Home BancShares Inc.
08/07/2026 | Press release | Distributed by Public on 08/07/2026 10:13
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our Form 10-K, filed with the Securities and Exchange Commission on February 27, 2026, which includes the audited financial statements for the year ended December 31, 2025. Unless the context requires otherwise, the terms "Company," "us," "we," and "our" refer to Home BancShares, Inc. on a consolidated basis.
General
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank subsidiary, Centennial Bank (sometimes referred to as "Centennial" or the "Bank"). As of June 30, 2026, we had, on a consolidated basis, total assets of $24.71 billion, loans receivable, net of allowance for credit losses, of $16.80 billion, total deposits of $19.11 billion, and stockholders' equity of $4.55 billion.
We generate the majority of our revenue from interest on loans and investments, service charges, and mortgage banking income. Deposits and Federal Home Loan Bank ("FHLB") and other borrowed funds are our primary sources of funding. Our largest expenses are interest on our funding sources, salaries and related employee benefits and occupancy and equipment. We measure our performance by calculating our return on average common equity, return on average assets and net interest margin. We also measure our performance by our efficiency ratio, which is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a non-GAAP measure and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding adjustments such as merger and acquisition expenses and/or certain gains, losses and other non-interest income and expenses.
Table 1: Key Financial Measures
| As of or for the Three Months Ended June 30, | As of or for the Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| Total assets | $ | 24,713,248 | $ | 22,907,022 | $ | 24,713,248 | $ | 22,907,022 | |||||||||||||||
| Loans receivable | 17,127,208 | 15,180,624 | 17,127,208 | 15,180,624 | |||||||||||||||||||
| Allowance for credit losses | (328,369) | (281,869) | (328,369) | (281,869) | |||||||||||||||||||
| Total deposits | 19,113,105 | 17,488,432 | 19,113,105 | 17,488,432 | |||||||||||||||||||
| Total stockholders' equity | 4,547,435 | 4,085,316 | 4,547,435 | 4,085,316 | |||||||||||||||||||
| Net income | 119,327 | 118,403 | 237,536 | 233,612 | |||||||||||||||||||
| Basic earnings per share | 0.59 | 0.60 | 1.19 | 1.18 | |||||||||||||||||||
| Diluted earnings per share | 0.59 | 0.60 | 1.19 | 1.18 | |||||||||||||||||||
| Book value per share | 22.68 | 20.71 | 22.68 | 20.71 | |||||||||||||||||||
|
Tangible book value per share (non-GAAP)(1)
|
15.32 | 13.44 | 15.32 | 13.44 | |||||||||||||||||||
| Annualized net interest margin - FTE | 4.51% | 4.44% | 4.51% | 4.44% | |||||||||||||||||||
| Efficiency ratio | 44.54 | 41.68 | 43.14 | 41.94 | |||||||||||||||||||
|
Efficiency ratio, as adjusted (non-GAAP)(2)
|
40.46 | 42.01 | 41.19 | 42.42 | |||||||||||||||||||
| Return on average assets | 1.95 | 2.08 | 2.02 | 2.08 | |||||||||||||||||||
| Return on average common equity | 10.55 | 11.77 | 10.78 | 11.76 | |||||||||||||||||||
(1)See Table 25 for the non-GAAP tabular reconciliation.
(2)See Table 29 for the non-GAAP tabular reconciliation.
Overview
Results of Operations for the Three Months Ended June 30, 2026 and 2025
Our net income increased $924,000, or 0.8%, to $119.3 million for the three-month period ended June 30, 2026, from $118.4 million for the same period in 2025. On a diluted earnings per share basis, our earnings were $0.59 per share for the three-month period ended June 30, 2026 compared to $0.60 per share for the three-month period ended June 30, 2025. During the three months ended June 30, 2026, the Company recorded $5.2 million in provision for credit losses on loans. Also, during the three months ended June 30, 2026, the Company recorded $274,000 in BOLI death benefit income, $817,000 in income from the fair value adjustment for marketable securities and $12.7 million in merger and acquisition expense due to the completion of the previously announced acquisition of Mountain Commerce Bancorp, Inc ("MCBI") during the second quarter of 2026. The merger and acquisition expense reduced earnings per share by $0.05 per share for the three-month period ended June 30, 2026.
Total interest income increased $17.7 million, or 5.6%, total interest expense decreased $4.0 million, or 4.0% and non-interest income increased $2.4 million, or 4.6%. This was partially offset by a $19.5 million, or 16.8%, increase in non-interest expense. The increase in interest income resulted from a $22.0 million, or 8.0%, increase in loan interest income, which was partially offset by a $3.8 million, or 42.6%, decrease in interest income on deposits at other banks and a $472,000, or 1.4%, decrease in investment interest income. The decrease in interest expense was primarily due to a $1.8 million, or 42.8%, decrease in interest on subordinated debentures, a $1.2 million, or 21.5%, decrease in interest on FHLB and other borrowed funds and a $1.1 million, or 1.2%, decrease in interest on deposits. The increase in non-interest income was primarily due to a $1.1 million, or 443.3%, increase in the fair value adjustment for marketable securities, an $875,000, or 16.7%, increase in trust fees, a $478,000, or 5.0%, increase in service charges on deposit accounts, a $330,000, or 2.6%, increase in other service charges and fees and a $319,000, or 2,453.8%, increase in gain (loss) on OREO, which was partially offset by a $969,000, or 99.7%, decrease in gain (loss) on sale of branches, equipment and other assets and a $383,000, or 2.8%, decrease in other income. The increase in non-interest expense was primarily due to the $12.7 million increase in merger and acquisition expense as a result of the acquisition of MCBI, a $4.4 million, or 6.9%, increase in salaries and employee benefits expense, $1.8 million, or 12.6%, increase in occupancy and equipment expense and a $943,000, or 11.3%, increase in data processing expense. These expenses were partially offset by a $403,000, or 1.4%, decrease in other operating expenses.
Our net interest margin increased from 4.44% for the three-month period ended June 30, 2025 to 4.51% for the three-month period ended June 30, 2026. The yield on interest earning assets decreased from 6.42% for the three months ended June 30, 2025 to 6.26% for the three months ended June 30, 2026, and average interest earning assets increased from $20.08 billion to $21.74 billion. The increase in average interest earning assets is primarily due to a $2.03 billion increase in average loans receivable, partially offset by a $258.6 million decrease in average interest bearing balances due from banks and a $106.9 million decrease in average investment securities. For the three months ended June 30, 2026 and 2025, we recognized $3.6 million and $1.2 million, respectively, in total net accretion for acquired loans and deposits, and average purchase accounting loan discounts were $42.0 million and $16.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase in accretion income along with the increase in the purchase accounting loan discounts, both of which resulted from the acquisition of Mountain Commerce, increased the net interest margin by five basis points for the three-month period ended June 30, 2026. We recognized $1.7 million in event income for the three months ended June 30, 2026 compared to $516,000 for the three months ended June 30, 2025. The increase in event income was accretive to the net interest margin by three basis points. The cost of interest bearing liabilities decreased from 2.73% for the three months ended June 30, 2025 to 2.45% for the three months ended June 30, 2026, and average interest-bearing liabilities increased from $14.58 billion to $15.61 billion. The increase in average interest-bearing liabilities is primarily due to a $1.27 billion increase in average interest-bearing deposits, which was partially offset by a $159.5 million decrease in average subordinated debentures and a $100.3 million decrease in FHLB and other borrowed funds. The reduction in subordinated debentures was due to the Company completing the payoff of its $140.0 million 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 and the Company also repurchasing $20.0 million of its $300.0 million Fixed-to-Floating Rate Subordinated Notes due 2032 during the third quarter of 2025. The two payoff events were accretive to the net interest margin by approximately four basis points. The overall increase in the net interest margin was due to an increase in interest income resulting from the increase in the average balance of interest-earning assets and a decrease in interest expense resulting from a decrease in interest rates paid on interest-bearing liabilities, which were partially offset by a decrease in interest income due to a reduction in asset yields and an increase in interest expense resulting from an increase in the average balance of interest-bearing liabilities.
Our efficiency ratio was 44.54% for the three months ended June 30, 2026, compared to 41.68% for the same period in 2025. For the three months ended June 30, 2026, our efficiency ratio, as adjusted (non-GAAP), was 40.46%, compared to 42.01% reported for the same period in 2025. (See Table 29 for the non-GAAP tabular reconciliation).
Our annualized return on average assets was 1.95% for the three months ended June 30, 2026, compared to 2.08% for the same period in 2025. (See Table 26 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.55% and 11.77% for the three months ended June 30, 2026, and 2025, respectively. (See Table 27 for the related non-GAAP financial measures and tabular reconciliation).
Results of Operations for the Six Months Ended June 30, 2026 and 2025
Our net income increased $3.9 million, or 1.7%, to $237.5 million for the six-month period ended June 30, 2026, from $233.6 million for the same period in 2025. On a diluted earnings per share basis, our earnings were $1.19 per share for the six-month period ended June 30, 2026 compared to $1.18 per share for the six-month period ended June 30, 2025. During the six months ended June 30, 2026, the Company recorded $6.7 million in provision for credit losses on loans, and the Company recorded a $1.0 million recovery of credit losses on unfunded commitments. As a result, total credit loss expense for the six-month period ended June 30, 2026 was $5.7 million. During the six months ended June 30, 2026, the Company recorded $1.7 million in income from an FDIC special assessment credit, $274,000 in BOLI death benefits, $431,000 in expense from the fair value adjustment for marketable securities and $13.1 million in merger and acquisition expense due to the completion of the previously announced acquisition of MCBI during the second quarter of 2026. The merger and acquisition expense reduced earnings per share by $0.05 per share for the six-month period ended June 30, 2026.
Total interest income increased $16.2 million, or 2.6%, interest expense decreased $14.7 million, or 7.5%. This was partially offset by a $20.5 million, or 9.0%, increase in non-interest expense and a $248,000, or 0.3%, decrease in non-interest income. The increase in interest income resulted from a $24.7 million, or 4.5%, increase in loan interest income which was partially offset by a $5.5 million, or 35.3%, decrease in interest income on deposits at other banks and a $3.0 million, or 4.3%, decrease in investment interest income. The decrease in interest expense was primarily due to a $8.7 million, or 5.0%, decrease in interest on deposits, a $3.5 million, or 42.9%, decrease in interest on subordinated debentures, and a $2.4 million, or 21.0%, decrease in interest on FHLB and other borrowed funds. The decrease in non-interest income was primarily due to a $2.7 million, or 10.9%, decrease in other income, an $813,000, or 100.5%, decrease in gain (loss) on sale of branches, equipment and other assets, a $635,000, or 311.3%, decrease in the fair value adjustment for marketable securities and a $549,000, or 2.4%, decrease in other service charges and fees, which was partially offset by a $1.6 million, or 16.0%, increase in trust fees, a $1.4 million, or 386.2%, increase in gain (loss) on OREO and a $1.2 million, or 14.2%, increase in mortgage lending income. Included within June 30, 2025 other income was $7.4 million in special income from equity investments, $885,000 in legal expense reimbursements and $1.2 million in BOLI death benefit income. The increase in non-interest expense was primarily due to the $13.1 million increase in merger and acquisition expense as a result of the acquisition of MCBI, a $5.8 million, or 4.6%, increase in salaries and employee benefits expense, $2.2 million, or 7.8%, increase in occupancy and equipment expense and a $1.3 million, or 7.5%, increase in data processing expense. These expenses were partially offset by a $1.9 million, or 3.3%, decrease in other operating expenses. Included within other operating expenses was the $1.7 million in FDIC special assessment credits recorded during the first quarter of 2026.
Our net interest margin increased from 4.44% for the six-month period ended June 30, 2025 to 4.51% for the six-month period ended June 30, 2026. The yield on interest earning assets decreased from 6.43% for the six-months ended June 30, 2025 to 6.26% for the six-months ended June 30, 2026, and average interest earning assets increased from $19.96 billion to $21.05 billion. The increase in average interest earning assets is primarily due to a $1.41 billion increase in average loans receivable, partially offset by a $157.1 million decrease in average interest-bearing balances due from banks and a $155.0 million decrease in average investment securities. For the six months ended June 30, 2026 and 2025, we recognized $4.7 million and $2.6 million, respectively, in total net accretion for acquired loans and deposits and average purchase accounting loan discounts were $27.3 million and $16.9 million for the six months ended June 30, 2026 and 2025, respectively. The increase in accretion income along with the increase in the purchase accounting loan discounts, both of which resulted from the acquisition of Mountain Commerce, increased the net interest margin by two basis points for the six-month period ended June 30, 2026. We recognized $1.7 million in event income for the six-months ended June 30, 2026 compared to $1.8 million for the six-months ended June 30, 2025. The cost of interest bearing liabilities decreased from 2.74% for the six-months ended June 30, 2025 to 2.43% for the six-months ended June 30, 2026, and average interest-bearing liabilities increased from $14.49 billion to $15.10 billion. The increase in average interest bearing liabilities is primarily due to a $865.5 million increase in average interest-bearing deposits, which was partially offset by a $159.7 million decrease in average subordinated debentures and a $100.3 million decrease in FHLB and other borrowed funds. The reduction in subordinated debentures was due to the Company completing the payoff of its $140.0 million 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 and the Company also repurchasing $20.0 million of its $300.0 million Fixed-to-Floating Rate Subordinated Notes due 2032 during the third quarter of 2025. The two payoff events were accretive to the net interest margin by approximately four basis points. The overall increase in the net interest margin was due to an increase in interest income resulting from the increase in the average balance of interest-earning assets and a decrease in interest expense resulting from a decrease in interest rates paid on interest-bearing liabilities, which were partially offset by a decrease in interest income due to a reduction in asset yields and an increase in interest expense resulting from an increase in the average balance of interest-bearing liabilities.
Our efficiency ratio was 43.14% for the six months ended June 30, 2026, compared to 41.94% for the same period in 2025. For the six months ended June 30, 2026, our efficiency ratio, as adjusted (non-GAAP), was 41.19%, compared to 42.42% reported for the same period in 2025. (See Table 29 for the non-GAAP tabular reconciliation).
Our annualized return on average assets was 2.02% for the six months ended June 30, 2026, compared to 2.08% for the same period in 2025. (See Table 26 for the related non-GAAP financial measures and tabular reconciliation). Our annualized return on average common equity was 10.78% and 11.76% for the six months ended June 30, 2026, and 2025, respectively. (See Table 27 for the related non-GAAP financial measures and tabular reconciliation).
Financial Condition as of and for the Period Ended June 30, 2026 and December 31, 2025
Our total assets, as of June 30, 2026, increased $1.83 billion to $24.71 billion from $22.88 billion reported as of December 31, 2025. The increase in total assets is primarily due to the acquisition of $1.77 billion in total assets, net of purchase accounting adjustments, from MCBI during the second quarter of 2026. Cash and cash equivalents increased $385.2 million for the six months ended June 30, 2026. Our loan portfolio balance increased to $17.13 billion, as of June 30, 2026, from $15.69 billion at December 31, 2025. The increase in loans was primarily due to the acquisition of $1.47 billion in loans, net of purchase accounting adjustments, from MCBI during the second quarter of 2026 and $25.3 million of organic loan growth from our Centennial Commercial Finance Group ("Centennial CFG") franchise , which was partially offset by $54.1 million of loan decline in our community banking footprint. Investment securities decreased by $100.2 million resulting from paydowns and maturities during the first six months of 2026. Total deposits increased $1.63 billion to $19.11 billion as of June 30, 2026 from $17.48 billion as of December 31, 2025. The increase in deposits was primarily due to the acquisition of $1.54 billion in deposits, net of purchase accounting adjustments, from MCBI during the second quarter of 2026. Stockholders' equity increased $250.6 million to $4.55 billion as of June 30, 2026, compared to $4.30 billion as of December 31, 2025. The $250.6 million increase in stockholders' equity is primarily associated with the $146.0 million in common stock issued to MCBI shareholders for the acquisition of MCBI on April 1, 2026 and the $237.5 million in net income for the six months ended June 30, 2026, partially offset by the $83.5 million in shareholder dividends paid, stock repurchases of $54.7 million and $3.1 million in other comprehensive loss.
