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 ~~June 30, 2018~~March 31, 2019

☐	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

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
~~incorporation or organization)~~		Identification No.)


719 Harkrider, Suite 100, 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 ~~the definitions~~definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

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 ☒☑

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

NASDAQ Global Select Market

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

Common Stock Issued and Outstanding: ~~174,662,674~~167,999,154 shares as of ~~August 3, 2018.~~May 2, 2019.

HOME BANCSHARES, INC.

FORM10-Q

~~June 30, 2018~~March 31, 2019

INDEX


		Page No.
Part I:	Financial Information

Item 1:	Financial Statements

	Consolidated Balance Sheets – ~~June 30, 2018~~ March 31, 2019 (Unaudited) and December 31, ~~2017~~2018		4

	Consolidated Statements of Income (Unaudited) – Three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		5

	Consolidated Statements of Comprehensive Income (Unaudited) – Three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		6

	Consolidated Statements of Stockholders’ Equity (Unaudited) – ~~Six~~ Three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		6

	Consolidated Statements of Cash Flows (Unaudited) – ~~Six~~ Three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~		7

	Condensed Notes to Consolidated Financial Statements (Unaudited)		~~8-52~~8-46

	Report of Independent Registered Public Accounting Firm		5347

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~54-91~~48-78

Item 3:	Quantitative and Qualitative Disclosures About Market Risk		~~91-94~~79-81

Item 4:	Controls and Procedures		9481

Part II:	Other Information

Item 1:	Legal Proceedings		9482

Item 1A:	Risk Factors		9582

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds		9582

Item 3:	Defaults Upon Senior Securities		9582

Item 4:	Mine Safety Disclosures		9582

Item 5:	Other Information		9582

Item 6:	Exhibits		~~96-97~~83-84

Signatures				9885

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of our statements contained in this document, including matters discussed under the caption “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 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;

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 any businesses that we 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 and other future legislative and regulatory changes;

governmental monetary and fiscal ~~policies, as well as legislative and regulatory changes, including as a result of initiatives of the 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 the Cuban government 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;

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

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

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;

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 losses or changes in our estimate of the adequacy of the allowance for loan 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 of our Form10-K filed with the Securities and Exchange Commission (the “SEC”) on February ~~27, 2018.~~26, 2019.

PART I: FINANCIAL INFORMATION

Item 1:

Financial Statements

~~Item 1: Financial Statements~~

Home BancShares, Inc.

Consolidated Balance Sheets


(In thousands, except share data)	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	197,658		$	166,915		$	141,027		$	175,024
Interest-bearing deposits with other banks		298,085			469,018			421,443			482,915

Cash and cash equivalents		495,743			635,933			562,470			657,939
Federal funds sold		500			24,109			1,700			325
Investment securities –available-for-sale		1,718,704			1,663,517			2,013,123			1,785,862
Investment securities –held-to-maturity		204,401			224,756			—			192,776
Loans receivable		10,897,970			10,331,188			10,978,935			11,071,879
Allowance for loan losses		(111,516	)		(110,266	)		(106,357	)		(108,791	)

Loans receivable, net		10,786,454			10,220,922			10,872,578			10,963,088
Bank premises and equipment, net		234,634			237,439			279,012			233,261
Foreclosed assets held for sale		17,853			18,867			14,466			13,236
Cash value of life insurance		147,281			146,866			149,353			148,621
Accrued interest receivable		45,682			45,708			50,288			48,945
Deferred tax asset, net		78,435			76,564			64,061			73,275
Goodwill		956,418			927,949			958,408			958,408
Core deposit and other intangibles		46,101			49,351			41,310			42,896
Other assets		191,914			177,779			172,732			183,806

Total assets	$	14,924,120		$	14,449,760		$	15,179,501		$	15,302,438


Liabilities and Stockholders’ Equity
Deposits:
Demand andnon-interest-bearing	$	2,523,553		$	2,385,252		$	2,519,175		$	2,401,232
Savings and interest-bearing transaction accounts		6,573,902			6,476,819			6,650,181			6,624,407
Time deposits		1,638,578			1,526,431			1,898,096			1,874,139

Total deposits		10,736,033			10,388,502			11,067,452			10,899,778
Securities sold under agreements to repurchase		139,750			147,789			152,239			143,679
FHLB and other borrowed funds		1,309,950			1,299,188			1,105,175			1,472,393
Accrued interest payable and other liabilities		55,971			41,959			124,172			67,912
Subordinated debentures		368,403			368,031			368,979			368,790

Total liabilities		12,610,107			12,245,469			12,818,017			12,952,552

Stockholders’ equity:
Common stock, par value $0.01; shares authorized 200,000,000 in 2018 and 2017; shares issued and outstanding 174,510,874 in 2018 and 173,632,983 in 2017		1,745			1,736
Common stock, par value $0.01; shares authorized 200,000,000 in 2019 and 2018; shares issued and outstanding 168,172,838 in 2019 and 170,720,072 in 2018								1,682			1,707
Capital surplus		1,693,337			1,675,318			1,560,994			1,609,810
Retained earnings		642,540			530,658			803,629			752,184
Accumulated other comprehensive loss		(23,609	)		(3,421	)		(4,821	)		(13,815	)

Total stockholders’ equity		2,314,013			2,204,291			2,361,484			2,349,886

Total liabilities and stockholders’ equity	$	14,924,120		$	14,449,760		$	15,179,501		$	15,302,438

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Income


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(In thousands, except per share data)	2018		2017		2018		2017		2019		2018
	(Unaudited)								(Unaudited)
Interest income:
Loans	$	152,996	$	112,732	$	301,061	$	218,494	$	163,848	$	148,065
Investment securities
Taxable		8,979		6,434		17,949		11,912		10,706		8,970
Tax-exempt		3,368		2,966		6,374		5,910		3,379		3,006
Deposits – other banks		1,206		727		2,135		1,035		1,543		929
Federal funds sold		12		4		18		6		11		6

Total interest income		166,561		122,863		327,537		237,357		179,487		160,976

Interest expense:
Interest on deposits		18,164		6,810		32,970		12,296		28,006		14,806
Federal funds purchased		—		—		1		—		—		1
FHLB and other borrowed funds		4,245		3,710		8,825		7,299		6,118		4,580
Securities sold under agreements to repurchase		372		196		748		361		634		376
Subordinated debentures		5,168		4,795		10,172		5,234		5,259		5,004

Total interest expense		27,949		15,511		52,716		25,190		40,017		24,767

Net interest income		138,612		107,352		274,821		212,167		139,470		136,209
Provision for loan losses		2,722		387		4,322		4,301		—		1,600

Net interest income after provision for loan losses		135,890		106,965		270,499		207,866		139,470		134,609

Non-interest income:
Service charges on deposit accounts		6,780		5,966		12,855		11,948		6,401		6,075
Other service charges and fees		9,797		8,576		19,952		17,493		6,563		10,155
Trust fees		379		309		825		765		403		446
Mortgage lending income		3,477		3,750		6,134		6,541		2,435		2,657
Insurance commissions		526		465		1,205		1,010		609		679
Increase in cash value of life insurance		730		463		1,384		773		736		654
Dividends from FHLB, FRB, FNBB & other		1,600		472		2,477		1,621
Gain on acquisitions		—		—		—		3,807
Dividends from FHLB, FRB, First National Bankers’ Bank & other										3,505		877
Gain on sale of SBA loans		262		387		444		575		241		182
Gain (loss) on sale of branches, equipment and other assets, net		—		431		7		375		79		7
Gain (loss) on OREO, net		1,046		393		1,451		514		206		405
Gain (loss) on securities, net		—		380		—		803
Other income		3,076		2,825		6,744		4,662		2,494		3,668

Totalnon-interest income		27,673		24,417		53,478		50,887		23,672		25,805

Non-interest expense:
Salaries and employee benefits		34,476		28,034		69,490		55,455		37,836		35,014
Occupancy and equipment		8,519		7,034		17,502		13,715		8,823		8,983
Data processing expense		3,339		2,863		7,325		5,586		3,970		3,986
Other operating expenses		16,894		13,072		32,291		31,388		18,428		15,397

Totalnon-interest expense		63,228		51,003		126,608		106,144		69,057		63,380

Income before income taxes		100,335		80,379		197,369		152,609		94,085		97,034
Income tax expense		24,310		30,282		48,280		55,656		22,735		23,970

Net income	$	76,025	$	50,097	$	149,089	$	96,953	$	71,350	$	73,064

Basic earnings per share	$	0.44	$	0.35	$	0.86	$	0.68	$	0.42	$	0.42

Diluted earnings per share	$	0.44	$	0.35	$	0.86	$	0.68	$	0.42	$	0.42

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Comprehensive Income


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(In thousands)	2018			2017			2018			2017			2019			2018
	(Unaudited)												(Unaudited)
Net income	$	76,025		$	50,097		$	149,089		$	96,953
Net income available to all stockholders													$	71,350		$	73,064
Net unrealized gain (loss) onavailable-for-sale securities		(4,345	)		9,318			(25,978	)		10,746			12,797			(21,633	)
Less: reclassification adjustment for realized (gains) losses included in income		—			(380	)		—			(803	)

Other comprehensive (loss) income, before tax effect		(4,345	)		8,938			(25,978	)		9,943
Tax effect on other comprehensive income		1,018			(3,506	)		6,780			(3,901	)
Other comprehensive income gain (loss), before tax effect														12,797			(21,633	)
Tax effect on other comprehensive income (loss)														(3,344	)		5,762

Other comprehensive income (loss)		(3,327	)		5,432			(19,198	)		6,042			9,453			(15,871	)

Comprehensive income	$	72,698		$	55,529		$	129,891		$	102,995		$	80,803		$	57,193

Home BancShares, Inc.

Consolidated Statements of Stockholders’ Equity

~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

For the three months ended March 31, 2019

(In thousands, except share data)
   Common
Stock Capital
Surplus Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Balances at January 1, 2017
   1,405 869,737 455,948 400 1,327,490
Comprehensive income:

Net income
   —   —   96,953 —   96,953
Other comprehensive income (loss)
   —   —   —   6,042 6,042
Net issuance of 135,108 shares of common stock from exercise of stock options
   1 645 —   —   646
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
Repurchase of 420,000 shares of common stock
   (4 ) (10,276 ) (10,280 )
Share-based compensation net issuance of 145,500 shares of restricted common stock
   2 3,425 —   —   3,427
Cash dividends – Common Stock, $0.1800 per share
   —   —   (25,563 ) —   (25,563 )


Balances at June 30, 2017 (unaudited)
   $ 1,431 $ 940,821 $ 527,338 $ 6,442 $ 1,476,032
Comprehensive income:

Net income
   —   —   38,130 —   38,130
Other comprehensive income (loss)
   —   —   —   (9,863 ) (9,863 )
Net issuance of 50,008 shares of common stock from exercise of stock options
   1 435 —   —   436
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 437,800 shares of common stock
   (5 ) (10,540 ) —   —   (10,545 )
Share-based compensation net issuance of 86,266 shares of restricted common stock
   —   3,278 —   —   3,278
Cash dividends – Common Stock, $0.2200 per share
   —   —   (34,810 ) —   (34,810 )


Balances at December 31, 2017
   $ 1,736 $ 1,675,318 $ 530,658 $ (3,421 ) $ 2,204,291
Comprehensive income:

Net Income
   —   —   149,089 —   149,089
Other comprehensive income (loss)
   —   —   —   (19,198 ) (19,198 )
Net issuance of 145,540 shares of common stock from exercise of stock options
   1 937 —   —   938
Issuance of 1,250,000 shares of common stock from acquisition of Shore Premier Finance
   13 28,188 —   —   28,201
Impact of adoption of new accounting standards⁽¹⁾
   —   —   990 (990 ) —
Repurchase of 649,320 shares of common stock
   (6 ) (14,989 ) —   —   (14,995 )
Share-based compensation net issuance of 147,000 shares of restricted common stock
   1 3,883 —   —   3,884
Cash dividends – Common Stock, $0.2200 per share
   —   —   (38,197 ) —   (38,197 )


Balances at June 30, 2018 (unaudited)
   $ 1,745 $ 1,693,337 $ 642,540 $ (23,609 ) $ 2,314,013


(In thousands, except share data)	Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 1, 2019	$	1,707		$	1,609,810		$	752,184		$	(13,815	)	$	2,349,886
Comprehensive income:
Net income		—			—			71,350			—			71,350
Other comprehensive income (loss)		—			—			—			9,453			9,453
Impact of adoption of new accounting standards⁽¹⁾		—			—			459			(459	)		—
Repurchase of 2,716,359 shares of common stock		(27	)		(51,658	)		—			—			(51,685	)
Share-based compensation net issuance of 169,125 shares of restricted common stock		2			2,842			—			—			2,844
Cash dividends – Common Stock, $0.12 per share		—			—			(20,364	)		—			(20,364	)

Balances at March 31, 2019 (unaudited)	$	1,682		$	1,560,994		$	803,629		$	(4,821	)	$	2,361,484

(1)	Represents the impact of adopting Accounting Standard Update (“ASU”)~~2016-01.~~2018-02. See Note 1 to the consolidated financial statements for more information.

For the three months ended March 31, 2018


(In thousands, except share data)	Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 1, 2018	$	1,736		$	1,675,318		$	530,658		$	(3,421	)	$	2,204,291
Comprehensive income:
Net income		—			—			73,064			—			73,064
Other comprehensive income (loss)		—			—			—			(15,871	)		(15,871	)
Net issuance of 142,116 shares of common stock from exercise of stock options		1			899			—			—			900
Impact of adoption of new accounting standards⁽²⁾		—			—			990			(990	)		—
Repurchase of 303,637 shares of common stock		(3	)		(7,111	)		—			—			(7,114	)
Share-based compensation net issuance of 147,000 shares of restricted common stock		2			2,035			—			—			2,037
Cash dividends – Common Stock, $0.11 per share		—			—			(19,126	)		—			(19,126	)

Balances at March 31, 2018 (unaudited)	$	1,736		$	1,671,141		$	585,586		$	(20,282	)	$	2,238,181

(2)	Represents the impact of adopting Accounting Standard Update (“ASU”)2016-01.

See Condensed Notes to Consolidated Financial Statements.

Home BancShares, Inc.

Consolidated Statements of Cash Flows


	Six Months Ended June 30,							Three Months Ended March 31,
(In thousands)	2018				2017			2019			2018
	(Unaudited)							(Unaudited)
Operating Activities
Net income	$	149,089			$	96,953		$	71,350		$	73,064
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		6,241				5,636
Amortization/(accretion)		10,403				7,698
Depreciation & amortization									4,939			5,123
Amortization of securities, net									3,355			3,321
Accretion of purchased loans									(9,055	)		(10,608	)
Share-based compensation		3,884				3,427			2,844			2,037
(Gain) loss on assets		(2,268	)			(3,379	)		(526	)		1,962
Gain on acquisitions		—				(3,807	)
Provision for loan losses		4,322				4,301			—			1,600
Deferred income tax effect		13,200				(2,680	)		9,214			3,998
Increase in cash value of life insurance		(1,384	)			(773	)		(736	)		(654	)
Originations of mortgage loans held for sale		(171,616	)			(182,918	)		(82,654	)		(72,636	)
Proceeds from sales of mortgage loans held for sale		176,029				193,406			64,345			80,250
Changes in assets and liabilities:
Accrued interest receivable		850				(276	)		(1,343	)		347
Other assets		(22,423	)			(5,733	)		7,738			(8,219	)
Accrued interest payable and other liabilities		14,012				(28,362	)		10,275			12,886

Net cash provided by operating activities		180,339				83,493			79,746			92,471

Investing Activities
Net decrease in federal funds sold		23,609		��		1,550
Net increase in loans, excluding purchased loans		(204,906	)			(29,021	)
Net (increase) decrease in federal funds sold									(1,375	)		22,284
Net decrease (increase) in loans									108,733			(116	)
Purchases of investment securities –available-for-sale		(254,851	)			(391,375	)		(107,453	)		(141,812	)
Proceeds from maturities of investment securities –available-for-sale		166,403				69,847			82,410			86,674
Proceeds from sale of investment securities –available-for-sale		809				27,134			—			809
Purchases of investment securities –held-to-maturity		—				(163	)
Proceeds from maturities of investment securities –held-to-maturity		20,048				29,057			—			10,899
Proceeds from sale of investment securities –held-to-maturity		—				491
Proceeds from foreclosed assets held for sale		10,384				9,671			3,713			3,391
Proceeds from sale of SBA Loans		7,055				10,393
Proceeds from sale of SBA loans									4,645			2,837
Purchases of premises and equipment, net		(3,422	)			(2,425	)		(2,855	)		(3,941	)
Return of investment on cash value of life insurance		1,325				592
Net cash (paid) proceeds received – market acquisitions		(384,983	)			41,363

Net cash used in investing activities		(618,529	)			(232,886	)
Net cash provided by (used in) investing activities									87,818			(18,975	)

Financing Activities
Net increase in deposits, excluding deposits acquired		347,531				381,206
Net (decrease) increase in securities sold under agreements to repurchase		(8,039	)			12,451
Net increase (decrease) in FHLB and other borrowed funds		10,762				(262,234	)
Net increase in deposits									167,674			8,113
Net increase in securities sold under agreements to repurchase									8,560			2,526
Net decrease in FHLB and other borrowed funds									(367,218	)		(184,127	)
Proceeds from exercise of stock options		938				646			—			900
Proceeds from issuance of subordinated notes		—				297,201
Repurchase of common stock		(14,995	)			(10,280	)		(51,685	)		(7,114	)
Common stock issuance costs – market acquisitions		—				(195	)
Tax benefits from stock options exercised		—				—
Dividends paid on common stock		(38,197	)			(25,563	)		(20,364	)		(19,126	)

Net cash provided by used in financing activities		298,000				393,232
Net cash used in financing activities									(263,033	)		(198,828	)

Net change in cash and cash equivalents		(140,190	)			243,839			(95,469	)		(125,332	)
Cash and cash equivalents – beginning of year		635,933				216,649			657,939			635,933

Cash and cash equivalents – end of period	$	495,743			$	460,488		$	562,470		$	510,601

See Condensed Notes to Consolidated Financial Statements.

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 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 basis. Accordingly, all of the banking services and branch locations are considered by management to be aggregated into one 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 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 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 ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ 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.

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 ~~2017~~2018 Form10-K, filed with the Securities and Exchange Commission.

New Accounting Pronouncements

The Company adopted ASU2016-02,Leases (Topic 842), ASU2018-11,Leases (Topic 842) Targeted Improvements and ASU2018-20 Narrow Scope Improvements for Lessors effective January 1, 2019. In accordance with the lease standards, the Company determines if an arrangement is a lease at inception. Operating leases are included in theright-of-use (“ROU”) lease asset and lease liability within bank premises and equipment, net and other liabilities, respectively, on the Company’s balance sheets. The ROU lease assets represent the Company’s right to use an underlying asset for the lease term, and the lease liability represents the Company’s obligation to make lease payments arising from the lease. The operating ROU lease asset and lease liability are recognized at the commencement date are based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. See Note 15 for additional disclosures.

In August 2017, the FASB issued ASU2017-12,Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting model to provide better insight to risk management activities in the financial statements, reduces the complexity in cash flow hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, requires the entire change in the fair value of a hedging instrument included in the assessment of the hedge effectiveness to be recorded in other comprehensive income, with amounts reclassified to earnings to be presented in the same line item used to present the earnings effect of the hedged item when the hedged item affects earnings and allows the initial prospective quantitative assessment of hedge effectiveness to be performed at any time after hedge designation, but no later than the first quarterly effectiveness testing date. This ASU is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The amendments in this standard must be applied using the modified retrospective approach for cash flow and net investment hedge relationships existing on the date of adoption. The Company adopted the guidance effective January 1, 2019, and as permitted by the ASU, the Company reclassified the prepayableheld-to-maturity investment securities, with a fair value of $193.6 million and $834,000 in net unrealized gains as of December 31, 2018, toavailable-for-sale investment securities.

The Company adopted ASU2018-02,Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income effective January 1, 2019. In accordance with the standard, the Company made an election to reclassify the income tax effects of the Tax Cuts and Jobs Act (“TCJA”) from accumulated other comprehensive income (“AOCI”) to retained earnings. The stranded tax effects were a result of the decrease in the corporate tax rate from 35% to 21% on deferred tax liabilities and assets foravailable-for-sale and equity securities which had been recognized as an adjustment to income tax expense and included in income from continuing operations, with the tax effects initially recognized directly in other comprehensive income which caused the stranded tax effects to remain in AOCI. The Company adopted the guidance effective January 1, 2019, and its adoption resulted in a $459,000 reclassification between retained earnings and accumulated other comprehensive income. The Company’s policy for future tax rate changes is to release the future disproportionate income tax effects from AOCI using the aggregate portfolio approach.

Revenue ~~Recognition.~~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 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 ofnon-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.

•

Mortgage lending income – This represents fee income on secondary market lending which is accounted for under ASC Topic 310 and transfer of loans based on a “bid” agreement with the investor which is accounted for under ASC Topic 860,~~Transfers and Servicing~~.

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
June 30,    Six Months Ended
June 30,
   2018    2017    2018    2017
   (In thousands)
Net income
   $ 76,025    $ 50,097    $ 149,089    $ 96,953
Average shares outstanding
   173,403    143,282    173,581    142,538
Effect of common stock options
   533    834    587    732








Average diluted shares outstanding
   173,936    144,116    174,168    143,270








Basic earnings per share
   $ 0.44    $ 0.35    $ 0.86    $ 0.68
Diluted earnings per share
   $ 0.44    $ 0.35    $ 0.86    $ 0.68


	Three Months Ended March 31,
	2019		2018
	(In thousands, except per share data)
Net income	$	71,350	$	73,064
Average shares outstanding		169,592		173,761
Effect of common stock-based compensation		—		622

Average diluted shares outstanding		169,592		174,383

Basic earnings per share	$	0.42	$	0.42
Diluted earnings per share		0.42		0.42

As of March 31, 2019, options to purchase 3.6 million shares of common stock, with a weighted average exercise price of $19.61, were excluded from the computation of diluted net income per share as the majority of the options had an exercise price which was greater than the average market price of the common stock.

2. Business Combinations

Acquisition of Shore Premier Finance

On June 30, 2018, the Company, completed the acquisition of Shore Premier Finance (“SPF”), a division of Union Bank & Trust of Richmond, Virginia, the bank subsidiary of Union Bankshares Corporation. The Company paid a purchase price of approximately ~~$375.0~~$377.4 million in cash, subject to certain post-closing adjustments, and 1,250,000 shares of HBI common stock valued at approximately $28.2 ~~million.~~million at the time of closing. SPF ~~currently~~ provides direct consumer financing tofor United States Coast Guard (“USCG”) registeredhigh-end sail and power boats. Additionally, SPF provides inventory floor plan lines of credit to marine dealers, primarily those selling USCG documented vessels.

Including the ~~effects of known~~ purchase accounting adjustments, as of the acquisition date, SPF had approximately ~~$374.7~~$377.0 million in total assets, including ~~$373.9~~$376.2 million in total loans, which resulted in ~~tentative~~ goodwill of ~~$28.5~~$30.5 million being recorded. 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 and intangible assets and to evaluate the assumed tax positions and contingencies.

This portfolio of loans ~~will~~is now be housed in a division of Centennial known as Shore Premier Finance. The SPF division of Centennial ~~will be~~is responsible for servicing the acquired loan portfolio and originating new loan production. In connection with this acquisition, ~~and the creation of the SPF division of~~ Centennial ~~Centennial has~~ opened a new loan production office in Chesapeake, ~~Virginia.~~Virginia to house the SPF division. Through ~~this loan production office,~~ the SPF division, of Centennial ~~will continue its vision~~is working to build out a lending platform focusing on commercial and consumer marine loans.

The Company has determined that the acquisition of the net assets of SPF constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired 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.

~~Acquisition of Stonegate Bank~~3. Investment Securities

~~On September 26, 2017,~~Effective January 1, 2019, as permitted by ASU2017-12,Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities, the Company ~~completed~~reclassified the ~~acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank~~prepayableheld-to-maturity (“~~Stonegate”~~HTM”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.

Including the effects of the purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.

The Company has determined that the acquisition of the net assets of Stonegate 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:

   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    474    103,515
Loans receivable
   2,446,149    (74,067 )    2,372,082
Allowance for loan losses
   (21,507 )    21,507    —






Loans receivable, net
   2,424,642    (52,560 )    2,372,082
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    11,990    39,330
Goodwill
   81,452    (81,452 )    —
Core deposit and other intangibles
   10,505    20,364    30,869
Other assets
   9,598    255    9,853






Total assets acquired
   $ 2,992,825    $ (105,302 )    $ 2,887,523






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    (484 )    7,616
Subordinated debentures
   8,345    1,489    9,834






Total liabilities assumed
   2,601,057    1,104    2,602,161






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






Total liabilities and equity assumed
   $ 2,992,825    $ (390,664 )    2,602,161






Net assets acquired
         285,362
Purchase price
         792,370


Goodwill
         $ 507,008

~~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 is a reasonable estimate of fair value based on the short-term nature of these assets.~~

~~Investment~~ investment securities, ~~– Investment securities were acquired from Stonegate with an approximately $474,000 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 $2.37 billion 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 $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,~~ and were recorded 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.

~~Bank premises and equipment~~ – Bank premises and equipment were acquired from Stonegate with a $3.6 million adjustment to market 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 at market value.~~

~~Accrued interest receivable~~ ~~– Accrued interest receivable was acquired from Stonegate 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 which was 39.225% at the time of acquisition.

~~Core deposit intangible~~ ~~– This intangible asset represents the value of the relationships that Stonegate 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,~~$193.6 million and ~~the~~$834,000 in 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 fair value adjustment applied for time deposits was because the weighted average interest rate of Stonegate’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 payable and other liabilities were acquired from Stonegate at market 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.~~

~~The unauditedpro-forma~~ combined consolidated financial information presents how the combined financial information of HBI and Stonegate might have appeared had the businesses actually been combined. The following schedule represents the unaudited pro forma combined financial information as of the years ended December 31, 2017 and 2016, assuming the acquisition was completed as of January 1, 2017 and 2016, respectively:

   Years Ended
December 31,
   2017    2016
   (In thousands, except per share data)
Total interest income
   $ 610,697    $ 538,258
Totalnon-interest income
   107,179    95,555
Net income available to all shareholders
   143,979    206,081
Basic earnings per common share
   $ 0.79    $ 1.20
Diluted earnings per common share
   0.79    1.20

~~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 from~~in-market~~ cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It 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 of The Bank of Commerce~~

On February 28, 2017, the Company completed its acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce (“BOC”), a Florida state-chartered bank that operated in the Sarasota, Florida area, 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, under which the Company submitted an initial bid to purchase the outstanding shares of BOC and was deemed to be the successful bidder after a subsequent auction was held. 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:~~

~~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 acquired from BOC with an $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 was estimated to be above 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 December 31, 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 assetsunrealized gains as of December 31, ~~2017 excluding BOC as recorded by HBI as of acquisition date, historical results are not believed~~2018, to ~~be material to the Company’s results, and thus nopro-forma~~available-for-sale ~~information is presented.~~

~~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 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 the Company’s 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.

The Company has determined that the acquisition 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:~~

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

~~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.~~

~~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 at the acquisition date. The $324,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of GHI’s certificates of deposits was estimated to be above 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.~~

~~3. Investment Securities~~

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


	June 30, 2018									March 31, 2019
	Available-for-Sale									Available-for-Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)									(In thousands)
U.S. government-sponsored enterprises	$	403,496	$	235	$	(5,792	)	$	397,939	$	419,558	$	694	$	(3,369	)	$	416,883
Residential mortgage-backed securities		509,610		404		(13,274	)		496,740		656,219		1,486		(7,241	)		650,464
Commercial mortgage-backed securities		489,706		47		(14,000	)		475,753		478,843		1,256		(5,403	)		474,696
State and political subdivisions		308,956		2,361		(2,827	)		308,490		431,160		6,989		(836	)		437,313
Other securities		38,055		2,047		(320	)		39,782		33,870		195		(298	)		33,767

Total	$	1,749,823	$	5,094	$	(36,213	)	$	1,718,704	$	2,019,650	$	10,620	$	(17,147	)	$	2,013,123


	Held-to-Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	3,790	$	—	$	(44	)	$	3,746
Residential mortgage-backed securities		50,886		21		(1,207	)		49,700
Commercial mortgage-backed securities		13,239		18		(309	)		12,948
State and political subdivisions		136,486		1,803		(139	)		138,150

Total	$	204,401	$	1,842	$	(1,699	)	$	204,544


	December 31, 2017
	Available-for-Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	407,387	$	899	$	(1,982	)	$	406,304
Residential mortgage-backed securities		481,981		538		(4,919	)		477,600
Commercial mortgage-backed securities		497,870		332		(4,430	)		493,772
State and political subdivisions		247,292		3,783		(774	)		250,301
Other securities		34,617		1,225		(302	)		35,540

Total	$	1,669,147	$	6,777	$	(12,407	)	$	1,663,517


	Held-to-Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	5,791	$	15	$	(15	)	$	5,791
Residential mortgage-backed securities		56,982		107		(402	)		56,687
Commercial mortgage-backed securities		16,625		114		(40	)		16,699
State and political subdivisions		145,358		3,031		(27	)		148,362

Total	$	224,756	$	3,267	$	(484	)	$	227,539


	December 31, 2018
	Available-for-Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	418,605	$	504	$	(4,976	)	$	414,133
Residential mortgage-backed securities		580,183		1,230		(8,512	)		572,901
Commercial mortgage-backed securities		463,084		539		(7,745	)		455,878
State and political subdivisions		308,835		2,311		(2,589	)		308,557
Other securities		34,336		304		(247	)		34,393

Total	$	1,805,043	$	4,888	$	(24,069	)	$	1,785,862


	Held-to-Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
	(In thousands)
U.S. government-sponsored enterprises	$	3,261	$	14	$	(71	)	$	3,204
Residential mortgage-backed securities		39,707		20		(689	)		39,038
Commercial mortgage-backed securities		17,587		58		(267	)		17,378
State and political subdivisions		132,221		1,815		(46	)		133,990

Total	$	192,776	$	1,907	$	(1,073	)	$	193,610

Assets, principally investment securities, having a carrying value of approximately ~~$1.14~~$1.26 billion and ~~$1.18~~$1.32 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. Also, investment securities pledged as collateral for repurchase agreements totaled approximately ~~$139.8~~$152.2 million and ~~$147.8~~$143.7 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

The amortized cost and estimated fair value of securities classified asavailable-for-sale ~~andheld-to-maturity~~at ~~June 30, 2018,~~March 31, 2019, by contractual maturity, are shown below. Expected maturities will 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		Estimated		Amortized		Estimated		Available-for-Sale
	Cost		Fair Value		Cost		Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)								(In thousands)
Due in one year or less	$	243,377	$	240,962	$	69,491	$	70,423	$	429,945	$	428,899
Due after one year through five years		947,593		930,579		89,707		89,298		1,030,952		1,024,795
Due after five years through ten years		425,364		416,479		11,975		11,762		396,169		397,294
Due after ten years		133,489		130,684		33,228		33,061		162,584		162,135

Total	$	1,749,823	$	1,718,704	$	204,401	$	204,544	$	2,019,650	$	2,013,123

For purposes of the maturity tables, mortgage-backed securities, which are 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.

