HOME BANCSHARES INC

Previous wording

We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as “Centennial” or the “Bank”). As of June 30, 2024, we had, on a consolidated basis, total assets of $22.92 billion, loans receivable, net of allowance for credit losses of $14.49 billion, total deposits of $16.96 billion, and stockholders’ equity of $3.86 billion.

Current wording

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, 2024, we had, on a consolidated basis, total assets of $22.82 billion, loans receivable, net of allowance for credit losses of $14.51 billion, total deposits of $16.71 billion, and stockholders’ equity of $3.96 billion.

Previous wording

Total interest expense increased by $75.5 million, or 49.5%. This was partially offset by a $69.6 million, or 12.1%, increase in total interest income, a $900,000, or 1.1%, increase in non-interest income and a $6.2 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 $59.0 million, or 45.6%, increase in interest on deposits, a $15.7 million, or 123.1%, increase in interest on FHLB and other borrowed funds and a $778,000, or 39.1%, increase in interest on securities sold under agreements to repurchase. The increase in interest income resulted from a $59.5 million, or 12.4%, increase in loan interest income and a $14.7 million, or 174.4%, increase in interest income on deposits at other banks, partially offset by a $4.5 million, or 5.3%, decrease in investment income. The increase in non-interest income was primarily due to an $11.4 million, or 106.9%, increase in the fair value adjustment for marketable securities, a $2.6 million, or 50.0%, increase in mortgage lending income, and a $1.1 million, or 121.2%, increase in gain on sale of branches, equipment and other assets, net, which was partially offset by a $13.0 million, or 48.0%, decrease in other income and a $2.8 million, or 11.7%, decrease in other service charges and fees. The decrease in non-interest expense was due to a decrease of $7.7 million, or 6.0%, in salaries and employee benefits and a decrease of $916,000, or 3.1%, in occupancy and equipment expense, which was partially offset by an increase of $2.4 million, or 4.4%, in other operating expenses.

Current wording

Total interest income increased by $38.6 million, or 13.1%, and non-interest expense decreased $4.7 million, or 4.1%. This was partially offset by a $25.3 million, or 27.4% increase in total interest expense and a $634,000, or 1.5%, decrease in non-interest income. These fluctuations are primarily due to the high interest rate environment. The increase in interest income resulted from a $32.5 million, or 13.0%, increase in loan interest income and a $9.8 million, or 419.6%, increase in interest income on deposits at other banks, which was partially offset by a $3.7 million, or 8.7%, decrease in investment interest income. The decrease in non-interest expense was due to a decrease of $5.7 million, or 8.8%, in salaries and employee benefits and a decrease of $917,000, or 5.9%, in occupancy and equipment expense, which was partially offset by an increase of $1.9 million, or 7.3%, in other operating expenses. The increase in interest expense was primarily due to a $19.1 million, or 24.3%, increase in interest on deposits and a $6.2 million, or 76.2%, increase in interest on FHLB and other borrowed funds. The decrease in non-interest income was primarily due to a $3.1 million, or 69.1%, decrease in the fair value adjustment for marketable securities which was partially offset by a $1.3 million, or 41.7%, increase in mortgage lending income and a $1.3 million, or 21.6%, increase in other income.

Previous wording

Our net interest margin decreased from 4.28% for the three-month period ended June 30, 2023 to 4.27% for the three-month period ended June 30, 2024. The yield on interest earning assets was 6.56% and 5.96% for the three months ended June 30, 2024 and 2023, respectively, while average interest earning assets increased from $19.58 billion to $20.21 billion. The increase in average interest earning assets is primarily due to a $609.9 million increase in average interest-bearing balances due from banks and a $388.9 million increase in average loans receivable, partially offset by a $368.3 million decrease in average investment securities. During the second 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 June 30, 2024 and 2023, we recognized $1.9 million and $2.7 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.7 million in event income for the three-months ended June 30, 2024 compared to $1.3 million for the three-months ended June 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.

Current wording

Our net interest margin increased from 4.19% for the three-month period ended September 30, 2023 to 4.28% for the three-month period ended September 30, 2024. The yield on interest earning assets was 6.60% and 6.09% for the three months ended September 30, 2024 and 2023, respectively, and average interest earning assets increased from $19.26 billion to $20.23 billion. The increase in average interest earning assets is primarily due to a $706.1 million increase in average interest-bearing balances due from banks and a $571.2 million increase in average loans receivable, partially offset by a $315.8 million decrease in average investment securities. During the third quarter of 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by approximately 10 basis points. For the three months ended September 30, 2024 and 2023, we recognized $1.9 million and $2.4 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by two basis points. We recognized $573,000 in event income for the three-months ended September 30, 2024 compared to $521,000 for the three-months ended September 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.

