HOMB filing — read by section

Item 2. Management’s Discussion and Analysis

Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 The following discussion should be read in conjunction with our Form 10-K, filed with the Securities and Exchange Commission on February 24, 2023, which includes the audited financial statements for the year ended December 31, 2022. Unless the context requires otherwise, the terms “Company,” “us,” “we,” and “our” refer to Home BancShares, Inc. on a consolidated basis. 
 
 General 
 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”). As of September 30, 2023, we had, on a consolidated basis, total assets of $21.95 billion, loans receivable, net of allowance for credit losses of $13.99 billion, total deposits of $16.52 billion, and stockholders’ equity of $3.65 billion. 
 We generate the majority of our revenue from interest on loans and investments, service charges, and mortgage banking income. Deposits and Federal Home Loan Bank (“FHLB”) and other borrowed funds are our primary sources of funding. Our largest expenses are interest on our funding sources, salaries and related employee benefits and occupancy and equipment. We measure our performance by calculating our return on average common equity, return on average assets and net interest margin. We also measure our performance by our efficiency ratio, which is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a non-GAAP measure and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding adjustments such as merger and acquisition expenses and/or certain gains, losses and other non-interest income and expenses. 
 Table 1: Key Financial Measures 
 
 As of or for the Three Months Ended September 30, As of or for the Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands, except per share data) 
 Total assets $ 21,950,638 $ 23,157,370 $ 21,950,638 $ 23,157,370 
 Loans receivable 14,271,833 13,829,311 14,271,833 13,829,311 
 Allowance for credit losses (285,562) (289,203) (285,562) (289,203) 
 Total deposits 16,518,745 18,542,324 16,518,745 18,542,324 
 Total stockholders’ equity 3,654,874 3,460,015 3,654,874 3,460,015 
 Net income 98,453 108,705 306,686 189,575 
 Basic earnings per share 0.49 0.53 1.51 0.99 
 Diluted earnings per share 0.49 0.53 1.51 0.99 
 Book value per share 18.06 16.94 18.06 16.94 
 Tangible book value per share (non-GAAP) (1) 
 10.90 9.82 10.90 9.82 
 Annualized net interest margin - FTE 4.19% 4.05% 4.28% 3.67% 
 Efficiency ratio 45.53 43.24 44.76 52.44 
 Efficiency ratio, as adjusted (non-GAAP) (2) 
 46.44 42.97 44.86 45.13 
 Return on average assets 1.78 1.81 1.84 1.13 
 Return on average common equity 10.65 12.25 11.32 7.71 

 (1) See Table 19 for the non-GAAP tabular reconciliation. 
 (2) See Table 23 for the non-GAAP tabular reconciliation. 
 
 
 
 
 
 
 
 
 
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 Overview 
 Results of Operations for the Three Months Ended September 30, 2023 and 2022 
 Our net income decreased $10.3 million, or 9.4%, to $98.5 million for the three-month period ended September 30, 2023, from $108.7 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $0.49 per share for the three-month period ended September 30, 2023 compared to $0.53 per share for the three-month period ended September 30, 2022. The Company recorded $1.3 million in credit loss expense for the quarter ended September 30, 2023. This consisted of a $2.8 million provision for credit losses on loans and a reversal of $1.5 million provision for unfunded commitments. During the three months ended September 30, 2023, the Company recorded $338,000 in bank owned life insurance ("BOLI") death benefits and a $4.5 million increase in the fair value of marketable securities. 
 Total interest income increased by $51.3 million, or 21.1%, and non-interest income increased by $212,000, or 0.5%. This was more than offset by a $62.5 million, or 209.3%, increase in total interest expense and a $416,000, or 0.4%, increase in non-interest expense. These fluctuations are primarily due to the rising interest rate environment. The increase in interest income resulted from a $53.6 million, or 27.4%, increase in loan interest income and a $6.0 million, or 16.6%, increase in investment income, partially offset by an $8.4 million, or 78.4%, decrease in interest income on deposits at other banks. The increase in non-interest income was primarily due to a $7.1 million, or 271.5%, increase in the fair value adjustment for marketable securities and a $1.2 million, or 67.5%, increase in dividends from FHLB, FRB, FNBB and other, partially offset by a $3.8 million, or 27.4%, decrease in other service charges and fees, a $3.3 million, or 34.9%, decrease in other income, and a $1.0 million, or 25.1%, decrease in mortgage lending income. The increase in interest expense was primarily due to a $55.4 million, or 237.1%, increase in interest on deposits, a $6.2 million, or 325.7%, increase in interest on FHLB and other borrowed funds and a $910,000, or 209.7%, increase in interest on securities sold under agreements to repurchase. The increase in non-interest expense was due to an increase of $508,000, or 2.0%, in other operating expenses, an increase of $356,000, or 4.1%, in data processing expense and an increase of $330,000, or 2.2%, in occupancy and equipment expense, partially offset by $778,000, or 1.2%, decrease in salaries and employee benefits. Income tax expense decreased by $2.4 million, or 7.3%, during the quarter due to the decrease in net income. 
 Our net interest margin increased from 4.05% for the three-month period ended September 30, 2022 to 4.19% for the three-month period ended September 30, 2023. The yield on interest earning assets was 6.09% and 4.62% for the three months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $21.09 billion to $19.26 billion. The decrease in average interest earning assets is primarily due to a $1.77 billion decrease in average interest-bearing balances due from banks and $429.7 million decrease in average investment securities, partially offset by a $369.0 million increase in average loans receivable. For the three months ended September 30, 2023 and 2022, we recognized $2.4 million and $4.6 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by four basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, which was partially offset by an increase in interest expense due to the higher yields on average interest-bearing liabilities as a result of the current rising interest rate environment. 
 Our efficiency ratio was 45.53% for the three months ended September 30, 2023, compared to 43.24% for the same period in 2022. For the third quarter of 2023, our efficiency ratio, as adjusted (non-GAAP), was 46.44%, compared to 42.97% reported for the third quarter of 2022. (See Table 23 for the non-GAAP tabular reconciliation). 
 Our annualized return on average assets was 1.78% for the three months ended September 30, 2023, compared to 1.81% for the same period in 2022. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.65% and 12.25% for the three months ended September 30, 2023, and 2022, respectively. (See Table 21 for the related non-GAAP financial measures and tabular reconciliation). 
 
 
 
 
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 Results of Operations for the Nine Months Ended September 30, 2023 and 2022 
 Our net income increased $117.1 million, or 61.8%, to $306.7 million for the nine months ended September 30, 2023, from $189.6 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $1.51 per share for the nine months ended September 30, 2023 compared to $0.99 per share for the nine months ended September 30, 2022. As a result of the acquisition of Happy, 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. 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. The Company recorded $6.5 million in credit loss expense for the nine months ended September 30, 2023. This consisted of a $6.3 million provision for credit losses on loans and a $1.7 million provision for credit losses on available-for-sale investment securities, partially offset by a reversal of $1.5 million provision for unfunded commitments. During the nine months ended September 30, 2023, the Company recorded a $6.1 million decrease in the fair value of marketable securities, $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits. 
 Total interest income increased by $264.0 million, or 43.6%, non-interest income increased by $8.6 million, or 7.3%, and non-interest expense decreased by $11.0 million, or 3.1%. This was partially offset by a $182.8 million, or 295.5%, increase in total interest expense. These fluctuations are primarily due to the acquisition of Happy and the rising interest rate environment. The increase in interest income resulted from a $222.6 million, or 43.9%, increase in loan interest income and a $49.5 million, or 62.9%, increase in investment income, partially offset by an $8.3 million decrease in interest income on deposits at other banks. The increase in non-interest income was primarily due to an $8.1 million, or 32.2%, increase in other income, a $4.7 million, or 53.0%, increase in trust fees, a $2.2 million, or 8.0%, increase in service charges on deposit accounts, a $2.2 million, or 35.2%, increase in dividends from FHLB, FRB, FNBB and other, and a $919,000 increase in gain on sale of branches, equipment and other assets, net. These increases were partially offset by a $5.7 million, or 40.7%, decrease in mortgage lending income and a $3.8 million, or 165.5%, decrease in the fair value adjustment for marketable securities. Included within other income were $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits. The increase in interest expense was primarily due to a $169.0 million, or 433.8%, increase in interest on deposits, a $15.3 million, or 268.3%, increase in interest on FHLB and other borrowed funds and a $2.6 million, or 357.2%, increase in interest on securities sold under agreements to repurchase, partially offset by a $4.1 million, or 24.9%, decrease in interest on subordinated debentures. The decrease in non-interest expense was due to a $49.6 million, or 100.0%, decrease in merger and acquisition expense, partially offset by an $18.9 million, or 10.8%, increase in salaries and employee benefits, an $11.5 million, or 16.9%, increase in other operating expenses, a $6.8 million, or 17.7%, increase in occupancy and equipment and a $1.3 million, or 5.2%, increase in data processing expense. Income tax expense increased by $35.8 million, or 63.3%, during the nine months ended September 30, 2023 due to an increase in net income. 
 Our net interest margin increased from 3.67% for the nine months ended September 30, 2022 to 4.28% for the nine months ended September 30, 2023. The yield on interest earning assets was 5.95% and 4.08% for the nine months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $20.03 billion to $19.63 billion. The decrease in average interest earning assets is primarily due to a $2.59 billion decrease in average interest-bearing balances due from banks, partially offset by a $1.76 billion increase in average loans receivable and a $425.2 million increase in average investment securities. For the nine months ended September 30, 2023 and 2022, we recognized $8.3 million and $12.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by three basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, 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. 
 Our efficiency ratio was 44.76% for the nine months ended September 30, 2023, compared to 52.44% for the same period in 2022. For the nine months ended September 30, 2023, our efficiency ratio, as adjusted (non-GAAP), was 44.86%, compared to 45.13% reported for the same period in 2022. (See Table 23 for the non-GAAP tabular reconciliation). 
 Our annualized return on average assets was 1.84% for the nine months ended September 30, 2023, compared to 1.13% for the same period in 2022. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 11.32% and 7.71% for the nine months ended September 30, 2023, and 2022, respectively. (See Table 21 for the related non-GAAP financial measures and tabular reconciliation). 
 
