What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-02-27 compared with 2024-02-26 · 291 added, 164 removed, 2083 unchanged (18% of the section changed)

38 unchanged sentences

Interest Rate Scenario Percentage Change from Base

December 31, 2024

Percentage Change from Base

December 31, 2023

Up 200 basis points 10.07 % 9.61 % 0.46 %

17 unchanged sentences

Based on management's assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2024.

FORVIS, LLP, Little Rock, Arkansas, (U.S.

Forvis Mazars, LLP, Little Rock, Arkansas, (U.S.

PCAOB Auditor Firm I.D.:

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders, Board of Directors and Audit Committee

To the Shareholders, Board of Directors and Audit Committee

Home BancShares, Inc.

21 unchanged sentences

Allowance for Credit Losses

As discussed in Notes 1 and 5 to the financial statements, the Company’s loan portfolio and the associated allowance for credit losses (“ACL”) were $14.4 billion and $288.2 million as of December 31, 2023, respectively.

As discussed in Notes 1 and 5 to the financial statements, the Company’s loan portfolio and the associated allowance for credit losses (“ACL”) were $14.8 billion and $275.9 million, respectively, as of December 31, 2024.

The Company estimates the ACL based on internal and external information relating to past events, current conditions, and reasonable and supportable forecasts.

13 unchanged sentences

Auditing management’s estimate of the allowances for loan credit losses, and more specifically the qualitative factor adjustments applied in the ACL, is a critical audit matter.

The principal consideration for our determination of the critical audit matter is a high degree of subjectivity of the assumptions utilized in calculating the qualitative reserve component within the model.

Furthermore, certain inputs and assumptions lack observable data and, therefore, applying audit procedures required a higher degree of auditor judgement and subjectivity due to the nature and extent of audit evidence and effort required to address this matter.

Furthermore, certain inputs and assumptions required a higher degree of auditor judgement due to the nature and extent of audit evidence and effort required to address this matter.

The primary audit procedures we performed to address this critical audit matter included:

7 unchanged sentences

• Evaluated the qualitative factors for appropriate identification and application including reasonableness of the basis for adjustment.

• Analyzed the total qualitative factor adjustment applied to each loan segment, in comparison to changes in the Company’s quantitatively driven expected credit losses and loan segments and evaluated the appropriateness of the total qualitative factor adjustments applied in the overall allowance.

• Analyzed the total qualitative factor adjustment applied to each loan segment and evaluated the appropriateness of the change in the qualitative factor adjustment in correlation to movement in the quantitative loss rate.

• Utilized the assistance of the firm’s internal specialists to test the mathematical operation of the model.

/s/ FORVIS, LLP

/s/ Forvis Mazars, LLP

We have served as the Company’s auditor since 2005.

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders, Board of Directors and Audit Committee

To the Shareholders, Board of Directors and Audit Committee

Home BancShares, Inc.

23 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ FORVIS, LLP

/s/ Forvis Mazars, LLP

Little Rock, Arkansas

67 unchanged sentences

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

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

(Recovery of ) provision for credit losses on investment securities ( 330 ) 1,683 2,005

Total credit loss expense 48,070 12,133 63,585

9 unchanged sentences

Gain on sale of SBA loans 617 278 183

Gain (loss) on branches, equipment and other assets, net 1,507 15 ( 105 )

Gain on OREO, net 332 500 2,003

Gain on securities, net — — 219

Gain on branches, equipment and other assets, net 2,102 1,507 15

(Loss) gain on OREO, net ( 2,272 ) 332 500

Fair value adjustment for marketable securities 2,971 ( 1,094 ) ( 1,272 )

19 unchanged sentences

Net income available to all stockholders $ 402,241 $ 392,929 $ 305,262

Net unrealized gain (loss) on available-for-sale securities 72,617 ( 417,349 ) ( 45,567 )

Other comprehensive income (loss), before tax effect 72,617 ( 417,349 ) ( 45,567 )

Tax effect on other comprehensive (income) loss ( 16,234 ) 101,429 11,909

Other comprehensive income (loss) 56,383 ( 315,920 ) ( 33,658 )

Net unrealized (loss) gain on available-for-sale securities ( 4,870 ) 72,617 ( 417,349 )

Other comprehensive (loss) income, before tax effect ( 4,870 ) 72,617 ( 417,349 )

Tax effect ( 2,163 ) ( 16,234 ) 101,429

Other comprehensive (loss) income ( 7,033 ) 56,383 ( 315,920 )

Comprehensive income (loss) $ 395,208 $ 449,312 $ ( 10,658 )

14 unchanged sentences

2 154 — — 156

Issuance of 42,425,352 shares of common stock including approximately $ 2.5 million in certain stock award settlements and stock issuance costs - Happy Bancshares acquisition

424 960,866 — — 961,290

Repurchase of 3,098,531 shares of common stock

7 unchanged sentences

Net income — — 392,929 — 392,929

Other comprehensive loss — — — ( 315,920 ) ( 315,920 )

Other comprehensive income — — — 56,383 56,383

Net issuance of 118,653 shares of common stock from exercise of stock options

1 801 — — 802

Issuance of 42,425,352 shares of common stock including approximately $ 2.5 million in certain stock award settlements and stock issuance costs - Happy Bancshares acquisition

424 960,866 — — 961,290

Repurchase of 2,225,849 shares of common stock

2 unchanged sentences

2 9,272 — — 9,274

Excise tax expense from repurchase of common stock — ( 430 ) — — ( 430 )

Cash dividends – Common Stock, $ 0.72 per share

23 unchanged sentences

Depreciation & amortization 29,198 30,929 31,856

Decrease (increase) in value of equity securities 1,094 1,272 ( 7,178 )

(Increase) decrease in value of equity securities ( 2,971 ) 1,094 1,272

Amortization of securities, net 14,446 16,491 20,335

15 unchanged sentences

Investing Activities

Net increase in federal funds sold ( 5,100 ) — —

Net (increase) decrease in loans, excluding loans acquired ( 9,037 ) ( 673,883 ) 1,328,378