Previous wording

Our efficiency ratio was 43.17% for the three months ended June 30, 2024, compared to 44.00% for the same period in 2023. For the second quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 42.59%, compared to 44.83% reported for the second quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).

Current wording

Our efficiency ratio was 41.42% for the three months ended September 30, 2024, compared to 45.53% for the same period in 2023. For the third quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 41.66%, compared to 46.44% reported for the third quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).

Previous wording

Our annualized return on average assets was 1.79% for the three months ended June 30, 2024, compared to 1.90% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.73% and 11.63% for the three months ended June 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).

Current wording

Our annualized return on average assets was 1.74% for the three months ended September 30, 2024, compared to 1.78% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.23% and 10.65% for the three months ended September 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).

Previous wording

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

Our net income decreased $6.6 million, or 3.17%, to $201.6 million for the six-month period ended June 30, 2024, from $208.2 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.00 per share for the six-month period ended June 30, 2024 compared to $1.02 per share for the six-month period ended June 30, 2023. The Company recorded $12.5 million in credit loss expense for the six-month period ended June 30, 2024. This consisted of a $13.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the six months ended June 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $729,000 increase in the fair value of marketable securities and $162,000 in BOLI death benefits, partially offset by $2.3 million of FDIC special assessment and a $2.0 million deferred tax asset write-down.

Current wording

Our net income decreased $5.0 million, or 1.63%, to $301.7 million for the nine-month period ended September 30, 2024, from $306.7 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.51 per share for both the nine-month periods ended September 30, 2024 and 2023. The Company recorded $31.4 million in credit loss expense for the nine-month period ended September 30, 2024, The $31.4 million of credit loss expense includes $31.7 million in provision for credit losses on loans, which was partially offset by a a $330,000 recovery of credit losses on available-for-sale investments due to an improvement in the unrealized losses for one of our subordinated debt investments. Of the $31.7 million provision for credit losses on loans recorded, $16.7 million was used to establish a hurricane reserve for loans located in the FEMA disaster areas impacted by Hurricane Helene, which made landfall during the third quarter of 2024. The hurricane related reserve had a six-cent impact to diluted earnings per share. The remaining portion of the provision was related to loan growth. During the nine months ended September 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $2.1 million increase in the fair value of marketable securities and $162,000 in bank owned life insurance bank owned life insurance ("BOLI") death benefits, partially offset by $2.3 million of Federal Deposit Insurance Corporation ("FDIC") special assessment and a $2.0 million deferred tax asset write-down.

Previous wording

Total interest income increased by $37.7 million, or 13.0%, and non-interest expense decreased $3.1 million, or 2.7%. This was offset by a $33.5 million, or 40.8% increase in total interest expense and a $6.7 million, or 13.6%, decrease in non-interest income. These fluctuations are primarily due to the high interest rate environment. The increase in interest income resulted from a $31.2 million, or 12.8%, increase in loan interest income and an $8.8 million, or 236.9%, increase in interest income on deposits at other banks, which was partially offset by a $2.3 million, or 5.5%, decrease in investment interest income. The decrease in non-interest expense was due to a decrease of $4.1 million, or 6.4%, in salaries and employee benefits and a decrease of $515,000, or 3.5%, in occupancy and equipment expense, and an decrease of $216,000, or 2.4%, in data processing expense, which was partially offset by an increase of $1.7 million, or 6.3%, in other operating expenses. The increase in interest expense was primarily due to a $25.6 million, or 36.5%, increase in interest on deposits, a $7.7 million, or 116.1%, increase in interest on FHLB and other borrowed funds and a $242,000, or 21.6%, increase in interest on securities sold under agreements to repurchase. The decrease in non-interest income was primarily due to an $8.5 million, or 56.0%, decrease in other income, a $1.1 million, or 135.0%, decrease in the fair value adjustment for marketable securities and a $1.1 million, or 9.2%, decrease in other service charges and fees, which was partially offset by a $1.6 million, or 61.4%, increase in mortgage lending income and a $1.1 million, or 123.77%, increase in gain on sale of branches, equipment and other assets, net.

