What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-04 · 225 added, 200 removed, 1645 unchanged (21% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

(In thousands, except share data) June 30, 2023 December 31, 2022

(In thousands, except share data) September 30, 2023 December 31, 2022

Cash and due from banks $ 229,474 $ 263,893

2 unchanged sentences

Fed funds sold 3,925 —

Investment securities — available-for-sale, net of allowance for credit losses of $ 2,524 and $ 842 at June 30, 2023 and December 31, 2023, respectively (amortized cost of $ 4,033,776 and $ 4,445,620 at June 30, 2023 and December 31, 2022, respectively)

Investment securities — available-for-sale, net of allowance for credit losses of $ 2,524 and $ 842 at September 30, 2023 and December 31, 2023, respectively (amortized cost of $ 3,937,221 and $ 4,445,620 at September 30, 2023 and December 31, 2022, respectively)

3,472,173 4,041,590

Investment securities — held-to-maturity, net of allowance for credit losses of $ 2,005 at both June 30, 2023 and December 31, 2022

Investment securities — held-to-maturity, net of allowance for credit losses of $ 2,005 at both September 30, 2023 and December 31, 2022

1,283,475 1,287,705

36 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands, except per share data) 2023 2022 2023 2022

16 unchanged sentences

Provision for credit losses on loans 2,800 — 6,300 45,170

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

(Reversal of ) provision for credit losses on unfunded commitments ( 1,500 ) — ( 1,500 ) 11,410

Provision for credit losses on investment securities — — 1,683 2,005

10 unchanged sentences

Gain on sale of SBA loans 97 58 236 153

Gain on sale of branches, equipment and other assets, net 917 2 924 18

(Loss) gain on sale of branches, equipment and other assets, net — ( 13 ) 924 5

Gain on OREO, net — — 319 487

18 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(In thousands) 2023 2022 2023 2022

Net income $ 98,453 $ 108,705 $ 306,686 $ 189,575

Net unrealized (loss) gain on available-for-sale securities ( 48,042 ) ( 146,888 ) 16,926 ( 302,603 )

Other comprehensive (loss) gain before tax effect ( 48,042 ) ( 146,888 ) 16,926 ( 302,603 )

Tax effect on other comprehensive (loss) income 11,665 35,540 ( 4,146 ) 76,236

Other comprehensive (loss) income ( 36,377 ) ( 111,348 ) 12,780 ( 226,367 )

Net unrealized loss on available-for-sale securities ( 76,279 ) ( 122,307 ) ( 59,353 ) ( 424,910 )

Other comprehensive loss before tax effect ( 76,279 ) ( 122,307 ) ( 59,353 ) ( 424,910 )

Tax effect on other comprehensive loss 18,427 30,757 14,281 106,993

Other comprehensive loss ( 57,852 ) ( 91,550 ) ( 45,072 ) ( 317,917 )

Comprehensive income (loss) $ 40,601 $ 17,155 $ 261,614 $ ( 128,342 )

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity

Three and Six Months Ended June 30, 2023

Three and Nine Months Ended September 30, 2023

(In thousands, except share data) Common

Comprehensive (Loss) Income

Comprehensive Income (Loss)

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

22 unchanged sentences

Balances at June 30, 2023 (unaudited) $ 2,026 $ 2,366,560 $ 1,578,176 $ ( 292,678 ) $ 3,654,084

Comprehensive income:

Net Income — — 98,453 — 98,453

Other comprehensive loss — — — ( 57,852 ) ( 57,852 )

Net issuance of 11,538 shares of common stock from exercise of stock options

Repurchase of 260,000 shares of common stock

( 3 ) ( 5,655 ) — — ( 5,658 )

Share-based compensation net forfeiture of 1,000 shares of restricted stock

— 2,235 — — 2,235

Cash dividends – Common Stock, $ 0.18 per share

— — ( 36,458 ) — ( 36,458 )

Balances at September 30, 2023 (unaudited) $ 2,023 $ 2,363,210 $ 1,640,171 $ ( 350,530 ) $ 3,654,874

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2022

For the Three and Nine Months Ended September 30, 2022

(In thousands, except share data) Common

27 unchanged sentences

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

Comprehensive income:

Net Income — — 108,705 — 108,705

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

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

Repurchase of 1,045,799 shares of common stock

( 10 ) ( 24,278 ) — — ( 24,288 )

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

( 1 ) 2,395 — — 2,394

Cash dividends – Common Stock, $ 0.165 per share

— — ( 33,811 ) — ( 33,811 )

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

See Condensed Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2023 2022

3 unchanged sentences

Depreciation & amortization 22,677 23,546

Decrease (increase) in value of equity securities 10,625 ( 324 )

Decrease in value of equity securities 6,118 2,304

Amortization of securities, net 12,441 17,324

3 unchanged sentences

Provision for credit losses - loans 6,300 45,170

Provision for credit losses - unfunded commitments — 11,410

(Recovery of) provision for credit losses - unfunded commitments ( 1,500 ) 11,410

Provision for credit losses - investment securities 1,683 2,005

74 unchanged sentences

The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year.

The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Form 10-K, filed with the Securities and Exchange Commission.