Net decrease (increase) in federal funds sold 1,375 ( 5,100 ) —

Net increase in loans, excluding loans acquired ( 420,984 ) ( 9,037 ) ( 673,883 )

Purchases of investment securities – available-for-sale ( 64,073 ) ( 9,894 ) ( 1,258,403 )

6 unchanged sentences

Purchases of other investments — ( 3,364 ) ( 60,889 )

Proceeds from redemption of other investments 643 — —

Proceeds from foreclosed assets held for sale 2,293 1,292 2,319

Proceeds from sale of SBA loans 8,519 3,968 4,304

Purchases of premises and equipment, net ( 8,550 ) ( 9,016 ) ( 10,282 )

Return of investment on cash value of life insurance 3,813 277 418

Purchases of premises and equipment ( 38,531 ) ( 22,465 ) ( 19,579 )

Proceeds from sales of premises and equipment 26,268 13,915 10,563

(Purchase of) return of investment on cash value of life insurance ( 346 ) 3,813 277

Purchase of marine loan portfolio — — ( 242,617 )

Net cash proceeds received (paid) – market acquisitions — 858,584 —

Net cash proceeds received – market acquisitions — — 858,584

Net cash provided by (used in) investing activities 5,667 578,459 ( 1,024,270 )

4 unchanged sentences

Financing Activities

Net (decrease) increase in deposits, excluding deposits acquired ( 1,151,072 ) ( 2,177,058 ) 1,534,780

Net increase (decrease) in deposits, excluding deposits acquired 358,586 ( 1,151,072 ) ( 2,177,058 )

Net increase (decrease) in securities sold under agreements to repurchase 20,265 10,939 ( 9,740 )

26 unchanged sentences

The Bank is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance.

Each of the branches of the Bank provide a group of similar banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts.

The individual bank branches have similar operating and economic characteristics.

While the chief decision maker monitors the revenue streams of the various products, services and branch locations, operations are managed, and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the banking services and branch locations are considered by management to be aggregated into one reportable operating segment.

Each of the regions and branches of the Bank provide a group of similar banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts.

The individual bank branches and regions have similar operating and economic characteristics.

While the chief decision maker monitors the revenue streams of the various products, services, branch locations and regions, operations are managed, and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the banking services, branch locations and regions are considered by management to be aggregated into one reportable operating segment.

Use of Estimates

11 unchanged sentences

Cash and cash equivalents consist of cash on hand, cash held as demand deposits at various banks and the Federal Reserve Bank (“FRB”) and interest-bearing deposits with other banks.

Included in cash and cash equivalents were $ 15.4 million and $ 22.8 million of restricted cash as of December 31, 2024 and 2023, respectively.

Investment Securities

10 unchanged sentences

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

The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments .

The Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.

10 unchanged sentences

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.

9 unchanged sentences

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.

The Company uses the discount cash flow ("DCF") method to estimate expected losses for all of 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.

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, the Federal Housing Finance Agency ("FHFA") housing price index and rental vacancy rate index.

The allowance for credit losses is measured based on call report segment as these types of loan exhibit similar risk characteristics.

11 unchanged sentences

• Other consumer - SPF

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

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

17 unchanged sentences

(viii) changes in the quality of the loan review system and (ix) economic conditions.

Loans considered to be collateral dependent, according to ASC 326, are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement.

The aggregate amount of collateral shortfall on such loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto.

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

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

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

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

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

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

180 unchanged sentences

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

The following schedule represents the unaudited pro forma combined financial information as of the years ended December 31, 2022 and 2021, assuming the acquisition was completed as of January 1, 2022 and 2021, respectively:

The following schedule represents the unaudited pro forma combined financial information as of the year ended December 31, 2022, assuming the acquisition was completed as of January 1, 2022:

December 31, 2022

(In thousands, except per share data)

5 unchanged sentences

The unaudited pro-forma consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue enhancements and expense efficiencies from in-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results.

Pro-forma results include Happy merger expenses of $ 49.6 million, provision for credit losses on acquired loans of $ 45.2 million, provision for credit losses on acquired unfunded commitments of $ 11.4 million and provision for credit losses on acquired investment securities of $ 2.0 million for the years ended December 31, 2022 and 2021, respectively.

The pro-forma financial information also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.

53 unchanged sentences

Total $ 1,283,987 $ ( 2,005 ) $ 1,281,982 $ 562 $ ( 112,063 ) $ 1,170,481

On April 1, 2022, the Company completed the acquisition of Happy.

Including the effects of the purchase accounting adjustments, as of the acquisition date, Happy had approximately $ 1.78 billion in investments, net of purchase accounting adjustments.

The Company classified approximately $ 1.12 billion of investments acquired from Happy as held-to-maturity at the acquisition date.

Assets, principally investment securities, having a fair value of approximately $ 2.61 billion and $ 3.57 billion at December 31, 2024 and 2023, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

17 unchanged sentences

During the year ended December 31, 2024, no available-for-sale securities were sold.

During the year ended December 31, 2023, no available-for-sale securities were sold.

During the year ended December 31, 2022, $ 67.3 million in available-for-sale securities were sold, and no gain or loss was recognized.

During the year ended December 31, 2021, $ 17.9 million in available-for-sale securities were sold, and the gross realized gains on the sales totaled $ 219,000 .

The income tax expense/benefit to net security gains and losses was 25.740 % of the gross amounts.

The following shows gross unrealized losses and estimated fair value of investment securities classified as available-for-sale and held-to-maturity, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of December 31, 2024 and 2023:

40 unchanged sentences

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.

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.

10 unchanged sentences

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 evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses.

The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics.

3 unchanged sentences

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

During the year ended December 31, 2024, the Company recovered $ 330,000 in AFS reserves due to an improvement in the unrealized loss position of one of the Company's subordinated debt investments.

