UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM10-Q

(Mark One)

☑
☑			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September~~June 30, ~~2017~~

2022

☐
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition period from ______ to

______

Commission File Number:~~000-51904~~

001-41093

HOME BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Arkansas						71-0682831
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

719 Harkrider, Suite 100 ~~Conway,~~,Conway, Arkansas						72032
(Address of principal executive offices)						(Zip Code)

(501) 339-2929
(Registrant's telephone number, including area code)

Not Applicable
Former name, former address and former fiscal year, if changed since last report

~~(501)339-2929~~

~~(Registrant’s telephone number, including area code)~~

~~Not Applicable~~

~~Former name, former address and former fiscal year, if changed since last report~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

HOMB

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or ~~15 (d)~~15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T ~~(§ 232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange ~~Act. (Check one):~~

Act:

Large ~~accelerated filer~~Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

~~Non-accelerated filer~~

☐

~~Smaller reporting company~~

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest ~~practical~~practicable date.

Common Stock Issued and Outstanding: ~~173,643,671~~ 205,065,089shares as of ~~November 1, 2017.~~

August 8, 2022.

~~HOME BANCSHARES, INC.~~

~~FORM10-Q~~

~~September 30, 2017~~

Table of Contents~~INDEX~~

~~Page No.~~

HOME BANCSHARES, INC.
FORM 10-Q
June 30, 2022

~~Part I:~~INDEX

~~Financial Information~~

Page No.

Part I:

Financial Information

Item 1:

Financial Statements

Consolidated Balance Sheets –
~~September 30, 2017~~June 3 0 , 2022 (Unaudited) and December 31, ~~2016~~2021

Consolidated Statements of Income (Unaudited) –
Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021

Consolidated Statements of Comprehensive (Loss) Income (Unaudited) –
Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021

Consolidated Statements of Stockholders’ Equity (Unaudited) –
~~Nine~~ Three and six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021

7-8

Consolidated Statements of Cash Flows (Unaudited) –
~~Nine~~ Six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021

Condensed Notes to Consolidated Financial Statements (Unaudited)

~~8-52~~

10-53

Report of Independent Registered Public Accounting Firm

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~54-92~~

55-94

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

~~93-95~~

94-95

Item 4:

Controls and Procedures

~~96-97~~

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3:

Defaults Upon Senior Securities

Item 4:

Mine Safety Disclosures

~~99-100~~

97-98

Signatures

~~101~~

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of our statements contained in this document, including matters discussed under the caption ~~“Management’s~~“Management's Discussion and Analysis of Financial Condition and Results of Operation,” are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to future events or our future financial performance and include statements about the competitiveness of the banking industry, potential regulatory obligations, our entrance and expansion into other markets, including through prospective or potential acquisitions, our other business strategies and other statements that are not historical facts. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared. These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to, the following:

•the effects of future local, regional, national and international economic conditions, including inflation or a decrease in commercial real estate and residential housing values;

•changes in the level of nonperforming assets and charge-offs, and credit risk generally;

•the risks of changes in interest rates or the level and composition of deposits, loan demand and the values of loan collateral, securities and interest-sensitive assets and liabilities;

•disruptions, uncertainties and related effects on credit quality, liquidity, other aspects of our business and our operations as a result of the ongoing COVID-19 pandemic and measures that have been or may be implemented or imposed in response to the pandemic;

•the effect of any mergers, acquisitions or other transactions to which we or our bank subsidiary may from time to time be a party, including our ability to successfully integrate our recent acquisition of Happy Bancshares, Inc. and its bank subsidiary, as well as any other businesses that we may acquire;

•the risk that expected cost savings and other benefits from acquisitions may not be fully realized or may take longer to realize than expected;

•the possibility that an acquisition does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all;

•the reaction to a proposed acquisition transaction of the respective companies’ customers, employees and counterparties;

•diversion of management time on acquisition-related issues;

•the ability to enter into and/or close additional acquisitions;

•the availability of and access to capital on terms acceptable to us;

•increased regulatory requirements and supervision that ~~will apply~~applies as a result of our exceeding $10 billion in total assets;

•legislation and regulation affecting the financial services industry as a whole, and the Company and its subsidiaries in particular, including the effects resulting from the ~~reforms enacted by the~~ Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) ~~and the adoption of regulations by regulatory bodies under~~, recent reforms to the Dodd-Frank ~~Act;~~Act, legislation and regulations in response to the COVID-19 pandemic and other future legislative and regulatory changes;

•changes in governmental monetary and fiscal ~~policies, as well as legislative and regulatory changes, including as a result of initiatives of the newly elected administration of President Donald J. Trump;~~policies;

•the effects of terrorism and efforts to combat it;

•political ~~instability;~~

~~risks associated with our customer relationship with~~instability, war, military conflicts (including the ~~Cuban government~~ongoing military conflict between Russia and ~~our correspondent banking relationship with Banco Internacional de Comercio, S.A. (BICSA), a Cuban commercial bank, through our recently completed acquisition of Stonegate Bank;~~Ukraine) and other major domestic or international events;

•adverse weather events, including hurricanes, and other natural disasters;

•the ability to keep pace with technological changes, including changes regarding cybersecurity;

Table of Contents

•an increase in the incidence or severity of fraud, illegal payments, ~~security~~cybersecurity breaches or other illegal acts impacting our bank subsidiary, our vendors or our customers;

•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with competitors offering banking products and services by mail, telephone and the Internet;

•potential claims, expenses and other adverse effects related to current or future litigation, regulatory examinations or other government actions;

•the effect of changes in accounting policies and practices and auditing requirements, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;

•higher defaults on our loan portfolio than we expect; and

•the failure of assumptions underlying the establishment of our allowance for ~~loan~~credit losses or changes in our estimate of the adequacy of the allowance for ~~loan~~credit losses.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, see the “Risk Factors” ~~sections~~section of our Form10-K filed with the Securities and Exchange Commission (the “SEC”) on February ~~28, 2017 and this Form10-Q.~~

24, 2022.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

Home BancShares, Inc.

Consolidated Balance Sheets

(In thousands, except share data)
   September 30, 2017 December 31, 2016
   (Unaudited)
Assets
Cash and due from banks
   $ 197,953 $ 123,758
Interest-bearing deposits with other banks
   354,367 92,891


Cash and cash equivalents
   552,320 216,649
Federal funds sold
   4,545 1,550
Investment securities –available-for-sale
   1,575,685 1,072,920
Investment securities –held-to-maturity
   234,945 284,176
Loans receivable
   10,286,193 7,387,699
Allowance for loan losses
   (111,620 ) (80,002 )


Loans receivable, net
   10,174,573 7,307,697
Bank premises and equipment, net
   239,990 205,301
Foreclosed assets held for sale
   21,701 15,951
Cash value of life insurance
   146,158 86,491
Accrued interest receivable
   41,071 30,838
Deferred tax asset, net
   121,787 61,298
Goodwill
   929,129 377,983
Core deposit and other intangibles
   50,982 18,311
Other assets
   163,081 129,300


Total assets
   $ 14,255,967 $ 9,808,465


Liabilities and Stockholders’ Equity
Deposits:

Demand andnon-interest-bearing
   $ 2,555,465 $ 1,695,184
Savings and interest-bearing transaction accounts
   6,341,883 3,963,241
Time deposits
   1,551,422 1,284,002


Total deposits
   10,448,770 6,942,427
Securities sold under agreements to repurchase
   149,531 121,290
FHLB and other borrowed funds
   1,044,333 1,305,198
Accrued interest payable and other liabilities
   38,782 51,234
Subordinated debentures
   367,835 60,826


Total liabilities
   12,049,251 8,480,975


Stockholders’ equity:

Common stock, par value $0.01; shares authorized 200,000,000 in 2017 and 2016; shares issued and outstanding 173,665,904 in 2017 and 140,472,205 in 2016
   1,737 1,405
Capital surplus
   1,674,642 869,737
Retained earnings
   526,448 455,948
Accumulated other comprehensive income
   3,889 400


Total stockholders’ equity
   2,206,716 1,327,490


Total liabilities and stockholders’ equity
   $ 14,255,967 $ 9,808,465


(In thousands, except share data)	June 30, 2022		December 31, 2021
	(Unaudited)
Assets
Cash and due from banks	$	287,451	$	119,908
Interest-bearing deposits with other banks	2,528,925		3,530,407
Cash and cash equivalents	2,816,376		3,650,315
Investment securities – available-for-sale, net of allowance for credit losses	3,791,509		3,119,807
Investment securities — held-to-maturity, net of allowance for credit losses	1,366,781		—
Total investment securities	5,158,290		3,119,807
Loans receivable	13,923,873		9,836,089
Allowance for credit losses	(294,267)		(236,714)
Loans receivable, net	13,629,606		9,599,375
Bank premises and equipment, net	415,056		275,760
Foreclosed assets held for sale	373		1,630
Cash value of life insurance	211,811		105,135
Accrued interest receivable	80,274		46,736
Deferred tax asset, net	208,585		78,290
Goodwill	1,398,400		973,025
Core deposit and other intangibles	63,410		25,045
Other assets	270,987		177,020
Total assets	$	24,253,168	$	18,052,138
Liabilities and Stockholders’ Equity
Deposits:
Demand and non-interest-bearing	$	6,036,583	$	4,127,878
Savings and interest-bearing transaction accounts	12,424,192		9,251,805
Time deposits	1,119,297		880,887
Total deposits	19,580,072		14,260,570
Securities sold under agreements to repurchase	118,573		140,886
FHLB and other borrowed funds	400,000		400,000
Accrued interest payable and other liabilities	197,503		113,868
Subordinated debentures	458,455		371,093
Total liabilities	20,754,603		15,286,417
Stockholders’ equity:
Common stock, par value $0.01; shares authorized 300,000,000 in 2022 and 2021; shares issued and outstanding 205,290,527 in 2022 and 163,699,282 in 2021	2,053		1,637
Capital surplus	2,426,271		1,487,373
Retained earnings	1,286,146		1,266,249
Accumulated other comprehensive (loss) income	(215,905)		10,462
Total stockholders’ equity	3,498,565		2,765,721
Total liabilities and stockholders’ equity	$	24,253,168	$	18,052,138

See Condensed Notes to Consolidated Financial Statements.

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Home BancShares, Inc.

Consolidated Statements of Income

   Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands, except per share data)
   2017 2016 2017 2016
   (Unaudited)
Interest income:

Loans
   $ 113,269 $ 102,953 $ 331,763 $ 300,281
Investment securities

Taxable
   7,071 5,583 18,983 16,178
Tax-exempt
   3,032 2,720 8,942 8,358
Deposits – other banks
   538 117 1,573 325
Federal funds sold
   3 2 9 7


Total interest income
   123,913 111,375 361,270 325,149


Interest expense:

Interest on deposits
   8,535 4,040 20,831 11,528
Federal funds purchased
   —   —   —   2
FHLB and other borrowed funds
   3,408 3,139 10,707 9,283
Securities sold under agreements to repurchase
   232 142 593 421
Subordinated debentures
   4,969 401 10,203 1,164


Total interest expense
   17,144 7,722 42,334 22,398


Net interest income
   106,769 103,653 318,936 302,751
Provision for loan losses
   35,023 5,536 39,324 16,905


Net interest income after provision for loan losses
   71,746 98,117 279,612 285,846


Non-interest income:

Service charges on deposit accounts
   6,408 6,527 18,356 18,607
Other service charges and fees
   8,490 7,504 25,983 22,589
Trust fees
   365 365 1,130 1,128
Mortgage lending income
   3,172 3,932 9,713 10,276
Insurance commissions
   472 534 1,482 1,808
Increase in cash value of life insurance
   478 344 1,251 1,092
Dividends from FHLB, FRB, Bankers’ bank & other
   834 808 2,455 2,147
Gain on acquisitions
   —   —   3,807 —
Gain on sale of SBA loans
   163 364 738 443
Gain (loss) on sale of branches, equipment and other assets, net
   (1,337 ) (86 ) (962 ) 701
Gain (loss) on OREO, net
   335 132 849 (713 )
Gain (loss) on securities, net
   136 —   939 25
FDIC indemnification accretion/(amortization), net
   —   —   —   (772 )
Other income
   1,941 1,590 6,603 5,892


Totalnon-interest income
   21,457 22,014 72,344 63,223


Non-interest expense:

Salaries and employee benefits
   28,510 25,623 83,965 75,018
Occupancy and equipment
   7,887 6,668 21,602 19,848
Data processing expense
   2,853 2,791 8,439 8,221
Other operating expenses
   31,596 15,944 62,984 41,174


Totalnon-interest expense
   70,846 51,026 176,990 144,261


Income before income taxes
   22,357 69,105 174,966 204,808
Income tax expense
   7,536 25,485 63,192 76,252


Net income
   $ 14,821 $ 43,620 $ 111,774 $ 128,556


Basic earnings per share
   $ 0.10 $ 0.31 $ 0.78 $ 0.92


Diluted earnings per share
   $ 0.10 $ 0.31 $ 0.78 $ 0.91


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2022		2021		2022		2021
	(Unaudited)
Interest income:
Loans	$	181,779	$	141,684	$	311,221	$	292,601
Investment securities
Taxable	20,941		7,185		30,021		13,438
Tax-exempt	7,725		4,905		12,432		9,976
Deposits – other banks	6,565		707		8,238		1,117
Federal funds sold	3		—		4		—
Total interest income	217,013		154,481		361,916		317,132
Interest expense:
Interest on deposits	10,729		6,434		15,623		14,139
Federal funds purchased	2		—		2		—
FHLB and other borrowed funds	1,896		1,896		3,771		3,771
Securities sold under agreements to repurchase	187		107		295		297
Subordinated debentures	5,441		4,792		12,319		9,585
Total interest expense	18,255		13,229		32,010		27,792
Net interest income	198,758		141,252		329,906		289,340
Provision for credit losses on acquired loans	45,170		—		45,170		—
Provision for credit losses on acquired unfunded commitments	11,410		—		11,410		—
Provision for credit losses on unfunded commitments	—		(4,752)		—		(4,752)
Provision for credit losses on acquired held-to-maturity investment securities	2,005		—		2,005		—
Total credit loss expense (benefit)	58,585		(4,752)		58,585		(4,752)
Net interest income after credit loss expense (benefit)	140,173		146,004		271,321		294,092
Non-interest income:
Service charges on deposit accounts	10,084		5,116		16,224		10,118
Other service charges and fees	12,541		9,659		20,274		17,267
Trust fees	4,320		444		4,894		966
Mortgage lending income	5,996		6,202		9,912		14,369
Insurance commissions	658		478		1,138		970
Increase in cash value of life insurance	1,140		537		1,632		1,039
Dividends from FHLB, FRB, FNBB & other	3,945		2,646		4,643		11,255
Gain on sale of SBA loans	—		1,149		95		1,149
Gain (loss) on sale of branches, equipment and other assets, net	2		(23)		18		(52)
Gain on OREO, net	9		619		487		1,020
Gain on securities, net	—		—		—		219
Fair value adjustment for marketable securities	(1,801)		1,250		324		7,032
Other income	7,687		3,043		15,609		11,044
Total non-interest income	44,581		31,120		75,250		76,396
Non-interest expense:
Salaries and employee benefits	65,795		42,462		109,346		84,521
Occupancy and equipment	14,256		9,042		23,400		18,279
Data processing expense	10,094		5,893		17,133		11,763
Merger and acquisition expenses	48,731		—		49,594		—
Other operating expenses	26,606		15,585		42,905		31,285
Total non-interest expense	165,482		72,982		242,378		145,848
Income before income taxes	19,272		104,142		104,193		224,640
Income tax expense	3,294		25,072		23,323		53,968
Net income	$	15,978	$	79,070	$	80,870	$	170,672
Basic earnings per share	$	0.08	$	0.48	$	0.44	$	1.03
Diluted earnings per share	$	0.08	$	0.48	$	0.44	$	1.03

See Condensed Notes to Consolidated Financial Statements.

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Home BancShares, Inc.

Consolidated Statements of Comprehensive (Loss) Income

   Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands)
   2017 2016 2017 2016
   (Unaudited)
Net income
   $ 14,821 $ 43,620 $ 111,774 $ 128,556
Net unrealized gain (loss) onavailable-for-sale securities
   (4,065 ) (4,334 ) 6,681 6,816
Less: reclassification adjustment for realized (gains) losses included in income
   (136 ) —   (939 ) (25 )


Other comprehensive (loss) income, before tax effect
   (4,201 ) (4,334 ) 5,742 6,791
Tax effect
   1,648 1,701 (2,253 ) (2,664 )


Other comprehensive income (loss)
   (2,553 ) (2,633 ) 3,489 4,127


Comprehensive income
   $ 12,268 $ 40,987 $ 115,263 $ 132,683

~~Home BancShares, Inc.~~

~~Consolidated Statements of Stockholders’ Equity~~

~~Nine Months Ended September 30, 2017 and 2016~~

(In thousands, except share data)
   Common
Stock Capital
Surplus Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balance at January 1, 2016
   $ 701 $ 867,981 $ 326,898 $ 4,177 $ 1,199,757
Comprehensive income:

Net income
   —   —   128,556 —   128,556
Other comprehensive income (loss)
   —   —   —   4,127 4,127
Net issuance of 461,737 shares of common stock from exercise of stock options plus issuance of 10,000 bonus shares of unrestricted common stock
   2 1,351 —   —   1,353
Issuance of common stock –2-for-1 stock split
   702 (702 ) —   —   —
Repurchase of 461,800 shares of common stock
   (2 ) (8,840 ) —   —   (8,842 )
Tax benefit from stock options exercised
   —   1,264 —   —   1,264
Share-based compensation net issuance of 239,070 shares of restricted common stock
   2 5,256 —   —   5,258
Cash dividends – Common Stock, $0.2525 per share
   —   —   (35,455 ) —   (35,455 )


Balances at September 30, 2016 (unaudited)
   1,405 866,310 419,999 8,304 1,296,018
Comprehensive income:

Net income
   —   —   48,590 —   48,590
Other comprehensive income (loss)
   —   —   —   (7,904 ) (7,904 )
Net issuance of 31,002 shares of common stock from exercise of stock options
   1 141 —   —   142
Repurchase of 48,808 shares of common stock
   (1 ) (974 ) —   —   (975 )
Tax benefit from stock options exercised
   —   2,890 —   —   2,890
Share-based compensation net issuance of 4,664 shares of restricted common stock
   —   1,370 —   —   1,370
Cash dividends – Common Stock, $0.09 per share
   —   —   (12,641 ) —   (12,641 )


Balances at December 31, 2016
   1,405 869,737 455,948 400 1,327,490
Comprehensive income:

Net income
   —   —   111,774 —   111,774
Other comprehensive income (loss)
   —   —   —   3,489 3,489
Net issuance of 160,237 shares of common stock from exercise of stock options
   2 847 —   —   849
Issuance of 2,738,038 shares of common stock from acquisition of GHI, net of issuance costs of approximately $195
   27 77,290 —   —   77,317
Issuance of 30,863,658 shares of common stock from acquisition of Stonegate, net of issuance costs of approximately $630
   309 741,324 —   —   741,633
Repurchase of 800,000 shares of common stock
   (8 ) (19,530 ) —   —   (19,538 )
Share-based compensation net issuance of 231,766 shares of restricted common stock
   2 4,974 —   —   4,976
Cash dividends – Common Stock, $0.29 per share
   —   —   (41,274 ) —   (41,274 )


Balances at September 30, 2017 (unaudited)
   $ 1,737 $ 1,674,642 $ 526,448 $ 3,889 $ 2,206,716


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
	(Unaudited)
Net income	$	15,978	$	79,070	$	80,870	$	170,672
Net unrealized (loss) gain on available-for-sale securities	(146,888)		13,091		(302,603)		(20,309)
Other comprehensive (loss) income before tax effect	(146,888)		13,091		(302,603)		(20,309)
Tax effect on other comprehensive loss (income)	35,540		(3,421)		76,236		5,308
Other comprehensive (loss) income	(111,348)		9,670		(226,367)		(15,001)
Comprehensive (loss) income	$	(95,370)	$	88,740	$	(145,497)	$	155,671

See Condensed Notes to Consolidated Financial Statements.

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Home BancShares, Inc.

Consolidated Statements of ~~Cash Flows~~

   Nine Months Ended
September 30,
(In thousands)
   2017 2016
   (Unaudited)
Operating Activities

Net income
   $ 111,774 $ 128,556
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation
   8,634 8,082
Amortization/(accretion)
   12,087 11,461
Share-based compensation
   4,976 5,258
Tax benefits from stock options exercised
   —   (1,264 )
Gain on acquisitions
   (3,807 ) —
(Gain) loss on assets
   (1,720 ) 3,425
Provision for loan losses
   39,324 16,905
Deferred income tax effect
   (15,867 ) 12,466
Increase in cash value of life insurance
   (1,251 ) (1,092 )
Originations of mortgage loans held for sale
   (243,948 ) (261,964 )
Proceeds from sales of mortgage loans held for sale
   250,784 257,666
Changes in assets and liabilities:

Accrued interest receivable
   (1,814 ) (266 )
Indemnification and other assets
   (22,642 ) (9,407 )
Accrued interest payable and other liabilities
   (35,436 ) (5,757 )


Net cash provided by (used in) operating activities
   101,094 164,069


Investing Activities

Net (increase) decrease in federal funds sold
   (1,480 ) (300 )
Net (increase) decrease in loans, excluding purchased loans
   (115,334 ) (492,795 )
Purchases of investment securities –available-for-sale
   (522,329 ) (246,983 )
Proceeds from maturities of investment securities –available-for-sale
   120,785 217,774
Proceeds from sale of investment securities –available-for-sale
   28,368 2,221
Purchases of investment securities –held-to-maturity
   (219 ) (123 )
Proceeds from maturities of investment securities –held-to-maturity
   48,144 32,417
Proceeds from sale of investment securities –held-to-maturity
   491 —
Proceeds from foreclosed assets held for sale
   13,315 11,124
Proceeds from sale of SBA Loans
   13,630 7,412
Purchases of premises and equipment, net
   (4,383 ) (3,355 )
Return of investment on cash value of life insurance
   592 —
Net cash proceeds (paid) received – market acquisitions
   227,845 —
Cash (paid) on FDIC loss sharebuy-out
   —   (6,613 )


Net cash provided by (used in) investing activities
   (190,575 ) (479,221 )


Financing Activities

Net increase (decrease) in deposits, excluding deposits acquired
   536,891 401,784
Net increase (decrease) in securities sold under agreements to repurchase
   2,078 (19,039 )
Net increase (decrease) in FHLB and other borrowed funds
   (350,230 ) 14,424
Proceeds from exercise of stock options
   849 1,353
Proceeds from issuance of subordinated notes
   297,201 —
Repurchase of common stock
   (19,538 ) (8,842 )
Common stock issuance costs – market acquisitions
   (825 ) —
Tax benefits from stock options exercised
   —   1,264
Dividends paid on common stock
   (41,274 ) (35,455 )


Net cash provided by (used in) financing activities
   425,152 355,489


Net change in cash and cash equivalents
   335,671 40,337
Cash and cash equivalents – beginning of year
   216,649 255,823


Cash and cash equivalents – end of period
   $ 552,320 $ 296,160

Stockholders’ Equity


Three and Six Months Ended June 30, 2022
(In thousands, except share data)	Common Stock		Capital Surplus		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balances at January 1, 2022	$	1,637	$	1,487,373	$	1,266,249	$	10,462	$	2,765,721
Comprehensive income:
Net income	—		—		64,892		—		64,892
Other comprehensive loss	—		—		—		(115,019)		(115,019)
Net issuance of 15,909 shares of common stock from exercise of stock options	1		129		—		—		130
Repurchase of 180,000 shares of common stock	(2)		(4,087)		—		—		(4,089)
Share-based compensation net issuance of 222,717 shares of restricted common stock	2		2,109		—		—		2,111
Cash dividends – Common Stock, $0.165 per share	—		—		(27,043)		—		(27,043)
Balances at March 31, 2022 (unaudited)	$	1,638	$	1,485,524	$	1,304,098	$	(104,557)	$	2,686,703
Comprehensive income:
Net Income	—		—		15,978		—		15,978
Other comprehensive loss	—		—		—		(111,348)		(111,348)
Net issuance of 1,500 shares of common stock from exercise of stock options	—		26		—		—		26
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 1,032,732 shares of common stock	(10)		(22,482)		—		—		(22,492)
Share-based compensation net issuance of 138,499 shares of restricted common stock	1		2,337		—		—		2,338
Cash dividends – Common Stock, $0.165 per share	—		—		(33,930)		—		(33,930)
Balances at June 30, 2022 (unaudited)	$	2,053	$	2,426,271	$	1,286,146	$	(215,905)	$	3,498,565

See Condensed Notes to Consolidated Financial Statements.

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Home BancShares, Inc.

Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2021
(In thousands, except share data)
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balances at January 1, 2021 $ 1,651 $ 1,520,617 $ 1,039,370 $ 44,120 $ 2,605,758
Comprehensive income:
Net income — — 91,602 — 91,602
Other comprehensive loss — — — (24,671) (24,671)
Net issuance of 161,434 shares of common stock from exercise of stock options 1 2,321 — — 2,322
Repurchase of 330,000 shares of common stock (3) (8,767) — — (8,770)
Share-based compensation net issuance of 214,684 shares of restricted common stock 2 2,115 — — 2,117
Cash dividends – Common Stock, $0.14 per share — — (23,154) — (23,154)
Balances at March 31, 2021 (unaudited) $ 1,651 $ 1,516,286 $ 1,107,818 $ 19,449 $ 2,645,204
Comprehensive income:
Net income — — 79,070 — 79,070
Other comprehensive income — — — 9,670 9,670
Net issuance of 3,628 shares of common stock from exercise of stock options — — — — —
Repurchase of 635,000 shares of common stock (6) (16,947) — — (16,953)
Share-based compensation net issuance of 21,500 shares of restricted common stock — 2,276 — — 2,276
Cash dividends – Common Stock, $0.14 per share — — (23,078) — (23,078)
Balances at June 30, 2021 (unaudited) $ 1,645 $ 1,501,615 $ 1,163,810 $ 29,119 $ 2,696,189

See Condensed Notes to Consolidated Financial Statements.

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Home BancShares, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2022
(In thousands) 2022 2021
(Unaudited)
Operating Activities
Net income $ 80,870 $ 170,672
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization 15,480 9,535
Increase in value of equity securities (324) (7,032)
Amortization of securities, net 12,874 13,693
Accretion of purchased loans (8,266) (11,282)
Share-based compensation 4,449 4,393
Gain on assets (600) (2,336)
Provision for credit losses - acquired loans 45,170 —
Provision for credit losses - acquired unfunded commitments 11,410 —
Provision for credit losses - unfunded commitments — (4,752)
Provision for credit losses - acquired held-to-maturity investment securities 2,005 —
Deferred income tax effect (18,645) 3,311
Increase in cash value of life insurance (1,632) (1,039)
Originations of mortgage loans held for sale (308,850) (393,886)
Proceeds from sales of mortgage loans held for sale 243,823 419,052
Changes in assets and liabilities:
Accrued interest receivable (1,548) 11,803
Other assets (1,067) 5,116
Accrued interest payable and other liabilities 27,466 (4,832)
Net cash provided by operating activities 102,615 212,416
Investing Activities
Net (increase) decrease in loans, excluding purchased loans (126,794) 989,477
Purchases of investment securities – available-for-sale (655,393) (968,660)
Purchases of investment securities - held-to-maturity (501,882) —
Proceeds from maturities of investment securities – available-for-sale 333,315 336,834
Proceeds from maturities of investment securities – held-to-maturity 250,020 —
Proceeds from sales of investment securities – available-for-sale — 18,112
Purchases of equity securities (29,975) (10,460)
Proceeds from sales of equity securities 13,778 15,354
Purchase of other investments (27,867) (5,084)
Proceeds from foreclosed assets held for sale 1,874 5,422
Proceeds from sale of SBA loans 2,859 12,361
Purchases of premises and equipment, net (6,596) (6,252)
Return of investment on cash value of life insurance — 418
Purchase of marine loan portfolio (242,617) —
Net cash received - market acquisition 858,898 —
Net cash (used in) provided by investing activities (130,380) 387,522
Financing Activities
Net (decrease) increase in deposits (535,708) 1,165,551
Net decrease in securities sold under agreements to repurchase (22,313) (18,391)
Net decrease in FHLB and other borrowed funds (78,330) —
Retirement of subordinated debentures (300,000) —
Proceeds from issuance of subordinated debentures 296,444 —
Redemption of trust preferred securities (78,869) —
Proceeds from exercise of stock options 156 2,322
Repurchase of common stock (26,581) (25,723)
Dividends paid on common stock (60,973) (46,232)
Net cash (used in) provided by financing activities (806,174) 1,077,527
Net change in cash and cash equivalents (833,939) 1,677,465
Cash and cash equivalents – beginning of year 3,650,315 1,263,788
Cash and cash equivalents – end of period $ 2,816,376 $ 2,941,253
See Condensed Notes to Consolidated Financial Statements.
9
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Home BancShares, Inc.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Home BancShares, Inc. (the “Company” or “HBI”) is a bank holding company headquartered in Conway, Arkansas. The Company is primarily engaged in providing a full range of banking services to individual and corporate customers through its wholly-owned community bank subsidiary – Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). The Bank has branch locations in Arkansas, Florida, South Alabama, Texas and New York City. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

A summary of the significant accounting policies of the Company follows:

Operating Segments

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. 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~~company-wide basis. Accordingly, all of the banking services and branch locations are considered by management to be aggregated into ~~one~~1 reportable operating segment.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for ~~loan~~credit losses, the valuation of investment securities, the valuation of foreclosed assets and the valuations of assets acquired, and liabilities assumed in business combinations. In connection with the determination of the allowance for ~~loan~~credit losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.

Principles of Consolidation

The consolidated financial statements include the accounts of HBI and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative information. These reclassifications had no effect on net earnings or stockholders’ equity.

Interim financial information

The accompanying unaudited consolidated financial statements as of ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

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The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~2016~~2021 Form10-K, filed with the Securities and Exchange Commission.

Loans Receivable and Allowance for Credit Losses

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, deferred fees or costs on originated loans. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding. Loan origination fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.

The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, commercial real estate price index, housing price index and national retail sales index.

The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:

•1-4 family construction

•All other construction

•1-4 family revolving home equity lines of credit (“HELOC”) & junior liens

•1-4 family senior liens

•Multifamily

•Owner occupied commercial real estate

•Non-owner occupied commercial real estate

•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other

•Consumer auto

•Other consumer

•Other consumer - SPF

The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. For loans that are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.

•Management has a reasonable expectation at the reporting date that troubled debt restructuring will be executed with an individual borrower.

•The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

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Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Loans considered impaired, according to ASC 326, are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for credit losses when in the process of collection, it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more past due. 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. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans
The Company accounts for its acquisitions under FASB ASC Topic 805, Business Combinations, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount or premium and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment. These models utilize a peer group benchmark in order to determine the probability of default and loss given default to be used in the calculation. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
For further discussion of the Company’s acquisitions, see Note 2 to the Condensed Notes to Consolidated Financial Statements.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
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Revenue Recognition
Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The majority of our revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as our loans, letters of credit, investment securities and mortgage lending income, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Descriptions of our significant revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our income statements as components of non-interest income are as follows:
•Service charges on deposit accounts – These represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.
•Other service charges and fees – These represent credit card interchange fees and Centennial Commercial Finance Group (“Centennial CFG”) loan fees. The interchange fees are recorded in the period the performance obligation is satisfied which is generally the cash basis based on agreed upon contracts. The Centennial CFG loan fees are based on loan or other negotiated agreements with customers and are accounted for under ASC Topic 310.

Earnings per Share

Basic earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the following periods:

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (In thousands)
Net income
   $ 14,821    $ 43,620    $ 111,774    $ 128,556
Average shares outstanding
   144,238    140,436    143,111    140,403
Effect of common stock options
   749    267    728    282








Average diluted shares outstanding
   144,987    140,703    143,839    140,685








Basic earnings per share
   $ 0.10    $ 0.31    $ 0.78    $ 0.92
Diluted earnings per share
   $ 0.10    $ 0.31    $ 0.78    $ 0.91


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Net income	$	15,978	$	79,070	$	80,870	$	170,672
Average shares outstanding	205,683		164,781		184,851		165,018
Effect of common stock options	332		445		372		296
Average diluted shares outstanding	206,015		165,226		185,223		165,314
Basic earnings per share	$	0.08	$	0.48	$	0.44	$	1.03
Diluted earnings per share	$	0.08	$	0.48	$	0.44	$	1.03

2. Business Combinations

Acquisition of ~~Stonegate Bank~~

Happy Bancshares, Inc.

On ~~September 26, 2017,~~April 1, 2022, the Company completed the acquisition of ~~all of the issued and outstanding shares of common stock of Stonegate Bank~~Happy Bancshares, Inc. (“~~Stonegate”~~Happy”), and merged ~~Stonegate~~Happy State Bank into ~~Centennial.~~Centennial Bank. The Company ~~paid a purchase price to the Stonegate shareholders of~~issued approximately ~~$792.4~~42.4 million ~~for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658~~ shares of ~~HBI~~its common stock valued at approximately ~~$742.3~~$958.8 million ~~plus approximately $50.1 million in cash in exchange for all outstanding shares~~as of ~~Stonegate common stock.~~April 1, 2022. In addition, the holders of ~~outstanding stock options of Stonegate~~certain Happy stock-based awards received approximately ~~$27.6~~$3.7 million in cash in ~~connection with the~~ cancellation of ~~their options immediately before the acquisition closed,~~such awards, for a total transaction value of approximately ~~$820.0~~$962.5 million.

The acquisition added new markets for expansion and brings complementary businesses together to drive synergies and growth.

Including the effects of the known purchase accounting adjustments, as of the acquisition date, ~~Stonegate~~Happy had approximately ~~$2.89~~$6.68 billion in total assets, ~~$2.37~~$3.65 billion in loans and ~~$2.53~~$5.86 billion in customer deposits. ~~Stonegate~~Happy formerly operated its banking business from 2462 locations in ~~key Florida markets with significant presence in Broward and Sarasota counties.~~

Texas.

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The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.

The Company has determined that the acquisition of the net assets of ~~Stonegate~~Happy constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a preliminary breakdown of the assets acquired and liabilities assumed as of the acquisition date:

   Stonegate Bank
   Acquired
from Stonegate    Fair Value
Adjustments    As Recorded
by HBI
   (Dollars in thousands)
Assets
Cash and due from banks
   $ 100,958    $ —      $ 100,958
Interest-bearing deposits with other banks
   135,631    —      135,631
Federal funds sold
   1,515    —      1,515
Investment securities
   103,041    477    103,518
Loans receivable
   2,446,149    (73,990 )    2,372,159
Allowance for loan losses
   (21,507 )    21,507    —






Loans receivable, net
   2,424,642    (52,483 )    2,372,159
Bank premises and equipment, net
   38,868    (3,572 )    35,296
Foreclosed assets held for sale
   4,187    (801 )    3,386
Cash value of life insurance
   48,000    —      48,000
Accrued interest receivable
   7,088    —      7,088
Deferred tax asset, net
   27,340    11,244    38,584
Goodwill
   81,452    (81,452 )    —
Core deposit and other intangibles
   10,505    20,364    30,869
Other assets
   9,598    231    9,829






Total assets acquired
   $ 2,992,825    $ (105,992 )    $ 2,886,833






Liabilities
Deposits

Demand andnon-interest-bearing
   $ 585,959    $ —      $ 585,959
Savings and interest-bearing transaction accounts
   1,776,256    —      1,776,256
Time deposits
   163,567    (85 )    163,482






Total deposits
   2,525,782    (85 )    2,525,697
FHLB borrowed funds
   32,667    184    32,851
Securities sold under agreements to repurchase
   26,163    —      26,163
Accrued interest payable and other liabilities
   8,100    5    8,105
Subordinated debentures
   8,345    1,490    9,835






Total liabilities assumed
   2,601,057    1,594    2,602,651






Equity
Total equity assumed
   391,768    (391,768 )    —






Total liabilities and equity assumed
   $ 2,992,825    $ (390,174 )    2,602,651






Net assets acquired
         284,182
Purchase price
         792,370


Goodwill
         $ 508,188


	Happy Bancshares, Inc.
	Acquired from Happy		Fair Value Adjustments		As Recorded by HBI
	(Dollars in thousands)
Assets
Cash and due from banks	$	112,999	$	(132)	$	112,867
Interest-bearing deposits with other banks	746,031		—		746,031
Cash and cash equivalents	859,030		(132)		858,898
Investment securities - available-for-sale, net of allowance for credit losses	1,773,540		8,485		1,782,025

Total investment securities	1,773,540		8,485		1,782,025
Loans receivable	3,657,009		(4,303)		3,652,706
Allowance for credit losses	(42,224)		25,408		(16,816)
Loans receivable, net	3,614,785		21,105		3,635,890
Bank premises and equipment, net	153,642		(11,575)		142,067
Foreclosed assets held for sale	193		(77)		116
Cash value of life insurance	105,049		3		105,052
Accrued interest receivable	31,575		—		31,575
Deferred tax asset, net	32,908		2,506		35,414
Goodwill	130,428		(130,428)		—
Core deposit and other intangibles	10,672		31,591		42,263
Other assets	43,330		6,422		49,752
Total assets acquired	$	6,755,152	$	(72,100)	$	6,683,052
Liabilities
Deposits
Demand and non-interest-bearing	$	1,932,756	$	—	$	1,932,756
Savings and interest-bearing transaction accounts	3,519,652		—		3,519,652
Time deposits	401,899		903		402,802
Total deposits	5,854,307		903		5,855,210

FHLB and other borrowed funds	74,212		4,118		78,330
Accrued interest payable and other liabilities	50,889		(6,130)		44,759
Subordinated debentures	159,965		7,625		167,590
Total liabilities assumed	$	6,139,373	$	6,516	$	6,145,889
Equity
Total equity assumed	615,779		(615,779)		—
Total liabilities and equity assumed	$	6,755,152	$	(609,263)	$	6,145,889
Net assets acquired					537,163
Purchase price					962,538
Goodwill					$	425,375

Table of Contents

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:

Cash and due from banks, interest-bearing deposits with other banks and federal funds sold – The carrying amount of these assets iswas deemed a reasonable estimate of fair value based on the short-term nature of these assets.

Investment securities – Investment securities were acquired from ~~Stonegate~~Happy with an approximately ~~$477,000~~$8.5 million adjustment to ~~market~~fair value based upon quoted market prices.

Otherwise the book value was deemed to approximate fair value.

Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, ~~and~~ whether or not the loan was amortizing and current discount rates. 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 ~~Company evaluated $2.37 billion of~~discount rate does not include a factor for credit losses as that has been included in the ~~loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,~~~~Nonrefundable Fees and Other Costs,~~~~which~~estimated cash flows. Loans were recorded with a $73.3 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $74.3 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic~~310-30,~~~~Loans and Debt Securities Acquired with Deteriorated Credit Quality,~~grouped together according to similar characteristics and were ~~recorded~~treated in the aggregate when applying various valuation techniques. See Note 5 to the Condensed Notes to Consolidated Financial Statements, for additional information related to purchased financial assets with ~~a $23.3 million discount. These purchase~~ credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired Stonegate loan balance and the fair value adjustment on loans receivable includes $22.6 million of discount on purchased loans, respectively.

deterioration.

Bank premises and equipment – Bank premises and equipment were acquired from ~~Stonegate~~Happy with a ~~$3.6~~$11.6 million adjustment to ~~market~~fair value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.

Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs of disposal.

~~Cash value of life insurance~~ –

Cash value of life insurance ~~was acquired from Stonegate~~– Bank owned life insurance is carried at ~~market~~its current cash surrender value, which is the most reasonable estimate of fair value.

Accrued interest receivable ~~– Accrued interest receivable was acquired from Stonegate at market value.~~

~~Deferred tax asset~~ – The ~~current and deferred income tax~~carrying amount of these assets ~~and liabilities are recorded to reflect the differences in the carrying values~~was deemed a reasonable estimate of the ~~acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate of 39.225%.~~

fair value.

Core deposit intangible and other intangibles – This core deposit intangible asset represents the value of the relationships that ~~Stonegate~~Happy had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. ~~The Company recorded $30.9 million of core deposit intangible.~~

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition, equal the amount payable on demand at the acquisition date. The ~~$85,000~~$903,000 fair value adjustment applied for time deposits was because the ~~weighted average~~weighted-average interest rate of ~~Stonegate’s~~Happy’s certificates of deposits were estimated to be below the current market rates.

FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

~~Securities sold under agreements to repurchase~~ ~~– Securities sold under agreements to repurchase were acquired from Stonegate at market value.~~

Accrued interest payable and other liabilities – ~~Accrued interest~~The fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities. The carrying amount of accrued interest and the remainder of other liabilities ~~were acquired from Stonegate at market~~was deemed to be a reasonable estimate of fair value.

Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.

Table of Contents

The unauditedpro-forma combined consolidated financial information presents how the combined financial information of HBI and ~~Stonegate~~Happy might have appeared had the businesses actually been combined. The following schedule represents the unaudited pro forma combined financial information as of the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, assuming the acquisition was completed as of January 1, ~~2017 and 2016, respectively:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (In thousands, except per share data)
Total interest income
   $ 154,425    $ 136,063    $ 451,716    $ 396,952
Totalnon-interest income
   24,072    24,081    79,887    69,302
Net income available to all shareholders
   7,399    50,176    120,670    148,495
Basic earnings per common share
   $ 0.04    $ 0.29    $ 0.69    $ 0.87
Diluted earnings per common share
   0.04    0.29    0.69    0.87

2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands, except per share data)
Total interest income	$	217,013	$	211,279	$	419,318	$	418,143
Total non-interest income	44,581		44,427		88,151		101,485
Net income available to all shareholders	96,923		34,536		182,557		129,653

Basic earnings per common share	$	0.47	$	0.17	$	0.89	$	0.63
Diluted earnings per common share	$	0.47	$	0.17	$	0.88	$	0.62

The unauditedpro-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 fromin-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. ItPro-forma results include Happy merger expenses of $48.7 million and $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 three and six months ended June 30, 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.

~~Acquisition~~

Purchased loans and leases that reflect a more-than-insignificant deterioration of ~~Giant Holdings, Inc.~~

credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans purchased as part of the Happy acquisition with credit deterioration at acquisition:


	April 1, 2022
	(In thousands)
Purchased Loans with Credit Deterioration:
Par value	$	165,028
Allowance for credit losses at acquisition	(16,816)
Premium on acquired loans	684
Purchase price	$	148,896

Table of Contents

3. Investment Securities

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


	June 30, 2022
	Available-for-Sale
	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	465,293	$	—	$	465,293	$	2,822	$	(16,658)	$	451,457
Residential mortgage-backed securities	1,780,519		—		1,780,519		657		(152,990)		1,628,186
Commercial mortgage-backed securities	363,117		—		363,117		14		(13,067)		350,064
State and political subdivisions	1,027,748		(842)		1,026,906		1,111		(93,486)		934,531
Other securities	444,184		—		444,184		131		(17,044)		427,271
Total	$	4,080,861	$	(842)	$	4,080,019	$	4,735	$	(293,245)	$	3,791,509


	June 30, 2022
	Held-to-Maturity
	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
	(In thousands)
U.S. Treasuries	$	277,688	$	—	$	277,688	$	—	$	(1,659)	$	276,029


State and political subdivisions	1,091,098		(2,005)		1,089,093		26		(91,868)		997,251

Total	$	1,368,786	$	(2,005)	$	1,366,781	$	26	$	(93,527)	$	1,273,280


	December 31, 2021
	Available-for-Sale
	Amortized Cost		Allowance for Credit Losses		Net Carrying Amount		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	433,829	$	—	$	433,829	$	2,375	$	(3,225)	$	432,979
Residential mortgage-backed securities	1,175,185		—		1,175,185		4,085		(18,551)		1,160,719
Commercial mortgage-backed securities	372,702		—		372,702		6,521		(1,968)		377,255
State and political subdivisions	973,318		(842)		972,476		26,296		(1,794)		996,978
Other securities	151,449		—		151,449		1,781		(1,354)		151,876
Total	$	3,106,483	$	(842)	$	3,105,641	$	41,058	$	(26,892)	$	3,119,807

On ~~February 23, 2017,~~April 1, 2022, the Company completed ~~its~~the acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.

~~GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area.~~Happy. Including the effects of the known purchase accounting adjustments, as of the acquisition date, ~~GHI~~Happy had approximately ~~$398.1 million~~$1.78 billion in ~~total assets, $327.8 million in loans after $8.1 million~~investments, net of ~~loan discounts, and $304.0 million in deposits.~~

purchase accounting adjustments. The Company ~~has determined that the acquisition~~classified approximately $1.12 billion of the net assets of GHI constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:

   Giant Holdings, Inc.
   Acquired
from GHI    Fair Value
Adjustments    As Recorded
by HBI
   (Dollars in thousands)
Assets
Cash and due from banks
   $ 41,019    $ —      $ 41,019
Interest-bearing deposits with other banks
   4,057    1    4,058
Investment securities
   1,961    (5 )    1,956
Loans receivable
   335,886    (6,517 )    329,369
Allowance for loan losses
   (4,568 )    4,568    —






Loans receivable, net
   331,318    (1,949 )    329,369
Bank premises and equipment, net
   2,111    608    2,719
Cash value of life insurance
   10,861    —      10,861
Accrued interest receivable
   850    —      850
Deferred tax asset, net
   2,286    1,807    4,093
Core deposit and other intangibles
   172    3,238    3,410
Other assets
   254    (489 )    (235 )






Total assets acquired
   $ 394,889    $ 3,211    $ 398,100






Liabilities
Deposits

Demand andnon-interest-bearing
   $ 75,993    $ —      $ 75,993
Savings and interest-bearing transaction accounts
   139,459    —      139,459
Time deposits
   88,219    324    88,543






Total deposits
   303,671    324    303,995
FHLB borrowed funds
   26,047    431    26,478
Accrued interest payable and other liabilities
   14,552    18    14,570






Total liabilities assumed
   344,270    773    345,043






Equity
Total equity assumed
   50,619    (50,619 )    —






Total liabilities and equity assumed
   $ 394,889    $ (49,846 )    345,043






Net assets acquired
         53,057
Purchase price
         96,015


Goodwill
         $ 42,958

~~The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:~~

~~Cash and due from banks and interest-bearing deposits with other banks~~ ~~– The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.~~

~~Investment securities~~ ~~– Investment securities were~~investments acquired from ~~GHI with an approximately $5,000 adjustment to market value based upon quoted market prices.~~

~~Loans~~ – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. 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 Company evaluated $315.6 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,~~~~Nonrefundable Fees and Other Costs,~~which were recorded with a $3.6 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $20.3 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic~~310-30,~~~~Loans and Debt Securities Acquired with Deteriorated Credit Quality,~~ and were recorded with a $4.5 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired GHI loan balance includes $1.6 million of discount on purchased loans.

~~Bank premises and equipment~~ – Bank premises and equipment were acquired from GHI with a $608,000 adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.

~~Cash value of life insurance~~ ~~– Cash value of life insurance was acquired from GHI at market value.~~

~~Accrued interest receivable~~ ~~– Accrued interest receivable was acquired from GHI at market value.~~

~~Deferred tax asset~~ – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate of 39.225%.

~~Core deposit intangible~~ – This intangible asset represents the value of the relationships that GHI had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $3.4 million of core deposit intangible.

~~Deposits~~ ~~– The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand~~Happy as held-to-maturity at the acquisition date. ~~The $324,000 fair value adjustment applied for time deposits was because the weighted average interest rate~~

Table of ~~GHI’s certificates of deposits were estimated to be below the current market rates.~~

~~FHLB borrowed funds~~ ~~– The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.~~

~~Accrued interest payable and other liabilities~~ ~~– The fair value used represents the adjustments of certain estimated liabilities from GHI.~~

The Company’s operating results for the period ended September 30, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact GHI total assets acquired are less than 5% of total assets as of September 30, 2017 excluding GHI as recorded by HBI as of acquisition date, historical results are not believed to be material to the Company’s results, and thus no pro-forma information is presented.

~~Acquisition of The Bank of Commerce~~

On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (“BOC”), pursuant to an acquisition agreement, dated December 1, 2016, by and between HBI and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.

The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the “Bankruptcy Code”) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”). The sale of BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court. On November 14, 2016, the Company submitted an initial bid to purchase the outstanding shares of BOC in accordance with the bidding procedures approved by the Bankruptcy Court. An auction was subsequently conducted on November 16, 2016, and the Company was deemed to be the successful bidder. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the Company pursuant to and in accordance with the acquisition agreement.

Under the terms of the acquisition agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.

BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.

The Company has determined that the acquisition of the net assets of BOC constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:

   The Bank of Commerce
   Acquired
from BOC    Fair Value
Adjustments    As Recorded
by HBI
   (Dollars in thousands)
Assets
Cash and due from banks
   $ 4,610    $ —      $ 4,610
Interest-bearing deposits with other banks
   14,360    —      14,360
Investment securities
   25,926    (113 )    25,813
Loans receivable
   124,289    (5,751 )    118,538
Allowance for loan losses
   (2,037 )    2,037    —






Loans receivable, net
   122,252    (3,714 )    118,538
Bank premises and equipment, net
   1,887    —      1,887
Foreclosed assets held for sale
   8,523    (3,165 )    5,358
Accrued interest receivable
   481    —      481
Deferred tax asset, net
   —      4,198    4,198
Core deposit intangible
   —      968    968
Other assets
   1,880    —      1,880






Total assets acquired
   $ 179,919    $ (1,826 )    $ 178,093






Liabilities
Deposits

Demand andnon-interest-bearing
   $ 27,245    $ —      $ 27,245
Savings and interest-bearing transaction accounts
   32,300    —      32,300
Time deposits
   79,945    270    80,215






Total deposits
   139,490    270    139,760
FHLB borrowed funds
   30,000    42    30,042
Accrued interest payable and other liabilities
   564    (255 )    309






Total liabilities assumed
   $ 170,054    $ 57    170,111






Net assets acquired
         7,982
Purchase price
         4,175


Pre-tax gain on acquisition
         $ 3,807

~~The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:~~

~~Investment securities~~ ~~– Investment securities were acquired from BOC with a $113,000 adjustment to market value based upon quoted market prices.~~

~~The Company evaluated $106.8 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,~~~~Nonrefundable Fees and Other Costs,~~which were recorded with a $3.0 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $17.5 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic~~310-30,~~~~Loans and Debt Securities Acquired with Deteriorated Credit Quality,~~ and were recorded with a $2.8 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows.