Loans Receivable and Allowance for Credit Losses

19 unchanged sentences

• Other consumer

• Other consumer - SPF

• Other consumer - Shore Premier Finance ("SPF")

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

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

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

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

The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell.

For loans 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.

For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

56 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

Diluted earnings per share $ 0.49 $ 0.53 $ 1.51 $ 0.99

The impact of anti-dilutive shares to the diluted earnings per share calculation was considered immaterial for the periods ended June 30, 2023 and 2022.

The impact of anti-dilutive shares to the diluted earnings per share calculation was considered immaterial for the periods ended September 30, 2023 and 2022.

Business Combinations

68 unchanged sentences

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

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

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

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

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

(In thousands, except per share data)

18 unchanged sentences

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

June 30, 2023

September 30, 2023

Available-for-Sale

8 unchanged sentences

Total $ 3,937,221 $ ( 2,524 ) $ 3,934,697 $ 3,456 $ ( 465,980 ) $ 3,472,173

June 30, 2023

September 30, 2023

Held-to-Maturity

25 unchanged sentences

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

The Company's available-for-sale portfolio includes investments in Pacific Western Bank with a par value of $ 7.5 million and Western Alliance Bancorporation with a par value of $ 12.0 million, as of June 30, 2023.

These investments are included within the other securities classification.

Assets, principally investment securities, having a carrying value of approximately $ 3.62 billion and $ 2.35 billion at June 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law.

Investment securities pledged as collateral for repurchase agreements totaled approximately $ 160.3 million and $ 131.1 million at June 30, 2023 and December 31, 2022, respectively.

The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at June 30, 2023, by contractual maturity, are shown below.

Assets, principally investment securities, having a carrying value of approximately $ 3.19 billion and $ 2.35 billion at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law.

Investment securities pledged as collateral for repurchase agreements totaled approximately $ 160.1 million and $ 131.1 million at September 30, 2023 and December 31, 2022, respectively.

The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at September 30, 2023, by contractual maturity, are shown below.

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

10 unchanged sentences

Total $ 3,937,221 $ 3,472,173 $ 1,285,480 $ 1,103,178

During the three and six months ended June 30, 2023 and 2022, no available-for-sale securities were sold.

The following table shows gross unrealized losses and estimated fair value of investment securities classified as available-for-sale and held-to-maturity, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of June 30, 2023 and December 31, 2022.

June 30, 2023

During the three and nine months ended September 30, 2023 and 2022, no available-for-sale securities were sold.

September 30, 2023

Less Than 12 Months 12 Months or More Total

51 unchanged sentences

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

During the period ended June 30, 2023, one of the Company’s AFS subordinated debt investment securities was downgraded below investment grade.

During the nine months ended September 30, 2023, one of the Company’s AFS subordinated debt investment securities was downgraded below investment grade.

As result, the Company wrote down the value of the investment to its unrealized loss position, which required a $ 1.7 million provision.

4 unchanged sentences

Available-for-Sale Investment Securities

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Allowance for credit losses:

2 unchanged sentences

Provision for credit loss 1,682 —

Balance, June 30

Balance, September 30

$ 2,524 $ 842

2 unchanged sentences

Held-to-Maturity Investment Securities

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Allowance for credit losses:

2 unchanged sentences

Provision for credit loss — 2,005

Balance, June 30

Balance, September 30

$ 2,005 $ 2,005

1 unchanged sentence

Balance, December 31, 2022

For the six months ended June 30, 2023, the Company had available-for-sale investment securities with approximately $ 390.6 million in unrealized losses, of which $ 373.9 million had been in continuous loss positions for more than twelve months.

With the exception of the subordinated debt investment securities for which one security was downgraded during the quarter resulting in the Company recording a provision for credit losses and credit concerns requiring reallocating the existing allowance for credit losses to certain securities within the other securities category of the portfolio, the Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition or downgrades by rating agencies.

For the nine months ended September 30, 2023, the Company had available-for-sale investment securities with approximately $ 466.0 million in unrealized losses, of which $ 455.7 million had been in continuous loss positions for more than twelve months.

With the exception of the subordinated debt investment securities for which one security was downgraded during the nine months ended September 30, 2023, resulting in the Company recording a provision for credit losses and credit concerns requiring reallocating the existing allowance for credit losses to certain securities within the other securities category of the portfolio, the Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition or downgrades by rating agencies.

In addition, approximately 29.8 % of the principal balance from the Company’s investment portfolio will mature or are expected to pay down within five years or less .

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

As of June 30, 2023, the Company's available-for-sale securities portfolio consisted of 1,606 investment securities, 1,366 of which were in an unrealized loss position.

As of September 30, 2023, the Company's available-for-sale securities portfolio consisted of 1,570 investment securities, 1,400 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 466.0 million.

5 unchanged sentences

With the exception of the investments for which an allowance for credit losses has been established, the unrealized losses on the Company's investments were primarily a result of interest rate changes, and the Company expects to recover the amortized cost basis over the term of the securities.

Because the decline in market value was attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company has determined that an additional provision for credit losses is not necessary as of June 30, 2023.

As of June 30, 2023, the Company's held-to-maturity securities portfolio consisted of 506 investment securities, 497 of which were in an unrealized loss position.

The Company has determined that, as of September 30, 2023, an additional provision for credit losses is not necessary because the decline in market value was attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.