Our non-performing loans were $185.3 million, or 1.08% of total loans as of June 30, 2026, compared to $85.0 million, or 0.54% of total loans, as of December 31, 2025. The allowance for credit losses as a percentage of non-performing loans decreased to 177.19% as of June 30, 2026, from 350.17% as of December 31, 2025. As of June 30, 2026, our non-performing assets increased to $228.6 million, or 0.93% of total assets, from $124.8 million, or 0.55% of total assets, as of December 31, 2025. The increase in non-performing loans and assets was primarily due to one loan relationship with a balance of $92.1 million being placed on non-accrual status during the quarter ended March 31, 2026.
Critical Accounting Estimates
Overview. We prepare our consolidated financial statements based on the selection of certain accounting policies, generally accepted accounting principles and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. Our accounting policies are described in detail in Note 1 to our consolidated financial statements included as part of this document.
We consider an accounting estimate to be critical if (i) the accounting estimate requires assumptions about matters that are highly uncertain at the time of the accounting estimate; and (ii) different estimates that could reasonably have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on our financial statements. Management has identified the following accounting estimates as the most critical to the understanding of the Company's financial statements.
Allowance for Credit Losses. We account for credit losses in accordance with ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326" or "CECL"). The allowance for credit losses ("ACL") represents management's estimate of expected credit losses within the Company's loan portfolio and certain off-balance sheet credit exposures. The ACL is inherently subjective because it requires management to make significant assumptions regarding future economic conditions, borrower performance, collateral values, and other factors that may impact collectability.
For originated and other non-purchased loans, expected credit losses are estimated using a discounted cash flow ("DCF") methodology. The DCF model incorporates assumptions regarding probability of default, loss given default, prepayment speeds, curtailment rates, recovery expectations, and the timing of expected cash flows. The estimate also incorporates reasonable and supportable forecasts of economic conditions, including unemployment rates, gross domestic product, retail sales activity, and the FHFA housing price index.
Management currently utilizes a four-quarter reasonable and supportable forecast period followed by a four-quarter straight-line reversion to historical loss experience. Changes in economic forecasts, portfolio composition, credit quality trends, collateral values, or other assumptions could result in material changes to the ACL and provision for credit losses.
The ACL is particularly sensitive to changes in economic forecasts, portfolio risk characteristics, collateral values, and qualitative adjustments. Management regularly evaluates the appropriateness of model assumptions, forecast inputs, and qualitative adjustments in light of changing economic conditions and portfolio performance. Differences between actual economic conditions and forecasted conditions, changes in borrower credit quality, or changes in collateral values may result in material changes to expected credit losses and future provision expense.
Management also applies qualitative adjustments to address risks not fully captured within the quantitative modeling process. These adjustments may consider changes in lending policies and procedures, portfolio concentrations, delinquency trends, classified assets, collateral values, regulatory factors, and broader economic conditions. Determining the nature and magnitude of these adjustments requires significant management judgment.
The Company also maintains an allowance for credit losses on off-balance sheet credit exposures, including unfunded loan commitments and other contractual obligations to extend credit that are not unconditionally cancellable. The estimate incorporates management's expectations regarding the likelihood that commitments will be funded, the expected timing of funding, and the expected credit losses associated with amounts anticipated to be funded. Changes in utilization assumptions, borrower credit quality, portfolio composition, or economic conditions may result in material changes to the reserve for off-balance sheet credit exposures.
Certain loans are evaluated individually, including collateral-dependent loans for which repayment is expected substantially through the operation or sale of collateral. For these loans, estimates regarding collateral values, selling costs, and expected cash flows may have a significant impact on the measurement of expected credit losses.
Acquisition Accounting and Acquired Loans. Business combinations are accounted for under ASC 805, Business Combinations. Assets acquired and liabilities assumed are recorded at their estimated fair values as of the acquisition date. Determining these fair values requires significant judgment regarding expected future cash flows, discount rates, prepayment assumptions, expected credit losses, and other market participant assumptions.
Acquired loans are evaluated to determine whether they are classified as purchased credit deteriorated ("PCD") loans or purchased seasoned loans ("PSLs"). The classification of acquired loans and the determination of their acquisition-date fair values require management to assess expected credit performance, future cash flows, economic conditions, and borrower-specific characteristics.
Under ASC 326, an allowance for credit losses is recognized at acquisition for PCD loans. Following the Company's adoption of ASU 2025-08 effective April 1, 2026, qualifying PSLs are also accounted for using the gross-up approach, whereby an allowance for credit losses is established as of the acquisition date and added to the purchase price to establish the loans' initial amortized cost basis.
While originated and other non-purchased loans are evaluated using a DCF methodology, qualifying PSLs are measured using an expected loss methodology based on unpaid principal balance in accordance with ASC 326 and ASU 2025-08. Management's estimates of expected losses on acquired loan portfolios are influenced by assumptions regarding borrower performance, expected cash flows, economic conditions, and collateral values. Changes in these assumptions may materially affect the allowance for credit losses and future operating results.
Because acquisition-date estimates establish the basis for future yield accretion, credit loss estimates, and amortization patterns, changes in assumptions may affect future net interest income, provision expense, and operating results.
Goodwill and Other Intangible Assets. The Company records goodwill and core deposit intangible assets in connection with business combinations. Goodwill is not amortized but is evaluated for impairment at least annually, or more frequently if events or circumstances indicate that impairment may exist.
The goodwill impairment analysis requires management to estimate the fair value of the reporting unit. Significant assumptions may include projected earnings, growth rates, market multiples, discount rates, and other factors affecting future operating performance and market valuations. Changes in economic conditions, interest rates, industry conditions, market valuations, or operating performance could affect these assumptions and potentially result in impairment charges.
Core deposit intangible assets are amortized over their estimated useful lives and evaluated for impairment annually or more often when events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Income Taxes. The Company accounts for income taxes under ASC 740, Income Taxes. Determining the provision for income taxes and related deferred tax assets and liabilities requires management to make estimates and judgments regarding future taxable income, tax planning strategies, the interpretation and application of tax laws, and the ultimate resolution of tax positions.
Deferred tax assets are evaluated each reporting period to determine whether it is more likely than not that the related tax benefits will be realized. This assessment requires significant judgment regarding future earnings, the timing and character of taxable income, available tax planning strategies, and other sources of taxable income.
The Company also evaluates uncertain tax positions and estimates potential exposures associated with tax matters. Changes in tax laws, regulatory interpretations, future operating results, or other factors affecting the realization of deferred tax assets or the recognition of tax benefits could result in adjustments to income tax expense and deferred tax balances in future periods.
Foreclosed Assets Held for Sale. Foreclosed assets held for sale are initially recorded at fair value less estimated selling costs and are subsequently carried at the lower of carrying value or fair value less estimated selling costs. Fair value estimates generally rely on independent appraisals, broker opinions, comparable sales information, and other market data.
Significant judgment is required in evaluating property values, market conditions, absorption periods, and estimated selling costs. Changes in real estate market conditions or other valuation assumptions could result in adjustments to the carrying value of foreclosed assets and impact future earnings.
Branches
As opportunities arise, we will continue to open new (commonly referred to as de novo) branches in our current markets and in other attractive market areas.
We opened one branch in Rockwall, Texas during the quarter ended June 30, 2026.
As of June 30, 2026, we had 227 branch locations. There were 75 branches in Arkansas, 78 branches in Florida, 60 branches in Texas, eight branches in Tennessee, five branches in Alabama and one branch in New York City.
Results of Operations
For the three and six months ended June 30, 2026 and 2025
Our net income increased $924,000, or 0.8%, to $119.3 million for the three-month period ended June 30, 2026, from $118.4 million for the same period in 2025. On a diluted earnings per share basis, our earnings were $0.59 per share for the three-month period ended June 30, 2026 compared to $0.60 per share for the three-month period ended June 30, 2025. During the three months ended June 30, 2026, the Company recorded $5.2 million in provision for credit losses on loans. Also, during the three months ended June 30, 2026, the Company recorded $274,000 in BOLI death benefit income, $817,000 in income from the fair value adjustment for marketable securities and $12.7 million in merger and acquisition expense due to the completion of the previously announced acquisition of MCBI during the second quarter of 2026. The merger and acquisition expense reduced earnings per share by $0.05 per share for the three-month period ended June 30, 2026.
Our net income increased $3.9 million, or 1.7%, to $237.5 million for the six-month period ended June 30, 2026, from $233.6 million for the same period in 2025. On a diluted earnings per share basis, our earnings were $1.19 per share for the six-month period ended June 30, 2026 compared to $1.18 per share for the six-month period ended June 30, 2025. During the six months ended June 30, 2026, the Company recorded $6.7 million in provision for credit losses on loans, and the Company recorded a $1.0 million recovery of credit losses on unfunded commitments. As a result, total credit loss expense for the six-month period ended June 30, 2026 was $5.7 million. During the six months ended June 30, 2026, the Company recorded $1.7 million in income from an FDIC special assessment credit, $274,000 in BOLI death benefits, $431,000 in expense from the fair value adjustment for marketable securities and $13.1 million in merger and acquisition expense due to the completion of the previously announced acquisition of MCBI during the second quarter of 2026. The merger and acquisition expense reduced earnings per share by $0.05 per share for the six-month period ended June 30, 2026.
Net Interest Income
Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments, rates paid on deposits and other borrowings, the level of non-performing loans and the amount of non-interest-bearing liabilities supporting earning assets. Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing tax-exempt income by one minus the combined federal and state income tax rate (24.359% and 24.433% for 2026 and 2025, respectively).
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 reduced the target rate three times during 2025. First, on September 17, 2025, the Federal Reserve reduced the target rate to 4.00% to 4.25%, second, on October 29, 2025, the target rate was reduced to 3.75% to 4.00% and third, on December 10, 2025, the target rate was reduced to 3.50% to 3.75%. The Federal Reserve has not changed the target rate during 2026.
Our net interest margin increased from 4.44% for the three-month period ended June 30, 2025 to 4.51% for the three-month period ended June 30, 2026. The yield on interest earning assets decreased from 6.42% for the three-months ended June 30, 2025 to 6.26% for the three-months ended June 30, 2026, and average interest earning assets increased from $20.08 billion to $21.74 billion. The increase in average interest earning assets is primarily due to a $2.03 billion increase in average loans receivable, partially offset by a $258.6 million decrease in average interest bearing balances due from banks and a $106.9 million decrease in average investment securities. For the three months ended June 30, 2026 and 2025, we recognized $3.6 million and $1.2 million, respectively, in total net accretion for acquired loans and deposits, and average purchase accounting loan discounts were $42.0 million and $16.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase in accretion income along with the increase in the purchase accounting loan discounts, both of which resulted from the acquisition of Mountain Commerce, increased the net interest margin by five basis points for the three-month period ended June 30, 2026. We recognized $1.7 million in event income for the three-months ended June 30, 2026 compared to $516,000 for the three-months ended June 30, 2025. The increase in event income was accretive to the net interest margin by three basis points. The cost of interest bearing liabilities decreased from 2.73% for the three-months ended June 30, 2025 to 2.45% for the three-months ended June 30, 2026, and average interest-bearing liabilities increased from $14.58 billion to $15.61 billion. The increase in average interest-bearing liabilities is primarily due to a $1.27 billion increase in average interest-bearing deposits, which was partially offset by a $159.5 million decrease in average subordinated debentures and a $100.3 million decrease in FHLB and other borrowed funds. The reduction in subordinated debentures was due to the Company completing the payoff of its $140.0 million 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 and the Company also repurchasing $20.0 million of its $300.0 million Fixed-to-Floating Rate Subordinated Notes due 2032 during the third quarter of 2025. The two payoff events were accretive to the net interest margin by approximately four basis points. The overall increase in the net interest margin was due to an increase in interest income resulting from the increase in the average balance of interest-earning assets and a decrease in interest expense resulting from a decrease in interest rates paid on interest-bearing liabilities, which were partially offset by a decrease in interest income due to a reduction in asset yields and an increase in interest expense resulting from an increase in the average balance of interest-bearing liabilities.
Our net interest margin increased from 4.44% for the six-month period ended June 30, 2025 to 4.51% for the six-month period ended June 30, 2026. The yield on interest earning assets decreased from 6.43% for the six-months ended June 30, 2025 to 6.26% for the six-months ended June 30, 2026, and average interest earning assets increased from $19.96 billion to $21.05 billion. The increase in average interest earning assets is primarily due to a $1.41 billion increase in average loans receivable, partially offset by a $157.1 million decrease in average interest-bearing balances due from banks and a $155.0 million decrease in average investment securities. For the six months ended June 30, 2026 and 2025, we recognized $4.7 million and $2.6 million, respectively, in total net accretion for acquired loans and deposits and average purchase accounting loan discounts were $27.3 million and $16.9 million for the six months ended June 30, 2026 and 2025, respectively. The increase in accretion income along with the increase in the purchase accounting loan discounts, both of which resulted from the acquisition of Mountain Commerce, increased the net interest margin by two basis points for the six-month period ended June 30, 2026. We recognized $1.7 million in event income for the six-months ended June 30, 2026 compared to $1.8 million for the six-months ended June 30, 2025. The cost of interest bearing liabilities decreased from 2.74% for the six-months ended June 30, 2025 to 2.43% for the six-months ended June 30, 2026, and average interest-bearing liabilities increased from $14.49 billion to $15.10 billion. The increase in average interest bearing liabilities is primarily due to a $865.5 million increase in average interest-bearing deposits, which was partially offset by a $159.7 million decrease in average subordinated debentures and a $100.3 million decrease in FHLB and other borrowed funds. The reduction in subordinated debentures was due to the Company completing the payoff of its $140.0 million 5.50% Fixed-to-Floating Rate Subordinated Notes due 2030 and the Company also repurchasing $20.0 million of its $300.0 million Fixed-to-Floating Rate Subordinated Notes due 2032 during the third quarter of 2025. The two payoff events were accretive to the net interest margin by approximately four basis points. The overall increase in the net interest margin was due to an increase in interest income resulting from the increase in the average balance of interest-earning assets and a decrease in interest expense resulting from a decrease in interest rates paid on interest-bearing liabilities, which were partially offset by a decrease in interest income due to a reduction in asset yields and an increase in interest expense resulting from an increase in the average balance of interest-bearing liabilities.
Net interest income on a fully taxable equivalent basis increased $21.8 million, or 9.8%, to $244.3 million for the three-month period ended June 30, 2026, from $222.5 million for the same period in 2025. This increase in net interest income for the three-month period ended June 30, 2026 was the result of a $17.8 million increase in interest income, on a fully taxable equivalent basis and a $4.0 million decrease in interest expense. The $17.8 million increase in interest income was primarily the result of the increase in average interest earning asset balances primarily due to the acquisition of MCBI during the second quarter of 2026, partially offset by the impact of the lower interest rate environment. The change in average interest earning asset balances resulted in an increase of $32.4 million in interest income, which was partially offset by a decrease of $14.6 million in interest income due to the lower yield on earning assets. The $4.0 million decrease in interest expense is also primarily the result of the lower interest rate environment. The lower rates on interest bearing liabilities resulted in a decrease in interest expense of approximately $10.4 million, partially offset by an increase in average interest bearing liabilities which increased interest expense by approximately $6.4 million.
