SECURITIES AND EXCHANGE COMMISSION
(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, 2017March 31, 2024
| | | | | |
| ☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Transition period from
______ to
______
Commission File Number:
000-51904 001-41093
(Exact Name of Registrant as Specified in Its Charter)
| | | | | | | | |
| Arkansas | | 71-0682831 |
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 |
(501)339-2929
(Registrant’s telephone number, including area code)
Not Applicable
Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | | HOMB | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
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. (Check one):Act: | | | | | | | | | | | |
| Large Accelerated Filer | ☑ | Accelerated filer | | | | ☐ |
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 Rule12b-2 of the Exchange Act). Yes ☐ No ☑ Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest
practicalpracticable date.
Common Stock Issued and Outstanding: 173,643,671 200,321,198shares as of November 1, 2017.May 2, 2024.
HOME BANCSHARES, INC.
FORM10-Q
September 30, 2017
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HOME BANCSHARES, INC.
FORM 10-Q
March 31, 2024 |
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| Page No. | INDEX |
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| Item 6:
| | Exhibits | | 99-100 | |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of our statements contained in this document, including matters discussed under the caption
“Management’s“Management's Discussion and Analysis of Financial Condition and Results of Operation,” are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to
expectations, beliefs, projections, future
financial performance, future plans and strategies, and anticipated events or
our future financial performancetrends, and include statements about the competitiveness of the banking industry, potential regulatory obligations, our entrance and expansion into other markets, including through potential acquisitions, our other business strategies and other statements that are not historical facts. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared. These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to, the following:
•the effects of future local, regional, national and international economic conditions, including inflation or a decrease in commercial real estate and residential housing values;
•changes in the level of nonperforming assets and charge-offs, and credit risk generally;
•the risks of changes in interest rates or the level and composition of deposits, loan demand and the values of loan collateral, securities and interest-sensitive assets and liabilities;
the effect•disruptions, uncertainties and related effects on credit quality, liquidity, other aspects of our business and our operations that may result from any mergers, acquisitions or other transactions to which we or our bank subsidiary may from time to time be a party, including ourfuture public health crises;
•the ability to identify, complete and successfully integrate any businesses that we acquire;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;
the possibility that an acquisition does not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all;
the reaction to a proposed acquisition transaction of the respective companies’ customers, employees and counterparties;
•diversion of management time on acquisition-related issues;
the ability to enter into and/or close additional acquisitions;
•the availability of and access to capital and liquidity on terms acceptable to us;
•increased regulatory requirements and supervision that will applyapplies as a result of our exceedinghaving 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, including the effects resulting from the reforms enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)future legislative and the adoption of regulations by regulatory bodies under the Dodd-Frank Act;changes;
•changes in governmental monetary and fiscal policies, as well as legislative and regulatory changes, including as a result of initiatives of the newly elected administration of President Donald J. Trump;policies;
•the effects of terrorism and efforts to combat it;
it, political instability;
risks associated with our customer relationship withinstability, war, military conflicts (including the Cuban governmentongoing military conflicts in the Middle East and our correspondent banking relationship with Banco Internacional de Comercio, S.A. (BICSA), a Cuban commercial bank, through our recently completed acquisition of Stonegate Bank;Ukraine) and other major domestic or international events;
•adverse weather events, including hurricanes, and other natural disasters;
•the ability to keep pace with technological changes, including changes regarding cybersecurity;
•an increase in the incidence or severity of, or any adverse effects resulting from, acts of fraud, illegal payments, securitycybersecurity 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 loancredit losses or changes in our estimate of the adequacy of the allowance for loancredit 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”
sectionssection of our Form
10-K filed with the Securities and Exchange Commission (the “SEC”) on February
28, 201726, 2024 and this Form
10-Q.
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
| | | | | | | | |
(In thousands, except share data) | | September 30, 2017 | | | December 31, 2016 | |
| | | (Unaudited) | | | | |
| Assets | | | | | | | | |
Cash and due from banks | | $ | 197,953 | | | $ | 123,758 | |
Interest-bearing deposits with other banks | | | 354,367 | | | | 92,891 | |
| | | | | | | | |
Cash and cash equivalents | | | 552,320 | | | | 216,649 | |
Federal funds sold | | | 4,545 | | | | 1,550 | |
Investment securities –available-for-sale | | | 1,575,685 | | | | 1,072,920 | |
Investment securities –held-to-maturity | | | 234,945 | | | | 284,176 | |
Loans receivable | | | 10,286,193 | | | | 7,387,699 | |
Allowance for loan losses | | | (111,620 | ) | | | (80,002 | ) |
| | | | | | | | |
Loans receivable, net | | | 10,174,573 | | | | 7,307,697 | |
Bank premises and equipment, net | | | 239,990 | | | | 205,301 | |
Foreclosed assets held for sale | | | 21,701 | | | | 15,951 | |
Cash value of life insurance | | | 146,158 | | | | 86,491 | |
Accrued interest receivable | | | 41,071 | | | | 30,838 | |
Deferred tax asset, net | | | 121,787 | | | | 61,298 | |
Goodwill | | | 929,129 | | | | 377,983 | |
Core deposit and other intangibles | | | 50,982 | | | | 18,311 | |
Other assets | | | 163,081 | | | | 129,300 | |
| | | | | | | | |
Total assets | | $ | 14,255,967 | | | $ | 9,808,465 | |
| | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
Deposits: | | | | | | | | |
Demand andnon-interest-bearing | | $ | 2,555,465 | | | $ | 1,695,184 | |
Savings and interest-bearing transaction accounts | | | 6,341,883 | | | | 3,963,241 | |
Time deposits | | | 1,551,422 | | | | 1,284,002 | |
| | | | | | | | |
Total deposits | | | 10,448,770 | | | | 6,942,427 | |
Securities sold under agreements to repurchase | | | 149,531 | | | | 121,290 | |
FHLB and other borrowed funds | | | 1,044,333 | | | | 1,305,198 | |
Accrued interest payable and other liabilities | | | 38,782 | | | | 51,234 | |
Subordinated debentures | | | 367,835 | | | | 60,826 | |
| | | | | | | | |
Total liabilities | | | 12,049,251 | | | | 8,480,975 | |
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Stockholders’ equity: | | | | | | | | |
Common stock, par value $0.01; shares authorized 200,000,000 in 2017 and 2016; shares issued and outstanding 173,665,904 in 2017 and 140,472,205 in 2016 | | | 1,737 | | | | 1,405 | |
Capital surplus | | | 1,674,642 | | | | 869,737 | |
Retained earnings | | | 526,448 | | | | 455,948 | |
Accumulated other comprehensive income | | | 3,889 | | | | 400 | |
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Total stockholders’ equity | | | 2,206,716 | | | | 1,327,490 | |
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Total liabilities and stockholders’ equity | | $ | 14,255,967 | | | $ | 9,808,465 | |
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| (In thousands, except share data) | | March 31, 2024 | | December 31, 2023 |
| | (Unaudited) | | |
| Assets | | | | |
| Cash and due from banks | | $ | 205,262 | | | $ | 226,363 | |
| Interest-bearing deposits with other banks | | 969,996 | | | 773,850 | |
| Cash and cash equivalents | | 1,175,258 | | | 1,000,213 | |
| Fed funds sold | | 5,200 | | | 5,100 | |
| Investment securities — available-for-sale, net of allowance for credit losses of $2,525 at both March 31, 2024 and December 31, 2023 (amortized cost of $3,763,609 and $3,840,927 at March 31, 2024 and December 31, 2023, respectively) | | 3,400,884 | | | 3,507,841 | |
| Investment securities — held-to-maturity, net of allowance for credit losses of $2,005 at both March 31, 2024 and December 31, 2023 | | 1,280,586 | | | 1,281,982 | |
| Total investment securities | | 4,681,470 | | | 4,789,823 | |
| Loans receivable | | 14,513,673 | | | 14,424,728 | |
| Allowance for credit losses | | (290,294) | | | (288,234) | |
| Loans receivable, net | | 14,223,379 | | | 14,136,494 | |
| Bank premises and equipment, net | | 389,618 | | | 393,300 | |
| Foreclosed assets held for sale | | 30,650 | | | 30,486 | |
| Cash value of life insurance | | 215,424 | | | 214,516 | |
| Accrued interest receivable | | 119,029 | | | 118,966 | |
| Deferred tax asset, net | | 202,882 | | | 197,164 | |
| Goodwill | | 1,398,253 | | | 1,398,253 | |
| Core deposit intangibles | | 46,630 | | | 48,770 | |
| Other assets | | 347,928 | | | 323,573 | |
| Total assets | | $ | 22,835,721 | | | $ | 22,656,658 | |
| Liabilities and Stockholders’ Equity | | | | |
| Deposits: | | | | |
| Demand and non-interest-bearing | | $ | 4,115,603 | | | $ | 4,085,501 | |
| Savings and interest-bearing transaction accounts | | 11,047,258 | | | 11,050,347 | |
| Time deposits | | 1,703,269 | | | 1,651,863 | |
| Total deposits | | 16,866,130 | | | 16,787,711 | |
| Securities sold under agreements to repurchase | | 176,107 | | | 142,085 | |
| FHLB and other borrowed funds | | 1,301,050 | | | 1,301,300 | |
| Accrued interest payable and other liabilities | | 241,345 | | | 194,653 | |
| Subordinated debentures | | 439,688 | | | 439,834 | |
| Total liabilities | | 19,024,320 | | | 18,865,583 | |
| Stockholders’ equity: | | | | |
Common stock, par value $0.01; shares authorized 300,000,000 in 2024 and 2023; shares issued and outstanding 200,796,852 in 2024 and 201,526,494 in 2023 | | 2,008 | | | 2,015 | |
| Capital surplus | | 2,326,824 | | | 2,348,023 | |
| Retained earnings | | 1,753,994 | | | 1,690,112 | |
| Accumulated other comprehensive loss | | (271,425) | | | (249,075) | |
| Total stockholders’ equity | | 3,811,401 | | | 3,791,075 | |
| Total liabilities and stockholders’ equity | | $ | 22,835,721 | | | $ | 22,656,658 | |
See Condensed Notes to Consolidated Financial Statements.
Consolidated Statements of Income
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
(In thousands, except per share data) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Unaudited) | |
Interest income: | | | | | | | | | | | | | | | | |
Loans | | $ | 113,269 | | | $ | 102,953 | | | $ | 331,763 | | | $ | 300,281 | |
Investment securities | | | | | | | | | | | | | | | | |
Taxable | | | 7,071 | | | | 5,583 | | | | 18,983 | | | | 16,178 | |
Tax-exempt | | | 3,032 | | | | 2,720 | | | | 8,942 | | | | 8,358 | |
Deposits – other banks | | | 538 | | | | 117 | | | | 1,573 | | | | 325 | |
Federal funds sold | | | 3 | | | | 2 | | | | 9 | | | | 7 | |
| | | | | | | | | | | | | | | | |
Total interest income | | | 123,913 | | | | 111,375 | | | | 361,270 | | | | 325,149 | |
| | | | | | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | |
Interest on deposits | | | 8,535 | | | | 4,040 | | | | 20,831 | | | | 11,528 | |
Federal funds purchased | | | — | | | | — | | | | — | | | | 2 | |
FHLB and other borrowed funds | | | 3,408 | | | | 3,139 | | | | 10,707 | | | | 9,283 | |
Securities sold under agreements to repurchase | | | 232 | | | | 142 | | | | 593 | | | | 421 | |
Subordinated debentures | | | 4,969 | | | | 401 | | | | 10,203 | | | | 1,164 | |
| | | | | | | | | | | | | | | | |
Total interest expense | | | 17,144 | | | | 7,722 | | | | 42,334 | | | | 22,398 | |
| | | | | | | | | | | | | | | | |
Net interest income | | | 106,769 | | | | 103,653 | | | | 318,936 | | | | 302,751 | |
Provision for loan losses | | | 35,023 | | | | 5,536 | | | | 39,324 | | | | 16,905 | |
| | | | | | | | | | | | | | | | |
Net interest income after provision for loan losses | | | 71,746 | | | | 98,117 | | | | 279,612 | | | | 285,846 | |
| | | | | | | | | | | | | | | | |
Non-interest income: | | | | | | | | | | | | | | | | |
Service charges on deposit accounts | | | 6,408 | | | | 6,527 | | | | 18,356 | | | | 18,607 | |
Other service charges and fees | | | 8,490 | | | | 7,504 | | | | 25,983 | | | | 22,589 | |
Trust fees | | | 365 | | | | 365 | | | | 1,130 | | | | 1,128 | |
Mortgage lending income | | | 3,172 | | | | 3,932 | | | | 9,713 | | | | 10,276 | |
Insurance commissions | | | 472 | | | | 534 | | | | 1,482 | | | | 1,808 | |
Increase in cash value of life insurance | | | 478 | | | | 344 | | | | 1,251 | | | | 1,092 | |
Dividends from FHLB, FRB, Bankers’ bank & other | | | 834 | | | | 808 | | | | 2,455 | | | | 2,147 | |
Gain on acquisitions | | | — | | | | — | | | | 3,807 | | | | — | |
Gain on sale of SBA loans | | | 163 | | | | 364 | | | | 738 | | | | 443 | |
Gain (loss) on sale of branches, equipment and other assets, net | | | (1,337 | ) | | | (86 | ) | | | (962 | ) | | | 701 | |
Gain (loss) on OREO, net | | | 335 | | | | 132 | | | | 849 | | | | (713 | ) |
Gain (loss) on securities, net | | | 136 | | | | — | | | | 939 | | | | 25 | |
FDIC indemnification accretion/(amortization), net | | | — | | | | — | | | | — | | | | (772 | ) |
Other income | | | 1,941 | | | | 1,590 | | | | 6,603 | | | | 5,892 | |
| | | | | | | | | | | | | | | | |
Totalnon-interest income | | | 21,457 | | | | 22,014 | | | | 72,344 | | | | 63,223 | |
| | | | | | | | | | | | | | | | |
Non-interest expense: | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 28,510 | | | | 25,623 | | | | 83,965 | | | | 75,018 | |
Occupancy and equipment | | | 7,887 | | | | 6,668 | | | | 21,602 | | | | 19,848 | |
Data processing expense | | | 2,853 | | | | 2,791 | | | | 8,439 | | | | 8,221 | |
Other operating expenses | | | 31,596 | | | | 15,944 | | | | 62,984 | | | | 41,174 | |
| | | | | | | | | | | | | | | | |
Totalnon-interest expense | | | 70,846 | | | | 51,026 | | | | 176,990 | | | | 144,261 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 22,357 | | | | 69,105 | | | | 174,966 | | | | 204,808 | |
Income tax expense | | | 7,536 | | | | 25,485 | | | | 63,192 | | | | 76,252 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
| | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.10 | | | $ | 0.31 | | | $ | 0.78 | | | $ | 0.92 | |
| | | | | | | | | | | | | | | | |
Diluted earnings per share | | $ | 0.10 | | | $ | 0.31 | | | $ | 0.78 | | | $ | 0.91 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| (In thousands, except per share data) | | 2024 | | 2023 | | | | |
| | (Unaudited) | | | | |
| Interest income: | | | | | | | | |
| Loans | | $ | 265,294 | | | $ | 236,997 | | | | | |
| Investment securities | | | | | | | | |
| Taxable | | 33,229 | | | 35,288 | | | | | |
| Tax-exempt | | 7,803 | | | 7,963 | | | | | |
| Deposits – other banks | | 10,528 | | | 4,685 | | | | | |
| Federal funds sold | | 61 | | | 6 | | | | | |
| Total interest income | | 316,915 | | | 284,939 | | | | | |
| Interest expense: | | | | | | | | |
| Interest on deposits | | 92,548 | | | 59,162 | | | | | |
| Federal funds purchased | | — | | | — | | | | | |
| FHLB and other borrowed funds | | 14,276 | | | 6,190 | | | | | |
| Securities sold under agreements to repurchase | | 1,404 | | | 868 | | | | | |
| Subordinated debentures | | 4,097 | | | 4,124 | | | | | |
| Total interest expense | | 112,325 | | | 70,344 | | | | | |
| Net interest income | | 204,590 | | | 214,595 | | | | | |
| | | | | | | | |
| Provision for credit losses on loans | | 5,500 | | | 1,200 | | | | | |
| Recovery of credit losses on unfunded commitments | | (1,000) | | | — | | | | | |
| Provision for credit losses on investment securities | | — | | | — | | | | | |
| Total credit loss expense | | 4,500 | | | 1,200 | | | | | |
| Net interest income after credit loss expense | | 200,090 | | | 213,395 | | | | | |
| Non-interest income: | | | | | | | | |
| Service charges on deposit accounts | | 9,686 | | | 9,842 | | | | | |
| Other service charges and fees | | 10,189 | | | 11,875 | | | | | |
| Trust fees | | 5,066 | | | 4,864 | | | | | |
| Mortgage lending income | | 3,558 | | | 2,571 | | | | | |
| Insurance commissions | | 508 | | | 526 | | | | | |
| Increase in cash value of life insurance | | 1,195 | | | 1,104 | | | | | |
| Dividends from FHLB, FRB, FNBB & other | | 3,007 | | | 2,794 | | | | | |
| Gain on sale of SBA loans | | 198 | | | 139 | | | | | |
| (Loss) gain on sale of branches, equipment and other assets, net | | (8) | | | 7 | | | | | |
| Gain on OREO, net | | 17 | | | — | | | | | |
| | | | | | | | |
| Fair value adjustment for marketable securities | | 1,003 | | | (11,408) | | | | | |
| Other income | | 7,380 | | | 11,850 | | | | | |
| Total non-interest income | | 41,799 | | | 34,164 | | | | | |
| Non-interest expense: | | | | | | | | |
| Salaries and employee benefits | | 60,910 | | | 64,490 | | | | | |
| Occupancy and equipment | | 14,551 | | | 14,952 | | | | | |
| Data processing expense | | 9,147 | | | 8,968 | | | | | |
| Merger and acquisition expenses | | — | | | — | | | | | |
| Other operating expenses | | 26,888 | | | 26,234 | | | | | |
| Total non-interest expense | | 111,496 | | | 114,644 | | | | | |
| Income before income taxes | | 130,393 | | | 132,915 | | | | | |
| Income tax expense | | 30,284 | | | 29,953 | | | | | |
| Net income | | $ | 100,109 | | | $ | 102,962 | | | | | |
| Basic earnings per share | | $ | 0.50 | | | $ | 0.51 | | | | | |
| Diluted earnings per share | | $ | 0.50 | | | $ | 0.51 | | | | | |
See Condensed Notes to Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
(In thousands) | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Unaudited) | |
Net income | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
Net unrealized gain (loss) onavailable-for-sale securities | | | (4,065 | ) | | | (4,334 | ) | | | 6,681 | | | | 6,816 | |
Less: reclassification adjustment for realized (gains) losses included in income | | | (136 | ) | | | — | | | | (939 | ) | | | (25 | ) |
| | | | | | | | | | | | | | | | |
Other comprehensive (loss) income, before tax effect | | | (4,201 | ) | | | (4,334 | ) | | | 5,742 | | | | 6,791 | |
Tax effect | | | 1,648 | | | | 1,701 | | | | (2,253 | ) | | | (2,664 | ) |
| | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | (2,553 | ) | | | (2,633 | ) | | | 3,489 | | | | 4,127 | |
| | | | | | | | | | | | | | | | |
Comprehensive income | | $ | 12,268 | | | $ | 40,987 | | | $ | 115,263 | | | $ | 132,683 | |
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Home BancShares, Inc.
Consolidated Statements of Stockholders’ Equity
Nine Months Ended September 30, 2017 and 2016
| | | | | | | | | | | | | | | | | | | | |
(In thousands, except share data) | | Common
Stock | | | Capital
Surplus | | | Retained
Earnings | | | Accumulated
Other
Comprehensive
Income (Loss) | | | Total | |
Balance at January 1, 2016 | | $ | 701 | | | $ | 867,981 | | | $ | 326,898 | | | $ | 4,177 | | | $ | 1,199,757 | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | | |
Net income | | | — | | | | — | | | | 128,556 | | | | — | | | | 128,556 | |
Other comprehensive income (loss) | | | — | | | | — | | | | — | | | | 4,127 | | | | 4,127 | |
Net issuance of 461,737 shares of common stock from exercise of stock options plus issuance of 10,000 bonus shares of unrestricted common stock | | | 2 | | | | 1,351 | | | | — | | | | — | | | | 1,353 | |
Issuance of common stock –2-for-1 stock split | | | 702 | | | | (702 | ) | | | — | | | | — | | | | — | |
Repurchase of 461,800 shares of common stock | | | (2 | ) | | | (8,840 | ) | | | — | | | | — | | | | (8,842 | ) |
Tax benefit from stock options exercised | | | — | | | | 1,264 | | | | — | | | | — | | | | 1,264 | |
Share-based compensation net issuance of 239,070 shares of restricted common stock | | | 2 | | | | 5,256 | | | | — | | | | — | | | | 5,258 | |
Cash dividends – Common Stock, $0.2525 per share | | | — | | | | — | | | | (35,455 | ) | | | — | | | | (35,455 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balances at September 30, 2016 (unaudited) | | | 1,405 | | | | 866,310 | | | | 419,999 | | | | 8,304 | | | | 1,296,018 | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | | |
Net income | | | — | | | | — | | | | 48,590 | | | | — | | | | 48,590 | |
Other comprehensive income (loss) | | | — | | | | — | | | | — | | | | (7,904 | ) | | | (7,904 | ) |
Net issuance of 31,002 shares of common stock from exercise of stock options | | | 1 | | | | 141 | | | | — | | | | — | | | | 142 | |
Repurchase of 48,808 shares of common stock | | | (1 | ) | | | (974 | ) | | | — | | | | — | | | | (975 | ) |
Tax benefit from stock options exercised | | | — | | | | 2,890 | | | | — | | | | — | | | | 2,890 | |
Share-based compensation net issuance of 4,664 shares of restricted common stock | | | — | | | | 1,370 | | | | — | | | | — | | | | 1,370 | |
Cash dividends – Common Stock, $0.09 per share | | | — | | | | — | | | | (12,641 | ) | | | — | | | | (12,641 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balances at December 31, 2016 | | | 1,405 | | | | 869,737 | | | | 455,948 | | | | 400 | | | | 1,327,490 | |
Comprehensive income: | | | | | | | | | | | | | | | | | | | | |
Net income | | | — | | | | — | | | | 111,774 | | | | — | | | | 111,774 | |
Other comprehensive income (loss) | | | — | | | | — | | | | — | | | | 3,489 | | | | 3,489 | |
Net issuance of 160,237 shares of common stock from exercise of stock options | | | 2 | | | | 847 | | | | — | | | | — | | | | 849 | |
Issuance of 2,738,038 shares of common stock from acquisition of GHI, net of issuance costs of approximately $195 | | | 27 | | | | 77,290 | | | | — | | | | — | | | | 77,317 | |
Issuance of 30,863,658 shares of common stock from acquisition of Stonegate, net of issuance costs of approximately $630 | | | 309 | | | | 741,324 | | | | — | | | | — | | | | 741,633 | |
Repurchase of 800,000 shares of common stock | | | (8 | ) | | | (19,530 | ) | | | — | | | | — | | | | (19,538 | ) |
Share-based compensation net issuance of 231,766 shares of restricted common stock | | | 2 | | | | 4,974 | | | | — | | | | — | | | | 4,976 | |
Cash dividends – Common Stock, $0.29 per share | | | — | | | | — | | | | (41,274 | ) | | | — | | | | (41,274 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balances at September 30, 2017 (unaudited) | | $ | 1,737 | | | $ | 1,674,642 | | | $ | 526,448 | | | $ | 3,889 | | | $ | 2,206,716 | |
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(Loss)
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| (In thousands) | | 2024 | | 2023 | | | | |
| | (Unaudited) | | | | |
| Net income | | $ | 100,109 | | | $ | 102,962 | | | | | |
| Net unrealized (loss) gain on available-for-sale securities | | (29,635) | | | 64,968 | | | | | |
| Other comprehensive (loss) income before tax effect | | (29,635) | | | 64,968 | | | | | |
| Tax effect on other comprehensive loss | | 7,285 | | | (15,811) | | | | | |
| Other comprehensive (loss) income | | (22,350) | | | 49,157 | | | | | |
| Comprehensive income | | $ | 77,759 | | | $ | 152,119 | | | | | |
See Condensed Notes to Consolidated Financial Statements.
Consolidated Statements of
Cash Flows | | | | | | | | |
| | | Nine Months Ended
September 30, | |
(In thousands) | | 2017 | | | 2016 | |
| | | (Unaudited) | |
Operating Activities | | | | | | | | |
Net income | | $ | 111,774 | | | $ | 128,556 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | |
Depreciation | | | 8,634 | | | | 8,082 | |
Amortization/(accretion) | | | 12,087 | | | | 11,461 | |
Share-based compensation | | | 4,976 | | | | 5,258 | |
Tax benefits from stock options exercised | | | — | | | | (1,264 | ) |
Gain on acquisitions | | | (3,807 | ) | | | — | |
(Gain) loss on assets | | | (1,720 | ) | | | 3,425 | |
Provision for loan losses | | | 39,324 | | | | 16,905 | |
Deferred income tax effect | | | (15,867 | ) | | | 12,466 | |
Increase in cash value of life insurance | | | (1,251 | ) | | | (1,092 | ) |
Originations of mortgage loans held for sale | | | (243,948 | ) | | | (261,964 | ) |
Proceeds from sales of mortgage loans held for sale | | | 250,784 | | | | 257,666 | |
Changes in assets and liabilities: | | | | | | | | |
Accrued interest receivable | | | (1,814 | ) | | | (266 | ) |
Indemnification and other assets | | | (22,642 | ) | | | (9,407 | ) |
Accrued interest payable and other liabilities | | | (35,436 | ) | | | (5,757 | ) |
| | | | | | | | |
Net cash provided by (used in) operating activities | | | 101,094 | | | | 164,069 | |
| | | | | | | | |
Investing Activities | | | | | | | | |
Net (increase) decrease in federal funds sold | | | (1,480 | ) | | | (300 | ) |
Net (increase) decrease in loans, excluding purchased loans | | | (115,334 | ) | | | (492,795 | ) |
Purchases of investment securities –available-for-sale | | | (522,329 | ) | | | (246,983 | ) |
Proceeds from maturities of investment securities –available-for-sale | | | 120,785 | | | | 217,774 | |
Proceeds from sale of investment securities –available-for-sale | | | 28,368 | | | | 2,221 | |
Purchases of investment securities –held-to-maturity | | | (219 | ) | | | (123 | ) |
Proceeds from maturities of investment securities –held-to-maturity | | | 48,144 | | | | 32,417 | |
Proceeds from sale of investment securities –held-to-maturity | | | 491 | | | | — | |
Proceeds from foreclosed assets held for sale | | | 13,315 | | | | 11,124 | |
Proceeds from sale of SBA Loans | | | 13,630 | | | | 7,412 | |
Purchases of premises and equipment, net | | | (4,383 | ) | | | (3,355 | ) |
Return of investment on cash value of life insurance | | | 592 | | | | — | |
Net cash proceeds (paid) received – market acquisitions | | | 227,845 | | | | — | |
Cash (paid) on FDIC loss sharebuy-out | | | — | | | | (6,613 | ) |
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Net cash provided by (used in) investing activities | | | (190,575 | ) | | | (479,221 | ) |
| | | | | | | | |
Financing Activities | | | | | | | | |
Net increase (decrease) in deposits, excluding deposits acquired | | | 536,891 | | | | 401,784 | |
Net increase (decrease) in securities sold under agreements to repurchase | | | 2,078 | | | | (19,039 | ) |
Net increase (decrease) in FHLB and other borrowed funds | | | (350,230 | ) | | | 14,424 | |
Proceeds from exercise of stock options | | | 849 | | | | 1,353 | |
Proceeds from issuance of subordinated notes | | | 297,201 | | | | — | |
Repurchase of common stock | | | (19,538 | ) | | | (8,842 | ) |
Common stock issuance costs – market acquisitions | | | (825 | ) | | | — | |
Tax benefits from stock options exercised | | | — | | | | 1,264 | |
Dividends paid on common stock | | | (41,274 | ) | | | (35,455 | ) |
| | | | | | | | |
Net cash provided by (used in) financing activities | | | 425,152 | | | | 355,489 | |
| | | | | | | | |
Net change in cash and cash equivalents | | | 335,671 | | | | 40,337 | |
Cash and cash equivalents – beginning of year | | | 216,649 | | | | 255,823 | |
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Cash and cash equivalents – end of period | | $ | 552,320 | | | $ | 296,160 | |
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Stockholders’ Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
| (In thousands, except share data) | | Common Stock | | Capital Surplus | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| Balances at January 1, 2024 | | $ | 2,015 | | | $ | 2,348,023 | | | $ | 1,690,112 | | | $ | (249,075) | | | $ | 3,791,075 | |
| Comprehensive income: | | | | | | | | | | |
| Net income | | — | | | — | | | 100,109 | | | — | | | 100,109 | |
| Other comprehensive loss | | — | | | — | | | — | | | (22,350) | | | (22,350) | |
| Net issuance of 76,542 shares of common stock from exercise of stock options | | 1 | | | 670 | | | — | | | — | | | 671 | |
| Repurchase of 1,025,934 shares of common stock | | (10) | | | (24,007) | | | — | | | — | | | (24,017) | |
| Share-based compensation net issuance of 219,750 shares of restricted common stock | | 2 | | | 2,273 | | | — | | | — | | | 2,275 | |
| Excise tax from repurchase of common stock | | — | | | (135) | | | — | | | — | | | (135) | |
| Cash dividends – Common Stock, $0.18 per share | | — | | | — | | | (36,227) | | | — | | | (36,227) | |
| Balances at March 31, 2024 (unaudited) | | $ | 2,008 | | | $ | 2,326,824 | | | $ | 1,753,994 | | | $ | (271,425) | | | $ | 3,811,401 | |
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See Condensed Notes to Consolidated Financial Statements.
Consolidated Statements of Stockholders’ Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2023 |
| (In thousands, except share data) | | Common Stock | | Capital Surplus | | Retained Earnings | | Accumulated Other Comprehensive 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 | | 1 | | | 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 | | 3 | | | 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 | |
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See Condensed Notes to Consolidated Financial Statements.
Home BancShares, Inc.
Consolidated Statements of Cash Flows | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| (In thousands) | | 2024 | | 2023 |
| | (Unaudited) |
| Operating Activities | | | | |
| Net income | | $ | 100,109 | | | $ | 102,962 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation & amortization | | 7,350 | | | 7,722 | |
| (Increase) decrease in value of equity securities | | (1,003) | | | 11,408 | |
| Amortization of securities, net | | 3,826 | | | 3,835 | |
| Accretion of purchased loans | | (2,772) | | | (3,172) | |
| Share-based compensation | | 2,275 | | | 2,507 | |
| Gain on assets | | (207) | | | (146) | |
| Provision for credit losses - loans | | 5,500 | | | 1,200 | |
| (Recovery of) provision for credit losses - unfunded commitments | | (1,000) | | | — | |
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| Deferred income tax effect | | 1,567 | | | 176 | |
| Increase in cash value of life insurance | | (1,195) | | | (1,104) | |
| Originations of mortgage loans held for sale | | (119,379) | | | (90,465) | |
| Proceeds from sales of mortgage loans held for sale | | 126,012 | | | 66,655 | |
| Changes in assets and liabilities: | | | | |
| Accrued interest receivable | | (63) | | | 459 | |
| Other assets | | (21,169) | | | (99) | |
| Accrued interest payable and other liabilities | | 47,692 | | | 16,010 | |
| Net cash provided by operating activities | | 147,543 | | | 117,948 | |
| Investing Activities | | | | |
| Net increase in federal funds sold | | (100) | | | — | |
| Net (increase) decrease in loans, excluding purchased loans | | (99,450) | | | 43,894 | |
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| Proceeds from maturities of investment securities – available-for-sale | | 73,448 | | | 330,539 | |
| Proceeds from maturities of investment securities – held-to-maturity | | 1,444 | | | 1,378 | |
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| (Purchase) redemption of other investments | | (2,176) | | | 5,239 | |
| Proceeds from foreclosed assets held for sale | | 306 | | | 157 | |
| Proceeds from sale of SBA loans | | 2,949 | | | 2,337 | |
| Purchases of premises and equipment, net | | (1,682) | | | (2,404) | |
| Return of investment on cash value of life insurance | | 280 | | | — | |
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| Net cash (used in) provided by investing activities | | (24,981) | | | 381,140 | |
| Financing Activities | | | | |
| Net increase (decrease) in deposits | | 78,419 | | | (493,317) | |
| Net increase in securities sold under agreements to repurchase | | 34,022 | | | 7,596 | |
| Decrease in FHLB and other borrowed funds | | (1,400,250) | | | — | |
| Increase in FHLB and other borrowed funds | | 1,400,000 | | | — | |
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| Proceeds from exercise of stock options | | 671 | | | 86 | |
| Repurchase of common stock | | (24,152) | | | (13,540) | |
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| Dividends paid on common stock | | (36,227) | | | (36,649) | |
| Net cash provided by (used in) financing activities | | 52,483 | | | (535,824) | |
| Net change in cash and cash equivalents | | 175,045 | | | (36,736) | |
| Cash and cash equivalents – beginning of year | | 1,000,213 | | | 724,790 | |
| Cash and cash equivalents – end of period | | $ | 1,175,258 | | | $ | 688,054 | |
See Condensed Notes to Consolidated Financial Statements.
Home BancShares, Inc.
Condensed Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
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 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-widecompany-wide basis. Accordingly, all of the banking services and branch locations are considered by management to be aggregated into one reportable operating segment.
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
loancredit 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
loancredit 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.
Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative information. These reclassifications had no effect on net earnings or stockholders’ equity.
Interim financial information
The accompanying unaudited consolidated financial statements
as of September 30, 2017 and 2016 have been prepared in condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
The information furnished in these interim statements reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s
20162023 Form
10-K, filed with the Securities and Exchange
Commission.Commission on February 26, 2024.
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")
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 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.
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 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.
Basic earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the following periods:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (In thousands) | |
Net income | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
Average shares outstanding | | | 144,238 | | | | 140,436 | | | | 143,111 | | | | 140,403 | |
Effect of common stock options | | | 749 | | | | 267 | | | | 728 | | | | 282 | |
| | | | | | | | | | | | | | | | |
Average diluted shares outstanding | | | 144,987 | | | | 140,703 | | | | 143,839 | | | | 140,685 | |
| | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.10 | | | $ | 0.31 | | | $ | 0.78 | | | $ | 0.92 | |
Diluted earnings per share | | $ | 0.10 | | | $ | 0.31 | | | $ | 0.78 | | | $ | 0.91 | |
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) | | | | |
| Net income | $ | 100,109 | | | $ | 102,962 | | | | | |
| Average shares outstanding | 201,210 | | | 203,456 | | | | | |
| Effect of common stock options | 180 | | | 169 | | | | | |
| Average diluted shares outstanding | 201,390 | | | 203,625 | | | | | |
| Basic earnings per share | $ | 0.50 | | | $ | 0.51 | | | | | |
| Diluted earnings per share | $ | 0.50 | | | $ | 0.51 | | | | | |
The impact of anti-dilutive shares to the diluted earnings per share calculation was considered immaterial for the periods ended March 31, 2024 and 2023.
Acquisition of
Stonegate BankOn September 26, 2017,Happy Bancshares, Inc.
The Company's most recent acquisition occurred on April 1, 2022, when the Company completed the acquisition of
all of the issued and outstanding shares of common stock of Stonegate BankHappy Bancshares, Inc. (“
Stonegate”Happy”), and merged
StonegateHappy State Bank into
Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.Including the effects of the known purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.
The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
The Company has determined thatCentennial Bank. For additional discussion regarding the acquisition of Happy, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2 "Business Combinations" in the net assets of Stonegate constitutes a business combination as defined byNotes to Consolidated Financial Statements included in the ASC Topic 805. Accordingly,Annual Report on Form 10-K for the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. year ended December 31, 2023.
3. Investment Securities
The following
schedule is a breakdown oftable summarizes the
assets acquiredamortized cost and
liabilities assumed as of the acquisition date: | | | | | | | | | | | | |
| | | Stonegate Bank | |
| | | Acquired
from Stonegate | | | Fair Value
Adjustments | | | As Recorded
by HBI | |
| | | (Dollars in thousands) | |
| Assets | | | | | | | | | | | | |
Cash and due from banks | | $ | 100,958 | | | $ | — | | | $ | 100,958 | |
Interest-bearing deposits with other banks | | | 135,631 | | | | — | | | | 135,631 | |
Federal funds sold | | | 1,515 | | | | — | | | | 1,515 | |
Investment securities | | | 103,041 | | | | 477 | | | | 103,518 | |
Loans receivable | | | 2,446,149 | | | | (73,990 | ) | | | 2,372,159 | |
Allowance for loan losses | | | (21,507 | ) | | | 21,507 | | | | — | |
| | | | | | | | | | | | |
Loans receivable, net | | | 2,424,642 | | | | (52,483 | ) | | | 2,372,159 | |
Bank premises and equipment, net | | | 38,868 | | | | (3,572 | ) | | | 35,296 | |
Foreclosed assets held for sale | | | 4,187 | | | | (801 | ) | | | 3,386 | |
Cash value of life insurance | | | 48,000 | | | | — | | | | 48,000 | |
Accrued interest receivable | | | 7,088 | | | | — | | | | 7,088 | |
Deferred tax asset, net | | | 27,340 | | | | 11,244 | | | | 38,584 | |
Goodwill | | | 81,452 | | | | (81,452 | ) | | | — | |
Core deposit and other intangibles | | | 10,505 | | | | 20,364 | | | | 30,869 | |
Other assets | | | 9,598 | | | | 231 | | | | 9,829 | |
| | | | | | | | | | | | |
Total assets acquired | | $ | 2,992,825 | | | $ | (105,992 | ) | | $ | 2,886,833 | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | |
Deposits | | | | | | | | | | | | |
Demand andnon-interest-bearing | | $ | 585,959 | | | $ | — | | | $ | 585,959 | |
Savings and interest-bearing transaction accounts | | | 1,776,256 | | | | — | | | | 1,776,256 | |
Time deposits | | | 163,567 | | | | (85 | ) | | | 163,482 | |
| | | | | | | | | | | | |
Total deposits | | | 2,525,782 | | | | (85 | ) | | | 2,525,697 | |
FHLB borrowed funds | | | 32,667 | | | | 184 | | | | 32,851 | |
Securities sold under agreements to repurchase | | | 26,163 | | | | — | | | | 26,163 | |
Accrued interest payable and other liabilities | | | 8,100 | | | | 5 | | | | 8,105 | |
Subordinated debentures | | | 8,345 | | | | 1,490 | | | | 9,835 | |
| | | | | | | | | | | | |
Total liabilities assumed | | | 2,601,057 | | | | 1,594 | | | | 2,602,651 | |
| | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
Total equity assumed | | | 391,768 | | | | (391,768 | ) | | | — | |
| | | | | | | | | | | | |
Total liabilities and equity assumed | | $ | 2,992,825 | | | $ | (390,174 | ) | | | 2,602,651 | |
| | | | | | | | | | | | |
Net assets acquired | | | | | | | | | | | 284,182 | |
Purchase price | | | | | | | | | | | 792,370 | |
| | | | | | | | | | | | |
Goodwill | | | | | | | | | | $ | 508,188 | |
| | | | | | | | | | | | |
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks, interest-bearing deposits with other banks and federal funds sold – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from Stonegate with an approximately $477,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $2.37 billion of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Fees and Other Costs,which were recorded with a $73.3 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $74.3 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $23.3 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired Stonegate loan balance and the fair value adjustment on loans receivable includes $22.6 million of discount on purchased loans, respectively.
Bank premises and equipment – Bank premises and equipment were acquired from Stonegate with a $3.6 million adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs of disposal.
Cash value of life insurance – Cash value of life insurance was acquired from Stonegate at market value.
Accrued interest receivable – Accrued interest receivable was acquired from Stonegate at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate of 39.225%.
Core deposit intangible – This intangible asset represents the value of the relationships that Stonegate had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $30.9 million of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $85,000 fair value adjustment applied for time deposits was because the weighted average interest rate of Stonegate’s certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Securities sold under agreements to repurchase – Securities sold under agreements to repurchase were acquired from Stonegate at market value.
Accrued interest payable and other liabilities – Accrued interest payable and other liabilities were acquired from Stonegate at market value.
Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
The unauditedpro-forma combined consolidated financial information presents how the combined financial information of HBI and Stonegate might have appeared had the businesses actually been combined. The following schedule represents the unaudited pro forma combined financial information as of the three and nine-month periods ended September 30, 2017 and 2016, assuming the acquisition was completed as of January 1, 2017 and 2016, respectively:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (In thousands, except per share data) | |
Total interest income | | $ | 154,425 | | | $ | 136,063 | | | $ | 451,716 | | | $ | 396,952 | |
Totalnon-interest income | | | 24,072 | | | | 24,081 | | | | 79,887 | | | | 69,302 | |
Net income available to all shareholders | | | 7,399 | | | | 50,176 | | | | 120,670 | | | | 148,495 | |
Basic earnings per common share | | $ | 0.04 | | | $ | 0.29 | | | $ | 0.69 | | | $ | 0.87 | |
Diluted earnings per common share | | | 0.04 | | | | 0.29 | | | | 0.69 | | | | 0.87 | |
The unauditedpro-forma consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue enhancements and expense efficiencies fromin-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.
Acquisition of Giant Holdings, Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after $8.1 million of loan discounts, and $304.0 million in deposits.
The Company has determined that the acquisition of the net assets of GHI constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
| | | | | | | | | | | | |
| | | Giant Holdings, Inc. | |
| | | Acquired
from GHI | | | Fair Value
Adjustments | | | As Recorded
by HBI | |
| | | (Dollars in thousands) | |
| Assets | | | | | | | | | | | | |
Cash and due from banks | | $ | 41,019 | | | $ | — | | | $ | 41,019 | |
Interest-bearing deposits with other banks | | | 4,057 | | | | 1 | | | | 4,058 | |
Investment securities | | | 1,961 | | | | (5 | ) | | | 1,956 | |
Loans receivable | | | 335,886 | | | | (6,517 | ) | | | 329,369 | |
Allowance for loan losses | | | (4,568 | ) | | | 4,568 | | | | — | |
| | | | | | | | | | | | |
Loans receivable, net | | | 331,318 | | | | (1,949 | ) | | | 329,369 | |
Bank premises and equipment, net | | | 2,111 | | | | 608 | | | | 2,719 | |
Cash value of life insurance | | | 10,861 | | | | — | | | | 10,861 | |
Accrued interest receivable | | | 850 | | | | — | | | | 850 | |
Deferred tax asset, net | | | 2,286 | | | | 1,807 | | | | 4,093 | |
Core deposit and other intangibles | | | 172 | | | | 3,238 | | | | 3,410 | |
Other assets | | | 254 | | | | (489 | ) | | | (235 | ) |
| | | | | | | | | | | | |
Total assets acquired | | $ | 394,889 | | | $ | 3,211 | | | $ | 398,100 | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | |
Deposits | | | | | | | | | | | | |
Demand andnon-interest-bearing | | $ | 75,993 | | | $ | — | | | $ | 75,993 | |
Savings and interest-bearing transaction accounts | | | 139,459 | | | | — | | | | 139,459 | |
Time deposits | | | 88,219 | | | | 324 | | | | 88,543 | |
| | | | | | | | | | | | |
Total deposits | | | 303,671 | | | | 324 | | | | 303,995 | |
FHLB borrowed funds | | | 26,047 | | | | 431 | | | | 26,478 | |
Accrued interest payable and other liabilities | | | 14,552 | | | | 18 | | | | 14,570 | |
| | | | | | | | | | | | |
Total liabilities assumed | | | 344,270 | | | | 773 | | | | 345,043 | |
| | | | | | | | | | | | |
| Equity | | | | | | | | | | | | |
Total equity assumed | | | 50,619 | | | | (50,619 | ) | | | — | |
| | | | | | | | | | | | |
Total liabilities and equity assumed | | $ | 394,889 | | | $ | (49,846 | ) | | | 345,043 | |
| | | | | | | | | | | | |
Net assets acquired | | | | | | | | | | | 53,057 | |
Purchase price | | | | | | | | | | | 96,015 | |
| | | | | | | | | | | | |
Goodwill | | | | | | | | | | $ | 42,958 | |
| | | | | | | | | | | | |
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from GHI with an approximately $5,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $315.6 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Fees and Other Costs,which were recorded with a $3.6 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $20.3 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $4.5 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired GHI loan balance includes $1.6 million of discount on purchased loans.
Bank premises and equipment – Bank premises and equipment were acquired from GHI with a $608,000 adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Cash value of life insurance – Cash value of life insurance was acquired from GHI at market value.
Accrued interest receivable – Accrued interest receivable was acquired from GHI at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate of 39.225%.
Core deposit intangible – This intangible asset represents the value of the relationships that GHI had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $3.4 million of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $324,000 fair value adjustment applied for time deposits was because the weighted average interest rate of GHI’s certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities – The fair value used represents the adjustments of certain estimated liabilities from GHI.
The Company’s operating results for the period ended September 30, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact GHI total assets acquired are less than 5% of total assets as of September 30, 2017 excluding GHI as recorded by HBI as of acquisition date, historical results are not believed to be material to the Company’s results, and thus no pro-forma information is presented.
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (“BOC”), pursuant to an acquisition agreement, dated December 1, 2016, by and between HBI and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the “Bankruptcy Code”) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”). The sale of BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court. On November 14, 2016, the Company submitted an initial bid to purchase the outstanding shares of BOC in accordance with the bidding procedures approved by the Bankruptcy Court. An auction was subsequently conducted on November 16, 2016, and the Company was deemed to be the successful bidder. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
The Company has determined that the acquisition of the net assets of BOC constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
| | | | | | | | | | | | |
| | | The Bank of Commerce | |
| | | Acquired
from BOC | | | Fair Value
Adjustments | | | As Recorded
by HBI | |
| | | (Dollars in thousands) | |
| Assets | | | | | | | | | | | | |
Cash and due from banks | | $ | 4,610 | | | $ | — | | | $ | 4,610 | |
Interest-bearing deposits with other banks | | | 14,360 | | | | — | | | | 14,360 | |
Investment securities | | | 25,926 | | | | (113 | ) | | | 25,813 | |
Loans receivable | | | 124,289 | | | | (5,751 | ) | | | 118,538 | |
Allowance for loan losses | | | (2,037 | ) | | | 2,037 | | | | — | |
| | | | | | | | | | | | |
Loans receivable, net | | | 122,252 | | | | (3,714 | ) | | | 118,538 | |
Bank premises and equipment, net | | | 1,887 | | | | — | | | | 1,887 | |
Foreclosed assets held for sale | | | 8,523 | | | | (3,165 | ) | | | 5,358 | |
Accrued interest receivable | | | 481 | | | | — | | | | 481 | |
Deferred tax asset, net | | | — | | | | 4,198 | | | | 4,198 | |
Core deposit intangible | | | — | | | | 968 | | | | 968 | |
Other assets | | | 1,880 | | | | — | | | | 1,880 | |
| | | | | | | | | | | | |
Total assets acquired | | $ | 179,919 | | | $ | (1,826 | ) | | $ | 178,093 | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | |
Deposits | | | | | | | | | | | | |
Demand andnon-interest-bearing | | $ | 27,245 | | | $ | — | | | $ | 27,245 | |
Savings and interest-bearing transaction accounts | | | 32,300 | | | | — | | | | 32,300 | |
Time deposits | | | 79,945 | | | | 270 | | | | 80,215 | |
| | | | | | | | | | | | |
Total deposits | | | 139,490 | | | | 270 | | | | 139,760 | |
FHLB borrowed funds | | | 30,000 | | | | 42 | | | | 30,042 | |
Accrued interest payable and other liabilities | | | 564 | | | | (255 | ) | | | 309 | |
| | | | | | | | | | | | |
Total liabilities assumed | | $ | 170,054 | | | $ | 57 | | | | 170,111 | |
| | | | | | | | | | | | |
Net assets acquired | | | | | | | | | | | 7,982 | |
Purchase price | | | | | | | | | | | 4,175 | |
| | | | | | | | | | | | |
Pre-tax gain on acquisition | | | | | | | | | | $ | 3,807 | |
| | | | | | | | | | | | |
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from BOC with a $113,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $106.8 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Fees and Other Costs,which were recorded with a $3.0 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $17.5 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $2.8 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows.
Bank premises and equipment – Bank premises and equipment were acquired from BOC at market value.
Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs to sell.
Accrued interest receivable – Accrued interest receivable was acquired from BOC at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate of 39.225%.
Core deposit intangible – This intangible asset represents the value of the relationships that BOC had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $968,000 of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $270,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of BOC’s certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities – The fair value used represents the adjustment of certain estimated liabilities from BOC.
The Company’s operating results for the period ended September 30, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact BOC total assets acquired are less than 5% of total assets as of September 30, 2017 excluding BOC as recorded by HBI as of acquisition date, historical results are not believed to be material to the Company’s results, and thus nopro-forma information is presented.
