Financial Data and Key Metrics Changes - Earnings for the quarter were $103 million or $0.51 per share, with adjusted earnings of $0.54 per share [47] - Return on assets was 1.84%, adjusted to 1.95%, while return on tangible common equity was 19.75%, adjusted to 20.90% [47] - Tangible book value increased by 5.4% from the first quarter, reaching $10.71 [47] - Net interest margin improved to 4.37% from 4.21%, a significant increase from 3.21% a year ago [68] - Total deposits declined slightly less than $500 million in the quarter, marking the lowest decline since the Happy Acquisition [102] Business Line Data and Key Metrics Changes - Loan origination volumes softened to $1.09 billion, with over 75% coming from Community Bank regions [76] - Non-performing loans and non-performing assets remained low at 0.51% and 0.33% respectively [78] - The yield on the loan book increased to 6.64%, up from 6.23% [97] Market Data and Key Metrics Changes - The company reported a quarterly decline in total deposits, which was spread evenly across the past three months [102] - The mix of deposit accounts stands at approximately two-thirds commercial or business and one-third retail, with 80% of accounts being retail [103] Company Strategy and Development Direction - The company aims to maintain strong liquidity and capital ratios, with a total risk-based capital ratio ending at 16.8% [55] - The management is cautious about loan growth, focusing on servicing existing customers and being selective in new lending opportunities [126] - The company is looking for opportunistic acquisitions but remains cautious due to the current market conditions [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to weather the current banking crisis, emphasizing strong liquidity and capital [40][64] - There is a belief that the current turmoil in the banking sector may not be over, and the company is prepared to navigate through potential challenges [127] - Management highlighted the importance of protecting existing customer relationships while being cautious about new lending [12][126] Other Important Information - The company has repurchased 590,000 shares during the first quarter and continues to be active under its stock repurchase plan [55] - The allowance for credit losses remains at 2% of loans, providing 388% coverage of non-performing loans [79] Q&A Session Summary Question: How is the company managing deposit outflows? - Management noted that deposit outflows were down about 4.90% through the quarter, the lowest seen in a while, and some deposits have started to flow back in [33] Question: What is the company's outlook on loan growth? - Management indicated that while there is potential for loan growth, they are being very careful and selective in their lending practices [126] Question: How does the company view the current banking crisis? - Management expressed that the crisis is serious and fragile, but the company is well-positioned to handle it due to strong liquidity and capital [12][64]

Financial Performance - Total assets increased to $22.88 billion in 2022 from $18.05 billion in 2021, representing a growth of 26.5%[1] - Total deposits rose to $17.94 billion in 2022, up from $14.26 billion in 2021, marking a 25.5% increase[1] - Total revenue for 2022 was $933.79 million, a 31.4% increase from $710.54 million in 2021[1] - Net income for 2022 was $305.26 million, a decrease of 4.3% compared to $319.02 million in 2021[1] - Basic earnings per share decreased to $1.57 in 2022 from $1.94 in 2021, a decline of 19.1%[204] - The efficiency ratio for 2022 was 49.53%, compared to 40.81% in 2021, indicating a decrease in operational efficiency[214] - The return on average assets was 1.35% in 2022, down from 1.83% in 2021[214] - The allowance for credit losses increased to $289.67 million in 2022 from $236.71 million in 2021, reflecting a rise in credit risk provisions[206] - Net income decreased by $13.8 million, or 4.3%, to $305.3 million for the year ended December 31, 2022, compared to $319.0 million in 2021[216] Acquisitions and Growth Strategy - The acquisition of Happy Bancshares, Inc. was completed for approximately $962.5 million, including 42.4 million shares of common stock valued at $958.8 million[26] - The company aims to continue expanding its presence in Texas, Arkansas, Florida, and Alabama through strategic acquisitions[33] - The company has acquired a total of 23 banks since 1999, with 18 of those acquisitions occurring since 2010, including the acquisition of Happy Bancshares in Q2 2022[173] - The company’s growth strategy includes acquisitions and de novo branching, which are subject to regulatory approval and associated risks[168] Loan Portfolio - As of December 31, 2022, the total loan portfolio amounted to $14,409,480,000, with real estate loans comprising 72.4% of the portfolio[38] - Non-farm/non-residential real estate loans totaled $5,632,063,000, representing 39.1% of the loan portfolio[38] - Construction and land development loans were $2,135,266,000, accounting for 14.8% of the total loan portfolio[39] - Residential real estate loans, including 1-4 family and multifamily properties, totaled $2,326,603,000, which is 