During the three-month period ended ~~June 30, 2018, there were~~March 31, 2019, no~~available-for-sale~~ ~~securities sold. Duringsix-month~~ ~~period ended June 30, 2018 approximately 809,000 in~~available-for-sale securities were sold. No realized gains or losses were recorded on the sales for the ~~three and~~three-month period ended March 31, 2019.

During the three-month period ended March 31, 2018, no~~six-month~~available-for-sale ~~periods~~securities were sold. However, approximately $809,000 equity securities carried at fair value were sold. No realized gains or losses were recorded on the sales for the three-month period ended ~~June 30,~~March 31, 2018. The income tax expense/benefit to net security gains and losses was 26.135% of the gross amounts.

During ~~the three and~~2018, no~~six-month~~ ~~periods ended June 30, 2017, approximately $12.0 million and $27.1 million, respectively, inavailable-for-sale~~held-to-maturity securities were sold. The gross realized gains and losses on the sales for the three-month period ended June 30, 2017 totaled approximately $514,000 and $127,000, respectively. The gross realized gains and losses on the sales for the~~six-month~~ ~~period ended June 30, 2017 totaled approximately $937,000 and $127,000, respectively. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.~~

~~During the three andsix-month~~ ~~periods ended June 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 three andsix-month~~ ~~periods ended June 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 basis, 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 andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018,~~March 31, 2019, no securities were deemed to have other-than-temporary impairment.

~~At June 30, 2018,~~For the three months ended March 31, 2019, the Company had investment securities with approximately ~~$11.6~~$16.0 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, approximately ~~69.2%~~72.2% 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.

The following 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	June 30, 2018
	Less Than 12 Months					12 Months or More					Total					March 31, 2019
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Less Than 12 Months					12 Months or More					Total
	Value		Losses			Value		Losses			Value		Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)															(In thousands)
U.S. government-sponsored enterprises	$	303,332	$	(4,514	)	$	48,149	$	(1,322	)	$	351,481	$	(5,836	)	$	69,092	$	(336	)	$	248,732	$	(3,033	)	$	317,824	$	(3,369	)
Residential mortgage-backed securities		358,975		(9,328	)		152,329		(5,153	)		511,304		(14,481	)		84,446		(527	)		402,496		(6,714	)		486,942		(7,241	)
Commercial mortgage-backed securities		359,275		(10,405	)		116,060		(3,904	)		475,335		(14,309	)		6,128		(39	)		366,462		(5,364	)		372,590		(5,403	)
State and political subdivisions		111,726		(2,018	)		21,126		(948	)		132,852		(2,966	)		3,114		(31	)		62,929		(805	)		66,043		(836	)
Other securities		2,990		(10	)		9,717		(310	)		12,707		(320	)		7,314		(206	)		8,243		(92	)		15,557		(298	)

Total	$	1,136,298	$	(26,275	)	$	347,381	$	(11,637	)	$	1,483,679	$	(37,912	)	$	170,094	$	(1,139	)	$	1,088,862	$	(16,008	)	$	1,258,956	$	(17,147	)


	December 31, 2017
	Less Than 12 Months					12 Months or More					Total					December 31, 2018
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Less Than 12 Months					12 Months or More					Total
	Value		Losses			Value		Losses			Value		Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)															(In thousands)
U.S. government-sponsored enterprises	$	234,213	$	(1,288	)	$	40,122	$	(709	)	$	274,335	$	(1,997	)	$	148,392	$	(1,398	)	$	192,456	$	(3,649	)	$	340,848	$	(5,047	)
Residential mortgage-backed securities		389,541		(3,656	)		99,989		(1,665	)		489,530		(5,321	)		95,001		(713	)		386,279		(8,488	)		481,280		(9,201	)
Commercial mortgage-backed securities		314,301		(2,343	)		120,365		(2,127	)		434,666		(4,470	)		33,917		(337	)		368,705		(7,675	)		402,622		(8,012	)
State and political subdivisions		41,299		(331	)		20,980		(470	)		62,279		(801	)		64,376		(763	)		77,602		(1,872	)		141,978		(2,635	)
Other securities		—		—			9,852		(302	)		9,852		(302	)		3,364		(154	)		8,307		(93	)		11,671		(247	)

Total	$	979,354	$	(7,618	)	$	291,308	$	(5,273	)	$	1,270,662	$	(12,891	)	$	345,050	$	(3,365	)	$	1,033,349	$	(21,777	)	$	1,378,399	$	(25,142	)

As of March 31, 2019, the Company’s securities portfolio consisted of 1,315 investment securities, 598 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $17.1 million. The U.S government-sponsored enterprises portfolio contained unrealized losses of $3.4 million on 92 securities. The residential mortgage-backed securities portfolio contained $7.2 million of unrealized losses on 291 securities, and the commercial mortgage-backed securities portfolio contained $5.4 million of unrealized losses on 116 securities. The state and political subdivisions portfolio contained $836,000 of unrealized losses on 93 securities. In addition, the other securities portfolio contained $298,000 of unrealized losses on 6 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 does not consider these investments to be other-than-temporarily impaired at March 31, 2019.

Income earned on securities for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ is as follows:

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2018    2017    2018    2017
   (In thousands)
Taxable:

Available-for-sale
   $ 8,528    $ 5,680    $ 16,993    $ 10,474
Held-to-maturity
   451    754    956    1,438
Non-taxable:

Available-for-sale
   2,452    1,583    3,801    3,130
Held-to-maturity
   916    1,383    2,573    2,780








Total
   $ 12,347    $ 9,400    $ 24,323    $ 17,822


	Three Months Ended March 31,
	2019		2018
	(In thousands)
Taxable:
Available-for-sale	$	10,706	$	8,465
Held-to-maturity		—		505
Non-taxable:
Available-for-sale		3,379		1,349
Held-to-maturity		—		1,657

Total	$	14,085	$	11,976

4. Loans Receivable

The various categories of loans receivable are summarized as follows:


	June 30,		December 31,
	2018		2017		March 31, 2019		December 31, 2018
	(In thousands)				(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	4,734,315	$	4,600,117	$	4,623,174	$	4,806,684
Construction/land development		1,662,199		1,700,491		1,649,303		1,546,035
Agricultural		77,053		82,229		76,092		76,433
Residential real estate loans
Residential1-4 family		1,960,841		1,970,311		1,947,119		1,975,586
Multifamily residential		540,526		441,303		538,098		560,475

Total real estate		8,974,934		8,794,451		8,833,786		8,965,213
Consumer		417,499		46,148		448,093		443,105
Commercial and industrial		1,287,637		1,297,397		1,505,773		1,476,331
Agricultural		55,768		49,815		58,966		48,562
Other		162,132		143,377		132,317		138,668

Total loans receivable	$	10,897,970	$	10,331,188	$	10,978,935	$	11,071,879

During the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30,~~March 31, 2019, the Company sold $4.4 million of the guaranteed portion of certain Small Business Administration (“SBA”) loans, which resulted in a gain of approximately $241,000. During the three-month period ended March 31, 2018, the Company sold ~~$4.0~~$2.7 million ~~and $6.6 million, respectively,~~ of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately ~~$262,000 and $444,000, respectively. During the three andsix-month~~ periods ended June 30, 2017, the Company sold $5.8 million and $9.8 million, respectively, of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $387,000 and $575,000, respectively.$182,000.

Mortgage loans held for sale of approximately ~~$39.9~~$56.5 million and ~~$44.3~~$64.2 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were not material.

A description of our accounting policies for loans, impaired loans, non-accrual loans and allowance for loan losses are set forth in our 2018 Form 10-K filed with the SEC on February 26, 2019. There have been no significant changes to these policies since December 31, 2018.

The Company had ~~$3.52~~$2.71 billion of purchased loans, which includes ~~$129.9~~$106.6 million of discount for credit losses on purchased loans, at ~~June 30, 2018.~~March 31, 2019. The Company had ~~$47.9~~$35.7 million and ~~$82.0~~$70.9 million remaining ofnon-accretable discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of ~~June 30, 2018.~~March 31, 2019. The Company had ~~$3.46~~$2.90 billion of purchased loans, which includes ~~$146.6~~$113.6 million of discount for credit losses on purchased loans, at December 31, ~~2017.~~2018. The Company had ~~$51.9~~$39.3 million and ~~$94.7~~$74.3 million remaining ofnon-accretable discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of December 31, ~~2017.~~2018.

5. Allowance for Loan Losses, Credit Quality and Other

The Company’s allowance for loan loss as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 was significantly impacted by Hurricane Michael, which made landfall in the Florida Panhandle as a Category 4 hurricane during the fourth quarter of 2018, and somewhat 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,~~during the third quarter of 2017. As of December 31, 2018, management reevaluated the storm-related allowance for Hurricane Irma. Based on ~~initial assessments of~~this analysis, management determined a $2.9 million storm-related allowance was still necessary. The Company’s management also performed an analysis on the ~~potential credit impact and damage to the approximately $2.41 billion~~loans with collateral in ~~legacy loans receivable we have~~counties in the ~~disaster area, the Company established~~Florida Panhandle which were impacted by Hurricane Michael. Based on this analysis, management determined a ~~$32.9~~$20.4 million storm-related provision was necessary. After establishing the storm-related provision for ~~loan losses~~Hurricane Michael and adjusting the allowance for Hurricane Irma, the storm-related allowance was $23.2 million and $23.3 million as of March 31, 2019 and December 31, ~~2017.~~2018, respectively. As of ~~June 30, 2018,~~March 31, 2019, charge-offs of ~~$2.5~~$2.6 million have been taken against the storm-related ~~provision~~allowance for loan losses.

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


	Six Months Ended June 30, 2018			Three Months Ended March 31, 2019
	(In thousands)			(In thousands)
Allowance for loan losses:
Beginning balance	$	110,266		$	108,791
Loans charged off		(4,672	)		(3,391	)
Recoveries of loans previously charged off		1,600			957

Net loans recovered (charged off)		(3,072	)		(2,434	)

Provision for loan losses		4,322			—

Balance, June 30, 2018	$	111,516
Balance, March 31, 2019				$	106,357

The following tables present the balance in the allowance for loan losses for the ~~three andsix-month~~three-month period ended ~~June 30, 2018,~~March 31, 2019, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of ~~June 30,~~March 31, 2019. 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 March 31, 2019
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	21,302		$	42,336		$	26,734		$	14,981		$	3,438		$	—	$	108,791
Loans charged off		(1,286	)		(339	)		(536	)		(704	)		(526	)		—		(3,391	)
Recoveries of loans previously charged off		23			191			352			182			209			—		957

Net loans recovered (charged off)		(1,263	)		(148	)		(184	)		(522	)		(317	)		—		(2,434	)
Provision for loan losses		1,848			(1,523	)		(1,105	)		231			549			—		—

Balance, March 31	$	21,887		$	40,665		$	25,445		$	14,690		$	3,670		$	—	$	106,357


	As of March 31, 2019
	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	$	103		$	386		$	87		$	19		$	—		$	—	$	595
Loans collectively evaluated for impairment		21,553			39,969			24,711			14,531			3,670			—		104,434

Loans evaluated for impairment balance, March 31		21,656			40,355			24,798			14,550			3,670			—		105,029

Purchased credit impaired loans		231			310			647			140			—			—		1,328

Balance, March 31	$	21,887		$	40,665		$	25,445		$	14,690		$	3,670		$	—	$	106,357

Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	11,635		$	60,160		$	37,682		$	33,802		$	3,667		$	—	$	146,946
Loans collectively evaluated for impairment		1,628,973			4,567,658			2,416,635			1,457,839			633,716			—		10,704,821

Loans evaluated for impairment balance, March 31		1,640,608			4,627,818			2,454,317			1,491,641			637,383			—		10,851,767

Purchased credit impaired loans		8,695			71,448			30,900			14,132			1,993			—		127,168

Balance, March 31	$	1,649,303		$	4,699,266		$	2,485,217		$	1,505,773		$	639,376		$	—	$	10,978,935

The following tables present the balances in the allowance for loan losses for the three-month period ended March 31, 2018 and the year ended December 31, 2018, and the allowance for loan losses and recorded investment in loans receivable based on portfolio segment by impairment method as of December 31, 2018. 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 June 30, 2018
   Construction/
Land
Development Other
Commercial
Real Estate Residential
Real Estate Commercial
& Industrial Consumer
& Other Unallocated Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 20,104 $ 44,831 $ 23,614 $ 16,193 $ 3,247 $ 2,223 $ 110,212
Loans charged off
   (54 ) (390 ) (952 ) (258 ) (478 ) —   (2,132 )
Recoveries of loans previously charged off
   89 87 174 219 145 —   714


Net loans recovered (charged off)
   35 (303 ) (778 ) (39 ) (333 ) —   (1,418 )
Provision for loan losses
   104 1,457 1,369 39 604 (851 ) 2,722


Balance, June 30
   $ 20,243 $ 45,985 $ 24,205 $ 16,193 $ 3,518 $ 1,372 $ 111,516

   Six Months Ended June 30, 2018
   Construction/
Land
Development Other
Commercial
Real Estate Residential
Real Estate Commercial
& Industrial Consumer
& Other Unallocated Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 20,343 $ 43,939 $ 24,506 $ 15,292 $ 3,334 $ 2,852 $ 110,266
Loans charged off
   (62 ) (837 ) (1,731 ) (1,072 ) (970 ) —   (4,672 )
Recoveries of loans previously charged off
   119 188 535 317 441 —   1,600


Net loans recovered (charged off)
   57 (649 ) (1,196 ) (755 ) (529 ) —   (3,072 )
Provision for loan losses
   (157 ) 2,695 895 1,656 713 (1,480 ) 4,322


Balance, June 30
   $ 20,243 $ 45,985 $ 24,205 $ 16,193 $ 3,518 $ 1,372 $ 111,516

   As of June 30, 2018
   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
   $ 1,166    $ 619    $ 130    $ 2,054    $ —      $ —      $ 3,969
Loans collectively evaluated for impairment
   19,024    44,451    23,273    13,882    3,510    1,372    105,512














Loans evaluated for impairment balance, June 30
   20,190    45,070    23,403    15,936    3,510    1,372    109,481














Purchased credit impaired loans
   53    915    802    257    8    —      2,035














Balance, June 30
   $ 20,243    $ 45,985    $ 24,205    $ 16,193    $ 3,518    $ 1,372    $ 111,516














Loans receivable:

Period end amount allocated to:

Loans individually evaluated for impairment
   $ 21,300    $ 144,590    $ 21,019    $ 33,853    $ 386    $ —      $ 221,148
Loans collectively evaluated for impairment
   1,627,159    4,574,063    2,439,468    1,241,038    632,784    —      10,514,512














Loans evaluated for impairment balance, June 30
   1,648,459    4,718,653    2,460,487    1,274,891    633,170    —      10,735,660














Purchased credit impaired loans
   13,740    92,715    40,880    12,746    2,229    —      162,310














Balance, June 30
   $ 1,662,199    $ 4,811,368    $ 2,501,367    $ 1,287,637    $ 635,399    $ —      $ 10,897,970

The following tables present the balances in the allowance for loan losses for the six-month period ended June 30, 2017 and the year ended December 31, 2017, and the allowance for loan losses and recorded investment in loans receivable based on portfolio segment by impairment method as of December 31, 2017. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.

   Year Ended December 31, 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
   (326 ) (1,655 ) (2,288 ) (779 ) (1,063 ) —   (6,111 )
Recoveries of loans previously charged off
   227 710 254 252 503 —   1,946


Net loans recovered (charged off)
   (99 ) (945 ) (2,034 ) (527 ) (560 ) —   (4,165 )
Provision for loan losses
   1,419 600 3,232 599 (565 ) (984 ) 4,301


Balance, June 30
   12,842 27,843 17,715 12,828 3,063 5,847 80,138
Loans charged off
   (1,306 ) (2,094 ) (1,692 ) (4,799 ) (1,469 ) —   (11,360 )
Recoveries of loans previously charged off
   235 332 422 212 338 —   1,539


Net loans recovered (charged off)
   (1,071 ) (1,762 ) (1,270 ) (4,587 ) (1,131 ) —   (9,821 )
Provision for loan losses
   8,572 17,858 8,061 7,051 1,402 (2,995 ) 39,949


Balance, December 31
   $ 20,343 $ 43,939 $ 24,506 $ 15,292 $ 3,334 $ 2,852 $ 110,266


															Year Ended December 31, 2018
															Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
															(In thousands)
Allowance for loan losses:
Beginning balance															$	20,343		$	43,939		$	24,506		$	15,292		$	3,334		$	2,852		$	110,266
Loans charged off																(8	)		(447	)		(779	)		(814	)		(492	)		—			(2,540	)
Recoveries of loans previously charged off																30			101			361			98			296			—			886

Net loans recovered (charged off)																22			(346	)		(418	)		(716	)		(196	)		—			(1,654	)
Provision for loan losses																(261	)		1,238			(474	)		1,617			109			(629	)		1,600

Balance, March 31																20,104			44,831			23,614			16,193			3,247			2,223			110,212
Loans charged off																(391	)		(764	)		(1,965	)		(1,407	)		(1,921	)		—			(6,448	)
Recoveries of loans previously charged off																150			426			563			526			640			—			2,305

Net loans recovered (charged off)																(241	)		(338	)		(1,402	)		(881	)		(1,281	)		—			(4,143	)
Provision for loan losses																1,439			(2,157	)		4,522			(331	)		1,472			(2,223	)		2,722

Balance, December 31															$	21,302		$	42,336		$	26,734		$	14,981		$	3,438		$	—		$	108,791


	As of December 31, 2017														As of December 31, 2018
	Construction/ Land Development		Other Commercial Real Estate		Residential Real Estate		Commercial & Industrial		Consumer & Other		Unallocated		Total		Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
	(In thousands)														(In thousands)
Allowance for loan losses:
Period end amount allocated to:
Loans individually evaluated for impairment	$	1,378	$	768	$	188	$	843	$	7	$	—	$	3,184	$	732		$	468		$	100		$	21		$	—		$	—		$	1,321
Loans collectively evaluated for impairment		18,954		42,824		23,341		14,290		3,310		2,852		105,571		20,336			41,512			25,970			14,789			3,438			—			106,045

Loans evaluated for impairment balance, December 31		20,332		43,592		23,529		15,133		3,317		2,852		108,755		21,068			41,980			26,070			14,810			3,438			—			107,366

Purchased credit impaired loans		11		347		977		159		17		—		1,511		234			356			664			171			—			—			1,425

Balance, December 31	$	20,343	$	43,939	$	24,506	$	15,292	$	3,334	$	2,852	$	110,266	$	21,302		$	42,336		$	26,734		$	14,981		$	3,438		$	—		$	108,791

Loans receivable:
Period end amount allocated to:
Loans individually evaluated for impairment	$	26,860	$	124,124	$	20,431	$	21,867	$	500	$	—	$	193,782	$	14,519		$	58,706		$	29,535		$	30,251		$	3,688		$	—		$	136,699
Loans collectively evaluated for impairment		1,658,519		4,442,201		2,341,081		1,261,161		236,392		—		9,939,354		1,522,520			4,741,484			2,473,467			1,431,608			624,561			—			10,793,640

Loans evaluated for impairment balance, December 31		1,685,379		4,566,325		2,361,512		1,283,028		236,892		—		10,133,136		1,537,039			4,800,190			2,503,002			1,461,859			628,249			—			10,930,339

Purchased credit impaired loans		15,112		116,021		50,102		14,369		2,448		—		198,052		8,996			82,927			33,059			14,472			2,086			—			141,540

Balance, December 31	$	1,700,491	$	4,682,346	$	2,411,614	$	1,297,397	$	239,340	$	—	$	10,331,188	$	1,546,035		$	4,883,117		$	2,536,061		$	1,476,331		$	630,335		$	—		$	11,071,879

The following is an aging analysis for loans receivable as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	June 30, 2018														March 31, 2019
	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		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)														(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	4,295	$	3,654	$	21,482	$	29,431	$	4,704,884	$	4,734,315	$	10,634	$	5,146	$	1,752	$	26,179	$	33,077	$	4,590,097	$	4,623,174	$	7,180
Construction/land development		455		417		8,844		9,716		1,652,483		1,662,199		3,482		259		113		5,878		6,250		1,643,053		1,649,303		3,369
Agricultural		—		—		247		247		76,806		77,053		—		1,141		—		145		1,286		74,806		76,092		—
Residential real estate loans
Residential1-4 family		4,424		1,162		16,529		22,115		1,938,726		1,960,841		1,932		8,288		1,062		22,127		31,477		1,915,642		1,947,119		2,797
Multifamily residential		879		—		1,274		2,153		538,373		540,526		798		134		—		1,166		1,300		536,798		538,098		—

Total real estate		10,053		5,233		48,376		63,662		8,911,272		8,974,934		16,846		14,968		2,927		55,495		73,390		8,760,396		8,833,786		13,346
Consumer		1,522		448		950		2,920		414,579		417,499		801		1,320		22		3,613		4,955		443,138		448,093		574
Commercial and industrial		3,804		1,846		7,277		12,927		1,274,710		1,287,637		2,049		3,017		3,003		5,053		11,073		1,494,700		1,505,773		657
Agricultural and other		420		16		175		611		217,289		217,900		—		658		36		32		726		190,557		191,283		—

Total	$	15,799	$	7,543	$	56,778	$	80,120	$	10,817,850	$	10,897,970	$	19,696	$	19,963	$	5,988	$	64,193	$	90,144	$	10,888,791	$	10,978,935	$	14,577


	December 31, 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	$	6,331	$	1,480	$	12,719	$	20,530	$	4,579,587	$	4,600,117	$	3,119
Construction/land development		834		13		8,258		9,105		1,691,386		1,700,491		3,247
Agricultural		—		221		19		240		81,989		82,229		—
Residential real estate loans
Residential1-4 family		9,066		2,013		16,612		27,691		1,942,620		1,970,311		2,175
Multifamily residential		—		—		253		253		441,050		441,303		100

Total real estate		16,231		3,727		37,861		57,819		8,736,632		8,794,451		8,641
Consumer		252		51		171		474		45,674		46,148		26
Commercial and industrial		2,073		1,030		6,528		9,631		1,287,766		1,297,397		1,944
Agricultural and other		288		113		137		538		192,654		193,192		54

Total	$	18,844	$	4,921	$	44,697	$	68,462	$	10,262,726	$	10,331,188	$	10,665


	December 31, 2018
	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	$	3,598	$	927	$	24,710	$	29,235	$	4,777,449	$	4,806,684	$	9,679
Construction/land development		2,057		261		8,761		11,079		1,534,956		1,546,035		3,481
Agricultural		98		—		20		118		76,315		76,433		—
Residential real estate loans
Residential1-4 family		5,890		3,745		19,137		28,772		1,946,814		1,975,586		1,753
Multifamily residential		—		200		972		1,172		559,303		560,475		—

Total real estate		11,643		5,133		53,600		70,376		8,894,837		8,965,213		14,913
Consumer		5,712		168		3,632		9,512		433,593		443,105		720
Commercial and industrial		1,237		87		6,977		8,301		1,468,030		1,476,331		1,526
Agricultural and other		1,121		—		33		1,154		186,076		187,230		—

Total	$	19,713	$	5,388	$	64,242	$	89,343	$	10,982,536	$	11,071,879	$	17,159

Non-accruing loans at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were ~~$37.1~~$49.6 million and ~~$34.0~~$47.1 million, respectively.

The following is a summary of the impaired loans as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

   June 30, 2018
            Three Months Ended    Six 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
   $ 28    $ 28    $ —      $ 29    $ —      $ 29    $ 1
Construction/land development
   18    18    —      19    —      34    1
Agricultural
   14    14    —      16    —      17    —
Residential real estate loans

Residential1-4 family
   187    187    —      171    3    152    6
Multifamily residential
   —      —      —      —      —      —      —














Total real estate
   247    247    —      235    3    232    8
Consumer
   30    30    —      23    1    21    1
Commercial and industrial
   248    248    —      225    4    185    7
Agricultural and other
   —      —      —      —      —      —      —














Total loans without a specific valuation allowance
   525    525    —      483    8    438    16
Loans with a specific valuation allowance

Real estate:

Commercial real estate loans

Non-farm/non-residential
   41,716    38,175    610    34,728    8    32,832    378
Construction/land development
   13,852    12,782    1,166    12,495    53    12,382    139
Agricultural
   514    518    9    530    1    448    8
Residential real estate loans

Residential1-4 family
   20,852    18,115    77    19,313    1    19,105    323
Multifamily residential
   2,896    2,717    53    2,215    73    2,019    92














Total real estate
   79,830    72,307    1,915    69,281    136    66,786    940
Consumer
   186    181    —      188    39    184    57
Commercial and industrial
   13,527    9,932    2,054    12,909    358    12,942    508
Agricultural and other
   175    175    —      177    1    221    4














Total loans with a specific valuation allowance
   93,718    82,595    3,969    82,555    534    80,133    1,509
Total impaired loans

Real estate:

Commercial real estate loans

Non-farm/non-residential
   41,744    38,203    610    34,757    8    32,861    379
Construction/land development
   13,870    12,800    1,166    12,514    53    12,416    140
Agricultural
   528    532    9    546    1    465    8
Residential real estate loans

Residential1-4 family
   21,039    18,302    77    19,484    4    19,257    329
Multifamily residential
   2,896    2,717    53    2,215    73    2,019    92














Total real estate
   80,077    72,554    1,915    69,516    139    67,018    948
Consumer
   216    211    —      211    40    205    58
Commercial and industrial
   13,775    10,180    2,054    13,134    362    13,127    515
Agricultural and other
   175    175    —      177    1    221    4














Total impaired loans
   $ 94,243    $ 83,120    $ 3,969    $ 83,038    $ 542    $ 80,571    $ 1,525


	March 31, 2019
							Three Months 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	$	41	$	41	$	—	$	42	$	1
Construction/land development		15		15		—		16		—
Agricultural		10		10		—		11		—
Residential real estate loans
Residential1-4 family		303		303		—		209		5
Multifamily residential		—		—		—		—		—

Total real estate		369		369		—		278		6
Consumer		23		23		—		21		1
Commercial and industrial		207		207		—		156		3
Agricultural and other		—		—		—		—		—

Total loans without a specific valuation allowance		599		599		—		455		10
Loans with a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential		43,984		39,921		377		39,257		484
Construction/land development		10,135		9,208		103		10,649		87
Agricultural		523		526		9		410		5
Residential real estate loans
Residential1-4 family		25,780		23,463		50		22,048		70
Multifamily residential		2,549		2,549		37		2,459		16

Total real estate		82,971		75,667		576		74,823		662
Consumer		3,811		3,612		—		3,624		7
Commercial and industrial		9,098		5,641		19		6,661		21
Agricultural and other		32		32		—		32		—

Total loans with a specific valuation allowance		95,912		84,952		595		85,140		690
Total impaired loans
Real estate:
Commercial real estate loans
Non-farm/non-residential		44,025		39,962		377		39,299		485
Construction/land development		10,150		9,223		103		10,665		87
Agricultural		533		536		9		421		5
Residential real estate loans
Residential1-4 family		26,083		23,766		50		22,257		75
Multifamily residential		2,549		2,549		37		2,459		16

Total real estate		83,340		76,036		576		75,101		668
Consumer		3,834		3,635		—		3,645		8
Commercial and industrial		9,305		5,848		19		6,817		24
Agricultural and other		32		32		—		32		—

Total impaired loans	$	96,511	$	85,551	$	595	$	85,595	$	700

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 ~~June 30, 2018.~~March 31, 2019.