3. Investment Securities
The amortized cost and estimated fair value of investment securities that are classified asavailable-for-sale andheld-to-maturity are as follows:
| | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Available-for-Sale | |
| | | Amortized
Cost | | | Gross
Unrealized
Gains | | | Gross
Unrealized
(Losses) | | | Estimated
Fair Value | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 396,323 | | | $ | 1,527 | | | $ | (658 | ) | | $ | 397,192 | |
Residential mortgage-backed securities | | | 446,397 | | | | 884 | | | | (1,534 | ) | | | 445,747 | |
Commercial mortgage-backed securities | | | 446,651 | | | | 1,272 | | | | (1,743 | ) | | | 446,180 | |
State and political subdivisions | | | 244,746 | | | | 4,924 | | | | (536 | ) | | | 249,134 | |
Other securities | | | 35,168 | | | | 2,642 | | | | (378 | ) | | | 37,432 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,569,285 | | | $ | 11,249 | | | $ | (4,849 | ) | | $ | 1,575,685 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Held-to-Maturity | |
| | | Amortized
Cost | | | Gross
Unrealized
Gains | | | Gross
Unrealized
(Losses) | | | Estimated
Fair Value | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 6,093 | | | $ | 26 | | | $ | — | | | $ | 6,119 | |
Residential mortgage-backed securities | | | 60,755 | | | | 233 | | | | (150 | ) | | | 60,838 | |
Commercial mortgage-backed securities | | | 17,878 | | | | 206 | | | | (5 | ) | | | 18,079 | |
State and political subdivisions | | | 150,219 | | | | 3,764 | | | | (2 | ) | | | 153,981 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 234,945 | | | $ | 4,229 | | | $ | (157 | ) | | $ | 239,017 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Available-for-Sale | |
| | | Amortized
Cost | | | Gross
Unrealized
Gains | | | Gross
Unrealized
(Losses) | | | Estimated
Fair Value | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 237,439 | | | $ | 963 | | | $ | (1,641 | ) | | $ | 236,761 | |
Residential mortgage-backed securities | | | 259,037 | | | | 1,226 | | | | (1,627 | ) | | | 258,636 | |
Commercial mortgage-backed securities | | | 322,316 | | | | 845 | | | | (2,342 | ) | | | 320,819 | |
State and political subdivisions | | | 215,209 | | | | 3,471 | | | | (2,181 | ) | | | 216,499 | |
Other securities | | | 38,261 | | | | 2,603 | | | | (659 | ) | | | 40,205 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,072,262 | | | $ | 9,108 | | | $ | (8,450 | ) | | $ | 1,072,920 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Held-to-Maturity | |
| | | Amortized
Cost | | | Gross
Unrealized
Gains | | | Gross
Unrealized
(Losses) | | | Estimated
Fair Value | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 6,637 | | | $ | 23 | | | $ | (32 | ) | | $ | 6,628 | |
Residential mortgage-backed securities | | | 71,956 | | | | 267 | | | | (301 | ) | | | 71,922 | |
Commercial mortgage-backed securities | | | 35,863 | | | | 107 | | | | (133 | ) | | | 35,837 | |
State and political subdivisions | | | 169,720 | | | | 3,100 | �� | | | (169 | ) | | | 172,651 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 284,176 | | | $ | 3,497 | | | $ | (635 | ) | | $ | 287,038 | |
| | | | | | | | | | | | | | | | |
held-to-maturity:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| 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 | $ | 342,771 | | | $ | — | | | $ | 342,771 | | | $ | 1,441 | | | $ | (18,537) | | | $ | 325,675 | |
| U.S. government-sponsored mortgage-backed securities | 1,667,526 | | | — | | | 1,667,526 | | | 396 | | | (215,187) | | | 1,452,735 | |
| Private mortgage-backed securities | 190,155 | | | — | | | 190,155 | | | — | | | (16,614) | | | 173,541 | |
| Non-government-sponsored asset backed securities | 367,066 | | | — | | | 367,066 | | | 695 | | | (6,421) | | | 361,340 | |
| State and political subdivisions | 980,415 | | | — | | | 980,415 | | | 1,104 | | | (81,647) | | | 899,872 | |
| Other securities | 215,676 | | | (2,525) | | | 213,151 | | | 957 | | | (26,387) | | | 187,721 | |
| Total | $ | 3,763,609 | | | $ | (2,525) | | | $ | 3,761,084 | | | $ | 4,593 | | | $ | (364,793) | | | $ | 3,400,884 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| 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 | $ | 43,353 | | | $ | — | | | $ | 43,353 | | | $ | — | | | $ | (3,342) | | | $ | 40,011 | |
| U.S. government-sponsored mortgage-backed securities | 129,077 | | | — | | | 129,077 | | | — | | | (6,093) | | | 122,984 | |
| State and political subdivisions | 1,110,161 | | | (2,005) | | | 1,108,156 | | | 216 | | | (112,222) | | | 996,150 | |
| | | | | | | | | | | |
| Total | $ | 1,282,591 | | | $ | (2,005) | | | $ | 1,280,586 | | | $ | 216 | | | $ | (121,657) | | | $ | 1,159,145 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 361,494 | | | $ | — | | | $ | 361,494 | | | $ | 2,247 | | | $ | (17,093) | | | $ | 346,648 | |
| U.S. government-sponsored mortgage-backed securities | 1,711,668 | | | — | | | 1,711,668 | | | 310 | | | (191,557) | | | 1,520,421 | |
| Private mortgage-backed securities | 191,522 | | | — | | | 191,522 | | | — | | | (16,117) | | | 175,405 | |
| Non-government-sponsored asset backed securities | 370,203 | | | | | 370,203 | | | 821 | | | (7,551) | | | 363,473 | |
| State and political subdivisions | 990,318 | | | — | | | 990,318 | | | 1,938 | | | (75,931) | | | 916,325 | |
| Other securities | 215,722 | | | (2,525) | | | 213,197 | | | 402 | | | (28,030) | | | 185,569 | |
| Total | $ | 3,840,927 | | | $ | (2,525) | | | $ | 3,838,402 | | | $ | 5,718 | | | $ | (336,279) | | | $ | 3,507,841 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 43,285 | | | $ | — | | | $ | 43,285 | | | $ | — | | | $ | (2,607) | | | $ | 40,678 | |
| U.S. government-sponsored mortgage-backed securities | 130,278 | | | — | | | 130,278 | | | 106 | | | (4,362) | | | 126,022 | |
| State and political subdivisions | 1,110,424 | | | (2,005) | | | 1,108,419 | | | 456 | | | (105,094) | | | 1,003,781 | |
| | | | | | | | | | | |
| Total | $ | 1,283,987 | | | $ | (2,005) | | | $ | 1,281,982 | | | $ | 562 | | | $ | (112,063) | | | $ | 1,170,481 | |
Assets, principally investment securities, having a carrying value of approximately
$1.13$3.55 billion and
$1.07$3.57 billion at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively, were pledged to secure public deposits,
as collateral for repurchase agreements, and for other purposes required or permitted by law.
This includes, investmentInvestment securities pledged as collateral for repurchase agreements
which totaled approximately
$149.5$176.1 million and
$121.3$142.1 million at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively.
The amortized cost and estimated fair value of securities classified as
available-for-sale and
held-to-maturity at
September 30, 2017,March 31, 2024, by contractual maturity, are shown below. Expected maturities
willcould differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
| | | | | | | | | | | | | | | | |
| | | Available-for-Sale | | | Held-to-Maturity | |
| | | Amortized
Cost | | | Estimated
Fair Value | | | Amortized
Cost | | | Estimated
Fair Value | |
| | | (In thousands) | |
Due in one year or less | | $ | 137,401 | | | $ | 139,500 | | | $ | 36,805 | | | $ | 38,016 | |
Due after one year through five years | | | 1,023,970 | | | | 1,027,436 | | | | 122,328 | | | | 124,666 | |
Due after five years through ten years | | | 293,622 | | | | 293,978 | | | | 17,556 | | | | 17,806 | |
Due after ten years | | | 114,292 | | | | 114,771 | | | | 58,256 | | | | 58,529 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,569,285 | | | $ | 1,575,685 | | | $ | 234,945 | | | $ | 239,017 | |
| | | | | | | | | | | | | | | | |
For purposes of the maturity tables, mortgage-backed securities, which are Securities not due at a single maturity date have been allocated over maturity groupings based on anticipated maturities. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
are shown separately.
| | | | | | | | | | | | | | | | | | | | | | | |
| Available-for-Sale | | Held-to-Maturity |
| Amortized Cost | | Estimated Fair Value | | Amortized Cost | | Estimated Fair Value |
| (In thousands) |
| Due in one year or less | $ | 15,856 | | | $ | 15,686 | | | $ | — | | | $ | — | |
| Due after one year through five years | 235,704 | | | 220,573 | | | 28,202 | | | 26,487 | |
| Due after five years through ten years | 396,977 | | | 355,394 | | | 313,321 | | | 283,296 | |
| Due after ten years | 890,325 | | | 821,615 | | | 811,991 | | | 726,378 | |
| U.S. government-sponsored mortgage-backed securities | 1,667,526 | | | 1,452,735 | | | 129,077 | | | 122,984 | |
| Private mortgage-backed securities | 190,155 | | | 173,541 | | | — | | | — | |
| Non-government-sponsored asset backed securities | 367,066 | | | 361,340 | | | — | | | — | |
| Total | $ | 3,763,609 | | | $ | 3,400,884 | | | $ | 1,282,591 | | | $ | 1,159,145 | |
During the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017, approximately $234,000 and $27.4 million, respectively, in2023, no available-for-sale securities were sold.
The gross realized gains on the sale for the three-month period ended September 30, 2017 totaled approximately $136,000. The gross realized gains and losses on the sales for the nine-month period ended September 30, 2017 totaled approximately $1.1 million and $127,000, respectively. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.During the three-month period ended September 30, 2016, noavailable-for-sale securities were sold. During the nine-month period ended September 30, 2016, approximately $2.2 million, inavailable-for-sale securities were sold. The gross realized gains on the sales for the nine-month period ended September 30, 2016 totaled approximately $25,000. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
During the three-month period ended September 30, 2017, noheld-to-maturity securities were sold. During the nine-month period ended September 30, 2017, oneheld-to-maturity security experienced its second downgrade in its credit rating. The Company made a strategic decision to sell thisheld-to-maturity security for approximately $483,000, which resulted in a gross realized loss on the sale for the nine-month period ended September 30, 2017 of approximately $7,000.
The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. In completing these evaluations the Company follows the requirements of FASB ASC 320,Investments—Debt and Equity Securities. Certain investment securities are valued less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. The Company does not intend to sell or believe it will be required to sell these investments before recovery of their amortized cost bases, which may be maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.
During the three and nine-month periods ended September 30, 2017, no securities were deemed to have other-than-temporary impairment.
For the nine months ended September 30, 2017, the Company had investment securities with approximately $2.4 million in unrealized losses, which have been in continuous loss positions for more than twelve months. Excluding impairment write downs taken in prior periods, the Company’s assessments indicated that the cause of the market depreciation was primarily the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies. In addition, 73.2% of the Company’s investment portfolio matures in five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.
The following
table shows gross unrealized losses and estimated fair value of investment securities classified as
available-for-sale and
held-to-maturity, with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of
September 30, 2017March 31, 2024 and December 31,
2016: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Less Than 12 Months | | | 12 Months or More | | | Total | |
| | | Fair
Value | | | Unrealized
Losses | | | Fair
Value | | | Unrealized
Losses | | | Fair
Value | | | Unrealized
Losses | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 57,089 | | | $ | (263 | ) | | $ | 51,593 | | | $ | (395 | ) | | $ | 108,682 | | | $ | (658 | ) |
Residential mortgage-backed securities | | | 214,267 | | | | (1,086 | ) | | | 42,101 | | | | (598 | ) | | | 256,368 | | | | (1,684 | ) |
Commercial mortgage-backed securities | | | 154,103 | | | | (937 | ) | | | 61,809 | | | | (811 | ) | | | 215,912 | | | | (1,748 | ) |
State and political subdivisions | | | 30,323 | | | | (248 | ) | | | 13,322 | | | | (290 | ) | | | 43,645 | | | | (538 | ) |
Other securities | | | 1,476 | | | | (39 | ) | | | 8,337 | | | | (339 | ) | | | 9,813 | | | | (378 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 457,258 | | | $ | (2,573 | ) | | $ | 177,162 | | | $ | (2,433 | ) | | $ | 634,420 | | | $ | (5,006 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Less Than 12 Months | | | 12 Months or More | | | Total | |
| | | Fair
Value | | | Unrealized
Losses | | | Fair
Value | | | Unrealized
Losses | | | Fair
Value | | | Unrealized
Losses | |
| | | (In thousands) | |
U.S. government-sponsored enterprises | | $ | 98,180 | | | $ | (1,031 | ) | | $ | 75,044 | | | $ | (642 | ) | | $ | 173,224 | | | $ | (1,673 | ) |
Residential mortgage-backed securities | | | 188,117 | | | | (1,742 | ) | | | 8,902 | | | | (186 | ) | | | 197,019 | | | | (1,928 | ) |
Commercial mortgage-backed securities | | | 202,289 | | | | (2,220 | ) | | | 21,020 | | | | (255 | ) | | | 223,309 | | | | (2,475 | ) |
State and political subdivisions | | | 94,309 | | | | (2,348 | ) | | | 500 | | | | (2 | ) | | | 94,809 | | | | (2,350 | ) |
Other securities | | | 1,540 | | | | (125 | ) | | | 12,687 | | | | (534 | ) | | | 14,227 | | | | (659 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 584,435 | | | $ | (7,466 | ) | | $ | 118,153 | | | $ | (1,619 | ) | | $ | 702,588 | | | $ | (9,085 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| 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 | $ | 29,035 | | | $ | (529) | | | $ | 177,346 | | | $ | (18,008) | | | $ | 206,381 | | | $ | (18,537) | |
| U.S. government-sponsored mortgage-backed securities | 34,770 | | | (956) | | | 1,365,034 | | | (214,231) | | | 1,399,804 | | | (215,187) | |
| Private mortgage-backed securities | — | | | — | | | 173,541 | | | (16,614) | | | 173,541 | | | (16,614) | |
| Non-government-sponsored asset backed securities | 17,486 | | | (15) | | | 212,754 | | | (6,406) | | | 230,240 | | | (6,421) | |
| State and political subdivisions | 32,760 | | | (921) | | | 782,538 | | | (80,726) | | | 815,298 | | | (81,647) | |
| Other securities | 2,415 | | | (1,085) | | | 167,048 | | | (25,302) | | | 169,463 | | | (26,387) | |
| Total | $ | 116,466 | | | $ | (3,506) | | | $ | 2,878,261 | | | $ | (361,287) | | | $ | 2,994,727 | | | $ | (364,793) | |
| Held-to-maturity: | | | | | | | | | | | |
| U.S. government-sponsored enterprises | $ | — | | | $ | — | | | $ | 40,011 | | | $ | (3,342) | | | $ | 40,011 | | | $ | (3,342) | |
| U.S. government-sponsored mortgage-backed securities | 42,125 | | | (960) | | | 80,859 | | | (5,133) | | | 122,984 | | | (6,093) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| State and political subdivisions | 10,816 | | | (480) | | | 961,813 | | | (111,742) | | | 972,629 | | | (112,222) | |
| Total | $ | 52,941 | | | $ | (1,440) | | | $ | 1,082,683 | | | $ | (120,217) | | | $ | 1,135,624 | | | $ | (121,657) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 2,742 | | | $ | (2) | | | $ | 180,569 | | | $ | (17,091) | | | $ | 183,311 | | | $ | (17,093) | |
| U.S. government-sponsored mortgage-backed securities | 102,831 | | | (2,166) | | | 1,392,318 | | | (189,391) | | | 1,495,149 | | | (191,557) | |
| Private mortgage-backed securities | 9,298 | | | (226) | | | 166,107 | | | (15,891) | | | 175,405 | | | (16,117) | |
| Non-government-sponsored asset backed securities | — | | | — | | | 213,838 | | | (7,551) | | | 213,838 | | | (7,551) | |
| State and political subdivisions | 28,596 | | | (400) | | | 769,860 | | | (75,531) | | | 798,456 | | | (75,931) | |
| Other securities | — | | | — | | | 164,430 | | | (28,030) | | | 164,430 | | | (28,030) | |
| Total | $ | 143,467 | | | $ | (2,794) | | | $ | 2,887,122 | | | $ | (333,485) | | | $ | 3,030,589 | | | $ | (336,279) | |
| Held to maturity: | | | | | | | | | | | |
| U.S. government-sponsored enterprises | $ | — | | | $ | — | | | $ | 40,677 | | | $ | (2,607) | | | $ | 40,677 | | | $ | (2,607) | |
| U.S. government-sponsored mortgage-backed securities | 48,498 | | | (861) | | | 65,573 | | | (3,501) | | | 114,071 | | | (4,362) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| State and political subdivisions | 21,493 | | | (297) | | | 956,578 | | | (104,797) | | | 978,071 | | | (105,094) | |
| Total | $ | 69,991 | | | $ | (1,158) | | | $ | 1,062,828 | | | $ | (110,905) | | | $ | 1,132,819 | | | $ | (112,063) | |
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. 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. 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 three months ended March 31, 2024, the Company determined the $2.5 million allowance for credit losses on the available for sale portfolio and the $2.0 million allowance for credit losses on the held-to-maturity portfolio were adequate. Therefore, no additional provision was considered necessary.
| | | | | | | | | | | |
| Available-for-Sale Investment Securities |
| March 31, 2024 | | December 31, 2023 |
| Allowance for credit losses: | (In thousands) |
| Beginning balance | $ | 2,525 | | | $ | 842 | |
| Provision for credit loss | — | | | — | |
| Balance, March 31 | $ | 2,525 | | | $ | 842 | |
| Provision for credit loss | | | 1,683 | |
| Balance, December 31, 2023 | | | $ | 2,525 | |
| | | | | | | | | | | |
| Held-to-Maturity Investment Securities |
| March 31, 2024 | | December 31, 2023 |
| Allowance for credit losses: | (In thousands) |
| Beginning balance | $ | 2,005 | | | $ | 2,005 | |
| Provision for credit loss | — | | | — | |
| Balance, March 31 | $ | 2,005 | | | $ | 2,005 | |
| Provision for credit loss | | | — | |
| Balance, December 31, 2023 | | | $ | 2,005 | |
For the three months ended March 31, 2024, the Company had available-for-sale investment securities with approximately $364.8 million in unrealized losses, of which $361.3 million had been in continuous loss positions for more than twelve months. With the exception of the subordinated debt investment securities which were downgraded during 2023 resulting in the allowance as noted above, the Company’s assessments indicated 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 34.7% 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 March 31, 2024, the Company's available-for-sale securities portfolio consisted of 1,570 investment securities, 1,321 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $364.8 million. The U.S. government-sponsored enterprises portfolio contained unrealized losses of $18.5 million on 63 securities. The U.S. government-sponsored mortgage-backed securities portfolio contained $215.2 million of unrealized losses on 660 securities, and the private mortgage-backed securities portfolio contained $16.6 million of unrealized losses on 32 securities. The non-government-sponsored asset backed securities portfolio contained $6.4 million of unrealized losses on 33 securities. The state and political subdivisions portfolio contained $81.6 million of unrealized losses on 471 securities. In addition, the other securities portfolio contained $26.4 million of unrealized losses on 62 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 March 31, 2024, 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.
As of March 31, 2024, the Company's held-to-maturity securities portfolio consisted of 508 investment securities, 492 of which were in an unrealized loss position. As noted in the table above, the total amount of the unrealized loss was $121.7 million. The U.S. government-sponsored enterprises portfolio contained unrealized losses of $3.3 million on 5 securities. The U.S. government-sponsored mortgage-backed securities portfolio contained unrealized losses of $6.1 million on 20 securities. The state and political subdivisions portfolio contained $112.2 million of unrealized losses on 467 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 March 31, 2024.
The following table summarizes bond ratings for the Company’s held-to-maturity portfolio, based upon amortized cost, issued by state and political subdivisions and other securities as of March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| State and political subdivisions | | U.S. government-sponsored enterprises | | U.S. government-sponsored mortgage-backed securities | | Total |
| (In thousands) |
| Aaa/AAA | $ | 235,082 | | | $ | 43,353 | | | $ | — | | | $ | 278,435 | |
| Aa/AA | 845,485 | | | — | | | — | | | 845,485 | |
| A | 27,686 | | | — | | | — | | | 27,686 | |
| | | | | | | |
| Not rated | 1,908 | | | — | | | — | | | 1,908 | |
| Agency Backed | — | | | — | | | 129,077 | | | 129,077 | |
| Total | $ | 1,110,161 | | | $ | 43,353 | | | $ | 129,077 | | | $ | 1,282,591 | |
Income earned on securities for the three
and nine months ended
September 30, 2017March 31, 2024 and
2016,2023, is as follows:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (In thousands) | |
Taxable: | | | | |
Available-for-sale | | $ | 6,527 | | | $ | 4,809 | | | $ | 17,001 | | | $ | 13,720 | |
Held-to-maturity | | | 544 | | | | 774 | | | | 1,982 | | | | 2,458 | |
Non-taxable: | | | | | | | | | | | | | | | | |
Available-for-sale | | | 1,627 | | | | 1,528 | | | | 4,757 | | | | 4,667 | |
Held-to-maturity | | | 1,405 | | | | 1,192 | | | | 4,185 | | | | 3,691 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 10,103 | | | $ | 8,303 | | | $ | 27,925 | | | $ | 24,536 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended
March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) | | | | |
| Taxable | | | | | | | |
| Available-for-sale | $ | 25,762 | | | $ | 27,798 | | | | | |
| Held-to-maturity | 7,467 | | | 7,490 | | | | | |
| Non-taxable | | | | | | | |
| Available-for-sale | 4,695 | | | 4,826 | | | | | |
| Held-to-maturity | 3,108 | | | 3,137 | | | | | |
| Total | $ | 41,032 | | | $ | 43,251 | | | | | |
The various categories of loans receivable are summarized as follows:
| | | | | | | | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
Real estate: | | | | | | | | |
Commercial real estate loans | | | | | | | | |
Non-farm/non-residential | | $ | 4,532,402 | | | $ | 3,153,121 | |
Construction/land development | | | 1,648,923 | | | | 1,135,843 | |
Agricultural | | | 88,295 | | | | 77,736 | |
Residential real estate loans | | | | | | | | |
Residential1-4 family | | | 1,968,688 | | | | 1,356,136 | |
Multifamily residential | | | 497,910 | | | | 340,926 | |
| | | | | | | | |
Total real estate | | | 8,736,218 | | | | 6,063,762 | |
Consumer | | | 51,515 | | | | 41,745 | |
Commercial and industrial | | | 1,296,485 | | | | 1,123,213 | |
Agricultural | | | 57,489 | | | | 74,673 | |
Other | | | 144,486 | | | | 84,306 | |
| | | | | | | | |
Total loans receivable | | $ | 10,286,193 | | | $ | 7,387,699 | |
| | | | | | | | |
| | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | (In thousands) |
| Real estate: | | | |
| Commercial real estate loans | | | |
| Non-farm/non-residential | $ | 5,616,965 | | | $ | 5,549,954 | |
| Construction/land development | 2,330,555 | | | 2,293,047 | |
| Agricultural | 337,618 | | | 325,156 | |
| Residential real estate loans | | | |
| Residential 1-4 family | 1,899,974 | | | 1,844,260 | |
| Multifamily residential | 415,926 | | | 435,736 | |
| Total real estate | 10,601,038 | | | 10,448,153 | |
| Consumer | 1,163,228 | | | 1,153,690 | |
| Commercial and industrial | 2,284,775 | | | 2,324,991 | |
| Agricultural | 278,609 | | | 307,327 | |
| Other | 186,023 | | | 190,567 | |
| Total loans receivable | 14,513,673 | | | 14,424,728 | |
| Allowance for credit losses | (290,294) | | | (288,234) | |
| Loans receivable, net | $ | 14,223,379 | | | $ | 14,136,494 | |
During the three
and nine-month periodsmonths ended
September 30, 2017,March 31, 2024, the Company sold
$3.1$2.7 million
and $12.9 million, respectively, of the guaranteed
portionportions of certain SBA loans, which resulted in a gain of approximately
$163,000 and $738,000, respectively.$198,000. During the
three-month and nine-month periodsthree months ended
September 30, 2016,March 31, 2023, the Company sold
$5.8$2.2 million
and $7.0 million of the guaranteed
portionportions of certain SBA loans,
respectively, which resulted in
gainsa gain of approximately
$364,000 and $443,000, respectively.$139,000.
Mortgage loans held for sale of approximately $49.4$95.2 million and $56.2$123.4 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, are included in residential1-4 family loans.Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are considered mandatory forward commitments. Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. The Company regularly sells mortgages into the capital markets to mitigate the effects of interest rate volatility during the period from the time an interest rate lock commitment (“IRLC”) is issued until the IRLC funds creating a mortgage loan held for sale and its subsequent sale into the secondary/capital markets. Loan sales are typically executed on a mandatory basis. Under a mandatory commitment, the Company agrees to deliver a specified dollar amount with predetermined terms by a certain date. Generally, the commitment is not loan specific, and any combination of loans can be delivered into the outstanding commitment provided the terms fall within the parameters of the commitment. Upon failure to deliver, the Company is subject to fees based on market movement. These commitments and IRLCs are derivative instruments and their fair values at September 30, 2017March 31, 2024 and December 31, 20162023 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 had $3.65 billiondevelops 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 purchasedthe 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 $90.5 million and $130.7 million in PCD loans, as of March 31, 2024 and December 31, 2023, respectively. This balance, as of March 31, 2024, consisted of $90.1 million resulting from the acquisition of Happy and $362,000 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 2023 Form 10-K filed with the SEC on February 26, 2024.
5. Allowance for Credit Losses, Credit Quality and Other
The Company uses the discounted cash flow (“DCF”) method to estimate expected losses for all of the Company’s loan pools. These pools are as follows: construction & land development; other commercial real estate; residential real estate; commercial & industrial; and consumer & other. The loan portfolio pools were selected in order to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council. For each of these loan pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.
Management qualitatively adjusts model results for risk factors ("Q-Factors") that are not considered within our modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the impact of (i) changes in lending policies, procedures and strategies; (ii) changes in nature and volume of the portfolio; (iii) staff experience; (iv) changes in volume and trends in classified loans, delinquencies and nonaccruals; (v) concentration risk; (vi) trends in underlying collateral values; (vii) external factors such as competition, legal and regulatory environment; (viii) changes in the quality of the loan review system; and (ix) economic conditions.
Each year management evaluates the performance of the selected models used in the CECL calculation through backtesting. Based on the results of the testing, management determines if the various models produced accurate results compared to the actual losses incurred for the current economic environment. Management then determines if changes to the input assumptions and economic factors would produce a stronger overall calculation that is more responsive to changes in economic conditions. The Company continues to use regression analysis to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default for the changes in the economic factors for the loss driver segments. The identified loss drivers by segment are included below as of both March 31, 2024 and December 31, 2023.
| | | | | | | | |
|
| Loss Driver Segment | Call Report Segment(s) | Modeled Economic Factors |
| 1-4 Family Construction | 1a1 | National Unemployment (%) & Housing Price Index (%) |
| All Other Construction | 1a2 | National Unemployment (%) & Gross Domestic Product (%) |
| 1-4 Family Revolving HELOC & Junior Liens | 1c1 | National Unemployment (%) & Housing Price Index – CoreLogic (%) |
| 1-4 Family Revolving HELOC & Junior Liens | 1c2b | National Unemployment (%) & Gross Domestic Product (%) |
| 1-4 Family Senior Liens | 1c2a | National Unemployment (%) & Gross Domestic Product (%) |
| Multifamily | 1d | Rental Vacancy Rate (%) & Housing Price Index – Case-Schiller (%) |
| Owner Occupied CRE | 1e1 | National Unemployment (%) & Gross Domestic Product (%) |
| Non-Owner Occupied CRE | 1e2,1b,8 | National Unemployment (%) & Gross Domestic Product (%) |
| Commercial & Industrial, Agricultural, Non-Depository Financial Institutions, Purchase/Carry Securities, Other | 4a, 3, 9a, 9b1, 9b2, 10, Other | National Unemployment (%) & National Retail Sales (%) |
| Consumer Auto | 6c | National Unemployment (%) & National Retail Sales (%) |
| Other Consumer | 6b, 6d | National Unemployment (%) & National Retail Sales (%) |
| Other Consumer - SPF | 6d | National Unemployment (%) |
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics.
The combination of adjustments for credit expectations (default and loss) and time expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An allowance for credit loss is established for the difference between the instrument’s NPV and amortized cost basis.
Construction/Land Development and OtherCommercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30 year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.
Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Residential real estate loans generally have a loan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to many factors including the borrower’s ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.
Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.
Consumer & Other Loans. Our consumer & other loans are primarily composed of loans to finance USCG registered high-end sail and power boats. The performance of consumer & other loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.
Off-Balance Sheet Credit Exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit loss on off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes $158.0consideration 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.
During the three months ended March 31, 2024, the Company recorded $5.5 million
of discountin provision for credit losses on
purchased loans,
at September 30, 2017. Theand the Company
had $55.1reversed $1.0 million
and $102.9in provision for unfunded commitments. During the three months ended March 31, 2023, the Company recorded $1.2 million
remaining ofnon-accretable discountin provision for credit losses on
purchased loans, and
accretable discountthe Company determined that no additional provision was necessary for
credit losses on purchased loans, respectively,unfunded commitments as
the current level of
September 30, 2017. The Company had $1.13 billion of purchased loans, which includes $100.1 million of discount for credit losses on purchased loans, at December 31, 2016. The Company had $35.3 million and $64.9 million remaining ofnon-accretable discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of December 31, 2016.5. Allowance for Loan Losses, Credit Quality and Other
the reserve was considered adequate.
The following table presents a summary of changesthe activity in the allowance for loan losses: | | | | |
| | | Nine Months Ended
September 30, 2017 | |
| | | (In thousands) | |
Allowance for loan losses: | | | | |
Beginning balance | | $ | 80,002 | |
Loans charged off | | | (10,535 | ) |
Recoveries of loans previously charged off | | | 2,829 | |
| | | | |
Net loans recovered (charged off) | | | (7,706 | ) |
| | | | |
Provision for loan losses | | | 39,324 | |
| | | | |
Balance, September 30, 2017 | | $ | 111,620 | |
| | | | |
credit losses for the three months ended March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2024 |
| Construction/
Land
Development | | Other
Commercial
Real Estate | | Residential
Real Estate | | Commercial
& Industrial | | Consumer
& Other | | Total |
| (In thousands) |
| Allowance for credit losses: | | | | | | | | | | | |
| Beginning balance | $ | 33,877 | | | $ | 78,635 | | | $ | 55,860 | | | $ | 92,810 | | | $ | 27,052 | | | $ | 288,234 | |
| | | | | | | | | | | |
| Loans charged off | (1) | | | (1,102) | | | (159) | | | (1,746) | | | (970) | | | (3,978) | |
| Recoveries of loans previously charged off | 7 | | | 20 | | | 19 | | | 101 | | | 391 | | | 538 | |
| Net loans recovered (charged off) | 6 | | | (1,082) | | | (140) | | | (1,645) | | | (579) | | | (3,440) | |
| | | | | | | | | | | |
| Provision for credit losses | 2,038 | | | 1,575 | | | 1,183 | | | (157) | | | 861 | | | 5,500 | |
| Balance, March 31 | $ | 35,921 | | | $ | 79,128 | | | $ | 56,903 | | | $ | 91,008 | | | $ | 27,334 | | | $ | 290,294 | |
The following
tables presenttable presents the
balanceactivity in the allowance for
loancredit losses for the three
and nine-month periodsmonths ended
September 30, 2017, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of September 30, 2017. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2017 | |
| | | Construction/
Land
Development | | | Other
Commercial
Real Estate | | | Residential
Real Estate | | | Commercial
& Industrial | | | Consumer
& Other | | | Unallocated | | | Total | |
| | | (In thousands) | |
Allowance for loan losses: | | | | |
Beginning balance | | $ | 12,842 | | | $ | 27,843 | | | $ | 17,715 | | | $ | 12,828 | | | $ | 3,063 | | | $ | 5,847 | | | $ | 80,138 | |
Loans charged off | | | (182 | ) | | | (796 | ) | | | (309 | ) | | | (2,280 | ) | | | (857 | ) | | | — | | | | (4,424 | ) |
Recoveries of loans previously charged off | | | 85 | | | | 278 | | | | 226 | | | | 140 | | | | 154 | | | | — | | | | 883 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans recovered (charged off) | | | (97 | ) | | | (518 | ) | | | (83 | ) | | | (2,140 | ) | | | (703 | ) | | | — | | | | (3,541 | ) |
Provision for loan losses | | | 6,175 | | | | 18,192 | | | | 8,036 | | | | 3,934 | | | | 1,292 | | | | (2,606 | ) | | | 35,023 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30 | | $ | 18,920 | | | $ | 45,517 | | | $ | 25,668 | | | $ | 14,622 | | | $ | 3,652 | | | $ | 3,241 | | | $ | 111,620 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2017 | |
| | | Construction/
Land
Development | | | Other
Commercial
Real Estate | | | Residential
Real Estate | | | Commercial
& Industrial | | | Consumer
& Other | | | Unallocated | | | Total | |
| | | (In thousands) | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning balance | | $ | 11,522 | | | $ | 28,188 | | | $ | 16,517 | | | $ | 12,756 | | | $ | 4,188 | | | $ | 6,831 | | | $ | 80,002 | |
Loans charged off | | | (508 | ) | | | (2,451 | ) | | | (2,597 | ) | | | (3,059 | ) | | | (1,920 | ) | | | — | | | | (10,535 | ) |
Recoveries of loans previously charged off | | | 312 | | | | 988 | | | | 480 | | | | 392 | | | | 657 | | | | — | | | | 2,829 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans recovered (charged off) | | | (196 | ) | | | (1,463 | ) | | | (2,117 | ) | | | (2,667 | ) | | | (1,263 | ) | | | — | | | | (7,706 | ) |
Provision for loan losses | | | 7,594 | | | | 18,792 | | | | 11,268 | | | | 4,533 | | | | 727 | | | | (3,590 | ) | | | 39,324 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30 | | $ | 18,920 | | | $ | 45,517 | | | $ | 25,668 | | | $ | 14,622 | | | $ | 3,652 | | | $ | 3,241 | | | $ | 111,620 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of September 30, 2017 | |
| | | Construction/
Land
Development | | | Other
Commercial
Real Estate | | | Residential
Real Estate | | | Commercial
& Industrial | | | Consumer
& Other | | | Unallocated | | | Total | |
| | | (In thousands) | |
Allowance for loan losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period end amount allocated to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 1,066 | | | $ | 995 | | | $ | 306 | | | $ | 512 | | | $ | 8 | | | $ | — | | | $ | 2,887 | |
Loans collectively evaluated for impairment | | | 17,839 | | | | 44,016 | | | | 24,467 | | | | 13,925 | | | | 3,613 | | | | 3,241 | | | | 107,101 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment balance, September 30 | | | 18,905 | | | | 45,011 | | | | 24,773 | | | | 14,437 | | | | 3,621 | | | | 3,241 | | | | 109,988 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | 15 | | | | 506 | | | | 895 | | | | 185 | | | | 31 | | | | — | | | | 1,632 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30 | | $ | 18,920 | | | $ | 45,517 | | | $ | 25,668 | | | $ | 14,622 | | | $ | 3,652 | | | $ | 3,241 | | | $ | 111,620 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period end amount allocated to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 31,130 | | | $ | 50,518 | | | $ | 22,601 | | | $ | 13,958 | | | $ | 1,009 | | | $ | — | | | $ | 119,216 | |
Loans collectively evaluated for impairment | | | 1,601,961 | | | | 4,442,747 | | | | 2,392,014 | | | | 1,265,189 | | | | 250,074 | | | | — | | | | 9,951,985 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment balance, September 30 | | | 1,633,091 | | | | 4,493,265 | | | | 2,414,615 | | | | 1,279,147 | | | | 251,083 | | | | — | | | | 10,071,201 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | 15,832 | | | | 127,432 | | | | 51,983 | | | | 17,338 | | | | 2,407 | | | | — | | | | 214,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30 | | $ | 1,648,923 | | | $ | 4,620,697 | | | $ | 2,466,598 | | | $ | 1,296,485 | | | $ | 253,490 | | | $ | — | | | $ | 10,286,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following tables present the balances in the allowance for loan losses for the nine-month period ended September 30, 2016March 31, 2023 and the year ended December 31, 2016,2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 and Year Ended December 31, 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 | (25) | | | (73) | | | (59) | | | (3,006) | | | (1,125) | | | (4,288) | |
| Recoveries of loans previously charged off | 7 | | | 19 | | | 126 | | | 109 | | | 327 | | | 588 | |
| Net loans (charged off) recovered | (18) | | | (54) | | | 67 | | | (2,897) | | | (798) | | | (3,700) | |
| | | | | | | | | | | |
| Provision for credit loss - loans | (1,053) | | | (6,816) | | | 403 | | | 5,939 | | | 2,727 | | | 1,200 | |
| Balance, March 31 | 31,172 | | — | 86,978 | | — | 51,433 | | — | 92,396 | | — | 25,190 | | | 287,169 | |
| Loans charged off | (238) | | | (2,262) | | | (210) | | | (6,151) | | | (2,906) | | | (11,767) | |
| Recoveries of loans previously charged off | 106 | | | 514 | | | 203 | | | 474 | | | 785 | | | 2,082 | |
| Net loans (charged off) recovered | (132) | | | (1,748) | | | (7) | | | (5,677) | | | (2,121) | | | (9,685) | |
| Provision for credit loss - loans | 2,837 | | | (6,595) | | | 4,434 | | | 6,091 | | | 3,983 | | | 10,750 | |
| Balance, December 31 | $ | 33,877 | | | $ | 78,635 | | | $ | 55,860 | | | $ | 92,810 | | | $ | 27,052 | | | $ | 288,234 | |
The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Nonaccrual | | Nonaccrual
with Reserve | | Loans Past Due
Over 90 Days
Still Accruing |
| (In thousands) |
| Real estate: | | | | | |
| Commercial real estate loans | | | | | |
| Non-farm/non-residential | $ | 12,887 | | | $ | — | | | $ | 9,377 | |
| Construction/land development | 15,782 | | | 9,059 | | | 603 | |
| Agricultural | 414 | | | — | | | — | |
| Residential real estate loans | | | | | |
| Residential 1-4 family | 22,037 | | | — | | | 543 | |
| | | | | |
| Total real estate | 51,120 | | | 9,059 | | | 10,523 | |
| Consumer | 4,639 | | | — | | | 48 | |
| Commercial and industrial | 10,969 | | | 3,112 | | | 2,311 | |
| Agricultural & other | 327 | | | — | | | 46 | |
| Total | $ | 67,055 | | | $ | 12,171 | | | $ | 12,928 | |
| | | | | | | | | | | | | | | | | |
| | December 31, 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 | $ | 13,178 | | | $ | — | | | $ | 2,177 | |
| Construction/land development | 12,094 | | | — | | | 255 | |
| Agricultural | 431 | | | — | | | — | |
| Residential real estate loans | | | | | |
| Residential 1-4 family | 20,351 | | | — | | | 84 | |
| Multifamily residential | — | | | — | | | — | |
| Total real estate | 46,054 | | | — | | | 2,516 | |
| Consumer | 3,423 | | | — | | | 79 | |
| Commercial and industrial | 9,982 | | | 2,534 | | | 1,535 | |
| Agricultural & other | 512 | | | — | | | — | |
| Total | $ | 59,971 | | | $ | 2,534 | | | $ | 4,130 | |
The Company had $67.1 million and $60.0 million in nonaccrual loans for the periods ended March 31, 2024 and December 31, 2023, respectively. In addition, the Company had $12.9 million and $4.1 million in loans past due 90 days or more and still accruing for the periods ended March 31, 2024 and December 31, 2023, respectively.
The Company had $12.2 million and $2.5 million in nonaccrual loans with a specific reserve as of March 31, 2024 and December 31, 2023, respectively.Interest income recognized on the non-accrual loans for the periods ended March 31, 2024 and March 31, 2023 was considered immaterial.
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 March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Commercial
Real Estate | | Residential
Real Estate | | Other |
| (In thousands) |
| Real estate: | | | | | |
| Commercial real estate loans | | | | | |
| Non-farm/non-residential | $ | 44,193 | | | $ | — | | | $ | — | |
| Construction/land development | 16,385 | | | — | | | — | |
| Agricultural | 414 | | | — | | | — | |
| Residential real estate loans | | | | | |
| Residential 1-4 family | — | | | 23,696 | | | — | |
| Multifamily residential | — | | | — | | | — | |
| Total real estate | 60,992 | | | 23,696 | | | — | |
| Consumer | — | | | — | | | 4,696 | |
| Commercial and industrial | — | | | — | | | 15,536 | |
| Agricultural & other | — | | | — | | | 373 | |
| Total | $ | 60,992 | | | $ | 23,696 | | | $ | 20,605 | |
| | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| Commercial
Real Estate | | Residential
Real Estate | | Other |
| (In thousands) |
| Real estate: | | | | | |
| Commercial real estate loans | | | | | |
| Non-farm/non-residential | $ | 39,813 | | | $ | — | | | $ | — | |
| Construction/land development | 12,350 | | | — | | | — | |
| Agricultural | 431 | | | — | | | — | |
| Residential real estate loans | | | | | |
| Residential 1-4 family | — | | | 21,386 | | | — | |
| Multifamily residential | — | | | — | | | — | |
| Total real estate | 52,594 | | | 21,386 | | | — | |
| Consumer | — | | | — | | | 3,511 | |
| Commercial and industrial | — | | | — | | | 16,890 | |
| Agricultural & other | — | | | — | | | 512 | |
| Total | $ | 52,594 | | | $ | 21,386 | | | $ | 20,913 | |
The Company had $105.3 million and $94.9 million in impaired loans for the periods ended March 31, 2024 and December 31, 2023, 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 loancredit losses and recorded investment in loans receivableis measured based on portfolio segment by impairment methodthe difference between the fair value of the collateral, net of estimated costs to sell, and the amortized cost basis of the loan as of December 31, 2016. Allocation of a portionthe measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated costs to sell. The allowance 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 one typesell.
Table of loans does not preclude its availability to absorb losses in other categories. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2016 | |
| | | Construction/
Land
Development | | | Other
Commercial
Real Estate | | | Residential
Real Estate | | | Commercial
& Industrial | | | Consumer
& Other | | | Unallocated | | | Total | |
| | | (In thousands) | |
Allowance for loan losses: | | | | |
Beginning balance | | $ | 10,782 | | | $ | 26,798 | | | $ | 14,818 | | | $ | 9,324 | | | $ | 5,016 | | | $ | 2,486 | | | $ | 69,224 | |
Loans charged off | | | (334 | ) | | | (2,590 | ) | | | (3,810 | ) | | | (4,424 | ) | | | (1,507 | ) | | | — | | | | (12,665 | ) |
Recoveries of loans previously charged off | | | 107 | | | | 608 | | | | 836 | | | | 656 | | | | 699 | | | | — | | | | 2,906 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans recovered (charged off) | | | (227 | ) | | | (1,982 | ) | | | (2,974 | ) | | | (3,768 | ) | | | (808 | ) | | | — | | | | (9,759 | ) |
Provision for loan losses | | | 171 | | | | 274 | | | | 4,181 | | | | 9,049 | | | | 448 | | | | 2,782 | | | | 16,905 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, September 30 | | | 10,726 | | | | 25,090 | | | | 16,025 | | | | 14,605 | | | | 4,656 | | | | 5,268 | | | | 76,370 | |
Loans charged off | | | (48 | ) | | | (996 | ) | | | (1,787 | ) | | | (1,354 | ) | | | (651 | ) | | | — | | | | (4,836 | ) |
Recoveries of loans previously charged off | | | 1,018 | | | | 249 | | | | 316 | | | | 4,877 | | | | 305 | | | | — | | | | 6,765 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loans recovered (charged off) | | | 970 | | | | (747 | ) | | | (1,471 | ) | | | 3,523 | | | | (346 | ) | | | — | | | | 1,929 | |
Provision for loan losses | | | (174 | ) | | | 3,845 | | | | 1,963 | | | | (5,372 | ) | | | (122 | ) | | | 1,563 | | | | 1,703 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31 | | $ | 11,522 | | | $ | 28,188 | | | $ | 16,517 | | | $ | 12,756 | | | $ | 4,188 | | | $ | 6,831 | | | $ | 80,002 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2016 | |
| | | Construction/
Land
Development | | | Other
Commercial
Real Estate | | | Residential
Real Estate | | | Commercial
& Industrial | | | Consumer
& Other | | | Unallocated | | | Total | |
| | | (In thousands) | |
Allowance for loan losses: | | | | |
Period end amount allocated to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 15 | | | $ | 1,416 | | | $ | 103 | | | $ | 95 | | | $ | — | | | $ | — | | | $ | 1,629 | |
Loans collectively evaluated for impairment | | | 11,463 | | | | 25,641 | | | | 15,796 | | | | 12,596 | | | | 4,176 | | | | 6,831 | | | | 76,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment balance, December 31 | | | 11,478 | | | | 27,057 | | | | 15,899 | | | | 12,691 | | | | 4,176 | | | | 6,831 | | | | 78,132 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | 44 | | | | 1,131 | | | | 618 | | | | 65 | | | | 12 | | | | — | | | | 1,870 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31 | | $ | 11,522 | | | $ | 28,188 | | | $ | 16,517 | | | $ | 12,756 | | | $ | 4,188 | | | $ | 6,831 | | | $ | 80,002 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans receivable: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period end amount allocated to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans individually evaluated for impairment | | $ | 12,374 | | | $ | 74,723 | | | $ | 35,187 | | | $ | 25,873 | | | $ | 1,096 | | | $ | — | | | $ | 149,253 | |
Loans collectively evaluated for impairment | | | 1,105,921 | | | | 3,080,201 | | | | 1,608,805 | | | | 1,085,891 | | | | 198,064 | | | | — | | | | 7,078,882 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans evaluated for impairment balance, December 31 | | | 1,118,295 | | | | 3,154,924 | | | | 1,643,992 | | | | 1,111,764 | | | | 199,160 | | | | — | | | | 7,228,135 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | 17,548 | | | | 75,933 | | | | 53,070 | | | | 11,449 | | | | 1,564 | | | | — | | | | 159,564 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31 | | $ | 1,135,843 | | | $ | 3,230,857 | | | $ | 1,697,062 | | | $ | 1,123,213 | | | $ | 200,724 | | | $ | — | | | $ | 7,387,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contents
The following is an aging analysis for loans receivable as of
September 30, 2017March 31, 2024 and December 31,
2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Loans
Past Due
30-59 Days | | | Loans
Past Due
60-89 Days | | | Loans
Past Due
90 Days
or More | | | Total
Past Due | | | Current
Loans | | | Total Loans
Receivable | | | Accruing
Loans
Past Due
90 Days
or More | |
| | | (In thousands) | |
Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 3,806 | | | $ | 2,684 | | | $ | 27,418 | | | $ | 33,908 | | | $ | 4,498,494 | | | $ | 4,532,402 | | | $ | 16,482 | |
Construction/land development | | | 2,267 | | | | 309 | | | | 8,778 | | | | 11,354 | | | | 1,637,569 | | | | 1,648,923 | | | | 3,258 | |
Agricultural | | | 152 | | | | — | | | | 34 | | | | 186 | | | | 88,109 | | | | 88,295 | | | | — | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 8,768 | | | | 1,659 | | | | 18,441 | | | | 28,868 | | | | 1,939,820 | | | | 1,968,688 | | | | 4,624 | |
Multifamily residential | | | 595 | | | | — | | | | 1,194 | | | | 1,789 | | | | 496,121 | | | | 497,910 | | | | 1,039 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 15,588 | | | | 4,652 | | | | 55,865 | | | | 76,105 | | | | 8,660,113 | | | | 8,736,218 | | | | 25,403 | |
Consumer | | | 729 | | | | 18 | | | | 142 | | | | 889 | | | | 50,626 | | | | 51,515 | | | | 3 | |
Commercial and industrial | | | 3,275 | | | | 3,229 | | | | 7,792 | | | | 14,296 | | | | 1,282,189 | | | | 1,296,485 | | | | 3,771 | |
Agricultural and other | | | 363 | | | | 101 | | | | 178 | | | | 642 | | | | 201,333 | | | | 201,975 | | | | 6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 19,955 | | | $ | 8,000 | | | $ | 63,977 | | | $ | 91,932 | | | $ | 10,194,261 | | | $ | 10,286,193 | | | $ | 29,183 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Loans
Past Due
30-59 Days | | | Loans
Past Due
60-89 Days | | | Loans
Past Due
90 Days
or More | | | Total
Past Due | | | Current
Loans | | | Total Loans
Receivable | | | Accruing
Loans
Past Due
90 Days
or More | |
| | | (In thousands) | |
Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 2,036 | | | $ | 686 | | | $ | 27,518 | | | $ | 30,240 | | | $ | 3,122,881 | | | $ | 3,153,121 | | | $ | 9,530 | |
Construction/land development | | | 685 | | | | 16 | | | | 7,042 | | | | 7,743 | | | | 1,128,100 | | | | 1,135,843 | | | | 3,086 | |
Agricultural | | | — | | | | — | | | | 435 | | | | 435 | | | | 77,301 | | | | 77,736 | | | | — | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 6,972 | | | | 1,287 | | | | 23,307 | | | | 31,566 | | | | 1,324,570 | | | | 1,356,136 | | | | 2,996 | |
Multifamily residential | | | — | | | | — | | | | 262 | | | | 262 | | | | 340,664 | | | | 340,926 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 9,693 | | | | 1,989 | | | | 58,564 | | | | 70,246 | | | | 5,993,516 | | | | 6,063,762 | | | | 15,612 | |
Consumer | | | 117 | | | | 66 | | | | 161 | | | | 344 | | | | 41,401 | | | | 41,745 | | | | 21 | |
Commercial and industrial | | | 984 | | | | 582 | | | | 3,464 | | | | 5,030 | | | | 1,118,183 | | | | 1,123,213 | | | | 309 | |
Agricultural and other | | | 782 | | | | 10 | | | | 935 | | | | 1,727 | | | | 157,252 | | | | 158,979 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 11,576 | | | $ | 2,647 | | | $ | 63,124 | | | $ | 77,347 | | | $ | 7,310,352 | | | $ | 7,387,699 | | | $ | 15,942 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Loans
Past Due
30-59 Days | | Loans
Past Due
60-89 Days | | Loans
Past Due
90 Days
or More | | Total
Past Due | | Current
Loans | | Total
Loans
Receivable | | Accruing
Loans
Past Due
90 Days
or More |
| (In thousands) |
| Real estate: | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | |
| Non-farm/non-residential | $ | 2,628 | | | $ | 1,148 | | | $ | 22,264 | | | $ | 26,040 | | | $ | 5,590,925 | | | $ | 5,616,965 | | | $ | 9,377 | |
| Construction/land development | 1,525 | | | 103 | | | 16,385 | | | 18,013 | | | 2,312,542 | | | 2,330,555 | | | 603 | |
| Agricultural | 301 | | | 311 | | | 414 | | | 1,026 | | | 336,592 | | | 337,618 | | | — | |
| Residential real estate loans | | | | | | | | | | | | | |
| Residential 1-4 family | 10,488 | | | 1,466 | | | 22,580 | | | 34,534 | | | 1,865,440 | | | 1,899,974 | | | 543 | |
| Multifamily residential | 790 | | | — | | | — | | | 790 | | | 415,136 | | | 415,926 | | | — | |
| Total real estate | 15,732 | | | 3,028 | | | 61,643 | | | 80,403 | | | 10,520,635 | | | 10,601,038 | | | 10,523 | |
| Consumer | 417 | | | 151 | | | 4,687 | | | 5,255 | | | 1,157,973 | | | 1,163,228 | | | 48 | |
| Commercial and industrial | 1,426 | | | 2,747 | | | 13,280 | | | 17,453 | | | 2,267,322 | | | 2,284,775 | | | 2,311 | |
| Agricultural & other | 462 | | | 48 | | | 373 | | | 883 | | | 463,749 | | | 464,632 | | | 46 | |
| Total | $ | 18,037 | | | $ | 5,974 | | | $ | 79,983 | | | $ | 103,994 | | | $ | 14,409,679 | | | $ | 14,513,673 | | | $ | 12,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 8,124 | | | $ | 416 | | | $ | 15,355 | | | $ | 23,895 | | | $ | 5,526,059 | | | $ | 5,549,954 | | | $ | 2,177 | |
| Construction/land development | 1,430 | | | — | | | 12,349 | | | 13,779 | | | 2,279,268 | | | 2,293,047 | | | 255 | |
| Agricultural | 474 | | | 314 | | | 431 | | | 1,219 | | | 323,937 | | | 325,156 | | | — | |
| Residential real estate loans | | | | | | | | | | | | | |
| Residential 1-4 family | 4,346 | | | 1,423 | | | 20,435 | | | 26,204 | | | 1,818,056 | | | 1,844,260 | | | 84 | |
| Multifamily residential | — | | | — | | | — | | | — | | | 435,736 | | | 435,736 | | | — | |
| Total real estate | 14,374 | | | 2,153 | | | 48,570 | | | 65,097 | | | 10,383,056 | | | 10,448,153 | | | 2,516 | |
| Consumer | 1,022 | | | 303 | | | 3,502 | | | 4,827 | | | 1,148,863 | | | 1,153,690 | | | 79 | |
| Commercial and industrial | 2,089 | | | 3,378 | | | 11,517 | | | 16,984 | | | 2,308,007 | | | 2,324,991 | | | 1,535 | |
| Agricultural and other | 1,074 | | | 113 | | | 512 | | | 1,699 | | | 496,195 | | | 497,894 | | | — | |
| Total | $ | 18,559 | | | $ | 5,947 | | | $ | 64,101 | | | $ | 88,607 | | | $ | 14,336,121 | | | $ | 14,424,728 | | | $ | 4,130 | |
Non-accruing loans at
September 30, 2017March 31, 2024 and December 31,
20162023 were
$34.8$67.1 million and
$47.2$60.0 million, respectively.