Net interest income on a fully taxable equivalent basis increased $31.2 million, or 7.1%, to $470.9 million for the six-month period ended June 30, 2026, from $439.7 million for the same period in 2025. This increase in net interest income for the six-month period ended June 30, 2026 was the result of a $16.5 million increase in interest income, on a fully taxable equivalent basis and a $14.7 million decrease in interest expense. The $16.5 million increase in interest income was primarily the result of the increase in average interest earning asset balances primarily due to the acquisition of MCBI during the second quarter of 2026, partially offset by the impact of the lower interest rate environment. The change in average interest earning asset balances resulted in an increase of $44.2 million in interest income, which was partially offset by a decrease of $27.8 million in interest income due to the lower yield on earning assets. The $14.7 million decrease in interest expense is also primarily the result of the lower interest rate environment. The lower rates on interest bearing liabilities resulted in a decrease in interest expense of approximately $21.6 million, partially offset by an increase in average interest bearing liabilities which increased interest expense by approximately $6.9 million.
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, 2026 and 2025, as well as changes in the fully taxable equivalent net interest margin for the three and six months ended June 30, 2026 compared to the same period in 2025.
Table 2: Analysis of Net Interest Income
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest income | $ | 336,836 | $ | 319,115 | $ | 647,859 | $ | 631,657 | |||||||||||||||
| Fully taxable equivalent adjustment | 2,653 | 2,526 | 5,314 | 5,060 | |||||||||||||||||||
| Interest income - fully taxable equivalent | 339,489 | 321,641 | 653,173 | 636,717 | |||||||||||||||||||
| Interest expense | 95,193 | 99,163 | 182,312 | 197,049 | |||||||||||||||||||
| Net interest income - fully taxable equivalent | $ | 244,296 | $ | 222,478 | $ | 470,861 | $ | 439,668 | |||||||||||||||
| Yield on earning assets - fully taxable equivalent | 6.26 | % | 6.42 | % | 6.26 | % | 6.43 | % | |||||||||||||||
| Cost of interest-bearing liabilities | 2.45 | 2.73 | 2.43 | 2.74 | |||||||||||||||||||
| Net interest spread - fully taxable equivalent | 3.81 | 3.69 | 3.83 | 3.69 | |||||||||||||||||||
| Net interest margin - fully taxable equivalent | 4.51 | 4.44 | 4.51 | 4.44 | |||||||||||||||||||
Table 3: Changes in Fully Taxable Equivalent Net Interest Margin
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| 2026 vs. 2025 | 2026 vs. 2025 | ||||||||||
| (In thousands) | |||||||||||
| Increase in interest income due to change in earning assets | $ | 32,413 | $ | 44,232 | |||||||
| Decrease in interest income due to change in earning asset yields | (14,565) | (27,776) | |||||||||
| Increase in interest expense due to change in interest-bearing liabilities | (6,400) | (6,899) | |||||||||
| Decrease in interest expense due to change in interest rates paid on interest-bearing liabilities | 10,370 | 21,636 | |||||||||
| Increase in net interest income | $ | 21,818 | $ | 31,193 | |||||||
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, 2026 and 2025, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Non-accrual loans were included in average loans for the purpose of calculating the rate earned on total loans.
Table 4: Average Balance Sheets and Net Interest Income Analysis
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average
Balance
|
Income /
Expense
|
Yield /
Rate
|
Average
Balance
|
Income / Expense |
Yield / Rate |
||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Earnings assets | |||||||||||||||||||||||||||||||||||
| Interest-bearing balances due from banks | $ | 555,186 | $ | 5,135 | 3.71 | % | $ | 813,833 | $ | 8,951 | 4.41 | % | |||||||||||||||||||||||
| Federal funds sold | 4,042 | 37 | 3.67 | 4,878 | 53 | 4.36 | |||||||||||||||||||||||||||||
| Investment securities - taxable | 2,936,008 | 25,787 | 3.52 | 3,095,764 | 26,444 | 3.43 | |||||||||||||||||||||||||||||
| Investment securities - non-taxable | 1,165,876 | 10,260 | 3.53 | 1,113,044 | 10,033 | 3.62 | |||||||||||||||||||||||||||||
| Loans receivable | 17,083,743 | 298,270 | 7.00 | 15,055,414 | 276,160 | 7.36 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 21,744,855 | 339,489 | 6.26 | % | 20,082,933 | 321,641 | 6.42 | % | |||||||||||||||||||||||||||
| Non-earning assets | 2,780,403 | 2,714,805 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 24,525,258 | $ | 22,797,738 | |||||||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Savings and interest-bearing transaction accounts | $ | 12,392,404 | $ | 68,650 | 2.22 | % | $ | 11,541,641 | 71,042 | 2.47 | % | ||||||||||||||||||||||||
| Time deposits | 2,301,685 | 18,782 | 3.27 | 1,886,147 | 17,447 | 3.71 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 14,694,089 | 87,432 | 2.39 | 13,427,788 | 88,489 | 2.64 | |||||||||||||||||||||||||||||
| Federal funds purchased | 30 | - | - | 46 | - | - | |||||||||||||||||||||||||||||
| Securities sold under agreement to repurchase | 167,885 | 1,057 | 2.53 | 143,752 | 1,012 | 2.82 | |||||||||||||||||||||||||||||
| FHLB and other borrowed funds | 466,734 | 4,346 | 3.73 | 566,984 | 5,539 | 3.92 | |||||||||||||||||||||||||||||
| Subordinated debentures | 279,519 | 2,358 | 3.38 | 439,027 | 4,123 | 3.77 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 15,608,257 | 95,193 | 2.45 | % | 14,577,597 | 99,163 | 2.73 | % | |||||||||||||||||||||||||||
| Non-interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Non-interest-bearing deposits | 4,222,813 | 3,981,901 | |||||||||||||||||||||||||||||||||
| Other liabilities | 158,476 | 202,085 | |||||||||||||||||||||||||||||||||
| Total liabilities | 19,989,546 | 18,761,583 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 4,535,712 | 4,036,155 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 24,525,258 | $ | 22,797,738 | |||||||||||||||||||||||||||||||
| Net interest spread | 3.81 | % | 3.69 | % | |||||||||||||||||||||||||||||||
| Net interest income and margin | $ | 244,296 | 4.51 | % | $ | 222,478 | 4.44 | % | |||||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average
Balance
|
Income /
Expense
|
Yield /
Rate
|
Average
Balance
|
Income / Expense |
Yield / Rate |
||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Earnings assets | |||||||||||||||||||||||||||||||||||
| Interest-bearing balances due from banks | $ | 556,312 | $ | 10,080 | 3.65 | % | $ | 713,455 | $ | 15,571 | 4.40 | % | |||||||||||||||||||||||
| Federal funds sold | 4,658 | 85 | 3.68 | 4,984 | 108 | 4.37 | |||||||||||||||||||||||||||||
| Investment securities - taxable | 2,935,955 | 50,515 | 3.47 | 3,137,296 | 53,877 | 3.46 | |||||||||||||||||||||||||||||
| Investment securities - non-taxable | 1,170,742 | 20,545 | 3.54 | 1,124,351 | 20,094 | 3.60 | |||||||||||||||||||||||||||||
| Loans receivable | 16,386,047 | 571,948 | 7.04 | 14,975,109 | 547,067 | 7.37 | |||||||||||||||||||||||||||||
| Total interest-earning assets | 21,053,714 | 653,173 | 6.26 | % | 19,955,195 | 636,717 | 6.43 | % | |||||||||||||||||||||||||||
| Non-earning assets | 2,702,912 | 2,718,779 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 23,756,626 | $ | 22,673,974 | |||||||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Savings and interest-bearing transaction accounts | $ | 12,132,136 | $ | 133,059 | 2.21 | % | $ | 11,472,548 | 140,713 | 2.47 | % | ||||||||||||||||||||||||
| Time deposits | 2,049,991 | 33,518 | 3.30 | 1,844,059 | 34,562 | 3.78 | |||||||||||||||||||||||||||||
| Total interest-bearing deposits | 14,182,127 | 166,577 | 2.37 | 13,316,607 | 175,275 | 2.65 | |||||||||||||||||||||||||||||
| Federal funds purchased | 15 | - | - | 23 | - | - | |||||||||||||||||||||||||||||
| Securities sold under agreement to repurchase | 159,925 | 1,984 | 2.50 | 149,773 | 2,086 | 2.81 | |||||||||||||||||||||||||||||
| FHLB and other borrowed funds | 483,399 | 9,038 | 3.77 | 583,739 | 11,441 | 3.95 | |||||||||||||||||||||||||||||
| Subordinated debentures | 279,435 | 4,713 | 3.40 | 439,100 | 8,247 | 3.79 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 15,104,901 | 182,312 | 2.43 | % | 14,489,242 | 197,049 | 2.74 | % | |||||||||||||||||||||||||||
| Non-interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
| Non-interest-bearing deposits | 4,040,665 | 3,981,425 | |||||||||||||||||||||||||||||||||
| Other liabilities | 167,823 | 196,232 | |||||||||||||||||||||||||||||||||
| Total liabilities | 19,313,389 | 18,666,899 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 4,443,237 | 4,007,075 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 23,756,626 | $ | 22,673,974 | |||||||||||||||||||||||||||||||
| Net interest spread | 3.83 | % | 3.69 | % | |||||||||||||||||||||||||||||||
| Net interest income and margin | $ | 470,861 | 4.51 | % | $ | 439,668 | 4.44 | % | |||||||||||||||||||||||||||
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, 2026 compared to the same period in 2025, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Table 5: Volume/Rate Analysis
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 over 2025 | 2026 over 2025 | ||||||||||||||||||||||||||||||||||
| Volume |
Yield / Rate |
Total | Volume |
Yield / Rate |
Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Increase (decrease) in: | |||||||||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||||||||
| Interest-bearing balances due from banks | $ | (2,543) | $ | (1,273) | $ | (3,816) | $ | (3,101) | $ | (2,390) | $ | (5,491) | |||||||||||||||||||||||
| Federal funds sold | (8) | (8) | (16) | (7) | (16) | (23) | |||||||||||||||||||||||||||||
| Investment securities - taxable | (1,390) | 733 | (657) | (3,464) | 102 | (3,362) | |||||||||||||||||||||||||||||
| Investment securities - non-taxable | 469 | (242) | 227 | 819 | (368) | 451 | |||||||||||||||||||||||||||||
| Loans receivable | 35,885 | (13,775) | 22,110 | 49,985 | (25,104) | 24,881 | |||||||||||||||||||||||||||||
| Total interest income | 32,413 | (14,565) | 17,848 | 44,232 | (27,776) | 16,456 | |||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||||||||
| Interest-bearing transaction and savings deposits | 5,014 | (7,406) | (2,392) | 7,789 | (15,443) | (7,654) | |||||||||||||||||||||||||||||
| Time deposits | 3,549 | (2,214) | 1,335 | 3,630 | (4,674) | (1,044) | |||||||||||||||||||||||||||||
| Securities sold under agreement to repurchase | 159 | (114) | 45 | 135 | (237) | (102) | |||||||||||||||||||||||||||||
| FHLB and other borrowed funds | (943) | (250) | (1,193) | (1,895) | (508) | (2,403) | |||||||||||||||||||||||||||||
| Subordinated debentures | (1,379) | (386) | (1,765) | (2,760) | (774) | (3,534) | |||||||||||||||||||||||||||||
| Total interest expense | 6,400 | (10,370) | (3,970) | 6,899 | (21,636) | (14,737) | |||||||||||||||||||||||||||||
| Increase (decrease) in net interest income | $ | 26,013 | $ | (4,195) | $ | 21,818 | $ | 37,333 | $ | (6,140) | $ | 31,193 | |||||||||||||||||||||||
Provision for Credit Losses
Credit Loss Expense: During the three and six months ended June 30, 2026, the Company recorded $5.2 million and $6.7 million in provision for credit losses on loans, respectively. Management determined no provision, or recovery of credit losses, was necessary for the unfunded commitments during the three months ended June 30, 2026. However, for the six months ended June 30, 2026, the Company recorded a $1.0 million recovery of credit losses on unfunded commitments. During the three and six months ended June 30, 2026, the Company determined no allowance for credit losses on the available-for-sale portfolio was necessary. The Company also determined the $2.0 million allowance for credit losses on the held-to-maturity portfolio was adequate. Therefore, no provision was considered necessary for either portfolio.
During the three and six months ended June 30, 2025, the Company recorded $3.0 million in provision for credit losses on loans. In addition, management determined that a provision was not necessary for the unfunded commitments as the current level of the reserve was considered adequate. During the three and six months ended June 30, 2025, the Company determined the $2.2 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 was adequate. Therefore, no additional provision was considered necessary.
Net charge-offs to average total loans were 0.14% and 0.03% for the three months ended June 30, 2026 and 2025, respectively. Net charge-offs (recoveries) to average total loans were 0.09% and (0.04)% for the six months ended June 30, 2026 and 2025, respectively.
Non-Interest Income
Total non-interest income was $53.5 million and $96.3 million for the three and six months ended June 30, 2026, compared to $51.1 million and $96.5 million for the same periods in 2025. 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.
Table 6 measures the various components of our non-interest income for the three and six months ended June 30, 2026 and 2025.
Table 6: Non-Interest Income
| Three Months Ended June 30, |
2026 Change from 2025 |
Six Months Ended June 30, |
2026 Change from 2025 |
||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | $ | 10,030 | $ | 9,552 | $ | 478 | 5.0 | % | $ | 20,037 | $ | 19,202 | $ | 835 | 4.3 | % | |||||||||||||||||||||||||||||||
| Other service charges and fees | 12,973 | 12,643 | 330 | 2.6 | 22,783 | 23,332 | (549) | (2.4) | |||||||||||||||||||||||||||||||||||||||
| Trust fees | 6,109 | 5,234 | 875 | 16.7 | 11,591 | 9,994 | 1,597 | 16.0 | |||||||||||||||||||||||||||||||||||||||
| Mortgage lending income | 5,139 | 4,780 | 359 | 7.5 | 9,569 | 8,379 | 1,190 | 14.2 | |||||||||||||||||||||||||||||||||||||||
| Insurance commissions | 578 | 589 | (11) | (1.9) | 1,114 | 1,124 | (10) | (0.9) | |||||||||||||||||||||||||||||||||||||||
| Increase in cash value of life insurance | 1,553 | 1,415 | 138 | 9.8 | 2,921 | 3,257 | (336) | (10.3) | |||||||||||||||||||||||||||||||||||||||
| Dividends from FHLB, FRB, FNBB & other | 2,841 | 2,657 | 184 | 6.9 | 5,377 | 5,375 | 2 | - | |||||||||||||||||||||||||||||||||||||||
| Gain on sale of SBA loans | - | - | - | - | 80 | 288 | (208) | (72.2) | |||||||||||||||||||||||||||||||||||||||
| Gain (loss) on sale of branches, equipment and other assets, net | 3 | 972 | (969) | (99.7) | (4) | 809 | (813) | (100.5) | |||||||||||||||||||||||||||||||||||||||
| Gain (loss) on OREO, net | 332 | 13 | 319 | 2,453.8 | 1,039 | (363) | 1,402 | 386.2 | |||||||||||||||||||||||||||||||||||||||
| Fair value adjustment for marketable securities | 817 | (238) | 1,055 | 443.3 | (431) | 204 | (635) | (311.3) | |||||||||||||||||||||||||||||||||||||||
| Other income | 13,079 | 13,462 | (383) | (2.8) | 22,181 | 24,904 | (2,723) | (10.9) | |||||||||||||||||||||||||||||||||||||||
| Total non-interest income | $ | 53,454 | $ | 51,079 | $ | 2,375 | 4.6 | % | $ | 96,257 | $ | 96,505 | $ | (248) | (0.3) | % | |||||||||||||||||||||||||||||||
Non-interest income increased $2.4 million, or 4.6%, to $53.5 million for the three months ended June 30, 2026 from $51.1 million for the same period in 2025. The primary factors in this increase were the increases in service charges on deposit accounts, trust fees and fair value adjustment for marketable securities, which was partially offset by the decrease in gain (loss) on sale of branches, equipment and other assets, net.