~~Bank premises and equipment~~ ~~– Bank premises and equipment were acquired from BOC at market value.~~

~~Foreclosed assets held for sale~~ ~~– These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs to sell.~~

~~Accrued interest receivable~~ ~~– Accrued interest receivable was acquired from BOC at market value.~~

~~Core deposit intangible~~ – This intangible asset represents the value of the relationships that BOC had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $968,000 of core deposit intangible.

~~Deposits~~ – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $270,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of BOC’s certificates of deposits were estimated to be below the current market rates.

~~FHLB borrowed funds~~ ~~– The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.~~

~~Accrued interest payable and other liabilities~~ ~~– The fair value used represents the adjustment of certain estimated liabilities from BOC.~~

The Company’s operating results for the period ended September 30, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact BOC total assets acquired are less than 5% of total assets as of September 30, 2017 excluding BOC as recorded by HBI as of acquisition date, historical results are not believed to be material to the Company’s results, and thus no~~pro-forma~~ ~~information is presented.~~

~~3. Investment Securities~~

~~The amortized cost and estimated fair value of investment securities that are classified asavailable-for-sale~~ ~~andheld-to-maturity~~ ~~are as follows:~~

   September 30, 2017
   Available-for-Sale
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair Value
   (In thousands)
U.S. government-sponsored enterprises
   $ 396,323    $ 1,527    $ (658 )    $ 397,192
Residential mortgage-backed securities
   446,397    884    (1,534 )    445,747
Commercial mortgage-backed securities
   446,651    1,272    (1,743 )    446,180
State and political subdivisions
   244,746    4,924    (536 )    249,134
Other securities
   35,168    2,642    (378 )    37,432








Total
   $ 1,569,285    $ 11,249    $ (4,849 )    $ 1,575,685

   Held-to-Maturity
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair Value
   (In thousands)
U.S. government-sponsored enterprises
   $ 6,093    $ 26    $ —      $ 6,119
Residential mortgage-backed securities
   60,755    233    (150 )    60,838
Commercial mortgage-backed securities
   17,878    206    (5 )    18,079
State and political subdivisions
   150,219    3,764    (2 )    153,981








Total
   $ 234,945    $ 4,229    $ (157 )    $ 239,017

   December 31, 2016
   Available-for-Sale
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair Value
   (In thousands)
U.S. government-sponsored enterprises
   $ 237,439    $ 963    $ (1,641 )    $ 236,761
Residential mortgage-backed securities
   259,037    1,226    (1,627 )    258,636
Commercial mortgage-backed securities
   322,316    845    (2,342 )    320,819
State and political subdivisions
   215,209    3,471    (2,181 )    216,499
Other securities
   38,261    2,603    (659 )    40,205








Total
   $ 1,072,262    $ 9,108    $ (8,450 )    $ 1,072,920

   Held-to-Maturity
   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair Value
   (In thousands)
U.S. government-sponsored enterprises
   $ 6,637    $ 23    $ (32 )    $ 6,628
Residential mortgage-backed securities
   71,956    267    (301 )    71,922
Commercial mortgage-backed securities
   35,863    107    (133 )    35,837
State and political subdivisions
   169,720    3,100 ��    (169 )    172,651








Total
   $ 284,176    $ 3,497    $ (635 )    $ 287,038

Contents

Assets, principally investment securities, having a carrying value of approximately ~~$1.13~~$2.77 billion and ~~$1.07~~$1.15 billion at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law. ~~This includes, investment~~Investment securities pledged as collateral for repurchase agreements ~~which~~ totaled approximately ~~$149.5~~$118.6 million and ~~$121.3~~$140.9 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

The amortized cost and estimated fair value of securities classified asavailable-for-sale andheld-to-maturity at ~~September~~June 30, ~~2017,~~2022, by contractual maturity, are shown below. Expected maturities ~~will~~could differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

   Available-for-Sale    Held-to-Maturity
   Amortized
Cost    Estimated
Fair Value    Amortized
Cost    Estimated
Fair Value
   (In thousands)
Due in one year or less
   $ 137,401    $ 139,500    $ 36,805    $ 38,016
Due after one year through five years
   1,023,970    1,027,436    122,328    124,666
Due after five years through ten years
   293,622    293,978    17,556    17,806
Due after ten years
   114,292    114,771    58,256    58,529








Total
   $ 1,569,285    $ 1,575,685    $ 234,945    $ 239,017

~~For purposes of the maturity tables, mortgage-backed securities, which are~~ Securities not due at a single maturity date have been allocated over maturity groupings based on anticipated maturities. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

are shown separately.


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
Due in one year or less	$	21,153	$	21,175	$	249,949	$	249,689
Due after one year through five years	145,743		140,380		4,757		4,690
Due after five years through ten years	487,573		459,863		181,961		168,691
Due after ten years	1,277,149		1,186,305		932,119		850,210
Mortgage - backed securities: Residential	1,780,519		1,628,186		—		—
Mortgage - backed securities: Commercial	363,117		350,064		—		—
Other	5,607		5,536		—		—
Total	$	4,080,861	$	3,791,509	$	1,368,786	$	1,273,280

During the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017, approximately $234,000 and $27.4 million, respectively, in~~2022, no available-for-sale securities were sold. ~~The gross~~

During the three months ended June 30, 2021, no available-for-sale securities were sold. There were no realized gains ~~on the sale for the three-month period ended September 30, 2017 totaled approximately $136,000. The gross realized gains and~~or losses recorded on ~~the~~ sales for the ~~nine-month period~~three months ended ~~September~~June 30, ~~2017 totaled approximately $1.1 million and $127,000, respectively. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.~~

2021. During the ~~three-month period~~six months ended ~~September~~June 30, ~~2016, noavailable-for-sale~~ ~~securities were sold. During the nine-month period ended September 30, 2016, approximately $2.2~~2021, $17.9 million inavailable-for-sale securities were sold. The gross realized gains on the sales totaled $219,000 for the ~~nine-month period ended September 30, 2016 totaled approximately $25,000. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.~~

~~During the three-month period ended September 30, 2017, noheld-to-maturity~~ ~~securities were sold. During the nine-month period ended September 30, 2017, oneheld-to-maturity~~ ~~security experienced its second downgrade in its credit rating. The Company made a strategic decision to sell thisheld-to-maturity~~ ~~security for approximately $483,000, which resulted in a gross realized loss on the sale for the nine-month period ended September 30, 2017 of approximately $7,000.~~

The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. In completing these evaluations the Company follows the requirements of FASB ASC 320,~~Investments—Debt and Equity Securities.~~ Certain investment securities are valued less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. The Company does not intend to sell or believe it will be required to sell these investments before recovery of their amortized cost bases, which may be maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

~~During the three and nine-month periods ended September 30, 2017, no securities were deemed to have other-than-temporary impairment.~~

~~For the nine~~six months ended ~~September~~June 30, 2017, the Company had investment securities with approximately $2.4 million in unrealized losses, which have been in continuous loss positions for more than twelve months. Excluding impairment write downs taken in prior periods, the Company’s assessments indicated that the cause of the market depreciation was primarily the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies. In addition, 73.2% of the Company’s investment portfolio matures in five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.

2021.

The following table shows gross unrealized losses and estimated fair value of investment securities classified asavailable-for-sale andheld-to-maturity, ~~with unrealized losses that are not deemed to be other-than-temporarily impaired,~~ aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

   September 30, 2017
   Less Than 12 Months 12 Months or More Total
   Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses
   (In thousands)
U.S. government-sponsored enterprises
   $ 57,089    $ (263 ) $ 51,593    $ (395 ) $ 108,682    $ (658 )
Residential mortgage-backed securities
   214,267    (1,086 ) 42,101    (598 ) 256,368    (1,684 )
Commercial mortgage-backed securities
   154,103    (937 ) 61,809    (811 ) 215,912    (1,748 )
State and political subdivisions
   30,323    (248 ) 13,322    (290 ) 43,645    (538 )
Other securities
   1,476    (39 ) 8,337    (339 ) 9,813    (378 )








Total
   $ 457,258    $ (2,573 ) $ 177,162    $ (2,433 ) $ 634,420    $ (5,006 )

   December 31, 2016
   Less Than 12 Months 12 Months or More Total
   Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses
   (In thousands)
U.S. government-sponsored enterprises
   $ 98,180    $ (1,031 ) $ 75,044    $ (642 ) $ 173,224    $ (1,673 )
Residential mortgage-backed securities
   188,117    (1,742 ) 8,902    (186 ) 197,019    (1,928 )
Commercial mortgage-backed securities
   202,289    (2,220 ) 21,020    (255 ) 223,309    (2,475 )
State and political subdivisions
   94,309    (2,348 ) 500    (2 ) 94,809    (2,350 )
Other securities
   1,540    (125 ) 12,687    (534 ) 14,227    (659 )








Total
   $ 584,435    $ (7,466 ) $ 118,153    $ (1,619 ) $ 702,588    $ (9,085 )

2021.


	June 30, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
Available-for-sale:
U.S. government-sponsored enterprises	$	115,827	$	(10,132)	$	67,691	$	(6,526)	$	183,518	$	(16,658)
Residential mortgage-backed securities	1,205,092		(105,830)		253,686		(47,160)		1,458,778		(152,990)
Commercial mortgage-backed securities	299,151		(9,507)		44,291		(3,560)		343,442		(13,067)
State and political subdivisions	789,862		(89,276)		22,922		(4,210)		812,784		(93,486)
Other securities	293,266		(15,278)		17,222		(1,766)		310,488		(17,044)
Total	$	2,703,198	$	(230,023)	$	405,812	$	(63,222)	$	3,109,010	$	(293,245)
Held-to-maturity:
U.S. Treasuries	276,029		(1,659)		—		—		276,029		(1,659)
State and political subdivisions	998,550		(91,868)		—		—		998,550		(91,868)
Total	$	1,274,579	$	(93,527)	$	—	$	—	$	1,274,579	$	(93,527)

Table of Contents


	December 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
U.S. government-sponsored enterprises	$	120,730	$	(1,356)	$	78,124	$	(1,869)	$	198,854	$	(3,225)
Residential mortgage-backed securities	854,807		(15,246)		104,897		(3,305)		959,704		(18,551)
Commercial mortgage-backed securities	100,702		(1,251)		28,711		(717)		129,413		(1,968)
State and political subdivisions	136,135		(1,282)		18,647		(512)		154,782		(1,794)
Other securities	75,744		(1,316)		2,703		(38)		78,447		(1,354)
Total	$	1,288,118	$	(20,451)	$	233,082	$	(6,441)	$	1,521,200	$	(26,892)

The Company evaluates all securities quarterly to determine if any debt securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

The Company recorded a $2.0 million provision for credit losses on the held-to-maturity investment securities during the second quarter of 2022 as a result of the investment securities acquired as part of the Happy acquisition. Of the Company's held-to-maturity securities, $1.09 billion, or 79.7% are municipal securities. To estimate the necessary loss provision, the Company utilized historical default and recovery rates of the municipal bond sector and applied these rates using a pooling method. The remainder of investments classified as held-to-maturity are U.S. Treasury securities. Due to the inherent low risk in U.S. Treasury securities, no provision for credit loss was established on that portion of the portfolio.


Available-for-Sale Investment Securities
	June 30, 2022		December 31, 2021
	(In thousands)
Allowance for credit losses:
Beginning balance	$	842	$	842
Provision for credit loss	—		—
Balance, June 30	$	842	$	842
Provision for credit loss			—
Balance, December 31, 2021			$	842

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Held-to-Maturity Investment Securities
	June 30, 2022				December 31, 2021
	State and Political Subdivisions		U.S. Treasuries		State and Political Subdivisions		U.S. Treasuries
Allowance for credit losses:	(In thousands)
Beginning balance	$	—	$	—	$	—	$	—
Provision for credit loss - acquired securities	(2,005)		—		—		—
Securities charged-off	—		—		—		—
Recoveries	—		—		—		—
Balance, June 30, 2022	$	(2,005)	$	—	$	—	$	—

For the six months ended June 30, 2022, the Company had investment securities with approximately $63.2 million in unrealized losses, which have 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 33.4% of the principal balance from the Company’s investment portfolio will mature or are expected to pay down within five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.

As of June 30, 2022, the Company's available-for-sale securities portfolio consisted of 1,644 investment securities, 1,333 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $293.2 million.The U.S. government-sponsored enterprises portfolio contained unrealized losses of $16.7 million on 58 securities. The residential mortgage-backed securities portfolio contained $153.0 million of unrealized losses on 575 securities, and the commercial mortgage-backed securities portfolio contained $13.1 million of unrealized losses on 152 securities. The state and political subdivisions portfolio contained $93.5 million of unrealized losses on 466 securities. In addition, the other securities portfolio contained $17.0 million of unrealized losses on 82 securities.The unrealized losses on the Company's investments were a result of interest rate changes. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value was attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company has determined that an additional provision for credit losses is not necessary as of June 30, 2022.

As of June 30, 2022, the Company's held-to-maturity securities portfolio consistedof 482 investment securities, 480 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $93.5 million. The U.S Treasury portfolio contained unrealized losses of $1.7 million on 5 securities, and the state and political subdivisions portfolio contained $91.9 million of unrealized losses on 475 securities.

The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of June 30, 2022:


	State and Political Subdivisions		U.S. Treasuries		Total
	(In thousands)
Aaa/AAA	$	217,912	$	277,688	$	495,600
Aa/AA	837,675		—		837,675
A	33,677		—		33,677
Baa/BBB	—		—		—
Not rated	1,834		—		1,834
Total	$	1,091,098	$	277,688	$	1,368,786

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Income earned on securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, is as follows:

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (In thousands)
Taxable:

Available-for-sale
   $ 6,527    $ 4,809    $ 17,001    $ 13,720
Held-to-maturity
   544    774    1,982    2,458
Non-taxable:

Available-for-sale
   1,627    1,528    4,757    4,667
Held-to-maturity
   1,405    1,192    4,185    3,691








Total
   $ 10,103    $ 8,303    $ 27,925    $ 24,536


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Taxable
Available-for-sale	$	14,493	$	7,185	$	23,238	$	13,438
Held-to-maturity	6,448		—		6,783		—
Non-taxable
Available-for-sale	4,751		4,905		9,459		9,976
Held-to-maturity	2,974		—		2,973		—
Total	$	28,666	$	12,090	$	42,453	$	23,414

4. Loans Receivable

The various categories of loans receivable are summarized as follows:

   September 30,
2017    December 31,
2016
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 4,532,402    $ 3,153,121
Construction/land development
   1,648,923    1,135,843
Agricultural
   88,295    77,736
Residential real estate loans

Residential1-4 family
   1,968,688    1,356,136
Multifamily residential
   497,910    340,926




Total real estate
   8,736,218    6,063,762
Consumer
   51,515    41,745
Commercial and industrial
   1,296,485    1,123,213
Agricultural
   57,489    74,673
Other
   144,486    84,306




Total loans receivable
   $ 10,286,193    $ 7,387,699


	June 30, 2022		December 31, 2021
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	5,092,539	$	3,889,284
Construction/land development	2,595,384		1,850,050
Agricultural	329,106		130,674
Residential real estate loans
Residential 1-4 family	1,708,221		1,274,953
Multifamily residential	389,633		280,837
Total real estate	10,114,883		7,425,798
Consumer	1,106,343		825,519
Commercial and industrial	2,187,771		1,386,747
Agricultural	324,630		43,920
Other	190,246		154,105
Total loans receivable	13,923,873		9,836,089
Allowance for credit losses	(294,267)		(236,714)
Loans receivable, net	$	13,629,606	$	9,599,375

On April 1, 2022, the Company completed the acquisition of Happy. Including the effects of the known purchase accounting adjustments, as of the acquisition date, Happy had approximately $3.65 billion in loans.

During the three ~~and nine-month periods~~months ended ~~September~~June 30, ~~2017,~~2022, the Company did not sell any guaranteed portions of certain SBA loans. During the six months ended June 30, 2022, the Company sold ~~$3.1~~$2.8 million ~~and $12.9 million, respectively,~~ of the guaranteed ~~portion~~portions of certain SBA loans, which resulted in a gain of approximately ~~$163,000 and $738,000, respectively.~~$95,000. During the ~~three-month and nine-month periods~~three months ended ~~September~~June 30, ~~2016,~~2021, the Company did not sell any guaranteed portions of certain SBA loans. During the six months ended June 30, 2021, the Company sold ~~$5.8 million and $7.0~~$11.1 million of the guaranteed ~~portion~~portions of certain SBA loans, ~~respectively,~~ which resulted in ~~gains~~a gain of approximately ~~$364,000 and $443,000, respectively.~~

$1.1 million.

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Mortgage loans held for sale of approximately ~~$49.4~~$137.8 million and ~~$56.2~~$72.7 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively, are included in residential1-4 family loans. Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are considered mandatory forward commitments. Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. These commitments are derivative instruments and their fair values at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 were not material.

Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company ~~had $3.65 billion~~develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of ~~purchased~~the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. The Company held approximately $152.3 million and $448,000 in PCD loans, as of June 30, 2022 and December 31, 2021, respectively. The balance consisted of $151.8 million resulting from the acquisition of Happy and $432,000 from the acquisition of LH-Finance.

A description of our accounting policies for loans, impaired loans and non-accrual loans are set forth in our 2021 Form 10-K filed with the SEC on February 24, 2022.

5. Allowance for Credit Losses, Credit Quality and Other

The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.

Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.

Each year management evaluates the performance of the selected models used in the CECL calculation through backtesting. Based on the results of the testing, management determines if the various models produced accurate results compared to the actual losses incurred for the current economic environment. Management then determines if changes to the input assumptions and economic factors would produce a stronger overall calculation that is more responsive to changes in economic conditions. 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. Based on this analysis during the second quarter of 2022, management determined the previously selected economic factors for the various loss driver segments were appropriate and no changes were necessary. The identified loss drivers by segment are included below as of both June 30, 2022 and December 31, 2021.

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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 (%)
1-4 Family Revolving HELOC & Junior Liens	1c1	National Unemployment (%) & Housing Price Index – CoreLogic (%)
1-4 Family Revolving HELOC & Junior Liens	1c2b	National Unemployment (%) & Gross Domestic Product (%)
1-4 Family Senior Liens	1c2a	National Unemployment (%) & Gross Domestic Product (%)
Multifamily	1d	Rental Vacancy Rate (%) & Housing Price Index – Case-Schiller (%)
Owner Occupied CRE	1e1	National Unemployment (%) & Gross Domestic Product (%)
Non-Owner Occupied CRE	1e2,1b,8	National Unemployment (%) & Gross Domestic Product (%)
Commercial & Industrial, Agricultural, Non-Depository Financial Institutions, Purchase/Carry Securities, Other	4a, 3, 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 (%)

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.

The combination of adjustments for credit expectations (default and loss) and time expectations prepayment, curtailment, and time to recovery produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.

Construction/Land Development and OtherCommercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30 year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.

Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Residential real estate loans generally have a loan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to many factors including the borrower’s ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.

Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.

Consumer & Other Loans. Our consumer & other loans are primarily composed of loans to finance USCG registered high-end sail and power boats. The performance of consumer & other loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.

Table of Contents

Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit loss on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes ~~$158.0~~consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The Company uses the DCF method to estimate expected losses for all of the Company’s off-balance sheet credit exposures through the use of the existing DCF models for the Company’s loan portfolio pools. The off-balance sheet credit exposures exhibit similar risk characteristics as loans currently in the Company’s loan portfolio.

ASC 326 requires that both a discount and allowance for credit losses be recorded on loans during an acquisition. The Company completed the acquisition of Happy on April 1, 2022. As a result, the Company recorded $4.3 million ~~of discount~~in net loan discounts and a $16.8 million increase in the allowance for credit losses related to PCD loans. In addition, the Company recorded a $45.2 million provision for credit losses on ~~purchased~~acquired loans ~~at September 30, 2017. The Company had $55.1~~for the CECL "double count" and an $11.4 million ~~and $102.9 million remaining ofnon-accretable~~ ~~discount~~provision for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of September 30, 2017. The Company had $1.13 billion of purchased loans, which includes $100.1 million of discount for credit losses on purchased loans, at December 31, 2016. The Company had $35.3 million and $64.9 million remaining of~~non-accretable~~ ~~discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of December 31, 2016.~~

~~5. Allowance for Loan Losses, Credit Quality and Other~~

acquired unfunded commitments.

The following table presents ~~a summary of changes~~the activity in the allowance for ~~loan losses:~~

   Nine Months Ended
September 30, 2017
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 80,002
Loans charged off
   (10,535 )
Recoveries of loans previously charged off
   2,829


Net loans recovered (charged off)
   (7,706 )


Provision for loan losses
   39,324


Balance, September 30, 2017
   $ 111,620

~~The following tables present the balance in the allowance for loan~~credit losses for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as~~2022:


	Three Months Ended June 30, 2022
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	26,349	$	95,876	$	37,111	$	52,492	$	22,940	$	234,768
Allowance for credit losses on PCD loans - Happy acquisition	950		9,283		980		5,596		7		16,816
Loans charged off	—		—		(39)		—		(3,226)		(3,265)
Recoveries of loans previously charged off	302		52		23		221		180		778
Net loans recovered (charged off)	302		52		(16)		221		(3,046)		(2,487)
Provision for credit losses - acquired loans	7,205		18,711		7,380		11,303		571		45,170
Provision for credit losses	1,883		(8,727)		5,691		(1,303)		2,456		—
Balance, June 30	$	36,689	$	115,195	$	51,146	$	68,309	$	22,928	$	294,267


	Six Months Ended June 30, 2022
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Total
	(In thousands)
Allowance for credit losses:
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	—		—		(289)		(1,416)		(3,870)		(5,575)
Recoveries of loans previously charged off	317		78		49		330		368		1,142
Net loans recovered (charged off)	317		78		(240)		(1,086)		(3,502)		(4,433)
Provision for credit losses - acquired loans	7,205		18,711		7,380		11,303		571		45,170
Provision for credit losses	(198)		(95)		(5,432)		(566)		6,291		—
Balance, June 30	$	36,689	$	115,195	$	51,146	$	68,309	$	22,928	$	294,267

Table of ~~September 30, 2017. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.~~

   Three Months Ended September 30, 2017
   Construction/
Land
Development Other
Commercial
Real Estate Residential
Real Estate Commercial
& Industrial Consumer
& Other Unallocated Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 12,842 $ 27,843 $ 17,715 $ 12,828 $ 3,063 $ 5,847 $ 80,138
Loans charged off
   (182 ) (796 ) (309 ) (2,280 ) (857 ) —   (4,424 )
Recoveries of loans previously charged off
   85 278 226 140 154 —   883


Net loans recovered (charged off)
   (97 ) (518 ) (83 ) (2,140 ) (703 ) —   (3,541 )
Provision for loan losses
   6,175 18,192 8,036 3,934 1,292 (2,606 ) 35,023


Balance, September 30
   $ 18,920 $ 45,517 $ 25,668 $ 14,622 $ 3,652 $ 3,241 $ 111,620

   Nine Months Ended September 30, 2017
   Construction/
Land
Development Other
Commercial
Real Estate Residential
Real Estate Commercial
& Industrial Consumer
& Other Unallocated Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 11,522 $ 28,188 $ 16,517 $ 12,756 $ 4,188 $ 6,831 $ 80,002
Loans charged off
   (508 ) (2,451 ) (2,597 ) (3,059 ) (1,920 ) —   (10,535 )
Recoveries of loans previously charged off
   312 988 480 392 657 —   2,829


Net loans recovered (charged off)
   (196 ) (1,463 ) (2,117 ) (2,667 ) (1,263 ) —   (7,706 )
Provision for loan losses
   7,594 18,792 11,268 4,533 727 (3,590 ) 39,324


Balance, September 30
   $ 18,920 $ 45,517 $ 25,668 $ 14,622 $ 3,652 $ 3,241 $ 111,620

   As of September 30, 2017
   Construction/
Land
Development    Other
Commercial
Real Estate    Residential
Real Estate    Commercial
& Industrial    Consumer
& Other    Unallocated    Total
   (In thousands)
Allowance for loan losses:

Period end amount allocated to:

Loans individually evaluated for impairment
   $ 1,066    $ 995    $ 306    $ 512    $ 8    $ —      $ 2,887
Loans collectively evaluated for impairment
   17,839    44,016    24,467    13,925    3,613    3,241    107,101














Loans evaluated for impairment balance, September 30
   18,905    45,011    24,773    14,437    3,621    3,241    109,988














Purchased credit impaired loans
   15    506    895    185    31    —      1,632














Balance, September 30
   $ 18,920    $ 45,517    $ 25,668    $ 14,622    $ 3,652    $ 3,241    $ 111,620














Loans receivable:

Period end amount allocated to:

Loans individually evaluated for impairment
   $ 31,130    $ 50,518    $ 22,601    $ 13,958    $ 1,009    $ —      $ 119,216
Loans collectively evaluated for impairment
   1,601,961    4,442,747    2,392,014    1,265,189    250,074    —      9,951,985














Loans evaluated for impairment balance, September 30
   1,633,091    4,493,265    2,414,615    1,279,147    251,083    —      10,071,201














Purchased credit impaired loans
   15,832    127,432    51,983    17,338    2,407    —      214,992














Balance, September 30
   $ 1,648,923    $ 4,620,697    $ 2,466,598    $ 1,296,485    $ 253,490    $ —      $ 10,286,193

Contents

The following ~~tables present~~table presents the balances in the allowance for ~~loan~~credit losses for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2016~~2021 and the year ended December 31, ~~2016,~~2021:


	Six Months Ended June 30, 2021 and Year Ended December 31, 2021
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	32,861	$	88,453	$	53,216	$	46,530	$	24,413	$	245,473
Loans charged off	—		(637)		(323)		(4,210)		(900)		(6,070)
Recoveries of loans previously charged off	39		68		166		302		473		1,048
Net loans recovered (charged off)	39		(569)		(157)		(3,908)		(427)		(5,022)
Provision for credit loss - loans	(10,755)		5,243		(1,877)		9,660		(2,271)		—
Balance, June 30	22,145		93,127		51,182		52,282		21,715		240,451
Loans charged off	—		(9)		(222)		(4,032)		(1,328)		(5,591)
Recoveries of loans previously charged off	19		717		517		289		312		1,854
Net loans recovered (charged off)	19		708		295		(3,743)		(1,016)		(3,737)
Provision for credit loss - loans	6,251		(6,617)		(3,019)		4,523		(1,138)		—
Balance, December 31	$	28,415	$	87,218	$	48,458	$	53,062	$	19,561	$	236,714

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of June 30, 2022 and December 31, 2021:


	June 30, 2022
	Nonaccrual		Nonaccrual with Reserve		Loans Past Due Over 90 Days Still Accruing
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	14,247	$	2,137	$	10,712
Construction/land development	1,050		—		246
Agricultural	194		—		711
Residential real estate loans
Residential 1-4 family	17,210		—		2,378
Multifamily residential	156		—		—
Total real estate	32,857		2,137		14,047
Consumer	1,321		—		43
Commercial and industrial	8,698		2,268		2,342
Agricultural & other	1,294		—		—
Total	$	44,170	$	4,405	$	16,432

Table of Contents


	December 31, 2021
	Nonaccrual		Nonaccrual with Reserve		Loans Past Due Over 90 Days Still Accruing
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	11,923	$	2,212	$	2,225
Construction/land development	1,445		—		—
Agricultural	897		—		—
Residential real estate loans
Residential 1-4 family	16,198		3,000		701
Multifamily residential	156		—		—
Total real estate	30,619		5,212		2,926
Consumer	1,648		—		2
Commercial and industrial	13,875		4,018		107
Agricultural & other	1,016		—		—
Total	$	47,158	$	9,230	$	3,035

The Company had $44.2 million and $47.2 million in nonaccrual loans for the periods ended June 30, 2022 and December 31, 2021, respectively. In addition, the Company had $16.4 million and $3.0 million in loans past due 90 days or more and still accruing for the periods ended June 30, 2022 and December 31, 2021, respectively.

The Company had $4.4 million and $9.2 million in nonaccrual loans with a specific reserve as of June 30, 2022 and December 31, 2021, respectively. The Company did not recognize any interest income on nonaccrual loans during the period ended June 30, 2022 or June 30, 2021.

The following table presents the amortized cost basis of collateral-dependent impaired loans by class of loans as of June 30, 2022 and December 31, 2021:


	June 30, 2022
	Commercial Real Estate		Residential Real Estate		Other
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	330,460	$	—	$	—
Construction/land development	1,296		—		—
Agricultural	905		—		—
Residential real estate loans
Residential 1-4 family	—		20,714		—
Multifamily residential	—		1,108		—
Total real estate	332,661		21,822		—
Consumer	—		—		1,376
Commercial and industrial	—		—		27,326
Agricultural & other	—		—		1,915
Total	$	332,661	$	21,822	$	30,617

Table of Contents


	December 31, 2021
	Commercial Real Estate		Residential Real Estate		Other
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	283,919	$	—	$	—
Construction/land development	4,775		—		—
Agricultural	897		—		—
Residential real estate loans
Residential 1-4 family	—		19,775		—
Multifamily residential	—		1,300		—
Total real estate	289,591		21,075		—
Consumer	—		—		1,663
Commercial and industrial	—		—		18,193
Agricultural & other	—		—		1,016
Total	$	289,591	$	21,075	$	20,872

The Company had $385.1 million and $331.5 million in collateral-dependent impaired loans for the periods ended June 30, 2022 and December 31, 2021, respectively.

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral-dependent impaired loans, excluding lodging and assisted living loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for ~~loan~~credit losses ~~and recorded investment in loans receivable~~is measured based on ~~portfolio segment by impairment method~~the difference between the fair value of the collateral and the amortized cost basis of the loan as of ~~December 31, 2016. Allocation of a portion~~the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated costs to sell. The allowance ~~to one type~~for credit losses may be zero if the fair value of ~~loans does not preclude its availability to absorb losses in other categories.~~

   Year Ended December 31, 2016
   Construction/
Land
Development Other
Commercial
Real Estate Residential
Real Estate Commercial
& Industrial Consumer
& Other Unallocated    Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 10,782 $ 26,798 $ 14,818 $ 9,324 $ 5,016 $ 2,486    $ 69,224
Loans charged off
   (334 ) (2,590 ) (3,810 ) (4,424 ) (1,507 ) —      (12,665 )
Recoveries of loans previously charged off
   107 608 836 656 699 —      2,906




Net loans recovered (charged off)
   (227 ) (1,982 ) (2,974 ) (3,768 ) (808 ) —      (9,759 )
Provision for loan losses
   171 274 4,181 9,049 448 2,782    16,905




Balance, September 30
   10,726 25,090 16,025 14,605 4,656 5,268    76,370
Loans charged off
   (48 ) (996 ) (1,787 ) (1,354 ) (651 ) —      (4,836 )
Recoveries of loans previously charged off
   1,018 249 316 4,877 305 —      6,765




Net loans recovered (charged off)
   970 (747 ) (1,471 ) 3,523 (346 ) —      1,929
Provision for loan losses
   (174 ) 3,845 1,963 (5,372 ) (122 ) 1,563    1,703




Balance, December 31
   $ 11,522 $ 28,188 $ 16,517 $ 12,756 $ 4,188 $ 6,831    $ 80,002

   As of December 31, 2016
   Construction/
Land
Development    Other
Commercial
Real Estate    Residential
Real Estate    Commercial
& Industrial    Consumer
& Other    Unallocated    Total
   (In thousands)
Allowance for loan losses:

Period end amount allocated to:

Loans individually evaluated for impairment
   $ 15    $ 1,416    $ 103    $ 95    $ —      $ —      $ 1,629
Loans collectively evaluated for impairment
   11,463    25,641    15,796    12,596    4,176    6,831    76,503














Loans evaluated for impairment balance, December 31
   11,478    27,057    15,899    12,691    4,176    6,831    78,132














Purchased credit impaired loans
   44    1,131    618    65    12    —      1,870














Balance, December 31
   $ 11,522    $ 28,188    $ 16,517    $ 12,756    $ 4,188    $ 6,831    $ 80,002














Loans receivable:

Period end amount allocated to:

Loans individually evaluated for impairment
   $ 12,374    $ 74,723    $ 35,187    $ 25,873    $ 1,096    $ —      $ 149,253
Loans collectively evaluated for impairment
   1,105,921    3,080,201    1,608,805    1,085,891    198,064    —      7,078,882














Loans evaluated for impairment balance, December 31
   1,118,295    3,154,924    1,643,992    1,111,764    199,160    —      7,228,135














Purchased credit impaired loans
   17,548    75,933    53,070    11,449    1,564    —      159,564














Balance, December 31
   $ 1,135,843    $ 3,230,857    $ 1,697,062    $ 1,123,213    $ 200,724    $ —      $ 7,387,699

the collateral at the measurement date exceeds the amortized cost basis of the loan.

Table of Contents

The following is an aging analysis for loans receivable as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

   September 30, 2017
   Loans
Past Due
30-59 Days    Loans
Past Due
60-89 Days    Loans
Past Due
90 Days
or More    Total
Past Due    Current
Loans    Total Loans
Receivable    Accruing
Loans
Past Due
90 Days
or More
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 3,806    $ 2,684    $ 27,418    $ 33,908    $ 4,498,494    $ 4,532,402    $ 16,482
Construction/land development
   2,267    309    8,778    11,354    1,637,569    1,648,923    3,258
Agricultural
   152    —      34    186    88,109    88,295    —
Residential real estate loans

Residential1-4 family
   8,768    1,659    18,441    28,868    1,939,820    1,968,688    4,624
Multifamily residential
   595    —      1,194    1,789    496,121    497,910    1,039














Total real estate
   15,588    4,652    55,865    76,105    8,660,113    8,736,218    25,403
Consumer
   729    18    142    889    50,626    51,515    3
Commercial and industrial
   3,275    3,229    7,792    14,296    1,282,189    1,296,485    3,771
Agricultural and other
   363    101    178    642    201,333    201,975    6














Total
   $ 19,955    $ 8,000    $ 63,977    $ 91,932    $ 10,194,261    $ 10,286,193    $ 29,183

   December 31, 2016
   Loans
Past Due
30-59 Days    Loans
Past Due
60-89 Days    Loans
Past Due
90 Days
or More    Total
Past Due    Current
Loans    Total Loans
Receivable    Accruing
Loans
Past Due
90 Days
or More
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 2,036    $ 686    $ 27,518    $ 30,240    $ 3,122,881    $ 3,153,121    $ 9,530
Construction/land development
   685    16    7,042    7,743    1,128,100    1,135,843    3,086
Agricultural
   —      —      435    435    77,301    77,736    —
Residential real estate loans

Residential1-4 family
   6,972    1,287    23,307    31,566    1,324,570    1,356,136    2,996
Multifamily residential
   —      —      262    262    340,664    340,926    —














Total real estate
   9,693    1,989    58,564    70,246    5,993,516    6,063,762    15,612
Consumer
   117    66    161    344    41,401    41,745    21
Commercial and industrial
   984    582    3,464    5,030    1,118,183    1,123,213    309
Agricultural and other
   782    10    935    1,727    157,252    158,979    —














Total
   $ 11,576    $ 2,647    $ 63,124    $ 77,347    $ 7,310,352    $ 7,387,699    $ 15,942

2021:


	June 30, 2022
	Loans Past Due 30-59 Days		Loans Past Due 60-89 Days		Loans Past Due 90 Days or More		Total Past Due		Current Loans		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	14,579	$	1,871	$	24,959	$	41,409	$	5,051,130	$	5,092,539	$	10,712
Construction/land development	3,553		2,145		1,296		6,994		2,588,390		2,595,384		246
Agricultural	4,106		337		905		5,348		323,758		329,106		711
Residential real estate loans
Residential 1-4 family	3,729		4,404		19,588		27,721		1,680,500		1,708,221		2,378
Multifamily residential	54		—		156		210		389,423		389,633		—
Total real estate	26,021		8,757		46,904		81,682		10,033,201		10,114,883		14,047
Consumer	701		122		1,364		2,187		1,104,156		1,106,343		43
Commercial and industrial	7,996		1,140		11,040		20,176		2,167,595		2,187,771		2,342
Agricultural & other	658		72		1,294		2,024		512,852		514,876		—
Total	$	35,376	$	10,091	$	60,602	$	106,069	$	13,817,804	$	13,923,873	$	16,432


	December 31, 2021
	Loans Past Due 30-59 Days		Loans Past Due 60-89 Days		Loans Past Due 90 Days or More		Total Past Due		Current Loans		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	1,434	$	576	$	14,148	$	16,158	$	3,873,126	$	3,889,284	$	2,225
Construction/land development	92		22		1,445		1,559		1,848,491		1,850,050		—
Agricultural	—		472		897		1,369		129,305		130,674		—
Residential real estate loans
Residential 1-4 family	1,633		3,560		16,899		22,092		1,252,861		1,274,953		701
Multifamily residential	—		—		156		156		280,681		280,837		—
Total real estate	3,159		4,630		33,545		41,334		7,384,464		7,425,798		2,926
Consumer	60		205		1,650		1,915		823,604		825,519		2
Commercial and industrial	958		316		13,982		15,256		1,371,491		1,386,747		107
Agricultural and other	587		2		1,016		1,605		196,420		198,025		—
Total	$	4,764	$	5,153	$	50,193	$	60,110	$	9,775,979	$	9,836,089	$	3,035

Non-accruing loans at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 were ~~$34.8~~$44.2 million and $47.2 million, respectively.

~~The following is a summary of the impaired loans as of September 30, 2017 and December 31, 2016:~~

   September 30, 2017
            Three Months Ended    Nine Months Ended
   Unpaid
Contractual
Principal
Balance    Total
Recorded
Investment    Allocation
of Allowance
for Loan
Losses    Average
Recorded
Investment    Interest
Recognized    Average
Recorded
Investment    Interest
Recognized
   (In thousands)
Loans without a specific valuation allowance

Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 29    $ —      $ —      $ 15    $ 1    $ 15    $ 2
Construction/land development
   66    —      —      12    1    6    3
Agricultural
   35    —      —      —      —      —      1
Residential real estate loans

Residential1-4 family
   79    —      —      101    2    108    7
Multifamily residential
   —      —      —      —      —      —      —














Total real estate
   209    —      —      128    4    129    13
Consumer
   4    —      —      —      —      —      —
Commercial and industrial
   101    —      —      41    2    51    6
Agricultural and other
   —      —      —      —      —      —      —














Total loans without a specific valuation allowance
   314    —      —      169    6    180    19
Loans with a specific valuation allowance

Real estate:

Commercial real estate loans

Non-farm/non-residential
   49,606    45,312    982    42,245    662    44,962    1,311
Construction/land development
   13,897    12,875    1,066    11,177    58    10,173    192
Agricultural
   281    319    13    218    4    259    7
Residential real estate loans

Residential1-4 family
   24,833    21,042    231    20,893    116    23,294    298
Multifamily residential
   2,812    2,681    75    2,168    32    1,358    64














Total real estate
   91,429    82,229    2,367    76,701    872    80,046    1,872
Consumer
   153    149    —      145    —      156    —
Commercial and industrial
   18,354    14,271    512    10,308    76    8,935    84
Agricultural and other
   312    343    8    606    3    728    5














Total loans with a specific valuation allowance
   110,248    96,992    2,887    87,760    951    89,865    1,961
Total impaired loans

Real estate:

Commercial real estate loans

Non-farm/non-residential
   49,635    45,312    982    42,260    663    44,977    1,313
Construction/land development
   13,963    12,875    1,066    11,189    59    10,179    195
Agricultural
   316    319    13    218    4    259    8
Residential real estate loans

Residential1-4 family
   24,912    21,042    231    20,994    118    23,402    305
Multifamily residential
   2,812    2,681    75    2,168    32    1,358    64














Total real estate
   91,638    82,229    2,367    76,829    876    80,175    1,885
Consumer
   157    149    —      145    —      156    —
Commercial and industrial
   18,455    14,271    512    10,349    78    8,986    90
Agricultural and other
   312    343    8    606    3    728    5














Total impaired loans
   $ 110,562    $ 96,992    $ 2,887    $ 87,929    $ 957    $ 90,045    $ 1,980

~~Note~~~~: Purchased credit impaired loans are accounted for on a pooled basis under ASC310-30.~~ ~~All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans being classified as impaired loans as of September 30, 2017.~~

   December 31, 2016
            Year Ended
   Unpaid
Contractual
Principal
Balance    Total
Recorded
Investment    Allocation of
Allowance
for Loan
Losses    Average
Recorded
Investment    Interest
Recognized
   (In thousands)
Loans without a specific valuation allowance

Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 29    $ 29    $ —      $ 23    $ 2
Construction/land development
   —      —      —      6    —
Agricultural
   40    —      —      —      2
Residential real estate loans

Residential1-4 family
   231    231    —      119    15
Multifamily residential
   —      —      —      19    —










Total real estate
   300    260    —      167    19
Consumer
   —      —      —      —      —
Commercial and industrial
   124    124    —      64    8
Agricultural and other
   —      —      —      —      —










Total loans without a specific valuation allowance
   424    384    —      231    27
Loans with a specific valuation allowance

Real estate:

Commercial real estate loans

Non-farm/non-residential
   52,477    50,355    1,414    42,979    1,335
Construction/land development
   8,313    7,595    15    12,878    334
Agricultural
   395    438    2    469    —
Residential real estate loans

Residential1-4 family
   26,681    25,675    95    20,239    293
Multifamily residential
   552    552    8    922    9










Total real estate
   88,418    84,615    1,534    77,487    1,971
Consumer
   165    161    —      223    3
Commercial and industrial
   7,160    7,032    95    10,630    255
Agricultural and other
   935    935    —      1,037    —










Total loans with a specific valuation allowance
   96,678    92,743    1,629    89,377    2,229
Total impaired loans

Real estate:

Commercial real estate loans

Non-farm/non-residential
   52,506    50,384    1,414    43,002    1,337
Construction/land development
   8,313    7,595    15    12,884    334
Agricultural
   435    438    2    469    2
Residential real estate loans

Residential1-4 family
   26,912    25,906    95    20,358    308
Multifamily residential
   552    552    8    941    9










Total real estate
   88,718    84,875    1,534    77,654    1,990
Consumer
   165    161    —      223    3
Commercial and industrial
   7,284    7,156    95    10,694    263
Agricultural and other
   935    935    —      1,037    —










Total impaired loans
   $ 97,102    $ 93,127    $ 1,629    $ 89,608    $ 2,256

Interest recognized on impaired loans, including those loans with a specific reserve, during the three and six months ended ~~September~~June 30, ~~2017 and 2016~~2022 was approximately ~~$957,000~~$4.8 million and ~~$597,000,~~$9.5 million, respectively.Interest recognized on impaired loans, including those loans with a specific reserve, during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 and 2016~~2021 was approximately ~~$2.0~~$3.6 million and ~~$1.7~~$7.1 million, respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.

Table of Contents

Credit Quality Indicators. As part of theon-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs,(iv) non-performing loans and (v) the general economic conditions in Arkansas, Florida, Texas, Alabama and New York.

The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. Descriptions of the general characteristics of the 8 risk ratings are as follows:

•

~~Risk rating 1 – Excellent.~~ Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.

•

~~Risk rating 2 – Good.~~ These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.

•

~~Risk rating 3 – Satisfactory.~~ Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.

•

~~Risk rating 4 – Watch.~~ Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. Included in this category are loans to borrowers in industries that are experiencing elevated risk.

•

~~Risk rating 5 – Other Loans Especially Mentioned (“OLEM”)~~. A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

•

~~Risk rating 6 – Substandard.~~ A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.

•

~~Risk rating 7 – Doubtful.~~ A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.

•

~~Risk rating 8 – Loss.~~Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should be~~charged-off~~ ~~in the period in which they became uncollectible.~~

•Risk rating 1 – Excellent. Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.

•Risk rating 2 – Good. These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.

•Risk rating 3 – Satisfactory. Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.

•Risk rating 4 – Watch. Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure.

•Risk rating 5 – Other Loans Especially Mentioned (“OLEM”). A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

•Risk rating 6 – Substandard. A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.

•Risk rating 7 – Doubtful. A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.

•Risk rating 8 – Loss. Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should be charged-off in the period in which they became uncollectible.

The Company’s classified loans include loans in risk ratings 6, 7 and 8. ~~The following is a presentation of classified loans (excluding loans accounted for under ASC Topic310-30)~~ ~~by class as of September 30, 2017 and December 31, 2016:~~

   September 30, 2017
   Risk Rated 6    Risk Rated 7    Risk Rated 8    Classified Total
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 21,521    $ 526    $ —      $ 22,047
Construction/land development
   24,427    114    —      24,541
Agricultural
   341    —      —      341
Residential real estate loans

Residential1-4 family
   22,852    573    —      23,425
Multifamily residential
   941    —      —      941








Total real estate
   70,082    1,213    —      71,295
Consumer
   184    10    —      194
Commercial and industrial
   17,994    50    —      18,044
Agricultural and other
   270    —      —      270








Total risk rated loans
   $ 88,530    $ 1,273    $ —      $ 89,803

   December 31, 2016
   Risk Rated 6    Risk Rated 7    Risk Rated 8    Classified Total
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 43,657    $ 462    $ —      $ 44,119
Construction/land development
   8,619    33    —      8,652
Agricultural
   759    —      —      759
Residential real estate loans

Residential1-4 family
   28,846    445    —      29,291
Multifamily residential
   1,391    —      —      1,391








Total real estate
   83,272    940    —      84,212
Consumer
   211    2    —      213
Commercial and industrial
   16,991    170    —      17,161
Agricultural and other
   935    —      —      935








Total risk rated loans
   $ 101,409    $ 1,112    $ —      $ 102,521

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. 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.