Current wording

Total interest income increased by $108.2 million, or 12.5% and non-interest expense decreased by $11.0 million, or 3.2%. This was partially offset by a $100.8 million, or 41.2% increase in total interest expense. These fluctuations are primarily due to the high interest rate environment. The increase in interest income resulted from a $92.0 million, or 12.6%, increase in loan interest income and a $24.4 million, or 227.6%, increase in interest income on deposits at other banks, partially offset by an $8.2 million, or 6.4%, decrease in investment income. The decrease in non-interest expense was due to a decrease of $13.3 million, or 6.9%, in salaries and employee benefits and a decrease of $1.8 million, or 4.0%, in occupancy and equipment expense, which was partially offset by an increase of $4.3 million, or 5.4%, in other operating expenses. The increase in interest expense was primarily due to a $78.1 million, or 37.5%, increase in interest on deposits, a $22.0 million, or 104.9%, increase in interest on FHLB and other borrowed funds and a $769,000, or 23.1%, increase in interest on securities sold under agreements to repurchase.

Previous wording

Our net interest margin decreased from 4.33% for the six-month period ended June 30, 2023 to 4.20% for the six-month period ended June 30, 2024. The yield on interest earning assets was 6.47% and 5.88% for the three months ended June 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.82 billion to $20.12 billion. The increase in average interest earning assets is primarily due to a $492.9 million increase in average interest-bearing balances due from banks, a $201.8 million increase in average loans receivable and a $1.8 million increase in average federal funds sold, partially offset by a $396.0 million decrease in average investment securities. During the six-month period ended June 30, 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 six months ended June 30, 2024 and 2023, we recognized $4.6 million and $5.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $2.8 million in event income for the six-months ended June 30, 2024 compared to $3.4 million for the six-months ended June 30, 2023.

Current wording

Our net interest margin decreased from 4.28% for the nine-month period ended September 30, 2023 to 4.23% for the nine-month period ended September 30, 2024. The yield on interest earning assets was 6.52% and 5.95% for the nine months ended September 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.63 billion to $20.16 billion. The increase in average interest earning assets is primarily due to a $564.7 million increase in average interest-bearing balances due from banks, a $326.0 million increase in average loans receivable and a $1.1 million increase in average federal funds sold, partially offset by a $368.8 million decrease in average investment securities. During the nine-month period ended September 30, 2024, the Company held excess liquidity of approximately $500.0 million which was dilutive to the net interest margin by approximately 10 basis points. For the nine months ended September 30, 2024 and 2023, we recognized $6.5 million and $8.3 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $3.4 million in event income for the nine-months ended September 30, 2024 compared to $2.8 million for the nine-months ended September 30, 2023.

Previous wording

Our efficiency ratio was 43.69% for the six months ended June 30, 2024, compared to 44.39% for the same period in 2023. For the second quarter of 2024, our efficiency ratio, as adjusted (non-GAAP), was 43.50%, compared to 44.12% reported for the second quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).

Current wording

Our efficiency ratio was 42.91% for the nine months ended September 30, 2024, compared to 44.76% for the same period in 2023. For the nine months ended September 30, 2024, our efficiency ratio, as adjusted (non-GAAP), was 42.87%, compared to 44.86% reported for the third quarter of 2023. (See Table 25 for the non-GAAP tabular reconciliation).

Previous wording

Our annualized return on average assets was 1.78% for the six months ended June 30, 2024, compared to 1.87% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.69% and 11.66% for the six months ended June 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).

Current wording

Our annualized return on average assets was 1.77% for the nine months ended September 30, 2024, compared to 1.84% for the same period in 2023. (See Table 22 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.53% and 11.32% for the nine months ended September 30, 2024, and 2023, respectively. (See Table 23 for the related non-GAAP financial measures and tabular reconciliation).

Previous wording

Our total assets as of June 30, 2024 increased $263.2 million to $22.92 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $58.5 million for the six months ended June 30, 2024. Our loan portfolio balance increased to $14.78 billion as of June 30, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $218.8 million of organic loan growth in our community banking footprint and $137.9 million of organic loan growth from our Centennial Commercial Finance Group ("CFG") franchise. These increases were partially offset by a $166.4 million decrease in investment securities resulting from paydowns and maturities during the first six months of 2024. Total deposits increased $168.1 million to $16.96 billion as of June 30, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $64.4 million to $3.86 billion as of June 30, 2024, compared to $3.79 billion as of December 31, 2023. The $64.4 million increase in stockholders’ equity is primarily associated with the $201.6 million in net income for the six months ended June 30, 2024, partially offset by the $72.3 million of shareholder dividends paid, stock repurchases of $56.6 million and the $12.7 million in other comprehensive loss.