16.1% of the portfolio[38] - Consumer loans amounted to $1,149,896,000, making up 8.0% of the total loan portfolio[38] - Commercial and industrial loans totaled $2,349,263,000, representing 16.3% of the loan portfolio[38] - Agricultural loans were $285,235,000, accounting for 2.0% of the total loan portfolio[38] - Approximately 72.5% of the total loan portfolio was secured by real estate, with commercial real estate loans totaling $5.98 billion, or 41.5% of total loans[153] - The company had a total of $6.46 billion, or 44.8% of total loans, committed to borrowers whose total debt exceeds the established in-house lending limit of $40 million[159] Regulatory Environment - The company is subject to additional supervision and regulation due to its bank subsidiary's total assets exceeding $10 billion[61] - The Dodd-Frank Act and EGRRCPA provisions govern the practices and oversight of financial institutions, impacting the company's operations[63] - The company is required to conduct annual company-run stress tests due to its average total consolidated assets exceeding $10 billion[80] - The company continues to utilize its risk committee to oversee enterprise-wide risk management practices despite no longer being required to maintain one[81] - The bank subsidiary is required to maintain adequate capital levels above regulatory guidelines, affecting its ability to pay dividends[86] - The CFPB supervises depository institutions with total assets of $10 billion or greater, focusing on consumer risks and compliance with federal consumer financial laws[105] - Companies with total assets exceeding $10 billion are subject to increased regulatory requirements, including a deposit assessment rate between 2.5 to 42 basis points based on performance metrics[139] - The Federal Reserve Board mandates that a bank holding company should not maintain cash dividends that could pressure the capital of its bank subsidiary[84] Risk Factors - Economic downturns have historically adversely affected the banking industry, particularly community banks, leading to increased delinquencies and foreclosures[141] - The COVID-19 pandemic has resulted in credit losses and increased allowance for credit losses in loan portfolios, affecting overall financial performance[143] - Changes in interest rates can significantly affect profitability, with potential adverse impacts on loan demand and borrower repayment capabilities[148] - The company may face increased loan loss reserves due to economic downturns, which could negatively impact operating results[152] - The company has faced risks related to fraud and compliance failures, particularly in loan origination and transactions, which could adversely impact its loan portfolio performance[184] Employee and Community Engagement - The company had 2,774 full-time equivalent employees as of December 31, 2022, with expectations for slight increases in staffing levels for 2023[54] - As of December 31, 2022, 70% of the company's employees were women, and 26% identified as a person of color[56] - 60% of the company's leadership positions were held by women as of December 31, 2022[56] Investment and Securities - The company owned $4.04 billion of available-for-sale investment securities as of December 31, 2022, which may be adversely affected by market conditions[163] - The company owned $1.29 billion of held-to-maturity investment securities, which are reported at historical cost adjusted for amortization[164] Compliance and Legal Matters - The company redeemed all outstanding trust preferred securities during the second and third quarters of 2022, resulting in no longer holding any such securities[72] - The bank subsidiary must comply with various federal and state consumer protection laws, which can result in significant liabilities if violated[104] - The company recorded $10.0 million in income from a lawsuit settlement, net of legal expenses[216] Technological and Operational Challenges - The company relies heavily on third-party service providers for core banking services, and any disruption in these services could materially impact its operations[183] - The company has experienced technological changes and may have fewer resources than competitors to invest in technological improvements, affecting its future success[178]

Home Bancshares, Inc. (Conway, AR) (NYSE:HOMB) Q3 2022 Earnings Conference Call October 20, 2022 2:00 PM ET Company Participants Donna Townsell - Senior EVP, Director, Investor Relations, Executive Officer & Director John Allison - Co-Founder, Chairman, President & CEO Kevin Hester - Chief Lending Officer & Executive Officer Chris Poulton - President, Centennial Commercial Finance Group Stephen Tipton - Chief Operating Officer & Executive Officer Brian Davis - CFO, Treasurer, Executive Officer & Director Tr ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ______ to ______ Commission File Number: 001-41093 HOME BANCSHARES, INC. (Exact Name of Registrant as Specified in Its Charter) Arkansas 71-068 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ______ to ______ Commission File Number: 001-41093 HOME BANCSHARES, INC. (Exact Name of Registrant as Specified in Its Charter) (State or othe ...