	December 31, 2017										December 31, 2018
							Year Ended										Year Ended
	Unpaid Contractual Principal Balance		Total Recorded Investment		Allocation of Allowance for Loan Losses		Average Recorded Investment		Interest Recognized		Unpaid Contractual Principal Balance		Total Recorded Investment		Allocation of Allowance for Loan Losses		Average Recorded Investment		Interest Recognized
	(In thousands)										(In thousands)
Loans without a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	29	$	29	$	—	$	23	$	2	$	42	$	42	$	—	$	34	$	3
Construction/land development		64		64		—		31		3		16		16		—		27		1
Agricultural		19		—		—		—		1		11		11		—		15		1
Residential real estate loans
Residential1-4 family		115		115		—		135		7		223		223		—		193		16
Multifamily residential		—		—		—		—		—		—		—		—		—		—

Total real estate		227		208		—		189		13		292		292		—		269		21
Consumer		18		—		—		—		1		27		27		—		24		2
Commercial and industrial		105		105		—		85		7		236		236		—		199		13
Agricultural and other		—		—		—		—		—		—		—		—		—		—

Total loans without a specific valuation allowance		350		313		—		274		21		555		555		—		492		36
Loans with a specific valuation allowance
Real estate:
Commercial real estate loans
Non-farm/non-residential		29,666		29,040		757		41,772		1,498		42,474		38,594		460		34,891		1,632
Construction/land development		12,976		12,157		1,378		10,556		262		13,178		12,091		732		12,337		307
Agricultural		281		303		11		268		11		291		294		8		388		18
Residential real estate loans
Residential1-4 family		19,770		18,689		124		22,347		363		22,570		20,526		58		19,017		485
Multifamily residential		1,627		1,627		64		1,412		81		2,369		2,369		42		2,166		83

Total real estate		64,320		61,816		2,334		76,355		2,215		80,882		73,874		1,300		68,799		2,525
Consumer		179		191		—		163		—		3,830		3,629		—		1,236		52
Commercial and industrial		16,777		13,007		843		9,726		121		11,176		7,550		21		10,599		257
Agricultural and other		297		309		7		644		8		33		32		—		146		3

Total loans with a specific valuation allowance		81,573		75,323		3,184		86,888		2,344		95,921		85,085		1,321		80,780		2,837
Total impaired loans
Real estate:
Commercial real estate loans
Non-farm/non-residential		29,695		29,069		757		41,795		1,500		42,516		38,636		460		34,925		1,635
Construction/land development		13,040		12,221		1,378		10,587		265		13,194		12,107		732		12,364		308
Agricultural		300		303		11		268		12		302		305		8		403		19
Residential real estate loans
Residential1-4 family		19,885		18,804		124		22,482		370		22,793		20,749		58		19,210		501
Multifamily residential		1,627		1,627		64		1,412		81		2,369		2,369		42		2,166		83

Total real estate		64,547		62,024		2,334		76,544		2,228		81,174		74,166		1,300		69,068		2,546
Consumer		197		191		—		163		1		3,857		3,656		—		1,260		54
Commercial and industrial		16,882		13,112		843		9,811		128		11,412		7,786		21		10,798		270
Agricultural and other		297		309		7		644		8		33		32		—		146		3

Total impaired loans	$	81,923	$	75,636	$	3,184	$	87,162	$	2,365	$	96,476	$	85,640	$	1,321	$	81,272	$	2,873

Interest recognized on impaired loans during the three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ was approximately ~~$542,000~~$700,000 and ~~$509,000, respectively. Interest recognized on impaired loans during the six months ended June 30, 2018 and 2017 was approximately $1.5 million and $1.0 million,~~$983,000, respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.

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, 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 becharged-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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	June 30, 2018								March 31, 2019
	Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total		Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total
	(In thousands)								(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	39,479	$	456	$	—	$	39,935	$	44,248	$	1,834	$	—	$	46,082
Construction/land development		22,649		—		—		22,649		12,233		546		—		12,779
Agricultural		539		—		—		539		773		—		—		773
Residential real estate loans
Residential1-4 family		22,097		386		—		22,483		35,823		339		—		36,162
Multifamily residential		1,258		—		—		1,258		1,166		—		—		1,166

Total real estate		86,022		842		—		86,864		94,243		2,719		—		96,962
Consumer		834		—		—		834		3,329		1		—		3,330
Commercial and industrial		17,774		298		—		18,072		20,423		603		—		21,026
Agricultural and other		193		—		—		193		49		—		—		49

Total risk rated loans	$	104,823	$	1,140	$	—	$	105,963	$	118,044	$	3,323	$	—	$	121,367


	December 31, 2017								December 31, 2018
	Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total		Risk Rated 6		Risk Rated 7		Risk Rated 8		Classified Total
	(In thousands)								(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	20,933	$	518	$	—	$	21,451	$	44,089	$	484	$	—	$	44,573
Construction/land development		24,013		204		—		24,217		15,236		—		—		15,236
Agricultural		321		—		—		321		301		3		—		304
Residential real estate loans
Residential1-4 family		23,420		564		—		23,984		34,731		253		—		34,984
Multifamily residential		939		—		—		939		972		—		—		972

Total real estate		69,626		1,286		—		70,912		95,329		740		—		96,069
Consumer		159		9		—		168		3,226		3		—		3,229
Commercial and industrial		12,818		80		—		12,898		16,362		585		—		16,947
Agricultural and other		136		—		—		136		48		—		—		48

Total risk rated loans	$	82,739	$	1,375	$	—	$	84,114	$	114,965	$	1,328	$	—	$	116,293

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 of loans receivable by class and risk rating as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


		June 30, 2018															March 31, 2019
		Risk Rated 1		Risk Rated 2		Risk Rated 3		Risk Rated 4		Risk Rated 5		Classified Total		Total			Risk Rated 1		Risk Rated 2		Risk Rated 3		Risk Rated 4		Risk Rated 5		Classified Total		Total
		(In thousands)															(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		$	1,003	$	327	$	2,682,429	$	1,800,969	$	117,133	$	39,935	$	4,641,796		$	—	$	293	$	2,613,119	$	1,862,510	$	29,902	$	46,082	$	4,551,906
Construction/land development			23		710		274,805		1,349,109		1,163		22,649		1,648,459			14		680		336,883		1,289,460		792		12,779		1,640,608
Agricultural			—		—		47,667		27,505		1,146		539		76,857			—		—		37,477		36,759		903		773		75,912
Residential real estate loans
Residential1-4 family			694		769		1,456,314		435,575		9,592		22,483		1,925,427			628		724		1,438,140		430,562		11,162		36,162		1,917,378
Multifamily residential			—		—		346,984		186,818		—		1,258		535,060			—		—		381,301		154,472		—		1,166		536,939

Total real estate			1,720		1,806		4,808,199		3,799,976		129,034		86,864		8,827,599			642		1,697		4,806,920		3,773,763		42,759		96,962		8,722,743
Consumer			13,779		583		387,476		12,992		937		834		416,601			14,189		4,074		403,101		20,973		433		3,330		446,100
Commercial and industrial			22,218		8,158		579,862		617,680		28,901		18,072		1,274,891			22,188		11,281		737,213		675,278		24,655		21,026		1,491,641
Agricultural and other			1,263		3,385		142,585		68,608		535		193		216,569			378		3,312		135,407		51,022		1,115		49		191,283

Total risk rated loans		$	38,980	$	13,932	$	5,918,122	$	4,499,256	$	159,407	$	105,963		10,735,660		$	37,397	$	20,364	$	6,082,641	$	4,521,036	$	68,962	$	121,367		10,851,767

Purchased credit impaired loans	Purchased credit impaired loans														162,310	Purchased credit impaired loans														127,168

Total loans receivable														$	10,897,970														$	10,978,935


	December 31, 2017														December 31, 2018
	Risk Rated 1		Risk Rated 2		Risk Rated 3		Risk Rated 4		Risk Rated 5		Classified Total		Total		Risk Rated 1		Risk Rated 2		Risk Rated 3		Risk Rated 4		Risk Rated 5		Classified Total		Total
	(In thousands)														(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	1,015	$	558	$	2,595,844	$	1,745,778	$	119,656	$	21,451	$	4,484,302	$	443	$	296	$	2,740,068	$	1,912,191	$	26,361	$	44,573	$	4,723,932
Construction/land development		28		583		280,980		1,373,133		6,438		24,217		1,685,379		17		645		264,507		1,255,258		1,377		15,236		1,537,040
Agricultural		—		19		53,018		27,515		1,150		321		82,023		—		—		37,377		38,295		282		304		76,258
Residential real estate loans
Residential1-4 family		1,140		969		1,414,849		475,619		11,658		23,984		1,928,219		715		738		1,453,859		446,557		7,078		34,984		1,943,931
Multifamily residential		—		—		329,070		103,071		213		939		433,293		—		—		388,572		169,526		—		972		559,070

Total real estate		2,183		2,129		4,673,761		3,725,116		139,115		70,912		8,613,216		1,175		1,679		4,884,383		3,821,827		35,098		96,069		8,840,231
Consumer		13,106		808		22,479		8,532		70		168		45,163		13,432		4,298		401,209		18,409		442		3,229		441,019
Commercial and industrial		20,870		7,543		627,316		592,088		22,313		12,898		1,283,028		21,673		13,310		737,218		649,390		23,321		16,947		1,461,859
Agricultural and other		1,986		3,914		147,323		38,370		—		136		191,729		737		3,423		133,901		48,567		554		48		187,230

Total risk rated loans	$	38,145	$	14,394	$	5,470,879	$	4,364,106	$	161,498	$	84,114		10,133,136	$	37,017	$	22,710	$	6,156,711	$	4,538,193	$	59,415	$	116,293		10,930,339

Purchased credit impaired loans														198,052														141,540

Total loans receivable													$	10,331,188													$	11,071,879

The following is a presentation of troubled debt restructurings (“TDRs”) by class as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	June 30, 2018												March 31, 2019
	Number of Loans		Pre-Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance		Number of Loans		Pre-Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance
	(Dollars in thousands)												(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		15	$	16,320	$	9,410	$	—	$	5,462	$	14,872		17	$	15,227	$	8,397	$	980	$	4,457	$	13,834
Construction/land development		3		641		555		70		—		625		2		584		547		15		—		562
Agricultural		2		345		281		18		—		299		3		451		388		13		—		401
Residential real estate loans
Residential1-4 family		18		3,846		1,033		356		1,093		2,482		22		3,231		1,091		274		1,002		2,367
Multifamily residential		3		1,701		1,305		—		287		1,592		3		1,701		1,230		—		290		1,520

Total real estate		41		22,853		12,584		444		6,842		19,870		47		21,194		11,653		1,282		5,749		18,684
Consumer		4		36		17		13		—		30		4		33		17		6		—		23
Commercial and industrial		13		1,344		446		106		—		552		14		1,679		884		90		—		974

Total		58	$	24,233	$	13,047	$	563	$	6,842	$	20,452		65	$	22,906	$	12,554	$	1,378	$	5,749	$	19,681


	December 31, 2017												December 31, 2018
	Number of Loans		Pre-Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance		Number of Loans		Pre-Modification Outstanding Balance		Rate Modification		Term Modification		Rate & Term Modification		Post- Modification Outstanding Balance
	(Dollars in thousands)												(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		16	$	16,853	$	8,815	$	250	$	5,513	$	14,578		17	$	15,227	$	8,482	$	982	$	4,475	$	13,939
Construction/land development		5		782		689		75		—		764		2		584		546		17		—		563
Agricultural		2		345		282		22		—		304		2		345		283		14		—		297
Residential real estate loans
Residential1-4 family		21		5,607		1,926		81		1,238		3,245		22		3,204		1,059		281		1,022		2,362
Multifamily residential		3		1,701		1,340		—		287		1,627		3		1,701		1,253		—		286		1,539

Total real estate		47		25,288		13,052		428		7,038		20,518		46		21,061		11,623		1,294		5,783		18,700
Consumer		3		19		—		18		—		18		5		38		18		9		—		27
Commercial and industrial		11		951		445		50		1		496		14		1,679		897		105		—		1,002
Agricultural and other		1		166		166		—		—		166

Total		62	$	26,424	$	13,663	$	496	$	7,039	$	21,198		65	$	22,778	$	12,538	$	1,408	$	5,783	$	19,729

The following is a presentation of TDRs onnon-accrual status as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 because they are not in compliance with the modified terms:


	June 30, 2018					December 31, 2017				March 31, 2019				December 31, 2018
	Number of Loans		Recorded Balance			Number of Loans		Recorded Balance		Number of Loans		Recorded Balance		Number of Loans		Recorded Balance
	(Dollars in thousands)									(Dollars in thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential		1	$	1,158			2	$	1,161		4	$	2,950		4	$	2,950
Construction/land development											1		546		1		546
Agricultural		1		18			1		22		1		13		1		14
Residential real estate loans
Residential1-4 family		7		744			8		850		8		752		8		778
Multifamily residential		1		149			1		153		1		138		1		142

Total real estate		10		2,069			12		2,186		15		4,399		15		4,430

Consumer											1		1		1		2
Commercial and industrial		3		56			1		—		6		179		6		194

Total		13	$	2,125			13	$	2,186		22	$	4,579		22	$	4,626
					��

The following is a presentation of total foreclosed assets as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

   June 30, 2018    December 31, 2017
   (In thousands)
Commercial real estate loans

Non-farm/non-residential
   $ 7,311    $ 9,766
Construction/land development
   5,261    5,920
Residential real estate loans

Residential1-4 family
   5,145    2,654
Multifamily residential
   136    527




Total foreclosed assets held for sale
   $ 17,853    $ 18,867

~~The following is a summary of the purchased credit impaired loans acquired in the SPF, GHI, BOC and Stonegate acquisitions as of the dates of acquisition:~~

   SPF    GHI    BOC    Stonegate
   (In thousands)
Contractually required principal and interest at acquisition
   $ 3,496    $ 22,379    $ 18,586    $ 98,444
Non-accretable difference (expected losses and foregone interest)
   285    4,462    2,811    23,297








Cash flows expected to be collected at acquisition
   3,211    17,917    15,775    75,147
Accretable yield
   808    2,071    1,043    11,761








Basis in purchased credit impaired loans at acquisition
   $ 2,403    $ 15,846    $ 14,732    $ 63,386


	March 31, 2019		December 31, 2018
	(In thousands)
Commercial real estate loans
Non-farm/non-residential	$	5,251	$	5,555
Construction/land development		5,571		3,534
Agricultural		—		—
Residential real estate loans
Residential1-4 family		3,644		4,142
Multifamily residential		—		5

Total foreclosed assets held for sale	$	14,466	$	13,236

Changes in the carrying amount of the accretable yield for purchased credit impaired loans were as follows for the~~six-month~~ three-month period ended ~~June 30, 2018~~March 31, 2019 for the Company’s acquisitions:

   Accretable Yield    Carrying
Amount of
Loans
   (In thousands)
Balance at beginning of period
   $ 41,803    $ 198,052
Reforecasted future interest payments for loan pools
   (724 )    —
Accretion recorded to interest income
   (8,516 )    8,516
Acquisitions
   808    2,403
Adjustment to yield
   2,056    —
Transfers to foreclosed assets held for sale
   —      (1,115 )
Payments received, net
   —      (45,546 )




Balance at end of period
   $ 35,427    $ 162,310


	Accretable Yield			Carrying Amount of Loans
	(In thousands)
Balance at beginning of period	$	33,759		$	141,540
Reforecasted future interest payments for loan pools		972			—
Accretion recorded to interest income		(4,369	)		4,369
Adjustment to yield		3,520			—
Transfers to foreclosed assets held for sale		—			163
Payments received, net		—			(18,904	)

Balance at end of period	$	33,882		$	127,168

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 ~~$724,000.~~$972,000. This updated forecast does not change the expected weighted average yields on the loan pools.

During the ~~2018~~2019 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 ~~$2.1~~$3.5 million as an additional adjustment to yield over the weighted average life of the loans.

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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, were as follows:

   June 30, 2018    December 31, 2017
   (In thousands)
Goodwill

Balance, beginning of period
   $ 927,949    $ 377,983
Acquisitions
   28,469    549,966




Balance, end of period
   $ 956,418    $ 927,949


							March 31, 2019			December 31, 2018
Goodwill							(In thousands)
Balance, beginning of period							$	958,408		$	927,949
Acquisitions								—			30,459

Balance, end of period							$	958,408		$	958,408

	June 30, 2018			December 31, 2017
	(In thousands)						March 31, 2019			December 31, 2018
Core Deposit and Other Intangibles							(In thousands)
Balance, beginning of period	$	49,351		$	18,311		$	42,896		$	49,351
Acquisition		—			4,378
Amortization expense		(3,250	)		(1,670	)		(1,586	)		(1,625	)

Balance, June 30	$	46,101			21,019
Balance, March 31							$	41,310			47,726

Acquisitions					30,869
Amortization expense					(2,537	)					(4,830	)

Balance, end of year				$	49,351					$	42,896

The carrying basis and accumulated amortization of core deposits and other intangibles at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 were:


	June 30, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(In thousands)						(In thousands)
Gross carrying basis	$	86,625		$	86,625		$	86,625		$	86,625
Accumulated amortization		(40,524	)		(37,274	)		(45,315	)		(43,729	)

Net carrying amount	$	46,101		$	49,351		$	41,310		$	42,896

Core deposit and other intangible amortization expense was approximately $1.6 million ~~and $866,000~~ for the three months ended ~~June 30, 2018~~March 31, 2019 and 2017, respectively. Core deposit and other intangible amortization expense was approximately $3.3 million and $1.7 million for the six months ended June 30, 2018 and 2017, respectively. Including all of the mergers completed as of December 31, 2017,2018. HBI’s estimated amortization expense of core deposits and other intangibles for each of the years ~~2018~~2019 through ~~2022~~2023 is approximately: ~~2018 – $6.6 million;~~ 2019 – $6.5 million; 2020 – $5.9 million; 2021 – $5.7 million; 2022 – $5.7 million; 2023 – $5.5 million.

The carrying amount of the Company’s goodwill was ~~$956.4 million and $927.9~~$958.4 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~2018. Goodwill is tested annually for impairment during the fourth quarter. 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.

7. Other Assets

Other assets consist primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018 other assets were ~~$191.9~~$172.7 million and ~~$177.8~~$183.8 million, respectively.

The Company has equity securities without readily determinable fair values such as stock holdings in the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“Federal Reserve”) which are outside the scope of ASC Topic 321,Investments – Equity Securities(“ASC Topic 321”). These equity securities without a readily determinable fair value were ~~$132.8~~$121.2 million and ~~$132.1~~$134.6 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, 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 ~~$24.2~~$25.2 million and ~~$23.9~~$25.1 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. There were no transactions during the period that would indicate a material change in fair value. Therefore, these investments were accounted for at ~~cost.~~cost, less impairment.

8. Deposits

The aggregate amount of time deposits with a minimum denomination of $250,000 was ~~$777.2~~$955.1 million and ~~$636.9~~$922.0 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was ~~$1.16~~$1.42 billion and ~~$998.3 million~~$1.41 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Interest expense applicable to certificates in excess of $100,000 totaled ~~$3.8~~$7.2 million and ~~$1.9~~$2.8 million for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $6.7 million and $3.6 million for the six months ended June 30, 2018 and 2017,~~ respectively. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, brokered deposits were ~~$580.7~~$636.3 million and ~~$1.03 billion,~~$660.2 million, respectively.

Deposits totaling approximately ~~$1.85~~$1.87 billion and ~~$1.51~~$1.97 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, were public funds obtained primarily from state and political subdivisions in the United States.

9. Securities Sold Under Agreements to Repurchase

At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, securities sold under agreements to repurchase totaled ~~$139.8~~$152.2 million and ~~$147.8~~$143.7 million, respectively. For the three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ securities sold under agreements to repurchase daily weighted-average totaled ~~$144.0~~$150.8 million and ~~$128.7 million, respectively. For thesix-month~~ ~~periods ended June 30, 2018 and 2017, securities sold under agreements to repurchase daily weighted-average totaled $148.3 million and $126.4~~$152.7 million, respectively.

The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is presented in the following tables:

   June 30, 2018
   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
   $ 10,706    $ —      $ —      $ —      $ 10,706
Mortgage-backed securities
   10,911    —      —      —      10,911
State and political subdivisions
   96,535    —      —      —      96,535
Other securities
   21,598    —      —      —      21,598










Total borrowings
   $ 139,750    $ —      $ —      $ —      $ 139,750


	March 31, 2019
	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	$	9,394	$	—	$	—	$	—	$	9,394
Mortgage-backed securities		32,132		—		—		—		32,132
State and political subdivisions		97,702		—		—		—		97,702
Other securities		13,011		—		—		—		13,011

Total borrowings	$	152,239	$	—	$	—	$	—	$	152,239


	December 31, 2017										December 31, 2018
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total		Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(In thousands)										(In thousands)
Securities sold under agreements to repurchase:
U.S. government-sponsored enterprises	$	11,525	$	—	$	—	$	10,000	$	21,525	$	19,124	$	—	$	—	$	—	$	19,124
Mortgage-backed securities		21,255		—		—		—		21,255		9,184		—		—		—		9,184
State and political subdivisions		85,428		—		—		—		85,428		98,841		—		—		—		98,841
Other securities		19,581		—		—		—		19,581		16,530		—		—		—		16,530

Total borrowings	$	137,789	$	—	$	—	$	10,000	$	147,789	$	143,679	$	—	$	—	$	—	$	143,679

10. FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were ~~$1.31~~$1.10 billion and ~~$1.30~~$1.47 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Other borrowed funds were $360,000 and $2.5 million and are classified as short-term advances as of March 31, 2019 and December 31, 2018, respectively. At ~~June 30, 2018, $885.0~~March 31, 2019, $415.4 million and ~~$425.0~~$689.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, ~~2017, $525.0~~2018, $782.6 million and ~~$774.2~~$689.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. The FHLB advances mature from the current year to ~~2025~~2033 with fixed interest rates ranging from ~~0.89%~~1.00% to 4.80% and are secured by loans and investments securities. Maturities of borrowings as of ~~June 30, 2018~~March 31, 2019 include: ~~2018 – $1.02 billion;~~ 2019 – ~~$143.0~~$558.4 million; 2020 – $146.4 million; 2021 – zero; ~~2025~~2022 – ~~$389,000.~~zero; after 2023 – $400.4 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI the right to prepay certain obligations.

Additionally, the Company had ~~$915.3 million~~$822.7 and ~~$695.3~~$821.3 million at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

~~11. Other Borrowings~~

~~The Company had zero other borrowings at June 30, 2018. The Parent Company~~Additionally, the parent company took out a $20.0 million ~~unsecured~~ line of credit for general corporate purposes during 2015. The balance on this line of credit at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 was zero.

~~12.~~11. Subordinated Debentures

Subordinated debentures at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 consisted of guaranteed payments on trust preferred securities with the following components:


	As of June 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(In thousands)				(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	$	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		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		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		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		4,328		4,304		4,365		4,353
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		5,615		5,569		5,685		5,662
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		297,634		297,332		298,103		297,949

Total	$	368,403	$	368,031	$	368,979	$	368,790

The Company holds trust preferred securities with a face amount of $73.3 million which are currently callable without penalty based on the terms of the specific agreements. The trust preferred securities aretax-advantaged issues that qualify for Tier 1 capital treatment subject to certain limitations. 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 acquired $12.5 million in trust preferred securities with a carrying value of $9.9 million and $9.8 million at June 30, 2018 and December 31, 2017, respectively, from the Stonegate acquisition. The difference between the fair value purchased of $9.9 million and the $12.5 million face amount, will be amortized into interest expense over the remaining life of the debentures. The associated subordinated debentures are redeemable, in whole or in part, prior to maturity at our option on a quarterly basis when interest is due and payable and in whole at any time within 90 days following the occurrence and continuation of certain changes in the tax treatment or capital treatment of the debentures.

~~13.~~12. Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA makes broad and complex changes to the U.S. tax code that affected our income tax rate in 2017. The TCJA reduced the U.S. federal corporate income tax rate from 35% to 21%. The TCJA also established new tax laws that will affect 2018.

ASC 740 requires a company to record the effects of a tax law change in the period of enactment; however, shortly after the enactment of the TCJA, the SEC staff issued SAB 118, which allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

The following is a summary of the components of the provision (benefit) for income taxes for the ~~three andsix-month~~three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
	2018		2017			2018		2017			2019		2018
	(In thousands)										(In thousands)
Current:
Federal	$	11,351	$	29,278		$	26,355	$	48,669		$	10,158	$	15,005
State		3,757		5,815			8,725		9,667			3,363		4,967

Total current		15,108		35,093			35,080		58,336			13,521		19,972

Deferred:
Federal		6,913		(4,014	)		9,917		(2,236	)		6,922		3,004
State		2,289		(797	)		3,283		(444	)		2,292		994

Total deferred		9,202		(4,811	)		13,200		(2,680	)		9,214		3,998

Income tax expense	$	24,310	$	30,282		$	48,280	$	55,656		$	22,735	$	23,970

The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the ~~three andsix-month~~three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended						Six Months Ended
	June 30,						June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
Statutory federal income tax rate		21.00	%		35.00	%		21.00	%		35.00	%		21.00	%		21.00	%
Effect ofnon-taxable interest income		(0.83	)		(1.36	)		(0.79	)		(1.43	)		(0.86	)		(0.74	)
Effect of gain on acquisitions		—			—			—			(0.87	)
Stock compensation		0.01			(0.07	)		(0.21	)		(0.55	)		(0.10	)		(0.83	)
State income taxes, net of federal benefit		4.16			4.12			4.57			4.03			3.98			4.10
Other		(0.11	)		(0.02	)		(0.11	)		0.29			0.14			1.17

Effective income tax rate		24.23	%		37.67	%		24.46	%		36.47	%		24.16	%		24.70	%

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:


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(In thousands)				(In thousands)
Deferred tax assets:
Allowance for loan losses	$	30,364	$	29,515	$	29,374	$	30,033
Deferred compensation		1,769		1,142		1,556		4,037
Stock compensation		3,326		2,731		4,784		4,259
Non-accrual interest income						132		—
Real estate owned		1,537		1,731		1,244		1,382
Unrealized loss on securitiesavailable-for-sale		8,251		1,471		1,706		5,050
Loan discounts		27,005		32,784		22,013		23,755
Tax basis premium/discount on acquisitions		8,754		8,802		6,889		7,378
Investments		975		1,155		946		866
Other		11,137		11,663		9,508		10,243

Gross deferred tax assets	$	93,118		90,994		78,152		87,003

Deferred tax liabilities:
Accelerated depreciation on premises and equipment		944		291		564		87
Core deposit intangibles		10,526		11,258		9,648		9,804
FHLB dividends		1,712		1,625		1,712		1,712
Other		1,501		1,256		2,167		2,125

Gross deferred tax liabilities		14,683		14,430		14,091		13,728

Net deferred tax assets	$	78,435	$	76,564	$	64,061	$	73,275

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and the states of Alabama, Arkansas, ~~Alabama,~~California, Florida, Kansas, New Jersey, New York, Ohio, Texas and ~~New York.~~Virginia. The Company is no longer subject to U.S. federal and state tax examinations by tax authorities for years before ~~2013.~~2015.

~~14.~~13. Common Stock, Compensation Plans and Other

Common Stock

~~The~~As of March 31, 2019, the Company’s Restated Articles of Incorporation, as amended, authorize the issuance of up to 200,000,000 shares of common stock, par value $0.01 per share.

On April 18, 2019 at the Annual Meeting of Shareholders of the Company, the shareholders approved an amendment to the Company’s Restated Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 to 300,000,000.

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.

Stock Repurchases

On ~~February 21, 2018,~~January 18, 2019, the Company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of its common stock under the previously approved stock repurchase program, which brought the ~~total~~remaining amount of authorized shares to repurchase to ~~14,752,000~~9,919,447 shares. During ~~2018,~~the first three months of 2019, the Company utilized a portion of this stock repurchase program.

During the first ~~six~~three months of ~~2018,~~2019, the Company repurchased a total of ~~649,320~~2,716,359 shares with a weighted-average stock price of ~~$23.07~~$19.00 per share. The ~~2018~~first quarter 2019 earnings were used to fund the repurchases during the ~~year.~~quarter. Shares repurchased under the program as of ~~June 30, 2018~~March 31, 2019 since its inception total ~~5,174,184~~12,548,912 shares. The remaining balance available for repurchase is ~~9,577,816~~7,203,088 shares at ~~June 30, 2018.~~March 31, 2019.

Stock Compensation Plans

The Company has a stock option and performance incentive plan known as the Amended and Restated 2006 Stock Option and Performance Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results. On April 19, 2018 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 13,288,000 shares. The Plan provides for the granting of incentive and~~non-qualified~~ ~~stock options and other equity awards, including the issuance of restricted shares.~~ As of ~~June 30, 2018,~~March 31, 2019, the maximum total number of shares of the Company’s common stock available for issuance under the Plan was 13,288,000. At ~~June 30, 2018,~~March 31, 2019, the Company had approximately ~~2,239,000~~1,683,000 shares of common stock remaining available for future grants and approximately ~~6,316,000~~5,279,000 shares of common stock reserved for issuance pursuant to outstanding awards under the Plan.

During the third quarter of 2018, the Company granted 1,452,000 stock options and 843,500 shares of restricted stock to certain employees under the HOMB $2.00 performance incentive program (“HOMB $2.00”). The purpose of the performance-based incentive plan is to motivate employees to help the Company achieve $2.00 of diluted earnings per share, as adjusted(non-GAAP), over a consecutive four-quarter period.

The intrinsic value of the stock options outstanding and stock options vested at ~~June 30, 2018~~March 31, 2019 was ~~$12.7~~$3.6 million and ~~$8.5~~$3.5 million, respectively. 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 ~~$5.3~~$11.4 million as of ~~June 30, 2018. For the first six months of 2018, the Company has expensed approximately $821,000 for thenon-vested~~ ~~awards.~~ March 31, 2019.

