of 2022, as well as $98.4 million in organic loan growth.
−Removed: Total deposits increased $4.28 billion to $18.54 billion as of September 30, 2022 from $14.26 billion as of December 31, 2021.
−Removed: The increase in deposits was primarily due to the acquisition of $5.86 billion in deposits, net of purchase accounting adjustments, from Happy in the second quarter of 2022.
−Removed: Stockholders’ equity increased $694.3 million to $3.46 billion as of September 30, 2022, compared to $2.77 billion as of December 31, 2021.
−Removed: The $694.3 million increase in stockholders’ equity is primarily associated with the $961.3 million in common stock issued to Happy shareholders for the acquisition of Happy on April 1, 2022 and the $189.6 million in net income for the nine months ended September 30, 2022, partially offset by the $317.9 million in other comprehensive loss, the $94.8 million of shareholder dividends paid and stock repurchases of $50.9 million in 2022.
+Added: Financial Condition as of and for the Period Ended March 31, 2023 and December 31, 2022
+Added: Our total assets as of March 31, 2023 decreased $365.3 million to $22.52 billion from $22.88 billion reported as of December 31, 2022.
+Added: The decrease in total assets is primarily due to $270.8 million decrease in investment securities resulting from paydowns and maturities during the first quarter of 2023.
+Added: Cash and cash equivalents decreased $36.7 million, for the three months ended March 31, 2023.
+Added: Our loan portfolio balance decreased to $14.39 billion as of March 31, 2023 from $14.41 billion at December 31, 2022.
+Added: The decrease in loans was primarily due to $94.6 million of organic loan decline from our Centennial Commercial Finance Group franchise and $2.1 million in PPP loan decline, partially offset by $73.9 million organic loan growth in our remaining footprint.
+Added: Total deposits decreased $493.3 million to $17.45 billion as of March 31, 2023 from $17.94 billion as of December 31, 2022.
+Added: The decrease in deposits was primarily due to the runoff of deposits in the normal course of business during the first quarter of 2023 as a result of the current interest rate environment.
+Added: Stockholders’ equity increased $104.5 million to $3.63 billion as of March 31, 2023, compared to $3.53 billion as of December 31, 2022.
+Added: The $104.5 million increase in stockholders’ equity is primarily associated with the $103.0 million in net income for the three months ended March 31, 2023 and the $49.2 million in other comprehensive income, partially offset by the $36.6 million of shareholder dividends paid and stock repurchases of $13.5 million in 2023.
Loan Portfolio
Loans Receivable
−Removed: Our loan portfolio averaged $13.82 billion and $10.04 billion during the three months ended September 30, 2022 and 2021, respectively.
−Removed: Our loan portfolio averaged $12.55 billion and $10.53 billion during the nine months ended September 30, 2022 and 2021, respectively.
−Removed: Loans receivable were $13.83 billion and $9.84 billion as of September 30, 2022 and December 31, 2021, respectively.
−Removed: From December 31, 2021 to September 30, 2022, the Company experienced an increase of approximately $3.99 billion in loans.
−Removed: The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting adjustments, from Happy in the second quarter of 2022 and $242.2 million in marine loans from LendingClub Bank during the first quarter of 2022, as well as $98.4 million in organic loan growth.
−Removed: The $98.4 million in organic loan growth included $156.6 million in loan growth for Centennial CFG and $96.0 million in loan growth within the remaining footprint, which was partially offset by a $154.2 million in decline in PPP loans.
−Removed: As of September 30, 2022, the Company had $10.8 million of PPP loans.
+Added: Our loan portfolio averaged $14.47 billion and $9.94 billion during the three months ended March 31, 2023 and 2022, respectively.
+Added: Loans receivable were $14.39 billion and $14.41 billion as of March 31, 2023 and December 31, 2022, respectively.
+Added: From December 31, 2022 to March 31, 2023, the Company experienced a decline of approximately $22.8 million in loans.
+Added: The decrease in loans was primarily due $94.6 million of organic loan decline from our Centennial Commercial Finance Group franchise and $2.1 million in PPP loan decline partially offset by $73.9 million organic loan growth in our remaining footprint.
+Added: As of March 31, 2023, the Company had $5.3 million of PPP loans.
The most significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans.
1 unchanged sentence
Although these loans are primarily originated within our franchises in Arkansas, Florida, Texas, Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida, Texas, Alabama and New York.
−Removed: Loans receivable were approximately $3.06 billion, $3.62 billion, $3.74 billion, $183.5 million, $1.15 billion and $2.08 billion as of September 30, 2022 in Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG, respectively.
−Removed: As of September 30, 2022, we had approximately $921.3 million of construction land development loans which were collateralized by land.
+Added: Loans receivable were approximately $3.17 billion, $3.90 billion, $3.70 billion, $165.3 million, $1.27 billion and $2.18 billion as of March 31, 2023 in Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG, respectively.
+Added: As of March 31, 2023, we had approximately $747.1 million of construction/land development loans which were collateralized by land.
This consisted of approximately $81.6 million for raw land and approximately $665.5 million for land with commercial and/or residential lots.
−Removed: Table 8 presents our loans receivable balances by category as of September 30, 2022 and December 31, 2021.
+Added: Table 8 presents our loans receivable balances by category as of March 31, 2023 and December 31, 2022.
Loans Receivable
−Removed: September 30, 2022 December 31, 2021
+Added: March 31, 2023 December 31, 2022
(In thousands)
18 unchanged sentences
A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.
−Removed: As of September 30, 2022, commercial real estate loans totaled $7.72 billion, or 55.8%, of loans receivable, as compared to $5.87 billion, or 59.7%, of loans receivable, as of December 31, 2021.
