株探米国株
英語
エドガーで原本を確認する
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2023
or
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: 001-41093
HOME BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Arkansas
71-0682831
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
719 Harkrider, Suite 100, Conway, 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share HOMB New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Common Stock Issued and Outstanding: 201,771,405 shares as of November 3, 2023.


HOME BANCSHARES, INC.
FORM 10-Q
September 30, 2023
INDEX
Page No.
7-8
10-54
56-93
94-96
97-98


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 expectations, beliefs, projections, future financial performance, future plans and strategies, and anticipated events or trends, 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;
•disruptions, uncertainties and related effects on credit quality, liquidity, other aspects of our business and our operations that may result from any future outbreaks of the COVID-19 pandemic or other public health crises;
•the ability to identify, complete and successfully integrate new acquisitions;
•the risk that expected cost savings and other benefits from acquisitions may not be fully realized or may take longer to realize than expected;
•diversion of management time on acquisition-related issues;
•the availability of and access to capital and liquidity on terms acceptable to us;
•increased regulatory requirements and supervision that applies as a result of our having over $10 billion in total assets;
•legislation and regulation affecting the financial services industry as a whole, and the Company and its subsidiaries in particular, and future legislative and regulatory changes;
•changes in governmental monetary and fiscal policies;
•the effects of terrorism and efforts to combat it, political instability, war, military conflicts (including the ongoing military conflicts in the Middle East and Ukraine) and other major domestic or international events;
•adverse weather events, including hurricanes, and other natural disasters;
•the ability to keep pace with technological changes, including changes regarding cybersecurity;
•an increase in the incidence or severity of fraud, illegal payments, cybersecurity breaches or other illegal acts impacting our bank subsidiary, our vendors or our customers;
•the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with competitors offering banking products and services by mail, telephone and the Internet;
•potential claims, expenses and other adverse effects related to current or future litigation, regulatory examinations or other government actions;
•potential increases in deposit insurance assessments, increased regulatory scrutiny, investment portfolio losses, or market disruptions resulting from financial challenges in the banking industry;
•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 credit losses or changes in our estimate of the adequacy of the allowance for credit losses.
All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, see the “Risk Factors” section of our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2023 and this Form 10-Q.


PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Home BancShares, Inc.
Consolidated Balance Sheets
(In thousands, except share data) September 30, 2023 December 31, 2022
(Unaudited)  
Assets
Cash and due from banks $ 229,474  $ 263,893 
Interest-bearing deposits with other banks 258,605  460,897 
Cash and cash equivalents 488,079  724,790 
Fed funds sold 3,925  — 
Investment securities — available-for-sale, net of allowance for credit losses of $2,524 and $842 at September 30, 2023 and December 31, 2023, respectively (amortized cost of $3,937,221 and $4,445,620 at September 30, 2023 and December 31, 2022, respectively)
3,472,173  4,041,590 
Investment securities — held-to-maturity, net of allowance for credit losses of $2,005 at both September 30, 2023 and December 31, 2022
1,283,475  1,287,705 
Total investment securities 4,755,648  5,329,295 
Loans receivable 14,271,833  14,409,480 
Allowance for credit losses (285,562) (289,669)
Loans receivable, net 13,986,271  14,119,811 
Bank premises and equipment, net 397,093  405,073 
Foreclosed assets held for sale 691  546 
Cash value of life insurance 213,351  213,693 
Accrued interest receivable 110,946  103,199 
Deferred tax asset, net 222,741  209,321 
Goodwill 1,398,253  1,398,253 
Core deposit intangibles 51,023  58,455 
Other assets 322,617  321,152 
Total assets $ 21,950,638  $ 22,883,588 
Liabilities and Stockholders’ Equity
Deposits:
Demand and non-interest-bearing $ 4,280,429  $ 5,164,997 
Savings and interest-bearing transaction accounts 10,786,087  11,730,552 
Time deposits 1,452,229  1,043,234 
Total deposits 16,518,745  17,938,783 
Securities sold under agreements to repurchase 160,120  131,146 
FHLB and other borrowed funds 1,001,550  650,000 
Accrued interest payable and other liabilities 175,367  196,877 
Subordinated debentures 439,982  440,420 
Total liabilities 18,295,764  19,357,226 
Stockholders’ equity:
Common stock, par value $0.01; shares authorized 300,000,000 in 2023 and 2022; shares issued and
outstanding 202,323,405 in 2023 and 203,433,690 in 2022
2,023  2,034 
Capital surplus 2,363,210  2,386,699 
Retained earnings 1,640,171  1,443,087 
Accumulated other comprehensive loss (350,530) (305,458)
Total stockholders’ equity 3,654,874  3,526,362 
Total liabilities and stockholders’ equity $ 21,950,638  $ 22,883,588 
See Condensed Notes to Consolidated Financial Statements.
4

Home BancShares, Inc.
Consolidated Statements of Income
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except per share data) 2023 2022 2023 2022
(Unaudited)
Interest income:
Loans $ 249,464  $ 195,841  $ 729,613  $ 507,062 
Investment securities
Taxable 34,520  28,273  104,559  58,294 
Tax-exempt 7,868  8,069  23,763  20,501 
Deposits – other banks 2,328  10,763  10,742  19,001 
Federal funds sold 82  156  13 
Total interest income 294,262  242,955  868,833  604,871 
Interest expense:
Interest on deposits 78,698  23,347  208,007  38,970 
Federal funds purchased — 
FHLB and other borrowed funds 8,161  1,917  20,947  5,688 
Securities sold under agreements to repurchase 1,344  434  3,333  729 
Subordinated debentures 4,121  4,153  12,368  16,472 
Total interest expense 92,325  29,851  244,658  61,861 
Net interest income 201,937  213,104  624,175  543,010 
Provision for credit losses on loans 2,800  —  6,300  45,170 
(Reversal of ) provision for credit losses on unfunded commitments (1,500) —  (1,500) 11,410 
Provision for credit losses on investment securities —  —  1,683  2,005 
Total credit loss expense 1,300  —  6,483  58,585 
Net interest income after credit loss expense 200,637  213,104  617,692  484,425 
Non-interest income:
Service charges on deposit accounts 10,062  10,756  29,135  26,980 
Other service charges and fees 10,128  13,951  33,766  34,225 
Trust fees 4,660  3,980  13,576  8,874 
Mortgage lending income 3,132  4,179  8,353  14,091 
Insurance commissions 562  601  1,606  1,739 
Increase in cash value of life insurance 1,170  1,089  3,485  2,721 
Dividends from FHLB, FRB, FNBB & other 2,916  1,741  8,632  6,384 
Gain on sale of SBA loans 97  58  236  153 
(Loss) gain on sale of branches, equipment and other assets, net —  (13) 924 
Gain on OREO, net —  —  319  487 
Fair value adjustment for marketable securities 4,507  (2,628) (6,118) (2,304)
Other income 6,179  9,487  33,172  25,096 
Total non-interest income 43,413  43,201  127,086  118,451 
Non-interest expense:
Salaries and employee benefits 64,512  65,290  193,536  174,636 
Occupancy and equipment 15,463  15,133  45,338  38,533 
Data processing expense 9,103  8,747  27,222  25,880 
Merger and acquisition expenses —  —  —  49,594 
Other operating expenses 25,684  25,176  79,592  68,081 
Total non-interest expense 114,762  114,346  345,688  356,724 
Income before income taxes 129,288  141,959  399,090  246,152 
Income tax expense 30,835  33,254  92,404  56,577 
Net income $ 98,453  $ 108,705  $ 306,686  $ 189,575 
Basic earnings per share $ 0.49  $ 0.53  $ 1.51  $ 0.99 
Diluted earnings per share $ 0.49  $ 0.53  $ 1.51  $ 0.99 
See Condensed Notes to Consolidated Financial Statements.
5

Home BancShares, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands) 2023 2022 2023 2022
(Unaudited)
Net income $ 98,453  $ 108,705  $ 306,686  $ 189,575 
Net unrealized loss on available-for-sale securities (76,279) (122,307) (59,353) (424,910)
Other comprehensive loss before tax effect (76,279) (122,307) (59,353) (424,910)
Tax effect on other comprehensive loss 18,427  30,757  14,281  106,993 
Other comprehensive loss (57,852) (91,550) (45,072) (317,917)
Comprehensive income (loss) $ 40,601  $ 17,155  $ 261,614  $ (128,342)
See Condensed Notes to Consolidated Financial Statements.
6

Home BancShares, Inc.
Consolidated Statements of Stockholders’ Equity
Three and Nine Months Ended September 30, 2023
(In thousands, except share data)
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive Income (Loss)
Total
Balances at January 1, 2023 $ 2,034  $ 2,386,699  $ 1,443,087  $ (305,458) $ 3,526,362 
Comprehensive income:
Net income —  —  102,962  —  102,962 
Other comprehensive income —  —  —  49,157  49,157 
Net issuance of 66,451 shares of common stock from exercise of stock options
85  —  —  86 
Repurchase of 590,000 shares of common stock
(6) (13,534) —  —  (13,540)
Share-based compensation net issuance of 258,000 shares of restricted common stock
2,504  —  —  2,507 
Cash dividends – Common Stock, $0.18 per share
—  —  (36,649) —  (36,649)
Balances at March 31, 2023 (unaudited) $ 2,032  $ 2,375,754  $ 1,509,400  $ (256,301) $ 3,630,885 
Comprehensive income:
Net income —  —  105,271  —  105,271 
Other comprehensive loss —  —  —  (36,377) (36,377)
Net issuance of 15,575 shares of common stock from exercise of stock options
—  275  —  —  275 
Repurchase of 560,849 shares of common stock
(5) (11,804) —  —  (11,809)
Share-based compensation net forfeiture of 50,000 shares of restricted common stock
(1) 2,335  —  —  2,334 
Cash dividends – Common Stock, $0.18 per share
—  —  (36,495) —  (36,495)
Balances at June 30, 2023 (unaudited) $ 2,026  $ 2,366,560  $ 1,578,176  $ (292,678) $ 3,654,084 
Comprehensive income:
Net Income —  —  98,453  —  98,453 
Other comprehensive loss —  —  —  (57,852) (57,852)
Net issuance of 11,538 shares of common stock from exercise of stock options
—  70  —  —  70 
Repurchase of 260,000 shares of common stock
(3) (5,655) —  —  (5,658)
Share-based compensation net forfeiture of 1,000 shares of restricted stock
—  2,235  —  —  2,235 
Cash dividends – Common Stock, $0.18 per share
—  —  (36,458) —  (36,458)
Balances at September 30, 2023 (unaudited) $ 2,023  $ 2,363,210  $ 1,640,171  $ (350,530) $ 3,654,874 
See Condensed Notes to Consolidated Financial Statements.
7

Home BancShares, Inc.
Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2022
(In thousands, except share data)
Common
Stock
Capital
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balances at January 1, 2022 $ 1,637  $ 1,487,373  $ 1,266,249  $ 10,462  $ 2,765,721 
Comprehensive income:
Net income —  —  64,892  —  64,892 
Other comprehensive loss —  —  —  (115,019) (115,019)
Net issuance of 15,909 shares of common stock from exercise of stock options
129  —  —  130 
Repurchase of 180,000 shares of common stock
(2) (4,087) —  —  (4,089)
Share-based compensation net issuance of 222,717 shares of restricted common stock
2,109  —  —  2,111 
Cash dividends – Common Stock, $0.165 per share
—  —  (27,043) —  (27,043)
Balances at March 31, 2022 (unaudited) $ 1,638  $ 1,485,524  $ 1,304,098  $ (104,557) $ 2,686,703 
Comprehensive income:
Net Income —  —  15,978  —  15,978 
Other comprehensive loss —  —  —  (111,348) (111,348)
Net issuance of 1,500 shares of common stock from exercise of stock options
—  26  —  —  26 
Issuance of 42,425,352 shares of common stock including approximately $2.5 million in certain stock award settlements and stock issuance costs - Happy Bancshares Acquisition
424  960,866  —  —  961,290 
Repurchase of 1,032,732 shares of common stock
(10) (22,482) —  —  (22,492)
Share-based compensation net issuance of 138,499 shares of restricted common stock
2,337  —  —  2,338 
Cash dividends – Common Stock, $0.165 per share
—  —  (33,930) —  (33,930)
Balances at June 30, 2022 (unaudited) $ 2,053  $ 2,426,271  $ 1,286,146  $ (215,905) $ 3,498,565 
Comprehensive income:
Net Income —  —  108,705  —  108,705 
Other comprehensive loss —  —  —  (91,550) (91,550)
Net issuance of 1,574 shares of common stock from exercise of stock options
—  —  —  —  — 
Repurchase of 1,045,799 shares of common stock
(10) (24,278) —  —  (24,288)
Share-based compensation net forfeiture of 27,250 shares of restricted stock
(1) 2,395  —  —  2,394 
Cash dividends – Common Stock, $0.165 per share
—  —  (33,811) —  (33,811)
Balances at September 30, 2022 (unaudited) $ 2,042  $ 2,404,388  $ 1,361,040  $ (307,455) $ 3,460,015 
See Condensed Notes to Consolidated Financial Statements.
8

Home BancShares, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(In thousands) 2023 2022
(Unaudited)
Operating Activities
Net income $ 306,686  $ 189,575 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization 22,677  23,546 
Decrease in value of equity securities 6,118  2,304 
Amortization of securities, net 12,441  17,324 
Accretion of purchased loans (8,263) (12,844)
Share-based compensation 7,076  6,843 
Gain on assets (1,479) (645)
Provision for credit losses - loans 6,300  45,170 
(Recovery of) provision for credit losses - unfunded commitments (1,500) 11,410 
Provision for credit losses - investment securities 1,683  2,005 
Deferred income tax effect 861  (9,671)
Increase in cash value of life insurance (3,485) (2,721)
Originations of mortgage loans held for sale (365,412) (432,589)
Proceeds from sales of mortgage loans held for sale 315,520  418,576 
Changes in assets and liabilities:
Accrued interest receivable (7,747) (9,945)
Other assets (7,293) (2,170)
Accrued interest payable and other liabilities (20,010) 22,999 
Net cash provided by operating activities 264,173  269,167 
Investing Activities
Net increase in federal funds sold (3,925) (2,700)
Net decrease (increase) in loans, excluding purchased loans 181,505  (84,995)
Purchases of investment securities – available-for-sale (8,433) (1,200,812)
Purchases of investment securities - held-to-maturity —  (636,474)
Proceeds from maturities of investment securities – available-for-sale 504,220  458,291 
Proceeds from maturities of investment securities – held-to-maturity 4,383  500,479 
Purchases of equity securities —  (49,975)
Proceeds from sales of equity securities 1,522  13,778 
Purchase of other investments (1,798) (38,224)
Proceeds from foreclosed assets held for sale 846  2,231 
Proceeds from sale of SBA loans 3,454  3,745 
Purchases of premises and equipment, net (6,779) (4,158)
Return of investment on cash value of life insurance 3,813  277 
Purchase of marine loan portfolio —  (242,617)
Net cash received - market acquisition —  858,943 
Net cash provided by (used in) investing activities 678,808  (422,211)
Financing Activities
Net decrease in deposits (1,420,038) (1,573,517)
Net increase (decrease) in securities sold under agreements to repurchase 28,974  (19,331)
Net increase (decrease) in FHLB and other borrowed funds 351,550  (78,330)
Retirement of subordinated debentures —  (300,000)
Proceeds from issuance of subordinated debentures —  296,324 
Redemption of trust preferred securities —  (96,499)
Proceeds from exercise of stock options 431  156 
Repurchase of common stock (31,007) (50,869)
Dividends paid on common stock (109,602) (94,784)
Net cash used in financing activities (1,179,692) (1,916,850)
Net change in cash and cash equivalents (236,711) (2,069,894)
Cash and cash equivalents – beginning of year 724,790  3,650,315 
Cash and cash equivalents – end of period $ 488,079  $ 1,580,421 
See Condensed Notes to Consolidated Financial Statements.
9

Home BancShares, Inc.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Home BancShares, Inc. (the “Company” or “HBI”) is a bank holding company headquartered in Conway, Arkansas. The Company is primarily engaged in providing a full range of banking services to individual and corporate customers through its wholly-owned community bank subsidiary – Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). The Bank has branch locations in Arkansas, Florida, South Alabama, Texas and New York City. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.
A summary of the significant accounting policies of the Company follows:
Operating Segments
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Bank is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance. Each of the branches of the Bank provide a group of similar banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts. The individual bank branches have similar operating and economic characteristics. While the chief decision maker monitors the revenue streams of the various products, services and branch locations, operations are managed, and financial performance is evaluated on a company-wide 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 credit losses, the valuation of investment securities, the valuation of foreclosed assets and the valuations of assets acquired, and liabilities assumed in business combinations. In connection with the determination of the allowance for credit losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.
Principles of Consolidation
The consolidated financial statements include the accounts of HBI and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative information. These reclassifications had no effect on net earnings or stockholders’ equity.
Interim financial information
The accompanying unaudited consolidated financial statements 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.

10

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 2022 Form 10-K, filed with the Securities and Exchange Commission on February 24, 2023.
Loans Receivable and Allowance for Credit Losses
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for any charge-offs, deferred fees or costs on originated loans. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding. Loan origination fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.
The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:
•1-4 family construction
•All other construction
•1-4 family revolving home equity lines of credit (“HELOC”) & junior liens
•1-4 family senior liens
•Multifamily
•Owner occupied commercial real estate
•Non-owner occupied commercial real estate
•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other
•Consumer auto
•Other consumer
•Other consumer - Shore Premier Finance ("SPF")
Loans that do not share risk characteristics are evaluated on an individual basis. For these loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.


11

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:
•Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty will be executed with an individual borrower.
•The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans
The Company accounts for its acquisitions under FASB Accounting Standards Codification ("ASC") Topic 805, Business Combinations, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with FASB ASC 326, the Company records both a discount or premium and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. These models utilize a peer group benchmark in order to determine the probability of default and loss given default to be used in the calculation. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
For further discussion of the Company’s acquisitions, see Note 2 to the Condensed Notes to Consolidated Financial Statements.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

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Revenue Recognition
ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. The majority of our revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as our loans, letters of credit, investment securities and mortgage lending income, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Descriptions of our significant revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our income statements as components of non-interest income are as follows:
•Service charges on deposit accounts – These represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.
•Other service charges and fees – These represent credit card interchange fees and Centennial Commercial Finance Group (“Centennial CFG”) loan fees. The interchange fees are recorded in the period the performance obligation is satisfied which is generally the cash basis based on agreed upon contracts. The Centennial CFG loan fees are based on loan or other negotiated agreements with customers and are accounted for under ASC Topic 310.
•Trust fees - The Company enters into contracts with its customers to manage assets for investment, and/or transact on their accounts. The Company generally satisfies its performance obligations as services are rendered. The management fees are percentage based, flat, percentage of income or a fixed percentage calculated upon the average balance of assets depending upon account type. Fees are collected on a monthly or annual basis.
Earnings per Share
Basic earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the following periods:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023 2022 2023 2022
(In thousands)
Net income $ 98,453  $ 108,705  $ 306,686  $ 189,575 
Average shares outstanding 202,526  204,829  202,921  191,584 
Effect of common stock options 124  306  147  357 
Average diluted shares outstanding 202,650  205,135  203,068  191,941 
Basic earnings per share $ 0.49  $ 0.53  $ 1.51  $ 0.99 
Diluted earnings per share $ 0.49  $ 0.53  $ 1.51  $ 0.99 
The impact of anti-dilutive shares to the diluted earnings per share calculation was considered immaterial for the periods ended September 30, 2023 and 2022.
2. Business Combinations
Acquisition of Happy Bancshares, Inc.
On April 1, 2022, the Company completed the acquisition of Happy Bancshares, Inc. (“Happy”), and merged Happy State Bank into Centennial Bank. The Company issued approximately 42.4 million shares of its common stock valued at approximately $958.8 million as of April 1, 2022. In addition, the holders of certain Happy stock-based awards received approximately $3.7 million in cash in cancellation of such awards, for a total transaction value of approximately $962.5 million. The acquisition added new markets for expansion and brought complementary businesses together to drive synergies and growth.
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Including the effects of purchase accounting adjustments, as of the acquisition date, Happy had approximately $6.69 billion in total assets, $3.65 billion in loans and $5.86 billion in customer deposits. Happy formerly operated its banking business from 62 locations in Texas.
The Company has determined that the acquisition of the net assets of Happy constitutes a business combination as defined by the ASC Topic 805, Business Combinations. 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, Fair Value Measurements. 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. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:

Happy Bancshares, Inc.
Acquired
from Happy
Fair Value Adjustments As Recorded
by HBI
(Dollars in thousands)
Assets
Cash and due from banks $ 112,999  $ (446) $ 112,553 
Interest-bearing deposits with other banks 746,031  —  746,031 
Cash and cash equivalents 859,030  (446) 858,584 
Investment securities - available-for-sale, net of allowance for credit losses 1,773,540  8,485  1,782,025 
Total investment securities 1,773,540  8,485  1,782,025 
Loans receivable 3,657,009  (4,389) 3,652,620 
Allowance for credit losses (42,224) 25,408  (16,816)
Loans receivable, net 3,614,785  21,019  3,635,804 
Bank premises and equipment, net 153,642  (12,270) 141,372 
Foreclosed assets held for sale 193  (77) 116 
Cash value of life insurance 105,049  105,052 
Accrued interest receivable 31,575  —  31,575 
Deferred tax asset, net 32,908  (1,092) 31,816 
Goodwill 130,428  (130,428) — 
Core deposit and other intangibles 10,672  31,591  42,263 
Other assets 43,330  15,567  58,897 
Total assets acquired $ 6,755,152  $ (67,648) $ 6,687,504 
Liabilities
Deposits
Demand and non-interest-bearing $ 1,932,756  $ 67  $ 1,932,823 
Savings and interest-bearing transaction accounts 3,519,652  —  3,519,652 
Time deposits 401,899  903  402,802 
Total deposits 5,854,307  970  5,855,277 
FHLB and other borrowed funds 74,212  4,118  78,330 
Accrued interest payable and other liabilities 50,889  (1,892) 48,997 
Subordinated debentures 159,965  7,625  167,590 
Total liabilities assumed $ 6,139,373  $ 10,821  $ 6,150,194 
Equity
Total equity assumed 615,779  (615,779) — 
Total liabilities and equity assumed $ 6,755,152  $ (604,958) $ 6,150,194 
Net assets acquired 537,310 
Purchase price 962,538 
Goodwill $ 425,228 

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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 was deemed a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from Happy with an approximately $8.5 million adjustment to fair value based upon quoted market prices. Otherwise, the book value was deemed to approximate fair value.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, 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 discount rate does not include a factor for credit losses as that has been included in the estimated cash flows. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. See Note 5 to the Condensed Notes to Consolidated Financial Statements, for additional information related to purchased financial assets with credit deterioration.
Bank premises and equipment – Bank premises and equipment were acquired from Happy with a $12.3 million adjustment to fair value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs of disposal.
Cash value of life insurance – Bank owned life insurance is carried at its current cash surrender value, which is the most reasonable estimate of fair value.
Accrued interest receivable – The carrying amount of these assets was deemed a reasonable estimate of the fair value.
Core deposit intangible and other intangibles – This core deposit intangible asset represents the value of the relationships that Happy had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits.
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 $903,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of Happy’s certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities – The fair value adjustment results from certain liabilities whose value was estimated to be more or less than book value, such as certain accounts payable and other miscellaneous liabilities. The carrying amount of accrued interest and the remainder of other liabilities was deemed to be a reasonable estimate of fair value.
Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.