During the year ended December 31, 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.

The remaining $ 842,000 allowance for credit losses on AFS investments is associated with certain securities in the subordinated debt portfolio within the banking sector.

As result, the Company wrote down the value of the investment to its unrealized loss position, which required a $ 1.7 million provision, but the remaining $ 842,000 allowance for credit losses on AFS investments associated with certain securities in the subordinated debt portfolio within the banking sector was considered adequate.

At December 31, 2022, the Company determined the $ 842,000 allowance for credit losses on AFS investments associated with certain securities in the subordinated debt portfolio within the banking sector was considered adequate.

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.

At both December 31, 2024 and 2023, 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.

During the year ended December 31, 2022, the Company recorded a $ 2.0 million provision for credit losses for the HTM portfolio as a result of the investment securities acquired as part of the Happy acquisition.

Available-for-Sale Investment Securities

17 unchanged sentences

For the year ended December 31, 2024, the Company had available-for-sale investment securities with approximately $ 334.9 million in unrealized losses, which have been in continuous loss positions for more than twelve months.

With the exception of the securities with credit losses noted above, the Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies.

With the exception of the subordinated debt investment securities which were downgraded during 2023 resulting in the allowance, the Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies.

In addition, approximately 38.9 % of the Company’s available-for-sale investment portfolio will mature or are expected to pay down within five years or less.

1 unchanged sentence

For the year ended December 31, 2023, the Company had available-for-sale investment securities with approximately $ 333.5 million in unrealized losses, which had been in continuous loss positions for more than twelve months.

The Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies.

In addition, approximately 30.4 % of the Company’s available-for-sale investment portfolio was expected to mature or pay down within five years or less.

5 unchanged sentences

The non-government-sponsored asset backed securities portfolio contained $ 3.4 million of unrealized losses on 23 securities.

The state and political subdivisions portfolio contained.

In addition, the other securities portfolio contained $ 75.9 million of unrealized losses on 444 securities.

The state and political subdivisions portfolio contained $ 86.0 million of unrealized losses on 474 securities.

In addition, the other securities portfolio contained $ 18.3 million of unrealized losses on 62 securities.

9 unchanged sentences

Because the decline in market value was attributable to changes in interest rates and not credit quality, the Company has determined that an additional provision for credit losses is not necessary as of December 31, 2024.

The following table summarizes bond ratings for the Company's held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of December 31, 2023:

December 31, 2024

State and Political Subdivisions U.S.

8 unchanged sentences

Total $ 1,109,480 $ 43,560 $ 124,169 $ 1,277,209

December 31, 2023

State and Political Subdivisions U.S.

government-sponsored enterprises U.S.

government-sponsored mortgage-backed securities Total

(In thousands)

Aaa/AAA $ 235,557 $ 43,285 $ — $ 278,842

Aa/AA 845,418 — — 845,418

A 27,667 — — 27,667

Not rated 1,782 — — 1,782

Agency Backed — — 130,278 130,278

Total $ 1,110,424 $ 43,285 $ 130,278 $ 1,283,987

Income earned on securities for the years ended is as follows:

24 unchanged sentences

Loans receivable, net $ 14,488,620 $ 14,136,494

On April 1, 2022, the Company completed the acquisition of Happy.

Including the effects of the purchase accounting adjustments, as of the acquisition date, Happy had approximately $ 3.65 billion in loans.

During the year ended December 31, 2024, the Company sold $ 7.8 million of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $ 617,000 .

During the year ended December 31, 2023, the Company sold $ 3.7 million of the guaranteed portion of certain SBA loans, which resulted in a gain of $ 278,000 .

During the year ended December 31, 2021, the Company sold $ 22.7 million of the guaranteed portion of certain SBA loans, which resulted in a gain of $ 2.4 million.

During the year ended December 31, 2022, the Company sold $ 4.1 million of the guaranteed portion of certain SBA loans, which resulted in a gain of $ 183,000 .

Mortgage loans held for sale of approximately $ 98.7 million and $ 123.4 million at December 31, 2024 and 2023, respectively, are included in residential 1-4 family loans.

19 unchanged sentences

The Company held approximately $ 76.3 million and $ 130.7 million in PCD loans, as of December 31, 2024 and 2023, respectively.

The balance, as of December 31, 2023, consisted of $ 130.4 million resulting from the acquisition of Happy and $ 376,100 from the acquisition of LH-Finance.

The balance, as of December 31, 2024, consisted of $ 76.3 million resulting from the acquisition of Happy.

The balance, as of December 31, 2023, consisted of $ 130.4 million resulting from the acquisition of Happy and $ 376,100 from the acquisition of LH-Finance.

12 unchanged sentences

This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.

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.

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.

11 unchanged sentences

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

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

Based on this analysis, management determined that changes to several of the economic factors for the loss driver segments, along with other model improvements and updates, were necessary, and updated models were implemented beginning with the June 30, 2024 allowance for credit losses calculation.

The identified loss drivers by segment are included below as of both December 31, 2024 and 2023.

December 31, 2024

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

1-4 Family Construction 1a1 National Unemployment (%) & Housing Price Index (%)

All Other Construction 1a2 National Unemployment (%) & Gross Domestic Product (%)

Farmland & Agriculture 1b, 3 National Unemployment (%)

Residential 1-4 Family 1c1, 1c2a, 1c2b National Unemployment (%) & Housing Price Index (%)

Multifamily 1d Rental Vacancy Rate (%) & Housing Price Index (%)

Non-Farm/ Non-Residential CRE 1e1, 1e2 National Unemployment (%) & Gross Domestic Product (%)

Commercial & Industrial, Non-Depository Financial Institutions, Purchase/Carry Securities, Leases, Other 4a, 9a, 9b1, 9b2, 10, Other National Unemployment (%) & National Retail Sales (%)

Consumer Auto 6c National Unemployment (%) & National Retail Sales (%)

Other Consumer 6b, 6d National Unemployment (%) & National Retail Sales (%)

Other Consumer - SPF 6d National Unemployment (%)

Obligations of States and Political Subdivisions 8 National Unemployment (%) & Gross Domestic Product (%)

December 31, 2023

Loss Driver Segment

47 unchanged sentences

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

During the year ended December 31, 2024, the Company recorded a $ 48.4 million provision for credit losses on loans.

$ 33.4 million of the provision for credit losses on loans recorded during 2024 was used to establish a hurricane reserve for loans located in the Federal Emergency Management Agency ("FEMA") disaster areas impacted by Hurricanes Helene and Milton which made landfall during the third and fourth quarters of 2024.

The remaining portion of the provision was related to loan growth.

In addition, during the third quarter of 2024, the Company recorded a $ 1.0 million provision for credit losses on unfunded commitments, which completely offset the $ 1.0 million recovery of credit losses on unfunded commitments which was recorded during the first quarter of 2024.

During the year ended December 31, 2023, the Company recorded a $ 12.0 million provision for credit losses on loans, and the Company reversed $ 1.5 million in provision for unfunded commitments.

4 unchanged sentences

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

During the year ended December 31, 2021, the Company did not record a provision for credit losses on loans as the level of the allowance for credit losses was considered adequate, and the Company reversed $ 4.8 million in provision for unfunded commitments.

The following table presents the activity in the allowance for credit losses for the year ended December 31, 2024.

11 unchanged sentences

Recoveries of loans previously charged off 221 59 180 628 1,194 2,282

Net loans recovered (charged off) ( 150 ) ( 1,802 ) 60 ( 8,574 ) ( 2,919 ) ( 13,385 )

Net loans (charged off) recovered

( 1,216 ) ( 38,073 ) ( 6,887 ) ( 10,461 ) ( 4,117 ) ( 60,754 )

Provision for credit loss - loans 19,610 50,753 1,862 ( 32,728 ) 8,903 48,400

12 unchanged sentences

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

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

Loans charged off ( 263 ) ( 2,335 ) ( 269 ) ( 9,157 ) ( 4,031 ) ( 16,055 )

Recoveries of loans previously charged off 113 533 329 583 1,112 2,670

Net loans recovered (charged off) 404 967 ( 327 ) ( 8,993 ) ( 6,082 ) ( 14,031 )

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

Net loans (charged off) recovered

( 150 ) ( 1,802 ) 60 ( 8,574 ) ( 2,919 ) ( 13,385 )

Provision for credit loss - loans 1,784 ( 13,411 ) 4,837 12,030 6,710 11,950

12 unchanged sentences

Beginning balance $ 28,415 $ 87,218 $ 48,458 $ 53,062 $ 19,561 $ 236,714

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

Loans charged off ( 1 ) — ( 446 ) ( 9,773 ) ( 7,047 ) ( 17,267 )

Recoveries of loans previously charged off 405 967 119 780 965 3,236

58 785 683 591 785 2,902

Net loans recovered (charged off) 404 967 ( 327 ) ( 8,993 ) ( 6,082 ) ( 14,031 )

58 139 138 ( 7,651 ) ( 1,443 ) ( 8,759 )

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

Provision for credit loss - loans ( 4,731 ) ( 22,331 ) ( 5,528 ) 28,386 9,204 5,000

152 unchanged sentences

Assets classified as loss should be charged-off in the period in which they became uncollectible.

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

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

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

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

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

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

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

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

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

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

Based on the most recent analysis performed, the risk category of loans by class as of December 31, 2024 and 2023 is as follows:

181 unchanged sentences

Total $ 2,138,730 $ 3,341,500 $ 2,083,044 $ 1,132,926 $ 872,429 $ 2,908,528 $ 1,947,571 $ 14,424,728

The following table presents gross write-offs by origination date for the year ended December 31, 2023.

The following table presents gross write-offs by origination date for the year ended December 31, 2024 and December 31, 2023.

December 31, 2024

8 unchanged sentences

Residential 1-4 family — 57 170 1 58 184 97 567

Multifamily residential — — 6,500 — — — — 6,500

Total real estate — 57 33,395 1,306 10,070 1,404 404 46,636

3 unchanged sentences

Total $ 3,044 $ 838 $ 34,489 $ 2,243 $ 10,522 $ 7,883 $ 4,017 $ 63,036

*The 2024 write-offs primarily consist of overdrafts.

December 31, 2023

Term Loans Amortized Cost Basis by Origination Year

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

(In thousands)

Commercial real estate loans

Non-farm/non-residential $ — $ — $ — $ — $ 1,826 $ 502 $ — $ 2,328

Construction/land development — 2 168 5 — 88 — 263

Agricultural — — — — 1 6 — 7

Residential real estate loans

Residential 1-4 family — 29 28 73 13 126 — 269

Total real estate — 31 196 78 1,840 722 — 2,867

Consumer — 51 44 98 63 263 25 544

Commercial and industrial — 407 1,110 894 911 5,369 466 9,157

Agricultural & other 3,252 **

1 1 2 64 3 164 3,487

Total $ 3,252 $ 490 $ 1,351 $ 1,072 $ 2,878 $ 6,357 $ 655 $ 16,055

** The 2023 write-off primarily consists of overdrafts.

94 unchanged sentences

These loans were considered immaterial for vintage disclosure inclusion.

The following table presents the amortized cost basis of modified loans to borrowers experiencing financial difficulty by class and modification type at December 31, 2023.

The following table presents the amortized cost basis of modified loans to borrowers experiencing financial difficulty by class and modification type at December 31, 2024 and December 31, 2023.

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

13 unchanged sentences

Total $ 3,807 $ 100,311 $ 102 $ 1,752 $ 938 $ 2 $ 15,646 $ 117 $ 122,675 0.83 %

During the year ended December 31, 2023, the Company restructured approximately $ 19.5 million in loans to 21 borrowers.

The ending balance of these loans as of December 31, 2023, was $ 21.0 million.

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

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

Two of the loans involved the loans being placed on interest only payments for 36 months and the term being extended an additional 36 months while the interest rate was increased by 9 basis points.

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

None of the $ 24.6 million in restructured loans held by the Company were considered to be collateral dependent as of December 31, 2023.

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

December 31, 2023

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

Combination of Modifications

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

Percentage of Total Class of Loans Receivable

(Dollars in thousands)

5 unchanged sentences

Residential 1-4 family 560 598 106 59 516 — — 116 1,955 0.11 %

Multifamily residential — — — — — — — — — — %

Total real estate 958 598 106 1,745 864 — 16,023 116 20,410 0.20 %

2 unchanged sentences

Total $ 3,225 $ 636 $ 149 $ 3,518 $ 938 $ 5 $ 16,023 $ 116 $ 24,610 0.17 %

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

The Company has modified 21 loans over the past 12 months to borrowers experiencing financial difficulty.

The pre-modification balance of the loans was $ 19.5 million, and the ending balance as of December 31, 2023 was $ 21.0 million.

The $ 21.0 million balance consists of $ 905,000 of non-accrual loans and $ 20.1 million of current loans, of which $ 1.5 million were 60-89 days past due as of December 31, 2023.

The remaining balance of the loans was current as of December 31, 2023.

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

During the year ended December 31, 2024, the Company restructured approximately $ 108.4 million in loans to 13 borrowers.

The ending balance of these loans as of December 31, 2024, was $ 100.5 million.

The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the year ended December 31, 2024 immaterial for tabular disclosure inclusion.

Three of the modified loans pertained to one borrower relationship and accounted for $ 99.1 million of the total post-modification outstanding balance.

The modification involved three new loans being underwritten resulting in the interest rate decreasing by 12 basis points and one of the loans in the relationship being charged-off.

The charged-off amount was $ 26.1 million.

Five of the $ 122.7 million in restructured loans held by the Company were considered to be collateral dependent as of December 31, 2024.

The outstanding balance of these loans was $ 114.7 million, and the specific reserve was $ 2.9 million.

The following table presents the amortized cost basis of loans that had a payment default during the years ended December 31, 2024 and 2023, respectively, and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

December 31, 2024

Term Extension Combination Interest Rate Reduction and Term Extension

(Dollars in thousands)

2 unchanged sentences

Construction/land development — —

Agricultural — —

Residential real estate loans —

Residential 1-4 family 249 —

Multifamily residential 1 1,130 969 — — 969

Total real estate 249 —

Consumer 2 18 11 — 1 12

Commercial and industrial — 2

Total $ 254 $ 2

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

December 31, 2023

Number of Loans

Recorded Balance

(Dollars in thousands)

Commercial real estate loans

1 unchanged sentence

Construction/land development — — — — — — —

Agricultural — — — — — — —

Residential real estate loans —

1 unchanged sentence

Total real estate 299 105 9 — 328 — 116

Consumer 14 — — 29 — 5 —

Commercial and industrial — — — — — — —

Total $ 313 $ 105 $ 9 $ 29 $ 328 $ 5 $ 116

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

The Company has modified 13 loans over the past 12 months to borrowers experiencing financial difficulty.

The pre-modification balance of the loans was $ 134.4 million, and the ending balance as of December 31, 2024 was $ 100.5 million.

The $ 100.5 million balance consists of $ 256,190 of non-accrual loans and $ 100.2 million of current loans, of which all were current as of December 31, 2024.

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

4 unchanged sentences

The Company held approximately $ 76.3 million and $ 130.7 million in PCD loans, as of December 31, 2024 and 2023, respectively.

The balance, as of December 31, 2023, consisted of $ 130.4 million resulting from the acquisition of Happy and $ 376,100 from the acquisition of LH-Finance.

The balance, as of December 31, 2024, resulted from the acquisition of Happy.

The balance, as of December 31, 2023, consisted of $ 130.4 million resulting from the acquisition of Happy and $ 376,100 from the acquisition of LH-Finance.

7 unchanged sentences

Residential 1-4 family 1,624 545

Multifamily residential — 121

Total foreclosed assets held for sale $ 43,407 $ 30,486

4 unchanged sentences

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

Acquisitions — 425,228

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

2 unchanged sentences

Balance, beginning of period $ 48,770 $ 58,455

Acquisitions — 42,263

Amortization expense ( 8,443 ) ( 9,685 )

21 unchanged sentences

As of December 31, 2024 and 2023, other assets were $ 345.3 million and $ 323.6 million, respectively.

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

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

These equity securities without a readily determinable fair value were $ 135.2 million and $ 134.6 million at December 31, 2024 and December 31, 2023, respectively, and are accounted for at cost.

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

The Company also has equity securities which are accounted for under ASC Topic 321.

These equity securities without a readily determinable fair value were $ 91.2 million and $ 88.6 million at December 31, 2024 and 2023, respectively.

1 unchanged sentence

The aggregate amount of time deposits with a minimum denomination of $250,000 was $ 917.1 million and $ 836.7 million at December 31, 2024 and 2023, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 1.09 billion and $ 639.3 million at December 31, 2023 and 2022, respectively.

The aggregate amount of time deposits with a minimum denomination of $100,000 was $ 1.20 billion and $ 1.09 billion at December 31, 2024 and 2023, respectively.

Interest expense applicable to certificates in excess of $100,000 totaled $ 49.3 million, $ 26.1 million and $ 3.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.

15 unchanged sentences

Securities sold under agreements to repurchase:

government-sponsored enterprises $ — $ — $ 5,322 $ 5,322

Mortgage-backed securities 48,056 48,056 — —

3 unchanged sentences

FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 600.0 million and $ 650.0 million at December 31, 2023 and 2022, respectively.

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 600.0 million at both December 31, 2024 and 2023.

At December 31, 2024, $ 100.0 million and $ 500.0 million balance was classified as short-term and long-term advances, respectively.