−Removed: Commercial real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $1.95 billion, $2.36 billion, $2.21 billion, $80.7 million, zero and $1.12 billion at September 30, 2022, respectively.
+Added: As of March 31, 2023, commercial real estate loans totaled $8.03 billion, or 55.8%, of loans receivable, as compared to $8.11 billion, or 56.3%, of loans receivable, as of December 31, 2022.
+Added: Commercial real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $2.00 billion, $2.45 billion, $2.19 billion, $74.6 million, zero and $1.32 billion at March 31, 2023, respectively.
Residential Real Estate Loans.
We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas.
−Removed: Approximately 40.0% and 50.1% of our residential mortgage loans consist of owner occupied 1-4 family properties and non-owner occupied 1-4 family properties (rental), respectively, as of September 30, 2022, with the remaining 9.9% relating to condos and mobile homes.
+Added: Approximately 45.8% and 46.7% of our residential mortgage loans consist of owner occupied 1-4 family properties and non-owner occupied 1-4 family properties (rental), respectively, as of March 31, 2023, with the remaining 7.5% relating to condos and mobile homes.
Residential real estate loans generally have a loan-to-value ratio of up to 90%.
These loans are underwritten by giving consideration to the borrower’s ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.
−Removed: As of September 30, 2022, residential real estate loans totaled $2.23 billion, or 16.1%, of loans receivable, compared to $1.56 billion, or 15.8%, of loans receivable, as of December 31, 2021.
−Removed: Residential real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $423.2 million, $930.0 million, $552.1 million, $46.7 million, zero and $278.0 million at September 30, 2022, respectively.
+Added: As of March 31, 2023, residential real estate loans totaled $2.39 billion, or 16.6%, of loans receivable, compared to $2.33 billion, or 16.1%, of loans receivable, as of December 31, 2022.
+Added: Residential real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $489.1 million, $985.2 million, $602.6 million, $41.8 million, zero and $267.2 million at March 31, 2023, respectively.
Consumer Loans.
1 unchanged sentence
The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.
−Removed: As of September 30, 2022, consumer loans totaled $1.12 billion, or 8.1%, of loans receivable, compared to $825.5 million, or 8.4%, of loans receivable, as of December 31, 2021.
−Removed: Consumer loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $29.3 million, $8.4 million, $27.9 million, $890,000, $1.05 billion and zero at September 30, 2022, respectively.
+Added: As of March 31, 2023, consumer loans totaled $1.17 billion, or 8.2%, of loans receivable, compared to $1.15 billion, or 8.0%, of loans receivable, as of December 31, 2022.
+Added: Consumer loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $37.8 million, $8.4 million, $22.3 million, $505,000, $1.10 billion and zero at March 31, 2023, respectively.
Commercial and Industrial Loans.
7 unchanged sentences
We require a first lien position for those loans.
−Removed: As of September 30, 2022, commercial and industrial loans totaled $2.27 billion, or 16.4%, of loans receivable, compared to $1.39 billion, or 14.1%, of loans receivable, as of December 31, 2021.
−Removed: Commercial and industrial loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $482.6 million, $264.0 million, $691.8 million, $52.6 million, $97.5 million and $680.4 million at September 30, 2022, respectively.
+Added: As of March 31, 2023, commercial and industrial loans totaled $2.37 billion, or 16.5%, of loans receivable, compared to $2.35 billion, or 16.3%, of loans receivable, as of December 31, 2022.
+Added: Commercial and industrial loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $480.7 million, $404.1 million, $676.2 million, $44.5 million, $170.4 million and $592.6 million at March 31, 2023, respectively.
Non-Performing Assets
6 unchanged sentences
An allowance for credit losses is determined using the same methodology as other loans.
−Removed: The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment.
−Removed: The initial allowance for credit losses determined on a collective basis is allocated to individual loans.
+Added: The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses.
The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis.
1 unchanged sentence
Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
−Removed: T he Company held approximately $146.0 million and $448,000 in PCD loans, as of September 30, 2022 and December 31, 2021 , respectively.
−Removed: Table 9 sets forth information with respect to our non-performing assets as of September 30, 2022 and December 31, 2021.
+Added: The Company held approximately $136.2 million and $142.5 million in PCD loans, as of March 31, 2023 and December 31, 2022, respectively.
+Added: Table 9 sets forth information with respect to our non-performing assets as of March 31, 2023 and December 31, 2022.
As of these dates, all non-performing restructured loans are included in non-accrual loans.
Non-performing Assets
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(Dollars in thousands)
16 unchanged sentences
If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the allowance for credit losses.
−Removed: Total non-performing loans were $61.7 million and $50.2 million as of September 30, 2022 and December 31, 2021, respectively.
−Removed: Non-performing loans at September 30, 2022 were $10.2 million, $24.8 million, $13.7 million, $204,000, $1.4 million and $11.4 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets, respectively.
−Removed: The $11.4 million balance of non-accrual loans for our Centennial CFG market consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program.
−Removed: Due to the condition of the two loans, partial charge-offs for a total of $2.2 million were taken on these loans during the third quarter of 2022.
+Added: Total non-performing loans were $74.0 million and $60.9 million as of March 31, 2023 and December 31, 2022, respectively.
+Added: Non-performing loans at March 31, 2023 were $11.2 million, $20.0 million, $26.9 million, $390,000, $2.1 million and $13.4 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets, respectively.
+Added: The $13.4 million balance of non-accrual loans for our Centennial CFG market consists of four loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program.
+Added: Due to the condition of the four loans, partial charge-offs for a total of $2.0 million were taken on these loans during the three months ended March 31, 2023.
The loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve.