As of September 30, 2023, the Company's held-to-maturity securities portfolio consisted of 506 investment securities, 504 of which were in an unrealized loss position.

As noted in the table above, the total amount of the unrealized loss was $ 180.3 million.

4 unchanged sentences

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

Because the decline in market value was attributable to changes in interest rates and not credit quality, the Company has determined that an additional provision for credit losses was not necessary as of June 30, 2023.

The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2023:

State and political subdivisions U.S.

8 unchanged sentences

Total $ 1,110,908 $ 43,217 $ 131,355 $ 1,285,480

Income earned on securities for the three and six months ended June 30, 2023 and 2022, is as follows:

Income earned on securities for the three and nine months ended September 30, 2023 and 2022, is as follows:

Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

7 unchanged sentences

The various categories of loans receivable are summarized as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In thousands)

14 unchanged sentences

Loans receivable, net $ 13,986,271 $ 14,119,811

During the three months ended June 30, 2023, the Company did no t sell any guaranteed portions of certain SBA loans.

During the six months ended June 30, 2023, the Company sold $ 2.2 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 139,000 .

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

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

Mortgage loans held for sale of approximately $ 125.9 million and $ 79.9 million at June 30, 2023 and December 31, 2022, respectively, are included in residential 1-4 family loans.

During the three months ended September 30, 2023, the Company sold $ 1.0 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 97,000 .

During the nine months ended September 30, 2023, the Company sold $ 3.2 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $ 236,000 .

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

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

Mortgage loans held for sale of approximately $ 129.7 million and $ 79.9 million at September 30, 2023 and December 31, 2022, respectively, are included in residential 1-4 family loans.

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

4 unchanged sentences

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

These commitments are derivative instruments and their fair values at June 30, 2023 and December 31, 2022 were not material.

These commitments are derivative instruments and their fair values at September 30, 2023 and December 31, 2022 were not material.

Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans.

5 unchanged sentences

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

The Company held approximately $ 132.6 million and $ 142.5 million in PCD loans, as of June 30, 2023 and December 31, 2022, respectively.

This balance, as of June 30, 2023, consisted of $ 132.2 million resulting from the acquisition of Happy and $ 396,000 from the acquisition of LH-Finance.

The Company held approximately $ 132.6 million and $ 142.5 million in PCD loans, as of September 30, 2023 and December 31, 2022, respectively.

This balance, as of September 30, 2023, consisted of $ 132.2 million resulting from the acquisition of Happy and $ 392,000 from the acquisition of LH-Finance.

A description of our accounting policies for loans and 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) are set forth in our 2022 Form 10-K filed with the SEC on February 24, 2023.

27 unchanged sentences

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

The identified loss drivers by segment are included below as of both June 30, 2023 and December 31, 2022.

The identified loss drivers by segment are included below as of both September 30, 2023 and December 31, 2022.

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

44 unchanged sentences

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

For the three and six months ended June 30, 2023, the Company recorded $ 2.3 million and $ 3.5 million in provision for credit losses on loans, respectively.

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

For the three and nine months ended September 30, 2023, the Company recorded $ 2.8 million and $ 6.3 million in provision for credit losses on loans, respectively.

For the three and nine months ended September 30, 2023, the Company reversed $ 1.5 million in provision for unfunded commitments.

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

3 unchanged sentences

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

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2023:

Three Months Ended June 30, 2023

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2023:

Three Months Ended September 30, 2023

Construction/

13 unchanged sentences

Provision for credit losses 484 ( 4,680 ) 3,233 2,059 1,704 2,800

Balance, June 30

Balance, September 30

$ 32,642 $ 78,553 $ 54,884 $ 92,469 $ 27,014 $ 285,562

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Construction/

8 unchanged sentences

Provision for credit losses 471 ( 13,789 ) 3,952 9,755 5,911 6,300

Balance, June 30 $ 32,275 $ 85,158 $ 51,732 $ 90,474 $ 26,044 $ 285,683

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2022 and the year ended December 31, 2022:

Three Months Ended June 30, 2022

Balance, September 30 $ 32,642 $ 78,553 $ 54,884 $ 92,469 $ 27,014 $ 285,562

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 and the year ended December 31, 2022:

Three Months Ended September 30, 2022

Construction/

2 unchanged sentences

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

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

Loans charged off ( 11 ) — ( 48 ) ( 4,536 ) ( 1,718 ) ( 6,313 )

3 unchanged sentences

( 3 ) 778 ( 3 ) ( 4,347 ) ( 1,489 ) ( 5,064 )

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

Provision for credit losses ( 1,999 ) ( 23,560 ) ( 1,322 ) 25,459 1,422 —

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

Six Months Ended June 30, 2022 and Year Ended December 31, 2022

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

Nine Months Ended September 30, 2022 and Year Ended December 31, 2022

Construction/

14 unchanged sentences

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

Balance, June 30

Balance, September 30

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

7 unchanged sentences

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

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of June 30, 2023 and December 31, 2022:

June 30, 2023

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of September 30, 2023 and December 31, 2022:

September 30, 2023

Nonaccrual Nonaccrual

30 unchanged sentences

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

The Company had $ 49.6 million and $ 51.0 million in nonaccrual loans for the periods ended June 30, 2023 and December 31, 2022, respectively.