Financial Data and Key Metrics Changes - The company reported an EPS of $0.40 for Q1 2022, which slightly exceeded expectations [4] - The liquidity position stands at approximately $3.8 billion, with a decision to use $300 million to retire floating rate subordinated notes, resulting in annual savings of $7.5 million [4][6] - The net interest income for Q1 2022 was $131.1 million, with a net interest margin of 3.21%, a decrease of 21 basis points from Q4 [31] Business Line Data and Key Metrics Changes - Centennial Bank's assets increased to $18.6 billion, up from $18 billion, representing a 3% growth [25] - Loans grew to $10 billion, up from $9.8 billion, a 2% increase for the quarter [25] - Deposits rose to $15.2 billion, up from $14.5 billion, marking a 4.5% increase [25] Market Data and Key Metrics Changes - The company experienced a significant change in the securities portfolio, with an unrealized loss of $101 million due to market conditions [12] - The allowance for loan loss to total loans was reported at 2.35%, with non-performing loans at 0.44%, indicating strong asset quality [26] Company Strategy and Development Direction - The acquisition of Happy Bancshares is part of a strategic focus to expand into high-growth Texas markets, with strong loan demand anticipated [10] - The company aims to maintain a disciplined approach to loan pricing and underwriting amidst rising interest rates [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a fortress balance sheet and a disciplined strategy as key strengths [21] - The expectation of continued interest rate hikes, with potential increases of 100 to 200 basis points, was highlighted as a significant factor affecting the market [16][17] Other Important Information - The company received recognition as Forbes' Number 1 bank in America for outstanding performance in 2021 [9] - The company is well-capitalized, with Tier 1 capital at $1.9 billion and total risk-based capital at $2.6 billion [32] Q&A Session Summary Question: What is the strategy for deploying the $3.5 billion liquidity? - Management indicated a need to see yields with a "four" in front before deploying funds, suggesting a cautious approach to investment [66][67] Question: How is the company approaching the current lending environment? - Management emphasized the importance of remaining disciplined in loan pricing and underwriting, given the challenges posed by rising rates and high asset prices [71] Question: What is the appetite for further portfolio acquisitions? - Management expressed a willingness to explore opportunistic acquisitions similar to the recent Lending Club deal, contingent on favorable conditions [80]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Home BancShares, Inc. operates as a bank holding company through Centennial Bank, focusing on commercial real estate lending and growth through acquisitions and national platforms, subject to extensive banking regulations Key Financial Data (2019-2021) | | 2021 | 2020 | 2019 | |---|---|---|---| | | (In thousands) | | | | **Total assets** | $18,052,138 | $16,398,804 | $15,032,047 | | **Total deposits** | $14,260,570 | $12,725,790 | $11,278,383 | | **Total revenue** | $710,540 | $694,341 | $662,733 | | **Net income** | $319,021 | $214,448 | $289,539 | - The company operates through its wholly-owned community bank subsidiary, Centennial Bank, with branches in Arkansas, Florida, South Alabama, and New York City[14](index=14&type=chunk) - Commercial real estate loans represented **59.7%** of gross loans as of December 31, 2021[14](index=14&type=chunk) - Growth strategy includes strategic acquisitions, with the proposed acquisition of Happy Bancshares, Inc. expected to close in Q1 2022, and organic growth through national lending platforms[37](index=37&type=chunk) [Lending Activities](index=11&type=section&id=Item%201.