Any interest payments that are received will be applied to the principal balance.
−Removed: Troubled debt restructurings (“TDRs”) generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term.
+Added: Debt restructuring generally occurs when a borrower is experiencing, or is expected to experience, financial difficulties in the near term.
As a result, we will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan.
1 unchanged sentence
When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about three to twelve months.
−Removed: For our TDRs that accrue interest at the time the loan is restructured, it would be a rare exception to have charged-off any portion of the loan.
−Removed: As of September 30, 2022, we had $6.2 million of restructured loans that are in compliance with the modified terms and are not reported as past due or non-accrual in Table 9.
+Added: For our restructured loans that accrue interest at the time the loan is restructured, it would be a rare exception to have charged-off any portion of the loan.
+Added: As of March 31, 2023, we had $3.3 million of restructured loans that are in compliance with the modified terms and are not reported as past due or non-accrual.
Our Florida market contains $1.2 million and our Arkansas market contains $2.1 million of these restructured loans.
−Removed: A loan modification that might not otherwise be considered may be granted resulting in classification as a TDR.
+Added: A loan modification that might not otherwise be considered may be granted.
These loans can involve loans remaining on non-accrual, moving to non-accrual, or continuing on an accrual status, depending on the individual facts and circumstances of the borrower.
2 unchanged sentences
If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan will remain in a non-accrual status.
−Removed: The majority of the Bank’s loan modifications relates to commercial lending and involves reducing the interest rate, changing from a principal and interest payment to interest-only, lengthening the amortization period, or a combination of some or all of the three.
+Added: The majority of the Bank’s restructured loans relate to real estate lending and generally involve reducing the interest rate, changing from a principal and interest payment to interest-only, lengthening the amortization period, or a combination of some or all of the three.
In addition, it is common for the Bank to seek additional collateral or guarantor support when modifying a loan.
−Removed: At September 30, 2022 and December 31, 2021, the amount of TDRs was $7.6 million and $7.5 million, respectively.
−Removed: As of September 30, 2022 and December 31, 2021, 81.1% and 85.7%, respectively, of all restructured loans were performing to the terms of the restructure.
−Removed: Total foreclosed assets held for sale were $365,000 as of September 30, 2022, compared to $1.6 million as of December 31, 2021 for a decrease of $1.3 million.
−Removed: The foreclosed assets held for sale as of September 30, 2022 are comprised of zero assets located in Arkansas, $260,000 located in Florida, $105,000 located in Texas and zero from Alabama, SPF and Centennial CFG.
−Removed: Table 10 shows the summary of foreclosed assets held for sale as of September 30, 2022 and December 31, 2021.
+Added: At March 31, 2023, the amount of restructured loans was $5.3 million.
+Added: As of March 31, 2023, 61.6% of all restructured loans were performing to the terms of the restructure.
+Added: Total foreclosed assets held for sale were $425,000 as of March 31, 2023, compared to $546,000 as of December 31, 2022 for a decrease of $121,000.
+Added: The foreclosed assets held for sale as of March 31, 2023 are comprised of zero assets located in Arkansas, $260,000 located in Florida, $165,000 located in Texas and zero in Alabama, SPF and Centennial CFG.
+Added: Table 10 shows the summary of foreclosed assets held for sale as of March 31, 2023 and December 31, 2022.
Foreclosed Assets Held For Sale
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(In thousands)
4 unchanged sentences
Residential 1-4 family 260 260
+Added: Multifamily residential — 121
Total foreclosed assets held for sale $ 425 $ 546
−Removed: A loan is considered impaired when it is probable that we will not receive all amounts due according to the contracted terms of the loans.
−Removed: Impaired loans include non-performing loans (loans past due 90 days or more and non-accrual loans), criticized and/or classified loans with a specific allocation, loans categorized as TDRs and certain other loans identified by management that are still performing (loans included in multiple categories are only included once).
−Removed: As of September 30, 2022 and December 31, 2021, impaired loans were $229.3 million and $331.5 million, respectively.
−Removed: The amortized cost balance for loans with a specific allocation decreased from $284.0 million to $169.7 million, and the specific allocation for impaired loans decreased by approximately $21.9 million for the period ended September 30, 2022 compared to the period ended December 31, 2021.
−Removed: The Company is continuing to monitor these impaired loans and will adjust the discount as necessary.
−Removed: As of September 30, 2022, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets accounted for approximately $24.2 million, $132.3 million, $59.8 million, $204,000, $1.4 million and $11.4 million of the impaired loans, respectively.
+Added: The Company considers a loan to be impaired when it is probable that we will not receive all amounts due according to the contracted terms of the loans.
+Added: 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 comprise the classification of loans which we define as "impaired" loans.
+Added: As of March 31, 2023 and December 31, 2022, impaired loans were $195.6 million and $221.1 million, respectively.
+Added: The amortized cost balance for loans with a specific allocation decreased from $168.6 million to $126.5 million, and the specific allocation for impaired loans decreased by approximately $8.1 million for the period ended March 31, 2023 compared to the period ended December 31, 2022.
+Added: As of March 31, 2023, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets accounted for approximately $24.7 million, $124.3 million, $30.6 million, $390,000, $2.1 million and $13.4 million of the impaired loans, respectively.
Past Due and Non-Accrual Loans
−Removed: Table 11 shows the summary of non-accrual loans as of September 30, 2022 and December 31, 2021:
+Added: Table 11 shows the summary of non-accrual loans as of March 31, 2023 and December 31, 2022:
Total Non-Accrual Loans
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(In thousands)
5 unchanged sentences
Residential 1-4 family 18,319 18,083
−Removed: Multifamily residential 156 156
Total real estate 37,339 32,557
3 unchanged sentences
Total non-accrual loans $ 65,401 $ 51,011
−Removed: If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.1 million and $662,000, respectively, would have been recorded for the three-month periods ended September 30, 2022 and 2021.