Additional details for the three months ended June 30, 2026 on some of the more significant changes are as follows:
•The $478,000 increase in service charges on deposit accounts is primarily related to an increase in overdraft fees as well as the acquisition of MCBI.
•The $875,000 increase in trust fees is primarily due to an increase in personal trust and IRA fees.
•The $969,000 decrease in gain (loss) on sale of branches, equipment and other assets, net is primarily due to the sale of a company airplane in 2025.
•The $1.1 million increase in the fair value adjustment for marketable securities is due to market fluctuations.
Non-interest income decreased $248,000, or 0.26%, to $96.3 million for the six months ended June 30, 2026 from $96.5 million for the same period in 2025. The primary factors in this decrease were the decreases in other service charges and fees, gain (loss) on sale of branches, equipment and other assets, net, fair value adjustment for marketable securities and other income, which were partially offset by the increases in services charges on deposit accounts, trust fees, mortgage lending income and the gain (loss) on OREO, net.
Additional details for the six months ended June 30, 2026 on some of the more significant changes are as follows:
•The $835,000 increase in service charges on deposit accounts is primarily related to an increase in overdraft fees as well as the acquisition of MCBI.
•The $549,000 decrease in other service charges and fees is primarily related to a decrease in Centennial CFG property finance loan fees, FIS Mastercard income and dealer floor fees.
•The $1.6 million increase in trust fees is primarily due to an increase in personal trust and IRA fees.
•The $1.2 million increase in mortgage lending income is primarily due to an increase in volume of secondary market loans.
•The $813,000 decrease in gain (loss) on sale of branches, equipment and other assets, net is primarily due to the sale of a company airplane in 2025.
•The $1.4 million increase in gain on OREO, net is primarily due to the gain on the sale of a building from our Florida region in 2026 and the loss on the sale of a building from our Florida region during 2025.
•The $635,000 decrease in the fair value adjustment for marketable securities is due to market fluctuations.
•The $2.7 million decrease in other income is primarily due to a $3.9 million decrease in income from the fair value of equity securities, a $968,000 decrease in BOLI death benefit income and a $498,000 decrease in recoveries on historic losses, partially offset by a $1.1 million increase in investment brokerage fee income and a $1.1 million increase in miscellaneous income primarily from various tax refunds.
Non-Interest Expense
Non-interest expense consists of salaries and employee benefits, occupancy and equipment, data processing, merger and acquisition and other expenses such as advertising, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees, other professional fees and other expenses.
Table 7 below sets forth a summary of non-interest expense for the three and six months ended June 30, 2026 and 2025.
Table 7: Non-Interest Expense
| Three Months Ended June 30, |
2026 Change from 2025 |
Six Months Ended June 30, |
2026 Change from 2025 |
||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 68,742 | $ | 64,318 | $ | 4,424 | 6.9 | % | $ | 131,978 | $ | 126,173 | $ | 5,805 | 4.6 | % | |||||||||||||||||||||||||||||||
| Occupancy and equipment | 15,787 | 14,023 | 1,764 | 12.6 | 30,654 | 28,448 | 2,206 | 7.8 | |||||||||||||||||||||||||||||||||||||||
| Data processing expense | 9,307 | 8,364 | 943 | 11.3 | 18,191 | 16,922 | 1,269 | 7.5 | |||||||||||||||||||||||||||||||||||||||
| Merger and acquisition expenses | 12,726 | - | 12,726 | 100.0 | 13,120 | - | 13,120 | 100.0 | |||||||||||||||||||||||||||||||||||||||
| Other operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Advertising | 2,214 | 2,054 | 160 | 7.8 | 4,441 | 3,982 | 459 | 11.5 | |||||||||||||||||||||||||||||||||||||||
| Amortization of intangibles | 2,889 | 2,025 | 864 | 42.7 | 4,827 | 4,072 | 755 | 18.5 | |||||||||||||||||||||||||||||||||||||||
| Electronic banking expense | 3,223 | 3,172 | 51 | 1.6 | 6,549 | 6,227 | 322 | 5.2 | |||||||||||||||||||||||||||||||||||||||
| Directors' fees | 416 | 431 | (15) | (3.5) | 934 | 883 | 51 | 5.8 | |||||||||||||||||||||||||||||||||||||||
| Due from bank service charges | 344 | 283 | 61 | 21.6 | 677 | 564 | 113 | 20.0 | |||||||||||||||||||||||||||||||||||||||
| FDIC and state assessment | 3,045 | 1,636 | 1,409 | 86.1 | 4,644 | 5,023 | (379) | (7.5) | |||||||||||||||||||||||||||||||||||||||
| Insurance | 1,090 | 1,049 | 41 | 3.9 | 2,164 | 2,048 | 116 | 5.7 | |||||||||||||||||||||||||||||||||||||||
| Legal and accounting | 1,426 | 2,360 | (934) | (39.6) | 2,340 | 6,001 | (3,661) | (61.0) | |||||||||||||||||||||||||||||||||||||||
| Other professional fees | 2,247 | 2,211 | 36 | 1.6 | 4,193 | 4,158 | 35 | 0.8 | |||||||||||||||||||||||||||||||||||||||
| Operating supplies | 769 | 711 | 58 | 8.2 | 1,517 | 1,422 | 95 | 6.7 | |||||||||||||||||||||||||||||||||||||||
| Postage | 684 | 488 | 196 | 40.2 | 1,227 | 991 | 236 | 23.8 | |||||||||||||||||||||||||||||||||||||||
| Telephone | 324 | 419 | (95) | (22.7) | 687 | 855 | (168) | (19.6) | |||||||||||||||||||||||||||||||||||||||
| Other expense | 10,261 | 12,496 | (2,235) | (17.9) | 21,326 | 21,199 | 127 | 0.6 | |||||||||||||||||||||||||||||||||||||||
| Total non-interest expense | $ | 135,494 | $ | 116,040 | $ | 19,454 | 16.8 | % | $ | 249,469 | $ | 228,968 | $ | 20,501 | 9.0 | % | |||||||||||||||||||||||||||||||
Non-interest expense increased $19.5 million, or 16.8%, to $135.5 million for the three months ended June 30, 2026 from $116.0 million for the same period in 2025. The primary factors that resulted in this increase were the increases in salaries and employee benefits, occupancy and equipment expense, data processing expense, merger and acquisition expense, amortization of intangibles and FDIC and state assessment expense, which were partially offset by the decreases in legal and accounting expense and other expenses.
Additional details for the three months ended June 30, 2026 on some of the more significant changes are as follows:
•The $4.4 million increase in salaries and employee benefits expense is primarily due to the MCBI acquisition as well as an increase in incentive compensation as a result of an increase in revenue for the Company combined with the additional costs of doing business.
•The $1.8 million increase in occupancy and equipment expense is due to an increase in depreciation expense on buildings, machinery and equipment related to the acquisition of MCBI.
•The $943,000 increase in data processing expense is due to an increase in core processing computer expense related to the acquisition of MCBI.
•The $12.7 million increase in merger and acquisition expense is related to costs associated with the acquisition of MCBI.
•The $864,000 increase in amortization of intangibles is due to the acquisition of MCBI.
•The $1.4 million increase in FDIC and state assessment expense is due to a reversal adjustment from restating call report uninsured deposits from December 2022 through December 2024, which lowered assessment expense for the second quarter of 2025.
•The $934,000 decrease in legal and accounting expense is primarily due to legal matters which occurred during 2025.
•The $2.2 million decrease in other expense is primarily due to $3.3 million in legal claims expense being recorded during the second quarter of 2025.
Non-interest expense increased $20.5 million, or 9.0%, to $249.5 million for the six months ended June 30, 2026 from $229.0 million for the same period in 2025. The primary factors that resulted in this increase were the increases in salaries and employee benefits, occupancy and equipment, data processing and merger and acquisition expenses, which were partially offset by the decrease in legal and accounting expense.
Additional details for the six months ended June 30, 2026 on some of the more significant changes are as follows:
•The $5.8 million increase in salaries and employee benefits expense is primarily due to the MCBI acquisition as well as an increase in incentive compensation as a result of an increase in revenue for the Company combined with the additional costs of doing business.
•The $2.2 million increase in occupancy and equipment expense is due to an increase in depreciation expense on buildings, machinery and equipment related to the acquisition of MCBI.
•The $1.3 million increase in data processing expense is due to an increase in core processing computer expense related to the acquisition of MCBI.
•The $13.1 million increase in merger and acquisition expense is related to costs associated with the acquisition of MCBI.
•The $3.6 million decrease in legal and accounting expense is primarily due to legal matters which occurred during 2025.
Income Taxes
Income tax expense increased $1.5 million, or 4.4%, to $35.1 million for the three-month period ended June 30, 2026, from $33.6 million for the same period in 2025. Income tax expense increased $3.6 million, or 5.4%, to $69.1 million for the six-month period ended June 30, 2026, from $65.5 million for the same period in 2025. The effective income tax rate was 22.72% and 22.53% for the three and six months ended June 30, 2026, compared to 22.10% and 21.91% for the same periods in 2025. The marginal tax rate was 24.359% and 24.433% for 2026 and 2025, respectively.
Financial Condition as of and for the Period Ended June 30, 2026 and December 31, 2025
Our total assets, as of June 30, 2026, increased $1.83 billion to $24.71 billion from $22.88 billion reported as of December 31, 2025. The increase in total assets is primarily due to the acquisition of $1.77 billion in total assets, net of purchase accounting adjustments, from MCBI during the second quarter of 2026. Cash and cash equivalents increased $385.2 million for the six months ended June 30, 2026. Our loan portfolio balance increased to $17.13 billion, as of June 30, 2026, from $15.69 billion at December 31, 2025. The increase in loans was primarily due to the acquisition of $1.47 billion in loans, net of purchase accounting adjustments, from MCBI during the second quarter of 2026 and $25.3 million of organic loan growth from our Centennial CFG franchise , which was partially offset by $54.1 million of loan decline in our community banking footprint. Investment securities decreased by $100.2 million resulting from paydowns and maturities during the first six months of 2026. Total deposits increased $1.63 billion to $19.11 billion as of June 30, 2026 from $17.48 billion as of December 31, 2025. The increase in deposits was primarily due to the acquisition of $1.54 billion in deposits, net of purchase accounting adjustments, from MCBI during the second quarter of 2026. Stockholders' equity increased $250.6 million to $4.55 billion as of June 30, 2026, compared to $4.30 billion as of December 31, 2025. The $250.6 million increase in stockholders' equity is primarily associated with the $146.0 million in common stock issued to MCBI shareholders for the acquisition of MCBI on April 1, 2026 and the $237.5 million in net income for the six months ended June 30, 2026, partially offset by the $83.5 million in shareholder dividends paid, stock repurchases of $54.7 million and $3.1 million in other comprehensive loss.
Loan Portfolio
Loans Receivable
Our loan portfolio averaged $17.08 billion and $15.06 billion during the three months ended June 30, 2026 and 2025, respectively. Our loan portfolio averaged $16.39 billion and $14.98 billion during the six months ended June 30, 2026 and 2025, respectively. Loans receivable were $17.13 billion and $15.69 billion as of June 30, 2026 and December 31, 2025, respectively.
From December 31, 2025 to June 30, 2026, the Company experienced an increase of approximately $1.44 billion in loans. The increase in loans was due to the acquisition of $1.47 billion in loans, net of purchase accounting adjustments, from MCBI during the second quarter of 2026 and $25.3 million of organic loan growth from our Centennial CFG franchise, which was partially offset by $54.1 million of loan decline in our community banking footprint.
The most significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans. These loans are generally secured by residential or commercial real estate or business or personal property. Although these loans are primarily originated within our franchises in Arkansas, Florida, Texas, Tennessee, Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida, Texas, Tennessee, Alabama and New York. Loans receivable were approximately $3.93 billion, $4.38 billion, $3.83 billion, $1.47 billion, $98.4 million, $1.39 billion and $2.04 billion as of June 30, 2026 in Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG, respectively.
Table 8 presents our loans receivable balances by category as of June 30, 2026 and December 31, 2025.
Table 8: Loans Receivable
| June 30, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Real estate: | |||||||||||
| Commercial real estate loans: | |||||||||||
| Non-farm/non-residential | $ | 5,921,829 | $ | 5,290,112 | |||||||
| Construction/land development | 2,780,116 | 2,726,993 | |||||||||
| Agricultural | 329,231 | 332,412 | |||||||||
| Residential real estate loans: | |||||||||||
| Residential 1-4 family | 2,545,462 | 2,134,334 | |||||||||
| Multifamily residential | 1,269,728 | 1,140,911 | |||||||||
| Total real estate | 12,846,366 | 11,624,762 | |||||||||
| Consumer | 1,278,008 | 1,253,746 | |||||||||
| Commercial and industrial | 2,285,054 | 2,222,401 | |||||||||
| Agricultural | 356,611 | 359,879 | |||||||||
| Other | 361,169 | 225,421 | |||||||||
| Total loans receivable | $ | 17,127,208 | $ | 15,686,209 | |||||||
Commercial Real Estate Loans. We originate non-farm and non-residential loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our commercial mortgage loans are generally collateralized by first liens on real estate and amortized (where defined) over a 15 to 30-year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow (debt service coverage), primary and secondary source of repayment, the financial strength of the borrower as well as any guarantors, the strength of the tenant (if any), the borrower's liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and assignment of lease is required if the collateral is rental property, with second lien positions considered on a case-by-case basis.
As of June 30, 2026, commercial real estate ("CRE") loans totaled $9.03 billion, or 52.7%, of loans receivable, as compared to $8.35 billion, or 53.2%, of loans receivable, as of December 31, 2025. CRE loans originated in our Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG markets were $2.26 billion, $2.67 billion, $1.86 billion, $740.2 million, $46.0 million, zero and $1.46 billion at June 30, 2026, respectively.
As of June 30, 2026, we had approximately $1.30 billion of construction/land development loans which were collateralized by land. This consisted of approximately $34.9 million for raw land and approximately $1.27 billion for land with commercial and/or residential lots.
Table 9 presents the composition of the funded and unfunded balances of our CRE portfolio by loan type, as of June 30, 2026 and December 31, 2025, and their respective percentages of our total CRE portfolio.