Current wording

Our total assets as of September 30, 2024 increased $166.5 million to $22.82 billion from $22.66 billion reported as of December 31, 2023. Cash and cash equivalents increased $17.5 million for the nine months ended September 30, 2024. Our loan portfolio balance increased to $14.82 billion as of September 30, 2024 from $14.42 billion at December 31, 2023. The increase in loans was primarily due to $350.4 million of organic loan growth in our community banking footprint and $48.9 million of organic loan growth from our Centennial Commercial Finance Group ("Centennial CFG") franchise. These increases were partially offset by a $242.1 million decrease in investment securities resulting from paydowns and maturities during the first nine months of 2024. Total deposits decreased $82.0 million to $16.71 billion as of September 30, 2024 from $16.79 billion as of December 31, 2023. Stockholders’ equity increased $168.7 million to $3.96 billion as of September 30, 2024, compared to $3.79 billion as of December 31, 2023. The $168.7 million increase in stockholders’ equity is primarily associated with the $301.7 million in net income and $54.2 million in other comprehensive income for the nine months ended September 30, 2024, which was partially offset by the $111.2 million of shareholder dividends paid and stock repurchases of $83.6 million.

Previous wording

Our non-performing loans were $86.3 million, or 0.58% of total loans as of June 30, 2024, compared to $64.1 million, or 0.44% of total loans, as of December 31, 2023. The allowance for credit losses as a percentage of non-performing loans decreased to 342.66% as of June 30, 2024, from 449.66% as of December 31, 2023. Non-performing loans from our Arkansas franchise were $16.2 million at June 30, 2024 compared to $15.4 million as of December 31, 2023. Non-performing loans from our Florida franchise were $39.1 million at June 30, 2024 compared to $9.3 million as of December 31, 2023. Non-performing loans from our Texas franchise were $24.7 million at June 30, 2024 compared to $33.5 million as of December 31, 2023. Non-performing loans from our Alabama franchise were $399,000 at June 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $3.2 million at June 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing loans from our Centennial CFG franchise were $2.8 million at June 30, 2024 compared to $2.7 million as of December 31, 2023.

Current wording

Our non-performing loans were $101.1 million, or 0.68% of total loans as of September 30, 2024, compared to $64.1 million, or 0.44% of total loans, as of December 31, 2023. The allowance for credit losses as a percentage of non-performing loans decreased to 309.16% as of September 30, 2024, from 449.66% as of December 31, 2023. Non-performing loans from our Arkansas franchise were $30.4 million at September 30, 2024 compared to $15.4 million as of December 31, 2023. Non-performing loans from our Florida franchise were $40.8 million at September 30, 2024 compared to $9.3 million as of December 31, 2023. Non-performing loans from our Texas franchise were $20.0 million at September 30, 2024 compared to $33.5 million as of December 31, 2023. Non-performing loans from our Alabama franchise were $391,000 at September 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing loans from our Shore Premier Finance ("SPF") franchise were $6.8 million at September 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing loans from our Centennial CFG franchise were $2.8 million at September 30, 2024 compared to $2.7 million as of December 31, 2023.

Previous wording

As of June 30, 2024, our non-performing assets increased to $127.8 million, or 0.56% of total assets, from $95.4 million, or 0.42% of total assets, as of December 31, 2023. Non-performing assets from our Arkansas franchise were $16.3 million at June 30, 2024 compared to $15.5 million as of December 31, 2023. Non-performing assets from our Florida franchise were $46.6 million at June 30, 2024 compared to $17.3 million as of December 31, 2023. Non-performing assets from our Texas franchise were $35.8 million at June 30, 2024 compared to $33.8 million as of December 31, 2023. Non-performing assets from our Alabama franchise were $399,000 at June 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing assets from our SPF franchise were $3.2 million at June 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing assets from our Centennial CFG franchise were $25.5 million at June 30, 2024 compared to $25.6 million as of December 31, 2023.