The following is a summary of the impaired loans as of September 30, 2017 and December 31, 2016:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | | | | | | | | | | Three Months Ended | | | Nine Months Ended | |
| | | Unpaid
Contractual
Principal
Balance | | | Total
Recorded
Investment | | | Allocation
of Allowance
for Loan
Losses | | | Average
Recorded
Investment | | | Interest
Recognized | | | Average
Recorded
Investment | | | Interest
Recognized | |
| | | (In thousands) | |
Loans without a specific valuation allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 29 | | | $ | — | | | $ | — | | | $ | 15 | | | $ | 1 | | | $ | 15 | | | $ | 2 | |
Construction/land development | | | 66 | | | | — | | | | — | | | | 12 | | | | 1 | | | | 6 | | | | 3 | |
Agricultural | | | 35 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 79 | | | | — | | | | — | | | | 101 | | | | 2 | | | | 108 | | | | 7 | |
Multifamily residential | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 209 | | | | — | | | | — | | | | 128 | | | | 4 | | | | 129 | | | | 13 | |
Consumer | | | 4 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Commercial and industrial | | | 101 | | | | — | | | | — | | | | 41 | | | | 2 | | | | 51 | | | | 6 | |
Agricultural and other | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans without a specific valuation allowance | | | 314 | | | | — | | | | — | | | | 169 | | | | 6 | | | | 180 | | | | 19 | |
Loans with a specific valuation allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 49,606 | | | | 45,312 | | | | 982 | | | | 42,245 | | | | 662 | | | | 44,962 | | | | 1,311 | |
Construction/land development | | | 13,897 | | | | 12,875 | | | | 1,066 | | | | 11,177 | | | | 58 | | | | 10,173 | | | | 192 | |
Agricultural | | | 281 | | | | 319 | | | | 13 | | | | 218 | | | | 4 | | | | 259 | | | | 7 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 24,833 | | | | 21,042 | | | | 231 | | | | 20,893 | | | | 116 | | | | 23,294 | | | | 298 | |
Multifamily residential | | | 2,812 | | | | 2,681 | | | | 75 | | | | 2,168 | | | | 32 | | | | 1,358 | | | | 64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 91,429 | | | | 82,229 | | | | 2,367 | | | | 76,701 | | | | 872 | | | | 80,046 | | | | 1,872 | |
Consumer | | | 153 | | | | 149 | | | | — | | | | 145 | | | | — | | | | 156 | | | | — | |
Commercial and industrial | | | 18,354 | | | | 14,271 | | | | 512 | | | | 10,308 | | | | 76 | | | | 8,935 | | | | 84 | |
Agricultural and other | | | 312 | | | | 343 | | | | 8 | | | | 606 | | | | 3 | | | | 728 | | | | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans with a specific valuation allowance | | | 110,248 | | | | 96,992 | | | | 2,887 | | | | 87,760 | | | | 951 | | | | 89,865 | | | | 1,961 | |
Total impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 49,635 | | | | 45,312 | | | | 982 | | | | 42,260 | | | | 663 | | | | 44,977 | | | | 1,313 | |
Construction/land development | | | 13,963 | | | | 12,875 | | | | 1,066 | | | | 11,189 | | | | 59 | | | | 10,179 | | | | 195 | |
Agricultural | | | 316 | | | | 319 | | | | 13 | | | | 218 | | | | 4 | | | | 259 | | | | 8 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 24,912 | | | | 21,042 | | | | 231 | | | | 20,994 | | | | 118 | | | | 23,402 | | | | 305 | |
Multifamily residential | | | 2,812 | | | | 2,681 | | | | 75 | | | | 2,168 | | | | 32 | | | | 1,358 | | | | 64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 91,638 | | | | 82,229 | | | | 2,367 | | | | 76,829 | | | | 876 | | | | 80,175 | | | | 1,885 | |
Consumer | | | 157 | | | | 149 | | | | — | | | | 145 | | | | — | | | | 156 | | | | — | |
Commercial and industrial | | | 18,455 | | | | 14,271 | | | | 512 | | | | 10,349 | | | | 78 | | | | 8,986 | | | | 90 | |
Agricultural and other | | | 312 | | | | 343 | | | | 8 | | | | 606 | | | | 3 | | | | 728 | | | | 5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 110,562 | | | $ | 96,992 | | | $ | 2,887 | | | $ | 87,929 | | | $ | 957 | | | $ | 90,045 | | | $ | 1,980 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: Purchased credit impaired loans are accounted for on a pooled basis under ASC310-30. All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans being classified as impaired loans as of September 30, 2017.
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | | | | | | | | | | Year Ended | |
| | | Unpaid
Contractual
Principal
Balance | | | Total
Recorded
Investment | | | Allocation of
Allowance
for Loan
Losses | | | Average
Recorded
Investment | | | Interest
Recognized | |
| | | (In thousands) | |
Loans without a specific valuation allowance | | | | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 29 | | | $ | 29 | | | $ | — | | | $ | 23 | | | $ | 2 | |
Construction/land development | | | — | | | | — | | | | — | | | | 6 | | | | — | |
Agricultural | | | 40 | | | | — | | | | — | | | | — | | | | 2 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 231 | | | | 231 | | | | — | | | | 119 | | | | 15 | |
Multifamily residential | | | — | | | | — | | | | — | | | | 19 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 300 | | | | 260 | | | | — | | | | 167 | | | | 19 | |
Consumer | | | — | | | | — | | | | — | | | | — | | | | — | |
Commercial and industrial | | | 124 | | | | 124 | | | | — | | | | 64 | | | | 8 | |
Agricultural and other | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total loans without a specific valuation allowance | | | 424 | | | | 384 | | | | — | | | | 231 | | | | 27 | |
Loans with a specific valuation allowance | | | | | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 52,477 | | | | 50,355 | | | | 1,414 | | | | 42,979 | | | | 1,335 | |
Construction/land development | | | 8,313 | | | | 7,595 | | | | 15 | | | | 12,878 | | | | 334 | |
Agricultural | | | 395 | | | | 438 | | | | 2 | | | | 469 | | | | — | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 26,681 | | | | 25,675 | | | | 95 | | | | 20,239 | | | | 293 | |
Multifamily residential | | | 552 | | | | 552 | | | | 8 | | | | 922 | | | | 9 | |
| | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 88,418 | | | | 84,615 | | | | 1,534 | | | | 77,487 | | | | 1,971 | |
Consumer | | | 165 | | | | 161 | | | | — | | | | 223 | | | | 3 | |
Commercial and industrial | | | 7,160 | | | | 7,032 | | | | 95 | | | | 10,630 | | | | 255 | |
Agricultural and other | | | 935 | | | | 935 | | | | — | | | | 1,037 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total loans with a specific valuation allowance | | | 96,678 | | | | 92,743 | | | | 1,629 | | | | 89,377 | | | | 2,229 | |
Total impaired loans | | | | | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 52,506 | | | | 50,384 | | | | 1,414 | | | | 43,002 | | | | 1,337 | |
Construction/land development | | | 8,313 | | | | 7,595 | | | | 15 | | | | 12,884 | | | | 334 | |
Agricultural | | | 435 | | | | 438 | | | | 2 | | | | 469 | | | | 2 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 26,912 | | | | 25,906 | | | | 95 | | | | 20,358 | | | | 308 | |
Multifamily residential | | | 552 | | | | 552 | | | | 8 | | | | 941 | | | | 9 | |
| | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 88,718 | | | | 84,875 | | | | 1,534 | | | | 77,654 | | | | 1,990 | |
Consumer | | | 165 | | | | 161 | | | | — | | | | 223 | | | | 3 | |
Commercial and industrial | | | 7,284 | | | | 7,156 | | | | 95 | | | | 10,694 | | | | 263 | |
Agricultural and other | | | 935 | | | | 935 | | | | — | | | | 1,037 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total impaired loans | | $ | 97,102 | | | $ | 93,127 | | | $ | 1,629 | | | $ | 89,608 | | | $ | 2,256 | |
| | | | | | | | | | | | | | | | | | | | |
Note: Purchased credit impaired loans are accounted for on a pooled basis under ASC310-30. All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans being classified as impaired loans as of December 31, 2016.
Interest recognized on impaired loans during the three months ended
September 30, 2017 and 2016March 31, 2024 was approximately
$957,000 and $597,000, respectively.$685,000. Interest recognized on impaired loans during the
ninethree months ended
September 30, 2017 and 2016March 31, 2023 was approximately
$2.0 million and $1.7 million, respectively.$1.8 million. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.
Credit Quality Indicators. As part of theon-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs,(iv) non-performing loans and (v) the general economic conditions in Arkansas, Florida, Texas, Alabama and New York. The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. Descriptions of the general characteristics of the 8 risk ratings are as follows:
| • | | Risk rating 1 – Excellent. Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category. |
| • | | Risk rating 2 – Good. These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification. |
| • | | Risk rating 3 – Satisfactory. Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound. |
| • | | Risk rating 4 – Watch. Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure. Included in this category are loans to borrowers in industries that are experiencing elevated risk. |
| • | | Risk rating 5 – Other Loans Especially Mentioned (“OLEM”). A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification. |
| • | | Risk rating 6 – Substandard. A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets. |
| • | | Risk rating 7 – Doubtful. A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan. |
| • | | Risk rating 8 – Loss.Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should becharged-off in the period in which they became uncollectible. |
•Risk rating 1 – Excellent. Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.
•Risk rating 2 – Good. These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the Bank. Collateral securing the Bank’s debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported by strong financial statements and on which repayment is satisfactory may be included in this classification.
•Risk rating 3 – Satisfactory. Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.
•Risk rating 4 – Watch. Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are decreasing, despite the borrower’s continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that appears to limit exposure.
•Risk rating 5 – Other Loans Especially Mentioned (“OLEM”). A loan criticized as OLEM has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.
•Risk rating 6 – Substandard. A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.
•Risk rating 7 – Doubtful. A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.
•Risk rating 8 – Loss. Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current facts, not probabilities. Assets classified as loss should be charged-off in the period in which they became uncollectible.
The Company’s classified loans include loans in risk ratings 6, 7 and 8.
The following is a presentation of classified loans (excluding loans accounted for under ASC Topic310-30) by class as of September 30, 2017 and December 31, 2016: | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Risk Rated 6 | | | Risk Rated 7 | | | Risk Rated 8 | | | Classified Total | |
| | | (In thousands) | |
Real estate: | | | | | | | | | | | | | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 21,521 | | | $ | 526 | | | $ | — | | | $ | 22,047 | |
Construction/land development | | | 24,427 | | | | 114 | | | | — | | | | 24,541 | |
Agricultural | | | 341 | | | | — | | | | — | | | | 341 | |
Residential real estate loans | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 22,852 | | | | 573 | | | | — | | | | 23,425 | |
Multifamily residential | | | 941 | | | | — | | | | — | | | | 941 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 70,082 | | | | 1,213 | | | | — | | | | 71,295 | |
Consumer | | | 184 | | | | 10 | | | | — | | | | 194 | |
Commercial and industrial | | | 17,994 | | | | 50 | | | | — | | | | 18,044 | |
Agricultural and other | | | 270 | | | | — | | | | — | | | | 270 | |
| | | | | | | | | | | | | | | | |
Total risk rated loans | | $ | 88,530 | | | $ | 1,273 | | | $ | — | | | $ | 89,803 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Risk Rated 6 | | | Risk Rated 7 | | | Risk Rated 8 | | | Classified Total | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 43,657 | | | $ | 462 | | | $ | — | | | $ | 44,119 | |
Construction/land development | | | 8,619 | | | | 33 | | | | — | | | | 8,652 | |
Agricultural | | | 759 | | | | — | | | | — | | | | 759 | |
Residential real estate loans | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 28,846 | | | | 445 | | | | — | | | | 29,291 | |
Multifamily residential | | | 1,391 | | | | — | | | | — | | | | 1,391 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 83,272 | | | | 940 | | | | — | | | | 84,212 | |
Consumer | | | 211 | | | | 2 | | | | — | | | | 213 | |
Commercial and industrial | | | 16,991 | | | | 170 | | | | — | | | | 17,161 | |
Agricultural and other | | | 935 | | | | — | | | | — | | | | 935 | |
| | | | | | | | | | | | | | | | |
Total risk rated loans | | $ | 101,409 | | | $ | 1,112 | | | $ | — | | | $ | 102,521 | |
| | | | | | | | | | | | | | | | |
Loans may be classified, but not considered impaired,collateral dependent, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for loan impairmentcredit loss testing. All loans over $2.0 million that are rated 5 – 8 are individually assessed for impairmentcredit losses on a quarterly basis. Loans rated 5 – 8 that fall under the threshold amount are not individually tested for impairmentcredit losses and therefore are not included in impairedcollateral dependent loans; (2) of the loans that are above the threshold amount and tested for impairment,credit losses after testing, some are considered to not be impairedcollateral dependent and are not included in impairedcollateral dependent loans.
Based on the most recent analysis performed, the risk category of loans by class of loans as of March 31, 2024 and December 31, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Real estate: | | | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | | | |
| Non-farm/non-residential | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 342 | | | $ | 91 | | | $ | 433 | |
| Risk rating 2 | — | | | — | | | — | | | — | | | — | | | 109 | | | — | | | 109 | |
| Risk rating 3 | 83,363 | | | 331,573 | | | 594,821 | | | 581,031 | | | 241,146 | | | 1,121,885 | | | 437,309 | | | 3,391,128 | |
| Risk rating 4 | 7,718 | | | 157,901 | | | 499,982 | | | 251,916 | | | 157,181 | | | 710,773 | | | 133,521 | | | 1,918,992 | |
| Risk rating 5 | — | | | — | | | 800 | | | 10,612 | | | — | | | 53,802 | | | — | | | 65,214 | |
| Risk rating 6 | — | | | — | | | 8,191 | | | 9,205 | | | 24,133 | | | 199,371 | | | 189 | | | 241,089 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total non-farm/non-residential | 91,081 | | | 489,474 | | | 1,103,794 | | | 852,764 | | | 422,460 | | | 2,086,282 | | | 571,110 | | | 5,616,965 | |
| Construction/land development | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | — | | | $ | 10 | |
| Risk rating 2 | — | | | 138 | | | — | | | — | | | — | | | 179 | | | — | | | 317 | |
| Risk rating 3 | 103,471 | | | 338,932 | | | 491,298 | | | 113,870 | | | 50,553 | | | 70,571 | | | 47,987 | | | 1,216,682 | |
| Risk rating 4 | 17,872 | | | 165,321 | | | 426,339 | | | 220,985 | | | 19,545 | | | 52,325 | | | 193,864 | | | 1,096,251 | |
| Risk rating 5 | — | | | 635 | | | — | | | — | | | — | | | 67 | | | — | | | 702 | |
| Risk rating 6 | — | | | — | | | 11,796 | | | 1,602 | | | 1,279 | | | 901 | | | 943 | | | 16,521 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | 72 | | | — | | | — | | | — | | | 72 | |
| Total construction/land development | 121,343 | | | 505,026 | | | 929,433 | | | 336,539 | | | 71,377 | | | 124,043 | | | 242,794 | | | 2,330,555 | |
| Agricultural | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 700 | | | $ | — | | | $ | 1,550 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,250 | |
| Risk rating 2 | — | | | 245 | | | — | | | 1,908 | | | — | | | — | | | — | | | 2,153 | |
| Risk rating 3 | 12,689 | | | 35,840 | | | 43,636 | | | 20,758 | | | 24,044 | | | 48,712 | | | 26,975 | | | 212,654 | |
| Risk rating 4 | 7,297 | | | 9,474 | | | 22,316 | | | 18,238 | | | 13,622 | | | 40,145 | | | 4,636 | | | 115,728 | |
| Risk rating 5 | — | | | — | | | — | | | — | | | — | | | 882 | | | — | | | 882 | |
| Risk rating 6 | — | | | — | | | — | | | 1,668 | | | 1,084 | | | 1,199 | | | — | | | 3,951 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total agricultural | 20,686 | | | 45,559 | | | 67,502 | | | 42,572 | | | 38,750 | | | 90,938 | | | 31,611 | | | 337,618 | |
| Total commercial real estate loans | $ | 233,110 | | | $ | 1,040,059 | | | $ | 2,100,729 | | | $ | 1,231,875 | | | $ | 532,587 | | | $ | 2,301,263 | | | $ | 845,515 | | | $ | 8,285,138 | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 96 | | | $ | 2 | | | $ | 98 | |
| Risk rating 2 | — | | | 867 | | | — | | | — | | | — | | | 14 | | | 1 | | | 882 | |
| Risk rating 3 | 68,236 | | | 222,450 | | | 374,959 | | | 238,269 | | | 140,564 | | | 399,083 | | | 123,952 | | | 1,567,513 | |
| Risk rating 4 | 3,710 | | | 14,286 | | | 43,663 | | | 52,466 | | | 20,855 | | | 76,831 | | | 85,756 | | | 297,567 | |
| Risk rating 5 | — | | | 158 | | | 670 | | | 29 | | | 298 | | | 1,412 | | | — | | | 2,567 | |
| Risk rating 6 | — | | | 1,274 | | | 5,386 | | | 3,915 | | | 3,939 | | | 16,047 | | | 784 | | | 31,345 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
| Total residential 1-4 family | 71,946 | | | 239,035 | | | 424,678 | | | 294,679 | | | 165,656 | | | 493,485 | | | 210,495 | | | 1,899,974 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Multifamily residential | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Risk rating 2 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 3 | 424 | | | 3,300 | | | 25,242 | | | 37,413 | | | 44,195 | | | 81,998 | | | 6,867 | | | 199,439 | |
| Risk rating 4 | — | | | 696 | | | 81,319 | | | 38,046 | | | 64,246 | | | 23,736 | | | 8,041 | | | 216,084 | |
| Risk rating 5 | — | | | — | | | 150 | | | — | | | — | | | — | | | — | | | 150 | |
| Risk rating 6 | — | | | — | | | — | | | — | | | — | | | 253 | | | — | | | 253 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total multifamily residential | 424 | | | 3,996 | | | 106,711 | | | 75,459 | | | 108,441 | | | 105,987 | | | 14,908 | | | 415,926 | |
| Total real estate | $ | 305,480 | | | $ | 1,283,090 | | | $ | 2,632,118 | | | $ | 1,602,013 | | | $ | 806,684 | | | $ | 2,900,735 | | | $ | 1,070,918 | | | $ | 10,601,038 | |
| Consumer | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 2,232 | | | $ | 4,108 | | | $ | 2,526 | | | $ | 1,834 | | | $ | 769 | | | $ | 1,238 | | | $ | 1,529 | | | $ | 14,236 | |
| Risk rating 2 | — | | | — | | | — | | | — | | | — | | | 170 | | | — | | | 170 | |
| Risk rating 3 | 44,644 | | | 230,405 | | | 238,893 | | | 206,923 | | | 102,296 | | | 289,483 | | | 1,196 | | | 1,113,840 | |
| Risk rating 4 | 904 | | | 7,573 | | | 8,067 | | | 1,015 | | | 49 | | | 4,911 | | | 255 | | | 22,774 | |
| Risk rating 5 | — | | | 5,052 | | | — | | | 223 | | | 165 | | | 905 | | | — | | | 6,345 | |
| Risk rating 6 | — | | | 186 | | | 1,482 | | | 950 | | | 932 | | | 2,276 | | | 23 | | | 5,849 | |
| Risk rating 7 | — | | | 13 | | | — | | | — | | | — | | | — | | | — | | | 13 | |
| Risk rating 8 | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Total consumer | 47,780 | | | 247,337 | | | 250,968 | | | 210,945 | | | 104,212 | | | 298,983 | | | 3,003 | | | 1,163,228 | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 678 | | | $ | 1,729 | | | $ | 860 | | | $ | 816 | | | $ | 231 | | | $ | 20,920 | | | $ | 12,287 | | | $ | 37,521 | |
| Risk rating 2 | — | | | 160 | | | 1,221 | | | 208 | | | 10 | | | 20 | | | 1,130 | | | 2,749 | |
| Risk rating 3 | 21,943 | | | 475,638 | | | 267,003 | | | 73,719 | | | 52,985 | | | 248,283 | | | 227,129 | | | 1,366,700 | |
| Risk rating 4 | 32,124 | | | 50,433 | | | 33,941 | | | 44,843 | | | 19,245 | | | 85,821 | | | 425,396 | | | 691,803 | |
| Risk rating 5 | — | | | 20 | | | 832 | | | 16,270 | | | 3,186 | | | 972 | | | 2,123 | | | 23,403 | |
| Risk rating 6 | 22 | | | 12,147 | | | 72,252 | | | 4,576 | | | 668 | | | 20,577 | | | 52,352 | | | 162,594 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | 5 | | | — | | | 5 | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total commercial and industrial | 54,767 | | | 540,127 | | | 376,109 | | | 140,432 | | | 76,325 | | | 376,598 | | | 720,417 | | | 2,284,775 | |
| Agricultural and other | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 427 | | | $ | 402 | | | $ | 120 | | | $ | 16 | | | $ | 105 | | | $ | — | | | $ | 331 | | | $ | 1,401 | |
| Risk rating 2 | 71 | | | 308 | | | 28 | | | 1 | | | — | | | 1,216 | | | 743 | | | 2,367 | |
| Risk rating 3 | 17,995 | | | 51,938 | | | 40,941 | | | 30,317 | | | 25,416 | | | 44,812 | | | 140,789 | | | 352,208 | |
| Risk rating 4 | 3,781 | | | 8,139 | | | 9,975 | | | 7,231 | | | 642 | | | 13,634 | | | 62,823 | | | 106,225 | |
| Risk rating 5 | — | | | — | | | 312 | | | — | | | 61 | | | 593 | | | 15 | | | 981 | |
| Risk rating 6 | — | | | 77 | | | 31 | | | 55 | | | 97 | | | 368 | | | 822 | | | 1,450 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total agricultural and other | 22,274 | | | 60,864 | | | 51,407 | | | 37,620 | | | 26,321 | | | 60,623 | | | 205,523 | | | 464,632 | |
| Total | $ | 430,301 | | | $ | 2,131,418 | | | $ | 3,310,602 | | | $ | 1,991,010 | | | $ | 1,013,542 | | | $ | 3,636,939 | | | $ | 1,999,861 | | | $ | 14,513,673 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Real estate: | | | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | | | |
| Non-farm/non-residential | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 232 | | | $ | 116 | | | $ | 55 | | | $ | 403 | |
| Risk rating 2 | — | | | — | | | — | | | — | | | 111 | | | — | | | — | | | 111 | |
| Risk rating 3 | 305,742 | | | 584,860 | | | 568,413 | | | 243,177 | | | 216,746 | | | 934,111 | | | 440,414 | | | 3,293,463 | |
| Risk rating 4 | 83,089 | | | 557,540 | | | 242,217 | | | 224,378 | | | 149,258 | | | 590,864 | | | 95,360 | | | 1,942,706 | |
| Risk rating 5 | — | | | — | | | 10,000 | | | — | | | 14,095 | | | 42,694 | | | 758 | | | 67,547 | |
| Risk rating 6 | — | | | 8,198 | | | 9,958 | | | 23,743 | | | 24,380 | | | 179,350 | | | 95 | | | 245,724 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total non-farm/non-residential | 388,831 | | | 1,150,598 | | | 830,588 | | | 491,298 | | | 404,822 | | | 1,747,135 | | | 536,682 | | | 5,549,954 | |
| Construction/land development | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | 10 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 10 | |
| Risk rating 2 | 759 | | | — | | | — | | | — | | | — | | | 186 | | | — | | | 945 | |
| Risk rating 3 | 300,941 | | | 499,984 | | | 130,342 | | | 62,134 | | | 22,656 | | | 56,180 | | | 44,603 | | | 1,116,840 | |
| Risk rating 4 | 198,874 | | | 417,244 | | | 252,602 | | | 22,713 | | | 32,342 | | | 24,527 | | | 209,063 | | | 1,157,365 | |
| Risk rating 5 | 641 | | | 1,163 | | | — | | | 3,306 | | | 218 | | | 69 | | | — | | | 5,397 | |
| Risk rating 6 | — | | | 7,817 | | | 1,631 | | | 748 | | | 641 | | | 254 | | | 1,327 | | | 12,418 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | 72 | | | — | | | — | | | — | | | — | | | 72 | |
| Total construction/land development | 501,215 | | | 926,208 | | | 384,657 | | | 88,901 | | | 55,857 | | | 81,216 | | | 254,993 | | | 2,293,047 | |
| Agricultural | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | 1,605 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,605 | |
| Risk rating 2 | 247 | | | — | | | 1,936 | | | — | | | — | | | — | | | — | | | 2,183 | |
| Risk rating 3 | 30,252 | | | 43,291 | | | 22,919 | | | 25,992 | | | 10,678 | | | 43,284 | | | 20,104 | | | 196,520 | |
| Risk rating 4 | 9,477 | | | 24,688 | | | 20,358 | | | 19,532 | | | 7,873 | | | 32,692 | | | 4,612 | | | 119,232 | |
| Risk rating 5 | — | | | — | | | — | | | — | | | 314 | | | 571 | | | — | | | 885 | |
| Risk rating 6 | — | | | — | | | 1,675 | | | 1,084 | | | 1,620 | | | 352 | | | — | | | 4,731 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total agricultural | 39,976 | | | 69,584 | | | 46,888 | | | 46,608 | | | 20,485 | | | 76,899 | | | 24,716 | | | 325,156 | |
| Total commercial real estate loans | $ | 930,022 | | | $ | 2,146,390 | | | $ | 1,262,133 | | | $ | 626,807 | | | $ | 481,164 | | | $ | 1,905,250 | | | $ | 816,391 | | | $ | 8,168,157 | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 144 | | | $ | 2 | | | $ | 146 | |
| Risk rating 2 | 259 | | | — | | | — | | | — | | | — | | | 20 | | | 1 | | | 280 | |
| Risk rating 3 | 246,462 | | | 366,149 | | | 241,985 | | | 145,339 | | | 93,751 | | | 324,569 | | | 122,950 | | | 1,541,205 | |
| Risk rating 4 | 14,992 | | | 37,444 | | | 55,406 | | | 21,240 | | | 13,313 | | | 67,084 | | | 62,356 | | | 271,835 | |
| Risk rating 5 | — | | | 243 | | | 246 | | | 479 | | | 831 | | | 1,343 | | | 40 | | | 3,182 | |
| Risk rating 6 | 71 | | | 5,361 | | | 2,926 | | | 4,064 | | | 3,432 | | | 10,567 | | | 1,189 | | | 27,610 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
| Total residential 1-4 family | 261,784 | | | 409,197 | | | 300,563 | | | 171,122 | | | 111,327 | | | 403,729 | | | 186,538 | | | 1,844,260 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Multifamily residential | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Risk rating 2 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 3 | 3,314 | | | 9,827 | | | 37,755 | | | 44,407 | | | 31,436 | | | 53,068 | | | 6,537 | | | 186,344 | |
| Risk rating 4 | 669 | | | 77,185 | | | 69,546 | | | 64,295 | | | 8,116 | | | 18,490 | | | 7,822 | | | 246,123 | |
| Risk rating 5 | — | | | — | | | — | | | — | | | — | | | 3,006 | | | — | | | 3,006 | |
| Risk rating 6 | — | | | — | | | — | | | — | | | 263 | | | — | | | — | | | 263 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total multifamily residential | 3,983 | | | 87,012 | | | 107,301 | | | 108,702 | | | 39,815 | | | 74,564 | | | 14,359 | | | 435,736 | |
| Total real estate | $ | 1,195,789 | | | $ | 2,642,599 | | | $ | 1,669,997 | | | $ | 906,631 | | | $ | 632,306 | | | $ | 2,383,543 | | | $ | 1,017,288 | | | $ | 10,448,153 | |
| Consumer | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 5,195 | | | $ | 2,952 | | | $ | 2,002 | | | $ | 839 | | | $ | 355 | | | $ | 1,114 | | | $ | 1,580 | | | $ | 14,037 | |
| Risk rating 2 | — | | | — | | | — | | | — | | | 126 | | | 54 | | | — | | | 180 | |
| Risk rating 3 | 240,897 | | | 245,543 | | | 211,312 | | | 108,009 | | | 108,063 | | | 191,220 | | | 1,264 | | | 1,106,308 | |
| Risk rating 4 | 9,597 | | | 7,534 | | | 2,479 | | | 69 | | | 109 | | | 6,073 | | | 214 | | | 26,075 | |
| Risk rating 5 | 22 | | | — | | | 22 | | | 483 | | | 872 | | | 261 | | | — | | | 1,660 | |
| Risk rating 6 | 204 | | | 1,559 | | | 830 | | | 581 | | | 881 | | | 1,349 | | | 11 | | | 5,415 | |
| Risk rating 7 | 15 | | | — | | | — | | | — | | | — | | | — | | | — | | | 15 | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total consumer | 255,930 | | | 257,588 | | | 216,645 | | | 109,981 | | | 110,406 | | | 200,071 | | | 3,069 | | | 1,153,690 | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 3,757 | | | $ | 918 | | | $ | 1,120 | | | $ | 236 | | | $ | 121 | | | $ | 20,835 | | | $ | 12,644 | | | $ | 39,631 | |
| Risk rating 2 | 174 | | | 1,293 | | | 220 | | | 12 | | | 164 | | | 218 | | | 963 | | | 3,044 | |
| Risk rating 3 | 487,896 | | | 272,608 | | | 78,507 | | | 50,340 | | | 77,761 | | | 170,610 | | | 227,043 | | | 1,364,765 | |
| Risk rating 4 | 115,025 | | | 34,474 | | | 55,812 | | | 33,000 | | | 27,189 | | | 71,854 | | | 378,417 | | | 715,771 | |
| Risk rating 5 | 21 | | | 547 | | | 16,318 | | | 3,352 | | | 201 | | | 980 | | | 1,767 | | | 23,186 | |
| Risk rating 6 | 12,498 | | | 75,536 | | | 4,942 | | | 1,154 | | | 9,086 | | | 12,180 | | | 63,198 | | | 178,594 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total commercial and industrial | 619,371 | | | 385,376 | | | 156,919 | | | 88,094 | | | 114,522 | | | 276,677 | | | 684,032 | | | 2,324,991 | |
| Agricultural and other | | | | | | | | | | | | | | | |
| Risk rating 1 | $ | 408 | | | $ | 131 | | | $ | 16 | | | $ | 105 | | | $ | — | | | $ | 2 | | | $ | 563 | | | $ | 1,225 | |
| Risk rating 2 | 396 | | | 28 | | | 1 | | | — | | | 1,181 | | | 100 | | | 693 | | | 2,399 | |
| Risk rating 3 | 52,758 | | | 45,796 | | | 31,378 | | | 26,918 | | | 3,059 | | | 43,984 | | | 145,419 | | | 349,312 | |
| Risk rating 4 | 14,007 | | | 7,663 | | | 8,025 | | | 955 | | | 10,955 | | | 3,188 | | | 94,186 | | | 138,979 | |
| Risk rating 5 | — | | | 2,286 | | | — | | | 134 | | | — | | | 593 | | | 665 | | | 3,678 | |
| Risk rating 6 | 71 | | | 33 | | | 63 | | | 108 | | | — | | | 370 | | | 1,656 | | | 2,301 | |
| Risk rating 7 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Risk rating 8 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total agricultural and other | 67,640 | | | 55,937 | | | 39,483 | | | 28,220 | | | 15,195 | | | 48,237 | | | 243,182 | | | 497,894 | |
| Total | $ | 2,138,730 | | | $ | 3,341,500 | | | $ | 2,083,044 | | | $ | 1,132,926 | | | $ | 872,429 | | | $ | 2,908,528 | | | $ | 1,947,571 | | | $ | 14,424,728 | |
The following is a presentationtable presents gross write-offs by origination date as of March 31, 2024 and December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Gross Loan Write-Offs by Origination Year | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Real estate | | | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | | | |
| Non-farm/non-residential | $ | — | | | $ | — | | | $ | — | | | $ | 750 | | | $ | 1 | | | $ | 351 | | | $ | — | | | $ | 1,102 | |
| Construction/land development | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Agricultural | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | — | | | 1 | | | 68 | | | — | | | 25 | | | 65 | | | — | | | 159 | |
| | | | | | | | | | | | | | | |
| Total real estate | — | | | 1 | | | 68 | | | 750 | | | 27 | | | 416 | | | — | | | 1,262 | |
| Consumer | — | | | 12 | | | 39 | | | 26 | | | 87 | | | 34 | | | — | | | 198 | |
| Commercial and industrial | — | | | 106 | | | 25 | | | 258 | | | — | | | 2 | | | 1,355 | | | 1,746 | |
| Agricultural & other | 772 | | * | — | | | — | | | — | | | — | | | — | | | — | | | 772 | |
| Total | $ | 772 | | | $ | 119 | | | $ | 132 | | | $ | 1,034 | | | $ | 114 | | | $ | 452 | | | $ | 1,355 | | | $ | 3,978 | |
*The 2024 write-off consists entirely of overdrafts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,826 | | | $ | 502 | | | $ | — | | | $ | 2,328 | |
| Construction/land development | — | | | 2 | | | 168 | | | 5 | | | — | | | 88 | | | — | | | 263 | |
| Agricultural | — | | | — | | | — | | | — | | | 1 | | | 6 | | | — | | | 7 | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | — | | | 29 | | | 28 | | | 73 | | | 13 | | | 126 | | | — | | | 269 | |
| | | | | | | | | | | | | | | |
| Total real estate | — | | | 31 | | | 196 | | | 78 | | | 1,840 | | | 722 | | | — | | | 2,867 | |
| Consumer | — | | | 51 | | | 44 | | | 98 | | | 63 | | | 263 | | | 25 | | | 544 | |
| Commercial and industrial | — | | | 407 | | | 1,110 | | | 894 | | | 911 | | | 5,369 | | | 466 | | | 9,157 | |
| Agricultural & other | 3,252 | | ** | 1 | | | 1 | | | 2 | | | 64 | | | 3 | | | 164 | | | 3,487 | |
| Total | $ | 3,252 | | | $ | 490 | | | $ | 1,351 | | | $ | 1,072 | | | $ | 2,878 | | | $ | 6,357 | | | $ | 655 | | | $ | 16,055 | |
**The 2023 write-offs consists entirely of overdrafts.
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 receivableas of March 31, 2024 and December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Real estate: | | | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | | | |
| Non-farm/non-residential | | | | | | | | | | | | | | | |
| Performing | $ | 91,081 | | | $ | 489,474 | | | $ | 1,103,713 | | | $ | 844,097 | | | $ | 421,053 | | | $ | 2,052,324 | | | $ | 571,030 | | | $ | 5,572,772 | |
| Non-performing | — | | | — | | | 81 | | | 8,667 | | | 1,407 | | | 33,958 | | | 80 | | | 44,193 | |
| Total non-farm/non-residential | 91,081 | | | 489,474 | | | 1,103,794 | | | 852,764 | | | 422,460 | | | 2,086,282 | | | 571,110 | | | 5,616,965 | |
| Construction/land development | | | | | | | | | | | | | | | |
| Performing | $ | 121,343 | | | $ | 505,026 | | | $ | 917,637 | | | $ | 334,866 | | | $ | 70,220 | | | $ | 123,226 | | | $ | 241,852 | | | $ | 2,314,170 | |
| Non-performing | — | | | — | | | 11,796 | | | 1,673 | | | 1,157 | | | 817 | | | 942 | | | 16,385 | |
| Total construction/ land development | 121,343 | | | 505,026 | | | 929,433 | | | 336,539 | | | 71,377 | | | 124,043 | | | 242,794 | | | 2,330,555 | |
| Agricultural | | | | | | | | | | | | | | | |
| Performing | $ | 20,686 | | | $ | 45,559 | | | $ | 67,502 | | | $ | 42,501 | | | $ | 38,750 | | | $ | 90,595 | | | $ | 31,611 | | | $ | 337,204 | |
| Non-performing | — | | | — | | | — | | | 71 | | | — | | | 343 | | | — | | | 414 | |
| Total agricultural | 20,686 | | | 45,559 | | | 67,502 | | | 42,572 | | | 38,750 | | | 90,938 | | | 31,611 | | | 337,618 | |
| Total commercial real estate loans | $ | 233,110 | | | $ | 1,040,059 | | | $ | 2,100,729 | | | $ | 1,231,875 | | | $ | 532,587 | | | $ | 2,301,263 | | | $ | 845,515 | | | $ | 8,285,138 | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | | | | | | | | | | | | | | | |
| Performing | $ | 71,946 | | | $ | 238,505 | | | $ | 420,458 | | | $ | 291,510 | | | $ | 162,453 | | | $ | 481,331 | | | $ | 210,075 | | | $ | 1,876,278 | |
| Non-performing | — | | | 530 | | | 4,220 | | | 3,169 | | | 3,203 | | | 12,154 | | | 420 | | | 23,696 | |
| Total residential 1-4 family | 71,946 | | | 239,035 | | | 424,678 | | | 294,679 | | | 165,656 | | | 493,485 | | | 210,495 | | | 1,899,974 | |
| Multifamily residential | | | | | | | | | | | | | | | |
| Performing | $ | 424 | | | $ | 3,996 | | | $ | 106,711 | | | $ | 75,459 | | | $ | 108,441 | | | $ | 105,987 | | | $ | 14,908 | | | $ | 415,926 | |
| Non-performing | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total multifamily residential | 424 | | | 3,996 | | | 106,711 | | | 75,459 | | | 108,441 | | | 105,987 | | | 14,908 | | | 415,926 | |
| Total real estate | $ | 305,480 | | | $ | 1,283,090 | | | $ | 2,632,118 | | | $ | 1,602,013 | | | $ | 806,684 | | | $ | 2,900,735 | | | $ | 1,070,918 | | | $ | 10,601,038 | |
| Consumer | | | | | | | | | | | | | | | |
| Performing | $ | 47,780 | | | $ | 247,223 | | | $ | 250,314 | | | $ | 210,065 | | | $ | 103,311 | | | $ | 296,854 | | | $ | 2,985 | | | $ | 1,158,532 | |
| Non-performing | — | | | 114 | | | 654 | | | 880 | | | 901 | | | 2,129 | | | 18 | | | 4,696 | |
| Total consumer | 47,780 | | | 247,337 | | | 250,968 | | | 210,945 | | | 104,212 | | | 298,983 | | | 3,003 | | | 1,163,228 | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Performing | $ | 54,767 | | | $ | 537,330 | | | $ | 373,206 | | | $ | 139,722 | | | $ | 75,802 | | | $ | 370,961 | | | $ | 717,451 | | | $ | 2,269,239 | |
| Non-performing | — | | | 2,797 | | | 2,903 | | | 710 | | | 523 | | | 5,637 | | | 2,966 | | | 15,536 | |
| Total commercial and industrial | 54,767 | | | 540,127 | | | 376,109 | | | 140,432 | | | 76,325 | | | 376,598 | | | 720,417 | | | 2,284,775 | |
| Agricultural and other | | | | | | | | | | | | | | | |
| Performing | $ | 22,274 | | | $ | 60,787 | | | $ | 51,376 | | | $ | 37,565 | | | $ | 26,321 | | | $ | 60,546 | | | $ | 205,390 | | | $ | 464,259 | |
| Non-performing | — | | | 77 | | | 31 | | | 55 | | | — | | | 77 | | | 133 | | | 373 | |
| Total agricultural and other | 22,274 | | | 60,864 | | | 51,407 | | | 37,620 | | | 26,321 | | | 60,623 | | | 205,523 | | | 464,632 | |
| Total | $ | 430,301 | | | $ | 2,131,418 | | | $ | 3,310,602 | | | $ | 1,991,010 | | | $ | 1,013,542 | | | $ | 3,636,939 | | | $ | 1,999,861 | | | $ | 14,513,673 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Term Loans Amortized Cost Basis by Origination Year | | | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Revolving Loans Amortized Cost Basis | | Total |
| (In thousands) |
| Real estate: | | | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | | | |
| Non-farm/non-residential | | | | | | | | | | | | | | | |
| Performing | $ | 388,831 | | | $ | 1,150,598 | | | $ | 821,373 | | | $ | 490,153 | | | $ | 404,061 | | | $ | 1,718,776 | | | $ | 536,349 | | | $ | 5,510,141 | |
| Non-performing | — | | | — | | | 9,215 | | | 1,145 | | | 761 | | | 28,359 | | | 333 | | | 39,813 | |
| Total non-farm/non-residential | 388,831 | | | 1,150,598 | | | 830,588 | | | 491,298 | | | 404,822 | | | 1,747,135 | | | 536,682 | | | 5,549,954 | |
| Construction/land development | | | | | | | | | | | | | | | |
| Performing | $ | 501,215 | | | $ | 918,390 | | | $ | 382,954 | | | $ | 88,204 | | | $ | 55,239 | | | $ | 81,028 | | | $ | 253,667 | | | $ | 2,280,697 | |
| Non-performing | — | | | 7,818 | | | 1,703 | | | 697 | | | 618 | | | 188 | | | 1,326 | | | 12,350 | |
| Total construction/land development | 501,215 | | | 926,208 | | | 384,657 | | | 88,901 | | | 55,857 | | | 81,216 | | | 254,993 | | | 2,293,047 | |
| Agricultural | | | | | | | | | | | | | | | |
| Performing | $ | 39,976 | | | $ | 69,584 | | | $ | 46,809 | | | $ | 46,608 | | | $ | 20,485 | | | $ | 76,547 | | | $ | 24,716 | | | $ | 324,725 | |
| Non-performing | — | | | — | | | 79 | | | — | | | — | | | 352 | | | — | | | 431 | |
| Total agricultural | 39,976 | | | 69,584 | | | 46,888 | | | 46,608 | | | 20,485 | | | 76,899 | | | 24,716 | | | 325,156 | |
| Total commercial real estate loans | $ | 930,022 | | | $ | 2,146,390 | | | $ | 1,262,133 | | | $ | 626,807 | | | $ | 481,164 | | | $ | 1,905,250 | | | $ | 816,391 | | | $ | 8,168,157 | |
| Residential real estate loans | | | | | | | | | | | | | | | |
| Residential 1-4 family | | | | | | | | | | | | | | | |
| Performing | $ | 261,784 | | | $ | 405,239 | | | $ | 298,207 | | | $ | 167,475 | | | $ | 108,091 | | | $ | 396,130 | | | $ | 185,948 | | | $ | 1,822,874 | |
| Non-performing | — | | | 3,958 | | | 2,356 | | | 3,647 | | | 3,236 | | | 7,599 | | | 590 | | | 21,386 | |
| Total residential 1-4 family | 261,784 | | | 409,197 | | | 300,563 | | | 171,122 | | | 111,327 | | | 403,729 | | | 186,538 | | | 1,844,260 | |
| Multifamily residential | | | | | | | | | | | | | | | |
| Performing | $ | 3,983 | | | $ | 87,012 | | | $ | 107,301 | | | $ | 108,702 | | | $ | 39,815 | | | $ | 74,564 | | | $ | 14,359 | | | $ | 435,736 | |
| Non-performing | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total multifamily residential | 3,983 | | | 87,012 | | | 107,301 | | | 108,702 | | | 39,815 | | | 74,564 | | | 14,359 | | | 435,736 | |
| Total real estate | $ | 1,195,789 | | | $ | 2,642,599 | | | $ | 1,669,997 | | | $ | 906,631 | | | $ | 632,306 | | | $ | 2,383,543 | | | $ | 1,017,288 | | | $ | 10,448,153 | |
| Consumer | | | | | | | | | | | | | | | |
| Performing | $ | 255,771 | | | $ | 256,826 | | | $ | 215,831 | | | $ | 109,442 | | | $ | 110,267 | | | $ | 198,982 | | | $ | 3,060 | | | $ | 1,150,179 | |
| Non-performing | 159 | | | 762 | | | 814 | | | 539 | | | 139 | | | 1,089 | | | 9 | | | 3,511 | |
| Total consumer | 255,930 | | | 257,588 | | | 216,645 | | | 109,981 | | | 110,406 | | | 200,071 | | | 3,069 | | | 1,153,690 | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Performing | $ | 616,809 | | | $ | 382,190 | | | $ | 156,056 | | | $ | 87,531 | | | $ | 111,529 | | | $ | 273,434 | | | $ | 680,552 | | | $ | 2,308,101 | |
| Non-performing | 2,562 | | | 3,186 | | | 863 | | | 563 | | | 2,993 | | | 3,243 | | | 3,480 | | | 16,890 | |
| Total commercial and industrial | 619,371 | | | 385,376 | | | 156,919 | | | 88,094 | | | 114,522 | | | 276,677 | | | 684,032 | | | 2,324,991 | |
| Agricultural and other | | | | | | | | | | | | | | | |
| Performing | $ | 67,569 | | | $ | 55,904 | | | $ | 39,473 | | | $ | 28,220 | | | $ | 15,195 | | | $ | 48,203 | | | $ | 242,818 | | | $ | 497,382 | |
| Non-performing | 71 | | | 33 | | | 10 | | | — | | | — | | | 34 | | | 364 | | | 512 | |
| Total agricultural and other | 67,640 | | | 55,937 | | | 39,483 | | | 28,220 | | | 15,195 | | | 48,237 | | | 243,182 | | | 497,894 | |
| Total | $ | 2,138,730 | | | $ | 3,341,500 | | | $ | 2,083,044 | | | $ | 1,132,926 | | | $ | 872,429 | | | $ | 2,908,528 | | | $ | 1,947,571 | | | $ | 14,424,728 | |
The Company had approximately $10.3 million or 61 total revolving loans convert to term loans for the three months ended March 31, 2024 compared to $6.2 million or 64 total revolving loans convert to term loans for the three months ended March 31, 2023. These loans were considered immaterial for vintage disclosure inclusion.