−Removed: If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $3.2 million and $2.0 million, respectively, would have been recorded for the nine month periods ended September 30, 2022 and 2021.
−Removed: The interest income recognized on non-accrual loans for the three and nine months ended September 30, 2022 and 2021 was considered immaterial.
−Removed: Table 12 shows the summary of accruing past due loans 90 days or more as of September 30, 2022 and December 31, 2021:
+Added: If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.4 million and $407,000, respectively, would have been recorded for the three-month periods ended March 31, 2023 and 2022.
+Added: The interest income recognized on non-accrual loans for the three months ended March 31, 2023 and 2022 was considered immaterial.
+Added: Table 12 shows the summary of accruing past due loans 90 days or more as of March 31, 2023 and December 31, 2022:
Loans Accruing Past Due 90 Days or More
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(In thousands)
7 unchanged sentences
Commercial and industrial 4,884 6,300
+Added: Other 241 261
Total loans accruing past due 90 days or more $ 8,567 $ 9,845
−Removed: Our ratio of total loans accruing past due 90 days or more and non-accrual loans to total loans was 0.45% and 0.51% at September 30, 2022 and December 31, 2021, respectively.
+Added: Our ratio of total loans accruing past due 90 days or more and non-accrual loans to total loans was 0.51% and 0.42% at March 31, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses
−Removed: The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
+Added: The allowance for credit losses on loans receivable is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loans.
Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.
24 unchanged sentences
Loans that do not share risk characteristics are evaluated on an individual basis.
−Removed: Loans evaluated individually are not also included in the collective evaluation.
−Removed: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.
−Removed: The contractual term excludes expected extensions, renewals and modifications unless Management has a reasonable expectation at the reporting date that troubled debt restructuring will be executed with an individual borrower or
+Added: The contractual term excludes expected extensions, renewals and modifications unless either of the following applies:
+Added: • Management has a reasonable expectation at the reporting date that troubled debt restructuring will be executed with an individual borrower.
• The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
10 unchanged sentences
and (ix) economic conditions.
−Removed: 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.
−Removed: The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto.
−Removed: 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.
−Removed: 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.
−Removed: When accrual of interest is discontinued, all unpaid accrued interest is reversed.
−Removed: Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.
−Removed: 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.
11 unchanged sentences
An allowance for credit losses is determined using the same methodology as other loans.
−Removed: The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment.
+Added: 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.
7 unchanged sentences
Specific Allocations.
−Removed: As a general rule, if a specific allocation is warranted, it is the result of an analysis of a previously classified credit or relationship.
−Removed: Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become collateral dependent, we will use appraisals or other collateral analysis to determine if collateral impairment has occurred.
+Added: As a general rule, if a specific allocation is warranted, it is the result of a credit loss analysis of a previously classified credit or relationship.
+Added: Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become collateral dependent, we will use appraisals or other collateral analysis to determine if a specific allocation is needed.
The amount or likelihood of loss on this credit may not yet be evident, so a charge-off would not be prudent.
−Removed: However, if the analysis indicates that an impairment has occurred, then a specific allocation will be determined for this loan.
−Removed: If our existing appraisal is outdated or the collateral has been subject to significant market changes, we will obtain a new appraisal for this impairment analysis.
−Removed: The majority of our impaired loans are collateral dependent at the present time, so third-party appraisals were used to determine the necessary impairment for these loans.
−Removed: Cash flow available to service debt was used for the other impaired loans.
+Added: However, if the analysis indicates that a specific allocation is needed, then a specific allocation will be determined for this loan.
This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for credit losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.
For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time.
−Removed: However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal validation report for the impairment analysis.
+Added: However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal valuation report for the credit loss analysis.
The recognition of any provision or related charge-off on a collateral dependent loan is either through annual credit analysis or, many times, when the relationship becomes delinquent.
2 unchanged sentences
In any case, loans are classified as non-accrual no later than 105 days past due.
−Removed: If the loan requires a quarterly impairment analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for credit losses.
−Removed: Any exposure identified through the impairment analysis is shown as a specific reserve on the individual impairment.
−Removed: If it is determined that a new appraisal or internal validation report is required, it is ordered and will be taken into consideration during completion of the next impairment analysis.
+Added: If the loan requires a quarterly credit loss analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for credit losses.
+Added: Any exposure identified through the credit loss analysis is shown as a specific reserve.
+Added: If it is determined that a new appraisal or internal validation report is required, it is ordered and will be taken into consideration during completion of the next credit loss analysis.
In estimating the net realizable value of the collateral, management may deem it appropriate to discount the appraisal based on the applicable circumstances.
7 unchanged sentences
When the amount or likelihood of a loss on a loan has been determined, a charge-off should be taken in the period it is determined.
−Removed: If a partial charge-off occurs, the quarterly impairment analysis will determine if the loan is still impaired, and thus continues to require a specific allocation.
−Removed: 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.
−Removed: Loans Collectively Evaluated for Impairment .
−Removed: Loans receivable collectively evaluated for impairment increased by approximately $4.10 billion from $9.54 billion at December 31, 2021 to $13.64 billion at September 30, 2022.
−Removed: The percentage of the allowance for credit losses allocated to loans receivable collectively evaluated for impairment to the total loans collectively evaluated for impairment was 1.90% and 1.94% at September 30, 2022 and December 31, 2021, respectively.
+Added: If a partial charge-off occurs, the quarterly credit loss analysis will determine if the loan is still collateral dependent, and thus continues to require a specific allocation.