Current wording

As of September 30, 2024, our non-performing assets increased to $144.2 million, or 0.63% of total assets, from $95.4 million, or 0.42% of total assets, as of December 31, 2023. Non-performing assets from our Arkansas franchise were $30.4 million at September 30, 2024 compared to $15.5 million as of December 31, 2023. Non-performing assets from our Florida franchise were $48.1 million at September 30, 2024 compared to $17.3 million as of December 31, 2023. Non-performing assets from our Texas franchise were $33.0 million at September 30, 2024 compared to $33.8 million as of December 31, 2023. Non-performing assets from our Alabama franchise were $391,000 at September 30, 2024 compared to $413,000 as of December 31, 2023. Non-performing assets from our SPF franchise were $6.8 million at September 30, 2024 compared to $2.8 million as of December 31, 2023. Non-performing assets from our Centennial CFG franchise were $25.5 million at September 30, 2024 compared to $25.6 million as of December 31, 2023.

Previous wording

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 $41.3 million in foreclosed assets held for sale.

Current wording

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 $43.0 million in foreclosed assets held for sale.

Previous wording

Our net income decreased $6.6 million, or 3.17%, to $201.6 million for the six-month period ended June 30, 2024, from $208.2 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.00 per share for the six-month period ended June 30, 2024 compared to $1.02 per share for the six-month period ended June 30, 2023. The Company recorded $12.5 million in credit loss expense for the six-month period ended June 30, 2024. This consisted of a $13.5 million provision for credit losses on loans and a reversal of $1.0 million provision for unfunded commitments. During the six months ended June 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $729,000 increase in the fair value of marketable securities and $162,000 in bank owned life insurance ("BOLI") death benefits, partially offset by $2.3 million of FDIC special assessment and a $2.0 million deferred tax asset write-down.

Current wording

Our net income decreased $5.0 million, or 1.63%, to $301.7 million for the nine-month period ended September 30, 2024, from $306.7 million for the same period in 2023. On a diluted earnings per share basis, our earnings were $1.51 per share for both the nine-month periods ended September 30, 2024 and 2023. The Company recorded $31.4 million in credit loss expense for the nine-month period ended September 30, 2024, The $31.4 million of credit loss expense includes $31.7 million in provision for credit losses on loans, which was partially offset by a a $330,000 recovery of credit losses on available-for-sale investments due to an improvement in the unrealized losses for one of our subordinated debt investments. Of the $31.7 million provision for credit losses on loans recorded, $16.7 million was used to establish a hurricane reserve for loans located in the FEMA disaster areas impacted by Hurricane Helene, which made landfall during the third quarter of 2024. The hurricane related reserve had a six-cent impact to diluted earnings per share. The remaining portion of the provision was related to loan growth. During the nine months ended September 30, 2024, the Company recorded a $2.1 million gain on sale of building from our Texas region, a $2.1 million increase in the fair value of marketable securities and $162,000 in bank owned life insurance BOLI death benefits, partially offset by $2.3 million of FDIC special assessment and a $2.0 million deferred tax asset write-down.

Previous wording

The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve increased the target rate four times during 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, on July 26, 2023, the target rate was increased to 5.25% to 5.50%. As of June 30, 2024, the target rate was 5.25% to 5.50% as the Federal Reserve has left the target rate unchanged in 2024.

Current wording

The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve increased the target rate four times during 2023. First, on February 1, 2023, the target rate was increased to 4.50% to 4.75%, second, on March 22, 2023, the target rate was increased to 4.75% to 5.00%, third, on May 3, 2023, the target rate was increased to 5.00% to 5.25% and fourth, on July 26, 2023, the target rate was increased to 5.25% to 5.50%. On September 18, 2024, the Federal Reserve reduced the target rate to 4.75% to 5.00%.

Previous wording

Our net interest margin decreased from 4.28% for the three-month period ended June 30, 2023 to 4.27% for the three-month period ended June 30, 2024. The yield on interest earning assets was 6.56% and 5.96% for the three months ended June 30, 2024 and 2023, respectively, while average interest earning assets increased from $19.58 billion to $20.21 billion. The increase in average interest earning assets is primarily due to a $609.9 million increase in average interest-bearing balances due from banks and a $388.9 million increase in average loans receivable, partially offset by a $368.3 million decrease in average investment securities. During the second 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 June 30, 2024 and 2023, we recognized $1.9 million and $2.7 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $1.7 million in event income for the three-months ended June 30, 2024 compared to $1.3 million for the three-months ended June 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.