The following table presents the amortized cost basis of modified loans to borrowers experiencing financial difficulty by class and risk rating as of September 30, 2017modification type at March 31, 2024 and December 31, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Risk
Rated 1 | | | Risk
Rated 2 | | | Risk
Rated 3 | | | Risk
Rated 4 | | | Risk
Rated 5 | | | Classified
Total | | | Total | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 1,021 | | | $ | 566 | | | $ | 2,523,273 | | | $ | 1,818,301 | | | $ | 39,968 | | | $ | 22,047 | | | $ | 4,405,176 | |
Construction/land development | | | 31 | | | | 571 | | | | 273,090 | | | | 1,323,834 | | | | 11,024 | | | | 24,541 | | | | 1,633,091 | |
Agricultural | | | — | | | | 45 | | | | 54,546 | | | | 32,004 | | | | 1,153 | | | | 341 | | | | 88,089 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 1,126 | | | | 1,095 | | | | 1,416,454 | | | | 470,981 | | | | 11,711 | | | | 23,425 | | | | 1,924,792 | |
Multifamily residential | | | — | | | | — | | | | 364,864 | | | | 123,804 | | | | 214 | | | | 941 | | | | 489,823 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 2,178 | | | | 2,277 | | | | 4,632,227 | | | | 3,768,924 | | | | 64,070 | | | | 71,295 | | | | 8,540,971 | |
Consumer | | | 15,239 | | | | 362 | | | | 25,404 | | | | 9,272 | | | | 78 | | | | 194 | | | | 50,549 | |
Commercial and industrial | | | 17,717 | | | | 9,041 | | | | 622,782 | | | | 601,360 | | | | 10,203 | | | | 18,044 | | | | 1,279,147 | |
Agricultural and other | | | 2,296 | | | | 4,388 | | | | 145,243 | | | | 48,337 | | | | — | | | | 270 | | | | 200,534 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total risk rated loans | | $ | 37,430 | | | $ | 16,068 | | | $ | 5,425,656 | | | $ | 4,427,893 | | | $ | 74,351 | | | $ | 89,803 | | | | 10,071,201 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | 214,992 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans receivable | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 10,286,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Risk
Rated 1 | | | Risk
Rated 2 | | | Risk
Rated 3 | | | Risk
Rated 4 | | | Risk
Rated 5 | | | Classified
Total | | | Total | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 1,047 | | | $ | 4,762 | | | $ | 1,568,385 | | | $ | 1,425,316 | | | $ | 33,559 | | | $ | 44,119 | | | $ | 3,077,188 | |
Construction/land development | | | 400 | | | | 981 | | | | 180,094 | | | | 921,081 | | | | 7,087 | | | | 8,652 | | | | 1,118,295 | |
Agricultural | | | — | | | | 157 | | | | 53,753 | | | | 22,238 | | | | 829 | | | | 759 | | | | 77,736 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 2,336 | | | | 1,683 | | | | 941,760 | | | | 324,045 | | | | 10,360 | | | | 29,291 | | | | 1,309,475 | |
Multifamily residential | | | — | | | | — | | | | 278,514 | | | | 45,742 | | | | 8,870 | | | | 1,391 | | | | 334,517 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 3,783 | | | | 7,583 | | | | 3,022,506 | | | | 2,738,422 | | | | 60,705 | | | | 84,212 | | | | 5,917,211 | |
Consumer | | | 15,080 | | | | 231 | | | | 15,330 | | | | 9,645 | | | | 81 | | | | 213 | | | | 40,580 | |
Commercial and industrial | | | 13,117 | | | | 3,644 | | | | 500,220 | | | | 558,413 | | | | 19,209 | | | | 17,161 | | | | 1,111,764 | |
Agricultural and other | | | 3,379 | | | | 976 | | | | 82,641 | | | | 70,649 | | | | — | | | | 935 | | | | 158,580 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total risk rated loans | | $ | 35,359 | | | $ | 12,434 | | | $ | 3,620,697 | | | $ | 3,377,129 | | | $ | 79,995 | | | $ | 102,521 | | | | 7,228,135 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Purchased credit impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | 159,564 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total loans receivable | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 7,387,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| | | | | | | | | 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 | $ | 396 | | | $ | 457 | | | $ | — | | | $ | 1,415 | | | $ | 347 | | | $ | — | | | $ | 16,023 | | | $ | — | | | $ | 18,638 | | | 0.33 | % |
| Construction/land development | — | | | — | | | — | | | 121 | | | — | | | — | | | — | | | — | | | 121 | | | 0.01 | |
| | | | | | | | | | | | | | | | | | | |
| Residential real estate loans | | | | | | | | | | | | | | | | | | | |
| Residential 1-4 family | 626 | | | 724 | | | 105 | | | 56 | | | 500 | | | — | | | — | | | 115 | | | 2,126 | | | 0.11 | |
| | | | | | | | | | | | | | | | | | | |
| Total real estate | 1,022 | | | 1,181 | | | 105 | | | 1,592 | | | 847 | | | — | | | 16,023 | | | 115 | | | 20,885 | | | 0.20 | |
| Consumer | — | | | — | | | 1 | | | 9 | | | — | | | 4 | | | — | | | — | | | 14 | | | — | |
| Commercial and industrial | 2,257 | | | 38 | | | 4 | | | 1,669 | | | 74 | | | — | | | — | | | — | | | 4,042 | | | 0.18 | |
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 3,279 | | | $ | 1,219 | | | $ | 110 | | | $ | 3,270 | | | $ | 921 | | | $ | 4 | | | $ | 16,023 | | | $ | 115 | | | $ | 24,941 | | | 0.17 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 398 | | | $ | — | | | $ | — | | | $ | 1,537 | | | $ | 348 | | | $ | — | | | $ | 16,023 | | | $ | — | | | $ | 18,306 | | | 0.33 | % |
| Construction/land development | — | | | — | | | — | | | 149 | | | — | | | — | | | — | | | — | | | 149 | | | 0.01 | |
| | | | | | | | | | | | | | | | | | | |
| Residential real estate loans | | | | | | | | | | | | | | | | | | | |
| Residential 1-4 family | 560 | | | 598 | | | 106 | | | 59 | | | 516 | | | — | | | — | | | 116 | | | 1,955 | | | 0.11 | |
| | | | | | | | | | | | | | | | | | | |
| Total real estate | 958 | | | 598 | | | 106 | | | 1,745 | | | 864 | | | — | | | 16,023 | | | 116 | | | 20,410 | | | 0.20 | |
| Consumer | 14 | | | — | | | 1 | | | 10 | | | — | | | 5 | | | — | | | — | | | 30 | | | — | |
| Commercial and industrial | 2,253 | | | 38 | | | 42 | | | 1,763 | | | 74 | | | — | | | — | | | — | | | 4,170 | | | 0.18 | |
| | | | | | | | | | | | | | | | | | | |
| Total | $ | 3,225 | | | $ | 636 | | | $ | 149 | | | $ | 3,518 | | | $ | 938 | | | $ | 5 | | | $ | 16,023 | | | $ | 116 | | | $ | 24,610 | | | 0.17 | % |
During the three-months ended March 31, 2024, the Company restructured approximately $668,000 in loans to 3 borrowers. The ending balance of these loans as of March 31, 2024, was $656,000. During the three-months ended March 31, 2023, the Company restructured approximately $52,000 in loans to three borrowers. The ending balance of these loans as of March 31, 2023, was $48,000. The Company considered the financial effect of these loan modifications to borrowers experiencing financial difficulty during the three-months ended March 31, 2024 and March 31, 2023 as well as the unadvanced balances to these borrowers immaterial for tabular disclosure inclusion.
The following istable presents the amortized cost basis of loans that had a presentationpayment default during the three-months ended March 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Term Extension | | Interest Rate Reduction | | Principal Reduction | | Interest Only | | Combination Interest Rate Reduction and Term Extension | | Combination Interest Rate Reduction and Principal Reduction | | Combination Term Extension and Principal Reduction |
| (Dollars in thousands) |
| Real estate | | | | | | | | | | | | | |
| Commercial real estate loans | | | | | | | | | | | | | |
| Non-farm/non-residential | $ | — | | | $ | — | | | $ | — | | | $ | 319 | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Residential real estate loans | | | | | | | | | | | | | |
| Residential 1-4 family | 115 | | | 104 | | | 9 | | | — | | | 323 | | | — | | | 115 | |
| Total real estate | 115 | | | 104 | | | 9 | | | 319 | | | 323 | | | — | | | 115 | |
| | | | | | | | | | | | | |
| Commercial and industrial | — | | | — | | | — | | | 28 | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
| Total | $ | 115 | | | $ | 104 | | | $ | 9 | | | $ | 347 | | | $ | 323 | | | $ | — | | | $ | 115 | |
The Company closely monitors the performance of
troubled debt restructurings (“TDRs”) by classthe loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The Company has modified 21 loans over the past 12 months to borrowers experiencing financial difficulty. The pre-modification balance of the loans was $20.2 million, and the ending balance as of
September 30, 2017March 31, 2024 was $21.5 million. The $21.5 million balance consists of $1.0 million of non-accrual loans and
December 31, 2016: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Number
of Loans | | | Pre-
Modification
Outstanding
Balance | | | Rate
Modification | | | Term
Modification | | | Rate
& Term
Modification | | | Post-
Modification
Outstanding
Balance | |
| | | (Dollars in thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 16 | | | $ | 18,162 | | | $ | 11,395 | | | $ | 253 | | | $ | 5,432 | | | $ | 17,080 | |
Construction/land development | | | 5 | | | | 782 | | | | 690 | | | | 77 | | | | — | | | | 767 | |
Agricultural | | | 2 | | | | 345 | | | | 282 | | | | 38 | | | | — | | | | 320 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 22 | | | | 5,708 | | | | 3,746 | | | | 84 | | | | 1,361 | | | | 5,191 | |
Multifamily residential | | | 3 | | | | 1,701 | | | | 1,355 | | | | — | | | | 287 | | | | 1,642 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 48 | | | | 26,698 | | | | 17,468 | | | | 452 | | | | 7,080 | | | | 25,000 | |
Consumer | | | 2 | | | | 7 | | | | — | | | | 7 | | | | — | | | | 7 | |
Commercial and industrial | | | 9 | | | | 647 | | | | 365 | | | | 71 | | | | 3 | | | | 439 | |
Other | | | 1 | | | | 166 | | | | 166 | | | | — | | | | — | | | | 166 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 60 | | | $ | 27,518 | | | $ | 17,999 | | | $ | 530 | | | $ | 7,083 | | | $ | 25,612 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Number
of Loans | | | Pre-
Modification
Outstanding
Balance | | | Rate
Modification | | | Term
Modification | | | Rate
& Term
Modification | | | Post-
Modification
Outstanding
Balance | |
| | | (Dollars in thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 17 | | | $ | 21,344 | | | $ | 14,600 | | | $ | 263 | | | $ | 5,542 | | | $ | 20,405 | |
Construction/land development | | | 1 | | | | 560 | | | | 556 | | | | — | | | | — | | | | 556 | |
Agricultural | | | 2 | | | | 146 | | | | — | | | | 43 | | | | 80 | | | | 123 | |
Residential real estate loans | | | | | | | | | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 21 | | | | 5,179 | | | | 2,639 | | | | 124 | | | | 1,017 | | | | 3,780 | |
Multifamily residential | | | 1 | | | | 295 | | | | — | | | | — | | | | 290 | | | | 290 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total real estate | | | 42 | | | | 27,524 | | | | 17,795 | | | | 430 | | | | 6,929 | | | | 25,154 | |
Commercial and industrial | | | 6 | | | | 395 | | | | 237 | | | | 115 | | | | 10 | | | | 362 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 48 | | | $ | 27,919 | | | $ | 18,032 | | | $ | 545 | | | $ | 6,939 | | | $ | 25,516 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
The following is a presentation$20.5 million of TDRs onnon-accrual statuscurrent loans, of which $71,000 were 30-59 days past due and $1.1 million were past due 90 days or more as of September 30, 2017March 31, 2024. The remaining balance of the loans was current as of March 31, 2024.
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and
December 31, 2016 because theythe 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
in compliance withconsidered to be collateral dependent, an allowance is recorded based on the
modified terms: | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | | | December 31, 2016 | |
| | | Number of Loans | | | Recorded Balance | | | Number of Loans | | | Recorded Balance | |
| | | (Dollars in thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 2 | | | $ | 2,284 | | | | 2 | | | $ | 696 | |
Agricultural | | | — | | | | — | | | | 2 | | | | 123 | |
Residential real estate loans | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 4 | | | | 124 | | | | 13 | | | | 2,240 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 6 | | | | 2,408 | | | | 17 | | | | 3,059 | |
Commercial and industrial | | | 1 | | | | 16 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total | | | 7 | | | $ | 2,424 | | | | 17 | | | $ | 3,059 | |
| | | | | | | | | | | | | | | | |
loss rate for the respective pool within the collective evaluation.
The following is a presentation of total foreclosed assets as of
September 30, 2017March 31, 2024 and December 31,
2016: | | | | | | | | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
Commercial real estate loans | | | | | | | | |
Non-farm/non-residential | | $ | 10,354 | | | $ | 9,423 | |
Construction/land development | | | 6,328 | | | | 4,009 | |
Agricultural | | | | | | | — | |
Residential real estate loans | | | | | | | | |
Residential1-4 family | | | 3,733 | | | | 2,076 | |
Multifamily residential | | | 1,286 | | | | 443 | |
| | | | | | | | |
Total foreclosed assets held for sale | | $ | 21,701 | | | $ | 15,951 | |
| | | | | | | | |
The following is a summary of the purchased credit impaired loans acquired in the GHI, BOC and Stonegate acquisitions during the first nine months of 2017 as of the dates of acquisition:
| | | | | | | | | | | | |
| | | GHI | | | BOC | | | Stonegate | |
Contractually required principal and interest at acquisition | | $ | 22,379 | | | $ | 18,586 | | | $ | 98,444 | |
Non-accretable difference (expected losses and foregone interest) | | | 4,462 | | | | 2,811 | | | | 23,297 | |
| | | | | | | | | | | | |
Cash flows expected to be collected at acquisition | | | 17,917 | | | | 15,775 | | | | 75,147 | |
Accretable yield | | | 2,071 | | | | 1,043 | | | | 11,761 | |
| | | | | | | | | | | | |
Basis in purchased credit impaired loans at acquisition | | $ | 15,846 | | | $ | 14,732 | | | $ | 63,386 | |
| | | | | | | | | | | | |
Changes in the carrying amount of the accretable yield for purchased credit impaired loans were as follows for the nine-month period ended September 30, 2017 for the Company’s acquisitions:
| | | | | | | | |
| | | Accretable Yield | | | Carrying
Amount of
Loans | |
| | | (In thousands) | |
Balance at beginning of period | | $ | 38,212 | | | $ | 159,564 | |
Reforecasted future interest payments for loan pools | | | 3,739 | | | | — | |
Accretion recorded to interest income | | | (14,955 | ) | | | 14,955 | |
Acquisitions | | | 14,875 | | | | 93,964 | |
Adjustment to yield | | | 2,210 | | | | — | |
Transfers to foreclosed assets held for sale | | | — | | | | (13,407 | ) |
Payments received, net | | | — | | | | (40,084 | ) |
| | | | | | | | |
Balance at end of period | | $ | 44,081 | | | $ | 214,992 | |
| | | | | | | | |
The loan pools were evaluated by the Company and are currently forecasted to have a slowerrun-off than originally expected. As a result, the Company has reforecast the total accretable yield expectations for those loan pools by $3.7 million. This updated forecast does not change the expected weighted average yields on the loan pools.
During the 2017 impairment tests on the estimated cash flows of loans, the Company established that several loan pools were determined to have a materially projected credit improvement. As a result of this improvement, the Company will recognize approximately $2.2 million as an additional adjustment to yield over the weighted average life of the loans.
2023:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| Commercial real estate loans | | | |
| Non-farm/non-residential | $ | 29,894 | | | $ | 29,894 | |
| Construction/land development | — | | | 47 | |
| Residential real estate loans | | | |
| Residential 1-4 family | 756 | | | 545 | |
| | | |
| Total foreclosed assets held for sale | $ | 30,650 | | | $ | 30,486 | |
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, 2017March 31, 2024 and December 31,
2016,2023, were as follows:
| | | | | | | | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
Goodwill | | | | |
Balance, beginning of period | | $ | 377,983 | | | $ | 377,983 | |
Acquisitions | | | 551,146 | | | | — | |
| | | | | | | | |
Balance, end of period | | $ | 929,129 | | | $ | 377,983 | |
| | | | | | | | |
| | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
Core Deposit and Other Intangibles | | | | |
Balance, beginning of period | | $ | 18,311 | | | $ | 21,443 | |
Acquisitions | | | 35,247 | | | | — | |
Amortization expense | | | (2,576 | ) | | | (2,370 | ) |
| | | | | | | | |
Balance, September 30 | | $ | 50,982 | | | | 19,073 | |
| | | | | | | | |
Amortization expense | | | | | | | (762 | ) |
| | | | | | | | |
Balance, end of year | | | | | | $ | 18,311 | |
| | | | | | | | |
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| Goodwill | | | |
| Balance, beginning of period | $ | 1,398,253 | | | $ | 1,398,253 | |
| Acquisitions | — | | | — | |
| Balance, end of period | $ | 1,398,253 | | | $ | 1,398,253 | |
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| Core Deposit Intangibles | | | |
| Balance, beginning of period | $ | 48,770 | | | $ | 58,455 | |
| | | |
| Amortization expense | (2,140) | | | (2,477) | |
| Balance, March 31 | $ | 46,630 | | | 55,978 | |
| Amortization expense | | | (7,208) | |
| Balance, end of year | | | $ | 48,770 | |
The carrying basis and accumulated amortization of core deposits and otherdeposit intangibles at September 30, 2017March 31, 2024 and December 31, 2016 were: | | | | | | | | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
| | | | |
Gross carrying basis | | $ | 86,625 | | | $ | 51,378 | |
Accumulated amortization | | | (35,643 | ) | | | (33,067 | ) |
| | | | | | | | |
Net carrying amount | | $ | 50,982 | | | $ | 18,311 | |
| | | | | | | | |
2023 were
: | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| Gross carrying basis | $ | 128,888 | | | $ | 128,888 | |
| Accumulated amortization | (82,258) | | | (80,118) | |
| Net carrying amount | $ | 46,630 | | | $ | 48,770 | |
Core deposit and other intangible amortization expense was approximately $906,000$2.1 million and $762,000 $2.5 millionfor the three months ended September 30, 2017March 31, 2024 and 2016,2023, respectively. Core deposit and other intangible amortization expense was approximately $2.6 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively. Including all of the mergers completed as of September 30, 2017, theThe Company’s estimated amortization expense of core deposits and other intangibles for each of the years 20172024 through 20212028 is approximately: 20172024 – $4.1$8.4 million; 20182025 – $8.0 million; 2026 – $7.8 million; 2027– $6.6 million; 20192028 – $6.5 million; 2020 – $5.9 million; 2021 – $5.7$4.2 million. The carrying amount of the Company’s goodwill was
$929.1 million and $378.0 million$1.40 billion at
September 30, 2017both March 31, 2024 and December 31,
2016, respectively.2023. Goodwill is tested annually for impairment during the fourth
quarter.quarter or more often if events and circumstances indicate there may be an impairment. During the 2023 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.
The purchase price allocation and certain fair value measurements related to the Stonegate acquisition remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
Other assets
consistsconsist primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of
September 30, 2017March 31, 2024 and December 31,
20162023, other assets were
$163.1$347.9 million and
$129.3$323.6 million, respectively.
The Company has equity securities without readily determinable fair values. These equity securitiesvalues such as stock holdings in the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“Federal Reserve”) which are outside the scope of ASC Topic 320,Investments-Debt and321, Investments – Equity Securities(“ASC Topic 321”). They include items such as stock holdings in Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“Federal Reserve”), Bankers’ Bank and other miscellaneous holdings. TheThese equity securities without a readily determinable fair value were $134.6$134.1 million and $112.4$133.4 million at September 30, 2017March 31, 2024 and December 31, 2016, respectively,2023, and are accounted for at cost. The Company has equity securities such as stock holdings in First National Bankers’ Bank and other miscellaneous holdings which are accounted for under ASC Topic 321. These equity securities without a readily determinable fair value were $92.7 million and $90.3 million at March 31, 2024 and December 31, 2023, respectively. There were no transactions during the period that would indicate a material change in fair value.
The aggregate amount of time deposits with a minimum denomination of $250,000 was
$628.3$847.9 million and
$569.1$836.7 million at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was
$1.02$1.11 billion and
$842.9 million$1.09 billion at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively. Interest expense applicable to certificates in excess of $100,000 totaled
$2.2$11.6 million and
$1.1$2.9 million for the three months ended
September 30, 2017March 31, 2024 and
2016, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $5.8 million and $3.2 million for the nine months ended September 30, 2017 and 2016,2023, respectively. As of
September 30, 2017March 31, 2024 and December 31,
2016,2023, brokered deposits were
$1.14 billion$407.4 million and
$502.5$401.0 million, respectively.
Deposits totaling approximately
$1.32$3.06 billion and
$1.23$3.05 billion at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively, were public funds obtained primarily from state and political subdivisions in the United States.
9. Securities Sold Under Agreements to Repurchase
At
September 30, 2017March 31, 2024 and December 31,
2016,2023, securities sold under agreements to repurchase totaled
$149.5$176.1 million and
$121.3$142.1 million, respectively. For the three-month periods ended
September 30, 2017March 31, 2024 and
2016,2023, securities sold under agreements to repurchase daily weighted-average totaled
$135.9$172.0 million and
$118.2$134.9 million, respectively.
For the nine-month periods ended September 30, 2017 and 2016, securities sold under agreements to repurchase daily weighted-average totaled $129.6 million and $121.0 million, respectively.The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of
September 30, 2017March 31, 2024 and December 31,
20162023 is presented in the following
tables: | | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Overnight and
Continuous | | | Up to 30
Days | | | 30-90
Days | | | Greater than
90 Days | | | Total | |
| | | (In thousands) | |
Securities sold under agreements to repurchase: | | | | | | | | | | | | | | | | | | | | |
U.S. government-sponsored enterprises | | $ | 14,125 | | | $ | — | | | $ | — | | | $ | 10,000 | | | $ | 24,125 | |
Mortgage-backed securities | | | 29,677 | | | | — | | | | — | | | | — | | | | 29,677 | |
State and political subdivisions | | | 75,829 | | | | — | | | | — | | | | — | | | | 75,829 | |
Other securities | | | 19,900 | | | | — | | | | — | | | | — | | | | 19,900 | |
| | | | | | | | | | | | | | | | | | | | |
Total borrowings | | $ | 139,531 | | | $ | — | | | $ | — | | | $ | 10,000 | | | $ | 149,531 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Overnight and
Continuous | | | Up to 30
Days | | | 30-90
Days | | | Greater than
90 Days | | | Total | |
| | | (In thousands) | |
Securities sold under agreements to repurchase: | | | | | | | | | | | | | | | | | | | | |
U.S. government-sponsored enterprises | | $ | 1,918 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,918 | |
Mortgage-backed securities | | | 22,691 | | | | — | | | | — | | | | — | | | | 22,691 | |
State and political subdivisions | | | 74,559 | | | | — | | | | — | | | | — | | | | 74,559 | |
Other securities | | | 22,122 | | | | — | | | | — | | | | — | | | | 22,122 | |
| | | | | | | | | | | | | | | | | | | | |
Total borrowings | | $ | 121,290 | | | $ | — | | | $ | — | | | $ | — | | | $ | 121,290 | |
| | | | | | | | | | | | | | | | | | | | |
table:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Overnight and Continuous | | Total | | Overnight and Continuous | | Total |
| (In thousands) |
| Securities sold under agreements to repurchase: | | | | | | | |
| | | | | | | |
| Mortgage-backed securities | $ | 12,602 | | | $ | 12,602 | | | $ | — | | | $ | — | |
| | | | | | | |
| Other securities | 163,505 | | | 163,505 | | | 142,085 | | | 142,085 | |
| Total borrowings | $ | 176,107 | | | $ | 176,107 | | | $ | 142,085 | | | $ | 142,085 | |
10. FHLB
and Other Borrowed Funds
The Company’s FHLB borrowed funds,
which are secured by our loan portfolio, were
$1.04 billion and $1.31 billion$600.0 million at
September 30, 2017both March 31, 2024 and December 31,
2016, respectively.2023. At
September 30, 2017, $245.0 millionMarch 31, 2024 and
$799.3December 31, 2023, the entire $600.0 million of the outstanding
balancebalances were
issuedclassified as
short-term and long-term
advances, respectively. At December 31, 2016, $40.0 million and $1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively.advances. The FHLB advances mature from
the current year2025 to
20272037 with fixed interest rates ranging from
0.636%3.37% to
5.960% and are secured by loans and investments securities. Maturities of borrowings as of September 30, 2017 include: 2017 – $75.3 million; 2018 – $409.5 million; 2019 – $143.1 million; 2020 – $146.4 million; 2021 – zero; after 2021 – $25.0 million.4.84%. Expected maturities
willcould differ from contractual maturities because FHLB may have the right to call, or
HBIthe Company may have the right to prepay certain obligations.
Other borrowed funds were $701.1 million as of March 31, 2024 and were classified as short-term advances. The Company had $701.3 million in other borrowed funds as of December 31, 2023. As of both March 31, 2024 and December 31, 2023, the Company had drawn $700.0 million from the Bank Term Funding Program in the ordinary course of business, and these advances mature on January 16, 2025.
Additionally, the Company had
$691.3 million$1.59 billion and
$516.2 million$1.33 billion at
September 30, 2017March 31, 2024 and December 31,
2016, respectively,2023, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively.
11.
Other BorrowingsThe Company had zero other borrowingsSubordinated Debentures
Subordinated debentures at
September 30, 2017. The Company took out a $20.0 million line of credit for general corporate purposes during 2015, but the balance on this line of credit at September 30, 2017March 31, 2024 and December 31,
2016 was zero.12. Subordinated Debentures
Subordinated debentures consists2023 consisted of subordinated debt securities and guaranteed payments on trust preferred securities. As of September 30, 2017 and December 31, 2016, subordinated debentures were $367.8 million and $60.8 million, respectively.
Subordinated debentures at September 30, 2017 and December 31, 2016 contained the following components:
| | | | | | | | |
| | | As of
September 30,
2017 | | | As of
December 31,
2016 | |
| | | (In thousands) | |
Trust preferred securities | | | | | | | | |
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | | $ | 3,093 | | | $ | 3,093 | |
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | | | 15,464 | | | | 15,464 | |
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | | | 25,774 | | | | 25,774 | |
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | | | 16,495 | | | | 16,495 | |
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month LIBOR rate, reset quarterly, currently callable without penalty | | | 4,292 | | | | — | |
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | | | 5,545 | | | | — | |
Subordinated debt securities | | | | | | | | |
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty | | | 297,172 | | | | — | |
| | | | | | | | |
Total | | $ | 367,835 | | | $ | 60,826 | |
| | | | | | | | |
Trust Preferred Securities. The Company holds trust preferred securities with a face amount
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (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 | $ | 141,756 | | | $ | 142,084 | |
| 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 | 297,932 | | | 297,750 | |
| Total | $ | 439,688 | | | $ | 439,834 | |
Subordinated Debt Securities. On April 3, 2017,1, 2022, the Company completed an underwritten public offering of $300.0acquired $140.0 million in aggregate principal amount of its 5.625%5.500% Fixed-to-Floating Rate Subordinated Notes due 20272030 (the “Notes”“2030 Notes”) for net proceeds, after underwriting discountsfrom Happy, and issuance costs, ofthe Company recorded approximately $297.0 million.$144.4 million which included fair value adjustments. The 2030 Notes are unsecured, subordinated debt obligations of the Company and will mature on April 15, 2027.July 31, 2030. From and including the date of issuance to, but excluding April 15, 2022,July 31, 2025 or the date of earlier redemption, the 2030 Notes will bear interest at an initial rate of 5.625%5.50% per annum.annum, payable in arrears on January 31 and July 31 of each year. From and including April 15, 2022July 31, 2025 to, but excluding, the maturity date or earlier redemption, the 2030 Notes will bear interest at a floating rate equal to three-month LIBOR as calculated on each applicable date of determination plus a spread of 3.575%; provided, however, that in the event three-month LIBORBenchmark rate (which is less than zero, then three-month LIBOR shall be deemedexpected to be zero.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 April 15, 2022,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 April 15, 2022,July 31, 2025, at itsthe Company’s option, in whole but not in part, if: (i) a change or prospective change in law occurssubject to prior approval of the Federal Reserve if then required, if certain events occur that could preventimpact the Company from deductingCompany’s ability to deduct interest payable on the 2030 Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that couldpurposes or preclude the 2030 Notes from being recognized as Tier 2 capital for regulatory capital purposes;purposes, or (iii)if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; inamended. 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. The Notes provide
On January 18, 2022, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the “2032 Notes”) for net proceeds, after underwriting discounts and issuance costs of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excludingJanuary 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding, the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.
The Company may, beginning with
additionalthe 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
support expected future growth.13.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.
The following is a summary of the components of the provision
(benefit) for income taxes for the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016: | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (In thousands) | |
Current: | | | | | | | | | | | | | | | | |
Federal | | $ | 17,289 | | | $ | 15,523 | | | $ | 65,958 | | | $ | 53,216 | |
State | | | 3,434 | | | | 3,083 | | | | 13,101 | | | | 10,570 | |
| | | | | | | | | | | | | | | | |
Total current | | | 20,723 | | | | 18,606 | | | | 79,059 | | | | 63,786 | |
| | | | | | | | | | | | | | | | |
Deferred: | | | | | | | | | | | | | | | | |
Federal | | | (11,002 | ) | | | 5,739 | | | | (13,238 | ) | | | 10,400 | |
State | | | (2,185 | ) | | | 1,140 | | | | (2,629 | ) | | | 2,066 | |
| | | | | | | | | | | | | | | | |
Total deferred | | | (13,187 | ) | | | 6,879 | | | | (15,867 | ) | | | 12,466 | |
| | | | | | | | | | | | | | | | |
Income tax expense | | $ | 7,536 | | | $ | 25,485 | | | $ | 63,192 | | | $ | 76,252 | |
| | | | | | | | | | | | | | | | |
2023:
| | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) | | | | |
| Current: | | | | | | | |
| Federal | $ | 23,327 | | | $ | 24,740 | | | | | |
| State | 5,390 | | | 5,037 | | | | | |
| Total current | 28,717 | | | 29,777 | | | | | |
| Deferred: | | | | | | | |
| Federal | 1,273 | | | 146 | | | | | |
| State | 294 | | | 30 | | | | | |
| Total deferred | 1,567 | | | 176 | | | | | |
| Income tax expense | $ | 30,284 | | | $ | 29,953 | | | | | |
The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016: | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Statutory federal income tax rate | | | 35.00 | % | | | 35.00 | % | | | 35.00 | % | | | 35.00 | % |
Effect ofnon-taxable interest income | | | (4.48 | ) | | | (1.47 | ) | | | (1.82 | ) | | | (1.54 | ) |
Effect of gain on acquisitions | | | — | | | | — | | | | (0.76 | ) | | | — | |
Stock compensation | | | (0.09 | ) | | | — | | | | (0.49 | ) | | | — | |
State income taxes, net of federal benefit | | | 3.91 | | | | 4.07 | | | | 4.01 | | | | 4.07 | |
Other | | | (0.63 | ) | | | (0.72 | ) | | | 0.18 | | | | (0.30 | ) |
| | | | | | | | | | | | | | | | |
Effective income tax rate | | | 33.71 | % | | | 36.88 | % | | | 36.12 | % | | | 37.23 | % |
| | | | | | | | | | | | | | | | |
2023:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| Statutory federal income tax rate | 21.00 | % | | 21.00 | % | | | | |
| Effect of non-taxable interest income | (0.43) | | | (0.78) | | | | | |
| Stock compensation | 0.35 | | | 0.39 | | | | | |
| State income taxes, net of federal benefit | 2.81 | | | 2.49 | | | | | |
| Executive officer compensation & other | (0.51) | | | (0.56) | | | | | |
| Effective income tax rate | 23.22 | % | | 22.54 | % | | | | |
The types of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:
| | | | | | | | |
| | | September 30,
2017 | | | December 31,
2016 | |
| | | (In thousands) | |
Deferred tax assets: | | | | | | | | |
Allowance for loan losses | | $ | 52,181 | | | $ | 31,381 | |
Deferred compensation | | | 3,430 | | | | 3,925 | |
Stock compensation | | | 1,605 | | | | 669 | |
Real estate owned | | | 3,697 | | | | 2,296 | |
Loan discounts | | | 16,634 | | | | 9,157 | |
Tax basis premium/discount on acquisitions | | | 32,833 | | | | 14,757 | |
Investments | | | 1,368 | | | | 1,957 | |
Other | | | 21,597 | | | | 8,361 | |
| | | | | | | | |
Gross deferred tax assets | | | 133,345 | | | | 72,503 | |
| | | | | | | | |
Deferred tax liabilities: | | | | | | | | |
Accelerated depreciation on premises and equipment | | | (1,200 | ) | | | 2,154 | |
Unrealized gain on securitiesavailable-for-sale | | | 2,018 | | | | 258 | |
Core deposit intangibles | | | 5,352 | | | | 4,950 | |
FHLB dividends | | | 1,926 | | | | 1,926 | |
Other | | | 3,462 | | | | 1,917 | |
| | | | | | | | |
Gross deferred tax liabilities | | | 11,558 | | | | 11,205 | |
| | | | | | | | |
Net deferred tax assets | | $ | 121,787 | | | $ | 61,298 | |
| | | | | | | | |
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| (In thousands) |
| Deferred tax assets: | | | |
| Allowance for credit losses | $ | 81,487 | | | $ | 81,251 | |
| Deferred compensation | 4,969 | | | 7,619 | |
| Stock compensation | 6,611 | | | 6,803 | |
| Non-accrual interest income | 1,641 | | | 1,463 | |
| Real estate owned | 70 | | | 79 | |
| Unrealized loss on investment securities, available-for-sale | 88,778 | | | 81,493 | |
| Loan discounts | 4,519 | | | 5,119 | |
| | | |
| Investments | 27,185 | | | 25,789 | |
| | | |
| Other | 19,531 | | | 14,691 | |
| Gross deferred tax assets | 234,791 | | | 224,307 | |
| Deferred tax liabilities: | | | |
| Accelerated depreciation on premises and equipment | 1,275 | | | 1,477 | |
| Tax basis on acquisitions | 4,937 | | | 4,061 | |
| | | |
| Core deposit intangibles | 10,547 | | | 11,021 | |
| FHLB dividends | 2,522 | | | 2,351 | |
| Other | 12,628 | | | 8,233 | |
| Gross deferred tax liabilities | 31,909 | | | 27,143 | |
| Net deferred tax assets | $ | 202,882 | | | $ | 197,164 | |
The Company
and its subsidiaries filefiles income tax returns in the U.S. federal
jurisdictionjurisdiction. The Company's income tax returns are open and
the states of Arkansas, Alabama, Florida, New York and California. The Company is no longer subject to
U.S. federalexaminations from the 2020 tax year and
forward. The Company's various state
income tax
examinations byreturns are generally open from the 2020 and later tax
authorities forreturn years
before 2013.The purchase price allocation and certain fair value measurements related to the Stonegate acquisition remain preliminary due to the timingbased on individual state statute of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
14.limitations.
13. Common Stock, Compensation Plans and Other
The Company’s Restated Articles of Incorporation, as amended, authorize the issuance of up to 300,000,000 shares of common stock, par value $0.01 per share.
The Company also has the authority to issue up to 5,500,000 shares of preferred stock, par value $0.01 per share under the Company’s Restated Articles of
Incorporation.Incorporation, as amended.
Stock Repurchases
On January 20, 2017, the Company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of its common stock under the previously approved stock repurchase program, which brought the total amount of authorized shares to repurchase to 9,752,000 shares.
During the
first ninethree months
of 2017, the Company utilized a portion of this stock repurchase program.The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:
| | | | | | | | | | | | | | | | |
Period | | Number of
Shares
Purchased | | | Average Price
Paid Per Share
Purchased | | | Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs | | | Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs | |
July 1 through July 31, 2017 | | | — | | | $ | — | | | | — | | | | 5,664,936 | |
August 1 through August 31, 2017 | | | 380,000 | | | | 24.36 | | | | 380,000 | | | | 5,284,936 | |
September 1 through September 30, 2017 | | | — | | | | — | | | | — | | | | 5,284,936 | |
| | | | | | | | | | | | | | | | |
Total | | | 380,000 | | | | | | | | 380,000 | | | | | |
| | | | | | | | | | | | | | | | |
During first nine months of 2017,ended March 31, 2024, the Company repurchased a total of 800,0001,025,934 shares with a weighted-average stock price of $24.44$23.38 per share. The 2017 earnings were used to fund the repurchases during the year. Shares repurchased under the program as of September 30, 2017March 31, 2024 since its inception total 4,467,06424,011,649 shares. The remaining balance available for repurchase is 5,284,93615,740,351 shares at September 30, 2017.
March 31, 2024.
The Company has a stock option and performance incentive plan
knownknow as the
Amended and Restated 2006 Stock Option and PerformanceHome BancShares, Inc. 2022 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results.
On April 21, 2016 at the Annual Meeting of Shareholders of the Company, the shareholders approved, as proposed in the Proxy Statement, an amendment to the Plan to increase the number of shares of the Company’s common stock available for issuance under the Plan by 2,000,000 shares to 11,288,000 shares. The Plan provides for the granting of incentive andnon-qualified stock options to and other equity awards, including the issuance of restricted shares. As of
September 30, 2017,March 31, 2024, the maximum total number of shares of the Company’s common stock available for issuance under the Plan was
11,288,000.14,788,000 shares. At
September 30, 2017,March 31, 2024, the Company had
approximately 2,405,0002,548,186 shares of common stock
remaining available for future grants and
approximately 4,729,0005,117,620 shares of common stock reserved for issuance pursuant to
outstanding awards under the Plan.
The intrinsic value of the stock options outstanding
andwas $8.8 million, which includes the intrinsic value of vested stock options
vestedof $7.9 million at
September 30, 2017March 31, 2024. The intrinsic value of stock options exercised during the three months ended March 31, 2024 was
$20.9 million and $12.1 million, respectively.approximately $1.2 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
$5.7$2.4 million as of
September 30, 2017. For the first nine months of 2017, the Company has expensed approximately $1.2 million for thenon-vested awards.March 31, 2024.
The table below summarizes the stock option transactions under the Plan at
September 30, 2017March 31, 2024 and December 31,
20162023 and changes during the
nine-monththree-month period and year then ended:
| | | | | | | | | | | | | | | | |
| | | For the Nine Months
Ended September 30, 2017 | | | For the Year Ended
December 31, 2016 | |
| | | Shares (000) | | | Weighted-
Average
Exercisable
Price | | | Shares (000) | | | Weighted-
Average
Exercisable
Price | |
Outstanding, beginning of year | | | 2,397 | | | $ | 15.19 | | | | 2,794 | | | $ | 12.71 | |
Granted | | | 80 | | | | 25.96 | | | | 140 | | | | 21.25 | |
Forfeited/Expired | | | — | | | | — | | | | (14 | ) | | | 17.28 | |
Exercised | | | (178 | ) | | | 7.60 | | | | (523 | ) | | | 3.50 | |
| | | | | | | | | | | | | | | | |
Outstanding, end of period | | | 2,299 | | | | 16.15 | | | | 2,397 | | | | 15.19 | |
| | | | | | | | | | | | | | | | |
Exercisable, end of period | | | 1,017 | | | $ | 13.32 | | | | 639 | | | $ | 8.88 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, 2024 | | For the Year Ended December 31, 2023 |
| Shares (000) | | Weighted-
Average
Exercisable
Price | | Shares (000) | | Weighted-
Average
Exercisable
Price |
| Outstanding, beginning of year | 2,776 | | | $ | 20.95 | | | 2,971 | | | $ | 20.45 | |
| Granted | — | | | — | | | 25 | | | 22.63 | |
| Forfeited/Expired | (19) | | | 22.32 | | | (10) | | | 23.38 | |
| Exercised | (188) | | | 17.78 | | | (210) | | | 14.01 | |
| Outstanding, end of period | 2,569 | | | 21.17 | | | 2,776 | | | 20.95 | |
| Exercisable, end of period | 1,987 | | | 20.65 | | | 1,940 | | | 20.05 | |
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’sCompany's employee stock options. The weighted-average fair value ofThere were no options granted during the ninethree months ended September 30, 2017 was $7.10 per share. The weighted-average fair value of options granted during the year ended DecemberMarch 31, 2016 was $5.08 per share.2024. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate, and expected life of options granted. | | | | | | | | |
| | | For the Nine Months Ended
September 30, 2017 | | | For the Year Ended
December 31, 2016 | |
Expected dividend yield | | | 1.39 | % | | | 1.65 | % |
Expected stock price volatility | | | 28.47 | % | | | 26.66 | % |
Risk-free interest rate | | | 2.06 | % | | | 1.65 | % |
Expected life of options | | | 6.5 years | | | | 6.5 years | |
The assumptions used in determining the fair value of the 2024 and 2023 stock option grants were as follows:
| | | | | | | | | | | |
| For the Three Months Ended March 31, 2024 | | For the Year Ended December 31, 2023 |
| Expected dividend yield | Not Applicable | | 2.98 | % |
| Expected stock price volatility | Not Applicable | | 27.97 | % |
| Risk-free interest rate | Not Applicable | | 3.37 | % |
| Expected life of options | Not Applicable | | 6.5 years |
The following is a summary of currently outstanding and exercisable options at
September 30, 2017: | | | | | | | | | | | | | | | | | | | | |
| | | Options Outstanding | | | Options Exercisable | |
Exercise Prices | | Options
Outstanding
Shares
(000) | | | Weighted-
Average
Remaining
Contractual
Life (in years) | | | Weighted-
Average
Exercise
Price | | | Options
Exercisable
Shares (000) | | | Weighted-
Average
Exercise
Price | |
$ 2.10 to $2.66 | | | 18 | | | | 1.49 | | | $ | 2.56 | | | | 18 | | | $ | 2.56 | |
$ 4.27 to $4.30 | | | 91 | | | | 0.29 | | | | 4.28 | | | | 91 | | | | 4.28 | |
$ 5.68 to $6.56 | | | 103 | | | | 3.81 | | | | 6.43 | | | | 103 | | | | 6.43 | |
$ 8.62 to $9.54 | | | 284 | | | | 5.43 | | | | 9.09 | | | | 224 | | | | 9.08 | |
$14.71 to $16.86 | | | 262 | | | | 7.01 | | | | 16.00 | | | | 124 | | | | 16.12 | |
$17.12 to $17.40 | | | 211 | | | | 7.18 | | | | 17.19 | | | | 90 | | | | 17.22 | |
$18.46 to $18.46 | | | 1,050 | | | | 7.90 | | | | 18.46 | | | | 329 | | | | 18.46 | |
$20.16 to $20.58 | | | 80 | | | | 8.02 | | | | 20.37 | | | | 14 | | | | 20.34 | |
$21.25 to $21.25 | | | 120 | | | | 8.56 | | | | 21.25 | | | | 24 | | | | 21.25 | |
$25.96 to $25.96 | | | 80 | | | | 9.56 | | | | 25.96 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2,299 | | | | | | | | | | | | 1,017 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | 0.79 | | $ | 14.71 | | | 100 | | | $ | 14.71 | |
| $16.00 to $17.99 | | 87 | | | 1.01 | | 17.05 | | | 87 | | | 17.05 | |
| $18.00 to $19.99 | | 736 | | | 1.56 | | 18.49 | | | 730 | | | 18.48 | |
| $20.00 to $21.99 | | 261 | | | 4.37 | | 20.88 | | | 194 | | | 20.99 | |
| $22.00 to $23.99 | | 1,295 | | | 4.40 | | 23.22 | | | 805 | | | 23.19 | |
| $24.00 to $25.99 | | 91 | | | 4.15 | | 25.59 | | | 71 | | | 25.95 | |
| | 2,570 | | | | | | | 1,987 | | | |
The table below summarized the activity for the Company’s restricted stock issued and outstanding at
September 30, 2017March 31, 2024 and December 31,
20162023 and changes during the period and year then ended:
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands) | |
Beginning of year | | | 958 | | | | 975 | |
Issued | | | 232 | | | | 244 | |
Vested | | | (45 | ) | | | (256 | ) |
Forfeited | | | — | | | | (5 | ) |
| | | | | | | | |
End of period | | | 1,145 | | | | 958 | |
| | | | | | | | |
Amount of expense for nine months and twelve months ended, respectively | | $ | 3,815 | | | $ | 4,049 | |
| | | | | | | | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (In thousands) |
| Beginning of year | 1,429 | | | 1,381 | |
| Issued | 238 | | | 261 | |
| Vested | (433) | | | (152) | |
| Forfeited | (18) | | | (61) | |
| End of period | 1,216 | | | 1,429 | |
| Amount of expense for the three months and twelve months ended, respectively | $ | 2,008 | | | $ | 8,016 | |
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
$14.3$14.5 million as of
September 30, 2017.15.March 31, 2024.
The table below shows the components of
non-interest expense for the three
and nine months ended
September 30, 2017March 31, 2024 and
2016: | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (In thousands) | |
Salaries and employee benefits | | $ | 28,510 | | | $ | 25,623 | | | $ | 83,965 | | | $ | 75,018 | |
Occupancy and equipment | | | 7,887 | | | | 6,668 | | | | 21,602 | | | | 19,848 | |
Data processing expense | | | 2,853 | | | | 2,791 | | | | 8,439 | | | | 8,221 | |
Other operating expenses: | | | | | | | | | | | | | | | | |
Advertising | | | 795 | | | | 866 | | | | 2,305 | | | | 2,422 | |
Merger and acquisition expenses | | | 18,227 | | | | — | | | | 25,743 | | | | — | |
FDIC loss sharebuy-out expense | | | — | | | | 3,849 | | | | — | | | | 3,849 | |
Amortization of intangibles | | | 906 | | | | 762 | | | | 2,576 | | | | 2,370 | |
Electronic banking expense | | | 1,712 | | | | 1,428 | | | | 4,885 | | | | 4,121 | |
Directors’ fees | | | 309 | | | | 292 | | | | 946 | | | | 856 | |
Due from bank service charges | | | 472 | | | | 319 | | | | 1,348 | | | | 961 | |
FDIC and state assessment | | | 1,293 | | | | 1,502 | | | | 3,763 | | | | 4,394 | |
Insurance | | | 577 | | | | 553 | | | | 1,698 | | | | 1,630 | |
Legal and accounting | | | 698 | | | | 583 | | | | 1,799 | | | | 1,764 | |
Other professional fees | | | 1,436 | | | | 1,137 | | | | 3,822 | | | | 3,106 | |
Operating supplies | | | 432 | | | | 437 | | | | 1,376 | | | | 1,292 | |
Postage | | | 280 | | | | 269 | | | | 861 | | | | 815 | |
Telephone | | | 305 | | | | 449 | | | | 1,027 | | | | 1,391 | |
Other expense | | | 4,154 | | | | 3,498 | | | | 10,835 | | | | 12,203 | |
| | | | | | | | | | | | | | | | |
Total other operating expenses | | | 31,596 | | | | 15,944 | | | | 62,984 | | | | 41,174 | |
| | | | | | | | | | | | | | | | |
Totalnon-interest expense | | $ | 70,846 | | | $ | 51,026 | | | $ | 176,990 | | | $ | 144,261 | |
| | | | | | | | | | | | | | | | |
2023:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (In thousands) | | |
| Salaries and employee benefits | $ | 60,910 | | | $ | 64,490 | | | | | |
| Occupancy and equipment | 14,551 | | | 14,952 | | | | | |
| Data processing expense | 9,147 | | | 8,968 | | | | | |
| Merger and acquisition expenses | — | | | — | | | | | |
| Other operating expenses: | | | | | | | |
| Advertising | 1,654 | | | 2,231 | | | | | |
| Amortization of intangibles | 2,140 | | | 2,477 | | | | | |
| Electronic banking expense | 3,156 | | | 3,330 | | | | | |
| Directors’ fees | 498 | | | 460 | | | | | |
| Due from bank service charges | 276 | | | 273 | | | | | |
| FDIC and state assessment | 3,318 | | | 3,500 | | | | | |
| Insurance | 903 | | | 889 | | | | | |
| Legal and accounting | 2,081 | | | 1,088 | | | | | |
| Other professional fees | 2,236 | | | 2,284 | | | | | |
| Operating supplies | 683 | | | 738 | | | | | |
| Postage | 523 | | | 501 | | | | | |
| Telephone | 470 | | | 528 | | | | | |
| Other expense | 8,950 | | | 7,935 | | | | | |
| Total other operating expenses | 26,888 | | | 26,234 | | | | | |
| Total non-interest expense | $ | 111,496 | | | $ | 114,644 | | | | | |
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 right-of-use ("ROU") asset and liability for such leases. In addition, equipment leases were determined to be immaterial and a related ROU asset and liability for such leases is not recorded.
As of March 31, 2024, the balances of the ROU asset and lease liability were $40.6 million and $43.3 million, respectively. As of December 31, 2023, the balances of the ROU asset and lease liability were $42.2 million and $45.0 million, respectively. The ROU asset is included in bank premises and equipment, net, and the lease liability is included in accrued interest payable and other liabilities.
The minimum rental commitments under these noncancelable operating leases are as follows (in thousands) as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| 2024 | $ | 7,018 | | | $ | 9,373 | |
| 2025 | 8,566 | | | 8,549 | |
| 2026 | 8,115 | | | 8,111 | |
| 2027 | 7,227 | | | 7,223 | |
| 2028 | 5,496 | | | 5,496 | |
| Thereafter | 19,827 | | | 19,827 | |
| Total future minimum lease payments | $ | 56,249 | | | $ | 58,579 | |
| Discount effect of cash flows | (12,903) | | | (13,551) | |
| Present value of net future minimum lease payments | $ | 43,346 | | | $ | 45,028 | |
Additional information (dollar amounts in thousands):
| | | | | | | | | | | | | | | |
| For the Three Months Ended | | |
| Lease expense: | March 31, 2024 | | March 31, 2023 | | | | |
| Operating lease expense | $ | 2,598 | | $ | 1,955 | | | | |
| Short-term lease expense | — | | — | | | | |
| Variable lease expense | 296 | | 260 | | | | |
| Total lease expense | $ | 2,894 | | $ | 2,215 | | | | |
| Other information: | | | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities | $ | 2,710 | | $ | 2,023 | | | | |
| Weighted-average remaining lease term (in years) | 7.88 | | 8.84 | | | | |
| Weighted-average discount rate | 3.42 | % | | 3.48 | % | | | | |
The Company currently leases three properties from three related parties. Total rent expense from the leases was $35,000, or 1.20% of total lease expense for the three months ended March 31, 2024.
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
loancredit 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, 2017March 31, 2024 and December 31,
2016,2023, commercial real estate loans represented
61.0%57.1% and
59.1%56.7% of total loans receivable, respectively, and
284.1%217.4% and
328.9%215.5% of total stockholders’ equity
at March 31, 2024 and December 31, 2023, respectively. Residential real estate loans represented
24.0%16.0% and
23.0%15.8% of total loans receivable and
111.8%60.8% and
127.8%60.1% of total stockholders’ equity at
September 30, 2017March 31, 2024 and December 31,
2016,2023, respectively.
Approximately
91.0%79.3% of the Company’s total loans and
91.9%83.7% of the Company’s real estate loans as of
September 30, 2017,March 31, 2024, are to borrowers whose collateral is located in Alabama, Arkansas, Florida,
Texas and New York, the states in which the Company has its branch locations.
Although general economic conditions in the Company’s market areas have improved, both nationally and locally, over the past three years and have shown signs of continued improvement, financial institutions still face circumstances and challenges which, in some cases, have resulted and could potentially result, in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.
Any future volatility in the economy could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for
loancredit 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
theirits 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, 2017March 31, 2024 and December 31,
2016,2023, commitments to extend credit of
$2.31$4.54 billion and
$1.82$4.59 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, 2017March 31, 2024 and December 31,
2016, is $76.82023, was $148.6 million and
$41.1$185.5 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.
The Bank is subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. Since the Bank is also under supervision of the Federal Reserve, it is further limited if the total of all dividends declared in any calendar year by the Bank exceeds the Bank’s net profits to date for that year combined with its retained net profits for the preceding two years. During the first ninethree months of 2017,ended March 31, 2024, the Company requested approximately $64.5$68.8 million in regular dividends from its banking subsidiary. This dividend is equal to approximately 52.7%
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,
common 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, 2017,March 31, 2024, the Company meets all capital adequacy requirements to which it is subject.