%20Business%23Lending%20Activities) The company's lending is heavily concentrated in real estate, particularly commercial real estate at **59.7%** of gross loans, and includes significant past participation in the PPP, with tiered loan approval processes in place Loan Portfolio Composition as of December 31, 2021 | Loan Category | Amount (in thousands) | Percentage of Portfolio | |---|---|---| | **Real estate:** | | | | Commercial real estate (Non-farm/non-residential) | $3,889,284 | 39.5% | | Construction/land development | $1,850,050 | 18.8% | | Residential 1-4 family | $1,274,953 | 13.0% | | Multifamily residential | $280,837 | 2.9% | | Agricultural (Real Estate) | $130,674 | 1.3% | | **Total real estate** | **$7,425,798** | **75.5%** | | **Consumer** | $825,519 | 8.4% | | **Commercial and industrial** | $1,386,747 | 14.1% | | **Agricultural (Non-Real Estate)** | $43,920 | 0.4% | | **Other** | $154,105 | 1.6% | | **Total** | **$9,836,089** | **100.0%** | - The company participated in the Paycheck Protection Program (PPP), generating **12,971 loans** totaling **$1.23 billion**. As of December 31, 2021, the outstanding PPP loan balance was **$112.8 million**[49](index=49&type=chunk) - Loan approval authority is tiered, with regional Directors' Loan Committees having authority up to **$6.0 million** and the Executive Loan Committee having authority up to the bank's legal lending limit[53](index=53&type=chunk) [Supervision and Regulation](index=15&type=section&id=Item%201.%20Business%23Supervision%20and%20Regulation) The company and its subsidiary are subject to extensive state and federal banking regulations, including heightened supervision by the CFPB due to exceeding **$10 billion** in assets, and must comply with Basel III capital requirements and the Durbin Amendment - As a bank holding company with **over $10 billion** in assets, the company is subject to additional supervision and regulation, including by the Consumer Financial Protection Bureau (CFPB)[68](index=68&type=chunk)[118](index=118&type=chunk) - The company is subject to Basel III capital rules. As its total assets were **less than $15 billion** on Dec 31, 2009, its trust preferred securities are grandfathered as Tier 1 capital. However, this treatment will be phased out upon the completion of the Happy Bancshares acquisition[84](index=84&type=chunk)[474](index=474&type=chunk) - The company participated in COVID-19 relief programs under the CARES Act, including the Paycheck Protection Program (PPP) and providing loan modifications, which were subject to specific regulatory guidance and accounting relief[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant industry, operational, and strategic risks, including extensive regulation, economic downturns, high concentration in commercial real estate loans (**59.7%**), geographic concentration, reliance on key personnel, and acquisition-related challenges - A high concentration of real estate loans, particularly commercial real estate at **59.7%** of the total loan portfolio, exposes the company to increased lending risk from downturns in the real estate market[171](index=171&type=chunk)[172](index=172&type=chunk) - **Exceeding $10 billion** in total assets subjects the company to heightened regulatory requirements, including supervision by the CFPB and lower debit card interchange fees under the Durbin Amendment, which increases compliance costs and reduces certain revenues[152](index=152&type=chunk)[153](index=153&type=chunk) - The pending acquisition of Happy Bancshares presents risks related to successful integration, realization of anticipated benefits, potential loss of key employees or customers, and incurring substantial merger-related expenses[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) - The company's success depends significantly on key executives, including Chairman John W. Allison. The loss of their services could materially and adversely affect the business[179](index=179&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from the SEC staff received more than 180 days prior to the fiscal year-end - There are no unresolved Commission staff comments as of the report date[216](index=216&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) The company's main office is in Conway, Arkansas, and its subsidiary, Centennial Bank, operated **160 branches** across Arkansas, Florida, Alabama, and New York City as of December 31, 2021 - As of December 31, 2021, Centennial Bank operated **76 branches** in Arkansas, **78 in Florida**, **five in Alabama**, and **one in New York City**[217](index=217&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, but management believes none will have a material adverse effect on its business or financial condition - Management believes there are no pending or