In addition, the Company had $ 10.9 million and $ 9.8 million in loans past due 90 days or more and still accruing for the periods ended June 30, 2023 and December 31, 2022, respectively.

The Company had $ 8.4 million in nonaccrual loans with a specific reserve as of both June 30, 2023 and December 31, 2022.

The Company did not recognize any interest income on nonaccrual loans during the period ended June 30, 2023 or June 30, 2022.

The following table presents the amortized cost basis of impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) by class of loans as of June 30, 2023 and December 31, 2022:

June 30, 2023

The Company had $ 84.2 million and $ 51.0 million in nonaccrual loans for the periods ended September 30, 2023 and December 31, 2022, respectively.

In addition, the Company had $ 6.7 million and $ 9.8 million in loans past due 90 days or more and still accruing for the periods ended September 30, 2023 and December 31, 2022, respectively.

The Company had zero and $ 8.4 million in nonaccrual loans with a specific reserve as of September 30, 2023 and December 31, 2022, respectively.

The Company did not recognize any interest income on nonaccrual loans during the period ended September 30, 2023 or September 30, 2022.

September 30, 2023

Real Estate Residential

29 unchanged sentences

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

The Company had $ 170.1 million and $ 221.1 million in impaired loans for the periods ended June 30, 2023 and December 31, 2022, respectively.

The Company had $ 123.1 million and $ 221.1 million in impaired loans for the periods ended September 30, 2023 and December 31, 2022, respectively.

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

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

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

The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell.

The following is an aging analysis for loans receivable as of June 30, 2023 and December 31, 2022:

June 30, 2023

The following is an aging analysis for loans receivable as of September 30, 2023 and December 31, 2022:

September 30, 2023

30-59 Days Loans

35 unchanged sentences

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

Non-accruing loans at June 30, 2023 and December 31, 2022 were $ 49.6 million and $ 51.0 million, respectively.

Interest recognized on impaired loans during the three and six months ended June 30, 2023 was approximately $ 1.5 million and $ 3.0 million, respectively.

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

Non-accruing loans at September 30, 2023 and December 31, 2022 were $ 84.2 million and $ 51.0 million, respectively.

Interest recognized on impaired loans during the three and nine months ended September 30, 2023 was approximately $ 346,930 and $ 1.0 million, respectively.

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

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

46 unchanged sentences

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

Based on the most recent analysis performed, the risk category of loans by class of loans as of June 30, 2023 and December 31, 2022 is as follows:

June 30, 2023

Based on the most recent analysis performed, the risk category of loans by class of loans as of September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023

Term Loans Amortized Cost Basis by Origination Year

43 unchanged sentences

Total residential 1-4 family 221,501 399,161 281,125 181,343 115,596 426,396 183,126 1,808,248

June 30, 2023

September 30, 2023

Term Loans Amortized Cost Basis by Origination Year

133 unchanged sentences

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

The following table presents gross write-offs by origination date as of June 30, 2023.

June 30, 2023

The following table presents gross write-offs by origination date as of September 30, 2023.

September 30, 2023

Gross Loan Write-Offs by Origination Year

15 unchanged sentences

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

The following tables present the amortized cost of performing and nonperforming loans as of June 30, 2023 and December 31, 2022.

June 30, 2023

The following tables present the amortized cost of performing and nonperforming loans as of September 30, 2023 and December 31, 2022.

September 30, 2023

Term Loans Amortized Cost Basis by Origination Year

85 unchanged sentences

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

The Company had approximately $ 21.8 million or 120 total revolving loans convert to term loans for the six months ended June 30, 2023 compared to $ 13.8 million or 83 total revolving loans convert to term loans for the six months ended June 30, 2022.

The Company had approximately $ 32.1 million or 182 total revolving loans convert to term loans for the nine months ended September 30, 2023 compared to $ 17.6 million or 136 total revolving loans convert to term loans for the nine months ended September 30, 2022.

These loans were considered immaterial for vintage disclosure inclusion.

The following table presents the amortized cost basis of modified loans by class and modification type at June 30, 2023.

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

June 30, 2023

The following table presents the amortized cost basis of modified loans to borrowers experiencing financial difficulty by class and modification type at September 30, 2023.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.

September 30, 2023

Combination of Modifications

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

Balance Total Class of Loans Receivable

Balance Percentage of Total Class of Loans Receivable

(In thousands)

11 unchanged sentences

Total $ 1,308 $ 551 $ 149 $ 3,573 $ 3,148 $ 5 $ 16,023 $ 145 $ 24,902 0.17 %

During the six-months ended June 30, 2023, the Company restructured approximately $ 18.4 million in loans to 13 borrowers.

The ending balance of these loans as of June 30, 2023, was $ 18.1 million.

The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the three-months ended June 30, 2023 immaterial for tabular disclosure inclusion.

During the nine-months ended September 30, 2023, the Company restructured approximately $ 19.4 million in loans to 18 borrowers.

The ending balance of these loans as of September 30, 2023, was $ 20.8 million.

The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the three-months ended September 30, 2023 immaterial for tabular disclosure inclusion.

Three of the modified loans accounted for $ 18.2 million of the total post-modification outstanding balance.