At December 31, 2023, the entire $ 600.0 million balance was classified as long-term advances.

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

The FHLB advances mature from 2025 to 2037 with fixed interest rates ranging from 3.37 % to 4.84 % and are secured by loans and investments securities.

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

Other borrowed funds were $ 750,000 as of December 31, 2024 and were classified as short-term advances.

Other borrowed funds were $ 701.3 million as of December 31, 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 $ 1.37 billion in liquidity with the Federal Reserve Bank as of December 31, 2023.

This consisted of $ 89.8 million available from the Discount Window and $ 1.28 billion available through the Bank Term Funding Program ("BTFP").

As of December 31, 2023, the primary and secondary credit rates available through the Discount Window were 5.50 % and 6.00 %, respectively, and the BTFP rate was 4.84 %.

As of December 31, 2023, the Company had drawn $ 700.0 million from the BTFP in the ordinary course of business.

These advances are included within other borrowed funds and are secured by certain investment securities within our investment portfolio.

During the fourth quarter of 2024, the Company paid off its $ 700.0 million advance from the Federal Reserve's Bank Term Funding Program ("BTFP").

Additionally, the Company had $ 1.22 billion and $ 1.33 billion at December 31, 2024 and 2023, respectively, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at December 31, 2024 and 2023, respectively.

3 unchanged sentences

2026 100,000 100,000

Thereafter 400,000 —

1 unchanged sentence

Subordinated Debentures

Subordinated debentures consist of subordinated debt securities and guaranteed payments on trust preferred securities.

As of December 31, 2024 and 2023, subordinated debentures were $ 439.2 million and $ 439.8 million, respectively.

9 unchanged sentences

Total $ 439,246 $ 439,834

Trust Preferred Securities .

On April 1, 2022, the Company acquired $ 23.2 million in trust preferred securities from Happy which were currently callable without penalty based on the terms of the specific agreements.

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

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

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

Subordinated Debt Securities .

15 unchanged sentences

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

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

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

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

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

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

The Company, beginning with the interest payment date of April 15, 2022, and on any interest payment date thereafter, was permitted to redeem the 2027 Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the 2027 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

On April 15, 2022, the Company completed the payoff of the 2027 Notes in aggregate principal amount of $ 300.0 million.

Each 2027 Note was redeemed pursuant to the terms of the Subordinated Indenture, as supplemented by the First Supplemental Indenture, each dated as of April 3, 2017, between the Company and U.S.

Bank Trust Company, National Association, the Trustee for the 2027 Notes, at the redemption price of 100 % of its principal amount, plus accrued and unpaid interest to, but excluding, the redemption date.

The following is a summary of the components of the provision for income taxes for the years ended December 31, 2024, 2023 and 2022:

29 unchanged sentences

Loan discounts 3,323 5,119

Tax basis on acquisitions

Investments 26,042 24,669

Accelerated depreciation on premises and equipment 664 —

Other 14,634 14,691

23 unchanged sentences

The remaining balance available for repurchase was 13,244,493 shares at December 31, 2024.

On January 17, 2025, the Board of Directors (the “Board”) of the Company authorized an increase in the shares of the Company’s common stock available for repurchase under its stock repurchase program, which was originally approved by the Board in January 2008 and most recently amended in January 2021, to renew the authorization to 20,000,000 shares.

As of January 17, 2025, a total of approximately 13,244,493 shares remained available for repurchase under the existing repurchase authorization, resulting in an increase of 6,755,507 shares of common stock available for repurchase.

Stock Compensation Plans

On January 21, 2022, the Company’s Board of Directors adopted, and on April 21, 2022, the Company's shareholders approved, the Home BancShares, Inc.

The Company has an equity incentive plan known as the Home BancShares, Inc.

2022 Equity Incentive Plan (the "2022 Plan").

The purpose of the 2022 Plan is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results.

The 2022 Plan replaced the Company’s Amended and Restated 2006 Stock Option and Performance Incentive Plan (the “2006 Plan” and, together with the 2022 Plan, the “Plans”), which expired on February 27, 2022.

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

Awards outstanding under the 2006 Plan remain in effect under the terms of the 2006 Plan until such awards vest, expire, lapse or are forfeited or terminated.

However, no new awards may be granted under the 2006 Plan.

As of December 31, 2024, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan).

At December 31, 2023, the Company had 2,638,311 shares of common stock remaining available for future grants and 5,413,912 shares of common stock reserved for issuance pursuant the Plans.

At December 31, 2024, the Company had 2,052,178 shares of common stock remaining available for future grants under the 2022 Plan and an aggregate of 3,641,537 shares of common stock reserved for issuance pursuant to outstanding awards under the Plans.

The intrinsic value of the stock options outstanding at December 31, 2024, 2023, and 2022 was $ 9.0 million, $ 12.2 million and $ 7.8 million, respectively.

1 unchanged sentence

The intrinsic value of the stock options exercised during 2024, 2023 and 2022 was $ 8.8 million, $ 1.9 million, and $ 1.8 million, respectively.

Total unrecognized compensation cost, net of income tax benefit, related to non-vested awards, which are expected to be recognized over the vesting periods, was approximately $ 3.7 million as of December 31, 2023.

Total unrecognized compensation cost related to non-vested awards, which are expected to be recognized over the vesting periods, was approximately $ 1.5 million as of December 31, 2024.

The table below summarized the stock option transactions under the Plan at December 31, 2024, 2023 and 2022 and changes during the years then ended:

41 unchanged sentences

$ 26.00 to $ 27.99

$ 28.00 to $ 29.99

10 9.85 29.41 — —

56 unchanged sentences

At December 31, 2024 and 2023, related party loans were approximately $ 36.3 million and $ 63.2 million, respectively.

New loans and advances on prior commitments made to the related parties were $ 662,000 and $ 24.8 million for the years ended December 31, 2023 and 2022, respectively.