+Added: The Company had $195.6 million and $221.1 million in 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) for the periods ended March 31, 2023 and December 31, 2022, respectively.
+Added: Loans Collectively Evaluated for Credit Loss.
+Added: Loans receivable collectively evaluated for credit loss increased by approximately $58.2 million from $14.19 billion at December 31, 2022 to $14.25 billion at March 31, 2023.
+Added: The percentage of the allowance for credit losses allocated to loans receivable collectively evaluated for credit loss to the total loans collectively evaluated for credit loss was 1.85% and 1.82% at March 31, 2023 and December 31, 2022, respectively.
Charge-offs and Recoveries.
−Removed: Total charge-offs increased to $6.3 million for the three months ended September 30, 2022, compared to $2.5 million for the same period in 2021.
−Removed: Total charge-offs increased to $11.9 million for the nine months ended September 30, 2022, compared to $8.5 million for the same period in 2021.
−Removed: Total recoveries were $1.2 million and $691,000 for the three months ended September 30, 2022 and 2021, respectively.
−Removed: Total recoveries were $2.4 million and $1.7 million for the nine months ended September 30, 2022 and 2021, respectively.
−Removed: For the three months ended September 30, 2022, net charge-offs were $295,000 for Arkansas, $1.6 million for Florida, $1.0 million for Texas, $11,000 for Alabama and $2.2 million for Centennial CFG, partially offset by net recoveries of $3,000 for SPF.
−Removed: These equal a net charge-off position of $5.1 million.
−Removed: For the nine months ended September 30, 2022, net charge-offs were $825,000 for Arkansas, $4.3 million for Florida, $1.7 million for Texas, $47,000 for Alabama, $392,000 for SPF and $2.2 million for Centennial CFG.
+Added: Total charge-offs increased to $4.3 million for the three months ended March 31, 2023, compared to $2.3 million for the same period in 2022.
+Added: Total recoveries were $588,000 and $364,000 for the three months ended March 31, 2023 and 2022, respectively.
+Added: For the three months ended March 31, 2023, net charge-offs were $214,000 for Arkansas, $200,000 for Florida, $1.2 million for Texas, $6,000 for Alabama, $136,000 for SPF and $2.0 million for Centennial CFG.
These equal a net charge-off position of $3.7 million.
2 unchanged sentences
This is usually established over a period of 6-12 months of timely payment performance.
−Removed: Table 13 shows the allowance for credit losses, charge-offs and recoveries as of and for the three and nine months ended September 30, 2022 and 2021.
+Added: Table 13 shows the allowance for credit losses, charge-offs and recoveries as of and for the three months ended March 31, 2023 and 2022.
Analysis of Allowance for Credit Losses
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
Balance, beginning of period $ 289,669 $ 236,714
−Removed: Allowance for credit losses on PCD loans - Happy acquisition — — 16,816 —
Loans charged off
16 unchanged sentences
Residential 1-4 family 118 26
+Added: Multifamily residential 8 —
Total real estate 152 67
5 unchanged sentences
Provision for credit loss - acquired loans 1,200 —
−Removed: Balance, September 30 $ 289,203 $ 238,673 $ 289,203 $ 238,673
+Added: Balance, March 31 $ 287,169 $ 234,768
Net charge-offs to average loans receivable 0.10 % 0.08 %
1 unchanged sentence
Allowance for credit losses to net charge-offs 1,913.75 2,974.72
−Removed: Table 14 presents the allocation of allowance for credit losses as of September 30, 2022 and December 31, 2021.
+Added: Table 14 presents the allocation of allowance for credit losses as of March 31, 2023 and December 31, 2022.
Allocation of Allowance for Credit Losses
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(Dollars in thousands)
18 unchanged sentences
If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities.
−Removed: The estimated effective duration of our securities portfolio was 5.2 years as of September 30, 2022.
+Added: The estimated effective duration of our securities portfolio was 5.4 years as of March 31, 2023.
Securities held-to-maturity, 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.
−Removed: As of September 30, 2022, we had $1.25 billion of held-to-maturity securities.
−Removed: As of September 30, 2022, $1.11 billion, or 88.7%, was invested in obligations of state and political subdivisions, $43.0 million, or 3.4%, were invested in obligations of U.S.
−Removed: Government-sponsored enterprises and $98.5 million, or 7.9%, were invested in mortgage-backed securities.
+Added: We had $1.29 billion of held-to-maturity securities at both March 31, 2023 and December 31, 2022.
+Added: At both March 31, 2023 and December 31, 2022, $1.11 billion, or 86.2%, was invested in obligations of state and political subdivisions.
+Added: As of March 31, 2023, $43.1 million, or 3.3%, was invested in obligations of U.S.
+Added: Government-sponsored enterprises, compared to $43.0 million, or 3.34%, as of December 31, 2022.
+Added: We had $133.9 million, or 10.4%, invested in mortgage-backed securities as of March 31, 2023, compared to $135.0 million, or 10.5% as of December 31, 2022.
government-sponsored enterprises and mortgage-backed securities are guaranteed by the U.S.
1 unchanged sentence
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.
−Removed: Available-for-sale securities were $4.09 billion and $3.12 billion as September 30, 2022 and December 31, 2021, respectively.
−Removed: As of September 30, 2022, $1.94 billion, or 47.5%, of our available-for-sale securities were invested in mortgage-backed securities, compared to $1.54 billion, or 49.3%, of our available-for-sale securities as of December 31, 2021.
−Removed: To reduce our income tax burden, $900.2 million, or 22.0%, of our available-for-sale securities portfolio as of September 30, 2022, were primarily invested in tax-exempt obligations of state and political subdivisions, compared to $997.0 million, or 32.0%, of our available-for-sale securities as of December 31, 2021.