threatened legal proceedings that will have a material adverse effect on the company's financial condition[218](index=218&type=chunk) [Mine Safety Disclosure](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This disclosure item is not applicable to the company's operations - Not applicable[219](index=219&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock (HOMB) trades on the NYSE, with **1,233 stockholders** as of February 2022, and the company repurchased **311,500 shares** in Q4 2021, though its stock underperformed key indices over the past five years Issuer Purchases of Equity Securities (Q4 2021) | Period | Number of Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Publicly Announced Plans | |---|---|---|---| | Oct 1 - Oct 31, 2021 | 161,500 | $23.98 | 161,500 | | Nov 1 - Nov 30, 2021 | — | — | — | | Dec 1 - Dec 31, 2021 | 150,000 | $23.97 | 150,000 | | **Total** | **311,500** | | **311,500** | - The company's stock performance from Dec 31, 2016 to Dec 31, 2021, with a starting value of $100, ended at **$98.87**, underperforming the Russell 2000 Index (**$176.39**) and the SNL Bank and Thrift Index (**$160.89**)[228](index=228&type=chunk) [Selected Financial Data](index=43&type=section&id=Item%206.%20Selected%20Financial%20Data) The company's 2021 selected financial data shows significant profitability growth, with net income reaching **$319.0 million** and diluted EPS at **$1.94**, driven by a negative provision for credit losses, alongside improved asset quality and strong performance ratios Selected Financial Data (2019-2021) | (Dollars in thousands, except per share data) | 2021 | 2020 | 2019 | |---|---|---|---| | **Net interest income** | $572,971 | $582,555 | $563,217 | | **Provision for credit losses** | $(4,752) | $129,253 | $1,325 | | **Net income** | $319,021 | $214,448 | $289,539 | | **Diluted earnings per common share** | $1.94 | $1.30 | $1.73 | | **Total assets (period end)** | $18,052,138 | $16,398,804 | $15,032,047 | | **Loans receivable (period end)** | $9,836,089 | $11,220,721 | $10,869,710 | | **Total deposits (period end)** | $14,260,570 | $12,725,790 | $11,278,383 | | **Return on average assets** | 1.83% | 1.33% | 1.93% | | **Non-performing assets to total assets** | 0.29% | 0.48% | 0.43% | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation) The MD&A details the company's 2021 financial performance, highlighting a **48.8%** increase in net income to **$319.0 million** due to reduced credit loss expense, a decline in net interest margin, a **$1.38 billion** decrease in loans, and significant improvements in asset quality - Net income for 2021 increased by **$104.6 million** (**48.8%**) to **$319.0 million**, largely due to a negative provision for credit losses of **$4.8 million** in 2021 versus a **$129.3 million** expense in 2020[246](index=246&type=chunk)[301](index=301&type=chunk) - Net interest margin decreased to **3.66%** in 2021 from **4.06%** in 2020. This was primarily driven by a **46 basis point** dilutive impact from excess liquidity held in low-yielding cash balances[248](index=248&type=chunk)[305](index=305&type=chunk) - Total loans decreased by **$1.38 billion** (**12.3%**) to **$9.84 billion**, mainly due to **$910.1 million** in PPP loan forgiveness and an organic loan decline of **$822.2 million**[350](index=350&type=chunk)[352](index=352&type=chunk)[355](index=355&type=chunk) - Asset quality improved, with non-performing loans decreasing by **$23.9 million** to **$50.2 million**, or **0.51%** of total loans, down from **0.66%** at year-end 2020[252](index=252&type=chunk)[383](index=383&type=chunk) [Critical Accounting Policies and Estimates](index=51&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation%23Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates, notably the Allowance for Credit Losses (ACL) under the CECL methodology, which resulted in a **$44.0 million** increase upon adoption, and the annual impairment testing of goodwill - The company adopted the CECL (Current Expected Credit Loss) methodology on January 1, 2020, which replaced the incurred loss model. This resulted in a one-time cumulative-effect adjustment increasing the allowance for credit losses by **$44.0 million**[268](index=268&type=chunk)[269](index=269&type=chunk) - The allowance for credit losses is estimated