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The unaudited pro-forma combined consolidated financial information presents how the combined financial information of HBI and Happy might have appeared had the businesses actually been combined. The following schedule represents the unaudited pro-forma combined financial information as of the three and nine month periods ended September 30, 2022, assuming the acquisition was completed as of January 1, 2021:
Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
(In thousands, except per share data)
Total interest income $ 242,955  $ 662,273 
Total non-interest income 43,201  131,352 
Net income available to all shareholders 108,705  291,262 
Basic earnings per common share $ 0.53  $ 1.42 
Diluted earnings per common share 0.53  1.41 
The unaudited pro-forma consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue enhancements and expense efficiencies from in-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. The pro-forma financial information also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.
Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans purchased as part of the Happy acquisition with credit deterioration at acquisition:
April 1, 2022
(In thousands)
Purchased Loans with Credit Deterioration:
Par value $ 165,028 
Allowance for credit losses at acquisition (16,816)
Premium on acquired loans 684 
Purchase price $ 148,896 
3. Investment Securities
The following table summarizes the amortized cost and fair value of securities that are classified as available-for-sale and held-to-maturity:
September 30, 2023
Available-for-Sale
Amortized
Cost
Allowance for Credit Losses Net Carrying Amount
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
(In thousands)
U.S. government-sponsored enterprises $ 378,514  $ —  $ 378,514  $ 2,543  $ (23,354) $ 357,703 
U.S. government-sponsored mortgage-backed securities 1,753,601  —  1,753,601  170  (246,267) 1,507,504 
Private mortgage-backed securities 193,497  —  193,497  —  (21,821) 171,676 
Non-government-sponsored asset backed securities 400,390  —  400,390  486  (11,253) 389,623 
State and political subdivisions 997,009  —  997,009  257  (130,911) 866,355 
Other securities 214,210  (2,524) 211,686  —  (32,374) 179,312 
Total $ 3,937,221  $ (2,524) $ 3,934,697  $ 3,456  $ (465,980) $ 3,472,173 
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September 30, 2023
Held-to-Maturity
Amortized
Cost
Allowance for Credit Losses Net Carrying Amount
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
(In thousands)
U.S. government-sponsored enterprises $ 43,217  $ —  $ 43,217  $ —  $ (4,373) $ 38,844 
U.S. government-sponsored mortgage-backed securities 131,355  —  131,355  —  (7,782) 123,573 
State and political subdivisions 1,110,908  (2,005) 1,108,903  11  (168,153) 940,761 
Total $ 1,285,480  $ (2,005) $ 1,283,475  $ 11  $ (180,308) $ 1,103,178 
December 31, 2022
Available-for-Sale
Amortized
Cost
Allowance for Credit Losses Net Carrying Amount
Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
(In thousands)
U.S. government-sponsored enterprises $ 682,316  $ —  $ 682,316  $ 2,713  $ (23,209) $ 661,820 
U.S. government-sponsored mortgage-backed securities 1,900,796  —  1,900,796  71  (215,405) 1,685,462 
Private mortgage-backed securities 197,435  —  197,435  —  (18,302) 179,133 
Non-government-sponsored asset backed securities 428,933  428,933  95  (14,654) 414,374 
State and political subdivisions 1,021,188  (842) 1,020,346  1,649  (115,698) 906,297 
Other securities 214,952  —  214,952  251  (20,699) 194,504 
Total $ 4,445,620  $ (842) $ 4,444,778  $ 4,779  $ (407,967) $ 4,041,590 
December 31, 2022
Held-to-Maturity
Amortized
Cost
Allowance for Credit Losses Net Carrying Amount Gross
Unrealized
Gains
Gross
Unrealized
(Losses)
Estimated
Fair Value
(In thousands)
U.S. government-sponsored enterprises $ 43,017  $ —  $ 43,017  $ —  $ (3,349) $ 39,668 
U.S. government-sponsored mortgage-backed securities 135,000  —  135,000  131  (3,756) 131,375 
State and political subdivisions 1,111,693  (2,005) 1,109,688  65  (154,650) 955,103 
Total $ 1,289,710  $ (2,005) $ 1,287,705  $ 196  $ (161,755) $ 1,126,146 
Assets, principally investment securities, having a carrying value of approximately $3.19 billion and $2.35 billion at September 30, 2023 and December 31, 2022, respectively, were pledged to secure public deposits, as collateral for repurchase agreements, and for other purposes required or permitted by law. Investment securities pledged as collateral for repurchase agreements totaled approximately $160.1 million and $131.1 million at September 30, 2023 and December 31, 2022, respectively.

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The amortized cost and estimated fair value of securities classified as available-for-sale and held-to-maturity at September 30, 2023, by contractual maturity, are shown below. Expected maturities could differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
Available-for-Sale Held-to-Maturity
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
(In thousands)
Due in one year or less $ 9,132  $ 9,121  $ —  $ — 
Due after one year through five years 217,228  199,819  22,832  20,879 
Due after five years through ten years 418,890  363,605  282,757  246,409 
Due after ten years 944,483  830,825  848,536  712,317 
U.S. government-sponsored mortgage-backed securities 1,753,601  1,507,504  131,355  123,573 
Private mortgage-backed securities 193,497  171,676  —  — 
Non-government-sponsored asset backed securities 400,390  389,623  —  — 
Total $ 3,937,221  $ 3,472,173  $ 1,285,480  $ 1,103,178 
During the three and nine months ended September 30, 2023 and 2022, no available-for-sale securities were sold.
The following table shows gross unrealized losses and estimated fair value of investment securities classified as available-for-sale and held-to-maturity, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of September 30, 2023 and December 31, 2022.
September 30, 2023
Less Than 12 Months 12 Months or More Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
Available-for-sale:
U.S. government-sponsored enterprises $ 877  $ (2) $ 176,509  $ (23,352) $ 177,386  $ (23,354)
U.S. government-sponsored mortgage-backed securities 104,207  (4,079) 1,383,852  (242,188) 1,488,059  (246,267)
Private mortgage-backed securities 22,987  (2,237) 148,690  (19,584) 171,677  (21,821)
Non-government-sponsored asset backed securities 8,825  (32) 245,892  (11,221) 254,717  (11,253)
State and political subdivisions 89,833  (3,284) 737,485  (127,627) 827,318  (130,911)
Other securities 10,753  (624) 155,696  (31,750) 166,449  (32,374)
Total $ 237,482  $ (10,258) $ 2,848,124  $ (455,722) $ 3,085,606  $ (465,980)
Held-to-maturity:
U.S. government-sponsored enterprises $ —  $ —  $ 38,844  $ (4,373) $ 38,844  $ (4,373)
U.S. government-sponsored mortgage-backed securities 67,904  (2,837) 55,669  (4,945) 123,573  (7,782)
State and political subdivisions 34,219  (2,538) 905,745  (165,615) 939,964  (168,153)
Total $ 102,123  $ (5,375) $ 1,000,258  $ (174,933) $ 1,102,381  $ (180,308)
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December 31, 2022
Less Than 12 Months 12 Months or More Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
Available-for-sale:
U.S. government-sponsored enterprises $ 315,531  $ (3,056) $ 128,527  $ (20,153) $ 444,058  $ (23,209)
U.S. government-sponsored mortgage-backed securities 850,268  (46,505) 807,566  (168,900) 1,657,834  (215,405)
Private mortgage-backed securities 179,133  (18,302) —  —  179,133  (18,302)
Non-government-sponsored asset backed securities 285,724  (9,726) 39,133  (4,928) 324,857  (14,654)
State and political subdivisions 485,817  (50,484) 338,638  (65,214) 824,455  (115,698)
Other securities 138,976  (15,314) 34,423  (5,385) 173,399  (20,699)
Total $ 2,255,449  $ (143,387) $ 1,348,287  $ (264,580) $ 3,603,736  $ (407,967)
Held to maturity:
U.S. government-sponsored enterprises $ 39,668  $ (3,349) $ —  $ —  $ 39,668  $ (3,349)
U.S. government-sponsored mortgage-backed securities 106,840  (3,756) —  —  106,840  (3,756)
State and political subdivisions 955,563  (154,650) —  —  955,563  (154,650)
Total $ 1,102,071  $ (161,755) $ —  $ —  $ 1,102,071  $ (161,755)
Debt securities available-for-sale ("AFS") are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity and other comprehensive income (loss), net of taxes. Securities that are held as available-for-sale are used as a part of our asset/liability management strategy. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments ("ASC 326"). The Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The Company has made the election to exclude accrued interest receivable on AFS securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Debt securities held-to-maturity ("HTM"), which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.

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During the nine months ended September 30, 2023, one of the Company’s AFS subordinated debt investment securities was downgraded below investment grade. As result, the Company wrote down the value of the investment to its unrealized loss position, which required a $1.7 million provision. In addition, the Company reallocated the existing $842,000 allowance for credit losses on AFS investments to certain securities in the subordinated debt portfolio due to credit concerns across the banking sector. These investments are classified within the other securities category of the AFS portfolio. The $2.0 million allowance for credit losses for the held-to-maturity portfolio was considered adequate. No additional provision for credit losses was considered necessary for the HTM portfolio.
Available-for-Sale Investment Securities
September 30, 2023 December 31, 2022
Allowance for credit losses: (In thousands)
Beginning balance $ 842  $ 842 
Provision for credit loss 1,682  — 
Balance, September 30
$ 2,524  $ 842 
Provision for credit loss — 
Balance, December 31, 2022
$ 842 
Held-to-Maturity Investment Securities
September 30, 2023 December 31, 2022
Allowance for credit losses: (In thousands)
Beginning balance $ 2,005  $ — 
Provision for credit loss —  2,005 
Balance, September 30
$ 2,005  $ 2,005 
Provision for credit loss — 
Balance, December 31, 2022
$ 2,005 
For the nine months ended September 30, 2023, the Company had available-for-sale investment securities with approximately $466.0 million in unrealized losses, of which $455.7 million had been in continuous loss positions for more than twelve months. With the exception of the subordinated debt investment securities for which one security was downgraded during the nine months ended September 30, 2023, resulting in the Company recording a provision for credit losses and credit concerns requiring reallocating the existing allowance for credit losses to certain securities within the other securities category of the portfolio, the Company’s assessments indicated that the cause of the market depreciation was primarily due to the change in interest rates and not the issuer’s financial condition or downgrades by rating agencies. In addition, approximately 29.8% of the principal balance from the Company’s investment portfolio will mature or are expected to pay down within five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.
As of September 30, 2023, the Company's available-for-sale securities portfolio consisted of 1,570 investment securities, 1,400 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $466.0 million. The U.S. government-sponsored enterprises portfolio contained unrealized losses of $23.4 million on 57 securities. The U.S. government-sponsored mortgage-backed securities portfolio contained $246.3 million of unrealized losses on 684 securities, and the private mortgage-backed securities portfolio contained $21.8 million of unrealized losses on 32 securities. The non-government-sponsored asset backed securities portfolio contained $11.3 million of unrealized losses on 36 securities. The state and political subdivisions portfolio contained $130.9 million of unrealized losses on 528 securities. In addition, the other securities portfolio contained $32.4 million of unrealized losses on 63 securities. With the exception of the investments for which an allowance for credit losses has been established, the unrealized losses on the Company's investments were primarily a result of interest rate changes, and the Company expects to recover the amortized cost basis over the term of the securities. The Company has determined that, as of September 30, 2023, an additional provision for credit losses is not necessary 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.

20

As of September 30, 2023, the Company's held-to-maturity securities portfolio consisted of 506 investment securities, 504 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $180.3 million. The U.S. government-sponsored enterprises portfolio contained unrealized losses of $4.4 million on 5 securities. The U.S. government-sponsored mortgage-backed securities portfolio contained unrealized losses of $7.8 million on 20 securities. The state and political subdivisions portfolio contained $168.2 million of unrealized losses on 479 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, the Company has determined that an additional provision for credit losses was not necessary as of September 30, 2023.
The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of September 30, 2023:
State and political subdivisions U.S. government-sponsored enterprises U.S. government-sponsored mortgage-backed securities Total
(In thousands)
Aaa/AAA $ 236,184  $ 43,217  $ —  $ 279,401 
Aa/AA 845,642  —  —  845,642 
A 27,648  —  —  27,648 
Not rated 1,434  —  —  1,434 
Agency Backed —  —  131,355  131,355 
Total $ 1,110,908  $ 43,217  $ 131,355  $ 1,285,480 
Income earned on securities for the three and nine months ended September 30, 2023 and 2022, is as follows:
Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2023 2022 2023 2022
(In thousands)
Taxable
Available-for-sale $ 27,028  $ 21,873  $ 82,080  $ 45,110 
Held-to-maturity 7,492  6,400  22,479  13,184 
Non-taxable
Available-for-sale 4,746  5,002  14,369  14,461 
Held-to-maturity 3,122  3,067  9,394  6,040 
Total $ 42,388  $ 36,342  $ 128,322  $ 78,795 
21

4. Loans Receivable
The various categories of loans receivable are summarized as follows:
  September 30, 2023 December 31, 2022
  (In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 5,614,259  $ 5,632,063 
Construction/land development 2,154,030  2,135,266 
Agricultural 336,160  346,811 
Residential real estate loans
Residential 1-4 family 1,808,248  1,748,551 
Multifamily residential 444,239  578,052 
Total real estate 10,356,936  10,440,743 
Consumer 1,153,461  1,149,896 
Commercial and industrial 2,195,678  2,349,263 
Agricultural 332,608  285,235 
Other 233,150  184,343 
Total loans receivable 14,271,833  14,409,480 
Allowance for credit losses (285,562) (289,669)
Loans receivable, net $ 13,986,271  $ 14,119,811 
During the three months ended September 30, 2023, the Company sold $1.0 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $97,000. During the nine months ended September 30, 2023, the Company sold $3.2 million of the guaranteed portions of certain SBA loans, which resulted in a gain of approximately $236,000. During the three months ended September 30, 2022, the Company sold $826,524 guaranteed portions of certain SBA loans, which resulted in a gain of approximately $58,000. During the nine months ended September 30, 2022, the Company sold $3.6 million guaranteed portions of certain SBA loans, which resulted in a gain of $153,000.
Mortgage loans held for sale of approximately $129.7 million and $79.9 million at September 30, 2023 and December 31, 2022, respectively, are included in residential 1-4 family loans. Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are considered mandatory forward commitments. Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. These commitments are derivative instruments and their fair values at September 30, 2023 and December 31, 2022 were not material.
Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. The Company held approximately $132.6 million and $142.5 million in PCD loans, as of September 30, 2023 and December 31, 2022, respectively. This balance, as of September 30, 2023, consisted of $132.2 million resulting from the acquisition of Happy and $392,000 from the acquisition of LH-Finance.
A description of our accounting policies for loans and impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) are set forth in our 2022 Form 10-K filed with the SEC on February 24, 2023.
22

5. Allowance for Credit Losses, Credit Quality and Other
The Company uses the discounted cash flow method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.
Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Each year management evaluates the performance of the selected models used in the CECL calculation through backtesting. Based on the results of the testing, management determines if the various models produced accurate results compared to the actual losses incurred for the current economic environment. Management then determines if changes to the input assumptions and economic factors would produce a stronger overall calculation that is more responsive to changes in economic conditions. The Company continues to use regression analysis to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default for the changes in the economic factors for the loss driver segments. The identified loss drivers by segment are included below as of both September 30, 2023 and December 31, 2022.
Loss Driver Segment Call Report Segment(s) Modeled Economic Factors
1-4 Family Construction 1a1 National Unemployment (%) & Housing Price Index (%)
All Other Construction 1a2 National Unemployment (%) & Gross Domestic Product (%)
1-4 Family Revolving HELOC & Junior Liens 1c1 National Unemployment (%) & Housing Price Index – CoreLogic (%)
1-4 Family Revolving HELOC & Junior Liens 1c2b National Unemployment (%) & Gross Domestic Product (%)
1-4 Family Senior Liens 1c2a National Unemployment (%) & Gross Domestic Product (%)
Multifamily 1d Rental Vacancy Rate (%) & Housing Price Index – Case-Schiller (%)
Owner Occupied CRE 1e1 National Unemployment (%) & Gross Domestic Product (%)
Non-Owner Occupied CRE 1e2,1b,8 National Unemployment (%) & Gross Domestic Product (%)
Commercial & Industrial, Agricultural, Non-Depository Financial Institutions, Purchase/Carry Securities, Other 4a, 3, 9a, 9b1, 9b2, 10, Other National Unemployment (%) & National Retail Sales (%)
Consumer Auto 6c National Unemployment (%) & National Retail Sales (%)
Other Consumer 6b, 6d National Unemployment (%) & National Retail Sales (%)
Other Consumer - SPF 6d National Unemployment (%)
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
The combination of adjustments for credit expectations (default and loss) and time expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.

23

Construction/Land Development and Other Commercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30 year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.
Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Residential real estate loans generally have a loan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to many factors including the borrower’s ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.
Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.
Consumer & Other Loans. Our consumer & other loans are primarily composed of loans to finance USCG registered high-end sail and power boats. The performance of consumer & other loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.
Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit loss on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The Company uses the DCF method to estimate expected losses for all of the Company’s off-balance sheet credit exposures through the use of the existing DCF models for the Company’s loan portfolio pools. The off-balance sheet credit exposures exhibit similar risk characteristics as loans currently in the Company’s loan portfolio.
For the three and nine months ended September 30, 2023, the Company recorded $2.8 million and $6.3 million in provision for credit losses on loans, respectively. For the three and nine months ended September 30, 2023, the Company reversed $1.5 million in provision for unfunded commitments.
During the year ended December 31, 2022, the Company completed the acquisition of Happy. As a result, the Company recorded $4.4 million in net loan discounts and a $16.8 million increase in the allowance for credit losses related to PCD loans. In addition, the Company recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count" and an $11.4 million provision for credit losses on acquired unfunded commitments. In addition, the Company recorded a $5.0 million provision for credit losses on loans due to increased loan growth. However, the Company determined that no additional provision was necessary for unfunded commitments as the current level of the reserve was considered adequate.

24

The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2023:
Three Months Ended September 30, 2023
Construction/
Land
Development
Other
Commercial
Real Estate
Residential
Real Estate
Commercial
& Industrial
Consumer
& Other
Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 32,275  $ 85,158  $ 51,732  $ 90,474  $ 26,044  $ 285,683 
Loans charged off (150) (1,950) (103) (183) (1,063) (3,449)
Recoveries of loans previously charged off
33  25  22  119  329  528 
Net loans recovered (charged off)
(117) (1,925) (81) (64) (734) (2,921)
Provision for credit losses 484  (4,680) 3,233  2,059  1,704  2,800 
Balance, September 30
$ 32,642  $ 78,553  $ 54,884  $ 92,469  $ 27,014  $ 285,562 
Nine Months Ended September 30, 2023
Construction/
Land
Development
Other
Commercial
Real Estate
Residential
Real Estate
Commercial
& Industrial
Consumer
& Other
Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 32,243  $ 93,848  $ 50,963  $ 89,354  $ 23,261  $ 289,669 
Loans charged off (175) (2,023) (192) (7,015) (3,058) (12,463)
Recoveries of loans previously charged off
103  517  161  375  900  2,056 
Net loans recovered (charged off)
(72) (1,506) (31) (6,640) (2,158) (10,407)
Provision for credit losses 471  (13,789) 3,952  9,755  5,911  6,300 
Balance, September 30 $ 32,642  $ 78,553  $ 54,884  $ 92,469  $ 27,014  $ 285,562 
The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 and the year ended December 31, 2022:
Three Months Ended September 30, 2022
Construction/
Land
Development
Other
Commercial
Real Estate
Residential
Real Estate
Commercial
& Industrial
Consumer
& Other
Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 36,689  $ 115,195  $ 51,146  $ 68,309  $ 22,928  $ 294,267 
Loans charged off (11) —  (48) (4,536) (1,718) (6,313)
Recoveries of loans previously charged off
778  45  189  229  1,249 
Net loans recovered (charged off)
(3) 778  (3) (4,347) (1,489) (5,064)
Provision for credit losses (1,999) (23,560) (1,322) 25,459  1,422  — 
Balance, September 30 $ 34,687  $ 92,413  $ 49,821  $ 89,421  $ 22,861  $ 289,203 
25

Nine Months Ended September 30, 2022 and Year Ended December 31, 2022
Construction/
Land
Development
Other
Commercial
Real Estate
Residential
Real Estate
Commercial
& Industrial
Consumer
& Other
Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 28,415  $ 87,218  $ 48,458  $ 53,062  $ 19,561  $ 236,714 
Allowance for credit losses on PCD loans 950  9,283  980  5,596  16,816 
Loans charged off (11) —  (337) (5,952) (5,588) (11,888)
Recoveries of loans previously charged off
325  856  94  519  597  2,391 
Net loans recovered (charged off)
314  856  (243) (5,433) (4,991) (9,497)
Provision for credit loss - acquired loans 7,205  18,711  7,380  11,303  571  45,170 
Provision for credit loss - loans (2,197) (23,655) (6,754) 24,893  7,713  — 
Balance, September 30
34,687  92,413  49,821  89,421  22,861  289,203 
Loans charged off 10  —  (109) (3,821) (1,459) (5,379)
Recoveries of loans previously charged off
80  111  25  261  368  845 
Net loans recovered (charged off)
90  111  (84) (3,560) (1,091) (4,534)
Provision for credit loss - loans (2,534) 1,324  1,226  3,493  1,491  5,000 
Balance, December 31
$ 32,243  $ 93,848  $ 50,963  $ 89,354  $ 23,261  $ 289,669 
The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of September 30, 2023 and December 31, 2022:
September 30, 2023
Nonaccrual Nonaccrual
with Reserve
Loans Past Due
Over 90 Days
Still Accruing
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 47,864  $ —  $ 2,999 
Construction/land development 3,659  —  1,025 
Agricultural 426  —  — 
Residential real estate loans
Residential 1-4 family 20,281  —  326 
Total real estate 72,230  —  4,350 
Consumer 3,572  —  191 
Commercial and industrial 8,042  —  2,033 
Agricultural & other 340  —  100 
Total $ 84,184  $ —  $ 6,674 
26

  December 31, 2022
Nonaccrual Nonaccrual
with Reserve
Loans Past Due
Over 90 Days
Still Accruing
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 12,219  $ 8,383  $ 1,844 
Construction/land development 1,977  —  31 
Agricultural 278  —  — 
Residential real estate loans
Residential 1-4 family 18,083  —  1,374 
Multifamily residential —  —  — 
Total real estate 32,557  8,383  3,249 
Consumer 2,842  —  35 
Commercial and industrial 14,920  —  6,300 
Agricultural & other 692  —  261 
Total $ 51,011  $ 8,383  $ 9,845 
The Company had $84.2 million and $51.0 million in nonaccrual loans for the periods ended September 30, 2023 and December 31, 2022, respectively. In addition, the Company had $6.7 million and $9.8 million in loans past due 90 days or more and still accruing for the periods ended September 30, 2023 and December 31, 2022, respectively.
The Company had zero and $8.4 million in nonaccrual loans with a specific reserve as of September 30, 2023 and December 31, 2022, respectively. The Company did not recognize any interest income on nonaccrual loans during the period ended September 30, 2023 or September 30, 2022.
The following table presents the amortized cost basis of impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) by class of loans as of September 30, 2023 and December 31, 2022:
September 30, 2023
Commercial
Real Estate
Residential
Real Estate
Other
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 75,656  $ —  $ — 
Construction/land development 4,684  —  — 
Agricultural 426  —  — 
Residential real estate loans
Residential 1-4 family —  21,500  — 
Multifamily residential —  —  — 
Total real estate 80,766  21,500  — 
Consumer —  —  3,773 
Commercial and industrial —  —  16,583 
Agricultural & other —  —  441 
Total $ 80,766  $ 21,500  $ 20,797 
27

  December 31, 2022
Commercial
Real Estate
Residential
Real Estate
Other
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 162,268  $ —  $ — 
Construction/land development 2,008  —  — 
Agricultural 278  —  — 
Residential real estate loans
Residential 1-4 family —  20,832  — 
Multifamily residential —  969  — 
Total real estate 164,554  21,801  — 
Consumer —  —  2,888 
Commercial and industrial —  —  30,334 
Agricultural & other —  —  1,527 
Total $ 164,554  $ 21,801  $ 34,749 
The Company had $123.1 million and $221.1 million in impaired loans for the periods ended September 30, 2023 and December 31, 2022, respectively.
Loans that do not share risk characteristics are evaluated on an individual basis. For these loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell.
The following is an aging analysis for loans receivable as of September 30, 2023 and December 31, 2022:
September 30, 2023
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 $ 6,000  $ 1,759  $ 50,863  $ 58,622  $ 5,555,637  $ 5,614,259  $ 2,999 
Construction/land development 911  460  4,684  6,055  2,147,975  2,154,030  1,025 
Agricultural 596  318  426  1,340  334,820  336,160  — 
Residential real estate loans
Residential 1-4 family 8,200  1,268  20,607  30,075  1,778,173  1,808,248  326 
Multifamily residential —  —  —  —  444,239  444,239  — 
Total real estate 15,707  3,805  76,580  96,092  10,260,844  10,356,936  4,350 
Consumer 2,653  1,045  3,763  7,461  1,146,000  1,153,461  191 
Commercial and industrial 4,701  763  10,075  15,539  2,180,139  2,195,678  2,033 
Agricultural & other 1,157  16  440  1,613  564,145  565,758  100 
Total $ 24,218  $ 5,629  $ 90,858  $ 120,705  $ 14,151,128  $ 14,271,833  $ 6,674 

28

December 31, 2022
Loans
Past Due
30-59 Days
Loans
Past Due
60-89 Days
Loans
Past Due
90 Days
or More
Total
Past Due
Current
Loans
Total
Loans
Receivable
Accruing
Loans
Past Due
90 Days
or More
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 4,242  $ 2,117  $ 14,063  $ 20,422  $ 5,611,641  $ 5,632,063  $ 1,844 
Construction/land development 4,042  1,892  2,008  7,942  2,127,324  2,135,266  31 
Agricultural 1,469  193  278  1,940  344,871  346,811  — 
Residential real estate loans
Residential 1-4 family 6,715  605  19,457  26,777  1,721,774  1,748,551  1,374 
Multifamily residential —  —  —  —  578,052  578,052  — 
Total real estate 16,468  4,807  35,806  57,081  10,383,662  10,440,743  3,249 
Consumer 950  539  2,877  4,366  1,145,530  1,149,896  35 
Commercial and industrial 3,007  1,075  21,220  25,302  2,323,961  2,349,263  6,300 
Agricultural and other 1,065  57  953  2,075  467,503  469,578  261 
Total $ 21,490  $ 6,478  $ 60,856  $ 88,824  $ 14,320,656  $ 14,409,480  $ 9,845 
Non-accruing loans at September 30, 2023 and December 31, 2022 were $84.2 million and $51.0 million, respectively.
Interest recognized on impaired loans during the three and nine months ended September 30, 2023 was approximately $346,930 and $1.0 million, respectively. Interest recognized on impaired loans during the three and nine months ended September 30, 2022 was approximately $2.8 million and $8.2 million, respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.