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 now:are: a 6.5%
“common equityCET1 risk-based capital ratio, a 5% Tier 1 leverage capital ratio, an 8% Tier 1 risk-based
capital” ratio, a 5% “Tier 1 leverage capital” ratio, an 8% “Tier 1 risk-based capital”capital ratio, and a 10%
“totaltotal risk-based
capital”capital ratio. As of
September 30, 2017,March 31, 2024, the Bank met the capital standards for a well-capitalized institution. The Company’s
“common equityCET1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based
capital” ratio, “Tier 1 leverage capital” ratio, “Tier 1 risk-based capital”capital ratio, and
“totaltotal risk-based
capital”capital ratio were
10.86%14.31%,
13.17%12.30%,
11.46%14.31%, and
15.06%17.95%, respectively, as of
September 30, 2017.March 31, 2024.
19. Additional Cash Flow Information
In connection with the GHI acquisition, accounted for using the purchase method, the Company acquired approximately $398.1 million in assets, including $41.0 million in cash and cash equivalents, assumed $345.0 million in liabilities, issued 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, and paid approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
In connection with the BOC acquisition, accounted for using the purchase method, the Company acquired approximately $178.1 million in assets, including $4.6 million in cash and cash equivalents, assumed $170.1 million in liabilities, issued no equity and paid approximately $4.2 million in cash. As a result, the Company recorded a bargain purchase gain of $3.8 million.
In connection with the Stonegate acquisition, accounted for using the purchase method, the Company acquired approximately $2.89 billion in assets, including $101.0 million in cash and cash equivalents, assumed $2.60 billion in liabilities, issued 30,863,658 shares of its common stock valued at approximately $742.3 million as of September 26, 2017, and paid $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock.
The following is a summary of the Company’s additional cash flow information during the
nine-monththree-month periods ended:
| | | | | | | | |
| | | September 30, | |
| | | 2017 | | | 2016 | |
| | | (In thousands) | |
Interest paid | | $ | 34,573 | | | $ | 22,295 | |
Income taxes paid | | | 117,025 | | | | 66,450 | |
Assets acquired by foreclosure | | | 9,255 | | | | 9,448 | |
| | | | | | | | | | | |
| March 31, |
| 2024 | | 2023 |
| (In thousands) |
| Interest paid | $ | 109,589 | | | $ | 71,697 | |
| Income taxes paid | 2,429 | | | 1,600 | |
| Assets acquired by foreclosure | 435 | | | 16 | |
20. Financial Instruments Fair value is the price that would be received
to sellfor 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
value: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 are – the only material instruments valued on a recurring basis which are held by the Company at fair value. The Company does not have any Level 1 securities. Primarily all of the Company’sCompany's available-for-sale securities are considered to be Level 2 securities. TheseThe Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. As of September 30, 2017 and December 31, 2016, Level 3 securities were immaterial. In addition, there were no material transfers between hierarchy levels during 2017 and 2016. The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities with complicated structures. Pricing for the Company’s investment securities is fairly generic and is easily obtained.
Impaired loans that are collateral dependent are The Company uses a third-party comparison pricing vendor in order to reflect consistency in the only material financial assets valued on anon-recurring basis which are heldfair values of the investment securities sampled by the Company ateach 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. Loan impairment is reported when full payment undervalue measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the loanU.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms is not expected.and conditions, among other things.
Impaired loans - Impaired loans include loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty. Impaired loans are carried at the net realizable value of the collateral if the loan is collateral dependent. A portion of the allowance for loancredit losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loancredit losses to require an increase, such increase is reported as a component of the provision for loancredit losses. The fair value of loans with specific allocated losses was $94.1$18.5 million and $91.5$10.5 million as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately $314,000 and $156,000$236,000 of accrued interest receivable whennon-covered impaired loans were put onnon-accrual status during the three months ended September 30, 2017March 31, 2024 and 2016,2023, respectively. The Company reversed approximately $523,000 and $457,000 of accrued interest receivable whennon-covered impaired loans were put onnon-accrual status during the nine months ended September 30, 2017 and 2016, respectively. Foreclosed assets held for sale are the only materialnon-financial– Foreclosed assets valued on anon-recurring basis whichheld 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 loancredit 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, 2017March 31, 2024 and December 31, 2016,2023, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $21.7$30.7 million and $16.0$30.5 million, respectively.Foreclosed
No foreclosed assets held for sale
with a carrying value of approximately $394,000 were remeasured during the
ninethree months ended
September 30, 2017, resulting in a write-down of approximately $306,000.March 31, 2024. Regulatory guidelines require usthe Company to reevaluate the fair value of foreclosed assets held for sale on at least an annual basis. The Company’s policy is to comply with the regulatory guidelines.
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and foreclosed assets primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from 20% to 50% for commercial and residential real estate collateral.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating fair values of financial instruments as disclosed in these notes:
Cash and cash equivalents and federal funds sold — For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment securities –held-to-maturity — These securities consist primarily of mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Loans receivable, net of impaired loans and allowance— For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are assumed to approximate the carrying amounts. The fair values for fixed-rate loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. Fair values for acquired loans are based on a discounted cash flow methodology that considers factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, current discount rates and whether or not the loan is amortizing. Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.
Accrued interest receivable —The carrying amount of accrued interest receivable approximates its fair value.
Deposits and securities sold under agreements to repurchase — The fair values of demand deposits, savings deposits and securities sold under agreements to repurchase are, by definition, equal to the amount payable on demand and, therefore, approximate their carrying amounts. The fair values for time deposits are estimated using a discounted cash flow calculation that utilizes interest rates currently being offered on time deposits with similar contractual maturities.
FHLB and other borrowed funds — For short-term instruments, the carrying amount is a reasonable estimate of fair value. The fair value of long-term debt is estimated based on the current rates available to the Company for debt with similar terms and remaining maturities.
Accrued interest payable — The carrying amount of accrued interest payable approximates its fair value.
Subordinated debentures — The fair value of subordinated debentures is estimated using the rates that would be charged for subordinated debentures of similar remaining maturities.
Commitments to extend credit, letters of credit and lines of credit— The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of these commitments is not material.
The following table presents the estimated fair values of the Company’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assetsexchange price that would be received for an asset or liabilities could be exchangedpaid to transfer a liability in a currentthe principal or most advantageous market for the asset or liability in an orderly transaction between willing parties other than in a forced or liquidation sale. Because no market exists for certainparticipants at the measurement date.
| | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Carrying
Amount | | Fair Value | | Level |
| (In thousands) | | |
| Financial assets: | | | | | |
| Cash and cash equivalents | $ | 1,175,258 | | | $ | 1,175,258 | | | 1 |
| Federal funds sold | 5,200 | | | 5,200 | | | 1 |
| Investment securities - available for sale | 3,400,884 | | | 3,400,884 | | | 2 |
| Investment securities - held-to-maturity | 1,280,586 | | | 1,159,145 | | | 2 |
| Loans receivable, net of impaired loans and allowance | 14,125,177 | | | 14,068,484 | | | 3 |
| Accrued interest receivable | 119,029 | | | 119,029 | | | 1 |
| FHLB, FRB & FNBB Bank stock; other equity investments | 226,765 | | | 226,765 | | | 3 |
| Marketable equity securities | 50,422 | | | 50,422 | | | 1 |
| Financial liabilities: | | | | | |
| Deposits: | | | | | |
| Demand and non-interest bearing | $ | 4,115,603 | | | $ | 4,115,603 | | | 1 |
| Savings and interest-bearing transaction accounts | 11,047,258 | | | 11,047,258 | | | 1 |
| Time deposits | 1,703,269 | | | 1,681,484 | | | 3 |
| Securities sold under agreements to repurchase | 176,107 | | | 176,107 | | | 1 |
| FHLB and other borrowed funds | 1,301,050 | | | 1,288,077 | | | 2 |
| Accrued interest payable | 21,860 | | | 21,860 | | | 1 |
| Subordinated debentures | 439,688 | | | 364,500 | | | 3 |
Table of these financial instruments and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate. | | | | | | | | | | | | |
| | | September 30, 2017 | |
| | | Carrying
Amount | | | Fair Value | | | Level | |
| | | (In thousands) | | | | |
Financial assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 552,320 | | | $ | 552,320 | | | | 1 | |
Federal funds sold | | | 4,545 | | | | 4,545 | | | | 1 | |
Investment securities –held-to-maturity | | | 234,945 | | | | 239,017 | | | | 2 | |
Loans receivable, net of impaired loans and allowance | | | 10,080,468 | | | | 9,966,022 | | | | 3 | |
Accrued interest receivable | | | 41,071 | | | | 41,071 | | | | 1 | |
Financial liabilities: | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | |
Demand andnon-interest bearing | | $ | 2,555,465 | | | $ | 2,555,465 | | | | 1 | |
Savings and interest-bearing transaction accounts | | | 6,341,883 | | | | 6,341,883 | | | | 1 | |
Time deposits | | | 1,551,422 | | | | 1,571,618 | | | | 3 | |
Federal funds purchased | | | — | | | | — | | | | N/A | |
Securities sold under agreements to repurchase | | | 149,531 | | | | 149,531 | | | | 1 | |
FHLB and other borrowed funds | | | 1,044,333 | | | | 1,044,936 | | | | 2 | |
Accrued interest payable | | | 10,964 | | | | 10,964 | | | | 1 | |
Subordinated debentures | | | 367,835 | | | | 384,485 | | | | 3 | |
| | | | | | | | | | | | |
| | | December 31, 2016 | |
| | | Carrying
Amount | | | Fair Value | | | Level | |
| | | (In thousands) | | | | |
Financial assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 216,649 | | | $ | 216,649 | | | | 1 | |
Federal funds sold | | | 1,550 | | | | 1,550 | | | | 1 | |
Investment securities –held-to-maturity | | | 284,176 | | | | 287,038 | | | | 2 | |
Loans receivable, net of impaired loans and allowance | | | 7,216,199 | | | | 7,131,199 | | | | 3 | |
Accrued interest receivable | | | 30,838 | | | | 30,838 | | | | 1 | |
Financial liabilities: | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | |
Demand andnon-interest bearing | | $ | 1,695,184 | | | $ | 1,695,184 | | | | 1 | |
Savings and interest-bearing transaction accounts | | | 3,963,241 | | | | 3,963,241 | | | | 1 | |
Time deposits | | | 1,284,002 | | | | 1,275,634 | | | | 3 | |
Securities sold under agreements to repurchase | | | 121,290 | | | | 121,290 | | | | 1 | |
FHLB and other borrowed funds | | | 1,305,198 | | | | 1,311,280 | | | | 2 | |
Accrued interest payable | | | 1,920 | | | | 1,920 | | | | 1 | |
Subordinated debentures | | | 60,826 | | | | 60,826 | | | | 3 | |
Contents
| | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Carrying
Amount | | Fair Value | | Level |
| (In thousands) | | |
| Financial assets: | | | | | |
| Cash and cash equivalents | $ | 1,000,213 | | | $ | 1,000,213 | | | 1 |
| Federal funds sold | 5,100 | | | 5,100 | | | 1 |
| Investment securities - available for sale | 3,507,841 | | | 3,507,841 | | | 2 |
| Investment securities - held-to-maturity | 1,281,982 | | | 1,170,481 | | | 2 |
| Loans receivable, net of impaired loans and allowance | 14,048,002 | | | 14,071,775 | | | 3 |
| Accrued interest receivable | 118,966 | | | 118,966 | | | 1 |
| FHLB, FRB & FNBB Bank stock; other equity investments | 223,748 | | | 223,748 | | | 3 |
| Marketable equity securities | 49,419 | | | 49,419 | | | 1 |
| Financial liabilities: | | | | | |
| Deposits: | | | | | |
| Demand and non-interest bearing | $ | 4,085,501 | | | $ | 4,085,501 | | | 1 |
| Savings and interest-bearing transaction accounts | 11,050,347 | | | 11,050,347 | | | 1 |
| Time deposits | 1,651,863 | | | 1,633,091 | | | 3 |
| Securities sold under agreements to repurchase | 142,085 | | | 142,085 | | | 1 |
| FHLB and other borrowed funds | 1,301,300 | | | 1,291,926 | | | 2 |
| Accrued interest payable | 19,124 | | | 19,124 | | | 1 |
| Subordinated debentures | 439,834 | | | 358,682 | | | 3 |
21. Recent Accounting Pronouncements
In May 2014,March 2020, the FASB issued ASU2014-09,Revenue from Contracts with Customers 2020-04, Reference Rate Reform (Topic 606)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU2014-09 2020-04 provides guidanceoptional 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 should recognize revenuehas 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 depictDecember 31, 2024, after which entities will no longer be permitted to apply the transfer of promised goods or services to customersrelief in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Topic 848.
In August 2015,January 2021, the FASB issued ASUNo. 2015-14,Revenue from Contracts with Customers 2021-01, Reference Rate Reform (Topic 606),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 effectivesunset date of this standardTopic 848 from December 31, 2022, to annual and interim periods beginningDecember 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.
In December 15, 2017; however, early adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. In April 2016,2022, the FASB issued ASU2016-10,Revenue from Contracts with Customers 2022-06, Reference Rate Reform (Topic 606)848): Identifying Performance Obligations and Licensing, which amends certain aspectsDeferral 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 ASU2014-09 (FASB’s new revenue standard)Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on (1) identifying performance obligations and (2) licensing.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 ASU2014-10’s 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 date and transition provisions are aligned with the requirements in ASU2014-09.upon issuance.
In May 2016,November 2023, the FASB issued ASU2016-12,Revenue from Contracts 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments apply to all public entities that are required to report segment information in accordance with Customers (Topic 606): Narrow-Scope ImprovementsFASB ASC Topic 280, Segment Reporting. The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments require that a public entity disclose, on an annual and Practical Expedientsinterim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss. Public entities are required to disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, public entities must provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB ASC Topic 280, Segment Reporting, which amends certain aspectsin interim periods. The amendments clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the FASB’s new revenue standard, ASU2014-09. ASU2016-12’s effective date and transition provisions are alignedreported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the requirementsmeasurement principles used in ASU2014-09The guidance issuedmeasuring the corresponding amounts in ASU2014-09, ASU2015-14, ASU2016-10 and ASU2016-12 permit two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company plans to adopt the new standard effective January 1, 2018 and apply it prospectively. The Company is currently evaluating the impact this guidance will have on itspublic entity’s consolidated financial statements. OnlyThe Amendments require that a portionpublic entity disclose the title and position of the Company’s revenues are impacted by this guidance becauseCODM and an explanation of how the guidance does not applyCODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to revenue on contracts accounted for under the financial instruments or insurance contracts standards. The Company’s evaluation process includes, but is not limited to, identifying contracts within the scope of the guidance, reviewing and documenting its accounting for these contracts, and identifying and determining the accounting for any related contract costs. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In January 2016, the FASB issued ASU2016-01,Financial Instruments—Overall(Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale securities. The new guidance is effective for annual reporting period and interim reporting periods within those annual periods, beginning after December 15, 2017. Management is currently evaluating the impact of the adoption of this guidance to the Company’s financial statements, but does not anticipate the guidance to have a material effect on the Company’s financial position or results of operations as the Company’s equity investments are immaterial. However,allocate resources. Finally, the amendments will have an impact on certain itemsrequire that are disclosed at fair valuea public entity that are not currently utilizinghas a single reportable segment provide all the exit price notion when measuring fair value. At this time,disclosures required by the Company cannot quantify the changeamendments in the fair value of suchASU and all existing segment disclosures since the Company is currently evaluating the full impact of the standards and is in the planning stages of developing appropriate procedures and processes to comply with the disclosure requirements of such amendments.ASC Topic 280. The current accounting policies and procedures will be adjusted after the Company has fully evaluated the standard to comply with the accounting changes mentioned above. For additional information on fair value of assets and liabilities, see Note 20.
In February 2016, the FASB issued ASU2016-02,Leases (Topic 842). The amendments in ASU2016-02 address several aspects of lease accounting with the significant change being the recognition of lease assets and lease liabilities for leases previously classified as operating leases. ASU2016-02 is effective for fiscal years beginning after December 15, 2018, including2023, and interim periods within those fiscal years.years beginning after December 15, 2024. Early application ofadoption is permitted. A public entity should apply the amendments retrospectively to all prior periods presented in ASU2016-02 is permitted for all entities. The Company has several lease agreements for which the amendments will requirefinancial statements. Upon transition, the Company to recognize a lease liability to make lease paymentssegment expense categories and aright-of-use asset which will represent its right to useamounts disclosed in the underlying asset forprior periods should be based on the lease term.significant segment expense categories identified and disclosed in the period of adoption. The Company is currently reviewingevaluating the amendmentspotential impacts related to ensure it is fully compliant by the adoption date and doesn’t expect to early adopt. The impact is not expected to have a material effect onof the Company’s financial position or results of operations as the Company does not have a material amount of lease agreements. ASU.
In addition, the Company will change its current accounting policies to comply with the amendments with such changes as mentioned above. For additional information on the Company’s leases, see Note 18 “Leases” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form10-K for the year ended December 31, 2016.In March 2016,2023, the FASB issued ASU2016-09,Compensation– Stock Compensation 2023-09, "
Income Taxes (Topic 718)740): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspectsIncome Tax Disclosures." The amendments require that public business entities on an annual basis (a) disclose specific categories in the rate reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the accounting for employee share-based payment transactions for both public and nonpublicamount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments also require that all entities includingdisclose on an annual basis the accounting foramount of income taxes forfeitures,paid (net of refunds received) disaggregated by federal (national), state, and statutoryforeign taxes, and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments require that all entities disclose income (or loss) from continuing operations before income tax withholding requirements, as well as classification in the statement of cash flows.expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the amendments effective January 1, 2017. The Company has a stock-based compensation plan for which the ASU2016-09 guidance results in the associated excess tax benefits or deficiencies being recognized as tax expense or benefit in the income statement instead of the previous accounting treatment, which requires excess tax benefits to be recognized as an adjustment to additionalpaid-in capital and excess tax deficiencies to be recognized as either an offset to accumulated excess tax benefits, if any, or to the income statement. In addition, such amounts are now classified as an operating activity in the statement of cash flows instead of the current accounting treatment, which required it to be classified as both an operating and a financing activity. The Company’s stock-based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies and, therefore, the Company has not experienced a material change in the Company’s financial position or results of operation as a result of the adoption and implementation of ASU2016-09. For additional information on the stock-based compensation plan, see Note 14.In May 2016, the FASB issued ASU2016-11,Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09 and2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update), which rescinds certain SEC guidance from the FASB Accounting Standards Codification in response to announcements made by the SEC staff at the Emerging Issues Task Force’s (“EITF”) March 3, 2016, meeting. ASU2016-11 is effective at the same time as ASU2014-09 and ASU2014-16. The Company is currently evaluating the impact, if any, ASU2016-11 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In June 2016, the FASB issued ASU2016-13,Measurement of Credit Losses on Financial Instruments, which amends the FASB’s guidance on the impairment of financial instruments. The amendments in ASU2016-13 replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates, known as the current expected credit loss (“CECL”) model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU2016-13 is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.2024. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The allowance for loan losses is a material estimate of the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the allowance for loan losses at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating toheld-to-maturity investment securities. In addition, the current accounting policy and procedures for other-than-temporary impairment onavailable-for-sale investment securities will be replaced with an allowance approach. The Company is currently evaluating the impact, if any, ASU2016-13 will have on itsannual financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. It is too early to assess the impact that the implementation of this guidance will have on the Company’s consolidated financial statements; however, the Company has begun developing processes and procedures to ensure it is fully compliant with the amendments at the required adoption date. Among other things, the Company has initiated data gathering and assessment to support forecasting of asset quality, loan balances, and portfolio net charge-offs and have developed anin-house data warehouse as well as developed asset quality forecast models in preparation for the implementation of this standard. For additional information on the allowance for loan losses, see Note 5.
In August 2016, the FASB issued ASU2016-15,Classification of Certain Cash Receipts and Cash Payments,which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU2016-15’s amendments add or clarify guidance on eight cash flow issues including debt prepayment or debt extinguishment costs; settlement ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and the guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact, if any, ASU2016-15 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In October 2016, the FASB issued ASU2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company is currently evaluating the impact, if any, ASU2016-16 will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In November 2016, the FASB issued ASU2016-18,Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the new guidance must be applied retrospectively to all periods presented. The Company is currently evaluating the impact, if any, ASU2016-18 will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In January 2017, the FASB issued ASU2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to entities to assist with evaluating when a set of transferred assets and activities (collectively, the “set”) is a business and provides a screen to determine when a set is not a business. Under the new guidance, when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted for interim or annual periods in which the financial statements have not been issued. The Company is currently evaluating the impact, if any, ASU2017-01 will have on its financial position, results of operations, and its financial statement disclosure. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In January 2017, the FASB issued ASU2017-03,Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323). The amendments in the update relate to SEC paragraphs pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF meetings related to disclosure of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not knowissued or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact.made available for issuance. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU2016-02,Leases, and ASU2014-09,Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. The Company adopted the amendments in this update during the fourth quarter of 2016 and appropriate disclosures have been included in this Note for each recently issued accounting standard.
In January 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoptionRetrospective application is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that wouldmore-likely-than-not reduce the fair value of the reporting unit below its carrying value. During 2016, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company’s goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.
In February 2017, the FASB issued ASU2017-05,Other Income: Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies the scope of the FASB’s guidance on nonfinancial asset derecognition (ASC610-20) as well as the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The ASU requires an entity to derecognize the nonfinancial asset orin-substance nonfinancial asset in a partial sale transaction when (1) the entity ceases to have a controlling financial interest in a subsidiary under ASC 810 and (2) control of the asset is transferred in accordance with ASC 606. The entity therefore has to consider repurchase agreements (e.g., a call option to repurchase the ownership interest in a subsidiary) in its assessment and may not be able to derecognize the nonfinancial assets, even though it no longer has a controlling financial interest in a subsidiary in accordance with ASC 810. The ASU illustrates the application of this guidance in ASC610-20-55-15 and55-16. The effective date of the new guidance is aligned with the requirements in the new revenue standard, which is effective for public entities for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017, and for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. If the entity decides to early adopt the ASU’s guidance, it must also early adopt ASC 606 (and vice versa).permitted. The Company is currently evaluating the impact, if any, ASU2017-05 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limitedpotential impacts related to identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In March 2017, the FASB issued ASU2017-08,Receivables—Nonrefundable Fees and Other Costs (Topic 310): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. This ASU will shorten the amortization period for the premium to be amortized to the earliest call date. This ASU does not apply to securities held at a discount, which will continue to be amortized to maturity. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings asASU.
Table of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU2017-08 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.In May 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The amendments in ASU2017-09 should be applied prospectively to an award modified on or after the adoption date. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate any modifications to its existing awards and therefore the adoption of ASU2017-09 is not expected to have a significant impact on the Company’s financial position, results of operations, or its financial statement disclosures.
In July 2017, the FASB issued ASU2017-11,Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily RedeemableNon-controlling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigatingTopic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemablenon-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU2017-11 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
Contents
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Results of Review of Interim Consolidated Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of Home BancShares Inc. (the Company)(“the Company”) and subsidiaries as of September 30, 2017,March 31, 2024, and the related condensed consolidated statements of income, and comprehensive income for the three- and nine-month periods ended September 30, 2017 and 2016, and the related statements of stockholders’(loss), stockholder’s equity, and cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2024 and 2016. These 2023, and the related notes (collectively referred to as the “interim financial statements are the responsibility of the Company’s management.We conductedinformation 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, 2023, 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 26, 2024 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, 2023, 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
statements consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board,PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Little Rock, Arkansas
November 7, 2017
Item 2: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
May 3, 2024
Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Form10-K, filed with the Securities and Exchange Commission on February 28, 2017,26, 2024, which includes the audited financial statements for the year ended December 31, 2016.2023. Unless the context requires otherwise, the terms “Company”, “us”, “we”,“Company,” “us,” “we,” and “our” refer to Home BancShares, Inc. on a consolidated basis. 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, 2017,March 31, 2024, we had, on a consolidated basis, total assets of
$14.26$22.84 billion, loans receivable, net of
$10.17allowance for credit losses of $14.22 billion, total deposits of
$10.45$16.87 billion, and stockholders’ equity of
$2.21$3.81 billion.
We generate
mostthe 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
sourcesources 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.
Table 1: Key Financial Measures
| | | | | | | | | | | | | | | | |
| | | As of or for the Three Months
Ended September 30, | | | As of or for the Nine Months
Ended September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands, except per share data) | |
Total assets | | $ | 14,255,967 | | | $ | 9,764,238 | | | $ | 14,255,967 | | | $ | 9,764,238 | |
Loans receivable | | | 10,286,193 | | | | 7,112,291 | | | | 10,286,193 | | | | 7,112,291 | |
Allowance for loan losses | | | 111,620 | | | | 76,370 | | | | 111,620 | | | | 76,370 | |
Total deposits | | | 10,448,770 | | | | 6,840,293 | | | | 10,448,770 | | | | 6,840,293 | |
Total stockholders’ equity | | | 2,206,716 | | | | 1,296,018 | | | | 2,206,716 | | | | 1,296,018 | |
Net income | | | 14,821 | | | | 43,620 | | | | 111,774 | | | | 128,556 | |
Basic earnings per share | | | 0.10 | | | | 0.31 | | | | 0.78 | | | | 0.92 | |
Diluted earnings per share | | | 0.10 | | | | 0.31 | | | | 0.78 | | | | 0.91 | |
Annualized net interest margin – FTE | | | 4.40 | % | | | 4.86 | % | | | 4.53 | % | | | 4.83 | % |
Efficiency ratio | | | 53.77 | | | | 39.41 | | | | 43.92 | | | | 38.16 | |
Annualized return on average assets | | | 0.54 | | | | 1.81 | | | | 1.41 | | | | 1.81 | |
Annualized return on average common equity | | | 3.88 | | | | 13.62 | | | | 10.33 | | | | 13.83 | |
Overview
The Company’s third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancShares’ financial condition and results of operation may not be known for some time, the Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in loans receivable we have in the disaster area, the Company has accrued $33.4 million ofpre-tax hurricane expenses. The $33.4 million of hurricane expenses include the following items: $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017.
Results of Operations for Three Months Ended September 30, 2017 and 2016
Our net income decreased $28.8 million, or 66.0%, to $14.8 million for the three-month period ended September 30, 2017, from $43.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.10 per share and $0.31 per share for the three-month periods ended September 30, 2017 and 2016, respectively. Excluding the $51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32 per share for the three months ended September 30, 2017. Excluding the $3.8 million of FDIC loss sharebuy-out expense, net income was $46.0 million, and diluted earnings per share for the three months ended September 30, 2016 was $0.33 per share. Net income excluding merger expenses, hurricane expenses and FDIC loss sharebuy-out expense for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in thenon-hurricane related provision for loan losses in third quarter of 2017 when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.
Our GAAP net interest margin decreased from 4.86% for the three-month period ended September 30, 2016 to 4.40% for the three-month period ended September 30, 2017. The yield on loans was 5.66% and 5.84% for the three months ended September 30, 2017 and 2016, respectively. For the three months ended September 30, 2017 and 2016, we recognized $7.2 million and $11.9 million, respectively, in total net accretion for acquired loans and deposits. Thenon-GAAP margin excluding accretion income was 4.07% and 4.25% for the three months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP yield on loans excluding accretion income was 5.24% and 5.10% for the three months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of $300 million of 5.625%fixed-to-floating rate subordinated notes, which added approximately $4.3 million of interest expense when compared to the same quarter in 2016.
Our efficiency ratio, was 53.77% for the three months ended September 30, 2017, compared to 39.41% for the same period in 2016. For the third quarter of 2017, our core efficiency ratio was 39.12%, which increased from the 36.51% reported for third quarter of 2016. The core efficiency ratioas adjusted, is anon-GAAP measure and is calculated by dividingnon-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis andnon-interest income excludingnon-core items adjustments such as merger and acquisition expenses FDIC loss sharebuy-out expense and/or certain gains, losses and losses.
Our annualized return on average assets was 0.54%other non-interest income and expenses.
Table 1: Key Financial Measures
| | | | | | | | | | | | | | | |
| As of or for the Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands, except per share data) | | | | |
| Total assets | $ | 22,835,721 | | $ | 22,518,255 | | | | |
| Loans receivable | 14,513,673 | | 14,386,634 | | | | |
| Allowance for credit losses | (290,294) | | (287,169) | | | | |
| Total deposits | 16,866,130 | | 17,445,466 | | | | |
| Total stockholders’ equity | 3,811,401 | | 3,630,885 | | | | |
| Net income | 100,109 | | 102,962 | | | | |
| Basic earnings per share | 0.50 | | 0.51 | | | | |
| Diluted earnings per share | 0.50 | | 0.51 | | | | |
| Book value per share | 18.98 | | 17.87 | | | | |
Tangible book value per share (non-GAAP)(1) | 11.79 | | 10.71 | | | | |
| Annualized net interest margin - FTE | 4.13% | | 4.37% | | | | |
| Efficiency ratio | 44.22 | | 44.80 | | | | |
Efficiency ratio, as adjusted (non-GAAP)(2) | 44.43 | | 43.42 | | | | |
| Return on average assets | 1.78 | | 1.84 | | | | |
| Return on average common equity | 10.64 | | 11.70 | | | | |
(1)See Table 19 for the three months ended September 30, 2017, compared to 1.81%non-GAAP tabular reconciliation.
(2)See Table 23 for the same period in 2016. Excluding merger expenses, hurricane expenses and FDIC loss sharebuy-out expense, our annualized return on average assets was 1.70% for the three months ended September 30, 2017, compared to 1.90% for the same period in 2016. Our annualized return on average common equity was 3.88% for the three months ended September 30, 2017, compared to 13.62% for the same period in 2016. Excluding merger expenses, hurricane expenses and FDIC loss sharebuy-out expense, our annualized return on average common equity was 12.17% for the three months ended September 30, 2017, compared to 14.35% for the same period in 2016.non-GAAP tabular reconciliation.
Overview
Results of Operations for
Ninethe Three Months Ended
September 30, 2017March 31, 2024 and
20162023
Our net income decreased $16.8$2.9 million, or 13.1%2.8%, to $111.8$100.1 million for the nine-monththree-month period ended September 30, 2017,March 31, 2024, from $128.6$103.0 million for the same period in 2016.2023. On a diluted earnings per share basis, our earnings were $0.78 per share and $0.91$0.50 per share for the nine-month periodsthree-month period ended September 30, 2017 and 2016, respectively. Excluding the $3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.00March 31, 2024 compared to $0.51 per share for the ninethree-month period ended March 31, 2023. The Company recorded $4.5 million in credit loss expense for the quarter ended March 31, 2024. This consisted of a $5.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the three months ended September 30, 2017. ExcludingMarch 31, 2024, the $3.8 million of FDIC loss sharebuy-out expense, net income was $130.9 millionCompany recorded $162,000 in bank owned life insurance ("BOLI") death benefits and diluted earnings per share for the nine months ended September 30, 2016 was $0.93 per share. The $13.6a $1.0 million increase in net income, excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss sharebuy-outthe fair value of marketable securities.
Total interest expense
is primarily associated with additional netincreased by $42.0 million, or 59.7%. This was partially offset by a $32.0 million, or 11.2%, increase in total interest income,
largely resultinga $7.6 million, or 22.3%, increase in non-interest income and a $3.1 million, or 2.7%, decrease in non-interest expense. These fluctuations are primarily due to the high interest rate environment. The increase in interest expense was primarily due to a $33.4 million, or 56.4%, increase in interest on deposits, an $8.1 million, or 130.6%, increase in interest on FHLB and other borrowed funds and a $536,000, or 61.8%, increase in interest on securities sold under agreements to repurchase. The increase in interest income resulted from
our acquisitionsa $28.3 million, or 11.9%, increase in loan interest income and
our organic loan growth plusa $5.8 million, or 124.7%, increase in interest income on deposits at other banks, partially offset by a $2.2 million, or 5.1%, decrease in investment income. The increase in non-interest income was primarily due to a $12.4 million, or 108.8%, increase in the fair value adjustment for marketable securities and a $987,000, or 38.4%, increase in mortgage lending income, which was partially offset by a $4.5 million, or 37.7%, decrease in other income and a $1.7 million, or 14.2%, decrease in other service charges and fees. The decrease in non-interest expense was due to a decrease
of $3.6 million, or 5.6%, in
thenon-hurricane related provision for loan lossessalaries and employee benefits and a decrease of $401,000, or 2.7%, in
first nine months of 2017, growth innon-interest incomeoccupancy and
the reduced amortization of the indemnification asset when compared to the same period in 2016. These improvements wereequipment expense, partially offset by an increase
of $654,000, or 2.5%, in
other operating expenses and an increase of $179,000, or 2.0%, in data processing expense. Income tax expense increased by $331,000, or 1.1%, during the
costs associated with the asset growth plusquarter due to an increase in
interest expense related to the
issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.income tax rate.
Our
GAAP net interest margin decreased from
4.83%4.37% for the
nine-monththree-month period ended
September 30, 2016March 31, 2023 to
4.53%4.13% for the
nine-monththree-month period ended
September 30, 2017.March 31, 2024. The yield on
loansinterest earning assets was
5.70%6.38% and
5.82%5.79% for the
ninethree months ended
September 30, 2017March 31, 2024 and
2016, respectively.2023, respectively, while average interest earning assets decreased from $20.06 billion to $20.03 billion. The decrease in average interest earning assets is primarily due to a $425.9 million decrease in average investment securities, partially offset by $375.4 million increase in average interest-bearing balances due from banks, a $13.4 million increase in average loans receivable and a $4.5 million increase in average federal funds sold. During the first quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the
ninethree months ended
September 30, 2017March 31, 2024 and
2016,2023, we recognized
$23.3$2.8 million and
$33.7$3.2 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP reduction in accretion was dilutive to the net interest margin
excluding accretionby one basis point. We recognized $1.1 million in event income for the three-months ended March 31, 2024 compared to $2.1 million for the three-months ended March 31, 2023. The decrease in event income was
4.16% and 4.24% fordilutive to the
nine months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reductionnet interest margin by two basis points. The remaining decrease in
net accretion income for acquired loans and deposits, the net interest margin was
negatively impacted by our April 2017 issuance of $300 million of 5.625%fixed-to-floating rate subordinated notes, which added approximately $8.5 million ofdue to an increase in interest expense
when compared toresulting from an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the
same period in 2016, and by our strategic decision to keep excess cash liquidity on the books during the first nine months of 2017.high interest rate environment.
Our efficiency ratio was 43.92%44.22% for the ninethree months ended September 30, 2017,March 31, 2024, compared to 38.16%44.80% for the same period in 2016.2023. For the first nine monthsquarter of 2017,2024, our core efficiency ratio, as adjusted (non-GAAP), was 37.79%44.43%, which increased from the 36.75%compared to 43.42% reported for the first nine monthsquarter of 2016. The core efficiency ratio is anon-GAAP measure and is calculated by dividingnon-interest expense less amortization of core deposit intangibles by2023. (See Table 23 for the sum of net interest income on a tax equivalent basis andnon-interest income excludingnon-core items such as merger expenses, hurricane damage expense, FDIC loss sharebuy-out expense and/or gains and losses.non-GAAP tabular reconciliation).
Our annualized return on average assets was
1.41%1.78% for the
ninethree months ended
September 30, 2017, compared to 1.81% for the same period in 2016. Excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss sharebuy-out expense, our annualized return on average assets was 1.82% for the nine months ended September 30, 2017,March 31, 2024, compared to 1.84% for the same period in
2016.2023. (See Table 20 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was
10.33%10.64% and 11.70% for the
ninethree months ended
September 30, 2017, compared to 13.83%March 31, 2024, and 2023, respectively. (See Table 21 for the
same period in 2016. Excluding gain on acquisitions, merger expenses, hurricane expensesrelated non-GAAP financial measures and
FDIC loss sharebuy-out expense, our annualized return on average common equity was 13.36% for the nine months ended September 30, 2017, compared to 14.08% for the same period in 2016.tabular reconciliation).
Financial Condition as of and for the Period Ended
September 30, 2017March 31, 2024 and December 31,
20162023
Our total assets as of
September 30, 2017March 31, 2024 increased
$4.45 billion$179.1 million to
$14.26$22.84 billion from
the $9.81$22.66 billion reported as of December 31,
2016.2023. Cash and cash equivalents increased $175.0 million for the three months ended March 31, 2024. Our loan portfolio
balance increased
$2.90 billion to
$10.29$14.51 billion as of
September 30, 2017,March 31, 2024 from
$7.39$14.42 billion at December 31, 2023. The increase in loans was primarily due to $81.5 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise and $7.4 million of organic loan growth in our remaining footprint. These increases were partially offset by a $108.4 million decrease in investment securities resulting from paydowns and maturities during the first three months of 2024. Total deposits increased $78.4 million to $16.87 billion as of March 31, 2024 from $16.79 billion as of December 31,
2016. This increase is primarily a result of our acquisitions since December 31, 2016.2023. Stockholders’ equity increased
$879.2$20.3 million to
$2.21$3.81 billion as of
September 30, 2017,March 31, 2024, compared to
$1.33$3.79 billion as of December 31,
2016.2023. The
$20.3 million increase in stockholders’ equity is primarily associated with the
$77.5$100.1 million
and $742.3 million of common stock issued toin net income for the
GHI and Stonegate shareholders, respectively, plus the $70.5 million increase in retained earnings combined with $3.5 million of comprehensive income and $5.0 million of share-based compensationthree months ended March 31, 2024, partially offset by the
repurchase of $19.5$36.2 million of
our commonshareholder dividends paid, the $22.4 million in other comprehensive loss and stock
during the first nine monthsrepurchases of
2017. The annualized improvement$24.0 million in
stockholders’ equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.As of September 30, 2017, our2024.
Our non-performing loans
increased to $64.0were $80.0 million, or
0.62%,0.55% of total loans
from $63.1as of March 31, 2024, compared to $64.1 million, or
0.85%,0.44% of total loans, as of December 31,
2016.2023. The allowance for
loancredit losses as a percentage of
non-performing loans
increaseddecreased to
174.47%362.94% as of
September 30, 2017, compared to 126.74%March 31, 2024, from 449.66% as of December 31,
2016.2023. Non-performing loans from our Arkansas franchise were
$24.3$17.6 million at
September 30, 2017March 31, 2024 compared to
$28.5$15.4 million as of December 31,
2016.2023. Non-performing loans from our Florida franchise were
$39.6$10.6 million at
September 30, 2017March 31, 2024 compared to
$34.0$9.3 million as of December 31,
2016.2023. Non-performing loans from our Texas franchise were $44.7 million at March 31, 2024 compared to $33.5 million as of December 31, 2023. Non-performing loans from our Alabama franchise were
$83,000$408,000 at
September 30, 2017March 31, 2024 compared to
$656,000$413,000 as of December 31,
2016. There2023. Non-performing loans from our Shore Premier Finance ("SPF") franchise were
nonon-performing$3.9 million at March 31, 2024 compared to $2.8 million as of December 31, 2023. Non-performing loans from our Centennial CFG
franchise.franchise were $2.8 million at March 31, 2024 compared to $2.7 million as of December 31, 2023.
As of September 30, 2017,March 31, 2024, ournon-performing assets increased to $85.7$110.7 million, or 0.60%,0.48% of total assets, from $79.1$95.4 million, or 0.81%,0.42% of total assets, as of December 31, 2016.2023.Non-performing assets from our Arkansas franchise were $36.4$17.9 million at September 30, 2017March 31, 2024 compared to $41.0$15.5 million as of December 31, 2016.2023. Non-performing assets from our Florida franchise were $48.6$17.9 million at September 30, 2017March 31, 2024 compared to $36.8$17.3 million as of December 31, 2016.2023. Non-performing assets from our Texas franchise were $45.0 million at March 31, 2024 compared to $33.8 million as of December 31, 2023. Non-performing assets from our Alabama franchise were $724,000$408,000 at September 30, 2017March 31, 2024 compared to $1.2$413,000 as of December 31, 2023. Non-performing assets from our SPF franchise were $3.9 million at March 31, 2024 compared to $2.8 million as of December 31, 2016. There were nonon-performing2023. Non-performing assets from our Centennial CFG franchise.franchise were $25.5 million at March 31, 2024 compared to $25.6 million as of December 31, 2023.
The $2.8 million balance of non-accrual loans for our Centennial CFG Capital Markets Group consists of two loans that are assessed for credit risk by the Federal Reserve under the Shared National Credit Program. The 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. In addition, the $22.8 million balance of foreclosed assets held for sale for our Centennial CFG Property Finance Group consists of an office building located in California. This represents the largest component of the Company's $30.7 million in foreclosed assets held for sale.
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 the accounting for the allowance for
loancredit 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" or "CECL"). 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 credit, 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. Available-for-sale. Securitiesavailable-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 asavailable-for-sale are used as a part of our asset/liability management strategy. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified asavailable-for-sale. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326. 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. Securities 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 and amortized/accreted respectively,to the call date to interest income using the constant effective yield method over the periodestimated life of the security. The Company evaluates all securities quarterly to maturity.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 Loan Losses.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. The allowance for loan losses is established through a provision for loan losses charged against income. The allowance represents an amount that, in management’s judgment, will be adequate to absorb probable credit losses on identifiable loans receivable is a valuation account that may become uncollectibleis 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 probableexpected 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 inherentis 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")
The allowance for credit losses for each segment is measured through the use of the discounted cash flow method ("DCF"). Loans evaluated individually that are considered to be collateral dependent are not included in the
remaindercollective evaluation. 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
portfolio. The amountsto be provided substantially through the operation or sale of
provisionsthe collateral, the allowance for
loancredit losses
areis measured based on
management’s analysisthe difference between the fair value of the collateral, net of estimated costs to sell, and
evaluationthe amortized cost basis of the loan
portfolio for identificationas of
problem credits, internal and external factors that may affect collectability, relevantthe measurement date. When repayment is expected to be from the operation of the collateral, expected credit
exposure, particular risks inherent in different kindslosses are calculated as the amount by which the amortized cost basis of
lending, current collateral values and other relevant factors.the loan exceeds the present value of expected cash flows from the operation of the collateral. The allowance consistsfor credit losses may be zero if the fair value of allocated and general components. The allocated component relatesthe collateral at the measurement date exceeds the amortized cost basis of the loan, net of estimated costs to sell. For individually analyzed loans thatwhich are classified as impaired. For those loans that are classified as impaired,not considered to be collateral dependent, an allowance is established whenrecorded based on the discounted cash flows, collateral value or observable market priceloss rate for the respective pool within the collective evaluation.
Expected credit losses are estimated over the contractual term of the impaired loan is lower thanloans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the carrying value offollowing applies:
•Management has a reasonable expectation at the reporting date that loan. The general component coversnon-classifiedrestructured loans and is based on historicalcharge-off experience and expected loss given default derived from the bank’s internal risk rating process. Other adjustments may be made to borrowers experiencing financial difficulty will be executed with an individual borrower.
•The extension or renewal options are included in the allowanceoriginal or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Management qualitatively adjusts model results for
pools of loans after an assessment of internal or external influences on credit qualityrisk factors that are not
fully reflectedconsidered 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
historical loss or risk rating data.Loans considered impaired, under FASB ASC310-10-35, are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual termsquality of the loan agreement. The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for loan lossesreview system; and amount of provisions thereto. Losses on impaired loans are charged against the allowance for loan losses when in the process of collection it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in management’s opinion the collection of interest is doubtful, or generally when loans are 90 days or more past due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.
(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
loancredit 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
loancredit 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.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, and liabilities assumed are recorded at fair value. NoIn accordance with ASC 326, the Company records both a discount and an allowance for loancredit losses related to theon acquired loans is recorded on the acquisition date as the fair value of the purchased loans incorporates assumptions regarding credit risk.loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820,Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.Over
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 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 noncredit discount or premium, which is amortized into interest income over the life of the purchasedloan. Subsequent changes to the allowance for credit impaired loans, we continuelosses 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 cash flowsincludes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. We evaluate at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has decreased and if so, recognize a provision for loan loss infunded over its consolidated statement of income. For any increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the pool’s remainingestimated life.
Foreclosed Assets Held for Sale.Sale. Real estate and personal propertiesproperty acquired through or in lieu of loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Valuations are periodically performed by management, and the real estate and personal propertiesproperty are carried at fair value less costs to sell. Gains and losses from the sale of other real estate and personal propertiesproperty are recorded innon-interest income, and expenses used to maintain the properties are included innon-interest expenses.
Intangible Assets.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—Intangibles - Goodwill and Other, in the fourth quarter.quarter or more often if events and circumstances indicate there may be an impairment.
Income Taxes.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 basesbasis 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.
Stock Compensation.Compensation. In accordance with FASB ASC 718,Compensation—Compensation - Stock Compensation, and FASB ASC505-50,Equity-Based Payments toNon-Employees, the fair value of each option award is estimated on the date of grant. We recognize compensation expense for the grant-date fair value of the option award over the vesting period of the award.
Acquisition of
Stonegate BankOn September 26, 2017,Happy Bancshares, Inc.
The Company's most recent acquisition occurred on April 1, 2022, when the Company completed the acquisition of
all of the issued and outstanding shares of common stock of Stonegate BankHappy Bancshares, Inc. (“
Stonegate”Happy”), and merged
Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.Including the effects of the known purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.
The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
Through our recently completed acquisition and merger of StonegateHappy State Bank into Centennial we maintain a customer relationshipBank. For additional discussion regarding the acquisition of Happy, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2 "Business Combinations" in the Notes to handleConsolidated Financial Statements included in the accounts for Cuba’s diplomatic missions at the United Nations andAnnual Report on Form 10-K for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S. Treasury Department’s Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba.
Acquisition of Giant Holdings, Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after $8.1 million of loan discounts, and $304.0 million in deposits.
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (“BOC”), pursuant to an acquisition agreement, datedyear ended December 1, 2016, by and between the Company and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the “Bankruptcy Code”) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”). The sale of BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court. On November 14, 2016, the Company submitted an initial bid to purchase the outstanding shares of BOC in accordance with the bidding procedures approved by the Bankruptcy Court. An auction was subsequently conducted on November 16, 2016, and the Company was deemed to be the successful bidder. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
Termination of Remaining Loss-Share Agreements
Effective July 27, 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. Under the terms of the agreement, Centennial made a net payment of $6.6 million to the FDIC as consideration for the early termination of the loss share agreements, and all rights and obligations of Centennial and the FDIC under the loss share agreements, including the clawback provisions and the settlement of loss share and expense reimbursement claims, have been resolved and terminated. This transaction with the FDIC created aone-time acceleration of the indemnification asset plus the negotiated settlement for thetrue-up liability, and resulted in a negative $3.8 millionpre-tax financial impact to the third quarter of 2016. It has and will create a positive financial impact to earnings of approximately $1.5 million annually on apre-tax basis through the year 2020 as a result of theone-time acceleration of the indemnification asset amortization.
Future Acquisitions
In our continuing evaluation of our growth plans, we believe properly priced bank acquisitions can complement our organic growth andde novo branching growth strategies. In the near term, our principal acquisition focus will be to continue to expand our presence in Arkansas, Florida and Alabama and into other contiguous markets through pursuing bothnon-FDIC-assisted and FDIC-assisted bank acquisitions. However, as financial opportunities in other market areas arise, we may expand into those areas.
We will continue evaluating all types of potential bank acquisitions to determine what is in the best interest of our Company. Our goal in making these decisions is to maximize the return to our investors.
31, 2023.
As opportunities arise, we will continue to open new (commonly referred to asde novo) branches in our current markets and in other attractive market areas.As a result of our continued focus on efficiency, during the fourth quarter of 2017, we plan to close a branch location in Daphne, Alabama. As a result of Hurricane Irma, our Naples, Florida branch location will remain closed until further notice.
During the third quarter of 2017, the Company acquired a total of 24 branches through the acquisition of Stonegate. In an effort to achieve efficiencies primarily from the Stonegate acquisition, the Company plans to close or merge several Florida locations during 2018. During the remainder of 2017, we may announce additional strategic consolidations where it improves efficiency in certain markets.
As of
September 30, 2017,March 31, 2024, we had
218 branch locations. There were 76 branches in Arkansas,
8978 branches in Florida,
658 branches in Texas, five branches in Alabama and one branch in New York City.
For the
Threethree months ended March 31, 2024 and
Nine Months Ended September 30, 2017 and 20162023
Our net income decreased
$28.8$2.9 million, or
66.0%2.8%, to
$14.8$100.1 million for the three-month period ended
September 30, 2017,March 31, 2024, from
$43.6$103.0 million for the same period in
2016.2023. On a diluted earnings per share basis, our earnings were
$0.10 per share and $0.31$0.50 per share for the three-month
periodsperiod ended
September 30, 2017 and 2016, respectively. Excluding the $51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32March 31, 2024 compared to $0.51 per share for the
three monthsthree-month period ended
September 30, 2017. ExcludingMarch 31, 2023. The Company recorded $4.5 million in credit loss expense for the
$3.8quarter ended March 31, 2024. This consisted of a $5.5 million
provision for credit losses on loans and a reversal of
FDIC loss sharebuy-out expense, net income was $46.0$1.0 million
and diluted earnings per shareprovision for
unfunded commitments. During the three months ended
September 30, 2016 was $0.33 per share. Net income excluding merger expenses, hurricane expensesMarch 31, 2024, the Company recorded $162,000 in bank owned life insurance ("BOLI") death benefits and
FDIC loss sharebuy-out expense for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a
decrease in thenon-hurricane related provision for loan losses in third quarter of 2017 when compared to the same period in 2016. These improvements were partially offset by an$1.0 million increase in the
costs associated with the asset growth plus an increase in interest expense related to the issuancefair value of
$300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.Our net income decreased $16.8 million, or 13.1%, to $111.8 million for the nine-month period ended September 30, 2017, from $128.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.78 per share and $0.91 per share for the nine-month periods ended September 30, 2017 and 2016, respectively. Excluding the $3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.00 per share for the nine months ended September 30, 2017. Excluding the $3.8 million of FDIC loss sharebuy-out expense, net income was $130.9 million and diluted earnings per share for the nine months ended September 30, 2016 was $0.93 per share. The $13.6 million increase in net income, excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss sharebuy-out expense, is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in thenon-hurricane related provision for loan losses in first nine months of 2017, growth innon-interest income and the reduced amortization of the indemnification asset when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.
marketable securities.
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
(39.225%(24.989% for
the three2024 and
nine-month periods ended September 30, 2017 and 2016)24.6735% for 2023).
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
FundsReserve increased the target rate
which is the cost to banks of immediately available overnight funds, was loweredfour times during 2023. First, on
December 16, 2008 to a historic low of 0.25% to 0%, where it remained until December 16, 2015, whenFebruary 1, 2023, the target rate was increased
slightly to
0.50%4.50% to
0.25%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, on July 26, 2023, the target rate was increased to 5.25% to 5.50%.