These three loans involved the loans being placed on interest only payments for 12 to 36 months while the interest rate was increased by 25 to 50 basis points.

The following table presents the amortized cost basis of loans that had a payment default during the three-months ended June 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

June 30, 2023

Two of the loans involved the loans being placed on interest only payments for 36 months and the term being extended an additional 36 months while the interest rate was increased by 50 basis points.

The third loan involved a new loan being underwritten resulting in the term being extended by approximately 49 months and the interest rate increasing by 3.45 percentage points.

The following table presents the amortized cost basis of loans that had a payment default during the three-months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

September 30, 2023

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

13 unchanged sentences

The Company has modified 22 loans over the past 12 months to borrowers experiencing financial difficulty.

The pre-modification balance of the loans was $ 20.0 million, and the ending balance as of June 30, 2023 was $ 19.2 million.

The $ 19.2 million balance consists of $ 1.1 million of non-accrual loans and $ 18.1 million of current loans, none of which were past due as of June 30, 2023.

The pre-modification balance of the loans was $ 19.5 million, and the ending balance as of September 30, 2023 was $ 20.9 million.

The $ 20.9 million balance consists of $ 933,000 of non-accrual loans and $ 20.0 million of current loans, of which $ 328,000 were 30-59 days past due as of September 30, 2023.

The remaining balance of the loans was current as of September 30, 2023.

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

1 unchanged sentence

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

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

The following is a presentation of total foreclosed assets as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.

The following is a presentation of total foreclosed assets as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

(In thousands)

7 unchanged sentences

Goodwill and Core Deposits and Other Intangibles

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023 December 31, 2022

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at September 30, 2023 and December 31, 2022, were as follows:

September 30, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In thousands)

3 unchanged sentences

Amortization expense ( 7,432 ) ( 6,376 )

Balance, June 30 $ 53,500 63,410

Balance, September 30 $ 51,023 60,932

Amortization expense ( 2,477 )

Balance, end of year $ 58,455

The carrying basis and accumulated amortization of core deposit intangibles at June 30, 2023 and December 31, 2022 were :

June 30, 2023 December 31, 2022

The carrying basis and accumulated amortization of core deposit intangibles at September 30, 2023 and December 31, 2022 were :

September 30, 2023 December 31, 2022

(In thousands)

2 unchanged sentences

Net carrying amount $ 51,023 $ 58,455

Core deposit intangible amortization expense was approximately $ 2.5 million for both the three months ended June 30, 2023 and 2022.

Core deposit intangible amortization expense was approximately $ 5.0 million and $ 3.9 million for the six months ended June 30, 2023 and 2022, respectively.

Core deposit intangible amortization expense was approximately $ 2.5 million for both the three months ended September 30, 2023 and 2022.

Core deposit intangible amortization expense was approximately $ 7.4 million and $ 6.4 million for the nine months ended September 30, 2023 and 2022, respectively.

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

4 unchanged sentences

2027 – $ 6.6 million.

The carrying amount of the Company’s goodwill was $ 1.40 billion at both June 30, 2023 and December 31, 2022.

The carrying amount of the Company’s goodwill was $ 1.40 billion at both September 30, 2023 and December 31, 2022.

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

3 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, other assets were $ 317.9 million and $ 321.2 million, respectively.

As of September 30, 2023 and December 31, 2022, other assets were $ 322.6 million and $ 321.2 million, respectively.

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

These equity securities without a readily determinable fair value were $ 136.3 million and $ 135.3 million at June 30, 2023 and December 31, 2022, and are accounted for at cost.

These equity securities without a readily determinable fair value were $ 137.0 million and $ 135.3 million at September 30, 2023 and December 31, 2022, and are accounted for at cost.

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

These equity securities without a readily determinable fair value were $ 91.1 million and $ 80.6 million at June 30, 2023 and December 31, 2022, respectively.

These equity securities without a readily determinable fair value were $ 89.5 million and $ 80.6 million at September 30, 2023 and December 31, 2022, respectively.

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

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

These marketable equity securities were $ 39.9 million and $ 52.0 million at June 30, 2023 and December 31, 2022, respectively.

The June 30, 2023 balance consisted primarily of investments in Pacific Western Bank and PNC Financial Services Group, Inc.

The fair value of these investments were $ 15.8 million and $ 18.7 million, respectively, at June 30, 2023.

The Company recorded $ 10.6 million in expense for the fair value adjustment for these marketable securities during the six months ended June 30, 2023.

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 456.4 million and $ 333.2 million at June 30, 2023 and December 31, 2022, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 790.4 million and $ 639.3 million at June 30, 2023 and December 31, 2022, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 5.2 million and $ 661,000 for the three months ended June 30, 2023 and 2022, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 8.2 million and $ 1.4 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, brokered deposits were $ 466.4 million and $ 476.6 million, respectively.

Deposits totaling approximately $ 2.77 billion and $ 2.65 billion at June 30, 2023 and December 31, 2022, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

These marketable equity securities were $ 44.4 million and $ 52.0 million at September 30, 2023 and December 31, 2022, respectively.

The September 30, 2023 balance consisted primarily of investments in Pacific Western Bank and PNC Financial Services Group, Inc.