New loans and advances on prior commitments made to the related parties were $ 1.7 and $ 662,000 for the years ended December 31, 2024 and 2023, respectively.

Repayments of loans made by the related parties were $ 1.7 million and $ 11.0 million for the years ended December 31, 2024 and 2023, respectively.

At December 31, 2023 and 2022, directors, officers, and other related interest parties had demand, non-interest-bearing deposits of approximately $ 4.3 million and $ 7.7 million, respectively, savings and interest-bearing transaction accounts of approximately $ 11.6 million and $ 10.9 million, respectively, and time certificates of deposit of approximately $ 878,000 and $ 390,000 , respectively.

At December 31, 2024 and 2023, directors, officers, and other related interest parties had demand, non-interest-bearing deposits of approximately $ 5.1 million and $ 4.3 million, respectively, savings and interest-bearing transaction accounts of approximately $ 7.8 million and $ 11.6 million, respectively, and time certificates of deposit of approximately $ 1.6 million and $ 878,000 , respectively.

During each of 2024, 2023 and 2022, rent expense totaling approximately $ 133,000 , $ 139,000 and $ 137,000 , respectively, was paid to related parties.

14 unchanged sentences

(In thousands)

2025 $ 10,262

Thereafter 16,346

61 unchanged sentences

Transfers of financial instruments between levels within the fair value hierarchy are recognized on the date management determines that the underlying circumstances or assumptions have changed.

Available-for-sale securities - the Company's available-for-sale securities are considered to be Level 2 securities.

Available-for-sale securities - Available-for-sale securities are the only material instruments valued on a recurring basis which are held by the Company at fair value.

The Company's available-for-sale securities are primarily considered to be Level 2 securities.

The Level 2 securities consist primarily of U.S.

3 unchanged sentences

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

As of December 31, 2024 and 2023, Level 2 securities were $ 3.05 billion and $ 3.49 billion, respectively.

As of December 31, 2024 and 2023, Level 3 securities were $ 21.5 million and $ 22.8 million, respectively.

In addition, there were no material transfers between hierarchy levels during 2024, 2023 and 2022.

The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices.

2 unchanged sentences

The Company uses a third-party comparison pricing vendor in order to reflect consistency in the fair values of the investment securities sampled by the Company each quarter.

Held-to-maturity securities – the Company's held-to-maturity securities are considered to be Level 2 securities.

The Level 2 securities consist primarily of U.S.

government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions.

For these securities, the Company obtains fair value measurements from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Impaired loans - Impaired loans include 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.

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

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

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

The fair value of loans with specific allocated losses was $ 10.5 million and $ 168.6 million as of December 31, 2023 and 2022, respectively.

See footnote 3 for further detail related to the fair value of the Company's available-for-sale investment portfolio.

Individually Evaluated Loans - Individually evaluated loans are the only material financial assets valued on a non-recurring basis which are held by the Company at fair value.

When the Company has a specific expectation to initiate, or has initiated, foreclosure proceedings, and when the repayment of a loan is expected to be substantially dependent upon the liquidation of the underlying collateral, the loan relationship is considered to be collateral dependent.

Fair value of the loan is determined by establishing an allowance for credit loss for any exposure based on the valuation of the underlying collateral.

The valuation of the collateral is determined by either an independent third-party appraisal or other collateral analysis.

Discounts can be made by the Company based upon the overall evaluation of the independent appraisal.

Collateral-dependent loans are classified within Level 3 of the fair value hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition.

Collateral values supporting the individually assessed loans are evaluated quarterly for updates to appraised values or adjustments due to non-current valuations.

The fair value of collateral-dependent loans was $ 209.8 million and $ 171.7 million as of December 31, 2024 and 2023, respectively.

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

The Company reversed $ 2.4 million and $ 1.1 million of accrued interest receivable when impaired loans were put on non-accrual status during the years ended December 31, 2023 and 2022, respectively.

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

Foreclosed assets held for sale - Foreclosed assets held for sale are the only material non-financial assets valued on a non-recurring basis which are held by the Company at fair value, less estimated costs to sell.

At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for credit losses.

1 unchanged sentence

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

As of December 31, 2023 and 2022, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 30.5 million and $ 546,000 , respectively.

No foreclosed assets held for sale were remeasured during the year ended December 31, 2023.

As of December 31, 2024 and 2023, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $ 43.4 million and $ 30.5 million, respectively.

Foreclosed assets held for sale with a carrying value of approximately $ 17.9 million were remeasured during the year ended December 31, 2024, resulting in a write-down of approximately $ 2.5 million.

No foreclosed assets held for sale were remeasured during the year ended December 31, 2023.

4 unchanged sentences

As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount.

During the reported periods, collateral discounts ranged from approximately 10 % to 70 %.

Fair Values of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents and federal funds sold - For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities - held-to-maturity securities – These securities consist primarily of U.S.

government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions.

For these securities, the Company obtains fair value measurements from an independent pricing service.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Loans receivable, net of impaired loans and allowance — For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are assumed to approximate the carrying amounts.

The fair values for fixed-rate loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics.

Fair values for acquired loans are based on a discounted cash flow methodology that considers factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan is amortizing.

Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques.

The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.

The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.

Accrued interest receivable and payable - The carrying amounts of accrued interest approximates fair value.

FHLB, FRB & FNBB stock;

other equity investments;

marketable equity securities - The carrying amount of these investments approximate fair value.

Deposits and securities sold under agreements to repurchase — The fair values of demand deposits, savings deposits and securities sold under agreements to repurchase are, by definition, equal to the amount payable on demand and, therefore, approximate their carrying amounts.

The fair values for time deposits are estimated using a discounted cash flow calculation that utilizes interest rates currently being offered on time deposits with similar contractual maturities.

FHLB and other borrowed funds - For short-term instruments, the carrying amount is a reasonable estimate of fair value.

The fair value of long-term debt is estimated based on the current rates available to the Company for debt with similar terms and remaining maturities.

Subordinated debentures - The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities.