Since DecemberAs of March 31,
2016,2024, the target rate was 5.25% to 5.50% as the Federal
FundsReserve has left the target rate
has increased 75 basis points and is currently at 1.25% to 1.00%.unchanged in 2024.
Our
GAAP net interest margin decreased from
4.86%4.37% for the three-month period ended
September 30, 2016March 31, 2023 to
4.40%4.13% for the three-month period ended
September 30, 2017.March 31, 2024. The yield on
loansinterest earning assets was
5.66%6.38% and
5.84%5.79% for the three months ended
September 30, 2017March 31, 2024 and
2016, respectively.2023, respectively, while average interest earning assets decreased from $20.06 billion to $20.03 billion. The decrease in average interest earning assets is primarily due to a $425.9 million decrease in average investment securities, partially offset by $375.4 million increase in average interest-bearing balances due from banks, a $13.4 million increase in average loans receivable and a $4.5 million increase in average federal funds sold. During the first quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by 10 basis points. For the three months ended
September 30, 2017March 31, 2024 and
2016,2023, we recognized
$7.2$2.8 million and
$11.9$3.2 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP reduction in accretion was dilutive to the net interest margin
excluding accretionby one basis point. We recognized $1.1 million in event income for the three-months ended March 31, 2024 compared to $2.1 million for the three-months ended March 31, 2023. The decrease in event income was
4.07% and 4.25% fordilutive to the
three months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP yield on loans excluding accretion income was 5.24% and 5.10% for the three months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reductionnet interest margin by two basis points. The remaining decrease in
net accretion income for acquired loans and deposits, the net interest margin was
negatively impacted by our April 2017 issuance of $300 million of 5.625%fixed-to-floating rate subordinated notes, which added approximately $4.3 million ofdue to an increase in interest expense
when compared toresulting from an increase in average interest-bearing liabilities at higher interest rates primarily as a result of the
same quarter in 2016.Our GAAP nethigh interest margin decreased from 4.83% for the nine-month period ended September 30, 2016 to 4.53% for the nine-month period ended September 30, 2017. The yield on loans was 5.70% and 5.82% for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, we recognized $23.3 million and $33.7 million, respectively, in total net accretion for acquired loans and deposits. Thenon-GAAP margin excluding accretion income was 4.16% and 4.24% for the nine months ended September 30, 2017 and 2016, respectively. Additionally, thenon-GAAP yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuancerate environment.
Net interest income on a fully taxable equivalent basis
increased $3.1decreased $10.7 million, or
2.93%5.0%, to
$108.6$205.5 million for the three-month period ended
September 30, 2017,March 31, 2024, from
$105.5$216.2 million for the same period in
2016.2023. This
increasedecrease in net interest income for the three-month period ended
September 30, 2017March 31, 2024 was the result of a
$12.5$42.0 million increase in interest expense, partially offset by a $31.2 million increase in interest income, on a fully taxable equivalent
basis offset by a $9.4basis. The $42.0 million increase in interest
expense.expense is primarily the result of the high interest rate environment. The
$12.5higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $33.9 million, in addition to an increase in average interest bearing liabilities that increased interest expense by approximately $8.1 million. The $31.2 million increase in interest income was
also primarily the result of
a higher level of earning assets offset by lower yields on ourthe high interest
earning assets, specifically on our loans.rate environment. The higher
level ofyield on earning assets resulted in an increase in interest income of approximately
$14.2 million. The lower yield, primarily caused by a $4.5$30.1 million,
reduction in
loan accretion income, resulted in an approximately $1.7 million decrease in interest income. The $9.4 million increase in interest expense for the three-month period ended September 30, 2017, is primarily the result ofaddition to an increase
in interest bearing liabilities repricing in a rising interest rate environment combined with a higher level of
our interest bearing liabilities. The repricing of our interest bearing liabilities in a rising interest rate environment resulted in an approximately $6.2$1.1 million
increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures, resulted in an increase in interest expense of approximately $3.2 million.Net interest income on a fully taxable equivalent basis increased $16.3 million, or 5.26%, to $324.8 million for the nine-month period ended September 30, 2017, from $308.6 million for the same period in 2016. This increase in net interest income on a fully taxable equivalent basis for the nine-month period ended September 30, 2017 was the result of a $36.2 million increase in interest income offset by a $19.9 million increasedue to the change in interest expense. The $36.2 million increase in interest income was primarily the result of a higher level of earning assets offset by lower yields on ouraverage interest earning assets, specifically on our loans. The higher level of earning assets resulted in an increase in interest income of approximately $39.4 million. The lower yield, primarily caused by a $9.6 million reduction in loan accretion income, resulted in an approximately $3.2 million decrease in interest income. The $19.9 million increase in interest expense for the nine-month period ended September 30, 2017, is primarily the result of an increase in interest bearing liabilities repricing in a rising interest rate environment combined with a higher level of our interest bearing liabilities. The repricing of our interest bearing liabilities in a rising interest rate environment resulted in an approximately $13.3 million increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures, resulted in an increase in interest expense of approximately $6.6 million.
Additional information and analysis for our net interest margin can be found in Tables 18 through 20 of ourNon-GAAP Financial Measurements section of the Management Discussion and Analysis.
asset balances.
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016,2023, as well as changes in fully taxable equivalent net interest margin for the three
and nine-month periodsmonths ended
September 30, 2017March 31, 2024 compared to the same
periodsperiod in
2016.2023.
Table 2: Analysis of Net Interest Income
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Interest income | | $ | 123,913 | | | $ | 111,375 | | | $ | 361,270 | | | $ | 325,149 | |
Fully taxable equivalent adjustment | | | 1,846 | | | | 1,869 | | | | 5,873 | | | | 5,816 | |
| | | | | | | | | | | | | | | | |
Interest income – fully taxable equivalent | | | 125,759 | | | | 113,244 | | | | 367,143 | | | | 330,965 | |
Interest expense | | | 17,144 | | | | 7,722 | | | | 42,334 | | | | 22,398 | |
| | | | | | | | | | | | | | | | |
Net interest income – fully taxable equivalent | | $ | 108,615 | | | $ | 105,522 | | | $ | 324,809 | | | $ | 308,567 | |
| | | | | | | | | | | | | | | | |
Yield on earning assets – fully taxable equivalent | | | 5.09 | % | | | 5.21 | % | | | 5.12 | % | | | 5.18 | % |
Cost of interest-bearing liabilities | | | 0.92 | | | | 0.46 | | | | 0.78 | | | | 0.45 | |
Net interest spread – fully taxable equivalent | | | 4.17 | | | | 4.75 | | | | 4.34 | | | | 4.73 | |
Net interest margin – fully taxable equivalent | | | 4.40 | | | | 4.86 | | | | 4.53 | | | | 4.83 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| Interest income | $ | 316,915 | | | $ | 284,939 | | | | | |
| Fully taxable equivalent adjustment | 892 | | | 1,628 | | | | | |
| Interest income – fully taxable equivalent | 317,807 | | | 286,567 | | | | | |
| Interest expense | 112,325 | | | 70,344 | | | | | |
| Net interest income – fully taxable equivalent | $ | 205,482 | | | $ | 216,223 | | | | | |
| Yield on earning assets – fully taxable equivalent | 6.38 | % | | 5.79 | % | | | | |
| Cost of interest-bearing liabilities | 3.09 | | | 2.06 | | | | | |
| Net interest spread – fully taxable equivalent | 3.29 | | | 3.73 | | | | | |
| Net interest margin – fully taxable equivalent | 4.13 | | | 4.37 | | | | | |
Table 3: Changes in Fully Taxable Equivalent Net Interest Margin
| | | | | | | | |
| | | Three Months Ended
September 30,
2017 vs. 2016 | | | Nine Months Ended
September 30,
2017 vs. 2016 | |
| | | (In thousands) | |
Increase (decrease) in interest income due to change in earning assets | | $ | 14,194 | | | $ | 39,390 | |
Increase (decrease) in interest income due to change in earning asset yields | | | (1,679 | ) | | | (3,212 | ) |
(Increase) decrease in interest expense due to change in interest-bearing liabilities | | | (3,212 | ) | | | (6,610 | ) |
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities | | | (6,210 | ) | | | (13,326 | ) |
| | | | | | | | |
Increase (decrease) in net interest income | | $ | 3,093 | | | $ | 16,242 | |
| | | | | | | | |
| | | | | | | |
| Three Months Ended March 31, | | |
| 2024 vs. 2023 | | |
| (In thousands) | | |
| Increase in interest income due to change in earning assets | $ | 1,117 | | | |
| Increase in interest income due to change in earning asset yields | 30,123 | | | |
| Increase in interest expense due to change in interest-bearing liabilities | (8,084) | | | |
| Increase in interest expense due to change in interest rates paid on interest-bearing liabilities | (33,897) | | | |
| Decrease in net interest income | $ | (10,741) | | | |
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
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016,2023, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis.
Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Table 4: Average Balance Sheets and Net Interest Income Analysis
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| | | Average
Balance | | | Income /
Expense | | | Yield /
Rate | | | Average
Balance | | | Income /
Expense | | | Yield /
Rate | |
| | | (Dollars in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings assets | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing balances due from banks | | $ | 180,368 | | | $ | 538 | | | | 1.18 | % | | $ | 110,993 | | | $ | 117 | | | | 0.42 | % |
Federal funds sold | | | 878 | | | | 3 | | | | 1.36 | | | | 1,136 | | | | 2 | | | | 0.70 | |
Investment securities – taxable | | | 1,326,117 | | | | 7,071 | | | | 2.12 | | | | 1,177,284 | | | | 5,583 | | | | 1.89 | |
Investment securities –non-taxable | | | 348,920 | | | | 4,908 | | | | 5.58 | | | | 328,979 | | | | 4,407 | | | | 5.33 | |
Loans receivable | | | 7,938,716 | | | | 113,239 | | | | 5.66 | | | | 7,027,634 | | | | 103,135 | | | | 5.84 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | | 9,794,999 | | | $ | 125,759 | | | | 5.09 | | | | 8,646,026 | | | | 113,244 | | | | 5.21 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-earning assets | | | 1,058,560 | | | | | | | | | | | | 956,337 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 10,853,559 | | | | | | | | | | | $ | 9,602,363 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Savings and interest-bearing transaction accounts | | $ | 4,512,785 | | | $ | 5,755 | | | | 0.51 | % | | $ | 3,721,019 | | | $ | 2,268 | | | | 0.24 | % |
Time deposits | | | 1,444,662 | | | | 2,780 | | | | 0.76 | | | | 1,361,589 | | | | 1,772 | | | | 0.52 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-bearing deposits | | | 5,957,447 | | | | 8,535 | | | | 0.57 | | | | 5,082,608 | | | | 4,040 | | | | 0.32 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Federal funds purchased | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Securities sold under agreement to repurchase | | | 135,855 | | | | 232 | | | | 0.68 | | | | 118,183 | | | | 142 | | | | 0.48 | |
FHLB and other borrowed funds | | | 920,754 | | | | 3,408 | | | | 1.47 | | | | 1,357,716 | | | | 3,139 | | | | 0.92 | |
Subordinated debentures | | | 358,347 | | | | 4,969 | | | | 5.50 | | | | 60,826 | | | | 401 | | | | 2.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-bearing liabilities | | | 7,372,403 | | | | 17,144 | | | | 0.92 | | | | 6,619,333 | | | | 7,722 | | | | 0.46 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest bearing deposits | | | 1,924,933 | | | | | | | | | | | | 1,663,621 | | | | | | | | | |
Other liabilities | | | 42,394 | | | | | | | | | | | | 45,332 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 9,339,730 | | | | | | | | | | | | 8,328,286 | | | | | | | | | |
Stockholders’ equity | | | 1,513,829 | | | | | | | | | | | | 1,274,077 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 10,853,559 | | | | | | | | | | | $ | 9,602,363 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net interest spread | | | | | | | | | | | 4.17 | % | | | | | | | | | | | 4.75 | % |
Net interest income and margin | | | | | | $ | 108,615 | | | | 4.40 | % | | | | | | $ | 105,522 | | | | 4.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Average Balance | | Income / Expense | | Yield / Rate | | Average Balance | | Income /
Expense | | Yield /
Rate |
| (Dollars in thousands) |
| ASSETS | | | | | | | | | | | |
| Earnings assets | | | | | | | | | | | |
| Interest-bearing balances due from banks | $ | 801,456 | | | $ | 10,528 | | | 5.28 | % | | $ | 426,051 | | | $ | 4,685 | | | 4.46 | % |
| Federal funds sold | 5,012 | | | 61 | | | 4.90 | | | 474 | | | 6 | | | 5.13 | |
| Investment securities – taxable | 3,473,511 | | | 33,229 | | | 3.85 | | | 3,867,737 | | | 35,288 | | | 3.70 | |
| Investment securities – non-taxable | 1,257,861 | | | 8,642 | | | 2.76 | | | 1,289,564 | | | 9,482 | | | 2.98 | |
| Loans receivable | 14,487,494 | | | 265,347 | | | 7.37 | | | 14,474,072 | | | 237,106 | | | 6.64 | |
| Total interest-earning assets | 20,025,334 | | | 317,807 | | | 6.38 | % | | 20,057,898 | | | 286,567 | | | 5.79 | % |
| Non-earning assets | 2,657,925 | | | | | | | 2,637,957 | | | | | |
| Total assets | $ | 22,683,259 | | | | | | | $ | 22,695,855 | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | |
| Savings and interest-bearing transaction accounts | $ | 11,038,910 | | | $ | 75,597 | | | 2.75 | % | | $ | 11,579,329 | | | 54,857 | | | 1.92 | % |
| Time deposits | 1,685,193 | | | 16,951 | | | 4.05 | | | 1,072,094 | | | 4,305 | | | 1.63 | |
| Total interest-bearing deposits | 12,724,103 | | | 92,548 | | | 2.93 | | | 12,651,423 | | | 59,162 | | | 1.90 | |
| | | | | | | | | | | |
| Securities sold under agreement to repurchase | 172,024 | | | 1,404 | | | 3.28 | | | 134,934 | | | 868 | | | 2.61 | |
| FHLB and other borrowed funds | 1,301,091 | | | 14,276 | | | 4.41 | | | 651,111 | | | 6,190 | | | 3.86 | |
| Subordinated debentures | 439,760 | | | 4,097 | | | 3.75 | | | 440,346 | | | 4,124 | | | 3.80 | |
| Total interest-bearing liabilities | 14,636,978 | | | 112,325 | | | 3.09 | % | | 13,877,814 | | | 70,344 | | | 2.06 | % |
| Non-interest-bearing liabilities | | | | | | | | | | | |
| Non-interest-bearing deposits | 4,017,659 | | | | | | | 5,043,219 | | | | | |
| Other liabilities | 244,970 | | | | | | | 205,230 | | | | | |
| Total liabilities | 18,899,607 | | | | | | | 19,126,263 | | | | | |
| Stockholders’ equity | 3,783,652 | | | | | | | 3,569,592 | | | | | |
| Total liabilities and stockholders’ equity | $ | 22,683,259 | | | | | | | $ | 22,695,855 | | | | | |
| Net interest spread | | | | | 3.29 | % | | | | | | 3.73 | % |
| Net interest income and margin | | | $ | 205,482 | | | 4.13 | % | | | | $ | 216,223 | | | 4.37 | % |
Table 4: Average Balance Sheets and Net Interest Income Analysis | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| | | Average
Balance | | | Income /
Expense | | | Yield /
Rate | | | Average
Balance | | | Income /
Expense | | | Yield /
Rate | |
| | | (Dollars in thousands) | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings assets | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing balances due from banks | | $ | 218,324 | | | $ | 1,573 | | | | 0.96 | % | | $ | 110,893 | | | $ | 325 | | | | 0.39 | % |
Federal funds sold | | | 1,161 | | | | 9 | | | | 1.04 | | | | 1,895 | | | | 7 | | | | 0.49 | |
Investment securities – taxable | | | 1,231,619 | | | | 18,983 | | | | 2.06 | | | | 1,174,998 | | | | 16,178 | | | | 1.84 | |
Investment securities –non-taxable | | | 347,578 | | | | 14,506 | | | | 5.58 | | | | 333,336 | | | | 13,616 | | | | 5.46 | |
Loans receivable | | | 7,785,925 | | | | 332,072 | | | | 5.70 | | | | 6,909,240 | | | | 300,839 | | | | 5.82 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | | 9,584,607 | | | $ | 367,143 | | | | 5.12 | | | | 8,530,362 | | | | 330,965 | | | | 5.18 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-earning assets | | | 1,033,310 | | | | | | | | | | | | 968,553 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 10,617,917 | | | | | | | | | | | $ | 9,498,915 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Savings and interest-bearing transaction accounts | | $ | 4,316,032 | | | $ | 13,445 | | | | 0.42 | % | | $ | 3,664,401 | | | $ | 6,426 | | | | 0.23 | % |
Time deposits | | | 1,415,383 | | | | 7,386 | | | | 0.70 | | | | 1,382,657 | | | | 5,102 | | | | 0.49 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-bearing deposits | | | 5,731,415 | | | | 20,831 | | | | 0.49 | | | | 5,047,058 | | | | 11,528 | | | | 0.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Federal funds purchased | | | — | | | | — | | | | — | | | | 312 | | | | 2 | | | | 0.86 | |
Securities sold under agreement to repurchase | | | 129,580 | | | | 593 | | | | 0.61 | | | | 120,966 | | | | 421 | | | | 0.46 | |
FHLB and other borrowed funds | | | 1,155,503 | | | | 10,707 | | | | 1.24 | | | | 1,376,145 | | | | 9,283 | | | | 0.90 | |
Subordinated debentures | | | 258,032 | | | | 10,203 | | | | 5.29 | | | | 60,826 | | | | 1,164 | | | | 2.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-bearing liabilities | | | 7,274,530 | | | | 42,334 | | | | 0.78 | | | | 6,605,307 | | | | 22,398 | | | | 0.45 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest bearing deposits | | | 1,847,843 | | | | | | | | | | | | 1,596,603 | | | | | | | | | |
Other liabilities | | | 48,804 | | | | | | | | | | | | 55,411 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 9,171,177 | | | | | | | | | | | | 8,257,321 | | | | | | | | | |
Stockholders’ equity | | | 1,446,740 | | | | | | | | | | | | 1,241,594 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 10,617,917 | | | | | | | | | | | $ | 9,498,915 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net interest spread | | | | | | | | | | | 4.34 | % | | | | | | | | | | | 4.73 | % |
Net interest income and margin | | | | | | $ | 324,809 | | | | 4.53 | % | | | | | | $ | 308,567 | | | | 4.83 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
of Contents
Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three
and nine-month periodsmonths ended
September 30, 2017March 31, 2024 compared to the same
periodsperiod in
2016,2023, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Table 5: Volume/Rate Analysis
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30,
2017 over 2016 | | | Nine Months Ended September 30,
2017 over 2016 | |
| | | Volume | | | Yield/Rate | | | Total | | | Volume | | | Yield/Rate | | | Total | |
| | | (In thousands) | |
Increase (decrease) in: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing balances due from banks | | $ | 107 | | | $ | 314 | | | $ | 421 | | | $ | 498 | | | $ | 750 | | | $ | 1,248 | |
Federal funds sold | | | — | | | | 1 | | | | 1 | | | | (4 | ) | | | 6 | | | | 2 | |
Investment securities – taxable | | | 750 | | | | 738 | | | | 1,488 | | | | 807 | | | | 1,998 | | | | 2,805 | |
Investment securities –non-taxable | | | 274 | | | | 227 | | | | 501 | | | | 590 | | | | 300 | | | | 890 | |
Loans receivable | | | 13,063 | | | | (2,959 | ) | | | 10,104 | | | | 37,499 | | | | (6,266 | ) | | | 31,233 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest income | | | 14,194 | | | | (1,679 | ) | | | 12,515 | | | | 39,390 | | | | (3,212 | ) | | | 36,178 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing transaction and savings deposits | | | 569 | | | | 2,918 | | | | 3,487 | | | | 1,308 | | | | 5,711 | | | | 7,019 | |
Time deposits | | | 114 | | | | 894 | | | | 1,008 | | | | 124 | | | | 2,160 | | | | 2,284 | |
Federal funds purchased | | | — | | | | — | | | | — | | | | (1 | ) | | | (1 | ) | | | (2 | ) |
Securities sold under agreement to repurchase | | | 23 | | | | 67 | | | | 90 | | | | 32 | | | | 140 | | | | 172 | |
FHLB borrowed funds | | | (1,222 | ) | | | 1,491 | | | | 269 | | | | (1,655 | ) | | | 3,079 | | | | 1,424 | |
Subordinated debentures | | | 3,728 | | | | 840 | | | | 4,568 | | | | 6,802 | | | | 2,237 | | | | 9,039 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total interest expense | | | 3,212 | | | | 6,210 | | | | 9,422 | | | | 6,610 | | | | 13,326 | | | | 19,936 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Increase (decrease) in net interest income | | $ | 10,982 | | | $ | (7,889 | ) | | $ | 3,093 | | | $ | 32,780 | | | $ | (16,538 | ) | | $ | 16,242 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 over 2023 | | |
| Volume | | Yield /
Rate | | Total | | | | | | |
| (In thousands) | | | | | | |
| Increase (decrease) in: | | | | | | | | | | | |
| Interest income: | | | | | | | | | | | |
| Interest-bearing balances due from banks | $ | 4,786 | | | $ | 1,057 | | | $ | 5,843 | | | | | | | |
| Federal funds sold | 55 | | | — | | | 55 | | | | | | | |
| Investment securities – taxable | (3,715) | | | 1,656 | | | (2,059) | | | | | | | |
| Investment securities – non-taxable | (229) | | | (611) | | | (840) | | | | | | | |
| Loans receivable | 220 | | | 28,021 | | | 28,241 | | | | | | | |
| Total interest income | 1,117 | | | 30,123 | | | 31,240 | | | | | | | |
| Interest expense: | | | | | | | | | | | |
| Interest-bearing transaction and savings deposits | (2,668) | | | 23,408 | | | 20,740 | | | | | | | |
| Time deposits | 3,482 | | | 9,164 | | | 12,646 | | | | | | | |
| | | | | | | | | | | |
| Securities sold under agreement to repurchase | 271 | | | 265 | | | 536 | | | | | | | |
| FHLB and other borrowed funds | 7,004 | | | 1,082 | | | 8,086 | | | | | | | |
| Subordinated debentures | (5) | | | (22) | | | (27) | | | | | | | |
| Total interest expense | 8,084 | | | 33,897 | | | 41,981 | | | | | | | |
| Increase (decrease) in net interest income | $ | (6,967) | | | $ | (3,774) | | | $ | (10,741) | | | | | | | |
Provision for
LoanCredit Losses
Our management assesses
Credit Loss Expense: During the adequacythree months ended March 31, 2024, the Company recorded a $5.5 million provision for credit losses on loans, no provision for credit losses on investment securities and a reversal of $1.0 million provision for unfunded commitments.
Net charge-offs to average total loans was 0.10% for both the three months ended March 31, 2024 and 2023.
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".
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 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 applyingwhich the provisionsamortized cost basis of FASB ASC310-10-35. Specific allocationsthe 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 determined for loansnot considered to be impairedcollateral 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 loss factors are assignedchanges to the remainderrating of the loan portfoliosecurity by a rating agency, and adverse conditions specifically related to determinethe 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 appropriate levelallowance 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 loan losses. 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 allowance is increased, as necessary, by makingCompany evaluates all securities quarterly to determine if any securities in a loss position require a provision for loan losses.credit losses in accordance with ASC 326. The specific allocations for impaired loans are assigned basedCompany measures expected credit losses on an estimated net realizable value after a thorough review of the credit relationship. The potential loss factors associated with the remainder of the loan portfolio are based on an internal net loss experience, as well as management’s review of trends within the portfolio and related industries.While general economic trends have improved recently, we cannot be certain that the current economic conditions will considerably improve in the near future. Recent and ongoing events at the national and international levels can create uncertainty in the financial markets. Despite these economic uncertainties, we continue to follow our historically conservative procedures for lending and evaluating the provision and allowance for loan losses. Our practice continues to be primarily traditional real estate lending with strongloan-to-value ratios.
Generally, commercial, commercial real estate, and residential real estate loans are assigned a level of risk at origination. Thereafter, these loans are reviewedHTM securities on a regular basis.collective basis by major security type, with each type sharing similar risk characteristics. The periodic reviews generally include loan payment and collateral status, the borrowers’ financial data, and key ratios such as cash flows, operating income, liquidity, and leverage. A material change in the borrower’sestimate of expected credit analysis can result in an increase or decrease in the loan’s assigned risk grade. Aggregate dollar volume by risk grade is monitored on anon-going basis.
Our management reviews certain key loan quality indicators on a monthly basis, including current economic conditions, delinquency trends and ratios, portfolio mix changes, and otherlosses considers historical credit loss information management deems necessary. This review process provides a degree of objective measurement that is usedadjusted 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 conjunction with periodic internal evaluations. To the extent that this review process yields differences between estimated and actual observed losses, adjustments are made to the loss factors used to determine the appropriate level of the allowance for loan losses.
Our Company is primarily a real estate lender in the markets we serve. As such, wecredit losses are subject to declines in asset quality when real estate prices fall. The recession in the latter years of the last decade harshly impacted the real estate market in Florida. The economic conditions particularly in our Florida markets have improved recently, although not topre-recession levels. Our Arkansas markets’ economies have been fairly stable over the past several years with no boom or bust. As a result, the Arkansas economy fared better with its real estate values during this time period.
Therecorded as provision for loan losses represents management’s determination of the amount necessary to be(or reversal of) credit loss expense. Losses are charged against the current period’s earnings, to maintainallowance when management believes the uncollectability of a security is confirmed.
During the three months ended March 31, 2024, the Company determined the $2.5 million allowance for
loancredit losses
at a level that is considered adequate in relation to the estimated risk inherent in the loan portfolio.The Company’s third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancShares’s financial condition and results of operation may not be known for some time, the Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in legacy loans receivable we have in the disaster area, the Company has accrued $33.4 million ofpre-tax hurricane expenses. The $33.4 million of hurricane expenses include the following items: $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017. The $32.9 million of storm-related provision for loan losses was calculated by taking a 5.0% allocation on the loans inAFS portfolio and the Florida Key loans receivable balances, a 5.0% allocation on specific large loans located in the path of the hurricane$2.0 million allowance for credit losses on the mainlandHTM portfolio were adequate. Therefore, no additional provision was considered necessary.
Non-Interest Income
Total non-interest income was $41.8 million
have accepted the90-day deferment.There was $35.0 million and $5.5 million of provision for loan losses for the three months ended September 30, 2017 and 2016, respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma, we experienced a $3.4 million decrease in the provision for loan losses during the third quarter of 2017 versus the third quarter of 2016. The $3.4 million decrease in provision for loan losses was primarily due to the Company not needing to take any additional provision related to charge-offs during the third quarter of 2017 because of a $2.0 million loancharge-off having a specific allocation that did not need to be replenished in the general allowance allocation plus lower organic loan growth during the third quarter of 2017 versus the third quarter of 2016.
There was $39.3 million and $16.9 million of provision for loan losses for the nine months ended September 30, 2017 and 2016, respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma, we experienced a $10.5 million decrease in the provision for loan losses during the first nine months of 2017 versus the first nine months of 2016. This $10.5 million decrease is primarily a result of reduced provisioning from lower net charge-offs and lower organic loan growth versus the first nine months of 2016.
Based upon current accounting guidance, the allowance for loan losses is not carried over in an acquisition. As a result, none of the acquired loans had any allocation of the allowance for loan losses at merger date. This is the result of all purchased loans being recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. However, as the acquired loans pay off or renew and the acquired footprint originates new loan production, it is necessary to establish an allowance which represents an amount that, in management’s judgment, will be adequate to absorb credit losses. The allowance for loan loss methodology for all originated loans as disclosed in Note 1 to the Notes to Consolidated Financial Statements in our Form10-K was used for these loans. Our current or historical provision levels should not be relied upon as a predictor or indicator of future levels going forward.
Non-Interest Income
Totalnon-interest income was $21.5 million and $72.3 million for the three and nine-month periods ended September 30, 2017,March 31, 2024, compared to $22.0 million and $63.2$34.2 million for the same periodsperiod in 2016, respectively.2023. Our recurringnon-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.
Table 6 measures the various components of ournon-interest income for the three months ended March 31, 2024 and nine-month periods ended September 30, 2017 and 2016, respectively, as well as changes2023.
Table 6: Non-Interest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | 2024 Change
from 2023 | | | | |
| 2024 | | 2023 | | | | | | |
| (Dollars in thousands) | | | | | | | | |
| Service charges on deposit accounts | $ | 9,686 | | | $ | 9,842 | | | $ | (156) | | | (1.6) | % | | | | | | | | |
| Other service charges and fees | 10,189 | | | 11,875 | | | (1,686) | | | (14.2) | | | | | | | | | |
| Trust fees | 5,066 | | | 4,864 | | | 202 | | | 4.2 | | | | | | | | | |
| Mortgage lending income | 3,558 | | | 2,571 | | | 987 | | | 38.4 | | | | | | | | | |
| Insurance commissions | 508 | | | 526 | | | (18) | | | (3.4) | | | | | | | | | |
| Increase in cash value of life insurance | 1,195 | | | 1,104 | | | 91 | | | 8.2 | | | | | | | | | |
| Dividends from FHLB, FRB, FNBB & other | 3,007 | | | 2,794 | | | 213 | | | 7.6 | | | | | | | | | |
| Gain on sale of SBA loans | 198 | | | 139 | | | 59 | | | 42.4 | | | | | | | | | |
| (Loss) gain on sale of branches, equipment and other assets, net | (8) | | | 7 | | | (15) | | | (214.3) | | | | | | | | | |
| Gain on OREO, net | 17 | | | — | | | 17 | | | 100.0 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Fair value adjustment for marketable securities | 1,003 | | | (11,408) | | | 12,411 | | | 108.8 | | | | | | | | | |
| Other income | 7,380 | | | 11,850 | | | (4,470) | | | (37.7) | | | | | | | | | |
| Total non-interest income | $ | 41,799 | | | $ | 34,164 | | | $ | 7,635 | | | 22.3 | % | | | | | | | | |
Non-interest income increased $7.6 million, or 22.3%, to $41.8 million for the three and nine-month periodsmonths ended September 30, 2017 compared to the same period in 2016.Table 6:Non-Interest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | 2017 Change | | | Nine Months Ended
September 30, | | | 2017 Change | |
| | | 2017 | | | 2016 | | | from 2016 | | | 2017 | | | 2016 | | | from 2016 | |
| | | (Dollars in thousands) | |
Service charges on deposit accounts | | $ | 6,408 | | | $ | 6,527 | | | $ | (119 | ) | | | (1.8 | )% | | $ | 18,356 | | | $ | 18,607 | | | $ | (251 | ) | | | (1.3 | )% |
Other service charges and fees | | | 8,490 | | | | 7,504 | | | | 986 | | | | 13.1 | | | | 25,983 | | | | 22,589 | | | | 3,394 | | | | 15.0 | |
Trust fees | | | 365 | | | | 365 | | | | — | | | | — | | | | 1,130 | | | | 1,128 | | | | 2 | | | | 0.2 | |
Mortgage lending income | | | 3,172 | | | | 3,932 | | | | (760 | ) | | | (19.3 | ) | | | 9,713 | | | | 10,276 | | | | (563 | ) | | | (5.5 | ) |
Insurance commissions | | | 472 | | | | 534 | | | | (62 | ) | | | (11.6 | ) | | | 1,482 | | | | 1,808 | | | | (326 | ) | | | (18.0 | ) |
Increase in cash value of life insurance | | | 478 | | | | 344 | | | | 134 | | | | 39.0 | | | | 1,251 | | | | 1,092 | | | | 159 | | | | 14.6 | |
Dividends from FHLB, FRB, Bankers’ Bank & other | | | 834 | | | | 808 | | | | 26 | | | | 3.2 | | | | 2,455 | | | | 2,147 | | | | 308 | | | | 14.3 | |
Gain on acquisitions | | | — | | | | — | | | | — | | | | — | | | | 3,807 | | | | — | | | | 3,807 | | | | 100.0 | |
Gain (loss) on SBA loans | | | 163 | | | | 364 | | | | (201 | ) | | | (55.2 | ) | | | 738 | | | | 443 | | | | 295 | | | | 66.6 | |
Gain (loss) on branches, equipment and other assets, net | | | (1,337 | ) | | | (86 | ) | | | (1,251 | ) | | | 1,454.7 | | | | (962 | ) | | | 701 | | | | (1,663 | ) | | | (237.2 | ) |
Gain (loss) on OREO, net | | | 335 | | | | 132 | | | | 203 | | | | 153.8 | | | | 849 | | | | (713 | ) | | | 1,562 | | | | 219.1 | |
Gain (loss) on securities, net | | | 136 | | | | — | | | | 136 | | | | 100.0 | | | | 939 | | | | 25 | | | | 914 | | | | 3,656.0 | |
FDIC indemnification accretion/(amortization), net | | | — | | | | — | | | | — | | | | — | | | | — | | | | (772 | ) | | | 772 | | | | (100.0 | ) |
Other income | | | 1,941 | | | | 1,590 | | | | 351 | | | | 22.1 | | | | 6,603 | | | | 5,892 | | | | 711 | | | | 12.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Totalnon-interest income | | $ | 21,457 | | | $ | 22,014 | | | $ | (557 | ) | | | (2.5 | )% | | $ | 72,344 | | | $ | 63,223 | | | $ | 9,121 | | | | 14.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-interest income decreased $557,000, or 2.5%, to $21.5 million for the three-month period ended September 30, 2017March 31, 2024 from $22.0$34.2 million for the same period in 2016.Non-interest income increased $9.1 million, or 14.4%, to $72.3 million for the nine-month period ended September 30, 2017 from $63.2 million for the same period in 2016.Non-interest income excluding gain on acquisitions increased $5.3 million, or 8.4%, to $68.5 million for the nine months ended September 30, 2017 from $63.2 million for the same period in 2016.
2023.
The primary factors that resulted in this increase were the increase in fair value adjustment for marketable securities and the three month period ended September 30, 2017 when compared to the same periodincrease in 2016 were changes related tomortgage lending income, which was partially offset by decreases in other service charges and fees mortgage lending income, and net loss on branches, equipment and other assets.income.
Additional details for the three months ended
September 30, 2017March 31, 2024 on some of the more significant changes are as follows:
•The $986,000 increase$1.7 million decrease in other service charges and fees is primarily from our first quarter 2017 acquisitions plus additionalrelated to decreases in Centennial CFG property finance loan payoff fees generated by Centennial CFG.fees.
•The $760,000 decrease$987,000 increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the resultlower volume of Hurricane Irmaloans during September 2017 when compared2023.
•The $12.4 million increase in the fair value adjustment for marketable securities is due to the same periodchanges in 2016. the fair value of marketable securities held by the Company.
•The disruption from the hurricane resulted in very little mortgage processing for nearly a two week period during the third quarter of 2017.
The $1.3$4.5 million decrease in gain (loss) on branches, equipment and other assets, net,income is primarily relateddue to a $2.9 million reduction of income for equity method investments and a $3.8 million decrease in recoveries on historic losses, on three vacant properties during the third quarter of 2017.
Excluding gain on acquisitions, the primary factors that resulted in the increase for the nine month period ended September 30, 2017 when compared to the same period in 2016 were changes related to other service charges and fees, net loss on branches, equipment and other assets, net gain on OREO, net gain on securities, and amortization on our former FDIC indemnification asset.
Additional details for the nine months ended September 30, 2017 on some of the more significant changes are as follows:
The $3.4partially offset by a $1.3 million increase in rental income for other service charges and fees is primarily from our first quarter 2017 acquisitions plus additional loan payoff fees generated by Centennial CFG and approximately $615,000 of MasterCard incentive income received in the first quarter of 2017.
The $1.7 million decrease in gain (loss) on branches, equipment and other assets, net, is primarily related to net losses on eleven vacant properties from closed branches during the first nine months of 2017 combined with net gains on four vacant properties during the first nine months of 2016 plusreal estate owned ("OREO"), a gain on the sale of a piece of software during the second quarter of 2016.
The $1.6 million$579,000 increase in gain (loss) on OREO is primarily related to realizing gains on sale from OREO properties during the first nine months of 2017 versus the revaluation of seven OREO properties during the first nine months of 2016.
The $914,000investment brokerage fee income and a $358,000 increase in gain (loss) on securities, net, is a resultmiscellaneous income.
The $772,000 increase in FDIC indemnification accretion/amortization, net, is a result of thebuy-out of the FDIC loss share portfolio during the third quarter of 2016.Non-Interest Expense
The $563,000 decrease in mortgage lending income is primarily the result of Hurricane Irma during September 2017 when compared to the same period in 2016. The disruption from the hurricane resulted in very little mortgage processing for nearly a two week period during the third quarter of 2017.
Non-Interest Expense
Non-interest expense primarily consists of salaries and employee benefits, occupancy and equipment, data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.
Table 7 below sets forth a summary of
non-interest expense for the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016, as well as changes for the three and nine-month periods ended September 30, 2017 compared to the same period in 2016.2023.
Table 7:
Non-Interest Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | 2017 Change | | | Nine Months Ended
September 30, | | | 2017 Change | |
| | | 2017 | | | 2016 | | | from 2016 | | | 2017 | | | 2016 | | | from 2016 | |
| | | (Dollars in thousands) | |
Salaries and employee benefits | | $ | 28,510 | | | $ | 25,623 | | | $ | 2,887 | | | | 11.3 | % | | $ | 83,965 | | | $ | 75,018 | | | $ | 8,947 | | | | 11.9 | % |
Occupancy and equipment | | | 7,887 | | | | 6,668 | | | | 1,219 | | | | 18.3 | | | | 21,602 | | | | 19,848 | | | | 1,754 | | | | 8.8 | |
Data processing expense | | | 2,853 | | | | 2,791 | | | | 62 | | | | 2.2 | | | | 8,439 | | | | 8,221 | | | | 218 | | | | 2.7 | |
Other operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advertising | | | 795 | | | | 866 | | | | (71 | ) | | | (8.2 | ) | | | 2,305 | | | | 2,422 | | | | (117 | ) | | | (4.8 | ) |
Merger and acquisition expenses | | | 18,227 | | | | — | | | | 18,227 | | | | 100.0 | | | | 25,743 | | | | — | | | | 25,743 | | | | 100.0 | |
FDIC loss sharebuy-out expense | | | — | | | | 3,849 | | | | (3,849 | ) | | | (100.0 | ) | | | — | | | | 3,849 | | | | (3,849 | ) | | | (100.0 | ) |
Amortization of intangibles | | | 906 | | | | 762 | | | | 144 | | | | 18.9 | | | | 2,576 | | | | 2,370 | | | | 206 | | | | 8.7 | |
Electronic banking expense | | | 1,712 | | | | 1,428 | | | | 284 | | | | 19.9 | | | | 4,885 | | | | 4,121 | | | | 764 | | | | 18.5 | |
Directors’ fees | | | 309 | | | | 292 | | | | 17 | | | | 5.8 | | | | 946 | | | | 856 | | | | 90 | | | | 10.5 | |
Due from bank service charges | | | 472 | | | | 319 | | | | 153 | | | | 48.0 | | | | 1,348 | | | | 961 | | | | 387 | | | | 40.3 | |
FDIC and state assessment | | | 1,293 | | | | 1,502 | | | | (209 | ) | | | (13.9 | ) | | | 3,763 | | | | 4,394 | | | | (631 | ) | | | (14.4 | ) |
Insurance | | | 577 | | | | 553 | | | | 24 | | | | 4.3 | | | | 1,698 | | | | 1,630 | | | | 68 | | | | 4.2 | |
Legal and accounting | | | 698 | | | | 583 | | | | 115 | | | | 19.7 | | | | 1,799 | | | | 1,764 | | | | 35 | | | | 2.0 | |
Other professional fees | | | 1,436 | | | | 1,137 | | | | 299 | | | | 26.3 | | | | 3,822 | | | | 3,106 | | | | 716 | | | | 23.1 | |
Operating supplies | | | 432 | | | | 437 | | | | (5 | ) | | | (1.1 | ) | | | 1,376 | | | | 1,292 | | | | 84 | | | | 6.5 | |
Postage | | | 280 | | | | 269 | | | | 11 | | | | 4.1 | | | | 861 | | | | 815 | | | | 46 | | | | 5.6 | |
Telephone | | | 305 | | | | 449 | | | | (144 | ) | | | (32.1 | ) | | | 1,027 | | | | 1,391 | | | | (364 | ) | | | (26.2 | ) |
Other expense | | | 4,154 | | | | 3,498 | | | | 656 | | | | 18.8 | | | | 10,835 | | | | 12,203 | | | | (1,368 | ) | | | (11.2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Totalnon-interest expense | | $ | 70,846 | | | $ | 51,026 | | | $ | 19,820 | | | | 38.8 | % | | $ | 176,990 | | | $ | 144,261 | | | $ | 32,729 | | | | 22.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | 2024 Change
from 2023 | | | | |
| 2024 | | 2023 | | | | | | |
| (Dollars in thousands) | | | | | | | | |
| Salaries and employee benefits | $ | 60,910 | | | $ | 64,490 | | | $ | (3,580) | | | (5.6) | % | | | | | | | | |
| Occupancy and equipment | 14,551 | | | 14,952 | | | (401) | | | (2.7) | | | | | | | | | |
| Data processing expense | 9,147 | | | 8,968 | | | 179 | | | 2.0 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Other operating expenses: | | | | | | | | | | | | | | | |
| Advertising | 1,654 | | | 2,231 | | | (577) | | | (25.9) | | | | | | | | | |
| Amortization of intangibles | 2,140 | | | 2,477 | | | (337) | | | (13.6) | | | | | | | | | |
| Electronic banking expense | 3,156 | | | 3,330 | | | (174) | | | (5.2) | | | | | | | | | |
| Directors' fees | 498 | | | 460 | | | 38 | | | 8.3 | | | | | | | | | |
| Due from bank service charges | 276 | | | 273 | | | 3 | | | 1.1 | | | | | | | | | |
| FDIC and state assessment | 3,318 | | | 3,500 | | | (182) | | | (5.2) | | | | | | | | | |
| Insurance | 903 | | | 889 | | | 14 | | | 1.6 | | | | | | | | | |
| Legal and accounting | 2,081 | | | 1,088 | | | 993 | | | 91.3 | | | | | | | | | |
| Other professional fees | 2,236 | | | 2,284 | | | (48) | | | (2.1) | | | | | | | | | |
| Operating supplies | 683 | | | 738 | | | (55) | | | (7.5) | | | | | | | | | |
| Postage | 523 | | | 501 | | | 22 | | | 4.4 | | | | | | | | | |
| Telephone | 470 | | | 528 | | | (58) | | | (11.0) | | | | | | | | | |
| Other expense | 8,950 | | | 7,935 | | | 1,015 | | | 12.8 | | | | | | | | | |
| Total non-interest expense | $ | 111,496 | | | $ | 114,644 | | | $ | (3,148) | | | (2.7) | % | | | | | | | | |
Non-interest expense increased $19.8decreased $3.1 million, or 38.8%2.7%, to $70.8$111.5 million for the three months ended September 30, 2017March 31, 2024 from $51.0$114.6 million for the same period in 2016.Non-interest2023. The primary factor that resulted in this decrease was the decrease in salaries and employee benefits and advertising expense, partially offset by an increase in other expense and legal and accounting expense.
Additional details for the three months ended March 31, 2024 on some of the more significant changes are as follows:
•The $3.6 million decrease in salaries and employee benefits expense is primarily due to the Company's project to reduce the size of its workforce and a decrease in deferred loan costs.
•The $577,000 decrease in advertising expense is primarily due to decreased volume of advertising.
•The $993,000 increase in legal and accounting expense is primarily due to ongoing legal matters.
•The $1.0 million increase in other expense is primarily due to an increase in OREO expense.
Income Taxes
Income tax expense increased
$32.7 million,$331,000, or
22.7%1.1%, to
$177.0$30.3 million for the
nine monthsthree-month period ended
September 30, 2017March 31, 2024, from
$144.3$30.0 million for the same period in
2016.Non-interest expense, excluding merger expenses and FDIC loss sharebuy-out expense, was $52.6 million and $151.2 million for the three and nine months ended September 30, 2017, respectively, compared to $47.2 million and $140.4 million for the same periods in 2016, respectively.The change innon-interest expense for 2017 excluding merger expenses and FDIC loss sharebuy-out expense when compared to 2016 is primarily related to the completion of our acquisitions, the normal increased cost of doing business and Centennial CFG.
Centennial CFG incurred $4.8 million and $13.8 million ofnon-interest expense during the three and nine months ended September 30, 2017, respectively, compared to $3.7 million and $10.5 million ofnon-interest expense during the three and nine months ended September 30, 2016, respectively. While the cost of doing business in New York City and Los Angeles is significantly higher than our Arkansas, Florida and Alabama markets, we are still committed to cost-saving measures while achieving our goals of growing the Company.
During the third quarter of 2017 and 2016, the Company had no write-downs on vacant properties.
During the first nine months of 2017 and 2016, the Company had write-downs on vacant property from closed branches of approximately $47,000 and $1.9 million, respectively. These write-downs are included in other expense.
Income Taxes
The income tax expense decreased $17.9 million, or 70.4%, to $7.5 million for the three-month period ended September 30, 2017, from $25.5 million for the same period in 2016. The income tax expense decreased $13.1 million, or 17.1%, to $63.2 million for the nine-month period ended September 30, 2017, from $76.3 million for the same period in 2016.2023. The effective income tax rate was 33.71% and 36.12%23.22% for the three and nine-month periodsmonths ended September 30, 2017,March 31, 2024, compared to 36.88% and 37.23%22.54% for the same periods in 2016.
2023. The primary cause of the decrease in taxes for the three months ended September 30, 2017 when compared to the same period in 2016 is our lower quarterlypre-tax earnings at our marginal tax rate was 24.989% and 24.6735% for 2024 and 2023, respectively.
Financial Condition as of and for the Period Ended September 30, 2017March 31, 2024 and December 31, 20162023
Our total assets as of
September 30, 2017March 31, 2024 increased
$4.45 billion$179.1 million to
$14.26$22.84 billion from
the $9.81$22.66 billion reported as of December 31,
2016.2023. Cash and cash equivalents increased $175.0 million for the three months ended March 31, 2024. Our loan portfolio
balance increased
$2.90 million to
$10.29$14.51 billion as of
September 30, 2017,March 31, 2024 from
$7.39$14.42 billion at December 31, 2023. The increase in loans was primarily due to $81.5 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise and $7.4 million of organic loan growth in our remaining footprint. These increases were partially offset by a $108.4 million decrease in investment securities resulting from paydowns and maturities during the first three months of 2024. Total deposits increased $78.4 million to $16.87 billion as of March 31, 2024 from $16.79 billion as of December 31,
2016. This increase is primarily a result of our acquisitions since December 31, 2016.2023. Stockholders’ equity increased
$879.2$20.3 million to
$2.21$3.81 billion as of
September 30, 2017,March 31, 2024, compared to
$1.33$3.79 billion as of December 31,
2016.2023. The
$20.3 million increase in stockholders’ equity is primarily associated with the
$77.5$100.1 million
and $742.3 million of common stock issued toin net income for the
GHI and Stonegate shareholders, respectively, plus the $70.5 million increase in retained earnings combined with $3.5 million of comprehensive income and $5.0 million of share-based compensationthree months ended March 31, 2024, partially offset by the
repurchase of $19.5$36.2 million of
our commonshareholder dividends paid, the $22.4 million in other comprehensive loss and stock
during the first nine monthsrepurchases of
2017. The annualized improvement$24.0 million in
stockholders’ equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.2024.
Our loan portfolio averaged
$7.94$14.49 billion and
$7.03$14.47 billion during the
three-month periodsthree months ended
September 30, 2017March 31, 2024 and
2016, respectively. Our loan portfolio averaged $7.79 billion and $6.91 billion during the nine-month periods ended September 30, 2017 and 2016,2023, respectively. Loans receivable were
$10.29$14.51 billion and $14.42 billion as of
September 30, 2017 compared to $7.39 billion as ofMarch 31, 2024 and December 31,
2016.During the first nine months of 2017,2023, respectively.
From December 31, 2023 to March 31, 2024, the Company
acquired $2.82 billionexperienced an increase of
approximately $88.9 million in loans. The increase in loans
net of purchase accounting discounts. Excluding the $2.82 billion of acquired loans during 2017, loans receivable were $7.47 billion as of September 30, 2017 comparedwas primarily due to
$7.39 billion as of December 31, 2016, which is $73.8$81.5 million of organic loan growth
or 1.33% annualized increase.from our Centennial CFG
produced $113.7franchise and $7.4 million
of net organic loan growth during the first nine months of 2017 while the legacy footprint experienced significant net payoffs during the first nine months of 2017, resulting in a decline of $39.9 million.from 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,
SouthTexas, Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida,
Texas, Alabama and New York. Loans receivable were approximately
$3.50$3.33 billion,
$5.34$3.99 billion,
$224.4$3.77 billion, $122.7 million,
$1.27 billion and
$1.22$2.03 billion as of
September 30, 2017March 31, 2024 in Arkansas, Florida,
Texas, Alabama,
SPF and Centennial CFG, respectively.
As of
September 30, 2017,March 31, 2024, we had approximately
$502.8$881.5 million of
construction construction/land development loans which were collateralized by land. This consisted of approximately
$257.9$95.5 million for raw land and approximately
$244.8$786.0 million for land with commercial
and and/or residential lots.
Table 8 presents our loans receivable balances by category as of
September 30, 2017March 31, 2024 and December 31,
2016.2023.