using a discounted cash flow method for various loan segments, incorporating historical loss experience adjusted for current conditions and reasonable forecasts of economic indicators like unemployment and GDP[275](index=275&type=chunk)[276](index=276&type=chunk) - Goodwill and other intangible assets, which totaled **$998.1 million** at year-end 2021, are tested for impairment at least annually. No impairment was recorded in 2021[193](index=193&type=chunk)[285](index=285&type=chunk) [Allowance for Credit Losses (ACL)](index=76&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation%23Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) decreased to **$236.7 million** (**2.41%** of loans) at year-end 2021, primarily due to **$8.8 million** in net charge-offs and no provision for credit losses, reflecting improved asset quality with ACL coverage of non-performing loans increasing to **471.61%** Analysis of Allowance for Credit Losses (in thousands) | | 2021 | 2020 | |---|---|---| | **Balance, beginning of year** | **$245,473** | **$102,122** | | Impact of adopting ASC 326 | — | 43,988 | | Allowance on acquired loans | — | 357 | | Total loans charged off | (11,661) | (14,486) | | Total recoveries | 2,902 | 2,070 | | **Net loans charged off** | **(8,759)** | **(12,416)** | | Provision for credit loss - loans | — | 102,113 | | Provision for credit loss - acquired loans | — | 9,309 | | **Balance, end of year** | **$236,714** | **$245,473** | - The allowance for credit losses as a percentage of total loans was **2.41%** at year-end 2021, compared to **2.19%** at year-end 2020[429](index=429&type=chunk) - The increase in collateral-dependent impaired loans to **$331.5 million** in 2021 from **$112.7 million** in 2020 was primarily due to changing the valuation method for lodging and assisted living loans to a market price methodology, which involved assigning a **15%** discount to par[420](index=420&type=chunk)[666](index=666&type=chunk) [Liquidity and Capital Adequacy Requirements](index=87&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation%23Liquidity%20and%20Capital%20Adequacy%20Requirements) The company maintains strong liquidity and capital, with the parent holding **$291.6 million** in cash, and both the company and Centennial Bank exceeding Basel III "well-capitalized" requirements, including a **19.77%** Total risk-based capital ratio at year-end 2021 Risk-Based Capital Ratios (Home BancShares, Inc.) | Ratio | Dec 31, 2021 | Dec 31, 2020 | Minimum to be Well-Capitalized | |---|---|---|---| | Common equity Tier 1 capital | 15.37% | 13.42% | 6.50% | | Tier 1 risk-based capital | 15.98% | 14.01% | 8.00% | | Total risk-based capital | 19.77% | 17.75% | 10.00% | | Leverage ratio | 11.11% | 10.85% | 5.00% | - The company has elected to adopt the interim final rule allowing a five-year transition period (2-year delay, 3-year phase-in) for the regulatory capital impact of CECL adoption[479](index=479&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=95&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company primarily manages interest rate risk through NII simulation and economic value of equity analysis, projecting an **11.67%** increase in NII from a **200 basis point** rate hike and a **3.18%** decrease from a **100 basis point** rate cut as of December 31, 2021 Sensitivity of Net Interest Income (as of Dec 31, 2021) | Interest Rate Scenario | Percentage Change from Base | |---|---| | Up 200 basis points | 11.67% | | Up 100 basis points | 5.42% | | Down 100 basis points | (3.18)% | | Down 200 basis points | (5.26)% | - The company's primary methods for analyzing and managing interest rate risk are net interest income simulation modeling and economic value of equity[519](index=519&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=96&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's 2021 consolidated financial statements, with management asserting effective internal controls and BKD, LLP issuing an unqualified opinion, while identifying the Allowance for Credit Losses as a Critical Audit Matter due to its subjective estimation - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[530](index=530&type=chunk) - The independent auditor, BKD, LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[534](index=534&type=chunk)[535](index=535&type=chunk) - The