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 Financial Condition as of and for the Period Ended September 30, 2023 and December 31, 2022 
 Our total assets as of September 30, 2023 decreased $933.0 million to $21.95 billion from $22.88 billion reported as of December 31, 2022. The decrease in total assets is primarily due to a $573.6 million decrease in investment securities resulting from paydowns and maturities during the first nine months of 2023. Cash and cash equivalents decreased $236.7 million for the nine months ended September 30, 2023. Our loan portfolio balance decreased to $14.27 billion as of September 30, 2023 from $14.41 billion at December 31, 2022. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial Commercial Finance Group ("CFG") franchise, partially offset by $126.1 million organic loan growth in our remaining footprint. Total deposits decreased $1.42 billion to $16.52 billion as of September 30, 2023 from $17.94 billion as of December 31, 2022. The decrease in deposits was primarily due to the runoff of deposits during the first nine months of 2023 as a result of the current rising interest rate environment. Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023. 
 Our non-performing loans were $90.9 million, or 0.64% of total loans as of September 30, 2023, compared to $60.9 million, or 0.42% of total loans, as of December 31, 2022. The allowance for credit losses as a percentage of non-performing loans decreased to 314.29% as of September 30, 2023, from 475.99% as of December 31, 2022. Non-performing loans from our Arkansas franchise were $12.6 million at September 30, 2023 compared to $8.4 million as of December 31, 2022. Non-performing loans from our Florida franchise were $17.3 million at September 30, 2023 compared to $20.5 million as of December 31, 2022. Non-performing loans from our Texas franchise were $27.2 million at September 30, 2023 compared to $22.2 million as of December 31, 2022. Non-performing loans from our Alabama franchise were $372,000 at September 30, 2023 compared to $404,000 as of December 31, 2022. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $3.0 million at September 30, 2023 compared to $2.3 million as of December 31, 2022. Non-performing loans from our Centennial CFG franchise were $30.4 million at September 30, 2023 compared to $7.1 million as of December 31, 2022. 
 As of September 30, 2023, our non-performing assets increased to $91.6 million, or 0.42% of total assets, from $61.5 million, or 0.27% of total assets, as of December 31, 2022. Non-performing assets from our Arkansas franchise were $12.8 million at September 30, 2023 compared to $8.5 million as of December 31, 2022. Non-performing assets from our Florida franchise were $17.5 million at September 30, 2023 compared to $20.8 million as of December 31, 2022. Non-performing assets from our Texas franchise were $27.5 million at September 30, 2023 compared to $22.4 million as of December 31, 2022. Non-performing assets from our Alabama franchise were $372,000 at September 30, 2023 compared to $404,000 as of December 31, 2022. Non-performing assets from our SPF franchise were $3.0 million at September 30, 2023 compared to $2.3 million as of December 31, 2022. Non-performing assets from our Centennial CFG franchise were $30.4 million at September 30, 2023 compared to $7.1 million as of December 31, 2022. 
 The $30.4 million balance of non-accrual loans for our Centennial CFG market consists of three loans, one loan totaling $27.6 million which was placed on non-accrual status effective August 30, 2023, with all accrued interest reversed effective the non-accrual date and the remaining $2.8 million balance consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. These two 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. 
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 Critical Accounting Policies and Estimates 
 Overview. We prepare our consolidated financial statements based on the selection of certain accounting policies, generally accepted accounting principles and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. Our accounting policies are described in detail in the notes to our consolidated financial statements included as part of this document. 
 We consider a policy critical if (i) the accounting estimate requires assumptions about matters that are highly uncertain at the time of the accounting estimate; and (ii) different estimates that could reasonably have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements. 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. 
 
 Credit Losses . We account for credit losses in accordance with ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326"). 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. 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 . 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. 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. The Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The Company has made the election to exclude accrued interest receivable on AFS securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. 
 Investments – Held-to-Maturity. Debt securities held-to-maturity ("HTM"), which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed. 
 Loans Receivable and Allowance for Credit Losses . 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. 
 
 
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 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. 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. 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. The identified loan segments are as follows: 
 • 1-4 family construction 
 • All other construction 
 • 1-4 family revolving home equity lines of credit (“HELOC”) & junior liens 
 • 1-4 family senior liens 
 • Multifamily 
 • Owner occupies commercial real estate 
 • Non-owner occupied commercial real estate 
 • Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other 
 • Consumer auto 
 • Other consumer 
 • Other consumer - Shore Premier Finance ("SPF") 
 Loans that do not share risk characteristics are evaluated on an individual basis. 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 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. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: 
 • Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty 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. 
 Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions. 
 
 
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 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. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest. 
 Acquisition Accounting and Acquired Loans . We account for our acquisitions under ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting. 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. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements . 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. 
 The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. 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. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. 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. 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. 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. 
 Intangible Assets . Intangible assets consist of goodwill and core deposit intangibles. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists. 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. We perform an annual impairment test of goodwill and core deposit intangibles as required by FASB ASC 350, Intangibles - Goodwill and Other , in the fourth quarter or more often if events and circumstances indicate there may be an impairment. 
 Income Taxes . We account for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes ). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. 
 Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. 
 Both we and our subsidiary file consolidated tax returns. Our subsidiary provides for income taxes on a separate return basis, and remits to us amounts determined to be currently payable. 
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 Stock Compensation . In accordance with FASB ASC 718, Compensation - Stock Compensation , and FASB ASC 505-50, Equity-Based Payments to Non-Employees , the fair value of each option award is estimated on the date of grant. We recognize compensation expense for the grant-date fair value of the option award over the vesting period of the award. 
 
 Acquisitions 
 Acquisition of Happy Bancshares, Inc. 
 On April 1, 2022, the Company completed the acquisition of Happy Bancshares, Inc. (“Happy”), and merged Happy State Bank into Centennial Bank. The Company issued approximately 42.4 million shares of its common stock valued at approximately $958.8 million as of April 1, 2022. In addition, the holders of certain Happy stock-based awards received approximately $3.7 million in cash in cancellation of such awards, for a total transaction value of approximately $962.5 million. 
 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. 
 Acquisition of Marine Portfolio 
 On February 4, 2022, the Company completed the purchase of the performing marine loan portfolio of Utah-based LendingClub Bank (“LendingClub”). Under the terms of the purchase agreement with LendingClub, the Company acquired approximately $242.2 million of yacht loans. 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. Our goal in making these decisions is to maximize the return to our investors. 
 
 Branches 
 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. 
 As of September 30, 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 
 For the three and nine months ended September 30, 2023 and 2022 
 Our net income decreased $10.3 million, or 9.4%, to $98.5 million for the three-month period ended September 30, 2023, from $108.7 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $0.49 per share for the three-month period ended September 30, 2023 compared to $0.53 per share for the three-month period ended September 30, 2022. The Company recorded $1.3 million in credit loss expense for the quarter ended September 30, 2023. This consisted of a $2.8 million provision for credit losses on loans and a reversal of $1.5 million provision for unfunded commitments. During the three months ended September 30, 2023, the Company recorded $338,000 in BOLI death benefits and a $4.5 million increase in the fair value of marketable securities. 
 
 
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 Our net income increased $117.1 million, or 61.8%, to $306.7 million for the nine months ended September 30, 2023, from $189.6 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $1.51 per share for the nine months ended September 30, 2023 compared to $0.99 per share for the nine months ended September 30, 2022. As a result of the acquisition of Happy, 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. 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. The Company recorded $6.5 million in credit loss expense for the nine months ended September 30, 2023. This consisted of a $6.3 million provision for credit losses on loans and a $1.7 million provision for credit losses on available-for-sale investment securities, partially offset by a reversal of $1.5 million provision for unfunded commitments. During the nine months ended September 30, 2023, the Company recorded a $6.1 million decrease in the fair value of marketable securities, $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits. 
 
 Net Interest Income 
 Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments, rates paid on deposits and other borrowings, the level of non-performing loans and the amount of non-interest-bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate (24.6735% for 2023 and 26.135% for 2022). 
 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. The Federal Reserve increased the target rate seven times during 2022. First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%. Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%. Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%. Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%. Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%. Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%. Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%. The Federal Reserve increased the target rate four times during the first nine months 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, the target rate was increased to 5.25% to 5.50% on July 26, 2023. 
 Our net interest margin increased from 4.05% for the three-month period ended September 30, 2022 to 4.19% for the three-month period ended September 30, 2023. The yield on interest earning assets was 6.09% and 4.62% for the three months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $21.09 billion to $19.26 billion. The decrease in average interest earning assets is primarily due to a $1.77 billion decrease in average interest-bearing balances due from banks and $429.7 million decrease in average investment securities, partially offset by a $369.0 million increase in average loans receivable. For the three months ended September 30, 2023 and 2022, we recognized $2.4 million and $4.6 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by four basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, which was partially offset by an increase in interest expense due to the higher yields on average interest-bearing liabilities as a result of the current rising interest rate environment. 
 Our net interest margin increased from 3.67% for the nine months ended September 30, 2022 to 4.28% for the nine months ended September 30, 2023. The yield on interest earning assets was 5.95% and 4.08% for the nine months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $20.03 billion to $19.63 billion. The decrease in average interest earning assets is primarily due to a $2.59 billion decrease in average interest-bearing balances due from banks, partially offset by a $1.76 billion increase in average loans receivable and a $425.2 million increase in average investment securities. For the nine months ended September 30, 2023 and 2022, we recognized $8.3 million and $12.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by three basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, 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. 
 