Table 8: Loans Receivable
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands) | |
Real estate: | | | | | | | | |
Commercial real estate loans: | | | | | | | | |
Non-farm/non-residential | | $ | 4,532,402 | | | $ | 3,153,121 | |
Construction/land development | | | 1,648,923 | | | | 1,135,843 | |
Agricultural | | | 88,295 | | | | 77,736 | |
Residential real estate loans: | | | | | | | | |
Residential1-4 family | | | 1,968,688 | | | | 1,356,136 | |
Multifamily residential | | | 497,910 | | | | 340,926 | |
| | | | | | | | |
Total real estate | | | 8,736,218 | | | | 6,063,762 | |
Consumer | | | 51,515 | | | | 41,745 | |
Commercial and industrial | | | 1,296,485 | | | | 1,123,213 | |
Agricultural | | | 57,489 | | | | 74,673 | |
Other | | | 144,486 | | | | 84,306 | |
| | | | | | | | |
Total loans receivable | | $ | 10,286,193 | | | $ | 7,387,699 | |
| | | | | | | | |
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| Real estate: | | | |
| Commercial real estate loans: | | | |
| Non-farm/non-residential | $ | 5,616,965 | | | $ | 5,549,954 | |
| Construction/land development | 2,330,555 | | | 2,293,047 | |
| Agricultural | 337,618 | | | 325,156 | |
| Residential real estate loans: | | | |
| Residential 1-4 family | 1,899,974 | | | 1,844,260 | |
| Multifamily residential | 415,926 | | | 435,736 | |
| Total real estate | 10,601,038 | | | 10,448,153 | |
| Consumer | 1,163,228 | | | 1,153,690 | |
| Commercial and industrial | 2,284,775 | | | 2,324,991 | |
| Agricultural | 278,609 | | | 307,327 | |
| Other | 186,023 | | | 190,567 | |
| Total loans receivable | $ | 14,513,673 | | | $ | 14,424,728 | |
Commercial Real Estate Loans. We originatenon-farm andnon-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 25 year30-year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on acase-by-case basis. As of
September 30, 2017,March 31, 2024, commercial real estate loans totaled
$6.27$8.29 billion, or
61.0%57.1%, of loans receivable, as compared to
$4.37$8.17 billion, or
59.1%56.7%, of loans receivable, as of December 31,
2016.2023. Commercial real estate loans originated in our Arkansas, Florida,
Texas, Alabama,
SPF and Centennial CFG
franchisesmarkets were
$1.96$2.13 billion,
$3.32$2.48 billion,
$120.4$2.15 billion, $48.1 million,
zero and
$866.4 million$1.48 billion at
September 30, 2017,March 31, 2024, respectively.
Including the effects of the purchase accounting adjustments, we acquired approximately $1.41 billion of commercial real estate loans, as of acquisition date from Stonegate.
Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately 49.71%52.3% and 37.59%39.7% of our residential mortgage loans consist of owner occupied1-4 family properties andnon-owner occupied1-4 family properties (rental), respectively, as of September 30, 2017.March 31, 2024, with the remaining 8.0% relating to condos and mobile homes. Residential real estate loans generally have aloan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to the borrower’s ability to pay, stability of employment or source of income,debt-to-income ratio, credit history andloan-to-value ratio. As of
September 30, 2017,March 31, 2024, residential real estate loans totaled
$2.47$2.32 billion, or
24.0%16.0%, of loans receivable, compared to
$1.70$2.28 billion, or
23.0%15.8%, of loans receivable, as of December 31,
2016.2023. Residential real estate loans originated in our Arkansas, Florida,
Texas, Alabama,
SPF and Centennial CFG
franchisesmarkets were
$870.1$527.3 million,
$1.36 billion, $74.9$988.9 million,
$604.2 million, $40.4 million, zero and
$162.7$155.2 million at
September 30, 2017,March 31, 2024, respectively.
Including the effects of the purchase accounting adjustments, we acquired approximately $551.3 million of residential real estate loans, as of acquisition date from Stonegate.
Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our bank.bank, the primary portion of which consists of loans to finance United States Coast Guard 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, 2017,March 31, 2024, consumer loans totaled
$51.5 million,$1.16 billion, or
0.5%8.0%, of loans receivable, compared to
$41.8 million,$1.15 billion, or
0.6%8.0%, of loans receivable, as of December 31,
2016.2023. Consumer loans originated in our Arkansas, Florida,
Texas, Alabama,
SPF and Centennial CFG
franchisesmarkets were
$24.1$22.9 million,
$26.5$7.5 million,
$1.0$15.1 million,
$503,000, $1.12 billion and zero at
September 30, 2017,March 31, 2024, respectively.
Including the effects of the purchase accounting adjustments, we acquired approximately $11.7 million of consumer loans, as of acquisition date from Stonegate.
Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information onof the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrower’s liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, speaking, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 60%80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans. As of
September 30, 2017,March 31, 2024, commercial and industrial loans totaled
$1.30$2.28 billion, or
12.6%15.7%, of loans receivable,
which is comparablecompared to
$1.12$2.32 billion, or
15.2%16.1%, of loans receivable, as of December 31,
2016.2023. Commercial and industrial loans originated in our Arkansas, Florida,
Texas, Alabama,
SPF and Centennial CFG
franchisesmarkets were
$573.7$483.6 million,
$503.7$465.3 million,
$26.2$782.0 million, $28.1 million, $154.0 million and
$193.0$371.8 million at
September 30, 2017,March 31, 2024, respectively.
Including the effects of the purchase accounting adjustments, we acquired approximately $301.0 million of commercial and industrial loans, as of acquisition date from Stonegate.
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.
We
Purchased loans that have
purchasedexperienced 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
with deterioratednot individually analyzed for credit
quality in our September 30, 2017 financial statements as a resultlosses. The sum of
our historical acquisitions.the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The
credit metrics most heavily impacted by our acquisitions of acquired loans with deteriorated credit quality weredifference between the
following credit quality indicators listed in Table 9 below:Allowance for loan losses tonon-performing loans;
Non-performing loans to total loans;initial amortized cost basis and
Non-performing assets to total assets.
On the date of acquisition, acquired credit-impaired loans are initially recognized at fair value, which incorporates the presentpar value of amounts estimated to be collectible. Asthe loan is a resultnon-credit discount or premium, which is amortized into interest income over the life of the application of this accounting methodology, certain credit-related ratios, including those referenced above, may not necessarily be directly comparable with periods priorloan. Subsequent changes to the acquisitionallowance for credit losses are recorded through the provision for credit losses. The Company held approximately $90.5 million and $130.7 million in PCD loans, as of the credit-impaired loansMarch 31, 2024 andnon-performing assets, or comparable with other institutions.
December 31, 2023, respectively.
Table 9 sets forth information with respect to our
non-performing assets as of
September 30, 2017March 31, 2024 and December 31,
2016.2023. As of these dates, all
non-performing restructured loans are included in
non-accrual loans.
Table 9:
Non-performing Assets
| | | | | | | | |
| | | As of
September 30,
2017 | | | As of
December 31,
2016 | |
| | | (Dollars in thousands) | |
Non-accrual loans | | $ | 34,794 | | | $ | 47,182 | |
Loans past due 90 days or more (principal or interest payments) | | | 29,183 | | | | 15,942 | |
| | | | | | | | |
Totalnon-performing loans | | | 63,977 | | | | 63,124 | |
| | | | | | | | |
Othernon-performing assets | | | | | | | | |
Foreclosed assets held for sale, net | | | 21,701 | | | | 15,951 | |
Othernon-performing assets | | | 3 | | | | 3 | |
| | | | | | | | |
Total othernon-performing assets | | | 21,704 | | | | 15,954 | |
| | | | | | | | |
Totalnon-performing assets | | $ | 85,681 | | | $ | 79,078 | |
| | | | | | | | |
Allowance for loan losses tonon-performing loans | | | 174.47 | % | | | 126.74 | % |
Non-performing loans to total loans | | | 0.62 | | | | 0.85 | |
Non-performing assets to total assets | | | 0.60 | | | | 0.81 | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (Dollars in thousands) |
| Non-accrual loans | $ | 67,055 | | | $ | 59,971 | |
| Loans past due 90 days or more (principal or interest payments) | 12,928 | | | 4,130 | |
| Total non-performing loans | 79,983 | | | 64,101 | |
| Other non-performing assets | | | |
| Foreclosed assets held for sale, net | 30,650 | | | 30,486 | |
| Other non-performing assets | 63 | | | 785 | |
| Total other non-performing assets | 30,713 | | | 31,271 | |
| Total non-performing assets | $ | 110,696 | | | $ | 95,372 | |
| Allowance for credit losses to non-accrual loans | 432.92 | % | | 480.62 | % |
| Allowance for credit losses to non-performing loans | 362.94 | | | 449.66 | |
| Non-accrual loans to total loans | 0.46 | | | 0.42 | |
| Non-performing loans to total loans | 0.55 | | | 0.44 | |
| Non-performing assets to total assets | 0.48 | | | 0.42 | |
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
loancredit losses.
Totalnon-performing loans were $64.0$80.0 million and $64.1 million as of September 30, 2017, compared to $63.1 million as ofMarch 31, 2024 and December 31, 2016, for an increase of $853,000. The $853,000 increase innon-performing loans is the result of a $4.2 million decrease innon-performing loans in our Arkansas franchise, a $5.6 million increase innon-performing loans in our Florida franchise and a $573,000 decrease innon-performing loans in our Alabama franchise.2023, respectively. Non-performing loans at September 30, 2017 are $24.3March 31, 2024 were $17.6 million, $39.6$10.6 million, $83,000$44.7 million, $408,000, $3.9 million and zero$2.8 million in the Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG franchises,markets, respectively. During
The $2.8 million balance of non-accrual loans for our Centennial CFG Capital Markets Group consists of two loans that are assessed for credit risk by the
third quarterFederal Reserve under the Shared National Credit Program. The 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. In addition, the $22.8 million balance of
2017, we completedforeclosed assets held for sale for our
acquisitionCentennial CFG Property Finance Group consists of
Stonegate which increased ournon-performing loans accruing past due 90 days or more by $6.3 million as of September 30, 2017.Althoughan office building located in California. This represents the current statelargest component of the real estate market has improved, uncertainties still presentCompany's $30.7 million in the economy may continue to increase our levelforeclosed assets held for sale.
Debt restructuring generally
occuroccurs when a borrower is experiencing, or is expected to experience, financial difficulties in the near term. As a result,
the Bankwe 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
potentially 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
TDRsrestructured 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.
Onlynon-performing restructured loans are included in ournon-performing loans. As of
September 30, 2017,March 31, 2024, we had
$23.2$22.9 million of restructured loans that are in compliance with the modified terms and are not reported as past due or
non-accrual, and we had $2.0 million of restructured loans that are not in
Table 9.compliance with the modified terms and are reported as non-accrual. Our Florida
franchise contains $17.0market contained $17.2 million, our Arkansas market contained $1.4 million, our Texas market contained $2.2 million and our
Arkansas franchise contains $6.2New York region contained $2.1 million of these restructured loans.
A loan modification that might not otherwise be considered may be
granted resulting in classification as a TDR.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
sixnine 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
loan modificationsrestructured loans relate to
commercialreal estate lending and
generally involve reducing the interest rate, changing from a principal and interest payment to interest-only,
a lengthening
of the amortization period, or a combination of some or all of the three. In addition, it is common for the Bank to seek additional collateral or guarantor support when modifying a loan. At
September 30, 2017,March 31, 2024, the amount of
TDRsrestructured loans was
$25.6 million, an increase of 0.4% from $25.5 million at December 31, 2016.$24.9 million. As of
September 30, 2017 and DecemberMarch 31,
2016, 90.5% and 88.0%, respectively,2024, 92.0% of all restructured loans were performing to the terms of the restructure.
Total foreclosed assets held for sale were
$21.7$30.7 million as of
September 30, 2017,March 31, 2024, compared to
$16.0$30.5 million as of December 31,
20162023 for an increase of
$5.7 million.$164,000. The foreclosed assets held for sale as of
September 30, 2017March 31, 2024 are comprised of
$12.1 million of$343,000 assets located in Arkansas,
$9.0$7.3 million
of assets located in Florida,
$641,000$272,000 located in
Texas, zero in Alabama,
zero in SPF and
zero from$22.8 million in Centennial CFG.
DuringThe majority of the
third quarter of 2017, we completed our acquisition of Stonegate which increased our foreclosed assets held for sale
by $3.4 million asis comprised of
September 30, 2017.During the first nine months of 2017, we had four foreclosed properties with a carrying value greater than $1.0 million.two properties. The first property is a development loanan office building located in Northwest Arkansas which was foreclosed in the first quarter of 2011. The carrying value was $2.0 million at September 30, 2017. The second property was anon-farm,non-residential property in Central Arkansas which was foreclosed in the third quarter of 2017. The carrying value was $1.5 million at September 30, 2017. The third property was a development property in Florida acquired from BOCSanta Monica, California with a carrying value of $2.1$22.8 million, at September 30, 2017. The last property was anon-farm,non-residential propertyand the second is an office building located in Miami, Florida acquired from Stonegate with a carrying value of $1.8$7.0 million. These two properties account for $29.8 million at September 30, 2017. The Company does not currently anticipate any additional losses on these properties. As of September 30, 2017, no otherthe balance of foreclosed assets held for sale have a carrying value greater than $1.0 million.
at March 31, 2024.
Table 10 shows the summary of foreclosed assets held for sale as of
September 30, 2017March 31, 2024 and December 31,
2016.2023.
Table 10: Foreclosed Assets Held For Sale
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | |
Non-farm/non-residential | | $ | 10,354 | | | $ | 9,423 | |
Construction/land development | | | 6,328 | | | | 4,009 | |
Agricultural | | | — | | | | — | |
Residential real estate loans | | | | | | | | |
Residential1-4 family | | | 3,733 | | | | 2,076 | |
Multifamily residential | | | 1,286 | | | | 443 | |
| | | | | | | | |
Total foreclosed assets held for sale | | $ | 21,701 | | | $ | 15,951 | |
| | | | | | | | |
A loan is considered
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (In thousands) |
| Commercial real estate loans | | | |
| Non-farm/non-residential | $ | 29,894 | | | $ | 29,894 | |
| Construction/land development | — | | | 47 | |
| Residential real estate loans | | | |
| Residential 1-4 family | 756 | | | 545 | |
| | | |
| Total foreclosed assets held for sale | $ | 30,650 | | | $ | 30,486 | |
The Company had $105.3 millionand $94.9 million in impaired when it is probable that we will not receive all amounts due according to the contracted terms of the loans. Impaired loans includenon-performing(which includes loans (loansindividually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more andnon-accrual loans), criticized and/or classified restructured loans made to borrowers experiencing financial difficulty) for the periods ended March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, our Arkansas, Florida, Texas, Alabama, SPF and Centennial CFG markets accounted for approximately $22.8 million, $27.8 million, $45.4 million, $408,000, $3.9 million and $5.0 million of the impaired loans, respectively.
The amortized cost balance for loans with a specific allocation loans categorized as TDRsincreased from $10.5 million to $18.5 million, and certain other loans identified by management that are still performing (loans included in multiple categories are only included once). As of September 30, 2017, averagethe specific allocation for impaired loans were $90.0 millionincreased by approximately $690,000 at March 31, 2024 compared to $89.6 million as of December 31, 2016. As2023.
Table of September 30, 2017, impaired loans were $97.0 million compared to $93.1 million as of December 31, 2016, for an increase of $3.9 million. This increase is primarily associated with an increase in loan balances with a specific allocation. As of September 30, 2017, our Arkansas, Florida, Alabama and Centennial CFG franchises accounted for approximately $42.8 million, $54.1 million, $83,000 and zero of the impaired loans, respectively.We evaluated loans purchased in conjunction with our historical acquisitions for impairment in accordance with the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that not all contractually required payments will be collected. Purchased credit impaired loans are not classified asnon-performing assets for the recognition of interest income as the pools are considered to be performing. However, for the purpose of calculating thenon-performing credit metrics, we have included all of the loans which are contractually 90 days past due and still accruing, including those in performing pools. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased impaired loans.
All purchased loans with deteriorated credit quality are considered impaired loans at the date of acquisition. Since the loans are accounted for on a pooled basis under ASC310-30, individual loans are not classified as impaired. Since the loans are accounted for on a pooled basis under ASC310-30, individual loans subsequently restructured within the pools are not classified as TDRs in accordance with ASC310-30-40. For purchased loans with deteriorated credit quality that were deemed TDRs prior to our acquisition of them, these loans are also not considered TDRs as they are accounted for under ASC310-30.
As of September 30, 2017 and December 31, 2016, there was not a material amount of purchased loans with deteriorated credit quality onnon-accrual status as a result of most of the loans being accounted for on the pool basis and the pools are considered to be performing for the accruing of interest income. Also, acquired loans contractually past due 90 days or more are accruing interest because the pools are considered to be performing for the purpose of accruing interest income.
Contents
Past Due andNon-Accrual Loans Table 11 shows the summary of
non-accrual loans as of
September 30, 2017March 31, 2024 and December 31,
2016:2023:
Table 11: Total
Non-Accrual Loans
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | |
Non-farm/non-residential | | $ | 10,936 | | | $ | 17,988 | |
Construction/land development | | | 5,520 | | | | 3,956 | |
Agricultural | | | 34 | | | | 435 | |
Residential real estate loans | | | | | | | | |
Residential1-4 family | | | 13,817 | | | | 20,311 | |
Multifamily residential | | | 155 | | | | 262 | |
| | | | | | | | |
Total real estate | | | 30,462 | | | | 42,952 | |
Consumer | | | 139 | | | | 140 | |
Commercial and industrial | | | 4,021 | | | | 3,155 | |
Agricultural | | | 171 | | | | — | |
Other | | | 1 | | | | 935 | |
| | | | | | | | |
Totalnon-accrual loans | | $ | 34,794 | | | $ | 47,182 | |
| | | | | | | | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (In thousands) |
| Real estate: | | | |
| Commercial real estate loans | | | |
| Non-farm/non-residential | $ | 12,887 | | | $ | 13,178 | |
| Construction/land development | 15,782 | | | 12,094 | |
| Agricultural | 414 | | | 431 | |
| Residential real estate loans | | | |
| Residential 1-4 family | 22,037 | | | 20,351 | |
| | | |
| Total real estate | 51,120 | | | 46,054 | |
| Consumer | 4,639 | | | 3,423 | |
| Commercial and industrial | 10,969 | | | 9,982 | |
| Agricultural & other | 327 | | | 512 | |
| Total non-accrual loans | $ | 67,055 | | | $ | 59,971 | |
If thenon-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $479,000 and $558,000, respectively, would have been recorded for the three-month periods ended September 30, 2017 and 2016. If thenon-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.7$1.4 million would have been recorded for eachboth of the nine-monththree-month periods ended September 30, 2017March 31, 2024 and 2016, respectively. 2023.The interest income recognized on thenon-accrual loans for the three months ended March 31, 2024 and nine-month periods ended September 30, 2017 and 20162023 was considered immaterial. Table 12 shows the summary of accruing past due loans 90 days ormore as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
Table 12: Loans Accruing Past Due 90 Days or More
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands) | |
Real estate: | | | | |
Commercial real estate loans | | | | | | | | |
Non-farm/non-residential | | $ | 16,482 | | | $ | 9,530 | |
Construction/land development | | | 3,258 | | | | 3,086 | |
Agricultural | | | — | | | | — | |
Residential real estate loans | | | | | | | | |
Residential1-4 family | | | 4,624 | | | | 2,996 | |
Multifamily residential | | | 1,039 | | | | — | |
| | | | | | | | |
Total real estate | | | 25,403 | | | | 15,612 | |
Consumer | | | 3 | | | | 21 | |
Commercial and industrial | | | 3,771 | | | | 309 | |
Agricultural | | | 6 | | | | — | |
Other | | | — | | | | — | |
| | | | | | | | |
Total loans accruing past due 90 days or more | | $ | 29,183 | | | $ | 15,942 | |
| | | | | | | | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (In thousands) |
| Real estate: | | | |
| Commercial real estate loans | | | |
| Non-farm/non-residential | $ | 9,377 | | | $ | 2,177 | |
| Construction/land development | 603 | | | 255 | |
| | | |
| Residential real estate loans | | | |
| Residential 1-4 family | 543 | | | 84 | |
| | | |
| Total real estate | 10,523 | | | 2,516 | |
| Consumer | 48 | | | 79 | |
| Commercial and industrial | 2,311 | | | 1,535 | |
| Other | 46 | | | — | |
| Total loans accruing past due 90 days or more | $ | 12,928 | | | $ | 4,130 | |
Our ratio of total loans accruing past due 90 days or more andnon-accrual loans to total loans was 0.62%0.55% and 0.85% as of September 30, 20170.44% at March 31, 2024 and December 31, 2016,2023, respectively. During
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 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 quarterparty to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of 2017,economic forecasts are also considered by management when developing the forecast metrics.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in the national unemployment rate, gross domestic product, 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 loan 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 - SPF
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 for each segment is measured through the use of the discounted cash flow method. Loans evaluated individually that are considered to be impaired are not included in the collective evaluation. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. For loans for which a specific reserve is not recorded, an allowance is recorded based on the loss rate for the respective pool within the collective evaluation if a specific reserve is not recorded.
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 ("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 considered to be collateral dependent, according to ASC 326, are loans for which, based on current information and events, it is probable that we completed our acquisitionwill be unable to collect all amounts due according to the contractual terms of Stonegate which increased ourthe loan agreement. The aggregate amount of collateral shortfall on such loans accruing past dueis utilized in evaluating the adequacy of the allowance for credit losses and amount of provisions thereto. Losses on collateral dependent loans are charged against the allowance for credit losses when in the process of collection, it appears likely that such losses will be realized. The accrual of interest on collateral dependent loans is discontinued when, in management’s opinion the collection of interest is doubtful or generally when loans are 90 days or more by $6.3 millionpast due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Loans are placed on non-accrual status when management believes that the borrower’s financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Accrued interest related to non-accrual loans is generally charged against the allowance for credit losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on non-accrual loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal. Non-accrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans. We account for our acquisitions under FASB ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. In accordance with ASC 326, the Company records both a discount and an allowance for credit losses on acquired loans. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, Fair Value Measurements. The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as
other loans. For PCD loans not individually analyzed for impairment, the Company develops separate PCD models for each loan segment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of
September 30, 2017.the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses.
Allowance for LoanCredit LossesOverview. on Off-Balance Sheet Credit Exposures.
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for loan losses is maintained at a level which our management believes is adequate to absorb all probablecredit losses on loans in the loan portfolio.off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The amountestimate includes consideration of the allowance is affected by: (i) loan charge-offs, which decrease the allowance; (ii) recoverieslikelihood that funding will occur and an estimate of expected credit losses on loans previously charged off, which increase the allowance; and (iii) the provision of possible loan losses chargedcommitments expected to income, which increases the allowance. In determining the provision for possible loan losses, it is necessary for our management to monitor fluctuations in the allowance resulting from actual charge-offs and recoveries and to periodically review the size and composition of the loan portfolio in light of current and anticipated economic conditions. If actual losses exceed the amount of allowance for loan losses, our earnings could be adversely affected.As we evaluate the allowance for loan losses, we categorize it as follows: (i) specific allocations; (ii) allocations for criticized and classified assets not individually evaluated for impairment; (iii) general allocations; and (iv) miscellaneous allocations.
funded over its estimated life.
Specific Allocations.As a general rule, if a specific allocation is warranted, it is the result of ana 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 collateral impairment has occurred.a specific allocation is needed. The amount or likelihood of loss on this credit may not yet be evident, so acharge-off would not be prudent. However, if the analysis indicates that an impairment has occurred,a specific allocation is needed, then a specific allocation will be determined for this loan. If our existing appraisal is outdated or the collateral has been subject to significant market changes, we will obtain a new appraisal for this impairment analysis. The majority of our impaired loans are collateral dependent at the present time, so third-party appraisals were used to determine the necessary impairment for these loans. Cash flow available to service debt was used for the other impaired loans. This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for loancredit losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.
For collateral dependent loans, we do not consider an appraisal outdated simply due to the passage of time. However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will consider the appraisal outdated and order either a new appraisal or an internal
validationvaluation report for the
impairmentcredit 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’sborrower'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
impairmentcredit loss analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of the allowance for
loancredit losses. Any exposure identified through the
impairmentcredit loss analysis is shown as a specific
reserve on the individual impairment.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
impairmentcredit 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’sloan's repayment history. If the loan is
$1.0$3.0 million or greater or the total loan relationship is
$2.0$5.0 million or greater, our policy requires an annual credit review. Our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we calculate the global repayment ability of the borrower/guarantors at least annually.
As a general rule, when it becomes evident that the full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan 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
impairmentcredit loss analysis will determine if the loan is still
impaired,collateral dependent, and thus continues to require a specific allocation.
Allocations
The Company had $105.3 million and $94.9 million in impaired loans (which includes loans individually analyzed for
Criticized and Classified Assets not Individually Evaluatedcredit losses for
Impairment. We establish allocations forwhich a specific reserve has been recorded, non-accrual loans,
rated “special mention” through “loss” in accordance with the guidelines established by the regulatory agencies. A percentage rate is applied to each loan category to determine the level of dollar allocation.General Allocations. We establish general allocations for each major loan category. This section also includes allocations to loans which are collectively evaluated for loss such as residential real estate, commercial real estate, consumer loans and commercial and industrial loans that fall below $2.0 million. The allocations in this section are based on a historical review of loan loss experience and past due accounts. We give consideration90 days or more and restructured loans made to trends, changes in loan mix, delinquencies, prior losses,borrowers experiencing financial difficulty) for the periods ended March 31, 2024 and other related information.
Miscellaneous Allocations. Allowance allocations other than specific, classified, and general are included in our miscellaneous section.
December 31, 2023, respectively.
Loans Collectively Evaluated for Impairment.Credit Loss. Loans receivable collectively evaluated for impairmentcredit loss increased by approximately $2.87 billion$100.9 million from $7.08$14.25 billion at December 31, 20162023 to $9.95$14.35 billion at September 30, 2017. During the third quarter of 2017, we completed our acquisition of Stonegate which increased our loans collectively evaluated by $2.37 billion as of September 30, 2017.March 31, 2024. The percentage of the allowance for loancredit losses allocated to loans receivable collectively evaluated for impairmentcredit loss to the total loans collectively evaluated for impairment remained unchangedcredit loss was 1.97% and 1.98% at 1.08% fromMarch 31, 2024 and December 31, 2016 to September 30, 2017.2023, respectively.
Charge-offs and Recoveries. Total charge-offs were $4.4decreased to $4.0 million for both the three months ended September 30, 2017 and 2016. Total charge-offs decreased to $10.5 million for the nine months ended September 30, 2017,March 31, 2024, compared to $12.7$4.3 million for the same period in 2016.2023. Total recoveries increased to $883,000were $538,000 and $588,000 for the three months ended September 30, 2017, compared to $844,000 for the same period in 2016. Total recoveries decreased to $2.8 million for the nine months ended September 30, 2017, compared to $2.9 million for the same period in 2016.March 31, 2024 and 2023, respectively. For the three months ended September 30, 2017,March 31, 2024, net charge-offs were $3.5$1.4 million for Arkansas, $16,000$390,000 for Florida, $1.5 million for Texas, $14,000 for Alabama and zero$78,000 for Centennial CFG, andSPF. These equal a net recoveries were $16,000 for Florida, equaling a netcharge-off position of $3.5$3.4 million. For the nine months ended September 30, 2017, net charge-offs were $7.3 million for Arkansas, $201,000 for Florida, $236,000 for Alabama and zero for Centennial CFG, equaling a netcharge-off position of $7.7 million. While the 2017 charge-offs and recoveries consisted of many relationships, there was only one individual relationship consisting of acharge-off greater than $1.0 million. Thischarge-off held a balance of $2.0 million at September 30, 2017. We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less estimated costs to sell (for collateral dependent loans), for any period presented. Loans partially
charged-off are placed on
non-accrual status until it is proven that the
borrower’sborrower'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.
Table 13 shows the allowance for
loancredit losses, charge-offs and recoveries as of and for the three
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016.2023.
Table 13: Analysis of Allowance for
LoanCredit Losses
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Balance, beginning of period | | $ | 80,138 | | | $ | 74,341 | | | $ | 80,002 | | | $ | 69,224 | |
Loans charged off | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | |
Commercial real estate loans: | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 796 | | | | 741 | | | | 2,324 | | | | 2,590 | |
Construction/land development | | | 182 | | | | 181 | | | | 508 | | | | 334 | |
Agricultural | | | — | | | | — | | | | 127 | | | | — | |
Residential real estate loans: | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 309 | | | | 1,069 | | | | 2,512 | | | | 3,345 | |
Multifamily residential | | | — | | | | 435 | | | | 85 | | | | 465 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 1,287 | | | | 2,426 | | | | 5,556 | | | | 6,734 | |
Consumer | | | 14 | | | | 23 | | | | 158 | | | | 131 | |
Commercial and industrial | | | 2,280 | | | | 1,388 | | | | 3,059 | | | | 4,424 | |
Agricultural | | | — | | | | — | | | | — | | | | — | |
Other | | | 843 | | | | 514 | | | | 1,762 | | | | 1,376 | |
| | | | | | | | | | | | | | | | |
Total loans charged off | | | 4,424 | | | | 4,351 | | | | 10,535 | | | | 12,665 | |
| | | | | | | | | | | | | | | | |
Recoveries of loans previously charged off | | | | | | | | | | | | | | | | |
Real estate: | | | | | | | | | | | | | | | | |
Commercial real estate loans: | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | | 278 | | | | 380 | | | | 988 | | | | 608 | |
Construction/land development | | | 85 | | | | 74 | | | | 312 | | | | 107 | |
Agricultural | | | — | | | | — | | | | — | | | | — | |
Residential real estate loans: | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 188 | | | | 140 | | | | 430 | | | | 814 | |
Multifamily residential | | | 38 | | | | 8 | | | | 50 | | | | 22 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 589 | | | | 602 | | | | 1,780 | | | | 1,551 | |
Consumer | | | 25 | | | | 19 | | | | 91 | | | | 55 | |
Commercial and industrial | | | 140 | | | | 42 | | | | 392 | | | | 656 | |
Agricultural | | | — | | | | — | | | | — | | | | — | |
Other | | | 129 | | | | 181 | | | | 566 | | | | 644 | |
| | | | | | | | | | | | | | | | |
Total recoveries | | | 883 | | | | 844 | | | | 2,829 | | | | 2,906 | |
| | | | | | | | | | | | | | | | |
Net loans charged off (recovered) | | | 3,541 | | | | 3,507 | | | | 7,706 | | | | 9,759 | |
Provision for loan losses | | | 35,023 | | | | 5,536 | | | | 39,324 | | | | 16,905 | |
| | | | | | | | | | | | | | | | |
Balance, September 30 | | $ | 111,620 | | | $ | 76,370 | | | $ | 111,620 | | | $ | 76,370 | |
| | | | | | | | | | | | | | | | |
Net charge-offs (recoveries) to average loans receivable | | | 0.18 | % | | | 0.20 | % | | | 0.13 | % | | | 0.19 | % |
Allowance for loan losses to total loans | | | 1.09 | | | | 1.07 | | | | 1.09 | | | | 1.07 | |
Allowance for loan losses to net charge-offs (recoveries) | | | 795 | | | | 547 | | | | 1,083 | | | | 586 | |
Allocated Allowance for Loan Losses. We use a risk rating and specific reserve methodology in the calculation and allocation
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| Balance, beginning of period | $ | 288,234 | | | $ | 289,669 | | | | | |
| | | | | | | |
| | | | | | | |
| Loans charged off | | | | | | | |
| Real estate: | | | | | | | |
| Commercial real estate loans: | | | | | | | |
| Non-farm/non-residential | 1,102 | | | 71 | | | | | |
| Construction/land development | 1 | | | 25 | | | | | |
| Agricultural | — | | | 2 | | | | | |
| Residential real estate loans: | | | | | | | |
| Residential 1-4 family | 159 | | | 59 | | | | | |
| | | | | | | |
| Total real estate | 1,262 | | | 157 | | | | | |
| Consumer | 198 | | | 221 | | | | | |
| Commercial and industrial | 1,746 | | | 3,006 | | | | | |
| | | | | | | |
| Other | 772 | | | 904 | | | | | |
| Total loans charged off | 3,978 | | | 4,288 | | | | | |
| Recoveries of loans previously charged off | | | | | | | |
| Real estate: | | | | | | | |
| Commercial real estate loans: | | | | | | | |
| Non-farm/non-residential | 20 | | | 19 | | | | | |
| Construction/land development | 7 | | | 7 | | | | | |
| | | | | | | |
| Residential real estate loans: | | | | | | | |
| Residential 1-4 family | 19 | | | 118 | | | | | |
| Multifamily residential | — | | | 8 | | | | | |
| Total real estate | 46 | | | 152 | | | | | |
| Consumer | 39 | | | 41 | | | | | |
| Commercial and industrial | 101 | | | 109 | | | | | |
| | | | | | | |
| Other | 352 | | | 286 | | | | | |
| Total recoveries | 538 | | | 588 | | | | | |
| Net loans charged off | 3,440 | | | 3,700 | | | | | |
| Provision for credit loss | 5,500 | | | 1,200 | | | | | |
| | | | | | | |
| Balance, March 31 | $ | 290,294 | | | $ | 287,169 | | | | | |
| Net charge-offs to average loans receivable | 0.10 | % | | 0.10 | % | | | | |
| Allowance for credit losses to total loans | 2.00 | | | 2.00 | | | | | |
| Allowance for credit losses to net charge-offs | 2,098.17 | | | 1,913.75 | | | | | |
Table of our allowance for loan losses. While the allowance is allocated to various loan categories in assessing and evaluating the level of the allowance, the allowance is available to cover charge-offs incurred in all loan categories. Because a portion of our portfolio has not matured to the degree necessary to obtain reliable loss data from which to calculate estimated future losses, the unallocated portion of the allowance is an integral component of the total allowance. Although unassigned to a particular credit relationship or product segment, this portion of the allowance is vital to safeguard against the imprecision inherent in estimating credit losses.The Company’s third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancShares’s financial condition and results of operation may not be known for some time, the Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in loans receivable we have in the disaster area, the Company has accrued $33.4 million ofpre-tax hurricane expenses. The $33.4 million of hurricane expenses include the following items: $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017.
The changes for the period ended September 30, 2017 and the year ended December 31, 2016 in the allocation of the allowance for loan losses for the individual types of loans are primarily associated with changes in the ASC 310 calculations, both individual and aggregate, and changes in the ASC 450 calculations. These calculations are affected by changes in individual loan impairments, changes in asset quality, net charge-offs during the period and normal changes in the outstanding loan portfolio, as well any changes to the general allocation factors due to changes within the actual characteristics of the loan portfolio.
Contents
Table 14 presents the allocation of allowance for
loancredit losses as of
September 30, 2017March 31, 2024 and December 31,
2016.2023.
Table 14: Allocation of Allowance for
LoanCredit Losses
| | | | | | | | | | | | | | | | |
| | |
| | | As of September 30, 2017 | | | As of December 31, 2016 | |
| | | Allowance
Amount | | | % of
loans(1) | | | Allowance
Amount | | | % of
loans(1) | |
| | | (Dollars in thousands) | |
Real estate: | | | | | | | | | | | | | | | | |
Commercial real estate loans: | | | | | | | | | | | | | | | | |
Non-farm/non-residential | | $ | 44,414 | | | | 44.1 | % | | $ | 27,695 | | | | 42.7 | % |
Construction/land development | | | 18,920 | | | | 16.0 | | | | 11,522 | | | | 15.4 | |
Agricultural | | | 1,103 | | | | 0.9 | | | | 493 | | | | 1.1 | |
Residential real estate loans: | | | | | | | | | | | | | | | | |
Residential1-4 family | | | 22,156 | | | | 19.1 | | | | 14,397 | | | | 18.3 | |
Multifamily residential | | | 3,512 | | | | 4.8 | | | | 2,120 | | | | 4.6 | |
| | | | | | | | | | | | | | | | |
Total real estate | | | 90,105 | | | | 84.9 | | | | 56,227 | | | | 82.1 | |
Consumer | | | 467 | | | | 0.5 | | | | 398 | | | | 0.6 | |
Commercial and industrial | | | 14,622 | | | | 12.6 | | | | 12,756 | | | | 15.2 | |
Agricultural | | | 2,998 | | | | 0.6 | | | | 3,790 | | | | 1.0 | |
Other | | | 187 | | | | 1.4 | | | | — | | | | 1.1 | |
Unallocated | | | 3,241 | | | | — | | | | 6,831 | | | | — | |
| | | | | | | | | | | | | | | | |
Total allowance for loan losses | | $ | 111,620 | | | | 100.0 | % | | $ | 80,002 | | | | 100.0 | % |
| | | | | | | | | | | | | | | | |
(1) | Percentage of loans in each category to total loans receivable. |
| | | | | | | | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| Allowance
Amount | | % of loans(1) | | Allowance
Amount | | % of loans(1) |
| (Dollars in thousands) |
| Real estate: | | | | | | | |
| Commercial real estate loans: | | | | | | | |
| Non-farm/non- residential | $ | 77,696 | | | 38.7 | % | | $ | 77,194 | | | 38.5 | % |
| Construction/land development | 35,921 | | | 16.1 | | | 33,877 | | | 15.9 | |
| Agricultural residential real estate loans | 1,432 | | | 2.3 | | | 1,441 | | | 2.3 | |
| Residential real estate loans: | | | | | | | |
| Residential 1-4 family | 52,647 | | | 13.1 | | | 51,313 | | | 12.8 | |
| Multifamily residential | 4,256 | | | 2.9 | | | 4,547 | | | 3.0 | |
| Total real estate | 171,952 | | | 73.1 | | | 168,372 | | | 72.5 | |
| Consumer | 25,055 | | | 8.0 | | | 24,728 | | | 8.0 | |
| Commercial and industrial | 89,759 | | | 15.7 | | | 91,551 | | | 16.1 | |
| Agricultural | 1,249 | | | 1.9 | | | 1,259 | | | 2.1 | |
| Other | 2,279 | | | 1.3 | | | 2,324 | | | 1.3 | |
| Total | $ | 290,294 | | | 100.0 | % | | $ | 288,234 | | | 100.0 | % |
(1)Percentage of loans in each category to total loans receivable.
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
2.74.9 years as of
September 30, 2017.AsMarch 31, 2024.
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 September 30, 2017premiums 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 of held-to-maturity securities at both March 31, 2024 and December 31, 2016, we had $234.9 million2023.
At both March 31, 2024 and
$284.2 million ofheld-to-maturity securities, respectively. Of the $234.9 million ofheld-to-maturity securities as of September 30, 2017, $6.1 million wereDecember 31, 2023, $1.11 billion, or 86.5%, was invested in
U.S. Government-sponsored enterprises, $78.6 million were invested in mortgage-backed securities and $150.2 million were invested inobligations of state and political subdivisions.
Of the $284.2 million ofheld-to-maturity securities as ofAt both March 31, 2024 and December 31,
2016, $6.62023, $43.4 million,
wereor 3.4%, was invested in obligations of U.S. Government-sponsored enterprises. We had $129.1 million, or 10.1%, invested in U.S.
Government-sponsored enterprises, $107.8 million were invested ingovernment-sponsored mortgage-backed securities
and $169.7at March 31, 2024, compared to $130.3 million,
were invested in state and political subdivisions.or 10.2% at December 31, 2023.
Securitiesavailable-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders’ equity as other comprehensive (loss) income. Securities that are held asavailable-for-sale are used as a part of our asset/liability management strategy. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified asavailable-for-sale.Available-for-sale securities were $1.58$3.40 billion and $1.07$3.51 billion as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively.
As of
September 30, 2017, $891.9 million,March 31, 2024, $1.45 billion, or
56.6%42.7%, of our
available-for-sale securities were invested in
U.S. government-sponsored mortgage-backed securities, compared to
$579.5 million,$1.52 billion, or
54.0%43.3%, of our
available-for-sale securities as of December 31,
2016.2023. To reduce our income tax burden,
$249.1$899.9 million, or
15.8%26.5%, of our
available-for-sale securities portfolio as of
September 30, 2017, wasMarch 31, 2024, were primarily invested in
tax-exempt obligations of state and political subdivisions, compared to
$216.5$916.3 million, or
20.2%26.1%, of our
available-for-sale securities as of December 31,
2016. Also, we2023. We had
approximately $397.2$325.7 million, or
25.2%9.6%, invested in obligations of U.S. Government-sponsored enterprises as of
September 30, 2017,March 31, 2024, compared to
$236.8$346.6 million, or
22.1%9.9%, of our
available-for-sale securities as of December 31,
2016.Certain investment2023. We had $361.3 million, or 10.6%, invested in non-government-sponsored asset backed securities are valued at lessas of March 31, 2024, compared to $363.5 million, or 10.4%, of our available-for-sale securities as of December 31, 2023. As of March 31, 2024, $173.5 million, or 5.1%, of our available-for-sale securities were invested in private mortgage-backed securities, compared to $175.4 million, or 5.0%, of our available-for-sale securities as of December 31, 2023. Also, we had approximately $187.7 million, or 5.5%, invested in other securities as of March 31, 2024, compared to $185.6 million, or 5.3% of our available-for-sale securities as of December 31, 2023.
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 their historical cost. These declines are primarilynot that the resultCompany will be required to sell the security before recovery of its amortized cost basis. If either of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, we believecriteria regarding intent or requirement to sell is met, the declinessecurity’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria, the Company evaluates whether the decline in fair value for these securitieshas resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are temporary. It is our intentcompared to hold these securities to recovery. Should the impairment of any of these securities become other than temporary, theamortized cost basis of the investment willsecurity. If the present value of cash flows expected to be reducedcollected 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 three months ended March 31, 2024, the Company determined the $2.5 million allowance for credit losses on the available for sale portfolio and the
resulting loss recognized in net income in$2.0 million allowance for credit losses on the
period the other than temporary impairment is identified.held-to-maturity portfolio were adequate. Therefore, no additional provision was considered necessary.
See Note 3
“Investment Securities” into the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.
Our deposits averaged
$7.88 billion and $7.58$16.74 billion for the three
and nine-month periodsmonths ended
September 30, 2017.March 31, 2024. Total deposits
were $16.87 billion as of
September 30, 2017 were $10.45 billion. Excluding $2.97March 31, 2024, and $16.79 billion
of deposits acquired through the 2017 acquisitions, total deposits as of
September 30, 2017 were $7.48 billion, for an annualized increase of 10.3% from December 31,
2016.2023. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions.
Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks.
Additionally, we participate in the Certificates of Deposit Account Registry Service (“CDARS”), which provides for reciprocal(“two-way”) transactions among banks for the purpose of giving our customers the potential for multi-million-dollar FDIC insurance coverage. Although classified as brokered deposits for regulatory purposes, funds placed through the CDARS program are our customer relationships that management views as core funding. We also participate in the
One-Way Buy Insured Cash Sweep (“ICS”) service
and similar services, which
providesprovide 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 efficientcost-efficient alternative funding source for the Company. However, to the extent that our condition or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding.
Table 15 reflects the classification of the brokered deposits as of
September 30, 2017March 31, 2024 and December 31,
2016.2023.
Table 15: Brokered Deposits
| | | | | | | | |
| | | September 30, 2017 | | | December 31, 2016 | |
| | | (In thousands) | |
Time Deposits | | $ | 60,022 | | | $ | 70,028 | |
CDARS | | | 46,959 | | | | 26,389 | |
Insured Cash Sweep and Other Transaction Accounts | | | 1,023,363 | | | | 406,120 | |
| | | | | | | | |
Total Brokered Deposits | | $ | 1,130,344 | | | $ | 502,537 | |
| | | | | | | | |
During the third quarter of 2017, we completed our acquisition of Stonegate which increased our brokered deposits by $488.2 million as of September 30, 2017.
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| (In thousands) |
| | | |
| | | |
| Insured Cash Sweep and Other Transaction Accounts | $ | 407,422 | | | $ | 401,004 | |
| Total Brokered Deposits | $ | 407,422 | | | $ | 401,004 | |
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 FundsReserve increased the target rate which is the cost to banks of immediately available overnight funds, was loweredfour times during 2023. First, on December 16, 2008 to a historic low of 0.25% to 0%, where it remained until December 16, 2015, whenFebruary 1, 2023, the target rate was increased slightly to 0.50%4.50% to 0.25%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, on July 26, 2023, the target rate was increased to 5.25% to 5.50%. Since DecemberAs of March 31, 2016,2024, the target rate was 5.25% to 5.50% as the Federal FundsReserve has left the target rate has increased 75 basis points and is currently at 1.25% to 1.00%.unchanged in 2024.
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
months ended March 31, 2024 and
nine-month periods ended September 30, 2017 and 2016.2023.
Table 16: Average Deposit Balances and Rates
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| | | Average
Amount | | | Average
Rate Paid | | | Average
Amount | | | Average
Rate Paid | |
| | | (Dollars in thousands) | |
Non-interest-bearing transaction accounts | | $ | 1,924,933 | | | | — | % | | $ | 1,663,621 | | | | — | % |
Interest-bearing transaction accounts | | | 3,973,270 | | | | 0.56 | | | | 3,243,984 | | | | 0.27 | |
Savings deposits | | | 539,515 | | | | 0.10 | | | | 477,035 | | | | 0.06 | |
Time deposits: | | | | | | | | | | | | | | | | |
$100,000 or more | | | 989,697 | | | | 0.89 | | | | 880,098 | | | | 0.60 | |
Other time deposits | | | 454,965 | | | | 0.48 | | | | 481,491 | | | | 0.37 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,882,380 | | | | 0.43 | % | | $ | 6,746,229 | | | | 0.24 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| | | Average
Amount | | | Average
Rate Paid | | | Average
Amount | | | Average
Rate Paid | |
| | | (Dollars in thousands) | |
Non-interest-bearing transaction accounts | | $ | 1,847,843 | | | | — | % | | $ | 1,596,603 | | | | — | % |
Interest-bearing transaction accounts | | | 3,792,388 | | | | 0.46 | | | | 3,202,095 | | | | 0.26 | |
Savings deposits | | | 523,644 | | | | 0.09 | | | | 462,306 | | | | 0.06 | |
Time deposits: | | | | | | | | | | | | | | | | |
$100,000 or more | | | 949,493 | | | | 0.82 | | | | 874,648 | | | | 0.55 | |
Other time deposits | | | 465,890 | | | | 0.44 | | | | 508,009 | | | | 0.39 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,579,258 | | | | 0.37 | % | | $ | 6,643,661 | | | | 0.23 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| Average
Amount | | Average
Rate Paid | | Average
Amount | | Average
Rate Paid |
| (Dollars in thousands) |
| Non-interest-bearing transaction accounts | $ | 4,017,659 | | | — | % | | $ | 5,043,219 | | | — | % |
| Interest-bearing transaction accounts | 9,886,083 | | | 2.98 | | | 10,225,694 | | | 2.08 | |
| Savings deposits | 1,152,827 | | | 0.85 | | | 1,353,635 | | | 0.76 | |
| Time deposits: | | | | | | | |
| $100,000 or more | 1,106,311 | | | 4.23 | | | 661,623 | | | 1.81 | |
| Other time deposits | 578,882 | | | 3.69 | | | 410,471 | | | 1.34 | |
| Total | $ | 16,741,762 | | | 2.22 | % | | $ | 17,694,642 | | | 1.36 | % |
Securities Sold Under Agreements to Repurchase
We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase increased
$28.2$34.0 million, or
23.3%23.9%, from
$121.3$142.1 million as of December 31,
20162023 to
$149.5$176.1 million as of
September 30, 2017.March 31, 2024.
FHLB
and Other Borrowed Funds
Our
The Company’s FHLB borrowed funds,
which are secured by our loan portfolio, were
$1.04 billion and $1.31 billion$600.0 million at
September 30, 2017March 31, 2024 and December 31,
2016, respectively. During2023. At March 31, 2024 and December 31, 2023, the
third quarter of 2017, approximately $300.2 million of FHLB advances matured. Due to the issuance of the $300 million of subordinated notes during the second quarter of 2017, we made the strategic decision to not renew all of the matured advances. At September 30, 2017, $245.0 million and $799.3entire $600.0 million of the outstanding
balancebalances were
issuedclassified as
short-term and long-term
advances. The FHLB advances
respectively. At December 31, 2016, $40.0 million and $1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively. Our remaining FHLB borrowing capacity was $1.23 billion and $718.2 million as of September 30, 2017 and December 31, 2016, respectively. Maturities of borrowings as of September 30, 2017 include: 2017 – $75.3 million; 2018 – $409.5 million; 2019 – $143.1 million; 2020 – $146.4 million; 2021 – zero; after 2021 – $25.0 million.mature from 2025 to 2037 with fixed interest rates ranging from 3.37% to 4.84%. Expected maturities
willcould differ from contractual maturities because FHLB may have the right to call, or
HBIthe Company may have the right to prepay certain obligations.
Subordinated Debentures
Subordinated debentures, which consist
Other borrowed funds were
$367.8$701.1 million as of
September 30, 2017. AsMarch 31, 2024 and were classified as short-term advances. The Company had $701.3 million in other borrowed funds as of December 31,
2016, subordinated debentures consisted only2023. As of
$60.8both March 31, 2024 and December 31, 2023, the Company had drawn $700.0 million
of guaranteed payments on trust preferred securities.The trust preferred securities aretax-advantaged issues that qualify for Tier 1 capital treatment subject to certain limitations. Distributions on these securities are included in interest expense. Each offrom the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in our subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interestsBank Term Funding Program in the assetsordinary course of business, and these advances mature on January 16, 2025.
Additionally, the respective trustsCompany had $1.59 billion and $1.33 billion at March 31, 2024 and December 31, 2023, in letters of credit under a FHLB blanket borrowing line of credit, which are subjectused to mandatory redemption upon paymentcollateralize public deposits at March 31, 2024 and December 31, 2023, respectively.
Subordinated Debentures
Subordinated debentures were $439.7 million and $439.8 million as of
the subordinated debentures held by the trust. We wholly own the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon our making payment on the related subordinated debentures. Our obligations under the subordinated securitiesMarch 31, 2024 and
other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by us of each respective trust’s obligations under the trust securities issued by each respective trust.December 31, 2023, respectively.
On April 3, 2017,1, 2022, the Company completed an underwritten public offering of $300acquired $140.0 million in aggregate principal amount of its 5.625%5.500% Fixed-to-Floating Rate Subordinated Notes due 20272030 (the “Notes”“2030 Notes”). from Happy, and the Company recorded approximately $144.4 million which included fair value adjustments. The Notes were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The2030 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 15, 2027. 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,
qualifyin 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
purposes.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 excludingJanuary 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.