~~The following is a presentation~~

Table of Contents

Based on the most recent analysis performed, the risk category of loans ~~receivable~~ by class ~~and risk rating~~of loans as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

   September 30, 2017
   Risk
Rated 1    Risk
Rated 2    Risk
Rated 3    Risk
Rated 4    Risk
Rated 5    Classified
Total    Total
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 1,021    $ 566    $ 2,523,273    $ 1,818,301    $ 39,968    $ 22,047    $ 4,405,176
Construction/land development
   31    571    273,090    1,323,834    11,024    24,541    1,633,091
Agricultural
   —      45    54,546    32,004    1,153    341    88,089
Residential real estate loans

Residential1-4 family
   1,126    1,095    1,416,454    470,981    11,711    23,425    1,924,792
Multifamily residential
   —      —      364,864    123,804    214    941    489,823














Total real estate
   2,178    2,277    4,632,227    3,768,924    64,070    71,295    8,540,971
Consumer
   15,239    362    25,404    9,272    78    194    50,549
Commercial and industrial
   17,717    9,041    622,782    601,360    10,203    18,044    1,279,147
Agricultural and other
   2,296    4,388    145,243    48,337    —      270    200,534














Total risk rated loans
   $ 37,430    $ 16,068    $ 5,425,656    $ 4,427,893    $ 74,351    $ 89,803    10,071,201














Purchased credit impaired loans
                     214,992


Total loans receivable
                     $ 10,286,193

   December 31, 2016
   Risk
Rated 1    Risk
Rated 2    Risk
Rated 3    Risk
Rated 4    Risk
Rated 5    Classified
Total    Total
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 1,047    $ 4,762    $ 1,568,385    $ 1,425,316    $ 33,559    $ 44,119    $ 3,077,188
Construction/land development
   400    981    180,094    921,081    7,087    8,652    1,118,295
Agricultural
   —      157    53,753    22,238    829    759    77,736
Residential real estate loans

Residential1-4 family
   2,336    1,683    941,760    324,045    10,360    29,291    1,309,475
Multifamily residential
   —      —      278,514    45,742    8,870    1,391    334,517














Total real estate
   3,783    7,583    3,022,506    2,738,422    60,705    84,212    5,917,211
Consumer
   15,080    231    15,330    9,645    81    213    40,580
Commercial and industrial
   13,117    3,644    500,220    558,413    19,209    17,161    1,111,764
Agricultural and other
   3,379    976    82,641    70,649    —      935    158,580














Total risk rated loans
   $ 35,359    $ 12,434    $ 3,620,697    $ 3,377,129    $ 79,995    $ 102,521    7,228,135














Purchased credit impaired loans
                     159,564


Total loans receivable
                     $ 7,387,699

2021 is as follows:


	June 30, 2022
	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Risk rating 1	$	—	$	—	$	—	$	245	$	—	$	161	$	—	$	406
Risk rating 2	—		—		—		122		—		4,188		—		4,310
Risk rating 3	168,978		512,718		295,392		299,302		354,655		970,977		219,357		2,821,379
Risk rating 4	185,605		310,791		184,980		177,523		400,884		464,893		134,386		1,859,062
Risk rating 5	8,462		—		4,181		14,622		36,376		232,972		95		296,708
Risk rating 6	876		—		12,785		29,675		5,630		61,442		266		110,674
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total non-farm/non-residential	363,921		823,509		497,338		521,489		797,545		1,734,633		354,104		5,092,539
Construction/land development
Risk rating 1	$	—	$	12	$	—	$	—	$	—	$	—	$	—	$	12
Risk rating 2	1,262		—		—		—		—		221		—		1,483
Risk rating 3	202,232		310,042		119,690		103,278		25,526		40,011		122,957		923,736
Risk rating 4	331,263		544,674		212,516		468,082		12,562		49,210		18,033		1,636,340
Risk rating 5	3,975		—		21,126		353		—		1,167		—		26,621
Risk rating 6	—		—		—		743		1		6,448		—		7,192
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total construction/land development	538,732		854,728		353,332		572,456		38,089		97,057		140,990		2,595,384
Agricultural
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		2,111		—		—		—		—		—		2,111
Risk rating 3	29,103		46,291		36,778		17,266		11,114		42,619		5,317		188,488
Risk rating 4	16,094		26,835		20,058		15,415		1,916		46,253		4,774		131,345
Risk rating 5	4,005		—		—		—		—		—		—		4,005
Risk rating 6	—		—		1,757		—		—		1,400		—		3,157
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total agricultural	49,202		75,237		58,593		32,681		13,030		90,272		10,091		329,106
Total commercial real estate loans	$	951,855	$	1,753,474	$	909,263	$	1,126,626	$	848,664	$	1,921,962	$	505,185	$	8,017,029
Residential real estate loans
Residential 1-4 family
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	118	$	37	$	155
Risk rating 2	—		—		—		—		—		115		—		115
Risk rating 3	228,300		254,988		183,584		122,093		105,793		361,623		105,987		1,362,368
Risk rating 4	25,964		41,184		66,127		12,130		18,418		71,178		70,261		305,262
Risk rating 5	2,734		180		—		3,066		501		1,557		186		8,224
Risk rating 6	—		2,180		2,413		3,825		2,414		17,814		3,450		32,096
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		1		—		1
Total residential 1-4 family	256,998		298,532		252,124		141,114		127,126		452,406		179,921		1,708,221

Table of Contents


	June 30, 2022
	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Multifamily residential
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		—		—		—		—		—		—		—
Risk rating 3	3,583		18,192		17,855		14,667		16,076		55,525		39,631		165,529
Risk rating 4	8,034		29,526		121,156		23,503		12,113		15,609		270		210,211
Risk rating 5	—		—		—		—		3,183		7,984		—		11,167
Risk rating 6	—		—		—		747		—		1,823		—		2,570
Risk rating 7	—		—		—		—		—		156		—		156
Risk rating 8	—		—		—		—		—		—		—		—
Total multifamily residential	11,617		47,718		139,011		38,917		31,372		81,097		39,901		389,633
Total real estate	$	1,220,470	$	2,099,724	$	1,300,398	$	1,306,657	$	1,007,162	$	2,455,465	$	725,007	$	10,114,883
Consumer
Risk rating 1	$	3,194	$	5,020	$	1,607	$	955	$	703	$	1,370	$	1,476	$	14,325
Risk rating 2	—		—		1		224		631		—		—		856
Risk rating 3	146,607		310,018		186,953		146,049		131,267		151,552		6,150		1,078,596
Risk rating 4	3,207		1,284		621		2,177		552		2,336		74		10,251
Risk rating 5	33		12		110		—		12		559		—		726
Risk rating 6	17		71		30		172		—		1,215		7		1,512
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		77		—		77
Total consumer	153,058		316,405		189,322		149,577		133,165		157,109		7,707		1,106,343
Commercial and industrial
Risk rating 1	$	920	$	32,090	$	6,644	$	304	$	29	$	21,677	$	7,979	$	69,643
Risk rating 2	170		307		81		197		—		254		546		1,555
Risk rating 3	176,716		166,123		89,398		79,402		48,010		95,750		282,994		938,393
Risk rating 4	26,642		231,306		49,175		123,869		80,950		57,810		494,944		1,064,696
Risk rating 5	283		6,156		28,092		361		7,239		9,480		806		52,417
Risk rating 6	18		577		12,237		4,462		24,553		11,165		6,122		59,134
Risk rating 7	—		—		—		—		1,634		299		—		1,933
Risk rating 8	—		—		—		—		—		—		—		—
Total commercial and industrial	204,749		436,559		185,627		208,595		162,415		196,435		793,391		2,187,771
Agricultural and other
Risk rating 1	$	136	$	727	$	114	$	—	$	—	$	5	$	746	$	1,728
Risk rating 2	73		123		—		3,467		34		968		1,795		6,460
Risk rating 3	107,154		41,975		32,179		6,170		10,553		48,565		123,477		370,073
Risk rating 4	8,981		18,330		3,635		13,824		2,101		11,582		75,742		134,195
Risk rating 5	—		8		203		—		—		1,311		—		1,522
Risk rating 6	—		57		194		16		—		631		—		898
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total agricultural and other	116,344		61,220		36,325		23,477		12,688		63,062		201,760		514,876
Total	$	1,694,621	$	2,913,908	$	1,711,672	$	1,688,306	$	1,315,430	$	2,872,071	$	1,727,865	$	13,923,873

Table of Contents


	December 31, 2021
	Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		—		—		—		—		—		—		—
Risk rating 3	284,127		281,982		266,990		341,642		195,301		891,035		194,640		2,455,717
Risk rating 4	111,697		32,788		115,989		301,520		90,747		345,254		90,028		1,088,023
Risk rating 5	—		10,930		2,239		23,117		49,926		189,038		—		275,250
Risk rating 6	—		—		23,723		2,224		11,751		32,372		224		70,294
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total non-farm/non-residential	395,824		325,700		408,941		668,503		347,725		1,457,699		284,892		3,889,284
Construction/land development
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		—		—		—		—		231		—		231
Risk rating 3	301,719		183,715		108,491		23,574		13,760		41,860		149,433		822,552
Risk rating 4	226,230		217,267		448,899		33,617		45,679		38,122		7,297		1,017,111
Risk rating 5	—		—		388		—		—		1,174		176		1,738
Risk rating 6	—		134		825		3		—		7,456		—		8,418
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total construction/land development	527,949		401,116		558,603		57,194		59,439		88,843		156,906		1,850,050
Agricultural
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		—		—		—		—		—		—		—
Risk rating 3	21,480		27,931		7,768		6,564		5,103		21,689		7,026		97,561
Risk rating 4	4,305		964		365		970		655		22,143		2,065		31,467
Risk rating 5	—		166		—		—		—		—		—		166
Risk rating 6	—		44		—		—		—		1,436		—		1,480
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total agricultural	25,785		29,105		8,133		7,534		5,758		45,268		9,091		130,674
Total commercial real estate loans	$	949,558	$	755,921	$	975,677	$	733,231	$	412,922	$	1,591,810	$	450,889	$	5,870,008
Residential real estate loans
Residential 1-4 family
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	76	$	89	$	165
Risk rating 2	—		—		—		—		—		29		—		29
Risk rating 3	210,970		147,523		119,861		94,848		82,474		296,687		85,836		1,038,199
Risk rating 4	8,885		3,397		56,839		16,887		21,874		53,578		36,642		198,102
Risk rating 5	—		—		3,065		1,220		582		1,366		193		6,426
Risk rating 6	1,136		2,252		2,432		2,063		1,263		16,305		6,580		32,031
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		1		—		1
Total residential 1-4 family	220,991		153,172		182,197		115,018		106,193		368,042		129,340		1,274,953

Table of Contents


	December 31, 2021
	Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Multifamily residential
Risk rating 1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Risk rating 2	—		—		—		—		—		—		—		—
Risk rating 3	11,898		5,211		34,492		17,375		9,430		43,804		3,583		125,793
Risk rating 4	3,755		44,294		30,060		3,412		2,981		18,805		33,723		137,030
Risk rating 5	—		—		—		7,591		8,105		—		—		15,696
Risk rating 6	—		—		—		—		890		1,428		—		2,318
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total multifamily residential	15,653		49,505		64,552		28,378		21,406		64,037		37,306		280,837
Total real estate	$	1,186,202	$	958,598	$	1,222,426	$	876,627	$	540,521	$	2,023,889	$	617,535	$	7,425,798
Consumer
Risk rating 1	$	4,441	$	1,799	$	1,237	$	920	$	226	$	1,383	$	1,893	$	11,899
Risk rating 2	—		—		45		639		—		8		—		692
Risk rating 3	221,986		173,511		132,148		109,810		67,992		92,076		1,098		798,621
Risk rating 4	3,547		923		2,944		1,776		158		2,641		79		12,068
Risk rating 5	—		116		—		15		—		131		—		262
Risk rating 6	69		34		39		117		—		1,711		7		1,977
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total consumer	230,043		176,383		136,413		113,277		68,376		97,950		3,077		825,519
Commercial and industrial
Risk rating 1	$	99,579	$	12,752	$	350	$	118	$	102	$	21,436	$	9,851	$	144,188
Risk rating 2	175		16		—		—		66		276		168		701
Risk rating 3	125,071		59,056		77,130		67,944		34,733		42,905		145,247		552,086
Risk rating 4	244,927		35,350		89,558		91,840		23,616		34,566		88,750		608,607
Risk rating 5	6,185		609		480		8,258		5,712		2,851		582		24,677
Risk rating 6	492		15,377		5,913		24,941		5,477		2,233		342		54,775
Risk rating 7	—		—		—		1,696		—		—		—		1,696
Risk rating 8	—		—		—		—		—		16		1		17
Total commercial and industrial	476,429		123,160		173,431		194,797		69,706		104,283		244,941		1,386,747
Agricultural and other
Risk rating 1	$	5,042	$	—	$	40	$	—	$	—	$	110	$	552	$	5,744
Risk rating 2	—		—		3,467		—		—		909		983		5,359
Risk rating 3	54,534		44,030		5,158		7,092		2,009		46,570		8,750		168,143
Risk rating 4	1,544		218		154		1,590		1,226		1,224		10,842		16,798
Risk rating 5	—		—		—		—		—		1,297		—		1,297
Risk rating 6	53		—		23		13		33		562		—		684
Risk rating 7	—		—		—		—		—		—		—		—
Risk rating 8	—		—		—		—		—		—		—		—
Total agricultural and other	61,173		44,248		8,842		8,695		3,268		50,672		21,127		198,025
Total	$	1,953,847	$	1,302,389	$	1,541,112	$	1,193,396	$	681,871	$	2,276,794	$	886,680	$	9,836,089

Table of Contents

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. The Company also evaluates credit quality based on the aging status of the loan, which was previously presented and by payment activity. The following tables present the amortized cost of performing and nonperforming loans as of June 30, 2022 and December 31, 2021.


	June 30, 2022
	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Performing	$	363,921	$	823,509	$	483,438	$	476,985	$	774,705	$	1,485,540	$	353,981	$	4,762,079
Non-performing	—		—		13,900		44,504		22,840		249,093		123		330,460
Total non-farm/non-residential	363,921		823,509		497,338		521,489		797,545		1,734,633		354,104		5,092,539
Construction/land development
Performing	$	538,732	$	854,677	$	353,332	$	571,712	$	37,933	$	96,712	$	140,990	$	2,594,088
Non-performing	—		51		—		744		156		345		—		1,296
Total construction/ land development	538,732		854,728		353,332		572,456		38,089		97,057		140,990		2,595,384
Agricultural
Performing	$	49,202	$	75,237	$	58,593	$	32,681	$	13,030	$	89,367	$	10,091	$	328,201
Non-performing	—		—		—		—		—		905		—		905
Total agricultural	49,202		75,237		58,593		32,681		13,030		90,272		10,091		329,106
Total commercial real estate loans	$	951,855	$	1,753,474	$	909,263	$	1,126,626	$	848,664	$	1,921,962	$	505,185	$	8,017,029
Residential real estate loans
Residential 1-4 family
Performing	$	256,998	$	297,261	$	249,716	$	137,945	$	125,699	$	442,616	$	177,272	$	1,687,507
Non-performing	—		1,271		2,408		3,169		1,427		9,790		2,649		20,714
Total residential 1-4 family	256,998		298,532		252,124		141,114		127,126		452,406		179,921		1,708,221
Multifamily residential
Performing	$	11,617	$	47,718	$	139,011	$	38,917	$	31,372	$	79,989	$	39,901	$	388,525
Non-performing	—		—		—		—		—		1,108		—		1,108
Total multifamily residential	11,617		47,718		139,011		38,917		31,372		81,097		39,901		389,633
Total real estate	$	1,220,470	$	2,099,724	$	1,300,398	$	1,306,657	$	1,007,162	$	2,455,465	$	725,007	$	10,114,883
Consumer
Performing	$	153,058	$	316,350	$	189,302	$	149,430	$	133,165	$	155,962	$	7,700	$	1,104,967
Non-performing	—		55		20		147		—		1,147		7		1,376
Total consumer	153,058		316,405		189,322		149,577		133,165		157,109		7,707		1,106,343
Commercial and industrial
Performing	$	204,749	$	435,803	$	182,667	$	204,643	$	153,210	$	192,144	$	787,229	$	2,160,445
Non-performing	—		756		2,960		3,952		9,205		4,291		6,162		27,326
Total commercial and industrial	204,749		436,559		185,627		208,595		162,415		196,435		793,391		2,187,771
Agricultural and other
Performing	$	116,344	$	61,220	$	36,122	$	23,461	$	12,688	$	61,852	$	201,274	$	512,961
Non-performing	—		—		203		16		—		1,210		486		1,915
Total agricultural and other	116,344		61,220		36,325		23,477		12,688		63,062		201,760		514,876
Total	$	1,694,621	$	2,913,908	$	1,711,672	$	1,688,306	$	1,315,430	$	2,872,071	$	1,727,865	$	13,923,873

Table of Contents


	December 31, 2021
	Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Performing	$	395,824	$	315,447	$	394,061	$	648,351	$	298,086	$	1,268,731	$	284,865	$	3,605,365
Non-performing	—		10,253		14,880		20,152		49,639		188,968		27		283,919
Total non-farm/non-residential	395,824		325,700		408,941		668,503		347,725		1,457,699		284,892		3,889,284
Construction/land development
Performing	$	527,949	$	400,982	$	557,778	$	57,024	$	59,439	$	85,197	$	156,906	$	1,845,275
Non-performing	—		134		825		170		—		3,646		—		4,775
Total construction/land development	527,949		401,116		558,603		57,194		59,439		88,843		156,906		1,850,050
Agricultural
Performing	$	25,785	$	28,939	$	8,133	$	7,534	$	5,758	$	44,537	$	9,091	$	129,777
Non-performing	—		166		—		—		—		731		—		897
Total agricultural	25,785		29,105		8,133		7,534		5,758		45,268		9,091		130,674
Total commercial real estate loans	$	949,558	$	755,921	$	975,677	$	733,231	$	412,922	$	1,591,810	$	450,889	$	5,870,008
Residential real estate loans
Residential 1-4 family
Performing	$	220,380	$	151,459	$	180,113	$	113,845	$	105,129	$	360,700	$	123,552	$	1,255,178
Non-performing	611		1,713		2,084		1,173		1,064		7,342		5,788		19,775
Total residential 1-4 family	220,991		153,172		182,197		115,018		106,193		368,042		129,340		1,274,953
Multifamily residential
Performing	$	15,653	$	49,505	$	64,552	$	28,378	$	21,406	$	62,737	$	37,306	$	279,537
Non-performing	—		—		—		—		—		1,300		—		1,300
Total multifamily residential	15,653		49,505		64,552		28,378		21,406		64,037		37,306		280,837
Total real estate	$	1,186,202	$	958,598	$	1,222,426	$	876,627	$	540,521	$	2,023,889	$	617,535	$	7,425,798
Consumer
Performing	$	229,986	$	176,355	$	136,403	$	113,160	$	68,376	$	96,506	$	3,070	$	823,856
Non-performing	57		28		10		117		—		1,444		7		1,663
Total consumer	230,043		176,383		136,413		113,277		68,376		97,950		3,077		825,519
Commercial and industrial
Performing	$	476,424	$	122,999	$	168,984	$	185,569	$	66,928	$	103,391	$	244,259	$	1,368,554
Non-performing	5		161		4,447		9,228		2,778		892		682		18,193
Total commercial and industrial	476,429		123,160		173,431		194,797		69,706		104,283		244,941		1,386,747
Agricultural and other
Performing	$	61,173	$	44,248	$	8,819	$	8,682	$	3,235	$	49,725	$	21,127	$	197,009
Non-performing	—		—		23		13		33		947		—		1,016
Total agricultural and other	61,173		44,248		8,842		8,695		3,268		50,672		21,127		198,025
Total	$	1,953,847	$	1,302,389	$	1,541,112	$	1,193,396	$	681,871	$	2,276,794	$	886,680	$	9,836,089

The Company had approximately $13.8 million or 83 total revolving loans convert to term loans for the six months ended June 30, 2022 compared to$21.7 million or 140 total revolving loans convert to term loans for the six months ended June 30, 2021. These loans were considered immaterial for vintage disclosure inclusion.

Table of Contents

The following is a presentation of troubled debt restructurings (“TDRs”) by class as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

   September 30, 2017
   Number
of Loans    Pre-
Modification
Outstanding
Balance    Rate
Modification    Term
Modification    Rate
& Term
Modification    Post-
Modification
Outstanding
Balance
   (Dollars in thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   16    $ 18,162    $ 11,395    $ 253    $ 5,432    $ 17,080
Construction/land development
   5    782    690    77    —      767
Agricultural
   2    345    282    38    —      320
Residential real estate loans

Residential1-4 family
   22    5,708    3,746    84    1,361    5,191
Multifamily residential
   3    1,701    1,355    —      287    1,642












Total real estate
   48    26,698    17,468    452    7,080    25,000
Consumer
   2    7    —      7    —      7
Commercial and industrial
   9    647    365    71    3    439
Other
   1    166    166    —      —      166












Total
   60    $ 27,518    $ 17,999    $ 530    $ 7,083    $ 25,612

   December 31, 2016
   Number
of Loans    Pre-
Modification
Outstanding
Balance    Rate
Modification    Term
Modification    Rate
& Term
Modification    Post-
Modification
Outstanding
Balance
   (Dollars in thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   17    $ 21,344    $ 14,600    $ 263    $ 5,542    $ 20,405
Construction/land development
   1    560    556    —      —      556
Agricultural
   2    146    —      43    80    123
Residential real estate loans

Residential1-4 family
   21    5,179    2,639    124    1,017    3,780
Multifamily residential
   1    295    —      —      290    290












Total real estate
   42    27,524    17,795    430    6,929    25,154
Commercial and industrial
   6    395    237    115    10    362












Total
   48    $ 27,919    $ 18,032    $ 545    $ 6,939    $ 25,516

2021:


	June 30, 2022
	Number of Loans	Pre- Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance
	(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	11	$	6,085	$	3,404	$	608	$	82	$	4,094
Construction/land development	1	216		199		—		—		199
Agricultural	—	—		—		—		—		—
Residential real estate loans
Residential 1-4 family	14	2,166		660		112		299		1,071
Multifamily residential	1	1,130		952		—		—		952
Total real estate	27	9,597		5,215		720		381		6,316
Consumer	4	23		12		—		3		15
Commercial and industrial	10	2,099		152		41		74		267
Total	41	$	11,719	$	5,379	$	761	$	458	$	6,598


	December 31, 2021
	Number of Loans	Pre- Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance
	(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	12	$	6,119	$	3,581	$	623	$	85	$	4,289
Construction/land development	2	240		210		1		—		211
Agricultural	1	282		262		—		—		262
Residential real estate loans
Residential 1-4 family	15	2,328		844		117		332		1,293
Multifamily residential	1	1,130		1,144		—		—		1,144
Total real estate	31	10,099		6,041		741		417		7,199
Consumer	4	22		13		—		3		16
Commercial and industrial	9	2,353		172		65		74		311
Total	44	$	12,474	$	6,226	$	806	$	494	$	7,526

Table of Contents

The following is a presentation of TDRs onnon-accrual status as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 because they are not in compliance with the modified terms:

   September 30, 2017    December 31, 2016
   Number of Loans    Recorded Balance    Number of Loans    Recorded Balance
   (Dollars in thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   2    $ 2,284    2    $ 696
Agricultural
   —      —      2    123
Residential real estate loans

Residential1-4 family
   4    124    13    2,240








Total real estate
   6    2,408    17    3,059
Commercial and industrial
   1    16    —      —








Total
   7    $ 2,424    17    $ 3,059


	June 30, 2022			December 31, 2021
	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
	(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	1	$	5	2	$	7
Construction/land development	1	199		1	210
Agricultural	—	—		1	262
Residential real estate loans
Residential 1-4 family	5	352		5	388
Total real estate	7	556		9	867
Consumer	3	3		3	3
Commercial and industrial	8	176		6	206
Total	18	$	735	18	$	1,076

The following is a presentation of total foreclosed assets as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

   September 30,
2017    December 31,
2016
   (In thousands)
Commercial real estate loans

Non-farm/non-residential
   $ 10,354    $ 9,423
Construction/land development
   6,328    4,009
Agricultural
      —
Residential real estate loans

Residential1-4 family
   3,733    2,076
Multifamily residential
   1,286    443




Total foreclosed assets held for sale
   $ 21,701    $ 15,951

2021:


	June 30, 2022		December 31, 2021
	(In thousands)
Commercial real estate loans
Non-farm/non-residential	$	49	$	536
Construction/land development	55		834
Residential real estate loans
Residential 1-4 family	269		260
Total foreclosed assets held for sale	$	373	$	1,630

The ~~following is a summary~~Company has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. As of June 30, 2022 and December 31, 2021, the ~~purchased~~balance of purchase credit ~~impaired~~deteriorated loans ~~acquired in the GHI, BOC~~was approximately $152.3 million and ~~Stonegate acquisitions during the first nine months of 2017~~$448,000, respectively. This balance, as of June 30, 2022, consisted of $151.8 million resulting from the ~~dates~~acquisition of ~~acquisition:~~

   GHI    BOC    Stonegate
Contractually required principal and interest at acquisition
   $ 22,379    $ 18,586    $ 98,444
Non-accretable difference (expected losses and foregone interest)
   4,462    2,811    23,297






Cash flows expected to be collected at acquisition
   17,917    15,775    75,147
Accretable yield
   2,071    1,043    11,761






Basis in purchased credit impaired loans at acquisition
   $ 15,846    $ 14,732    $ 63,386

~~Changes in~~Happy and $432,000 from the ~~carrying amount~~acquisition of ~~the accretable yield for purchased credit impaired loans were as follows for the nine-month period ended September 30, 2017 for the Company’s acquisitions:~~

   Accretable Yield    Carrying
Amount of
Loans
   (In thousands)
Balance at beginning of period
   $ 38,212    $ 159,564
Reforecasted future interest payments for loan pools
   3,739    —
Accretion recorded to interest income
   (14,955 )    14,955
Acquisitions
   14,875    93,964
Adjustment to yield
   2,210    —
Transfers to foreclosed assets held for sale
   —      (13,407 )
Payments received, net
   —      (40,084 )




Balance at end of period
   $ 44,081    $ 214,992

~~The loan pools were evaluated by the Company and are currently forecasted to have a slowerrun-off~~ than originally expected. As a result, the Company has reforecast the total accretable yield expectations for those loan pools by $3.7 million. This updated forecast does not change the expected weighted average yields on the loan pools.

During the 2017 impairment tests on the estimated cash flows of loans, the Company established that several loan pools were determined to have a materially projected credit improvement. As a result of this improvement, the Company will recognize approximately $2.2 million as an additional adjustment to yield over the weighted average life of the loans.

LH-Finance.

6. Goodwill and Core Deposits and Other Intangibles

Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, were as follows:

   September 30,
2017    December 31,
2016
   (In thousands)
Goodwill

Balance, beginning of period
   $ 377,983    $ 377,983
Acquisitions
   551,146    —




Balance, end of period
   $ 929,129    $ 377,983




   September 30,
2017    December 31,
2016
   (In thousands)
Core Deposit and Other Intangibles

Balance, beginning of period
   $ 18,311    $ 21,443
Acquisitions
   35,247    —
Amortization expense
   (2,576 )    (2,370 )




Balance, September 30
   $ 50,982    19,073



Amortization expense
      (762 )


Balance, end of year
      $ 18,311


	June 30, 2022		December 31, 2021
	(In thousands)
Goodwill
Balance, beginning of period	$	973,025	$	973,025
Acquisition of Happy Bancshares	425,375		—
Balance, end of period	$	1,398,400	$	973,025

Table of Contents


	June 30, 2022		December 31, 2021
	(In thousands)
Core Deposit and Other Intangibles
Balance, beginning of period	$	25,045	$	30,728
Acquisition of Happy Bancshares	42,263		—
Amortization expense	(3,898)		(2,842)
Balance, June 30	63,410		27,886
Amortization expense			(2,841)
Balance, end of year			$	25,045

The carrying basis and accumulated amortization of core deposits and other intangibles at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016 were:~~

   September 30,
2017    December 31,
2016
   (In thousands)

Gross carrying basis
   $ 86,625    $ 51,378
Accumulated amortization
   (35,643 )    (33,067 )




Net carrying amount
   $ 50,982    $ 18,311

2021 were:


	June 30, 2022		December 31, 2021
	(In thousands)
Gross carrying basis	$	128,888	$	86,625
Accumulated amortization	(65,478)		(61,580)
Net carrying amount	$	63,410	$	25,045

Core deposit and other intangible amortization expense was approximately ~~$906,000~~$2.5 million and ~~$762,000~~$1.4 million for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. Core deposit and other intangible amortization expense was approximately ~~$2.6~~$3.9 million and ~~$2.4~~$2.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. ~~Including all of the mergers completed as of September 30, 2017, the~~The Company’s estimated amortization expense of core deposits and other intangibles for each of the years ~~2017~~2022 through ~~2021~~2026 is approximately: ~~2017~~2022 – ~~$4.1~~$8.9 million; ~~2018~~2023 – ~~$6.6~~$9.7 million; ~~2019~~2024 – ~~$6.5~~$8.5 million; ~~2020~~2025 – ~~$5.9~~$8.1 million; ~~2021~~2026 – ~~$5.7~~$7.8 million.

The carrying amount of the Company’s goodwill was ~~$929.1 million~~$1.40 billion and ~~$378.0~~$973.0 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. Goodwill is tested annually for impairment during the fourth ~~quarter.~~quarter or more often if events and circumstances indicate there may be an impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements.

The purchase price allocation and certain fair value measurements related to the Stonegate acquisition remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.

7. Other Assets

Other assets ~~consists~~consist primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021, other assets were ~~$163.1~~$271.0 million and ~~$129.3~~$177.0 million, respectively.

The Company has equity securities without readily determinable fair ~~values. These equity securities~~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 ~~320,~~~~Investments-Debt and~~321, Investments – Equity Securities(“ASC Topic 321”). ~~They include items such as stock holdings in Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“Federal Reserve”), Bankers’ Bank and other miscellaneous holdings. The~~These equity securities without a readily determinable fair value were ~~$134.6~~$112.1 million and ~~$112.4~~$88.2 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, respectively,~~2021, and are accounted for at cost.

The Company has equity securities such as stock holdings in First National Bankers’ Bank and other miscellaneous holdings which are accounted for under ASC Topic 321. These equity securities without a readily determinable fair value were $70.3 million and $36.4 million at June 30, 2022 and December 31, 2021. There were no observable transactions during the period that would indicate a material change in fair value. Therefore, these investments were accounted for at cost, less impairment.

Table of Contents

8. Deposits

The aggregate amount of time deposits with a minimum denomination of $250,000 was ~~$628.3~~$353.2 million and ~~$569.1~~$321.6 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, respectively.~~2021. The aggregate amount of time deposits with a minimum denomination of $100,000 was ~~$1.02 billion~~$688.2 million and ~~$842.9~~$537.4 million at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.Interest expense applicable to certificates in excess of $100,000 totaled ~~$2.2 million~~$661,000 and ~~$1.1~~$2.0 million for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively.~~2021. Interest expense applicable to certificates in excess of $100,000 totaled ~~$5.8~~$1.4 million and ~~$3.2~~$4.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively.~~2021. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, brokered deposits were ~~$1.14 billion~~$626.9 million and ~~$502.5~~$625.7 million, respectively.

Deposits totaling approximately ~~$1.32~~$2.69 billion and ~~$1.23~~$1.91 billion at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

9. Securities Sold Under Agreements to Repurchase

At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, securities sold under agreements to repurchase totaled ~~$149.5~~$118.6 million and ~~$121.3~~$140.9 million, respectively. For the three-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, securities sold under agreements to repurchase daily weighted-average totaled ~~$135.9~~$123.1 million and ~~$118.2~~$157.6 million, respectively. For the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, securities sold under agreements to repurchase daily weighted-average totaled ~~$129.6~~$130.2 million and ~~$121.0~~$158.6 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 is presented in the following tables:

   September 30, 2017
   Overnight and
Continuous    Up to 30
Days    30-90
Days    Greater than
90 Days    Total
   (In thousands)
Securities sold under agreements to repurchase:

U.S. government-sponsored enterprises
   $ 14,125    $ —      $ —      $ 10,000    $ 24,125
Mortgage-backed securities
   29,677    —      —      —      29,677
State and political subdivisions
   75,829    —      —      —      75,829
Other securities
   19,900    —      —      —      19,900










Total borrowings
   $ 139,531    $ —      $ —      $ 10,000    $ 149,531

   December 31, 2016
   Overnight and
Continuous    Up to 30
Days    30-90
Days    Greater than
90 Days    Total
   (In thousands)
Securities sold under agreements to repurchase:

U.S. government-sponsored enterprises
   $ 1,918    $ —      $ —      $ —      $ 1,918
Mortgage-backed securities
   22,691    —      —      —      22,691
State and political subdivisions
   74,559    —      —      —      74,559
Other securities
   22,122    —      —      —      22,122










Total borrowings
   $ 121,290    $ —      $ —      $ —      $ 121,290


	June 30, 2022
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(In thousands)
Securities sold under agreements to repurchase:
U.S. government-sponsored enterprises	$	6,540	$	—	$	—	$	—	$	6,540
Mortgage-backed securities	3,300		—		—		—		3,300
State and political subdivisions	105,319		—		—		—		105,319
Other securities	3,414		—		—		—		3,414
Total borrowings	$	118,573	$	—	$	—	$	—	$	118,573


	December 31, 2021
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(In thousands)
Securities sold under agreements to repurchase:
U.S. government-sponsored enterprises	$	8,433	$	—	$	—	$	—	$	8,433
Mortgage-backed securities	7,920		—		—		—		7,920
State and political subdivisions	122,173		—		—		—		122,173
Other securities	2,360		—		—		—		2,360
Total borrowings	$	140,886	$	—	$	—	$	—	$	140,886

Table of Contents

10. FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were ~~$1.04 billion and $1.31 billion~~$400.0 million at ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, respectively.~~2021.The Company had no other borrowed funds as of June 30, 2022 or December 31, 2021. At ~~September~~June 30, ~~2017, $245.0 million~~2022 and ~~$799.3 million~~December 31, 2021, all of the outstanding ~~balance~~balances were ~~issued~~classified as ~~short-term and~~ long-term ~~advances, respectively. At December 31, 2016, $40.0 million and $1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively.~~advances. The FHLB advances mature ~~from the current year to 2027~~in 2033 with fixed interest rates ranging from ~~0.636%~~1.76% to 5.960% and are secured by loans and investments securities. Maturities of borrowings as of September 30, 2017 include: 2017 – $75.3 million; 2018 – $409.5 million; 2019 – $143.1 million; 2020 – $146.4 million; 2021 – zero; after 2021 – $25.0 million.2.26%. Expected maturities ~~will~~could differ from contractual maturities because FHLB may have the right to call or ~~HBI~~the Company may have the right to prepay certain obligations.

Additionally, the Company had ~~$691.3 million~~$1.09 billion and ~~$516.2 million~~$1.07 billion at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, respectively,~~2021, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

~~11. Other Borrowings~~

The ~~Company had zero other borrowings at September 30, 2017. The Company~~parent company took out a $20.0 million line of credit for general corporate purposes during ~~2015, but the~~2015. The balance on this line of credit at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 was zero.

~~12.~~

11. Subordinated Debentures

Subordinated debentures ~~consists~~at June 30, 2022 and December 31, 2021 consisted of subordinated debt securities and guaranteed payments on trust preferred ~~securities. As of September 30, 2017 and December 31, 2016, subordinated debentures were $367.8 million and $60.8 million, respectively.~~

~~Subordinated debentures at September 30, 2017 and December 31, 2016 contained~~securities with the following components:

   As of
September 30,
2017    As of
December 31,
2016
   (In thousands)
Trust preferred securities

Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
   $ 3,093    $ 3,093
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
   15,464    15,464
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
   25,774    25,774
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
   16,495    16,495
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month LIBOR rate, reset quarterly, currently callable without penalty
   4,292    —
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
   5,545    —
Subordinated debt securities

Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty
   297,172    —




Total
   $ 367,835    $ 60,826

As of June 30, 2022
As of
December 31, 2021
(In thousands)
Trust preferred securities
Subordinated debentures, issued in 2004, due 2034, floating rate of 4.00% above the three-month LIBOR rate, reset quarterly, currently callable without penalty $ 2,165 $ —
Subordinated debentures, issued in 2003, due 2034, floating rate of 2.95% above the three-month LIBOR rate, reset quarterly, currently callable without penalty 10,310 —
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month LIBOR rate, reset quarterly, currently callable without penalty 5,155 4,501
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty — 3,093
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty — 15,464
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty — 25,774
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty — 16,495
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty — 5,942
Subordinated debt securities
Subordinated notes, net of issuance costs, issued in 2020, due 2030, fixed rate of 5.50% during the first five years and at a floating rate of 534.5 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2025 without penalty 144,063 —
Subordinated notes, net of issuance costs, issued in 2022, due 2032, fixed rate of 3.125% during the first five years and at a floating rate of 182 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2027 without penalty 296,762 —
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty — 299,824
Total $ 458,455 $ 371,093

Table of Contents

Trust Preferred ~~Securities~~. Securities. The Company holds trust preferred securities with a face amount of ~~$73.3~~$17.6 million which are currently callable without penalty based on the terms of the specific agreements. The trust preferred securities aretax-advantaged issues that ~~qualify~~previously qualified for Tier 1 capital treatment subject to certain limitations. However, now that the Company has exceeded $15 billion in assets and has completed the acquisition of Happy Bancshares, the Tier 1 treatment of the Company’s outstanding trust preferred securities has been eliminated, and these securities are now treated as Tier 2 capital. Distributions on these securities are included in interest expense. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in the Company’s subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the subordinated debentures held by the trust. The Company wholly owns the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related subordinated debentures. The Company’s obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.

The ~~Bank~~Company has received approval from the Federal Reserve to redeem the trust preferred securities, and is in the process of redeeming all of its 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 quarter, $10.7 million of these trust preferred securities were paid off without penalty. As of June 30, 2022, the Company held a face amount of $12.5 million in trust preferred securities ~~with~~acquired from Happy.

During the second quarter of 2022, the Company chose to redeem an additional $68.1 million in trust preferred securities held prior to the acquisition of Happy. As of June 30, 2022, the Company's remaining balance of trust preferred securities which were held prior to the acquisition of Happy was $5.1 million.

Subordinated Debt Securities. On April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy. These notes have a ~~fair value~~maturity date of ~~$9.8 million from~~July 31, 2030 and carry a fixed rate of 5.500% for the ~~Stonegate acquisition. The difference between~~first five years. Thereafter, the ~~fair value purchased of $9.8 million~~notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345% resetting quarterly. Interest payments are due semi-annually and the ~~$12.5~~notes include a right of prepayment without penalty on or after July 31, 2025.

On January 18, 2022, the Company completed an underwritten public offering of $300.0 million ~~face~~in aggregate principal amount ~~will be amortized into interest expense over the remaining life~~of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the ~~debentures.~~ Company and will mature on January 30, 2032. From and including the date of issuance to, but excludingJanuary 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.

The ~~associated subordinated debentures are redeemable,~~Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to ~~maturity at our option on a quarterly basis when~~100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest ~~is due and payable and in whole~~to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, ~~within 90 days following~~including prior to January 30, 2027, at the ~~occurrence and continuation of certain changes~~Company’s option, in ~~the tax treatment or capital treatment~~whole but not in part, subject to prior approval of the ~~debentures.~~

~~Subordinated Debt Securities~~. Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

On April 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”~~“2027 Notes”) for net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The 2027 Notes are unsecured, subordinated debt obligations and mature on April 15, 2027. From and including the date of issuance to, but excluding April 15, 2022, the 2027 Notes bear 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 2027 Notes ~~will~~ 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 shall be deemed to be zero.

Table of Contents

The Company, ~~may,~~ 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. ~~The Company may also redeem the Notes at any time, including prior to~~On April 15, 2022, ~~at its option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent~~ the Company ~~from deducting interest payable on~~completed the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100%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 ~~any~~ accrued and unpaid interest to, but excluding, the ~~redemption date. The Notes provide the Company with additional Tier 2 regulatory capital to support expected future growth.~~

~~13.~~Redemption Date.

12. Income Taxes

The following is a summary of the components of the provision ~~(benefit)~~ for income taxes for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (In thousands)
Current:

Federal
   $ 17,289    $ 15,523    $ 65,958    $ 53,216
State
   3,434    3,083    13,101    10,570








Total current
   20,723    18,606    79,059    63,786








Deferred:

Federal
   (11,002 )    5,739    (13,238 )    10,400
State
   (2,185 )    1,140    (2,629 )    2,066








Total deferred
   (13,187 )    6,879    (15,867 )    12,466








Income tax expense
   $ 7,536    $ 25,485    $ 63,192    $ 76,252

2021:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Current:
Federal	$	19,242	$	15,175	$	33,207	$	38,058
State	5,077		5,024		8,761		12,599
Total current	24,319		20,199		41,968		50,657
Deferred:
Federal	(16,636)		3,661		(14,752)		2,488
State	(4,389)		1,212		(3,893)		823
Total deferred	(21,025)		4,873		(18,645)		3,311
Income tax expense	$	3,294	$	25,072	$	23,323	$	53,968

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
Statutory federal income tax rate
   35.00 % 35.00 % 35.00 % 35.00 %
Effect ofnon-taxable interest income
   (4.48 ) (1.47 ) (1.82 ) (1.54 )
Effect of gain on acquisitions
   —   —   (0.76 ) —
Stock compensation
   (0.09 ) —   (0.49 ) —
State income taxes, net of federal benefit
   3.91 4.07 4.01 4.07
Other
   (0.63 ) (0.72 ) 0.18 (0.30 )


Effective income tax rate
   33.71 % 36.88 % 36.12 % 37.23 %

2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Statutory federal income tax rate	21.00	%	21.00	%	21.00	%	21.00	%
Effect of non-taxable interest income	(8.30)		(1.03)		(2.53)		(0.97)
Stock compensation	0.90		0.16		0.58		0.25
State income taxes, net of federal benefit	(4.38)		4.18		2.56		4.22
Executive officer compensation & other	7.87		(0.24)		0.77		(0.48)
Effective income tax rate	17.09	%	24.07	%	22.38	%	24.02	%

Table of Contents

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

   September 30,
2017    December 31,
2016
   (In thousands)
Deferred tax assets:

Allowance for loan losses
   $ 52,181    $ 31,381
Deferred compensation
   3,430    3,925
Stock compensation
   1,605    669
Real estate owned
   3,697    2,296
Loan discounts
   16,634    9,157
Tax basis premium/discount on acquisitions
   32,833    14,757
Investments
   1,368    1,957
Other
   21,597    8,361




Gross deferred tax assets
   133,345    72,503




Deferred tax liabilities:

Accelerated depreciation on premises and equipment
   (1,200 )    2,154
Unrealized gain on securitiesavailable-for-sale
   2,018    258
Core deposit intangibles
   5,352    4,950
FHLB dividends
   1,926    1,926
Other
   3,462    1,917




Gross deferred tax liabilities
   11,558    11,205




Net deferred tax assets
   $ 121,787    $ 61,298


	June 30, 2022		December 31, 2021
	(In thousands)
Deferred tax assets:
Allowance for credit losses	$	84,584	$	68,644
Deferred compensation	5,310		5,342
Stock compensation	6,211		5,044
Non-accrual interest income	1,914		694
Real estate owned	109		109
Unrealized loss on investment securities, available-for-sale	72,534		—
Loan discounts	8,550		4,169
Tax basis premium/discount on acquisitions	2,216		3,220
Investments	34,527		263
Deposits	207		—
Other	17,392		5,283
Gross deferred tax assets	233,554		92,768
Deferred tax liabilities:
Accelerated depreciation on premises and equipment	4,095		761
Unrealized gain on securities	—		4,220
Core deposit intangibles	15,360		5,736
FHLB dividends	2,782		2,820
Other	2,732		941
Gross deferred tax liabilities	24,969		14,478
Net deferred tax assets	$	208,585	$	78,290

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and the states of Alabama, Arizona, Arkansas, ~~Alabama,~~California, Florida, Georgia, Illinois, Kansas, Kentucky, Maryland, Mississippi, Missouri, New Hampshire, New Jersey, New York, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas and ~~California.~~Wisconsin. The Company is no longer subject to U.S. federal and state tax examinations by tax authorities for years before ~~2013.~~

~~14.~~2018.

13. Common Stock, Compensation Plans and Other

Common Stock

The Company’s Restated Articles of Incorporation, as amended, authorize the issuance of up to 300,000,000 shares of common stock, par value $0.01 per share.

The Company also has the authority to issue up to 5,500,000 shares of preferred stock, par value $0.01 per share under the Company’s Restated Articles of ~~Incorporation.~~

Incorporation, as amended.

Stock Repurchases

On January ~~20, 2017,~~22, 2021, the Company’s Board of Directors authorized the repurchase of up to an additional ~~5,000,000~~20,000,000 shares of its common stock under the previously approved stock repurchase ~~program, which brought the total amount of authorized shares to repurchase to 9,752,000 shares.~~program. During the first ~~nine~~six months of ~~2017, the Company utilized a portion of this stock repurchase program.~~

~~The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:~~

Period
   Number of
Shares
Purchased    Average Price
Paid Per Share
Purchased    Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs    Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs
July 1 through July 31, 2017
   —      $ —      —      5,664,936
August 1 through August 31, 2017
   380,000    24.36    380,000    5,284,936
September 1 through September 30, 2017
   —      —      —      5,284,936





Total
   380,000       380,000

~~During first nine months of 2017,~~2022, the Company repurchased a total of ~~800,000~~1,212,732 shares with a weighted-average stock price of ~~$24.44~~$21.89 per share. ~~The 2017 earnings were used to fund the repurchases during the year.~~ Shares repurchased under the program as of ~~September~~June 30, ~~2017~~2022 since its inception total ~~4,467,064~~18,874,067 shares. The remaining balance available for repurchase is ~~5,284,936~~20,877,933 shares at ~~September~~June 30, ~~2017.~~

2022.

Table of Contents

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. 2022 Equity Incentive Plan (the “2022 Plan”). The ~~Company has a stock option and performance incentive plan known as~~2022 Plan replaced the Company’s Amended and Restated 2006 Stock Option and Performance Incentive Plan (the ~~“Plan”~~“2006 Plan” and, together with the 2022 Plan, the “Plans”)., which expired on February 27, 2022. The purpose of the ~~Plan~~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. On April 21, 2016 at the Annual Meeting of Shareholders of the Company, the shareholders approved, as proposed in the Proxy Statement, an amendment to the Plan to increase the number of shares of the Company’s common stock available for issuance under the Plan by 2,000,000 shares to 11,288,000 shares. The Plan provides for the granting of incentive and~~non-qualified~~ ~~stock options to and other equity awards, including the issuance of restricted shares.~~ As of ~~September~~June 30, ~~2017,~~2022, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan, subject to shareholder approval of the Plan, was ~~11,288,000.~~14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan). At ~~September~~June 30, ~~2017,~~2022, the Company had ~~approximately 2,405,000~~2,617,211 shares of common stock ~~remaining~~ available for future grants ~~and approximately 4,729,000~~under 2022 Plan, subject to shareholder approval of the 2022 Plan. As of June 30, 2022, a total of 5,761,527 shares of common stock were reserved for issuance pursuant to ~~outstanding awards under~~ the ~~Plan.~~

Plans.

The intrinsic value of the stock options outstanding and stock options vested at ~~September~~June 30, ~~2017~~2022 was ~~$20.9~~$5.7 million and ~~$12.1~~$5.4 million, respectively. The intrinsic value of stock options exercised during the six months ended June 30, 2022 was approximately $259,000. Total unrecognized compensation cost, net of income tax benefit, related tonon-vested stock option awards, which are expected to be recognized over the vesting periods, was approximately ~~$5.7~~$5.5 million as of ~~September~~June 30, ~~2017. For the first nine months of 2017, the Company has expensed approximately $1.2 million for thenon-vested~~ ~~awards.~~

2022.

The table below summarizes the stock option transactions under the 2022 Plan at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 and changes during the ~~nine-month~~three-month period and year then ~~ended:~~

   For the Nine Months
Ended September 30, 2017    For the Year Ended
December 31, 2016
   Shares (000)    Weighted-
Average
Exercisable
Price    Shares (000)    Weighted-
Average
Exercisable
Price
Outstanding, beginning of year
   2,397    $ 15.19    2,794    $ 12.71
Granted
   80    25.96    140    21.25
Forfeited/Expired
   —      —      (14 )    17.28
Exercised
   (178 )    7.60    (523 )    3.50








Outstanding, end of period
   2,299    16.15    2,397    15.19








Exercisable, end of period
   1,017    $ 13.32    639    $ 8.88

ended:


	For the Six Months Ended June 30, 2022			For the Year Ended December 31, 2021
	Shares (000)	Weighted- Average Exercisable Price		Shares (000)	Weighted- Average Exercisable Price
Outstanding, beginning of year	3,015	$	20.06	3,254	$	19.77
Granted	178	21.04		15	21.68
Forfeited/Expired	(29)	22.83		(57)	22.44
Exercised	(20)	10.63		(197)	14.78
Outstanding, end of period	3,144	20.14		3,015	20.06
Exercisable, end of period	1,813	$	18.46	1,543	$	17.46

Stock-based compensation expense for stock-based compensation awards granted is based on the grant-date fair value. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the ~~Company’s~~Company's employee stock options. The weighted-average fair value of options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~$7.10~~$5.17 per share. ~~The weighted-average fair value of~~There were 178,000 options granted during the ~~year~~six months ended ~~December 31, 2016 was $5.08 per share.~~June 30, 2022. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate, and expected life of options granted.

   For the Nine Months Ended
September 30, 2017 For the Year Ended
December 31, 2016
Expected dividend yield
   1.39 % 1.65 %
Expected stock price volatility
   28.47 % 26.66 %
Risk-free interest rate
   2.06 % 1.65 %
Expected life of options
   6.5 years 6.5 years

The assumptions used in determining the fair value of the 2022 and 2021 stock option grants were as follows:


	For the Six Months Ended June 30, 2022		For the Year Ended December 31, 2021
Expected dividend yield	3.15	%	2.59	%
Expected stock price volatility	31.22	%	70.13	%
Risk-free interest rate	2.80	%	0.75	%
Expected life of options	6.5 years		6.5 years

Table of Contents

The following is a summary of currently outstanding and exercisable options at ~~September~~June 30, ~~2017:~~

   Options Outstanding    Options Exercisable
Exercise Prices
   Options
Outstanding
Shares
(000)    Weighted-
Average
Remaining
Contractual
Life (in years)    Weighted-
Average
Exercise
Price    Options
Exercisable
Shares (000)    Weighted-
Average
Exercise
Price
$    2.10 to $2.66
   18    1.49    $ 2.56    18    $ 2.56
$    4.27 to $4.30
   91    0.29    4.28    91    4.28
$    5.68 to $6.56
   103    3.81    6.43    103    6.43
$    8.62 to $9.54
   284    5.43    9.09    224    9.08
$14.71 to $16.86
   262    7.01    16.00    124    16.12
$17.12 to $17.40
   211    7.18    17.19    90    17.22
$18.46 to $18.46
   1,050    7.90    18.46    329    18.46
$20.16 to $20.58
   80    8.02    20.37    14    20.34
$21.25 to $21.25
   120    8.56    21.25    24    21.25
$25.96 to $25.96
   80    9.56    25.96    —      —





   2,299          1,017

2022:


Options Outstanding					Options Exercisable
Exercise Prices	Options Outstanding Shares (000)	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price		Options Exercisable Shares (000)	Weighted- Average Exercise Price
$6.56 to $8.62	140	0.55	$	8.62	140	$	8.62
$9.54 to $14.71	140	2.05	13.23		140	13.23
$16.77 to $16.86	130	2.14	16.80		130	16.80
$17.12 to $17.36	92	2.72	17.13		92	17.13
$17.40 to $18.46	871	3.13	18.45		738	18.45
$18.50 to $20.16	41	6.78	19.05		23	19.05
$20.46 to $21.25	293	6.58	20.79		149	21.10
$21.31 to $22.22	132	6.68	22.18		82	22.21
$22.70 to $23.32	1,208	6.06	23.32		246	23.32
$23.51 to $25.96	99	5.81	25.39		73	25.85
	3,144				1,813

The table below summarized the activity for the Company’s restricted stock issued and outstanding at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 and changes during the period and year then ended:

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands)
Beginning of year
   958    975
Issued
   232    244
Vested
   (45 )    (256 )
Forfeited
   —      (5 )




End of period
   1,145    958




Amount of expense for nine months and twelve months ended, respectively
   $ 3,815    $ 4,049


	As of June 30, 2022		As of December 31, 2021
	(In thousands)
Beginning of year	1,231		1,371
Issued	391		216
Vested	(177)		(320)
Forfeited	(31)		(36)
End of period	1,414		1,231
Amount of expense for six months and twelve months ended, respectively	$	3,664	$	7,112

Total unrecognized compensation cost, net of income tax benefit, related tonon-vested restricted stock awards, which are expected to be recognized over the vesting periods, was approximately ~~$14.3~~$19.2 million as of ~~September~~June 30, ~~2017.~~

~~15.~~2022.