Table 9: CRE Loan Concentrations
| June 30, 2026 | |||||||||||||||||||||||
| Funded Balance | % of CRE Loans | Unfunded Balance | % of CRE Loans | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Non-Farm/Non-Residential: | |||||||||||||||||||||||
| Single Purpose Building | $ | 757,852 | 8.4 | % | $ | 71,413 | 3.6 | % | |||||||||||||||
| Office Building | 1,047,935 | 11.6 | 94,024 | 4.7 | |||||||||||||||||||
| Hotel | 1,289,940 | 14.3 | 20,422 | 1.0 | |||||||||||||||||||
| Industrial | 433,517 | 4.8 | 49,368 | 2.5 | |||||||||||||||||||
| Retail | 546,466 | 6.1 | 14,685 | 0.7 | |||||||||||||||||||
|
Owner-Occupied (1)
|
1,846,119 | 20.5 | 107,079 | 5.4 | |||||||||||||||||||
| Construction/Land Development: | |||||||||||||||||||||||
| Construction Residential-Spec | 326,584 | 3.6 | 303,182 | 15.2 | |||||||||||||||||||
| Residential Land Development | 393,840 | 4.4 | 126,161 | 6.3 | |||||||||||||||||||
| Construction Commercial | 308,890 | 3.4 | 275,914 | 13.8 | |||||||||||||||||||
| Construction Multi Family | 407,759 | 4.5 | 398,969 | 20.0 | |||||||||||||||||||
| Commercial Land Development | 904,059 | 10.0 | 94,690 | 4.7 | |||||||||||||||||||
| Construction Residential-Presold | 290,899 | 3.2 | 167,491 | 8.4 | |||||||||||||||||||
| Construction Hotel | 112,886 | 1.2 | 256,223 | 12.8 | |||||||||||||||||||
| Raw Land | 35,199 | 0.4 | 270 | - | |||||||||||||||||||
|
Agricultural (1)
|
329,231 | 3.6 | 18,529 | 0.9 | |||||||||||||||||||
|
Total Commercial Real Estate (2)
|
$ | 9,031,176 | 100.0 | % | $ | 1,998,420 | 100.0 | % | |||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Funded Balance | % of CRE Loans | Unfunded Balance | % of CRE Loans | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Non-Farm/Non-Residential: | |||||||||||||||||||||||
| Single Purpose Building | $ | 706,177 | 8.5 | % | $ | 71,063 | 3.3 | % | |||||||||||||||
| Office Building | 1,008,629 | 12.1 | 96,027 | 4.4 | |||||||||||||||||||
| Hotel | 1,160,378 | 13.9 | 13,105 | 0.6 | |||||||||||||||||||
| Industrial | 310,376 | 3.7 | 36,695 | 1.7 | |||||||||||||||||||
| Retail | 503,907 | 6.0 | 16,513 | 0.8 | |||||||||||||||||||
|
Owner-Occupied (1)
|
1,600,645 | 19.2 | 113,429 | 5.2 | |||||||||||||||||||
| Construction/Land Development: | |||||||||||||||||||||||
| Construction Residential-Spec | 403,058 | 4.8 | 289,133 | 13.2 | |||||||||||||||||||
| Residential Land Development | 414,542 | 5.0 | 168,976 | 7.7 | |||||||||||||||||||
| Construction Commercial | 267,719 | 3.2 | 309,536 | 14.1 | |||||||||||||||||||
| Construction Multi Family | 546,607 | 6.5 | 500,520 | 22.9 | |||||||||||||||||||
| Commercial Land Development | 777,853 | 9.3 | 115,489 | 5.3 | |||||||||||||||||||
| Construction Residential-Presold | 180,721 | 2.2 | 146,770 | 6.7 | |||||||||||||||||||
| Construction Hotel | 94,712 | 1.1 | 280,314 | 12.8 | |||||||||||||||||||
| Raw Land | 41,781 | 0.5 | 610 | - | |||||||||||||||||||
|
Agricultural (1)
|
332,412 | 4.0 | 27,869 | 1.3 | |||||||||||||||||||
|
Total Commercial Real Estate (2)
|
$ | 8,349,517 | 100.0 | % | $ | 2,186,049 | 100.0 | % | |||||||||||||||
(1) Agriculture real estate loans and owner-occupied non-farm non-residential loans are not included within CRE for regulatory reporting purposes.
(2) Excludes multi-family residential loans of $1.27 billion and $1.14 billion as of June 30, 2026 and December 31, 2025, respectively, which are included in the residential real estate loans throughout the filing. Multi-family residential loans are included in CRE for regulatory purposes.
Table 10 presents the composition of our CRE loan portfolio by the ten largest geographical locations of the collateral as of June 30, 2026 and December 31, 2025.
Table 10: Geographical Locations of CRE Loans
| (In thousands) | Florida | Texas | Arkansas | Tennessee | New York | California | Missouri | Alabama | Georgia | Utah | All Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As of June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-Farm/Non-Residential: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Single Purpose Building | $ | 183,596 | $ | 156,465 | $ | 227,671 | $ | 72,306 | $ | - | $ | 600 | $ | 12,407 | $ | 13,546 | $ | 16,259 | $ | - | $ | 75,002 | $ | 757,852 | |||||||||||||||||||||||||||||||||||||||||||||||
| Office Building | 157,306 | 402,948 | 61,432 | 82,314 | 597 | 9,431 | 260,002 | 1,279 | 42,936 | - | 29,690 | 1,047,935 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hotel | 623,585 | 278,355 | 116,927 | 121,468 | 4,964 | - | 507 | 16,372 | 23,941 | - | 103,821 | 1,289,940 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial | 45,083 | 173,875 | 55,879 | 20,148 | 52,155 | 54,210 | - | 29,481 | - | - | 2,686 | 433,517 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail | 107,822 | 225,147 | 38,630 | 66,195 | - | 35,968 | 292 | 11,552 | 688 | - | 60,172 | 546,466 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Owner-Occupied (1)
|
468,942 | 482,234 | 358,047 | 240,304 | - | 6,530 | 1,682 | 26,970 | 26,006 | - | 235,404 | 1,846,119 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction/Land Development: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Construction Residential - Spec |
140,071 | 113,939 | 34,522 | 20,725 | - | - | - | 682 | - | - | 16,645 | 326,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Residential Land Development |
165,503 | 83,937 | 41,317 | 6,348 | - | - | - | 2,056 | - | 92,789 | 1,890 | 393,840 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Commercial | 72,708 | 26,833 | 87,823 | 16,958 | 23,929 | - | - | 29,294 | - | 14,936 | 36,409 | 308,890 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Multi Family | 284,384 | 419 | 23,554 | - | - | 28,315 | - | - | - | - | 71,087 | 407,759 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Commercial Land Development |
259,825 | 62,568 | 24,696 | 21,145 | 158,909 | 188,429 | - | 24,916 | 16,015 | - | 147,556 | 904,059 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Construction Residential - Presold |
57,085 | 101,679 | 15,063 | 14,423 | 101,386 | - | - | 1,263 | - | - | - | 290,899 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Hotel | 2,992 | 23,940 | - | 37,921 | - | - | - | 19,740 | - | - | 28,293 | 112,886 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Raw Land | 8,454 | 10,352 | 15,776 | 194 | - | - | - | 236 | - | - | 187 | 35,199 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Agricultural (1)
|
46,864 | 139,118 | 106,847 | 16,784 | - | - | 3,026 | 2,158 | - | - | 14,434 | 329,231 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Total Commercial Real Estate (2)
|
$ | 2,624,220 | $ | 2,281,809 | $ | 1,208,184 | $ | 737,233 | $ | 341,940 | $ | 323,483 | $ | 277,916 | $ | 179,545 | $ | 125,845 | $ | 107,725 | $ | 823,276 | $ | 9,031,176 | |||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Florida | Texas | Arkansas | New York | California | Georgia | Alabama | Utah | Pennsylvania | Tennessee | All Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-Farm/Non-Residential: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Single Purpose Building | $ | 221,682 | $ | 165,311 | $ | 227,874 | $ | - | $ | 600 | $ | 12,229 | $ | 7,554 | $ | - | $ | - | $ | 5,071 | $ | 65,856 | $ | 706,177 | |||||||||||||||||||||||||||||||||||||||||||||||
| Office Building | 256,836 | 404,755 | 64,001 | 622 | 17,562 | 130,687 | 9,086 | - | 19,229 | - | 105,851 | 1,008,629 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hotel | 602,220 | 267,493 | 118,862 | 4,999 | - | 24,083 | 17,812 | - | - | - | 124,909 | 1,160,378 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial | 60,891 | 148,448 | 35,640 | - | 20,751 | - | 42,875 | - | - | - | 1,771 | 310,376 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail | 140,082 | 241,732 | 41,756 | - | 35,936 | 1,022 | 11,760 | - | - | 406 | 31,213 | 503,907 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Owner-Occupied (1)
|
455,897 | 499,183 | 351,471 | - | 6,557 | 17,732 | 27,131 | - | 79,608 | 6,262 | 156,804 | 1,600,645 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction/Land Development: | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Construction Residential - Spec |
136,751 | 103,726 | 41,319 | 118,698 | - | - | 91 | - | - | - | 2,473 | 403,058 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Residential Land Development |
140,163 | 89,286 | 46,114 | - | 27,315 | 171 | 1,583 | 76,741 | - | 3,615 | 29,554 | 414,542 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Commercial | 48,964 | 40,140 | 71,385 | 22,775 | 31,017 | - | 16,701 | 14,637 | - | 13,011 | 9,089 | 267,719 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Multi Family | 289,314 | 508 | 924 | 104,942 | - | - | - | - | 267 | 32,923 | 117,729 | 546,607 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Commercial Land Development |
194,889 | 70,052 | 26,108 | 121,137 | 119,335 | 19,133 | 15,749 | 38,332 | - | 11,640 | 161,478 | 777,853 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Construction Residential - Presold |
62,595 | 96,170 | 19,626 | - | - | - | 2,330 | - | - | - | - | 180,721 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction Hotel | 2,424 | 32,064 | - | - | - | - | 13,549 | - | - | 18,813 | 27,862 | 94,712 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Raw Land | 10,581 | 10,618 | 20,158 | - | - | - | 232 | - | - | - | 192 | 41,781 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Agricultural (1)
|
47,080 | 149,162 | 116,396 | - | - | - | 2,297 | - | - | - | 17,477 | 332,412 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Total Commercial Real Estate (2)
|
$ | 2,670,369 | $ | 2,318,648 | $ | 1,181,634 | $ | 373,173 | $ | 259,073 | $ | 205,057 | $ | 168,750 | $ | 129,710 | $ | 99,104 | $ | 91,741 | $ | 852,258 | $ | 8,349,517 | |||||||||||||||||||||||||||||||||||||||||||||||
(1) Agriculture real estate loans and owner-occupied non-farm non-residential loans are not included within CRE for regulatory reporting purposes.
(2) Excludes multi-family residential loans of $1.27 billion and $1.14 billion as of June 30, 2026 and December 31, 2025, respectively, which are included in the residential real estate loans throughout the filing. Multi-family residential loans are included in CRE for regulatory purposes.
Our loan policy states that in order to achieve a well-balanced, diversified credit portfolio, concentrations containing inappropriate or excessive risk are to be avoided. It is the goal of the Company to maintain a prudent diversification of loans. We define a concentration of credit as direct or indirect obligations according to the following guidelines: (i) concentrations of 25% or more of total risk-based capital by individual borrower, small, interrelated group of individuals, single repayment source or individual project; (ii) concentrations of 100% or more of total risk-based capital by industry or product line. As of June 30, 2026, we have not met the threshold for the concentration limits. In addition, the Bank's Board of Directors monitors the CRE loan portfolio for concentrations related to geography, industry, and collateral type and determines applicable guidelines. The Chief Lending Officer also reviews the portfolio periodically to determine if any concentrations exist and makes recommendations with respect to setting internal guidelines.
The Company also monitors key risk indicators ("KRIs") on a quarterly basis for the overall loan portfolio as well as specific KRIs for the CRE portfolio. The KRIs are tied to the Bank's appetite for credit risk which is reflected in the Bank's credit policy and underwriting criteria. The KRIs related to underwriting include loan downgrades by loan review, loan downgrades to classified levels and loan policy exceptions (loan to value, debt coverage ratio and credit score). The KRIs related to CRE loans include concentrations of construction and land loans, concentrations of total CRE loans, CRE loans in excess of loan to value guidelines and total real estate loans in excess of loan to value guidelines. The results of the KRI analysis are presented to the Bank's Asset Quality Committee on a quarterly basis. Any exceptions to established limits and thresholds are monitored and addressed in a timely manner as required by the Asset Quality Committee.
The Company has a CRE strategy and contingency plan which outlines the principles required to adequately manage our CRE exposures. It discusses the inherent risks within CRE lending, as well as the risks unique to specific lending activities and property taxes. In addition, the plan outlines internal limits related to CRE lending, reasoning for operating outside those limits, and provides for a contingency plan to reduce the CRE exposures under adverse economic conditions or other situations where it is deemed necessary to do so. The responsibility for monitoring the CRE Strategy and Contingency Plan, and subsequent reporting to management and the Board of Directors lies with the Chief Lending Officer and the Asset Quality Committee of the Board of Directors. Within the CRE Strategy and Contingency Plan, we established four adverse economic triggers to measure on an ongoing basis to attempt to determine when a change in CRE strategy might be warranted, at least from an external economic perspective. If one or a combination of these triggers have exceeded Board approved thresholds, the Executive Risk Committee will determine which action or combination of actions, if any, to take based on the specific situation. If utilized, the required actions are likely to focus on tightening/loosening of underwriting criteria, potential capital raises or loan distribution actions such as selling or participating loans. However, other action steps may be considered necessary depending upon the specific situation. As of June 30, 2026, the Company believes our current underwriting standards and capital position remain adequate for addressing the risks to our CRE portfolio.
Residential Real Estate Loans. We originate one to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately 61.5% and 32.9% of our residential mortgage loans consist of owner occupied 1-4 family properties and non-owner occupied 1-4 family properties (rental), respectively, as of June 30, 2026, with the remaining 5.6% relating to condominiums and mobile homes. Residential real estate loans generally have a loan-to-value ratio of up to 90%. These loans are underwritten by giving consideration to the borrower's ability to pay, stability of employment or source of income, debt-to-income ratio, credit history and loan-to-value ratio.
As of June 30, 2026, residential real estate loans totaled $3.82 billion, or 22.3%, of loans receivable, compared to $3.28 billion, or 20.9%, of loans receivable, as of December 31, 2025. Residential real estate loans originated in our Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG markets were $764.8 million, $1.13 billion, $852.9 million, $620.9 million, $38.9 million, zero and $405.0 million at June 30, 2026, respectively.
Consumer Loans. Our consumer loans are composed of secured and unsecured loans originated by our bank, the primary portion of which consists of loans to finance United States Coast Guard registered high-end sail and power boats within our SPF division. The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual changes in circumstance.
Consumer loans totaled $1.28 billion, or 7.5%, of loans receivable at June 30, 2026, compared to $1.25 billion, or 8.0%, of loans receivable, as of December 31, 2025. Consumer loans originated in our Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG markets were $17.8 million, $5.9 million, $7.6 million, $9.9 million $400,000, $1.24 billion and zero at June 30, 2026, respectively.
Commercial and Industrial Loans. Commercial and industrial loans are made for a variety of business purposes, including working capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information of the borrower and, where appropriate, by adequate collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of the borrower as well as any guarantors, the borrower's liquidity and leverage, management experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally, accounts receivable are financed at between 50% and 80% of accounts receivable less than 60 days past due. Inventory financing will range between 50% and 80% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.
As of June 30, 2026, commercial and industrial loans totaled $2.29 billion, or 13.3%, of loans receivable, compared to $2.22 billion, or 14.2%, of loans receivable, as of December 31, 2025. Commercial and industrial loans originated in our Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG markets were $552.4 million, $562.8 million, $819.6 million, $96.8 million, $13.2 million, $152.5 million and $87.9 million at June 30, 2026, respectively.
Non-Performing Assets
We classify our problem loans into three categories: past due loans, special mention loans and classified loans (accruing and non-accruing).