29

Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) non-performing loans and (v) the general economic conditions in Arkansas, Florida, Texas, Alabama and New York.
The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. Descriptions of the general characteristics of the 8 risk ratings are as follows:
•Risk rating 1 – Excellent. Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.
•Risk rating 2 – Good. These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.
•Risk rating 3 – Satisfactory. Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.
•Risk rating 4 – Watch. Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure.
•Risk rating 5 – Other Loans Especially Mentioned (“OLEM”). A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.
•Risk rating 6 – Substandard. A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.
•Risk rating 7 – Doubtful. A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.
•Risk rating 8 – Loss. Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should be charged-off in the period in which they became uncollectible.
The Company’s classified loans include loans in risk ratings 6, 7 and 8. Loans may be classified, but not considered collateral dependent, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for credit loss testing. All loans over $2.0 million that are rated 5 – 8 are individually assessed for credit losses on a quarterly basis. Loans rated 5 – 8 that fall under the threshold amount are not individually tested for credit losses and therefore are not included in collateral dependent loans; (2) of the loans that are above the threshold amount and tested for credit losses after testing, some are considered to not be collateral dependent and are not included in collateral dependent loans.
30

Based on the most recent analysis performed, the risk category of loans by class of loans as of September 30, 2023 and December 31, 2022 is as follows:
September 30, 2023
Term Loans Amortized Cost Basis by Origination Year
2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Risk rating 1 $ —  $ —  $ —  $ —  $ 233  $ 120  $ 95  $ 448 
Risk rating 2 —  —  —  —  113  3,738  —  3,851 
Risk rating 3 282,869  614,851  577,319  244,180  250,130  1,019,886  422,819  3,412,054 
Risk rating 4 58,295  499,063  253,271  245,070  154,490  597,201  86,762  1,894,152 
Risk rating 5 —  —  608  —  13,809  56,118  697  71,232 
Risk rating 6 —  8,265  9,359  18,065  18,550  170,673  594  225,506 
Risk rating 7 —  92  —  —  —  —  —  92 
Risk rating 8 —  —  —  —  6,924  —  —  6,924 
Total non-farm/non-residential 341,164  1,122,271  840,557  507,315  444,249  1,847,736  510,967  5,614,259 
Construction/land development
Risk rating 1 $ —  $ —  $ 11  $ —  $ —  $ —  $ —  $ 11 
Risk rating 2 597  29  —  —  —  192  —  818 
Risk rating 3 206,236  489,719  146,106  69,454  23,365  46,683  39,995  1,021,558 
Risk rating 4 64,040  387,295  388,374  29,849  32,017  28,712  196,949  1,127,236 
Risk rating 5 —  —  —  —  241  70  —  311 
Risk rating 6 —  328  1,642  770  693  263  307  4,003 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  93  —  —  —  —  93 
Total construction/land development 270,873  877,371  536,226  100,073  56,316  75,920  237,251  2,154,030 
Agricultural
Risk rating 1 $ —  $ 1,649  $ —  $ —  $ —  $ —  $ —  $ 1,649 
Risk rating 2 248  —  1,963  —  —  —  —  2,211 
Risk rating 3 30,365  44,038  33,205  28,043  11,558  44,842  12,294  204,345 
Risk rating 4 4,198  25,459  25,642  20,868  7,552  33,087  5,139  121,945 
Risk rating 5 —  —  —  —  318  583  —  901 
Risk rating 6 —  —  1,686  1,120  1,620  683  —  5,109 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total agricultural 34,811  71,146  62,496  50,031  21,048  79,195  17,433  336,160 
Total commercial real estate loans $ 646,848  $ 2,070,788  $ 1,439,279  $ 657,419  $ 521,613  $ 2,002,851  $ 765,651  $ 8,104,449 
Residential real estate loans
Residential 1-4 family
Risk rating 1 $ —  $ —  $ —  $ —  $ —  $ 146  $ $ 148 
Risk rating 2 266  —  —  —  —  27  294 
Risk rating 3 209,136  360,723  251,931  156,643  97,653  340,093  116,363  1,532,542 
Risk rating 4 12,099  33,971  26,632  20,541  13,990  70,603  64,463  242,299 
Risk rating 5 —  236  —  91  11  942  998  2,278 
Risk rating 6 —  4,231  2,562  4,068  3,942  14,584  1,299  30,686 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  — 
Total residential 1-4 family 221,501  399,161  281,125  181,343  115,596  426,396  183,126  1,808,248 
31

September 30, 2023
Term Loans Amortized Cost Basis by Origination Year
2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Multifamily residential
Risk rating 1 $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Risk rating 2 —  —  —  —  —  —  —  — 
Risk rating 3 2,875  39,899  38,511  44,619  31,741  60,546  5,989  224,180 
Risk rating 4 2,963  46,350  42,751  62,604  8,159  14,174  7,493  184,494 
Risk rating 5 —  —  —  31,432  —  3,038  —  34,470 
Risk rating 6 —  —  —  —  276  819  —  1,095 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total multifamily residential 5,838  86,249  81,262  138,655  40,176  78,577  13,482  444,239 
Total real estate $ 874,187  $ 2,556,198  $ 1,801,666  $ 977,417  $ 677,385  $ 2,507,824  $ 962,259  $ 10,356,936 
Consumer
Risk rating 1 $ 4,041  $ 3,471  $ 2,329  $ 810  $ 422  $ 1,219  $ 1,584  $ 13,876 
Risk rating 2 —  —  —  —  133  57  —  190 
Risk rating 3 168,076  257,403  225,656  116,451  115,491  205,235  21,004  1,109,316 
Risk rating 4 5,284  7,871  2,703  634  122  5,228  133  21,975 
Risk rating 5 —  502  617  877  386  2,385 
Risk rating 6 36  1,159  104  878  898  2,611  29  5,715 
Risk rating 7 —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total consumer 177,441  270,406  231,409  118,774  117,943  214,736  22,752  1,153,461 
Commercial and industrial
Risk rating 1 $ 2,107  $ 1,310  $ 1,492  $ 245  $ 137  $ 20,849  $ 12,269  $ 38,409 
Risk rating 2 188  1,364  231  14  164  218  389  2,568 
Risk rating 3 183,256  299,284  87,929  51,757  73,198  182,357  233,434  1,111,215 
Risk rating 4 66,144  119,405  84,099  36,368  30,584  79,731  568,354  984,685 
Risk rating 5 —  —  15,928  85  248  1,009  1,586  18,856 
Risk rating 6 2,809  2,945  4,978  1,455  9,844  14,229  3,649  39,909 
Risk rating 7 —  —  —  —  —  36  —  36 
Risk rating 8 —  —  —  —  —  —  —  — 
Total commercial and industrial 254,504  424,308  194,657  89,924  114,175  298,429  819,681  2,195,678 
Agricultural and other
Risk rating 1 $ 81  $ 161  $ 16  $ 115  $ —  $ 91  $ 586  $ 1,050 
Risk rating 2 724  29  —  1,181  100  1,104  3,140 
Risk rating 3 73,119  49,798  32,503  27,315  3,410  45,830  143,063  375,038 
Risk rating 4 17,352  6,851  9,449  1,302  11,423  3,441  132,108  181,926 
Risk rating 5 —  389  —  134  —  593  713  1,829 
Risk rating 6 71  36  63  108  25  792  1,680  2,775 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total agricultural and other 91,347  57,264  42,033  28,974  16,039  50,847  279,254  565,758 
Total $ 1,397,479  $ 3,308,176  $ 2,269,765  $ 1,215,089  $ 925,542  $ 3,071,836  $ 2,083,946  $ 14,271,833 
32

December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Risk rating 1 $ —  $ —  $ —  $ 237  $ —  $ 132  $ 85  $ 454 
Risk rating 2 —  —  —  118  —  3,992  —  4,110 
Risk rating 3 616,809  509,269  263,188  279,157  322,278  852,727  374,371  3,217,799 
Risk rating 4 438,565  341,047  235,669  161,421  321,188  482,437  139,203  2,119,530 
Risk rating 5 —  757  1,145  14,417  35,273  37,561  95  89,248 
Risk rating 6 876  196  14,247  26,649  4,720  153,909  194  200,791 
Risk rating 7 131  —  —  —  —  —  —  131 
Risk rating 8 —  —  —  —  —  —  —  — 
Total non-farm/non-residential 1,056,381  851,269  514,249  481,999  683,459  1,530,758  513,948  5,632,063 
Construction/land development
Risk rating 1 $ —  $ 11  $ —  $ —  $ —  $ —  $ —  $ 11 
Risk rating 2 682  —  —  —  —  210  —  892 
Risk rating 3 421,774  283,546  83,631  48,350  19,340  34,910  75,797  967,348 
Risk rating 4 354,852  512,541  58,368  79,924  11,520  43,634  65,960  1,126,799 
Risk rating 5 —  —  30,987  310  —  1,140  —  32,437 
Risk rating 6 612  —  574  751  5,839  —  7,779 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total construction/land development 777,920  796,098  173,560  129,335  30,863  85,733  141,757  2,135,266 
Agricultural
Risk rating 1 $ 1,749  $ —  $ —  $ —  $ —  $ —  $ —  $ 1,749 
Risk rating 2 —  2,048  —  —  —  —  —  2,048 
Risk rating 3 61,725  43,356  32,895  16,475  10,326  37,892  5,996  208,665 
Risk rating 4 18,870  25,252  20,532  8,706  3,154  42,886  4,755  124,155 
Risk rating 5 —  —  —  326  —  603  —  929 
Risk rating 6 —  1,630  1,623  4,972  —  1,040  —  9,265 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total agricultural 82,344  72,286  55,050  30,479  13,480  82,421  10,751  346,811 
Total commercial real estate loans $ 1,916,645  $ 1,719,653  $ 742,859  $ 641,813  $ 727,802  $ 1,698,912  $ 666,456  $ 8,114,140 
Residential real estate loans
Residential 1-4 family
Risk rating 1 $ —  $ —  $ —  $ —  $ —  $ 115  $ 40  $ 155 
Risk rating 2 —  —  —  —  —  48  50 
Risk rating 3 360,510  255,775  176,955  112,053  98,093  314,492  110,881  1,428,759 
Risk rating 4 37,471  35,875  61,418  11,871  15,577  61,034  65,674  288,920 
Risk rating 5 —  —  —  3,049  226  328  —  3,603 
Risk rating 6 849  2,423  3,564  3,521  2,536  12,662  1,508  27,063 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  — 
Total residential 1-4 family 398,830  294,073  241,937  130,494  116,432  388,680  178,105  1,748,551 
33

December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Multifamily residential
Risk rating 1 $ —  $ —  $ —  $ —  $ —  $ —  $ —  $ — 
Risk rating 2 —  —  —  —  —  —  —  — 
Risk rating 3 38,830  37,566  14,127  33,813  13,098  60,117  6,534  204,085 
Risk rating 4 43,478  101,282  182,850  8,284  11,934  11,779  1,201  360,808 
Risk rating 5 —  —  —  —  3,142  7,897  —  11,039 
Risk rating 6 —  —  —  302  —  1,818  —  2,120 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total multifamily residential 82,308  138,848  196,977  42,399  28,174  81,611  7,735  578,052 
Total real estate $ 2,397,783  $ 2,152,574  $ 1,181,773  $ 814,706  $ 872,408  $ 2,169,203  $ 852,296  $ 10,440,743 
Consumer
Risk rating 1 $ 5,332  $ 3,952  $ 1,134  $ 637  $ 552  $ 1,176  $ 1,467  $ 14,250 
Risk rating 2 —  —  —  193  614  —  —  807 
Risk rating 3 284,828  276,044  146,256  132,763  118,244  135,266  16,093  1,109,494 
Risk rating 4 15,306  2,293  422  1,216  459  907  69  20,672 
Risk rating 5 —  633  19  —  810  —  1,470 
Risk rating 6 215  156  270  970  24  1,386  101  3,122 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  77  —  81 
Total consumer 305,684  283,078  148,102  135,779  119,901  139,622  17,730  1,149,896 
Commercial and industrial
Risk rating 1 $ 3,450  $ 7,692  $ 268  $ 264  $ 16  $ 21,298  $ 8,832  $ 41,820 
Risk rating 2 1,590  305  27  198  —  226  781  3,127 
Risk rating 3 301,063  126,312  80,636  73,360  71,964  112,017  253,111  1,018,463 
Risk rating 4 70,862  120,618  69,963  89,975  81,389  48,496  568,795  1,050,098 
Risk rating 5 83,272  14,762  159  1,408  6,815  185  75,891  182,492 
Risk rating 6 4,842  2,539  11,204  4,193  5,769  16,559  3,554  48,660 
Risk rating 7 —  —  —  —  4,316  202  85  4,603 
Risk rating 8 —  —  —  —  —  —  —  — 
Total commercial and industrial 465,079  272,228  162,257  169,398  170,269  198,983  911,049  2,349,263 
Agricultural and other
Risk rating 1 $ 297  $ 266  $ 115  $ —  $ —  $ 95  $ 722  $ 1,495 
Risk rating 2 140  78  —  2,338  34  115  1,661  4,366 
Risk rating 3 85,707  36,004  30,546  4,725  7,986  46,748  131,760  343,476 
Risk rating 4 7,627  13,591  2,598  1,671  1,710  8,766  69,179  105,142 
Risk rating 5 —  204  —  —  593  745  1,550 
Risk rating 6 —  58  157  11,137  304  949  944  13,549 
Risk rating 7 —  —  —  —  —  —  —  — 
Risk rating 8 —  —  —  —  —  —  —  — 
Total agricultural and other 93,771  50,005  33,620  19,871  10,034  57,266  205,011  469,578 
Total $ 3,262,317  $ 2,757,885  $ 1,525,752  $ 1,139,754  $ 1,172,612  $ 2,565,074  $ 1,986,086  $ 14,409,480 

34

The following table presents gross write-offs by origination date as of September 30, 2023.
September 30, 2023
Gross Loan Write-Offs by Origination Year
2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Real estate
Commercial real estate loans
Non-farm/non-residential $ —  $ —  $ —  $ —  $ 1,514  $ 502  $ —  $ 2,016 
Construction/land development —  168  —  —  —  175 
Agricultural —  —  —  —  — 
Residential real estate loans
Residential 1-4 family —  29  28  39  13  83  —  192 
Total real estate —  31  196  44  1,528  591  —  2,390 
Consumer —  46  42  28  63  257  25  461 
Commercial and industrial —  147  1,063  894  21  4,703  187  7,015 
Agricultural & other 2,439  * —  149  2,597 
Total $ 2,439  $ 225  $ 1,302  $ 968  $ 1,612  $ 5,556  $ 361  $ 12,463 
*The 2023 write-off consists entirely of overdrafts.
35

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. The Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following tables present the amortized cost of performing and nonperforming loans as of September 30, 2023 and December 31, 2022.
September 30, 2023
Term Loans Amortized Cost Basis by Origination Year
2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Performing $ 341,164  $ 1,122,271  $ 831,342  $ 506,170  $ 435,793  $ 1,791,222  $ 510,641  $ 5,538,603 
Non-performing —  —  9,215  1,145  8,456  56,514  326  75,656 
Total non-farm/non-residential
341,164  1,122,271  840,557  507,315  444,249  1,847,736  510,967  5,614,259 
Construction/land development
Performing $ 270,873  $ 877,043  $ 534,491  $ 99,354  $ 54,877  $ 75,763  $ 236,945  $ 2,149,346 
Non-performing —  328  1,735  719  1,439  157  306  4,684 
Total construction/ land development
270,873  877,371  536,226  100,073  56,316  75,920  237,251  2,154,030 
Agricultural
Performing $ 34,811  $ 71,146  $ 62,407  $ 50,031  $ 21,048  $ 78,858  $ 17,433  $ 335,734 
Non-performing —  —  89  —  —  337  —  426 
Total agricultural 34,811  71,146  62,496  50,031  21,048  79,195  17,433  336,160 
Total commercial real estate loans
$ 646,848  $ 2,070,788  $ 1,439,279  $ 657,419  $ 521,613  $ 2,002,851  $ 765,651  $ 8,104,449 
Residential real estate loans
Residential 1-4 family
Performing $ 221,501  $ 396,219  $ 279,314  $ 178,024  $ 112,234  $ 417,402  $ 182,054  $ 1,786,748 
Non-performing —  2,942  1,811  3,319  3,362  8,994  1,072  21,500 
Total residential 1-4 family
221,501  399,161  281,125  181,343  115,596  426,396  183,126  1,808,248 
Multifamily residential
Performing $ 5,838  $ 86,249  $ 81,262  $ 138,655  $ 40,176  $ 78,577  $ 13,482  $ 444,239 
Non-performing —  —  —  —  —  —  —  — 
Total multifamily residential
5,838  86,249  81,262  138,655  40,176  78,577  13,482  444,239 
Total real estate $ 874,187  $ 2,556,198  $ 1,801,666  $ 977,417  $ 677,385  $ 2,507,824  $ 962,259  $ 10,356,936 
Consumer
Performing $ 177,405  $ 270,083  $ 231,325  $ 117,999  $ 117,798  $ 212,355  $ 22,723  $ 1,149,688 
Non-performing 36  323  84  775  145  2,381  29  3,773 
Total consumer 177,441  270,406  231,409  118,774  117,943  214,736  22,752  1,153,461 
Commercial and industrial
Performing $ 254,504  $ 421,493  $ 193,465  $ 89,323  $ 110,458  $ 293,689  $ 816,163  $ 2,179,095 
Non-performing —  2,815  1,192  601  3,717  4,740  3,518  16,583 
Total commercial and industrial 254,504  424,308  194,657  89,924  114,175  298,429  819,681  2,195,678 
Agricultural and other
Performing $ 91,276  $ 57,228  $ 42,023  $ 28,974  $ 16,014  $ 50,713  $ 279,089  $ 565,317 
Non-performing 71  36  10  —  25  134  165  441 
Total agricultural and other 91,347  57,264  42,033  28,974  16,039  50,847  279,254  565,758 
Total $ 1,397,479  $ 3,308,176  $ 2,269,765  $ 1,215,089  $ 925,542  $ 3,071,836  $ 2,083,946  $ 14,271,833 



36

December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential
Performing $ 1,056,381  $ 851,269  $ 509,258  $ 456,196  $ 679,187  $ 1,403,874  $ 513,630  $ 5,469,795 
Non-performing —  —  4,991  25,803  4,272  126,884  318  162,268 
Total non-farm/non-residential
1,056,381  851,269  514,249  481,999  683,459  1,530,758  513,948  5,632,063 
Construction/land development
Performing $ 777,309  $ 796,098  $ 172,987  $ 128,736  $ 30,860  $ 85,511  $ 141,757  $ 2,133,258 
Non-performing 611  —  573  599  222  —  2,008 
Total construction/land development
777,920  796,098  173,560  129,335  30,863  85,733  141,757  2,135,266 
Agricultural
Performing $ 82,344  $ 72,286  $ 55,050  $ 30,479  $ 13,480  $ 82,143  $ 10,751  $ 346,533 
Non-performing —  —  —  —  —  278  —  278 
Total agricultural 82,344  72,286  55,050  30,479  13,480  82,421  10,751  346,811 
Total commercial real estate loans
$ 1,916,645  $ 1,719,653  $ 742,859  $ 641,813  $ 727,802  $ 1,698,912  $ 666,456  $ 8,114,140 
Residential real estate loans
Residential 1-4 family
Performing $ 397,464  $ 292,100  $ 239,047  $ 127,250  $ 114,337  $ 380,210  $ 177,311  $ 1,727,719 
Non-performing 1,366  1,973  2,890  3,244  2,095  8,470  794  20,832 
Total residential 1-4 family
398,830  294,073  241,937  130,494  116,432  388,680  178,105  1,748,551 
Multifamily residential
Performing $ 82,308  $ 138,848  $ 196,977  $ 42,399  $ 28,174  $ 80,642  $ 7,735  $ 577,083 
Non-performing —  —  —  —  —  969  —  969 
Total multifamily residential
82,308  138,848  196,977  42,399  28,174  81,611  7,735  578,052 
Total real estate $ 2,397,783  $ 2,152,574  $ 1,181,773  $ 814,706  $ 872,408  $ 2,169,203  $ 852,296  $ 10,440,743 
Consumer
Performing $ 305,620  $ 282,944  $ 147,820  $ 134,831  $ 119,877  $ 138,288  $ 17,628  $ 1,147,008 
Non-performing 64  134  282  948  24  1,334  102  2,888 
Total consumer 305,684  283,078  148,102  135,779  119,901  139,622  17,730  1,149,896 
Commercial and industrial
Performing $ 464,285  $ 267,719  $ 159,152  $ 165,733  $ 160,267  $ 194,162  $ 907,611  $ 2,318,929 
Non-performing 794  4,509  3,105  3,665  10,002  4,821  3,438  30,334 
Total commercial and industrial 465,079  272,228  162,257  169,398  170,269  198,983  911,049  2,349,263 
Agricultural and other
Performing $ 93,771  $ 50,001  $ 33,416  $ 19,818  $ 10,034  $ 56,631  $ 204,380  $ 468,051 
Non-performing —  204  53  —  635  631  1,527 
Total agricultural and other 93,771  50,005  33,620  19,871  10,034  57,266  205,011  469,578 
Total $ 3,262,317  $ 2,757,885  $ 1,525,752  $ 1,139,754  $ 1,172,612  $ 2,565,074  $ 1,986,086  $ 14,409,480 
The Company had approximately $32.1 million or 182 total revolving loans convert to term loans for the nine months ended September 30, 2023 compared to $17.6 million or 136 total revolving loans convert to term loans for the nine months ended September 30, 2022. These loans were considered immaterial for vintage disclosure inclusion.