The table below summarizes the stock option transactions under the Plan at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 and changes during the three-month period and year then ended:


	For the Six Months Ended June 30, 2018					For the Year Ended December 31, 2017					For the Three Months Ended March 31, 2019					For the Year Ended December 31, 2018
	Shares (000)			Weighted- Average Exercisable Price		Shares (000)			Weighted- Average Exercisable Price		Shares (000)			Weighted- Average Exercisable Price		Shares (000)			Weighted- Average Exercisable Price
Outstanding, beginning of year		2,274		$	16.23		2,397		$	15.19		3,617		$	19.62		2,274		$	16.23
Granted		110			22.22		80			25.96		5			18.50		1,581			23.24
Forfeited/Expired		—			—		—			—		(25	)		20.79		(37	)		22.30
Exercised		(145	)		8.87		(203	)		7.82		—					(201	)		9.25

Outstanding, end of period		2,239			17.00		2,274			16.23		3,597			19.61		3,617			19.62

Exercisable, end of period		1,058		$	14.54		1,016		$	13.55		1,186		$	15.27		1,167		$	15.31

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 employee stock options. The weighted-average fair value of options granted during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 was ~~$5.85~~$4.08 per share. The weighted-average fair value of options granted during the year ended December 31, ~~2017~~2018 was ~~$7.10~~$5.58 per share. 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 Six Months Ended			For the Year Ended
	June 30, 2018			December 31, 2017			For the Three Months Ended March 31, 2019			For the Year Ended December 31, 2018
Expected dividend yield		1.98	%		1.39	%		2.59	%		2.05	%
Expected stock price volatility		27.92	%		28.47	%		26.12	%		25.59	%
Risk-free interest rate		2.87	%		2.06	%		2.61	%		2.82	%
Expected life of options		6.5 years			6.5 years			6.5 years			6.5 years

The following is a summary of currently outstanding and exercisable options at ~~June 30, 2018:~~March 31, 2019:


Options Outstanding	Options Outstanding				Options Exercisable		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		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		12	0.97	2.60	12	2.60
$5.68 to $6.56		99	3.16	6.45	99	6.45
$2.66 to $2.77									6		0.75		2.66		6		2.66
$4.30 to $6.56									87		2.81		6.56		87		6.56
$8.62 to $9.54		264	4.67	9.05	264	9.05			245		3.91		9.01		245		9.01
$14.71 to $16.86		262	6.26	16.00	178	16.09			252		5.53		15.97		198		15.96
$17.12 to $17.40		201	6.41	17.19	124	17.22			193		5.64		17.20		128		17.24
$18.46 to $18.46		1,010	7.15	18.46	289	18.46
$18.46 to $18.50									1,015		6.42		18.46		433		18.46
$20.16 to $20.58		80	7.27	20.37	28	20.34			48		6.53		20.51		25		20.45
$21.25 to $22.22		230	8.77	21.71	48	21.25			235		8.04		21.71		48		21.25
$25.96 to $25.96		80	8.81	25.96	16	25.96
$22.70 to $23.51									1,436		9.31		23.32		—		0.00
$25.96									80		8.06		25.96		16		25.96

		2,238			1,058				3,597						1,186

The table below summarized the activity for the Company’s restricted stock issued and outstanding at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 and changes during the period and year then ended:


	As of June 30, 2018			As of December 31, 2017			As of March 31, 2019			As of December 31, 2018
	(In thousands)						(In thousands)
Beginning of year		1,145			958			1,873			1,145
Issued		162			232			177			1,010
Vested		(156	)		(45	)		(162	)		(233	)
Forfeited		(15	)		—			(7	)		(49	)

End of period		1,136			1,145			1,881			1,873

Amount of expense for six months and twelve months ended, respectively	$	3,133		$	5,237
Amount of expense for three months and twelve months ended, respectively							$	2,090		$	7,232

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 ~~$13.4~~$29.2 million as of ~~June 30, 2018.~~March 31, 2019.

~~15.~~14.Non-Interest Expense

The table below shows the components ofnon-interest expense for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017:~~2018:


	Three Months Ended				Six Months Ended
	June 30,				June 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(In thousands)								(In thousands)
Salaries and employee benefits	$	34,476	$	28,034	$	69,490	$	55,455	$	37,836	$	35,014
Occupancy and equipment		8,519		7,034		17,502		13,715		8,823		8,983
Data processing expense		3,339		2,863		7,325		5,586		3,970		3,986
Other operating expenses:
Advertising		1,142		812		2,104		1,510		1,051		962
Merger and acquisition expenses		—		789		—		7,516
Amortization of intangibles		1,624		866		3,250		1,670		1,586		1,625
Electronic banking expense		1,828		1,654		3,706		3,173		1,903		1,878
Directors’ fees		318		324		648		637		434		330
Due from bank service charges		242		456		461		876		238		219
FDIC and state assessment		2,788		1,182		4,396		2,470		1,710		1,608
Hurricane expense										897		—
Insurance		714		543		1,601		1,121		697		887
Legal and accounting		858		474		1,636		1,101		981		778
Other professional fees		1,601		1,233		3,240		2,386		2,812		1,639
Operating supplies		602		477		1,202		944		536		600
Postage		323		295		667		581		326		344
Telephone		371		398		744		722		303		373
Other expense		4,483		3,569		8,636		6,681		4,954		4,154

Total other operating expenses		16,894		13,072		32,291		31,388		18,428		15,397

Totalnon-interest expense	$	63,228	$	51,003	$	126,608	$	106,144	$	69,057	$	63,380

15. Leases

The Company leases land and office facilities under long-term,non-cancelable operating lease agreements. The leases expire at various dates through 2042 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. Upon adoption of ASU2016-02, the Company recorded a $47.1 millionright-of-use (“ROU”) asset and $49.0 million lease liability within bank premises and equipment, net, and other liabilities, respectively, within the Company’s balance sheets. No cumulative adjustment to the opening balance of retained earnings was considered necessary due to the nature of the Company’s leases. Short-term leases are leases having a term of twelve months or less. As part of the standard adoption, the Company elected the package of practical expedients whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. In accordance with ASU2018-11, the Company also elected the practical expedient whereby we elected to not separate nonlease components from the associated lease component of our operating leases. As a result, we account 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 March 31, 2019, the balances of theright-of-use asset and lease liability was $46.0 million and $48.0 million, respectively. Theright-of-use asset is included in bank premises and equipment, net, and the lease liability is included in accrued interest payable and other liabilities.

At March 31, 2019, the maturity of the lease liabilities for the operating leases are as follows (in thousands):


2019	$	4,508
2020-2021		10,455
2022-2023		7,220
Thereafter		25,823

	$	48,006

At March 31, 2019, the minimum rental commitments under these noncancelable operating leases are as follows (in thousands):


2019	$	5,788
2020		7,230
2021		6,157
2022		4,976
2023		4,341
Thereafter		30,414

	$	58,906

Additional information (dollar amounts in thousands):


	Three Months Ended March 31,
	2019
Lease expense:
Operating lease expense	$	2,065
Short-term lease expense		24
Variable lease expense		239

Total lease expense	$	2,328

Other information:
Cash paid for amounts included in the measurement of lease liabilities	$	1,940
Weighted-average remaining lease term		10.81 years
Weighted-average discount rate		3.64	%

The Company currently leases three properties from three related parties. Total rent expense from the leases for the three months ended March 31, 2019 was $35,000 or 1.51% of total lease expense.

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 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, 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 March 31, 2019 and December 31, 2018, commercial real estate loans represented ~~59.4%~~57.8% and ~~61.8%~~58.1% of total loans receivable, ~~at June 30, 2018 and December 31, 2017,~~ respectively, and ~~279.8%~~268.8% and ~~289.6%~~273.6% of total stockholders’ equity at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Residential real estate loans represented ~~23.0%~~22.6% and ~~23.3%~~22.9% of total loans receivable and ~~108.1%~~105.2% and ~~109.4%~~107.9% of total stockholders’ equity at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Approximately ~~91.1%~~79.3% of the Company’s total loans and ~~89.0%~~83.1% of the Company’s real estate loans as of ~~June 30, 2018,~~March 31, 2019, are to borrowers whose collateral is located in Alabama, Arkansas, Florida and New York, the states in which the Company has its branch locations.

Although general economic conditions in ~~our~~the Company’s market areas have improved, both nationally and locally, ~~in recent~~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 statements have been prepared using values and information currently available to the Company.

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 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 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, commitments to extend credit of ~~$2.28~~$2.35 billion and ~~$2.38~~$2.34 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, is ~~$65.4~~$58.2 million and ~~$70.5~~$55.6 million, respectively.

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

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 ~~six months~~quarter of ~~2018,~~2019, the Company requested approximately ~~$93.9~~$59.8 million in regular dividends from its banking subsidiary. This dividend is equal to approximately ~~58.7%~~75.0% of the Company’s banking subsidiary’s~~year-to-date~~ ~~2018~~ first quarter 2019 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 ~~June 30, 2018,~~March 31, 2019, the Company meets all capital adequacy requirements to which it is subject.

In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. The capital conservation buffer requirement began being phased in beginning January 1, 2016 at the 0.625% level and ~~will increase~~increased by 0.625% on each subsequent January 1, until it ~~reaches~~reached 2.5% on January 1, 2019 when thephase-in period ~~ends~~ended, and the full capital conservation buffer requirement ~~becomes~~became effective.

The rule phases out of Tier 1 capital thesenon-qualifying capital instruments issued before May 19, 2010 by all other bank holding companies. Because our total consolidated assets were less than $15 billion as of December 31, 2009, our outstanding trust preferred securities continue to be treated as Tier 1 capital. However, now that the Company has exceeded $15 billion in assets, if the Company acquires another financial institution in the future, then the Tier 1 treatment of the Company’s outstanding trust preferred securities will be phased out, but those securities will still be treated as Tier 2 capital.

Basel III 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 ~~June 30, 2018,~~March 31, 2019, 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 ~~11.12%~~11.40%, ~~10.57%~~10.21%, ~~11.71%~~11.99%, and ~~15.11%~~15.36%, respectively, as of ~~June 30, 2018.~~March 31, 2019.

19. Additional Cash Flow Information

In connection with the GHI acquisition, accounted for using the purchase method, the Company acquired approximately $398.1 million in assets, including $41.0 million in cash and cash equivalents, assumed $345.0 million in liabilities, issued 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, and paid approximately $18.5 million in cash in exchange for all outstanding shares 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 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.

In connection with the SPF acquisition, accounted for using the purchase method, the Company acquired approximately $374.7 million in assets, including $373.9 million in loans, issued 1,250,000 shares of its common stock valued at approximately $28.2 million as of June 29, 2018, and paid $375.0 million in cash.

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


	June 30,				March 31,
	2018		2017		2019		2018
	(In thousands)				(In thousands)
Interest paid	$	51,069	$	20,491	$	35,574	$	19,296
Income taxes paid		23,375		74,542		1,036		865
Assets acquired by foreclosure		7,919		9,137		4,737		4,253

20. Financial Instruments

Fair value is the exchange price that would be received 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 on the measurement date. There is a hierarchy of three levels of inputs that may be used to measure fair values:


~~Level 1~~		Level 1	Quoted prices in active markets for identical assets or liabilities


~~Level 2~~		Level 2	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


~~Level 3~~		Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

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 are the only material ~~financial~~ 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 securities are considered to be Level 2 securities. These 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, Level 3 securities were immaterial. In addition, there were no material transfers between hierarchy levels during ~~2018~~2019 and ~~2017.~~2018. See ~~footnote~~Note 3 for additional detail related to investment ~~securities.~~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. 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

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. 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 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 losses to require an increase, such increase is reported as a component of the provision for loan losses. The fair value of loans with specific allocated losses was ~~$79.2~~$85.0 million and ~~$72.5~~$84.3 million as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately ~~$368,000~~$188,000 and ~~$111,000~~$195,000 of accrued interest receivable when~~non-covered~~ impaired loans were put onnon-accrual status during the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively. The Company reversed approximately $563,000 and $209,000 of accrued interest receivable whennon-covered~~ ~~impaired loans were put onnon-accrual~~ ~~status during the six months ended June 30, 2018 and 2017,~~ respectively.

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 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the fair value of foreclosed assets held for sale, less estimated costs to sell, was ~~$17.9~~$14.5 million and ~~$18.9~~$13.2 million, respectively.

~~No foreclosed~~Foreclosed assets held for sale with a carrying value of approximately $190,000 were remeasured during the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019, resulting in a write-down of approximately $100,000. Regulatory guidelines require the 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%~~25% for commercial and residential real estate collateral.

Fair Values of Financial Instruments

The following table presents the estimated fair values of the Company’s financial instruments. Fair value is the exchange price that would be received 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 on the measurement date.

   June 30, 2018
   Carrying
Amount    Fair Value    Level
   (In thousands)
Financial assets:

Cash and cash equivalents
   $ 495,743    $ 495,743    1
Federal funds sold
   500    500    1
Investment securities –held-to-maturity
   204,401    204,544    2
Loans receivable, net of impaired loans and allowance
   10,707,303    10,537,866    3
Accrued interest receivable
   45,682    45,682    1
Financial liabilities:

Deposits:

Demand andnon-interest-bearing
   $ 2,523,553    $ 2,523,553    1
Savings and interest-bearing transaction accounts
   6,573,902    6,573,902    1
Time deposits
   1,638,578    1,612,077    3
Securities sold under agreements to repurchase
   139,750    139,750    1
FHLB and other borrowed funds
   1,309,950    1,305,602    2
Accrued interest payable
   7,231    7,231    1
Subordinated debentures
   368,403    377,553    3


	December 31, 2017						March 31, 2019
	Carrying Amount		Fair Value		Level		Carrying Amount		Fair Value		Level
	(In thousands)						(In thousands)
Financial assets:
Cash and cash equivalents	$	635,933	$	635,933		1	$	562,470	$	562,470		1
Federal funds sold		24,109		24,109		1		1,700		1,700		1
Investment securities –held-to-maturity		224,756		227,539		2		—		—		2
Loans receivable, net of impaired loans and allowance		10,148,470		10,055,901		3		10,787,622		10,579,699		3
Accrued interest receivable		45,708		45,708		1		50,288		50,288		1
FHLB, Federal Reserve & First National Banker’s Bank stock; other equity investments								146,366		146,366		3
Financial liabilities:
Deposits:
Demand andnon-interest-bearing	$	2,385,252	$	2,385,252		1
Demand andnon-interest bearing							$	2,519,175	$	2,519,175		1
Savings and interest-bearing transaction accounts		6,476,819		6,476,819		1		6,650,181		6,650,181		1
Time deposits		1,526,431		1,514,670		3		1,898,096		1,888,180		3
Securities sold under agreements to repurchase		147,789		147,789		1		152,239		152,239		1
FHLB and other borrowed funds		1,299,188		1,299,961		2		1,105,175		1,105,175		2
Accrued interest payable		5,583		5,583		1		13,334		13,334		1
Subordinated debentures		368,031		379,146		3		368,979		373,971		3

							December 31, 2018
							Carrying Amount		Fair Value		Level
							(In thousands)
Financial assets:
Cash and cash equivalents							$	657,939	$	657,939		1
Federal funds sold								325		325		1
Investment securities –held-to-maturity								192,776		193,610		2
Loans receivable, net of impaired loans and allowance								10,878,769		10,659,428		3
Accrued interest receivable								48,945		48,945		1
FHLB, Federal Reserve & First National Banker’s Bank stock; other equity investments								159,775		159,775		3
Financial liabilities:
Deposits:
Demand andnon-interest bearing							$	2,401,232	$	2,401,232		1
Savings and interest-bearing transaction accounts								6,624,407		6,624,407		1
Time deposits								1,874,139		1,852,816		3
Securities sold under agreements to repurchase								143,679		143,679		1
FHLB and other borrowed funds								1,472,393		1,464,073		2
Accrued interest payable								8,891		8,891		1
Subordinated debentures								368,790		366,159		3

21. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU2014-09,Revenue from Contracts with Customers (Topic 606). ASU2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASUNo. 2015-14,Revenue from Contracts with Customers (Topic 606), which defers the effective date of this standard to annual and interim periods beginning after December 15, 2017; however, early adoption ~~was~~is permitted for annual and interim reporting periods beginning after December 15, 2016. In April 2016, the FASB issued ASU2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends certain aspects of the guidance in ASU2014-09 (FASB’s new revenue standard) on (1) identifying performance obligations and (2) licensing. ASU2014-10’s effective date and transition provisions are aligned with the requirements in ASU2014-09. In May 2016, the FASB issued ASU2016-12,Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends certain aspects of the FASB’s new revenue standard, ASU2014-09. ASU2016-12’s effective date and transition provisions are aligned with the requirements 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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In January 2016, the FASB issued ASU2016-01,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. ASU~~2016-01~~ requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in accumulated other comprehensive income (“AOCI”). In addition, ASU2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale securities. The new guidance is effective for annual reporting period and interim reporting periods within those annual periods, beginning after December 15, 2017. The Company adopted the ~~guidance~~new standard effective January 1, 2018, and ~~recorded~~the implementation resulted in a ~~cumulative-effect adjustment~~$990,000 increase to retained earnings ofand a $990,000 decrease to ~~reclassify~~accumulated other comprehensive income. The current accounting policies and procedures have been adjusted to comply with the ~~cumulative change in fair value of equity securities previously recognized in AOCI.~~accounting changes mentioned above. For additional information on fair value of assets and liabilities, see Note ~~20.~~19.

In February 2016, the FASB issued ASU2016-02,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. ~~ASU~~The new standard establishes a~~2016-02~~right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~Early application~~An entity may adopt the new guidance either by restating prior periods and recording a cumulative effect adjustment at the beginning of the ~~amendments in~~earliest comparative period presented or by recording a cumulative effect adjustment at the beginning of the period of adoption. The Company adopted the standard effective January 1, 2019 and recorded a ROU asset of $47.1 million and lease liability of $49.0 million. No cumulative adjustment to the opening balance of retained earnings was considered necessary due to the nature of the Company’s leases. As part of the standard adoption, the Company elected the package of practical expedients whereby we did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. In accordance with ASU~~2016-02~~2018-11 ~~is permitted~~Leases (Topic 842) Targeted Improvements, the Company also elected the practical expedient whereby we elected to not separate nonlease components from the associated lease component of our operating leases. As a result, we account for ~~all entities.~~these components as a single component under Topic 842 since (i) the timing and pattern of the 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 has ~~several lease agreements for which~~also elected to not apply the ~~amendments will require~~recognition requirements of ASU2016-02 to any short-term leases (as defined by related accounting guidance). As of March 31, 2019, the ~~Company to recognize a lease liability to make lease payments and a~~balances of theright-of-use asset ~~which will represent its right to use the underlying~~and lease liability was $46.0 million and $48.0 million, respectively. Theright-of-use asset ~~for~~is included in bank premises and equipment, net, and the lease ~~term. The Company~~liability is ~~currently reviewing the amendments to ensure it is fully compliant by the adoption date~~included in accrued interest payable and does not 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, 2017.~~other liabilities.

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. ASU2016-11 is effective at the same time as ASU2014-09 and ASU2014-16. The Company adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

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. ASU2016-13 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 toheld-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 has developed anin-house data warehouse, developed asset quality forecast models and ~~evaluated potential~~selected a software ~~vendors~~vendor 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. ASU2016-15 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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on ~~the Company’s statement of cash flows~~our financial position or financial statement disclosures.

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 on a modified retrospective basis through 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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

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 interim or annual periods in which the financial statements have not been issued. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

~~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 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 wouldmore-likely-than-not reduce the fair value of the reporting unit below its carrying value. During ~~2017,~~2018, 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, ~~the Company~~ does not anticipate a material impact from these amendments to ~~the Company’s~~our 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 orin-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 ASC610-20-55-15 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. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

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 early adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on ~~the Company’s~~our financial position or financial statement disclosures.

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 ASU2017-09 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 adopted the guidance effective January 1, ~~2018. The Company does~~2018, and its adoption did not ~~anticipate any modifications to its existing awards, and therefore, the adoption of ASU2017-09~~ ~~is not expected to~~ have a significant impact on ~~the Company’s~~our 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 RedeemableNon-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 navigatingTopic 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 redeemablenon-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~~adopted the guidance effective January 1, 2019, and its adoption did not have a significant impact ~~if any, ASU2017-11~~ ~~will have~~ on ~~its~~our financial position ~~results of operations, and its~~or 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 2019.

In August 2017, the FASB issued ASU2017-12,Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting model to provide better insight to risk management activities in the financial statements, reduces the complexity in cash flow hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, requires the entire change in the fair value of a hedging instrument included in the assessment of the hedge effectiveness to be recorded in other comprehensive income, with amounts reclassified to earnings to be presented in the same line item used to present the earnings effect of the hedged item when the hedged item affects earnings and allows the initial prospective quantitative assessment of hedge effectiveness to be performed at any time after hedge designation, but no later than the first quarterly effectiveness testing date. This ASU is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The amendments in this standard must be applied using the modified retrospective approach for cash flow and net investment hedge relationships existing on the date of adoption. The Company ~~is currently evaluating the impact, if any, ASU2017-12~~ 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 ofadopted the guidance ~~reviewing its accounting~~effective January 1, 2019, and ~~disclosures for these transactions~~as permitted by the ASU, the Company reclassified the prepayable HTM investment securities, with a fair value of $193.6 million and ~~accounts, and identifying and implementing any necessary changes~~$834,000 in net unrealized gains as of December 31, 2018, 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 2019.available-for-sale investment securities.

In February 2018, the FASB issued ASU2018-02,Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which was issued to address the income tax accounting treatment of the stranded tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the TCJA on December 22, 2017 that changed the Company’s federal income tax rate from 35% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the tax laws or rates were recognized. The Company ~~plans to adopt~~adopted the guidance effective January 1, ~~2019. As of June 30, 2018, the balance of the stranded tax effects within~~2019, and its adoption resulted in a $459,000 reclassification between retained earnings and accumulated other comprehensive ~~income was $612,000.~~income.

In February 2018, the FASB issued ASU2018-03,Technical Corrections and Improvements to Financial Instruments — Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU2018-03 make technical corrections to certain aspects of ASU2016-01 (on recognition of financial assets and financial liabilities), including the following:

Equity securities without a readily determinable fair value — discontinuation.

Equity securities without a readily determinable fair value — adjustments.

Forward contracts and purchased options.

Presentation requirements for certain fair value option liabilities.

Fair value option liabilities denominated in a foreign currency.

Transition guidance for equity securities without a readily determinable fair value.

The amendments in ASU2018-03 are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Early adoption of ASU2018-03 is permitted for all entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, if they have adopted ASU2016-01. The Company has adopted the guidance ~~effective~~ January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In March 2018, the FASB issued ASU2018-04,Amendments to SEC~~Paragraphs~~ paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273. The ASU adds, amends, and supersedes various paragraphs that contain SEC guidance in ASC 320,Investments– Debt Securities, and ASC 980,Regulated Operations. The effective date for the amendments to ASC 320 is the same as the effective date of ASU2016-01. Other amendments are effective upon issuance. The Company has adopted the amendments to ASC 320 ~~effective~~ January 1, 2018 and the adoption did not have a significant impact on our financial position or financial statement disclosures. The Company has adopted the other amendments effective March 9, 2018 and the adoption did not have a significant impact on our financial position or financial statement disclosures.

In March 2018, the FASB issued ASU2018-05,Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The ASU adds seven paragraphs to ASC 740, Income Taxes, that contain SEC guidance related to SAB 118 (codified as SEC SAB Topic 5.EE,Income Tax Accounting Implications of the Tax Cuts and Jobs Act. This ASU was effective upon issuance. The Company adopted the guidance effective March 13, 2018, and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In June 2018, the FASB issued ASU2018-07,Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted the guidance effective January 1, 2019, and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In August 2018, the FASB issued ASUNo. 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. This guidance is applicable to the Company beginning January 1, ~~2019.~~2020. The Company is currently evaluating the potential effects of this guidance on ~~its~~our consolidated financial statements.

In August 2018, the FASB issued ASUNo. 2018-15,Intangibles-Goodwill andOther-Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract,that amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was aninternal-use software project. Theinternal-use software guidance states that only qualifying costs incurred during the application development stage can be capitalized. The effective date is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively in accordance with the applicable guidance. At the time of adoption, entities will be required to disclose the nature of its hosting arrangements that are service contracts and provide disclosures as if the deferred implementation costs were a separate, major depreciable asset class. The Company is beginning to evaluate its cloud computing arrangements and has not yet determined how we will apply or the impact of this new standard.

In October 2018, the FASB issued ASUNo. 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this Update permit the OIS rate based on SOFR as a U.S. benchmark interest rate. Including the OIS rate based on SOFR as an eligible benchmark interest rate during the early stages of the marketplace transition will facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. For entities that have not already adopted ASU2017-12, the amendments in this Update are required to be adopted concurrently with the amendments in ASU2017-12. The Company adopted the guidance concurrently with ASU2017-12 effective January 1, 2019, and its adoption did not have a significant impact on our financial position or financial statement disclosures.

In November 2018, the FASB issued ASUNo. 2018-19,Codification Improvements to Topic 326, Financial Instruments-Credit Losses.The amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The effective date and transition requirements for the amendments in this update are the same as the effective dates and transition requirements in ASU2016-13.

In December 2018, the FASB issued ASUNo. 2018-20,Narrow-Scope Improvements for Lessors. The amendments in this update permit lessors, as an accounting policy election, to not evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Consequently, a lessor making this election will exclude from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and will provide certain disclosures. The amendments in this update related to certain lessor costs require lessors to exclude from variable payments, and therefore revenue, lessor costs paid by lessees directly to third parties. The amendments also require lessors to account for costs excluded from the consideration of a contract that are paid by the lessor and reimbursed by the lessee as variable payments. A lessor will record those reimbursed costs as revenue. The amendments in this Update related to recognizing variable payments for contracts with lease andnon-lease components require lessors to allocate certain variable payments to the lease andnon-lease components when the changes in facts and circumstances on which the variable payment is based occur. After the allocation, the amount of variable payments allocated to the lease components will be recognized as income in profit or loss in accordance with Topic 842, while the amount of variable payments allocated tonon-lease components will be recognized in accordance with other Topics, such as Topic 606. The Company adopted the standard effective January 1, 2019 and its adoption did not have a significant impact.

In March 2019, the FASB issued ASUNo. 2019-01,Leases (Topic 842) Codification Improvements. The amendments in this Update reinstate the exception in Topic 842 for lessors that are not manufacturers or dealers. Specifically, those lessors will use their cost, reflecting any volume or trade discounts that may apply, as the fair value of the underlying asset. However, if significant time lapses between the acquisition of the underlying asset and lease commencement, those lessors will be required to apply the definition offair value (exit price) in Topic 820. In addition, the amendments in this Update address the concerns of lessors within the scope of Topic 942 about where “principal payments received under leases” should be presented. Specifically, lessors that are depository and lending institutions within the scope of Topic 942 will present all “principal payments received under leases” within investing activities. Finally, the amendments in this Update clarify the Board’s original intent by explicitly providing an exception to the paragraph250-10-50-3 interim disclosure requirements in the Topic 842 transition disclosure requirements. The effective date for the amendments in this update is for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.

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 condensed consolidated balance sheet of Home BancShares, Inc. (“the Company”) as of ~~June 30, 2018,~~March 31, 2019, and the related condensed consolidated statements of income, ~~and~~ comprehensive income, ~~for the three-month and six-month periods ended June 30, 2018 and 2017, and~~ stockholders’ equity and cash flows for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2019, and 2018, ~~and 2017,~~ and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We 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, ~~2017,~~2018, 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 ~~27, 2018,~~26, 2019, 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, ~~2017,~~2018, 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 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 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.

/s/BKD,LLP

Little Rock, Arkansas

~~August~~May 6, ~~2018~~2019

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 ~~27, 2018,~~26, 2019, which includes the audited financial statements for the year ended December 31, ~~2017.~~2018.Unless the context requires otherwise, the terms “Company”, “us”, ~~“we”,~~“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 ~~June 30, 2018,~~March 31, 2019, we had, on a consolidated basis, total assets of ~~$14.92~~$15.18 billion, loans receivable, net of ~~$10.79~~$10.87 billion, total deposits of ~~$10.74~~$11.07 billion, and stockholders’ equity of ~~$2.31~~$2.36 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. The efficiency ratio, as 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 adjustments such as merger expenses and/or gains and losses.

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,						As of or for the Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(Dollars in thousands, except per share data)												(Dollars in thousands, except per share data)
Total assets	$	14,924,120		$	10,872,228		$	14,924,120		$	10,872,228		$	15,179,501		$	14,323,229
Loans receivable		10,897,970			7,834,475			10,897,970			7,834,475			10,978,935			10,325,736
Allowance for loan losses		111,516			80,138			111,516			80,138			106,357			110,212
Total deposits		10,736,033			7,767,388			10,736,033			7,767,388			11,067,452			10,396,615
Total stockholders’ equity		2,314,013			1,476,032			2,314,013			1,476,032			2,361,484			2,238,181
Net income		76,025			50,097			149,089			96,953			71,350			73,064
Basic earnings per share		0.44			0.35			0.86			0.68			0.42			0.42
Diluted earnings per share		0.44			0.35			0.86			0.68			0.42			0.42
Book value per share		13.26			10.32			13.26			10.32			14.04			12.89
Tangible book value per share (non-GAAP)		7.52			7.23			7.52			7.23
Tangible book value per share(non-GAAP)⁽¹⁾														8.10			7.27
Annualized net interest margin – FTE		4.47	%		4.50	%		4.47	%		4.60	%		4.30	%		4.46	%
Efficiency ratio		36.74			37.48			37.28			39.12			41.01			37.83
Efficiency ratio, as adjusted(non-GAAP)(2)		37.03			37.29			37.49			37.13			40.58			37.97
Annualized return on average assets		2.13			1.86			2.11			1.86			1.92			2.08
Annualized return on average common equity		13.54			13.83			13.46			13.84			12.34			13.38

(1)	See Table 19 for thenon-GAAP tabular reconciliation.

(2)	See Table 23 for thenon-GAAP tabular reconciliation.