Current wording

Our net interest margin increased from 4.19% for the three-month period ended September 30, 2023 to 4.28% for the three-month period ended September 30, 2024. The yield on interest earning assets was 6.60% and 6.09% for the three months ended September 30, 2024 and 2023, respectively, and average interest earning assets increased from $19.26 billion to $20.23 billion. The increase in average interest earning assets is primarily due to a $706.1 million increase in average interest-bearing balances due from banks and a $571.2 million increase in average loans receivable, partially offset by a $315.8 million decrease in average investment securities. During the third 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, 2024 and 2023, we recognized $1.9 million and $2.4 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by two basis points. We recognized $573,000 in event income for the three-months ended September 30, 2024 compared to $521,000 for the three-months ended September 30, 2023. The remaining increase in the net interest margin was due to an increase in interest income resulting from an increase in average interest-bearing assets at higher interest rates primarily as a result of the high interest rate environment.

Previous wording

Our net interest margin decreased from 4.33% for the six-month period ended June 30, 2023 to 4.20% for the six-month period ended June 30, 2024. The yield on interest earning assets was 6.47% and 5.88% for the three months ended June 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.82 billion to $20.12 billion. The increase in average interest earning assets is primarily due to a $492.9 million increase in average interest-bearing balances due from banks, a $201.8 million increase in average loans receivable and a $1.8 million increase in average federal funds sold, partially offset by a $396.0 million decrease in average investment securities. During the six-month period ended June 30, 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 six months ended June 30, 2024 and 2023, we recognized $4.6 million and $5.8 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $2.8 million in event income for the six-months ended June 30, 2024 compared to $3.4 million for the six-months ended June 30, 2023.

Current wording

Our net interest margin decreased from 4.28% for the nine-month period ended September 30, 2023 to 4.23% for the nine-month period ended September 30, 2024. The yield on interest earning assets was 6.52% and 5.95% for the nine months ended September 30, 2024 and 2023, respectively, as average interest earning assets increased from $19.63 billion to $20.16 billion. The increase in average interest earning assets is primarily due to a $564.7 million increase in average interest-bearing balances due from banks, a $326.0 million increase in average loans receivable and a $1.1 million increase in average federal funds sold, partially offset by a $368.8 million decrease in average investment securities. During the nine-month period ended September 30, 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 nine months ended September 30, 2024 and 2023, we recognized $6.5 million and $8.3 million, respectively, in total net accretion for acquired loans and deposits. The reduction in accretion was dilutive to the net interest margin by one basis point. We recognized $3.4 million in event income for the nine-months ended September 30, 2024 compared to $2.8 million for the nine-months ended September 30, 2023.

Previous wording

Net interest income on a fully taxable equivalent basis increased $5.3 million, or 2.5%, to $214.5 million for the three-month period ended June 30, 2024, from $209.1 million for the same period in 2023. This increase in net interest income for the three-month period ended June 30, 2024 was the result of a $38.8 million increase in interest income, which was partially offset by a $33.5 million increase in interest expense, on a fully taxable equivalent basis. The $38.8 million increase in interest income was primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $27.2 million, in addition to an increase of $11.6 million in interest income due to the change in average interest earning asset balances. The $33.5 million increase in interest expense is also primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $22.8 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $10.7 million.

Current wording

Net interest income on a fully taxable equivalent basis increased $14.6 million, or 7.2%, to $217.8 million for the three-month period ended September 30, 2024, from $203.2 million for the same period in 2023. This increase in net interest income for the three-month period ended September 30, 2024 was the result of a $39.9 million increase in interest income, which was partially offset by a $25.3 million increase in interest expense, on a fully taxable equivalent basis. The $39.9 million increase in interest income was primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $22.9 million, in addition to an increase of $17.0 million in interest income due to the change in average interest earning asset balances. The $25.3 million increase in interest expense is also primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $14.2 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $11.1 million.