The fair value of these investments were $ 21.0 million and $ 18.5 million, respectively, at September 30, 2023.

The Company recorded $ 4.5 million in income and $ 6.1 million in expense for the fair value adjustment for the marketable securities portfolio during the three and nine months ended September 30, 2023, respectively, compared to $ 2.6 million and $ 2.3 million in expense during the three and nine months ended September 30, 2022, respectively.

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 638.2 million and $ 333.2 million at September 30, 2023 and December 31, 2022, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 933.6 million and $ 639.3 million at September 30, 2023 and December 31, 2022, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 7.5 million and $ 615,000 for the three months ended September 30, 2023 and 2022, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 15.7 million and $ 2.0 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and December 31, 2022, brokered deposits were $ 401.7 million and $ 476.6 million, respectively.

Deposits totaling approximately $ 2.65 billion at both September 30, 2023 and December 31, 2022, were public funds obtained primarily from state and political subdivisions in the United States.

Securities Sold Under Agreements to Repurchase

At June 30, 2023 and December 31, 2022, securities sold under agreements to repurchase totaled $ 160.3 million and $ 131.1 million, respectively.

For the three-month periods ended June 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $ 144.0 million and $ 123.1 million, respectively.

For the six-month periods ended June 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $ 139.5 million and $ 130.2 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of June 30, 2023 and December 31, 2022 is presented in the following table:

June 30, 2023 December 31, 2022

At September 30, 2023 and December 31, 2022, securities sold under agreements to repurchase totaled $ 160.1 million and $ 131.1 million, respectively.

For the three-month periods ended September 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $ 154.7 million and $ 126.8 million, respectively.

For the nine-month periods ended September 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $ 144.6 million and $ 129.1 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2023 and December 31, 2022 is presented in the following table:

September 30, 2023 December 31, 2022

Overnight and

8 unchanged sentences

FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 650.0 million at June 30, 2023 and $ 650.0 million at December 31, 2022.

Other borrowed funds were $ 51.6 million as of June 30, 2023 and were classified as short-term advances.

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

At both June 30, 2023 and December 31, 2022, $ 50.0 million and $ 600.0 million of the outstanding FHLB balances were classified as short-term and long-term advances.

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 750.0 million at September 30, 2023 and $ 650.0 million at December 31, 2022.

At September 30, 2023, $ 150.0 million and $ 600.0 million of the outstanding balances were classified as short-term and long-term advances.

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

The FHLB advances mature from 2023 to 2037 with fixed interest rates ranging from 3.37 % to 5.38 %.

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

Additionally, the Company had $ 1.18 billion and $ 1.14 billion at June 30, 2023 and December 31, 2022, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at June 30, 2023 and December 31, 2022, respectively.

The Company had access to approximately $ 1.43 billion in liquidity with the Federal Reserve Bank as of June 30, 2023.

Additionally, the Company had $ 1.53 billion and $ 1.14 billion at September 30, 2023 and December 31, 2022, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at September 30, 2023 and December 31, 2022, respectively.

Other borrowed funds were $ 251.6 million as of September 30, 2023 and were classified as short-term advances.

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

The Company had access to approximately $ 1.14 billion in liquidity with the Federal Reserve Bank as of September 30, 2023.

This consisted of $ 80.9 million available from the Discount Window and $ 1.06 billion available through the Bank Term Funding Program ("BTFP").

As of June 30, 2023, the primary and secondary credit rates available through the Discount Window were 5.25 % and 5.75 %, respectively, and the BTFP rate was 5.50 %.

As of June 30, 2023, the Company had drawn $50.0 million from the BTFP in the ordinary course of business.

As of September 30, 2023, the primary and secondary credit rates available through the Discount Window were 5.50 % and 6.00 %, respectively, and the BTFP rate was 5.54 %.

As of September 30, 2023, the Company had drawn $ 250.0 million from the BTFP in the ordinary course of business.

This advance is included within other borrowed funds.

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

The balance on this line of credit at June 30, 2023 and December 31, 2022 was zero .

Subordinated Debentures

Subordinated debentures at June 30, 2023 and December 31, 2022 consisted of the following components:

As of June 30, 2023

Subordinated debentures at September 30, 2023 and December 31, 2022 consisted of the following components:

As of September 30, 2023

December 31, 2022

23 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.

The following is a summary of the components of the provision for income taxes for the three and six months ended June 30, 2023 and 2022:

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

The following is a summary of the components of the provision for income taxes for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

7 unchanged sentences

Income tax expense $ 30,835 $ 33,254 $ 92,404 $ 56,577

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and six months ended June 30, 2023 and 2022:

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

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

6 unchanged sentences

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

September 30,

2023 December 31,

27 unchanged sentences

Stock Repurchases

During the six months ended June 30, 2023, the Company repurchased a total of 1,150,849 shares with a weighted-average stock price of $ 22.00 per share.

Shares repurchased under the program as of June 30, 2023 since its inception total 21,910,715 shares.

The remaining balance available for repurchase is 17,841,285 shares at June 30, 2023.

During the nine months ended September 30, 2023, the Company repurchased a total of 1,410,849 shares with a weighted-average stock price of $ 21.95 per share.

Shares repurchased under the program as of September 30, 2023 since its inception total 22,170,715 shares.

The remaining balance available for repurchase is 17,581,285 shares at September 30, 2023.

Stock Compensation Plans

3 unchanged sentences

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

As of June 30, 2023, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan).

At June 30, 2023, the Company had 2,575,023 shares of common stock available for future grants and 5,442,539 shares of common stock reserved for issuance pursuant to the Plans.

The intrinsic value of the stock options outstanding and stock options vested at June 30, 2023 was $ 6.3 million and $ 6.1 million, respectively.

The intrinsic value of stock options exercised during the six months ended June 30, 2023 was approximately $ 1.5 million.

Total unrecognized compensation cost, net of income tax benefit, related to non-vested stock option awards, which are expected to be recognized over the vesting periods, was approximately $ 3.7 million as of June 30, 2023.

The table below summarizes the stock option transactions under the 2022 Plan at June 30, 2023 and December 31, 2022 and changes during the three-month period and year then ended:

For the Six Months Ended June 30, 2023 For the Year Ended

As of September 30, 2023, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan).

At September 30, 2023, the Company had 2,607,485 shares of common stock available for future grants and 5,432,001 shares of common stock reserved for issuance pursuant to the Plans.

The intrinsic value of the stock options outstanding and stock options vested at September 30, 2023 was $ 3.5 million.

The intrinsic value of stock options exercised during the nine months ended September 30, 2023 was approximately $ 1.7 million.

The table below summarizes the stock option transactions under the 2022 Plan at September 30, 2023 and December 31, 2022 and changes during the three-month period and year then ended:

For the Nine Months Ended September 30, 2023 For the Year Ended

December 31, 2022

12 unchanged sentences

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

The weighted-average fair value of options granted during the six months ended June 30, 2023 was $ 5.37 per share.

There were 25,000 options granted during the six months ended June 30, 2023.

The weighted-average fair value of options granted during the nine months ended September 30, 2023 was $ 5.37 per share.

There were 25,000 options granted during the nine months ended September 30, 2023.

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

The assumptions used in determining the fair value of the 2023 and 2022 stock option grants were as follows:

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

For the Year Ended December 31, 2022

3 unchanged sentences

Expected life of options 6.5 years 6.5 years

The following is a summary of currently outstanding and exercisable options at June 30, 2023:

The following is a summary of currently outstanding and exercisable options at September 30, 2023:

Options Outstanding Options Exercisable

16 unchanged sentences

91 4.65 25.59 71 25.95

The table below summarized the activity for the Company’s restricted stock issued and outstanding at June 30, 2023 and December 31, 2022 and changes during the period and year then ended:

June 30, 2023

The table below summarized the activity for the Company’s restricted stock issued and outstanding at September 30, 2023 and December 31, 2022 and changes during the period and year then ended:

September 30, 2023

December 31, 2022

5 unchanged sentences

End of period 1,436 1,381

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

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

$ 6,114 $ 7,646

Total unrecognized compensation cost, net of income tax benefit, related to non-vested restricted stock awards, which are expected to be recognized over the vesting periods, was approximately $ 15.1 million as of June 30, 2023.

Non-Interest Expense

The table below shows the components of non-interest expense for the three and six months ended June 30, 2023 and 2022:

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

The table below shows the components of non-interest expense for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

29 unchanged sentences

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

As of June 30, 2023, the balances of the right-of-use asset and lease liability were $ 41.9 million and $ 44.8 million, respectively.

As of September 30, 2023, the balances of the right-of-use asset and lease liability were $ 42.4 million and $ 45.3 million, respectively.

As of December 31, 2022, the balances of the right-of-use asset and lease liability were $ 42.9 million and $ 46.0 million, respectively.

The right-of-use asset is included in bank premises and equipment, net , and the lease liability is included in accrued interest payable and other liabilities .

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

2023 $ 2,426 $ 8,332

8 unchanged sentences

Additional information (dollar amounts in thousands):

For the Three Months Ended Six Months Ended

For the Three Months Ended Nine Months Ended

Lease expense:

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Operating lease expense $ 2,059 $ 2,052 $ 5,937 $ 5,991

9 unchanged sentences

The Company currently leases three properties from three related parties.

Total rent expense from the leases was $ 35,000 , or 1.59 % of total lease expense and $ 69,000 , or 1.57 % of total lease expense, for the three and six months ended June 30, 2023, respectively.

Total rent expense from the leases was $ 35,000 , or 1.47 % of total lease expense and $ 104,000 , or 1.54 % of total lease expense, for the three and nine months ended September 30, 2023, respectively.

Significant Estimates and Concentrations of Credit Risks

5 unchanged sentences

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

Although the Company has a diversified loan portfolio, at June 30, 2023 and December 31, 2022, commercial real estate loans represented 56.6 % and 56.3 % of total loans receivable, respectively, and 219.5 % and 230.1 % of total stockholders’ equity at June 30, 2023 and December 31, 2022, respectively.

Residential real estate loans represented 15.8 % and 16.1 % of total loans receivable and 61.5 % and 66.0 % of total stockholders’ equity at June 30, 2023 and December 31, 2022, respectively.