Table of Contents

14. Non-Interest Expense

The table below shows the components ofnon-interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (In thousands)
Salaries and employee benefits
   $ 28,510    $ 25,623    $ 83,965    $ 75,018
Occupancy and equipment
   7,887    6,668    21,602    19,848
Data processing expense
   2,853    2,791    8,439    8,221
Other operating expenses:

Advertising
   795    866    2,305    2,422
Merger and acquisition expenses
   18,227    —      25,743    —
FDIC loss sharebuy-out expense
   —      3,849    —      3,849
Amortization of intangibles
   906    762    2,576    2,370
Electronic banking expense
   1,712    1,428    4,885    4,121
Directors’ fees
   309    292    946    856
Due from bank service charges
   472    319    1,348    961
FDIC and state assessment
   1,293    1,502    3,763    4,394
Insurance
   577    553    1,698    1,630
Legal and accounting
   698    583    1,799    1,764
Other professional fees
   1,436    1,137    3,822    3,106
Operating supplies
   432    437    1,376    1,292
Postage
   280    269    861    815
Telephone
   305    449    1,027    1,391
Other expense
   4,154    3,498    10,835    12,203








Total other operating expenses
   31,596    15,944    62,984    41,174








Totalnon-interest expense
   $ 70,846    $ 51,026    $ 176,990    $ 144,261

2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(In thousands)
Salaries and employee benefits	$	65,795	$	42,462	$	109,346	$	84,521
Occupancy and equipment	14,256		9,042		23,400		18,279
Data processing expense	10,094		5,893		17,133		11,763
Merger and acquisition expenses	48,731		—		49,594		—
Other operating expenses:
Advertising	2,117		1,194		3,383		2,240
Amortization of intangibles	2,477		1,421		3,898		2,842
Electronic banking expense	3,352		2,616		5,890		4,854
Directors’ fees	375		414		779		797
Due from bank service charges	396		273		666		522
FDIC and state assessment	2,390		1,108		4,058		2,471
Insurance	973		787		1,743		1,568
Legal and accounting	1,061		1,058		1,858		1,904
Other professional fees	2,254		1,796		3,863		3,409
Operating supplies	995		465		1,749		952
Postage	556		292		862		630
Telephone	384		365		721		711
Other expense	9,276		3,796		13,435		8,385
Total other operating expenses	26,606		15,585		42,905		31,285
Total non-interest expense	$	165,482	$	72,982	$	242,378	$	145,848

15. Leases

The Company leases land and office facilities under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2044 and do not include renewal options based on economic factors that would have implied that continuation of the lease was reasonably certain. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally include real estate taxes and common area maintenance (“CAM”) charges in the rental payments. Short-term leases are leases having a term of twelve months or less. In accordance with ASU 2018-11, the Company does not separate nonlease components from the associated lease component of our operating leases. As a result, the Company accounts for these components as a single component under Topic 842 since (i) the timing and pattern of transfer of the nonlease components and the associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease. The Company recognizes short term leases on a straight-line basis and does not record a related ROU asset and liability for such leases. In addition, equipment leases were determined to be immaterial and a related ROU asset and liability for such leases is not recorded.

As of June 30, 2022, the balances of the right-of-use asset and lease liability was $45.6 million and $48.7 million, respectively. As of December 31, 2021, the balances of the right-of-use asset and lease liability was $39.6 million and $42.4 million, respectively The right-of-use asset is included in bank premises and equipment, net, and the lease liability is included in accrued interest payable and other liabilities.

Table of Contents

The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
2022	$	4,547	$	7,714
2023	8,153		6,574
2024	7,296		6,001
2025	6,568		5,510
2026	6,308		5,389
Thereafter	30,335		24,999
Total future minimum lease payments	$	63,207	$	56,187
Discount effect of cash flows	(14,505)		(13,778)
Present value of net future minimum lease payments	$	48,702	$	42,409

Additional information (dollar amounts in thousands):


	For the Three Months Ended						Six Months Ended
Lease expense:	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Operating lease expense	$	2,116		$	1,981		$	3,939		$	3,990
Short-term lease expense	—			1			1			5
Variable lease expense	218			251			443			508
Total lease expense	$	2,334		$	2,233		$	4,383		$	4,503
Other information:
Cash paid for amounts included in the measurement of lease liabilities	$	2,154		$	1,974		$	3,983		$	3,968
Weighted-average remaining lease term (in years)	9.33			9.75			9.42			9.84
Weighted-average discount rate	3.38		%	3.53		%	3.39		%	3.53		%

The Company currently leases three properties from three related parties. Total rent expense from the leases was $36,000 or 1.56% of total lease expense and $73,000 or 1.66% of total lease expense for the three and six months ended June 30, 2022.

16. Significant Estimates and Concentrations of Credit Risks

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for ~~loan~~credit losses and certain concentrations of credit risk are reflected in Note 5, while deposit concentrations are reflected in Note 8.

The Company’s primary market areas are in Arkansas, Florida, Texas, South Alabama and New York. The Company primarily grants loans to customers located within these markets unless the borrower has an established relationship with the Company.

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

Although the Company has a diversified loan portfolio, at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, commercial real estate loans represented ~~61.0%~~57.6% and ~~59.1%~~59.7% of total loans receivable, respectively, and ~~284.1%~~229.2% and ~~328.9%~~212.2% of total stockholders’ equity at June 30, 2022 and December 31, 2021, respectively. Residential real estate loans represented ~~24.0%~~15.1% and ~~23.0%~~15.8% of total loans receivable and ~~111.8%~~60.0% and ~~127.8%~~56.3% of total stockholders’ equity at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

Approximately ~~91.0%~~78.0% of the Company’s total loans and ~~91.9%~~82.1% of the Company’s real estate loans as of ~~September~~June 30, ~~2017,~~2022, are to borrowers whose collateral is located in Alabama, Arkansas, Florida, Texas and New York, the states in which the Company has its branch locations.

~~Although general economic conditions~~

Table of Contents

As of June 30, 2022, the markets in the Company’s market areas have improved, both nationally and locally, over the past three years and have shown signs of continued improvement, financial institutions still face circumstances and challenges which in some cases, have resulted and could potentially result, in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statementswe operate have been ~~prepared using values~~experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and ~~information currently available to~~ the ~~Company.~~

potential impacts of international unrest. However, excluding the impact of the acquisition of Happy Bancshares, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022. In addition, excluding the impact of the acquisition of Happy Bancshares, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022.

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

17. Commitments and Contingencies

In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of ~~their~~its customers. These commitments and contingent liabilities include lines of credit and commitments to extend credit and issue standby letters of credit. The Company applies the same credit policies and standards as they do in the lending process when making these commitments. The collateral obtained is based on the assessed creditworthiness of the borrower.

At ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, commitments to extend credit of ~~$2.31~~$4.47 billion and ~~$1.82~~$3.05 billion, respectively, were outstanding. A percentage of these balances are participated out to other banks; therefore, the Company can call on the participating banks to fund future draws. Since some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

Outstanding standby letters of credit are contingent commitments issued by the Company, generally to guarantee the performance of a customer in third-party borrowing arrangements. The term of the guarantee is dependent upon the creditworthiness of the borrower, some of which are long-term. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does foron-balance-sheet instruments. The maximum amount of future payments the Company could be required to make under these guarantees at ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, is $76.8~~2021, was $164.9 million and ~~$41.1~~$110.8 million, respectively.

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

18. Regulatory Matters

The Bank is subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. Since the Bank is also under supervision of the Federal Reserve, it is further limited if the total of all dividends declared in any calendar year by the Bank exceeds the Bank’s net profits to date for that year combined with its retained net profits for the preceding two years. During the first ~~nine~~six months of ~~2017,~~2022, the Company requested approximately ~~$64.5~~$53.1 million in regular dividends from its banking subsidiary. ~~This dividend is equal to approximately 52.7% of the Company’s banking subsidiary’syear-to-date~~ ~~2017 earnings.~~

The Company’s banking subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s regulators could require adjustments to regulatory capital not reflected in the consolidated financial statements.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, common Tier 1 equity and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of ~~September~~June 30, ~~2017,~~2022, the Company meets all capital adequacy requirements to which it is subject.

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On December 31, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 27, 2020, the federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. The Company elected to adopt the interim final rule, which is reflected in the Company's risk-based capital ratios.

Basel III permanently grandfathers 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 phases out of Tier 1 capital these non-qualifying capital instruments issued before May 19, 2010 by all other bank holding companies. However, now that the Company has exceeded $15 billion in assets and has completed the acquisition of Happy Bancshares, the Tier 1 treatment of the Company’s outstanding trust preferred securities has been eliminated, and these securities are now treated as Tier 2 capital.

Basel III also amended the prompt corrective action rules to incorporate a “common equity Tier 1 capital” requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization will be required to have at least a 4.5% “common equity Tier 1 risk-based capital” ratio, a 4% “Tier 1 leverage capital” ratio, a 6% “Tier 1 risk-based capital” ratio and an 8% “total risk-based capital” ratio.

The Federal Reserve Board’s risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. Under Basel III, the criteria for a well-capitalized institution are now: a 6.5% “common equity Tier 1 risk-based capital” ratio, a 5% “Tier 1 leverage capital” ratio, an 8% “Tier 1 risk-based capital” ratio, and a 10% “total risk-based capital” ratio. As of ~~September~~June 30, ~~2017,~~2022, the Bank met the capital standards for a well-capitalized institution. The Company’s “common equity Tier 1 risk-based capital” ratio, “Tier 1 leverage capital” ratio, “Tier 1 risk-based capital” ratio, and “total risk-based capital” ratio were ~~10.86%~~12.78%, ~~13.17%~~9.77%, ~~11.46%~~12.88%, and ~~15.06%~~16.61%, respectively, as of ~~September~~June 30, ~~2017.~~

2022.

19. Additional Cash Flow Information

In connection with the ~~GHI~~Happy acquisition, accounted for ~~using the purchase method,~~under ASC Topic 805, the Company acquired approximately ~~$398.1 million~~$6.68 billion in assets, including ~~$41.0~~$858.9 million in cash and cash equivalents, assumed ~~$345.0 million~~$6.15 billion in liabilities, issued ~~2,738,038~~approximately 42.4 million shares of its common stock valued at approximately ~~$77.5~~$958.8 million as of ~~February 23, 2017, and paid~~April 1, 2022. In addition, the holders of certain Happy stock-based awards received approximately ~~$18.5~~$3.7 million in cash in ~~exchange~~cancellation of such awards, for ~~all outstanding shares~~a total transaction value of ~~GHI common stock.~~

~~In connection with the BOC acquisition, accounted for using the purchase method, the Company acquired~~ approximately $178.1 million in assets, including $4.6 million in cash and cash equivalents, assumed $170.1 million in liabilities, issued no equity and paid approximately $4.2 million in cash. As a result, the Company recorded a bargain purchase gain of $3.8$962.5 million.

In connection with the Stonegate acquisition, accounted for using the purchase method, the Company acquired approximately $2.89 billion in assets, including $101.0 million in cash and cash equivalents, assumed $2.60 billion in liabilities, issued 30,863,658 shares of its common stock valued at approximately $742.3 million as of September 26, 2017, and paid $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock.

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

   September 30,
   2017    2016
   (In thousands)
Interest paid
   $ 34,573    $ 22,295
Income taxes paid
   117,025    66,450
Assets acquired by foreclosure
   9,255    9,448


	June 30,
	2022		2021
	(In thousands)
Interest paid	$	27,605	$	28,428
Income taxes paid	38,553		58,685
Assets acquired by foreclosure	9		1,951

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20. Financial Instruments

Fair value is the exchange price that would be received ~~to sell~~for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants aton the measurement date. ~~Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.~~ There is a hierarchy of three levels of inputs that may be used to measure fair ~~value:~~

values:

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. 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.

Financial Assets and Liabilities Measured on a Recurring Basis

Available-for-sale securities and marketable equity securities are the only material instruments valued on a recurring basis which are held by the Company at fair value. ~~The Company does not have any Level 1 securities.~~ Primarily all of the ~~Company’s~~Company's securities are considered to be Level 2 securities, with the exception of the marketable equity securities, which are considered to be Level 1 securities. ~~These~~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. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, Level 3 securities were immaterial. In addition, there were no material transfers between hierarchy levels during ~~2017~~2022 and ~~2016.~~

2021. See Note 3 to the Condensed Notes to Consolidated Financial Statements for additional detail related to investment securities.

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. In general, the Company does not purchase investment portfolio securities with complicated structures. Pricing for the Company’s investment securities is fairly generic and is easily obtained.

~~Impaired~~ 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.

Financial Assets and Liabilities Measured on a Nonrecurring Basis

Held-to-maturity investment securities and impaired loans that are collateral dependent are the only material financial assets valued on anon-recurring basis which are held by the Company at fair value. The held-to-maturity investment securities consist primarily of state and political subdivisions plus U.S. Treasury securities. 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. Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are carried at the net realizable value of the collateral if the loan is collateral dependent. A portion of the allowance for ~~loan~~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 ~~loan~~credit losses to require an increase, such increase is reported as a component of the provision for ~~loan~~credit losses.The fair value of loans with specific allocated losses was ~~$94.1~~$323.1 million and ~~$91.5~~$280.0 million as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately ~~$314,000~~$77,000 and ~~$156,000~~$126,000 of accrued interest receivable when~~non-covered~~ impaired loans were put onnon-accrual status during the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The Company reversed approximately ~~$523,000~~$149,000 and ~~$457,000~~$184,000 of accrued interest receivable when~~non-covered~~ impaired loans were put onnon-accrual status during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

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Nonfinancial Assets and Liabilities Measured on a Nonrecurring Basis

Foreclosed assets held for sale are the only materialnon-financial assets valued on anon-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 ~~loan~~credit losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets held for sale is estimated using Level 3 inputs based on appraisals of underlying collateral. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the fair value of foreclosed assets held for sale, less estimated costs to sell, was ~~$21.7~~$373,000 and $1.6 million, ~~and $16.0 million,~~ respectively.

~~Foreclosed~~

No foreclosed assets held for sale ~~with a carrying value of approximately $394,000~~ were remeasured during the ~~nine~~six months ended ~~September~~June 30, ~~2017, resulting in a write-down of approximately $306,000.~~

2022. Regulatory guidelines require usthe Company to reevaluate the fair value of foreclosed assets held for sale on at least an annual basis. The Company’s policy is to comply with the regulatory guidelines.

The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and foreclosed assets primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. 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 ~~20%~~10% to ~~50%~~60% for commercial and residential real estate collateral.

Fair Values of Financial Instruments

~~The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed in these notes:~~

~~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~~ — These securities consist primarily of 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 —~~~~The carrying amount of accrued interest receivable approximates its 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.

~~Accrued interest payable~~ ~~— The carrying amount of accrued interest payable approximates its fair value.~~

~~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.

The following table presents the estimated fair values of the Company’s financial instruments. ~~The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties.~~ Fair value is the ~~estimated amount at which financial assets~~exchange price that would be received for an asset or ~~liabilities could be exchanged~~paid to transfer a liability (exit price) in ~~a current~~the principal or most advantageous market for the asset or liability in an orderly transaction between ~~willing parties other than in a forced or liquidation sale. Because no~~ market ~~exists for certain~~participants on the measurement date.


	June 30, 2022
	Carrying Amount		Fair Value		Level
	(In thousands)
Financial assets:
Cash and cash equivalents	$	2,816,376	$	2,816,376	1
Investment securities - available for sale	3,791,509		3,791,509		2
Investment securities - held-to-maturity (U.S. Treasuries)	277,688		276,029		1
Investment securities - held-to-maturity (state and political subdivisions)	1,089,093		997,251		2
Loans receivable, net of impaired loans and allowance	13,302,682		13,695,308		3
Accrued interest receivable	80,274		80,274		1
FHLB, FRB & FNBB Bank stock; other equity investments	182,399		182,399		3
Marketable equity securities	33,631		33,631		1
Financial liabilities:
Deposits:
Demand and non-interest bearing	$	6,036,583	$	6,036,583	1
Savings and interest-bearing transaction accounts	12,424,192		12,424,192		1
Time deposits	1,119,297		1,096,797		3
Securities sold under agreements to repurchase	118,573		118,573		1
FHLB and other borrowed funds	400,000		400,025		2
Accrued interest payable	9,203		9,203		1
Subordinated debentures	458,455		430,470		3

Table of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

   September 30, 2017
   Carrying
Amount    Fair Value    Level
   (In thousands)
Financial assets:

Cash and cash equivalents
   $ 552,320    $ 552,320    1
Federal funds sold
   4,545    4,545    1
Investment securities –held-to-maturity
   234,945    239,017    2
Loans receivable, net of impaired loans and allowance
   10,080,468    9,966,022    3
Accrued interest receivable
   41,071    41,071    1
Financial liabilities:

Deposits:

Demand andnon-interest bearing
   $ 2,555,465    $ 2,555,465    1
Savings and interest-bearing transaction accounts
   6,341,883    6,341,883    1
Time deposits
   1,551,422    1,571,618    3
Federal funds purchased
   —      —      N/A
Securities sold under agreements to repurchase
   149,531    149,531    1
FHLB and other borrowed funds
   1,044,333    1,044,936    2
Accrued interest payable
   10,964    10,964    1
Subordinated debentures
   367,835    384,485    3

   December 31, 2016
   Carrying
Amount    Fair Value    Level
   (In thousands)
Financial assets:

Cash and cash equivalents
   $ 216,649    $ 216,649    1
Federal funds sold
   1,550    1,550    1
Investment securities –held-to-maturity
   284,176    287,038    2
Loans receivable, net of impaired loans and allowance
   7,216,199    7,131,199    3
Accrued interest receivable
   30,838    30,838    1
Financial liabilities:

Deposits:

Demand andnon-interest bearing
   $ 1,695,184    $ 1,695,184    1
Savings and interest-bearing transaction accounts
   3,963,241    3,963,241    1
Time deposits
   1,284,002    1,275,634    3
Securities sold under agreements to repurchase
   121,290    121,290    1
FHLB and other borrowed funds
   1,305,198    1,311,280    2
Accrued interest payable
   1,920    1,920    1
Subordinated debentures
   60,826    60,826    3

Contents


	December 31, 2021
	Carrying Amount		Fair Value		Level
	(In thousands)
Financial assets:
Cash and cash equivalents	$	3,650,315	$	3,650,315	1
Investment securities - available for sale	3,119,807		3,119,807		2
Loans receivable, net of impaired loans and allowance	9,319,421		9,503,261		3
Accrued interest receivable	46,736		46,736		1
FHLB, FRB & FNBB Bank stock; other equity investments	124,638		124,638		3
Marketable equity securities	17,110		17,110		1
Financial liabilities:
Deposits:
Demand and non-interest bearing	$	4,127,878	$	4,127,878	1
Savings and interest-bearing transaction accounts	9,251,805		9,251,805		1
Time deposits	880,887		901,280		3
Securities sold under agreements to repurchase	140,886		140,886		1
FHLB and other borrowed funds	400,000		401,362		2
Accrued interest payable	4,798		4,798		1
Subordinated debentures	371,093		374,894		3

21. Recent Accounting Pronouncements

In ~~May 2014,~~December 31, 2019, the FASB issued ASU~~2014-09,~~~~Revenue~~ 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 ~~Contracts with Customers (Topic 606). ASU2014-09~~ ~~provides guidance~~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 ~~recognize revenue to depict~~be considered part of the ~~transfer of promised goods or services to customers~~business combination in ~~an amount that reflects the consideration to~~ which the book goodwill was originally recognized and when it should be considered a separate transaction, specifying that an entity ~~expects~~is not required to ~~be entitled~~allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in ~~exchange~~its separate financial statements; however, an entity may elect to do so on an entity-by-entity basis for ~~those goods~~a legal entity that is both not subject to tax and ~~services.~~ 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 ~~August 2015,~~March 2020, the FASB issued ASU~~No. 2015-14,~~~~Revenue from Contracts with Customers~~ 2020-04,“Reference Rate Reform (Topic ~~606)~~~~, which defers~~848): Facilitation of the ~~effective date~~Effects of ~~this standard~~Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for accounting related to ~~annual~~contracts, hedging relationships and ~~interim periods beginning~~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 ~~15, 2017; however, early adoption is permitted~~31, 2022, except for ~~annual~~hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and ~~interim reporting periods beginning after~~that are retained through the end of the hedging relationship. ASU 2020-04 was effective upon issuance and generally can be applied through December ~~15, 2016.~~ 31, 2022.

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In ~~April 2016,~~January 2021, the FASB issued ASU~~2016-10,~~~~Revenue from Contracts with Customers~~ 2021-01, “Reference Rate Reform (Topic ~~606)~~848): ~~Identifying Performance Obligations~~Scope.” The amendments in the update clarify that certain optional expedients and ~~Licensing~~~~, which amends~~exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain ~~aspects~~provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in the update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments in ~~ASU2014-09~~ ~~(FASB’s~~this Update do not apply to contract modifications made after December 31, 2022, new ~~revenue standard) on (1) identifying performance obligations~~hedging relationships entered into after December 31, 2022, and ~~(2) licensing.~~existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. ASU~~2014-10’s~~ 2020-04 was effective ~~date~~upon issuance and ~~transition provisions are aligned with the requirements in ASU2014-09.~~generally can be applied through December 31, 2022.

In ~~May 2016,~~March 2022, the FASB issued ASU~~2016-12,~~~~Revenue from Contracts with Customers~~ 2022-02, "Financial Instruments—Credit Losses (Topic ~~606)~~326): ~~Narrow-Scope Improvements~~Troubled Debt Restructurings and ~~Practical Expedients~~~~, which amends certain aspects of~~Vintage Disclosures." The amendments eliminate the ~~FASB’s new revenue standard, ASU2014-09.~~ ~~ASU2016-12’s~~ ~~effective date~~TDR recognition and ~~transition provisions are aligned~~measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in ~~ASU2014-09~~

~~The guidance issued in ASU2014-09,~~ ~~ASU2015-14,~~ ~~ASU2016-10~~ ~~and ASU2016-12~~ permit two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company plans to adopt the new standard effective January 1, 2018 and apply it prospectively. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. Only a portion of the Company’s revenues are impacted by this guidance because the guidance does not apply to revenue on contracts accounted for under the financial instruments or insurance contracts standards. The Company’s evaluation process includes, but is not limited to, identifying contractsleases within the scope of Subtopic 326-20. Gross write-off information must be included in the ~~guidance, reviewing~~vintage disclosures required for public business entities in accordance with Subtopic 326-20, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and documenting its accounting for these contracts, and identifying and determining the accounting for any related contract costs. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoptionclass of ~~the new standard in 2018.~~

~~In January 2016, the FASB issued~~financing receivable by year of origination. ASU~~2016-01,~~~~Financial Instruments—Overall~~~~(Subtopic825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU~~2016-01~~ ~~clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale~~ ~~securities. The new guidance~~ 2022-02 is effective for annual reporting period and interim reporting periods within those annual periods, beginning after December 15, 2017. Management is currently evaluating the impact of the adoption of this guidance to the Company’s financial statements, but does not anticipate the guidance toentities that have a material effect on the Company’s financial position or results of operations as the Company’s equity investments are immaterial. However, the amendments will have an impact on certain items that are disclosed at fair value that are not currently utilizing the exit price notion when measuring fair value. At this time, the Company cannot quantify the change in the fair value of such disclosures since the Company is currently evaluating the full impact of the standards and is in the planning stages of developing appropriate procedures and processes to comply with the disclosure requirements of such amendments. The current accounting policies and procedures will be adjusted after the Company has fully evaluated the standard to comply with the accounting changes mentioned above. For additional information on fair value of assets and liabilities, see Note 20.

~~In February 2016, the FASB issued~~adopted ASU~~2016-02,~~~~Leases (Topic 842).~~ ~~The amendments in ASU2016-02~~ ~~address several aspects of lease accounting with the significant change being the recognition of lease assets and lease liabilities for leases previously classified as operating leases. ASU2016-02~~ ~~is effective~~ No. 2016-13 for fiscal years beginning after December 15, ~~2018,~~2022, including interim periods within those fiscal years. ~~Early application of the~~These amendments ~~in ASU2016-02~~ ~~is permitted for all entities. The Company has several lease agreements for which the amendments will require the Company to recognize a lease liability to make lease payments and aright-of-use~~ asset which will represent its right to use the underlying asset for the lease term. The Company is currently reviewing the amendments to ensure it is fully compliant by the adoption date and doesn’t expect to early adopt. The impact is not expected to have a material effect on the Company’s financial position or results of operations as the Company does not have a material amount of lease agreements. In addition, the Company will change its current accounting policies to comply with the amendments with such changes as mentioned above. For additional information on the Company’s leases, see Note 18 “Leases” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form~~10-K~~ ~~for the year ended December 31, 2016.~~

~~In March 2016, the FASB issued ASU2016-09,~~~~Compensation~~– ~~Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU~~2016-09~~ is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the amendments effective January 1, 2017. The Company has a stock-based compensation plan for which the ASU~~2016-09~~ guidance results in the associated excess tax benefits or deficiencies being recognized as tax expense or benefit in the income statement instead of the previous accounting treatment, which requires excess tax benefits to be recognized as an adjustment to additional~~paid-in~~ capital and excess tax deficiencies to be recognized as either an offset to accumulated excess tax benefits, if any, or to the income statement. In addition, such amounts are now classified as an operating activity in the statement of cash flows instead of the current accounting treatment, which required it to be classified as both an operating and a financing activity. The Company’s stock-based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies and, therefore, the Company has not experienced a material change in the Company’s financial position or results of operation as a result of the adoption and implementation of ASU~~2016-09.~~ ~~For additional information on the stock-based compensation plan, see Note 14.~~

~~In May 2016, the FASB issued ASU2016-11,~~~~Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09~~ ~~and2014-16~~ ~~Pursuant to Staff Announcements at the March~~ ~~3, 2016 EITF Meeting (SEC Update)~~, which rescinds certain SEC guidance from the FASB Accounting Standards Codification in response to announcements made by the SEC staff at the Emerging Issues Task Force’s (“EITF”) March 3, 2016, meeting. ASU~~2016-11~~ ~~is effective at the same time as ASU2014-09~~ ~~and ASU2014-16.~~ ~~The Company is currently evaluating the impact, if any, ASU2016-11~~ will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In June 2016, the FASB issued ASU2016-13,~~~~Measurement of Credit Losses on Financial Instruments~~~~, which amends the FASB’s guidance on the impairment of financial instruments. The amendments in ASU2016-13~~ replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates, known as the current expected credit loss (“CECL”) model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU~~2016-13~~ ~~is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU2016-13~~ is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The allowance for loan losses is a material estimate of the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the allowance for loan losses at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating to~~held-to-maturity~~ ~~investment securities. In addition, the current accounting policy and procedures for other-than-temporary impairment onavailable-for-sale~~ ~~investment securities will be replaced with an allowance approach. The Company is currently evaluating the impact, if any, ASU2016-13~~ will have on its financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. It is too early to assess the impact that the implementation of this guidance will have on the Company’s consolidated financial statements; however, the Company has begun developing processes and procedures to ensure it is fully compliant with the amendments at the required adoption date. Among other things, the Company has initiated data gathering and assessment to support forecasting of asset quality, loan balances, and portfolio net charge-offs and have developed an~~in-house~~ ~~data warehouse as well as developed asset quality forecast models in preparation for the implementation of this standard. For additional information on the allowance for loan losses, see Note 5.~~

~~In August 2016, the FASB issued ASU2016-15,~~~~Classification of Certain Cash Receipts and Cash Payments,~~~~which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU2016-15~~ ~~is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU2016-15’s~~ ~~amendments add or clarify guidance on eight cash flow issues including debt prepayment or debt extinguishment costs; settlement ofzero-coupon~~ debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU~~2016-15~~ is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and the guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact, if any, ASU~~2016-15~~ will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In October 2016, the FASB issued ASU2016-16,~~~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied onprospectively. However, for the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective ~~basis through~~transition method, resulting in a cumulative-effect adjustment ~~directly~~ to retained earnings ~~at the beginning period of adoption. Early adoption is permitted~~ in ~~the first interim period of an annual reporting period for which financial statements have not been issued. The Company is currently evaluating the impact, if any, ASU2016-16~~ will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In November 2016, the FASB issued ASU2016-18,~~~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)~~, which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the new guidance must be applied retrospectively to all periods presented. The Company is currently evaluating the impact, if any, ASU~~2016-18~~ will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In January 2017, the FASB issued ASU2017-01,~~~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~, which provides guidance to entities to assist with evaluating when a set of transferred assets and activities (collectively, the “set”) is a business and provides a screen to determine when a set is not a business. Under the new guidance, when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted ~~for~~if an entity has adopted ASU 2016-13. If an entity elects to early adopt ASU 2022-02 in an interim ~~or annual periods in which~~period, the ~~financial statements have not been issued.~~guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is currently evaluating the ~~impact, if any, ASU2017-01~~ ~~will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited~~potential impacts related to ~~identifying transactions and accounts within~~ the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the ~~new standard in 2018.~~

~~In January 2017, the FASB issued ASU2017-03,~~~~Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323)~~~~. The amendments in the update relate to SEC paragraphs pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF meetings related to disclosure~~ASU.

Table of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU~~2016-02,~~~~Leases~~~~, and ASU2014-09,~~~~Revenue from Contracts with Customers~~, although, the amendments apply to any subsequent amendments to guidance in the ASC. The Company adopted the amendments in this update during the fourth quarter of 2016 and appropriate disclosures have been included in this Note for each recently issued accounting standard.

~~In January 2017, the FASB issued ASU2017-04,~~~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would~~more-likely-than-not~~ reduce the fair value of the reporting unit below its carrying value. During 2016, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company’s goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

~~In February 2017, the FASB issued ASU2017-05,~~~~Other Income: Gains and Losses from the Derecognition of Nonfinancial Assets~~~~, which clarifies the scope of the FASB’s guidance on nonfinancial asset derecognition (ASC610-20)~~ as well as the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The ASU requires an entity to derecognize the nonfinancial asset or~~in-substance~~ nonfinancial asset in a partial sale transaction when (1) the entity ceases to have a controlling financial interest in a subsidiary under ASC 810 and (2) control of the asset is transferred in accordance with ASC 606. The entity therefore has to consider repurchase agreements (e.g., a call option to repurchase the ownership interest in a subsidiary) in its assessment and may not be able to derecognize the nonfinancial assets, even though it no longer has a controlling financial interest in a subsidiary in accordance with ASC 810. The ASU illustrates the application of this guidance in ASC~~610-20-55-15~~ ~~and55-16.~~ The effective date of the new guidance is aligned with the requirements in the new revenue standard, which is effective for public entities for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017, and for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. If the entity decides to early adopt the ASU’s guidance, it must also early adopt ASC 606 (and vice versa). The Company is currently evaluating the impact, if any, ASU~~2017-05~~ will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In March 2017, the FASB issued ASU2017-08,~~~~Receivables—Nonrefundable Fees and Other Costs (Topic 310): Premium Amortization on Purchased Callable Debt Securities~~, which amends the amortization period for certain purchased callable debt securities held at a premium. This ASU will shorten the amortization period for the premium to be amortized to the earliest call date. This ASU does not apply to securities held at a discount, which will continue to be amortized to maturity. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU~~2017-08~~ will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

~~In May 2017, the FASB issued ASU2017-09,~~~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The amendments in ASU~~2017-09~~ should be applied prospectively to an award modified on or after the adoption date. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate any modifications to its existing awards and therefore the adoption of ASU~~2017-09~~ ~~is not expected to have a significant impact on the Company’s financial position, results of operations, or its financial statement disclosures.~~

~~In July 2017, the FASB issued ASU2017-11,~~Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable~~Non-controlling~~ ~~Interests with a Scope Exception.~~ Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating~~Topic 480, Distinguishing Liabilities from Equity~~, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable~~non-controlling~~ interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU~~2017-11~~ will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.

Contents

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Home BancShares, Inc.

Conway, Arkansas

Results of Review of Interim Consolidated Financial Statements

We have reviewed the ~~accompanying~~ condensed consolidated balance sheet of Home BancShares, Inc. and subsidiaries (the ~~Company)~~“Company”) as of ~~September~~June 30, ~~2017,~~2022, and the related condensed consolidated statements of income, comprehensive (loss) income and ~~comprehensive income~~stockholders’ equity for the ~~three-~~three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016, and the related statements of stockholders’ equity~~2021 and cash flows for the ~~nine-month~~six month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016. These interim~~2021, and the related notes (collectively referred to as the “interim financial information” or “statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements ~~are~~referred to above for them to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~

America.

We ~~conducted our reviews~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (“PCAOB”), the consolidated balance sheet of the Company and subsidiaries as of December 31, 2021, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein), and in our report dated February 24, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures ~~to financial data~~ and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board,~~PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/FORVIS, LLP

(Formerly BKD,~~LLP~~

LLP)

Little Rock, Arkansas

~~November 7, 2017~~

~~Item 2:~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

August 9, 2022

Table of Contents

Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Form10-K, filed with the Securities and Exchange Commission on February ~~28, 2017,~~24, 2022, which includes the audited financial statements for the year ended December 31, ~~2016.~~2021. Unless the context requires otherwise, the terms ~~“Company”, “us”, “we”,~~“Company,” “us,” “we,” and “our” refer to Home BancShares, Inc. on a consolidated basis.

General

We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). As of ~~September~~June 30, ~~2017,~~2022, we had, on a consolidated basis, total assets of ~~$14.26~~$24.25 billion, loans receivable, net of ~~$10.17~~allowance for credit losses of $13.63 billion, total deposits of ~~$10.45~~$19.58 billion, and stockholders’ equity of ~~$2.21~~$3.50 billion.

We generate most of our revenue from interest on loans and investments, service charges, and mortgage banking income. Deposits and Federal Home Loan Bank (“FHLB”) and other borrowed funds are our primary source of funding. Our largest expenses are interest on our funding sources, salaries and related employee benefits and occupancy and equipment. We measure our performance by calculating our return on average common equity, return on average assets and net interest margin. We also measure our performance by our efficiency ratio, which is calculated by dividingnon-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest income.

~~Table 1: Key Financial Measures~~

   As of or for the Three Months
Ended September 30, As of or for the Nine Months
Ended September 30,
   2017 2016 2017 2016
   (Dollars in thousands, except per share data)
Total assets
   $ 14,255,967 $ 9,764,238 $ 14,255,967 $ 9,764,238
Loans receivable
   10,286,193 7,112,291 10,286,193 7,112,291
Allowance for loan losses
   111,620 76,370 111,620 76,370
Total deposits
   10,448,770 6,840,293 10,448,770 6,840,293
Total stockholders’ equity
   2,206,716 1,296,018 2,206,716 1,296,018
Net income
   14,821 43,620 111,774 128,556
Basic earnings per share
   0.10 0.31 0.78 0.92
Diluted earnings per share
   0.10 0.31 0.78 0.91
Annualized net interest margin – FTE
   4.40 % 4.86 % 4.53 % 4.83 %
Efficiency ratio
   53.77 39.41 43.92 38.16
Annualized return on average assets
   0.54 1.81 1.41 1.81
Annualized return on average common equity
   3.88 13.62 10.33 13.83

~~Overview~~

~~Results of Operations for Three Months Ended September 30, 2017 and 2016~~

Our net income decreased $28.8 million, or 66.0%, to $14.8 million for the three-month period ended September 30, 2017, from $43.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.10 per share and $0.31 per share for the three-month periods ended September 30, 2017 and 2016, respectively. Excluding the $51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32 per share for the three months ended September 30, 2017. Excluding the $3.8 million of FDIC loss share~~buy-out~~ expense, net income was $46.0 million, and diluted earnings per share for the three months ended September 30, 2016 was $0.33 per share. Net income excluding merger expenses, hurricane expenses and FDIC loss share~~buy-out~~ expense for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in the~~non-hurricane~~ related provision for loan losses in third quarter of 2017 when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.

Our GAAP net interest margin decreased from 4.86% for the three-month period ended September 30, 2016 to 4.40% for the three-month period ended September 30, 2017. The yield on loans was 5.66% and 5.84% for the three months ended September 30, 2017 and 2016, respectively. For the three months ended September 30, 2017 and 2016, we recognized $7.2 million and $11.9 million, respectively, in total net accretion for acquired loans and deposits. The~~non-GAAP~~ ~~margin excluding accretion income was 4.07% and 4.25% for the three months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP~~ yield on loans excluding accretion income was 5.24% and 5.10% for the three months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of $300 million of 5.625%~~fixed-to-floating~~ ~~rate subordinated notes, which added approximately $4.3 million of interest expense when compared to the same quarter in 2016.~~

~~Our~~ efficiency ratio, was 53.77% for the three months ended September 30, 2017, compared to 39.41% for the same period in 2016. For the third quarter of 2017, our core efficiency ratio was 39.12%, which increased from the 36.51% reported for third quarter of 2016. The core efficiency ratioas adjusted, is anon-GAAP measure and is calculated by dividingnon-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest income excluding~~non-core~~ ~~items~~ adjustments such as merger and acquisition expenses ~~FDIC loss sharebuy-out~~ ~~expense~~ and/or certain gains, losses and ~~losses.~~

~~Our annualized return on average assets was 0.54%~~other non-interest income and expenses.

Table 1: Key Financial Measures


	As of or for the Three Months Ended June 30,				As of or for the Six Months Ended June 30,
	2022		2021		2022		2021
	(Dollars in thousands, except per share data)
Total assets	$	24,253,168	$	17,627,192	$	24,253,168	$	17,627,192
Loans receivable	13,923,873		10,199,175		13,923,873		10,199,175
Allowance for credit losses	(294,267)		(240,451)		(294,267)		(240,451)
Total deposits	19,580,072		13,891,341		19,580,072		13,891,341
Total stockholders’ equity	3,498,565		2,696,189		3,498,565		2,696,189
Net income	15,978		79,070		80,870		170,672
Basic earnings per share	0.08		0.48		0.44		1.03
Diluted earnings per share	0.08		0.48		0.44		1.03
Book value per share	17.04		16.39		17.04		16.39
Tangible book value per share (non-GAAP)(1)	9.92		10.31		9.92		10.31
Annualized net interest margin - FTE	3.64%		3.61%		3.46%		3.81%
Efficiency ratio	66.31		41.09		58.26		38.72
Efficiency ratio, as adjusted (non-GAAP)(2)	46.02		42.07		46.53		41.36
Return on average assets	0.26		1.81		0.75		2.01
Return on average common equity	1.78		11.92		5.14		13.02

(1)See Table 19 for the ~~three months ended September 30, 2017, compared to 1.81%~~non-GAAP tabular reconciliation.

(2)See Table 23 for the ~~same period in 2016. Excluding merger expenses, hurricane expenses and FDIC loss sharebuy-out~~ expense, our annualized return on average assets was 1.70% for the three months ended September 30, 2017, compared to 1.90% for the same period in 2016. Our annualized return on average common equity was 3.88% for the three months ended September 30, 2017, compared to 13.62% for the same period in 2016. Excluding merger expenses, hurricane expenses and FDIC loss share~~buy-out~~ ~~expense, our annualized return on average common equity was 12.17% for the three months ended September 30, 2017, compared to 14.35% for the same period in 2016.~~

non-GAAP tabular reconciliation.

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Results of Operations for ~~Nine~~the Three Months Ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~

2021

Our net income decreased ~~$16.8~~$63.1 million, or ~~13.1%~~79.8%, to ~~$111.8~~$16.0 million for the ~~nine-month~~three-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$128.6~~$79.1 million for the same period in ~~2016.~~2021. On a diluted earnings per share basis, our earnings were ~~$0.78 per share and $0.91~~$0.08 per share for the ~~nine-month periods~~three-month period ended ~~September~~June 30, 2017 and 2016, respectively. Excluding the $3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.002022 compared to $0.48 per share for the ~~nine months~~three-month period ended ~~September~~June 30, ~~2017. Excluding~~2021. During the ~~$3.8~~second quarter of 2022, we completed the previously announced acquisition of Happy Bancshares, Inc. ("Happy"). As a result of the acquisition of Happy, which we completed on April 1, 2022, we incurred $48.7 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of ~~FDIC loss sharebuy-out~~ ~~expense, net income was $130.9~~these items reduced earnings by $107.3 million and ~~diluted~~ earnings per share by $0.39 per share for the ~~nine~~three-month period ended June 30, 2022. The markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest. However, excluding the impact of the acquisition of Happy, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022. In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022. During the three months ended ~~September~~June 30, ~~2016~~2022, the Company recorded $1.4 million in special dividend from equity investments, $2.4 million in recoveries on historic losses, $1.8 million loss for the decrease in the fair value of marketable securities and $2.1 million in trust preferred securities ("TRUPS") redemption fees.

Total interest income increased by $62.5 million, or 40.5%, and non-interest income increased by $13.5 million, or 43.3%. This was ~~$0.93 per share. The $13.6~~more than offset by a $5.0 million, or 38.0%, increase in ~~net income, excluding gain on acquisitions, merger expenses, hurricane expenses~~total interest expense and ~~FDIC loss sharebuy-out~~ ~~expense, is primarily associated with additional net~~a $92.5 million, or 126.7%, increase in non-interest expense. The increase in interest income ~~largely resulting from our acquisitions and our organic~~was due to a $40.1 million, or 28.3%, increase in loan ~~growth plus~~interest income, a ~~decrease~~$16.6 million, or 137.1%, increase in ~~thenon-hurricane~~ ~~related provision for loan losses in first nine months of 2017, growth innon-interest~~investment income and ~~the reduced amortization of the indemnification asset when compared~~a $5.9 million, or 828.6%, increase in interest income on deposits at other banks. The increase in non-interest income was primarily due to ~~the same period~~a $5.0 million, or 97.1%, increase in ~~2016. These improvements were~~service charges on deposit accounts, a $4.6 million, or 152.6%, increase in other income, a $3.9 million, or 873.0%, increase in trust fees, a $2.9 million, or 29.8%, increase in other services charges and fees and $1.3 million, or 49.1%, increase in dividends from FHLB, FRB, FNBB and other which was partially offset by ~~an increase~~a $3.1 million, or 244.1%, decrease in the ~~costs associated with~~fair value adjustment for marketable securities resulting from a $1.8 million loss for the ~~asset growth plus an~~decrease in the fair value of marketable securities, and a $1.1 million, or 100.0%, decrease in gain on sale of SBA loans. Included within other income was $2.4 million in recoveries on historic losses, and included within dividends from FHLB, FRB, FNBB and other was $1.4 million in special dividends. The increase in interest expense ~~related~~was primarily due to a $4.3 million, or 66.8%, increase in interest on deposits and a $649,000, or 13.5%, increase in interest on subordinated debentures as a result of the ~~issuance~~acquisition of ~~$300~~$140.0 million of subordinated ~~notes~~debt and $23.2 million in trust preferred securities from Happy during the ~~second~~quarter. The increase in non-interest expense was due to $48.7 million in merger and acquisition expenses, a $23.3 million, or 55.0%, increase in salaries and employee benefits, an $11.0 million, or 70.7%, increase in other operating expenses, a $5.2 million, or 57.7%, increase in occupancy and equipment and a $4.2 million, or 71.3%, increase in data processing expense. Included within other operating expense was $2.1 million in TRUPS redemption fees. Income tax expense decreased by $21.8 million, or 86.9%, during the quarter ~~of 2017 when compared~~due to a decrease in net income. These fluctuations are primarily due to the ~~same period in 2016.~~

acquisition of Happy during the quarter and the rising rate environment.

Our ~~GAAP~~ net interest margin ~~decreased~~increased from ~~4.83%~~3.61% for the ~~nine-month~~three-month period ended ~~September~~June 30, ~~2016~~2021 to ~~4.53%~~3.64% for the ~~nine-month~~three-month period ended ~~September~~June 30, ~~2017.~~2022. The yield on ~~loans~~interest earning assets was ~~5.70%~~3.97% and ~~5.82%~~3.94% for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively.~~ 2021, respectively, as average interest earning assets increased from $15.89 billion to $22.18 billion.The increase in average earning assets is primarily due to a $3.30 billion increase in average loans receivable, a $2.31 billion increase in average investment securities, and $675.6 million increase in average interest-bearing balances due from banks due to the acquisition of Happy during the quarter.For the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, we recognized ~~$23.3~~$5.2 million and ~~$33.7~~$5.8 million, respectively, in total net accretion for acquired loans and deposits. The~~non-GAAP~~ ~~margin excluding accretion income was 4.16% and 4.24% for the nine months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP~~ ~~yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned~~ reduction in ~~net~~ accretion ~~income for acquired loans and deposits,~~was dilutive to the net interest margin ~~was negatively impacted~~ by ~~our April 2017 issuance of $300~~one basis point. We recognized $1.4 million ~~of 5.625%fixed-to-floating~~ ~~rate subordinated notes, which added approximately $8.5 million of~~in event interest ~~expense when~~income for the three months ended June 30, 2022 compared to $942,000 for the ~~same period in 2016, and~~three months ended June 30, 2021. This increased the net interest margin by ~~our strategic decision to keep excess cash liquidity on the books during the first nine months of 2017.~~

one basis point.

Our efficiency ratio was ~~43.92%~~66.31% for the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~38.16%~~41.09% for the same period in ~~2016.~~2021. For the ~~first nine months~~second quarter of ~~2017,~~2022, our ~~core~~ efficiency ratio, as adjusted (non-GAAP), was ~~37.79%~~46.02%, ~~which increased from the 36.75%~~compared to 42.07% reported for ~~first nine months~~the second quarter of ~~2016. The core efficiency ratio is a~~2021. (See Table 23 for the non-GAAP ~~measure and is calculated by dividingnon-interest~~ ~~expense less amortization~~ tabular reconciliation).

Table of ~~core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest~~ ~~income excludingnon-core~~ ~~items such as merger expenses, hurricane damage expense, FDIC loss sharebuy-out~~ ~~expense and/or gains and losses.~~

Contents

Our annualized return on average assets was ~~1.41%~~0.26% for the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2022, compared to 1.81% for the same period in ~~2016. Excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss sharebuy-out~~ ~~expense, our~~2021. Our annualized return on average assets, as adjusted (non-GAAP), was ~~1.82%~~1.57% for the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~1.84%~~1.75% for the same period in ~~2016.~~2021. (See Table 20 for the non-GAAP tabular reconciliation). Our annualized return on average common equity was ~~10.33%~~1.78% and 11.92% for the ~~nine~~three months ended ~~September~~June 30, ~~2017, compared to 13.83%~~2022, and 2021, respectively. Our annualized return on average common equity, as adjusted (non-GAAP), was 10.83% for the three months ended June 30, 2022 and 11.54% for the same period in ~~2016. Excluding gain~~2021. (See Table 21 for the non-GAAP tabular reconciliation).

Results of Operations for the Six Months Ended June 30, 2022 and 2021

Our net income decreased $89.8 million, or 52.6%, to $80.9 million for the six-month period ended June 30, 2022, from $170.7 million for the same period in 2021. On a diluted earnings per share basis, our earnings were $0.44 per share for the six-month period ended June 30, 2022 compared to $1.03 per share for the six-month period ended June 30, 2021. As a result of the acquisition of Happy, which we completed on ~~acquisitions,~~April 1, 2022, we incurred $49.6 million in merger expenses ~~hurricane~~and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of these items reduced earnings by $108.2 million and earnings per share by $0.44per share for the six-month period ended June 30, 2022. The markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest. However, excluding the impact of the acquisition of Happy, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022. In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022. During the six months ended June 30, 2022, the Company recorded a $324,000 adjustment for the increase in fair value of marketable securities, $1.4 million special dividend from equity investments, $2.1 million in TRUPS redemption fees and a $5.6 million recovery on historic losses.

Total interest income increased by $44.8 million, or 14.1%. This was more than offset by a $1.1 million, or 1.5%, decrease in non-interest income, a $4.2 million, or 15.2%, increase in interest expense and a $96.5 million, or 66.2%, increase in non-interest expense. The increase in interest income was due to an $18.6 million, or 6.4%, increase in loan interest income, a $19.0 million, or 81.3%, increase in investment income and a $7.1 million, or 637.5%, increase in interest income on deposits at other banks. The decrease in non-interest income was primarily due to a $6.7 million, or 95.4%, decrease in income for the fair value adjustment for marketable securities resulting from a $324,000 increase in the fair value of marketable securities for the six months ended June 30, 2022 compared to a $7.0 million increase for the six months ended June 30, 2021, a $6.6 million, or 58.7%, decrease in dividends from FHLB, FRB, FNBB and other, a $4.5 million, or 31.0%, decrease in mortgage lending income, which was partially offset by a $6.1 million, or 60.3%, increase in service charges on deposit accounts, a $4.6 million, or 41.3%, increase in other income, a $3.9 million, or 406.6%, increase in trust fees and a $3.0 million, or 17.4%, increase in other service charges and fees. Included within other income was $5.6 million recovery on historic losses, and included within dividends from FHLB, FRB, FNBB and other was $1.4 million in special dividends. The increase in interest expense was primarily due to a $2.7 million, or 28.5%, increase in interest on subordinated debentures as a result of the acquisition of $140.0 million of subordinated debt and $23.2 million in trust preferred securities from Happy during the second quarter,and a $1.5 million, or 10.5%, increase in interest on deposits. The increase in non-interest expense was due to $49.6 million in merger and acquisition expenses, a $24.8 million, or 29.4%, increase in salaries and ~~FDIC loss sharebuy-out~~employee benefits, an $11.6 million, or 37.1%, increase in other operating expenses, a $5.4 million, or 45.7%, increase in data processing expense and a $5.1 million, or 28.0% increase in occupancy and equipment. Included within other operating expense was $2.1 million in TRUPS redemption fees. Income tax expense decreased by $30.6 million, or 56.8%, during the quarter due to a decrease in net income. These fluctuations are primarily due to the acquisition of Happy during the second quarter of 2022 and the rising rate environment.

Our net interest margin decreased from 3.81% for the six-month period ended June 30, 2021 to 3.46% for the six-month period ended June 30, 2022. The yield on interest earning assets was 3.79% and 4.17% for the six-month period ended June 30, 2022 and 2021, respectively, as average interest earning assets increased from $15.51 billion to $19.49 billion. The increase in average earning assets is primarily the result of a $1.59 billion increase in average investment securities, a $1.28 billion increase in average interest-bearing balances due from banks and a $1.12 billion increase in average loans receivable. For the six months ended June 30, 2022 and 2021, we recognized $8.3 million and $11.3 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by 3 basis points. The Company experienced an $18.8 million reduction in interest income from PPP loans due to the forgiveness of the PPP loans and the acceleration of the deferred fees for the loans that were forgiven. This was dilutive to the net interest margin by approximately 9 basis points.

Our efficiency ratio was 58.26% for the six-month period ended June 30, 2022, compared to 38.72% for the same period in 2021. For the first six months of 2022, our efficiency ratio, as adjusted (non-GAAP), was 46.53%, compared to 41.36% reported for the first six months of 2021. (See Table 23 for the non-GAAP tabular reconciliation).