When management determines that a loan is no longer performing, and that collection of interest appears doubtful, the loan is placed on non-accrual status. Loans that are 90 days past due are placed on non-accrual status unless they are adequately secured and there is reasonable assurance of full collection of both principal and interest. Our management closely monitors all loans that are contractually 90 days past due, treated as "special mention" or otherwise classified or on non-accrual status.
Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using an expected loss methodology. The Company develops separate PCD models for each loan segment with PCD loans not individually analyzed for credit losses. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a non-credit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit losses. The Company held approximately $95.8 million and $52.2 million in PCD loans, as of June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026, $50.1 million and $45.7 million resulted from the acquisitions of Happy Bancshares, Inc. in 2022 and Mountain Commerce Bancorp, Inc. in 2026, respectively.
Table 11 sets forth information with respect to our non-performing assets as of June 30, 2026 and December 31, 2025. As of these dates, all non-performing restructured loans are included in non-accrual loans.
Table 11: Non-performing Assets
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Non-accrual loans | $ | 183,199 | $ | 78,002 | |||||||
| Loans past due 90 days or more (principal or interest payments) | 2,126 | 6,980 | |||||||||
| Total non-performing loans | 185,325 | 84,982 | |||||||||
| Other non-performing assets | |||||||||||
| Foreclosed assets held for sale, net | 42,139 | 39,831 | |||||||||
| Other non-performing assets | 1,140 | - | |||||||||
| Total other non-performing assets | 43,279 | 39,831 | |||||||||
| Total non-performing assets | $ | 228,604 | $ | 124,813 | |||||||
| Allowance for credit losses to non-accrual loans | 179.24 | % | 381.51 | % | |||||||
| Allowance for credit losses to non-performing loans | 177.19 | 350.17 | |||||||||
| Non-accrual loans to total loans | 1.07 | 0.50 | |||||||||
| Non-performing loans to total loans | 1.08 | 0.54 | |||||||||
| Non-performing assets to total assets | 0.93 | 0.55 | |||||||||
Our non-performing loans are comprised of non-accrual loans and accruing loans that are contractually past due 90 days. Our bank subsidiary recognizes income principally on the accrual basis of accounting. When loans are classified as non-accrual, the accrued interest is charged off and no further interest is accrued, unless the credit characteristics of the loan improve. If a loan is determined by management to be uncollectible, the portion of the loan determined to be uncollectible is then charged to the allowance for credit losses.
Our non-performing loans were $185.3 million, or 1.08% of total loans as of June 30, 2026, compared to $85.0 million, or 0.54% of total loans, as of December 31, 2025. The allowance for credit losses as a percentage of non-performing loans decreased to 177.19% as of June 30, 2026, from 350.17% as of December 31, 2025. As of June 30, 2026, our non-performing assets increased to $228.6 million, or 0.93% of total assets, from $124.8 million, or 0.55% of total assets, as of December 31, 2025. The increase in non-performing loans and assets was primarily due to one loan relationship with a balance of $92.1 million being placed on non-accrual status during the quarter ended March 31, 2026.
Table 12 below shows the non-performing loans and non-performing assets by region as of June 30, 2026 and December 31, 2025:
Table 12: Non-performing Assets By Region
| As of June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) |
Arkansas
|
Florida | Texas | Tennessee | Alabama |
Shore Premier Finance
|
Centennial CFG | Total | ||||||||||||||||||||||||||||||||||||||||||
| Non-accrual loans | $ | 19,529 | $ | 24,235 | $ | 123,170 | $ | 4,335 | $ | 44 | $ | 11,886 | $ | - | $ | 183,199 | ||||||||||||||||||||||||||||||||||
| Loans 90+ days past due | 238 | 282 | 690 | 916 | - | - | - | 2,126 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-performing loans | $ | 19,767 | $ | 24,517 | $ | 123,860 | $ | 5,251 | $ | 44 | $ | 11,886 | $ | - | $ | 185,325 | ||||||||||||||||||||||||||||||||||
| Foreclosed assets held for sale | 2,028 | 260 | 15,647 | 1,392 | - | - | 22,812 | 42,139 | ||||||||||||||||||||||||||||||||||||||||||
| Other non-performing assets | - | - | - | - | - | 1,140 | - | 1,140 | ||||||||||||||||||||||||||||||||||||||||||
| Total other non-performing assets | 2,028 | 260 | 15,647 | 1,392 | - | 1,140 | 22,812 | 43,279 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-performing assets | $ | 21,795 | $ | 24,777 | $ | 139,507 | $ | 6,643 | $ | 44 | $ | 13,026 | $ | 22,812 | $ | 228,604 | ||||||||||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) |
Arkansas
|
Florida | Texas | Alabama |
Shore Premier Finance
|
Centennial CFG | Total | |||||||||||||||||||||||||||||||||||||
| Non-accrual loans | $ | 18,234 | $ | 24,645 | $ | 24,234 | $ | 54 | $ | 10,048 | $ | 787 | $ | 78,002 | ||||||||||||||||||||||||||||||
| Loans 90+ days past due | 291 | 1,020 | 2,383 | - | 3,286 | - | 6,980 | |||||||||||||||||||||||||||||||||||||
| Total non-performing loans | $ | 18,525 | $ | 25,665 | $ | 26,617 | $ | 54 | $ | 13,334 | $ | 787 | $ | 84,982 | ||||||||||||||||||||||||||||||
| Foreclosed assets held for sale | 771 | 260 | 15,988 | - | - | 22,812 | 39,831 | |||||||||||||||||||||||||||||||||||||
| Total other non-performing assets | 771 | 260 | 15,988 | - | - | 22,812 | 39,831 | |||||||||||||||||||||||||||||||||||||
| Total non-performing assets | $ | 19,296 | $ | 25,925 | $ | 42,605 | $ | 54 | $ | 13,334 | $ | 23,599 | $ | 124,813 | ||||||||||||||||||||||||||||||
Debt restructuring generally occurs when a borrower is experiencing, or is expected to experience, financial difficulties in the near term. As a result, we will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan. In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in potentially an unfavorable and depressed real estate market. When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about three to twelve months. For our restructured loans that accrue interest at the time the loan is restructured, it would be a rare exception to have charged-off any portion of the loan. As of June 30, 2026, we had $4.7 million of restructured loans that are in compliance with the modified terms and are not reported as past due or non-accrual. Our Arkansas market contains $2.0 million, our Florida market contains $1.2 million and our Texas market contains $1.5 million of these restructured loans.
A loan modification that might not otherwise be considered may be granted. These loans can involve loans remaining on non-accrual, moving to non-accrual, or continuing on an accrual status, depending on the individual facts and circumstances of the borrower. Generally, a non-accrual loan that is restructured remains on non-accrual for a period of three months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can pay under the new terms and may result in the loan being returned to an accrual status after a shorter performance period. If the borrower's ability to meet the revised payment schedule is not reasonably assured, the loan will remain in a non-accrual status.
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The Company has modified 10 loans over the past 12 months to borrowers experiencing financial difficulty. The pre-modification balance of the loans was $1.1 million, and the ending balance as of June 30, 2026 was $1.0 million. The $1.0 million balance consists of $487,000 of non-accrual loans and $532,000 of current loans as of June 30, 2026.
The Company had $223.5 million and $219.4 million in impaired loans (which includes loans individually analyzed for credit losses for which a specific reserve has been recorded, non-accrual loans, loans past due 90 days or more and restructured loans made to borrowers experiencing financial difficulty) for the periods ended June 30, 2026 and December 31, 2025, respectively. As of June 30, 2026, our Arkansas, Florida, Texas, Tennessee, Alabama, SPF and Centennial CFG markets accounted for approximately $25.4 million, $25.7 million, $155.2 million, $5.3 million, $44,000, $11.9 million and zero of the impaired loans, respectively.
Total foreclosed assets held for sale were $42.1 million as of June 30, 2026, compared to $39.8 million as of December 31, 2025, for an increase of $2.3 million. The foreclosed assets held for sale as of June 30, 2026 are comprised of $2.0 million located in Arkansas, $260,000 located in Florida, $15.6 million located in Texas, $1.4 million located in Tennessee, zero in Alabama, zero in SPF and $22.8 million in Centennial CFG. The majority of the foreclosed assets held for sale is comprised of two properties. The first is an office building located in Santa Monica, California with a carrying value of $22.8 million. The second is an apartment complex in Gunter, Texas with a carrying value of $15.0 million. These two properties account for $37.8 million of the balance of foreclosed assets held for sale at June 30, 2026.
Table 13 shows the summary of foreclosed assets held for sale as of June 30, 2026 and December 31, 2025.
Table 13: Foreclosed Assets Held For Sale
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Commercial real estate loans | |||||||||||
| Non-farm/non-residential | $ | 23,911 | $ | 23,433 | |||||||
| Construction/land development | 16,024 | 15,230 | |||||||||
| Residential real estate loans | |||||||||||
| Residential 1-4 family | 2,204 | 1,168 | |||||||||
| Total foreclosed assets held for sale | $ | 42,139 | $ | 39,831 | |||||||
Past Due and Non-Accrual Loans
Table 14 shows the summary of non-accrual loans as of June 30, 2026 and December 31, 2025:
Table 14: Total Non-Accrual Loans
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Real estate: | |||||||||||
| Commercial real estate loans | |||||||||||
| Non-farm/non-residential | $ | 56,071 | $ | 21,685 | |||||||
| Construction/land development | 8,179 | 5,444 | |||||||||
| Agricultural | 1,670 | 489 | |||||||||
| Residential real estate loans | |||||||||||
| Residential 1-4 family | 26,255 | 24,149 | |||||||||
| Multifamily residential | 12,391 | 10,925 | |||||||||
| Total real estate | 104,566 | 62,692 | |||||||||
| Consumer | 12,138 | 10,326 | |||||||||
| Commercial and industrial | 65,227 | 3,760 | |||||||||
| Agricultural & other | 1,268 | 1,224 | |||||||||
| Total non-accrual loans | $ | 183,199 | $ | 78,002 | |||||||
If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $3.8 million and $1.8 million, respectively, would have been recorded for the three-month periods ended June 30, 2026 and 2025. If non-accrual loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $7.6 million and $3.5 million, respectively, would have been recorded for the six-month periods ended June 30, 2026 and 2025. The interest income recognized on non-accrual loans for the three months ended June 30, 2026 and 2025 was considered immaterial.
Table 15 shows the summary of accruing past due loans 90 days or more as of June 30, 2026 and December 31, 2025:
Table 15: Loans Accruing Past Due 90 Days or More
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Real estate: | |||||||||||
| Commercial real estate loans | |||||||||||
| Non-farm/non-residential | $ | 491 | $ | - | |||||||
| Construction/land development | - | 405 | |||||||||
| Residential real estate loans | |||||||||||
| Residential 1-4 family | 1,276 | 2,321 | |||||||||
| Total real estate | 1,767 | 2,726 | |||||||||
| Consumer | 16 | 3,290 | |||||||||
| Commercial and industrial | 331 | 964 | |||||||||
| Agricultural & Other | 12 | - | |||||||||
| Total loans accruing past due 90 days or more | $ | 2,126 | $ | 6,980 | |||||||
Our ratio of total loans accruing past due 90 days or more and non-accrual loans to total loans was 1.08% and 0.54% at June 30, 2026 and December 31, 2025, respectively.
Allowance for Credit Losses
Overview. The allowance for credit losses on loans receivable was $328.4 million and $297.6 million at June 30, 2026 and December 31, 2025, respectively. The Company completed the acquisition of MCBI on April 1, 2026. Pursuant to ASC 326 and ASU 2025-08, the Company established an acquisition-date allowance for credit losses of $31.3 million using the gross-up approach, consisting of $7.6 million related to PCD loans and $23.7 million related to PSLs. The acquisition-date allowance was recorded as an adjustment to the amortized cost basis of the acquired loans and did not result in provision for credit losses expense upon acquisition.
The specific reserve for loans individually analyzed for credit losses was $18.4 million on $197.2 million of individually analyzed loans as of June 30, 2026, compared to a specific reserve of $17.0 million on $186.5 million of individually analyzed loans as of December 31, 2025. The amortized cost balance for loans with a specific allocation decreased from $71.3 million to $57.9 million from December 31, 2025 to June 30, 2026. The allowance for credit losses as a percentage of loans was 1.92% and 1.90% at June 30, 2026 and December 31, 2025, respectively.
Loans Collectively Evaluated for Credit Loss. Loans receivable collectively evaluated for credit loss increased by approximately $1.43 billion from $15.50 billion at December 31, 2025 to $16.93 billion at June 30, 2026. The increase was primarily due to the acquisition of MCBI on April 1, 2026, which included $1.47 billion in loans, including the effects of the known purchase accounting adjustments. The percentage of the allowance for credit losses allocated to loans receivable collectively evaluated for credit loss to the total loans collectively evaluated for credit loss was 1.83% and 1.81% at June 30, 2026 and December 31, 2025, respectively.
Charge-offs and Recoveries. For the three months ended June 30, 2026, total charge-offs were $6.5 million and total recoveries were $722,000, for a net charge-off position of $5.8 million. For the six months ended June 30, 2026, total charge-offs were $9.4 million and total recoveries were $2.1 million, for a net charge-off position of $7.2 million. For the three months ended June 30, 2025, total charge-offs were $4.1 million and total recoveries were $3.0 million, for a net charge-off position of $1.1 million. For the six months ended June 30, 2025, total charge-offs were $7.5 million and total recoveries were $10.5 million, for a net recovery position of $3.0 million.
Table 16 below shows charge-off and recovery detail by region for the six months ended June 30, 2026 and 2025.
Table 16: Charge-Off and Recovery Detail By Region
| For the Three Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Arkansas | Florida | Texas | Tennessee | Alabama | Shore Premier Finance | Centennial CFG | Total | ||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 2,605 | $ | 286 | $ | 1,708 | $ | 11 | $ | 14 | $ | 1,896 | $ | - | $ | 6,520 | ||||||||||||||||||||||||||||||||||
| Recoveries | (324) | (142) | (249) | - | (2) | (5) | - | (722) | ||||||||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 2,281 | $ | 144 | $ | 1,459 | $ | 11 | $ | 12 | $ | 1,891 | $ | - | $ | 5,798 | ||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Arkansas | Florida | Texas | Tennessee | Alabama | Shore Premier Finance | Centennial CFG | Total | ||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 3,587 | $ | 423 | $ | 3,428 | $ | 11 | $ | 24 | $ | 1,896 | $ | - | $ | 9,369 | ||||||||||||||||||||||||||||||||||
| Recoveries | (602) | (196) | (1,037) | - | (5) | (282) | - | (2,122) | ||||||||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 2,985 | $ | 227 | $ | 2,391 | $ | 11 | $ | 19 | $ | 1,614 | $ | - | $ | 7,247 | ||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Arkansas | Florida | Texas | Alabama | Shore Premier Finance | Centennial CFG | Total | |||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 462 | $ | 245 | $ | 2,588 | $ | 13 | $ | 582 | $ | 181 | $ | 4,071 | ||||||||||||||||||||||||||||||
| Recoveries | (223) | (577) | (2,172) | (2) | (22) | - | (2,996) | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 239 | $ | (332) | $ | 416 | $ | 11 | $ | 560 | $ | 181 | $ | 1,075 | ||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Arkansas | Florida | Texas | Alabama | Shore Premier Finance | Centennial CFG | Total | |||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 936 | $ | 2,724 | $ | 3,032 | $ | 21 | $ | 635 | $ | 181 | $ | 7,529 | ||||||||||||||||||||||||||||||
| Recoveries | (451) | (694) | (8,686) | (4) | (25) | (658) | (10,518) | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 485 | $ | 2,030 | $ | (5,654) | $ | 17 | $ | 610 | $ | (477) | $ | (2,989) | ||||||||||||||||||||||||||||||
Loans partially charged-off are placed on non-accrual status until it is proven that the borrower's repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of 6-12 months of timely payment performance.