auditor identified the Allowance for Credit Losses as a Critical Audit Matter due to the high degree of subjectivity and complexity in the models and qualitative adjustments used in the estimate[539](index=539&type=chunk)[541](index=541&type=chunk) [Notes to Consolidated Financial Statements](index=106&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data%23Notes%20to%20Consolidated%20Financial%20Statements) The notes to the financial statements detail key accounting policies, including the 2020 CECL adoption, business combinations like the pending Happy Bancshares acquisition, and significant subsequent events such as a **$300 million** subordinated note issuance and a **$238 million** marine loan portfolio purchase in early 2022 - The company is set to acquire Happy Bancshares, Inc. in a stock transaction expected to close in Q1 2022. Happy shareholders will receive **2.17 shares** of HOMB common stock for each share of Happy common stock[619](index=619&type=chunk)[621](index=621&type=chunk) - On February 4, 2022, the company purchased a performing marine loan portfolio of approximately **$238 million** from LendingClub Bank[776](index=776&type=chunk) - On January 18, 2022, the company issued **$300 million** of **3.125%** Fixed-to-Floating Rate Subordinated Notes due 2032[773](index=773&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=156&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - No items are reportable under this item[777](index=777&type=chunk) [Controls and Procedures](index=156&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes identified during Q4 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[778](index=778&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, the company's internal controls[780](index=780&type=chunk) [Other Information](index=156&type=section&id=Item%209B.%20Other%20Information) No items were reportable under this section for the period - No items are reportable[781](index=781&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=157&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 proxy statement - This section is incorporated by reference from the company's 2022 proxy statement[784](index=784&type=chunk) [Executive Compensation](index=157&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 proxy statement - This section is incorporated by reference from the company's 2022 proxy statement[785](index=785&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=157&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated from the 2022 proxy statement, with **3,015,016 securities** issuable from outstanding options and **1,625,136** available for future issuance under equity plans as of December 31, 2021 Equity Compensation Plan Information as of December 31, 2021 | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | |---|---|---|---| | Equity compensation plans approved by stockholders | 3,015,016 | $20.06 | 1,625,136 | [Certain Relationships and Related Transactions, and Director Independence](index=157&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2022 proxy statement - This section is incorporated by reference from the company's 2022 proxy statement[788](index=788&type=chunk) [Principal Accounting Fees and Services](index=157&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2022 proxy statement - This section is incorporated by reference from the company's 2022 proxy statement[789](index=789&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=158&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including merger agreements, corporate governance documents, and required certifications - The financial statements and schedules listed in the index are filed as part of this report[792](index=792&type=chunk) - A comprehensive list of exhibits is provided, including merger agreements, corporate governance documents, and required certifications[793](index=793&type=chunk)[794](index=794&type=chunk) [Form 10-K Summary](index=160&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None[795](index=795&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 2021 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from to Commission File Number: 000-51904 HOME BANCSHARES, INC. (Exact Name of Registrant as Specified in Its Charter) Arkansas 71-0682831 (State or other jurisd ...