Overview

Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Our net income ~~increased $25.9~~decreased $1.7 million, or ~~51.8%~~2.3%, to ~~$76.0~~$71.4 million for the three-month period ended ~~June 30, 2018,~~March 31, 2019, from ~~$50.1~~$73.1 million for the same period in ~~2017.~~2018. On a diluted earnings per share basis, our earnings were ~~$0.44 per share and $0.35~~$0.42 per share for the three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017, respectively. Excluding the $789,000 of merger expenses associated with the 2017 acquisitions, our net income~~2018. Total interest expense increased ~~$25.3~~$15.3 million or ~~50.0%~~61.6%,non-interest expense increased $5.7 million or 9.0% andnon-interest income decreased by $2.1 million or 8.3%. This was partially offset by an $18.5 million, or 11.5%, ~~to $76.0 million for~~increase in total interest income. The primary drivers of the ~~three-month period ended June 30, 2018, from $50.7 million for the same period~~increase in ~~2017 (See Table 18 for the~~interest income and decrease in~~non-GAAP~~non-interest ~~tabular reconciliation). Of the $25.3~~income were a $15.8 million increase in ~~net~~loan interest income ~~excluding~~and a $3.6 million decrease in other service charges and fees, respectively, and the ~~$789,000~~primary driver of ~~merger expenses associated with~~ the ~~2017 acquisitions, $12.5~~increase in interest expense was a $13.2 million, ~~was due to tax savings from the TCJA. The remaining $12.8 million is primarily associated with additional net income largely resulting from our acquisition of Stonegate.~~or 89.2%, increase in interest expense on deposits.

Our net interest margin decreased from ~~4.50%~~4.46% for the three-month period ended ~~June 30, 2017~~March 31, 2018 to ~~4.47%~~4.30% for the three-month period ended ~~June 30, 2018.~~March 31, 2019. The yield on ~~loans~~interest earning assets was ~~5.94%~~5.52% and ~~5.78%~~5.27% for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, as average ~~loans~~interest earning assets increased from ~~$7.83~~$12.49 billion to ~~$10.35~~$13.30 billion. The increase in ~~loan balances~~earning assets is primarily the result of our acquisition of $376.2 million in loans from our purchase of Shore Premier Finance (“SPF”) in the second quarter of 2018 and organic loan growth of $277.0 million. The acquisition of SPF in the second quarter of 2018 resulted in a 3 basis point decline to our net interest margin due to lower interest rates on the ~~acquisition of Stonegate. For the three months ended June 30, 2018 and 2017, we recognized $10.7 million and $8.5 million in total net accretion for~~ acquired ~~loans and deposits.~~loans. The rate on ~~interest-bearing deposits increased from 0.48%~~interest bearing liabilities was 1.59% and 1.05% for the three months ended ~~June 30, 2017~~March 31, 2019 and 2018, respectively, as average interest-bearing liabilities increased from $9.60 billion to ~~0.90% for the three months ended June 30, 2018 with average balances of $5.74 billion and $8.06 billion, respectively.~~$10.18 billion. The growth of average interest earning assets ~~of $2.82 billion, which was primarily due to the acquisition of Stonegate,~~ and the increase in yield were offset by the increase in ~~interest-bearing~~interest bearing liabilities and the rate on interest bearing liabilities plus the acquisition of SPF, which led to a decrease in net interest margin for the quarter ended ~~June 30, 2018.~~March 31, 2019.

Our efficiency ratio was ~~36.74%~~41.01% for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~37.48%~~37.83% for the same period in ~~2017.~~2018. For the ~~second~~first quarter of ~~2018,~~2019, our efficiency ratio, as adjusted(non-GAAP), was ~~37.03%~~40.58%, an ~~improvement~~increase of 26261 basis points from the ~~37.29%~~37.97% reported for ~~second~~first quarter of 2018 (See Table 23 for thenon-GAAP tabular reconciliation). ~~Even though acquisitions tend to~~The increase ~~our efficiency ratio in the short term, we had an improvement~~ in the efficiency ratio is primarily ~~associated with cost savings from our Stonegate acquisition being realized soon after conversion,~~due to the increase innon-interest expense which was ~~completed on February 9,~~primarily driven by a $2.8 million or 8.1% increase in salary and employee benefits as well as a decrease innon-interest income which is primarily due to a $3.6 million or 35.4% decrease in other service charges and fees. This decrease is due to the Bank being subject to the Durbin Amendment to the Dodd-Frank Act which restricted interchange fees beginning in the third quarter of 2018. We estimate that quarterly interchange fees are approximately $3.0 million lower as a result of the Durbin Amendment.

Our annualized return on average assets was ~~2.13%~~1.92% for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~1.86%~~2.08% for the same period in ~~2017.~~2018. Our annualized return on average common equity was ~~13.54%~~12.34% for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~13.83%~~13.38% for the same period in 2017. Excluding the $12.5 million tax effect of the TCJA, our annualized return on average assets was 1.78% for the three months ended June 30, 2018 and our annualized return on average common equity was 11.32%.

~~Results of Operations for Six Months Ended June 30, 2018 and 2017~~

~~Our net income increased $52.1 million, or 53.8%, to $149.1 million for thesix-month~~ ~~period ended June 30, 2018, from $97.0 million for the same period in 2017. On a diluted earnings per share basis, our earnings were $0.86 per share and $0.68 per share for thesix-month~~ ~~periods ended June 30, 2018 and 2017, respectively. Excluding the $3.8 million ofone-timenon-taxable~~ gain on acquisition and $7.5 million of merger expenses associated with the 2017 acquisitions, our net income increased $51.0 million, or 52.0%, to $149.1 million for the six-month period ended June 30, 2018, from $98.1 million for the same period in 2017 (See Table 18 for the~~non-GAAP~~ tabular reconciliation). Of the $51.0 million increase in net income excluding the $3.8 million of gain on acquisition and $7.5 million of merger expense associated with the 2017 acquisitions, $24.6 million was due to tax savings from the TCJA. The remaining $26.4 million increase in net income, excluding gain on acquisitions and merger expenses, is primarily associated with additional net income largely resulting from our acquisitions.

~~Our net interest margin decreased from 4.60% for thesix-month~~ ~~period ended June 30, 2017 to 4.47% for thesix-month~~ period ended June 30, 2018. The yield on loans was 5.88% and 5.72% for the six months ended June 30, 2018 and 2017, respectively as average loans increased from $7.71 billion to $10.34 billion. The increase in loan balances is primarily due to the acquisitions we completed during 2017. For the six months ended June 30, 2018 and 2017, we recognized $21.3 million and $16.1 million, respectively, in total net accretion for acquired loans and deposits. The rate on interest-bearing deposits increased from 0.44% for the six months ended June 30, 2017, to 0.83% for the six months ended June 30, 2018, with average balances of $5.62 billion and $7.99 billion, respectively. The growth of average interest earning assets of $3.05 billion, which was primarily due to acquisitions completed in 2017, and the increase in yield were offset by the increase in interest-bearing liabilities and the rate on interest-bearing liabilities, which led to a decrease in net interest margin for the quarter ended June 30, 2018.

~~Our efficiency ratio was 37.28% for the six months ended June 30, 2018, compared to 39.12% for the same period in 2017. For the first six months of 2018, our efficiency ratio, as adjusted(non-GAAP),~~ ~~was 37.49%, which increased from the 37.13% reported for first six months of 2017. (See Table 23 for thenon-GAAP~~ tabular reconciliation). Even though acquisitions tend to increase our efficiency ratio in the short term, we had an improvement in the efficiency ratio primarily associated with cost savings from our Stonegate acquisition being realized soon after conversion which was completed on February 9, 2018.

Our annualized return on average assets was 2.11% for the six months ended June 30, 2018, compared to 1.86% for the same period in 2017. Our annualized return on average common equity was 13.46% for the six months ended June 30, 2018, compared to 13.84% for the same period in 2017. Excluding the $24.6 million tax effect of the TCJA, our annualized return on average assets was 1.76% for the six months ended June 30, 2018 and our annualized return on average common equity was 11.25%.

Financial Condition as of and for the Period Ended ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018

Our total assets as of ~~June 30, 2018 increased $474.4~~March 31, 2019 decreased $122.9 million to ~~$14.92~~$15.18 billion from the ~~$14.45~~$15.30 billion reported as of December 31, ~~2017. Our loan portfolio increased $566.8~~2018. Cash and cash equivalents decreased $95.5 million, or ~~5.49%~~14.5%, for the quarter ended ~~June 30, 2018~~March 31, 2019. Our loan portfolio balance declined slightly to $10.98 billion as of March 31, 2019 from ~~$10.33~~$11.07 billion at December 31, 2018. Total deposits increased $167.7 million to $11.07 billion as of March 31, 2019 from $10.90 billion as of December 31, ~~2017~~2018. Stockholders’ equity increased $11.6 million to ~~$10.90~~$2.36 billion as of ~~June 30, 2018. The increase is primarily due~~March 31, 2019, compared to the acquisition of $373.9 million of loans as part of the acquisition of Shore Premier Finance (“SPF”) as well as $192.9 million of organic loan growth for the first six months of 2018. Total deposits increased $347.5 million to $10.74 billion as of June 30, 2018 from $10.39$2.35 billion as of December 31, ~~2017. Stockholders’ equity increased $109.7 million to $2.31 billion as of June 30, 2018, compared to $2.20 billion as of December 31, 2017.~~2018. The increase in stockholders’ equity is primarily associated with ~~the $111.9~~quarterly net income of $71.4 million ~~increase in retained earnings as well as the issuance~~and $9.5 million of ~~1,250,000 shares~~other comprehensive income resulting from a $12.8 million unrealized gain on available for sale securities and $3.3 million of ~~stock with a value of $28.2 million as part of the acquisition of SPF,~~deferred tax impact, which ~~were~~was partially offset by ~~$20.2~~the $20.4 million ~~of comprehensive loss and the repurchase of $15.0 million of our common stock~~dividend paid during ~~2018. The annualized improvement in stockholders’ equity for~~ the first ~~six months~~quarter of ~~2018, excluding the $28.2 million~~2019 and stock repurchases of ~~common stock issued for the acquisition of SPF, was 7.4%.~~$51.7 million.

~~As of June 30, 2018, our~~

Ournon-performing loans ~~increased to $56.8~~were $64.2 million, or ~~0.52%, of total loans from $44.7 million, or 0.43%,~~0.58% of total loans as of March 31, 2019 and December 31, ~~2017.~~2018. The allowance for loan losses as a percent ofnon-performing loans decreased to ~~196.41%~~165.7% as of ~~June 30, 2018,~~March 31, 2019, from ~~246.70%~~169.4% as of December 31, ~~2017.~~2018.Non-performing loans from our Arkansas franchise were ~~$13.0~~$17.7 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$15.5~~$17.4 million as of December 31, ~~2017.~~2018.Non-performing loans from our Florida franchise were ~~$43.0~~$40.0 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$28.2~~$43.3 million as of December 31, ~~2017.~~2018.Non-performing loans from our Alabama franchise were ~~$52,000~~$3.0 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$929,000~~$179,000 as of December 31, ~~2017.~~2018.Non-performing loans from our SPF franchise were ~~$769,000, and there~~$3.5 million at March 31, 2019 compared to $3.4 million as of December 31, 2018. There were nonon-performing loans from our Centennial CFG ~~franchise as of June 30, 2018.~~franchise.

As of ~~June 30, 2018,~~March 31, 2019, ournon-performing assets increased to ~~$74.6~~$79.6 million, or ~~0.50%~~0.52%, of total assets, from ~~$63.6~~$78.0 million, or ~~0.44%,~~0.51% of total assets, as of December 31, ~~2017.~~2018.Non-performing assets from our Arkansas franchise were ~~$21.0~~$24.9 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$25.6~~$24.0 million as of December 31, ~~2017.~~2018.Non-performing assets from our Florida franchise were ~~$51.5~~$48.2 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$36.4~~$50.2 million as of December 31, ~~2017.~~2018.Non-performing assets from our Alabama franchise were ~~$1.4~~$3.0 million at ~~June 30, 2018~~March 31, 2019 compared to ~~$1.6 million~~$306,000 as of December 31, ~~2017.~~ 2018.Non-performing assets from our SPF franchise were ~~$769,000, and there~~$3.5 million at March 31, 2019 compared to $3.4 million as of December 31, 2018. There were nonon-performing assets from our Centennial CFG ~~franchise as of June 30, 2018.~~franchise.

Critical Accounting Policies

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 the accounting for the allowance for loan 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 ofnon-interest income are as follows:

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 ~~$6.9 million, $13.3 million, $5.7~~$3.0 million and ~~$11.8~~$6.1 million for the ~~three~~three-month period ended March 31, 2019 and ~~six-month periods ended June 30,~~March 31, 2018, ~~and June 30, 2017,~~ respectively. Centennial CFG loan fees were ~~$1.3 million, $3.2 million, $1.5 million~~$916,000 and ~~$3.0~~$1.2 million for the ~~three~~three-month period ended March 31, 2019 and ~~six-month periods ended June 30,~~March 31, 2018, ~~and June 30, 2017,~~ respectively.

•

Financial Instruments. ASU2016-01“Financial Instruments—Overall (Subtopic825-10): Recognition of Financial Assets and Financial Liabilities,(“ASU2016-01”) makes targeted amendments to the guidance for recognition, measurement, presentation and disclosure of financial instruments. ASU2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in ~~accumulated other comprehensive income (“AOCI”).~~AOCI. ASU2016-01 became effective for us on January 1, 2018. The adoption of the guidance resulted in a $990,000 cumulative-effect adjustment that increased retained earnings, with offsetting related adjustments to deferred taxes and AOCI. ASU2016-01 also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, we refined the calculation used to determine the disclosed fair value of our loans held for investment portfolio as part of adopting this standard. The refined calculation did not have a significant impact on our fair value disclosures.

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.

Investments –Held-to-Maturity. Securitiesheld-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~~Starting January 1, 2018, premiums are now amortized to call date under ASU2017-08 and discounts are ~~amortized and~~ accreted ~~respectively,~~ to interest income using the constant yield method over the period to maturity. Effective January 1, 2019, as permitted by ASU2017-12,Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities, the Company reclassified the prepayableheld-to-maturity (“HTM”) investment securities, with a fair value of $193.6 million and $834,000 in net unrealized gains as of December 31, 2018, toavailable-for-sale investment securities.

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

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 that may become uncollectible and probable credit losses inherent in 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, internal and external factors that may affect collectability, relevant credit exposure, particular risks inherent in different kinds of lending, current collateral values and other relevant factors.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. 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 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 in the historical loss or risk rating data.

Loans considered impaired, under FASB ASC310-10-35, 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 losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for loan 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 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 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. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair value of the purchased loans incorporates assumptions regarding credit risk. 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 the life of the purchased credit impaired loans, we continue to estimate cash flows 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 in 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 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.

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—Goodwill and Other, in the fourth quarter.

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

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets 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—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~~ Shore Premier Finance

On June 30, 2018, the Company, completed the acquisition of ~~Shore Premier Finance (“SPF”),~~SPF, a division of Union Bank & Trust of Richmond, Virginia, the bank subsidiary of Union Bankshares Corporation. The Company paid a purchase price of approximately ~~$375.0~~$377.4 million in cash, subject to certain post-closing adjustments, and 1,250,000 shares of HBI common stock. SPF ~~currently~~ provides direct consumer financing tofor United States Coast Guard (“USCG”) registeredhigh-end sail and power boats. Additionally, SPF provides inventory floor plan lines of credit to marine dealers, primarily those selling USCG documented vessels.

Including the ~~effects of known~~ purchase accounting adjustments, as of acquisition date, SPF had approximately ~~$374.7~~$377.0 million in total assets, including ~~$373.9~~$376.2 million in total loans, which resulted in ~~tentative~~ goodwill of ~~$28.5~~$30.5 million being recorded. 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 and intangible assets and to evaluate the assumed tax positions and contingencies.

This portfolio of loans ~~will~~is now be housed in a division of Centennial known as Shore Premier Finance. The SPF division of Centennial ~~will be~~is responsible for servicing the acquired loan portfolio and originating new loan production. In connection with this acquisition, ~~and the creation of the SPF division of~~ Centennial ~~Centennial has~~ opened a new loan production office in Chesapeake, ~~Virginia.~~Virginia, to house the SPF division. Through ~~this loan production office,~~ the SPF division, of Centennial ~~will continue its vision~~is working to build out a lending platform focusing on commercial and consumer marine loans.

See Note 2 “Business Combinations” in the Notes to Consolidated Financial Statements for additional information regarding the acquisition of SPF.

~~Acquisition of Stonegate Bank~~

On September 26, 2017, the Company completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank (“Stonegate”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.

Through our acquisition and merger of Stonegate 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 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 established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba.

~~See Note 2 “Business Combinations” in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K~~ ~~for the year ended December 31, 2017, for additional information regarding the acquisition of Stonegate.~~

~~Acquisition of The Bank of Commerce~~

On February 28, 2017, the Company completed its 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.

~~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 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.

Future Acquisitions

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

We will continue evaluating all types of potential bank acquisitions to determine what is in the best interest of our Company. Our goal in making these decisions is to maximize the return to our investors.

Branches

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

During the second quarter of 2018, we opened one branch in the Northeast Arkansas Region. Additionally, in connection with the acquisition and creation of the SPF division of Centennial, we established a new loan production office in Chesapeake, Virginia.

As of ~~June 30, 2018,~~March 31, 2019, we had 159 branch locations. There were 77 branches in Arkansas, 76 branches in Florida, five branches in Alabama and one branch in New York City.

Results of Operations

For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~

Our net income ~~increased $25.9~~decreased $1.7 million, or ~~51.8%~~2.3%, to ~~$76.0~~$71.4 million for the three-month period ended ~~June 30, 2018,~~March 31, 2019, from ~~$50.1~~$73.1 million for the same period in ~~2017.~~2018. On a diluted earnings per share basis, our earnings were ~~$0.44 per share and $0.35~~$0.42 per share for the three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017, respectively. Excluding the $789,000 of merger expenses associated with the 2017 acquisitions our net income~~2018. Total interest expense increased ~~$25.3~~$15.3 million or ~~50.0%~~61.6%,non-interest expense increased $5.7 million or 9.0% andnon-interest income decreased by $2.1 million or 8.3%. This was partially offset by an $18.5 million, or 11.5%, ~~to $76.0 million for~~increase in total interest income. The primary drivers of the ~~three-month period ended June 30, 2018, from $50.7 million for the same period~~increase in ~~2017 (See Table 18 for the~~interest income and decrease in~~non-GAAP~~non-interest ~~tabular reconciliation). Of the $25.3~~income were a $15.8 million increase in ~~net~~loan interest income ~~excluding~~and a $3.6 million decrease in other service charges and fees, respectively, and the ~~$789,000~~primary driver of ~~merger expenses associated with~~ the ~~2017 acquisitions, $12.5 million~~increase in interest expense was ~~due to tax savings from the TCJA. The remaining $12.8 million is primarily associated with additional net income largely resulting from our acquisition of Stonegate.~~

~~Our net income increased $52.1~~a $13.2 million, or ~~53.8%~~89.2%, ~~to $149.1 million for thesix-month~~ ~~period ended June 30, 2018, from $97.0 million for the same period in 2017. On a diluted earnings per share basis, our earnings were $0.86 per share and $0.68 per share for thesix-month~~ ~~periods ended June 30, 2018 and 2017, respectively. Excluding the $3.8 million ofone-timenon-taxable~~ gain on acquisition and $7.5 million of merger expenses associated with the 2017 acquisitions, our net income increased $51.0 million, or 52.0%, to $149.1 million for the six-month period ended June 30, 2018, from $98.1 million for the same period in 2017 (See Table 18 for the~~non-GAAP~~ ~~tabular reconciliation). Of the $51.0 million~~ increase in ~~net income excluding the $3.8 million of gain~~interest expense on acquisition and $7.5 million of merger expense associated with the 2017 acquisitions, $24.6 million was due to tax savings from the TCJA. The remaining $26.4 million increase in net income, excluding gain on acquisitions and merger expenses, is primarily associated with additional net income largely resulting from our acquisitions.deposits.

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 (26.135% ~~and 39.225%~~ for the ~~three andsix-month~~three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017, respectively)~~2018).

The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Funds target rate, which is the cost to banks of immediately available overnight funds, is 2.25% to 2.50% as of March 31, 2019, which has increased ~~50 basis points since December~~from the target rate of 1.50% to 1.75% as of March 31, ~~2017 and is currently at 2.00% to 1.75%.~~

For the three months ended June 30, 2018 and 2017, we recognized $10.7 million and $8.5 million in total net accretion for acquired loans and deposits. Purchase accounting accretion on acquired loans was $10.6 million and $8.4 million and average purchase accounting loan discounts were $153.6 million and $104.4 million for the three-month periods ended June 30, 2018 and June 30, 2017, respectively. Net accretion of time deposit premiums was $102,000 and $106,000 and net average unamortized CD premiums were $538,000 and $832,000 for the three-month periods ended June 30, 2018 and June 30, 2017, respectively.

For the six months ended June 30, 2018 and 2017, we recognized $21.3 million and $16.1 million, respectively, in total net accretion for acquired loans and deposits. Purchase accounting accretion on acquired loans was $21.1 million and $16.0 million and average purchase accounting loan discounts were $159.4 million and $101.4 million for the~~six-month~~ periods ended June 30, 2018 and June 30, 2017, respectively. Net accretion of time deposit premiums was $203,000 and $194,000 and net average unamortized CD premiums were $589,000 and $715,000 for the~~six-month~~ ~~periods ended June 30, 2018 and June 30, 2017, respectively.~~2018.

Our net interest margin decreased from ~~4.50%~~4.46% for the three-month period ended ~~June 30, 2017~~March 31, 2018 to ~~4.47%~~4.30% for the three-month period ended ~~June 30, 2018.~~March 31, 2019. The yield on ~~loans~~interest earning assets was ~~5.94%~~5.52% and ~~5.78%~~5.27% for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, as average ~~loans~~interest earning assets increased from ~~$7.83~~$12.49 billion to ~~$10.35~~$13.30 billion. The increase in ~~loan balances~~earning assets is primarily the result of our acquisition of $376.2 million in loans from our purchase of SPF in the second quarter of 2018 and organic loan growth of $277.0 million. The acquisition of SPF in the second quarter of 2018 resulted in a 3 basis point decline to our net interest margin due to lower interest rates on the ~~acquisition of Stonegate. For the three months ended June 30, 2018 and 2017, we recognized $10.7 million and $8.5 million in total net accretion for~~ acquired ~~loans and deposits.~~loans. The rate on ~~interest-bearing deposits increased from 0.48%~~interest bearing liabilities was 1.59% and 1.05% for the three months ended ~~June 30, 2017~~March 31, 2019 and 2018, respectively, as average interest-bearing liabilities increased from $9.60 billion to ~~0.90% for the three months ended June 30, 2018 with average balances of $5.74 billion and $8.06 billion, respectively.~~$10.18 billion. The growth of average interest earning assets ~~of $2.82 billion, which was primarily due to acquisition of Stonegate,~~ and the increase in yield were offset by the increase in ~~interest-bearing~~interest bearing liabilities and the rate on ~~interest-bearing~~interest bearing liabilities plus the acquisition of SPF, which led to a decrease in net interest margin for the quarter ended ~~June 30, 2018.~~March 31, 2019.

~~Our~~For the three months ended March 31, 2019 and 2018, purchase accounting accretion on acquired loans was $9.0 million and $10.5 million and average purchase accounting loan discounts were $131.6 million and $164.1 million, respectively. Net accretion of time deposit premiums was $30,189 and $102,000 and net ~~interest margin decreased from 4.60%~~average unamortized CD premiums were $357,000 and $641,000 for the~~six-month~~ ~~period~~ three-month periods ended ~~June 30, 2017 to 4.47% for thesix-month~~ ~~period ended June 30, 2018. The yield on loans was 5.88%~~March 31, 2019 and ~~5.72% for the six months ended June 30,~~March 31, 2018, and 2017, respectively, as average loans increased from $7.71 billion to $10.34 billion. The increase in loan balances is primarily due to the acquisitions we completed during 2017. For the six months ended June 30, 2018 and 2017, we recognized $21.3 million and $16.1 million, respectively, in total net accretion for acquired loans and deposits. The rate on interest-bearing deposits increased from 0.44% for the six months ended June 30, 2017 to 0.83% for the six months ended June 30, 2018, with average balances of $5.62 billion and $7.99 billion, respectively. The growth of average interest earning assets of $3.05 billion, which was primarily due to acquisitions completed in 2017, and the increase in yield were offset by the increase in interest-bearing liabilities and the rate on interest-bearing liabilities, which led to a decrease in net interest margin for the quarter ended June 30, 2018.

Net interest income on a fully taxable equivalent basis increased ~~$30.6~~$3.4 million, or ~~28.0%~~2.5%, to ~~$140.0~~$140.8 million for the three-month period ended ~~June 30, 2018,~~March 31, 2019, from ~~$109.4~~$137.4 million for the same period in ~~2017.~~2018. This increase in net interest income for the three-month period ended ~~June 30, 2018~~March 31, 2019 was the result of ~~a $43.1~~an $18.7 million increase in interest income partially offset by a ~~$12.4~~$15.3 million increase in interest ~~expense.~~expense, on a fully taxable equivalent basis. The ~~$43.1~~$18.7 million increase in interest income was primarily the result of a higher level of earning assets accompanied by higher yields on our loans. The higher level of earning assets resulted in an increase in interest income of approximately ~~$39.3~~$11.3 million. The higher yield ~~on our interest earning assets~~was primarily driven by the increased loan production in the higher rate environment as well as the repricing of floating rate loans, which resulted in ~~an approximately $3.8~~a $7.4 million increase in interest ~~income.~~income, which was partially offset by a decrease in loan accretion income on our historical acquisitions. The $15.3 million increase in interest expense for the three-month period ended March 31, 2019 is primarily the result of an increase in interest bearing liabilities primarily resulting from a 7.3% increase in average deposits, combined with interest bearing liabilities repricing in a higher interest rate environment. The repricing of our interest-bearing liabilities in a higher interest rate environment resulted in an approximately ~~$9.8~~$13.8 million increase in interest expense. The higher level of our interest-bearing liabilities resulted in an increase in interest expense of approximately ~~$2.6~~$1.5 million.

~~Net interest income on a fully taxable equivalent basis increased $61.2 million, or 28.3%, to $277.4 million for thesix-month~~ ~~period ended June 30, 2018, from $216.2 million for the same period in 2017. This increase in net interest income for thesix-month~~ period ended June 30, 2018 was the result of a $88.8 million increase in interest income partially offset by a $27.5 million increase in interest expense. The $88.8 million increase in interest income was primarily the result of a higher level of earning assets accompanied by higher yields on our loans. The higher level of earning assets resulted in an increase in interest income of approximately $81.3 million. The higher yield on our interest earning assets resulted in an approximately $7.4 million increase in interest income. The repricing of our interest-bearing liabilities in a higher interest rate environment resulted in an approximately $18.5 million increase in interest expense. The higher level of our interest-bearing liabilities resulted in an increase in interest expense of approximately $9.0 million.

Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the ~~three andsix-month~~three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ as well as changes in fully taxable equivalent net interest margin for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018~~March 31, 2019 compared to the same period in ~~2017.~~2018.