Previous wording

Net interest income on a fully taxable equivalent basis decreased $5.4 million, or 1.3%, to $419.9 million for the six-month period ended June 30, 2024, from $425.4 million for the same period in 2023. This decrease in net interest income for the six-month period ended June 30, 2024 was the result of a $75.5 million increase in interest expense, which was partially offset by a $70.0 million increase in interest income, on a fully taxable equivalent basis. The $75.5 million increase in interest expense is primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $56.7 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $18.8 million. The $70.0 million increase in interest income was also primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $57.5 million, in addition to an increase of $12.6 million in interest income due to the change in average interest earning asset balances.

Current wording

Net interest income on a fully taxable equivalent basis increased $9.2 million, or 1.5%, to $637.8 million for the nine-month period ended September 30, 2024, from $628.6 million for the same period in 2023. This increase in net interest income for the nine-month period ended September 30, 2024 was the result of a $110.0 million increase in interest income, which was partially offset by a $100.8 million increase in interest expense, on a fully taxable equivalent basis. The $110.0 million increase in interest income was primarily the result of the high interest rate environment. The higher yield on earning assets resulted in an increase in interest income of approximately $80.6 million, in addition to an increase of $29.4 million in interest income due to the change in average interest earning asset balances. The $100.8 million increase in interest expense is also primarily the result of the high interest rate environment. The higher rates on interest bearing liabilities resulted in an increase in interest expense of approximately $70.6 million, in addition to an increase in average interest bearing liabilities which increased interest expense by approximately $30.2 million.

Previous wording

Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and six months ended June 30, 2024 and 2023, as well as changes in the fully taxable equivalent net interest margin for the three and six months ended June 30, 2024 compared to the same period in 2023.

Current wording

Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2024 and 2023, as well as changes in the fully taxable equivalent net interest margin for the three and nine months ended September 30, 2024 compared to the same period in 2023.

Previous wording

Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and six months ended June 30, 2024 and 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.

Current wording

Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and nine months ended September 30, 2024 and 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.

Previous wording

Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and six months ended June 30, 2024 compared to the same period in 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.

Current wording

Table 5 shows changes in interest income and interest expense resulting from changes in volume and changes in interest rates for the three and nine months ended September 30, 2024 compared to the same period in 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.

Previous wording

During the period ended June 30, 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.

Current wording

Credit Loss Expense: During the three months ended September 30, 2024, the Company recorded $18.9 million in credit loss expense. The $18.9 million of credit loss expense includes $18.2 million in provision for credit losses on loans. Of the $18.2 million provision for credit losses on loans recorded, $16.7 million was used to establish a hurricane reserve for loans located in the FEMA disaster areas impacted by Hurricane Helene, which made landfall during the quarter. The hurricane related reserve had a six-cent impact to diluted earnings per share for the quarter. The remaining portion of the provision was related to loan growth. The Company also recorded a $1.0 million provision for credit losses on unfunded commitments and recorded a $330,000 recovery of credit losses on available-for-sale investments due to an improvement in the unrealized losses for one of our subordinated debt investments. During the nine months ended September 30, 2024, the Company recorded $31.4 million in credit loss expense. The $31.4 million of credit loss expense includes $31.7 million in provision for credit losses on loans, which as partially offset by the $330,000 recovery of credit losses on available-for-sale investments due to an improvement in the unrealized losses for one of our subordinated debt investments. Of the $31.7 million provision for credit losses on loans recorded, $16.7 million was used to establish a hurricane reserve for loans. The remaining portion of the provision was related to loan growth. For both the three and nine month periods ended September 30, 2024, the Company determined the $2.0 million allowance for credit losses on the held-to-maturity portfolio was adequate. Therefore, no additional provision was considered necessary for the HTM portfolio.

Previous wording

Net charge-offs to average total loans was 0.07% and 0.11% for the three months ended June 30, 2024 and 2023, respectively, and net charge-offs to average total loans was 0.08% and 0.11% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Net charge-offs to average total loans was 0.04% and 0.08% for the three months ended September 30, 2024 and 2023, respectively, and net charge-offs to average total loans was 0.07% and 0.10% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Total non-interest income was $42.8 million and $84.6 million for the three and six months ended June 30, 2024, compared to $49.5 million and $83.7 million for the same period in 2023. Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.

Current wording

Total non-interest income was $42.8 million and $127.4 million for the three and nine months ended September 30, 2024, compared to $43.4 million and $127.1 million for the same period in 2023. Our recurring non-interest income includes service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending income, insurance commissions, increase in cash value of life insurance, fair value adjustment for marketable securities and dividends.

Previous wording

Table 6 measures the various components of our non-interest income for the three and six months ended June 30, 2024 and 2023.