Commitments to extend credit, letters of credit and lines of credit – The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties.

For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

The fair value of these commitments is not material and are therefore, omitted from this disclosure.

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

5 unchanged sentences

Cash and cash equivalents $ 910,347 $ 910,347 1

Federal funds sold 3,725 3,725 1

Investment securities - available for sale 3,051,110 3,051,110 2

Investment securities - available for sale 21,529 21,529 3

Investment securities - held-to-maturity 1,275,204 1,142,940 2

17 unchanged sentences

Cash and cash equivalents $ 1,000,213 $ 1,000,213 1

Federal funds sold 5,100 5,100 1

Investment securities - available for sale 3,485,031 3,485,031 2

Investment securities - available for sale 22,810 22,810 3

Investment securities - held-to-maturity 1,281,982 1,170,481 2

67 unchanged sentences

Additional Cash Flow Information

In connection with the Happy acquisition, accounted for under ASC Topic 805, the Company acquired approximately $ 6.69 billion in assets, including $ 858.6 million in cash and cash equivalents, assumed $ 6.15 billion in liabilities, and issued approximately 42.4 million shares of its common stock valued at approximately $ 958.8 million as of April 1, 2022.

In addition, the holders of certain Happy stock-based awards received approximately $ 3.7 million in cash in cancellation of such awards, for a total transaction value of approximately $ 962.5 million.

The following is summary of the Company’s additional cash flow information during the years ended December 31:

10 unchanged sentences

Investments in wholly-owned subsidiaries 3,782,780 3,679,597

Premises and equipment

Other assets 16,959 18,049

7 unchanged sentences

Retained earnings 1,942,350 1,690,112

Accumulated other comprehensive income ( 249,075 ) ( 305,458 )

Accumulated other comprehensive loss

( 256,108 ) ( 249,075 )

Total stockholders' equity 3,961,025 3,791,075

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Dividends from banking subsidiary 311,127 329,997 216,086

Other (loss) income ( 724 ) ( 1,297 ) 7,234

Other income (loss)

3,842 ( 724 ) ( 1,297 )

Total income 318,558 332,907 216,877

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Share-based compensation 9,222 9,274 9,133

Decrease (increase) in value of equity securities 1,094 1,272 ( 7,178 )

(Increase) decrease in value of equity securities

( 2,971 ) 1,094 1,272

Equity in undistributed income of subsidiaries ( 110,217 ) ( 84,869 ) ( 116,566 )

3 unchanged sentences

Cash flows from investing activities

Purchases of premises and equipment, net

Net cash proceeds from Happy Bancshares, Inc.

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Cash and cash equivalents, end of year $ 550,340 $ 484,542 $ 359,570

Segment Information

The Company has one reportable segment:

The Banking Segment.

The Company's reportable segment is determined by the Chairman & Chief Executive Officer, who is the designated chief operating decision maker ("CODM"), based upon information provided about the Company's products and services offered, primarily banking operations.

The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business such as geographical regions and branches, which are then aggregated since these have similar operating and economic characteristics.

Each of the branches and regions of the Bank provide a group of similar banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts.

The CODM will evaluate the financial performance of the Company's business components such as evaluating revenue streams, significant expenses and budget to actual results in order to assess the Company's segment and to determine the allocation of resources.

The CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets.

The CODM uses consolidated net income in order to benchmark the Company against its competitors.

The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation.

Loans, investments and deposits provide the revenues in the banking operation.

Interest expense, provision for credit losses and payroll provide the significant expenses in the banking operation.

All operations are domestic.

Accounting policies for segments are the same as those described in Note 1.

Segment performance is evaluated using consolidated net income.

The table below presents the information reported internally for performance assessment by the CODM for years ended December 31, 2024, 2023 and 2022:

Banking Segment 2024 2023 2022

(In thousands)

Interest Income $ 1,299,777 $ 1,175,053 $ 877,766

Reconciliation of revenue:

Other Revenues*

168,574 169,934 175,111

Total consolidated revenues $ 1,468,351 $ 1,344,987 $ 1,052,877

Interest Expense 451,003 348,108 119,090

Segment net interest income and noninterest income $ 1,017,348 $ 996,879 $ 933,787

Provision for credit losses 48,070 12,133 63,585

Salaries and employee benefits 241,022 256,966 238,885

Occupancy and equipment**

58,031 60,303 53,417

Data Processing expense 36,494 36,329 34,942

Merger and acquisition expense — — 49,594

Other expense 36,963 32,967 27,905

FDIC and state assessment 15,388 25,530 8,428

Electronic banking expense 13,444 14,313 13,632

Other segment items***

45,594 46,455 48,824

Income tax expense 120,101 118,954 89,313

Segment net income/consolidated net income

402,241 392,929 305,262

Reconciliation of profit or loss:

Adjustments and reconciling items — — —

Consolidated net income $ 402,241 $ 392,929 $ 305,262

*Includes earnings in equity method investments of $ 5.1 million, $ 12.7 million and $ 9.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

** Includes depreciation and amortization expense of $ 29.2 million, $ 30.9 million and $ 31.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

***Other segment items include expenses for advertising, amortization of intangibles, directors' fees, due from bank service charges, hurricane damage, insurance expense, legal and accounting fees, other professional fees, operating supplies, postage and telephone.

Recent Accounting Pronouncements

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

Simplifying the Accounting for Income Taxes.

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

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

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

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

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

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

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

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

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

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

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

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ASU 2022-06 was effective upon issuance.

The sunset of the provisions did not have a material impact on our financial position.

In November 2023, the FASB issued ASU 2023-07, " Segment Reporting (Topic 280):

12 unchanged sentences

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

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

The Company adopted the guidance effective December 31, 2024, and its option did not have a significant impact on our financial position or financial statements.

In December 2023, the FASB issued ASU 2023-09, " Income Taxes (Topic 740):

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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 7A. Quantitative and Qualitative Disclosures About Market Risk