Table 2: Analysis of Net Interest Income


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(Dollars in thousands)												(Dollars in thousands)
Interest income	$	166,561		$	122,863		$	327,537		$	237,357		$	179,487		$	160,976
Fully taxable equivalent adjustment		1,403			2,016			2,612			4,027			1,367			1,209

Interest income – fully taxable equivalent		167,964			124,879			330,149			241,384			180,854			162,185
Interest expense		27,949			15,511			52,716			25,190			40,017			24,767

Net interest income – fully taxable equivalent	$	140,015		$	109,368		$	277,433		$	216,194		$	140,837		$	137,418

Yield on earning assets – fully taxable equivalent		5.36	%		5.14	%		5.32	%		5.14	%		5.52	%		5.27	%
Cost of interest-bearing liabilities		1.18			0.84			1.11			0.70			1.59			1.05
Net interest spread – fully taxable equivalent		4.18			4.30			4.21			4.44			3.93			4.22
Net interest margin – fully taxable equivalent		4.47			4.50			4.47			4.60			4.30			4.46

Table 3: Changes in Fully Taxable Equivalent Net Interest Margin


	Three Months Ended June 30, 2018 vs. 2017			Six Months Ended June 30, 2018 vs. 2017			Three Months Ended March 31, 2019 vs. 2018
	(In thousands)						(In thousands)
Increase (decrease) in interest income due to change in earning assets	$	39,331		$	81,321		$	11,277
Increase (decrease) in interest income due to change in earning asset yields		3,754			7,444			7,392
(Increase) decrease in interest expense due to change in interest-bearing liabilities		(2,592	)		(9,016	)		(1,481	)
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities		(9,846	)		(18,510	)		(13,769	)

Increase (decrease) in net interest income	$	30,647		$	61,239		$	3,419

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 andsix-month~~three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ 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 June 30,
   2018 2017
   Average
Balance    Income /
Expense    Yield /
Rate Average
Balance    Income /
Expense    Yield /
Rate
   (Dollars in thousands)
ASSETS

Earnings assets

Interest-bearing balances due from banks
   $ 288,643    $ 1,206    1.68 % $ 303,997    $ 727    0.96 %
Federal funds sold
   679    12    7.09 1,427    4    1.12
Investment securities – taxable
   1,528,613    8,979    2.36 1,256,202    6,434    2.05
Investment securities –non-taxable
   398,067    4,476    4.51 346,708    4,812    5.57
Loans receivable
   10,345,846    153,291    5.94 7,829,615    112,902    5.78









Total interest-earning assets
   12,561,848    $ 167,964    5.36 9,737,949    $ 124,879    5.14





Non-earning assets
   1,742,635       1,055,821





Total assets
   $ 14,304,483       $ 10,793,770





LIABILITIES AND STOCKHOLDERS’ EQUITY


Liabilities

Interest-bearing liabilities

Savings and interest-bearing transaction accounts
   $ 6,451,204    $ 13,489    0.84 % $ 4,292,389    $ 4,313    0.40 %
Time deposits
   1,611,353    4,675    1.16 1,443,228    2,497    0.69









Total interest-bearing deposits
   8,062,557    18,164    0.90 5,735,617    6,810    0.48









Federal funds purchased
   46    —      —   —      —      —
Securities sold under agreement to repurchase
   143,952    372    1.04 128,661    196    0.61
FHLB and other borrowed funds
   928,357    4,245    1.83 1,177,510    3,710    1.26
Subordinated debentures
   368,309    5,168    5.63 351,659    4,795    5.47









Total interest-bearing liabilities
   9,503,221    27,949    1.18 7,393,447    15,511    0.84





Non-interest-bearing liabilities

Non-interest-bearing deposits
   2,496,701       1,899,865
Other liabilities
   53,149       47,359





Total liabilities
   12,053,071       9,340,671
Stockholders’ equity
   2,251,412       1,453,099





Total liabilities and stockholders’ equity
   $ 14,304,483       $ 10,793,770





Net interest spread
         4.18 %       4.30 %
Net interest income and margin
      $ 140,015    4.47 %    $ 109,368    4.50 %

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


		Six Months Ended June 30,															Three Months Ended March 31,
		2018							2017								2019							2018
		Average Balance		Income / Expense		Yield / Rate			Average Balance		Income / Expense		Yield / Rate				Average Balance		Income / Expense		Yield / Rate			Average Balance		Income / Expense		Yield / Rate
		(Dollars in thousands)															(Dollars in thousands)
ASSETS
Earnings assets
Interest-bearing balances due from banks		$	267,347	$	2,135		1.61	%	$	237,617	$	1,035		0.88	%		$	272,410	$	1,543		2.30	%	$	245,815	$	929		1.53	%
Federal funds sold			5,156		18		0.70			1,305		6		0.93				1,491		11		2.99			9,682		6		0.25
Investment securities – taxable			1,544,451		17,949		2.34			1,183,588		11,912		2.03				1,595,605		10,706		2.72			1,560,464		8,970		2.33
Investment securities –non-taxable			371,788		8,473		4.60			346,895		9,598		5.58				390,754		4,424		4.59			345,217		3,997		4.70
Loans receivable			10,335,699		301,574		5.88			7,708,264		218,833		5.72				11,036,503		164,170		6.03			10,325,439		148,283		5.82

Total interest-earning assets			12,524,441		330,149		5.32			9,477,669		241,384		5.14				13,296,763	$	180,854		5.52			12,486,617	$	162,185		5.27

Non-earning assets			1,745,179							1,020,474								1,782,909							1,747,752

Total assets		$	14,269,620						$	10,498,143							$	15,079,672						$	14,234,369

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY															LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Interest-bearing liabilities
Savings and interest-bearing transaction accounts		$	6,430,509	$	24,731		0.78	%	$	4,216,025	$	7,690		0.37	%		$	6,596,895	$	19,537		1.20	%	$	6,409,585	$	11,242		0.71	%
Time deposits			1,562,873		8,239		1.06			1,400,501		4,606		0.66				1,903,373		8,469		1.80			1,513,854		3,564		0.95

Total interest-bearing deposits			7,993,382		32,970		0.83			5,616,526		12,296		0.44				8,500,268		28,006		1.34			7,923,439		14,806		0.76

Federal funds purchased			62		1		3.25			—		—		—				—		—		0.00			78		1		5.20
Securities sold under agreement to repurchase			148,310		748		1.02			126,390		361		0.58				150,803		634		1.71			152,716		376		1.00
FHLB and other borrowed funds			1,038,612		8,825		1.71			1,274,823		7,299		1.15				1,159,629		6,118		2.14			1,150,091		4,580		1.62
Subordinated debentures			368,217		10,172		5.57			207,043		5,234		5.10				368,884		5,259		5.78			368,124		5,004		5.51

Total interest-bearing liabilities			9,548,583		52,716		1.11			7,224,782		25,190		0.70				10,179,584		40,017		1.59			9,594,448		24,767		1.05

Non-interest-bearing liabilities
Non-interest-bearing deposits			2,439,299							1,808,660								2,439,520							2,381,259
Other liabilities			48,779							52,062								115,911							44,360

Total liabilities			12,036,661							9,085,504								12,735,015							12,020,067
Stockholders’ equity			2,232,959							1,412,639								2,344,657							2,214,302

Total liabilities and stockholders’ equity		$	14,269,620						$	10,498,143							$	15,079,672						$	14,234,369

Net interest spread							4.21	%						4.44	%							3.93	%						4.22	%
Net interest income and margin				$	277,433		4.47	%			$	216,194		4.60	%				$	140,837		4.30	%			$	137,418		4.46	%

Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018~~March 31, 2019 compared to the same period in ~~2017,~~2018, 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 June 30,									Six Months Ended June 30,
	2018 over 2017									2018 over 2017									Three Months Ended March 31, 2019 over 2018
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
	(In thousands)																		(In thousands)
Increase (decrease) in:
Interest income:
Interest-bearing balances due from banks	$	(39	)	$	518		$	479		$	143		$	957		$	1,100		$	110		$	504		$	614
Federal funds sold		(3	)		11			8			13			(1	)		12			(9	)		14			5
Investment securities – taxable		1,517			1,028			2,545			4,005			2,032			6,037			206			1,530			1,736
Investment securities –non-taxable		653			(989	)		(336	)		653			(1,778	)		(1,125	)		517			(90	)		427
Loans receivable		37,203			3,186			40,389			76,507			6,234			82,741			10,453			5,434			15,887

Total interest income		39,331			3,754			43,085			81,321			7,444			88,765			11,277			7,392			18,669


Interest expense:
Interest-bearing transaction and savings deposits		2,914			6,262			9,176			5,478			11,563			17,041			338			7,957			8,295
Time deposits		320			1,858			2,178			587			3,046			3,633			1,100			3,805			4,905
Federal funds purchased		—			—			—			—			1			1			—			(1	)		(1	)
Securities sold under agreement to repurchase		25			151			176			72			315			387			(5	)		263			258
FHLB borrowed funds		(898	)		1,433			535			(1,533	)		3,059			1,526			38			1,500			1,538
Subordinated debentures		231			142			373			4,412			526			4,938			10			245			255

Total interest expense		2,592			9,846			12,438			9,016			18,510			27,526			1,481			13,769			15,250

Increase (decrease) in net interest income	$	36,739		$	(6,092	)	$	30,647		$	72,305		$	(11,066	)	$	61,239		$	9,796		$	(6,377	)	$	3,419

Provision for Loan Losses

Our management assesses the adequacy of the allowance for loan losses by applying the provisions of FASB ASC310-10-35. Specific allocations are determined for loans considered to be impaired and loss factors are assigned to the remainder of the loan portfolio to determine an appropriate level 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 the credit relationship. The potential loss factors associated with the remainder of the loan portfolio are based on an internal net loss experience, as well as management’s review of trends within the portfolio and related industries.

While general economic trends have continued to improve, we cannot be certain that the current economic conditions will continue in the future. Recent and ongoing events at the national and international levels can create uncertainty in the financial markets. Despite ~~the current positive~~these economic ~~conditions,~~uncertainties, we continue to follow our historically conservative procedures for lending and evaluating 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 as cash flows, operating income, liquidity, and leverage. A material change in the borrower’s credit analysis can result in an increase or decrease in 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~~

We are primarily a real estate lender in 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 of the last decade harshly impacted the real estate market in Florida. The economic conditions in virtually every asset class, particularly in our Florida markets, have improved in recent years. Our Arkansas markets’ economies remained relatively stable during and after the recession with no significant boom or bust.

The provision for loan losses represents management’s determination of the amount necessary 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.

~~We had $2.7~~There was zero and $1.6 million ~~and $387,000~~ of provision for loan losses for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, reflecting a $2.3~~respectively. This $1.6 million ~~increase~~decrease in the provision for loan losses during the ~~second quarter~~first three months of ~~2018~~2019 versus the ~~second quarter~~first three months of ~~2017. This $2.3 million increase~~2018 is primarily a result of ~~increased net charge-offs and higher organic loan growth.~~

~~We had $4.3 million of provision for loan losses for the six months ended June 30, 2018 and 2017. The provision remained substantially flat as net charge-offs as a percentage of total~~continued strong asset quality withnon-performing loans ~~remained consistent at 0.05% as of June 30, 2017, compared to 0.03% as of June 30, 2018. In addition, the allowance for loan losses~~ to total loans ~~remained unchanged at 1.02% as~~ of ~~June 30, 2018~~0.58% and ~~2017.~~non-performing assets to total assets of 0.52%. In addition, net charge-offs to average total loans was 0.09% for the first three months of 2019.

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 payoff 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 Form10-K for the year ended December 31, 2018, 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 ~~$27.7 million and $53.5~~$23.7 million for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018,~~March 31, 2019, compared to ~~$24.4 million and $50.9~~$25.8 million for the same ~~periods~~period in ~~2017,~~2018, respectively. Our recurringnon-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending, insurance, increase in cash value of life insurance and dividends.

Table 6 measures the various components of ournon-interest income for the ~~three andsix-month~~three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, as well as changes for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018~~March 31, 2019 compared to the same period in ~~2017.~~2018.

Table 6:Non-Interest Income


	Three Months Ended									Six Months Ended
	June 30,				2018 Change					June 30,				2018 Change						Three Months Ended March 31,				2019 Change
	2018		2017		from 2017					2018		2017		from 2017						2019		2018		from 2018
	(Dollars in thousands)																			(Dollars in thousands)
Service charges on deposit accounts	$	6,780	$	5,966	$	814		13.6	%	$	12,855	$	11,948	$	907			7.6	%	$	6,401	$	6,075	$	326		5.4	%
Other service charges and fees		9,797		8,576		1,221		14.2			19,952		17,493		2,459			14.1			6,563		10,155		(3,592	)	(35.4	)
Trust fees		379		309		70		22.7			825		765		60			7.8			403		446		(43	)	(9.6	)
Mortgage lending income		3,477		3,750		(273	)	(7.3	)		6,134		6,541		(407	)		(6.2	)		2,435		2,657		(222	)	(8.4	)
Insurance commissions		526		465		61		13.1			1,205		1,010		195			19.3			609		679		(70	)	(10.3	)
Increase in cash value of life insurance		730		463		267		57.7			1,384		773		611			79.0			736		654		82		12.5
Dividends from FHLB, FRB, FNBB & other		1,600		472		1,128		239.0			2,477		1,621		856		��	52.8
Gain on acquisitions		—		—		—		—			—		3,807		(3,807	)		(100.0	)
Dividends from FHLB, FRB, First National Bankers’ Bank & other																					3,505		877		2,628		299.7
Gain on sale of SBA loans		262		387		(125	)	(32.3	)		444		575		(131	)		(22.8	)		241		182		59		32.4
Gain (loss) on sale of branches, equipment and other assets, net		—		431		(431	)	(100.0	)		7		375		(368	)		(98.1	)		79		7		72		1,028.6
Gain (loss) on OREO, net		1,046		393		653		166.2			1,451		514		937			182.3			206		405		(199	)	(49.1	)
Gain (loss) on securities, net		—		380		(380	)	(100.0	)		—		803		(803	)		(100.0	)
Other income		3,076		2,825		251		8.9			6,744		4,662		2,082			44.7			2,494		3,668		(1,174	)	(32.0	)

Totalnon-interest income	$	27,673	$	24,417	$	3,256		13.3	%	$	53,478	$	50,887	$	2,591			5.1	%	$	23,672	$	25,805	$	(2,133	)	(8.3	)%

Non-interest income ~~increased $3.3~~decreased $2.1 million, or ~~13.3%~~8.3%, to ~~$27.7~~$23.7 million for the three-month period ended ~~June 30, 2018~~March 31, 2019 from ~~$24.4~~$25.8 million for the same period in ~~2017.Non-interest~~ ~~income increased $2.6 million, or 5.1%, to $53.5 million for thesix-month~~ ~~period ended June 30, 2018 from $50.9 million for the same period in 2017.Non-interest~~ ~~income excluding gain on acquisitions increased $6.4 million, or 13.6%, to $53.5 million for the six months ended June 30, 2018 from $47.1 million for the same period in 2017.~~

~~Excluding gain on acquisitions, the~~2018. The primary ~~factors~~factor that resulted in this ~~increase~~decrease was the impact of the Durbin Amendment which reduced interchange fees by approximately $3.0 million for the quarter. Other factors were changes related to service charges on deposit accounts, other service charges and fees, ~~increase in cash value of life insurance, dividends, net gain on securities, net~~mortgage lending income, gain on OREO and other ~~income.~~income, partially offset by an increase in dividends from FHLB, FRB, First National Bankers’ Bank & other.

Additional details for the three months ended ~~June 30, 2018~~March 31, 2019 on some of the more significant changes are as follows:

The ~~$814,000~~$326,000 increase in service charges on deposit accounts is primarily related to an increase in overdraft fees due to additional volume ~~the acquisition of Stonegate during the third quarter of 2017 and~~as well as improved pricing.

The ~~$1.2~~$3.6 million ~~increase~~decrease in other service charges and fees is primarily ~~from additional interchange fees as well as the acquisition of Stonegate during the third quarter of 2017.~~

~~The $267,000 increase in cash value of life insurance is primarily~~ due to the ~~additional life insurance held by the Company~~reduction in interchange fees as a result of the ~~acquisition~~Company being subject to interchange fee restrictions from the Durbin Amendment. We exceeded $10 billion in assets during the first quarter of ~~Stonegate during~~2017 and became subject to the Durbin Amendment to the Dodd-Frank Act interchange fee restrictions beginning in the third quarter of ~~2017.~~2018. The Durbin Amendment negatively impacted debit card and ATM fees. We estimate that quarterly interchange fees are approximately $3.0 million lower as a result of the Durbin Amendment.

The ~~$1.1~~$222,000 decrease in mortgage lending income is primarily the result of lower fee income for secondary market loans.

The $2.6 million increase in dividends from FHLB, FRB, First National Bankers’ Bank & other is primarily the result of a $2.1 million special dividend from an equity investment. The remaining increase is associated with higher dividend income from Federal Reserve ~~stock~~ and ~~other equity investments, which increased $660,000 and $424,000 from the second quarter of 2017 to the second quarter of 2018, respectively. The increase in the Federal Reserve~~FHLB stock dividend is related to an increased investment balance and improved dividend rate. The increase in the other equity investments dividend is related to two dividends being paid during the second quarter of 2018 as no dividend was paid during the first quarter of 2018.

~~The $653,000 increase in gain on OREO is primarily related to realizing additional gains on sale from OREO properties during the second quarter of 2018 compared to the second quarter of 2017.~~

The $431,000 decrease in gain sale of branches, equipment and other assets, net, is a result of no sales of branches, equipment or other assets during the second quarter of 2018 compared to the second quarter of 2017.

~~The 380,000 decrease in gain on securities, net, is a result of no sales of securities in the second quarter of 2018.~~

We exceeded $10 billion in assets during the first quarter of 2017 and will become subject to the Durbin Amendment to the Dodd-Frank Act interchange fee restrictions beginning in July 2018. The Durbin Amendment will negatively impact debit card and ATM fees beginning in the second half of 2018. During the second quarter of 2018, we collected $6.9 million in debit card interchange fees. We estimate that our interchange fee revenue will be reduced by approximately 35.0% for the third quarter of 2018 compared to the second quarter of 2018.

~~Additional details for the six months ended June 30, 2018 on some of the more significant changes are as follows:~~

The $907,000, increase in service charges on deposit accounts is primarily related to an increase in overdraft fees due to additional volume, the acquisition of Stonegate during the third quarter of 2017 and improved pricing.

~~The $2.5 million increase in other service charges and fees is primarily from the acquisition of Stonegate during the third quarter of 2017~~ as well as increased ~~interchange fees.~~

The $611,000 increase in cash value of life insurance is primarily due to the additional life insurance held by the Company as a result of the acquisition of Stonegate during the third quarter of 2017.

~~The $856,000 increase in dividends from FHLB, FRB, First National Bankers’ Bank & other is primarily associated with higher~~ dividend income from ~~Federal Reserve stock~~other equity investments, which is related to an increased investment balance and improved dividend rate.

The ~~$937,000 increase~~$199,000 decrease in gain (loss) on OREO is primarily related to realizing ~~additional~~fewer gains on sale from OREO properties during the first ~~six-months of 2018 and no revaluation expense for the first six~~three months of ~~2018 compared to $144,000 incurred during the first quarter of 2017.~~

The $3.8 million decrease in gain on acquisitions is a result of no bargain purchase gain being recorded for the first six months of 2018. During the first quarter of 2017, we acquired BOC and recorded a $3.8 million bargain purchase gain on this acquisition.

~~The 803,000 decrease in gain on securities, net, is a result of no sales of securities for the first six months of 2018~~2019 compared to the first ~~six~~three months of ~~2017.~~2018 and a $100,000 increase in OREO reevaluation expense compared to 2018.

Other income includes loan recoveries of $1.3 million ~~of additional income for items~~on purchased loans previously charged off prior to acquisition, $363,000 of brokerage fee income, $421,000 of rental income and ~~$688,000~~$410,000 of ~~income related to the fair value adjustment of equity securities.~~miscellaneous income.

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~~three-month period ended March 31, 2019 and~~six-month~~ ~~periods ended June 30,~~ 2018, ~~and 2017,~~ as well as changes for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018~~March 31, 2019 compared to the same period in ~~2017.~~2018.

Table 7:Non-Interest Expense


	Three Months Ended									Six Months Ended
	June 30,				2018 Change					June 30,				2018 Change					Three Months Ended March 31,				2019 Change
	2018		2017		from 2017					2018		2017		from 2017					2019		2018		from 2018
	(Dollars in thousands)																		(Dollars in thousands)
Salaries and employee benefits	$	34,476	$	28,034	$	6,442		23.0	%	$	69,490	$	55,455	$	14,035		25.3	%	$	37,836	$	35,014	$	2,822		8.1	%
Occupancy and equipment		8,519		7,034		1,485		21.1			17,502		13,715		3,787		27.6			8,823		8,983		(160	)	(1.8	)
Data processing expense		3,339		2,863		476		16.6			7,325		5,586		1,739		31.1			3,970		3,986		(16	)	(0.4	)
Other operating expenses:
Advertising		1,142		812		330		40.6			2,104		1,510		594		39.3			1,051		962		89		9.3
Merger and acquisition expenses		—		789		(789	)	(100.0	)		—		7,516		(7,516	)	(100.0	)
Amortization of intangibles		1,624		866		758		87.5			3,250		1,670		1,580		94.6			1,586		1,625		(39	)	(2.4	)
Electronic banking expense		1,828		1,654		174		10.5			3,706		3,173		533		16.8			1,903		1,878		25		1.3
Directors’ fees		318		324		(6	)	(1.9	)		648		637		11		1.7			434		330		104		31.5
Due from bank service charges		242		456		(214	)	(46.9	)		461		876		(415	)	(47.4	)		238		219		19		8.7
FDIC and state assessment		2,788		1,182		1,606		135.9			4,396		2,470		1,926		78.0			1,710		1,608		102		6.3
Hurricane expense																				897		—		897		100.0
Insurance		714		543		171		31.5			1,601		1,121		480		42.8			697		887		(190	)	(21.4	)
Legal and accounting		858		474		384		81.0			1,636		1,101		535		48.6			981		778		203		26.1
Other professional fees		1,601		1,233		368		29.8			3,240		2,386		854		35.8			2,812		1,639		1,173		71.6
Operating supplies		602		477		125		26.2			1,202		944		258		27.3			536		600		(64	)	(10.7	)
Postage		323		295		28		9.5			667		581		86		14.8			326		344		(18	)	(5.2	)
Telephone		371		398		(27	)	(6.8	)		744		722		22		3.0			303		373		(70	)	(18.8	)
Other expense		4,483		3,569		914		25.6			8,636		6,681		1,955		29.3			4,954		4,153		800		19.3

Totalnon-interest expense	$	63,228	$	51,003	$	12,225		24.0	%	$	126,608	$	106,144	$	20,464		19.3	%	$	69,057	$	63,380	$	5,677		9.0	%

Non-interest expense increased ~~$12.2~~$5.7 million, or ~~24.0%~~9.0%, to ~~$63.2~~$69.1 million for the three months ended ~~June 30, 2018~~March 31, 2019 from ~~$51.0~~$63.4 million for the same period in ~~2017.Non-interest~~ ~~expense increased $20.5 million, or 19.3%, to $126.6 million for the six months ended June 30, 2018 from $106.1 million for the same period in 2017.Non-interest~~ expense, excluding merger expenses, was $63.2 million and $126.6 million for the three and six months ended June 30, 2018 compared to $50.2 million and $98.6 million for the same periods in 2017, respectively.2018.

The ~~change~~$2.8 million increase in~~non-interest~~ salaries and employee benefits expense is primarily due to the $844,000 additional expense related to performance based restricted stock and stock options granted during the third quarter of 2018 under the Company’s “HOMB $2.00” performance incentive program (“HOMB $2.00”), a $703,000 increase in salary expense for ~~2018 when compared to 2017 is primarily related to~~Centennial CFG, the completion of the acquisition of ~~Stonegate in~~SPF during the ~~third~~second quarter of ~~2017,~~2018, which accounted for $253,000 of the increase, and increased salary expense related to the normal increased cost of doing business ~~and Centennial CFG.~~as well as additional employees hired as a result of the increased regulatory environment.

~~Centennial CFG’s branch and loan production offices~~The $897,000 in hurricane expense is related to damages from Hurricane Michael which made landfall in Mexico Beach, Florida on October 10, 2018.

The $1.2 million increase in other professional fees is primarily related to $900,000 of expense incurred ~~$5.7 million and $11.1 million~~in relation to a completed outsourced special project.

The $800,000 increase in other expense is primarily related to the continued growth of~~non-interest~~ ~~expense during the three and six months ended June 30, 2018, compared to $4.5 million and $9.1 million ofnon-interest~~ expense during the three and six months ended June 30, 2017, respectively. While the cost of doing business in New York City 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.

Income Taxes

~~In December 2017, President Trump signed into law the TCJA which lowered the Company’s corporate tax rate of 35.0% to 21.0%. Income~~The income tax expense decreased ~~$6.0~~$1.3 million, or ~~19.7%~~5.2%, to ~~$24.3~~$22.7 million for the three-month period ended ~~June 30, 2018,~~March 31, 2019, from ~~$30.3~~$24.0 million for the same period in ~~2017. The income tax expense decreased $7.4 million, or 13.3%, to $48.3 million for thesix-month~~ ~~period ended June 30, 2018, from $55.7 million for the same period in 2017.~~2018. The effective income tax rate was ~~24.2% and 24.5%~~24.16% for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018,~~March 31, 2019, compared to ~~37.67% and 36.47%~~24.70% for the same ~~periods~~period in ~~2017, respectively. Since January 1, 2018, the Company has benefited from a lower marginal tax rate of 26.135% from 39.225% in previous years.~~2018.

Financial Condition as of and for the Period Ended ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018

Our total assets as of ~~June 30, 2018 increased $474.4~~March 31, 2019 decreased $122.9 million to ~~$14.92~~$15.18 billion from the ~~$14.45~~$15.30 billion reported as of December 31, ~~2017. Our loan portfolio increased $566.8~~2018. Cash and cash equivalents decreased $95.5 million, or ~~5.49%~~14.5%, for the quarter ended ~~June 30, 2018~~March 31, 2019. Our loan portfolio balance declined slightly to $10.98 billion as of March 31, 2019 from ~~$10.33~~$11.07 billion at December 31, 2018. Total deposits increased $167.7 million to $11.07 billion as of March 31, 2019 from $10.90 billion as of December 31, ~~2017~~2018. Stockholders’ equity increased $11.6 million to ~~$10.90~~$2.36 billion as of ~~June 30, 2018. The increase is primarily due~~March 31, 2019, compared to the acquisition of $373.9 million of loans as part of the acquisition of SPF as well as $192.9 million of organic loan growth for the first six months of 2018. Total deposits increased $347.5 million to $10.74 billion as of June 30, 2018 from $10.39$2.35 billion as of December 31, ~~2017. Stockholders’ equity increased $109.7 million to $2.31 billion as of June 30, 2018, compared to $2.20 billion as of December 31, 2017.~~2018. The increase in stockholders’ equity is primarily associated with ~~the $111.9~~quarterly net income of $71.4 million ~~increase in retained earnings as well as the issuance~~and $9.5 million of ~~1.3~~other comprehensive income resulting from a $12.8 million ~~shares~~unrealized gain on available for sale securities and $3.3 million of ~~stock with a value of $28.2 million as part of the acquisition of SPF,~~deferred tax impact, which ~~were~~was partially offset by ~~$20.2~~the $20.4 million ~~of comprehensive loss and the repurchase of $15.0 million of our common stock~~dividend paid during ~~2018. The annualized improvement in stockholders’ equity for~~ the first ~~six months~~quarter of ~~2018, excluding the $28.2 million~~2019 and stock repurchases of ~~common stock issued for the acquisition of SPF, was 7.4%.~~$51.7 million.

Loan Portfolio

Loans Receivable

Our loan portfolio averaged ~~$10.35~~$11.04 billion and ~~$7.83~~$10.33 billion during the three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively. Our loan portfolio averaged $10.34 billion and $7.71 billion during thesix-month~~ ~~periods ended June 30, 2018 and 2017,~~ respectively. Loans receivable were ~~$10.90~~$10.98 billion and ~~$10.33~~$11.07 billion as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

~~During the second quarter of 2018, the Company acquired $373.9 million of loans, net of known purchase accounting discounts.~~ From December 31, ~~2017~~2018 to ~~June 30, 2018,~~March 31, 2019, the Company ~~produced organic loan growth~~experienced a decline of approximately ~~$192.9~~$92.9 million in ~~addition to the acquired~~ loans. Centennial CFG ~~produced $204.1 million of organic loan growth during the first six months of 2018, while the legacy footprint~~ experienced ~~$10.8~~$25.1 million of organic loan decline during the first ~~six months~~quarter of ~~2018.~~2019, while the legacy footprint experienced $67.8 million of organic loan decline during the first quarter of 2019.

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 Alabama ~~SPF~~ and Centennial CFG, ~~franchises,~~ the property securing these loans may not physically be located within our ~~primary~~ market areas of Arkansas, Florida, Alabama and New York. Loans receivable were approximately ~~$3.46~~$3.72 billion, ~~$5.19~~$5.09 billion, ~~$226.0~~$216.9 million, ~~$373.9~~$436.2 million and ~~$1.65~~$1.52 billion as of ~~June 30, 2018~~March 31, 2019 in ~~our~~ Arkansas, Florida, Alabama, SPF and Centennial CFG, ~~franchises,~~ respectively.

As of ~~June 30, 2018,~~March 31, 2019, we had approximately ~~$533.7~~$541.3 million of construction land development loans which were collateralized by land. This consisted of approximately ~~$244.7~~$268.6 million for raw land and approximately ~~$288.9~~$272.7 million for land with commercial and or residential lots.

Table 8 presents our loans receivable balances by category as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~

~~Table 8: Loans Receivable~~2018.


	As of		As of
Table 8: Loans Receivable					Table 8: Loans Receivable
	June 30, 2018		December 31, 2017			As of March 31, 2019		As of December 31, 2018
	(In thousands)					(In thousands)
Real estate:
Commercial real estate loans:
Non-farm/non-residential	$	4,734,315	$	4,600,117		$	4,623,174	$	4,806,684
Construction/land development		1,662,199		1,700,491			1,649,303		1,546,035
Agricultural		77,053		82,229			76,092		76,433
Residential real estate loans:
Residential1-4 family		1,960,841		1,970,311			1,947,119		1,975,586
Multifamily residential		540,526		441,303			538,098		560,475

Total real estate		8,974,934		8,794,451			8,833,786		8,965,213
Consumer		417,499		46,148			448,093		443,105
Commercial and industrial		1,287,637		1,297,397			1,505,773		1,476,331
Agricultural		55,768		49,815			58,966		48,562
Other		162,132		143,377			132,317		138,668

Total loans receivable	$	10,897,970	$	10,331,188		$	10,978,935	$	11,071,879

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 ~~June 30, 2018,~~March 31, 2019, commercial real estate loans totaled ~~$6.47~~$6.35 billion, or ~~59.4%~~57.8% of loans receivable, as compared to ~~$6.38~~$6.43 billion, or ~~61.8%~~58.1% of loans receivable, as of December 31, ~~2017.~~2018. Commercial real estate loans originated in our Arkansas, Florida, Alabama, SPF and Centennial CFG markets were ~~$1.97~~$2.10 billion, ~~$3.23~~$3.17 billion, ~~$124.4~~$117.7 million, zero and ~~$1.14 billion~~$959.6 million at ~~June 30, 2018,~~March 31, 2019, respectively.

Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately ~~29.7%~~30.9% and ~~59.3%~~57.8% of our residential mortgage loans consist of owner occupied1-4 family properties andnon-owner occupied1-4 family properties (rental), respectively, as of ~~June 30, 2018.~~March 31, 2019, with the remaining 11.3% 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 ~~June 30, 2018,~~March 31, 2019, residential real estate loans totaled ~~$2.50~~$2.49 billion, or ~~23.0%~~22.6%, of loans receivable, compared to ~~$2.41~~$2.54 billion, or ~~23.3%~~22.9% of loans receivable, as of December 31, ~~2017.~~2018. Residential real estate loans originated in our Arkansas, Florida, Alabama, SPF and Centennial CFG markets were ~~$872.8~~$937.1 million, ~~$1.35~~$1.31 billion, ~~$69.7~~$69.5 million, zero and ~~$204.7~~$166.2 million at ~~June 30, 2018,~~March 31, 2019, respectively.

Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our bank, the primary portion of which consists of loans to finance USCG registeredhigh-end sail and power boats as a result of our acquisition of SPF on June 30, 2018. The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.

As of ~~June 30, 2018,~~March 31, 2019, consumer loans totaled ~~$417.5~~$448.1 million, or ~~3.8%~~4.1% of loans receivable, compared to ~~$46.2~~$443.1 million, or ~~0.4%~~4.0% of loans receivable, as of December 31, ~~2017. The significant increase is due to our acquisition of SPF on June 30,~~ 2018. Consumer loans originated in our Arkansas, Florida, Alabama, SPF and Centennial CFG markets were ~~$22.6~~$33.9 million, ~~$30.3~~$16.5 million, ~~$877,000, $363.7~~$1.2 million, $396.6 million and zero at ~~June 30, 2018,~~March 31, 2019, respectively.

Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally 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 ~~June 30, 2018,~~March 31, 2019, commercial and industrial loans totaled ~~$1.29~~$1.51 billion, or ~~11.8%~~13.7% of loans receivable, ~~which is comparable~~compared to ~~$1.30~~$1.48 billion, or ~~12.6%~~13.3% of loans receivable, as of December 31, ~~2017.~~2018. Commercial and industrial loans originated in our Arkansas, Florida, Alabama, SPF and Centennial CFG markets were ~~$492.0~~$549.2 million, ~~$458.9~~$494.2 million, ~~$29.6~~$27.5 million, ~~$10.2~~$39.6 million and ~~$297.0~~$395.3 million at ~~June 30, 2018,~~March 31, 2019, respectively.

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.

We have purchased loans with deteriorated credit quality in our ~~June 30, 2018~~March 31, 2019 financial statements as a result of our historical acquisitions. The credit metrics most heavily impacted by our acquisitions of acquired loans with deteriorated credit quality were the following credit quality indicators listed in Table 9 below:

Allowance for loan losses tonon-performing loans;

Non-performing loans to total loans; 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 value of amounts estimated to be collectible. As a result of the application of this accounting methodology, certain credit-related ratios, including those referenced above, may not necessarily be directly comparable with periods prior to the acquisition of the credit-impaired loans andnon-performing assets, or comparable with other institutions.

Table 9 sets forth information with respect to ournon-performing assets as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. As of these dates, allnon-performing restructured loans are included innon-accrual loans.

Table 9:Non-performing Assets


	As of			As of
	June 30,			December 31,
	2018			2017			As of March 31, 2019			As of December 31, 2018
	(Dollars in thousands)						(Dollars in thousands)
Non-accrual loans	$	37,082		$	34,032		$	49,616		$	47,083
Loans past due 90 days or more (principal or interest payments)		19,696			10,665			14,577			17,159

Totalnon-performing loans		56,778			44,697			64,193			64,242

Othernon-performing assets
Foreclosed assets held for sale, net		17,853			18,867			14,466			13,236
Othernon-performing assets		3			3			947			497

Total othernon-performing assets		17,856			18,870			15,413			13,733

Totalnon-performing assets	$	74,634		$	63,567		$	79,606		$	77,975

Allowance for loan losses tonon-performing loans		196.41	%		246.70	%		165.68	%		169.35	%
Non-performing loans to total loans		0.52			0.43			0.58			0.58
Non-performing assets to total assets		0.50			0.44			0.52			0.51

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 losses.

Totalnon-performing loans were ~~$56.8~~$64.2 million as of ~~June 30, 2018, compared to $44.7 million as of~~March 31, 2019 and December 31, ~~2017, an increase of $12.1 million. The $12.1 million increase innon-performing~~ ~~loans is the result of a $14.8 million increase innon-performing~~ ~~loans in our Florida market and a $769,000 increase innon-performing~~ ~~loans in our SPF market, which was partially offset by a $2.6 million decrease innon-performing~~ ~~loans in our Arkansas market and an $877,000 decrease innon-performing~~ ~~loans in our Alabama market. The majority of the increase innon-performing~~ ~~loans in our Florida market was the result of four loans with the largest loan having a balance of $5.8 million as of June 30,~~ 2018.Non-performing loans at ~~June 30, 2018~~March 31, 2019 are ~~$13.0~~$17.7 million, ~~$43.0~~$40.0 million, ~~$52,000, $769,000~~$3.0 million, $3.5 million and zero in the Arkansas, Florida, Alabama, SPF and Centennial CFG markets, respectively.

Although the 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 and our purchased loans are adequately discounted at ~~June 30, 2018,~~March 31, 2019, as additional facts become known about relevant internal and external factors that affect loan collectability and our assumptions, it may result in us making additions to the provision for loan losses during ~~2018.~~2019. Our current or historical provision levels should not be relied upon as a predictor or indicator of future levels going forward.

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, 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 ~~June 30, 2018,~~March 31, 2019, we had ~~$18.3~~$15.1 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 market contains ~~$12.9~~$9.8 million, ~~and~~ our Arkansas market contains ~~$5.4~~$4.9 million and our Alabama market contains $381,000 of these restructured loans. ~~Our Alabama, SPF and Centennial CFG markets do not contain any restructured loans as of June 30, 2018.~~

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 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.

The majority of the Bank’s loan modifications relates to commercial lending and 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 ~~June 30,~~March 31, 2019 and December 31, 2018, the amount of TDRs was ~~$20.5 million, a decrease of 3.5% from $21.2 million at December 31, 2017.~~$19.7 million. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, 89.6%~~2018, 76.7% and ~~89.7%~~76.6%, respectively, of all restructured loans were performing to the terms of the restructure.

Total foreclosed assets held for sale were ~~$17.9~~$14.5 million as of ~~June 30, 2018,~~March 31, 2019, compared to ~~$18.9~~$13.2 million as of December 31, ~~2017~~2018 for an increase of ~~$1.0~~$1.3 million. The foreclosed assets held for sale as of ~~June 30, 2018~~March 31, 2019 are comprised of ~~$8.0~~$7.2 million of assets located in Arkansas, ~~$8.4~~$7.2 million of assets located in Florida, ~~$1.4 million~~$34,000 located in Alabama and zero from SPF and Centennial CFG.

During the first ~~six~~three months of ~~2018,~~2019, we had ~~three~~two foreclosed properties with a carrying value greater than $1.0 million. The first property was a development property in Florida acquired from ~~BOC~~The Bank of Commerce with a carrying value of $2.1 million at ~~June 30, 2018.~~March 31, 2019. The second property was a ~~nonfarmnon-residential~~development property in Florida ~~acquired from Stonegate~~ with a carrying value of ~~$1.9~~$1.5 million at ~~June 30, 2018. The last property was a nonfarmnon-residential~~ ~~property in Florida that used to be the Naples branch for Stonegate with a carrying value of $1.7 million at June 30, 2018.~~March 31, 2019. The Company does not currently anticipate any additional losses on these properties. As of ~~June 30, 2018,~~March 31, 2019, 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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Table 10: Foreclosed Assets Held For Sale


	As of June 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(In thousands)				(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	7,311	$	9,766	$	5,251	$	5,555
Construction/land development		5,261		5,920		5,571		3,534
Agricultural		—		—		—		—
Residential real estate loans
Residential1-4 family		5,145		2,654		3,644		4,142
Multifamily residential		136		527		—		5

Total foreclosed assets held for sale	$	17,853	$	18,867	$	14,466	$	13,236

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 ~~June 30, 2018,~~March 31, 2019, average impaired loans were ~~$80.6~~$85.6 million compared to ~~$87.2~~$81.3 million as of December 31, ~~2017.~~2018. As of ~~June 30,~~March 31, 2019 and December 31, 2018, impaired loans were ~~$83.1 million compared to $75.6 million as of December 31, 2017, for an increase of $7.5~~$85.6 million. ~~This increase is primarily associated with the increase in loan~~Loan balances with a specific allocation ~~and~~increased while the specific allocation for impaired loans ~~increased~~decreased by approximately ~~$785,000.~~$726,000. As of ~~June 30, 2018,~~March 31, 2019, our Arkansas, Florida, Alabama, SPF and Centennial CFG markets accounted for approximately ~~$24.7~~$28.8 million, ~~$58.3~~$49.9 million, ~~$52,000, $769,000~~$3.4 million, $3.5 million and zero of the impaired loans, respectively.

We evaluated loans purchased in conjunction with our historical acquisitions for impairment in accordance with the provisions 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 asnon-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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, 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.

Past Due andNon-Accrual Loans

Table 11 shows the summary ofnon-accrual loans as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Table 11: TotalNon-Accrual Loans


	As of June 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(In thousands)				(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	10,848	$	9,600	$	18,999	$	15,031
Construction/land development		5,362		5,011		2,509		5,280
Agricultural		247		19		145		20
Residential real estate loans
Residential1-4 family		14,597		14,437		19,330		17,384
Multifamily residential		476		153		1,166		972

Total real estate		31,530		29,220		42,149		38,687
Consumer		149		145		3,039		2,912
Commercial and industrial		5,228		4,584		4,396		5,451
Agricultural		174		54		31		32
Other		1		29		1		1

Totalnon-accrual loans	$	37,082	$	34,032	$	49,616	$	47,083

If thenon-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately ~~$543,000~~$700,000 and ~~$549,000, respectively, would have been recorded~~$504,000 for the three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017. Ifnon-accrual~~ ~~loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.0 million and $1.1 million~~respectively, would have been ~~recorded for each of thesix-month~~ ~~periods ended June 30, 2018 and 2017, respectively.~~recorded. The interest income recognized on thenon-accrual loans for the ~~three andsix-month~~three-month periods ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ was considered immaterial.

Table 12 shows the summary of accruing past due loans 90 days or more as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:

Table 12: Loans Accruing Past Due 90 Days or More


	As of June 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(In thousands)				(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential	$	10,634	$	3,119	$	7,180	$	9,679
Construction/land development		3,482		3,247		3,369		3,481
Agricultural		—		—		—		—
Residential real estate loans
Residential1-4 family		1,932		2,175		2,797		1,753
Multifamily residential		798		100		—		—

Total real estate		16,846		8,641		13,346		14,913
Consumer		801		26		574		720
Commercial and industrial		2,049		1,944		657		1,526
Agricultural and other		—		54		—		—

Total loans accruing past due 90 days or more	$	19,696	$	10,665	$	14,577	$	17,159

Our total loans accruing past due 90 days or more andnon-accrual loans to total loans ~~was 0.52% and 0.43% as of June 30, 2018~~0.58% at both March 31, 2019 and December 31, ~~2017, respectively.~~2018.

Allowance for Loan Losses

Overview. The allowance for loan losses is maintained at a level which our management believes is adequate to absorb all probable losses on loans in the loan portfolio. The amount of the allowance is affected by: (i) loan charge-offs, which decrease the allowance; (ii) recoveries on loans previously charged off, which increase the allowance; and (iii) the provision of possible loan losses charged 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.

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 losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.

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 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 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 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 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.

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 for Criticized 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.

Loans Collectively Evaluated for Impairment. Loans receivable collectively evaluated for impairment ~~increased~~decreased by approximately ~~$575.2~~$88.8 million from ~~$9.94~~$10.79 billion at December 31, ~~2017~~2018 to ~~$10.51~~$10.70 billion at ~~June 30, 2018.~~March 31, 2019. The percentage of the allowance for loan losses allocated to loans receivable collectively evaluated for impairment to the total loans collectively evaluated for impairment was ~~1.00% and 1.06%~~0.98% at ~~June 30, 2018~~both March 31, 2019 and December 31, 2017, respectively. This decrease is primarily the result of acquiring the SPF loans, which were not individually evaluated for impairment as a result of purchase accounting rules requiring the acquired loans to be marked to fair value at acquisition.2018.

~~Hurricane~~Hurricanes Irma & Michael. The Company’s allowance for loan ~~losses~~loss as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~ 2018

was significantly impacted by Hurricane Michael, which made landfall in the Florida Panhandle as a Category 4 hurricane during the fourth quarter of 2018, and somewhat 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,~~during the third quarter of 2017. As of December 31, 2018, management reevaluated the storm-related allowance for Hurricane Irma. Based on ~~initial assessments of~~this analysis, management determined a $2.9 million storm-related allowance was still necessary. This amount was calculated by assigning a 0.10% to 0.35% allocation on the ~~potential credit impact and damage to the approximately $2.41 billion in legacy~~ loans ~~receivable we have~~ in the ~~disaster area,~~impacted counties, with the ~~Company established~~counties most heavily impacted receiving the 0.35% allocation. The Company’s management also performed an analysis on the loans with collateral in counties in the Florida Panhandle which were impacted by Hurricane Michael. Based on this analysis, management determined a ~~$32.9~~$20.4 million storm-related provision was necessary. This amount was calculated by taking a 1.0% to 6.0% allocation on the loans in the impacted counties. The counties that experienced the most damage were assigned a 6.0% allocation. After establishing the storm-related provision for ~~loan losses as of~~Hurricane Michael and adjusting the allowance for Hurricane Irma, the storm-related allowance was $23.2 million and $23.3 million at March 31, 2019 and December 31, ~~2017.~~2018, respectively. As of ~~June 30, 2018,~~March 31, 2019, charge-offs of ~~$2.5~~$2.6 million have been taken against the storm-related ~~provision~~allowance for loan losses. ~~Due to the uncertainty that still exists as to the timing of the full recovery of the disaster area, we believe that the storm-related provision recorded as of June 30, 2018 is appropriate.~~

Charge-offs and Recoveries. Total charge-offs increased to ~~$2.1~~$3.4 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~$1.4~~$2.5 million for the same period in ~~2017.~~2018. Total ~~charge-offs decreased~~recoveries increased to ~~$4.7 million~~$957,000 for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, compared to ~~$6.1 million~~$886,000 for the same period in 2017. Total recoveries decreased to $714,000 for the three months ended June 30, 2018, compared to $845,000 for the same period in 2017. Total recoveries decreased to $1.6 million for the six months ended June 30, 2018, compared to $1.9 million for the same period in 2017.2018. For the three months ended ~~June 30, 2018,~~March 31, 2019, net charge-offs were ~~$660,000~~$914,000 for Arkansas, ~~$716,000~~$1.5 million for Florida ~~$43,000 for Alabama~~ and zero for SPF and Centennial CFG, ~~equaling~~while Alabama had $8,000 in net recoveries. These equaled a netcharge-off position of $1.4 million. For the six months ended June 30, 2018, net charge-offs were $1.9 million for Arkansas, $1.0 million for Florida, $117,000 for Alabama and zero for SPF and Centennial CFG, equaling a net~~charge-off~~ ~~position of $3.1~~$2.4 million. While the ~~2018~~2019 charge-offs and recoveries consisted of many relationships, there were no individual relationships consisting of charge-offs greater than $1.0 million.

We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less estimated costs to sell (for collateral dependent loans), for any period presented. Loans partiallycharged-off are placed onnon-accrual status until it is proven that the borrower’s repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of6-12 months of timely payment performance.

Table 13 shows the allowance for loan losses, charge-offs and recoveries as of and for the ~~three andsix-month~~three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Table 13: Analysis of Allowance for Loan Losses


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
	(Dollars in thousands)												(Dollars in thousands)
Balance, beginning of period	$	110,212		$	80,311		$	110,266		$	80,002		$	108,791		$	110,266
Loans charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential		390			189			837			1,528			339			447
Construction/land development		54			119			62			326			1,286			8
Agricultural		—			2			—			127			—			—
Residential real estate loans:
Residential1-4 family		952			326			1,731			2,203			536			779
Multifamily residential		—			71			—			85			—			—

Total real estate		1,396			707			2,630			4,269			2,161			1,234
Consumer		43			122			58			144			39			15
Commercial and industrial		258			134			1,072			779			704			814
Agricultural		—			—			—			—			—			2
Other		435			442			912			919			487			475

Total loans charged off		2,132			1,405			4,672			6,111			3,391			2,540

Recoveries of loans previously charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential		87			379			188			710			191			101
Construction/land development		89			28			119			227			23			30
Agricultural		—			—			—			—			—			—
Residential real estate loans:																	—
Residential1-4 family		167			114			494			242			347			327
Multifamily residential		7			7			41			12			5			34

Total real estate		350			528			842			1,191			566			492
Consumer		33			33			60			66			20			26
Commercial and industrial		219			70			317			252			182			98
Agricultural		—			—			—			—			—			46
Other		112			214			381			437			189			224

Total recoveries		714			845			1,600			1,946			957			886

Net loans charged off (recovered)		1,418			560			3,072			4,165			2,434			1,654
Provision for loan losses		2,722			387			4,322			4,301			—			1,600

Balance, June 30	$	111,516		$	80,138		$	111,516		$	80,138
Balance, March 31													$	106,357		$	110,212

Net charge-offs (recoveries) to average loans receivable		0.05	%		0.03	%		0.06	%		0.11	%		0.09	%		0.06	%
Allowance for loan losses to total loans		1.02			1.02			1.02			1.02			0.97			1.07
Allowance for loan losses to net charge-offs (recoveries)		1,961			3,568			1,800			954			1,077			1,643

Allocated Allowance for Loan Losses. We use a risk rating and specific reserve methodology in the calculation and allocation 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 ~~June 30, 2018~~March 31, 2019 and the year ended December 31, ~~2017~~2018 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.

Table 14 presents the allocation of allowance for loan losses as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Table 14: Allocation of Allowance for Loan Losses


	As of June 30, 2018					As of December 31, 2017					As of March 31, 2019					As of December 31, 2018
	Allowance Amount		% of loans⁽¹⁾			Allowance Amount		% of loans⁽¹⁾			Allowance Amount		% of loans⁽¹⁾			Allowance Amount		% of loans⁽¹⁾
	(Dollars in thousands)										(Dollars in thousands)
Real estate:
Commercial real estate loans:
Non-farm/non-residential	$	44,949		43.4	%	$	42,893		44.5	%	$	40,021		42.1	%	$	41,721		43.4	%
Construction/land development		20,243		15.3			20,343		16.4			21,887		15.0			21,302		14.0
Agricultural		1,036		0.7			1,046		0.8			644		0.7			615		0.7
Residential real estate loans:
Residential1-4 family		20,062		18.0			21,370		19.1			21,542		17.7			22,547		17.8
Multifamily residential		4,143		5.0			3,136		4.3			3,903		4.9			4,187		5.1

Total real estate		90,433		82.4			88,788		85.1			87,997		80.4			90,372		81.0
Consumer		386		3.8			462		0.4			1,262		4.1			1,153		4.0
Commercial and industrial		16,193		11.8			15,292		12.6			14,690		13.7			14,981		13.3
Agricultural		2,958		0.5			2,692		0.5			2,300		0.6			2,175		0.4
Other		174		1.5			180		1.4			108		1.2			110		1.3
Unallocated		1,372		—			2,852		—			—		—			—		—

Total allowance for loan losses	$	111,516		100.0	%	$	110,266		100.0	%	$	106,357		100.0	%	$	108,791		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 ~~3.3~~2.7 years as of ~~June 30, 2018.~~March 31, 2019.

Effective January 1, 2019, as permitted by ASU2017-12,Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities, the Company reclassified the prepayableheld-to-maturity investment securities, with a fair value of $193.6 million and $834,000 in net unrealized gains as of December 31, 2018, toavailable-for-sale investment securities.

As of ~~June 30, 2018 and~~ December 31, ~~2017,~~2018, we had ~~$204.4 million and $224.8~~$192.8 million ofheld-to-maturity ~~securities, respectively.~~securities. Of the ~~$204.4 million ofheld-to-maturity~~ securities as of June 30, 2018, $3.8 million were invested in U.S. Government-sponsored enterprises, $64.1 million were invested in mortgage-backed securities and $136.5 million were invested in state and political subdivisions. Of the $224.8$192.8 million ofheld-to-maturity securities as of December 31, ~~2017, $5.8~~2018, $3.3 million were invested in U.S. Government-sponsored enterprises, ~~$73.6~~$57.3 million were invested in mortgage-backed securities and ~~$145.4~~$132.2 million were invested in state and political subdivisions.

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 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 ~~$1.72~~$2.01 billion and ~~$1.66~~$1.79 billion as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

As of ~~June 30, 2018, $972.5 million,~~March 31, 2019, $1.13 billion, or ~~56.6%~~55.9%, of ouravailable-for-sale securities were invested in mortgage-backed securities, compared to ~~$971.4 million,~~$1.03 billion, or ~~58.4%~~57.6%, of ouravailable-for-sale securities as of December 31, ~~2017.~~2018. To reduce our income tax burden, ~~$308.5~~$437.3 million, or ~~17.9%~~21.7%, of ouravailable-for-sale securities portfolio as of ~~June 30, 2018,~~March 31, 2019, was primarily invested intax-exempt obligations of state and political subdivisions, compared to ~~$250.3~~$308.6 million, or ~~15.0%~~17.3%, of ouravailable-for-sale securities as of December 31, ~~2017. Also, we~~2018. We had ~~approximately $397.9~~$416.9 million, or ~~23.2%~~20.7%, invested in obligations of U.S. Government-sponsored enterprises as of ~~June 30, 2018,~~March 31, 2019, compared to ~~$406.3~~$414.1 million, or ~~24.4%~~23.2%, of ouravailable-for-sale securities as of December 31, ~~2017.~~2018. Also, we had approximately $33.8 million, or 1.7%, invested in other securities as of March 31, 2019, compared to $34.3 million, or 1.9% of ouravailable-for-sale securities as of December 31, 2018.

Certain investment securities are valued at 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, we believe the declines in fair value for these securities are temporary. It is our intent to hold these securities to recovery. 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.

See Note 3 “Investment Securities” in the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.

Deposits

Our deposits averaged ~~$10.56 billion and $10.43~~$10.94 billion for the ~~three andsix-month~~ ~~periods~~three-month period ended ~~June 30, 2018.~~March 31, 2019. Total deposits were ~~$10.74~~$11.07 billion as of ~~June 30, 2018,~~March 31, 2019, and ~~$10.39~~$10.90 billion as of December 31, ~~2017.~~2018. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions.

Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. We also participate in theOne-Way Buy Insured Cash Sweep (“ICS”) service and similar services, which 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 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.

Table 15 reflects the classification of the brokered deposits as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Table 15: Brokered Deposits


	June 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
	(In thousands)				(In thousands)
Time Deposits	$	44,971	$	60,022	$	101,932	$	125,610
CDARS		109		53,588		109		109
Insured Cash Sweep and Other Transaction Accounts		535,662		915,060		534,307		534,508

Total Brokered Deposits	$	580,742	$	1,028,670	$	636,348	$	660,228

The Economic Growth, Regulatory Relief and Consumer Protection Act enacted in May 2018, provides that most reciprocal deposits are no longer treated as brokered deposits. As a result of this new law, our brokered deposits as of June 30, 2018, were approximately $429.3 million lower than they would otherwise have been.

The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional funds can be attracted, and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs.

The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Funds target rate ~~which is the cost to banks of immediately available overnight funds, has increased 50 basis points since December 31, 2017, and~~ is currently at ~~2.00%~~2.25% to ~~1.75%~~2.50%.

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 andsix-month~~three-month periods ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Table 16: Average Deposit Balances and Rates

   Three Months Ended June 30,
   2018 2017
   Average
Amount    Average
Rate
Paid Average
Amount    Average
Rate
Paid
   (Dollars in thousands)
Non-interest-bearing transaction accounts
   $ 2,496,701    —   % $ 1,899,865    —   %
Interest-bearing transaction accounts
   5,793,026    0.91 3,768,958    0.45
Savings deposits
   658,178    0.20 523,431    0.09
Time deposits:

$100,000 or more
   1,116,669    1.38 961,172    0.81
Other time deposits
   494,684    0.68 482,056    0.47





Total
   $ 10,559,258    0.69 % $ 7,635,482    0.36 %





   Six Months Ended June 30,
   2018 2017
   Average
Amount    Average
Rate
Paid Average
Amount    Average
Rate
Paid
   (Dollars in thousands)
Non-interest-bearing transaction accounts
   $ 2,439,299    —   % $ 1,808,660    —   %
Interest-bearing transaction accounts
   5,771,779    0.84 3,700,448    0.41
Savings deposits
   658,730    0.19 515,577    0.08
Time deposits:

$100,000 or more
   1,060,012    1.27 929,057    0.78
Other time deposits
   502,861    0.63 471,444    0.43





Total
   $ 10,432,681    0.64 % $ 7,425,186    0.33 %


	Three Months Ended March 31,
	2019					2018
	Average Amount		Average Rate Paid			Average Amount		Average Rate Paid
	(Dollars in thousands)
Non-interest-bearing transaction accounts	$	2,439,520		—	%	$	2,381,259		—	%
Interest-bearing transaction accounts		5,971,626		1.30			5,750,298		0.77
Savings deposits		625,269		0.25			659,287		0.19
Time deposits:
$100,000 or more		1,436,170		2.04			1,002,725		1.14
Other time deposits		467,203		1.09			511,129		0.59

Total	$	10,939,788		1.04	%	$	10,304,698		0.58	%

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 ~~decreased $8.0~~increased $8.6 million, or ~~5.4%~~6.0%, from ~~$147.8~~$143.7 million as of December 31, ~~2017~~2018 to ~~$139.8~~$152.2 million as of ~~June 30, 2018.~~March 31, 2019.

FHLB and Other Borrowed Funds

The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were ~~$1.31~~$1.10 billion and ~~$1.30~~$1.47 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Other borrowed funds were $360,000 and $2.5 million and are classified as short-term advances as of March 31, 2019 and December 31, 2018, respectively. At ~~June 30, 2018, $885.0~~March 31, 2019, $415.4 million and ~~$425.0~~$689.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, ~~2017, $525.0~~2018, $782.6 million and ~~$774.2~~$689.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. The FHLB advances mature from the current year to ~~2025~~2033 with fixed interest rates ranging from ~~0.89%~~1.00% to 4.80% and are secured by loans and investments securities. Maturities of borrowings as of ~~June 30, 2018~~March 31, 2019 include: ~~2018 – $1.02 billion;~~ 2019 – ~~$143.0~~$558.4 million; 2020 – $146.4 million; 2021 – zero million; 2022 – zero; ~~2025~~after 2023 – ~~$389,000.~~$400.3 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI the right to prepay certain obligations.

Subordinated Debentures

Subordinated debentures, which consist of subordinated debt securities and guaranteed payments on trust preferred securities, were ~~$368.4~~$369.0 million and $368.8 million as of ~~June 30,~~March 31, 2019 and December 31, 2018, ~~and $357.8 million as of June 30, 2017.~~respectively.

The trust preferred securities aretax-advantaged issues that qualify for Tier 1 capital treatment subject to certain limitations. 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 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. We wholly own the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon our making payment on the related subordinated debentures. Our obligations under the subordinated securities and other relevant trust agreements, in the aggregate, constitute a full and unconditional guarantee by us of each respective trust’s obligations under the trust securities issued by each respective trust.

During 2017, we acquired $12.5 million in trust preferred securities with a fair value of $9.8 million from the Stonegate acquisition. The difference between the fair value purchased of $9.8 million and the $12.5 million face amount will be amortized into interest expense over the remaining life of the debentures. The associated subordinated debentures are redeemable, in whole or in part, prior to maturity at our option on a quarterly basis when interest is due and payable and in whole at any time within 90 days following the occurrence and continuation of certain changes in the tax treatment or capital treatment of the debentures.

Stockholders’ Equity

Stockholders’ equity was ~~$2.31~~$2.36 billion at ~~June 30, 2018~~March 31, 2019 compared to ~~$2.20~~$2.35 billion at December 31, ~~2017.~~2018. The increase in stockholders’ equity is primarily associated with ~~the $111.9~~quarterly net income of $71.4 million ~~increase~~and $9.5 million of change in ~~retained earnings for the first six months of 2018 combined with the issuance of 1,250,000 shares of common stock with a value of $28.2 million as part of the acquisition of SPF,~~accumulated other comprehensive income, which was partially offset by ~~$20.2~~the $20.4 million dividend paid during the first quarter of ~~other comprehensive losses and the repurchase of $15.0~~2019 as well as $51.7 million ~~of our common stock.~~in stock repurchases. The annualized improvement in stockholders’ equity for the first ~~six~~three months of ~~2018, excluding the $28.2 million of common stock issued for the acquisition of SPF,~~2019 was ~~7.4%~~2.00%. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, our equity to asset ratio was ~~15.51%~~15.56% and ~~15.25%~~15.36%, respectively. Book value per share was ~~$13.26~~$14.04 as of ~~June 30, 2018,~~March 31, 2019, compared to ~~$12.70~~$13.76 as of December 31, ~~2017,~~2018, an ~~8.82%~~8.25% annualized increase.

Common Stock Cash Dividends. We declared cash dividends on our common stock of $0.12 per share and $0.11 per share ~~and $0.09 per share~~ for each of the three-month periods ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. The common stock dividend payout ratio for the three months ended ~~June 30,~~March 31, 2019 and 2018 was 28.54% and ~~2017 was 25.1% and 25.8%~~26.19%, respectively. ~~The common stock dividend payout ratio for the six months ended June 30, 2018 and 2017 was 25.6% and 26.4%, respectively. For the third quarter of 2018,~~On April 18, 2019, the Board of Directors declared a regular ~~$0.12~~$0.13 per share quarterly cash dividend payable ~~September~~June 5, ~~2018,~~2019, to shareholders of record ~~August~~May 15, ~~2018.~~2019.

Stock Repurchase Program.On ~~February 21, 2018,~~January 18, 2019, the Company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of its common stock under the previously approved stock repurchase program, which brought the total amount of authorized shares to repurchase to approximately ~~14,752,000~~19,752,000 shares. During the first ~~six months~~quarter of ~~2018,~~2019, the Company utilized a portion of this stock repurchase program. We repurchased a total of ~~345,683~~2,716,359 shares with a weighted-average stock price of ~~$22.77~~$19.00 per share during the ~~second~~first quarter of ~~2018.~~2019. Shares repurchased under the program as of ~~June 30, 2018~~March 31, 2019 total ~~5,174,184~~12,548,912 shares. The remaining balance available for repurchase was ~~9,577,816~~7,203,088 shares at ~~June 30, 2018.~~March 31, 2019.

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.

In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. The capital conservation buffer requirement began being phased in beginning January 1, 2016 at the 0.625% level and increased by 0.625% on each subsequent January 1, until it reached 2.5% on January 1, 2019 when thephase-in period ended, and the full capital conservation buffer requirement became effective.

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 ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we met all regulatory capital adequacy requirements to which we were subject.