Financial Data and Key Metrics Changes - The company reported earnings of $75 million or $0.46 per share for Q3 2021, with year-to-date earnings of $245.7 million or $1.49 per share, marking a record for the company [7][8]. - The return on assets (ROA) was reported at 1.68%, with a potential adjusted ROA of 2% when excess capital is excluded [8][14]. - The company maintained a strong capital ratio, with a return on tangible common equity (ROTCE) of 17.39% and a non-interest expense increase of $8 million year-over-year [15][43]. Business Line Data and Key Metrics Changes - Centennial Bank's total revenue for Q3 was $178 million, leading to a year-to-date total of $546 million, with an efficiency ratio of 37.54 [32]. - Non-interest income for Centennial Bank increased by 16%, driven by service charges and mortgage activities [33]. - The boat finance segment reported a year-to-date pre-tax profit contribution of $23 million, exceeding the full year 2020 profit of $21 million [59]. Market Data and Key Metrics Changes - Unfunded commitments of loans and credit lines increased by $250 million to $3 billion, indicating expected loan growth in the second half of the year [13]. - The commercial real estate portfolio grew by over $100 million, while the C&I book saw modest declines due to corporate borrowers paying down facilities [56]. - Total deposits increased by $112 million during Q3, with non-interest bearing balances now representing 30% of the total deposit base [65]. Company Strategy and Development Direction - The company is focused on growth through mergers and acquisitions, specifically highlighting the acquisition of Happy BancShares as a strategic move to enhance shareholder value [9][10]. - The management emphasized the importance of maintaining asset quality and disciplined loan growth, avoiding low-quality loans despite competitive pressures [14][88]. - The company aims to align Happy Banc's expenses with its own to maximize profitability post-acquisition [101]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth in the second half of 2021, citing a solid pipeline and improved credit metrics [47][50]. - The management acknowledged the challenges posed by supply chain disruptions but remained confident in the demand for their products [57]. - The company plans to maintain high loan loss reserves in light of the recent acquisition, ensuring prudent risk management [118]. Other Important Information - The company reported a significant increase in excess liquidity, which has impacted net interest margin (NIM) negatively [41]. - The management highlighted the importance of maintaining a strong capital position, with tier one capital at $1.8 billion and total risk-based capital at $2.3 billion [43][44]. - The company is actively considering redeeming subordinated debt to enhance earnings [102][110]. Q&A Session Summary Question: What changed between August and September regarding loan demand? - Management indicated that there was no significant change; rather, the anticipated loan growth began to materialize as previously expected [84]. Question: What is the expected long-term growth rate for the company? - Management suggested a normal growth rate of 3% to 5%, with potential for 5% in favorable conditions [100]. Question: How does the company view its loan loss reserves? - Management expressed a desire to maintain high reserves, especially after acquiring Happy Banc, to ensure prudent risk management [118]. Question: Will the company continue to be active in stock buybacks? - Management confirmed ongoing stock buyback activities, emphasizing the importance of completing the Happy transaction first [111].

Transaction Overview - Home BancShares (HOMB) will acquire Happy Bancshares in a transaction valued at $919 million[14] - Each share of Happy Bancshares will be exchanged for 2.17 shares of HOMB[11] - Happy shareholders are expected to own approximately 21% of the combined company[18] - The transaction is anticipated to close in Q1 2022, pending shareholder and regulatory approvals[24, 26, 27] Financial Impact - The acquisition is projected to be accretive to EPS by 5.5% in 2022E and 9.2% in 2023E[28] - It is also expected to be accretive to book value per share (BVPS) and tangible book value per share (TBVPS)[6, 28] - Estimated cost savings of approximately $53 million are anticipated, phased in over time[45, 47] - A gross credit mark of 2.12% is applied to Happy's gross loans projected at closing, which is about $3.6 billion[52] Combined Company - The combined company will have approximately $24 billion in total assets and $19 billion in deposits[8] - Happy State Bank will operate as a division of Centennial Bank in Texas[23] - The merger will add over $3 billion in wealth and trust assets[6]