37

The following table presents the amortized cost basis of modified loans to borrowers experiencing financial difficulty by class and modification type at September 30, 2023. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
September 30, 2023
Combination of Modifications
Term Extension Interest Rate Reduction Principal Reduction Interest Only Interest Rate Reduction and Term Extension Principal Reduction and Interest Rate Reduction Term Extension and Interest Only Term Extension and Principal Reduction Post-
Modification
Outstanding
Balance
Percentage of Total Class of Loans Receivable
(In thousands)
Real estate:
Commercial real estate loans
    Non-farm/non-residential $ 580  $ —  $ —  $ 1,581  $ 2,487  $ —  $ 16,023  $ —  $ 20,671  0.37  %
    Construction/land development —  —  —  155  —  —  —  —  155  0.01 
    Agricultural —  —  —  —  —  —  —  —  —  — 
Residential real estate loans
    Residential 1-4 family 606  502  97  63  587  —  —  145  2,000  0.11 
    Multifamily residential —  —  —  —  —  —  —  —  —  — 
Total real estate 1,186  502  97  1,799  3,074  —  16,023  145  22,826  0.22 
Consumer 14  —  10  —  —  —  30  — 
Commercial and industrial 108  49  51  1,764  74  —  —  —  2,046  0.09 
Agricultural & other —  —  —  —  —  —  —  —  —  — 
Total $ 1,308  $ 551  $ 149  $ 3,573  $ 3,148  $ $ 16,023  $ 145  $ 24,902  0.17  %
During the nine-months ended September 30, 2023, the Company restructured approximately $19.4 million in loans to 18 borrowers. The ending balance of these loans as of September 30, 2023, was $20.8 million. The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the three-months ended September 30, 2023 immaterial for tabular disclosure inclusion. Three of the modified loans accounted for $18.2 million of the total post-modification outstanding balance. Two of the loans involved the loans being placed on interest only payments for 36 months and the term being extended an additional 36 months while the interest rate was increased by 50 basis points. The third loan involved a new loan being underwritten resulting in the term being extended by approximately 49 months and the interest rate increasing by 3.45 percentage points.
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The following table presents the amortized cost basis of loans that had a payment default during the three-months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.
September 30, 2023
Term Extension Principal Reduction Interest Only Combination Interest Rate Reduction and Principal Reduction Combination Term Extension and Principal Reduction
(Dollars in thousands)
Real estate
Commercial real estate loans
Non-farm/non-residential $ —  $ —  $ —  $ —  $ — 
Construction/land development —  —  —  —  — 
Agricultural —  —  —  —  — 
Residential real estate loans
Residential 1-4 family 339  97  282  —  145 
Total real estate 339  97  282  —  145 
Consumer 14  —  —  — 
Commercial and industrial —  51  —  —  — 
Agricultural & other —  —  —  —  — 
Total $ 353  $ 148  $ 282  $ $ 145 
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The Company has modified 22 loans over the past 12 months to borrowers experiencing financial difficulty. The pre-modification balance of the loans was $19.5 million, and the ending balance as of September 30, 2023 was $20.9 million. The $20.9 million balance consists of $933,000 of non-accrual loans and $20.0 million of current loans, of which $328,000 were 30-59 days past due as of September 30, 2023. The remaining balance of the loans was current as of September 30, 2023.
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses on loans is adjusted by the same amount. The defaults impact the loss rate by applicable loan pool for the quarterly CECL calculation. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.
The following is a presentation of total foreclosed assets as of September 30, 2023 and December 31, 2022:
September 30, 2023 December 31, 2022
(In thousands)
Commercial real estate loans
Non-farm/non-residential $ 118  $ 118 
Construction/land development 47  47 
Residential real estate loans
Residential 1-4 family 526  260 
Multifamily residential —  121 
Total foreclosed assets held for sale $ 691  $ 546 
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6. Goodwill and Core Deposits and Other Intangibles
Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at September 30, 2023 and December 31, 2022, were as follows:
September 30, 2023 December 31, 2022
(In thousands)
Goodwill
Balance, beginning of period $ 1,398,253  $ 973,025 
Acquisition of Happy Bancshares —  425,228 
Balance, end of period $ 1,398,253  $ 1,398,253 
September 30, 2023 December 31, 2022
(In thousands)
Core Deposit Intangibles
Balance, beginning of period $ 58,455  $ 25,045 
Acquisition of Happy Bancshares —  42,263 
Amortization expense (7,432) (6,376)
Balance, September 30 $ 51,023  60,932 
Amortization expense (2,477)
Balance, end of year $ 58,455 
The carrying basis and accumulated amortization of core deposit intangibles at September 30, 2023 and December 31, 2022 were:
September 30, 2023 December 31, 2022
(In thousands)
Gross carrying basis $ 128,888  $ 128,888 
Accumulated amortization (77,865) (70,433)
Net carrying amount $ 51,023  $ 58,455 
Core deposit intangible amortization expense was approximately $2.5 million for both the three months ended September 30, 2023 and 2022. Core deposit intangible amortization expense was approximately $7.4 million and $6.4 million for the nine months ended September 30, 2023 and 2022, respectively. The Company’s estimated amortization expense of core deposits intangibles for each of the years 2023 through 2027 is approximately: 2023 – $9.7 million; 2024 – $8.4 million; 2025 – $8.0 million; 2026– $7.8 million; 2027 – $6.6 million.
The carrying amount of the Company’s goodwill was $1.40 billion at both September 30, 2023 and December 31, 2022. Goodwill is tested annually for impairment during the fourth quarter or more often if events and circumstances indicate there may be an impairment. During the 2022 review, no impairment was found. 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 September 30, 2023 and December 31, 2022, other assets were $322.6 million and $321.2 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 $137.0 million and $135.3 million at September 30, 2023 and December 31, 2022, and are accounted for at cost.

40

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 $89.5 million and $80.6 million at September 30, 2023 and December 31, 2022, respectively. There were no transactions during the period that would indicate a material change in fair value.
Included in other assets are marketable equity securities held at the holding company which are accounted for under ASC Topic 321. These marketable equity securities were $44.4 million and $52.0 million at September 30, 2023 and December 31, 2022, respectively. The September 30, 2023 balance consisted primarily of investments in Pacific Western Bank and PNC Financial Services Group, Inc. The fair value of these investments were $21.0 million and $18.5 million, respectively, at September 30, 2023. The Company recorded $4.5 million in income and $6.1 million in expense for the fair value adjustment for the marketable securities portfolio during the three and nine months ended September 30, 2023, respectively, compared to $2.6 million and $2.3 million in expense during the three and nine months ended September 30, 2022, respectively.
8. Deposits
The aggregate amount of time deposits with a minimum denomination of $250,000 was $638.2 million and $333.2 million at September 30, 2023 and December 31, 2022, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was $933.6 million and $639.3 million at September 30, 2023 and December 31, 2022, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $7.5 million and $615,000 for the three months ended September 30, 2023 and 2022, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $15.7 million and $2.0 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, brokered deposits were $401.7 million and $476.6 million, respectively.
Deposits totaling approximately $2.65 billion at both September 30, 2023 and December 31, 2022, were public funds obtained primarily from state and political subdivisions in the United States.
9. Securities Sold Under Agreements to Repurchase
At September 30, 2023 and December 31, 2022, securities sold under agreements to repurchase totaled $160.1 million and $131.1 million, respectively. For the three-month periods ended September 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $154.7 million and $126.8 million, respectively. For the nine-month periods ended September 30, 2023 and 2022, securities sold under agreements to repurchase daily weighted-average totaled $144.6 million and $129.1 million, respectively.
The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2023 and December 31, 2022 is presented in the following table:
September 30, 2023 December 31, 2022
Overnight and
Continuous
Total
Overnight and
Continuous
Total
(In thousands)
Securities sold under agreements to repurchase:
U.S. government-sponsored enterprises $ —  $ —  $ 5,322  $ 5,322 
Mortgage-backed securities —  —  5,153  5,153 
State and political subdivisions —  —  117,674  117,674 
Other securities 160,120  160,120  2,997  2,997 
Total borrowings $ 160,120  $ 160,120  $ 131,146  $ 131,146 
10. FHLB and Other Borrowed Funds
The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $750.0 million at September 30, 2023 and $650.0 million at December 31, 2022. At September 30, 2023, $150.0 million and $600.0 million of the outstanding balances were classified as short-term and long-term advances. At December 31, 2022, $50.0 million and $600.0 million of the outstanding FHLB balances were classified as short-term and long-term advances, respectively. The FHLB advances mature from 2023 to 2037 with fixed interest rates ranging from 3.37% to 5.38%. Expected maturities could differ from contractual maturities because FHLB may have the right to call, or the Company may have the right to prepay certain obligations.
41

Additionally, the Company had $1.53 billion and $1.14 billion at September 30, 2023 and December 31, 2022, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at September 30, 2023 and December 31, 2022, respectively.
Other borrowed funds were $251.6 million as of September 30, 2023 and were classified as short-term advances. The Company had no other borrowed funds as of December 31, 2022.
The Company had access to approximately $1.14 billion in liquidity with the Federal Reserve Bank as of September 30, 2023. This consisted of $80.9 million available from the Discount Window and $1.06 billion available through the Bank Term Funding Program ("BTFP"). As of September 30, 2023, the primary and secondary credit rates available through the Discount Window were 5.50% and 6.00%, respectively, and the BTFP rate was 5.54%. As of September 30, 2023, the Company had drawn $250.0 million from the BTFP in the ordinary course of business. This advance is included within other borrowed funds.
11. Subordinated Debentures
Subordinated debentures at September 30, 2023 and December 31, 2022 consisted of the following components:
As of September 30, 2023
As of
December 31, 2022
(In thousands)
Subordinated debt securities
Subordinated notes, net of issuance costs, issued in 2020, due 2030, fixed rate of 5.50% during the first five years and at a floating rate of 534.5 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2025 without penalty
$ 142,416  $ 143,400 
Subordinated notes, net of issuance costs, issued in 2022, due 2032, fixed rate of 3.125% during the first five years and at a floating rate of 182 basis points above the then three-month SOFR rate, reset quarterly, thereafter, callable in 2027 without penalty
297,566  297,020 
Total $ 439,982  $ 440,420 
Subordinated Debt Securities. On April 1, 2022, the Company acquired $140.0 million in aggregate principal amount of 5.500% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”) from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. From and including the date of issuance to, but excluding July 31, 2025 or the date of earlier redemption, the 2030 Notes will bear interest at an initial rate of 5.50% per annum, payable in arrears on January 31 and July 31 of each year. From and including July 31, 2025 to, but excluding, the maturity date or earlier redemption, the 2030 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be 3-month Secured Overnight Funding Rate (SOFR)), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2030 Notes, plus 5.345%, payable quarterly in arrears on January 31, April 30, July 31, and October 31 of each year, commencing on October 31, 2025.
The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
On January 18, 2022, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excluding January 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding, the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.
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The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
12. Income Taxes
The following is a summary of the components of the provision for income taxes for the three and nine months ended September 30, 2023 and 2022:
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2023 2022 2023 2022
(In thousands)
Current:
Federal $ 23,861  $ 19,211  $ 76,059  $ 52,418 
State 4,858  5,068  15,484  13,830 
Total current 28,719  24,279  91,543  66,248 
Deferred:
Federal 1,758  7,101  715  (7,652)
State 358  1,874  146  (2,019)
Total deferred 2,116  8,975  861  (9,671)
Income tax expense $ 30,835  $ 33,254  $ 92,404  $ 56,577 
The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Statutory federal income tax rate 21.00  % 21.00  % 21.00  % 21.00  %
Effect of non-taxable interest income (0.64) (1.07) (0.71) (1.69)
Stock compensation 0.29  0.02  0.29  0.25 
State income taxes, net of federal benefit 2.73  3.40  2.64  3.04 
Executive officer compensation & other 0.47  0.08  (0.07) 0.38 
Effective income tax rate 23.85  % 23.43  % 23.15  % 22.98  %
43

The types of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:
September 30,
2023
December 31,
2022
(In thousands)
Deferred tax assets:
Allowance for credit losses $ 79,227  $ 80,232 
Deferred compensation 6,795  7,817 
Stock compensation 6,497  6,180 
Non-accrual interest income 1,477  1,518 
Real estate owned 103  103 
Unrealized loss on investment securities, available-for-sale 114,451  98,587 
Loan discounts 5,369  7,007 
Tax basis premium/discount on acquisitions (125) 1,222 
Investments 28,862  28,523 
Other 8,578  8,007 
Gross deferred tax assets 251,234  239,196 
Deferred tax liabilities:
Accelerated depreciation on premises and equipment 1,954  4,252 
Core deposit intangibles 14,419  14,755 
FHLB dividends 3,182  2,681 
Other 8,938  8,187 
Gross deferred tax liabilities 28,493  29,875 
Net deferred tax assets $ 222,741  $ 209,321 
The Company files income tax returns in the U.S. federal jurisdiction. The Company's income tax returns are open and subject to examinations from the 2019 tax year and forward. The Company's various state income tax returns are generally open from the 2019 and later tax return years based on individual state statute of limitations.
13. Common Stock, Compensation Plans and Other
Common Stock
The Company’s Restated Articles of Incorporation, as amended, authorize the issuance of up to 300,000,000 shares of common stock, par value $0.01 per share.
The Company also has the authority to issue up to 5,500,000 shares of preferred stock, par value $0.01 per share under the Company’s Restated Articles of Incorporation, as amended.
Stock Repurchases
During the nine months ended September 30, 2023, the Company repurchased a total of 1,410,849 shares with a weighted-average stock price of $21.95 per share. Shares repurchased under the program as of September 30, 2023 since its inception total 22,170,715 shares. The remaining balance available for repurchase is 17,581,285 shares at September 30, 2023.

44

Stock Compensation Plans
On January 21, 2022, the Company’s Board of Directors adopted, and on April 21, 2022, the Company's shareholders approved, the Home BancShares, Inc. 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan replaced the Company’s Amended and Restated 2006 Stock Option and Performance Incentive Plan (the “2006 Plan” and, together with the 2022 Plan, the “Plans”), which expired on February 27, 2022. The purpose of the Plans is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results. As of September 30, 2023, the maximum total number of shares of the Company’s common stock available for issuance under the 2022 Plan was 14,788,000 shares (representing 13,288,000 shares approved for issuance under the 2006 Plan plus 1,500,000 shares added upon adoption of the 2022 Plan). At September 30, 2023, the Company had 2,607,485 shares of common stock available for future grants and 5,432,001 shares of common stock reserved for issuance pursuant to the Plans.
The intrinsic value of the stock options outstanding and stock options vested at September 30, 2023 was $3.5 million. The intrinsic value of stock options exercised during the nine months ended September 30, 2023 was approximately $1.7 million. Total unrecognized compensation cost, net of income tax benefit, related to non-vested stock option awards, which are expected to be recognized over the vesting periods, was approximately $3.7 million as of September 30, 2023.
The table below summarizes the stock option transactions under the 2022 Plan at September 30, 2023 and December 31, 2022 and changes during the three-month period and year then ended:
For the Nine Months Ended September 30, 2023
For the Year Ended
December 31, 2022
Shares (000) Weighted-
Average
Exercisable
Price
Shares (000) Weighted-
Average
Exercisable
Price
Outstanding, beginning of year 2,971  $ 20.45  3,015  $ 20.06 
Granted 25  22.63  183  21.13 
Forfeited/Expired (5) 23.23  (96) 21.89 
Exercised (166) 12.57  (131) 11.30 
Outstanding, end of period 2,825  20.93  2,971  20.45 
Exercisable, end of period 1,983  20.04  1,837  18.89 
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 nine months ended September 30, 2023 was $5.37 per share. There were 25,000 options granted during the nine months ended September 30, 2023. 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.
The assumptions used in determining the fair value of the 2023 and 2022 stock option grants were as follows:
For the Nine Months Ended September 30, 2023
For the Year Ended December 31, 2022
Expected dividend yield 2.98  % 3.14  %
Expected stock price volatility 27.97  % 31.18  %
Risk-free interest rate 3.37  % 2.82  %
Expected life of options 6.5 years 6.5 years
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The following is a summary of currently outstanding and exercisable options at September 30, 2023:
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
$14.00 to $15.99
100  1.30 $ 14.71  100  $ 14.71 
$16.00 to $17.99
190  1.20 16.94  190  16.94 
$18.00 to $19.99
846  2.04 18.48  839  18.48 
$20.00 to $21.99
270  4.99 20.88  193  20.99 
$22.00 to $23.99
1,328  4.91 23.21  590  23.13 
$24.00 to $25.99
91  4.65 25.59  71  25.95 
2,825  1,983 
The table below summarized the activity for the Company’s restricted stock issued and outstanding at September 30, 2023 and December 31, 2022 and changes during the period and year then ended:
As of
September 30, 2023
As of
December 31, 2022
(In thousands)
Beginning of year 1,381  1,231 
Issued 261  409 
Vested (152) (178)
Forfeited (54) (81)
End of period 1,436  1,381 
Amount of expense for the nine months and twelve months ended, respectively
$ 6,114  $ 7,646 
Total unrecognized compensation cost, net of income tax benefit, related to non-vested restricted stock awards, which are expected to be recognized over the vesting periods, was approximately $13.1 million as of September 30, 2023.
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14. Non-Interest Expense
The table below shows the components of non-interest expense for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(In thousands)
Salaries and employee benefits $ 64,512  $ 65,290  $ 193,536  $ 174,636 
Occupancy and equipment 15,463  15,133  45,338  38,533 
Data processing expense 9,103  8,747  27,222  25,880 
Merger and acquisition expenses —  —  —  49,594 
Other operating expenses:
Advertising 2,295  2,024  6,624  5,407 
Amortization of intangibles 2,477  2,477  7,432  6,376 
Electronic banking expense 3,709  3,828  10,714  9,718 
Directors’ fees 417  354  1,415  1,133 
Due from bank service charges 282  316  841  982 
FDIC and state assessment 2,794  2,146  9,514  6,204 
Insurance 878  959  2,694  2,702 
Legal and accounting 1,514  1,581  4,038  3,439 
Other professional fees 2,117  2,466  7,175  6,329 
Operating supplies 860  681  2,361  2,430 
Postage 491  614  1,578  1,476 
Telephone 544  593  1,645  1,314 
Other expense 7,306  7,137  23,561  20,571 
Total other operating expenses 25,684  25,176  79,592  68,081 
Total non-interest expense $ 114,762  $ 114,346  $ 345,688  $ 356,724 
15. Leases
The Company leases land and office facilities under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2044 and do not include renewal options based on economic factors that would have implied that continuation of the lease was reasonably certain. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally include real estate taxes and common area maintenance charges in the rental payments. Short-term leases are leases having a term of twelve months or less. The Company does not separate nonlease components from the associated lease component of our operating leases. As a result, the Company accounts for these components as a single component 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 September 30, 2023, the balances of the right-of-use asset and lease liability were $42.4 million and $45.3 million, respectively. As of December 31, 2022, the balances of the right-of-use asset and lease liability were $42.9 million and $46.0 million, respectively. The right-of-use asset is included in bank premises and equipment, net, and the lease liability is included in accrued interest payable and other liabilities.
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The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of September 30, 2023 and December 31, 2022:
September 30, 2023 December 31, 2022
2023 $ 2,426  $ 8,332 
2024 8,800  7,463 
2025 7,977  6,739 
2026 7,556  6,352 
2027 7,002  5,821 
Thereafter 24,655  24,591 
Total future minimum lease payments $ 58,416  $ 59,298 
Discount effect of cash flows (13,126) (13,344)
Present value of net future minimum lease payments $ 45,290  $ 45,954 
Additional information (dollar amounts in thousands):
For the Three Months Ended Nine Months Ended
Lease expense: September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022
Operating lease expense $ 2,059 $ 2,052 $ 5,937 $ 5,991
Short-term lease expense 2 2
Variable lease expense 289 215 810 658
Total lease expense $ 2,348 $ 2,269 $ 6,747 $ 6,651
Other information:
Cash paid for amounts included in the measurement of lease liabilities
$ 2,136 $ 2,096 $ 6,146 $ 6,078
Weighted-average remaining lease term (in years)
8.33 9.21 8.62 9.35
Weighted-average discount rate 3.43  % 3.48  % 3.44  % 3.42  %
The Company currently leases three properties from three related parties. Total rent expense from the leases was $35,000, or 1.47% of total lease expense and $104,000, or 1.54% of total lease expense, for the three and nine months ended September 30, 2023, respectively.
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 credit losses and certain concentrations of credit risk are reflected in Note 5, while deposit concentrations are reflected in Note 8.
The Company’s primary market areas are in Arkansas, Florida, Texas, South Alabama and New York. The Company primarily grants loans to customers located within these markets unless the borrower has an established relationship with the Company.
The diversity of the Company’s economic base tends to provide a stable lending environment. Although the Company has a loan portfolio that is diversified in both industry and geographic area, a substantial portion of its debtors’ ability to honor their contracts is dependent upon real estate values, tourism demand and the economic conditions prevailing in its market areas.
Although the Company has a diversified loan portfolio, at September 30, 2023 and December 31, 2022, commercial real estate loans represented 56.8% and 56.3% of total loans receivable, respectively, and 221.7% and 230.1% of total stockholders’ equity at September 30, 2023 and December 31, 2022, respectively. Residential real estate loans represented 15.8% and 16.1% of total loans receivable and 61.6% and 66.0% of total stockholders’ equity at September 30, 2023 and December 31, 2022, respectively.
Approximately 79.5% of the Company’s total loans and 84.6% of the Company’s real estate loans as of September 30, 2023, are to borrowers whose collateral is located in Alabama, Arkansas, Florida, Texas and New York, the states in which the Company has its branch locations.
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For the three and nine months ended September 30, 2023, the Company recorded $2.8 million and $6.3 million in provision for credit losses on loans, respectively. For the three and nine months ended September 30, 2023, the Company released $1.5 million in provision for unfunded commitments.
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 credit losses and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.
17. Commitments and Contingencies
In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of its customers. These commitments and contingent liabilities include lines of credit and commitments to extend credit and issue standby letters of credit. The Company applies the same credit policies and standards as they do in the lending process when making these commitments. The collateral obtained is based on the assessed creditworthiness of the borrower.
At September 30, 2023 and December 31, 2022, commitments to extend credit of $4.67 billion and $4.83 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 for on-balance-sheet instruments. The maximum amount of future payments the Company could be required to make under these guarantees at September 30, 2023 and December 31, 2022, was $184.1 million and $184.6 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 nine months ended September 30, 2023, the Company requested approximately $254.8 million in regular dividends from its banking subsidiary.
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 certain off-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, Tier 1 common equity Tier 1 ("CET1") and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2023, the Company meets all capital adequacy requirements to which it is subject.

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On December 31, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 27, 2020, the federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. The Company elected to adopt the interim final rule, which is reflected in the Company's risk-based capital ratios.
Basel III became effective for the Company and its bank subsidiary on January 1, 2015. Basel III amended the prompt corrective action rules to incorporate a CET1 requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization is required to have at least a 4.5% CET1 risk-based capital ratio, a 4% Tier 1 leverage 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: a 6.5% CET1 risk-based capital ratio, a 5% Tier 1 leverage capital ratio, an 8% Tier 1 risk-based capital ratio, and a 10% total risk-based capital ratio. As of September 30, 2023, the Bank met the capital standards for a well-capitalized institution. The Company’s CET1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 13.99%, 12.39%, 13.99%, and 17.64%, respectively, as of September 30, 2023.
19. Additional Cash Flow Information
The following is a summary of the Company’s additional cash flow information during the nine-month periods ended:
September 30,
2023 2022
(In thousands)
Interest paid $ 241,466  $ 65,123 
Income taxes paid 106,619  69,204 
Assets acquired by foreclosure 383  327 
20. Financial Instruments
Fair value is the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair values:
Level 1 Quoted prices in active markets for identical assets or liabilities
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 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.
Available-for-sale securities – the Company's available-for-sale securities are considered to be Level 2 securities. The Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
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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.
Held-to-maturity securities – the Company's held-to-maturity securities are considered to be Level 2 securities. The Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Collateral dependent individually evaluated loans - loans are carried at the net realizable value of the collateral or observable market price if the loan is collateral dependent. A portion of the allowance for credit losses is allocated to collateral dependent loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for credit losses to require an increase, such increase is reported as a component of the provision for credit losses. The fair value of loans with specific allocated losses was $11.4 million and $168.6 million as of September 30, 2023 and December 31, 2022, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately $1.3 million and $693,000 of accrued interest receivable when impaired loans were put on non-accrual status during the three months ended September 30, 2023 and 2022, respectively. The Company reversed approximately $1.9 million and $842,000 of accrued interest receivable when impaired loans were put on non-accrual status during the nine months ended September 30, 2023 and 2022, respectively.
Foreclosed assets held for sale – Foreclosed assets held for sale are held by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for credit losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets held for sale is estimated using Level 3 inputs based on appraisals of underlying collateral. As of September 30, 2023 and December 31, 2022, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $691,000 and $546,000, respectively.
No foreclosed assets held for sale were remeasured during the nine months ended September 30, 2023. 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.
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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 in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.
September 30, 2023
Carrying
Amount
Fair Value Level
(In thousands)
Financial assets:
Cash and cash equivalents $ 488,079  $ 488,079  1
Federal funds sold 3,925  3,925  1
Investment securities - available for sale 3,472,173  3,472,173  2
Investment securities - held-to-maturity 1,283,475  1,103,178  2
Loans receivable, net of impaired loans and allowance 13,870,028  13,663,607  3
Accrued interest receivable 110,946  110,946  1
FHLB, FRB & FNBB Bank stock; other equity investments
226,445  226,445  3
Marketable equity securities 44,394  44,394  1
Financial liabilities:
Deposits:
Demand and non-interest bearing $ 4,280,429  $ 4,280,429  1
Savings and interest-bearing transaction accounts 10,786,087  10,786,087  1
Time deposits 1,452,229  1,428,696  3
Securities sold under agreements to repurchase 160,120  160,120  1
FHLB and other borrowed funds 1,001,550  987,870  2
Accrued interest payable 13,814  13,814  1
Subordinated debentures 439,982  388,817  3
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December 31, 2022
Carrying
Amount
Fair Value Level
(In thousands)
Financial assets:
Cash and cash equivalents $ 724,790  $ 724,790  1
Investment securities - available for sale 4,041,590  4,041,590  2
 Investment securities - held-to-maturity 1,287,705  1,126,146  2
Loans receivable, net of impaired loans and allowance 13,929,892  13,723,865  3
Accrued interest receivable 103,199  103,199  1
FHLB, FRB & FNBB Bank stock; other equity investments
215,952  215,952  3
Marketable equity securities 52,034  52,034  1
Financial liabilities:
Deposits:
Demand and non-interest bearing $ 5,164,997  $ 5,164,997  1
Savings and interest-bearing transaction accounts 11,730,552  11,730,552  1
Time deposits 1,043,234  1,014,348  3
Securities sold under agreements to repurchase 131,146  131,146  1
FHLB and other borrowed funds 650,000  595,886  2
Accrued interest payable 10,622  10,622  1
Subordinated debentures 440,420  411,686  3
21. Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (ASU 2022-06) defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2022-01"). The amendments in the update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in the update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments in this Update do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

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In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings ("TDR") and Vintage Disclosures ("ASU 2022-02"). The amendments eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The amendments require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. Gross write-off information must be included in the vintage disclosures required for public business entities, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. ASU 2022-02 is effective for entities that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively. The Company adopted the guidance effective January 1, 2023 and elected to apply the amendments prospectively. The adoption did not have a significant impact on our financial position.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. ASU 2022-06 was effective upon issuance.
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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”) and subsidiaries as of September 30, 2023, and the related condensed consolidated statements of income, comprehensive income (loss), and stockholder’s equity for the three-month and nine-month periods ended September 30, 2023 and 2022, and cash flows for the nine-month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information or statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed financial statements 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, 2022, and the related consolidated statements of income, comprehensive income (loss), stockholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated February 24, 2023, 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, 2022 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 interim 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/ FORVIS, LLP

Little Rock, Arkansas
November 6, 2023
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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Form 10-K, filed with the Securities and Exchange Commission on February 24, 2023, which includes the audited financial statements for the year ended December 31, 2022. Unless the context requires otherwise, the terms “Company,” “us,” “we,” and “our” refer to Home BancShares, Inc. on a consolidated basis.
General
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). As of September 30, 2023, we had, on a consolidated basis, total assets of $21.95 billion, loans receivable, net of allowance for credit losses of $13.99 billion, total deposits of $16.52 billion, and stockholders’ equity of $3.65 billion.
We generate the majority of our revenue from interest on loans and investments, service charges, and mortgage banking income. Deposits and Federal Home Loan Bank (“FHLB”) and other borrowed funds are our primary sources of funding. Our largest expenses are interest on our funding sources, salaries and related employee benefits and occupancy and equipment. We measure our performance by calculating our return on average common equity, return on average assets and net interest margin. We also measure our performance by our efficiency ratio, which is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a non-GAAP measure and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding adjustments such as merger and acquisition expenses and/or certain gains, losses and other non-interest income and expenses.
Table 1: Key Financial Measures
As of or for the Three Months Ended September 30, As of or for the Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands, except per share data)
Total assets $ 21,950,638 $ 23,157,370 $ 21,950,638 $ 23,157,370
Loans receivable 14,271,833 13,829,311 14,271,833 13,829,311
Allowance for credit losses (285,562) (289,203) (285,562) (289,203)
Total deposits 16,518,745 18,542,324 16,518,745 18,542,324
Total stockholders’ equity 3,654,874 3,460,015 3,654,874 3,460,015
Net income 98,453 108,705 306,686 189,575
Basic earnings per share 0.49 0.53 1.51 0.99
Diluted earnings per share 0.49 0.53 1.51 0.99
Book value per share 18.06 16.94 18.06 16.94
Tangible book value per share (non-GAAP)(1)
10.90 9.82 10.90 9.82
Annualized net interest margin - FTE 4.19% 4.05% 4.28% 3.67%
Efficiency ratio 45.53 43.24 44.76 52.44
Efficiency ratio, as adjusted (non-GAAP)(2)
46.44 42.97 44.86 45.13
Return on average assets 1.78 1.81 1.84 1.13
Return on average common equity 10.65 12.25 11.32 7.71
(1)See Table 19 for the non-GAAP tabular reconciliation.
(2)See Table 23 for the non-GAAP tabular reconciliation.




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Overview
Results of Operations for the Three Months Ended September 30, 2023 and 2022
Our net income decreased $10.3 million, or 9.4%, to $98.5 million for the three-month period ended September 30, 2023, from $108.7 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $0.49 per share for the three-month period ended September 30, 2023 compared to $0.53 per share for the three-month period ended September 30, 2022. The Company recorded $1.3 million in credit loss expense for the quarter ended September 30, 2023. This consisted of a $2.8 million provision for credit losses on loans and a reversal of $1.5 million provision for unfunded commitments. During the three months ended September 30, 2023, the Company recorded $338,000 in bank owned life insurance ("BOLI") death benefits and a $4.5 million increase in the fair value of marketable securities.
Total interest income increased by $51.3 million, or 21.1%, and non-interest income increased by $212,000, or 0.5%. This was more than offset by a $62.5 million, or 209.3%, increase in total interest expense and a $416,000, or 0.4%, increase in non-interest expense. These fluctuations are primarily due to the rising interest rate environment. The increase in interest income resulted from a $53.6 million, or 27.4%, increase in loan interest income and a $6.0 million, or 16.6%, increase in investment income, partially offset by an $8.4 million, or 78.4%, decrease in interest income on deposits at other banks. The increase in non-interest income was primarily due to a $7.1 million, or 271.5%, increase in the fair value adjustment for marketable securities and a $1.2 million, or 67.5%, increase in dividends from FHLB, FRB, FNBB and other, partially offset by a $3.8 million, or 27.4%, decrease in other service charges and fees, a $3.3 million, or 34.9%, decrease in other income, and a $1.0 million, or 25.1%, decrease in mortgage lending income. The increase in interest expense was primarily due to a $55.4 million, or 237.1%, increase in interest on deposits, a $6.2 million, or 325.7%, increase in interest on FHLB and other borrowed funds and a $910,000, or 209.7%, increase in interest on securities sold under agreements to repurchase. The increase in non-interest expense was due to an increase of $508,000, or 2.0%, in other operating expenses, an increase of $356,000, or 4.1%, in data processing expense and an increase of $330,000, or 2.2%, in occupancy and equipment expense, partially offset by $778,000, or 1.2%, decrease in salaries and employee benefits. Income tax expense decreased by $2.4 million, or 7.3%, during the quarter due to the decrease in net income.
Our net interest margin increased from 4.05% for the three-month period ended September 30, 2022 to 4.19% for the three-month period ended September 30, 2023. The yield on interest earning assets was 6.09% and 4.62% for the three months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $21.09 billion to $19.26 billion. The decrease in average interest earning assets is primarily due to a $1.77 billion decrease in average interest-bearing balances due from banks and $429.7 million decrease in average investment securities, partially offset by a $369.0 million increase in average loans receivable. For the three months ended September 30, 2023 and 2022, we recognized $2.4 million and $4.6 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by four basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, which was partially offset by an increase in interest expense due to the higher yields on average interest-bearing liabilities as a result of the current rising interest rate environment.
Our efficiency ratio was 45.53% for the three months ended September 30, 2023, compared to 43.24% for the same period in 2022. For the third quarter of 2023, our efficiency ratio, as adjusted (non-GAAP), was 46.44%, compared to 42.97% reported for the third quarter of 2022. (See Table 23 for the non-GAAP tabular reconciliation).
Our annualized return on average assets was 1.78% for the three months ended September 30, 2023, compared to 1.81% for the same period in 2022. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.65% and 12.25% for the three months ended September 30, 2023, and 2022, respectively. (See Table 21 for the related non-GAAP financial measures and tabular reconciliation).

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Results of Operations for the Nine Months Ended September 30, 2023 and 2022
Our net income increased $117.1 million, or 61.8%, to $306.7 million for the nine months ended September 30, 2023, from $189.6 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $1.51 per share for the nine months ended September 30, 2023 compared to $0.99 per share for the nine months ended September 30, 2022. As a result of the acquisition of Happy, we incurred $49.6 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments and a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of these items reduced earnings by $108.2 million and earnings per share by $0.42 per share for the nine-month period ended September 30, 2022. The Company recorded $6.5 million in credit loss expense for the nine months ended September 30, 2023. This consisted of a $6.3 million provision for credit losses on loans and a $1.7 million provision for credit losses on available-for-sale investment securities, partially offset by a reversal of $1.5 million provision for unfunded commitments. During the nine months ended September 30, 2023, the Company recorded a $6.1 million decrease in the fair value of marketable securities, $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits.
Total interest income increased by $264.0 million, or 43.6%, non-interest income increased by $8.6 million, or 7.3%, and non-interest expense decreased by $11.0 million, or 3.1%. This was partially offset by a $182.8 million, or 295.5%, increase in total interest expense. These fluctuations are primarily due to the acquisition of Happy and the rising interest rate environment. The increase in interest income resulted from a $222.6 million, or 43.9%, increase in loan interest income and a $49.5 million, or 62.9%, increase in investment income, partially offset by an $8.3 million decrease in interest income on deposits at other banks. The increase in non-interest income was primarily due to an $8.1 million, or 32.2%, increase in other income, a $4.7 million, or 53.0%, increase in trust fees, a $2.2 million, or 8.0%, increase in service charges on deposit accounts, a $2.2 million, or 35.2%, increase in dividends from FHLB, FRB, FNBB and other, and a $919,000 increase in gain on sale of branches, equipment and other assets, net. These increases were partially offset by a $5.7 million, or 40.7%, decrease in mortgage lending income and a $3.8 million, or 165.5%, decrease in the fair value adjustment for marketable securities. Included within other income were $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits. The increase in interest expense was primarily due to a $169.0 million, or 433.8%, increase in interest on deposits, a $15.3 million, or 268.3%, increase in interest on FHLB and other borrowed funds and a $2.6 million, or 357.2%, increase in interest on securities sold under agreements to repurchase, partially offset by a $4.1 million, or 24.9%, decrease in interest on subordinated debentures. The decrease in non-interest expense was due to a $49.6 million, or 100.0%, decrease in merger and acquisition expense, partially offset by an $18.9 million, or 10.8%, increase in salaries and employee benefits, an $11.5 million, or 16.9%, increase in other operating expenses, a $6.8 million, or 17.7%, increase in occupancy and equipment and a $1.3 million, or 5.2%, increase in data processing expense. Income tax expense increased by $35.8 million, or 63.3%, during the nine months ended September 30, 2023 due to an increase in net income.
Our net interest margin increased from 3.67% for the nine months ended September 30, 2022 to 4.28% for the nine months ended September 30, 2023. The yield on interest earning assets was 5.95% and 4.08% for the nine months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $20.03 billion to $19.63 billion. The decrease in average interest earning assets is primarily due to a $2.59 billion decrease in average interest-bearing balances due from banks, partially offset by a $1.76 billion increase in average loans receivable and a $425.2 million increase in average investment securities. For the nine months ended September 30, 2023 and 2022, we recognized $8.3 million and $12.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by three basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, partially offset by an increase in interest expense due to an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the Happy acquisition and the current rising interest rate environment.
Our efficiency ratio was 44.76% for the nine months ended September 30, 2023, compared to 52.44% for the same period in 2022. For the nine months ended September 30, 2023, our efficiency ratio, as adjusted (non-GAAP), was 44.86%, compared to 45.13% reported for the same period in 2022. (See Table 23 for the non-GAAP tabular reconciliation).
Our annualized return on average assets was 1.84% for the nine months ended September 30, 2023, compared to 1.13% for the same period in 2022. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 11.32% and 7.71% for the nine months ended September 30, 2023, and 2022, respectively. (See Table 21 for the related non-GAAP financial measures and tabular reconciliation).
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Financial Condition as of and for the Period Ended September 30, 2023 and December 31, 2022
Our total assets as of September 30, 2023 decreased $933.0 million to $21.95 billion from $22.88 billion reported as of December 31, 2022. The decrease in total assets is primarily due to a $573.6 million decrease in investment securities resulting from paydowns and maturities during the first nine months of 2023. Cash and cash equivalents decreased $236.7 million for the nine months ended September 30, 2023. Our loan portfolio balance decreased to $14.27 billion as of September 30, 2023 from $14.41 billion at December 31, 2022. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial Commercial Finance Group ("CFG") franchise, partially offset by $126.1 million organic loan growth in our remaining footprint. Total deposits decreased $1.42 billion to $16.52 billion as of September 30, 2023 from $17.94 billion as of December 31, 2022. The decrease in deposits was primarily due to the runoff of deposits during the first nine months of 2023 as a result of the current rising interest rate environment. Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023.
Our non-performing loans were $90.9 million, or 0.64% of total loans as of September 30, 2023, compared to $60.9 million, or 0.42% of total loans, as of December 31, 2022. The allowance for credit losses as a percentage of non-performing loans decreased to 314.29% as of September 30, 2023, from 475.99% as of December 31, 2022. Non-performing loans from our Arkansas franchise were $12.6 million at September 30, 2023 compared to $8.4 million as of December 31, 2022. Non-performing loans from our Florida franchise were $17.3 million at September 30, 2023 compared to $20.5 million as of December 31, 2022. Non-performing loans from our Texas franchise were $27.2 million at September 30, 2023 compared to $22.2 million as of December 31, 2022. Non-performing loans from our Alabama franchise were $372,000 at September 30, 2023 compared to $404,000 as of December 31, 2022. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $3.0 million at September 30, 2023 compared to $2.3 million as of December 31, 2022. Non-performing loans from our Centennial CFG franchise were $30.4 million at September 30, 2023 compared to $7.1 million as of December 31, 2022.
As of September 30, 2023, our non-performing assets increased to $91.6 million, or 0.42% of total assets, from $61.5 million, or 0.27% of total assets, as of December 31, 2022. Non-performing assets from our Arkansas franchise were $12.8 million at September 30, 2023 compared to $8.5 million as of December 31, 2022. Non-performing assets from our Florida franchise were $17.5 million at September 30, 2023 compared to $20.8 million as of December 31, 2022. Non-performing assets from our Texas franchise were $27.5 million at September 30, 2023 compared to $22.4 million as of December 31, 2022. Non-performing assets from our Alabama franchise were $372,000 at September 30, 2023 compared to $404,000 as of December 31, 2022. Non-performing assets from our SPF franchise were $3.0 million at September 30, 2023 compared to $2.3 million as of December 31, 2022. Non-performing assets from our Centennial CFG franchise were $30.4 million at September 30, 2023 compared to $7.1 million as of December 31, 2022.
The $30.4 million balance of non-accrual loans for our Centennial CFG market consists of three loans, one loan totaling $27.6 million which was placed on non-accrual status effective August 30, 2023, with all accrued interest reversed effective the non-accrual date and the remaining $2.8 million balance consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. These two loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve. Any interest payments that are received will be applied to the principal balance.
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Critical Accounting Policies and Estimates
Overview. We prepare our consolidated financial statements based on the selection of certain accounting policies, generally accepted accounting principles and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. Our accounting policies are described in detail in the notes to our consolidated financial statements included as part of this document.
We consider a policy critical if (i) the accounting estimate requires assumptions about matters that are highly uncertain at the time of the accounting estimate; and (ii) different estimates that could reasonably have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements. Using these criteria, we believe that the accounting policies most critical to us are those associated with our lending practices, including revenue recognition and the accounting for the allowance for credit losses, foreclosed assets, investments, intangible assets, income taxes and stock options.
Credit Losses. We account for credit losses in accordance with ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326"). The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.
Investments – Available-for-sale. Securities available-for-sale ("AFS") are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity and other comprehensive income (loss), net of taxes. Securities that are held as available-for-sale are used as a part of our asset/liability management strategy. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. The Company has made the election to exclude accrued interest receivable on AFS securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Investments – Held-to-Maturity. Debt securities held-to-maturity ("HTM"), which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.
Loans Receivable and Allowance for Credit Losses. Except for loans acquired during our acquisitions, substantially all of our loans receivable are reported at their outstanding principal balance adjusted for any charge-offs, as it is management’s intent to hold them for the foreseeable future or until maturity or payoff, except for mortgage loans held for sale. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding.

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The allowance for credit losses on loans receivable is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, rental vacancy rate, housing price indices and rental vacancy rate index.
The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:
•1-4 family construction
•All other construction
•1-4 family revolving home equity lines of credit (“HELOC”) & junior liens
•1-4 family senior liens
•Multifamily
•Owner occupies commercial real estate
•Non-owner occupied commercial real estate
•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other
•Consumer auto
•Other consumer
•Other consumer - Shore Premier Finance ("SPF")
Loans that do not share risk characteristics are evaluated on an individual basis. For these loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:
•Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty will be executed with an individual borrower.
•The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Management qualitatively adjusts model results for risk factors that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factors ("Q-Factors") and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.

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Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans. We account for our acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, and liabilities assumed are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. Purchase credit deteriorated (“PCD”) loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit loss.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Intangible Assets. Intangible assets consist of goodwill and core deposit intangibles. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by valuation specialists. The core deposit intangibles are being amortized over 48 months to 121 months on a straight-line basis. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. We perform an annual impairment test of goodwill and core deposit intangibles as required by FASB ASC 350, Intangibles - Goodwill and Other, in the fourth quarter or more often if events and circumstances indicate there may be an impairment.
Income Taxes. We account for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than 50 percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Both we and our subsidiary file consolidated tax returns. Our subsidiary provides for income taxes on a separate return basis, and remits to us amounts determined to be currently payable.
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Stock Compensation. In accordance with FASB ASC 718, Compensation - Stock Compensation, and FASB ASC 505-50, Equity-Based Payments to Non-Employees, the fair value of each option award is estimated on the date of grant. We recognize compensation expense for the grant-date fair value of the option award over the vesting period of the award.
Acquisitions
Acquisition of Happy Bancshares, Inc.
On April 1, 2022, the Company completed the acquisition of Happy Bancshares, Inc. (“Happy”), and merged Happy State Bank into Centennial Bank. The Company issued approximately 42.4 million shares of its common stock valued at approximately $958.8 million as of April 1, 2022. In addition, the holders of certain Happy stock-based awards received approximately $3.7 million in cash in cancellation of such awards, for a total transaction value of approximately $962.5 million.
Including the purchase accounting adjustments, as of the acquisition date, Happy had approximately $6.69 billion in total assets, $3.65 billion in loans and $5.86 billion in customer deposits. Happy formerly operated its banking business from 62 locations in Texas.
For further discussion of the acquisition, see Note 2 "Business Combinations" to the Condensed Notes to Consolidated Financial Statements.
Acquisition of Marine Portfolio
On February 4, 2022, the Company completed the purchase of the performing marine loan portfolio of Utah-based LendingClub Bank (“LendingClub”). Under the terms of the purchase agreement with LendingClub, the Company acquired approximately $242.2 million of yacht loans. This portfolio of loans is housed within the Company's Shore Premier Finance division, which is responsible for servicing the acquired loan portfolio and originating new loan production.
We will continue evaluating all types of potential bank acquisitions, which may include FDIC-assisted acquisitions as opportunities arise, to determine what is in the best interest of our Company. Our goal in making these decisions is to maximize the return to our investors.
Branches
As opportunities arise, we will continue to open new (commonly referred to as de novo) branches in our current markets and in other attractive market areas.
As of September 30, 2023, we had 223 branch locations. There were 76 branches in Arkansas, 78 branches in Florida, 63 branches in Texas, five branches in Alabama and one branch in New York City.
Results of Operations
For the three and nine months ended September 30, 2023 and 2022
Our net income decreased $10.3 million, or 9.4%, to $98.5 million for the three-month period ended September 30, 2023, from $108.7 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $0.49 per share for the three-month period ended September 30, 2023 compared to $0.53 per share for the three-month period ended September 30, 2022. The Company recorded $1.3 million in credit loss expense for the quarter ended September 30, 2023. This consisted of a $2.8 million provision for credit losses on loans and a reversal of $1.5 million provision for unfunded commitments. During the three months ended September 30, 2023, the Company recorded $338,000 in BOLI death benefits and a $4.5 million increase in the fair value of marketable securities.

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Our net income increased $117.1 million, or 61.8%, to $306.7 million for the nine months ended September 30, 2023, from $189.6 million for the same period in 2022. On a diluted earnings per share basis, our earnings were $1.51 per share for the nine months ended September 30, 2023 compared to $0.99 per share for the nine months ended September 30, 2022. As a result of the acquisition of Happy, we incurred $49.6 million in merger expenses and recorded a $45.2 million provision for credit losses on acquired loans for the CECL "double count," an $11.4 million provision for credit losses on acquired unfunded commitments and a $2.0 million provision for credit losses on acquired held-to-maturity investment securities. The summation of these items reduced earnings by $108.2 million and earnings per share by $0.42 per share for the nine-month period ended September 30, 2022. The Company recorded $6.5 million in credit loss expense for the nine months ended September 30, 2023. This consisted of a $6.3 million provision for credit losses on loans and a $1.7 million provision for credit losses on available-for-sale investment securities, partially offset by a reversal of $1.5 million provision for unfunded commitments. During the nine months ended September 30, 2023, the Company recorded a $6.1 million decrease in the fair value of marketable securities, $3.5 million in recoveries on historic losses and $3.1 million in BOLI death benefits.
Net Interest Income
Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments, rates paid on deposits and other borrowings, the level of non-performing loans and the amount of non-interest-bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate (24.6735% for 2023 and 26.135% for 2022).
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve increased the target rate seven times during 2022. First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%. Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%. Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%. Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%. Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%. Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%. Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%. The Federal Reserve increased the target rate four times during the first nine months 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, the target rate was increased to 5.25% to 5.50% on July 26, 2023.
Our net interest margin increased from 4.05% for the three-month period ended September 30, 2022 to 4.19% for the three-month period ended September 30, 2023. The yield on interest earning assets was 6.09% and 4.62% for the three months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $21.09 billion to $19.26 billion. The decrease in average interest earning assets is primarily due to a $1.77 billion decrease in average interest-bearing balances due from banks and $429.7 million decrease in average investment securities, partially offset by a $369.0 million increase in average loans receivable. For the three months ended September 30, 2023 and 2022, we recognized $2.4 million and $4.6 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by four basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, which was partially offset by an increase in interest expense due to the higher yields on average interest-bearing liabilities as a result of the current rising interest rate environment.
Our net interest margin increased from 3.67% for the nine months ended September 30, 2022 to 4.28% for the nine months ended September 30, 2023. The yield on interest earning assets was 5.95% and 4.08% for the nine months ended September 30, 2023 and 2022, respectively, while average interest earning assets decreased from $20.03 billion to $19.63 billion. The decrease in average interest earning assets is primarily due to a $2.59 billion decrease in average interest-bearing balances due from banks, partially offset by a $1.76 billion increase in average loans receivable and a $425.2 million increase in average investment securities. For the nine months ended September 30, 2023 and 2022, we recognized $8.3 million and $12.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by three basis points. The overall increase in the net interest margin was due to a decrease in average interest-bearing cash balances as well as an increase in interest income from higher yields on average interest-earning assets, partially offset by an increase in interest expense due to an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the Happy acquisition and the current rising interest rate environment.

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Net interest income on a fully taxable equivalent basis decreased $12.3 million, or 5.7%, to $203.2 million for the three-month period ended September 30, 2023, from $215.5 million for the same period in 2022. This decrease in net interest income for the three-month period ended September 30, 2023 was the result of a $62.5 million increase in interest expense, mostly offset by a $50.2 million increase in interest income, on a fully taxable equivalent basis. The $62.5 million increase in interest expense is primarily the result of the increasing interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $62.0 million, partially offset by the decrease in average interest bearing liabilities that reduced interest expense by approximately $440,000. The $50.2 million increase in interest income was primarily the result of the increasing interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $62.6 million, which was partially offset by the decrease of $12.4 million in interest income due to the decrease in average interest earning asset balances.
Net interest income on a fully taxable equivalent basis increased $78.9 million, or 14.4%, to $628.6 million for the nine months ended September 30, 2023, from $549.7 million for the same period in 2022. This increase in net interest income for the nine months ended September 30, 2023 was the result of a $261.7 million increase in interest income, partially offset by a $182.8 million increase in interest expense, on a fully taxable equivalent basis. The $261.7 million increase in interest income was primarily the result of the increasing interest rate environment and the higher level of average interest earning assets due to the acquisition of Happy during the second quarter of 2022. The higher yield on earning assets resulted in an increase in interest income of approximately $205.1 million, and the increase in earning assets resulted in an increase in interest income of approximately $56.6 million. The $182.8 million increase in interest expense is primarily the result of the increasing interest rate environment as well as the higher level of average interest bearing liabilities due to the acquisition of Happy during the second quarter of 2022. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $179.4 million, and the increase in interest bearing liabilities resulted in an increase in interest expense of approximately $3.4 million.
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2023 and 2022, as well as changes in fully taxable equivalent net interest margin for the three and nine months ended September 30, 2023 compared to the same period in 2022.
Table 2: Analysis of Net Interest Income
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
Interest income $ 294,262  $ 242,955  $ 868,833  $ 604,871 
Fully taxable equivalent adjustment 1,293  2,437  4,415  6,646 
Interest income – fully taxable equivalent 295,555  245,392  873,248  611,517 
Interest expense 92,325  29,851  244,658  61,861 
Net interest income – fully taxable equivalent $ 203,230  $ 215,541  $ 628,590  $ 549,656 
Yield on earning assets – fully taxable equivalent 6.09  % 4.62  % 5.95  % 4.08  %
Cost of interest-bearing liabilities 2.69  0.83  2.38  0.61 
Net interest spread – fully taxable equivalent 3.40  3.79  3.57  3.47 
Net interest margin – fully taxable equivalent 4.19  4.05  4.28  3.67 
Table 3: Changes in Fully Taxable Equivalent Net Interest Margin
Three Months Ended September 30, Nine Months Ended September 30,
2023 vs. 2022 2023 vs. 2022
(In thousands)
(Decrease) increase in interest income due to change in earning assets $ (12,445) $ 56,615 
Increase in interest income due to change in earning asset yields 62,608  205,116 
Increase in interest expense due to change in interest-bearing liabilities (440) (3,369)
Increase in interest expense due to change in interest rates paid on interest-bearing liabilities (62,034) (179,428)
(Decrease) increase in net interest income $ (12,311) $ 78,934 

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Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and nine months ended September 30, 2023 and 2022, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Table 4: Average Balance Sheets and Net Interest Income Analysis
Three Months Ended September 30,
2023 2022
Average
Balance
Income /
Expense
Yield /
Rate
Average
Balance
Income /
Expense
Yield /
Rate
(Dollars in thousands)
ASSETS
Earnings assets
Interest-bearing balances due from banks $ 197,336  $ 2,328  4.68  % $ 1,965,136  $ 10,763  2.17  %
Federal funds sold 4,859  82  6.70  1,176  3.04 
Investment securities – taxable 3,598,513  34,520  3.81  4,008,230  28,273  2.80 
Investment securities – non-taxable 1,272,680  9,034  2.82  1,292,702  10,370  3.18 
Loans receivable 14,191,461  249,591  6.98  13,822,459  195,977  5.63 
Total interest-earning assets 19,264,849  295,555  6.09  % 21,089,703  245,392  4.62  %
Non-earning assets 2,637,585  2,689,066 
Total assets $ 21,902,434  $ 23,778,769 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Interest-bearing liabilities
Savings and interest-bearing transaction accounts $ 10,923,936  $ 68,067  2.47  % $ 12,233,755  22,388  0.73  %
Time deposits 1,319,126  10,631  3.20  1,078,112  959  0.35 
Total interest-bearing deposits 12,243,062  78,698  2.55  13,311,867  23,347  0.70 
Federal funds purchased 54  7.35  14  —  — 
Securities sold under agreement to repurchase 154,687  1,344  3.45  126,770  434  1.36 
FHLB and other borrowed funds 773,345  8,161  4.19  400,012  1,917  1.90 
Subordinated debentures 440,054  4,121  3.72  442,312  4,153  3.73 
Total interest-bearing liabilities 13,611,202  92,325  2.69  % 14,280,975  29,851  0.83  %
Non-interest-bearing liabilities
Non-interest-bearing deposits 4,434,394  5,779,082 
Other liabilities 189,499  199,416 
Total liabilities 18,235,095  20,259,473 
Stockholders’ equity 3,667,339  3,519,296 
Total liabilities and stockholders’ equity $ 21,902,434  $ 23,778,769 
Net interest spread 3.40  % 3.79  %
Net interest income and margin $ 203,230  4.19  % $ 215,541  4.05  %
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Nine Months Ended September 30,
2023 2022
Average
Balance
Income /
Expense
Yield /
Rate
Average
Balance
Income /
Expense
Yield /
Rate
(Dollars in thousands)
ASSETS
Earnings assets
Interest-bearing balances due from banks $ 313,637  $ 10,742  4.58  % $ 2,899,620  $ 19,001  0.88  %
Federal funds sold 3,577  156  5.83  1,593  13  1.09 
Investment securities – taxable 3,726,710  104,559  3.75  3,442,854  58,294  2.26 
Investment securities – non-taxable 1,280,947  27,848  2.91  1,139,628  26,709  3.13 
Loans receivable 14,307,358  729,943  6.82  12,547,275  507,500  5.41 
Total interest-earning assets 19,632,229  873,248  5.95  % 20,030,970  611,517  4.08  %
Non-earning assets 2,640,096  2,308,827 
Total assets $ 22,272,325  $ 22,339,797 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities
Savings and interest- bearing transaction accounts $ 11,246,350  $ 185,560  2.21  % $ 11,420,566  36,031  0.42  %
Time deposits 1,189,620  22,447  2.52  1,035,340  2,939  0.38 
Total interest-bearing deposits 12,435,970  208,007  2.24  12,455,906  38,970  0.42 
Federal funds purchased 59  6.80  294  0.91 
Securities sold under agreement to repurchase 144,603  3,333  3.08  129,076  729  0.76 
FHLB borrowed funds 701,748  20,947  3.99  400,004  5,688  1.90 
Subordinated debentures 440,199  12,368  3.76  540,175  16,472  4.08 
Total interest-bearing liabilities 13,722,579  244,658  2.38  % 13,525,455  61,861  0.61  %
Non-interest-bearing liabilities
Non-interest-bearing deposits 4,729,515  5,363,770 
Other liabilities 197,498  161,402 
Total liabilities 18,649,592  19,050,627 
Stockholders’ equity 3,622,733  3,289,170 
Total liabilities and stockholders’ equity $ 22,272,325  $ 22,339,797 
Net interest spread 3.57  % 3.47  %
Net interest income and margin $ 628,590  4.28  % $ 549,656  3.67  %
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Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and nine months ended September 30, 2023 compared to the same period in 2022, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Table 5: Volume/Rate Analysis
Three Months Ended September 30, Nine Months Ended September 30,
2023 over 2022 2023 over 2022
Volume Yield /
Rate
Total Volume Yield /
Rate
Total
(In thousands)
(Decrease) increase in:
Interest income:
Interest-bearing balances due from banks $ (14,577) $ 6,142  $ (8,435) $ (29,425) $ 21,166  $ (8,259)
Federal funds sold 53  20  73  32  111  143 
Investment securities – taxable (3,120) 9,367  6,247  5,158  41,107  46,265 
Investment securities – non-taxable (158) (1,178) (1,336) 3,161  (2,022) 1,139 
Loans receivable 5,357  48,257  53,614  77,689  144,754  222,443 
Total interest income (12,445) 62,608  50,163  56,615  205,116  261,731 
Interest expense:
Interest-bearing transaction and savings deposits (2,643) 48,322  45,679  (558) 150,087  149,529 
Time deposits 261  9,411  9,672  502  19,006  19,508 
Federal funds purchased —  (3)
Securities sold under agreement to repurchase 114  796  910  98  2,506  2,604 
FHLB borrowed funds 2,729  3,515  6,244  6,210  9,049  15,259 
Subordinated debentures (21) (11) (32) (2,880) (1,224) (4,104)
Total interest expense 440  62,034  62,474  3,369  179,428  182,797 
Increase (decrease) in net interest income $ (12,885) $ 574  $ (12,311) $ 53,246  $ 25,688  $ 78,934 
Provision for Credit Losses
Credit Loss Expense: During the nine months ended September 30, 2023, the Company recorded a $6.3 million provision for credit losses on loans, a $1.7 million provision for credit losses on investment securities and a reversal of $1.5 million provision for unfunded commitments.
Net charge-offs to average total loans was 0.08% for the three months ended September 30, 2023 compared to 0.15% for the three months ended September 30, 2022, and net charge-offs to average total loans was 0.10% for both the nine months ended September 30, 2023 and 2022.
Loans. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
Acquired loans. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. This is commonly referred to as "double accounting" or "double count".

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The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The identified loan segments are as follows:
•1-4 family construction
•All other construction
•1-4 family revolving HELOC & junior liens
•1-4 family senior liens
•Multifamily
•Owner occupied commercial real estate
•Non-owner occupied commercial real estate
•Commercial & industrial, agricultural, non-depository financial institutions, purchase/carry securities, other
•Consumer auto
•Other consumer
•Other consumer - SPF
The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be collateral dependent are not included in the collective evaluation. For those loans that are classified as collateral dependent, an allowance is established when the discounted cash flows, collateral value or observable market price of the collateral dependent loan is lower than the carrying value of that loan. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.
Investments – Available-for-sale: The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, and changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Investments – Held-to-Maturity. The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.
During the nine months ended September 30, 2023, one of the Company’s AFS subordinated debt investment securities was downgraded below investment grade. As result, the Company wrote down the value of the investment to its unrealized loss position, which required a $1.7 million provision. In addition, the Company reallocated the existing $842,000 allowance for credit losses on AFS investments to certain securities in the subordinated debt portfolio due to credit concerns across the banking sector. These investments are classified within the other securities category of the AFS portfolio. The $2.0 million allowance for credit losses for the held-to-maturity portfolio was considered adequate. No additional provision for credit losses was considered necessary for the HTM portfolio.
Non-Interest Income
Total non-interest income was $43.4 million and $127.1 million for the three and nine months ended September 30, 2023, compared to $43.2 million and $118.5 million for the same periods in 2022. Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.
69

Table 6 measures the various components of our non-interest income for the three and nine months ended September 30, 2023 and 2022, respectively, as well as changes for the three and nine months ended September 30, 2023 and 2022.
Table 6: Non-Interest Income
Three Months Ended September 30, 2023 Change
from 2022
Nine Months Ended September 30, 2023 Change
from 2022
2023 2022 2023 2022
(Dollars in thousands)
Service charges on deposit accounts $ 10,062  $ 10,756  $ (694) (6.5) % $ 29,135  $ 26,980  $ 2,155  8.0  %
Other service charges and fees 10,128  13,951  (3,823) (27.4) 33,766  34,225  (459) (1.3)
Trust fees 4,660  3,980  680  17.1  13,576  8,874  4,702  53.0 
Mortgage lending income 3,132  4,179  (1,047) (25.1) 8,353  14,091  (5,738) (40.7)
Insurance commissions 562  601  (39) (6.5) 1,606  1,739  (133) (7.6)
Increase in cash value of life insurance 1,170  1,089  81  7.4  3,485  2,721  764  28.1 
Dividends from FHLB, FRB, FNBB & other 2,916  1,741  1,175  67.5  8,632  6,384  2,248  35.2 
Gain on sale of SBA loans 97  58  39  67.2  236  153  83  54.2 
(Loss) gain on sale of branches, equipment and other assets, net —  (13) 13  100.0  924  919  18,380.0 
Gain on OREO, net —  —  —  —  319  487  (168) (34.5)
Fair value adjustment for marketable securities 4,507  (2,628) 7,135  271.5  (6,118) (2,304) (3,814) (165.5)
Other income 6,179  9,487  (3,308) (34.9) 33,172  25,096  8,076  32.2 
Total non-interest income $ 43,413  $ 43,201  $ 212  0.5  % $ 127,086  $ 118,451  $ 8,635  7.3  %
Non-interest income increased $212,000, or 0.5%, to $43.4 million for the three months ended September 30, 2023 from $43.2 million for the same period in 2022. The primary factors that resulted in this increase were the increase in fair value adjustment for marketable securities, partially offset by decreases in other service charges and fees and other income. Other factors were changes related to increase in trust fees and dividends from FHLB, FRB, FNBB & other, partially offset by decreases in service charges on deposit accounts and mortgage lending income.
Additional details for the three months ended September 30, 2023 on some of the more significant changes are as follows:
•The $694,000 decrease in service charges on deposit accounts is primarily related to a decrease in overdraft fees, service charge fees and account analysis fees.
•The $3.8 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees.
•The $680,000 increase in trust fees is primarily due to increases in retirement fees, partially offset by a decrease in personal trust fees.
•The $1.0 million decrease in mortgage lending income is primarily related to a decrease in volume of secondary market loans from the higher volume of loans during 2022. The decrease in volume is due to the increase in interest rates.
•The $1.2 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in dividends on FHLB and FRB stock holdings as well as an increase in volume of marketable security dividends.
•The $7.1 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.
•The $3.3 million decrease in other income is primarily due to $2.4 million reduction of income for equity method investments and a $1.6 million decrease in loan recoveries on historic losses, partially offset by $338,000 in BOLI death benefit income and an increase in miscellaneous income.

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Non-interest income increased $8.6 million, or 7.3%, to $127.1 million for the nine months ended September 30, 2023 from $118.5 million for the same period in 2022. The primary factors that resulted in this increase were the increases in service charges on deposit accounts, trust fees, dividends from FHLB, FRB, FNBB & other and other income. Other factors were changes related to increase in cash value of life insurance and gain on sale of branches, equipment and other assets, partially offset by decreases in mortgage lending income and the fair value adjustment for marketable securities.
Additional details for the nine months ended September 30, 2023 on some of the more significant changes are as follows:
•The $2.2 million increase in service charges on deposit accounts is primarily related to an increase in overdraft fees and service charge fees related to the acquisition of Happy.
•The $4.7 million increase in trust fees is primarily related to an increase in trust fees resulting from the acquisition of Happy during 2022.
•The $5.7 million decrease in mortgage lending income is primarily related to a decrease in volume of secondary market loans from the higher volume of loans during 2022. The decrease in volume is due to the increase in interest rates.
•The $764,000 increase in cash value of life insurance is primarily related to the increase in bank owned life insurance resulting from the acquisition of Happy.
•The $2.2 million increase for dividends from FHLB, FRB, FNBB & other is primarily due to an increase in dividend income from FHLB and FRB stock holdings related to the acquisition of Happy and an increase in dividends on marketable securities, partially offset by and a lower volume of dividends from equity investments.
•The $919,000 increase in gain on sale of branches, equipment and other assets, net, is primarily due to the sale of a building in Texas during 2023.
•The $3.8 million decrease in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.
•The $8.1 million increase in other income is primarily due to $9.1 million of income for equity method investments, $3.1 million in BOLI death benefit income and a $1.3 million increase in rental income related to the acquisition of Happy, partially offset by a $5.5 million decrease in recoveries on historic losses.
Non-Interest Expense
Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.
71

Table 7 below sets forth a summary of non-interest expense for the three and nine months ended September 30, 2023 and 2022.
Table 7: Non-Interest Expense
Three Months Ended September 30, 2023 Change
from 2022
Nine Months Ended September 30, 2023 Change
from 2022
2023 2022 2023 2022
(Dollars in thousands)
Salaries and employee benefits $ 64,512  $ 65,290  $ (778) (1.2) % $ 193,536  $ 174,636  $ 18,900  10.8  %
Occupancy and equipment 15,463  15,133  330  2.2  45,338  38,533  6,805  17.7 
Data processing expense 9,103  8,747  356  4.1  27,222  25,880  1,342  5.2 
Merger and acquisition expenses —  —  —  —  —  49,594  (49,594) (100.0)
Other operating expenses:
Advertising 2,295  2,024  271  13.4  6,624  5,407  1,217  22.5 
Amortization of intangibles 2,477  2,477  —  —  7,432  6,376  1,056  16.6 
Electronic banking expense 3,709  3,828  (119) (3.1) 10,714  9,718  996  10.2 
Directors' fees 417  354  63  17.8  1,415  1,133  282  24.9 
Due from bank service charges 282  316  (34) (10.8) 841  982  (141) (14.4)
FDIC and state assessment 2,794  2,146  648  30.2  9,514  6,204  3,310  53.4 
Insurance 878  959  (81) (8.4) 2,694  2,702  (8) (0.3)
Legal and accounting 1,514  1,581  (67) (4.2) 4,038  3,439  599  17.4 
Other professional fees 2,117  2,466  (349) (14.2) 7,175  6,329  846  13.4 
Operating supplies 860  681  179  26.3  2,361  2,430  (69) (2.8)
Postage 491  614  (123) (20.0) 1,578  1,476  102  6.9 
Telephone 544  593  (49) (8.3) 1,645  1,314  331  25.2 
Other expense 7,306  7,137  169  2.4  23,561  20,571  2,990  14.5 
Total non-interest expense $ 114,762  $ 114,346  $ 416  0.4  % $ 345,688  $ 356,724  $ (11,036) (3.1) %
Non-interest expense increased $416,000, or 0.4%, to $114.8 million for the three months ended September 30, 2023 from $114.3 million for the same period in 2022. The primary factor that resulted in this increase was the increase in FDIC and state assessment. Other factors were changes related to occupancy and equipment, data processing expense and advertising, partially offset by decreases in salaries and employee benefits and other professional fees.
Additional details for the three months ended September 30, 2023 on some of the more significant changes are as follows:
•The $778,000 decrease in salaries and employee benefits expense is primarily due to attrition as a result of the Happy acquisition, partially offset by increased salary expense and deferred loan costs.
•The $330,000 increase in occupancy and equipment expenses is primarily due to the normal increased cost of doing business.
•The $356,000 increase in data processing expense is primarily due to the normal increased cost of doing business.
•The $271,000 increase in advertising expense is primarily due to increased volume of advertising.
•The $648,000 increase in FDIC and state assessment expense is primarily due to a two basis-point increase in assessment rate in the first quarter of 2023 implemented on large financial institutions to increase the FDIC reserves.
•The $349,000 decrease in other professional fees is primarily due to decreased recruitment and placement fees.

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Non-interest expense decreased $11.0 million, or 3.1%, to $345.7 million for the nine months ended September 30, 2023 from $356.7 million for the same period in 2022. The primary factor that resulted in this decrease was the decrease in merger and acquisition expense. Factors that partially offset this decrease were increases in salaries and employee benefits, occupancy and equipment, data processing expense, advertising expenses, amortization of intangibles, electronic banking expenses, FDIC and state assessment expense, other professional fees and other expenses.
Additional details for the nine months ended September 30, 2023 on some of the more significant changes are as follows:
•The $18.9 million increase in salaries and employee benefits expense is primarily due to the acquisition of Happy.
•The $6.8 million increase in occupancy and equipment expenses is primarily due to increases in depreciation on buildings, machinery and equipment; utility expenses; lease expense; equipment maintenance and repairs; janitorial expenses; property taxes and other occupancy expenses related to the acquisition of Happy.
•The $1.3 million increase in data processing expense is primarily due to increases in telecommunication fees, depreciation of equipment and software, software licensing subscriptions, core processing expenses and computer expenses related to the acquisition of Happy.
•The $49.6 million decrease in merger and acquisition expense is due to the costs associated with the acquisition of Happy being incurred during the first and second quarters of 2022.
•The $1.2 million increase in advertising expense is related to the acquisition of Happy.
•The $1.1 million increase in amortization of intangibles is due to the acquisition of Happy.
•The $996,000 increase in electronic banking expense is primarily due to increased debit card processing fees and interchange network expenses resulting from the acquisition of Happy.
•The $3.3 million increase in FDIC and state assessment expense is primarily due to a two basis-point increase in assessment rate in the first quarter of 2023 implemented on large financial institutions to increase the FDIC reserves and the acquisition of Happy.
•The $846,000 increase in other professional fees is primarily related to the acquisition of Happy, partially offset by a decrease in recruitment and placement fees.
•The $3.0 million increase in other expenses is primarily related to the acquisition of Happy, partially offset by the reduction of $2.1 million in TRUPS redemption fees which were incurred in 2022.
Income Taxes
Income tax expense decreased $2.4 million, or 7.3%, to $30.8 million for the three-month period ended September 30, 2023, from $33.3 million for the same period in 2022. Income tax expense increased $35.8 million, or 63.3%, to $92.4 million for the nine-month period ended September 30, 2023, from $56.6 million for the same period in 2022. The effective income tax rate was 23.85% and 23.15% for the three and nine months ended September 30, 2023, compared to 23.43% and 22.98% for the same periods in 2022. The marginal tax rate was 24.6735% and 26.135% for 2023 and 2022, respectively.
Financial Condition as of and for the Period Ended September 30, 2023 and December 31, 2022
Our total assets as of September 30, 2023 decreased $933.0 million to $21.95 billion from $22.88 billion reported as of December 31, 2022. The decrease in total assets is primarily due to a $573.6 million decrease in investment securities resulting from paydowns and maturities during the first nine months of 2023. Cash and cash equivalents decreased $236.7 million for the nine months ended September 30, 2023. Our loan portfolio balance decreased to $14.27 billion as of September 30, 2023 from $14.41 billion at December 31, 2022. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial CFG franchise, partially offset by $126.1 million organic loan growth in our remaining footprint. Total deposits decreased $1.42 billion to $16.52 billion as of September 30, 2023 from $17.94 billion as of December 31, 2022. The decrease in deposits was primarily due to the runoff of deposits during the first nine months of 2023 as a result of the current rising interest rate environment. Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023.
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Loan Portfolio
Loans Receivable
Our loan portfolio averaged $14.19 billion and $13.82 billion during the three months ended September 30, 2023 and 2022, respectively. Our loan portfolio averaged $14.31 billion and $12.55 billion during the nine months ended September 30, 2023 and 2022, respectively. Loans receivable were $14.27 billion and $14.41 billion as of September 30, 2023 and December 31, 2022, respectively.
From December 31, 2022 to September 30, 2023, the Company experienced a decline of approximately $137.6 million in loans. The decrease in loans was primarily due to $263.7 million of organic loan decline from our Centennial CFG franchise which was partially offset by $126.1 million organic loan growth in our remaining footprint.
The most significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans. These loans are generally secured by residential or commercial real estate or business or personal property. Although these loans are primarily originated within our franchises in Arkansas, Florida, Texas, Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida, Texas, Alabama and New York. Loans receivable were approximately $3.23 billion, $3.88 billion, $3.78 billion, $129.2 million, $1.24 billion and $2.01 billion as of September 30, 2023 in Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG, respectively.
As of September 30, 2023, we had approximately $784.6 million of construction/land development loans which were collateralized by land. This consisted of approximately $82.1 million for raw land and approximately $702.5 million for land with commercial and/or residential lots.
Table 8 presents our loans receivable balances by category as of September 30, 2023 and December 31, 2022.
Table 8: Loans Receivable
September 30, 2023 December 31, 2022
(In thousands)
Real estate:
Commercial real estate loans:
Non-farm/non-residential $ 5,614,259  $ 5,632,063 
Construction/land development 2,154,030  2,135,266 
Agricultural 336,160  346,811 
Residential real estate loans:
Residential 1-4 family 1,808,248  1,748,551 
Multifamily residential 444,239  578,052 
Total real estate 10,356,936  10,440,743 
Consumer 1,153,461  1,149,896 
Commercial and industrial 2,195,678  2,349,263 
Agricultural 332,608  285,235 
Other 233,150  184,343 
Total loans receivable $ 14,271,833  $ 14,409,480 
Commercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30-year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.

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As of September 30, 2023, commercial real estate loans totaled $8.10 billion, or 56.8%, of loans receivable, as compared to $8.11 billion, or 56.3%, of loans receivable, as of December 31, 2022. Commercial real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $2.03 billion, $2.44 billion, $2.23 billion, $50.3 million, zero and $1.36 billion at September 30, 2023, respectively.
Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately 49.3% and 43.2% of our residential mortgage loans consist of owner occupied 1-4 family properties and non-owner occupied 1-4 family properties (rental), respectively, as of September 30, 2023, with the remaining 7.5% relating to condos and mobile homes. Residential real estate loans generally have a loan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to the borrower’s ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.
As of September 30, 2023, residential real estate loans totaled $2.25 billion, or 15.8%, of loans receivable, compared to $2.33 billion, or 16.1%, of loans receivable, as of December 31, 2022. Residential real estate loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $512.8 million, $973.3 million, $614.2 million, $42.8 million, zero and $109.4 million at September 30, 2023, respectively.
Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our bank, the primary portion of which consists of loans to finance USCG registered high-end sail and power boats within our SPF division. The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.
As of September 30, 2023, consumer loans totaled $1.15 billion, or 8.1%, of loans receivable, compared to $1.15 billion, or 8.0%, of loans receivable, as of December 31, 2022. Consumer loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $41.0 million, $8.0 million, $18.5 million, $519,000, $1.09 billion and zero at September 30, 2023, respectively.
Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.
As of September 30, 2023, commercial and industrial loans totaled $2.20 billion, or 15.4%, of loans receivable, compared to $2.35 billion, or 16.3%, of loans receivable, as of December 31, 2022. Commercial and industrial loans originated in our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets were $463.2 million, $411.3 million, $659.9 million, $31.0 million, $155.1 million and $475.3 million at September 30, 2023, respectively.
Non-Performing Assets
We classify our problem loans into three categories: past due loans, special mention loans and classified loans (accruing and non-accruing).
When management determines that a loan is no longer performing, and that collection of interest appears doubtful, the loan is placed on non-accrual status. Loans that are 90 days past due are placed on non-accrual status unless they are adequately secured and there is reasonable assurance of full collection of both principal and interest. Our management closely monitors all loans that are contractually 90 days past due, treated as “special mention” or otherwise classified or on non-accrual status.
Purchased loans that have experienced more than insignificant credit deterioration since origination are purchase credit deteriorated (“PCD”) loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. The Company held approximately $132.6 million and $142.5 million in PCD loans, as of September 30, 2023 and December 31, 2022, respectively.
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Table 9 sets forth information with respect to our non-performing assets as of September 30, 2023 and December 31, 2022. As of these dates, all non-performing restructured loans are included in non-accrual loans.
Table 9: Non-performing Assets
As of September 30, 2023 As of December 31, 2022
(Dollars in thousands)
Non-accrual loans $ 84,184  $ 51,011 
Loans past due 90 days or more (principal or interest payments) 6,674  9,845 
Total non-performing loans 90,858  60,856 
Other non-performing assets
Foreclosed assets held for sale, net 691  546 
Other non-performing assets 64  74 
Total other non-performing assets 755  620 
Total non-performing assets $ 91,613  $ 61,476 
Allowance for credit losses to non-accrual loans 339.21  % 567.86  %
Allowance for credit losses to non-performing loans 314.29  475.99 
Non-accrual loans to total loans 0.59  0.35 
Non-performing loans to total loans 0.64  0.42 
Non-performing assets to total assets 0.42  0.27 
Our non-performing loans are comprised of non-accrual loans and accruing loans that are contractually past due 90 days. Our bank subsidiary recognizes income principally on the accrual basis of accounting. When loans are classified as non-accrual, the accrued interest is charged off and no further interest is accrued, unless the credit characteristics of the loan improve. If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the allowance for credit losses.
Total non-performing loans were $90.9 million and $60.9 million as of September 30, 2023 and December 31, 2022, respectively. Non-performing loans at September 30, 2023 were $12.6 million, $17.3 million, $27.2 million, $372,000, $3.0 million and $30.4 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets, respectively.
The $30.4 million balance of non-accrual loans for our Centennial CFG market consists of three loans, one loan totaling $27.6 million which was placed on non-accrual status effective August 30, 2023, with all accrued interest reversed effective the non-accrual date and the remaining $2.8 million balance consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. These two loans are not current on either principal or interest, and we have reversed any interest that had accrued subsequent to the non-accrual date designated by the Federal Reserve. Any interest payments that are received will be applied to the principal balance.
Debt restructuring generally occurs when a borrower is experiencing, or is expected to experience, financial difficulties in the near term. As a result, we will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan. In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable and depressed real estate market. When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about three to twelve months. For our restructured loans that accrue interest at the time the loan is restructured, it would be a rare exception to have charged-off any portion of the loan. As of September 30, 2023, we had $22.8 million of restructured loans that are in compliance with the modified terms and are not reported as past due or non-accrual. Our Florida market contains $17.5 million, our Arkansas market contains $1.7 million, our Texas market contains $1.5 million and our New York region contains $2.1 million of these restructured loans.

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A loan modification that might not otherwise be considered may be granted. These loans can involve loans remaining on non-accrual, moving to non-accrual, or continuing on an accrual status, depending on the individual facts and circumstances of the borrower. Generally, a non-accrual loan that is restructured remains on non-accrual for a period of nine months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can pay under the new terms and may result in the loan being returned to an accrual status after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan will remain in a non-accrual status.
The majority of the Bank’s restructured loans relate to real estate lending and generally involve reducing the interest rate, changing from a principal and interest payment to interest-only, lengthening the amortization period, or a combination of some or all of the three. In addition, it is common for the Bank to seek additional collateral or guarantor support when modifying a loan. At September 30, 2023, the amount of restructured loans was $24.9 million. As of September 30, 2023, 91.6% of all restructured loans were performing to the terms of the restructure.
Total foreclosed assets held for sale were $691,000 as of September 30, 2023, compared to $546,000 as of December 31, 2022 for a increase of $145,000. The foreclosed assets held for sale as of September 30, 2023 are comprised of $167,000 assets located in Arkansas, $260,000 located in Florida, $264,000 located in Texas and zero in Alabama, SPF and Centennial CFG.
Table 10 shows the summary of foreclosed assets held for sale as of September 30, 2023 and December 31, 2022.
Table 10: Foreclosed Assets Held For Sale
As of September 30, 2023 As of December 31, 2022
(In thousands)
Commercial real estate loans
Non-farm/non-residential $ 118  $ 118 
Construction/land development 47  47 
Residential real estate loans
Residential 1-4 family 526  260 
Multifamily residential —  121 
Total foreclosed assets held for sale $ 691  $ 546 
The Company had $123.1 million and $221.1 million in impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) for the periods ended September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets accounted for approximately $25.7 million, $34.9 million, $28.7 million, $372,000, $3.0 million and $30.4 million of the impaired loans, respectively.
The amortized cost balance for loans with a specific allocation decreased from $168.6 million to $11.4 million, and the specific allocation for impaired loans decreased by approximately $24.4 million for the period ended September 30, 2023 compared to the period ended December 31, 2022.








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Past Due and Non-Accrual Loans
Table 11 shows the summary of non-accrual loans as of September 30, 2023 and December 31, 2022:
Table 11: Total Non-Accrual Loans
As of September 30, 2023 As of December 31, 2022
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 47,864  $ 12,219 
Construction/land development 3,659  1,977 
Agricultural 426  278 
Residential real estate loans
Residential 1-4 family 20,281  18,083 
Total real estate 72,230  32,557 
Consumer 3,572  2,842 
Commercial and industrial 8,042  14,920 
Agricultural & other 340  692 
Total non-accrual loans $ 84,184  $ 51,011 
If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.9 million and $672,000, respectively, would have been recorded for the three-month periods ended September 30, 2023 and 2022. If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $5.5 million and $3.2 million, respectively, would have been recorded for the nine-month periods ended September 30, 2023 and 2022. The interest income recognized on non-accrual loans for the three and nine months ended September 30, 2023 and 2022 was considered immaterial.
Table 12 shows the summary of accruing past due loans 90 days or more as of September 30, 2023 and December 31, 2022:
Table 12: Loans Accruing Past Due 90 Days or More
As of September 30, 2023 As of December 31, 2022
(In thousands)
Real estate:
Commercial real estate loans
Non-farm/non-residential $ 2,999  $ 1,844 
Construction/land development 1,025  31 
Residential real estate loans
Residential 1-4 family 326  1,374 
Total real estate 4,350  3,249 
Consumer 191  35 
Commercial and industrial 2,033  6,300 
Other 100  261 
Total loans accruing past due 90 days or more $ 6,674  $ 9,845 
Our ratio of total loans accruing past due 90 days or more and non-accrual loans to total loans was 0.64% and 0.42% at September 30, 2023 and December 31, 2022, respectively.

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Allowance for Credit Losses
Overview. The allowance for credit losses on loans receivable is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, national retail sales index, housing price indices and rental vacancy rate index.
The combination of adjustments for credit expectations (default and loss) and time expectations prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.
The allowance for credit losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The allowance for credit losses for each segment is measured through the use of the discounted cash flow method. Loans that do not share risk characteristics are evaluated on an individual basis. For these loans, where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the allowance for credit losses is measured based on the difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance for credit losses may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell. For individually analyzed loans which are not considered to be collateral dependent, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies:
•Management has a reasonable expectation at the reporting date that restructured loans made to borrowers experiencing financial difficulty will be executed with an individual borrower.
•The extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
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Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans. We account for our acquisitions under FASB ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other loans. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Specific Allocations. As a general rule, if a specific allocation is warranted, it is the result of a credit loss analysis of a previously classified credit or relationship. Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become collateral dependent, we will use appraisals or other collateral analysis to determine if a specific allocation is needed. The amount or likelihood of loss on this credit may not yet be evident, so a charge-off would not be prudent. However, if the analysis indicates that a specific allocation is needed, then a specific allocation will be determined for this loan. This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for credit losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.

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For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time. However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal valuation report for the credit loss analysis. The recognition of any provision or related charge-off on a collateral dependent loan is either through annual credit analysis or, many times, when the relationship becomes delinquent. If the borrower is not current, we will update our credit and cash flow analysis to determine the borrower's repayment ability. If we determine this ability does not exist and it appears that the collection of the entire principal and interest is not likely, then the loan could be placed on non-accrual status. In any case, loans are classified as non-accrual no later than 105 days past due. If the loan requires a quarterly credit loss analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for credit losses. Any exposure identified through the credit loss analysis is shown as a specific reserve. If it is determined that a new appraisal or internal validation report is required, it is ordered and will be taken into consideration during completion of the next credit loss analysis.
In estimating the net realizable value of the collateral, management may deem it appropriate to discount the appraisal based on the applicable circumstances. In such case, the amount charged off may result in loan principal outstanding being below fair value as presented in the appraisal.
Between the receipt of the original appraisal and the updated appraisal, we monitor the loan's repayment history. If the loan is $3.0 million or greater or the total loan relationship is $5.0 million or greater, our policy requires an annual credit review. For these loans, our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we calculate the global repayment ability of the borrower/guarantors at least annually on these loans.
As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan as non-performing. It will remain non-performing until it performs in a manner that it is reasonable to expect that we will collect the full principal and accrued interest.
When the amount or likelihood of a loss on a loan has been determined, a charge-off should be taken in the period it is determined. If a partial charge-off occurs, the quarterly credit loss analysis will determine if the loan is still collateral dependent, and thus continues to require a specific allocation.
The Company had $123.1 million and $221.1 million in impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) for the periods ended September 30, 2023 and December 31, 2022, respectively.
Loans Collectively Evaluated for Credit Loss. Loans receivable collectively evaluated for credit loss increased by approximately $18.0 million from $14.19 billion at December 31, 2022 to $14.21 billion at September 30, 2023. The percentage of the allowance for credit losses allocated to loans receivable collectively evaluated for credit loss to the total loans collectively evaluated for credit loss was 1.96% and 1.82% at September 30, 2023 and December 31, 2022, respectively.
Charge-offs and Recoveries. Total charge-offs decreased to $3.4 million for the three months ended September 30, 2023, compared to $6.3 million for the same period in 2022. Total charge-offs increased to $12.5 million for the nine months ended September 30, 2023, compared to $11.9 million for the same period in 2022. Total recoveries were $528,000 and $1.2 million for the three months ended September 30, 2023 and 2022, respectively. Total recoveries were $2.1 million and $2.4 million for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023, net charge-offs were $714,000 for Arkansas, $1.5 million for Florida, $674,000 for Texas, $14,000 for Alabama and $53,000 for SPF. These equal a net charge-off position of $2.9 million. For the nine months ended September 30, 2023, net charge-offs were $1.1 million for Arkansas, $1.2 million for Florida, $3.2 million for Texas, $25,000 for Alabama, $244,000 for SPF and $4.6 million for Centennial CFG. These equal a net charge-off position of $10.4 million.
We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less estimated costs to sell (for collateral dependent loans), for any period presented. Loans partially charged-off are placed on non-accrual status until it is proven that the borrower's repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of 6-12 months of timely payment performance.
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Table 13 shows the allowance for credit losses, charge-offs and recoveries as of and for the three and nine months ended September 30, 2023 and 2022.
Table 13: Analysis of Allowance for Credit Losses
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
Balance, beginning of period $ 285,683  $ 294,267  $ 289,669  $ 236,714 
Allowance for credit losses on PCD loans - Happy acquisition —  —  —  16,816 
Loans charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential 1,945  —  2,016  — 
Construction/land development 150  11  175  11 
Agricultural —  — 
Residential real estate loans:
Residential 1-4 family 103  48  192  337 
Total real estate 2,203  59  2,390  348 
Consumer 102  47  464  2,284 
Commercial and industrial 183  4,536  7,015  5,952 
Other 961  1,671  2,594  3,304 
Total loans charged off 3,449  6,313  12,463  11,888 
Recoveries of loans previously charged off
Real estate:
Commercial real estate loans:
Non-farm/non-residential 25  778  517  856 
Construction/land development 33  103  325 
Residential real estate loans:
Residential 1-4 family 22  45  153  94 
Multifamily residential —  —  — 
Total real estate 80  831  781  1,275 
Consumer 22  42  79  90 
Commercial and industrial 119  189  375  519 
Other 307  187  821  507 
Total recoveries 528  1,249  2,056  2,391 
Net loans charged off 2,921  5,064  10,407  9,497 
Provision for credit loss 2,800  —  6,300  — 
Provision for credit loss - acquired loans —  —  —  45,170 
Balance, September 30 $ 285,562  $ 289,203  $ 285,562  $ 289,203 
Net charge-offs to average loans receivable 0.08  % 0.15  % 0.10  % 0.10  %
Allowance for credit losses to total loans 2.00  2.09  2.00  2.09 
Allowance for credit losses to net charge-offs 2,464.13  1,439.47  2,052.32  2,277.65 


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Table 14 presents the allocation of allowance for credit losses as of September 30, 2023 and December 31, 2022.
Table 14: Allocation of Allowance for Credit Losses
As of September 30, 2023 As of December 31, 2022
Allowance
Amount
% of
loans(1)
Allowance
Amount
% of
loans(1)
(Dollars in thousands)
Real estate:
Commercial real estate loans:
Non-farm/non- residential $ 77,019  39.3  % $ 92,197  39.1  %
Construction/land development 32,642  15.1  32,243  14.8 
Agricultural residential real estate loans 1,534  2.4  1,651  2.4 
Residential real estate loans:
Residential 1-4 family 50,135  12.7  45,312  12.1 
Multifamily residential 4,749  3.1  5,651  4.0 
Total real estate 166,079  72.6  177,054  72.4 
Consumer 24,566  8.1  20,907  8.0 
Commercial and industrial 91,064  15.4  88,131  16.3 
Agricultural 1,405  2.3  1,223  2.0 
Other 2,448  1.6  2,354  1.3 
Total $ 285,562  100.0  % $ 289,669  100.0  %
(1)Percentage of loans in each category to total loans receivable.
Investment Securities
Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as held-to-maturity, available-for-sale, or trading based on the intent and objective of the investment and the ability to hold to maturity. Fair values of securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities. The estimated effective duration of our securities portfolio was 5.4 years as of September 30, 2023.
Securities held-to-maturity, which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. We had $1.28 billion and $1.29 billion of held-to-maturity securities at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, $1.11 billion, or 86.4%, was invested in obligations of state and political subdivisions, compared to $1.11 billion, or 86.2%, as of December 31, 2022. As of September 30, 2023, $43.2 million, or 3.4%, was invested in obligations of U.S. Government-sponsored enterprises, compared to $43.0 million, or 3.3%, as of December 31, 2022. We had $131.4 million, or 10.2%, invested in U.S. government-sponsored mortgage-backed securities as of September 30, 2023, compared to $135.0 million, or 10.5% as of December 31, 2022.
Securities available-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity as other comprehensive (loss) income. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale. Available-for-sale securities were $3.47 billion and $4.04 billion as September 30, 2023 and December 31, 2022, respectively.

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As of September 30, 2023, $1.51 billion, or 43.4%, of our available-for-sale securities were invested in U.S. government-sponsored mortgage-backed securities, compared to $1.69 billion, or 41.7%, of our available-for-sale securities as of December 31, 2022. To reduce our income tax burden, $866.4 million, or 25.0%, of our available-for-sale securities portfolio as of September 30, 2023, were primarily invested in tax-exempt obligations of state and political subdivisions, compared to $906.3 million, or 22.4%, of our available-for-sale securities as of December 31, 2022. We had $357.7 million, or 10.3%, invested in obligations of U.S. Government-sponsored enterprises as of September 30, 2023, compared to $661.8 million, or 16.4%, of our available-for-sale securities as of December 31, 2022. We had $389.6 million, or 11.2%, invested in non-government-sponsored asset backed securities as of September 30, 2023, compared to $414.4 million, or 10.3%, of our available-for-sale securities as of December 31, 2022. As of September 30, 2023, $171.7 million, or 4.9%, of our available-for-sale securities were invested in private mortgage-backed securities, compared to $179.1 million, or 4.4%, of our available-for-sale securities as of December 31, 2022. Also, we had approximately $179.3 million, or 5.2%, invested in other securities as of September 30, 2023, compared to $194.5 million, or 4.8% of our available-for-sale securities as of December 31, 2022.
The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. The Company first assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
During the nine months ended September 30, 2023, one of the Company’s AFS subordinated debt investment securities was downgraded below investment grade. As result, the Company wrote down the value of the investment to its unrealized loss position, which required a $1.7 million provision. In addition, the Company reallocated the existing $842,000 allowance for credit losses on AFS investments to certain securities in the subordinated debt portfolio due to credit concerns across the banking sector. These investments are classified within the other securities category of the AFS portfolio. The $2.0 million allowance for credit losses for the held-to-maturity portfolio was also considered adequate. No additional provision for credit losses was considered necessary for the HTM portfolio.
See Note 3 to the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.
Deposits
Our deposits averaged $16.68 billion and $17.17 billion for the three and nine months ended September 30, 2023. Our deposits averaged $19.09 billion and $17.82 billion for the three and nine months ended September 30, 2022. Total deposits were $16.52 billion as of September 30, 2023, and $17.94 billion as of December 31, 2022. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions.
Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. We also participate in the One-Way Buy Insured Cash Sweep (“ICS”) service and similar services, which provide for one-way buy transactions among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements. Management believes these sources represent a reliable and cost-efficient alternative funding source for the Company. However, to the extent that our condition or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding.
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Table 15 reflects the classification of the brokered deposits as of September 30, 2023 and December 31, 2022.
Table 15: Brokered Deposits
September 30, 2023 December 31, 2022
(In thousands)
Insured Cash Sweep and Other Transaction Accounts $ 401,709  $ 476,630 
Total Brokered Deposits $ 401,709  $ 476,630 
The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional funds can be attracted, and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs.
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve increased the target rate seven times during 2022. First, on March 16, 2022, the target rate was increased to 0.25% to 0.50%. Second, on May 4, 2022, the target rate was increased to 0.75% to 1.00%. Third, on June 15, 2022, the target rate was increased to 1.50% to 1.75%. Fourth, on July 27, 2022, the target rate was increased to 2.25% to 2.50%. Fifth, on September 21, 2022, the target rate was increased to 3.00% to 3.25%. Sixth, on November 2, 2022, the target rate was increased to 3.75% to 4.00%. Seventh, on December 14, 2022, the target rate was increased to 4.25% to 4.50%. The Federal Reserve increased the target rate four times during the first nine months 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, the target rate was increased to 5.25% to 5.50% on July 26, 2023.
Table 16 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of 10 percent of average total deposits, for the three and nine months ended September 30, 2023 and 2022.
Table 16: Average Deposit Balances and Rates
Three Months Ended September 30,
2023 2022
Average
Amount
Average
Rate Paid
Average
Amount
Average
Rate Paid
(Dollars in thousands)
Non-interest-bearing transaction accounts $ 4,434,394  —  % $ 5,779,082  —  %
Interest-bearing transaction accounts 9,700,273  2.68  10,759,379  0.81 
Savings deposits 1,223,663  0.79  1,474,376  0.09 
Time deposits:
$100,000 or more 854,338  3.46  654,550  0.37 
Other time deposits 464,788  2.71  423,562  0.32 
Total $ 16,677,456  1.87  % $ 19,090,949  0.49  %
Nine Months Ended September 30,
2023 2022
Average
Amount
Average
Rate Paid
Average
Amount
Average
Rate Paid
(Dollars in thousands)
Non-interest-bearing transaction accounts $ 4,729,515  —  % $ 5,363,770  —  %
Interest-bearing transaction accounts 9,961,524  2.39  10,058,021  0.47 
Savings deposits 1,284,826  0.77  1,362,545  0.07 
Time deposits:
$100,000 or more 752,952  2.78  635,555  0.43 
Other time deposits 436,668  2.08  399,785  0.30 
Total $ 17,165,485  1.62  % $ 17,819,676  0.29  %
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Securities Sold Under Agreements to Repurchase
We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase increased $29.0 million, or 22.1%, from $131.1 million as of December 31, 2022 to $160.1 million as of September 30, 2023.
FHLB and Other Borrowed Funds
The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $750.0 million at September 30, 2023 and $650.0 million at December 31, 2022. At September 30, 2023, $150.0 million and $600.0 million of the outstanding balances were classified as short-term and long-term advances. At December 31, 2022, $50.0 million and $600.0 million of the outstanding FHLB balances were classified as short-term and long-term advances, respectively. The FHLB advances mature from 2023 to 2037 with fixed interest rates ranging from 3.37% to 5.38%. Expected maturities could differ from contractual maturities because FHLB may have the right to call, or the Company may have the right to prepay certain obligations.
Additionally, the Company had $1.53 billion and $1.14 billion at September 30, 2023 and December 31, 2022, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at September 30, 2023 and December 31, 2022, respectively.
Other borrowed funds were $251.6 million as of September 30, 2023 and were classified as short-term advances. The Company had no other borrowed funds as of December 31, 2022.
The Company had access to approximately $1.14 billion in liquidity with the Federal Reserve Bank as of September 30, 2023. This consisted of $80.9 million available from the Discount Window and $1.06 billion available through the Bank Term Funding Program ("BTFP"). As of September 30, 2023, the primary and secondary credit rates available through the Discount Window were 5.50% and 6.00%, respectively, and the BTFP rate was 5.54%. As of September 30, 2023, the Company had drawn $250.0 million from the BTFP in the ordinary course of business. This advance is included within other borrowed funds.
Subordinated Debentures
Subordinated debentures were $440.0 million and $440.4 million as of September 30, 2023 and December 31, 2022, respectively.
On April 1, 2022, the Company acquired $140.0 million in aggregate principal amount of 5.500% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”) from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. From and including the date of issuance to, but excluding July 31, 2025 or the date of earlier redemption, the 2030 Notes will bear interest at an initial rate of 5.50% per annum, payable in arrears on January 31 and July 31 of each year. From and including July 31, 2025 to, but excluding, the maturity date or earlier redemption, the 2030 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be 3-month Secured Overnight Funding Rate (SOFR)), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2030 Notes, plus 5.345%, payable quarterly in arrears on January 31, April 30, July 31, and October 31 of each year, commencing on October 31, 2025.