+Added: Available-for-sale securities were $3.77 billion and $4.04 billion as March 31, 2023 and December 31, 2022, respectively.
+Added: As of March 31, 2023, $1.85 billion, or 49.1%, of our available-for-sale securities were invested in mortgage-backed securities, compared to $1.86 billion, or 46.1%, of our available-for-sale securities as of December 31, 2022.
+Added: To reduce our income tax burden, $916.2 million, or 24.3%, of our available-for-sale securities portfolio as of March 31, 2023, were primarily invested in tax-exempt obligations of state and political subdivisions, compared to $906.3 million, or 22.4%, of our available-for-sale securities as of December 31, 2022.
We had $397.1 million, or 10.5%, invested in obligations of U.S.
−Removed: Government-sponsored enterprises as of September 30, 2022, compared to $433.0 million, or 13.9%, of our available-for-sale securities as of December 31, 2021.
−Removed: Also, we had approximately $564.3 million, or 13.8%, invested in other securities as of September 30, 2022, compared to $151.9 million, or 4.9% of our available-for-sale securities as of December 31, 2021.
+Added: Government-sponsored enterprises as of March 31, 2023, compared to $661.8 million, or 16.4%, of our available-for-sale securities as of December 31, 2022.
+Added: Also, we had approximately $607.0 million, or 16.1%, invested in other securities as of March 31, 2023, compared to $608.9 million, or 15.1% of our available-for-sale securities as of December 31, 2022.
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 .
8 unchanged sentences
Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
−Removed: 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.
−Removed: Of the Company's held-to-maturity securities, $1.11 billion, or 88.7% are municipal securities.
−Removed: 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.
−Removed: The remainder of investments classified as held-to-maturity are U.S.
−Removed: government-sponsored enterprises and mortgage-backed securities all of which are guaranteed by the U.S.
−Removed: Due to the inherent low risk in these U.S.
−Removed: government guaranteed securities, no provision for credit loss was established on this portion of the portfolio.
−Removed: 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 HTM portfolio was considered adequate.
+Added: 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.
See Note 3 to the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.
−Removed: Our deposits averaged $19.09 billion and $17.82 billion for the three and nine months ended September 30, 2022, respectively.
−Removed: Our deposits averaged $13.95 billion and $13.59 billion for the three and nine months ended September 30, 2021, respectively.
−Removed: Total deposits were $18.54 billion as of September 30, 2022, and $14.26 billion as of December 31, 2021.
+Added: Our deposits averaged $17.69 billion for the three ended March 31, 2023.
+Added: Our deposits averaged $14.37 billion for the three months ended March 31, 2022.
+Added: Total deposits were $17.45 billion as of March 31, 2023, and $17.94 billion as of December 31, 2022.
Deposits are our primary source of funds.
10 unchanged sentences
In that event we would be required to obtain alternate sources for funding.
−Removed: Table 15 reflects the classification of the brokered deposits as of September 30, 2022 and December 31, 2021.
+Added: Table 15 reflects the classification of the brokered deposits as of March 31, 2023 and December 31, 2022.
Brokered Deposits
−Removed: September 30, 2022 December 31, 2021
+Added: March 31, 2023 December 31, 2022
(In thousands)
6 unchanged sentences
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions.
−Removed: In 2020, the Federal Reserve lowered the target rate to 0.00% to 0.25%.
−Removed: This remained in effect throughout all of 2021.
−Removed: On March 16, 2022, the target rate was increased to 0.25% to 0.50%.
−Removed: On May 4, 2022, the target rate was increased to 0.75% to 1.00%.
−Removed: On June 15, 2022, the target rate was increased to 1.50% to 1.75%.
−Removed: On July 27, 2022, the target rate was increased to 2.25% to 2.50%.
−Removed: On September 21, 2022, the target rate was increased to 3.00% to 3.25%.
−Removed: Presently, the Federal Reserve has indicated they are anticipating further rate increases.
−Removed: Table 16 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of 10 percent of average total deposits, for the three and nine months ended September 30, 2022 and 2021.
+Added: The Federal Reserve increased the target rate seven times during 2022.
+Added: First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%.
+Added: Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%.
+Added: Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%.
+Added: Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%.
+Added: Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%.
+Added: Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%.
+Added: Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%.
+Added: The Federal Reserve increased the target rate twice during the first quarter of 2023.
+Added: First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, and second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%.
+Added: Table 16 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of 10 percent of average total deposits, for the three months ended March 31, 2023 and 2022.
Average Deposit Balances and Rates
−Removed: Three Months Ended September 30,
−Removed: Amount Average
−Removed: Rate Paid Average
−Removed: Amount Average
−Removed: (Dollars in thousands)
−Removed: Non-interest-bearing transaction accounts $ 5,779,082 — % $ 4,091,174 — %
−Removed: Interest-bearing transaction accounts 10,759,379 0.81 7,895,663 0.18
−Removed: Savings deposits 1,474,376 0.09 898,994 0.06
−Removed: Time deposits:
−Removed: $100,000 or more 654,550 0.37 708,524 0.94
−Removed: Other time deposits 423,562 0.32 354,976 0.40
−Removed: Total $ 19,090,949 0.49 % $ 13,949,331 0.16 %
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
Amount Average
13 unchanged sentences
Interest incurred on repurchase agreements is reported as interest expense.
−Removed: Securities sold under agreements to repurchase decreased $19.3 million, or 13.7%, from $140.9 million as of December 31, 2021 to $121.6 million as of September 30, 2022.