Table 17 shows the allowance for credit losses, charge-offs and recoveries as of and for the three and six months ended June 30, 2026 and 2025.
Table 17: Analysis of Allowance for Credit Losses
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Balance, beginning of period | $ | 297,634 | $ | 279,944 | $ | 297,583 | $ | 275,880 | |||||||||||||||
| Allowance for credit losses on acquired loans - MCBI | 31,333 | - | 31,333 | - | |||||||||||||||||||
| Loans charged off | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial real estate loans: | |||||||||||||||||||||||
| Non-farm/non-residential | 2,214 | 19 | 2,671 | 2,319 | |||||||||||||||||||
| Construction/land development | - | 70 | - | 70 | |||||||||||||||||||
| Agricultural | - | - | 1 | - | |||||||||||||||||||
| Residential real estate loans: | |||||||||||||||||||||||
| Residential 1-4 family | 224 | 54 | 617 | 129 | |||||||||||||||||||
| Total real estate | 2,438 | 143 | 3,289 | 2,518 | |||||||||||||||||||
| Consumer | 1,914 | 785 | 1,991 | 1,015 | |||||||||||||||||||
| Commercial and industrial | 1,419 | 2,369 | 2,745 | 2,530 | |||||||||||||||||||
| Other | 749 | 774 | 1,344 | 1,466 | |||||||||||||||||||
| Total loans charged off | 6,520 | 4,071 | 9,369 | 7,529 | |||||||||||||||||||
| Recoveries of loans previously charged off | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial real estate loans: | |||||||||||||||||||||||
| Non-farm/non-residential | 47 | 1,629 | 659 | 7,789 | |||||||||||||||||||
| Construction/land development | 25 | 416 | 45 | 541 | |||||||||||||||||||
| Agricultural | - | - | 5 | - | |||||||||||||||||||
| Residential real estate loans: | |||||||||||||||||||||||
| Residential 1-4 family | 190 | 12 | 208 | 63 | |||||||||||||||||||
| Total real estate | 262 | 2,057 | 917 | 8,393 | |||||||||||||||||||
| Consumer | 26 | 49 | 343 | 68 | |||||||||||||||||||
| Commercial and industrial | 158 | 615 | 349 | 1,573 | |||||||||||||||||||
| Other | 276 | 275 | 513 | 484 | |||||||||||||||||||
| Total recoveries | 722 | 2,996 | 2,122 | 10,518 | |||||||||||||||||||
| Net loans charged off (recovered) | 5,798 | 1,075 | 7,247 | (2,989) | |||||||||||||||||||
| Provision for credit loss | 5,200 | 3,000 | 6,700 | 3,000 | |||||||||||||||||||
| Ending balance | $ | 328,369 | $ | 281,869 | $ | 328,369 | $ | 281,869 | |||||||||||||||
| Net charge-offs (recoveries) to average loans receivable | 0.14 | % | 0.03 | % | 0.09 | % | (0.04) | % | |||||||||||||||
| Allowance for credit losses to total loans | 1.92 | 1.86 | 1.92 | 1.86 | |||||||||||||||||||
| Allowance for credit losses to net charge-offs (recoveries) | 1,411.99 | 6,537.13 | 2,246.93 | (4,676.35) | |||||||||||||||||||
Table 18 presents the allocation of allowance for credit losses as of June 30, 2026 and December 31, 2025.
Table 18: Allocation of Allowance for Credit Losses
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||||||||||||||
|
Allowance Amount |
% of
loans(1)
|
Allowance Amount |
% of
loans(1)
|
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||
| Commercial real estate loans: | |||||||||||||||||||||||
| Non-farm/non- residential | $ | 97,348 | 34.6 | % | $ | 74,172 | 33.7 | % | |||||||||||||||
| Construction/land development | 51,506 | 16.2 | 48,023 | 17.4 | |||||||||||||||||||
| Agricultural residential real estate loans | 3,096 | 1.9 | 3,048 | 2.1 | |||||||||||||||||||
| Residential real estate loans: | |||||||||||||||||||||||
| Residential 1-4 family | 59,895 | 14.9 | 46,291 | 13.6 | |||||||||||||||||||
| Multifamily residential | 26,255 | 7.4 | 26,401 | 7.3 | |||||||||||||||||||
| Total real estate | 238,100 | 75.0 | 197,935 | 74.1 | |||||||||||||||||||
| Consumer | 23,876 | 7.5 | 28,993 | 8.0 | |||||||||||||||||||
| Commercial and industrial | 57,828 | 13.3 | 64,396 | 14.2 | |||||||||||||||||||
| Agricultural | 1,790 | 2.1 | 1,536 | 2.3 | |||||||||||||||||||
| Other | 6,775 | 2.1 | 4,723 | 1.4 | |||||||||||||||||||
| Total | $ | 328,369 | 100.0 | % | $ | 297,583 | 100.0 | % | |||||||||||||||
(1)Percentage of loans in each category to total loans receivable.
During the first quarter of 2026, the Company implemented updated allowance for credit loss models as part of the annual model review and challenge process. The allowance calculation called for a higher level of reserves for the CRE portfolio and a corresponding reduction in reserves for the commercial and industrial portfolio as well as the consumer portfolio.
Investment Securities
Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as held-to-maturity, available-for-sale, or trading based on the intent and objective of the investment and the ability to hold to maturity. Fair values of securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities. The estimated effective duration of our securities portfolio was 4.7 years as of June 30, 2026.
On April 1, 2026, the Company completed the acquisition of MCBI. Including the effects of the known purchase accounting adjustments, as of the acquisition date, MCBI had approximately $103.3 million in investments. The Company classified the entire balance of investments acquired from MCBI as available-for-sale at the acquisition date.
Securities held-to-maturity, which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for amortization of premiums and accretion of discounts. Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security. We had $1.25 billion and $1.26 billion of held-to-maturity securities at June 30, 2026 and December 31, 2025, respectively. The detail of the held-to-maturity portfolio by carrying amount and percentage of the portfolio at June 30, 2026 and December 31, 2025 can be seen below.
Table 19: Held to Maturity Securities
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Net Carrying Amount | Percentage of Total | Net Carrying Amount | Percentage of Total | ||||||||||||||||||||
| (In Thousands) | (In Thousands) | ||||||||||||||||||||||
| U.S. government-sponsored enterprises | $ | 43,984 | 3.5 | % | $ | 43,841 | 3.5 | % | |||||||||||||||
| U.S. government-sponsored mortgage-backed securities | 110,969 | 8.8 | % | 114,813 | 9.1 | % | |||||||||||||||||
| State and political subdivisions | 1,099,849 | 87.7 | % | 1,100,608 | 87.4 | % | |||||||||||||||||
| Total | $ | 1,254,802 | 100.0 | % | $ | 1,259,262 | 100.0 | % | |||||||||||||||
Securities available-for-sale are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders' equity as other comprehensive (loss) income. Securities that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale. Available-for-sale securities were $2.78 billion and $2.87 billion as of June 30, 2026 and December 31, 2025, respectively. The detail of the available-for-sale portfolio by estimated fair value and percentage of the portfolio at June 30, 2026 and December 31, 2025 can be seen below.
Table 20: Available for Sale Securities
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Estimated Fair Value | Percentage of Total | Estimated Fair Value | Percentage of Total | ||||||||||||||||||||
| (In Thousands) | (In Thousands) | ||||||||||||||||||||||
| U.S. government-sponsored enterprises | $ | 204,386 | 7.4 | % | $ | 240,782 | 8.4 | % | |||||||||||||||
| U.S. government-sponsored mortgage-backed securities | 1,159,938 | 41.8 | % | 1,212,948 | 42.2 | % | |||||||||||||||||
| Private mortgage-backed securities | 167,761 | 6.0 | % | 145,720 | 5.1 | % | |||||||||||||||||
| Non-government-sponsored asset backed securities | 96,881 | 3.5 | % | 157,844 | 5.5 | % | |||||||||||||||||
| State and political subdivisions | 905,333 | 32.6 | % | 887,838 | 30.9 | % | |||||||||||||||||
| Other securities | 241,917 | 8.7 | % | 226,799 | 7.9 | % | |||||||||||||||||
| Total | $ | 2,776,216 | 100.0 | % | $ | 2,871,931 | 100.0 | % | |||||||||||||||
During the three and six months ended June 30, 2026, the Company determined no allowance for credit losses on the available-for-sale portfolio was necessary. The Company also determined the $2.0 million allowance for credit losses on the held-to-maturity portfolio was adequate. Therefore, no provision was considered necessary for either portfolio.
See Note 3 to the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value of investment securities.
Deposits
On April 1, 2026, the Company completed the acquisition of MCBI. Including the effects of the known purchase accounting adjustments, as of the acquisition date, MCBI had approximately $1.54 billion in deposits.
Our deposits averaged $18.92 billion and $17.41 billion for the three months ended June 30, 2026 and June 30, 2025, respectively. Our deposits averaged $18.22 billion and $17.30 billion for the six months ended June 30, 2026 and June 30, 2025, respectively. Total deposits were $19.11 billion as of June 30, 2026, and $17.48 billion as of December 31, 2025. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other depository institutions.
Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. We also participate in the One-Way Buy Insured Cash Sweep ("ICS") service and similar services, which provide for one-way buy transactions among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements. Management believes these sources represent a reliable and cost-efficient alternative funding source for the Company. However, to the extent that our condition or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding.
Table 21 reflects the classification of the brokered deposits as of June 30, 2026 and December 31, 2025.
Table 21: Brokered Deposits
| June 30, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Time Deposits | $ | 143,491 | $ | - | |||||||
| Insured Cash Sweep and Other Transaction Accounts | 443,822 | 435,678 | |||||||||
| Total Brokered Deposits | $ | 587,313 | $ | 435,678 | |||||||
The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional funds can be attracted, and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs.
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Reserve reduced the target rate three times during 2025. First, on September 17, 2025, the Federal Reserve reduced the target rate to 4.00% to 4.25%, second, on October 29, 2025, the target rate was reduced to 3.75% to 4.00% and third, on December 10, 2025, the target rate was reduced to 3.50% to 3.75%. The Federal Reserve has not changed the target rate during 2026.
Table 22 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of 10 percent of average total deposits, for the three and six months ended June 30, 2026 and 2025.
Table 22: Average Deposit Balances and Rates
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
|
Average Amount |
Average Rate Paid |
Average Amount |
Average Rate Paid |
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Non-interest-bearing transaction accounts | $ | 4,222,813 | - | % | $ | 3,981,901 | - | % | |||||||||||||||
| Interest-bearing transaction accounts | 11,152,152 | 2.38 | 10,428,530 | 2.66 | |||||||||||||||||||
| Savings deposits | 1,240,252 | 0.82 | 1,113,111 | 0.72 | |||||||||||||||||||
| Time deposits: | |||||||||||||||||||||||
| Certificates of deposit | 2,185,011 | 3.35 | 1,778,847 | 3.78 | |||||||||||||||||||
| IRAs | 116,674 | 1.86 | 107,300 | 2.51 | |||||||||||||||||||
| Total | $ | 18,916,902 | 1.85 | % | $ | 17,409,689 | 2.04 | % | |||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
|
Average Amount |
Average Rate Paid |
Average Amount |
Average Rate Paid |
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Non-interest-bearing transaction accounts | $ | 4,040,665 | - | % | $ | 3,981,425 | - | % | |||||||||||||||
| Interest-bearing transaction accounts | 10,962,933 | 2.37 | 10,369,523 | 2.66 | |||||||||||||||||||
| Savings deposits | 1,169,203 | 0.76 | 1,103,025 | 0.71 | |||||||||||||||||||
| Time deposits: | |||||||||||||||||||||||
| Certificates of deposit | 1,940,811 | 3.37 | 1,736,287 | 3.86 | |||||||||||||||||||
| IRAs | 109,180 | 2.05 | 107,772 | 2.54 | |||||||||||||||||||
| Total | $ | 18,222,792 | 1.84 | % | $ | 17,298,032 | 2.04 | % | |||||||||||||||
Securities Sold Under Agreements to Repurchase
We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase increased $2.9 million, or 1.9%, from $155.8 million as of December 31, 2025 to $158.7 million as of June 30, 2026.
FHLB and Other Borrowed Funds
The Company's FHLB borrowed funds, which are secured by our loan portfolio, were $450.0 million and $500.0 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026, $50.0 million and $400.0 million of the outstanding balances were classified as short-term and long-term advances, respectively. At December 31, 2025, $100.0 million and $400.0 million of the outstanding balances were classified as short-term and long-term advances, respectively.
The FHLB advances mature from 2026 to 2037 with fixed interest rates ranging from 3.37% to 4.67%. Expected maturities could differ from contractual maturities because FHLB may have the right to call, or the Company may have the right to prepay certain obligations.
Other borrowed funds were $250,000 at both June 30, 2026 and December 31, 2025. These were classified as short-term advances.
Additionally, the Company had $1.85 billion and $1.48 billion at June 30, 2026 and December 31, 2025, respectively, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits.
Subordinated Debentures
Subordinated debentures were $279.6 million and $279.3 million as of June 30, 2026 and December 31, 2025, respectively.
Subordinated Debt Securities. On January 18, 2022, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 3.125% Fixed-to-Floating Rate Subordinated Notes due 2032 (the "2032 Notes") for net proceeds, after underwriting discounts and issuance costs of approximately $296.4 million. The 2032 Notes are unsecured, subordinated debt obligations of the Company and will mature on January 30, 2032. From and including the date of issuance to, but excluding January 30, 2027 or the date of earlier redemption, the 2032 Notes will bear interest at an initial rate of 3.125% per annum, payable in arrears on January 30 and July 30 of each year. From and including January 30, 2027 to, but excluding, the maturity date or earlier redemption, the 2032 Notes will bear interest at a floating rate equal to the Benchmark rate (which is expected to be Three-Month Term SOFR), each as defined in and subject to the provisions of the applicable supplemental indenture for the 2032 Notes, plus 182 basis points, payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on April 30, 2027.
The Company may, beginning with the interest payment date of January 30, 2027, and on any interest payment date thereafter, redeem the 2032 Notes, in whole or in part, subject to prior approval of the Federal Reserve if then required, at a redemption price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the 2032 Notes at any time, including prior to January 30, 2027, at the Company's option, in whole but not in part, subject to prior approval of the Federal Reserve if then required, if certain events occur that could impact the Company's ability to deduct interest payable on the 2032 Notes for U.S. federal income tax purposes or preclude the 2032 Notes from being recognized as Tier 2 capital for regulatory capital purposes, or if the Company is required to register as an investment company under the Investment Company Act of 1940, as amended. In each case, the redemption would be at a redemption price equal to 100% of the principal amount of the 2032 Notes plus any accrued and unpaid interest to, but excluding, the redemption date.
On September 4, 2025, the Company repurchased $20.0 million of the 2032 Notes in an open-market transaction. The repurchase resulted in a $1.9 million gain.