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Our annualized return on average assets was 0.75% for the six-month period ended June 30, 2022, compared to 2.01% for the same period in 2021. Our annualized return on average assets, as adjusted (non-GAAP), was 1.48% for the six months ended June 30, 2022, compared to 1.81% for the same period in 2021. (See Table 20 for the non-GAAP tabular reconciliation). Our annualized return on average common equity was ~~13.36%~~5.14% and 13.02% for the ~~nine~~six-month period ended June 30, 2022, and 2021, respectively. Our annualized return on average common equity, as adjusted (non-GAAP), was 10.08% for the six months ended ~~September~~June 30, ~~2017, compared to 14.08%~~2022 and 11.74% for the same period in ~~2016.~~

2021. (See Table 21 for the non-GAAP tabular reconciliation).

Financial Condition as of and for the Period Ended ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~

2021

Our total assets as of ~~September~~June 30, ~~2017~~2022 increased ~~$4.45~~$6.20 billion to ~~$14.26~~$24.25 billion from the ~~$9.81~~$18.05 billion reported as of December 31, ~~2016.~~2021. The increase in total assets is primarily due to the acquisition of $6.68 billion in total assets, net of purchase accounting adjustments, from Happy during the second quarter of 2022. Cash and cash equivalents decreased $833.9 million, for the six months ended June 30, 2022. Our loan portfolio balance increased ~~$2.90 billion~~ to ~~$10.29~~$13.92 billion as of ~~September~~June 30, ~~2017,~~2022 from ~~$7.39~~$9.84 billion at December 31, 2021. The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting adjustments, from Happy in the second quarter of 2022 and $242.2 million in marine loans from LendingClub Bank during the first quarter of 2022, as well as $192.9 million in organic loan growth. Total deposits increased $5.32 billion to $19.58 billion as of June 30, 2022 from $14.26 billion as of December 31, ~~2016. This~~2021. The increase isin deposits was primarily ~~a result~~due to the acquisition of ~~our acquisitions since December 31, 2016.~~$5.86 billion in deposits, net of purchase accounting adjustments, from Happy in the second quarter of 2022. Stockholders’ equity increased ~~$879.2~~$732.8 million to ~~$2.21~~$3.50 billion as of ~~September~~June 30, ~~2017,~~2022, compared to ~~$1.33~~$2.77 billion as of December 31, ~~2016.~~2021. The $732.8 million increase in stockholders’ equity is primarily associated with the ~~$77.5~~$961.3 million ~~and $742.3 million of~~in common stock issued to Happy shareholders for the ~~GHI~~acquisition of Happy on April 1, 2022 and ~~Stonegate shareholders, respectively, plus~~ the ~~$70.5~~$80.9 million ~~increase~~ in ~~retained earnings combined with $3.5 million of comprehensive~~net income ~~and $5.0 million of share-based compensation~~for the six months ended June 30, 2022, partially offset by the ~~repurchase of $19.5~~$226.4 million in other comprehensive loss, the $61.0 million of ~~our common~~shareholder dividends paid and stock ~~during the first nine months~~repurchases of ~~2017. The annualized improvement~~$26.6 million in ~~stockholders’ equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.~~

~~As of September 30, 2017, our~~2022.

Our non-performing loans ~~increased to $64.0~~were $60.6 million, or ~~0.62%,~~0.44% of total loans ~~from $63.1~~as of June 30, 2022, compared to $50.2 million, or ~~0.85%,~~0.51% of total loans as of December 31, ~~2016.~~2021. The allowance for ~~loan~~credit losses as a percentage ofnon-performing loans increased to ~~174.47%~~485.57% as of ~~September~~June 30, ~~2017, compared to 126.74%~~2022, from 471.61% as of December 31, ~~2016.~~2021. Non-performing loans from our Arkansas franchise were ~~$24.3~~$15.0 million at ~~September~~June 30, ~~2017~~2022 compared to ~~$28.5~~$13.9 million as of December 31, ~~2016.~~2021. Non-performing loans from our Florida franchise were ~~$39.6~~$33.3 million at ~~September~~June 30, ~~2017~~2022 compared to ~~$34.0~~$26.8 million as of December 31, ~~2016.~~2021. Non-performing loans from our Texas franchise were $5.5 million at June 30, 2022 compared to zero as of December 31, 2021. Non-performing loans from our Alabama franchise were ~~$83,000~~$813,000 at ~~September~~June 30, ~~2017~~2022 compared to ~~$656,000~~$470,000 as of December 31, ~~2016. There~~2021. Non-performing loans from our Shore Premier Finance ("SPF") franchise were no~~non-performing~~$1.3 million at June 30, 2022 compared to $1.5 million as of December 31, 2021. Non-performing loans from our Centennial ~~CFG franchise.~~

Commercial Finance Group (“CFG”) franchise were $4.7 million at June 30, 2022 compared to $7.5 million as of December 31, 2021.

As of ~~September~~June 30, ~~2017,~~2022, ournon-performing assets increased to ~~$85.7~~$61.1 million, or ~~0.60%,~~0.25% of total assets, from ~~$79.1~~$51.8 million, or ~~0.81%,~~0.29% of total assets, as of December 31, ~~2016.~~2021. Non-performing assets from our Arkansas franchise were ~~$36.4~~$15.0 million at ~~September~~June 30, ~~2017~~2022 compared to ~~$41.0~~$14.4 million as of December 31, ~~2016.~~2021.Non-performing assets from our Florida franchise were ~~$48.6~~$33.6 million at ~~September~~June 30, ~~2017~~2022 compared to ~~$36.8~~$27.9 million as of December 31, ~~2016.~~2021.Non-performing assets from our Texas franchise were $5.7 million at June 30, 2022 compared to zero as of December 31, 2021. Non-performing assets from our Alabama franchise were ~~$724,000~~$813,000 at ~~September~~June 30, ~~2017~~2022 compared to ~~$1.2~~$470,000 as of December 31, 2021. Non-performing assets from our SPF franchise were $1.3 million at June 30, 2022 compared to $1.5 million as of December 31, ~~2016. There were nonon-performing~~2021. Non-performing assets from our CFG franchise were $4.7 million at June 30, 2022 compared to $7.5 million as of December 31, 2021.

The $4.7 million balance of non-accrual loans for our Centennial CFG ~~franchise.~~

market consists of one loan that is assessed for credit risk by the Federal Reserve under the Shared National Credit Program. The decision to place this loan on non-accrual status was made by the Federal Reserve and not the Company. The loan that makes up the total balance is still current on both principal and interest. However, all interest payments are currently being applied to the principal balance. Because the Federal Reserve required us to place this loan on non-accrual status, we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve.

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Critical Accounting Policies

and Estimates

Overview. We prepare our consolidated financial statements based on the selection of certain accounting policies, generally accepted accounting principles and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. Our accounting policies are described in detail in the notes to our consolidated financial statements included as part of this document.

We consider a policy critical if (i) the accounting estimate requires assumptions about matters that are highly uncertain at the time of the accounting estimate; and (ii) different estimates that could reasonably have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements. Using these criteria, we believe that the accounting policies most critical to us are those associated with our lending practices, including revenue recognition and the accounting for the allowance for ~~loan~~credit losses, foreclosed assets, investments, intangible assets, income taxes and stock options.

Revenue Recognition. Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The majority of our revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as our loans, letters of credit and investment securities, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Descriptions of our revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our income statements as components of non-interest income are as follows:

•Service charges on deposit accounts – These represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

•Other service charges and fees – These represent credit card interchange fees and Centennial CFG loan fees. The interchange fees are recorded in the period the performance obligation is satisfied which is generally the cash basis based on agreed upon contracts. Centennial CFG loan fees are based on loan or other negotiated agreements with customers and are accounted for under ASC Topic 310. Interchange fees were $6.5 million, $10.5 million, $4.3 million and $8.1 million for the three and six months ended June 30, 2022 and 2021, respectively. Centennial CFG loan fees were $3.3 million, $5.1 million, $3.3 million and $5.3 million and for the three and six months ended June 30, 2022 and 2021, respectively.

Investments –Available-for-sale. Securitiesavailable-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity and other comprehensive income (loss), net of taxes. Securities that are held asavailable-for-sale are used as a part of our asset/liability management strategy. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified asavailable-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 ("CECL"). The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

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Investments –~~Held-to-Maturity~~. Held-to-Maturity. Securitiesheld-to-maturity ("HTM"), which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are ~~amortized and~~ amortized/accreted ~~respectively,~~to the call date to interest income using the constant effective yield method over the ~~period~~estimated life of the security. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to ~~maturity.~~

exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

Loans Receivable and Allowance for ~~Loan~~Credit Losses. ~~Except~~Loans receivable that management has the intent and ability to hold for ~~loans acquired during our acquisitions, substantially all of our loans receivable~~the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, ~~as it is management’s intent to hold them for the foreseeable future~~deferred fees or ~~until maturity or payoff, except for mortgage loans held for sale.~~costs on originated loans. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding.

Loan origination fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.

The allowance for ~~loan losses is established through a provision for loan losses charged against income. The allowance represents an amount that, in management’s judgment, will be adequate to absorb probable~~ credit losses on ~~identifiable~~ loans receivable is a valuation account that ~~may become uncollectible~~is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and ~~probable credit losses inherent in~~expected to be charged-off.

Management estimates the ~~remainder of the loan portfolio. The amounts of provisions for loan losses are based on management’s analysis and evaluation of the loan portfolio for identification of problem credits,~~allowance balance using relevant available information, from internal and external ~~factors that may affect collectability, relevant~~sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit ~~exposure, particular risks inherent~~loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in ~~different kinds of lending,~~ current ~~collateral values~~loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, rental vacancy rate, housing price index and ~~other relevant factors.~~

national retail sales index.

The allowance ~~consists~~for credit losses is measured based on call report segment as these types of ~~allocated and general components.~~loans exhibit similar risk characteristics. The ~~allocated component relates to loans~~identified loan segments are as follows:

•1-4 family construction

•All other construction

•1-4 family revolving home equity lines of credit (“HELOC”) & junior liens

•1-4 family senior liens

•Multifamily

•Owner occupied commercial real estate

•Non-owner occupied commercial real estate

•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other

•Consumer auto

•Other consumer

•Other consumer - SPF

The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans that do not share risk characteristics are ~~classified as impaired.~~evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. ~~The general component coversnon-classified~~For loans ~~and is based on historicalcharge-off~~ experience and expected loss given default derived from the bank’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not ~~fully reflected~~considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.

•Management has a reasonable expectation at the reporting date that troubled debt restructuring will be executed with an individual borrower.

•The extension or renewal options are included in the ~~historical loss~~original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

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Management qualitatively adjusts model results for risk ~~rating data.~~

factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.

Loans considered impaired, ~~under FASB~~according to ASC~~310-10-35,~~ 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 impairment of loans is utilized in evaluating the adequacy of the allowance for ~~loan~~credit losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for ~~loan~~credit losses when in the process of collection, it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more past due. 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.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.

Loans are placed onnon-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for ~~loan~~credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related tonon-accrual loans is generally charged against the allowance for ~~loan~~credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income onnon-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal.Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.

Acquisition Accounting and Acquired Loans.We account for our acquisitions under FASB ASC Topic 805,Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. NoIn accordance with ASC 326, the Company records both a discount and an allowance for ~~loan~~credit losses ~~related to the~~on acquired ~~loans is recorded on the acquisition date as the fair value of the purchased loans incorporates assumptions regarding credit risk.~~loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820,Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

~~Over~~

Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the ~~purchased~~loan. Subsequent changes to the allowance for credit ~~impaired loans, we continue~~losses are recorded through the provision for credit losses.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss. The estimate ~~cash flows~~includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. We evaluate at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has decreased and if so, recognize a provision for loan loss infunded over its ~~consolidated statement of income. For any increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the pool’s remaining~~estimated life.

Foreclosed Assets Held for Sale.Real estate and personal properties acquired through or in lieu of loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Valuations are periodically performed by management, and the real estate and personal properties are carried at fair value less costs to sell. Gains and losses from the sale of other real estate and personal properties are recorded innon-interest income, and expenses used to maintain the properties are included innon-interest expenses.

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Intangible Assets. Intangible assets consist of goodwill and core deposit intangibles. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists. The core deposit intangibles are being amortized over 48 to 121 months on a straight-line basis. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. We perform an annual impairment test of goodwill and core deposit intangibles as required by FASB ASC 350,~~Intangibles—~~Intangibles - Goodwill and Other, in the fourth ~~quarter.~~

quarter or more often if events and circumstances indicate there may be an impairment.

Income Taxes. We account for income taxes in accordance with income tax accounting guidance (ASC 740,Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax ~~bases~~basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets themore-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met themore-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Both we and our subsidiary file consolidated tax returns. Our subsidiary provides for income taxes on a separate return basis, and remits to us amounts determined to be currently payable.

Stock Compensation. In accordance with FASB ASC 718,~~Compensation—~~Compensation - Stock Compensation,and FASB ASC505-50,Equity-Based Payments toNon-Employees, the fair value of each option award is estimated on the date of grant. We recognize compensation expense for the grant-date fair value of the option award over the vesting period of the award.

Acquisitions

Acquisition of ~~Stonegate~~Marine Portfolio

On February 4, 2022, the Company completed the purchase of the performing marine loan portfolio of Utah-based LendingClub Bank

(“LendingClub”). Under the terms of the purchase agreement with LendingClub, the Company acquired yacht loans totaling approximately $242.2 million. This portfolio of loans is housed within the Company's Shore Premier Finance division, which is responsible for servicing the acquired loan portfolio and originating new loan production.

Acquisition of Happy Bancshares, Inc.

Through our recently completed acquisition and merger of Stonegate Bank into Centennial, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S. Treasury Department’s Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba.

~~Acquisition of Giant Holdings, Inc.~~

On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.

GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after $8.1 million of loan discounts, and $304.0 million in deposits.

~~Acquisition of The Bank of Commerce~~

On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (“BOC”), pursuant to an acquisition agreement, dated December 1, 2016, by and between the Company and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.

~~Under the terms~~Texas.

For further discussion of the acquisition, agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.

~~Termination of Remaining Loss-Share Agreements~~

~~Effective July 27, 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. Under the terms of the agreement, Centennial made a net payment of $6.6 million~~see Note 2 "Business Combinations" to the FDIC as consideration for the early termination of the loss share agreements, and all rights and obligations of Centennial and the FDIC under the loss share agreements, including the clawback provisions and the settlement of loss share and expense reimbursement claims, have been resolved and terminated. This transaction with the FDIC created a~~one-time~~ ~~acceleration of the indemnification asset plus the negotiated settlement for thetrue-up~~ ~~liability, and resulted in a negative $3.8 millionpre-tax~~ ~~financial impact~~Condensed Notes to ~~the third quarter of 2016. It has and will create a positive financial impact to earnings of approximately $1.5 million annually on apre-tax~~ ~~basis through the year 2020 as a result of theone-time~~ ~~acceleration of the indemnification asset amortization.~~

~~Future Acquisitions~~

~~In our continuing evaluation of our growth plans, we believe properly priced bank acquisitions can complement our organic growth and~~~~de novo~~ branching growth strategies. In the near term, our principal acquisition focus will be to continue to expand our presence in Arkansas, Florida and Alabama and into other contiguous markets through pursuing both~~non-FDIC-assisted~~ ~~and FDIC-assisted bank acquisitions. However, as financial opportunities in other market areas arise, we may expand into those areas.~~

Consolidated Financial Statements.

We will continue evaluating all types of potential bank acquisitions, which may include FDIC-assisted acquisitions as opportunities arise, to determine what is in the best interest of our Company. Our goal in making these decisions is to maximize the return to our investors.

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Branches

As opportunities arise, we will continue to open new (commonly referred to asde novo) branches in our current markets and in other attractive market areas.

As a result of our continued focus on efficiency, during the fourth quarter of 2017, we plan to close a branch location in Daphne, Alabama. As a result of Hurricane Irma, our Naples, Florida branch location will remain closed until further notice.

During the third quarter of 2017, the Company acquired a total of 24 branches through the acquisition of Stonegate. In an effort to achieve efficiencies primarily from the Stonegate acquisition, the Company plans to close or merge several Florida locations during 2018. During the remainder of 2017, we may announce additional strategic consolidations where it improves efficiency in certain markets.

As of ~~September~~June 30, ~~2017,~~2022, we had 222 branch locations. There were 76 branches in Arkansas, 8978 branches in Florida, 662 branches in Texas, five branches in Alabama and one branch in New York City.

Results of Operations

For the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, ~~2017~~2022 and ~~2016~~

2021

Our net income decreased ~~$28.8~~$63.1 million, or ~~66.0%~~79.8%, to ~~$14.8~~$16.0 million for the three-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$43.6~~$79.1 million for the same period in ~~2016.~~2021. On a diluted earnings per share basis, our earnings were ~~$0.10 per share and $0.31~~$0.08 per share for the three-month ~~periods~~period ended ~~September~~June 30, ~~2017 and 2016, respectively. Excluding the $51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32~~2022 compared to $0.48 per share for the ~~three months~~three-month period ended ~~September~~June 30, ~~2017. Excluding~~2021. During the ~~$3.8~~second quarter of 2022, we completed the previously announced acquisition of Happy Bancshares, Inc. ("Happy"). As a result of the acquisition of Happy, which we completed on April 1, 2022, we incurred $48.7 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of ~~FDIC loss sharebuy-out~~ ~~expense, net income was $46.0~~these items reduced earnings by $107.3 million and ~~diluted~~ earnings per share by $0.39 per share for the three-month period ended June 30, 2022. The markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest. However, excluding the impact of the acquisition of Happy, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022. In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022. During the three months ended ~~September~~June 30, ~~2016 was $0.33 per share. Net income excluding merger expenses, hurricane expenses and FDIC~~2022, the Company recorded $1.4 million in special dividend from equity investments, $2.4 million in recoveries on historic losses, $1.8 million loss ~~sharebuy-out~~ ~~expense~~ for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in the~~non-hurricane~~ ~~related provision for loan losses~~ fair value of marketable securities and $2.1 million in third quarter of 2017 when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.

TRUPS redemption fees.

Our net income decreased ~~$16.8~~$89.8 million, or ~~13.1%~~52.6%, to ~~$111.8~~$80.9 million for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$128.6~~$170.7 million for the same period in ~~2016.~~2021. On a diluted earnings per share basis, our earnings were ~~$0.78 per share and $0.91~~$0.44 per share for the ~~nine-month periods~~six-month period ended ~~September~~June 30, 2017 and 2016, respectively. Excluding the $3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.002022 compared to $1.03 per share for the ~~nine months~~six-month period ended ~~September~~June 30, ~~2017. Excluding~~2021. As a result of the ~~$3.8~~acquisition of Happy, which we completed on April 1, 2022, we incurred $49.6 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments, a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of ~~FDIC loss sharebuy-out~~ ~~expense, net income was $130.9~~these items reduced earnings by $108.2 million and ~~diluted~~ earnings per share by $0.44per share for the ~~nine~~six-month period ended June 30, 2022. The markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the potential impacts of international unrest. However, excluding the impact of the acquisition of Happy, the Company determined that an additional provision for credit losses was not necessary as the current level of the allowance for credit losses was considered adequate as of June 30, 2022. In addition, excluding the impact of the acquisition of Happy, the Company determined no additional provision for unfunded commitments was necessary as of June 30, 2022. During the six months ended ~~September~~June 30, ~~2016 was $0.93 per share. The $13.6 million~~2022, the Company recorded a $324,000 adjustment for the increase in ~~net income, excluding gain~~fair value of marketable securities, $1.4 million special dividend from equity investments, $2.1 million in TRUPS redemption fees and a $5.6 million recovery on ~~acquisitions, merger expenses, hurricane expenses and FDIC loss sharebuy-out~~ ~~expense, is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in thenon-hurricane~~ ~~related provision for loan losses in first nine months of 2017, growth innon-interest~~ income and the reduced amortization of the indemnification asset when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.

historic losses.

Net Interest Income

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments, rates paid on deposits and other borrowings, the level ofnon-performing loans and the amount ofnon-interest-bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividingtax-exempt income by one minus the combined federal and state income tax rate ~~(39.225%~~(25.1475% for ~~the three~~2022 and ~~nine-month periods ended September 30, 2017 and 2016)~~25.74% for 2021).

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The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. ~~The~~In 2020, the Federal ~~Funds~~Reserve lowered the target rate ~~which is the cost~~ to ~~banks~~0.00% to 0.25%. This remained in effect throughout all of ~~immediately available overnight funds, was lowered on December~~2021. On March 16, ~~2008 to a historic low of 0.25% to 0%, where it remained until December 16, 2015, when~~2022, the target rate was increased ~~slightly~~to 0.25% to 0.50%. On May 4, 2022, the target rate was increased to ~~0.25%~~0.75% to 1.00%. ~~Since December 31, 2016,~~On June 15, 2022, the target rate was increased to 1.50% to 1.75%. Presently, the Federal ~~Funds target~~Reserve has indicated they are anticipating multiple rate ~~has increased 75 basis points and is currently at 1.25% to 1.00%.~~

increases for 2022.

Our ~~GAAP~~ net interest margin ~~decreased~~increased from ~~4.86%~~3.61% for the three-month period ended ~~September~~June 30, ~~2016~~2021 to ~~4.40%~~3.64% for the three-month period ended ~~September~~June 30, ~~2017.~~2022. The yield on ~~loans~~interest earning assets was ~~5.66%~~3.97% and ~~5.84%~~3.94% for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively.~~ 2021, respectively, as average interest earning assets increased from $15.89 billion to $22.18 billion.The increase in average earning assets is primarily due to a $3.30 billion increase in average loans receivable, a $2.31 billion increase in average investment securities, and $675.6 million increase in average interest-bearing balances due from banks due to the acquisition of Happy during the quarter.For the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, we recognized ~~$7.2~~$5.2 million and ~~$11.9~~$5.8 million, respectively, in total net accretion for acquired loans and deposits. The~~non-GAAP~~ reduction in accretion was dilutive to the net interest margin ~~excluding accretion~~by one basis point. We recognized $1.4 million in event interest income ~~was 4.07% and 4.25%~~ for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively. Additionally, thenon-GAAP~~ ~~yield on loans excluding accretion income was 5.24% and 5.10%~~2022 compared to $942,000 for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits,~~2021. This increased the net interest margin ~~was negatively impacted~~ by ~~our April 2017 issuance of $300 million of 5.625%fixed-to-floating~~ ~~rate subordinated notes, which added approximately $4.3 million of interest expense when compared to the same quarter in 2016.~~

one basis point.

Our ~~GAAP~~ net interest margin decreased from ~~4.83%~~3.81% for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2016~~2021 to ~~4.53%~~3.46% for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017.~~2022. The yield on ~~loans~~interest earning assets was ~~5.70%~~3.79% and ~~5.82%~~4.17% for the ~~nine~~six-month period ended June 30, 2022 and 2021, respectively, as average interest earning assets increased from $15.51 billion to $19.49 billion. The increase in average earning assets is primarily the result of a $1.59 billion increase in average investment securities, a $1.28 billion increase in average interest-bearing balances due from banks and a $1.12 billion increase in average loans receivable. For the six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively. For the nine months ended September 30, 2017 and 2016,~~2021, we recognized ~~$23.3~~$8.3 million and ~~$33.7~~$11.3 million, respectively, in total net accretion for acquired loans and deposits. The~~non-GAAP~~ ~~margin excluding accretion income was 4.16% and 4.24% for the nine months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP~~ ~~yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned~~ reduction in ~~net~~ accretion ~~income for acquired loans and deposits,~~was dilutive to the net interest margin ~~was negatively impacted~~ by ~~our April 2017 issuance of $300~~3 basis points. The Company experienced an $18.8 million ~~of 5.625%fixed-to-floating~~ ~~rate subordinated notes, which added approximately $8.5 million of~~reduction in interest ~~expense when compared~~income from PPP loans due to the ~~same period in 2016,~~forgiveness of the PPP loans and the acceleration of the deferred fees for the loans that were forgiven. This was dilutive to the net interest margin by ~~our strategic decision to keep excess cash liquidity on the books during the first nine months of 2017.~~

approximately 9 basis points.

Net interest income on a fully taxable equivalent basis increased ~~$3.1~~$58.2 million, or ~~2.93%~~40.7%, to ~~$108.6~~$201.2 million for the three-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$105.5~~$143.0 million for the same period in ~~2016.~~ 2021.This increase in net interest income for the three-month period ended ~~September~~June 30, ~~2017~~2022 was the result of a ~~$12.5~~$63.2 million increase in interest income, partially offset by an $5.0 million increase in interest expense, on a fully taxable equivalent ~~basis offset by a $9.4 million increase in interest expense.~~basis. The ~~$12.5~~$63.2 million increase in interest income was primarily the result of athe higher level of ~~earning assets offset by lower yields on our~~average interest earning assets ~~specifically on our loans.~~due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate environment. The higher ~~level of~~yield on earning assets resulted in an increase in interest income of approximately ~~$14.2 million. The lower yield, primarily caused by a $4.5~~$6.9 million, ~~reduction in loan accretion income, resulted in an approximately $1.7 million decrease in interest income. The $9.4 million~~and the increase in interest expense for the three-month period ended September 30, 2017, is primarily the result of an increase in interest bearing liabilities repricing in a rising interest rate environment combined with a higher level of our interest bearing liabilities. The repricing of our interest bearing liabilities in a rising interest rate environment resulted in an approximately $6.2 million increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures, resulted in an increase in interest expense of approximately $3.2 million.

Net interest income on a fully taxable equivalent basis increased $16.3 million, or 5.26%, to $324.8 million for the nine-month period ended September 30, 2017, from $308.6 million for the same period in 2016. This increase in net interest income on a fully taxable equivalent basis for the nine-month period ended September 30, 2017 was the result of a $36.2 million increase in interest income offset by a $19.9 million increase in interest expense. The $36.2 million increase in interest income was primarily the result of a higher level of earning assets offset by lower yields on our interest earning assets, specifically on our loans. The higher level of earning assets resulted in an increase in interest income of approximately ~~$39.4~~$56.3 million. The ~~lower yield, primarily caused by a $9.6 million reduction in loan accretion income, resulted in an approximately $3.2 million decrease in interest income. The $19.9~~$5.0 million increase in interest expense ~~for the nine-month period ended September 30, 2017,~~ is primarily the result of ~~an increase in~~the higher level of average interest bearing liabilities ~~repricing in a rising~~due to the acquisition of Happy during the second quarter of 2022 and the increasing interest rate ~~environment combined with a~~environment. The higher ~~level of our~~yield on interest bearing ~~liabilities. The repricing of our interest bearing~~ liabilities ~~in a rising interest rate environment resulted in an approximately $13.3 million increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures,~~ resulted in an increase in interest expense of approximately ~~$6.6~~$548,000 and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $4.5 million.

~~Additional information and analysis~~

Net interest income on a fully taxable equivalent basis increased $41.2 million, or 14.1%, to $334.1 million for ~~our~~the six-month period ended June 30, 2022, from $292.9 million for the same period in 2021.This increase in net interest ~~margin can be found~~income for the six-month period ended June 30, 2022 was the result of a $45.4 million increase in ~~Tables 18 through 20 of ourNon-GAAP~~ ~~Financial Measurements section~~interest income, partially offset by a $4.2 million increase in interest expense, on a fully taxable equivalent basis. The $45.4 million increase in interest income was primarily the result of the ~~Management Discussion~~higher level of average interest earning assets due to the acquisition of Happy during the second quarter of 2022 partially offset by lower earning asset yields. The lower yield on earning assets resulted in a decrease in interest income of approximately $844,000, and ~~Analysis.~~

the increase in earning assets resulted in an increase in interest income of approximately $46.2 million. The $4.2 million increase in interest expense is primarily the result of the higher level of average interest bearing liabilities due to the acquisition of Happy during the second quarter of 2022 partially offset by lower interest rates paid on interest-bearing liabilities. The lower yield on interest bearing liabilities resulted in an decrease in interest expense of approximately $2.8 million and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $7.0 million.

Table of Contents

Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, as well as changes in fully taxable equivalent net interest margin for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 compared to the same ~~periods~~period in ~~2016.~~

2021.

Table 2: Analysis of Net Interest Income

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Interest income
   $ 123,913 $ 111,375 $ 361,270 $ 325,149
Fully taxable equivalent adjustment
   1,846 1,869 5,873 5,816


Interest income – fully taxable equivalent
   125,759 113,244 367,143 330,965
Interest expense
   17,144 7,722 42,334 22,398


Net interest income – fully taxable equivalent
   $ 108,615 $ 105,522 $ 324,809 $ 308,567


Yield on earning assets – fully taxable equivalent
   5.09 % 5.21 % 5.12 % 5.18 %
Cost of interest-bearing liabilities
   0.92 0.46 0.78 0.45
Net interest spread – fully taxable equivalent
   4.17 4.75 4.34 4.73
Net interest margin – fully taxable equivalent
   4.40 4.86 4.53 4.83


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Interest income	$	217,013		$	154,481		$	361,916		$	317,132
Fully taxable equivalent adjustment	2,471			1,774			4,209			3,595
Interest income – fully taxable equivalent	219,484			156,255			366,125			320,727
Interest expense	18,255			13,229			32,010			27,792
Net interest income – fully taxable equivalent	$	201,229		$	143,026		$	334,115		$	292,935
Yield on earning assets – fully taxable equivalent	3.97		%	3.94		%	3.79		%	4.17		%
Cost of interest-bearing liabilities	0.49			0.49			0.49			0.53
Net interest spread – fully taxable equivalent	3.48			3.45			3.30			3.64
Net interest margin – fully taxable equivalent	3.64			3.61			3.46			3.81

Table 3: Changes in Fully Taxable Equivalent Net Interest Margin

   Three Months Ended
September 30,
2017 vs. 2016    Nine Months Ended
September 30,
2017 vs. 2016
   (In thousands)
Increase (decrease) in interest income due to change in earning assets
   $ 14,194    $ 39,390
Increase (decrease) in interest income due to change in earning asset yields
   (1,679 )    (3,212 )
(Increase) decrease in interest expense due to change in interest-bearing liabilities
   (3,212 )    (6,610 )
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities
   (6,210 )    (13,326 )




Increase (decrease) in net interest income
   $ 3,093    $ 16,242


	Three Months Ended June 30,		Six Months Ended June 30,
	2022 vs. 2021		2022 vs. 2021
	(In thousands)
Increase in interest income due to change in earning assets	$	56,278	$	46,242
Increase (decrease) increase in interest income due to change in earning asset yields	6,951		(844)
Increase in interest expense due to change in interest-bearing liabilities	(4,478)		(7,014)
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities	(548)		2,796
Increase (decrease) increase in net interest income	$	58,203	$	41,180

Table of Contents

Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis.Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.

Table 4: Average Balance Sheets and Net Interest Income Analysis

   Three Months Ended September 30,
   2017 2016
   Average
Balance    Income /
Expense    Yield /
Rate Average
Balance    Income /
Expense    Yield /
Rate
   (Dollars in thousands)
ASSETS

Earnings assets

Interest-bearing balances due from banks
   $ 180,368    $ 538    1.18 % $ 110,993    $ 117    0.42 %
Federal funds sold
   878    3    1.36 1,136    2    0.70
Investment securities – taxable
   1,326,117    7,071    2.12 1,177,284    5,583    1.89
Investment securities –non-taxable
   348,920    4,908    5.58 328,979    4,407    5.33
Loans receivable
   7,938,716    113,239    5.66 7,027,634    103,135    5.84









Total interest-earning assets
   9,794,999    $ 125,759    5.09 8,646,026    113,244    5.21





Non-earning assets
   1,058,560       956,337





Total assets
   $ 10,853,559       $ 9,602,363





LIABILITIES AND STOCKHOLDERS’ EQUITY


Liabilities

Interest-bearing liabilities

Savings and interest-bearing transaction accounts
   $ 4,512,785    $ 5,755    0.51 % $ 3,721,019    $ 2,268    0.24 %
Time deposits
   1,444,662    2,780    0.76 1,361,589    1,772    0.52









Total interest-bearing deposits
   5,957,447    8,535    0.57 5,082,608    4,040    0.32









Federal funds purchased
   —      —      —   —      —      —
Securities sold under agreement to repurchase
   135,855    232    0.68 118,183    142    0.48
FHLB and other borrowed funds
   920,754    3,408    1.47 1,357,716    3,139    0.92
Subordinated debentures
   358,347    4,969    5.50 60,826    401    2.62









Total interest-bearing liabilities
   7,372,403    17,144    0.92 6,619,333    7,722    0.46





Non-interest bearing liabilities

Non-interest bearing deposits
   1,924,933       1,663,621
Other liabilities
   42,394       45,332





Total liabilities
   9,339,730       8,328,286
Stockholders’ equity
   1,513,829       1,274,077





Total liabilities and stockholders’ equity
   $ 10,853,559       $ 9,602,363





Net interest spread
         4.17 %       4.75 %
Net interest income and margin
      $ 108,615    4.40 %    $ 105,522    4.86 %


	Three Months Ended June 30,
	2022						2021
	Average Balance		Income / Expense		Yield / Rate		Average Balance		Income / Expense		Yield / Rate
	(Dollars in thousands)
ASSETS
Earnings assets
Interest-bearing balances due from banks	$	3,252,674	$	6,565	0.81	%	$	2,577,101	$	707	0.11	%
Federal funds sold	1,857		3		0.65		51		—		—
Investment securities – taxable	3,817,209		20,941		2.20		1,909,485		7,185		1.51
Investment securities – non-taxable	1,270,602		10,055		3.17		864,416		6,494		3.01
Loans receivable	13,838,687		181,920		5.27		10,541,466		141,869		5.40
Total interest-earning assets	22,181,029		219,484		3.97	%	15,892,519		156,255		3.94	%
Non-earning assets	2,607,336						1,598,840
Total assets	$	24,788,365					$	17,491,359
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Interest-bearing liabilities
Savings and interest-bearing transaction accounts	$	12,632,612	$	9,770	0.31	%	$	8,684,726	3,960		0.18	%
Time deposits	1,170,860		959		0.33		1,123,287		2,474		0.88
Total interest-bearing deposits	13,803,472		10,729		0.31		9,808,013		6,434		0.26
Federal funds purchased	869		2		0.92		—		—		—
Securities sold under agreement to repurchase	123,011		187		0.61		157,570		107		0.27
FHLB and other borrowed funds	400,000		1,896		1.90		400,000		1,896		1.90
Subordinated debentures	568,187		5,441		3.84		370,613		4,792		5.19
Total interest-bearing liabilities	14,895,539		18,255		0.49	%	10,736,196		13,229		0.49	%
Non-interest-bearing liabilities
Non-interest-bearing deposits	6,138,497						3,966,968
Other liabilities	162,571						128,048
Total liabilities	21,196,607						14,831,212
Stockholders’ equity	3,591,758						2,660,147
Total liabilities and stockholders’ equity	$	24,788,365					$	17,491,359
Net interest spread					3.48	%					3.45	%
Net interest income and margin			$	201,229	3.64	%			$	143,026	3.61	%

Table ~~4: Average Balance Sheets and Net Interest Income Analysis~~

   Nine Months Ended September 30,
   2017 2016
   Average
Balance    Income /
Expense    Yield /
Rate Average
Balance    Income /
Expense    Yield /
Rate
   (Dollars in thousands)
ASSETS

Earnings assets

Interest-bearing balances due from banks
   $ 218,324    $ 1,573    0.96 % $ 110,893    $ 325    0.39 %
Federal funds sold
   1,161    9    1.04 1,895    7    0.49
Investment securities – taxable
   1,231,619    18,983    2.06 1,174,998    16,178    1.84
Investment securities –non-taxable
   347,578    14,506    5.58 333,336    13,616    5.46
Loans receivable
   7,785,925    332,072    5.70 6,909,240    300,839    5.82









Total interest-earning assets
   9,584,607    $ 367,143    5.12 8,530,362    330,965    5.18





Non-earning assets
   1,033,310       968,553





Total assets
   $ 10,617,917       $ 9,498,915





LIABILITIES AND STOCKHOLDERS’ EQUITY


Liabilities

Interest-bearing liabilities

Savings and interest-bearing transaction accounts
   $ 4,316,032    $ 13,445    0.42 % $ 3,664,401    $ 6,426    0.23 %
Time deposits
   1,415,383    7,386    0.70 1,382,657    5,102    0.49









Total interest-bearing deposits
   5,731,415    20,831    0.49 5,047,058    11,528    0.31









Federal funds purchased
   —      —      —   312    2    0.86
Securities sold under agreement to repurchase
   129,580    593    0.61 120,966    421    0.46
FHLB and other borrowed funds
   1,155,503    10,707    1.24 1,376,145    9,283    0.90
Subordinated debentures
   258,032    10,203    5.29 60,826    1,164    2.56









Total interest-bearing liabilities
   7,274,530    42,334    0.78 6,605,307    22,398    0.45





Non-interest bearing liabilities

Non-interest bearing deposits
   1,847,843       1,596,603
Other liabilities
   48,804       55,411





Total liabilities
   9,171,177       8,257,321
Stockholders’ equity
   1,446,740       1,241,594





Total liabilities and stockholders’ equity
   $ 10,617,917       $ 9,498,915





Net interest spread
         4.34 %       4.73 %
Net interest income and margin
      $ 324,809    4.53 %    $ 308,567    4.83 %

of Contents


	Six Months Ended June 30,
	2022						2021
	Average Balance		Income / Expense		Yield / Rate		Average Balance		Income / Expense		Yield / Rate
	(Dollars in thousands)
ASSETS
Earnings assets
Interest-bearing balances due from banks	$	3,374,606	$	8,238	0.49	%	$	2,096,452	$	1,117	0.11	%
Federal funds sold	1,805		4		0.45		84		—		—
Investment securities – taxable	3,155,481		30,021		1.92		1,774,026		13,438		1.53
Investment securities – non-taxable	1,061,822		16,339		3.10		856,332		13,194		3.11
Loans receivable	11,899,115		311,523		5.28		10,780,972		292,978		5.48
Total interest-earning assets	19,492,829		366,125		3.79	%	15,507,866		320,727		4.17	%
Non-earning assets	2,115,558						1,599,393
Total assets	$	21,608,387					$	17,107,259
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Savings and interest- bearing transaction accounts	$	11,007,232	$	13,643	0.25	%	$	8,512,714	8,677		0.21	%
Time deposits	1,013,600		1,980		0.39		1,166,121		5,462		0.94
Total interest-bearing deposits	12,020,832		15,623		0.26		9,678,835		14,139		0.29
Federal funds purchased	437		2		0.92		—		—		—
Securities sold under agreement to repurchase	130,248		295		0.46		158,628		297		0.38
FHLB borrowed funds	400,000		3,771		1.90		400,000		3,771		1.90
Subordinated debentures	589,917		12,319		4.21		370,518		9,585		5.22
Total interest-bearing liabilities	13,141,434		32,010		0.49	%	10,607,981		27,792		0.53	%
Non-interest-bearing liabilities
Non-interest-bearing deposits	5,152,673						3,724,854
Other liabilities	142,080						131,446
Total liabilities	18,436,187						14,464,281
Stockholders’ equity	3,172,200						2,642,978
Total liabilities and stockholders’ equity	$	21,608,387					$	17,107,259
Net interest spread					3.30	%					3.64	%
Net interest income and margin			$	334,115	3.46	%			$	292,935	3.81	%

Table of Contents

Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 compared to the same ~~periods~~period in ~~2016,~~2021, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.

Table 5: Volume/Rate Analysis

   Three Months Ended September 30,
2017 over 2016    Nine Months Ended September 30,
2017 over 2016
   Volume Yield/Rate Total    Volume Yield/Rate Total
   (In thousands)
Increase (decrease) in:

Interest income:

Interest-bearing balances due from banks
   $ 107 $ 314 $ 421    $ 498 $ 750 $ 1,248
Federal funds sold
   —   1 1    (4 ) 6 2
Investment securities – taxable
   750 738 1,488    807 1,998 2,805
Investment securities –non-taxable
   274 227 501    590 300 890
Loans receivable
   13,063 (2,959 ) 10,104    37,499 (6,266 ) 31,233




Total interest income
   14,194 (1,679 ) 12,515    39,390 (3,212 ) 36,178




Interest expense:

Interest-bearing transaction and
savings deposits
   569 2,918 3,487    1,308 5,711 7,019
Time deposits
   114 894 1,008    124 2,160 2,284
Federal funds purchased
   —   —   —      (1 ) (1 ) (2 )
Securities sold under agreement to
repurchase
   23 67 90    32 140 172
FHLB borrowed funds
   (1,222 ) 1,491 269    (1,655 ) 3,079 1,424
Subordinated debentures
   3,728 840 4,568    6,802 2,237 9,039




Total interest expense
   3,212 6,210 9,422    6,610 13,326 19,936




Increase (decrease) in net interest income
   $ 10,982 $ (7,889 ) $ 3,093    $ 32,780 $ (16,538 ) $ 16,242

Three Months Ended June 30, Six Months Ended June 30,
2022 over 2021 2022 over 2021
Volume Yield /
Rate Total Volume Yield /
Rate Total
(In thousands)
Increase (decrease) in:
Interest income:
Interest-bearing balances due from banks $ 232 $ 5,626 $ 5,858 $ 1,036 $ 6,085 $ 7,121
Federal funds sold — 3 3 — 4 4
Investment securities – taxable 9,432 4,324 13,756 12,480 4,103 16,583
Investment securities – non-taxable 3,198 363 3,561 3,162 (17) 3,145
Loans receivable 43,416 (3,365) 40,051 29,564 (11,019) 18,545
Total interest income 56,278 6,951 63,229 46,242 (844) 45,398
Interest expense:
Interest-bearing transaction and savings deposits 2,295 3,515 5,810 2,859 2,107 4,966
Time deposits 101 (1,616) (1,515) (638) (2,844) (3,482)
Federal funds purchased 1 1 2 1 1 2
Securities sold under agreement to repurchase (28) 108 80 (58) 56 (2)
FHLB borrowed funds — — — — — —
Subordinated debentures 2,109 (1,460) 649 4,850 (2,116) 2,734
Total interest expense 4,478 548 5,026 7,014 (2,796) 4,218
Increase (decrease) in net interest income $ 51,800 $ 6,403 $ 58,203 $ 39,228 $ 1,952 $ 41,180

Provision for ~~Loan~~Credit Losses

~~Our management assesses~~

The measurement of expected credit losses under the ~~adequacy~~CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of ~~the allowance for loan losses~~credits, financial guarantees, and other similar instruments) and net investments in leases recognized by ~~applying the provisions of FASB~~a lessor in accordance with Topic 842 on leases. ASC~~310-10-35.~~ ~~Specific allocations are determined for loans considered to be impaired and loss factors are assigned~~ 326 requires enhanced disclosures related to the ~~remainder of the loan portfolio to determine an appropriate level~~significant estimates and judgments used in the allowance for loan losses. The allowance is increased, as necessary, by making a provision for loan losses. The specific allocations for impaired loans are assigned based on an estimated net realizable value after a thorough review of theestimating credit ~~relationship. The potential loss factors associated with the remainder of the loan portfolio are based on an internal net loss experience,~~losses as well as ~~management’s review~~the credit quality and underwriting standards of ~~trends within~~a company’s portfolio. In addition, ASC 326 requires credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities management does not intend to sell or believes that it is more likely than not, they will be required to sell.

Loans. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio ~~and related industries.~~

~~While general economic trends have improved recently, we cannot be certain that the current economic~~mix, delinquency level, or term as well as for changes in environmental conditions, ~~will considerably improve~~such as changes in the ~~near future. Recent~~national unemployment rate, gross domestic product, rental vacancy rate, housing price index and ~~ongoing events at~~national retail sales index.

Acquired loans. In accordance with ASC 326, the ~~national~~Company records both a discount and ~~international levels can create uncertainty~~an allowance for credit losses on acquired loans. This is commonly referred to as “double accounting" (or "double count").

Table of Contents

The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:

•1-4 family construction

•All other construction

•1-4 family revolving HELOC & junior liens

•1-4 family senior liens

•Multifamily

•Owner occupied commercial real estate

•Non-owner occupied commercial real estate

•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other

•Consumer auto

•Other consumer

•Other consumer - SPF

The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the ~~financial markets. Despite these economic uncertainties, we continue to follow our historically conservative procedures for lending and evaluating~~collective evaluation. For those loans that are classified as impaired, an allowance is established when the ~~provision and allowance for loan losses. Our practice continues to be primarily traditional real estate lending with strongloan-to-value~~ ~~ratios.~~

Generally, commercial, commercial real estate, and residential real estate loans are assigned a level of risk at origination. Thereafter, these loans are reviewed on a regular basis. The periodic reviews generally include loan payment and collateral status, the borrowers’ financial data, and key ratios such asdiscounted cash flows, ~~operating income, liquidity,~~collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.

During the three-month and ~~leverage. A material change~~six-month periods ended June 30, 2022, the Company recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count" and an $11.4 million provision for credit losses on acquired unfunded commitments resulting from the acquisition of Happy on April 1, 2022. As of June 30, 2022, the markets in which we operate have been experiencing significant economic uncertainty primarily related to inflationary concerns, continuing supply chain issues and the ~~borrower’s~~potential impacts of international unrest. However, excluding the impact of the acquisition of Happy, the Company determined that an additional provision for credit ~~analysis can result in an increase or decrease in~~losses was not necessary as the ~~loan’s assigned risk grade. Aggregate dollar volume by risk grade is monitored on anon-going~~ ~~basis.~~

~~Our management reviews certain key loan quality indicators on a monthly basis, including~~ current economic conditions, delinquency trends and ratios, portfolio mix changes, and other information management deems necessary. This review process provides a degree of objective measurement that is used in conjunction with periodic internal evaluations. To the extent that this review process yields differences between estimated and actual observed losses, adjustments are made to the loss factors used to determine the appropriate level of the allowance for ~~loan losses.~~

~~Our Company is primarily a real estate lender in~~credit losses was considered adequate as of June 30, 2022. In addition, excluding the ~~markets we serve. As such, we are subject to declines in asset quality when real estate prices fall. The recession in the latter years~~impact of the ~~last decade harshly impacted~~acquisition of Happy, the ~~real estate market in Florida. The economic conditions particularly in our Florida markets have improved recently, although not topre-recession~~ ~~levels. Our Arkansas markets’ economies have been fairly stable over the past several years with~~Company determined no ~~boom or bust. As a result, the Arkansas economy fared better with its real estate values during this time period.~~

~~The~~additional provision for ~~loan losses represents management’s determination~~unfunded commitments was necessary as of ~~the amount necessary~~June 30, 2022.

Net charge-offs to ~~be charged against the current period’s earnings, to maintain the allowance for loan losses at a level that is considered adequate in relation to the estimated risk inherent in the loan portfolio.~~

The Company’s third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While theaverage total impact of this hurricane on Home BancShares’s financial condition and results of operation may not be known for some time, the Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in legacy loans ~~receivable we have in the disaster area, the Company has accrued $33.4 million ofpre-tax~~ hurricane expenses. The $33.4 million of hurricane expenses include the following items: $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017. The $32.9 million of storm-related provision for loan losses was calculated by taking a 5.0% allocation on the loans in the Florida Key loans receivable balances, a 5.0% allocation on specific large loans located in the path of the hurricane on the mainland of Florida, and a 0.75% allocation on balances in the remaining counties within the FEMA-designated disaster areas. Additionally, as a result of Hurricane Irma, the Company offered customers located in the disaster area a~~90-day~~ ~~deferment on outstanding loans. As of November 1, 2017, customers with loan balances totaling approximately $205.8 million have accepted the90-day~~ ~~deferment.~~

~~There was $35.0 million and $5.5 million of provision for loan losses~~0.07% for the three months ended ~~September~~June 30, ~~2017~~2022 compared to 0.09% for the three months ended June 30, 2021. Net charge-offs to average total loans was 0.08% for the six months ended June 30, 2022 compared to 0.09% for the six months ended June 30, 2021.

Investments – Available-for-sale: The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and ~~2016, respectively. Excluding $32.9~~changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Investments – Held-to-Maturity. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

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At June 30, 2022, the Company determined that the allowance for credit losses of $842,000, resulting from economic uncertainty, was adequate for the available-for-sale investment portfolio, and the allowance for credit losses for the HTM portfolio resulting from the Happy acquisition was considered adequate. No additional provision for loan losses related to Hurricane Irma, we experienced a $3.4 million decrease in the provision for loan losses during the third quarter of 2017 versus the third quarter of 2016. The $3.4 million decrease in provision for loancredit losses was ~~primarily due to~~considered necessary for the ~~Company not needing to take any additional provision related to charge-offs during the third quarter of 2017 because of a $2.0 million loancharge-off~~ ~~having a specific allocation that did not need to be replenished in the general allowance allocation plus lower organic loan growth during the third quarter of 2017 versus the third quarter of 2016.~~

~~There~~portfolio.

Non-Interest Income

Total non-interest income was ~~$39.3~~$44.6 million and $16.9 million of provision for loan losses for the nine months ended September 30, 2017 and 2016, respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma, we experienced a $10.5 million decrease in the provision for loan losses during the first nine months of 2017 versus the first nine months of 2016. This $10.5 million decrease is primarily a result of reduced provisioning from lower net charge-offs and lower organic loan growth versus the first nine months of 2016.

Based upon current accounting guidance, the allowance for loan losses is not carried over in an acquisition. As a result, none of the acquired loans had any allocation of the allowance for loan losses at merger date. This is the result of all purchased loans being recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. However, as the acquired loans pay off or renew and the acquired footprint originates new loan production, it is necessary to establish an allowance which represents an amount that, in management’s judgment, will be adequate to absorb credit losses. The allowance for loan loss methodology for all originated loans as disclosed in Note 1 to the Notes to Consolidated Financial Statements in our Form~~10-K~~ ~~was used for these loans. Our current or historical provision levels should not be relied upon as a predictor or indicator of future levels going forward.~~

~~Non-Interest~~ ~~Income~~

~~Totalnon-interest~~ ~~income was $21.5 million and $72.3~~$75.3 million for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$22.0~~$31.1 million and ~~$63.2~~$76.4 million for the same ~~periods~~period in ~~2016, respectively.~~2021. Our recurringnon-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.