Table 17 presents our risk-based capital ratios on a consolidated basis as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Table 17: Risk-Based Capital


	As of June 30, 2018			As of December 31, 2017			As of March 31, 2019			As of December 31, 2018
	(Dollars in thousands)						(Dollars in thousands)
Tier 1 capital
Stockholders’ equity	$	2,314,013		$	2,204,291		$	2,361,484		$	2,349,886
Goodwill and core deposit intangibles, net		(1,002,066	)		(966,890	)		(999,294	)		(1,000,842	)
Unrealized (gain) loss onavailable-for-sale securities		23,609			3,421			4,821			13,815
Deferred tax assets		—			—			—			—

Total common equity Tier 1 capital		1,335,556			1,240,822			1,367,011			1,362,859
Qualifying trust preferred securities		70,769			70,698			70,876			70,841

Total Tier 1 capital		1,406,325			1,311,520			1,437,887			1,433,700

Tier 2 capital
Qualifying subordinated notes		297,634			297,332			298,103			297,949
Qualifying allowance for loan losses		111,516			110,266			106,357			108,791

Total Tier 2 capital		409,150			407,598			404,460			406,740

Total risk-based capital	$	1,815,475		$	1,719,118		$	1,842,347		$	1,840,440

Average total assets for leverage ratio	$	13,302,417		$	13,147,046		$	14,080,378		$	13,838,137

Risk weighted assets	$	12,013,508		$	11,424,963		$	11,990,970		$	12,022,576

Ratios at end of period
Common equity Tier 1 capital		11.12	%		10.86	%		11.40	%		11.34	%
Leverage ratio		10.57			9.98			10.21			10.36
Tier 1 risk-based capital		11.71			11.48			11.99			11.93
Total risk-based capital		15.11			15.05			15.36			15.31
Minimum guidelines – Basel IIIphase-in schedule
Common equity Tier 1 capital		6.38	%		5.75	%		7.00	%		6.375	%
Leverage ratio		4.00			4.00			4.00			4.00
Tier 1 risk-based capital		7.88			7.25			8.50			7.875
Total risk-based capital		9.88			9.25			10.50			9.875
Minimum guidelines – Basel III fullyphased-in
Common equity Tier 1 capital		7.00	%		7.00	%		7.00	%		7.00	%
Leverage ratio		4.00			4.00			4.00			4.00
Tier 1 risk-based capital		8.50			8.50			8.50			8.50
Total risk-based capital		10.50			10.50			10.50			10.50
Well-capitalized guidelines
Common equity Tier 1 capital		6.50	%		6.50	%		6.50	%		6.50	%
Leverage ratio		5.00			5.00			5.00			5.00
Tier 1 risk-based capital		8.00			8.00			8.00			8.00
Total risk-based capital		10.00			10.00			10.00			10.00

As of the most recent notification from regulatory agencies, our bank subsidiary was “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized”, we, as well as our banking subsidiary, must maintain minimum 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, this report contains financial information determined by methods other than in accordance with ~~generally accepted accounting principles (GAAP),~~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 tangible equity excluding intangible amortization; tangible equity to tangible assets; and efficiency ratio, as 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.

The tables below presentnon-GAAP reconciliations of earnings, as adjusted, and diluted earnings per share, as adjusted as well as thenon-GAAP computations of tangible book value per share, return on average assets, return on average tangible equity excluding intangible amortization, tangible equity to tangible assets and the efficiency ratio, as adjusted. The items used in these calculations are included in financial results presented in accordance with ~~generally accepted accounting principles (“GAAP”).~~GAAP.

Earnings, as adjusted, and diluted earnings per common share, as adjusted, are meaningfulnon-GAAP financial measures for management, as they exclude certain items such as ~~merger~~hurricane expenses and/or certain gains and losses. Management believes the exclusion of these 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 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 items to be relevant to ongoing financial performance.

In Table 18 below, we have provided a reconciliation of thenon-GAAP calculation of the financial measure for the periods indicated.

Table 18: Earnings, As Adjusted


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
	2018		2017		2018		2017			2019			2018
	(Dollars in thousands)									(In thousands, except per share data)
GAAP net income available to common shareholders (A)	$	76,025	$	50,097	$	149,089	$	96,953		$	71,350		$	73,064
Adjustments:
Gain on acquisitions		—		—		—		(3,807	)
Merger expenses		—		789		—		7,516
Special dividend from equity investment											(2,134	)		—
Hurricane expenses											897			—
Outsourced special project expense											900			—

Total adjustments		—		789		—		3,709			(337	)		—
Tax-effect of adjustments⁽¹⁾		—		199		—		2,581			(88	)		—

Adjustmentsafter-tax (B)		—		590		—		1,128			(249	)		—

Earnings, as adjusted (C)	$	76,025	$	50,687	$	149,089	$	98,081		$	71,101		$	73,064

Average diluted shares outstanding (D)		173,936		144,116		174,168		143,270			169,592			174,383
GAAP diluted earnings per share: A/D	$	0.44	$	0.35	$	0.86	$	0.68		$	0.42		$	0.42
Adjustmentsafter-tax B/D		—		—		—		—
Adjustmentsafter-tax: B/D											—			—

Diluted earnings per common share, as adjusted: C/D	$	0.44	$	0.35	$	0.86	$	0.68		$	0.42		$	0.42

(1)	Effective tax rate of ~~39.225%, adjusted fornon-taxable~~ ~~gain on acquisition andnon-deductible~~ ~~merger-related costs~~26.135% for the ~~quarter~~quarters ended ~~June 30, 2017.~~March 31, 2019 and 2018.

We had $999.7 million, $1.00 billion, ~~$977.3 million,~~ and ~~$442.0~~$975.7 million total goodwill, core deposit intangibles and other intangible assets as of ~~June 30, 2018,~~March 31, 2019, December 31, ~~2017~~2018 and ~~June 30, 2017,~~March 31, 2018, respectively. Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets, return on average tangible equity excluding intangible amortization and tangible equity to tangible assets are useful in evaluating our company. These calculations, which are similar to the GAAP calculation of diluted earnings per share, tangible book value, return on average assets, return on average equity, and equity to assets, are presented in Tables 19 through 22, respectively.

Table 19: Tangible Book Value Per Share


	As of June 30, 2018		As of December 31, 2017		As of March 31, 2019		As of December 31, 2018
	(In thousands, except per share data)				(In thousands, except per share data)
Book value per share: A/B	$	13.26	$	12.70	$	14.04	$	13.76
Tangible book value per share:(A-C-D)/B		7.52		7.07		8.10		7.90
(A) Total equity	$	2,314,013	$	2,204,291	$	2,361,484	$	2,349,886
(B) Shares outstanding		174,511		173,633		168,173		170,720
(C) Goodwill	$	956,418	$	927,949	$	958,408	$	958,408
(D) Core deposit and other intangibles		46,101		49,351		41,310		42,896

Table 20: Return on Average Assets

   Three Months Ended
June 30, Six Months Ended
June 30,
   2018 2017 2018 2017
   (Dollars in thousands)
Return on average assets: A/D
   2.13 % 1.86 % 2.11 % 1.86 %
Return on average assets excluding intangible
amortization:B/(D-E)
   2.32 1.96 2.30 1.96
Return on average assets excluding gain on
acquisitions and merger expenses: (A+C)/D

(A) Net income
   $ 76,025 $ 50,097 $ 149,089 $ 96,953
Intangible amortizationafter-tax
   1,200 526 2,401 1,015


(B) Earnings excluding intangible amortization
   $ 77,225 $ 50,623 $ 151,490 $ 97,968


(C) Adjustmentsafter-tax
   $ —   $ 590 $ —   $ 1,128
(D) Average assets
   14,304,483 10,793,770 14,269,620 10,498,143
(E) Average goodwill, core deposits and other intangible assets
   975,345 442,380 975,895 429,113


	Three Months Ended March 31,
	2019			2018
	(Dollars in thousands)
Return on average assets: A/D		1.92	%		2.08	%
Return on average assets excluding intangible amortization:(A+B)/(D-E)		2.09			2.27
Return on average assets excluding special dividend from equity investment, hurricane expenses & outsourced special project expense: (ROA, as adjusted) (A+C)/D		1.91			2.08
(A) Net income	$	71,350		$	73,064
(B) Intangible amortization after tax		1,172			1,201
(C) Adjustmentsafter-tax		(249	)		—
(D) Average assets		15,079,672			14,234,369
(E) Average goodwill, core deposits and other intangible assets		1,000,494			976,451

Table 21: Return on Average Tangible Equity Excluding Intangible Amortization

   Three Months Ended
June 30, Six Months Ended
June 30,
   2018 2017 2018 2017
   (Dollars in thousands)
Return on average equity: A/C
   13.54 % 13.83 % 13.46 % 13.84 %
Return on average tangible equity excluding intangible amortization:B/(C-D)
   24.27 20.09 24.30 20.09
(A) Net income
   $ 76,025 $ 50,097 $ 149,089 $ 96,953
(B) Earnings excluding intangible amortization
   77,225 50,623 151,490 97,968
(C) Average equity
   2,251,412 1,453,099 2,232,959 1,412,639
(D) Average goodwill, core deposits and other intangible assets
   975,345 442,380 975,895 429,113


	Three Months Ended March 31,
	2019			2018
	(Dollars in thousands)
Return on average equity: A/D		12.34	%		13.38	%
Return on average common equity excluding special dividend from equity investment, merger expenses, hurricane expenses & outsourced special project expense: (ROE, as adjusted) ((A+C)/D)		12.30			13.38
Return on average tangible equity excluding intangible amortization:B/(D-E)		21.88			24.33
Return on average tangible common equity excluding special dividend from equity investment, hurricane expenses & outsourced special project expense: (ROTCE, as adjusted)((A+C)/(D-E))		21.45			23.94
(A) Net income	$	71,350		$	73,064
(B) Earnings excluding intangible amortization		72,522			74,265
(C) Adjustmentsafter-tax		(249	)		—
(D) Average equity		2,344,657			2,214,302
(E) Average goodwill, core deposits and other intangible assets		1,000,494			976,451

Table 22: Tangible Equity to Tangible Assets


	As of June 30, 2018			As of December 31, 2017			As of March 31, 2019			As of December 31, 2018
	(Dollars in thousands)						(Dollars in thousands)
Equity to assets: B/A		15.51	%		15.25	%		15.56	%		15.36	%
Tangible equity to tangible assets:(B-C-D)/(A-C-D)		9.42			9.11			9.60			9.43
(A) Total assets	$	14,924,120		$	14,449,760		$	15,179,501		$	15,302,438
(B) Total equity		2,314,013			2,204,291			2,361,484			2,349,886
(C) Goodwill		956,418			927,949			958,408			958,408
(D) Core deposit and other intangibles		46,101			49,351			41,310			42,896

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 efficiency ratio, as adjusted, is a meaningfulnon-GAAP measure for management, as it excludes 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 items such as merger expenses and/or certain other gains and losses. In Table 23 below, we have provided a reconciliation of thenon-GAAP calculation of the financial measure for the periods indicated.

Table 23: Efficiency Ratio, As Adjusted

   Three Months Ended
June 30, Six Months Ended
June 30,
   2018 2017 2018 2017
   (Dollars in thousands)
Net interest income (A)
   $ 138,612 $ 107,352 $ 274,821 $ 212,167
Non-interest income (B)
   27,673 24,417 53,478 50,887
Non-interest expense (C)
   63,228 51,003 126,608 106,144
FTE Adjustment (D)
   1,403 2,016 2,612 4,027
Amortization of intangibles (E)
   1,624 866 3,250 1,670
Non-fundamental items:

Non-interest income:

Gain on acquisitions
   $ —   $ —   $ —   $ 3,807
Gain (loss) on OREO, net
   1,046 393 1,451 514
Gain on sale of SBA loans
   262 387 444 575
Gain (loss) on sale of branches, equipment and
other assets, net
   —   431 7 375
Gain (loss) on securities, net
   —   380 —   803


Totalnon-fundamentalnon-interest income (F)
   $ 1,308 $ 1,591 $ 1,902 $ 6,074


Non-interest expense:

Merger expenses
   $ —   $ 789 $ —   $ 7,516
Other expense⁽¹⁾
   —   47 —   47


Totalnon-fundamentalnon-interest expense (G)
   $ —   $ 836 $ —   $ 7,563


Efficiency ratio (reported):((C-E)/(A+B+D))
   36.74 % 37.48 % 37.28 % 39.12 %
Efficiency ratio, as adjusted(non-GAAP):((C-E-G)/(A+B+D-F))
   37.03 37.29 37.49 37.13

~~(1)~~

~~Amount includes vacant properties write-downs.~~


	Three Months Ended March 31,
	2019			2018
	(Dollars in thousands)
Net interest income (A)	$	139,470		$	136,209
Non-interest income (B)		23,672			25,805
Non-interest expense (C)		69,057			63,380
FTE Adjustment (D)		1,367			1,209
Amortization of intangibles (E)		1,586			1,625
Adjustments:
Non-interest income:
Special dividend from equity investment	$	2,134		$	—
Gain (loss) on OREO, net		206			405
Gain on sale of SBA loans		241			182
Gain (loss) on sale of branches, equipment and other assets, net		79			7

Totalnon-interest income adjustments (F)	$	2,660		$	594

Non-interest expense:
Hurricane damage expenses	$	897		$	—
Outsourced special project expense		900			—

Totalnon-interest expense adjustments (G)	$	1,797		$	—

Efficiency ratio (reported):((C-E)/(A+B+D))		41.01	%		37.83	%
Efficiency ratio, as adjusted(non-GAAP):((C-E-G)/(A+B+D-F))		40.58			37.97

Recently Issued Accounting Pronouncements

See Note 21 in the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.

~~Item 3:~~

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 ~~June 30, 2018,~~March 31, 2019, our cash and cash equivalents were ~~$495.7~~$562.5 million, or ~~3.3%~~3.7% of total assets, compared to ~~$635.9~~$657.9 million, or ~~4.4%~~4.3% of total assets, as of December 31, ~~2017.~~2018. Ouravailable-for-sale investment securities and federal funds sold were ~~$1.72~~$2.01 billion and ~~$1.69~~$1.79 billion as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

As of ~~June 30, 2018,~~March 31, 2019, our investment portfolio was comprised of approximately ~~69.2%~~72.2% or ~~$1.33~~$1.45 billion of securities which mature in less than five years. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017, $1.14~~2018, $1.26 billion and ~~$1.18~~$1.32 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 ~~June 30, 2018,~~March 31, 2019, our total deposits were ~~$10.74~~$11.07 billion, or ~~71.9%~~72.9% of total assets, compared to ~~$10.39~~$10.90 billion, or ~~71.9%~~71.2% of total assets, as of December 31, ~~2017.~~2018. 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 First National Bankers’ Bank to provide short-term borrowings in the form of federal funds purchases. In addition, we maintain lines of credit with ~~three~~two other financial institutions.

As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, we could have borrowed up to ~~$145.1~~$310.0 million and ~~$106.4~~$288.0 million, respectively, on a secured basis from the Federal Reserve, up to ~~$50.0~~$25.0 million from First National Bankers’ Bank on an unsecured basis, up to $25.0 million from First National Bankers’ Bank on a secured 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 ~~$1.31~~$1.10 billion and ~~$1.30~~$1.47 billion at ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Other borrowed funds were $360,000 and $2.5 million and are classified as short-term advances as of March 31, 2019 and December 31, 2018, respectively. At ~~June 30, 2018, $885.0~~March 31, 2019, $415.4 million and ~~$425.0~~$689.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, ~~2017, $525.0~~2018, $782.6 million and ~~$774.2~~$698.8 million of the outstanding balance were issued as short-term and long-term advances, respectively. Our ~~unused~~ FHLB borrowing ~~availability~~capacity was ~~$1.74~~$3.07 billion and ~~$1.96~~$2.62 billion as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

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.

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 proportionally 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 more slowly, usually changing less than the change in market rates and 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.

For the rising and falling interest rate scenarios, the base market interest rate forecast was increased and decreased over twelve months by 200 and 100 basis points, respectively. At ~~June 30, 2018,~~March 31, 2019, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us.

Table 24 presents our sensitivity to net interest income as of ~~June 30, 2018.~~March 31, 2019.

Table 24: Sensitivity of Net Interest Income


	~~Percentage~~
	~~Change~~
Interest Rate Scenario	Percentage Change from Base
Up 200 basis points		~~6.71~~6.93	%
Up 100 basis points		~~3.75~~3.71
Down 100 basis points		(~~6.18~~6.41	)
Down 200 basis points		(~~12.23~~12.42	)

Interest Rate Sensitivity. Our primary business is banking and the resulting earnings, primarily net interest income, are susceptible to changes in market interest rates. Management’s goal is 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 ~~June 30, 2018,~~March 31, 2019, our gap position was asset sensitive with aone-year cumulative repricing gap as a percentage of total earning assets of ~~5.9%~~6.7%.

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 25 presents a summary of the repricing schedule of our interest-earning assets and interest-bearing liabilities (gap) as of ~~June 30, 2018.~~March 31, 2019.

Table 25: Interest Rate Sensitivity


	Interest Rate Sensitivity Period																							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		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)																							(Dollars in thousands)
Earning assets
Interest-bearing deposits due from banks	$	298,085		$	—		$	—		$	—		$	—		$	—		$	—		$	298,085	$	421,443		$	—		$	—		$	—		$	—		$	—		$	—		$	421,443
Federal funds sold		500			—			—			—			—			—			—			500		1,700			—			—			—			—			—			—			1,700
Investment securities		278,105			59,440			95,180			116,119			190,303			489,882			694,076			1,923,105		345,395			77,906			100,278			175,071			270,649			504,715			539,109			2,013,123
Loans receivable		3,486,891			604,364			756,152			1,275,858			1,592,588			2,578,701			603,416			10,897,970		3,354,378			665,908			755,534			1,376,420			1,687,912			2,380,165			758,618			10,978,935

Total earning assets		4,063,581			663,804			851,332			1,391,977			1,782,891			3,068,583			1,297,492			13,119,660		4,122,916			743,814			855,812			1,551,491			1,958,561			2,884,880			1,297,727			13,415,201

Interest-bearing liabilities
Interest-bearing transaction and savings deposits		1,152,566			515,897			773,846			1,547,692			886,677			644,791			1,052,433			6,573,902	$	1,193,499		$	515,059		$	772,588		$	1,545,177		$	900,386		$	655,882		$	1,067,590		$	6,650,181
Time deposits		139,156			141,059			222,608			460,647			560,342			112,597			2,169			1,638,578		207,349			210,909			240,030			906,118			232,192			99,105			2,393			1,898,096
Securities sold under repurchase agreements		139,750			—			—			—			—			—			—			139,750		152,239			—			—			—			—			—			—			152,239
FHLB and other borrowed funds		510,010			240,065			270,024			15,044			143,048			131,759			—			1,309,950		415,143			15,017			128,053			24			146,784			24			400,130			1,105,175
Subordinated debentures		70,769			—			—			—			—			297,634			—			368,403		70,876			—			—			—			—			298,102			—			368,978

Total interest-bearing liabilities		2,012,251			897,021			1,266,478			2,023,383			1,590,067			1,186,781			1,054,602			10,030,583		2,039,106			740,985			1,140,671			2,451,319			1,279,362			1,053,113			1,470,113			10,174,669

Interest rate sensitivity gap	$	2,051,330		$	(233,217	)	$	(415,146	)	$	(631,406	)	$	192,824		$	1,881,802		$	242,890		$	3,089,077	$	2,083,810		$	2,829		$	(284,859	)	$	(899,828	)	$	679,199		$	1,831,767		$	(172,386	)	$	3,240,532

Cumulative interest rate sensitivity gap	$	2,051,330		$	1,818,113		$	1,402,967		$	771,561		$	964,385		$	2,846,187		$	3,089,077				$	2,083,810		$	2,086,639		$	1,801,780		$	901,952		$	1,581,151		$	3,412,918		$	3,240,532
Cumulative rate sensitive assets to rate sensitive liabilities		201.9	%		162.5	%		133.6	%		112.4	%		112.4	%		131.7	%		130.8	%				202.2	%		175.1	%		146.0	%		114.2	%		120.7	%		139.2	%		131.8	%
Cumulative gap as a % of total earning assets		15.6	%		13.9	%		10.7	%		5.9	%		7.4	%		21.7	%		23.5	%				15.5	%		15.6	%		13.4	%		6.7	%		11.8	%		25.4	%		24.2	%

~~Item 4: CONTROLS AND PROCEDURES~~

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.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal controls over financial reporting during the quarter ended ~~June 30, 2018,~~March 31, 2019, 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:

~~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, ~~2017.~~2018. 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.

~~Item 2: Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

~~In connection with~~On January 18, 2019, the Company’s ~~acquisition~~Board of ~~SPF, on June 30, 2018,~~Directors authorized the ~~Company issued 1,250,000~~repurchase of up to an additional 5,000,000 shares of ~~HBI~~its common stock ~~to Union in partial consideration for~~under the ~~acquisition. The shares were issued to Union pursuant to Section 4(a)(2) of the Securities Act of 1933.~~

~~During the three months ended June 30, 2018, the Company utilized a portion of its~~previously approved stock repurchase program, which was last amended and approved ~~by the Board of Directors~~ on February 21, 2018. This ~~program~~authorization brought the total amount of authorized ~~the~~shares to repurchase ~~of 14,752,000 shares of the Company’s common stock.~~to 9,919,447 shares. 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⁾
April 1 through April 30, 2018
   231,463    $ 22.66    231,463    9,692,036
May 1 through May 31, 2018
   —      —      —      9,692,036
June 1 through June 30, 2018
   114,220    22.99    114,220    9,577,816







Total
   345,683    22.77    345,683







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⁾
January 1 through January 31, 2019
   200,000    $ 18.62    200,000    9,719,447
February 1 through February 28, 2019
   2,100,000    19.25    2,100,000    7,619,447
March 1 through March 31, 2019
   416,359    17.92    416,359    7,203,088





Total
   2,716,359       2,716,359






(1)
The above described stock repurchase program has no expiration date.
~~Item 3: Defaults Upon Senior Securities~~
Item 3:
Defaults Upon Senior Securities
Not applicable.
~~Item 4: Mine Safety Disclosures~~
Item 4:
Mine Safety Disclosures
Not applicable.
~~Item 5: Other Information~~
Item 5:
Other Information
Not applicable.
Item 6:
~~Item 6:~~ Exhibits

Exhibit No.

  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 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 Current Report on Form8-K filed on April 23, 2019)
  3.11 Restated Bylaws of Home BancShares, Inc. (incorporated by reference to Exhibit 3.5 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)
  4.1    Specimen Stock Certificate representing Home BancShares, Inc. Common Stock (incorporated by reference to Exhibit 4.6 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)
  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.
10.1    Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on March 30, 2012)
10.2    Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Quarterly Report on Form10-Q for the period ended June 30, 2015, filed on August 6, 2015)
10.3    Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on April 22, 2016)
10.4    Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on April 20, 2018)
  10.5    Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.5 of Home BancShares’s Quarterly Report on Form10-Q for the quarter ended March 31, 2018, filed on May 7, 2018)
  ~~12.1~~ Computation of Ratios of Earnings to Fixed Charges*
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*
  ~~99.1~~ Asset Purchase Agreement by and among Home BancShares, Inc., Centennial Bank, and Union Bank & Trust, dated June 29, 2018 (incorporated by reference to Exhibit 99.3 of Home BancShares’s Current Report on Form~~8-K~~ ~~filed on July 6, 2018)~~
101.INS    XBRL Instance Document*
101.SCH    XBRL Taxonomy Extension Schema Document*
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB    XBRL Taxonomy Extension Label Linkbase Document*
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document*

*
Filed herewith
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)

~~HOME BANCSHARES, INC.~~
~~(Registrant)~~
Date: ~~August~~May 6, ~~2018~~2019
/s/ C. Randall Sims
C. Randall Sims, Chief Executive Officer
Date: ~~August~~May 6, ~~2018~~2019
/s/ Brian S. Davis
Brian S. Davis, Chief Financial Officer
Date: ~~August~~May 6, ~~2018~~2019
/s/ Jennifer C. Floyd
Jennifer C. Floyd, Chief Accounting Officer

9885


	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			474			103,515
Loans receivable		2,446,149			(74,067	)		2,372,082
Allowance for loan losses		(21,507	)		21,507			—

Loans receivable, net		2,424,642			(52,560	)		2,372,082
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			11,990			39,330
Goodwill		81,452			(81,452	)		—
Core deposit and other intangibles		10,505			20,364			30,869
Other assets		9,598			255			9,853

Total assets acquired	$	2,992,825		$	(105,302	)	$	2,887,523

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			(484	)		7,616
Subordinated debentures		8,345			1,489			9,834

Total liabilities assumed		2,601,057			1,104			2,602,161

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

Total liabilities and equity assumed	$	2,992,825		$	(390,664	)		2,602,161

Net assets acquired								285,362
Purchase price								792,370

Goodwill							$	507,008


	Years Ended December 31,
	2017		2016
	(In thousands, except per share data)
Total interest income	$	610,697	$	538,258
Totalnon-interest income		107,179		95,555
Net income available to all shareholders		143,979		206,081
Basic earnings per common share	$	0.79	$	1.20
Diluted earnings per common share		0.79		1.20


	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


	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


	Three Months Ended June 30, 2018
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	20,104		$	44,831		$	23,614		$	16,193		$	3,247		$	2,223		$	110,212
Loans charged off		(54	)		(390	)		(952	)		(258	)		(478	)		—			(2,132	)
Recoveries of loans previously charged off		89			87			174			219			145			—			714

Net loans recovered (charged off)		35			(303	)		(778	)		(39	)		(333	)		—			(1,418	)
Provision for loan losses		104			1,457			1,369			39			604			(851	)		2,722

Balance, June 30	$	20,243		$	45,985		$	24,205		$	16,193		$	3,518		$	1,372		$	111,516


	Six Months Ended June 30, 2018
	Construction/ Land Development			Other Commercial Real Estate			Residential Real Estate			Commercial & Industrial			Consumer & Other			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	20,343		$	43,939		$	24,506		$	15,292		$	3,334		$	2,852		$	110,266
Loans charged off		(62	)		(837	)		(1,731	)		(1,072	)		(970	)		—			(4,672	)
Recoveries of loans previously charged off		119			188			535			317			441			—			1,600

Net loans recovered (charged off)		57			(649	)		(1,196	)		(755	)		(529	)		—			(3,072	)
Provision for loan losses		(157	)		2,695			895			1,656			713			(1,480	)		4,322

Balance, June 30	$	20,243		$	45,985		$	24,205		$	16,193		$	3,518		$	1,372		$	111,516


	Year Ended December 31, 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		(326	)		(1,655	)		(2,288	)		(779	)		(1,063	)		—			(6,111	)
Recoveries of loans previously charged off		227			710			254			252			503			—			1,946

Net loans recovered (charged off)		(99	)		(945	)		(2,034	)		(527	)		(560	)		—			(4,165	)
Provision for loan losses		1,419			600			3,232			599			(565	)		(984	)		4,301

Balance, June 30		12,842			27,843			17,715			12,828			3,063			5,847			80,138
Loans charged off		(1,306	)		(2,094	)		(1,692	)		(4,799	)		(1,469	)		—			(11,360	)
Recoveries of loans previously charged off		235			332			422			212			338			—			1,539

Net loans recovered (charged off)		(1,071	)		(1,762	)		(1,270	)		(4,587	)		(1,131	)		—			(9,821	)
Provision for loan losses		8,572			17,858			8,061			7,051			1,402			(2,995	)		39,949

Balance, December 31	$	20,343		$	43,939		$	24,506		$	15,292		$	3,334		$	2,852		$	110,266


	SPF		GHI		BOC		Stonegate
	(In thousands)
Contractually required principal and interest at acquisition	$	3,496	$	22,379	$	18,586	$	98,444
Non-accretable difference (expected losses and foregone interest)		285		4,462		2,811		23,297

Cash flows expected to be collected at acquisition		3,211		17,917		15,775		75,147
Accretable yield		808		2,071		1,043		11,761

Basis in purchased credit impaired loans at acquisition	$	2,403	$	15,846	$	14,732	$	63,386


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, 2018		231,463	$	22.66		231,463		9,692,036
May 1 through May 31, 2018		—		—		—		9,692,036
June 1 through June 30, 2018		114,220		22.99		114,220		9,577,816

Total		345,683		22.77		345,683


Exhibit No.

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 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 Current Report on Form8-K filed on April 23, 2019)

3.11		Restated Bylaws of Home BancShares, Inc. (incorporated by reference to Exhibit 3.5 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

4.1		Specimen Stock Certificate representing Home BancShares, Inc. Common Stock (incorporated by reference to Exhibit 4.6 of Home BancShares’s registration statement onForm S-1 (FileNo. 333-132427), as amended)

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.

10.1		Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on March 30, 2012)

10.2		Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Quarterly Report on Form10-Q for the period ended June 30, 2015, filed on August 6, 2015)

10.3		Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on April 22, 2016)

10.4		Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.1 of Home BancShares’s Current Report on Form8-K filed on April 20, 2018)



10.5		Amendment to Amended and Restated 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc. (incorporated by reference to Exhibit 10.5 of Home BancShares’s Quarterly Report on Form10-Q for the quarter ended March 31, 2018, filed on May 7, 2018)

~~12.1~~		Computation of Ratios of Earnings to Fixed Charges*

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*

~~99.1~~		Asset Purchase Agreement by and among Home BancShares, Inc., Centennial Bank, and Union Bank & Trust, dated June 29, 2018 (incorporated by reference to Exhibit 99.3 of Home BancShares’s Current Report on Form~~8-K~~ ~~filed on July 6, 2018)~~

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*


~~HOME BANCSHARES, INC.~~
~~(Registrant)~~

Date: ~~August~~May 6, ~~2018~~2019								/s/ C. Randall Sims
								C. Randall Sims, Chief Executive Officer

Date: ~~August~~May 6, ~~2018~~2019								/s/ Brian S. Davis
								Brian S. Davis, Chief Financial Officer

Date: ~~August~~May 6, ~~2018~~2019								/s/ Jennifer C. Floyd
								Jennifer C. Floyd, Chief Accounting Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company