The 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
was $2.21increased $20.3 million to $3.81 billion
at September 30, 2017as of March 31, 2024, compared to
$1.33$3.79 billion
atas of December 31,
2016.2023. The
$20.3 million increase in stockholders’ equity is primarily associated with the
$77.5$100.1 million
and $742.3 million of common stock issued toin net income for the
GHI and Stonegate shareholders, respectively, plus the $70.5 million increase in retained earnings combined with $3.5 million of comprehensive income and $5.0 million of share-based compensationthree months ended March 31, 2024, partially offset by the
repurchase of $19.5$36.2 million of
our commonshareholder dividends paid, the $22.4 million in other comprehensive loss and stock
during the first nine monthsrepurchases of
2017. The annualized improvement$24.0 million in
stockholders’ equity for the first nine months of 2017 excluding the $819.8 million of common stock issued to both the GHI and Stonegate shareholders was 6.0%.2024. As of
September 30, 2017March 31, 2024 and December 31,
2016,2023, our equity to asset ratio was
15.48%16.69% and
13.53%16.73%, respectively. Book value per
common share was
$12.71 at September 30, 2017$18.98 as of March 31, 2024, compared to
$9.45 at$18.81 as of December 31,
2016. The acquisition of Stonegate added $2.45 per share to book value per common share as of September 30, 2017.2023, a 3.6% annualized increase.
Common Stock Cash Dividends. We declared cash dividends on our common stock of $0.11 per share and $0.09$0.18 per share for both the three-month periodsthree months ended September 30, 2017March 31, 2024 and 2016, respectively. 2023.The common stock dividend payout ratio for the three months ended September 30, 2017March 31, 2024 and 20162023 was 106.03%36.2% and 28.97%35.6%, respectively. The common stock dividend payout ratio for the nine months ended September 30, 2017 and 2016 was 36.93% and 27.58%, respectively. For the fourth quarter of 2017,On April 18, 2024, the Board of Directors declared a regular $0.11$0.18 per share quarterly cash dividend payable December 6, 2017,June 5, 2024, to shareholders of record NovemberMay 15, 2017.2024.
Stock Repurchase Program.On January 20, 2017, our Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of our common stock under our previously approved stock repurchase program, which brought the total amount of authorized shares to repurchase to 9,752,000 shares. During the first ninethree months of 2017, we utilized a portion of this stock repurchase program. We2024, the Company repurchased a total of 800,0001,025,934 shares with a weighted-average stock price of $24.44$23.38 per share during the first nine months of 2017.share. Shares repurchased to date under the program as of March 31, 2024 since its inception total 4,467,06424,011,649 shares. The remaining balance available for repurchase is 5,284,93615,740,351 shares at September 30, 2017.March 31, 2024.
Liquidity and Capital Adequacy Requirements
Risk-Based Capital. We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk weightings and other factors. In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. 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.
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, 2017March 31, 2024 and December 31,
2016,2023, we met all regulatory capital adequacy requirements to which we were subject.
On
April 3, 2017,January 18, 2022, the Company completed an underwritten public offering of
$300 millionthe 2032 Notes in aggregate principal amount of
its Notes which were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0$300.0 million. The
2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on
April 15, 2027.January 30, 2032. The
Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes,
qualifyin whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company’s option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company’s ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory
purposes.Duecapital 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 timingimpact 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 closingday-one impact of our acquisitionadopting CECL and 25% of Stonegate, our reported leverage ratio is artificially inflated as of September 30, 2017 since Stonegate’s assets are includedthe cumulative change in the average asset balancereported allowance for only four days duringcredit losses since adopting CECL. The Company has elected to adopt the quarter. Hadinterim final rule, which is reflected in the acquisition closed at the beginningrisk-based capital ratios presented below.
Table 17 presents our risk-based capital ratios on a consolidated basis as of
September 30, 2017March 31, 2024 and December 31,
2016.2023.
Table 17: Risk-Based Capital
| | | | | | | | |
| | | As of
September 30,
2017 | | | As of
December 31,
2016 | |
| | | (Dollars in thousands) | |
Tier 1 capital | | | | | | | | |
Stockholders’ equity | | $ | 2,206,716 | | | $ | 1,327,490 | |
Goodwill and core deposit intangibles, net | | | (969,258 | ) | | | (388,336 | ) |
Unrealized (gain) loss onavailable-for-sale securities | | | (3,889 | ) | | | (400 | ) |
Deferred tax assets | | | — | | | | — | |
| | | | | | | | |
Total common equity Tier 1 capital | | | 1,233,569 | | | | 938,754 | |
Qualifying trust preferred securities | | | 68,461 | | | | 59,000 | |
| | | | | | | | |
Total Tier 1 capital | | | 1,302,030 | | | | 997,754 | |
| | | | | | | | |
Tier 2 capital | | | | | | | | |
Qualifying subordinated notes | | | 297,172 | | | | — | |
Qualifying allowance for loan losses | | | 111,620 | | | | 80,002 | |
| | | | | | | | |
Total Tier 2 capital | | | 408,792 | | | | 80,002 | |
| | | | | | | | |
Total risk-based capital | | $ | 1,710,822 | | | $ | 1,077,756 | |
| | | | | | | | |
Average total assets for leverage ratio | | $ | 9,884,301 | | | $ | 9,388,812 | |
| | | | | | | | |
Risk weighted assets | | $ | 11,361,791 | | | $ | 8,308,468 | |
| | | | | | | | |
Ratios at end of period | | | | | | | | |
Common equity Tier 1 capital | | | 10.86 | % | | | 11.30 | % |
Leverage ratio | | | 13.17 | | | | 10.63 | |
Tier 1 risk-based capital | | | 11.46 | | | | 12.01 | |
Total risk-based capital | | | 15.06 | | | | 12.97 | |
Minimum guidelines – Basel IIIphase-in schedule | | | | | | | | |
Common equity Tier 1 capital | | | 5.75 | % | | | 5.125 | % |
Leverage ratio | | | 4.00 | | | | 4.000 | |
Tier 1 risk-based capital | | | 7.25 | | | | 6.625 | |
Total risk-based capital | | | 9.25 | | | | 8.625 | |
Minimum guidelines – Basel III fullyphased-in | | | | | | | | |
Common equity Tier 1 capital | | | 7.00 | % | | | 7.00 | % |
Leverage ratio | | | 4.00 | | | | 4.00 | |
Tier 1 risk-based capital | | | 8.50 | | | | 8.50 | |
Total risk-based capital | | | 10.50 | | | | 10.50 | |
Well-capitalized guidelines | | | | | | | | |
Common equity Tier 1 capital | | | 6.50 | % | | | 6.50 | % |
Leverage ratio | | | 5.00 | | | | 5.00 | |
Tier 1 risk-based capital | | | 8.00 | | | | 8.00 | |
Total risk-based capital | | | 10.00 | | | | 10.00 | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (Dollars in thousands) |
| Tier 1 capital | | | |
| Stockholders’ equity | $ | 3,811,401 | | | $ | 3,791,075 | |
| ASC 326 transitional period adjustment | 8,122 | | | 16,246 | |
| Goodwill and core deposit intangibles, net | (1,444,433) | | | (1,446,573) | |
| Unrealized loss on available-for-sale securities | 271,425 | | | 249,075 | |
| Total common equity Tier 1 capital | 2,646,515 | | | 2,609,823 | |
| | | |
| Total Tier 1 capital | 2,646,515 | | | 2,609,823 | |
| Tier 2 capital | | | |
| Allowance for credit losses | 290,294 | | | 288,234 | |
| ASC 326 transitional period adjustment | (8,122) | | | (16,246) | |
| Disallowed allowance for credit losses (limited to 1.25% of risk weighted assets) | (49,802) | | | (40,509) | |
| Qualifying allowance for credit losses | 232,370 | | | 231,479 | |
| Qualifying subordinated notes | 439,688 | | | 439,834 | |
| Total Tier 2 capital | 672,058 | | | 671,313 | |
| Total risk-based capital | $ | 3,318,573 | | | $ | 3,281,136 | |
| Average total assets for leverage ratio | $ | 21,515,408 | | | $ | 20,981,774 | |
| Risk weighted assets | $ | 18,492,561 | | | $ | 18,440,964 | |
| Ratios at end of period | | | |
| Common equity Tier 1 capital | 14.31 | % | | 14.15 | % |
| Leverage ratio | 12.30 | | | 12.44 | |
| Tier 1 risk-based capital | 14.31 | | | 14.15 | |
| Total risk-based capital | 17.95 | | | 17.79 | |
| 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”,“well-capitalized,” we, as well as our banking subsidiary, must maintain minimum
common equity Tier 1CET1 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,
duethis report contains financial information determined by methods other than in accordance with GAAP, including earnings, as adjusted; diluted earnings per common share, as adjusted; tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity, excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to
the application of purchase accounting from our significant number of historical acquisitions (especially Liberty and Stonegate), we believe certainnon-GAAP measures and ratios that exclude the impact of these items are useful to the investors and users of our financial statements to evaluate our performance, including net interest margintangible assets; and efficiency
ratio.Becauseratio, as adjusted.
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.
In Tables 18 through 20 below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to thenon-GAAP financial measures and ratios, or a reconciliation of thenon-GAAP calculation of the financial measure for the periods indicated:Table 18: Average Yield on Loans
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Interest income on loans receivable – FTE | | $ | 113,239 | | | $ | 103,135 | | | $ | 332,072 | | | $ | 300,839 | |
Purchase accounting accretion | | | 7,068 | | | | 11,576 | | | | 23,019 | | | | 32,590 | |
| | | | | | | | | | | | | | | | |
Non-GAAP interest income on loans receivable – FTE | | $ | 106,171 | | | $ | 91,559 | | | $ | 309,053 | | | $ | 268,249 | |
| | | | | | | | | | | | | | | | |
Average loans | | $ | 7,938,716 | | | $ | 7,027,634 | | | $ | 7,785,925 | | | $ | 6,909,240 | |
Average purchase accounting loan discounts(1) | | | 97,978 | | | | 115,766 | | | | 97,158 | | | | 131,506 | |
| | | | | | | | | | | | | | | | |
Average loans(non-GAAP) | | $ | 8,036,694 | | | $ | 7,143,400 | | | $ | 7,883,083 | | | $ | 7,040,746 | |
| | | | | | | | | | | | | | | | |
Average yield on loans (reported) | | | 5.66 | % | | | 5.84 | % | | | 5.70 | % | | | 5.82 | % |
Average contractual yield on loans(non-GAAP) | | | 5.24 | | | | 5.10 | | | | 5.24 | | | | 5.09 | |
(1) | Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively. |
Table 19: Average Cost of Deposits
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Interest expense on interest-bearing deposits | | $ | 8,535 | | | $ | 4,040 | | | $ | 20,831 | | | $ | 11,528 | |
Amortization of time deposit (premiums)/discounts, net | | | 106 | | | | 361 | | | | 300 | | | | 1,094 | |
| | | | | | | | | | | | | | | | |
Non-GAAP interest expense on interest-bearing deposits | | $ | 8,641 | | | $ | 4,401 | | | $ | 21,131 | | | $ | 12,622 | |
| | | | | | | | | | | | | | | | |
Average interest-bearing deposits | | $ | 5,957,447 | | | $ | 5,082,608 | | | $ | 5,731,415 | | | $ | 5,047,058 | |
Average unamortized CD (premium)/discount, net | | | (733 | ) | | | (732 | ) | | | (721 | ) | | | (1,096 | ) |
| | | | | | | | | | | | | | | | |
Average interest-bearing deposits(non-GAAP) | | $ | 5,956,714 | | | $ | 5,081,876 | | | $ | 5,730,694 | | | $ | 5,045,962 | |
| | | | | | | | | | | | | | | | |
Average cost of deposits (reported) | | | 0.57 | % | | | 0.32 | % | | | 0.49 | % | | | 0.31 | % |
Average contractual cost of deposits(non-GAAP) | | | 0.58 | | | | 0.34 | | | | 0.49 | | | | 0.33 | |
Table 20: Net Interest Margin
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Net interest income – FTE | | $ | 108,615 | | | $ | 105,522 | | | $ | 324,809 | | | $ | 308,567 | |
Total purchase accounting accretion | | | 7,174 | | | | 11,937 | | | | 23,319 | | | | 33,684 | |
| | | | | | | | | | | | | | | | |
Non-GAAP net interest income – FTE | | $ | 101,441 | | | $ | 93,585 | | | $ | 301,490 | | | $ | 274,883 | |
| | | | | | | | | | | | | | | | |
Average interest-earning assets | | $ | 9,794,999 | | | $ | 8,646,026 | | | $ | 9,584,607 | | | $ | 8,530,362 | |
Average purchase accounting loan discounts(1) | | | 97,978 | | | | 115,766 | | | | 97,158 | | | | 131,506 | |
| | | | | | | | | | | | | | | | |
Average interest-earning assets(non-GAAP) | | $ | 9,892,977 | | | $ | 8,761,792 | | | $ | 9,681,765 | | | $ | 8,661,868 | |
| | | | | | | | | | | | | | | | |
Net interest margin (reported) | | | 4.40 | % | | | 4.86 | % | | | 4.53 | % | | | 4.83 | % |
Net interest margin(non-GAAP) | | | 4.07 | | | | 4.25 | | | | 4.16 | | | | 4.24 | |
(1) | Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively. |
The tables below present
non-GAAP reconciliations of earnings,
excludingnon-fundamental itemsas adjusted, and diluted earnings per share,
excludingnon-fundamental itemsas adjusted, as well as the
non-GAAP computations of tangible book value per
share,share; return on average assets, excluding intangible
amortization,amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity excluding intangible
amortization,amortization; return on average tangible equity, as adjusted; tangible equity to tangible
assetsassets; and
the core efficiency
ratio.ratio, as adjusted. The
non-fundamental items used in these calculations are included in financial results presented in accordance with
generally accepted accounting principles (“GAAP”).GAAP.
Earnings,
excludingnon-fundamental items is aas adjusted, and diluted earnings per common share, as adjusted, are meaningful
non-GAAP financial
measuremeasures for management, as
it excludesnon-fundamentalthey exclude certain items such as merger expenses and/or
certain gains and losses. Management believes the exclusion of these
non-fundamental items in expressing earnings provides a meaningful foundation for
period-to-period and
company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our
fundamental 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
non-fundamental items to be relevant to ongoing financial performance.
In Table
2118 below, we have provided a reconciliation of the
non-GAAP calculation of the financial measure for the periods indicated.
Table
21:18: Earnings,
ExcludingNon-Fundamental Items | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
GAAP net income available to common shareholders (A) | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
Non-fundamental items: | | | | | | | | | | | | | | | | |
Gain on acquisitions | | | — | | | | — | | | | (3,807 | ) | | | — | |
Merger expenses | | | 18,227 | | | | — | | | | 25,743 | | | | — | |
FDIC loss sharebuy-out | | | — | | | | 3,849 | | | | — | | | | 3,849 | |
Hurricane expenses(1) | | | 33,445 | | | | — | | | | 33,445 | | | | — | |
| | | | | | | | | | | | | | | | |
Totalnon-fundamental items | | | 51,672 | | | | 3,849 | | | | 55,381 | | | | 3,849 | |
Tax-effect ofnon-fundamental items(2) | | | 20,045 | | | | 1,510 | | | | 22,626 | | | | 1,510 | |
| | | | | | | | | | | | | | | | |
Non-fundamental itemsafter-tax (B) | | | 31,627 | | | | 2,339 | | | | 32,755 | | | | 2,339 | |
| | | | | | | | | | | | | | | | |
Earnings excludingnon-fundamental items (C) | | $ | 46,448 | | | $ | 45,959 | | | $ | 144,529 | | | $ | 130,895 | |
| | | | | | | | | | | | | | | | |
Average diluted shares outstanding (D) | | | 144,987 | | | | 140,703 | | | | 143,839 | | | | 140,685 | |
GAAP diluted earnings per share: A/D | | $ | 0.10 | | | $ | 0.31 | | | $ | 0.78 | | | $ | 0.91 | |
Non-fundamental itemsafter-tax: B/D | | | 0.22 | | | | 0.02 | | | | 0.22 | | | | 0.02 | |
| | | | | | | | | | | | | | | | |
Diluted earnings per common share excluding non- fundamental items: C/D | | $ | 0.32 | | | $ | 0.33 | | | $ | 1.00 | | | $ | 0.93 | |
| | | | | | | | | | | | | | | | |
(1) | Hurricane expenses includes $32,889 of provision for loan losses and $556 of damage expense related to Hurricane Irma. |
(2) | Effective tax rate of 39.225%, adjusted fornon-taxable gain on acquisition andnon-deductible merger-related costs. |
As Adjusted
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| GAAP net income available to common shareholders (A) | $ | 100,109 | | | $ | 102,962 | | | | | |
| Pre-tax adjustments: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Fair value adjustment for marketable securities | (1,003) | | | 11,408 | | | | | |
| | | | | | | |
| | | | | | | |
| Recoveries on historic losses | — | | | (3,461) | | | | | |
| | | | | | | |
| BOLI death benefits | (162) | | | — | | | | | |
| Total pre-tax adjustments | (1,165) | | | 7,947 | | | | | |
Tax-effect of adjustments(1) | (251) | | | 1,961 | | | | | |
| Total adjustments after-tax (B) | (914) | | | 5,986 | | | | | |
| Earnings, as adjusted (C) | $ | 99,195 | | | $ | 108,948 | | | | | |
| Average diluted shares outstanding (D) | 201,390 | | | 203,625 | | | | | |
| GAAP diluted earnings per share: A/D | $ | 0.50 | | | $ | 0.51 | | | | | |
| Adjustments after-tax: B/D | (0.01) | | | 0.03 | | | | | |
| Diluted earnings per common share excluding adjustments: C/D | $ | 0.49 | | | $ | 0.54 | | | | | |
(1) Blended statutory rate of 24.989% for 2024 and 24.6735% for 2023.
We had
$980.1 million, $396.3 million,$1.44 billion, $1.45 billion, and
$397.1 million$1.45 billion in total goodwill
and core deposit intangibles
and other intangible assets as of
September 30, 2017,March 31, 2024, December 31,
20162023 and
September 30, 2016,March 31, 2023, 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
calculationcalculations of
diluted earningsbook value per share,
tangible book value, return on average assets, return on average equity, and equity to assets, are presented in Tables
19 through 22,
through 25, respectively.
Table
22:19: Tangible Book Value Per Share
| | | | | | | | |
| | | As of
September 30, 2017 | | | As of
December 31, 2016 | |
| | | (In thousands, except per share data) | |
Book value per share: A/B | | $ | 12.71 | | | $ | 9.45 | |
Tangible book value per share:(A-C-D)/B | | | 7.06 | | | | 6.63 | |
(A) Total equity | | $ | 2,206,716 | | | $ | 1,327,490 | |
(B) Shares outstanding | | | 173,666 | | | | 140,472 | |
(C) Goodwill | | $ | 929,129 | | | $ | 377,983 | |
(D) Core deposit and other intangibles | | | 50,982 | | | | 18,311 | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (In thousands, except per share data) |
| Book value per share: A/B | $ | 18.98 | | | $ | 18.81 | |
| Tangible book value per share: (A-C-D)/B | 11.79 | | | 11.63 | |
| (A) Total equity | $ | 3,811,401 | | | $ | 3,791,075 | |
| (B) Shares outstanding | 200,797 | | | 201,526 | |
| (C) Goodwill | 1,398,253 | | | 1,398,253 | |
| (D) Core deposit intangibles | 46,630 | | | 48,770 | |
Table
23:20: Return on Average Assets,
Excluding Intangible Amortization | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Return on average assets: A/D | | | 0.54 | % | | | 1.81 | % | | | 1.41 | % | | | 1.81 | % |
Return on average assets excluding intangible amortization:B/(D-E) | | | 0.59 | | | | 1.91 | | | | 1.49 | | | | 1.91 | |
Return on average assets excluding gain on acquisitions, merger expenses, FDIC loss sharebuy-out expense and hurricane expenses: (A+C)/D | | | 1.70 | | | | 1.90 | | | | 1.82 | | | | 1.84 | |
(A) Net income | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
Intangible amortizationafter-tax | | | 551 | | | | 463 | | | | 1,566 | | | | 1,440 | |
| | | | | | | | | | | | | | | | |
(B) Earnings excluding intangible amortization | | $ | 15,372 | | | $ | 44,083 | | | $ | 113,340 | | | $ | 129,996 | |
| | | | | | | | | | | | | | | | |
(C)Non-fundamental itemsafter-tax | | $ | 31,627 | | | $ | 2,339 | | | $ | 32,755 | | | $ | 2,339 | |
(D) Average assets | | | 10,853,559 | | | | 9,602,363 | | | | 10,617,917 | | | | 9,498,915 | |
(E) Average goodwill, core deposits and other intangible assets | | | 462,799 | | | | 397,429 | | | | 440,465 | | | | 398,195 | |
As Adjusted
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| Return on average assets: A/D | 1.78 | % | | 1.84 | % | | | | |
| Return on average assets, as adjusted: (A+C)/D | 1.76 | | | 1.95 | | | | | |
| Return on average assets excluding intangible amortization: B/(D-E) | 1.93 | | | 2.00 | | | | | |
| (A) Net income | $ | 100,109 | | | $ | 102,962 | | | | | |
| Intangible amortization after-tax | 1,605 | | | 1,866 | | | | | |
| (B) Earnings excluding intangible amortization | $ | 101,714 | | | $ | 104,828 | | | | | |
| (C) Adjustments after-tax | $ | (914) | | | $ | 5,986 | | | | | |
| (D) Average assets | 22,683,259 | | | 22,695,855 | | | | | |
| (E) Average goodwill, core deposits and other intangible assets | 1,445,902 | | | 1,455,423 | | | | | |
Table 21: Return on Average
Tangible Equity,
Excluding Intangible Amortization | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Return on average equity: A/D | | | 3.88 | % | | | 13.62 | % | | | 10.33 | % | | | 13.83 | % |
Return on average tangible equity excluding intangible amortization:B/(D-E) | | | 5.80 | | | | 20.01 | | | | 15.06 | | | | 20.59 | |
Return on average equity excluding gain on acquisitions, merger expenses, FDIC loss sharebuy-out expense and hurricane expenses: (A+C)/D | | | 12.17 | | | | 14.35 | | | | 13.36 | | | | 14.08 | |
(A) Net income | | $ | 14,821 | | | $ | 43,620 | | | $ | 111,774 | | | $ | 128,556 | |
(B) Earnings excluding intangible amortization | | | 15,372 | | | | 44,083 | | | | 113,340 | | | | 129,996 | |
(C)Non-fundamental itemsafter-tax | | | 31,627 | | | | 2,339 | | | | 32,755 | | | | 2,339 | |
(D) Average equity | | | 1,513,829 | | | | 1,274,077 | | | | 1,446,740 | | | | 1,241,594 | |
(E) Average goodwill, core deposits and other intangible assets | | | 462,799 | | | | 397,429 | | | | 440,465 | | | | 398,195 | |
As Adjusted
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| Return on average equity: A/D | 10.64 | % | | 11.70 | % | | | | |
| Return on average common equity, as adjusted: (A+C)/D | 10.54 | | | 12.38 | | | | | |
| Return on average tangible common equity: A/(D-E) | 17.22 | | | 19.75 | | | | | |
| Return on average tangible equity excluding intangible amortization: B/(D-E) | 17.50 | | | 20.11 | | | | | |
| Return on average tangible common equity, as adjusted: (A+C)/(D-E) | 17.07 | | | 20.90 | | | | | |
| (A) Net income | $ | 100,109 | | | $ | 102,962 | | | | | |
| (B) Earnings excluding intangible amortization | 101,714 | | | 104,828 | | | | | |
| (C) Adjustments after-tax | (914) | | | 5,986 | | | | | |
| (D) Average equity | 3,783,652 | | | 3,569,592 | | | | | |
| (E) Average goodwill, core deposits and other intangible assets | 1,445,902 | | | 1,455,423 | | | | | |
Table
25:22: Tangible Equity to Tangible Assets
| | | | | | | | |
| | | As of
September 30,
2017 | | | As of
December 31,
2016 | |
| | | (Dollars in thousands) | |
Equity to assets: B/A | | | 15.48 | % | | | 13.53 | % |
Tangible equity to tangible assets:(B-C-D)/(A-C-D) | | | 9.24 | | | | 9.89 | |
(A) Total assets | | $ | 14,255,967 | | | $ | 9,808,465 | |
(B) Total equity | | | 2,206,716 | | | | 1,327,490 | |
(C) Goodwill | | | 929,129 | | | | 377,983 | |
(D) Core deposit and other intangibles | | | 50,982 | | | | 18,311 | |
| | | | | | | | | | | |
| As of March 31, 2024 | | As of December 31, 2023 |
| (Dollars in thousands) |
| Equity to assets: B/A | 16.69 | % | | 16.73 | % |
| Tangible equity to tangible assets: (B-C-D)/(A-C-D) | 11.06 | | | 11.05 | |
| (A) Total assets | $ | 22,835,721 | | | $ | 22,656,658 | |
| (B) Total equity | 3,811,401 | | | 3,791,075 | |
| (C) Goodwill | 1,398,253 | | | 1,398,253 | |
| (D) Core deposit intangibles | 46,630 | | | 48,770 | |
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
core efficiency ratio,
as adjusted, is a meaningful
non-GAAP measure for management, as it excludes
non-core 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
non-core items such as merger expenses and/or
certain gains,
losses and
losses.other non-interest income and expenses. In Table
2623 below, we have provided a reconciliation of the
non-GAAP calculation of the financial measure for the periods indicated.
Table
26: Core23: Efficiency Ratio,
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (Dollars in thousands) | |
Net interest income (A) | | $ | 106,769 | | | $ | 103,653 | | | $ | 318,936 | | | $ | 302,751 | |
Non-interest income (B) | | | 21,457 | | | | 22,014 | | | | 72,344 | | | | 63,223 | |
Non-interest expense (C) | | | 70,846 | | | | 51,026 | | | | 176,990 | | | | 144,261 | |
FTE Adjustment (D) | | | 1,846 | | | | 1,869 | | | | 5,873 | | | | 5,816 | |
Amortization of intangibles (E) | | | 906 | | | | 762 | | | | 2,576 | | | | 2,370 | |
Non-core items: | | | | | | | | | | | | | | | | |
Non-interest income: | | | | | | | | | | | | | | | | |
Gain on acquisitions | | $ | — | | | $ | — | | | $ | 3,807 | | | $ | — | |
Gain (loss) on OREO, net | | | 335 | | | | 132 | | | | 849 | | | | (713 | ) |
Gain (loss) on SBA loans | | | 163 | | | | 364 | | | | 738 | | | | 443 | |
Gain (loss) on branches, equipment and other assets, net | | | (1,337 | ) | | | (86 | ) | | | (962 | ) | | | 701 | |
Gain (loss) on securities, net | | | 136 | | | | — | | | | 939 | | | | 25 | |
Other income(1) | | | — | | | | — | | | | — | | | | 925 | |
| | | | | | | | | | | | | | | | |
Totalnon-corenon-interest income (F) | | $ | (703 | ) | | $ | 410 | | | $ | 5,371 | | | $ | 1,381 | |
| | | | | | | | | | | | | | | | |
Non-interest expense: | | | | | | | | | | | | | | | | |
Merger expenses | | $ | 18,227 | | | $ | — | | | $ | 25,743 | | | $ | — | |
FDIC loss sharebuy-out | | | — | | | | 3,849 | | | | — | | | | 3,849 | |
Hurricane damage expense | | | 556 | | | | — | | | | 556 | | | | — | |
Other expense(2) | | | — | | | | — | | | | 47 | | | | 1,914 | |
| | | | | | | | | | | | | | | | |
Totalnon-corenon-interest expense (G) | | $ | 18,783 | | | $ | 3,849 | | | $ | 26,346 | | | $ | 5,763 | |
| | | | | | | | | | | | | | | | |
Efficiency ratio (reported):((C-E)/(A+B+D)) | | | 53.77 | % | | | 39.41 | % | | | 43.92 | % | | | 38.16 | % |
Core efficiency ratio(non-GAAP):((C-E-G)/(A+B+D-F)) | | | 39.12 | | | | 36.51 | | | | 37.79 | | | | 36.75 | |
(3) | Amount includes recoveries on historical losses. |
(4) | Amount includes vacant properties write-downs. |
As Adjusted
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2024 | | 2023 | | | | |
| (Dollars in thousands) | | | | |
| Net interest income (A) | $ | 204,590 | | | $ | 214,595 | | | | | |
| Non-interest income (B) | 41,799 | | | 34,164 | | | | | |
| Non-interest expense (C) | 111,496 | | | 114,644 | | | | | |
| FTE Adjustment (D) | 892 | | | 1,628 | | | | | |
| Amortization of intangibles (E) | 2,140 | | | 2,477 | | | | | |
| Adjustments: | | | | | | | |
| Non-interest income: | | | | | | | |
| Fair value adjustment for marketable securities | $ | 1,003 | | | $ | (11,408) | | | | | |
| | | | | | | |
| Gain on OREO, net | 17 | | | — | | | | | |
| Gain (loss) on branches, equipment and other assets, net | (8) | | | 7 | | | | | |
| BOLI death benefits | 162 | | | — | | | | | |
| Recoveries on historic losses | — | | | 3,461 | | | | | |
| Total non-interest income adjustments (F) | $ | 1,174 | | | $ | (7,940) | | | | | |
| Non-interest expense: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total non-interest expense adjustments (G) | $ | — | | | $ | — | | | | | |
| Efficiency ratio (reported): ((C-E)/(A+B+D)) | 44.22 | % | | 44.80 | % | | | | |
| Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F)) | 44.43 | | | 43.42 | | | | | |
Recently Issued Accounting Pronouncements
See Note 21
into the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.
Item 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 3:QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Liquidity and Market Risk Management
Liquidity Management. Liquidity refers
At March 31, 2024, we held $2.67 billion in assets that could be used for liquidity purposes, which we refer to
the ability or the financial flexibility to manage future cash flows to meet the needsas net available internal liquidity. This balance consisted of
depositors and borrowers and fund operations. Maintaining appropriate levels of liquidity allows us to have sufficient funds available for reserve requirements, customer demand for loans, withdrawal of deposit balances and maturities of deposits and other liabilities. Our primary source of liquidity at our holding company is dividends paid by our bank subsidiary. Applicable statutes and regulations impose restrictions on the amount of dividends that may be declared by our bank subsidiary. Further, any dividend payments are subject to the continuing ability of the bank subsidiary to maintain compliance with minimum federal regulatory capital requirements and to retain its characterization under federal regulations as a “well-capitalized” institution.Our bank subsidiary has potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers. Many of these obligations and commitments to fund future borrowings to our loan customers are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position.
Liquidity needs can be met from either assets or liabilities. On the asset side, our primary sources of liquidity include cash and due from banks, federal funds sold,available-for-sale$1.58 billion in unpledged investment securities and scheduled repayments and maturities of loans. We maintain adequate levels ofwhich could be used for additional secured borrowing capacity, $924.1 million in cash and cash equivalents to meet ourday-to-day needs. As of September 30, 2017, our cash and cash equivalents were $552.3 million, or 3.9% of total assets, compared to $216.6 million, or 2.2% of total assets, as of December 31, 2016. Ouravailable-for-sale investment securities and federal funds sold were $1.58 billion and $1.07 billion as of September 30, 2017 and December 31, 2016, respectively.
As of September 30, 2017, our investment portfolio was comprised of approximately 73.2% or $1.32 billion of securities which mature in less than five years. As of September 30, 2017 and December 31, 2016, $1.13 billion and $1.07 billion, respectively, of securities were pledged as collateral for various public fund deposits and securities sold under agreements to repurchase.
On the liability side, our principal sources of liquidity are deposits, borrowed funds, and access to capital markets. Customer deposits are our largest sources of funds. As of September 30, 2017, our total deposits were $10.45 billion, or 73.3% of total assets, compared to $6.94 billion, or 70.8% of total assets, as of December 31, 2016. We attract our deposits primarily from individuals, business, and municipalities located in our market areas.
In the event that additional short-term liquidity is needed to temporarily satisfy our liquidity needs, we have established and currently maintain lines of crediton deposit with the Federal Reserve Bank (“Federal Reserve”("FRB") and Bankers’$160.7 million in other liquid cash accounts.
Consistent with our practice of maintaining access to significant external liquidity, we had $3.11 billion in net available sources of borrowed funds, which we refer to as net available external liquidity, as of March 31, 2024. This included $4.75 billion in total borrowing capacity with the Federal Home Loan Bank
to provide short-term borrowings("FHLB"), of which $1.84 billion has been drawn upon in the
formordinary course of
federal funds purchases. In addition, we maintain lines of credit with two other financial institutions.As of September 30, 2017 and December 31, 2016, we could have borrowed up to $105.9 million and $104.6 million, respectively, on a secured basis from the Federal Reserve, up to $50.0 million from Bankers’ Bank on an unsecured basis, and up to $45.0 millionbusiness, resulting in the aggregate from other financial institutions on an unsecured basis. The unsecured lines may be terminated by the respective institutions at any time.
The lines of credit we maintain$2.91 billion in net available liquidity with the FHLB can provide usas of March 31, 2024. The $1.84 billion consisted of $600.0 million in outstanding FHLB advances and $1.24 billion used for pledging purposes. We also had access to approximately $798.3 million in liquidity with both short-termthe FRB as of March 31, 2024, of which $700.0 million has been drawn upon in the ordinary course of business, resulting in $98.3 million in net available liquidity with the FRB as of March 31, 2024. As of March 31, 2024, the Company also had access to $55.0 million from First National Bankers’ Bank ("FNBB"), and long-term forms$45.0 million from other various external sources.
Overall, we had $5.77 billion net available liquidity as of March 31, 2024, which consisted of $2.67 billion of net available internal liquidity and $3.11 billion in net available external liquidity. Details on a secured basis. FHLB borrowed funds were $1.04 billionour available liquidity as of March 31, 2024 is available below.
| | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | Total Available | | Amount Used | | Net Availability |
| Internal Sources | | | | | | |
| Unpledged investment securities (market value) | | $ | 1,581,821 | | | $ | — | | | $ | 1,581,821 | |
| Cash at FRB | | 924,148 | | | — | | | 924,148 | |
| Other liquid cash accounts | | 160,738 | | | — | | | 160,738 | |
| Total Internal Liquidity | | 2,666,707 | | | — | | | 2,666,707 | |
| External Sources | | | | | | |
| FHLB | | 4,746,613 | | | 1,837,367 | | | 2,909,246 | |
| FRB Discount Window | | 98,307 | | | — | | | 98,307 | |
| BTFP (par value) | | 700,000 | | | 700,000 | | | — | |
| FNBB | | 55,000 | | | — | | | 55,000 | |
| Other | | 45,000 | | | — | | | 45,000 | |
| Total External Liquidity | | 5,644,920 | | | 2,537,367 | | | 3,107,553 | |
| Total Available Liquidity | | $ | 8,311,627 | | | $ | 2,537,367 | | | $ | 5,774,260 | |
We have continued to limit our exposure to uninsured deposits and
$1.31 billion at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, $245.0 million and $799.3 millionhave been actively monitoring this exposure in light of the
outstanding balancecurrent banking environment. As of March 31, 2024, we held approximately $8.42 billion in uninsured deposits of which $602.4 million were
issued as short-termintercompany subsidiary deposit balances and
long-term advances, respectively. At December 31, 2016, $40.0 million$3.03 billion were collateralized deposits, for a net position of $4.79 billion. This represented approximately 28.4% of total deposits. In addition, net available liquidity exceeded uninsured and
$1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively. Our FHLB borrowing capacity was $1.23 billion and $718.2uncollateralized deposits by $987.0 million as of
September 30, 2017 and DecemberMarch 31,
2016, respectively.On April 3, 2017, the Company completed an underwritten public offering of $300 million in aggregate principal amount of its Notes which were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated debt obligations of the Company and will mature on April 15, 2027. The Notes qualify as Tier 2 capital for regulatory purposes.
For purposes of determining our liquidity position, we use the primary liquidity ratio; a measure of liquidity calculated as the excess Federal Reserve Bank balances plus federal funds sold plus unpledged securities divided by total liabilities. We also use the alternative liquidity ratio which is calculated as cash and due from banks plus federal funds sold plus unpledged securities divided by total liabilities. Our primary liquidity ratio and alternative liquidity ratio were 7.76% and 10.38%, respectively, as of September 30, 2017. Management believes our current liquidity position is adequate to meet foreseeable liquidity requirements.
We believe that we have sufficient liquidity to satisfy our current operations.
Market Risk Management. Our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. We do not hold market risk sensitive instruments for trading purposes.
2024.
| | | | | |
| (in thousands) | As of March 31, 2024 |
| Uninsured Deposits | $ | 8,415,764 | |
| Intercompany Subsidiary and Affiliate Balances | 602,351 | |
| Collateralized Deposits | 3,026,129 | |
| Net Uninsured Position | $ | 4,787,284 | |
| |
| Total Available Liquidity | $ | 5,774,260 | |
| Net Uninsured Position | 4,787,284 | |
| Net Available Liquidity in Excess of Uninsured Deposits | $ | 986,976 | |
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
usually changing less than
the change in market rates and
changes at our discretion.
This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet remains static and that its structure does not change over the course of the year. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.
Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.
Interest Rate Sensitivity. Our primary business is banking
For the rising and falling interest rate scenarios, the resulting earnings, primarilybase market interest rate forecast was increased and decreased over twelve months by 200 and 100 basis points, respectively. At March 31, 2024, our net interest income, are susceptiblemargin exposure related to these hypothetical changes in market interest rates. It is management’s goalrates was within the current guidelines established by us.
Table 24 presents our sensitivity to
maximize net interest income
within acceptable levels of interest rate and liquidity risks.A key element in the financial performance of financial institutions is the level and type of interest rate risk assumed. The single most significant measure of interest rate risk is the relationship of the repricing periods of earning assets and interest-bearing liabilities. The more closely the repricing periods are correlated, the less interest rate risk we assume. We use repricing gap and simulation modeling as the primary methods in analyzing and managing interest rate risk.
Gap analysis attempts to capture the amounts and timing of balances exposed to changes in interest rates at a given point in time. As of September 30, 2017, our gap position was asset sensitive with aone-year cumulative repricing gap as a percentage of total earning assets of 8.8%.
During this period, the amount of change our asset base realizes in relation to the total change in market interest rates is higher than that of the liability base. As a result, our net interest income will have a positive effect in an environment of modestly rising rates.
We have a portion of our securities portfolio invested in mortgage-backed securities. Mortgage-backed securities are included based on their final maturity date. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Table 26 presents a summary of the repricing schedule of our interest-earning assets and interest-bearing liabilities (gap) as of September 30, 2017.
March 31, 2024.
Table
26:24: Sensitivity of Net Interest
Rate Sensitivity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Interest Rate Sensitivity Period | |
| | | 0-30
Days | | | 31-90
Days | | | 91-180
Days | | | 181-365
Days | | | 1-2
Years | | | 2-5
Years | | | Over 5
Years | | | Total | |
| | | (Dollars in thousands) | |
Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits due from banks | | $ | 354,367 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 354,367 | |
Federal funds sold | | | 4,545 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,545 | |
Investment securities | | | 313,284 | | | | 65,991 | | | | 92,746 | | | | 122,662 | | | | 232,241 | | | | 383,048 | | | | 600,658 | | | | 1,810,630 | |
Loans receivable | | | 4,022,711 | | | | 579,056 | | | | 629,589 | | | | 1,120,816 | | | | 1,389,219 | | | | 2,150,212 | | | | 394,590 | | | | 10,286,193 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total earning assets | | | 4,694,907 | | | | 645,047 | | | | 722,335 | | | | 1,243,478 | | | | 1,621,460 | | | | 2,533,260 | | | | 995,248 | | | | 12,455,735 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing transaction and savings deposits | | | 1,209,692 | | | | 519,106 | | | | 778,659 | | | | 1,557,318 | | | | 781,773 | | | | 560,261 | | | | 935,074 | | | | 6,341,883 | |
Time deposits | | | 253,409 | | | | 213,728 | | | | 272,149 | | | | 458,790 | | | | 223,177 | | | | 129,251 | | | | 918 | | | | 1,551,422 | |
Securities sold under repurchase agreements | | | 149,531 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 149,531 | |
FHLB and other borrowed funds | | | 570,021 | | | | 41 | | | | 34,048 | | | | 120,337 | | | | 173,079 | | | | 146,807 | | | | — | | | | 1,044,333 | |
Subordinated debentures | | | 70,662 | | | | — | | | | — | | | | — | | | | — | | | | 297,173 | | | | — | | | | 367,835 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total interest-bearing liabilities | | | 2,253,315 | | | | 732,875 | | | | 1,084,856 | | | | 2,136,445 | | | | 1,178,029 | | | | 1,133,492 | | | | 935,992 | | | | 9,455,004 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate sensitivity gap | | $ | 2,441,592 | | | $ | (87,828 | ) | | $ | (362,521 | ) | | $ | (892,967 | ) | | $ | 443,431 | | | $ | 1,399,768 | | | $ | 59,256 | | | $ | 3,000,731 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cumulative interest rate sensitivity gap | | $ | 2,441,592 | | | $ | 2,353,764 | | | $ | 1,991,243 | | | $ | 1,098,276 | | | $ | 1,541,707 | | | $ | 2,941,475 | | | $ | 3,000,731 | | | | | |
Cumulative rate sensitive assets to rate sensitive liabilities | | | 208.4 | % | | | 178.8 | % | | | 148.9 | % | | | 117.7 | % | | | 120.9 | % | | | 134.5 | % | | | 131.7 | % | | | | |
Cumulative gap as a % of total earning assets | | | 19.6 | % | | | 18.9 | % | | | 16.0 | % | | | 8.8 | % | | | 12.4 | % | | | 23.6 | % | | | 24.1 | % | | | | |
| Item 4: | | | | | | | |
| Interest Rate Scenario | | CONTROLS AND PROCEDURESPercentage Change from Base |
| Up 200 basis points | | 9.43 | % |
| Up 100 basis points | | 4.84 | |
| Down 100 basis points | | (5.81) | |
| Down 200 basis points | | (11.95) | |
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.
As permitted by SEC guidance, management excluded from its assessment the operations of the Stonegate Bank acquisition made during 2017, which is described in Note 2 of the Consolidated Financial Statements. The total assets of the entity acquired in this acquisition represented approximately 20% of the Company’s total consolidated assets as of September 30, 2017.
Changes in Internal Control Over Financial Reporting
On September 26, 2017, we completed our acquisition of Stonegate Bank, and as a result, we extended our oversight and monitoring processes that support our internal control over financial reporting during the third quarter of 2017, to include the operations of Stonegate. Otherwise, there
There were no changes in the Company’s internal controls over financial reporting during the quarter ended
September 30, 2017,March 31, 2024, 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.
Except for the risk factors set forth below, there
Item 1A: Risk Factors
There were no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Form
10-K for the year ended December 31,
2016.2023. 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.
Risks Related to Our Industry
The short-term
Item 2: Unregistered Sales of Equity Securities and
long-term impactUse of
the changing regulatory capital requirements and new capital rules is uncertain.In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all banking organizations. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets) and a higher minimum Tier 1 risk-based capital requirement (6% of risk-weighted assets) and assigns higher risk weightings (150%) to exposures that are more than 90 days past due or are onnon-accrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” of 2.5% of common equity tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule became effective for our bank subsidiary and us on January 1, 2015. The capital conservation buffer requirement began being phased in on January 1, 2016, and the full capital conservation buffer requirement will be effective January 1, 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such activities. In addition, if the banking organization grows above $15 billion as a result of an acquisition, or organically grows above $15 billion and then makes an acquisition, its trust preferred securities will be included as Tier 2 capital rather than Tier 1 capital.
While our current capital levels well exceed the revised capital requirements and we are currently under the $15 billion threshold, our capital levels could decrease in the future as a result of factors such as acquisitions, faster than anticipated growth, reduced earnings levels, operating losses, exceeding the $15 billion threshold and other factors. The application of more stringent capital requirements for us could, among other things, result in lower returns on equity, require the raising of additional capital, and result in our inability to pay dividends or repurchase shares if we were to be unable to comply with such requirements.
Risks Related to Our Business
The total impact of Hurricane Irma on our financial condition and results of operation may not be known for some time and may negatively impact our future earnings.
Hurricane Irma caused significant property damage in our South Florida market areas, particularly in the Florida Keys and southwestern Florida, and resulted in widespread disruptions in power, transportation and the local economies of these areas, as well as less extensive damage throughout other parts of the state of Florida. A substantial amount of our loans are secured by real estate located in the market areas affected by this powerful storm. On most collateral dependent loans, our exposure is limited due to the existence of flood and property insurance. We monitor our borrower’s insurance coverage on a regular basis and force place insurance, as necessary.
We are continuing to evaluate Hurricane Irma’s impact on our customers and our business, including our properties, assets and loan portfolios. However, we expect to experience increased loan delinquencies and loan restructurings as a result of the storm, particularly in the short term as customers undertake recovery andclean-up efforts, including the submission of insurance claims. Based on our initial assessments of the potential credit impact and damage, we accrued $33.4 million ofpre-tax hurricane expenses during the third quarter of 2017. The $33.4 million of hurricane expenses includes $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017. In addition, in order to assist our customers during this crisis, we are waiving various deposit and loan fees that would have otherwise been assessed.
Because the total impact of the storm may not be known for some time, it is impossible to know at this time whether our current accrual for hurricane-related expenses will be sufficient to cover our actual losses. We may experience more extensive loan delinquencies and restructurings than we currently expect, which could negatively impact our cash flow and, if not timely cured, increase ournon-performing assets and reduce our net interest income. Such increases could require us to further increase our provision for loan losses and result in higher loan charge-offs, either of which could have a material adverse impact on our results of operations and financial condition in future periods.
Risks Related to Our Acquisition of Stonegate Bank
Our financial results and condition could be adversely affected if we fail to realize the expected benefits of the Stonegate acquisition or it takes longer than expected to realize those benefits.
Following our acquisition of Stonegate Bank (“Stonegate”), on September 26, 2017, we began the process of integrating the businesses of Stonegate. We have plans to complete the overall integration of the two businesses during the first quarter of 2018. This integration process could result in the loss of key employees, the disruption of ongoing businesses and the loss of customers and their business and deposits. It may also divert management attention and resources from other operations and limit the Company’s ability to pursue other acquisitions. There is no assurance that we will realize the cost savings and other financial benefits of the acquisition when and in the amounts expected.
We may incur losses on loans, securities and other acquired assets of Stonegate that are materially greater than reflected in our preliminary fair value adjustments.
We accounted for the Stonegate acquisition under the purchase method of accounting, recording the acquired assets and liabilities of Stonegate at fair value based on preliminary purchase accounting adjustments. Under purchase accounting, we have until one year after the acquisition to finalize the fair value adjustments, meaning we could materially adjust until then the preliminary fair value estimates of Stonegate’s assets and liabilities based on new or updated information. As of September 30, 2017, the purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. We will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
As of September 30, 2017, we recorded at fair value all credit-impaired loans acquired in the merger of Stonegate Bank into Centennial Bank based on the present value of their expected cash flows. We estimated cash flows using internal credit, interest rate and prepayment risk models using assumptions about matters that are inherently uncertain. We may not realize the estimated cash flows or fair value of these loans. In addition, although the difference between thepre-merger carrying value of the credit-impaired loans and their expected cash flows—the“non-accretable difference”—is available to absorb future charge-offs, we may be required to increase our allowance for credit losses and related provision expense because of subsequent additional credit deterioration in these loans.
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
During the three months ended September 30, 2017, the Company utilized a portion of its stock repurchase program last amended and approved by the Board of Directors on January 20, 2017. This program authorized the repurchase of 9,752,000 shares of the Company’s common stock. Proceeds
The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:
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Period | | Number of
Shares
Purchased | | | Average Price
Paid Per Share
Purchased | | | Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs | | | Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs(1) | |
July 1 through July 31, 2017 | | | — | | | $ | — | | | | — | | | | 5,664,936 | |
August 1 through August 31, 2017 | | | 380,000 | | | | 24.36 | | | | 380,000 | | | | 5,284,936 | |
September 1 through September 30, 2017 | | | — | | | | — | | | | — | | | | 5,284,936 | |
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Total | | | 380,000 | | | | | | | | 380,000 | | | | | |
| | | | | | | | | | | | | | | | |
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| Period | | Number of
Shares
Purchased | | Average Price
Paid Per Share
Purchased | | Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(1) |
| January 1 through January 31, 2024 | | 205,934 | | | $ | 23.48 | | | 205,934 | | | 16,560,351 | |
| February 1 through February 29, 2024 | | 580,000 | | | 23.24 | | | 580,000 | | | 15,980,351 | |
| March 1 through March 31, 2024 | | 240,000 | | | 23.63 | | | 240,000 | | | 15,740,351 | |
| Total | | 1,025,934 | | | | | 1,025,934 | | | |
(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 March 31, 2024, 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
| (1) | | | | | | | |
| Exhibit No. | | 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.
Not applicable.
| | Description of Exhibit |
Exhibit No.
3.1 | | |
2.1 | | Agreement and Plan of Merger by and among Home BancShares, Inc., Centennial Bank, Giant Holdings, Inc., and Landmark Bank, N.A., dated November 7, 2016. (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form8-K/A filed on November 10, 2016) |
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2.2 | | Amendment to Agreement and Plan of Merger by and among Home BancShares, Inc., Centennial Bank, Giant Holdings, Inc., and Landmark Bank, N.A., dated December 7, 2016. (incorporated by reference to Appendix A of Home BancShares’s Registration Statement on FormS-4 (FileNo. 333-214957), as amended) |
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2.3 | | Acquisition Agreement By and Between Home BancShares, Inc. and Bank of Commerce Holdings, Inc., dated December 1, 2016 (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form8-K filed on December 7, 2016) |
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2.4 | | Agreement and Plan of Merger by and among Home BancShares, Inc., Centennial Bank and Stonegate Bank, dated March 27, 2017 (incorporated by reference to Exhibit 2.1 of Home BancShares’s Current Report on Form8-K filed on March 27, 2017) |
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| 3.13 | | |
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| 4.1 | | |
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| 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. |
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12.115 | | Computation of Ratios of Earnings to Fixed Charges* |
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15 | | |
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| 31.1 | | |
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| 31.2 | | |
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| 32.1 | | |
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| 32.2 | | |
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| 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.INS | | XBRL Instance Document*
| 101.SCH | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document* |
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| 101.CAL | | XBRLInlineXBRL Taxonomy Extension Calculation Linkbase Document* |
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| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document* |
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| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document* |
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| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document* |
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| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* 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.
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.
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| Date: | May 3, 2024 | | | /s/ John W. Allison |
| Date: November 7, 2017 | | | /s/ C. Randall Sims |
| | | | C. Randall Sims,John W. Allison, Chairman and Chief Executive Officer |
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Date: November 7, 2017 | May 3, 2024 | | | /s/ Brian S. Davis |
| | | | Brian S. Davis, Chief Financial Officer |
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| Date: | May 3, 2024 | | /s/ Jennifer C. Floyd |
| | | Jennifer C. Floyd, Chief Accounting Officer |
101