 
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 Net interest income on a fully taxable equivalent basis decreased $12.3 million, or 5.7%, to $203.2 million for the three-month period ended September 30, 2023, from $215.5 million for the same period in 2022. This decrease in net interest income for the three-month period ended September 30, 2023 was the result of a $62.5 million increase in interest expense, mostly offset by a $50.2 million increase in interest income, on a fully taxable equivalent basis. The $62.5 million increase in interest expense is primarily the result of the increasing interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $62.0 million, partially offset by the decrease in average interest bearing liabilities that reduced interest expense by approximately $440,000. The $50.2 million increase in interest income was primarily the result of the increasing interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $62.6 million, which was partially offset by the decrease of $12.4 million in interest income due to the decrease in average interest earning asset balances. 
 Net interest income on a fully taxable equivalent basis increased $78.9 million, or 14.4%, to $628.6 million for the nine months ended September 30, 2023, from $549.7 million for the same period in 2022. This increase in net interest income for the nine months ended September 30, 2023 was the result of a $261.7 million increase in interest income, partially offset by a $182.8 million increase in interest expense, on a fully taxable equivalent basis. The $261.7 million increase in interest income was primarily the result of the increasing interest rate environment and the higher level of average interest earning assets due to the acquisition of Happy during the second quarter of 2022. The higher yield on earning assets resulted in an increase in interest income of approximately $205.1 million, and the increase in earning assets resulted in an increase in interest income of approximately $56.6 million. The $182.8 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 $179.4 million, and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $3.4 million. 
 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, 2023 and 2022, as well as changes in fully taxable equivalent net interest margin for the three and nine months ended September 30, 2023 compared to the same period in 2022. 
 Table 2: Analysis of Net Interest Income 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Interest income $ 294,262 $ 242,955 $ 868,833 $ 604,871 
 Fully taxable equivalent adjustment 1,293 2,437 4,415 6,646 
 Interest income – fully taxable equivalent 295,555 245,392 873,248 611,517 
 Interest expense 92,325 29,851 244,658 61,861 
 Net interest income – fully taxable equivalent $ 203,230 $ 215,541 $ 628,590 $ 549,656 
 Yield on earning assets – fully taxable equivalent 6.09 % 4.62 % 5.95 % 4.08 % 
 Cost of interest-bearing liabilities 2.69 0.83 2.38 0.61 
 Net interest spread – fully taxable equivalent 3.40 3.79 3.57 3.47 
 Net interest margin – fully taxable equivalent 4.19 4.05 4.28 3.67 

 Table 3: Changes in Fully Taxable Equivalent Net Interest Margin 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 vs. 2022 2023 vs. 2022 
 (In thousands) 
 (Decrease) increase in interest income due to change in earning assets $ (12,445) $ 56,615 
 Increase in interest income due to change in earning asset yields 62,608 205,116 
 Increase in interest expense due to change in interest-bearing liabilities (440) (3,369) 
 Increase in interest expense due to change in interest rates paid on interest-bearing liabilities (62,034) (179,428) 
 (Decrease) increase in net interest income $ (12,311) $ 78,934 

 
 
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 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, 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. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans. 
 Table 4: Average Balance Sheets and Net Interest Income Analysis 
 
 Three Months Ended September 30, 
 2023 2022 
 Average 
 Balance 
 Income / 
 Expense 
 Yield / 
 Rate 
 Average 
 Balance 
 Income /
Expense Yield /
Rate 
 (Dollars in thousands) 
 ASSETS 
 Earnings assets 
 Interest-bearing balances due from banks $ 197,336 $ 2,328 4.68 % $ 1,965,136 $ 10,763 2.17 % 
 Federal funds sold 4,859 82 6.70 1,176 9 3.04 
 Investment securities – taxable 3,598,513 34,520 3.81 4,008,230 28,273 2.80 
 Investment securities – non-taxable 1,272,680 9,034 2.82 1,292,702 10,370 3.18 
 Loans receivable 14,191,461 249,591 6.98 13,822,459 195,977 5.63 
 Total interest-earning assets 19,264,849 295,555 6.09 % 21,089,703 245,392 4.62 % 
 Non-earning assets 2,637,585 2,689,066 
 Total assets $ 21,902,434 $ 23,778,769 
 LIABILITIES AND STOCKHOLDERS’ EQUITY 
 Liabilities 
 Interest-bearing liabilities 
 Savings and interest-bearing transaction accounts $ 10,923,936 $ 68,067 2.47 % $ 12,233,755 22,388 0.73 % 
 Time deposits 1,319,126 10,631 3.20 1,078,112 959 0.35 
 Total interest-bearing deposits 12,243,062 78,698 2.55 13,311,867 23,347 0.70 
 Federal funds purchased 54 1 7.35 14 — — 
 Securities sold under agreement to repurchase 154,687 1,344 3.45 126,770 434 1.36 
 FHLB and other borrowed funds 773,345 8,161 4.19 400,012 1,917 1.90 
 Subordinated debentures 440,054 4,121 3.72 442,312 4,153 3.73 
 Total interest-bearing liabilities 13,611,202 92,325 2.69 % 14,280,975 29,851 0.83 % 
 Non-interest-bearing liabilities 
 Non-interest-bearing deposits 4,434,394 5,779,082 
 Other liabilities 189,499 199,416 
 Total liabilities 18,235,095 20,259,473 
 Stockholders’ equity 3,667,339 3,519,296 
 Total liabilities and stockholders’ equity $ 21,902,434 $ 23,778,769 
 Net interest spread 3.40 % 3.79 % 
 Net interest income and margin $ 203,230 4.19 % $ 215,541 4.05 % 

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 Nine Months Ended September 30, 
 2023 2022 
 Average
Balance Income /
Expense Yield /
Rate Average
Balance Income /
Expense Yield /
Rate 
 (Dollars in thousands) 
 ASSETS 
 Earnings assets 
 Interest-bearing balances due from banks $ 313,637 $ 10,742 4.58 % $ 2,899,620 $ 19,001 0.88 % 
 Federal funds sold 3,577 156 5.83 1,593 13 1.09 
 Investment securities – taxable 3,726,710 104,559 3.75 3,442,854 58,294 2.26 
 Investment securities – non-taxable 1,280,947 27,848 2.91 1,139,628 26,709 3.13 
 Loans receivable 14,307,358 729,943 6.82 12,547,275 507,500 5.41 
 Total interest-earning assets 19,632,229 873,248 5.95 % 20,030,970 611,517 4.08 % 
 Non-earning assets 2,640,096 2,308,827 
 Total assets $ 22,272,325 $ 22,339,797 
 LIABILITIES AND SHAREHOLDERS' EQUITY 
 Liabilities 
 Interest-bearing liabilities 
 Savings and interest- bearing transaction accounts $ 11,246,350 $ 185,560 2.21 % $ 11,420,566 36,031 0.42 % 
 Time deposits 1,189,620 22,447 2.52 1,035,340 2,939 0.38 
 Total interest-bearing deposits 12,435,970 208,007 2.24 12,455,906 38,970 0.42 
 Federal funds purchased 59 3 6.80 294 2 0.91 
 Securities sold under agreement to repurchase 144,603 3,333 3.08 129,076 729 0.76 
 FHLB borrowed funds 701,748 20,947 3.99 400,004 5,688 1.90 
 Subordinated debentures 440,199 12,368 3.76 540,175 16,472 4.08 
 Total interest-bearing liabilities 13,722,579 244,658 2.38 % 13,525,455 61,861 0.61 % 
 Non-interest-bearing liabilities 
 Non-interest-bearing deposits 4,729,515 5,363,770 
 Other liabilities 197,498 161,402 
 Total liabilities 18,649,592 19,050,627 
 Stockholders’ equity 3,622,733 3,289,170 
 Total liabilities and stockholders’ equity $ 22,272,325 $ 22,339,797 
 Net interest spread 3.57 % 3.47 % 
 Net interest income and margin $ 628,590 4.28 % $ 549,656 3.67 % 

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 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, 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. 
 Table 5: Volume/Rate Analysis 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 over 2022 2023 over 2022 
 Volume Yield /
Rate Total Volume Yield /
Rate Total 
 (In thousands) 
 (Decrease) increase in: 
 Interest income: 
 Interest-bearing balances due from banks $ (14,577) $ 6,142 $ (8,435) $ (29,425) $ 21,166 $ (8,259) 
 Federal funds sold 53 20 73 32 111 143 
 Investment securities – taxable (3,120) 9,367 6,247 5,158 41,107 46,265 
 Investment securities – non-taxable (158) (1,178) (1,336) 3,161 (2,022) 1,139 
 Loans receivable 5,357 48,257 53,614 77,689 144,754 222,443 
 Total interest income (12,445) 62,608 50,163 56,615 205,116 261,731 
 Interest expense: 
 Interest-bearing transaction and savings deposits (2,643) 48,322 45,679 (558) 150,087 149,529 
 Time deposits 261 9,411 9,672 502 19,006 19,508 
 Federal funds purchased — 1 1 (3) 4 1 
 Securities sold under agreement to repurchase 114 796 910 98 2,506 2,604 
 FHLB borrowed funds 2,729 3,515 6,244 6,210 9,049 15,259 
 Subordinated debentures (21) (11) (32) (2,880) (1,224) (4,104) 
 Total interest expense 440 62,034 62,474 3,369 179,428 182,797 
 Increase (decrease) in net interest income $ (12,885) $ 574 $ (12,311) $ 53,246 $ 25,688 $ 78,934 

 
 Provision for Credit Losses 
 Credit Loss Expense : During the nine months ended September 30, 2023, the Company recorded a $6.3 million provision for credit losses on loans, a $1.7 million provision for credit losses on investment securities and a reversal of $1.5 million provision for unfunded commitments. 
 Net charge-offs to average total loans was 0.08% for the three months ended September 30, 2023 compared to 0.15% for the three months ended September 30, 2022, and net charge-offs to average total loans was 0.10% for both the nine months ended September 30, 2023 and 2022. 
 Loans. 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. 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. 
 Acquired loans . In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. This is commonly referred to as "double accounting" or "double count". 
 
 
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 The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows: 
 • 1-4 family construction 
 • All other construction 
 • 1-4 family revolving HELOC & junior liens 
 • 1-4 family senior liens 
 • Multifamily 
 • Owner occupied commercial real estate 
 • Non-owner occupied commercial real estate 
 • Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other 
 • Consumer auto 
 • Other consumer 
 • Other consumer - SPF 
 The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation. For those loans that are classified as 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. 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. 
 Investments – Available-for-sale : The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments . The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. 
 Investments – Held-to-Maturity. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed. 
 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. In addition, the Company reallocated the existing $842,000 allowance for credit losses on AFS investments to certain securities in the subordinated debt portfolio due to credit concerns across the banking sector. These investments are classified within the other securities category of the AFS portfolio. The $2.0 million allowance for credit losses for the held-to-maturity portfolio was considered adequate. No additional provision for credit losses was considered necessary for the HTM portfolio. 
 
 Non-Interest Income 
 Total non-interest income was $43.4 million and $127.1 million for the three and nine months ended September 30, 2023, compared to $43.2 million and $118.5 million for the same periods 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. 
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 Table 6 measures the various components of our non-interest income for the three and nine months ended September 30, 2023 and 2022, respectively, as well as changes for the three and nine months ended September 30, 2023 and 2022. 
 Table 6: Non-Interest Income 
 
 Three Months Ended September 30, 2023 Change
from 2022 Nine Months Ended September 30, 2023 Change
from 2022 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Service charges on deposit accounts $ 10,062 $ 10,756 $ (694) (6.5) % $ 29,135 $ 26,980 $ 2,155 8.0 % 
 Other service charges and fees 10,128 13,951 (3,823) (27.4) 33,766 34,225 (459) (1.3) 
 Trust fees 4,660 3,980 680 17.1 13,576 8,874 4,702 53.0 
 Mortgage lending income 3,132 4,179 (1,047) (25.1) 8,353 14,091 (5,738) (40.7) 
 Insurance commissions 562 601 (39) (6.5) 1,606 1,739 (133) (7.6) 
 Increase in cash value of life insurance 1,170 1,089 81 7.4 3,485 2,721 764 28.1 
 Dividends from FHLB, FRB, FNBB & other 2,916 1,741 1,175 67.5 8,632 6,384 2,248 35.2 
 Gain on sale of SBA loans 97 58 39 67.2 236 153 83 54.2 
 (Loss) gain on sale of branches, equipment and other assets, net — (13) 13 100.0 924 5 919 18,380.0 
 Gain on OREO, net — — — — 319 487 (168) (34.5) 
 
 Fair value adjustment for marketable securities 4,507 (2,628) 7,135 271.5 (6,118) (2,304) (3,814) (165.5) 
 Other income 6,179 9,487 (3,308) (34.9) 33,172 25,096 8,076 32.2 
 Total non-interest income $ 43,413 $ 43,201 $ 212 0.5 % $ 127,086 $ 118,451 $ 8,635 7.3 % 

 Non-interest income increased $212,000, or 0.5%, to $43.4 million for the three months ended September 30, 2023 from $43.2 million for the same period in 2022. The primary factors that resulted in this increase were the increase in fair value adjustment for marketable securities, partially offset by decreases in other service charges and fees and other income. Other factors were changes related to increase in trust fees and dividends from FHLB, FRB, FNBB & other, partially offset by decreases in service charges on deposit accounts and mortgage lending income. 
 Additional details for the three months ended September 30, 2023 on some of the more significant changes are as follows: 
 • The $694,000 decrease in service charges on deposit accounts is primarily related to a decrease in overdraft fees, service charge fees and account analysis fees. 
 • The $3.8 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees. 
 • The $680,000 increase in trust fees is primarily due to increases in retirement fees, partially offset by a decrease in personal trust fees. 
 • The $1.0 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 $1.2 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in dividends on FHLB and FRB stock holdings as well as an increase in volume of marketable security dividends. 
 • The $7.1 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company. 
 • The $3.3 million decrease in other income is primarily due to $2.4 million reduction of income for equity method investments and a $1.6 million decrease in loan recoveries on historic losses, partially offset by $338,000 in BOLI death benefit income and an increase in miscellaneous income. 
 
 
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 Non-interest income increased $8.6 million, or 7.3%, to $127.1 million for the nine months ended September 30, 2023 from $118.5 million for the same period in 2022. The primary factors that resulted in this increase were the increases in service charges on deposit accounts, trust fees, dividends from FHLB, FRB, FNBB & other and other income. Other factors were changes related to increase in cash value of life insurance and gain on sale of branches, equipment and other assets, partially offset by decreases in mortgage lending income and the fair value adjustment for marketable securities. 
 Additional details for the nine months ended September 30, 2023 on some of the more significant changes are as follows: 
 • The $2.2 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 $4.7 million increase in trust fees is primarily related to an increase in trust fees resulting from the acquisition of Happy during 2022. 
 • The $5.7 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 $764,000 increase in cash value of life insurance is primarily related to the increase in bank owned life insurance resulting from the acquisition of Happy. 
 • The $2.2 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in dividend income from FHLB and FRB stock holdings related to the acquisition of Happy and an increase in dividends on marketable securities, partially offset by and a lower volume of dividends from equity investments. 
 • The $919,000 increase in gain on sale of branches, equipment and other assets, net, is primarily due to the sale of a building in Texas during 2023. 
 • The $3.8 million decrease in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company. 
 • The $8.1 million increase in other income is primarily due to $9.1 million of income for equity method investments, $3.1 million in BOLI death benefit income and a $1.3 million increase in rental income related to the acquisition of Happy, partially offset by a $5.5 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. 
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 Table 7 below sets forth a summary of non-interest expense for the three and nine months ended September 30, 2023 and 2022. 
 Table 7: Non-Interest Expense 
 
 Three Months Ended September 30, 2023 Change
from 2022 Nine Months Ended September 30, 2023 Change
from 2022 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Salaries and employee benefits $ 64,512 $ 65,290 $ (778) (1.2) % $ 193,536 $ 174,636 $ 18,900 10.8 % 
 Occupancy and equipment 15,463 15,133 330 2.2 45,338 38,533 6,805 17.7 
 Data processing expense 9,103 8,747 356 4.1 27,222 25,880 1,342 5.2 
 Merger and acquisition expenses — — — — — 49,594 (49,594) (100.0) 
 Other operating expenses: 
 Advertising 2,295 2,024 271 13.4 6,624 5,407 1,217 22.5 
 Amortization of intangibles 2,477 2,477 — — 7,432 6,376 1,056 16.6 
 Electronic banking expense 3,709 3,828 (119) (3.1) 10,714 9,718 996 10.2 
 Directors' fees 417 354 63 17.8 1,415 1,133 282 24.9 
 Due from bank service charges 282 316 (34) (10.8) 841 982 (141) (14.4) 
 FDIC and state assessment 2,794 2,146 648 30.2 9,514 6,204 3,310 53.4 
 Insurance 878 959 (81) (8.4) 2,694 2,702 (8) (0.3) 
 Legal and accounting 1,514 1,581 (67) (4.2) 4,038 3,439 599 17.4 
 Other professional fees 2,117 2,466 (349) (14.2) 7,175 6,329 846 13.4 
 Operating supplies 860 681 179 26.3 2,361 2,430 (69) (2.8) 
 Postage 491 614 (123) (20.0) 1,578 1,476 102 6.9 
 Telephone 544 593 (49) (8.3) 1,645 1,314 331 25.2 
 Other expense 7,306 7,137 169 2.4 23,561 20,571 2,990 14.5 
 Total non-interest expense $ 114,762 $ 114,346 $ 416 0.4 % $ 345,688 $ 356,724 $ (11,036) (3.1) % 

 Non-interest expense increased $416,000, or 0.4%, to $114.8 million for the three months ended September 30, 2023 from $114.3 million for the same period in 2022. The primary factor that resulted in this increase was the increase in FDIC and state assessment. Other factors were changes related to occupancy and equipment, data processing expense and advertising, partially offset by decreases in salaries and employee benefits and other professional fees. 
 Additional details for the three months ended September 30, 2023 on some of the more significant changes are as follows: 
 • The $778,000 decrease in salaries and employee benefits expense is primarily due to attrition as a result of the Happy acquisition, partially offset by increased salary expense and deferred loan costs. 
 • The $330,000 increase in occupancy and equipment expenses is primarily due to the normal increased cost of doing business. 
 • The $356,000 increase in data processing expense is primarily due to the normal increased cost of doing business. 
 • The $271,000 increase in advertising expense is primarily due to increased volume of advertising. 
 • The $648,000 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. 
 • The $349,000 decrease in other professional fees is primarily due to decreased recruitment and placement fees. 
 
 
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 Non-interest expense decreased $11.0 million, or 3.1%, to $345.7 million for the nine months ended September 30, 2023 from $356.7 million for the same period in 2022. The primary factor that resulted in this decrease was the decrease in merger and acquisition expense. Factors that partially offset this decrease were increases in salaries and employee benefits, 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. 
 Additional details for the nine months ended September 30, 2023 on some of the more significant changes are as follows: 
 • The $18.9 million increase in salaries and employee benefits expense is primarily due to the acquisition of Happy. 
 • The $6.8 million increase in occupancy and equipment expenses is primarily due to increases in depreciation on buildings, machinery and equipment; utility expenses; lease expense; equipment maintenance and repairs; janitorial expenses; property taxes and other occupancy expenses related to the acquisition of Happy. 
 • The $1.3 million increase in data processing expense is primarily due to increases in telecommunication fees, depreciation of equipment and software, software licensing subscriptions, core processing expenses and computer expenses related to the acquisition of Happy. 
 • The $49.6 million 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 $1.2 million increase in advertising expense is related to the acquisition of Happy. 
 • The $1.1 million increase in amortization of intangibles is due to the acquisition of Happy. 
 • The $996,000 increase in electronic banking expense is primarily due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy. 
 • The $3.3 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. 
 • The $846,000 increase in other professional fees is primarily related to the acquisition of Happy, partially offset by a decrease in recruitment and placement fees. 
 • The $3.0 million increase in other expenses is primarily related to the acquisition of Happy, partially offset by the reduction of $2.1 million in TRUPS redemption fees which were incurred in 2022. 
 
 Income Taxes 
 Income tax expense decreased $2.4 million, or 7.3%, to $30.8 million for the three-month period ended September 30, 2023, from $33.3 million for the same period in 2022. Income tax expense increased $35.8 million, or 63.3%, to $92.4 million for the nine-month period ended September 30, 2023, from $56.6 million for the same period in 2022. The effective income tax rate was 23.85% and 23.15% for the three and nine months ended September 30, 2023, compared to 23.43% and 22.98% for the same periods in 2022. The marginal tax rate was 24.6735% and 26.135% for 2023 and 2022, respectively. 
 
 Financial Condition as of and for the Period Ended September 30, 2023 and December 31, 2022 
 Our total assets as of September 30, 2023 decreased $933.0 million to $21.95 billion from $22.88 billion reported as of December 31, 2022. The decrease in total assets is primarily due to a $573.6 million decrease in investment securities resulting from paydowns and maturities during the first nine months of 2023. Cash and cash equivalents decreased $236.7 million for the nine months ended September 30, 2023. Our loan portfolio balance decreased to $14.27 billion as of September 30, 2023 from $14.41 billion at December 31, 2022. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial CFG franchise, partially offset by $126.1 million organic loan growth in our remaining footprint. Total deposits decreased $1.42 billion to $16.52 billion as of September 30, 2023 from $17.94 billion as of December 31, 2022. The decrease in deposits was primarily due to the runoff of deposits during the first nine months of 2023 as a result of the current rising interest rate environment. Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023. 
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 Loan Portfolio 
 Loans Receivable 
 Our loan portfolio averaged $14.19 billion and $13.82 billion during the three months ended September 30, 2023 and 2022, respectively. Our loan portfolio averaged $14.31 billion and $12.55 billion during the nine months ended September 30, 2023 and 2022, respectively. Loans receivable were $14.27 billion and $14.41 billion as of September 30, 2023 and December 31, 2022, respectively. 
 From December 31, 2022 to September 30, 2023, the Company experienced a decline of approximately $137.6 million in loans. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial CFG franchise which was partially offset by $126.1 million organic loan growth in our remaining footprint. 
 The most significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans. These loans are generally secured by residential or commercial real estate or business or personal property. 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. Loans receivable were approximately $3.23 billion, $3.88 billion, $3.78 billion, $129.2 million, $1.24 billion and $2.01 billion as of September 30, 2023 in Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG, respectively. 
 As of September 30, 2023, we had approximately $784.6 million of construction/land development loans which were collateralized by land. This consisted of approximately $82.1 million for raw land and approximately $702.5 million for land with commercial and/or residential lots. 
 Table 8 presents our loans receivable balances by category as of September 30, 2023 and December 31, 2022. 
 Table 8: Loans Receivable 
 
 September 30, 2023 December 31, 2022 
 (In thousands) 
 Real estate: 
 Commercial real estate loans: 
 Non-farm/non-residential $ 5,614,259 $ 5,632,063 
 Construction/land development 2,154,030 2,135,266 
 Agricultural 336,160 346,811 
 Residential real estate loans: 
 Residential 1-4 family 1,808,248 1,748,551 
 Multifamily residential 444,239 578,052 
 Total real estate 10,356,936 10,440,743 
 Consumer 1,153,461 1,149,896 
 Commercial and industrial 2,195,678 2,349,263 
 Agricultural 332,608 285,235 
 Other 233,150 184,343 
 Total loans receivable $ 14,271,833 $ 14,409,480 

 Commercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30-year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. 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. 
 
 
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 As of September 30, 2023, commercial real estate loans totaled $8.10 billion, or 56.8%, of loans receivable, as compared to $8.11 billion, or 56.3%, of loans receivable, as of December 31, 2022. Commercial real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $2.03 billion, $2.44 billion, $2.23 billion, $50.3 million, zero and $1.36 billion at September 30, 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. Approximately 49.3% and 43.2% 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, 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. 
 As of September 30, 2023, residential real estate loans totaled $2.25 billion, or 15.8%, of loans receivable, compared to $2.33 billion, or 16.1%, of loans receivable, as of December 31, 2022. Residential real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $512.8 million, $973.3 million, $614.2 million, $42.8 million, zero and $109.4 million at September 30, 2023, respectively. 
 Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our bank, the primary portion of which consists of loans to finance USCG registered high-end sail and power boats within our SPF division. 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. 
 As of September 30, 2023, consumer loans totaled $1.15 billion, or 8.1%, of loans receivable, compared to $1.15 billion, or 8.0%, of loans receivable, as of December 31, 2022. Consumer loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $41.0 million, $8.0 million, $18.5 million, $519,000, $1.09 billion and zero at September 30, 2023, respectively. 
 Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans. 
 As of September 30, 2023, commercial and industrial loans totaled $2.20 billion, or 15.4%, of loans receivable, compared to $2.35 billion, or 16.3%, of loans receivable, as of December 31, 2022. Commercial and industrial loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $463.2 million, $411.3 million, $659.9 million, $31.0 million, $155.1 million and $475.3 million at September 30, 2023, respectively. 
 
 Non-Performing Assets 
 We classify our problem loans into three categories: past due loans, special mention loans and classified loans (accruing and non-accruing). 
 When management determines that a loan is no longer performing, and that collection of interest appears doubtful, the loan is placed on non-accrual status. Loans that are 90 days past due are placed on non-accrual status unless they are adequately secured and there is reasonable assurance of full collection of both principal and interest. Our management closely monitors all loans that are contractually 90 days past due, treated as “special mention” or otherwise classified or on non-accrual status. 
 Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. 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. 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 September 30, 2023 and December 31, 2022, respectively. 
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 Table 9 sets forth information with respect to our non-performing assets as of September 30, 2023 and December 31, 2022. As of these dates, all non-performing restructured loans are included in non-accrual loans. 
 Table 9: Non-performing Assets 
 
 As of September 30, 2023 As of December 31, 2022 
 (Dollars in thousands) 
 Non-accrual loans $ 84,184 $ 51,011 
 Loans past due 90 days or more (principal or interest payments) 6,674 9,845 
 Total non-performing loans 90,858 60,856 
 Other non-performing assets 
 Foreclosed assets held for sale, net 691 546 
 Other non-performing assets 64 74 
 Total other non-performing assets 755 620 
 Total non-performing assets $ 91,613 $ 61,476 
 Allowance for credit losses to non-accrual loans 339.21 % 567.86 % 
 Allowance for credit losses to non-performing loans 314.29 475.99 
 Non-accrual loans to total loans 0.59 0.35 
 Non-performing loans to total loans 0.64 0.42 
 Non-performing assets to total assets 0.42 0.27 

 Our non-performing loans are comprised of non-accrual loans and accruing loans that are contractually past due 90 days. Our bank subsidiary recognizes income principally on the accrual basis of accounting. When loans are classified as non-accrual, the accrued interest is charged off and no further interest is accrued, unless the credit characteristics of the loan improve. 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. 
 Total non-performing loans were $90.9 million and $60.9 million as of September 30, 2023 and December 31, 2022, respectively. Non-performing loans at September 30, 2023 were $12.6 million, $17.3 million, $27.2 million, $372,000, $3.0 million and $30.4 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets, respectively. 
 The $30.4 million balance of non-accrual loans for our Centennial CFG market consists of three loans, one loan totaling $27.6 million which was placed on non-accrual status effective August 30, 2023, with all accrued interest reversed effective the non-accrual date and the remaining $2.8 million balance consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. These two 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. 
 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. In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable and depressed real estate market. 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. 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. As of September 30, 2023, we had $22.8 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 $17.5 million, our Arkansas market contains $1.7 million, our Texas market contains $1.5 million and our New York region contains $2.1 million of these restructured loans. 
 