+Added: Securities sold under agreements to repurchase increased $7.6 million, or 5.8%, from $131.1 million as of December 31, 2022 to $138.7 million as of March 31, 2023.
FHLB and Other Borrowed Funds
−Removed: 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 .
−Removed: The Company had no other borrowed funds as of September 30, 2022 or December 31, 2021.
−Removed: 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.
−Removed: At December 31, 2021, all of the outstanding balances were classified as long-term advances.
−Removed: The FHLB advances mature in 2033 with fixed interest rates ranging from 1.76% to 2.26%.
+Added: 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.
+Added: The Company had no other borrowed funds as of March 31, 2023 or December 31, 2022.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: The Company had access to approximately $677.7 million in liquidity with the Federal Reserve Bank as of March 31, 2023.
+Added: This consisted of $71.8 million available from the Discount Window and $605.9 million available through the Bank Term Funding Program ("BTFP").
+Added: 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%.
+Added: As of March 31, 2023, the balance on these available sources was zero.
+Added: For further discussion of the Company's available sources of liquidity, see Item 3:
+Added: Quantitative and Qualitative Disclosures about Market Risk.
Subordinated Debentures
−Removed: Subordinated debentures, which consist of subordinated debt securities and guaranteed payments on trust preferred securities, were $440.6 million and $371.1 million as of September 30, 2022 and December 31, 2021, respectively.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: As a result, the Company no longer holds any trust preferred securities.
−Removed: On April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy.
−Removed: These notes have a maturity date of July 31, 2030 and carry a fixed rate of 5.500% for the first five years.
−Removed: Thereafter, the notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345% resetting quarterly.
−Removed: Interest payments are due semi-annually and the notes include a right of prepayment without penalty on or after July 31, 2025.
+Added: Subordinated debentures were $440.3 million and $440.4 million as of March 31, 2023 and December 31, 2022, respectively.
+Added: 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.
+Added: The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
6 unchanged sentences
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.
−Removed: 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.
−Removed: The 2027 Notes were unsecured, subordinated debt obligations and would have matured on April 15, 2027.
−Removed: 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.
−Removed: 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%;
−Removed: provided, however, that in the event three-month LIBOR was less than zero, then three-month LIBOR would have been deemed to be zero.
−Removed: 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.
−Removed: On April 15, 2022, the Company completed the payoff of the 2027 Notes in aggregate principal amount of $300.0 million.
−Removed: 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.
−Removed: 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.
Stockholders’ Equity
−Removed: Stockholders’ equity increased $694.3 million to $3.46 billion as of September 30, 2022, compared to $2.77 billion as of December 31, 2021.
−Removed: The $694.3 million increase in stockholders’ equity is primarily associated with the $961.3 million in common stock issued to Happy shareholders for the acquisition of Happy on April 1, 2022 and the $189.6 million in net income for the nine months ended September 30, 2022, partially offset by the $317.9 million in other comprehensive loss, the $94.8 million of shareholder dividends paid and stock repurchases of $50.9 million in 2022.
−Removed: As of September 30, 2022 and December 31, 2021, our equity to asset ratio was 14.94% and 15.32%, respectively.
−Removed: Book value per share was $16.94 as of September 30, 2022, compared to $16.90 as of December 31, 2021, a 0.3% annualized increase.
+Added: Stockholders’ equity increased $104.5 million to $3.63 billion as of March 31, 2023, compared to $3.53 billion as of December 31, 2022.
+Added: The $104.5 million increase in stockholders’ equity is primarily associated with the $103.0 million in net income for the three months ended March 31, 2023 and the $49.2 million in other comprehensive income, partially offset by the $36.6 million of shareholder dividends paid and stock repurchases of $13.5 million in 2023.
+Added: As of March 31, 2023 and December 31, 2022, our equity to asset ratio was 16.12% and 15.41%, respectively.
+Added: Book value per share was $17.87 as of March 31, 2023, compared to $17.33 as of December 31, 2022, a 12.6% annualized increase.
Common Stock Cash Dividends.
−Removed: We declared cash dividends on our common stock of $0.165 and $0.14 per share for the three months ended September 30, 2022 and 2021, respectively.
−Removed: The common stock dividend payout ratio for the three months ended September 30, 2022 and 2021 was 31.1% and 30.6%, respectively.
−Removed: The common stock dividend payout ratio for the nine months ended September 30, 2022 and 2021 was 50.0% and 28.2%, respectively.
−Removed: On October 21, 2022, the Board of Directors declared a regular $0.165 per share quarterly cash dividend payable December 7, 2022, to shareholders of record November 16, 2022.
+Added: We declared cash dividends on our common stock of $0.18 and $0.165 per share for the three months ended March 31, 2023 and 2022, respectively.
+Added: The common stock dividend payout ratio for the three months ended March 31, 2023 and 2022 was 35.6% and 41.7%, respectively.
+Added: On April 20, 2023, the Board of Directors declared a regular $0.18 per share quarterly cash dividend payable June 7, 2023, to shareholders of record May 17, 2023.
Stock Repurchase Program.
−Removed: 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.
−Removed: We repurchased a total of 2,258,531 shares with a weighted-average stock price of $22.50 per share during the first nine months of 2022.
−Removed: The remaining balance available for repurchase was 19,832,134 shares at September 30, 2022.
+Added: 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.
+Added: Shares repurchased under the program as of March 31, 2023 since its inception total 21,349,866 shares.
+Added: The remaining balance available for repurchase is 18,402,134 shares at March 31, 2023.
Liquidity and Capital Adequacy Requirements
9 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
−Removed: 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 .
+Added: Basel III amended the prompt corrective action rules to incorporate a common equity Tier 1 ("CET1") capital requirement and to raise the capital requirements for certain capital categories.