The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.

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On January 18, 2022, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs, of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excluding January 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.
The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
Stockholders’ Equity
Stockholders’ equity increased $128.5 million to $3.65 billion as of September 30, 2023, compared to $3.53 billion as of December 31, 2022. The $128.5 million increase in stockholders’ equity is primarily associated with the $306.7 million in net income for the nine months ended September 30, 2023, partially offset by the $109.6 million of shareholder dividends paid, the $45.1 million in other comprehensive loss and stock repurchases of $31.0 million in 2023. As of September 30, 2023 and December 31, 2022, our equity to asset ratio was 16.65% and 15.41%, respectively. Book value per share was $18.06 as of September 30, 2023, compared to $17.33 as of December 31, 2022, a 5.6% annualized increase.
Common Stock Cash Dividends. We declared cash dividends on our common stock of $0.18 and $0.165 per share for the three months ended September 30, 2023 and 2022, respectively, and $0.54 and $0.495 per share for the nine months ended September 30, 2023 and 2022, respectively. The common stock dividend payout ratio for the three months ended September 30, 2023 and 2022 was 37.0% and 31.1%, respectively. The common stock dividend payout ratio for the nine months ended September 30, 2023 and 2022 was 35.7% and 50.0%, respectively. On October 20, 2023, the Board of Directors declared a regular $0.18 per share quarterly cash dividend payable December 6, 2023, to shareholders of record November 15, 2023.
Stock Repurchase Program. During the first nine months of 2023, the Company repurchased a total of 1,410,849 shares with a weighted-average stock price of $21.95 per share. Shares repurchased under the program as of September 30, 2023 since its inception total 22,170,715 shares. The remaining balance available for repurchase is 17,581,285 shares at September 30, 2023.
Liquidity and Capital Adequacy Requirements
Risk-Based Capital. We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk weightings and other factors.
In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. Basel III limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% of common equity Tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements.
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Basel III amended the prompt corrective action rules to incorporate a common equity Tier 1 ("CET1") capital requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization is required to have at least a 4.5% CET1 risk-based capital ratio, a 4% Tier 1 leverage ratio, a 6% Tier 1 risk-based capital ratio and an 8% total risk-based capital ratio.
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that, as of September 30, 2023 and December 31, 2022, we met all regulatory capital adequacy requirements to which we were subject.
On January 18, 2022, the Company completed an underwritten public offering of the 2032 Notes in aggregate principal amount of $300.0 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
On April 1, 2022, the Company acquired $140.0 million in aggregate principal amount of 5.500% Fixed-to-Floating Rate Subordinated Notes due 2030 from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on July 31, 2030. The Company may, beginning with the interest payment date of July 31, 2025, and on any interest payment date thereafter, redeem the 2030 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2030 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2030 Notes at any time, including prior to July 31, 2025, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2030 Notes plus any accrued and unpaid interest to, but excluding, the redemption
On December 21, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of the new CECL accounting rule on retained earnings over a period of three years. As part of its response to the impact of COVID-19, on March 27, 2020, the federal banking regulatory agencies issued an interim final rule that provided the option to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period. The interim final rule allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. The Company has elected to adopt the interim final rule, which is reflected in the risk-based capital ratios presented below.
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Table 17 presents our risk-based capital ratios on a consolidated basis as of September 30, 2023 and December 31, 2022.
Table 17: Risk-Based Capital
As of September 30, 2023 As of December 31, 2022
(Dollars in thousands)
Tier 1 capital
Stockholders’ equity $ 3,654,874  $ 3,526,362 
ASC 326 transitional period adjustment 16,246  24,369 
Goodwill and core deposit intangibles, net (1,448,838) (1,456,270)
Unrealized loss on available-for-sale securities 350,530  305,458 
Total common equity Tier 1 capital 2,572,812  2,399,919 
Total Tier 1 capital 2,572,812  2,399,919 
Tier 2 capital
Allowance for credit losses 285,562  289,669 
ASC 326 transitional period adjustment (16,246) (24,369)
Disallowed allowance for credit losses (limited to 1.25% of risk weighted assets) (38,516) (32,184)
Qualifying allowance for credit losses 230,800  233,116 
Qualifying subordinated notes 439,982  440,420 
Total Tier 2 capital 670,782  673,536 
Total risk-based capital $ 3,243,594  $ 3,073,455 
Average total assets for leverage ratio $ 20,773,349  $ 22,091,588 
Risk weighted assets $ 18,388,636  $ 18,583,293 
Ratios at end of period
Common equity Tier 1 capital 13.99  % 12.91  %
Leverage ratio 12.39  10.86 
Tier 1 risk-based capital 13.99  12.91 
Total risk-based capital 17.64  16.54 
Minimum guidelines – Basel III
Common equity Tier 1 capital 7.00  % 7.00  %
Leverage ratio 4.00  4.00 
Tier 1 risk-based capital 8.50  8.50 
Total risk-based capital 10.50  10.50 
Well-capitalized guidelines
Common equity Tier 1 capital 6.50  % 6.50  %
Leverage ratio 5.00  5.00 
Tier 1 risk-based capital 8.00  8.00 
Total risk-based capital 10.00  10.00 
As of the most recent notification from regulatory agencies, our bank subsidiary was “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” we, as well as our banking subsidiary, must maintain minimum CET1 capital, leverage, Tier 1 risk-based capital, and total risk-based capital ratios as set forth in the table. There are no conditions or events since that notification that we believe have changed the bank subsidiary’s category.
Non-GAAP Financial Measurements
Our accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, this report contains financial information determined by methods other than in accordance with GAAP, including earnings, as adjusted; diluted earnings per common share, as adjusted; tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity, excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted.
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We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to these non-GAAP measures and ratios in assessing our operating results and related trends, and when planning and forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.
The tables below present non-GAAP reconciliations of earnings, as adjusted, and diluted earnings per share, as adjusted, as well as the non-GAAP computations of tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted. The items used in these calculations are included in financial results presented in accordance with GAAP.
Earnings, as adjusted, and diluted earnings per common share, as adjusted, are meaningful non-GAAP financial measures for management, as they exclude certain items such as merger expenses and/or certain gains and losses. Management believes the exclusion of these items in expressing earnings provides a meaningful foundation for period-to-period and company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our financial measures and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of our business, because management does not consider these items to be relevant to ongoing financial performance.
In Table 18 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.
Table 18: Earnings, As Adjusted
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
GAAP net income available to common shareholders (A) $ 98,453  $ 108,705  $ 306,686  $ 189,575 
Pre-tax adjustments:
Merger and acquisition expenses —  —  —  49,594 
Initial provision for credit losses - acquisition —  —  —  58,585 
Fair value adjustment for marketable securities (4,507) 2,628  6,118  2,304 
Special dividend from equity investment —  —  —  (1,434)
TRUPS redemption fees —  —  —  2,081 
Recoveries on historic losses —  (1,065) (3,461) (6,706)
BOLI death benefits (338) —  (3,117) — 
Total pre-tax adjustments (4,845) 1,563  (460) 104,424 
Tax-effect of adjustments(1)
(1,112) 393  (30) 25,569 
Total adjustments after-tax (B) (3,733) 1,170  (430) 78,855 
Earnings, as adjusted (C) $ 94,720  $ 109,875  $ 306,256  $ 268,430 
Average diluted shares outstanding (D) 202,650  205,135  203,068  191,941 
GAAP diluted earnings per share: A/D $ 0.49  $ 0.53  $ 1.51  $ 0.99 
Adjustments after-tax: B/D (0.02) 0.01  —  0.41 
Diluted earnings per common share excluding adjustments: C/D $ 0.47  $ 0.54  $ 1.51  $ 1.40 
(1) Blended statutory rate of 24.674% for 2023 and 26.135% for 2022.

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We had $1.45 billion, $1.46 billion, and $1.46 billion in total goodwill and core deposit intangibles as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets excluding intangible amortization, return on average tangible equity, return on average tangible equity excluding intangible amortization, and tangible equity to tangible assets are useful in evaluating our company. Management also believes return on average assets, as adjusted, return on average equity, as adjusted, and return on average tangible equity, as adjusted, are meaningful non-GAAP financial measures, as they exclude items such as certain non-interest income and expenses that management believes are not indicative of our primary business operating results. These calculations, which are similar to the GAAP calculations of book value per share, return on average assets, return on average equity, and equity to assets, are presented in Tables 19 through 22, respectively.
Table 19: Tangible Book Value Per Share
As of September 30, 2023 As of December 31, 2022
(In thousands, except per share data)
Book value per share: A/B $ 18.06  $ 17.33 
Tangible book value per share: (A-C-D)/B 10.90  10.17 
(A) Total equity $ 3,654,874  $ 3,526,362 
(B) Shares outstanding 202,323  203,434 
(C) Goodwill 1,398,253  1,398,253 
(D) Core deposit intangibles 51,023  58,455 
Table 20: Return on Average Assets
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
Return on average assets: A/D 1.78  % 1.81  % 1.84  % 1.13  %
Return on average assets, as adjusted: (A+C)/D 1.72  1.83  1.84  1.61 
Return on average assets excluding intangible amortization: B/(D-E) 1.95  1.97  2.01  1.23 
(A) Net income $ 98,453  $ 108,705  $ 306,686  $ 189,575 
  Intangible amortization after-tax 1,866  1,854  5,598  4,757 
(B) Earnings excluding intangible amortization $ 100,319  $ 110,559  $ 312,284  $ 194,332 
(C) Adjustments after-tax $ (3,733) $ 1,170  $ (430) $ 78,855 
(D) Average assets 21,902,434  23,778,769  22,272,325  22,339,797 
(E) Average goodwill, core deposits and other intangible assets 1,450,478  1,459,034  1,452,933  1,294,971 
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Table 21: Return on Average Equity
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
Return on average equity: A/D 10.65  % 12.25  % 11.32  % 7.71  %
Return on average common equity, as adjusted: (A+C)/D 10.25  12.39  11.30  10.91 
Return on average tangible common equity: A/(D-E) 17.62  20.93  18.90  12.71 
Return on average tangible equity excluding intangible amortization: B/(D-E) 17.95  21.29  19.24  13.03 
Return on average tangible common equity, as adjusted:
   (A+C)/(D-E)
16.95  21.16  18.87  18.00 
(A) Net income $ 98,453  $ 108,705  $ 306,686  $ 189,575 
(B) Earnings excluding intangible amortization 100,319  110,559  312,284  194,332 
(C) Adjustments after-tax (3,733) 1,170  (430) 78,855 
(D) Average equity 3,667,339  3,519,296  3,622,733  3,289,170 
(E) Average goodwill, core deposits and other intangible assets 1,450,478  1,459,034  1,452,933  1,294,971 
Table 22: Tangible Equity to Tangible Assets
As of September 30, 2023 As of December 31, 2022
(Dollars in thousands)
Equity to assets: B/A 16.65  % 15.41  %
Tangible equity to tangible assets: (B-C-D)/(A-C-D) 10.76  9.66 
(A) Total assets $ 21,950,638  $ 22,883,588 
(B) Total equity 3,654,874  3,526,362 
(C) Goodwill 1,398,253  1,398,253 
(D) Core deposit intangibles 51,023  58,455 

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The efficiency ratio is a standard measure used in the banking industry and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a meaningful non-GAAP measure for management, as it excludes certain items and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding items such as merger expenses and/or certain gains, losses and other non-interest income and expenses. In Table 23 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.
Table 23: Efficiency Ratio, As Adjusted
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands)
Net interest income (A) $ 201,937  $ 213,104  $ 624,175  $ 543,010 
Non-interest income (B) 43,413  43,201  127,086  118,451 
Non-interest expense (C) 114,762  114,346  345,688  356,724 
FTE Adjustment (D) 1,293  2,437  4,415  6,646 
Amortization of intangibles (E) 2,477  2,477  7,432  6,376 
Adjustments:
Non-interest income:
Fair value adjustment for marketable securities $ 4,507  $ (2,628) $ (6,118) $ (2,304)
Special dividend from equity investment —  —  —  1,434 
Gain on OREO, net —  —  319  487 
    Gain (loss) on branches, equipment and other assets, net —  (13) 924 
BOLI death benefits 338  —  3,117  — 
Recoveries on historic losses —  1,065  3,461  6,706 
Total non-interest income adjustments (F) $ 4,845  $ (1,576) $ 1,703  $ 6,328 
Non-interest expense:
Merger and acquisition expenses —  —  —  49,594 
TRUPS redemption fees —  —  —  2,081 
Total non-interest expense adjustments (G) $ —  $ —  $ —  $ 51,675 
Efficiency ratio (reported): ((C-E)/(A+B+D)) 45.53  % 43.24  % 44.76  % 52.44  %
Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F)) 46.44  42.97  44.86  45.13 
Recently Issued Accounting Pronouncements
See Note 21 to the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.







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Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Liquidity and Market Risk Management
At September 30, 2023, we held $1.78 billion in assets that could be used for liquidity purposes, which we refer to as net available internal liquidity. This balance consisted of $1.38 billion in unpledged investment securities which could be used for additional secured borrowing capacity, $228.1 million in cash on deposit with the Federal Reserve Bank ("FRB") and $172.7 million in other liquid cash accounts.
Consistent with our practice of maintaining access to significant external liquidity, we had $4.33 billion in net available sources of borrowed funds, which we refer to as net available external liquidity, as of September 30, 2023. This included $5.09 billion in total borrowing capacity with the Federal Home Loan Bank ("FHLB"), of which $2.00 billion has been drawn upon in the ordinary course of business, resulting in $3.09 billion in net available liquidity with the FHLB as of September 30, 2023. The $2.00 billion consisted of $750.0 million in outstanding FHLB advances and $1.25 billion used for pledging purposes. We also had access to approximately $1.39 billion in liquidity with the FRB as of September 30, 2023, of which $250.0 million has been drawn upon in the ordinary course of business, resulting in $1.14 billion in net available liquidity with the FRB as of September 30, 2023. The $1.14 billion consisted of $80.9 million available borrowing capacity from the Discount Window and $1.06 billion available through the Bank Term Funding Program ("BTFP"). As of September 30, 2023, the Company also had access to $55.0 million from First National Bankers’ Bank ("FNBB"), and $45.0 million from other various external sources.
Overall, we had $6.12 billion net available liquidity as of September 30, 2023, which consisted of $1.78 billion of net available internal liquidity and $4.33 billion in net available external liquidity. Details on our available liquidity as of September 30, 2023 is available below.
(in thousands) Total Available Amount Used Net Availability
Internal Sources
Unpledged investment securities (market value) $ 1,382,775  $ —  $ 1,382,775 
Cash at FRB 228,114  —  228,114 
Other liquid cash accounts 172,708  —  172,708 
Total Internal Liquidity 1,783,597  —  1,783,597 
External Sources
FHLB 5,089,340  1,995,990  3,093,350 
FRB Discount Window 80,919  —  80,919 
BTFP (par value) 1,309,205  250,000  1,059,205 
FNBB 55,000  —  55,000 
Other 45,000  —  45,000 
Total External Liquidity 6,579,464  2,245,990  4,333,474 
Total Available Liquidity $ 8,363,061  $ 2,245,990  $ 6,117,071 

We have continued to limit our exposure to uninsured deposits and have been actively monitoring this exposure in light of the current banking environment. As of September 30, 2023, we held approximately $7.95 billion in uninsured deposits of which $568.5 million were intercompany subsidiary deposit balances and $2.65 billion were collateralized deposits, for a net position of $4.73 billion. This represents approximately 28.7% of total deposits. In addition, net available liquidity exceeded uninsured and uncollateralized deposits by $1.38 billion.

(in thousands)
As of September 30, 2023
Uninsured Deposits $ 7,952,922 
Intercompany Subsidiary and Affiliate Balances 568,511 
Collateralized Deposits 2,650,369 
Net Uninsured Position $ 4,734,042 
Total Available Liquidity $ 6,117,071 
Net Uninsured Position 4,734,042 
Net Available Liquidity in Excess of Uninsured Deposits $ 1,383,029 
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Asset/Liability Management. Our management actively measures and manages interest rate risk. The asset/liability committees of the boards of directors of our holding company and bank subsidiary are also responsible for approving our asset/liability management policies, overseeing the formulation and implementation of strategies to improve balance sheet positioning and earnings, and reviewing our interest rate sensitivity position.
Our objective is to manage liquidity in a way that ensures cash flow requirements of depositors and borrowers are met in a timely and orderly fashion while ensuring the reliance on various funding sources does not become so heavily weighted to any one source that it causes undue risk to the bank. Our liquidity sources are prioritized based on availability and ease of activation. Our current liquidity condition is a primary driver in determining our funding needs and is a key component of our asset and liability management.
Various sources of liquidity are available to meet the cash flow needs of depositors and borrowers. Our principal source of funds is core deposits, including checking, savings, money market accounts and certificates of deposit. We may also from time to time obtain wholesale funding through brokered deposits. Secondary sources of funding include advances from the Federal Home Loan Bank of Dallas, the Federal Reserve Bank Discount Window and other borrowings, such as through correspondent banking relationships. These secondary sources enable us to borrow funds at rates and terms which, at times, are more beneficial to us. Additionally, as needed, we can liquidate or utilize our available for sale investment portfolio as collateral to provide funds for an intermediate source of liquidity.
Interest Rate Sensitivity. Our primary business is banking and the resulting earnings, primarily net interest income, are susceptible to changes in market interest rates. It is management’s goal to maximize net interest income within acceptable levels of interest rate and liquidity risks.
A key element in the financial performance of financial institutions is the level and type of interest rate risk assumed. The single most significant measure of interest rate risk is the relationship of the repricing periods of earning assets and interest-bearing liabilities. The more closely the repricing periods are correlated, the less interest rate risk we assume. We use net interest income simulation modeling and economic value of equity as the primary methods in analyzing and managing interest rate risk.
One of the tools that our management uses to measure short-term interest rate risk is a net interest income simulation model. This analysis calculates the difference between net interest income forecasted using base market rates and using a rising and a falling interest rate scenario. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and proportional to the change in market rates, depending on their contracted index. Some loans and investments include the opportunity of prepayment (embedded options), and accordingly, the simulation model uses indexes to estimate these prepayments and reinvest their proceeds at current yields. Our non-term deposit products re-price overnight in the model while we project certain other deposits by product type to have stable balances based on our deposit history. This accounts for the portion of our portfolio that moves more slowly than market rates and changes at our discretion.
This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet remains static and that its structure does not change over the course of the year. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.
Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

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 September 30, 2023, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us.
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Table 24 presents our sensitivity to net interest income as of September 30, 2023.
Table 24: Sensitivity of Net Interest Income
Interest Rate Scenario
Percentage Change from Base
Up 200 basis points 7.50  %
Up 100 basis points 3.80 
Down 100 basis points (4.70)
Down 200 basis points (9.60)
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 Form 10-Q, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-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 were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023, 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
There are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company or its subsidiaries are a party or of which any of their property is the subject.
Item 1A: Risk Factors
Except for the risk factor set forth below, there were no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Form 10-K for the year ended December 31, 2022. See the discussion of our risk factors in the Form 10-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.
The failure of other financial institutions could adversely affect us, and we may incur losses on investments in other financial institutions.
The financial system is highly interrelated, including as a result of lending, trading, clearing, counterparty, and other relationships. We have exposure to and routinely execute transactions with a wide variety of financial institutions, including brokers, dealers, commercial banks, investment banks and other substantial participants. In addition, we currently hold and may in the future acquire additional investments in the debt or equity securities of other financial institutions. Some of the institutions or other participants with whom we transact business or in which we hold investments may experience instability due to financial challenges in the banking industry or may be perceived to be unstable. If any of these institutions or participants were to fail in meeting its obligations in full and on time, or were to enter bankruptcy, conservatorship, or receivership, the consequences could ripple throughout the financial system and may adversely affect our business, results of operations, financial condition, or prospects. Our investments in any such institutions could decline in value or become valueless, which could result in us incurring losses in our investment portfolio that may have a materially adverse effect our operating results. Further, our stock price may be negatively impacted by failures of other financial institutions and their effects on consumer and investor confidence, and we may experience increased deposit insurance premiums, increased regulatory scrutiny and other adverse effects on our business, profitability or financial condition as a result of these failures.
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Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:
Period Number of
Shares
Purchased
Average Price
Paid Per Share
Purchased
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares That May
Yet Be Purchased
Under the Plans or
Programs(1)
July 1 through July 31, 2023 —  $ —  —  17,841,285 
August 1 through August 31, 2023 100,000  22.93  100,000  17,741,285 
September 1 through September 30, 2023 160,000  20.98  160,000  17,581,285 
Total 260,000    260,000   
(1)The above described stock repurchase program has no expiration date.
Item 3: Defaults Upon Senior Securities
Not applicable.
Item 4: Mine Safety Disclosures
Not applicable.
Item 5: Other Information
During the three months ended September 30, 2023, none of the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6: Exhibits
Exhibit No. Description of Exhibit
2.1
2.2
2.3
3.1
3.2
 
3.3
3.4
3.5
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3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
4.1
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.
15
31.1
31.2
32.1
32.2
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
101.SCH Inline XBRL Taxonomy Extension Schema Document*
101.CAL InlineXBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document*
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*    Filed herewith
**    The disclosure schedules referenced in the Agreement and Plan of Merger have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. The Company hereby agrees to furnish supplementally a copy of any omitted disclosure schedule to the SEC upon request.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOME BANCSHARES, INC.
(Registrant)
Date: November 6, 2023 /s/ John W. Allison
John W. Allison, Chairman and Chief Executive Officer
Date: November 6, 2023 /s/ Brian S. Davis
Brian S. Davis, Chief Financial Officer
Date: November 6, 2023 /s/ Jennifer C. Floyd
Jennifer C. Floyd, Chief Accounting Officer
99
EX-15 2 homb-20230930xexx15.htm EX-15 Document
Exhibit 15

Awareness of Independent Registered
Public Accounting Firm



We are aware that our report dated November 6, 2023, included with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, is incorporated by reference in Forms S-8 (Nos. 333-136645, 333-148763, 333-188591, 333-211116, 333-226608, 333-229805 and 333-264409) and Form S-3 (No. 333-261495). Pursuant to Rule 436(c) under the Securities Act of 1933 (the Act), this report should not be considered a part of these registration statements prepared or certified by us within the meaning of Sections 7 and 11 of the Act.
FORVIS, LLP

Little Rock, Arkansas
November 6, 2023



EX-31.1 3 homb-20230930x10qexx311.htm EX-31.1 Document

Exhibit 31.1
I, John W. Allison, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Home BancShares, Inc. for the period ended September 30, 2023;
2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2023
/s/ John W. Allison
John W. Allison
Chief Executive Officer

EX-31.2 4 homb-20230930x10qexx312.htm EX-31.2 Document

Exhibit 31.2
I, Brian S. Davis, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Home BancShares, Inc. for the period ended September 30, 2023;
2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2023
/s/ Brian S. Davis
Brian S. Davis
Chief Financial Officer

EX-32.1 5 homb-20230930x10qexx321.htm EX-32.1 Document

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report of Home BancShares, Inc. (the Company) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John W. Allison, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 6, 2023
/s/ John W. Allison
John W. Allison
Chief Executive Officer

EX-32.2 6 homb-20230930x10qexx322.htm EX-32.2 Document

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report of Home BancShares, Inc. (the Company) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Brian S. Davis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 6, 2023
/s/ Brian S. Davis
Brian S. Davis
Chief Financial Officer