 
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 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. Generally, a non-accrual loan that is restructured remains on non-accrual for a period of nine months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can pay under the new terms and may result in the loan being returned to an accrual status after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan will remain in a non-accrual status. 
 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. At September 30, 2023, the amount of restructured loans was $24.9 million. As of September 30, 2023, 91.6% of all restructured loans were performing to the terms of the restructure. 
 
 Total foreclosed assets held for sale were $691,000 as of September 30, 2023, compared to $546,000 as of December 31, 2022 for a increase of $145,000. The foreclosed assets held for sale as of September 30, 2023 are comprised of $167,000 assets located in Arkansas, $260,000 located in Florida, $264,000 located in Texas and zero in Alabama, SPF and Centennial CFG. 
 Table 10 shows the summary of foreclosed assets held for sale as of September 30, 2023 and December 31, 2022. 
 Table 10: Foreclosed Assets Held For Sale 
 
 As of September 30, 2023 As of December 31, 2022 
 (In thousands) 
 Commercial real estate loans 
 Non-farm/non-residential $ 118 $ 118 
 Construction/land development 47 47 
 Residential real estate loans 
 Residential 1-4 family 526 260 
 Multifamily residential — 121 
 Total foreclosed assets held for sale $ 691 $ 546 

 The Company had $123.1 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 September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets accounted for approximately $25.7 million, $34.9 million, $28.7 million, $372,000, $3.0 million and $30.4 million of the impaired loans, respectively. 
 The amortized cost balance for loans with a specific allocation decreased from $168.6 million to $11.4 million, and the specific allocation for impaired loans decreased by approximately $24.4 million for the period ended September 30, 2023 compared to the period ended December 31, 2022. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Past Due and Non-Accrual Loans 
 Table 11 shows the summary of non-accrual loans as of September 30, 2023 and December 31, 2022: 
 Table 11: Total Non-Accrual Loans 
 
 As of September 30, 2023 As of December 31, 2022 
 (In thousands) 
 Real estate: 
 Commercial real estate loans 
 Non-farm/non-residential $ 47,864 $ 12,219 
 Construction/land development 3,659 1,977 
 Agricultural 426 278 
 Residential real estate loans 
 Residential 1-4 family 20,281 18,083 
 
 Total real estate 72,230 32,557 
 Consumer 3,572 2,842 
 Commercial and industrial 8,042 14,920 
 Agricultural & other 340 692 
 Total non-accrual loans $ 84,184 $ 51,011 

 If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.9 million and $672,000, respectively, would have been recorded for the three-month periods ended September 30, 2023 and 2022. If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $5.5 million and $3.2 million, respectively, would have been recorded for the nine-month periods ended September 30, 2023 and 2022. The interest income recognized on non-accrual loans for the three and nine months ended September 30, 2023 and 2022 was considered immaterial. 
 Table 12 shows the summary of accruing past due loans 90 days or more as of September 30, 2023 and December 31, 2022: 
 Table 12: Loans Accruing Past Due 90 Days or More 
 
 As of September 30, 2023 As of December 31, 2022 
 (In thousands) 
 Real estate: 
 Commercial real estate loans 
 Non-farm/non-residential $ 2,999 $ 1,844 
 Construction/land development 1,025 31 
 
 Residential real estate loans 
 Residential 1-4 family 326 1,374 
 
 Total real estate 4,350 3,249 
 Consumer 191 35 
 Commercial and industrial 2,033 6,300 
 Other 100 261 
 Total loans accruing past due 90 days or more $ 6,674 $ 9,845 

 Our ratio of total loans accruing past due 90 days or more and non-accrual loans to total loans was 0.64% and 0.42% at September 30, 2023 and December 31, 2022, respectively. 
 
 
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 Allowance for Credit Losses 
 Overview. 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. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. 
 The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. 
 For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics. 
 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. 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. 
 The combination of adjustments for credit expectations (default and loss) and time expectations prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis. 
 The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. 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. 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 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. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: 
 • Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty 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. 
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 Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions. 
 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. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest. 
 Acquisition Accounting and Acquired Loans. We account for our acquisitions under FASB ASC Topic 805, Business Combinations , which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements . 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. 
 Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. 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. 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. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. 
 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. 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. 
 Specific Allocations. 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. 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. 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. 
 
 
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 For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time. 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. If the borrower is not current, we will update our credit and cash flow analysis to determine the borrower's repayment ability. If we determine this ability does not exist and it appears that the collection of the entire principal and interest is not likely, then the loan could be placed on non-accrual status. In any case, loans are classified as non-accrual no later than 105 days past due. 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. Any exposure identified through the credit loss analysis is shown as a specific reserve. 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. In such case, the amount charged off may result in loan principal outstanding being below fair value as presented in the appraisal. 
 Between the receipt of the original appraisal and the updated appraisal, we monitor the loan's repayment history. If the loan is $3.0 million or greater or the total loan relationship is $5.0 million or greater, our policy requires an annual credit review. For these loans, our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we calculate the global repayment ability of the borrower/guarantors at least annually on these loans. 
 As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan as non-performing. It will remain non-performing until it performs in a manner that it is reasonable to expect that we will collect the full principal and accrued interest. 
 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. 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. 
 The Company had $123.1 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 September 30, 2023 and December 31, 2022, respectively. 
 Loans Collectively Evaluated for Credit Loss. Loans receivable collectively evaluated for credit loss increased by approximately $18.0 million from $14.19 billion at December 31, 2022 to $14.21 billion at September 30, 2023. 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 1.96% and 1.82% at September 30, 2023 and December 31, 2022, respectively. 
 Charge-offs and Recoveries. Total charge-offs decreased to $3.4 million for the three months ended September 30, 2023, compared to $6.3 million for the same period in 2022. Total charge-offs increased to $12.5 million for the nine months ended September 30, 2023, compared to $11.9 million for the same period in 2022. Total recoveries were $528,000 and $1.2 million for the three months ended September 30, 2023 and 2022, respectively. Total recoveries were $2.1 million and $2.4 million for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023, net charge-offs were $714,000 for Arkansas, $1.5 million for Florida, $674,000 for Texas, $14,000 for Alabama and $53,000 for SPF. These equal a net charge-off position of $2.9 million. For the nine months ended September 30, 2023, net charge-offs were $1.1 million for Arkansas, $1.2 million for Florida, $3.2 million for Texas, $25,000 for Alabama, $244,000 for SPF and $4.6 million for Centennial CFG. These equal a net charge-off position of $10.4 million. 
 We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less estimated costs to sell (for collateral dependent loans), for any period presented. Loans partially charged-off are placed on non-accrual status until it is proven that the borrower's repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of 6-12 months of timely payment performance. 
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 Table 13 shows the allowance for credit losses, charge-offs and recoveries as of and for the three and nine months ended September 30, 2023 and 2022. 
 Table 13: Analysis of Allowance for Credit Losses 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Balance, beginning of period $ 285,683 $ 294,267 $ 289,669 $ 236,714 
 
 Allowance for credit losses on PCD loans - Happy acquisition — — — 16,816 
 Loans charged off 
 Real estate: 
 Commercial real estate loans: 
 Non-farm/non-residential 1,945 — 2,016 — 
 Construction/land development 150 11 175 11 
 Agricultural 5 — 7 — 
 Residential real estate loans: 
 Residential 1-4 family 103 48 192 337 
 
 Total real estate 2,203 59 2,390 348 
 Consumer 102 47 464 2,284 
 Commercial and industrial 183 4,536 7,015 5,952 
 
 Other 961 1,671 2,594 3,304 
 Total loans charged off 3,449 6,313 12,463 11,888 
 Recoveries of loans previously charged off 
 Real estate: 
 Commercial real estate loans: 
 Non-farm/non-residential 25 778 517 856 
 Construction/land development 33 8 103 325 
 
 Residential real estate loans: 
 Residential 1-4 family 22 45 153 94 
 Multifamily residential — — 8 — 
 Total real estate 80 831 781 1,275 
 Consumer 22 42 79 90 
 Commercial and industrial 119 189 375 519 
 
 Other 307 187 821 507 
 Total recoveries 528 1,249 2,056 2,391 
 Net loans charged off 2,921 5,064 10,407 9,497 
 Provision for credit loss 2,800 — 6,300 — 
 Provision for credit loss - acquired loans — — — 45,170 
 Balance, September 30 $ 285,562 $ 289,203 $ 285,562 $ 289,203 
 Net charge-offs to average loans receivable 0.08 % 0.15 % 0.10 % 0.10 % 
 Allowance for credit losses to total loans 2.00 2.09 2.00 2.09 
 Allowance for credit losses to net charge-offs 2,464.13 1,439.47 2,052.32 2,277.65 

 
 
 
 
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 Table 14 presents the allocation of allowance for credit losses as of September 30, 2023 and December 31, 2022. 
 Table 14: Allocation of Allowance for Credit Losses 
 
 As of September 30, 2023 As of December 31, 2022 
 Allowance
Amount % of 
 loans (1) 
 Allowance
Amount % of 
 loans (1) 
 
 (Dollars in thousands) 
 Real estate: 
 Commercial real estate loans: 
 Non-farm/non- residential $ 77,019 39.3 % $ 92,197 39.1 % 
 Construction/land development 32,642 15.1 32,243 14.8 
 Agricultural residential real estate loans 1,534 2.4 1,651 2.4 
 Residential real estate loans: 
 Residential 1-4 family 50,135 12.7 45,312 12.1 
 Multifamily residential 4,749 3.1 5,651 4.0 
 Total real estate 166,079 72.6 177,054 72.4 
 Consumer 24,566 8.1 20,907 8.0 
 Commercial and industrial 91,064 15.4 88,131 16.3 
 Agricultural 1,405 2.3 1,223 2.0 
 Other 2,448 1.6 2,354 1.3 
 Total $ 285,562 100.0 % $ 289,669 100.0 % 

 (1) Percentage of loans in each category to total loans receivable. 
 