Current wording

Table 6 measures the various components of our non-interest income for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Non-interest income decreased $6.7 million, or 13.6%, to $42.8 million for the three months ended June 30, 2024 from $49.5 million for the same period in 2023. The primary factors that resulted in this decrease were the decreases in other service charges and fees, fair value adjustment for marketable securities and other income, which was partially offset by increases in mortgage lending income and the gain on sale of branches, equipment and other assets, net.

Current wording

Non-interest income decreased $634,000, or 1.5%, to $42.8 million for the three months ended September 30, 2024 from $43.4 million for the same period in 2023. The primary factor that resulted in this decrease was the decreases in fair value adjustment for marketable securities, which was partially offset by increases in other service charges and fees, mortgage lending income and other income.

Previous wording

•The $2.8 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees and Mastercard income, partially offset by an increase in merchant service income.

Current wording

•The $362,000 increase in other service charges and fees is primarily related to an increase in Centennial CFG property finance loan fees.

Previous wording

•The $1.6 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.

Current wording

•The $1.3 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.

Previous wording

•The $1.1 million decrease in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.

Current wording

•The $3.1 million decrease in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.

Previous wording

•The $8.5 million decrease in other income is primarily due to a $7.0 million reduction in income for equity method investments, a $2.8 million reduction in BOLI death benefit income and a $398,000 decrease in recoveries on historic losses, partially offset by an $852,000 increase in rental income from other real estate owned ("OREO") and a $689,000 increase in investment brokerage fee income.

Current wording

•The $1.3 million increase in other income is primarily due to a $737,000 increase in rental income from other real estate owned ("OREO"), a $230,000 increase in investment brokerage fee income and a $705,000 increase in recoveries on historic losses, partially offset by a $338,000 reduction in BOLI death benefit income.

Previous wording

Non-interest income increased $900,000, or 1.1%, to $84.6 million for the six months ended June 30, 2024 from $83.7 million for the same period in 2023. The primary factors that resulted in this increase were the increases in fair value adjustment for marketable securities, trust fees, mortgage lending income and the gain on sale of branches, equipment and other assets, net, which was partially offset by decreases in other service charges and fees and other income.

Current wording

Non-interest income increased $266,000, or 0.2%, to $127.4 million for the nine months ended September 30, 2024 from $127.1 million for the same period in 2023. The primary factors that resulted in this increase were the increases in fair value adjustment for marketable securities, trust fees, mortgage lending income and the gain on sale of branches, equipment and other assets, net, which was partially offset by decreases in other service charges and fees and other income.

Previous wording

•The $1.1 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees and Mastercard income and incentives.

Current wording

•The $2.4 million decrease in other service charges and fees is primarily related to decreases in Centennial CFG property finance loan fees and Mastercard income.

Previous wording

•The $871,000 increase in trust fees is primarily related to increases in IRA fees, retirement fees and other fees.

Current wording

•The $614,000 increase in trust fees is primarily related to increases in personal trust fees, employee trust fees, IRA fees and retirement fees.

Previous wording

•The $2.6 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.

Current wording

•The $3.9 million increase in mortgage lending income is primarily related to an increase in volume of secondary market loans from the lower volume of loans during 2023.

Previous wording

•The $11.4 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.

Current wording

•The $8.2 million increase in the fair value adjustment for marketable securities is due to the changes in the fair value of marketable securities held by the Company.

Previous wording

•The $13.0 million decrease in other income is primarily due to a $9.9 million reduction of income for equity method investments, a $2.8 million reduction in BOLI death benefit income and a $4.2 million decrease in recoveries on historic losses, partially offset by a $2.1 million increase in rental income from OREO, a $1.3 million increase in investment brokerage fee income and a $372,000 increase in miscellaneous income.

Current wording

•The $11.6 million decrease in other income is primarily due to a $9.9 million reduction in income for equity method investments, a $3.0 million reduction in BOLI death benefit income and a $3.5 million decrease in recoveries on historic losses, partially offset by a $2.9 million increase in rental income from OREO and a $1.5 million increase in investment brokerage fee income.

Previous wording

Table 7 below sets forth a summary of non-interest expense for the three and six months ended June 30, 2024 and 2023.

Current wording

Table 7 below sets forth a summary of non-interest expense for the three and nine months ended September 30, 2024 and 2023.