Table 6 measures the various components of ournon-interest income for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively, as well as changes for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 compared to the same period in ~~2016.~~

2021.

Table 6:Non-Interest Income

   Three Months Ended
September 30, 2017 Change Nine Months Ended
September 30, 2017 Change
   2017 2016 from 2016 2017 2016 from 2016
   (Dollars in thousands)
Service charges on deposit accounts
   $ 6,408 $ 6,527 $ (119 ) (1.8 )% $ 18,356 $ 18,607 $ (251 ) (1.3 )%
Other service charges and fees
   8,490 7,504 986 13.1 25,983 22,589 3,394 15.0
Trust fees
   365 365 —   —   1,130 1,128 2 0.2
Mortgage lending income
   3,172 3,932 (760 ) (19.3 ) 9,713 10,276 (563 ) (5.5 )
Insurance commissions
   472 534 (62 ) (11.6 ) 1,482 1,808 (326 ) (18.0 )
Increase in cash value of life insurance
   478 344 134 39.0 1,251 1,092 159 14.6
Dividends from FHLB, FRB, Bankers’ Bank & other
   834 808 26 3.2 2,455 2,147 308 14.3
Gain on acquisitions
   —   —   —   —   3,807 —   3,807 100.0
Gain (loss) on SBA loans
   163 364 (201 ) (55.2 ) 738 443 295 66.6
Gain (loss) on branches, equipment and other assets, net
   (1,337 ) (86 ) (1,251 ) 1,454.7 (962 ) 701 (1,663 ) (237.2 )
Gain (loss) on OREO, net
   335 132 203 153.8 849 (713 ) 1,562 219.1
Gain (loss) on securities, net
   136 —   136 100.0 939 25 914 3,656.0
FDIC indemnification accretion/(amortization), net
   —   —   —   —   —   (772 ) 772 (100.0 )
Other income
   1,941 1,590 351 22.1 6,603 5,892 711 12.1


Totalnon-interest income
   $ 21,457 $ 22,014 $ (557 ) (2.5 )% $ 72,344 $ 63,223 $ 9,121 14.4 %


	Three Months Ended June 30,				2021 Change from 2020				Six Months Ended June 30,				2021 Change from 2020
	2022		2021						2022		2021
	(Dollars in thousands)
Service charges on deposit accounts	$	10,084	$	5,116	$	4,968	97.1	%	$	16,224	$	10,118	$	6,106	60.3	%
Other service charges and fees	12,541		9,659		2,882		29.8		20,274		17,267		3,007		17.4
Trust fees	4,320		444		3,876		873.0		4,894		966		3,928		406.6
Mortgage lending income	5,996		6,202		(206)		(3.3)		9,912		14,369		(4,457)		(31.0)
Insurance commissions	658		478		180		37.7		1,138		970		168		17.3
Increase in cash value of life insurance	1,140		537		603		112.3		1,632		1,039		593		57.1
Dividends from FHLB, FRB, FNBB & other	3,945		2,646		1,299		49.1		4,643		11,255		(6,612)		(58.7)
Gain on sale of SBA loans	—		1,149		(1,149)		(100.0)		95		1,149		(1,054)		(91.7)
Gain (loss) on sale of branches, equipment and other assets, net	2		(23)		25		108.7		18		(52)		70		134.6
Gain on OREO, net	9		619		(610)		(98.5)		487		1,020		(533)		(52.3)
Gain on securities, net	—		—		—		0.0		—		219		(219)		(100.0)
Fair value adjustment for marketable securities	(1,801)		1,250		(3,051)		(244.1)		324		7,032		(6,708)		(95.4)
Other income	7,687		3,043		4,644		152.6		15,609		11,044		4,565		41.3
Total non-interest income	$	44,581	$	31,120	$	13,461	43.3	%	$	75,250	$	76,396	$	(1,146)	(1.5)	%

Non-interest income ~~decreased $557,000,~~increased $13.5 million, or ~~2.5%~~43.3%, to ~~$21.5~~$44.6 million for the ~~three-month period~~three months ended ~~September~~June 30, ~~2017~~2022 from ~~$22.0~~$31.1 million for the same period in ~~2016.Non-interest~~ ~~income increased $9.1 million, or 14.4%, to $72.3 million for the nine-month period ended September 30, 2017 from $63.2 million for the same period in 2016.Non-interest~~ ~~income excluding gain on acquisitions increased $5.3 million, or 8.4%, to $68.5 million for the nine months ended September 30, 2017 from $63.2 million for the same period in 2016.~~

2021. The primary factors that resulted in this increase were the increase ~~for~~in service charges on deposit account and the ~~three month period ended September 30, 2017 when compared to the same period~~increase in ~~2016~~other income. Other factors were changes related to other ~~service~~services charges and fees, ~~mortgage lending income, and net loss on branches, equipment~~trust fees, dividends from FHLB, FRB, FNBB and other, ~~assets.~~

gain on sale of SBA loans, gain on OREO and fair value adjustment for marketable securities.

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Additional details for the three months ended ~~September~~June 30, ~~2017~~2022 on some of the more significant changes are as follows:

•The ~~$986,000~~$5.0 million increase in ~~other~~ service charges ~~and fees is primarily from our first quarter 2017 acquisitions plus additional loan payoff fees generated by Centennial CFG.~~

The $760,000 decrease in mortgage lending income is primarily the result of Hurricane Irma during September 2017 when compared to the same period in 2016. The disruption from the hurricane resulted in very little mortgage processing for nearly a two week period during the third quarter of 2017.

~~The $1.3 million decrease in gain (loss)~~ on ~~branches, equipment and other assets, net,~~deposit accounts is primarily related to ~~losses on three vacant properties during~~an increase in overdraft fees resulting from the ~~third quarter~~acquisition of ~~2017.~~Happy.

Excluding gain on acquisitions, the primary factors that resulted in the increase for the nine month period ended September 30, 2017 when compared to the same period in 2016 were changes related to other service charges and fees, net loss on branches, equipment and other assets, net gain on OREO, net gain on securities, and amortization on our former FDIC indemnification asset.

~~Additional details for the nine months ended September 30, 2017 on some of the more significant changes are as follows:~~

•The ~~$3.4~~$2.9 million increase in other service charges and fees is primarily related to an increase in interchange fees resulting from ~~our first quarter 2017 acquisitions plus additional loan payoff~~the acquisition of Happy.

•The $3.9 million increase in trust fees ~~generated by Centennial CFG and approximately $615,000 of MasterCard incentive income received in the first quarter of 2017.~~

~~The $1.7 million decrease in gain (loss) on branches, equipment and other assets, net,~~ is primarily related to ~~net losses on eleven vacant properties~~an increase in trust fees resulting from ~~closed branches during~~ the ~~first nine months~~acquisition of ~~2017 combined with net~~Happy.

•The $1.3 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in special dividends from equity investments and an increase in FRB stock holdings related to the acquisition of Happy.

•The $1.1 million decrease in gains on ~~four vacant properties during the first nine months~~sales of ~~2016 plus a gain on the sale of a piece of software~~SBA loans was due to no SBA loan sales taking place during the second quarter of ~~2016.~~2022.

•The ~~$1.6~~$610,000 decrease in gains on OREO resulted from a reduction in the level of sales of OREO during 2022.

•The $3.1 million decrease in the fair value adjustment for marketable securities is due to a reduction in the fair market values of marketable securities held by the Company.

•The $4.6 million increase in other income is primarily due to a $2.8 million increase in additional income for items previously charged off, a $878,000 increase in investment brokerage fee income, a $260,000 increase in real estate rental income and a $492,000 increase in building rental income related to the acquisition of Happy.

Non-interest income decreased $1.1 million, or 1.5%, to $75.3 million for the six months ended June 30, 2022 from $76.4 million for the same period in 2021. The primary factors that resulted in this decrease were the reduction in dividends from FHLB, FRB, FNBB & other, the reduction in fair value adjustment for marketable securities and the reduction in mortgage lending income which was partially offset by the increase in service charges on deposit accounts, increase in other income and increase in trust fees. Other factors were changes related to other service charges and fees and gain ~~(loss)~~ on ~~OREO~~sale of SBA loans.

Additional details for the six months ended June 30, 2022 on some of the more significant changes are as follows:

•The $6.1 million increase in service charges on deposit accounts is primarily related to ~~realizing gains on sale from OREO properties during the first nine months of 2017 versus the revaluation of seven OREO properties during the first nine months of 2016.~~

~~The $914,000~~an increase in ~~gain (loss) on securities, net, is a result~~overdraft fees resulting from the acquisition of ~~a strategic decision to recognize the long-term capital gains on sales of investment securities when compared to the same period in 2016.~~Happy.

•The ~~$772,000~~$3.0 million increase in ~~FDIC indemnification accretion/amortization, net,~~other service charges and fees is ~~a result~~primarily related to an increase in interchange acquisition fees resulting from the acquisition of Happy.

•The $3.9 million increase in trust fees is primarily related to an increase in employee and personal trust fees resulting from the~~buy-out~~ acquisition of ~~the FDIC loss share portfolio during the third quarter of 2016.~~Happy.

•The ~~$563,000~~$4.5 million decrease in mortgage lending income is primarily due to a decrease in volume of secondary market loans from the ~~result~~high volume of ~~Hurricane Irma~~loans during ~~September 2017 when compared~~2021.

•The $6.6 million decrease for dividends from FHLB, FRB, FNBB & other is primarily due to a decrease in special dividends from equity investments, partially offset by an increase in FRB stock holdings related to the ~~same period~~acquisition of Happy.

•The $1.1 million decrease in ~~2016.~~ gains on sales of SBA loans is primarily due to decrease in the volume of SBA loan sales during 2022.

•The ~~disruption~~$533,000 decrease in gains on OREO resulted from a reduction in the ~~hurricane resulted~~level of sales of OREO during 2022.

•The $6.7 million decrease in ~~very little mortgage processing~~the fair value adjustment for ~~nearly~~marketable securities is due to a ~~two week period during~~reduction in the ~~third quarter~~increase of ~~2017.~~the fair market values of marketable securities held by the Company.

•The $4.6 million increase in other income is primarily due to a $2.8 million increase in additional income for items previously charged off and a $1.4 million increase in investment brokerage fee income related to the acquisition of Happy.

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Non-Interest Expense

Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.

Table 7 below sets forth a summary ofnon-interest expense for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, as well as changes for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 compared to the same period in ~~2016.~~

2021.

Table 7:Non-Interest Expense

   Three Months Ended
September 30,    2017 Change Nine Months Ended
September 30,    2017 Change
   2017    2016    from 2016 2017    2016    from 2016
   (Dollars in thousands)
Salaries and employee benefits
   $ 28,510    $ 25,623    $ 2,887 11.3 % $ 83,965    $ 75,018    $ 8,947 11.9 %
Occupancy and equipment
   7,887    6,668    1,219 18.3 21,602    19,848    1,754 8.8
Data processing expense
   2,853    2,791    62 2.2 8,439    8,221    218 2.7
Other operating expenses:

Advertising
   795    866    (71 ) (8.2 ) 2,305    2,422    (117 ) (4.8 )
Merger and acquisition expenses
   18,227    —      18,227 100.0 25,743    —      25,743 100.0
FDIC loss sharebuy-out expense
   —      3,849    (3,849 ) (100.0 ) —      3,849    (3,849 ) (100.0 )
Amortization of intangibles
   906    762    144 18.9 2,576    2,370    206 8.7
Electronic banking expense
   1,712    1,428    284 19.9 4,885    4,121    764 18.5
Directors’ fees
   309    292    17 5.8 946    856    90 10.5
Due from bank service charges
   472    319    153 48.0 1,348    961    387 40.3
FDIC and state assessment
   1,293    1,502    (209 ) (13.9 ) 3,763    4,394    (631 ) (14.4 )
Insurance
   577    553    24 4.3 1,698    1,630    68 4.2
Legal and accounting
   698    583    115 19.7 1,799    1,764    35 2.0
Other professional fees
   1,436    1,137    299 26.3 3,822    3,106    716 23.1
Operating supplies
   432    437    (5 ) (1.1 ) 1,376    1,292    84 6.5
Postage
   280    269    11 4.1 861    815    46 5.6
Telephone
   305    449    (144 ) (32.1 ) 1,027    1,391    (364 ) (26.2 )
Other expense
   4,154    3,498    656 18.8 10,835    12,203    (1,368 ) (11.2 )










Totalnon-interest expense
   $ 70,846    $ 51,026    $ 19,820 38.8 % $ 176,990    $ 144,261    $ 32,729 22.7 %


	Three Months Ended June 30,				2022 Change from 2021				Six Months Ended June 30,				2022 Change from 2021
	2022		2021						2022		2021
	(Dollars in thousands)
Salaries and employee benefits	$	65,795	$	42,462	$	23,333	55.0	%	$	109,346	$	84,521	$	24,825	29.4	%
Occupancy and equipment	14,256		9,042		5,214		57.7		23,400		18,279		5,121		28.0
Data processing expense	10,094		5,893		4,201		71.3		17,133		11,763		5,370		45.7
Merger and acquisition expenses	48,731		—		48,731		100.0		49,594		—		49,594		100.0
Other operating expenses:
Advertising	2,117		1,194		923		77.3		3,383		2,240		1,143		51.0
Amortization of intangibles	2,477		1,421		1,056		74.3		3,898		2,842		1,056		37.2
Electronic banking expense	3,352		2,616		736		28.1		5,890		4,854		1,036		21.3
Directors' fees	375		414		(39)		(9.4)		779		797		(18)		(2.3)
Due from bank service charges	396		273		123		45.1		666		522		144		27.6
FDIC and state assessment	2,390		1,108		1,282		115.7		4,058		2,471		1,587		64.2
Insurance	973		787		186		23.6		1,743		1,568		175		11.2
Legal and accounting	1,061		1,058		3		0.3		1,858		1,904		(46)		(2.4)
Other professional fees	2,254		1,796		458		25.5		3,863		3,409		454		13.3
Operating supplies	995		465		530		114.0		1,749		952		797		83.7
Postage	556		292		264		90.4		862		630		232		36.8
Telephone	384		365		19		5.2		721		711		10		1.4
Other expense	9,276		3,796		5,480		144.4		13,435		8,385		5,050		60.2
Total non-interest expense	$	165,482	$	72,982	$	92,500	126.7	%	$	242,378	$	145,848	$	96,530	66.2	%

Non-interest expense increased ~~$19.8~~$92.5 million, or ~~38.8%~~126.7%, to ~~$70.8~~$165.5 million for the three months ended ~~September~~June 30, ~~2017~~2022 from ~~$51.0~~$73.0 million for the same period in ~~2016.~~2021. The primary factors that resulted in this increase were the changes related to salaries and employee benefits and merger and acquisition expense. Other factors were changes related to occupancy and equipment, data processing expense, amortization of intangibles, FDIC and state assessment fees and other expenses.

Additional details for the three months ended June 30, 2022 on some of the more significant changes are as follows:

•The $23.3 million increase in salaries and employee benefits expense is primarily due to increased salary expenses and insurance expenses related to the acquisition of Happy.

•The $5.2 million increase in occupancy and equipment expenses is primarily due to increases in depreciation on buildings, machinery and equipment, increases in utility expenses and increases in property taxes related to the acquisition of Happy.

•The $4.2 million increase in data processing expense is primarily due to increases in telecommunication fees, computer software fees, licensing fee and increases in internet banking and cash management expenses related to the acquisition of Happy.

•The $48.7 increase in merger and acquisition expense is related to costs associated with the acquisition of Happy.

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•The $923,000 increase in advertising expense is related to the acquisition of Happy.

•The $1.1 million increase in amortization of intangibles is due to the acquisition of Happy.

•The $736,000 increase in electronic banking expense is due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy.

•The $1.3 million increase in FDIC and state assessment expense is primarily due to FDIC assessment reductions for 2021 and the acquisition of Happy during the second quarter of 2022.

•The $5.5 million increase in other expenses is primarily related to the acquisition of Happy as well as $2.1 million in TRUPS redemption fees.

Non-interest expense increased ~~$32.7~~$96.5 million, or ~~22.7%~~66.2%, to ~~$177.0~~$242.4 million for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2022 from ~~$144.3~~$145.8 million for the same period in ~~2016.Non-interest~~2021. The primary factors that resulted in this increase were the changes related to salaries and employee benefits and merger and acquisition expense. Other factors were changes related to occupancy and equipment expense, ~~excluding merger~~data processing expense, advertising, amortization of intangibles, electronic banking expense, FDIC and state assessment fees and other expenses.

Additional details for the six months ended June 30, 2022 on some of the more significant changes are as follows:

•The $24.8 million increase in salaries and employee benefits expense is primarily due to the acquisition of Happy.

•The $5.1 million increase in occupancy and equipment expense is primarily due to increases in depreciation on buildings, machinery and equipment, increases in utility expenses and increases in property taxes related to the acquisition of Happy.

•The $5.4 million increase in data processing expense is primarily due to increases in telecommunication fees, computer software fees, licensing fee and increases in internet banking and cash management expenses related to the acquisition of Happy.

•The $49.6 million increase in merger and acquisition expense is related to costs associated with the acquisition of Happy.

•The $1.1 million increase in advertising expense is related to the acquisition of Happy.

•The $1.1 million increase in amortization of intangibles is due to the acquisition of Happy.

•The $1.0 million increase in electronic banking expense is due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy.

•The $1.6 million increase in FDIC ~~loss sharebuy-out~~and state assessment expense ~~was $52.6~~is primarily due to FDIC assessment reductions for 2021 and the acquisition of Happy during the second quarter of 2022.

•The $5.1 million ~~and $151.2 million for the three and nine months ended September 30, 2017, respectively, compared to $47.2 million and $140.4 million for the same periods~~increase in ~~2016, respectively.~~

~~The change innon-interest~~ ~~expense for 2017 excluding merger~~other expenses ~~and FDIC loss sharebuy-out~~ ~~expense when compared to 2016~~ is primarily related to the ~~completion~~acquisition of ~~our acquisitions, the normal increased cost of doing business and Centennial CFG.~~

~~Centennial CFG incurred $4.8~~Happy. as well as $2.1 million ~~and $13.8 million ofnon-interest~~ ~~expense during the three and nine months ended September 30, 2017, respectively, compared to $3.7 million and $10.5 million ofnon-interest~~ ~~expense during the three and nine months ended September 30, 2016, respectively. While the cost of doing business~~ in ~~New York City and Los Angeles is significantly higher than our Arkansas, Florida and Alabama markets, we are still committed to cost-saving measures while achieving our goals of growing the Company.~~

~~During the third quarter of 2017 and 2016, the Company had no write-downs on vacant properties.~~

During the first nine months of 2017 and 2016, the Company had write-downs on vacant property from closed branches of approximately $47,000 and $1.9 million, respectively. These write-downs are included in other expense.

TRUPS redemption fees.

Income Taxes

~~The income~~

Income tax expense decreased ~~$17.9~~$21.8 million, or ~~70.4%~~86.9%, to ~~$7.5~~$3.3 million for the three-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$25.5~~$25.1 million for the same period in ~~2016. The income~~2021. Income tax expense decreased ~~$13.1~~$30.6 million, or ~~17.1%~~56.8%, to ~~$63.2~~$23.3 million for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017,~~2022, from ~~$76.3~~$54.0 million for the same period in ~~2016.~~2021. The effective income tax rate was ~~33.71%~~17.09% and ~~36.12%~~22.38% for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~36.88%~~24.07% and ~~37.23%~~24.02% for the same periods in ~~2016.~~

2021. The ~~primary cause of the decrease in taxes for the three months ended September 30, 2017 when compared to the same period in 2016 is our lower quarterlypre-tax~~ ~~earnings at our~~ marginal tax rate was 25.1475% and 25.74% 2022 and 2021, respectively.

Table of ~~39.225% adjusted for the $570,000 ofnon-deductible~~ ~~merger expenses during the third quarter of 2017.~~

~~The primary cause of the decrease in taxes for the nine months ended September 30, 2017 when compared to the same period in 2016 is our lowerpre-tax~~ ~~earnings at our marginal tax rate of 39.225% adjusted for the $3.8 million ofnon-taxable~~ ~~gain on acquisitions offset by approximately $1.5 million ofnon-deductible~~ ~~merger expenses during the first nine months of 2017.~~

Contents

Financial Condition as of and for the Period Ended ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~

2021

Our total assets as of ~~September~~June 30, ~~2017~~2022 increased ~~$4.45~~$6.20 billion to ~~$14.26~~$24.25 billion from the ~~$9.81~~$18.05 billion reported as of December 31, ~~2016.~~2021. The increase in total assets is primarily due to the acquisition of $6.68 billion in total assets, net of purchase accounting adjustments, from Happy during the second quarter of 2022. Cash and cash equivalents decreased $833.9 million, for the six months ended June 30, 2022. Our loan portfolio balance increased ~~$2.90 million~~ to ~~$10.29~~$13.92 billion as of ~~September~~June 30, ~~2017,~~2022 from ~~$7.39~~$9.84 billion at December 31, 2021. The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting adjustments, from Happy in the second quarter of 2022 and $242.2 million in marine loans from LendingClub Bank during the first quarter of 2022, as well as $192.9 million in organic loan growth. Total deposits increased $5.32 billion to $19.58 billion as of June 30, 2022 from $14.26 billion as of December 31, ~~2016. This~~2021. The increase isin deposits was primarily ~~a result~~due to the acquisition of ~~our acquisitions since December 31, 2016.~~$5.86 billion in deposits, net of purchase accounting adjustments, from Happy in the second quarter of 2022. Stockholders’ equity increased ~~$879.2~~$732.8 million to ~~$2.21~~$3.50 billion as of ~~September~~June 30, ~~2017,~~2022, compared to ~~$1.33~~$2.77 billion as of December 31, ~~2016.~~2021. The $732.8 million increase in stockholders’ equity is primarily associated with the ~~$77.5~~$961.3 million ~~and $742.3 million of~~in common stock issued to Happy shareholders for the ~~GHI~~acquisition of Happy on April 1, 2022 and ~~Stonegate shareholders, respectively, plus~~ the ~~$70.5~~$80.9 million ~~increase~~ in ~~retained earnings combined with $3.5 million of comprehensive~~net income ~~and $5.0 million of share-based compensation~~for the six months ended June 30, 2022, partially offset by the ~~repurchase of $19.5~~$226.4 million in other comprehensive loss, the $61.0 million of ~~our common~~shareholder dividends paid and stock ~~during the first nine months~~repurchases of ~~2017. The annualized improvement~~$26.6 million in ~~stockholders’ equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.~~

2022.

Loan Portfolio

Loans Receivable

Our loan portfolio averaged ~~$7.94~~$13.84 billion and ~~$7.03~~$10.54 billion during the ~~three-month periods~~three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. Our loan portfolio averaged ~~$7.79~~$11.90 billion and ~~$6.91~~$10.78 billion during the ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. Loans receivable were ~~$10.29~~$13.92 billion and $9.84 billion as of ~~September~~June 30, ~~2017 compared to $7.39 billion as of~~2022 and December 31, ~~2016.~~

~~During the first nine months of 2017,~~2021, respectively.

From December 31, 2021 to June 30, 2022, the Company ~~acquired $2.82~~experienced an increase of approximately $4.09 billion in loans. The increase in loans was primarily due to the acquisition of $3.65 billion in loans, net of purchase accounting ~~discounts. Excluding~~adjustments, from Happy in the ~~$2.82 billion~~second quarter of ~~acquired~~2022 and $242.2 million in marine loans from LendingClub Bank during ~~2017, loans receivable were $7.47 billion~~the first quarter of 2022, as ~~of September 30, 2017 compared to $7.39 billion~~well as ~~of December 31, 2016, which is $73.8~~$192.9 million ofin organic loan growth. The $192.9 million in organic loan growth ~~or 1.33% annualized increase.~~included $498.6 million in loan growth for Centennial CFG ~~produced $113.7~~which was partially offset by $177.9 million in loan decline within the remaining footprint as well as $127.8 million in PPP loan decline. As of June 30, 2022, the Company had $37.2 million of net organic loan growth during the first nine months of 2017 while the legacy footprint experienced significant net payoffs during the first nine months of 2017, resulting in a decline of $39.9 million.

PPP loans.

The most significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans. These loans are generally secured by residential or commercial real estate or business or personal property. Although these loans are primarily originated within our franchises in Arkansas, Florida, ~~South~~Texas, Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida, Texas, Alabama and New York. Loans receivable were approximately ~~$3.50~~$3.03 billion, ~~$5.34~~$3.49 billion, ~~$224.4~~$3.66 billion, $202.5 million, $1.12 billion and ~~$1.22~~$2.42 billion as of ~~September~~June 30, ~~2017~~2022 in Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG, respectively.

As of ~~September~~June 30, ~~2017,~~2022, we had approximately ~~$502.8 million~~$1.05 billion of construction land development loans which were collateralized by land. This consisted of approximately ~~$257.9~~$136.8 million for raw land and approximately ~~$244.8~~$912.5 million for land with commercial ~~and~~ and/or residential lots.

Table of Contents

Table 8 presents our loans receivable balances by category as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Table 8: Loans Receivable

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands)
Real estate:

Commercial real estate loans:

Non-farm/non-residential
   $ 4,532,402    $ 3,153,121
Construction/land development
   1,648,923    1,135,843
Agricultural
   88,295    77,736
Residential real estate loans:

Residential1-4 family
   1,968,688    1,356,136
Multifamily residential
   497,910    340,926




Total real estate
   8,736,218    6,063,762
Consumer
   51,515    41,745
Commercial and industrial
   1,296,485    1,123,213
Agricultural
   57,489    74,673
Other
   144,486    84,306




Total loans receivable
   $ 10,286,193    $ 7,387,699

June 30, 2022 December 31, 2021
(In thousands)
Real estate:
Commercial real estate loans:
Non-farm/non-residential $ 5,092,539 $ 3,889,284
Construction/land development 2,595,384 1,850,050
Agricultural 329,106 130,674
Residential real estate loans:
Residential 1-4 family 1,708,221 1,274,953
Multifamily residential 389,633 280,837
Total real estate 10,114,883 7,425,798
Consumer 1,106,343 825,519
Commercial and industrial 2,187,771 1,386,747
Agricultural 324,630 43,920
Other 190,246 154,105
Total loans receivable $ 13,923,873 $ 9,836,089

Commercial Real Estate Loans. We originatenon-farm andnon-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to ~~25 year~~30-year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on acase-by-case basis.

As of ~~September~~June 30, ~~2017,~~2022, commercial real estate loans totaled ~~$6.27~~$8.02 billion, or ~~61.0%~~57.6%, of loans receivable, as compared to ~~$4.37~~$5.87 billion, or ~~59.1%~~59.7%, of loans receivable, as of December 31, ~~2016.~~2021. Commercial real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises~~markets were ~~$1.96~~$1.97 billion, ~~$3.32~~$2.27 billion, ~~$120.4~~$2.14 billion, $87.9 million, zero and ~~$866.4 million~~$1.55 billion at ~~September~~June 30, ~~2017,~~2022, respectively. ~~Including the effects of the purchase accounting adjustments, we acquired approximately $1.41 billion of commercial real estate loans, as of acquisition date from Stonegate.~~

Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately ~~49.71%~~38.6% and ~~37.59%~~51.6% of our residential mortgage loans consist of owner occupied1-4 family properties andnon-owner occupied1-4 family properties (rental), respectively, as of ~~September~~June 30, ~~2017.~~2022, with the remaining 9.8% relating to condos and mobile homes. Residential real estate loans generally have aloan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to the borrower’s ability to pay, stability of employment or source of income,debt-to-income ratio, credit history andloan-to-value ratio.

As of ~~September~~June 30, ~~2017,~~2022, residential real estate loans totaled ~~$2.47~~$2.10 billion, or ~~24.0%~~15.1%, of loans receivable, compared to ~~$1.70~~$1.56 billion, or ~~23.0%~~15.8%, of loans receivable, as of December 31, ~~2016.~~2021. Residential real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises~~markets were ~~$870.1~~$416.6 million, ~~$1.36 billion, $74.9~~$862.2 million, $562.8 million, $49.3 million, zero and ~~$162.7~~$206.9 million at ~~September~~June 30, ~~2017,~~2022, respectively. ~~Including the effects of the purchase accounting adjustments, we acquired approximately $551.3 million of residential real estate loans, as of acquisition date from Stonegate.~~

Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our ~~bank.~~bank, the primary portion of which consists of loans to finance USCG registered high-end sail and power boats within our SPF division. The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.

Table of Contents

As of ~~September~~June 30, ~~2017,~~2022, consumer loans totaled ~~$51.5 million,~~$1.11 billion, or ~~0.5%~~7.9%, of loans receivable, compared to ~~$41.8~~$825.5 million, or ~~0.6%~~8.4%, of loans receivable, as of December 31, ~~2016.~~2021. Consumer loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises~~markets were ~~$24.1~~$23.2 million, ~~$26.5~~$7.8 million, ~~$1.0~~$31.3 million, $977,000, $1.04 billion and zero at ~~September~~June 30, ~~2017,~~2022, respectively. ~~Including the effects of the purchase accounting adjustments, we acquired approximately $11.7 million of consumer loans, as of acquisition date from Stonegate.~~

Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, ~~speaking,~~ accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and ~~60%~~80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.

As of ~~September~~June 30, ~~2017,~~2022, commercial and industrial loans totaled ~~$1.30~~$2.19 billion, or ~~12.6%~~15.7%, of loans receivable, ~~which is comparable~~compared to ~~$1.12~~$1.39 billion, or ~~15.2%~~14.1%, of loans receivable, as of December 31, ~~2016.~~2021. Commercial and industrial loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises~~markets were ~~$573.7~~$453.9 million, ~~$503.7~~$288.4 million, ~~$26.2~~$653.0 million, $56.4 million, $73.1 million and ~~$193.0~~$662.9 million at ~~September~~June 30, ~~2017,~~2022, respectively. ~~Including the effects of the purchase accounting adjustments, we acquired approximately $301.0 million of commercial and industrial loans, as of acquisition date from Stonegate.~~

Non-Performing Assets

We classify our problem loans into three categories: past due loans, special mention loans and classified loans (accruing andnon-accruing).

When management determines that a loan is no longer performing, and that collection of interest appears doubtful, the loan is placed onnon-accrual status. Loans that are 90 days past due are placed onnon-accrual status unless they are adequately secured and there is reasonable assurance of full collection of both principal and interest. Our management closely monitors all loans that are contractually 90 days past due, treated as “special mention” or otherwise classified or onnon-accrual status.

Purchased loans that have ~~purchased~~experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans ~~with deteriorated~~not individually analyzed for impairment. The initial allowance for credit ~~quality in our September 30, 2017 financial statements as~~losses determined on a ~~result~~collective basis is allocated to individual loans. The sum of ~~our historical acquisitions.~~the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The ~~credit metrics most heavily impacted by our acquisitions of acquired loans with deteriorated credit quality were~~difference between the ~~following credit quality indicators listed in Table 9 below:~~

~~Allowance for loan losses tonon-performing~~ ~~loans;~~

~~Non-performing~~ ~~loans to total loans;~~initial amortized cost basis and

~~Non-performing~~ ~~assets to total assets.~~

On the ~~date of acquisition, acquired credit-impaired loans are initially recognized at fair value, which incorporates the present~~par value of ~~amounts estimated to be collectible. As~~the loan is a ~~result~~non-credit discount or premium, which is amortized into interest income over the life of the ~~application of this accounting methodology, certain credit-related ratios, including those referenced above, may not necessarily be directly comparable with periods prior~~loan. Subsequent changes to the ~~acquisition~~allowance for credit losses are recorded through the provision for credit losses. The Company held approximately $152.3 million and $448,000 in PCD loans, as of ~~the credit-impaired loans~~June 30, 2022 and~~non-performing~~ ~~assets, or comparable with other institutions.~~

December 31, 2021, respectively.

Table of Contents

Table 9 sets forth information with respect to ournon-performing assets as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~2021. As of these dates, allnon-performing restructured loans are included innon-accrual loans.

Table 9:Non-performing Assets

   As of
September 30,
2017 As of
December 31,
2016
   (Dollars in thousands)
Non-accrual loans
   $ 34,794 $ 47,182
Loans past due 90 days or more (principal or interest payments)
   29,183 15,942


Totalnon-performing loans
   63,977 63,124


Othernon-performing assets

Foreclosed assets held for sale, net
   21,701 15,951
Othernon-performing assets
   3 3


Total othernon-performing assets
   21,704 15,954


Totalnon-performing assets
   $ 85,681 $ 79,078


Allowance for loan losses tonon-performing loans
   174.47 % 126.74 %
Non-performing loans to total loans
   0.62 0.85
Non-performing assets to total assets
   0.60 0.81


	As of June 30, 2022			As of December 31, 2021
	(Dollars in thousands)
Non-accrual loans	$	44,170		$	47,158
Loans past due 90 days or more (principal or interest payments)	16,432			3,035
Total non-performing loans	60,602			50,193
Other non-performing assets
Foreclosed assets held for sale, net	373			1,630
Other non-performing assets	104			—
Total other non-performing assets	477			1,630
Total non-performing assets	$	61,079		$	51,823
Allowance for credit losses to non-accrual loans	666.21		%	501.96		%
Allowance for credit losses to non-performing loans	485.57			471.61
Non-accrual loans to total loans	0.32			0.48
Non-performing loans to total loans	0.44			0.51
Non-performing assets to total assets	0.25			0.29

Ournon-performing loans are comprised ofnon-accrual loans and accruing loans that are contractually past due 90 days. Our bank subsidiary recognizes income principally on the accrual basis of accounting. When loans are classified asnon-accrual, the accrued interest is charged off and no further interest is accrued, unless the credit characteristics of the loan improve. If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the allowance for ~~loan~~credit losses.

Totalnon-performing loans were ~~$64.0~~$60.6 million and $50.2 million as of ~~September~~June 30, ~~2017, compared to $63.1 million as of~~2022 and December 31, ~~2016, for an increase of $853,000. The $853,000 increase innon-performing~~ ~~loans is the result of a $4.2 million decrease innon-performing~~ ~~loans in our Arkansas franchise, a $5.6 million increase innon-performing~~ ~~loans in our Florida franchise and a $573,000 decrease innon-performing~~ ~~loans in our Alabama franchise.~~2021, respectively. Non-performing loans at ~~September~~June 30, ~~2017 are $24.3~~2022 were $15.0 million, ~~$39.6~~$33.3 million, ~~$83,000~~$5.5 million, $813,000, $1.3 million and ~~zero~~$4.7 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises,~~markets, respectively. ~~During~~

The $4.7 million balance of non-accrual loans for our Centennial CFG market consists of one loan that is assessed for credit risk by the ~~third quarter of 2017, we completed our acquisition of Stonegate which increased ournon-performing~~ ~~loans accruing past due 90 days or more~~Federal Reserve under the Shared National Credit Program. The decision to place this loan on non-accrual status was made by ~~$6.3 million as of September 30, 2017.~~

~~Although~~ the Federal Reserve and not the Company. The loan that makes up the total balance is still current ~~state of the real estate market has improved, uncertainties still present in the economy may continue to increase our level ofnon-performing~~ ~~loans. While we believe our allowance for loan losses is adequate~~on both principal and ~~our purchased loans~~interest. However, all interest payments are adequately discounted at September 30, 2017, as additional facts become known about relevant internal and external factors that affect loan collectability and our assumptions, it may result in us making additionscurrently being applied to the ~~provision for~~principal balance. Because the Federal Reserve required us to place this loan ~~losses during 2017. Our current or historical provision levels should not be relied upon as a predictor or indicator of future levels going forward.~~

on non-accrual status, we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve.

Troubled debt restructurings (“TDRs”) generally occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term. As a result, ~~the Bank~~we will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan. In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable and depressed real estate market. When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about three to twelve months. For our TDRs that accrue interest at the time the loan is restructured, it would be a rare exception to havecharged-off any portion of the loan. ~~Onlynon-performing~~ ~~restructured loans are included in ournon-performing~~ ~~loans.~~ As of ~~September~~June 30, ~~2017,~~2022, we had ~~$23.2~~$5.9 million of restructured loans that are in compliance with the modified terms and are not reported as past due ornon-accrual in Table 9. Our Florida ~~franchise~~market contains ~~$17.0~~$3.6 million and our Arkansas ~~franchise~~market contains ~~$6.2~~$2.3 million of these restructured loans.

A loan modification that might not otherwise be considered may be granted resulting in classification as a TDR. These loans can involve loans remaining onnon-accrual, moving tonon-accrual, or continuing on an accrual status, depending on the individual facts and circumstances of the borrower. Generally, anon-accrual loan that is restructured remains onnon-accrual for a period of ~~six~~nine months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can pay under the new terms and may result in the loan being returned to an accrual status after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan will remain in anon-accrual status.

Table of Contents

The majority of the Bank’s loan modifications ~~relate~~relates to commercial lending and ~~involve~~involves reducing the interest rate, changing from a principal and interest payment to interest-only, a lengthening of the amortization period, or a combination of some or all of the three. In addition, it is common for the Bank to seek additional collateral or guarantor support when modifying a loan. At ~~September~~June 30, ~~2017,~~2022 and December 31, 2021, the amount of TDRs was ~~$25.6~~$6.6 million ~~an increase of 0.4% from $25.5~~and $7.5 million, ~~at December 31, 2016.~~ respectively.As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, 90.5%~~2021, 88.9% and ~~88.0%~~85.7%, respectively, of all restructured loans were performing to the terms of the restructure.

Total foreclosed assets held for sale were ~~$21.7 million~~$373,000 as of ~~September~~June 30, ~~2017,~~2022, compared to ~~$16.0~~$1.6 million as of December 31, ~~2016~~2021 for ~~an increase~~a decrease of ~~$5.7~~$1.3 million. The foreclosed assets held for sale as of ~~September~~June 30, ~~2017~~2022 are comprised of ~~$12.1 million~~$8,000 of assets located in Arkansas, ~~$9.0 million of assets~~$260,000 located in Florida, ~~$641,000~~$105,000 located in ~~Alabama~~Texas and zero from Alabama, SPF and Centennial CFG. ~~During the third quarter of 2017, we completed our acquisition of Stonegate which increased our foreclosed assets held for sale by $3.4 million as of September 30, 2017.~~

During the first nine months of 2017, we had four foreclosed properties with a carrying value greater than $1.0 million. The first property is a development loan in Northwest Arkansas which was foreclosed in the first quarter of 2011. The carrying value was $2.0 million at September 30, 2017. The second property was a~~non-farm,non-residential~~ property in Central Arkansas which was foreclosed in the third quarter of 2017. The carrying value was $1.5 million at September 30, 2017. The third property was a development property in Florida acquired from BOC with a carrying value of $2.1 million at September 30, 2017. The last property was a~~non-farm,non-residential~~ property in Florida acquired from Stonegate with a carrying value of $1.8 million at September 30, 2017. The Company does not currently anticipate any additional losses on these properties. As of September 30, 2017, no other foreclosed assets held for sale have a carrying value greater than $1.0 million.

Table 10 shows the summary of foreclosed assets held for sale as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Table 10: Foreclosed Assets Held For Sale

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 10,354    $ 9,423
Construction/land development
   6,328    4,009
Agricultural
   —      —
Residential real estate loans

Residential1-4 family
   3,733    2,076
Multifamily residential
   1,286    443




Total foreclosed assets held for sale
   $ 21,701    $ 15,951


	As of June 30, 2022		As of December 31, 2021
	(In thousands)
Commercial real estate loans
Non-farm/non-residential	$	49	$	536
Construction/land development	55		834
Residential real estate loans
Residential 1-4 family	269		260
Multifamily residential	—		—
Total foreclosed assets held for sale	$	373	$	1,630

A loan is considered impaired when it is probable that we will not receive all amounts due according to the contracted terms of the loans. Impaired loans includenon-performing loans (loans past due 90 days or more andnon-accrual loans), criticized and/or classified loans with a specific allocation, loans categorized as TDRs and certain other loans identified by management that are still performing (loans included in multiple categories are only included once). As of ~~September~~June 30, ~~2017, average~~2022 and December 31, 2021, impaired loans were ~~$90.0~~$385.1 million ~~compared to $89.6~~and $331.5 million, ~~as of December 31, 2016. As of September 30, 2017, impaired~~respectively.The amortized cost balance for loans ~~were $97.0 million compared to $93.1 million as of December 31, 2016, for an increase of $3.9 million. This increase is primarily associated with an increase in loan balances~~ with a specific ~~allocation.~~allocation increased from $284.0 million to $323.1 million, and the specific allocation for impaired loans increased by approximately $6.6 million for the period ended June 30, 2022 compared to the period ended December 31, 2021. The Company is continuing to monitor these impaired loans and will adjust the discount as necessary. As of ~~September~~June 30, ~~2017,~~2022, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG ~~franchises~~markets accounted for approximately ~~$42.8~~$176.3 million, ~~$54.1~~$145.0 million, ~~$83,000~~$57.1 million, $813,000, $1.3 million and ~~zero~~$4.7 million of the impaired loans, respectively.

~~We evaluated loans purchased in conjunction with our historical acquisitions for impairment in accordance with the provisions~~

Table of ~~FASB ASC Topic310-30,~~~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. Purchased credit impaired loans are not classified as~~non-performing~~ ~~assets for the recognition of interest income as the pools are considered to be performing. However, for the purpose of calculating thenon-performing~~ credit metrics, we have included all of the loans which are contractually 90 days past due and still accruing, including those in performing pools. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans.

~~All purchased loans with deteriorated credit quality are considered impaired loans at the date of acquisition. Since the loans are accounted for on a pooled basis under ASC310-30,~~ ~~individual loans are not classified as impaired. Since the loans are accounted for on a pooled basis under ASC310-30,~~ ~~individual loans subsequently restructured within the pools are not classified as TDRs in accordance with ASC310-30-40.~~ ~~For purchased loans with deteriorated credit quality that were deemed TDRs prior to our acquisition of them, these loans are also not considered TDRs as they are accounted for under ASC310-30.~~

~~As of September 30, 2017 and December 31, 2016, there was not a material amount of purchased loans with deteriorated credit quality onnon-accrual~~ status as a result of most of the loans being accounted for on the pool basis and the pools are considered to be performing for the accruing of interest income. Also, acquired loans contractually past due 90 days or more are accruing interest because the pools are considered to be performing for the purpose of accruing interest income.

Contents

Past Due andNon-Accrual Loans

Table 11 shows the summary ofnon-accrual loans as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

2021:

Table 11: TotalNon-Accrual Loans

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 10,936    $ 17,988
Construction/land development
   5,520    3,956
Agricultural
   34    435
Residential real estate loans

Residential1-4 family
   13,817    20,311
Multifamily residential
   155    262




Total real estate
   30,462    42,952
Consumer
   139    140
Commercial and industrial
   4,021    3,155
Agricultural
   171    —
Other
   1    935




Totalnon-accrual loans
   $ 34,794    $ 47,182


	As of June 30, 2022		As of December 31, 2021
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	14,247	$	11,923
Construction/land development	1,050		1,445
Agricultural	194		897
Residential real estate loans
Residential 1-4 family	17,210		16,198
Multifamily residential	156		156
Total real estate	32,857		30,619
Consumer	1,321		1,648
Commercial and industrial	8,698		13,875
Agricultural & other	1,294		1,016
Total non-accrual loans	$	44,170	$	47,158

If ~~the~~non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately ~~$479,000~~$672,000 and ~~$558,000,~~$795,000, respectively, would have been recorded for the three-month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~2021. If ~~the~~non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately ~~$1.7~~$1.3 million and $1.6 million, respectively, would have been recorded for ~~each of~~ the ~~nine-month~~six month periods ended ~~September~~June 30, ~~2017~~2022 and ~~2016, respectively.~~2021. The interest income recognized on ~~the~~non-accrual loans for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was considered immaterial.

Table 12 shows the summary of accruing past due loans 90 days ormore as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~

2021:

Table 12: Loans Accruing Past Due 90 Days or More

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands)
Real estate:

Commercial real estate loans

Non-farm/non-residential
   $ 16,482    $ 9,530
Construction/land development
   3,258    3,086
Agricultural
   —      —
Residential real estate loans

Residential1-4 family
   4,624    2,996
Multifamily residential
   1,039    —




Total real estate
   25,403    15,612
Consumer
   3    21
Commercial and industrial
   3,771    309
Agricultural
   6    —
Other
   —      —




Total loans accruing past due 90 days or more
   $ 29,183    $ 15,942


	As of June 30, 2022		As of December 31, 2021
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	10,712	$	2,225
Construction/land development	246		—
Agricultural	711		—
Residential real estate loans
Residential 1-4 family	2,378		701
Multifamily residential	—		—
Total real estate	14,047		2,926
Consumer	43		2
Commercial and industrial	2,342		107
Other	—		—
Total loans accruing past due 90 days or more	$	16,432	$	3,035

Our ratio of total loans accruing past due 90 days or more andnon-accrual loans to total loans was ~~0.62%~~0.44% and ~~0.85% as of September~~0.51% at June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. ~~During~~

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Allowance for Credit Losses

Overview. The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

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 ~~quarter~~party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of ~~2017,~~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, rental vacancy rate, housing price index and national retail sales index.

The combination of adjustments for credit expectations (default and loss) and time expectations prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.

The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless Management has a reasonable expectation at the reporting date that troubled debt restructuring will be executed with an individual borrower or

the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

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Loans considered impaired, according to ASC 326, are loans for which, based on current information and events, it is probable that we ~~completed our acquisition~~will be unable to collect all amounts due according to the contractual terms of ~~Stonegate which increased our~~the loan agreement. The aggregate amount of impairment of loans ~~accruing past due~~is utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for credit losses when in the process of collection, it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more ~~by $6.3 million~~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. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.

Acquisition Accounting and Acquired Loans. We account for our acquisitions under FASB ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for impairment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of ~~September 30, 2017.~~

the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.

Allowance for ~~Loan~~Credit Losses

~~Overview.~~ on Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for ~~loan losses is maintained at a level which our management believes is adequate to absorb all probable~~credit losses on ~~loans in the loan portfolio.~~off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The ~~amount~~estimate includes consideration of the ~~allowance is affected by: (i) loan charge-offs, which decrease the allowance; (ii) recoveries~~likelihood that funding will occur and an estimate of expected credit losses on ~~loans previously charged off, which increase the allowance; and (iii) the provision of possible loan losses charged~~commitments expected to income, which increases the allowance. In determining the provision for possible loan losses, it is necessary for our management to monitor fluctuations in the allowance resulting from actual charge-offs and recoveries and to periodically review the size and composition of the loan portfolio in light of current and anticipated economic conditions. If actual losses exceed the amount of allowance for loan losses, our earnings could be ~~adversely affected.~~

As we evaluate the allowance for loan losses, we categorize it as follows: (i) specific allocations; (ii) allocations for criticized and classified assets not individually evaluated for impairment; (iii) general allocations; and (iv) miscellaneous allocations.

funded over its estimated life.

Specific Allocations.As a general rule, if a specific allocation is warranted, it is the result of an analysis of a previously classified credit or relationship. Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become collateral dependent, we will use appraisals or other collateral analysis to determine if collateral impairment has occurred. The amount or likelihood of loss on this credit may not yet be evident, so acharge-off would not be prudent. However, if the analysis indicates that an impairment has occurred, then a specific allocation will be determined for this loan. If our existing appraisal is outdated or the collateral has been subject to significant market changes, we will obtain a new appraisal for this impairment analysis. The majority of our impaired loans are collateral dependent at the present time, so third-party appraisals were used to determine the necessary impairment for these loans. Cash flow available to service debt was used for the other impaired loans. This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for ~~loan~~credit losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.

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For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time. However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal validation report for the impairment analysis. The recognition of any provision or relatedcharge-off on a collateral dependent loan is either through annual credit analysis or, many times, when the relationship becomes delinquent. If the borrower is not current, we will update our credit and cash flow analysis to determine the ~~borrower’s~~borrower's repayment ability. If we determine this ability does not exist and it appears that the collection of the entire principal and interest is not likely, then the loan could be placed onnon-accrual status. In any case, loans are classified asnon-accrual no later than 105 days past due. If the loan requires a quarterly impairment analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for ~~loan~~credit losses. Any exposure identified through the impairment analysis is shown as a specific reserve on the individual impairment. If it is determined that a new appraisal or internal validation report is required, it is ordered and will be taken into consideration during completion of the next impairment analysis.

In estimating the net realizable value of the collateral, management may deem it appropriate to discount the appraisal based on the applicable circumstances. In such case, the amount charged off may result in loan principal outstanding being below fair value as presented in the appraisal.

Between the receipt of the original appraisal and the updated appraisal, we monitor the ~~loan’s~~loan's repayment history. If the loan is ~~$1.0~~$3.0 million or greater or the total loan relationship is ~~$2.0~~$5.0 million or greater, our policy requires an annual credit review. ~~Our~~For these loans, our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we calculate the global repayment ability of the borrower/guarantors at least ~~annually.~~

annually on these loans.

As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan asnon-performing. It will remainnon-performing until it performs in a manner that it is reasonable to expect that we will collect the full principal and accrued interest.

When the amount or likelihood of a loss on a loan has been determined, acharge-off should be taken in the period it is determined. If a partialcharge-off occurs, the quarterly impairment analysis will determine if the loan is still impaired, and thus continues to require a specific allocation.

~~Allocations~~

The Company had $385.1 million and $331.5 million in collateral-dependent impaired loans for ~~Criticized~~the periods ended June 30, 2022 and ~~Classified Assets not Individually Evaluated for Impairment.~~ We establish allocations for loans rated “special mention” through “loss” in accordance with the guidelines established by the regulatory agencies. A percentage rate is applied to each loan category to determine the level of dollar allocation.

~~General Allocations.~~ We establish general allocations for each major loan category. This section also includes allocations to loans, which are collectively evaluated for loss such as residential real estate, commercial real estate, consumer loans and commercial and industrial loans that fall below $2.0 million. The allocations in this section are based on a historical review of loan loss experience and past due accounts. We give consideration to trends, changes in loan mix, delinquencies, prior losses, and other related information.

~~Miscellaneous Allocations.~~ ~~Allowance allocations other than specific, classified, and general are included in our miscellaneous section.~~

December 31, 2021, respectively.