 Investment Securities 
 Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as held-to-maturity, available-for-sale, or trading based on the intent and objective of the investment and the ability to hold to maturity. Fair values of securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities. The estimated effective duration of our securities portfolio was 5.4 years as of September 30, 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. We had $1.28 billion and $1.29 billion of held-to-maturity securities at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, $1.11 billion, or 86.4%, was invested in obligations of state and political subdivisions, compared to $1.11 billion, or 86.2%, as of December 31, 2022. As of September 30, 2023, $43.2 million, or 3.4%, was invested in obligations of U.S. Government-sponsored enterprises, compared to $43.0 million, or 3.3%, as of December 31, 2022. We had $131.4 million, or 10.2%, invested in U.S. government-sponsored mortgage-backed securities as of September 30, 2023, compared to $135.0 million, or 10.5% as of December 31, 2022. 
 Securities available-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity as other comprehensive (loss) income. 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. Available-for-sale securities were $3.47 billion and $4.04 billion as September 30, 2023 and December 31, 2022, respectively. 
 
 
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 As of September 30, 2023, $1.51 billion, or 43.4%, of our available-for-sale securities were invested in U.S. government-sponsored mortgage-backed securities, compared to $1.69 billion, or 41.7%, of our available-for-sale securities as of December 31, 2022. To reduce our income tax burden, $866.4 million, or 25.0%, of our available-for-sale securities portfolio as of September 30, 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 $357.7 million, or 10.3%, invested in obligations of U.S. Government-sponsored enterprises as of September 30, 2023, compared to $661.8 million, or 16.4%, of our available-for-sale securities as of December 31, 2022. We had $389.6 million, or 11.2%, invested in non-government-sponsored asset backed securities as of September 30, 2023, compared to $414.4 million, or 10.3%, of our available-for-sale securities as of December 31, 2022. As of September 30, 2023, $171.7 million, or 4.9%, of our available-for-sale securities were invested in private mortgage-backed securities, compared to $179.1 million, or 4.4%, of our available-for-sale securities as of December 31, 2022. Also, we had approximately $179.3 million, or 5.2%, invested in other securities as of September 30, 2023, compared to $194.5 million, or 4.8% 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. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. 
 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. In addition, the Company reallocated the existing $842,000 allowance for credit losses on AFS investments to certain securities in the subordinated debt portfolio due to credit concerns across the banking sector. These investments are classified within the other securities category of the AFS portfolio. 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 HTM portfolio. 
 See Note 3 to the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities. 
 
 Deposits 
 Our deposits averaged $16.68 billion and $17.17 billion for the three and nine months ended September 30, 2023. Our deposits averaged $19.09 billion and $17.82 billion for the three and nine months ended September 30, 2022. Total deposits were $16.52 billion as of September 30, 2023, and $17.94 billion as of December 31, 2022. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions. 
 Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. We also participate in the One-Way Buy Insured Cash Sweep (“ICS”) service and similar services, which provide for one-way buy transactions among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements. Management believes these sources represent a reliable and cost-efficient alternative funding source for the Company. However, to the extent that our condition or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding. 
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 Table 15 reflects the classification of the brokered deposits as of September 30, 2023 and December 31, 2022. 
 Table 15: Brokered Deposits 
 
 September 30, 2023 December 31, 2022 
 (In thousands) 
 
 
 Insured Cash Sweep and Other Transaction Accounts $ 401,709 $ 476,630 
 Total Brokered Deposits $ 401,709 $ 476,630 

 The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional funds can be attracted, and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs. 
 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. The Federal Reserve increased the target rate seven times during 2022. First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%. Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%. Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%. Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%. Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%. Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%. Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%. The Federal Reserve increased the target rate four times during the first nine months 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, the target rate was increased to 5.25% to 5.50% on July 26, 2023. 
 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, 2023 and 2022. 
 Table 16: Average Deposit Balances and Rates 
 
 Three Months Ended September 30, 
 2023 2022 
 Average
Amount Average
Rate Paid Average
Amount Average
Rate Paid 
 (Dollars in thousands) 
 Non-interest-bearing transaction accounts $ 4,434,394 — % $ 5,779,082 — % 
 Interest-bearing transaction accounts 9,700,273 2.68 10,759,379 0.81 
 Savings deposits 1,223,663 0.79 1,474,376 0.09 
 Time deposits: 
 $100,000 or more 854,338 3.46 654,550 0.37 
 Other time deposits 464,788 2.71 423,562 0.32 
 Total $ 16,677,456 1.87 % $ 19,090,949 0.49 % 

 
 Nine Months Ended September 30, 
 2023 2022 
 Average
Amount Average
Rate Paid Average
Amount Average
Rate Paid 
 (Dollars in thousands) 
 Non-interest-bearing transaction accounts $ 4,729,515 — % $ 5,363,770 — % 
 Interest-bearing transaction accounts 9,961,524 2.39 10,058,021 0.47 
 Savings deposits 1,284,826 0.77 1,362,545 0.07 
 Time deposits: 
 $100,000 or more 752,952 2.78 635,555 0.43 
 Other time deposits 436,668 2.08 399,785 0.30 
 Total $ 17,165,485 1.62 % $ 17,819,676 0.29 % 

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 Securities Sold Under Agreements to Repurchase 
 We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase increased $29.0 million, or 22.1%, from $131.1 million as of December 31, 2022 to $160.1 million as of September 30, 2023. 
 
 FHLB and Other Borrowed Funds 
 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 $1.53 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 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. 
 Subordinated Debentures 
 Subordinated debentures were $440.0 million and $440.4 million as of September 30, 2023 and December 31, 2022, respectively. 
 On April 1, 2022, the Company acquired $140.0 million in aggregate principal amount of 5.500% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”) from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. From and including the date of issuance to, but excluding July 31, 2025 or the date of earlier redemption, the 2030 Notes will bear interest at an initial rate of 5.50% per annum, payable in arrears on January 31 and July 31 of each year. From and including July 31, 2025 to, but excluding, the maturity date or earlier redemption, the 2030 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be 3-month Secured Overnight Funding Rate (SOFR)), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2030 Notes, plus 5.345%, payable quarterly in arrears on January 31, April 30, July 31, and October 31 of each year, commencing on October 31, 2025. 
 
 
 The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption date. 
 
 
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 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. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excluding January 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027. 
 The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 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 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, 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 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date. 
 
 Stockholders’ Equity 
 Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023. As of September 30, 2023 and December 31, 2022, our equity to asset ratio was 16.65% and 15.41%, respectively. Book value per share was $18.06 as of September 30, 2023, compared to $17.33 as of December 31, 2022, a 5.6% annualized increase. 
 Common Stock Cash Dividends. We declared cash dividends on our common stock of $0.18 and $0.165 per share for the three months ended September 30, 2023 and 2022, respectively, and $0.54 and $0.495 per share for the nine months ended September 30, 2023 and 2022, respectively. The common stock dividend payout ratio for the three months ended September 30, 2023 and 2022 was 37.0% and 31.1%, respectively. The common stock dividend payout ratio for the nine months ended September 30, 2023 and 2022 was 35.7% and 50.0%, respectively. On October 20, 2023, the Board of Directors declared a regular $0.18 per share quarterly cash dividend payable December 6, 2023, to shareholders of record November 15, 2023. 
 Stock Repurchase Program. During the first nine months of 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. 
 
 Liquidity and Capital Adequacy Requirements 
 Risk-Based Capital. We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk weightings and other factors. 
 In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. Basel III limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% of common equity Tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements. 
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 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. 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. Management believes that, as of September 30, 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. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 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 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, 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 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date. 
 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. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption 
 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. As part of its response to the impact of COVID-19, on March 27, 2020, the federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. The Company has elected to adopt the interim final rule, which is reflected in the risk-based capital ratios presented below. 
 
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 Table 17 presents our risk-based capital ratios on a consolidated basis as of September 30, 2023 and December 31, 2022. 
 Table 17: Risk-Based Capital 
 
 As of September 30, 2023 As of December 31, 2022 
 (Dollars in thousands) 
 Tier 1 capital 
 Stockholders’ equity $ 3,654,874 $ 3,526,362 
 ASC 326 transitional period adjustment 16,246 24,369 
 Goodwill and core deposit intangibles, net (1,448,838) (1,456,270) 
 Unrealized loss on available-for-sale securities 350,530 305,458 
 Total common equity Tier 1 capital 2,572,812 2,399,919 
 
 Total Tier 1 capital 2,572,812 2,399,919 
 Tier 2 capital 
 Allowance for credit losses 285,562 289,669 
 ASC 326 transitional period adjustment (16,246) (24,369) 
 Disallowed allowance for credit losses (limited to 1.25% of risk weighted assets) (38,516) (32,184) 
 Qualifying allowance for credit losses 230,800 233,116 
 Qualifying subordinated notes 439,982 440,420 
 Total Tier 2 capital 670,782 673,536 
 Total risk-based capital $ 3,243,594 $ 3,073,455 
 Average total assets for leverage ratio $ 20,773,349 $ 22,091,588 
 Risk weighted assets $ 18,388,636 $ 18,583,293 
 Ratios at end of period 
 Common equity Tier 1 capital 13.99 % 12.91 % 
 Leverage ratio 12.39 10.86 
 Tier 1 risk-based capital 13.99 12.91 
 Total risk-based capital 17.64 16.54 
 Minimum guidelines – Basel III 
 Common equity Tier 1 capital 7.00 % 7.00 % 
 Leverage ratio 4.00 4.00 
 Tier 1 risk-based capital 8.50 8.50 
 Total risk-based capital 10.50 10.50 
 Well-capitalized guidelines 
 Common equity Tier 1 capital 6.50 % 6.50 % 
 Leverage ratio 5.00 5.00 
 Tier 1 risk-based capital 8.00 8.00 
 Total risk-based capital 10.00 10.00 

 As of the most recent notification from regulatory agencies, our bank subsidiary was “well-capitalized” under the regulatory framework for prompt corrective action. 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. 
 
 Non-GAAP Financial Measurements 
 Our accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, this report contains financial information determined by methods other than in accordance with GAAP, including earnings, as adjusted; diluted earnings per common share, as adjusted; tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity, excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted. 
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 We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to these non-GAAP measures and ratios in assessing our operating results and related trends, and when planning and forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. 
 The tables below present non-GAAP reconciliations of earnings, as adjusted, and diluted earnings per share, as adjusted, as well as the non-GAAP computations of tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted. The items used in these calculations are included in financial results presented in accordance with GAAP. 
 Earnings, as adjusted, and diluted earnings per common share, as adjusted, are meaningful non-GAAP financial measures for management, as they exclude certain items such as merger expenses and/or certain gains and losses. Management believes the exclusion of these items in expressing earnings provides a meaningful foundation for period-to-period and company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our financial measures and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of our business, because management does not consider these items to be relevant to ongoing financial performance. 
 In Table 18 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated. 
 Table 18: Earnings, As Adjusted 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 GAAP net income available to common shareholders (A) $ 98,453 $ 108,705 $ 306,686 $ 189,575 
 Pre-tax adjustments: 
 Merger and acquisition expenses — — — 49,594 
 Initial provision for credit losses - acquisition — — — 58,585 
 Fair value adjustment for marketable securities (4,507) 2,628 6,118 2,304 
 Special dividend from equity investment — — — (1,434) 
 TRUPS redemption fees — — — 2,081 
 Recoveries on historic losses — (1,065) (3,461) (6,706) 
 
 BOLI death benefits (338) — (3,117) — 
 Total pre-tax adjustments (4,845) 1,563 (460) 104,424 
 Tax-effect of adjustments (1) 
 (1,112) 393 (30) 25,569 
 Total adjustments after-tax (B) (3,733) 1,170 (430) 78,855 
 Earnings, as adjusted (C) $ 94,720 $ 109,875 $ 306,256 $ 268,430 
 Average diluted shares outstanding (D) 202,650 205,135 203,068 191,941 
 GAAP diluted earnings per share: A/D $ 0.49 $ 0.53 $ 1.51 $ 0.99 
 Adjustments after-tax: B/D (0.02) 0.01 — 0.41 
 Diluted earnings per common share excluding adjustments: C/D $ 0.47 $ 0.54 $ 1.51 $ 1.40 

 (1) Blended statutory rate of 24.674% for 2023 and 26.135% for 2022. 
 
 
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 We had $1.45 billion, $1.46 billion, and $1.46 billion in total goodwill and core deposit intangibles as of September 30, 2023, December 31, 2022 and September 30, 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. Management also believes return on average assets, as adjusted, return on average equity, as adjusted, and return on average tangible equity, as adjusted, are meaningful non-GAAP financial measures, as they exclude items such as certain non-interest income and expenses that management believes are not indicative of our primary business operating results. These calculations, which are similar to the GAAP calculations of book value per share, return on average assets, return on average equity, and equity to assets, are presented in Tables 19 through 22, respectively. 
 Table 19: Tangible Book Value Per Share 
 
 As of September 30, 2023 As of December 31, 2022 
 (In thousands, except per share data) 
 Book value per share: A/B $ 18.06 $ 17.33 
 Tangible book value per share: (A-C-D)/B 10.90 10.17 
 (A) Total equity $ 3,654,874 $ 3,526,362 
 (B) Shares outstanding 202,323 203,434 
 (C) Goodwill 1,398,253 1,398,253 
 (D) Core deposit intangibles 51,023 58,455 

 Table 20: Return on Average Assets 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Return on average assets: A/D 1.78 % 1.81 % 1.84 % 1.13 % 
 Return on average assets, as adjusted: (A+C)/D 1.72 1.83 1.84 1.61 
 Return on average assets excluding intangible amortization: B/(D-E) 1.95 1.97 2.01 1.23 
 (A) Net income $ 98,453 $ 108,705 $ 306,686 $ 189,575 
 Intangible amortization after-tax 1,866 1,854 5,598 4,757 
 (B) Earnings excluding intangible amortization $ 100,319 $ 110,559 $ 312,284 $ 194,332 
 (C) Adjustments after-tax $ (3,733) $ 1,170 $ (430) $ 78,855 
 (D) Average assets 21,902,434 23,778,769 22,272,325 22,339,797 
 (E) Average goodwill, core deposits and other intangible assets 1,450,478 1,459,034 1,452,933 1,294,971 

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 Table 21: Return on Average Equity 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Return on average equity: A/D 10.65 % 12.25 % 11.32 % 7.71 % 
 Return on average common equity, as adjusted: (A+C)/D 10.25 12.39 11.30 10.91 
 Return on average tangible common equity: A/(D-E) 17.62 20.93 18.90 12.71 
 Return on average tangible equity excluding intangible amortization: B/(D-E) 17.95 21.29 19.24 13.03 
 Return on average tangible common equity, as adjusted: 
 (A+C)/(D-E) 16.95 21.16 18.87 18.00 
 (A) Net income $ 98,453 $ 108,705 $ 306,686 $ 189,575 
 (B) Earnings excluding intangible amortization 100,319 110,559 312,284 194,332 
 (C) Adjustments after-tax (3,733) 1,170 (430) 78,855 
 (D) Average equity 3,667,339 3,519,296 3,622,733 3,289,170 
 (E) Average goodwill, core deposits and other intangible assets 1,450,478 1,459,034 1,452,933 1,294,971 

 Table 22: Tangible Equity to Tangible Assets 
 
 As of September 30, 2023 As of December 31, 2022 
 (Dollars in thousands) 
 Equity to assets: B/A 16.65 % 15.41 % 
 Tangible equity to tangible assets: (B-C-D)/(A-C-D) 10.76 9.66 
 (A) Total assets $ 21,950,638 $ 22,883,588 
 (B) Total equity 3,654,874 3,526,362 
 (C) Goodwill 1,398,253 1,398,253 
 (D) Core deposit intangibles 51,023 58,455 

 
 
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 The efficiency ratio is a standard measure used in the banking industry and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a meaningful non-GAAP measure for management, as it excludes certain items and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding items such as merger expenses and/or certain gains, losses and other non-interest income and expenses. In Table 23 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated. 
 
 Table 23: Efficiency Ratio, As Adjusted 
 
 Three Months Ended September 30, Nine Months Ended September 30, 
 2023 2022 2023 2022 
 (Dollars in thousands) 
 Net interest income (A) $ 201,937 $ 213,104 $ 624,175 $ 543,010 
 Non-interest income (B) 43,413 43,201 127,086 118,451 
 Non-interest expense (C) 114,762 114,346 345,688 356,724 
 FTE Adjustment (D) 1,293 2,437 4,415 6,646 
 Amortization of intangibles (E) 2,477 2,477 7,432 6,376 
 Adjustments: 
 Non-interest income: 
 Fair value adjustment for marketable securities $ 4,507 $ (2,628) $ (6,118) $ (2,304) 
 Special dividend from equity investment — — — 1,434 
 Gain on OREO, net — — 319 487 
 Gain (loss) on branches, equipment and other assets, net — (13) 924 5 
 BOLI death benefits 338 — 3,117 — 
 Recoveries on historic losses — 1,065 3,461 6,706 
 Total non-interest income adjustments (F) $ 4,845 $ (1,576) $ 1,703 $ 6,328 
 Non-interest expense: 
 
 
 Merger and acquisition expenses — — — 49,594 
 
 TRUPS redemption fees — — — 2,081 
 Total non-interest expense adjustments (G) $ — $ — $ — $ 51,675 
 Efficiency ratio (reported): ((C-E)/(A+B+D)) 45.53 % 43.24 % 44.76 % 52.44 % 
 Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F)) 46.44 42.97 44.86 45.13 

 
 Recently Issued Accounting Pronouncements 
 See Note 21 to the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
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Item 2. Management’s Discussion and Analysis