+Added: 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 ratio, a 6% Tier 1 risk-based capital ratio and an 8% total risk-based capital ratio .
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.
−Removed: Management believes that, as of September 30, 2022 and December 31, 2021, we met all regulatory capital adequacy requirements to which we were subject.
+Added: Management believes that, as of March 31, 2023 and December 31, 2022, we met all regulatory capital adequacy requirements to which we were subject.
On January 18, 2022, the Company completed an underwritten public offering of the 2032 Notes in aggregate principal amount of $300.0 million.
4 unchanged sentences
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.
−Removed: On April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy.
−Removed: These notes have a maturity date of July 31, 2030 and carry a fixed rate of 5.500% for the first five years.
−Removed: Thereafter, the notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345% resetting quarterly.
−Removed: Interest payments are due semi-annually and the notes include a right of prepayment without penalty on or after July 31, 2025.
−Removed: On April 3, 2017, the Company completed an underwritten public offering of the 2027 Notes in aggregate principal amount of $300.0 million.
−Removed: The 2027 Notes were unsecured, subordinated debt obligations and would have matured on April 15, 2027.
−Removed: On April 15, 2022, the Company completed the payoff of the 2027 Notes in aggregate principal amount of $300.0 million.
−Removed: 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.
−Removed: 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.
+Added: 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 from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments.
+Added: The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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
On December 21, 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 has elected to adopt the interim final rule, which is reflected in the risk-based capital ratios presented below.
−Removed: Table 17 presents our risk-based capital ratios on a consolidated basis as of September 30, 2022 and December 31, 2021.
+Added: Table 17 presents our risk-based capital ratios on a consolidated basis as of March 31, 2023 and December 31, 2022.
Risk-Based Capital
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(Dollars in thousands)
5 unchanged sentences
Total common equity Tier 1 capital 2,449,639 2,399,919
−Removed: Qualifying trust preferred securities — 71,270
Total Tier 1 capital 2,449,639 2,399,919
25 unchanged sentences
As of the most recent notification from regulatory agencies, our bank subsidiary was “well-capitalized” under the regulatory framework for prompt corrective action.
−Removed: To be categorized as “well-capitalized,” we, as well as our banking subsidiary, must maintain minimum common equity Tier 1 capital, leverage, Tier 1 risk-based capital, and total risk-based capital ratios as set forth in the table.
+Added: To be categorized as “well-capitalized,” we, as well as our banking subsidiary, must maintain minimum CET1 capital, leverage, Tier 1 risk-based capital, and total risk-based capital ratios as set forth in the table.
There are no conditions or events since that notification that we believe have changed the bank subsidiary’s category.
28 unchanged sentences
Earnings, As Adjusted
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
2 unchanged sentences
Merger and acquisition expenses — 863
−Removed: Initial provision for credit losses - acquisition — — 58,585 —
Fair value adjustment for marketable securities 11,408 (2,125)
−Removed: Special dividend from equity investment — (2,227) (1,434) (12,500)
−Removed: TRUPS redemption fees — — 2,081 —
Recoveries on historic losses (3,461) (3,288)
−Removed: Gain on securities — — — (219)
Total pre-tax adjustments 7,947 (4,550)
11 unchanged sentences
(1) Blended statutory rate of 24.674% for 2023 and 26.135% for 2022.
−Removed: We had $1.46 billion, $998.1 million, and $999.5 million in total goodwill, core deposit intangibles and other intangible assets as of September 30, 2022, December 31, 2021 and September 30, 2021, respectively.
+Added: We had $1.45 billion, $1.46 billion, and $996.6 million in total goodwill and core deposit intangibles as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets excluding intangible amortization, return on average tangible equity, return on average tangible equity excluding intangible amortization, and tangible equity to tangible assets are useful in evaluating our company.
2 unchanged sentences
Tangible Book Value Per Share
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(In thousands, except per share data)
8 unchanged sentences
Return on Average Assets
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
11 unchanged sentences
(E) Average goodwill, core deposits and other intangible assets 1,455,423 997,338
−Removed: 1,459,034 1,000,175 1,294,971 1,001,585
Return on Average Equity
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
5 unchanged sentences
A/(D-E) 19.75 15.03
−Removed: Return on average tangible equity excluding intangible
−Removed: amortization:
+Added: Return on average tangible equity excluding intangible amortization:
B/(D-E) 20.11 15.28
5 unchanged sentences
(D) Average equity 3,569,592 2,747,980
−Removed: (E) Average goodwill, core deposits and other intangible
−Removed: assets 1,459,034 1,000,175 1,294,971 1,001,585
+Added: (E) Average goodwill, core deposits and other intangible assets 1,455,423 997,338
Tangible Equity to Tangible Assets
−Removed: As of September 30, 2022 As of December 31, 2021
+Added: As of March 31, 2023 As of December 31, 2022
(Dollars in thousands)
11 unchanged sentences
Efficiency Ratio, As Adjusted
−Removed: Three Months Ended September 30, Nine Months Ended September 30,
−Removed: 2022 2021 2022 2021
+Added: Three Months Ended March 31,
(Dollars in thousands)
6 unchanged sentences
Fair value adjustment for marketable securities $ (11,408) $ 2,125
−Removed: Special dividend from equity investment — 2,227 1,434 12,500
Gain on OREO, net — 478
Gain (loss) on branches, equipment and other assets, net 7 16
−Removed: Gain on securities, net — — — 219
Recoveries on historic losses 3,461 3,288
2 unchanged sentences
Merger and acquisition expenses — 863
−Removed: TRUPS redemption fees — — 2,081 —
Total non-core non-interest expense (G) $ — $ 863
6 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.