Stockholders' Equity
Stockholders' equity increased $250.6 million to $4.55 billion as of June 30, 2026, from $4.30 billion as of December 31, 2025. The $250.6 million increase in stockholders' equity is primarily associated with the $146.0 million in common stock issued to MCBI shareholders for the acquisition of MCBI on April 1, 2026 and the $237.5 million in net income for the six months ended June 30, 2026, which was partially offset by the $3.1 million in other comprehensive loss, the $83.5 million in shareholder dividends paid and stock repurchases of $54.7 million in 2026. As of June 30, 2026 and December 31, 2025, our equity to asset ratio was 18.40% and 18.78%, respectively. Book value per share was $22.68 as of June 30, 2026, compared to $21.88 as of December 31, 2025, a 7.4% annualized increase.
Common Stock Cash Dividends. We declared cash dividends on our common stock of $0.21 and $0.20 per share for the three months ended June 30, 2026 and 2025, respectively, and $0.42 and $0.395 per share for the six months ended June 30, 2026 and 2025, respectively. The common stock dividend payout ratio for the three months ended June 30, 2026 and 2025 was 35.4% and 33.4%, respectively. The common stock dividend payout ratio for the six months ended June 30, 2026 and 2025 was 35.2% and 33.5%, respectively. On July 17, 2026, the Board of Directors declared a regular $0.23 per share quarterly cash dividend payable September 2, 2026, to shareholders of record August 12, 2026.
Stock Repurchase Program. During the six months ended June 30, 2026, the Company repurchased a total of 2,007,622 shares with a weighted-average stock price of $27.04 per share. Shares repurchased under the program as of June 30, 2026 since its inception total 31,405,835 shares. The remaining balance available for repurchase was 15,101,672 shares at June 30, 2026.
Liquidity and Capital Adequacy Requirements
Risk-Based Capital. We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk weightings and other factors.
In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" and certain provisions of the Dodd-Frank Act ("Basel III"). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. Basel III limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" of 2.5% of common equity Tier 1 capital to risk-weighted assets, which is in addition to the amount necessary to meet its minimum risk-based capital requirements.
Basel III amended the prompt corrective action rules to incorporate a common equity Tier 1 ("CET1") capital requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization is required to have at least a 4.5% CET1 risk-based capital ratio, a 4% Tier 1 leverage ratio, a 6% Tier 1 risk-based capital ratio and an 8% total risk-based capital ratio.
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that, as of June 30, 2026 and December 31, 2025, we met all regulatory capital adequacy requirements to which we were subject.
Table 23 presents our risk-based capital ratios on a consolidated basis as of June 30, 2026 and December 31, 2025.
Table 23: Risk-Based Capital
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Tier 1 capital | |||||||||||
| Stockholders' equity | $ | 4,547,435 | $ | 4,296,871 | |||||||
| Goodwill and core deposit intangibles, net | (1,479,247) | (1,430,107) | |||||||||
| Unrealized loss on available-for-sale securities | 168,980 | 165,887 | |||||||||
| Total common equity Tier 1 capital | 3,237,168 | 3,032,651 | |||||||||
| Total Tier 1 capital | 3,237,168 | 3,032,651 | |||||||||
| Tier 2 capital | |||||||||||
| Allowance for credit losses | 328,369 | 297,583 | |||||||||
| Disallowed allowance for credit losses (limited to 1.25% of risk weighted assets) | (79,252) | (63,704) | |||||||||
| Qualifying allowance for credit losses | 249,117 | 233,879 | |||||||||
| Qualifying subordinated notes | 279,602 | 279,265 | |||||||||
| Total Tier 2 capital | 528,719 | 513,144 | |||||||||
| Total risk-based capital | $ | 3,765,887 | $ | 3,545,795 | |||||||
| Average total assets for leverage ratio | $ | 23,218,213 | $ | 21,528,936 | |||||||
| Risk weighted assets | $ | 19,811,980 | $ | 18,607,517 | |||||||
| Ratios at end of period | |||||||||||
| Common equity Tier 1 capital | 16.34 | % | 16.30 | % | |||||||
| Leverage ratio | 13.94 | 14.09 | |||||||||
| Tier 1 risk-based capital | 16.34 | 16.30 | |||||||||
| Total risk-based capital | 19.01 | 19.06 | |||||||||
| Minimum guidelines - Basel III | |||||||||||
| Common equity Tier 1 capital | 7.00 | % | 7.00 | % | |||||||
| Leverage ratio | 4.00 | 4.00 | |||||||||
| Tier 1 risk-based capital | 8.50 | 8.50 | |||||||||
| Total risk-based capital | 10.50 | 10.50 | |||||||||
| Well-capitalized guidelines | |||||||||||
| Common equity Tier 1 capital | 6.50 | % | 6.50 | % | |||||||
| Leverage ratio | 5.00 | 5.00 | |||||||||
| Tier 1 risk-based capital | 8.00 | 8.00 | |||||||||
| Total risk-based capital | 10.00 | 10.00 | |||||||||
As of the most recent notification from regulatory agencies, our bank subsidiary was "well-capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well-capitalized," we, as well as our banking subsidiary, must maintain minimum CET1 capital, leverage, Tier 1 risk-based capital, and total risk-based capital ratios as set forth in the table. There are no conditions or events since that notification that we believe have changed the bank subsidiary's category.
Non-GAAP Financial Measurements
Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry. However, this report contains financial information determined by methods other than in accordance with GAAP, including earnings, as adjusted; diluted earnings per common share, as adjusted; tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity, excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted.
We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to these non-GAAP measures and ratios in assessing our operating results and related trends, and when planning and forecasting future periods. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.
The tables below present non-GAAP reconciliations of earnings, as adjusted, and diluted earnings per share, as adjusted, as well as the non-GAAP computations of tangible book value per share; return on average assets, excluding intangible amortization; return on average assets, as adjusted; return on average common equity, as adjusted; return on average tangible equity excluding intangible amortization; return on average tangible equity, as adjusted; tangible equity to tangible assets; and efficiency ratio, as adjusted. The items used in these calculations are included in financial results presented in accordance with GAAP.
Earnings, as adjusted, and diluted earnings per common share, as adjusted, are meaningful non-GAAP financial measures for management, as they exclude certain items such as merger expenses and/or certain gains and losses. Management believes the exclusion of these items in expressing earnings provides a meaningful foundation for period-to-period and company-to-company comparisons, which management believes will aid both investors and analysts in analyzing our financial measures and predicting future performance. These non-GAAP financial measures are also used by management to assess the performance of our business, because management does not consider these items to be relevant to ongoing financial performance.
In Table 24 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.
Table 24: Earnings, As Adjusted
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| GAAP net income available to common shareholders (A) | $ | 119,327 | $ | 118,403 | $ | 237,536 | $ | 233,612 | |||||||||||||||
| Pre-tax adjustments: | |||||||||||||||||||||||
| Merger and acquisition expenses | 12,726 | - | 13,120 | - | |||||||||||||||||||
| FDIC special assessment credit | - | (1,516) | (1,697) | (1,516) | |||||||||||||||||||
| Fair value adjustment for marketable securities | (817) | 238 | 431 | (204) | |||||||||||||||||||
| Special income from equity investment | - | (3,498) | - | (7,389) | |||||||||||||||||||
| Gain on sale of premises and equipment | - | (983) | - | (983) | |||||||||||||||||||
| Legal fee reimbursement | - | (885) | - | (885) | |||||||||||||||||||
| Legal claims expense | - | 3,300 | - | 3,300 | |||||||||||||||||||
| Recoveries on historic losses | - | - | - | - | |||||||||||||||||||
| BOLI death benefits | (274) | (1,243) | (274) | (1,243) | |||||||||||||||||||
| Total pre-tax adjustments | 11,635 | (4,587) | 11,580 | (8,920) | |||||||||||||||||||
|
Tax-effect of adjustments(1)
|
2,901 | (817) | 2,888 | (1,876) | |||||||||||||||||||
| Total adjustments after-tax (B) | 8,734 | (3,770) | 8,692 | (7,044) | |||||||||||||||||||
| Earnings, as adjusted (C) | $ | 128,061 | $ | 114,633 | $ | 246,228 | $ | 226,568 | |||||||||||||||
| Average diluted shares outstanding (D) | 201,420 | 197,765 | 199,088 | 198,289 | |||||||||||||||||||
| GAAP diluted earnings per share: A/D | $ | 0.59 | $ | 0.60 | $ | 1.19 | $ | 1.18 | |||||||||||||||
| Adjustments after-tax: B/D | 0.05 | (0.02) | 0.05 | (0.04) | |||||||||||||||||||
| Diluted earnings per common share excluding adjustments: C/D | $ | 0.64 | $ | 0.58 | $ | 1.24 | $ | 1.14 | |||||||||||||||
(1) Blended statutory rate of 24.359% for 2026 and 24.433% for 2025.
We had $1.48 billion, $1.43 billion and $1.43 billion total goodwill and core deposit intangibles as of June 30, 2026, December 31, 2025 and June 30, 2025, respectively. Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets excluding intangible amortization, return on average tangible equity, return on average tangible equity excluding intangible amortization, and tangible equity to tangible assets are useful in evaluating our company. Management also believes return on average assets, as adjusted, return on average equity, as adjusted, and return on average tangible equity, as adjusted, are meaningful non-GAAP financial measures, as they exclude items such as certain non-interest income and expenses that management believes are not indicative of our primary business operating results. These calculations, which are similar to the GAAP calculations of book value per share, return on average assets, return on average equity, and equity to assets, are presented in Tables 25 through 28, respectively.
Table 25: Tangible Book Value Per Share
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (In thousands, except per share data) | |||||||||||
| Book value per share: A/B | $ | 22.68 | $ | 21.88 | |||||||
| Tangible book value per share: (A-C-D)/B | 15.32 | 14.60 | |||||||||
| (A) Total equity | $ | 4,547,435 | $ | 4,296,871 | |||||||
| (B) Shares outstanding | 200,460 | 196,357 | |||||||||
| (C) Goodwill | 1,410,211 | 1,398,253 | |||||||||
| (D) Core deposit intangibles | 65,541 | 32,293 | |||||||||
Table 26: Return on Average Assets, As Adjusted
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Return on average assets: A/D | 1.95 | % | 2.08 | % | 2.02 | % | 2.08 | % | |||||||||||||||
| Return on average assets, as adjusted: (A+C)/D | 2.09 | 2.02 | 2.09 | 2.02 | |||||||||||||||||||
| Return on average assets excluding intangible amortization: B/(D-E) | 2.12 | 2.25 | 2.18 | 2.25 | |||||||||||||||||||
| (A) Net income | $ | 119,327 | $ | 118,403 | $ | 237,536 | $ | 233,612 | |||||||||||||||
| Intangible amortization after-tax | 2,185 | 1,530 | 3,651 | 3,077 | |||||||||||||||||||
| (B) Earnings excluding intangible amortization | $ | 121,512 | $ | 119,933 | $ | 241,187 | $ | 236,689 | |||||||||||||||
| (C) Adjustments after-tax | $ | 8,734 | $ | (3,770) | $ | 8,692 | $ | (7,044) | |||||||||||||||
| (D) Average assets | 24,525,258 | 22,797,738 | 23,756,626 | 22,673,974 | |||||||||||||||||||
| (E) Average goodwill, core deposits and other intangible assets | 1,481,989 | 1,435,480 | 1,455,903 | 1,436,492 | |||||||||||||||||||
Table 27: Return on Average Equity, As Adjusted
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Return on average equity: A/D | 10.55 | % | 11.77 | % | 10.78 | % | 11.76 | % | |||||||||||||||
| Return on average common equity, as adjusted: (A+C)/D | 11.32 | 11.39 | 11.18 | 11.40 | |||||||||||||||||||
| Return on average tangible common equity: A/(D-E) | 15.67 | 18.26 | 16.03 | 18.33 | |||||||||||||||||||
| Return on average tangible equity excluding intangible amortization: B/(D-E) | 15.96 | 18.50 | 16.28 | 18.57 | |||||||||||||||||||
| Return on average tangible common equity, as adjusted: (A+C)/(D-E) | 16.82 | 17.68 | 16.62 | 17.77 | |||||||||||||||||||
| (A) Net income | $ | 119,327 | $ | 118,403 | $ | 237,536 | $ | 233,612 | |||||||||||||||
| (B) Earnings excluding intangible amortization | 121,512 | 119,933 | 241,187 | 236,689 | |||||||||||||||||||
| (C) Adjustments after-tax | 8,734 | (3,770) | 8,692 | (7,044) | |||||||||||||||||||
| (D) Average equity | 4,535,712 | 4,036,155 | 4,443,237 | 4,007,075 | |||||||||||||||||||
| (E) Average goodwill, core deposits and other intangible assets | 1,481,989 | 1,435,480 | 1,455,903 | 1,436,492 | |||||||||||||||||||
Table 28: Tangible Equity to Tangible Assets
| As of June 30, 2026 | As of December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Equity to assets: B/A | 18.40 | % | 18.78 | % | |||||||
| Tangible equity to tangible assets: (B-C-D)/(A-C-D) | 13.22 | 13.36 | |||||||||
| (A) Total assets | $ | 24,713,248 | $ | 22,881,879 | |||||||
| (B) Total equity | 4,547,435 | 4,296,871 | |||||||||
| (C) Goodwill | 1,410,211 | 1,398,253 | |||||||||
| (D) Core deposit intangibles | 65,541 | 32,293 | |||||||||
The efficiency ratio is a standard measure used in the banking industry and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. The efficiency ratio, as adjusted, is a meaningful non-GAAP measure for management, as it excludes certain items and is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income excluding items such as merger expenses and/or certain gains, losses and other non-interest income and expenses. In Table 29 below, we have provided a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.
Table 29: Efficiency Ratio, As Adjusted
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Net interest income (A) | $ | 241,643 | $ | 219,952 | $ | 465,547 | $ | 434,608 | |||||||||||||||
| Non-interest income (B) | 53,454 | 51,079 | 96,257 | 96,505 | |||||||||||||||||||
| Non-interest expense (C) | 135,494 | 116,040 | 249,469 | 228,968 | |||||||||||||||||||
| FTE Adjustment (D) | 2,653 | 2,526 | 5,314 | 5,060 | |||||||||||||||||||
| Amortization of intangibles (E) | 2,889 | 2,025 | 4,827 | 4,072 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||
| Fair value adjustment for marketable securities | $ | 817 | $ | (238) | (431) | 204 | |||||||||||||||||
| Special income from equity investments | - | 3,498 | - | 7,389 | |||||||||||||||||||
| Gain (loss) on OREO, net | 332 | 13 | 1,039 | (363) | |||||||||||||||||||
| Gain (loss) on branches, equipment and other assets, net | 3 | 972 | (4) | 809 | |||||||||||||||||||
| BOLI death benefits | 274 | 1,243 | 274 | 1,243 | |||||||||||||||||||
| Legal expense reimbursement | - | 885 | - | 885 | |||||||||||||||||||
| Total non-interest income adjustments (F) | $ | 1,426 | $ | 6,373 | $ | 878 | $ | 10,167 | |||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||
| FDIC special assessment credit | - | (1,516) | (1,697) | (1,516) | |||||||||||||||||||
| Merger and acquisition expenses | 12,726 | - | 13,120 | - | |||||||||||||||||||
| Legal claims expense | - | 3,300 | - | 3,300 | |||||||||||||||||||
| Total non-interest expense adjustments (G) | $ | 12,726 | $ | 1,784 | $ | 11,423 | $ | 1,784 | |||||||||||||||
| Efficiency ratio (reported): ((C-E)/(A+B+D)) | 44.54 | % | 41.68 | % | 43.14 | % | 41.94 | % | |||||||||||||||
| Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F)) | 40.46 | 42.01 | 41.19 | 42.42 | |||||||||||||||||||
Recently Issued Accounting Pronouncements
See Note 22 to the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.
Home BancShares Inc. published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 16:14 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]