Loans Collectively Evaluated for Impairment. Loans receivable collectively evaluated for impairment increased by approximately ~~$2.87~~$4.04 billion from ~~$7.08~~$9.54 billion at December 31, ~~2016~~2021 to ~~$9.95~~$13.57 billion at ~~September~~June 30, ~~2017. During the third quarter of 2017, we completed our acquisition of Stonegate which increased our loans collectively evaluated by $2.37 billion as of September 30, 2017.~~2022. The percentage of the allowance for ~~loan~~credit losses allocated to loans receivable collectively evaluated for impairment to the total loans collectively evaluated for impairment ~~remained unchanged~~was 1.74% and 1.94% at ~~1.08% from~~June 30, 2022 and December 31, ~~2016 to September 30, 2017.~~

2021, respectively.

Charge-offs and Recoveries. Total charge-offs ~~were $4.4~~increased to $3.3 million for ~~both~~ the three months ended ~~September~~June 30, ~~2017 and 2016. Total charge-offs decreased to $10.5 million for the nine months ended September 30, 2017,~~2022, compared to ~~$12.7~~$3.0 million for the same period in ~~2016.~~2021. Total ~~recoveries increased to $883,000 for the three months ended September 30, 2017, compared to $844,000 for the same period in 2016. Total recoveries~~charge-offs decreased to ~~$2.8~~$5.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, compared to ~~$2.9~~$6.1 million for the same period in ~~2016.~~2021. Total recoveries were $778,000 and $542,000 for the three months ended June 30, 2022 and 2021, respectively. Total recoveries were $1.1 million and $1.0 million for the six months ended June 30, 2022 and 2021, respectively. For the three months ended ~~September~~June 30, ~~2017,~~2022, net charge-offs were ~~$3.5~~$262,000 for Arkansas, $1.5 million for ~~Arkansas, $16,000~~Florida, $724,000 for Texas, $35,000 for Alabama and zero for Centennial CFG, ~~and~~partially offset by net recoveries ~~were $16,000~~of $63,000 for ~~Florida, equaling~~SPF. These equal a netcharge-off position of ~~$3.5~~$2.5 million. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, net charge-offs were ~~$7.3~~$530,000 for Arkansas, $2.7 million for ~~Arkansas, $201,000~~Florida, $724,000 for ~~Florida, $236,000~~Texas, $36,000 for Alabama, $395,000 for SPF and zero for Centennial ~~CFG, equaling~~CFG. These equal a netcharge-off position of ~~$7.7~~$4.4 million. ~~While the 2017 charge-offs and recoveries consisted of many relationships, there was only one individual relationship consisting of acharge-off~~ ~~greater than $1.0 million. Thischarge-off~~ ~~held a balance of $2.0 million at September 30, 2017.~~

We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less estimated costs to sell (for collateral dependent loans), for any period presented. Loans partiallycharged-off are placed onnon-accrual status until it is proven that the ~~borrower’s~~borrower's repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of6-12 months of timely payment performance.

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Table 13 shows the allowance for ~~loan~~credit losses, charge-offs and recoveries as of and for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~

2021.

Table 13: Analysis of Allowance for ~~Loan~~Credit Losses

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Balance, beginning of period
   $ 80,138 $ 74,341 $ 80,002 $ 69,224
Loans charged off

Real estate:

Commercial real estate loans:

Non-farm/non-residential
   796 741 2,324 2,590
Construction/land development
   182 181 508 334
Agricultural
   —   —   127 —
Residential real estate loans:

Residential1-4 family
   309 1,069 2,512 3,345
Multifamily residential
   —   435 85 465


Total real estate
   1,287 2,426 5,556 6,734
Consumer
   14 23 158 131
Commercial and industrial
   2,280 1,388 3,059 4,424
Agricultural
   —   —   —   —
Other
   843 514 1,762 1,376


Total loans charged off
   4,424 4,351 10,535 12,665


Recoveries of loans previously charged off

Real estate:

Commercial real estate loans:

Non-farm/non-residential
   278 380 988 608
Construction/land development
   85 74 312 107
Agricultural
   —   —   —   —
Residential real estate loans:

Residential1-4 family
   188 140 430 814
Multifamily residential
   38 8 50 22


Total real estate
   589 602 1,780 1,551
Consumer
   25 19 91 55
Commercial and industrial
   140 42 392 656
Agricultural
   —   —   —   —
Other
   129 181 566 644


Total recoveries
   883 844 2,829 2,906


Net loans charged off (recovered)
   3,541 3,507 7,706 9,759
Provision for loan losses
   35,023 5,536 39,324 16,905


Balance, September 30
   $ 111,620 $ 76,370 $ 111,620 $ 76,370


Net charge-offs (recoveries) to average loans receivable
   0.18 % 0.20 % 0.13 % 0.19 %
Allowance for loan losses to total loans
   1.09 1.07 1.09 1.07
Allowance for loan losses to net charge-offs (recoveries)
   795 547 1,083 586

~~Allocated Allowance for Loan Losses.~~ ~~We use a risk rating and specific reserve methodology in the calculation and allocation~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Balance, beginning of year	$	234,768		$	242,932		$	236,714		$	245,473

Allowance for credit losses on PCD loans - Happy acquisition	16,816			—			16,816			—
Loans charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential	—			576			—			595
Construction/land development	—			—			—			—
Agricultural	—			42			—			42
Residential real estate loans:
Residential 1-4 family	39			97			289			323
Multifamily residential	—			—			—			—
Total real estate	39			715			289			960
Consumer	2,174			55			2,237			122
Commercial and industrial	—			1,931			1,416			4,210
Agricultural	—			—			—			—
Other	1,052			322			1,633			778
Total loans charged off	3,265			3,023			5,575			6,070
Recoveries of loans previously charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential	52			54			78			68
Construction/land development	302			17			317			39
Agricultural	—			—			—			—
Residential real estate loans:
Residential 1-4 family	23			104			49			166
Multifamily residential	—			—			—			—
Total real estate	377			175			444			273
Consumer	37			(14)			48			32
Commercial and industrial	221			226			330			302
Agricultural	—			—			—			—
Other	143			155			320			441
Total recoveries	778			542			1,142			1,048
Net loans charged off	2,487			2,481			4,433			5,022
Provision for credit loss - acquired loans	45,170			—			45,170			—

Balance, June 30	$	294,267		$	240,451		$	294,267		$	240,451
Net charge-offs to average loans receivable	0.07		%	0.09		%	0.08		%	0.09		%
Allowance for credit losses to total loans	2.11			2.36			2.11			2.36
Allowance for credit losses to net charge-offs	2,949.95			2,416.29			3,291.77			2,374.30

Table of our allowance for loan losses. While the allowance is allocated to various loan categories in assessing and evaluating the level of the allowance, the allowance is available to cover charge-offs incurred in all loan categories. Because a portion of our portfolio has not matured to the degree necessary to obtain reliable loss data from which to calculate estimated future losses, the unallocated portion of the allowance is an integral component of the total allowance. Although unassigned to a particular credit relationship or product segment, this portion of the allowance is vital to safeguard against the imprecision inherent in estimating credit losses.

The changes for the period ended September 30, 2017 and the year ended December 31, 2016 in the allocation of the allowance for loan losses for the individual types of loans are primarily associated with changes in the ASC 310 calculations, both individual and aggregate, and changes in the ASC 450 calculations. These calculations are affected by changes in individual loan impairments, changes in asset quality, net charge-offs during the period and normal changes in the outstanding loan portfolio, as well any changes to the general allocation factors due to changes within the actual characteristics of the loan portfolio.

Contents

Table 14 presents the allocation of allowance for ~~loan~~credit losses as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Table 14: Allocation of Allowance for ~~Loan~~Credit Losses

   As of September 30, 2017 As of December 31, 2016
   Allowance
Amount    % of
loans⁽¹⁾ Allowance
Amount    % of
loans⁽¹⁾
   (Dollars in thousands)
Real estate:

Commercial real estate loans:

Non-farm/non-residential
   $ 44,414    44.1 % $ 27,695    42.7 %
Construction/land development
   18,920    16.0 11,522    15.4
Agricultural
   1,103    0.9 493    1.1
Residential real estate loans:

Residential1-4 family
   22,156    19.1 14,397    18.3
Multifamily residential
   3,512    4.8 2,120    4.6






Total real estate
   90,105    84.9 56,227    82.1
Consumer
   467    0.5 398    0.6
Commercial and industrial
   14,622    12.6 12,756    15.2
Agricultural
   2,998    0.6 3,790    1.0
Other
   187    1.4 —      1.1
Unallocated
   3,241    —   6,831    —






Total allowance for loan losses
   $ 111,620    100.0 % $ 80,002    100.0 %

~~(1)~~

~~Percentage of loans in each category to total loans receivable.~~

As of June 30, 2022 As of December 31, 2021
Allowance
Amount
% of
loans(1)
Allowance
Amount
% of
loans(1)
(Dollars in thousands)
Real estate:
Commercial real estate loans:
Non-farm/non- residential $ 113,645 36.6 % $ 86,910 39.5 %
Construction/land development 36,689 18.6 28,415 18.8
Agricultural residential real estate loans 1,550 2.4 308 1.3
Residential real estate loans:
Residential 1-4 family 47,343 12.3 45,364 13.0
Multifamily residential 3,803 2.8 3,094 2.9
Total real estate 203,030 72.7 164,091 75.5
Consumer 20,460 7.9 16,612 8.4
Commercial and industrial 66,894 15.7 52,910 14.1
Agricultural 1,415 2.3 152 0.4
Other 2,468 1.4 2,949 1.6
Total $ 294,267 100.0 % $ 236,714 100.0 %

(1)Percentage of loans in each category to total loans receivable.

Investment Securities

Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified asheld-to-maturity,available-for-sale, or trading based on the intent and objective of the investment and the ability to hold to maturity. Fair values of securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities. The estimated effective duration of our securities portfolio was ~~2.7~~5.2 years as of ~~September~~June 30, ~~2017.~~

2022.

Securities held-to-maturity, which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. As of ~~September~~June 30, ~~2017 and December 31, 2016,~~2022, we had ~~$234.9 million and $284.2 million~~$1.37 billion ofheld-to-maturity ~~securities, respectively.~~ securities. Of the ~~$234.9 million~~$1.37 billion ofheld-to-maturity securities as of ~~September~~June 30, ~~2017, $6.1~~2022, $1.09 billion, or 79.7%, is invested in obligations of state and political subdivisions and the other $277.7 million, ~~were~~or 20.3%, is invested in U.S. ~~Government-sponsored enterprises, $78.6 million were invested in mortgage-backed securities and $150.2 million were invested in state and political subdivisions. Of the $284.2 million ofheld-to-maturity~~ securities as of December 31, 2016, $6.6 million were invested in U.S. Government-sponsored enterprises, $107.8 million were invested in mortgage-backed securities and $169.7 million were invested in state and political subdivisions.

Treasury securities.

Securitiesavailable-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity as other comprehensive (loss) income. ~~Securities that are held asavailable-for-sale~~ ~~are used as a part of our asset/liability management strategy.~~ Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified asavailable-for-sale.Available-for-sale securities were ~~$1.58~~$3.79 billion and ~~$1.07~~$3.12 billion as ~~of September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

As of ~~September~~June 30, ~~2017, $891.9 million,~~2022, $1.98 billion, or ~~56.6%~~52.2%, of ouravailable-for-sale securities were invested in mortgage-backed securities, compared to ~~$579.5 million,~~$1.54 billion, or ~~54.0%~~49.3%, of ouravailable-for-sale securities as of December 31, ~~2016.~~2021. To reduce our income tax burden, ~~$249.1~~$934.5 million, or ~~15.8%~~24.6%, of ouravailable-for-sale securities portfolio as of ~~September~~June 30, ~~2017, was~~2022, were primarily invested intax-exempt obligations of state and political subdivisions, compared to ~~$216.5~~$997.0 million, or ~~20.2%~~32.0%, of ouravailable-for-sale securities as of December 31, ~~2016. Also, we~~2021. We had ~~approximately $397.2~~$451.5 million, or ~~25.2%~~11.9%, invested in obligations of U.S. Government-sponsored enterprises as of ~~September~~June 30, ~~2017,~~2022, compared to ~~$236.8~~$433.0 million, or ~~22.1%~~13.9%, of ouravailable-for-sale securities as of December 31, ~~2016.~~

~~Certain investment~~2021. Also, we had approximately $427.3 million, or 11.3%, invested in other securities ~~are valued at less~~as of June 30, 2022, compared to $151.9 million, or 4.9% of our available-for-sale securities as of December 31, 2021.

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The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. The Company first assesses whether it intends to sell or if it is more likely than ~~their historical cost. These declines are primarily~~not that the ~~result~~Company will be required to sell the security before recovery of its amortized cost basis. If either of the ~~rate for these investments yielding less than current market rates. Based on evaluation of available evidence, we believe~~criteria regarding intent or requirement to sell is met, the ~~declines~~security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value ~~for these securities~~has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are ~~temporary. It is our intent~~compared to ~~hold these securities to recovery. Should~~ the ~~impairment of any of these securities become other than temporary, the~~amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

The Company recorded a $2.0 million provision for credit losses on the held-to-maturity investment ~~will be reduced~~securities during the second quarter of 2022 as a result of the investment securities acquired as part of the Happy acquisition. Of the Company's held-to-maturity securities, $1.09 billion, or 79.7% are municipal securities. To estimate the necessary loss provision, the Company utilized historical default and recovery rates of the municipal bond sector and applied these rates using a pooling method. The remainder of investments classified as held-to-maturity are U.S. Treasury securities. Due to the inherent low risk in U.S. Treasury securities, no provision for credit loss was established on that portion of the portfolio.

portfolio.

See Note 3 ~~“Investment Securities” in~~to the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.

Deposits

Our deposits averaged ~~$7.88~~$19.94 billion and ~~$7.58~~$17.17 billion for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017.~~2022, respectively. Our deposits averaged $13.77 billion and $13.40 billion for the three and six months ended June 30, 2021, respectively. Total deposits were $19.58 billion as of ~~September~~June 30, ~~2017 were $10.45 billion. Excluding $2.97~~2022, and $14.26 billion ~~of deposits acquired through the 2017 acquisitions, total deposits~~ as of ~~September 30, 2017 were $7.48 billion, for an annualized increase of 10.3% from~~ December 31, ~~2016.~~2021. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions.

Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. ~~Additionally, we participate in the Certificates of Deposit Account Registry Service (“CDARS”), which provides for reciprocal(“two-way”)~~ transactions among banks for the purpose of giving our customers the potential for multi-million-dollar FDIC insurance coverage. Although classified as brokered deposits for regulatory purposes, funds placed through the CDARS program are our customer relationships that management views as core funding. We also participate in theOne-Way Buy Insured Cash Sweep (“ICS”) service and similar services, which ~~provides~~provide forone-way buy transactions among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements. Management believes these sources represent a reliable and ~~cost efficient~~cost-efficient alternative funding source for the Company. However, to the extent that our condition or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding.

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Table 15 reflects the classification of the brokered deposits as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Table 15: Brokered Deposits

   September 30, 2017    December 31, 2016
   (In thousands)
Time Deposits
   $ 60,022    $ 70,028
CDARS
   46,959    26,389
Insured Cash Sweep and Other Transaction Accounts
   1,023,363    406,120




Total Brokered Deposits
   $ 1,130,344    $ 502,537

~~During the third quarter of 2017, we completed our acquisition of Stonegate which increased our brokered deposits by $488.2 million as of September 30, 2017.~~


	June 30, 2022		December 31, 2021
	(In thousands)
Time Deposits	$	—	$	—
CDARS	—		—
Insured Cash Sweep and Other Transaction Accounts	626,929		625,704
Total Brokered Deposits	$	626,929	$	625,704

The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional funds can be attracted, and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs.

increases for 2022.

Table 16 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of 10 percent of average total deposits, for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~

2021.

Table 16: Average Deposit Balances and Rates

   Three Months Ended September 30,
   2017 2016
   Average
Amount    Average
Rate Paid Average
Amount    Average
Rate Paid
   (Dollars in thousands)
Non-interest-bearing transaction accounts
   $ 1,924,933    —   % $ 1,663,621    —   %
Interest-bearing transaction accounts
   3,973,270    0.56 3,243,984    0.27
Savings deposits
   539,515    0.10 477,035    0.06
Time deposits:

$100,000 or more
   989,697    0.89 880,098    0.60
Other time deposits
   454,965    0.48 481,491    0.37





Total
   $ 7,882,380    0.43 % $ 6,746,229    0.24 %

   Nine Months Ended September 30,
   2017 2016
   Average
Amount    Average
Rate Paid Average
Amount    Average
Rate Paid
   (Dollars in thousands)
Non-interest-bearing transaction accounts
   $ 1,847,843    —   % $ 1,596,603    —   %
Interest-bearing transaction accounts
   3,792,388    0.46 3,202,095    0.26
Savings deposits
   523,644    0.09 462,306    0.06
Time deposits:

$100,000 or more
   949,493    0.82 874,648    0.55
Other time deposits
   465,890    0.44 508,009    0.39





Total
   $ 7,579,258    0.37 % $ 6,643,661    0.23 %

Three Months Ended June 30,
2022 2021
Average
Amount Average
Rate Paid Average
Amount Average
Rate Paid
(Dollars in thousands)
Non-interest-bearing transaction accounts $ 6,138,497 — % $ 3,966,968 — %
Interest-bearing transaction accounts 10,999,598 0.35 7,816,822 0.20
Savings deposits 1,633,014 0.07 867,904 0.06
Time deposits:
$100,000 or more 731,761 0.36 761,017 1.06
Other time deposits 439,099 0.27 362,270 0.51
Total $ 19,941,969 0.22 % $ 13,774,981 0.19 %

Six Months Ended June 30,
2022 2021
Average
Amount Average
Rate Paid Average
Amount Average
Rate Paid
(Dollars in thousands)
Non-interest-bearing transaction accounts $ 5,152,673 — % $ 3,724,854 — %
Interest-bearing transaction accounts 9,701,529 0.27 7,682,933 0.22
Savings deposits 1,305,703 0.07 829,781 0.06
Time deposits:
$100,000 or more 625,901 0.46 797,619 1.12
Other time deposits 387,699 0.29 368,502 0.56
Total $ 17,173,505 0.18 % $ 13,403,689 0.21 %

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Securities Sold Under Agreements to Repurchase

We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase ~~increased $28.2~~decreased $22.3 million, or ~~23.3%~~15.8%, from ~~$121.3~~$140.9 million as of December 31, ~~2016~~2021 to ~~$149.5~~$118.6 million as of ~~September~~June 30, ~~2017.~~

2022.

FHLB and Other Borrowed Funds

~~Our~~

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were ~~$1.04 billion and $1.31 billion~~$400.0 million at ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, respectively. During the third quarter~~2021.The Company had no other borrowed funds as of 2017, approximately $300.2 million of FHLB advances matured. Due to the issuance of the $300 million of subordinated notes during the second quarter of 2017, we made the strategic decision to not renewJune 30, 2022 or December 31, 2021. At June 30, 2022 and December 31, 2021, all of the ~~matured~~outstanding balances were classified as long-term advances. ~~At September 30, 2017, $245.0 million and $799.3 million of the outstanding balance were issued as short-term and long-term~~The FHLB advances respectively. At December 31, 2016, $40.0 million and $1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively. Our remaining FHLB borrowing capacity was $1.23 billion and $718.2 million as of September 30, 2017 and December 31, 2016, respectively. Maturities of borrowings as of September 30, 2017 include: 2017 – $75.3 million; 2018 – $409.5 million; 2019 – $143.1 million; 2020 – $146.4 million; 2021 – zero; after 2021 – $25.0 million.mature in 2033 with fixed interest rates ranging from 1.76% to 2.26%. Expected maturities ~~will~~could differ from contractual maturities because FHLB may have the right to call or ~~HBI~~the Company may have the right to prepay certain obligations.

Subordinated Debentures

Subordinated debentures, which consist of subordinated debt securities and guaranteed payments on trust preferred securities, were ~~$367.8~~$458.5 million and $371.1 million as of ~~September~~June 30, ~~2017. As of~~2022 and December 31, ~~2016, subordinated debentures consisted only of $60.8 million of guaranteed payments on~~2021, respectively.

The Company holds trust preferred ~~securities.~~

securities with a face amount of $17.6 million which are currently callable without penalty based on the terms of the specific agreements. The trust preferred securities aretax-advantaged issues that ~~qualify~~previously qualified for Tier 1 capital treatment subject to certain limitations. However, now that the Company has exceeded $15 billion in assets and has completed the acquisition of Happy Bancshares, the Tier 1 treatment of the Company’s outstanding trust preferred securities has been eliminated, and these securities are now treated as Tier 2 capital. Distributions on these securities are included in interest expense. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in ~~our~~the Company’s subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the subordinated debentures held by the trust. WeThe Company wholly ~~own~~owns the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon ~~our~~the Company making payment on the related subordinated debentures. ~~Our~~The Company’s obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by usthe Company of each respective trust’s obligations under the trust securities issued by each respective trust.

The Company has received approval from the Federal Reserve to redeem the trust preferred securities, and is in the process of redeeming all of its trust preferred securities.

During the second quarter, the Company chose to redeem an additional $68.1 million in trust preferred securities held prior to the acquisition of Happy. As of June 30, 2022, the Company's remaining balance of trust preferred securities which were held prior to the acquisition of Happy was $5.1 million.

On April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy. These notes have a maturity date of July 31, 2030 and carry a fixed rate of 5.500% for the first five years. Thereafter, the notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345% resetting quarterly. Interest payments are due semi-annually and the notes include a right of prepayment without penalty on or after July 31, 2025.

On January 18, 2022, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs, of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excludingJanuary 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.

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The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

On April 3, 2017, the Company completed an underwritten public offering of ~~$300~~$300.0 million in aggregate principal amount of its 5.625%Fixed-to-Floating Rate Subordinated Notes due 2027 (the ~~“Notes”~~“2027 Notes”)~~. The Notes were issued at 99.997% of par, resulting in~~ for net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The 2027 Notes are unsecured, subordinated debt obligations ~~of the Company~~ and ~~will~~ mature on April 15, 2027. From and including the date of issuance to, but excluding April 15, 2022, the 2027 Notes bear 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 2027 Notes 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 shall be 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, ~~qualify~~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 ~~Tier 2 capital~~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 ~~regulatory purposes.~~

the 2027 Notes, at the redemption price of 100% of its principal amount, plus accrued and unpaid interest to, but excluding, the Redemption Date.

Stockholders’ Equity

Stockholders’ equity ~~was $2.21~~increased $732.8 million to $3.50 billion ~~at September~~as of June 30, ~~2017~~2022, compared to ~~$1.33~~$2.77 billion atas of December 31, ~~2016.~~2021. The $732.8 million increase in stockholders’ equity is primarily associated with the ~~$77.5~~$961.3 million ~~and $742.3 million of~~in common stock issued to Happy shareholders for the ~~GHI~~acquisition of Happy on April 1, 2022 and ~~Stonegate shareholders, respectively, plus~~ the ~~$70.5~~$80.9 million ~~increase~~ in ~~retained earnings combined with $3.5 million of comprehensive~~net income ~~and $5.0 million of share-based compensation~~for the six months ended June 30, 2022, partially offset by the ~~repurchase of $19.5~~$226.4 million in other comprehensive loss, the $61.0 million of ~~our common~~shareholder dividends paid and stock ~~during the first nine months~~repurchases of ~~2017. The annualized improvement~~$26.6 million in ~~stockholders’ equity for the first nine months of 2017 excluding the $819.8 million of common stock issued to both the GHI and Stonegate shareholders was 6.0%.~~ 2022. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, our equity to asset ratio was ~~15.48%~~14.43% and ~~13.53%~~15.32%, respectively. Book value per ~~common~~ share was ~~$12.71 at September~~$17.04 as of June 30, ~~2017~~2022, compared to ~~$9.45 at~~$16.90 as of December 31, ~~2016. The acquisition of Stonegate added $2.45 per share to book value per common share as of September 30, 2017.~~

2021, a 3.5% annualized increase.

Common Stock Cash Dividends. We declared cash dividends on our common stock of ~~$0.11 per share~~$0.165 and ~~$0.09~~$0.14 per share for the ~~three-month periods~~three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The common stock dividend payout ratio for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was ~~106.03%~~212.4% and ~~28.97%~~29.2%, respectively. The common stock dividend payout ratio for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was ~~36.93%~~75.4% and ~~27.58%~~27.1%, respectively. ~~For the fourth quarter of 2017,~~On July 22, 2022, the Board of Directors declared a regular ~~$0.11~~$0.165 per share quarterly cash dividend payable ~~December 6, 2017,~~September 7, 2022, to shareholders of record ~~November 15, 2017.~~

August 17, 2022.

Stock Repurchase Program.On January ~~20, 2017, our~~22, 2021, the Company’s Board of Directors authorized the repurchase of up to an additional ~~5,000,000~~20,000,000 shares of ~~our~~its common stock under ~~our~~the previously approved ~~stock repurchase program, which brought the total amount of authorized shares to repurchase to 9,752,000 shares. During the first nine months of 2017, we utilized a portion of this~~ stock repurchase program. We repurchased a total of ~~800,000~~1,212,732 shares with a weighted-average stock price of ~~$24.44~~$21.89 per share during the first ~~nine~~six months of ~~2017. Shares repurchased to date under the program total 4,467,064 shares.~~2022. The remaining balance available for repurchase ~~is 5,284,936~~was 20,877,933 shares at ~~September~~June 30, ~~2017.~~

2022.

Liquidity and Capital Adequacy Requirements

Risk-Based Capital. We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk weightings and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that, as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, we met all regulatory capital adequacy requirements to which we were subject.

On ~~April 3, 2017,~~January 18, 2022, the Company completed an underwritten public offering of ~~$300 million~~the 2032 Notes in aggregate principal amount of ~~its Notes which were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0~~$300.0 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on ~~April 15, 2027.~~January 30, 2032. The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, ~~qualify~~in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory ~~purposes.~~

~~Due~~capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

On April 3, 2017, the Company completed an underwritten public offering of the 2027 Notes in aggregate principal amount of $300.0 million. The 2027 Notes are unsecured, subordinated debt obligations and mature on April 15, 2027. 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 ~~timing~~terms of the ~~closing of our acquisition of Stonegate, our reported leverage ratio is artificially inflated~~Subordinated Indenture, as supplemented by the First Supplemental Indenture, each dated as of ~~September 30,~~April 3, 2017, ~~since Stonegate’s assets are included~~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.

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On December 21, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 27, 2020, the federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the ~~average asset balance~~reported allowance for ~~only four days during~~credit losses since adopting CECL. The Company has elected to adopt the ~~quarter. Had~~interim final rule, which is reflected in the ~~acquisition closed at the beginning of the third quarter, our leverage ratio would have been approximately 9.89% on apro-forma~~ ~~basis as of September 30, 2017.~~

risk-based capital ratios presented below.

Table 17 presents our risk-based capital ratios on a consolidated basis as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~

2021.

Table 17: Risk-Based Capital

   As of
September 30,
2017 As of
December 31,
2016
   (Dollars in thousands)
Tier 1 capital

Stockholders’ equity
   $ 2,206,716 $ 1,327,490
Goodwill and core deposit intangibles, net
   (969,258 ) (388,336 )
Unrealized (gain) loss onavailable-for-sale securities
   (3,889 ) (400 )
Deferred tax assets
   —   —


Total common equity Tier 1 capital
   1,233,569 938,754
Qualifying trust preferred securities
   68,461 59,000


Total Tier 1 capital
   1,302,030 997,754


Tier 2 capital

Qualifying subordinated notes
   297,172 —
Qualifying allowance for loan losses
   111,620 80,002


Total Tier 2 capital
   408,792 80,002


Total risk-based capital
   $ 1,710,822 $ 1,077,756


Average total assets for leverage ratio
   $ 9,884,301 $ 9,388,812


Risk weighted assets
   $ 11,361,791 $ 8,308,468


Ratios at end of period

Common equity Tier 1 capital
   10.86 % 11.30 %
Leverage ratio
   13.17 10.63
Tier 1 risk-based capital
   11.46 12.01
Total risk-based capital
   15.06 12.97
Minimum guidelines – Basel IIIphase-in schedule

Common equity Tier 1 capital
   5.75 % 5.125 %
Leverage ratio
   4.00 4.000
Tier 1 risk-based capital
   7.25 6.625
Total risk-based capital
   9.25 8.625
Minimum guidelines – Basel III fullyphased-in

Common equity Tier 1 capital
   7.00 % 7.00 %
Leverage ratio
   4.00 4.00
Tier 1 risk-based capital
   8.50 8.50
Total risk-based capital
   10.50 10.50
Well-capitalized guidelines

Common equity Tier 1 capital
   6.50 % 6.50 %
Leverage ratio
   5.00 5.00
Tier 1 risk-based capital
   8.00 8.00
Total risk-based capital
   10.00 10.00


	As of June 30, 2022			As of December 31, 2021
	(Dollars in thousands)
Tier 1 capital
Stockholders’ equity	$	3,498,565		$	2,765,721
ASC 326 transitional period adjustment	24,369			55,143
Goodwill and core deposit intangibles, net	(1,461,362)			(997,605)
Unrealized (gain) loss on available-for-sale securities	215,905			(10,462)
Total common equity Tier 1 capital	2,277,477			1,812,797
Qualifying trust preferred securities	17,630			71,270
Total Tier 1 capital	2,295,107			1,884,067
Tier 2 capital
Allowance for credit losses	294,267			236,714
ASC 326 transitional period adjustment	(24,369)			(55,143)
Disallowed allowance for credit losses (limited to 1.25% of risk weighted assets)	(46,178)			(33,514)
Qualifying allowance for credit losses	223,720			148,057
Qualifying subordinated notes	440,825			299,824
Total Tier 2 capital	664,545			447,881
Total risk-based capital	$	2,959,652		$	2,331,948
Average total assets for leverage ratio	$	23,482,743		$	16,960,683
Risk weighted assets	$	17,817,635		$	11,793,539
Ratios at end of period
Common equity Tier 1 capital	12.78		%	15.37		%
Leverage ratio	9.77			11.11
Tier 1 risk-based capital	12.88			15.98
Total risk-based capital	16.61			19.77
Minimum guidelines – Basel III
Common equity Tier 1 capital	7.00		%	7.00		%
Leverage ratio	4.00			4.00
Tier 1 risk-based capital	8.50			8.50
Total risk-based capital	10.50			10.50
Well-capitalized guidelines
Common equity Tier 1 capital	6.50		%	6.50		%
Leverage ratio	5.00			5.00
Tier 1 risk-based capital	8.00			8.00
Total risk-based capital	10.00			10.00

Table of Contents

As of the most recent notification from regulatory agencies, our bank subsidiary was “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as ~~“well-capitalized”,~~“well-capitalized,” we, as well as our banking subsidiary, must maintain minimum common equity Tier 1 capital, leverage, Tier 1 risk-based capital, and total risk-based capital ratios as set forth in the table. There are no conditions or events since that notification that we believe have changed the bank subsidiary’s category.

Non-GAAP Financial Measurements

Our accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, ~~due~~this report contains financial information determined by methods other than in accordance with GAAP, including earnings, as adjusted; diluted earnings per common share, as adjusted; tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity, excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to ~~the application of purchase accounting from our significant number of historical acquisitions (especially Liberty and Stonegate), we believe certainnon-GAAP~~ ~~measures and ratios that exclude the impact of these items are useful to the investors and users of our financial statements to evaluate our performance, including net interest margin~~tangible assets; and efficiency ~~ratio.~~

Because of our significant number of historical acquisitions, our net interest margin was impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting. The accretion and amortization affect certain operating ratiosratio, as ~~we accrete loan discounts to interest income and amortize premiums and discounts on time deposits to interest expense.~~

adjusted.

We believe thesenon-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to thesenon-GAAP measures and ratios in assessing our operating results and related trends, and when planning and forecasting future periods. However, thesenon-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. ~~In Tables 18 through 20 below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to thenon-GAAP~~ ~~financial measures and ratios, or a reconciliation of thenon-GAAP~~ ~~calculation of the financial measure for the periods indicated:~~

~~Table 18: Average Yield on Loans~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Interest income on loans receivable – FTE
   $ 113,239 $ 103,135 $ 332,072 $ 300,839
Purchase accounting accretion
   7,068 11,576 23,019 32,590


Non-GAAP interest income on loans receivable – FTE
   $ 106,171 $ 91,559 $ 309,053 $ 268,249


Average loans
   $ 7,938,716 $ 7,027,634 $ 7,785,925 $ 6,909,240
Average purchase accounting loan discounts⁽¹⁾
   97,978 115,766 97,158 131,506


Average loans(non-GAAP)
   $ 8,036,694 $ 7,143,400 $ 7,883,083 $ 7,040,746


Average yield on loans (reported)
   5.66 % 5.84 % 5.70 % 5.82 %
Average contractual yield on loans(non-GAAP)
   5.24 5.10 5.24 5.09

~~(1)~~

~~Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively.~~

~~Table 19: Average Cost of Deposits~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Interest expense on interest-bearing deposits
   $ 8,535 $ 4,040 $ 20,831 $ 11,528
Amortization of time deposit (premiums)/discounts, net
   106 361 300 1,094


Non-GAAP interest expense on interest-bearing deposits
   $ 8,641 $ 4,401 $ 21,131 $ 12,622


Average interest-bearing deposits
   $ 5,957,447 $ 5,082,608 $ 5,731,415 $ 5,047,058
Average unamortized CD (premium)/discount, net
   (733 ) (732 ) (721 ) (1,096 )


Average interest-bearing deposits(non-GAAP)
   $ 5,956,714 $ 5,081,876 $ 5,730,694 $ 5,045,962


Average cost of deposits (reported)
   0.57 % 0.32 % 0.49 % 0.31 %
Average contractual cost of deposits(non-GAAP)
   0.58 0.34 0.49 0.33

~~Table 20: Net Interest Margin~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Net interest income – FTE
   $ 108,615 $ 105,522 $ 324,809 $ 308,567
Total purchase accounting accretion
   7,174 11,937 23,319 33,684


Non-GAAP net interest income – FTE
   $ 101,441 $ 93,585 $ 301,490 $ 274,883


Average interest-earning assets
   $ 9,794,999 $ 8,646,026 $ 9,584,607 $ 8,530,362
Average purchase accounting loan discounts⁽¹⁾
   97,978 115,766 97,158 131,506


Average interest-earning assets(non-GAAP)
   $ 9,892,977 $ 8,761,792 $ 9,681,765 $ 8,661,868


Net interest margin (reported)
   4.40 % 4.86 % 4.53 % 4.83 %
Net interest margin(non-GAAP)
   4.07 4.25 4.16 4.24

~~(1)~~

~~Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively.~~

The tables below presentnon-GAAP reconciliations of earnings, ~~excludingnon-fundamental~~ ~~items~~as adjusted, and diluted earnings per share, ~~excludingnon-fundamental~~ ~~items~~as adjusted, as well as thenon-GAAP computations of tangible book value per ~~share,~~share; return on average assets, excluding intangible ~~amortization,~~amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity excluding intangible ~~amortization,~~amortization; return on average tangible equity, as adjusted; tangible equity to tangible ~~assets~~assets; and ~~the core~~ efficiency ~~ratio.~~ratio, as adjusted. The~~non-fundamental~~ items used in these calculations are included in financial results presented in accordance with ~~generally accepted accounting principles (“GAAP”).~~

GAAP.

Earnings, ~~excludingnon-fundamental~~ ~~items is a~~as adjusted, and diluted earnings per common share, as adjusted, are meaningfulnon-GAAP financial ~~measure~~measures for management, as ~~it excludesnon-fundamental~~they exclude certain items such as merger expenses and/or certain gains and losses. Management believes the exclusion of these~~non-fundamental~~ items in expressing earnings provides a meaningful foundation forperiod-to-period andcompany-to-company comparisons, which management believes will aid both investors and analysts in analyzing our ~~fundamental~~ financial measures and predicting future performance. Thesenon-GAAP financial measures are also used by management to assess the performance of our business, because management does not consider these~~non-fundamental~~ items to be relevant to ongoing financial performance.

Table of Contents

In Table 2118 below, we have provided a reconciliation of thenon-GAAP calculation of the financial measure for the periods indicated.

Table ~~21:~~18: Earnings, ~~ExcludingNon-Fundamental~~ ~~Items~~

   Three Months Ended
September 30,    Nine Months Ended
September 30,
   2017    2016    2017    2016
   (Dollars in thousands)
GAAP net income available to common shareholders (A)
   $ 14,821    $ 43,620    $ 111,774    $ 128,556
Non-fundamental items:

Gain on acquisitions
   —      —      (3,807 )    —
Merger expenses
   18,227    —      25,743    —
FDIC loss sharebuy-out
   —      3,849    —      3,849
Hurricane expenses⁽¹⁾
   33,445    —      33,445    —








Totalnon-fundamental items
   51,672    3,849    55,381    3,849
Tax-effect ofnon-fundamental items⁽²⁾
   20,045    1,510    22,626    1,510








Non-fundamental itemsafter-tax (B)
   31,627    2,339    32,755    2,339








Earnings excludingnon-fundamental items (C)
   $ 46,448    $ 45,959    $ 144,529    $ 130,895








Average diluted shares outstanding (D)
   144,987    140,703    143,839    140,685
GAAP diluted earnings per share: A/D
   $ 0.10    $ 0.31    $ 0.78    $ 0.91
Non-fundamental itemsafter-tax: B/D
   0.22    0.02    0.22    0.02








Diluted earnings per common share excluding non-
fundamental items: C/D
   $ 0.32    $ 0.33    $ 1.00    $ 0.93

~~(1)~~

~~Hurricane expenses includes $32,889 of provision for loan losses and $556 of damage expense related to Hurricane Irma.~~

~~(2)~~

~~Effective tax rate of 39.225%, adjusted fornon-taxable~~ ~~gain on acquisition andnon-deductible~~ ~~merger-related costs.~~

As Adjusted


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Dollars in thousands)
GAAP net income available to common shareholders (A)	$	15,978	$	79,070	$	80,870	$	170,672
Pre-tax adjustments:
Merger and acquisition expenses	48,731		—		49,594		—
Initial provision for credit losses - acquisition	58,585		—		58,585		—
Fair value adjustment for marketable securities	1,801		(1,250)		(324)		(7,032)
Special dividend from equity investment	(1,434)		(2,200)		(1,434)		(10,273)
TRUPS redemption fees	2,081		—		2,081		—
Recoveries on historic losses	(2,353)		—		(5,641)		(5,107)
Gain on securities	—		—		—		(219)
Total pre-tax adjustments	107,411		(3,450)		102,861		(22,631)
Tax-effect of adjustments(1)	26,396		(888)		25,176		(5,825)
Total adjustments after-tax (B)	81,015		(2,562)		77,685		(16,806)
Earnings, as adjusted (C)	$	96,993	$	76,508	$	158,555	$	153,866
Average diluted shares outstanding (D)	206,015		165,226		185,223		165,314
GAAP diluted earnings per share: A/D	$	0.08	$	0.48	$	0.44	$	1.03
Adjustments after-tax: B/D	0.39		(0.02)		0.42		(0.10)
Diluted earnings per common share excluding adjustments: C/D	$	0.47	$	0.46	$	0.86	$	0.93

(1) Blended statutory rate of 25.1475% for 2022 and 25.74% for 2021

We had ~~$980.1 million, $396.3~~$1.46 billion, $998.1 million, and ~~$397.1 million~~$1.00 billion total goodwill, core deposit intangibles and other intangible assets as of ~~September~~June 30, ~~2017,~~2022, December 31, ~~2016~~2021 and ~~September~~June 30, ~~2016,~~2021, respectively. Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets excluding intangible amortization, return on average tangible equity, return on average tangible equity excluding intangible amortization, and tangible equity to tangible assets are useful in evaluating our company. Management also believes return on average assets, as adjusted, return on average equity, as adjusted, and return on average tangible equity, as adjusted, are meaningful non-GAAP financial measures, as they exclude items such as certain non-interest income and expenses that management believes are not indicative of our primary business operating results. These calculations, which are similar to the GAAP ~~calculation~~calculations of ~~diluted earnings~~book value per share, ~~tangible book value,~~ return on average assets, return on average equity, and equity to assets, are presented in Tables 19 through 22, ~~through 25,~~ respectively.

Table ~~22:~~19: Tangible Book Value Per Share

   As of
September 30, 2017    As of
December 31, 2016
   (In thousands, except per share data)
Book value per share: A/B
   $ 12.71    $ 9.45
Tangible book value per share:(A-C-D)/B
   7.06    6.63
(A) Total equity
   $ 2,206,716    $ 1,327,490
(B) Shares outstanding
   173,666    140,472
(C) Goodwill
   $ 929,129    $ 377,983
(D) Core deposit and other intangibles
   50,982    18,311


	As of June 30, 2022		As of December 31, 2021
	(In thousands, except per share data)
Book value per share: A/B	$	17.04	$	16.90
Tangible book value per share: (A-C-D)/B	9.92		10.80
(A) Total equity	$	3,498,565	$	2,765,721
(B) Shares outstanding	205,291		163,699
(C) Goodwill	1,398,400		973,025
(D) Core deposit and other intangibles	63,410		25,045

Table ~~23:~~of Contents

Table 20: Return on Average Assets ~~Excluding Intangible Amortization~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Return on average assets: A/D
   0.54 % 1.81 % 1.41 % 1.81 %
Return on average assets excluding intangible amortization:B/(D-E)
   0.59 1.91 1.49 1.91
Return on average assets excluding gain on acquisitions, merger expenses, FDIC loss sharebuy-out expense and hurricane expenses: (A+C)/D
   1.70 1.90 1.82 1.84
(A) Net income
   $ 14,821 $ 43,620 $ 111,774 $ 128,556
Intangible amortizationafter-tax
   551 463 1,566 1,440


(B) Earnings excluding intangible amortization
   $ 15,372 $ 44,083 $ 113,340 $ 129,996


(C)Non-fundamental itemsafter-tax
   $ 31,627 $ 2,339 $ 32,755 $ 2,339
(D) Average assets
   10,853,559 9,602,363 10,617,917 9,498,915
(E) Average goodwill, core deposits and other intangible assets
   462,799 397,429 440,465 398,195


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Return on average assets: A/D	0.26		%	1.81		%	0.75		%	2.01		%
Return on average assets excluding intangible amortization: (A+B)/(D-E)	0.31			1.95			0.83			2.16
Return on average assets, as adjusted: (A+C)/D	1.57			1.75			1.48			1.81
(A) Net income	$	15,978		$	79,070		$	80,870		$	170,672
Intangible amortization after-tax	1,854			1,055			2,903			2,110
(B) Earnings excluding intangible amortization	$	17,832		$	80,125		$	83,773		$	172,782
(C) Adjustments after-tax	$	81,015		$	(2,562)		$	77,685		$	(16,806)
(D) Average assets	24,788,365			17,491,359			21,608,387			17,107,259
(E) Average goodwill, core deposits and other intangible assets	1,423,466			1,001,598			1,211,580			1,002,301

Table ~~24:~~21: Return on Average ~~Tangible~~ Equity ~~Excluding Intangible Amortization~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Return on average equity: A/D
   3.88 % 13.62 % 10.33 % 13.83 %
Return on average tangible equity excluding intangible amortization:B/(D-E)
   5.80 20.01 15.06 20.59
Return on average equity excluding gain on acquisitions, merger expenses, FDIC loss sharebuy-out expense and hurricane expenses: (A+C)/D
   12.17 14.35 13.36 14.08
(A) Net income
   $ 14,821 $ 43,620 $ 111,774 $ 128,556
(B) Earnings excluding intangible amortization
   15,372 44,083 113,340 129,996
(C)Non-fundamental itemsafter-tax
   31,627 2,339 32,755 2,339
(D) Average equity
   1,513,829 1,274,077 1,446,740 1,241,594
(E) Average goodwill, core deposits and other intangible assets
   462,799 397,429 440,465 398,195


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Return on average equity: A/D	1.78		%	11.92		%	5.14		%	13.02		%
Return on average common equity, as adjusted: (A+C)/D	10.83			11.54			10.08			11.74
Return on average tangible equity excluding intangible amortization: B/(D-E)	3.30			19.38			8.62			21.24
Return on average tangible common equity, as adjusted: (A+C)/(D-E)	17.94			18.50			16.31			18.91
(A) Net income	$	15,978		$	79,070		$	80,870		$	170,672
(B) Earnings excluding intangible amortization	17,832			80,125			83,773			172,782
(C) Adjustments after-tax	81,015			(2,562)			77,685			(16,806)
(D) Average equity	3,591,758			2,660,147			3,172,200			2,642,978
(E) Average goodwill, core deposits and other intangible assets	1,423,466			1,001,598			1,211,580			1,002,301

Table ~~25:~~22: Tangible Equity to Tangible Assets

   As of
September 30,
2017 As of
December 31,
2016
   (Dollars in thousands)
Equity to assets: B/A
   15.48 % 13.53 %
Tangible equity to tangible assets:(B-C-D)/(A-C-D)
   9.24 9.89
(A) Total assets
   $ 14,255,967 $ 9,808,465
(B) Total equity
   2,206,716 1,327,490
(C) Goodwill
   929,129 377,983
(D) Core deposit and other intangibles
   50,982 18,311


	As of June 30, 2022			As of December 31, 2021
	(Dollars in thousands)
Equity to assets: B/A	14.43		%	15.32		%
Tangible equity to tangible assets: (B-C-D)/(A-C-D)	8.94			10.36
(A) Total assets	$	24,253,168		$	18,052,138
(B) Total equity	3,498,565			2,765,721
(C) Goodwill	1,398,400			973,025
(D) Core deposit and other intangibles	63,410			25,045

Table of Contents

The efficiency ratio is a standard measure used in the banking industry and is calculated by dividingnon-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest income. The ~~core~~ efficiency ratio, as adjusted, is a meaningfulnon-GAAP measure for management, as it excludes~~non-core~~ certain items and is calculated by dividingnon-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest income excluding~~non-core~~ items such as merger expenses and/or certain gains, losses and ~~losses.~~other non-interest income and expenses. In Table 2623 below, we have provided a reconciliation of thenon-GAAP calculation of the financial measure for the periods indicated.

Table ~~26: Core~~23: Efficiency Ratio,

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
   (Dollars in thousands)
Net interest income (A)
   $ 106,769 $ 103,653 $ 318,936 $ 302,751
Non-interest income (B)
   21,457 22,014 72,344 63,223
Non-interest expense (C)
   70,846 51,026 176,990 144,261
FTE Adjustment (D)
   1,846 1,869 5,873 5,816
Amortization of intangibles (E)
   906 762 2,576 2,370
Non-core items:

Non-interest income:

Gain on acquisitions
   $ —   $ —   $ 3,807 $ —
Gain (loss) on OREO, net
   335 132 849 (713 )
Gain (loss) on SBA loans
   163 364 738 443
Gain (loss) on branches, equipment and other assets, net
   (1,337 ) (86 ) (962 ) 701
Gain (loss) on securities, net
   136 —   939 25
Other income⁽¹⁾
   —   —   —   925


Totalnon-corenon-interest income (F)
   $ (703 ) $ 410 $ 5,371 $ 1,381


Non-interest expense:

Merger expenses
   $ 18,227 $ —   $ 25,743 $ —
FDIC loss sharebuy-out
   —   3,849 —   3,849
Hurricane damage expense
   556 —   556 —
Other expense⁽²⁾
   —   —   47 1,914


Totalnon-corenon-interest expense (G)
   $ 18,783 $ 3,849 $ 26,346 $ 5,763


Efficiency ratio (reported):((C-E)/(A+B+D))
   53.77 % 39.41 % 43.92 % 38.16 %
Core efficiency ratio(non-GAAP):((C-E-G)/(A+B+D-F))
   39.12 36.51 37.79 36.75

~~(3)~~

~~Amount includes recoveries on historical losses.~~

~~(4)~~

~~Amount includes vacant properties write-downs.~~

As Adjusted


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Net interest income (A)	$	198,758		$	141,252		$	329,906		$	289,340
Non-interest income (B)	44,581			31,120			75,250			76,396
Non-interest expense (C)	165,482			72,982			242,378			145,848
FTE Adjustment (D)	2,471			1,774			4,209			3,595
Amortization of intangibles (E)	2,477			1,421			3,898			2,842
Adjustments:
Non-interest income:
Fair value adjustment for marketable securities	$	(1,801)		$	1,250		$	324		$	7,032
Special dividend from equity investment	1,434			2,200			1,434			10,273
Gain on OREO, net	9			619			487			1,020
Gain (loss) on branches, equipment and other assets, net	2			(23)			18			(52)
Gain on securities, net	—			—			—			219
Recoveries on historic losses	2,353			—			5,641			5,107
Total non-interest income adjustments (F)	$	1,997		$	4,046		$	7,904		$	23,599
Non-interest expense:


Merger and acquisition expenses	48,731			—			49,594			—


Total non-core non-interest expense (G)	$	50,812		$	—		$	51,675		$	—
Efficiency ratio (reported): ((C-E)/(A+B+D))	66.31		%	41.09		%	58.26		%	38.72		%
Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F))	46.02			42.07			46.53			41.36

Recently Issued Accounting Pronouncements

See Note 21 into the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.

~~Item 3:~~ ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Item 3:QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Liquidity and Market Risk Management

~~Liquidity Management.~~ Liquidity refers to the ability or the financial flexibility to manage future cash flows to meet the needs of depositors and borrowers and fund operations. Maintaining appropriate levels of liquidity allows us to have sufficient funds available for reserve requirements, customer demand for loans, withdrawal of deposit balances and maturities of deposits and other liabilities. Our primary source of liquidity at our holding company is dividends paid by our bank subsidiary. Applicable statutes and regulations impose restrictions on the amount of dividends that may be declared by our bank subsidiary. Further, any dividend payments are subject to the continuing ability of the bank subsidiary to maintain compliance with minimum federal regulatory capital requirements and to retain its characterization under federal regulations as a “well-capitalized” institution.

Our bank subsidiary has potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers. Many of these obligations and commitments to fund future borrowings to our loan customers are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position.

