What changed in this filing

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Item 1. Business

2025-02-27 compared with 2024-02-26 · 32 added, 47 removed, 572 unchanged (12% of the section changed)

31 unchanged sentences

LH-Finance – On February 29, 2020, the Company completed the acquisition of LH-Finance, the marine lending division of People’s United Bank, N.A., for a cash purchase price of approximately $421.2 million.

Like SPF, LH-Finance provides direct consumer financing for United States Coast Guard ("USCG") registered high-end sail and power boats, as well as inventory floor plan lines of credit to marine dealers, primarily those selling USCG documented vessels.

Like SPF, LH-Finance provided direct consumer financing for United States Coast Guard ("USCG") registered high-end sail and power boats, as well as inventory floor plan lines of credit to marine dealers, primarily those selling USCG documented vessels.

Including the purchase accounting adjustments, as of the acquisition date, LH-Finance had approximately $409.1 million in total assets, including $407.4 million in total loans, which resulted in goodwill of $14.6 million being recorded.

23 unchanged sentences

Floyd 50 Chief Accounting Officer Chief Accounting Officer

Hester 60 Chief Lending Officer Chief Lending Officer and Director

Stephen Tipton 42 Chief Operating Officer Chief Operating Officer

French 62 Director and Executive Officer Chairman of the Board, Chief Executive Officer and President

Hester 61 President and Chief Lending Officer

President, Chief Lending Officer and Director

Stephen Tipton 43 Chief Operating Officer Chief Executive Officer

French 63 Director

Chairman of the Board

Townsell 54 Senior Executive Vice President, Director of Investor Relations and Director Senior Executive Vice President and Director

4 unchanged sentences

• Strategic acquisitions – Strategic acquisitions (both FDIC-assisted and non-FDIC-assisted) have been a significant component of our historical growth strategy, and we believe properly priced bank acquisitions can continue to be a large part of our growth strategy.

We completed the acquisition of Happy Bancshares, Inc.

headquartered in Amarillo, Texas, during the second quarter of 2022.

Our principal acquisition focus in the near term will be to continue to expand our presence in Texas, Arkansas, Florida and Alabama and into other contiguous markets, although we may seek to expand into other areas if attractive financial opportunities in other market areas arise.

141 unchanged sentences

The Executive Loan Committee has approval authority up to the Bank’s legal lending limit, subject to exception approval by the full Board for single loans over $100 million or relationships over $200 million.

In addition, any relationship above $40 million must have the specific approval of two of the following:

the Chairman, the Vice Chairman or our director Richard H.

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

the Chairman, Vice Chairman or our director Richard H.

In addition, any relationship above $40 million must have the specific approval of the Chairman and the Vice Chairman.

Currently, our board of directors has established an in-house consolidated lending limit of $40.0 million to any one borrowing relationship without obtaining the approval of the Chairman and Vice Chairman.

We have 86 separate relationships that exceed this in-house limit.

5 unchanged sentences

Additionally, our policy also permits the acceptance of brokered deposits.

Secondary sources of funding include advances from the Federal Home Loan Bank of Dallas, the Federal Reserve Bank Discount Window, Federal Reserve Bank Term Funding Program ("BTFP") and other borrowings.

Secondary sources of funding include advances from the Federal Home Loan Bank of Dallas, the Federal Reserve Bank Discount Window and other borrowings.

These secondary sources enable us to borrow funds at rates and terms which, at times, are more beneficial to us.

24 unchanged sentences

As of December 31, 2024, we conducted business through 218 branch locations in our primary market areas of Pulaski, Faulkner, Craighead, Lonoke, Pope, Washington, White, Benton, Greene, Sebastian, Cleburne, Independence, Stone, Baxter, Clay, Conway, Crawford, Johnson, Saline, Sharp and Yell counties in Arkansas;

Broward, Monroe, Hillsborough, Leon, Sarasota, Bay, Franklin, Palm Beach, Gulf, Charlotte, Collier, Escambia, Orange, Osceola, Pasco, Pinellas, Polk, Walton, Miami-Dade, Lee, Calhoun, Gadsden, Hernando, Liberty, Okaloosa, Santa Rosa, Seminole, Wakulla and Manatee counties in Florida;

Wheeler and Williamson counties in Texas;

Bailey, Carson;

Castro, Collin, Comal, Dallam, Dallas, Deaf Smith, Garza, Gillespie, Gray, Hale, Hall, Hutchinson, Kendall, Kerr, Lamb, Lubbock, Lynn, Moore, Motley, Parmer, Potter, Randall, Sherman, Swisher, Tarrant, Taylor, Travis, Wheeler and Williamson counties in Texas;

Baldwin County in Alabama;

12 unchanged sentences

On December 31, 2024, we had 2,552 full-time equivalent employees.

Except for any additional employees acquired in future acquisitions, we expect that our 2024 staffing levels will be lower than those at year end 2023 as a reflection of the efforts taken during the fourth quarter of 2023.

Except for any additional employees acquired in future acquisitions, we expect that our 2025 staffing levels will be consistent that of 2024.

We consider our employee relations to be good, and we have no collective bargaining agreements with any employees.

4 unchanged sentences

We strive to offer an inclusive environment where employees from all backgrounds can succeed.

As of December 31, 2023, 69% of our employees were women and 27% of our employees identify as a person of color.

As of December 31, 2024, 69% of our employees were women and 28% of our employees identify as persons of color.

Further, as of December 31, 2024, 62% of the Company’s leadership positions were held by women.

4 unchanged sentences

We also provide other basic insurance coverage including dental, life, and long-term disability insurance.

Although our offices have generally returned to a normal working environment following the COVID-19 pandemic, we continue to support working remotely for those employees who have a need to telework for health reasons and in certain other circumstances.

We also stand ready to re-implement COVID-19 safety protocols should circumstances dictate due a future outbreak of the virus or another public health crisis.

We are committed to providing a healthy and safe environment that allows employees to thrive professionally and personally.

To support the well-being of our employees and their families we also offer resources focused on physical, mental, and emotional health.

Although our offices have generally returned to a normal working environment following the pandemic, we continue to support working remotely for those employees who have a need to telework for health reasons and in certain other circumstances.

SUPERVISION AND REGULATION

58 unchanged sentences

As of December 31, 2024, our capital conservation buffer was 9.11%, and our CET1 capital, Tier 1 risk-based capital, total risk-based capital and leverage ratios were 15.11%, 15.11%, 18.74% and 13.05%, respectively.

The Basel III final rule adopted in 2013 permanently grandfathered trust preferred securities and other non-qualifying capital instruments that were issued and outstanding as of May 19, 2010 in the Tier 1 capital of bank holding companies with total consolidated assets of less than $15 billion as of December 31, 2009.

The rule phased out of Tier 1 capital these non-qualifying capital instruments issued before May 19, 2010 by all other bank holding companies.

Because our total consolidated assets were less than $15 billion as of December 31, 2009, our outstanding trust preferred securities continued to be treated as Tier 1 capital until the completion of our acquisition of Happy Bancshares on April 1, 2022, after which those securities were treated as Tier 2 capital.

During the second and third quarters of 2022, the Company redeemed, without penalty, all of its outstanding trust preferred securities.

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

The federal banking agencies’ risk-based and leverage ratios are minimum supervisory ratios generally applicable to banking organizations that meet certain specified criteria.

92 unchanged sentences

This assessment is only imposed on banks with assets of $5 billion or more.

During the fourth quarter of 2023, we recorded $13.0 million in FDIC special assessment expense in anticipation of this assessment.

The special assessment will be imposed beginning with the first quarterly assessment period of 2024 for an anticipated total of eight quarterly assessment periods.

Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships terminate.

During the fourth quarter of 2023, we recorded $13.0 million in FDIC special assessment expense, and during the second quarter of 2024, we recorded $2.3 million in special assessment expense.

The special assessment began with the first quarterly assessment period of 2024 and will continue for an anticipated total of eight quarterly assessment periods.

Community Reinvestment Act .

20 unchanged sentences

The EGRRCPA, enacted in May 2018, provides that most reciprocal deposits are no longer treated as brokered deposits.

In July 2024, the FDIC proposed a rule to expand the definition of deposits that would be considered brokered, but the rule has not been finalized as of February 1, 2025.

Federal Home Loan Bank System.

10 unchanged sentences

In light of the shift to an ample reserves regime, the Federal Reserve reduced the reserve requirement ratios to zero percent effective on March 26, 2020.

As a result, the Bank is no longer required to maintain required reserve balance with either the FRB or in the form of cash on hand.

As a result, the Bank is no longer required to maintain required reserve balance with either the Federal Reserve Board or in the form of cash on hand.

Concentrated Commercial Real Estate Lending Regulations.

25 unchanged sentences

The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets, as well as their affiliates.

Beginning February 8, 2025, however, the Trump Administration has taken various actions to temporarily or permanently shut down the CFPB, including issuing a series of directives causing the CFPB to pause or suspend many of its operations, including its supervision, examination, rulemaking and enforcement activity.

Some of these actions have been challenged in court proceedings, and further administrative, judicial or legislative developments are likely that may substantially affect the future operations and function of this agency and the oversight and enforcement of federal consumer protection laws.

As a result, the status of the CFPB’s future regulatory role remains unclear, and uncertainty exists regarding whether and to what extent the agency will continue to function in a supervisory, rulemaking or enforcement capacity going forward.

Loans to One Borrower.

54 unchanged sentences

The proposed joint compensation regulations would require compensation practices consistent with the three principles discussed above.

As of February 1, 2024, these regulations have not been finalized;

however, the agencies have indicated that they intend to issue a third proposed rule in the near future.

In May 2024, several of the initial publishing agencies repurposed the joint rule in a new proposal restating the entirety of the 2016 predecessor and requesting comment on several alternative provisions that could be included in a final rule.

These alternatives include reducing compliance time, subjecting credit unions to the requirements, amending definitions, and reducing limits on options-based compensation, among other items.

As of February 1, 2025, neither proposal has been finalized.

Unless and until a final rule is adopted, we cannot fully determine whether compliance with such a rule will adversely affect the Company’s or our bank subsidiary’s ability to hire, retain and motivate our key employees.

10 unchanged sentences

Our bank subsidiary has adopted a customer information security program to comply with these requirements.

Cybersecurity.

Our bank subsidiary is subject to cybersecurity regulations jointly adopted by the Federal Reserve Board, FDIC, and OCC.

These rules require a banking organization to notify its primary federal regulator no later than 36 hours after the organization determines that a cyber event rising to the level of a “notification incident” has occurred.

Incidents requiring notification are defined as having materially affected (or being reasonably likely to materially affect) the viability of the bank’s operations, its ability to deliver banking products and services, or the stability of the financial sector

Arkansas Law.

5 unchanged sentences

No such state of emergency has been declared to exist by the Bank Commissioner to date.

Regulatory Developments Relating to the CARES Act

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 to provide national emergency economic relief measures.

The CARES Act’s programs were implemented through rules and guidance adopted by federal departments and agencies, including the U.S.

Department of Treasury, the Federal Reserve, and other federal bank regulatory authorities, including those with direct supervisory jurisdiction over the Company and its bank subsidiary.

Set forth below is a brief overview of select provisions of the CARES Act and other regulations and supervisory guidance related to the COVID-19 pandemic that are applicable to the operations and activities of the Company and its bank subsidiary.

Paycheck Protection Program (“PPP”) .

The CARES Act established a new federal economic relief program administered by the Small Business Administration (“SBA”) called the Paycheck Protection Program (“PPP”), which provided for 100% federally guaranteed loans to be issued by participating private financial institutions to small businesses for payroll and certain other permitted expenses during the COVID-19 pandemic.

Our bank subsidiary participated in the PPP as a lender.

These loans were eligible to be forgiven if certain conditions were satisfied and were fully guaranteed by the SBA.

Additionally, loan payments were deferred for the first six months of the loan term.

The PPP commenced on April 3, 2020 and was available to qualified borrowers through May 31, 2021.

No collateral or personal guarantees were required.

Neither the government nor lenders were permitted to charge the recipients any fees.

The majority of our bank subsidiary’s PPP loans outstanding as of December 31, 2022, were forgiven or repaid during 2023.

As of December 31, 2023, the remaining balance of outstanding PPP loans was considered immaterial.

Temporary Regulatory Capital Relief related to Impact of Current Expected Credit Loss (“CECL”).

Concurrent with enactment of the CARES Act, the federal bank regulatory agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the implementation of CECL.

The interim final rule maintains the three-year transition option in the previous rule and provides banking organizations that implemented CECL during 2020 the option to delay for two years the estimated impact of CECL on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

We adopted CECL on January 1, 2020 and have elected to utilize the five-year transition option.

Proposed Legislation and Regulatory Action

16 unchanged sentences

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

What changed 10-K

Item 1. Business