
Part I: Financial Information Item 1: Financial Statements This section presents the unaudited consolidated financial statements for Home BancShares, Inc. as of March 31, 2023, and for the three-month period then ended, with comparative data for prior periods Consolidated Balance Sheets The Consolidated Balance Sheet shows a slight decrease in total assets to $22.52 billion as of March 31, 2023, from $22.88 billion at year-end 2022, primarily driven by a decrease in investment securities and total deposits, while stockholders' equity increased to $3.63 billion Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $22,518,255 | $22,883,588 | | Loans receivable, net | $14,099,465 | $14,119,811 | | Total investment securities | $5,058,511 | $5,329,295 | | Total Liabilities | $18,887,370 | $19,357,226 | | Total deposits | $17,445,466 | $17,938,783 | | Total Stockholders' Equity | $3,630,885 | $3,526,362 | Consolidated Statements of Income For the three months ended March 31, 2023, the company reported a significant year-over-year increase in net income to $103.0 million from $64.9 million, driven by a substantial rise in net interest income reflecting the higher interest rate environment and the Happy Bancshares acquisition Consolidated Income Statement Highlights (Unaudited) | (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net interest income | $214,595 | $131,148 | | Provision for credit losses | $1,200 | $— | | Non-interest income | $34,164 | $30,669 | | Non-interest expense | $114,644 | $76,896 | | Net income | $102,962 | $64,892 | | Diluted earnings per share | $0.51 | $0.40 | Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $3.53 billion at the start of 2023 to $3.63 billion at March 31, 2023, primarily driven by net income and positive changes in other comprehensive income, partially offset by common stock dividends and stock repurchases - Key changes in stockholders' equity for Q1 2023 included: - Net income of $103.0 million20 - Other comprehensive income of $49.2 million20 - Cash dividends paid of $36.6 million ($0.18 per share)20 - Repurchase of 590,000 shares of common stock for $13.5 million20 Consolidated Statements of Cash Flows For the first three months of 2023, the company experienced a net decrease in cash and cash equivalents of $36.7 million, with net cash provided by operating activities of $117.9 million and investing activities providing $381.1 million, while financing activities used $535.8 million Cash Flow Summary (Unaudited) | (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $117,948 | $89,486 | | Net cash provided by (used in) investing activities | $381,140 | $(716,414) | | Net cash (used in) provided by financing activities | $(535,824) | $596,071 | | Net change in cash and cash equivalents | $(36,736) | $(30,857) | Condensed Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial statement components, covering the Happy Bancshares acquisition, investment and loan portfolios, allowance for credit losses, goodwill, deposits, borrowings, and regulatory capital - On April 1, 2022, the Company completed its acquisition of Happy Bancshares, Inc. for a total transaction value of approximately $962.5 million, adding $6.69 billion in assets and creating $425.2 million in goodwill495051 - As of March 31, 2023, the investment portfolio had gross unrealized losses of $343.7 million in the available-for-sale portfolio and $117.5 million in the held-to-maturity portfolio, primarily attributed to changes in interest rates rather than credit quality727879 - The allowance for credit losses on loans was $287.2 million as of March 31, 2023, down slightly from $289.7 million at year-end 202298[96](index=96&type=chunk] - A provision for credit losses of $1.2 million was recorded in Q1 202396 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the first quarter of 2023, highlighting a 58.7% increase in net income to $103.0 million year-over-year, attributing this growth to the Happy Bancshares acquisition and a rising interest rate environment that expanded the net interest margin to 4.37% Results of Operations Net income for Q1 2023 rose to $103.0 million ($0.51 per diluted share) from $64.9 million ($0.40 per diluted share) in Q1 2022, driven by a $140.0 million rise in interest income that outpaced the $56.6 million increase in interest expense, expanding the net interest margin to 4.37% Q1 Performance Comparison | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $103.0M | $64.9M | | Diluted EPS | $0.51 | $0.40 | | Net Interest Margin (FTE) | 4.37% | 3.21% | | Return on Average Assets | 1.84% | 1.43% | | Return on Average Equity | 11.70% | 9.58% | - The increase in net interest income was primarily due to higher yields on a larger base of earning assets, a result of both the Happy acquisition and the rising interest rate environment214252 Financial Condition Total assets decreased slightly to $22.52 billion at March 31, 2023, from $22.88 billion at year-end 2022, mainly due to a $270.8 million decrease in investment securities, while the loan portfolio remained stable and total deposits decreased by $493.3 million - The loan portfolio experienced a $94.6 million organic decline from the Centennial Commercial Finance Group, offset by $73.9 million in organic growth elsewhere283285 - Non-performing loans increased to $74.0 million (0.51% of total loans) from $60.9 million (0.42% of total loans) at year-end 2022218303 - The allowance for credit losses stood at $287.2 million, or 2.00% of total loans, as of March 31, 2023341 Liquidity and Capital Adequacy The company maintains strong capital ratios, with a Common Equity Tier 1 (CET1) ratio of 13.21% and a Total Risk-Based Capital ratio of 16.84% as of March 31, 2023, both well above regulatory minimums for being "well-capitalized," and management details the company's liquidity and risk management strategies Risk-Based Capital Ratios | Ratio | As of March 31, 2023 | Well-Capitalized Guideline | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 13.21% | 6.50% | | Tier 1 Risk-Based Capital | 13.21% | 8.00% | | Total Risk-Based Capital | 16.84% | 10.00% | | Leverage Ratio | 11.37% | 5.00% | Item 3: Quantitative and Qualitative Disclosures About Market Risk The company details its liquidity and market risk management framework, reporting total net available liquidity of $6.92 billion as of March 31, 2023, which exceeded net uninsured and uncollateralized deposits, and presents an interest rate sensitivity analysis showing an estimated 8.55% increase in net interest income in a +200 basis point rate shock scenario Available Liquidity as of March 31, 2023 | (in thousands) | Net Availability | | :--- | :--- | | Total Internal Liquidity | $2,743,339 | | Total External Liquidity | $4,180,764 | | Total Available Liquidity | $6,924,103 | - Net available liquidity of $6.92 billion exceeded the net uninsured deposit position of $5.21 billion by $1.72 billion408409 Net Interest Income Sensitivity | Interest Rate Scenario | Percentage Change from Base | | :--- | :--- | | Up 200 basis points | 8.55% | | Down 100 basis points | (4.83)% | Item 4: Controls and Procedures The company's Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2023, the disclosure controls and procedures were effective, with no material changes in the company's internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures are effective423 - No material changes to internal control over financial reporting were identified during the quarter ended March 31, 2023424 Part II: Other Information Item 1: Legal Proceedings The company reports no material pending legal proceedings outside of ordinary routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation425 Item 1A: Risk Factors There were no material changes from the risk factors disclosed in the company's 2022 Form 10-K, with the exception of a new risk factor concerning the potential adverse effects from the failure of other financial institutions - A new risk factor was added regarding the potential adverse effects from the failure of other financial institutions, which could lead to losses on investments, increased deposit insurance premiums, and negative impacts on stock price and investor confidence428 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2023, the company repurchased 590,000 shares of its common stock at an average price of $22.92 per share as part of its publicly announced stock repurchase program Share Repurchases in Q1 2023 | Period | Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2023 | 150,000 | $22.67 | | Feb 2023 | 60,000 | $23.95 | | Mar 2023 | 380,000 | $22.85 | | Total | 590,000 | - | Item 3: Defaults Upon Senior Securities Not applicable Item 4: Mine Safety Disclosures Not applicable Item 5: Other Information Not applicable Item 6: Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL data files