Approximately 80.7 % of the Company’s total loans and 86.1 % of the Company’s real estate loans as of June 30, 2023, are to borrowers whose collateral is located in Alabama, Arkansas, Florida, Texas and New York, the states in which the Company has its branch locations.

For the three and six months ended June 30, 2023, the Company recorded $ 2.3 million and $ 3.5 million in provision for credit losses on loans, respectively.

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

Although the Company has a diversified loan portfolio, at September 30, 2023 and December 31, 2022, commercial real estate loans represented 56.8 % and 56.3 % of total loans receivable, respectively, and 221.7 % and 230.1 % of total stockholders’ equity at September 30, 2023 and December 31, 2022, respectively.

Residential real estate loans represented 15.8 % and 16.1 % of total loans receivable and 61.6 % and 66.0 % of total stockholders’ equity at September 30, 2023 and December 31, 2022, respectively.

Approximately 79.5 % of the Company’s total loans and 84.6 % of the Company’s real estate loans as of September 30, 2023, are to borrowers whose collateral is located in Alabama, Arkansas, Florida, Texas and New York, the states in which the Company has its branch locations.

For the three and nine months ended September 30, 2023, the Company recorded $ 2.8 million and $ 6.3 million in provision for credit losses on loans, respectively.

For the three and nine months ended September 30, 2023, the Company released $ 1.5 million in provision for unfunded commitments.

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

4 unchanged sentences

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

At June 30, 2023 and December 31, 2022, commitments to extend credit of $ 4.93 billion and $ 4.83 billion, respectively, were outstanding.

At September 30, 2023 and December 31, 2022, commitments to extend credit of $ 4.67 billion and $ 4.83 billion, respectively, were outstanding.

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

6 unchanged sentences

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

The maximum amount of future payments the Company could be required to make under these guarantees at June 30, 2023 and December 31, 2022, was $ 186.8 million and $ 184.6 million, respectively.

The maximum amount of future payments the Company could be required to make under these guarantees at September 30, 2023 and December 31, 2022, was $ 184.1 million and $ 184.6 million, respectively.

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

3 unchanged sentences

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

During the six months ended June 30, 2023, the Company requested approximately $ 175.8 million in regular dividends from its banking subsidiary.

During the nine months ended September 30, 2023, the Company requested approximately $ 254.8 million in regular dividends from its banking subsidiary.

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

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Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, Tier 1 common equity Tier 1 ("CET1") and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).

Management believes that, as of June 30, 2023, the Company meets all capital adequacy requirements to which it is subject.

Management believes that, as of September 30, 2023, the Company meets all capital adequacy requirements to which it is subject.

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

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a 6.5 % CET1 risk-based capital ratio, a 5 % Tier 1 leverage capital ratio, an 8 % Tier 1 risk-based capital ratio, and a 10 % total risk-based capital ratio.

As of June 30, 2023, the Bank met the capital standards for a well-capitalized institution.

The Company’s CET1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 13.63 %, 11.92 %, 13.63 %, and 17.28 %, respectively, as of June 30, 2023.

As of September 30, 2023, the Bank met the capital standards for a well-capitalized institution.

The Company’s CET1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 13.99 %, 12.39 %, 13.99 %, and 17.64 %, respectively, as of September 30, 2023.

Additional Cash Flow Information

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

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

September 30,

(In thousands)

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

The fair value of loans with specific allocated losses was $ 96.7 million and $ 168.6 million as of June 30, 2023 and December 31, 2022, respectively.

The fair value of loans with specific allocated losses was $ 11.4 million and $ 168.6 million as of September 30, 2023 and December 31, 2022, respectively.

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

The Company reversed approximately $ 420,000 and $ 77,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended June 30, 2023 and 2022, respectively.

The Company reversed approximately $ 656,000 and $ 149,000 of accrued interest receivable when impaired loans were put on non-accrual status during the six months ended June 30, 2023 and 2022, respectively.

The Company reversed approximately $ 1.3 million and $ 693,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended September 30, 2023 and 2022, respectively.

The Company reversed approximately $ 1.9 million and $ 842,000 of accrued interest receivable when impaired loans were put on non-accrual status during the nine months ended September 30, 2023 and 2022, respectively.

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

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

As of June 30, 2023 and December 31, 2022, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 725,000 and $ 546,000 , respectively.

No foreclosed assets held for sale were remeasured during the six months ended June 30, 2023.

As of September 30, 2023 and December 31, 2022, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 691,000 and $ 546,000 , respectively.

No foreclosed assets held for sale were remeasured during the nine months ended September 30, 2023.

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

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

June 30, 2023

September 30, 2023

Amount Fair Value Level

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

(“the Company”) and subsidiaries as of June 30, 2023, and the related condensed consolidated statements of income, comprehensive income (loss), and stockholder’s equity for the three-month and six-month periods ended June 30, 2023 and 2022, and cash flows for the six-month periods ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information or statements”).

(“the Company”) and subsidiaries as of September 30, 2023, and the related condensed consolidated statements of income, comprehensive income (loss), and stockholder’s equity for the three-month and nine-month periods ended September 30, 2023 and 2022, and cash flows for the nine-month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information or statements”).

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

11 unchanged sentences

Little Rock, Arkansas

August 4, 2023

November 6, 2023

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

What changed 10-Q

Item 1. Financial Statements