~~Liquidity needs can be met from either assets or liabilities. On the asset side, our primary sources of liquidity include cash and due from banks, federal funds sold,available-for-sale~~ ~~investment securities and scheduled repayments and maturities of loans. We maintain adequate levels of cash and cash equivalents to meet ourday-to-day~~ ~~needs. As of September 30, 2017, our cash and cash equivalents were $552.3 million, or 3.9% of total assets, compared to $216.6 million, or 2.2% of total assets, as of December 31, 2016. Ouravailable-for-sale~~ ~~investment securities and federal funds sold were $1.58 billion and $1.07 billion as of September 30, 2017 and December 31, 2016, respectively.~~

As of September 30, 2017, our investment portfolio was comprised of approximately 73.2% or $1.32 billion of securities which mature in less than five years. As of September 30, 2017 and December 31, 2016, $1.13 billion and $1.07 billion, respectively, of securities were pledged as collateral for various public fund deposits and securities sold under agreements to repurchase.

On the liability side, our principal sources of liquidity are deposits, borrowed funds, and access to capital markets. Customer deposits are our largest sources of funds. As of September 30, 2017, our total deposits were $10.45 billion, or 73.3% of total assets, compared to $6.94 billion, or 70.8% of total assets, as of December 31, 2016. We attract our deposits primarily from individuals, business, and municipalities located in our market areas.

In the event that additional short-term liquidity is needed to temporarily satisfy our liquidity needs, we have established and currently maintain lines of credit with the Federal Reserve Bank (“Federal Reserve”) and Bankers’ Bank to provide short-term borrowings in the form of federal funds purchases. In addition, we maintain lines of credit with two other financial institutions.

As of September 30, 2017 and December 31, 2016, we could have borrowed up to $105.9 million and $104.6 million, respectively, on a secured basis from the Federal Reserve, up to $50.0 million from Bankers’ Bank on an unsecured basis, and up to $45.0 million in the aggregate from other financial institutions on an unsecured basis. The unsecured lines may be terminated by the respective institutions at any time.

The lines of credit we maintain with the FHLB can provide us with both short-term and long-term forms of liquidity on a secured basis. FHLB borrowed funds were $1.04 billion and $1.31 billion at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, $245.0 million and $799.3 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, 2016, $40.0 million and $1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively. Our FHLB borrowing capacity was $1.23 billion and $718.2 million as of September 30, 2017 and December 31, 2016, respectively.

On April 3, 2017, the Company completed an underwritten public offering of $300 million in aggregate principal amount of its Notes which were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated debt obligations of the Company and will mature on April 15, 2027. The Notes qualify as Tier 2 capital for regulatory purposes.

For purposes of determining our liquidity position, we use the primary liquidity ratio; a measure of liquidity calculated as the excess Federal Reserve Bank balances plus federal funds sold plus unpledged securities divided by total liabilities. We also use the alternative liquidity ratio which is calculated as cash and due from banks plus federal funds sold plus unpledged securities divided by total liabilities. Our primary liquidity ratio and alternative liquidity ratio were 7.76% and 10.38%, respectively, as of September 30, 2017. Management believes our current liquidity position is adequate to meet foreseeable liquidity requirements.

~~We believe that we have sufficient liquidity to satisfy our current operations.~~

~~Market Risk Management~~. Our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. We do not hold market risk sensitive instruments for trading purposes.

Asset/Liability Management. Our management actively measures and manages interest rate risk. The asset/liability committees of the boards of directors of our holding company and bank subsidiary are also responsible for approving our asset/liability management policies, overseeing the formulation and implementation of strategies to improve balance sheet positioning and earnings, and reviewing our interest rate sensitivity position.

Our objective is to manage liquidity in a way that ensures cash flow requirements of depositors and borrowers are met in a timely and orderly fashion while ensuring the reliance on various funding sources does not become so heavily weighted to any one source that it causes undue risk to the bank. Our liquidity sources are prioritized based on availability and ease of activation. Our current liquidity condition is a primary driver in determining our funding needs and is a key component of our asset liability management.

Table of Contents

Various sources of liquidity are available to meet the cash flow needs of depositors and borrowers. Our principal source of funds is core deposits, including checking, savings, money market accounts and certificates of deposit. We may also from time to time obtain wholesale funding through brokered deposits. Secondary sources of funding include advances from the Federal Home Loan Bank of Dallas, the Federal Reserve Bank Discount Window and other borrowings, such as through correspondent banking relationships. These secondary sources enable us to borrow funds at rates and terms which, at times, are more beneficial to us. Additionally, as needed, we can liquidate or utilize our available for sale investment portfolio as collateral to provide funds for an intermediate source of liquidity.

Interest Rate Sensitivity. Our primary business is banking and the resulting earnings, primarily net interest income, are susceptible to changes in market interest rates. It is management’s goal to maximize net interest income within acceptable levels of interest rate and liquidity risks.

A key element in the financial performance of financial institutions is the level and type of interest rate risk assumed. The single most significant measure of interest rate risk is the relationship of the repricing periods of earning assets and interest-bearing liabilities. The more closely the repricing periods are correlated, the less interest rate risk we assume. We use net interest income simulation modeling and economic value of equity as the primary methods in analyzing and managing interest rate risk.

One of the tools that our management uses to measure short-term interest rate risk is a net interest income simulation model. This analysis calculates the difference between net interest income forecasted using base market rates and using a rising and a falling interest rate scenario. The income simulation model includes various assumptions regarding there-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed tore-price immediately, and proportional to the change in market rates, depending on their contracted index. Some loans and investments include the opportunity of prepayment (embedded options), and accordingly, the simulation model uses indexes to estimate these prepayments and reinvest their proceeds at current yields. Ournon-term deposit productsre-price overnight in the model while we project certain other deposits by product type to have stable balances based on our deposit history. This accounts for the portion of our portfolio that moves more slowly ~~usually changing less~~ than ~~the change in~~ market rates and changes at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet remains static and that its structure does not change over the course of the year. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.

Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

~~Interest Rate Sensitivity.~~ ~~Our primary business is banking~~

For the rising and falling interest rate scenarios, the ~~resulting earnings, primarily~~base market interest rate forecast was increased and decreased over twelve months by 200 and 100 basis points, respectively. At June 30, 2022, our net interest ~~income, are susceptible~~margin exposure related to these hypothetical changes in market interest ~~rates. It is management’s goal~~rates was within the current guidelines established by us.

Table 24 presents our sensitivity to ~~maximize~~ net interest income ~~within acceptable levels of interest rate and liquidity risks.~~

A key element in the financial performance of financial institutions is the level and type of interest rate risk assumed. The single most significant measure of interest rate risk is the relationship of the repricing periods of earning assets and interest-bearing liabilities. The more closely the repricing periods are correlated, the less interest rate risk we assume. We use repricing gap and simulation modeling as the primary methods in analyzing and managing interest rate risk.

Gap analysis attempts to capture the amounts and timing of balances exposed to changes in interest rates at a given point in time. As of September 30, 2017, our gap position was asset sensitive with a~~one-year~~ ~~cumulative repricing gap as a percentage of total earning assets of 8.8%.~~

During this period, the amount of change our asset base realizes in relation to the total change in market interest rates is higher than that of the liability base. As a result, our net interest income will have a positive effect in an environment of modestly rising rates.

We have a portion of our securities portfolio invested in mortgage-backed securities. Mortgage-backed securities are included based on their final maturity date. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

~~Table 26 presents a summary of the repricing schedule of our interest-earning assets and interest-bearing liabilities (gap)~~ as of ~~September~~June 30, ~~2017.~~

2022.

Table ~~26:~~24: Sensitivity of Net Interest ~~Rate Sensitivity~~

   Interest Rate Sensitivity Period
   0-30
Days 31-90
Days 91-180
Days 181-365
Days 1-2
Years 2-5
Years Over 5
Years Total
   (Dollars in thousands)
Earning assets

Interest-bearing deposits due from banks
   $ 354,367 $ —   $ —   $ —   $ —   $ —   $ —   $ 354,367
Federal funds sold
   4,545 —   —   —   —   —   —   4,545
Investment securities
   313,284 65,991 92,746 122,662 232,241 383,048 600,658 1,810,630
Loans receivable
   4,022,711 579,056 629,589 1,120,816 1,389,219 2,150,212 394,590 10,286,193


Total earning assets
   4,694,907 645,047 722,335 1,243,478 1,621,460 2,533,260 995,248 12,455,735


Interest-bearing liabilities

Interest-bearing transaction and savings deposits
   1,209,692 519,106 778,659 1,557,318 781,773 560,261 935,074 6,341,883
Time deposits
   253,409 213,728 272,149 458,790 223,177 129,251 918 1,551,422
Securities sold under repurchase agreements
   149,531 —   —   —   —   —   —   149,531
FHLB and other borrowed funds
   570,021 41 34,048 120,337 173,079 146,807 —   1,044,333
Subordinated debentures
   70,662 —   —   —   —   297,173 —   367,835


Total interest-bearing liabilities
   2,253,315 732,875 1,084,856 2,136,445 1,178,029 1,133,492 935,992 9,455,004


Interest rate sensitivity gap
   $ 2,441,592 $ (87,828 ) $ (362,521 ) $ (892,967 ) $ 443,431 $ 1,399,768 $ 59,256 $ 3,000,731


Cumulative interest rate sensitivity gap
   $ 2,441,592 $ 2,353,764 $ 1,991,243 $ 1,098,276 $ 1,541,707 $ 2,941,475 $ 3,000,731
Cumulative rate sensitive assets to rate sensitive liabilities
   208.4 % 178.8 % 148.9 % 117.7 % 120.9 % 134.5 % 131.7 %
Cumulative gap as a % of total earning assets
   19.6 % 18.9 % 16.0 % 8.8 % 12.4 % 23.6 % 24.1 %

Income

~~Item 4:~~	~~CONTROLS AND PROCEDURES~~
Interest Rate Scenario		Percentage Change from Base
Up 200 basis points		12.10	%
Up 100 basis points		6.20
Down 100 basis points		(5.90)
Down 200 basis points		(9.60)

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Item 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Additionally, our disclosure controls and procedures were also effective in ensuring that information required to be disclosed in our Exchange Act report is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

As permitted by SEC guidance, management excluded from its assessment the operations of the Stonegate Bank acquisition made during 2017, which is described in Note 2 of the Consolidated Financial Statements. The total assets of the entity acquired in this acquisition represented approximately 20% of the Company’s total consolidated assets as of September 30, 2017.

Changes in Internal Control Over Financial Reporting

On ~~September 26, 2017,~~April 1, 2022, we completed our acquisition of ~~Stonegate Bank,~~Happy Bancshares, Inc. ("Happy"), and as a result, we extended our oversight and monitoring processes that support our internal control over financial reporting during the ~~third~~second quarter of ~~2017,~~2022, to include the operations of ~~Stonegate.~~Happy. Otherwise, there were no changes in the Company’s internal controls over financial reporting during the quarter ended ~~September~~June 30, ~~2017,~~2022, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

~~Item 1:~~

~~Legal Proceedings~~

Item 1: Legal Proceedings

There are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company or its subsidiaries are a party or of which any of their property is the subject.

~~Item 1A:~~

~~Risk Factors~~

~~Except for the risk factors set forth below, there~~

Item 1A: Risk Factors

There were no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Form10-K for the year ended December 31, ~~2016.~~2021. See the discussion of our risk factors in the Form10-K, as filed with the SEC. The risks described are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

~~Risks Related to Our Industry~~

~~The short-term~~

Item 2: Unregistered Sales of Equity Securities and ~~long-term impact~~Use of ~~the changing regulatory capital requirements and new capital rules is uncertain.~~

In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all banking organizations. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets) and a higher minimum Tier 1 risk-based capital requirement (6% of risk-weighted assets) and assigns higher risk weightings (150%) to exposures that are more than 90 days past due or are on~~non-accrual~~ status and certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% of common equity tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule became effective for our bank subsidiary and us on January 1, 2015. The capital conservation buffer requirement began being phased in on January 1, 2016, and the full capital conservation buffer requirement will be effective January 1, 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such activities. In addition, if the banking organization grows above $15 billion as a result of an acquisition, or organically grows above $15 billion and then makes an acquisition, its trust preferred securities will be included as Tier 2 capital rather than Tier 1 capital.

While our current capital levels well exceed the revised capital requirements and we are currently under the $15 billion threshold, our capital levels could decrease in the future as a result of factors such as acquisitions, faster than anticipated growth, reduced earnings levels, operating losses, exceeding the $15 billion threshold and other factors. The application of more stringent capital requirements for us could, among other things, result in lower returns on equity, require the raising of additional capital, and result in our inability to pay dividends or repurchase shares if we were to be unable to comply with such requirements.

~~Risks Related to Our Business~~

~~The total impact of Hurricane Irma on our financial condition and results of operation may not be known for some time and may negatively impact our future earnings.~~

Hurricane Irma caused significant property damage in our South Florida market areas, particularly in the Florida Keys and southwestern Florida, and resulted in widespread disruptions in power, transportation and the local economies of these areas, as well as less extensive damage throughout other parts of the state of Florida. A substantial amount of our loans are secured by real estate located in the market areas affected by this powerful storm. On most collateral dependent loans, our exposure is limited due to the existence of flood and property insurance. We monitor our borrower’s insurance coverage on a regular basis and force place insurance, as necessary.

We are continuing to evaluate Hurricane Irma’s impact on our customers and our business, including our properties, assets and loan portfolios. However, we expect to experience increased loan delinquencies and loan restructurings as a result of the storm, particularly in the short term as customers undertake recovery and~~clean-up~~ ~~efforts, including the submission of insurance claims. Based on our initial assessments of the potential credit impact and damage, we accrued $33.4 million ofpre-tax~~ hurricane expenses during the third quarter of 2017. The $33.4 million of hurricane expenses includes $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017. In addition, in order to assist our customers during this crisis, we are waiving various deposit and loan fees that would have otherwise been assessed.

Because the total impact of the storm may not be known for some time, it is impossible to know at this time whether our current accrual for hurricane-related expenses will be sufficient to cover our actual losses. We may experience more extensive loan delinquencies and restructurings than we currently expect, which could negatively impact our cash flow and, if not timely cured, increase our~~non-performing~~ assets and reduce our net interest income. Such increases could require us to further increase our provision for loan losses and result in higher loan charge-offs, either of which could have a material adverse impact on our results of operations and financial condition in future periods.

~~Risks Related to Our Acquisition of Stonegate Bank~~

~~Our financial results and condition could be adversely affected if we fail to realize the expected benefits of the Stonegate acquisition or it takes longer than expected to realize those benefits.~~

Following our acquisition of Stonegate Bank (“Stonegate”), on September 26, 2017, we began the process of integrating the businesses of Stonegate. We have plans to complete the overall integration of the two businesses during the first quarter of 2018. This integration process could result in the loss of key employees, the disruption of ongoing businesses and the loss of customers and their business and deposits. It may also divert management attention and resources from other operations and limit the Company’s ability to pursue other acquisitions. There is no assurance that we will realize the cost savings and other financial benefits of the acquisition when and in the amounts expected.

~~We may incur losses on loans, securities and other acquired assets of Stonegate that are materially greater than reflected in our preliminary fair value adjustments.~~

We accounted for the Stonegate acquisition under the purchase method of accounting, recording the acquired assets and liabilities of Stonegate at fair value based on preliminary purchase accounting adjustments. Under purchase accounting, we have until one year after the acquisition to finalize the fair value adjustments, meaning we could materially adjust until then the preliminary fair value estimates of Stonegate’s assets and liabilities based on new or updated information. As of September 30, 2017, the purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. We will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.

As of September 30, 2017, we recorded at fair value all credit-impaired loans acquired in the merger of Stonegate Bank into Centennial Bank based on the present value of their expected cash flows. We estimated cash flows using internal credit, interest rate and prepayment risk models using assumptions about matters that are inherently uncertain. We may not realize the estimated cash flows or fair value of these loans. In addition, although the difference between the~~pre-merger~~ ~~carrying value of the credit-impaired loans and their expected cash flows—the“non-accretable~~ difference”—is available to absorb future charge-offs, we may be required to increase our allowance for credit losses and related provision expense because of subsequent additional credit deterioration in these loans.

~~Item 2:~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~

During the three months ended September 30, 2017, the Company utilized a portion of its stock repurchase program last amended and approved by the Board of Directors on January 20, 2017. This program authorized the repurchase of 9,752,000 shares of the Company’s common stock. Proceeds

The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:

Period
   Number of
Shares
Purchased    Average Price
Paid Per Share
Purchased    Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs    Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs⁽¹⁾
July 1 through July 31, 2017
   —      $ —      —      5,664,936
August 1 through August 31, 2017
   380,000    24.36    380,000    5,284,936
September 1 through September 30, 2017
   —      —      —      5,284,936





Total
   380,000       380,000


Period	Number of Shares Purchased	Average Price Paid Per Share Purchased		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(1)
April 1 through April 30, 2022	572,732	$	22.22	572,732	21,337,933
May 1 through May 31, 2022	180,000	21.55		180,000	21,157,933
June 1 through June 30, 2022	280,000	20.92		280,000	20,877,933
Total	1,032,732			1,032,732

(1)The above described stock repurchase program has no expiration date.

Item 3: Defaults Upon Senior Securities

Not applicable.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

Not applicable.

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Item 6: Exhibits

~~(1)~~

~~The above described stock repurchase program has no expiration date.~~

~~Item 3:~~

~~Defaults Upon Senior Securities~~

~~Not applicable.~~

~~Item 4:~~

~~Mine Safety Disclosures~~

~~Not applicable.~~

~~Item 5:~~

~~Other Information~~

~~Not applicable.~~

~~Item 6:~~ ~~Exhibits~~


Exhibit No.			Description of Exhibit
2.1			Agreement and Plan of Merger, dated as of September 15, 2021, by and among Home BancShares, Inc., Centennial Bank, ~~Giant Holdings,~~Happy Bancshares, Inc., and ~~Landmark~~Happy State Bank ~~N.A., dated November 7, 2016.~~ (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form~~8-K/A~~ 8-K filed on ~~November 10, 2016)~~September 15, 2021)**

2.2			Amendment and Joinder Agreement, dated as of October 18, 2021, by and among Home Bancshares, Inc., Centennial Bank, Happy Bancshares, Inc., Happy State Bank and HOMB Acquisition Sub III, Inc. (incorporated by reference to Appendix A of Home BancShares’s registration statement on Form S-4 (File No. 333-260446)), as amended)

2.3			Second Amendment to Agreement and Plan of Merger, dated as of November 8, 2021, by and among Home BancShares, Inc., Centennial Bank, ~~Giant Holdings,~~HOMB Acquisition Sub III, Inc., Happy Bancshares, Inc. and ~~Landmark~~Happy State Bank ~~N.A., dated December 7, 2016.~~ (incorporated by reference to Appendix A of Home BancShares’s ~~Registration Statement~~registration statement on FormS-4 (FileNo. ~~333-214957)~~333-260446), as amended)

~~2.3~~	Acquisition Agreement By and Between Home BancShares, Inc. and Bank of Commerce Holdings, Inc., dated December 1, 2016 (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form~~8-K~~ ~~filed on December 7, 2016)~~

~~2.4~~3.1		Agreement and Plan of Merger by and among Home BancShares, Inc., Centennial Bank and Stonegate Bank, dated March 27, 2017 (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form~~8-K~~ ~~filed on March 27, 2017)~~

~~3.1~~	Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

3.2			Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.2 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

3.3			Second Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.3 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

3.4			Third Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.4 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

3.5			Fourth Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home BancShares’s Quarterly Report on Form10-Q for the quarter ended June 30, 2007, filed on August 8, 2007)

3.6			Fifth Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 4.6 of Home BancShares’s registration statement onForm S-3 (FileNo. 333-157165))

3.7			Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, filed with the Secretary of State of the State of Arkansas on January 14, 2009 (incorporated by reference to Exhibit 3.1 of Home BancShares’s Current Report on Form8-K, filed on January 21, 2009)

3.8			Seventh Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home BancShares’s Current Report on Form8-K filed on April 19, 2013)

3.9			Eighth Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home ~~BancShares~~BancShares’s Current Report on Form8-K filed on April 22, 2016)

3.10			Ninth Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home BancShares’s Current Report on Form 8-K filed on April 23, 2019)

3.11			Tenth Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (incorporated by reference to Exhibit 4.11 of Home BancShares’s registration statement on Form S-8 (File No. 333-264409))

3.12			Amended and Restated Bylaws of Home BancShares, Inc. (incorporated by reference to Exhibit ~~3.5~~3.1 of Home BancShares’s ~~registration statement~~Current Report onForm ~~S-1~~ ~~(FileNo. 333-132427),~~ ~~as amended)~~8-K filed on January 28, 2021)

~~4.1~~3.13			Amendment to the Amended and Restated Bylaws of Home BancShares, Inc. (incorporated by reference to Exhibit 3.1 of Home BancShares’s Current Report on Form 8-K filed on April 22, 2022)

4.1			Specimen Stock Certificate representing Home BancShares, Inc. Common Stock (incorporated by reference to Exhibit ~~4.6~~4.1 2 of ~~Home BancShares’s~~the Company’s registration statement onForm ~~S-1~~S-3ASR (FileNo. ~~333-132427),~~ ~~as amended)~~333-261495))

Table of Contents



4.2						Instruments defining the rights of security holders including indentures. Home BancShares hereby agrees to furnish to the SEC upon request copies of instruments defining the rights of holders of long-term debt of Home BancShares and its consolidated subsidiaries. No issuance of debt exceeds ten percent of the assets of Home BancShares and its subsidiaries on a consolidated basis.

~~12.1~~10.1						Computation of Ratios of Earnings to Fixed ChargesEmployment Agreement by and between Mikel Williamson and Centennial Bank, effective April 1, 2022.**

15						Awareness of Independent Registered Public Accounting Firm*

31.1
CEO Certification PursuantRule 13a-14(a)/15d-14(a)*
31.2
CFO Certification PursuantRule 13a-14(a)/15d-14(a)*
32.1
CEO Certification Pursuant 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes – Oxley Act of 2002*
32.2
CFO Certification Pursuant 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes – Oxley Act of 2002*
101.INS Inline XBRL Instance Document*Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH Inline XBRL Taxonomy Extension Schema Document*
101.CAL ~~XBRL~~InlineXBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	~~Filed herewith~~

* Filed herewith

** The disclosure schedules referenced in the Agreement and Plan of Merger have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. The Company hereby agrees to furnish supplementally a copy of any omitted disclosure schedule to the SEC upon request.

***Filed herewith. Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of SEC Regulation S-K. The Company hereby agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon request.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HOME BANCSHARES, INC.

(Registrant)

Date: ~~November 7, 2017~~

August 9, 2022

/s/ ~~C. Randall Sims~~John W. Allison

~~C. Randall Sims,~~John W. Allison, Chairman and Chief Executive Officer

Date: ~~November 7, 2017~~

August 9, 2022

/s/ Brian S. Davis

Brian S. Davis, Chief Financial Officer

Date:

August 9, 2022

/s/ Jennifer C. Floyd

Jennifer C. Floyd, Chief Accounting Officer

~~101~~


(In thousands, except share data)	September 30, 2017			December 31, 2016
	(Unaudited)
Assets
Cash and due from banks	$	197,953		$	123,758
Interest-bearing deposits with other banks		354,367			92,891

Cash and cash equivalents		552,320			216,649
Federal funds sold		4,545			1,550
Investment securities –available-for-sale		1,575,685			1,072,920
Investment securities –held-to-maturity		234,945			284,176
Loans receivable		10,286,193			7,387,699
Allowance for loan losses		(111,620	)		(80,002	)

Loans receivable, net		10,174,573			7,307,697
Bank premises and equipment, net		239,990			205,301
Foreclosed assets held for sale		21,701			15,951
Cash value of life insurance		146,158			86,491
Accrued interest receivable		41,071			30,838
Deferred tax asset, net		121,787			61,298
Goodwill		929,129			377,983
Core deposit and other intangibles		50,982			18,311
Other assets		163,081			129,300

Total assets	$	14,255,967		$	9,808,465

Liabilities and Stockholders’ Equity
Deposits:
Demand andnon-interest-bearing	$	2,555,465		$	1,695,184
Savings and interest-bearing transaction accounts		6,341,883			3,963,241
Time deposits		1,551,422			1,284,002

Total deposits		10,448,770			6,942,427
Securities sold under agreements to repurchase		149,531			121,290
FHLB and other borrowed funds		1,044,333			1,305,198
Accrued interest payable and other liabilities		38,782			51,234
Subordinated debentures		367,835			60,826

Total liabilities		12,049,251			8,480,975

Stockholders’ equity:
Common stock, par value $0.01; shares authorized 200,000,000 in 2017 and 2016; shares issued and outstanding 173,665,904 in 2017 and 140,472,205 in 2016		1,737			1,405
Capital surplus		1,674,642			869,737
Retained earnings		526,448			455,948
Accumulated other comprehensive income		3,889			400

Total stockholders’ equity		2,206,716			1,327,490

Total liabilities and stockholders’ equity	$	14,255,967		$	9,808,465


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2017			2016			2017			2016
	(Unaudited)
Interest income:
Loans	$	113,269		$	102,953		$	331,763		$	300,281
Investment securities
Taxable		7,071			5,583			18,983			16,178
Tax-exempt		3,032			2,720			8,942			8,358
Deposits – other banks		538			117			1,573			325
Federal funds sold		3			2			9			7

Total interest income		123,913			111,375			361,270			325,149

Interest expense:
Interest on deposits		8,535			4,040			20,831			11,528
Federal funds purchased		—			—			—			2
FHLB and other borrowed funds		3,408			3,139			10,707			9,283
Securities sold under agreements to repurchase		232			142			593			421
Subordinated debentures		4,969			401			10,203			1,164

Total interest expense		17,144			7,722			42,334			22,398

Net interest income		106,769			103,653			318,936			302,751
Provision for loan losses		35,023			5,536			39,324			16,905

Net interest income after provision for loan losses		71,746			98,117			279,612			285,846

Non-interest income:
Service charges on deposit accounts		6,408			6,527			18,356			18,607
Other service charges and fees		8,490			7,504			25,983			22,589
Trust fees		365			365			1,130			1,128
Mortgage lending income		3,172			3,932			9,713			10,276
Insurance commissions		472			534			1,482			1,808
Increase in cash value of life insurance		478			344			1,251			1,092
Dividends from FHLB, FRB, Bankers’ bank & other		834			808			2,455			2,147
Gain on acquisitions		—			—			3,807			—
Gain on sale of SBA loans		163			364			738			443
Gain (loss) on sale of branches, equipment and other assets, net		(1,337	)		(86	)		(962	)		701
Gain (loss) on OREO, net		335			132			849			(713	)
Gain (loss) on securities, net		136			—			939			25
FDIC indemnification accretion/(amortization), net		—			—			—			(772	)
Other income		1,941			1,590			6,603			5,892

Totalnon-interest income		21,457			22,014			72,344			63,223

Non-interest expense:
Salaries and employee benefits		28,510			25,623			83,965			75,018
Occupancy and equipment		7,887			6,668			21,602			19,848
Data processing expense		2,853			2,791			8,439			8,221
Other operating expenses		31,596			15,944			62,984			41,174

Totalnon-interest expense		70,846			51,026			176,990			144,261

Income before income taxes		22,357			69,105			174,966			204,808
Income tax expense		7,536			25,485			63,192			76,252

Net income	$	14,821		$	43,620		$	111,774		$	128,556

Basic earnings per share	$	0.10		$	0.31		$	0.78		$	0.92

Diluted earnings per share	$	0.10		$	0.31		$	0.78		$	0.91


	Stonegate Bank
	Acquired from Stonegate			Fair Value Adjustments			As Recorded by HBI
	(Dollars in thousands)
Assets
Cash and due from banks	$	100,958		$	—		$	100,958
Interest-bearing deposits with other banks		135,631			—			135,631
Federal funds sold		1,515			—			1,515
Investment securities		103,041			477			103,518
Loans receivable		2,446,149			(73,990	)		2,372,159
Allowance for loan losses		(21,507	)		21,507			—

Loans receivable, net		2,424,642			(52,483	)		2,372,159
Bank premises and equipment, net		38,868			(3,572	)		35,296
Foreclosed assets held for sale		4,187			(801	)		3,386
Cash value of life insurance		48,000			—			48,000
Accrued interest receivable		7,088			—			7,088
Deferred tax asset, net		27,340			11,244			38,584
Goodwill		81,452			(81,452	)		—
Core deposit and other intangibles		10,505			20,364			30,869
Other assets		9,598			231			9,829

Total assets acquired	$	2,992,825		$	(105,992	)	$	2,886,833

Liabilities
Deposits
Demand andnon-interest-bearing	$	585,959		$	—		$	585,959
Savings and interest-bearing transaction accounts		1,776,256			—			1,776,256
Time deposits		163,567			(85	)		163,482

Total deposits		2,525,782			(85	)		2,525,697
FHLB borrowed funds		32,667			184			32,851
Securities sold under agreements to repurchase		26,163			—			26,163
Accrued interest payable and other liabilities		8,100			5			8,105
Subordinated debentures		8,345			1,490			9,835

Total liabilities assumed		2,601,057			1,594			2,602,651

Equity
Total equity assumed		391,768			(391,768	)		—

Total liabilities and equity assumed	$	2,992,825		$	(390,174	)		2,602,651

Net assets acquired								284,182
Purchase price								792,370

Goodwill							$	508,188


	Giant Holdings, Inc.
	Acquired from GHI			Fair Value Adjustments			As Recorded by HBI
	(Dollars in thousands)
Assets
Cash and due from banks	$	41,019		$	—		$	41,019
Interest-bearing deposits with other banks		4,057			1			4,058
Investment securities		1,961			(5	)		1,956
Loans receivable		335,886			(6,517	)		329,369
Allowance for loan losses		(4,568	)		4,568			—

Loans receivable, net		331,318			(1,949	)		329,369
Bank premises and equipment, net		2,111			608			2,719
Cash value of life insurance		10,861			—			10,861
Accrued interest receivable		850			—			850
Deferred tax asset, net		2,286			1,807			4,093
Core deposit and other intangibles		172			3,238			3,410
Other assets		254			(489	)		(235	)

Total assets acquired	$	394,889		$	3,211		$	398,100

Liabilities
Deposits
Demand andnon-interest-bearing	$	75,993		$	—		$	75,993
Savings and interest-bearing transaction accounts		139,459			—			139,459
Time deposits		88,219			324			88,543

Total deposits		303,671			324			303,995
FHLB borrowed funds		26,047			431			26,478
Accrued interest payable and other liabilities		14,552			18			14,570

Total liabilities assumed		344,270			773			345,043

Equity
Total equity assumed		50,619			(50,619	)		—

Total liabilities and equity assumed	$	394,889		$	(49,846	)		345,043

Net assets acquired								53,057
Purchase price								96,015

Goodwill							$	42,958


	The Bank of Commerce
	Acquired from BOC			Fair Value Adjustments			As Recorded by HBI
	(Dollars in thousands)
Assets
Cash and due from banks	$	4,610		$	—		$	4,610
Interest-bearing deposits with other banks		14,360			—			14,360
Investment securities		25,926			(113	)		25,813
Loans receivable		124,289			(5,751	)		118,538
Allowance for loan losses		(2,037	)		2,037			—

Loans receivable, net		122,252			(3,714	)		118,538
Bank premises and equipment, net		1,887			—			1,887
Foreclosed assets held for sale		8,523			(3,165	)		5,358
Accrued interest receivable		481			—			481
Deferred tax asset, net		—			4,198			4,198
Core deposit intangible		—			968			968
Other assets		1,880			—			1,880

Total assets acquired	$	179,919		$	(1,826	)	$	178,093

Liabilities
Deposits
Demand andnon-interest-bearing	$	27,245		$	—		$	27,245
Savings and interest-bearing transaction accounts		32,300			—			32,300
Time deposits		79,945			270			80,215

Total deposits		139,490			270			139,760
FHLB borrowed funds		30,000			42			30,042
Accrued interest payable and other liabilities		564			(255	)		309

Total liabilities assumed	$	170,054		$	57			170,111

Net assets acquired								7,982
Purchase price								4,175

Pre-tax gain on acquisition							$	3,807


	September 30, 2017
	Available-for-Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	396,323	$	1,527	$	(658	)	$	397,192
Residential mortgage-backed securities		446,397		884		(1,534	)		445,747
Commercial mortgage-backed securities		446,651		1,272		(1,743	)		446,180
State and political subdivisions		244,746		4,924		(536	)		249,134
Other securities		35,168		2,642		(378	)		37,432

Total	$	1,569,285	$	11,249	$	(4,849	)	$	1,575,685


	Held-to-Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	6,093	$	26	$	—		$	6,119
Residential mortgage-backed securities		60,755		233		(150	)		60,838
Commercial mortgage-backed securities		17,878		206		(5	)		18,079
State and political subdivisions		150,219		3,764		(2	)		153,981

Total	$	234,945	$	4,229	$	(157	)	$	239,017


	September 30, 2017		December 31, 2016
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	4,532,402	$	3,153,121
Construction/land development		1,648,923		1,135,843
Agricultural		88,295		77,736
Residential real estate loans
Residential1-4 family		1,968,688		1,356,136
Multifamily residential		497,910		340,926

Total real estate		8,736,218		6,063,762
Consumer		51,515		41,745
Commercial and industrial		1,296,485		1,123,213
Agricultural		57,489		74,673
Other		144,486		84,306

Total loans receivable	$	10,286,193	$	7,387,699


	Nine Months Ended September 30, 2017
	(In thousands)
Allowance for loan losses:
Beginning balance	$	80,002
Loans charged off		(10,535	)
Recoveries of loans previously charged off		2,829

Net loans recovered (charged off)		(7,706	)

Provision for loan losses		39,324

Balance, September 30, 2017	$	111,620


	Three Months Ended September 30, 2017
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	12,842		$	27,843		$	17,715		$	12,828		$	3,063		$	5,847		$	80,138
Loans charged off		(182	)		(796	)		(309	)		(2,280	)		(857	)		—			(4,424	)
Recoveries of loans previously charged off		85			278			226			140			154			—			883

Net loans recovered (charged off)		(97	)		(518	)		(83	)		(2,140	)		(703	)		—			(3,541	)
Provision for loan losses		6,175			18,192			8,036			3,934			1,292			(2,606	)		35,023

Balance, September 30	$	18,920		$	45,517		$	25,668		$	14,622		$	3,652		$	3,241		$	111,620


	Nine Months Ended September 30, 2017
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	11,522		$	28,188		$	16,517		$	12,756		$	4,188		$	6,831		$	80,002
Loans charged off		(508	)		(2,451	)		(2,597	)		(3,059	)		(1,920	)		—			(10,535	)
Recoveries of loans previously charged off		312			988			480			392			657			—			2,829

Net loans recovered (charged off)		(196	)		(1,463	)		(2,117	)		(2,667	)		(1,263	)		—			(7,706	)
Provision for loan losses		7,594			18,792			11,268			4,533			727			(3,590	)		39,324

Balance, September 30	$	18,920		$	45,517		$	25,668		$	14,622		$	3,652		$	3,241		$	111,620


	As of September 30, 2017
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Period end amount allocated to:
Loans individually evaluated for impairment	$	1,066	$	995	$	306	$	512	$	8	$	—	$	2,887
Loans collectively evaluated for impairment		17,839		44,016		24,467		13,925		3,613		3,241		107,101

Loans evaluated for impairment balance, September 30		18,905		45,011		24,773		14,437		3,621		3,241		109,988

Purchased credit impaired loans		15		506		895		185		31		—		1,632

Balance, September 30	$	18,920	$	45,517	$	25,668	$	14,622	$	3,652	$	3,241	$	111,620

Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	31,130	$	50,518	$	22,601	$	13,958	$	1,009	$	—	$	119,216
Loans collectively evaluated for impairment		1,601,961		4,442,747		2,392,014		1,265,189		250,074		—		9,951,985

Loans evaluated for impairment balance, September 30		1,633,091		4,493,265		2,414,615		1,279,147		251,083		—		10,071,201

Purchased credit impaired loans		15,832		127,432		51,983		17,338		2,407		—		214,992

Balance, September 30	$	1,648,923	$	4,620,697	$	2,466,598	$	1,296,485	$	253,490	$	—	$	10,286,193


	Year Ended December 31, 2016
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	10,782		$	26,798		$	14,818		$	9,324		$	5,016		$	2,486	$	69,224
Loans charged off		(334	)		(2,590	)		(3,810	)		(4,424	)		(1,507	)		—		(12,665	)
Recoveries of loans previously charged off		107			608			836			656			699			—		2,906

Net loans recovered (charged off)		(227	)		(1,982	)		(2,974	)		(3,768	)		(808	)		—		(9,759	)
Provision for loan losses		171			274			4,181			9,049			448			2,782		16,905

Balance, September 30		10,726			25,090			16,025			14,605			4,656			5,268		76,370
Loans charged off		(48	)		(996	)		(1,787	)		(1,354	)		(651	)		—		(4,836	)
Recoveries of loans previously charged off		1,018			249			316			4,877			305			—		6,765

Net loans recovered (charged off)		970			(747	)		(1,471	)		3,523			(346	)		—		1,929
Provision for loan losses		(174	)		3,845			1,963			(5,372	)		(122	)		1,563		1,703

Balance, December 31	$	11,522		$	28,188		$	16,517		$	12,756		$	4,188		$	6,831	$	80,002


	As of December 31, 2016
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Period end amount allocated to:
Loans individually evaluated for impairment	$	15	$	1,416	$	103	$	95	$	—	$	—	$	1,629
Loans collectively evaluated for impairment		11,463		25,641		15,796		12,596		4,176		6,831		76,503

Loans evaluated for impairment balance, December 31		11,478		27,057		15,899		12,691		4,176		6,831		78,132

Purchased credit impaired loans		44		1,131		618		65		12		—		1,870

Balance, December 31	$	11,522	$	28,188	$	16,517	$	12,756	$	4,188	$	6,831	$	80,002

Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	12,374	$	74,723	$	35,187	$	25,873	$	1,096	$	—	$	149,253
Loans collectively evaluated for impairment		1,105,921		3,080,201		1,608,805		1,085,891		198,064		—		7,078,882

Loans evaluated for impairment balance, December 31		1,118,295		3,154,924		1,643,992		1,111,764		199,160		—		7,228,135

Purchased credit impaired loans		17,548		75,933		53,070		11,449		1,564		—		159,564

Balance, December 31	$	1,135,843	$	3,230,857	$	1,697,062	$	1,123,213	$	200,724	$	—	$	7,387,699


	September 30, 2017
	Loans Past Due 30-59 Days		Loans Past Due 60-89 Days		Loans Past Due 90 Days or More		Total Past Due		Current Loans		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	3,806	$	2,684	$	27,418	$	33,908	$	4,498,494	$	4,532,402	$	16,482
Construction/land development		2,267		309		8,778		11,354		1,637,569		1,648,923		3,258
Agricultural		152		—		34		186		88,109		88,295		—
Residential real estate loans
Residential1-4 family		8,768		1,659		18,441		28,868		1,939,820		1,968,688		4,624
Multifamily residential		595		—		1,194		1,789		496,121		497,910		1,039

Total real estate		15,588		4,652		55,865		76,105		8,660,113		8,736,218		25,403
Consumer		729		18		142		889		50,626		51,515		3
Commercial and industrial		3,275		3,229		7,792		14,296		1,282,189		1,296,485		3,771
Agricultural and other		363		101		178		642		201,333		201,975		6

Total	$	19,955	$	8,000	$	63,977	$	91,932	$	10,194,261	$	10,286,193	$	29,183


	September 30, 2017
							Three Months Ended				Nine Months Ended
	Unpaid Contractual Principal Balance		Total Recorded Investment		Allocation of Allowance for Loan Losses		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(In thousands)
Loans without a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	29	$	—	$	—	$	15	$	1	$	15	$	2
Construction/land development		66		—		—		12		1		6		3
Agricultural		35		—		—		—		—		—		1
Residential real estate loans
Residential1-4 family		79		—		—		101		2		108		7
Multifamily residential		—		—		—		—		—		—		—

Total real estate		209		—		—		128		4		129		13
Consumer		4		—		—		—		—		—		—
Commercial and industrial		101		—		—		41		2		51		6
Agricultural and other		—		—		—		—		—		—		—

Total loans without a specific valuation allowance		314		—		—		169		6		180		19
Loans with a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential		49,606		45,312		982		42,245		662		44,962		1,311
Construction/land development		13,897		12,875		1,066		11,177		58		10,173		192
Agricultural		281		319		13		218		4		259		7
Residential real estate loans
Residential1-4 family		24,833		21,042		231		20,893		116		23,294		298
Multifamily residential		2,812		2,681		75		2,168		32		1,358		64

Total real estate		91,429		82,229		2,367		76,701		872		80,046		1,872
Consumer		153		149		—		145		—		156		—
Commercial and industrial		18,354		14,271		512		10,308		76		8,935		84
Agricultural and other		312		343		8		606		3		728		5

Total loans with a specific valuation allowance		110,248		96,992		2,887		87,760		951		89,865		1,961
Total impaired loans
Real estate:
Commercial real estate loans
Non-farm/non-residential		49,635		45,312		982		42,260		663		44,977		1,313
Construction/land development		13,963		12,875		1,066		11,189		59		10,179		195
Agricultural		316		319		13		218		4		259		8
Residential real estate loans
Residential1-4 family		24,912		21,042		231		20,994		118		23,402		305
Multifamily residential		2,812		2,681		75		2,168		32		1,358		64

Total real estate		91,638		82,229		2,367		76,829		876		80,175		1,885
Consumer		157		149		—		145		—		156		—
Commercial and industrial		18,455		14,271		512		10,349		78		8,986		90
Agricultural and other		312		343		8		606		3		728		5

Total impaired loans	$	110,562	$	96,992	$	2,887	$	87,929	$	957	$	90,045	$	1,980


	December 31, 2016
							Year Ended
	Unpaid Contractual Principal Balance		Total Recorded Investment		Allocation of Allowance for Loan Losses		Average Recorded Investment		Interest Recognized
	(In thousands)
Loans without a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	29	$	29	$	—	$	23	$	2
Construction/land development		—		—		—		6		—
Agricultural		40		—		—		—		2
Residential real estate loans
Residential1-4 family		231		231		—		119		15
Multifamily residential		—		—		—		19		—

Total real estate		300		260		—		167		19
Consumer		—		—		—		—		—
Commercial and industrial		124		124		—		64		8
Agricultural and other		—		—		—		—		—

Total loans without a specific valuation allowance		424		384		—		231		27
Loans with a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential		52,477		50,355		1,414		42,979		1,335
Construction/land development		8,313		7,595		15		12,878		334
Agricultural		395		438		2		469		—
Residential real estate loans
Residential1-4 family		26,681		25,675		95		20,239		293
Multifamily residential		552		552		8		922		9

Total real estate		88,418		84,615		1,534		77,487		1,971
Consumer		165		161		—		223		3
Commercial and industrial		7,160		7,032		95		10,630		255
Agricultural and other		935		935		—		1,037		—

Total loans with a specific valuation allowance		96,678		92,743		1,629		89,377		2,229
Total impaired loans
Real estate:
Commercial real estate loans
Non-farm/non-residential		52,506		50,384		1,414		43,002		1,337
Construction/land development		8,313		7,595		15		12,884		334
Agricultural		435		438		2		469		2
Residential real estate loans
Residential1-4 family		26,912		25,906		95		20,358		308
Multifamily residential		552		552		8		941		9

Total real estate		88,718		84,875		1,534		77,654		1,990
Consumer		165		161		—		223		3
Commercial and industrial		7,284		7,156		95		10,694		263
Agricultural and other		935		935		—		1,037		—

Total impaired loans	$	97,102	$	93,127	$	1,629	$	89,608	$	2,256


	September 30, 2017
	Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	21,521	$	526	$	—	$	22,047
Construction/land development		24,427		114		—		24,541
Agricultural		341		—		—		341
Residential real estate loans
Residential1-4 family		22,852		573		—		23,425
Multifamily residential		941		—		—		941

Total real estate		70,082		1,213		—		71,295
Consumer		184		10		—		194
Commercial and industrial		17,994		50		—		18,044
Agricultural and other		270		—		—		270

Total risk rated loans	$	88,530	$	1,273	$	—	$	89,803


	September 30, 2017
	Risk Rated 1		Risk Rated 2		Risk Rated 3		Risk Rated 4		Risk Rated 5		Classified Total		Total
	(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	1,021	$	566	$	2,523,273	$	1,818,301	$	39,968	$	22,047	$	4,405,176
Construction/land development		31		571		273,090		1,323,834		11,024		24,541		1,633,091
Agricultural		—		45		54,546		32,004		1,153		341		88,089
Residential real estate loans
Residential1-4 family		1,126		1,095		1,416,454		470,981		11,711		23,425		1,924,792
Multifamily residential		—		—		364,864		123,804		214		941		489,823

Total real estate		2,178		2,277		4,632,227		3,768,924		64,070		71,295		8,540,971
Consumer		15,239		362		25,404		9,272		78		194		50,549
Commercial and industrial		17,717		9,041		622,782		601,360		10,203		18,044		1,279,147
Agricultural and other		2,296		4,388		145,243		48,337		—		270		200,534

Total risk rated loans	$	37,430	$	16,068	$	5,425,656	$	4,427,893	$	74,351	$	89,803		10,071,201

Purchased credit impaired loans														214,992

Total loans receivable													$	10,286,193


	September 30, 2017
	Number of Loans		Pre- Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance
	(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		16	$	18,162	$	11,395	$	253	$	5,432	$	17,080
Construction/land development		5		782		690		77		—		767
Agricultural		2		345		282		38		—		320
Residential real estate loans
Residential1-4 family		22		5,708		3,746		84		1,361		5,191
Multifamily residential		3		1,701		1,355		—		287		1,642

Total real estate		48		26,698		17,468		452		7,080		25,000
Consumer		2		7		—		7		—		7
Commercial and industrial		9		647		365		71		3		439
Other		1		166		166		—		—		166

Total		60	$	27,518	$	17,999	$	530	$	7,083	$	25,612


	September 30, 2017				December 31, 2016
	Number of Loans		Recorded Balance		Number of Loans		Recorded Balance
	(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		2	$	2,284		2	$	696
Agricultural		—		—		2		123
Residential real estate loans
Residential1-4 family		4		124		13		2,240

Total real estate		6		2,408		17		3,059
Commercial and industrial		1		16		—		—

Total		7	$	2,424		17	$	3,059


	September 30, 2017		December 31, 2016
	(In thousands)
Commercial real estate loans
Non-farm/non-residential	$	10,354	$	9,423
Construction/land development		6,328		4,009
Agricultural				—
Residential real estate loans
Residential1-4 family		3,733		2,076
Multifamily residential		1,286		443

Total foreclosed assets held for sale	$	21,701	$	15,951


	GHI		BOC		Stonegate
Contractually required principal and interest at acquisition	$	22,379	$	18,586	$	98,444
Non-accretable difference (expected losses and foregone interest)		4,462		2,811		23,297

Cash flows expected to be collected at acquisition		17,917		15,775		75,147
Accretable yield		2,071		1,043		11,761

Basis in purchased credit impaired loans at acquisition	$	15,846	$	14,732	$	63,386


	Accretable Yield			Carrying Amount of Loans
	(In thousands)
Balance at beginning of period	$	38,212		$	159,564
Reforecasted future interest payments for loan pools		3,739			—
Accretion recorded to interest income		(14,955	)		14,955
Acquisitions		14,875			93,964
Adjustment to yield		2,210			—
Transfers to foreclosed assets held for sale		—			(13,407	)
Payments received, net		—			(40,084	)

Balance at end of period	$	44,081		$	214,992


	September 30, 2017
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(In thousands)
Securities sold under agreements to repurchase:
U.S. government-sponsored enterprises	$	14,125	$	—	$	—	$	10,000	$	24,125
Mortgage-backed securities		29,677		—		—		—		29,677
State and political subdivisions		75,829		—		—		—		75,829
Other securities		19,900		—		—		—		19,900

Total borrowings	$	139,531	$	—	$	—	$	10,000	$	149,531


	As of September 30, 2017		As of December 31, 2016
	(In thousands)
Trust preferred securities
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty	$	3,093	$	3,093
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty		15,464		15,464
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty		25,774		25,774
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty		16,495		16,495
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month LIBOR rate, reset quarterly, currently callable without penalty		4,292		—
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty		5,545		—
Subordinated debt securities
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty		297,172		—

Total	$	367,835	$	60,826


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Statutory federal income tax rate		35.00	%		35.00	%		35.00	%		35.00	%
Effect ofnon-taxable interest income		(4.48	)		(1.47	)		(1.82	)		(1.54	)
Effect of gain on acquisitions		—			—			(0.76	)		—
Stock compensation		(0.09	)		—			(0.49	)		—
State income taxes, net of federal benefit		3.91			4.07			4.01			4.07
Other		(0.63	)		(0.72	)		0.18			(0.30	)

Effective income tax rate		33.71	%		36.88	%		36.12	%		37.23	%


Period	Number of Shares Purchased		Average Price Paid Per Share Purchased		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1 through July 31, 2017		—	$	—		—		5,664,936
August 1 through August 31, 2017		380,000		24.36		380,000		5,284,936
September 1 through September 30, 2017		—		—		—		5,284,936

Total		380,000				380,000


	For the Nine Months Ended September 30, 2017					For the Year Ended December 31, 2016
	Shares (000)			Weighted- Average Exercisable Price		Shares (000)			Weighted- Average Exercisable Price
Outstanding, beginning of year		2,397		$	15.19		2,794		$	12.71
Granted		80			25.96		140			21.25
Forfeited/Expired		—			—		(14	)		17.28
Exercised		(178	)		7.60		(523	)		3.50

Outstanding, end of period		2,299			16.15		2,397			15.19

Exercisable, end of period		1,017		$	13.32		639		$	8.88


	For the Nine Months Ended September 30, 2017			For the Year Ended December 31, 2016
Expected dividend yield		1.39	%		1.65	%
Expected stock price volatility		28.47	%		26.66	%
Risk-free interest rate		2.06	%		1.65	%
Expected life of options		6.5 years			6.5 years

Quoted prices in active markets for identical assets or liabilities

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities